New defence procurement policy comes into force

[AVERAGE INDIAN]

Against the backdrop of scams such as the VVIP chopper deal, a new defence procurement policy came into force on Saturday which aims at enhancing transparency and probity in military purchases and gives first right of refusal to Indian vendors to promote indigenous industry.

"The Defence Procurement Procedure 2013 which takes effect from today, aims to balance the competing requirements of expediting capital procurement, developing a robust indigenous defence sector and conforming to the highest standards of transparency, probity and public accountability," Defence Ministry said in a release.

While laying a strong emphasis on promoting indigenisation, the new policy aims at creating a level playing field for the Indian Industry, it said.

In his remarks in the foreword of the new policy document, Defence Minister AK Antony expressed hope that "the defence industry as well as the procurement agencies will find the DPP-2013 to be a 'progressive step' aimed at giving impetus to indigenisation, creating level playing field and expediting the procurement process as a whole."

Terming defence acquisition as a "complex" process, the Defence Minister said, it needs to balance the competing requirements of expeditious procurement, development of an indigenous defence sector and conformity to the highest standards of transparency and probity.

In the new policy, the Defence Ministry has accorded a "higher preference explicitly to the Buy (Indian), Buy and Make (Indian) and Make categorisation, besides bringing further clarity in the definition of the 'Indigenous Content' and simplifying the Buy and Make (Indian) process."

The DPP 2013 stipulates that if forces have to procure from foreign vendors under the Buy (Global) category, they will have to justify "not considering the other higher preference categories. This is expected to give a stronger impetus to indigenisation."

Seeking to expedite the procurement procedure, the new policy has reduced the validity of Acceptance of Necessity from two years to one year and the services have been told that services specifications would not be changed after the AoN is accorded by the Defence Acquisition Council.

"A higher delegation of financial powers to the Service Headquarters and the Defence Procurement Board (DPB) headed by the Defence Secretary has also been made. Together, these measures are expected to make the procurement procedure more efficient and reduce delays," the Ministry said.

The Ministry has also decided that any request for extending the timeline for submitting bids will have to be made two weeks prior to the bid submission dates "in order to encourage timely submission of the bids by the vendors and to discourage last minute requests for extension of time".

To promote the indigenous industry, the DPP 2013 has allowed the foreign vendors to nominate the Indian vendors of their choice for the maintenance of the equipment supplied to Indian forces by them.

The Ministry said further measures to strengthen the Indian defence sector are under consideration and will be brought about after due consultation with all stake holders.

New defence procurement policy comes into force - India - DNA

 

[Ganesh2691]

MoD's new tough rules on indigenisation

On Saturday, the defence ministry (MoD) released the Defence Procurement Procedure of 2013 (DPP-2013), which had only been outlined earlier. The full policy document contains unprecedented clauses and rules that add teeth to the MoD's declared intention to promote indigenisation.

A key step towards this is a far more stringent definition of "indigenous equipment." So far, successive DPPs of 2002, 2005, 2006, 2008, 2009 and 2011 have regarded all equipment purchased from Indian suppliers as "indigenous", even when it contains 80-90 per cent foreign-built items, with just 10-20 per cent Indian components, often in secondary fields like assembly and delivery. Now, indigenisation will be gauged all the way down the chain of vendors and sub-vendors. The MoD has ruled, "Import content in the products supplied by the sub-vendors will not qualify towards indigenous content."

Companies like Bharat Electronics Ltd (BEL), which traditionally do large volumes of "indigenous" business that actually consist of assembling imported components, will struggle to meet the MoD's new definition of indigenisation.

An entire new Appendix to DPP-2013 precisely defines "indigenous content." It stipulates that the following will be deducted from the cost of indigenous equipment: the direct costs "of all materials, components, sub-assemblies, assemblies and products imported into India"; costs of all services obtained from non-Indian entities; all royalties, license fees, technical fees etc. that are paid abroad.

The new procurement policy charges the prime vendor (with which the MoD has signed a procurement contract) with compiling the actual indigenisation achieved by all his sub-vendors. Each level of manufacture/production/assembly is required to compile and report their actual level of indigenisation --- based on the MoD's new definition --- to the level above them. The policy stipulates, "The final aggregation of indigenous content shall be undertaken by the prime (main) contractor with whom an acquisition contract is signed by the Ministry."

