New Indian Defense Policy Favors Domestic Sourcing

By Jay Menon
Source: AWIN First
April 22, 2013
Credit: Aeronautical Development Agency

India’s defense ministry has unveiled a new set of rules aimed at boosting the country’s indigenous defense industry by making procurement from foreign vendors only a last option.

The Defense Acquisition Council (DAC), the top decision-making body of India’s defense ministry, has cleared amendments to the Defense Procurement Procedure (DPP) to give priority to domestic public and private sector firms for major military procurements, thus reducing the country’s dependence on imports.

“The only way forward for the country is rapid indigenization of defense products, with both the public and the private sectors playing pivotal roles in this endeavor,” Defense Minister A.K. Antony says. Increased indigenization is important for the armed forces so that they have access to reliable supply chains in times of urgent need, Antony says.

Under the amended rules, the DAC has laid down a preferred order for procurement, with direct purchase from abroad as the final option. “Preference for indigenous procurement has now been made a part of DPP through an amendment that provides for a preferred order of categorization, with global cases being a choice of last resort,” defense ministry spokesman Sitanshu Kar says.

The first option will be to buy from India, followed by “buy and make India,” in which private and public sector firms can team with foreign vendors to produce foreign-developed military equipment within the country. Other less desirable options include “buy and make with transfer of technology,” and “buy global,” Kar says.

The armed forces will have to clearly state the reason for choosing options farther down the list. The new rules say that all deviations from the procurement procedure will now need to be approved by the DAC, which is headed by the defense minister and includes three service chiefs as members. Until now, the defense minister alone could give such permission.

The new policy will also end the monopoly of state-owned firms and ordnance factories in the defense sector, since private firms will be allowed to compete for maintenance and repair of systems procured from abroad.

“This is expected to have a positive impact on private sector participation in maintenance, repairs and overhaul work,” Kar says. 

The new rules are also aimed at boosting transparency in defense deals, to avoid controversies such as the bribery scandal surrounding the AW101 VIP helicopter deal with Finmeccanica subsidiary AgustaWestland. 

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