Defence Minister Rajnath Singh today unveiled Defence Acquisition Procedure 2020 that will come into effect from 1st October. The new policy has replaced the Defence Procurement Procedure (DPP), introducing a series of reforms to make India 'Atmanirbhar' in defence, the government claimed.
"The DAP 2020 has been aligned with the Prime Minister Shri Narendra Modi's vision of Atmanirbhar Bharat and empowering the Indian domestic industry through Make in India initiative with the ultimate aim of turning India into a global manufacturing hub," tweeted Rajnath, unveiling the policy.
Major changes in guidelines
In future government-to-government agreements, such as the Rafale agreement signed in 2016, the Defence Ministry has done away with offsets and also allowed the armed forces to procure military equipment on lease. The offset guidelines have been updated to give priority to offers to produce goods by defence majors, rather than just relevant parts, in India.
An official statement from Defence Ministry read, "The offset guidelines have also been revised, wherein preference will be given to the manufacturing of complete defence products over components and various multipliers have been added to give incentivisation in the discharge of offsets."
Doing away with the offset requirements for government-to-government contracts would considerably lower the cost of the project. As per offset of 2005, the foreign vendor was mandated to invest in India at least 30 per cent of the entire value of the purchase. The per cent went up steeply to 50 per cent in case of Rafale deal which India signed in 2016. Generally, India never included an offset clause in a government to government deal; for instance, with Russia there was never an offset deal signed.
Further, the DAP 2020 also includes a detailed chapter on Leasing, a concept that was introduced for the first time in the draft issued in April 2020. Under leasing, the defence forces will be allowed to lease the defence equipment from companies or foreign countries instead of purchasing. The process intents to save money from the defence budget which is one of the lowest since the 1962 India-China war and is expected to tank further due to COVID-19 pandemic.