Interestingly, DPP-2013 recognises that the MoD has only a limited ability to monitor entire production chains for multiple contracts that it simultaneously handles. Therefore, each prime contractor is required to self-certify the indigenisation achieved by his supply chain. The ministry, however, will conduct random audits at any level in the production chain. Alternatively, the audit could be conducted by "an agency/institution/officer(s) nominated by the Ministry."

Payments by the MoD will only be made after "a certificate of indigenous content issued by the Chief Financial Officer of the prime/main contractor." In addition, a certificate is required from the vendor's company auditor.

DPP-2013 provides for banning or suspending a vendor for up to 5 years if any false certification is detected, or if a vendor fails to achieve the mandated levels of indigenisation. However, the new procedure provides for allowing a vendor who is facing difficulties in indigenising at an early stage of the contract, to make up the deficiency at a later stage.

The new DPP recognises that the "Buy and Make (Indian)" and the "Make" procedures must be simplified to attract more Indian companies into defence production and, thereby, enhance indigenisation. In the former category, the requirement for a "Project Appraisal Committee" to short-list vendors has been done away with. The validity of an Acceptance of Necessity (AoN) --- an MoD sanction that recognizes the military need for the equipment being procured --- has been kept at two years in order to permit detailed consultations with defence industry.

The MoD says that the simplification of the "Make" procedure is also under way and "is expected to be completed in a few months."

Defence Minister AK Antony clearly expects that mandating a greater role for Indian industry is the route to indigenisation. He states in the introduction to DPP-2013, "The emphasis this time has been on giving a boost to the Indian Defence Industry, both in the Public and the Private sector, by according a higher preference to the 'Buy (Indian)', 'Buy and Make (Indian)' and 'Make' categorisation, bringing further clarity in the definition of the 'Indian Content' and simplifying the 'Buy and Make (Indian)' procedure."

However, private defence companies see DPP-2013 as only a first step. "Unless structural discrimination against the private sector is addressed, this will only be a pretty-sounding expression of intent. The MoD must protect us against exchange rate variation (ERV); and bring tax and import duty regimes in line with what the public sector and foreign vendors enjoy," says the CEO of an IT engineering company with interests in defence.

Broadsword: MoD’s new tough rules on indigenisation

 

[sorcerer]

Govt Holds Consultations for Radically Different Defence Offsets Policy
The defence ministry carried out a second round of consultation with the private defence firms on Thursday for finalising a radically different offsets policy on defence deals. The proposed new offsets policy will do away with the existing policy which mandates 30 per cent offsets on a foreign defence contract.

Defence minister Manohar Parrikar has been a critic of the current offsets policy. He has argued that India has so far been spending 14-18 per cent extra on defence contracts because of the existing offset policy. He also stated that India has signed $5 billion worth defence offset contracts while $10 billion of additional offsets are in the pipeline.

Department of defence production has held two rounds of negotiations with the industry so far. In the first interaction in December, officials outlined the broad contours of the proposed policy.
The proposed policy has three options given to the foreign supplier for discharge of offsets, which will be clearly specified in the Request for Proposal (RFP) issued by the ministry.

In the first option, the RFP will specify certain critical technology that the foreign supplier will have to transfer to the Indian partner. This will be chosen from a bank of technologies identified by the DRDO in collaboration with private industry.

The second option will ask the foreign supplier to manufacture a specific sub-system or component of a product in India,

while the final option obligates the foreign vendor to develop requisite skill sets in the Indian industry. The government will specify either one or more of these offset options in the RFP.

Under the existing policy, foreign defence suppliers signing contracts worth Rs 300 crore or more are mandated to spend at least 30 per cent of the contract value in India as offsets. Earlier this month, Parrikar announced that the contract value for offsets will be raised from Rs 300 crore to Rs 2,000 crore in Defence Procurement Procedure (DPP) 2016.

Sources in the defence ministry said that DPP-2016 is scheduled to be notified in a couple of months and will feature the existing offsets policy, with the raised contract value of Rs 2,000 crore. The proposed offsets policy, once finalised, will be notified separately later in the year to replace this older version.


An industry representative who attended the meeting with defence ministry officials earlier this week told The Indian Express that the industry feedback was about the transfer of technology being done to DRDO. The industry representatives felt that the license for the technology should be with the private sector and DRDO can at best be a co-holder of technology.

The other issues flagged by the industry representatives pertain to ownership structure of Indian partner, non-insistence on 100 per cent IPR over the transfer and wider flexibility to foreign supplier to discharge offsets across group companies. Defence ministry officials said that they will now take these issues to the DPSUs, service headquarters, DRDO and other stakeholders before finalizing the policy.

http://indianexpress.com/article/bu...r-radically-different-defence-offsets-policy/

 

[HariPrasad-1]

IF I had been into policy making, I wold ban all small arms and low tech items to be purchased from outside. No item of low and medium technology should be purchased from outside.

