NEW DELHI — India, which plans to spend buy weaponry worth $150 billion on weaponry in the next 10 to 15 ten to fifteen years, is considering changes in itsweapons procurement policy.
However, the first contours of the policy cleared by the government are not being seen as substantively different changes which called as a shift away from current the ongoing procurement policy. The Defence Procurement Policy-2016 (DPP-2016) is expected to be formally promulgated in two months.
In the run-up to the DPP-2016, the Ministry of Defence raised (MoD) Jan. 13 cleared some changed and include raising the level at which mandatory offsets kick in. bar of value of the total weapons contract for fulfilling mandatory offsets by overseas companies.
"Now mandatory offsets will be discharged by overseas defense companies only when the contract is over $303 million compared to the existing level of $45 million — a relief to overseas defense companies," said an MoD official.
The DPP-2016 expected to be promulgated in two months will be the first defense procurement policy announcement of the Narendra Modi government, which came after it came to power in May 2014.
Another major change cleared by MoD for DPP-2016 also will give the highest priority to a new category of procurement named Indigenous Design, Development and Manufacturing (IDDM).
"It seems like a hybrid category, combining Buy (Indian) and Make. Though the details are not quite clear, it appears that the products bought under this category would require 40 percent indigenous content if the design of the product is also indigenous, otherwise it will have to have 60 percent indigenous content. According to the reports it will be the most preferred category," said Amit Cowshish, MoD's former additional financial adviser.
Vivek Rae, former MoD director general, Defence Procurement Board, however, sees no major shift from previous system of weapon procurement systems.
"The IDDM category is not different from the earlier make category. In fact, there is no substantive change," said Rae." The existing make category also focuses on indigenous design and development. There is no difference" adds Rae.
Currently, weapon procurement categories are Make India; Buy and Make (India); Buy and Make Global; and Buy Global. Priority is given in the same order.
Welcoming the creation of IDDM, a senior executive of private sector company Larsen & Toubro (L&T), Ltd who requested anonymity, not to be quoted said," This is a new category to promote indigenous design and developed products and systems within the country. This would galvanize locally designed and developed systems. This category is given the highest priority, clearly indicating the MoD thrust area."
The other major changes likely to be made in the DPP-2016 could involve the policy on blacklisting of overseas defense companies. on charges of alleged corruption.
Between 2009 and 2012, defense companies including based Singapore Technologies Kinetics, of Singapore, Israel Military Industries, (IMI) of Israel, Rheinmetall Air Defence (RAD) of Switzerland and Corporation Defence of Russia have been debarred from doing defense business in India for the next 10 ten years on charges of alleged corruption. In 2005, Denel of South Africa was blacklisted and in 2014 AgustaWestland's contract for purchase of VVIP helicopters was canceled following allegations of corruption. Finmeccanica of Italy and its group companies are now kept out of future defense projects.
Analysts are however, divided on how the new changes in DPP could affect the ways India will buy weapons.
"I do not see any structural changes in DPP. In fact, the changes will make the acquisition process more complex and cumbersome. The criteria for deciding whether a product is designed indigenously is not clear. Issues will arise about whether a prototype has been successfully developed or not under the modified make procedure. Differing interpretations will give rise to disputes," Rae said.
Cowshish said there will be some changes.
"It is difficult to say that at this juncture as the new DPP is yet to be released. But some of the decisions taken by the Defence Acquisition Council on Jan. 13 2016would constitute a departure from the past," he added.