The defence ministry’s rebranded Defence Acquisition Policy focuses heavily on self-reliance by discouraging off-the-shelf imports and increasing indigenous content in imported hardware

Defence minister Rajnath Singh today released the government’s Defence Acquisition Procedure (DAP)-2020, a renamed version of the Defence Procurement Policy (DPP). The DAP-2020 lays down guidelines for the ministry of defence (MoD) to acquire weapons and equipment. The DPP has been revised in 2005, 2006, 2008, 2009, 2011 and 2013, adding new categories like ‘Make’, ‘Buy and Make’ and ‘Make (Indian)’ as well as the concept of offsets and ship-building procedures since governments, over the years, have pursued ways to reduce India’s crippling dependence on imported military hardware.

The DAP-2020, which has been in the works for a year, is significantly focused on indigenisation and realising the government’s ‘Atmanirbhar Bharat (self-reliant India)’ goal. Among the highlights are the notification of a list of weapons and platforms banned from imports, the indigenisation of imported spares, and exploring the willingness of prospective foreign vendors to progressively undertake manufacturing as well as setting up of indigenous ecosystems even at the spares and sub-component levels.

As part of its plan to leverage India’s position as the world’s second-largest arms importer and kick-start an indigenous defence ecosystem, the DAP has introduced a new category of ‘Buy (Global-Manufacture in India)’. ‘Buy (Global)’ is a category where the entire platform is imported from a foreign supplier with no production in India. ‘Buy (Global-Manufacture in India)’ calls for ‘manufacturing either the entire or a part of the equipment or spares and assemblies and sub-assemblies, maintenance, repair and overhaul for the equipment through its subsidiary in India’.

The MoD reasons this is being done to encourage foreign OEMs (original equipment manufacturers) to set up ‘manufacturing/maintenance entities’ through their subsidiaries in India while enabling requisite protections to the domestic industry.

What the DAP does, or at least intends to do, is to effectively end off-the-shelf purchases, which do not have any indigenous content (IC). ‘Buy (Global)’ has traditionally been at the bottom of MoD’s desirability chart, topped by Indigenously Designed Developed and Manufactured (IDDM) products. This is because off-the-shelf products involve a huge foreign exchange outgo and no technology benefits to Indian firms apart from lifelong dependence on the supplier for spares and servicing. These acquisitions, however, go through because often no competing systems are available. A case in point being the five S-400 missile systems worth $5.43 billion (Rs 40,058 crore) that India bought off the shelf from Russia and the 10 C-17 Globemaster-III heavy lift aircraft purchased from the US for over $4 billion (Rs 29,509 crore).

In the revised ‘Buy (Global)’ category, the DAP stipulates that the OEM will need to put in Indian content to the tune of 30 per cent of the contract value. For ‘Buy (Global-Manufacture in India)’, the OEM will need to ensure that 50 per cent of the value of the contract is sourced from Indian firms. It remains to be seen how this policy will be implemented and how effective is the ‘simple and practical indigenous content verification process’ that the MoD claims to have put in place.

India plans to spend $130 billion (Rs 9.59 lakh crore) on military modernisation over the next five years. The government has opened up the defence industry for private sector participation to provide an impetus to indigenous manufacturing. The opening up of the industry also paves the way for foreign OEMs to enter into strategic partnerships with Indian companies. In May, the government allowed foreign companies to own 74 per cent stake in Indian defence companies, up from the 49 per cent earlier.