 

[sorcerer]

India Is Putting Part of Its Nuclear-Missile Maker Up For Sale
The country is seeking to divest 20 percent of each state-owned defense company -- including nuclear-missile maker Bharat Dynamics Ltd. -- to boost their efficiency, Defence Production Secretary A. K. Gupta said. India also plans to cut its 75 percent shareholding in Bharat Electronics Ltd., he said.

"We’re going ahead with the disinvestment so that we can have more transparency and accountability," Gupta, one of the defense ministry’s top bureaucrats, said in an interview in New Delhi. He was referring to Bharat Dynamics and didn’t give any timelines.

India’s goal is an ambitious $150 billion modernization of its sometimes poorly equipped armed forces, including more local production to curb a flood of costly imports. One of Prime Minister Narendra Modi’s challenges is to improve state defense companies, which account for the bulk of domestic weapons output but are strained and lack the most modern technology.

Bharat Dynamics, based in the southern city of Hyderabad, is over four decades old and manufactures India’s strategic missiles such as the nuclear-capable Agni and Prithvi series. Its net income climbed 21 percent to 4.2 billion rupees ($62 million) in the 12 months ended March 2015 from a year earlier.
The government is also moving ahead with a long-pending proposal to sell a 10 percent stake in Hindustan Aeronautics Ltd., India’s biggest defense contractor, Gupta said.

The other government-controlled defense enterprises in Asia’s No. 3 economy are BEML Ltd., Mazagon Dock Ltd., Goa Shipyard Ltd., Garden Reach Shipbuilders & Engineers Ltd., Mishra Dhatu Nigam Ltd. and Hindustan Shipyard Ltd. The state controls about 54 percent of BEML, while the other companies are government owned.


Investor Interest
Modi’s policy changes to encourage domestic output include fewer curbs on foreign investment in defense, looser export controls and less red tape. His government has set a goal of boosting arms exports 20-fold in a decade to $3 billion. India is currently one of the world’s top importers.


The changes have stirred investor interest. Bharat Electronics, whose products include naval systems, has surged 135 percent since the premier took office in May 2014. The benchmark S&P BSE Sensex index rose 1.3 percent over the same period. BEML, which makes everything from missile launchers to armored vehicles, advanced 81 percent.

Zen Technologies Ltd., which sells training simulators to the armed forces, surged 764 percent. Astra Microwave Products Ltd., a maker of communications products, advanced 33 percent.

"Divestment will provide capital for growth and enough transparency to drive efficiencies, though structural changes will be required for the state-run defense companies to be more attractive for investors," said Anurag Garg, a director of defense at Strategy&, a consulting group of PricewaterhouseCoopers LLP.


Inefficiency
Globally, defense and aerospace companies have about twice as many orders as revenue, Garg said. That can stretch to 10 times revenue at Indian state-run defense businesses, an indication of lagging performance that has affected the armed forces, he said.

Government-managed defense contractors will face greater private-sector competition in the future, the defense ministry’s Gupta said.
They thus "need to ensure optimal utilization of their resources in view of the fast obsolescence of their products, in order to remain financially viable," he said.
Source>>

 

[Indx TechStyle]

India Is Putting Part of Its Nuclear-Missile Maker Up For Sale
The country is seeking to divest 20 percent of each state-owned defense company -- including nuclear-missile maker Bharat Dynamics Ltd. -- to boost their efficiency, Defence Production Secretary A. K. Gupta said. India also plans to cut its 75 percent shareholding in Bharat Electronics Ltd., he said.

"We’re going ahead with the disinvestment so that we can have more transparency and accountability," Gupta, one of the defense ministry’s top bureaucrats, said in an interview in New Delhi. He was referring to Bharat Dynamics and didn’t give any timelines.

India’s goal is an ambitious $150 billion modernization of its sometimes poorly equipped armed forces, including more local production to curb a flood of costly imports. One of Prime Minister Narendra Modi’s challenges is to improve state defense companies, which account for the bulk of domestic weapons output but are strained and lack the most modern technology.

