Defence Procurement Policy

Defence Procurement Policy came into effect in 2002. Under DPP all capital acquisitions are categorized into: Buy(Indian), Buy & Make (Indian), Make, Buy & Make, Buy (Global).

• Buy (Indian) : minimum of 30% indigenous content.
• Buy & Make (Indian) : Initial quantities are purchased through the Indian company followed by licensed production in India by an Indian company / joint venture(JV). Indigenization level should be a minimum of 50%.
• Make: applies to cases where Indian companies and / or DRDO have the capability to develop high technology complex systems through local research, design and development in a reasonable amount of time. Indigenization level is a minimum of 30%.
• Buy & Make with ToT (Transfer of technology): It applies to cases where Indian companies buy from foreign entities with offset obligation of 30%.No offset obligation will apply if the indigenous content is 50% or more.
• Buy (Global) : It applies when Indian companies buy from abroad with offset obligations.

Since 2002, the scopes of procedures have been periodically revised resulting in the promulgation of the DPP 2003, 2005, 2006, 2008 and 2011. In 2013 significant changes were once again introduced in the DPP.

One of the major changes introduced was the change in the arrangement of procurement categories with ‘Buy (Indian)’ as the most preferred category, followed by ‘Buy and Make (Indian)’, ‘Make (Indian)’, ‘Buy and Make’ and ‘Buy (Global)’. Thus, it is clear that the focus of the changes of 2013 is towards greater indigenization.

Along with this, other changes were introduced to streamline the procurement procedure. However still there are structural bottlenecks in the procurement procedure which makes the entire process complex and opaque. This breeds corruption in the procurement process involving middlemen, politicians etc. Often the companies are found paying a percentage/commission of profit from deal .In addition to this foreign companies are finding difficulties in adhering to offset guidelines leading to delay in implementation of projects. Then private sector is also not able to grow up to its potential due to disparity in structure of the policies which is highly favorable towards DPSUs. This led to the formation of another committee under Dhirendra Singh. Currently government is planning to amend the DPP to align it with the Make in India project based on the committee’s report.