DAC approves major changes in Defence Procurement Procedure

January 12, 2016

The Defence Acquisition Council (DAC) chaired by Union Defence Minister Manohar Parrikar has approved major changes in the new Defence Procurement Procedure (DDP) 2016.
These changes were made in DPP 2016 to streamline defence acquisitions and give a big impetus to indigenisation of Defence sector through the ‘Make in India’ initiative.
Some of the changes were based on recommendations of the expert committee headed by former Home Secretary Dhirendra Singh.
Major Changes are

Addition of new category to promote domestic manufacturing, including government funding.
The funding will be mainly in technology development for Research & Development (R&D) and recognition of the Micro, Small and Medium Enterprises (MSME).
New category Indigenously Designed, Developed and Manufactured (IDDM) platforms have been added and it will be the priority route for procurements.
Under IDDM, there will be two sub-categories one with mandatory 40 percent domestic content for a domestic design.
Other will be for mandating 60 percent local content if the design is not domestic. Under it, eligible domestic companies will have majority Indian control and operated by Indian nationals.
Government will fund private R&D for building a defence technology base in the country for which various norms have been stipulated. Under it companies are eligible for up to 90 percent funding.
Contentious issue of offsets has been amended from the current 300 crore rupees to 2000 crore rupees to give flexibility for foreign companies.
Currently, offset clause mandates that a foreign company should invest 30 percent of the contract value back into the country with a view to bring in technology.

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