Bharat Dynamics, based in the southern city of Hyderabad, is over four decades old and manufactures India’s strategic missiles such as the nuclear-capable Agni and Prithvi series. Its net income climbed 21 percent to 4.2 billion rupees ($62 million) in the 12 months ended March 2015 from a year earlier.
The government is also moving ahead with a long-pending proposal to sell a 10 percent stake in Hindustan Aeronautics Ltd., India’s biggest defense contractor, Gupta said.

The other government-controlled defense enterprises in Asia’s No. 3 economy are BEML Ltd., Mazagon Dock Ltd., Goa Shipyard Ltd., Garden Reach Shipbuilders & Engineers Ltd., Mishra Dhatu Nigam Ltd. and Hindustan Shipyard Ltd. The state controls about 54 percent of BEML, while the other companies are government owned.


Investor Interest
Modi’s policy changes to encourage domestic output include fewer curbs on foreign investment in defense, looser export controls and less red tape. His government has set a goal of boosting arms exports 20-fold in a decade to $3 billion. India is currently one of the world’s top importers.


The changes have stirred investor interest. Bharat Electronics, whose products include naval systems, has surged 135 percent since the premier took office in May 2014. The benchmark S&P BSE Sensex index rose 1.3 percent over the same period. BEML, which makes everything from missile launchers to armored vehicles, advanced 81 percent.

Zen Technologies Ltd., which sells training simulators to the armed forces, surged 764 percent. Astra Microwave Products Ltd., a maker of communications products, advanced 33 percent.

"Divestment will provide capital for growth and enough transparency to drive efficiencies, though structural changes will be required for the state-run defense companies to be more attractive for investors," said Anurag Garg, a director of defense at Strategy&, a consulting group of PricewaterhouseCoopers LLP.


Inefficiency
Globally, defense and aerospace companies have about twice as many orders as revenue, Garg said. That can stretch to 10 times revenue at Indian state-run defense businesses, an indication of lagging performance that has affected the armed forces, he said.

Government-managed defense contractors will face greater private-sector competition in the future, the defense ministry’s Gupta said.
They thus "need to ensure optimal utilization of their resources in view of the fast obsolescence of their products, in order to remain financially viable," he said.
Source>>

Sell them to Taiwan, Vietnam, Japan, Mongolia, South Korea and Kazakhstan.
At least, red problem will be reduced to some extent.

 

[sorcerer]

Sell them to Taiwan, Vietnam, Japan, Mongolia, South Korea and Kazakhstan.
At least, red problem will be reduced to some extent.

They are selling off the stakes to pvt players..like Reliance...Tata or Mahindra... I dont think foreign players will be encouraged in these companies...

 

[Screambowl]

India’s goal is an ambitious $150 billion modernization of its sometimes poorly equipped armed forces, including more local production to curb a flood of costly imports. One of Prime Minister Narendra Modi’s challenges is to improve state defense companies, which account for the bulk of domestic weapons output but are strained and lack the most modern technology.

So they are always poorly equipped, as I am hearing this since I am born, and will remain poorly equipped because India does not have the technology. Or Media does not glorify the technology India has?

I guess a lot of snakes in India are malign the image of Indian industry like they did with tejas. India's clandestine agency must try to set these media personal.

 

[sorcerer]

So they are always poorly equipped, as I am hearing this since I am born, and will remain poorly equipped because India does not have the technology. Or Media does not glorify the technology India has?

I guess a lot of snakes in India are malign the image of Indian industry like they did with tejas. India's clandestine agency must try to set these media personal.

The problem is sometimes at policy level..we let the poison work in the system...to the effect that the poison becomes ineffective... and never work ever again on us!

The root is to withstand and survive such poison.

 

[Screambowl]

The problem is sometimes at policy level..we let the poison work in the system...to the effect that the poison becomes ineffective... and never work ever again on us!

The root is to withstand and survive such poison.

It demotivated the youth, that's the only problem. Slows down India's aggressive development and policy making. In the long run of course it will not affect.

 

[Panjab47]

It's more just startup funding for Tata & reliance. Don't think foreign will be allowed.

This way they can set up system immune to congress, & readily transfer tech between public & private.

 

[sorcerer]

It demotivated the youth, that's the only problem. Slows down India's aggressive development and policy making. In the long run of course it will not affect.

Yes..it did have its biggest side effect. and its a huge problem.
With a proactive Government in the center which sends positive signals to the youth through interaction and engagement..this can be avoided to an extent.

But at the same time...more and more avenues...skill development..restructuring has to be made...constantly...in real world.

The "feeling" of governance itself is a biggest motivating factor...unfortunately..this is the nerve on which the media is doing their tapdance.