INTRODUCTION:

The process through which the authorities in the field of defence acquire various goods, services or work in order to perform their duties and missions is called as the defence procurement. The objective of this procedure is to make sure prompt procurement of the approved requirements of the soldiers in terms of capabilities sought in the prescribe time-frame with optimum utilisation of the allocated budgetary resources. The DPP was introduced in 2002 to provide probity, transparency and structured procedure. The DPP has been a work-in-progress since 2002 till date. The Ministry of Defence has recently released the draft Defence Procurement Procedure 2020 it amends the existing military procurement rules in line with Government’s long-run target to boost defence capability and reduce imports under the ‘Make in India’ initiative.

HISTORICAL BACKGROUND:  

India is the 3^rd largest armed forces and 10^th largest defence spender in the world and it spends around 2% of its GDP to defence. Also an FDI of 26% is allowed in this industry[1]. The post-independence defence procurement in India was heavily influenced by an ideology preference for public sector and high dependence on one foreign exporter that’s the USSR. There was no transfer of technology and domestic capacity was often confined to integration of systems under licensing. With the recommendations of the Public Accounts Committee of Parliament in 1989, the Government had issued the Procedure for Defence Procurement in February, 1992, to put in place robust processes for defence purchases. The guidelines provided for a long term perspective plan (LTPP), 5 year acquisition plan and ‘Make’ and ‘Buy’ decisions. A Defence Acquisition Council (DAC) was formed chaired by the Defence Minister after the Kargil War. A dedicated structure for defence with technical, finance and acquisition managers with an appropriate skill set was created. A Defence Procurement Manual (DPM) was in 2009 notified to regulate procurement of goods and services under revenue head by organizations under the Ministry of Defence. In 2011 a Defence Production Policy was issued which aimed towards ‘substantive self reliance in design, development and production of equipments, weapon systems and platforms required for defence in as early a time frame as possible[2]’.

LEGAL ANALYSIS:

There is no ad hoc codified law for Defence Procurement it’s under the head of defence is controlled and supervised solely by Defence Procurement Policy (DPP). The Ministry of Defence is headed by Defence Minister who overall regulates the armed forces of the Nation whereas the Supreme Command of the Armed Forces vests in The President. The Ministry of Defence keeps a keen eye upon the policies obtained by Government and its implementation by the books within the allocated resources. The Ministry has 4 departments:

1. Defence Research and Development Organisation (DRDO)
2. Department of Defence Production (DDP)
3. Department of Defence (DOD)
4. Department of Ex-Serviceman Welfare (DESW)

Lack of transparency of procedure and accounts lies throughout this sector. It has been the host of the most humiliating scams and scandals India has faced countless scandals in the defence sector some of them are:

1. Bofors scandal
2. 2013 Indian Helicopter Bribery scandal
3. Jeep scandal
4. Barak missile scandal
5. Scorpene Deal scam
6. Kargil coffin scam[3]

A codified law is strictly needed which can regulate the defence procurement and which can be a watch dog for the matters related to defence procurement. Also transparency in procurements is a necessity to penalize corrupt policies as well as people.

CHANGES PROPOSED:

The draft Defence Procurement Procedure 2020(DPP) was released by the Ministry of Defence and it proposes vital amendments with the objective of growing domestic capability and also achieving national security objectives. The draft was unveiled by Shri Rajnath Singh. The draft mainly proposes:

1. Boost to ‘Make in India’: The Defence Minister on the occasion said, ‘Our aim is to make India self-reliant and a global manufacturing hub. The government is consistently striving to formulate policies to empower the private industry including MSMEs so as to develop the eco-system for indigenous defence production. The defence industry of India is strategically important sector having huge potential for growth. It needs to be the catalyst for India’s economic growth and realisation of our global ambitions. [4]

The major changes proposed in the new DPP are:

1. Indigenous content ratio hiked: The draft proposes by about10% increase in the ‘Make in India’ initiative by use of raw materials, special alloys and software incentivised as use of indigenous raw materials.
2. Procurement on single vendor basis from Aero Engine manufacturing unit and chips from FAB manufacturing units.
3. New Category Buy (Global-Manufacture in India) has introduced with minimum 50% indigenous content on cost basis of total contract value. Only essentials would be bought from abroad and balance quantities be manufactured in India.
4. Leasing has been introduced as a new category to the existing ‘Buy’ and ‘Make’ categories which substitute huge initial capital outlays with periodical rental payments. It’s permitted under two categories where Lease (Indian) where Lessor is an Indian entity and is the owner of the assets and Lease (Global) where Lessor is a global identity.
5. The scope for Product Support has been widened to concepts like, Performance Based Logistics (PBL), Life Cycle Support Contract (LCSC), and Comprehensive Maintenance Contract (CMC) to optimise life cycle support. Capital acquisition contract would normally include 5 years beyond the warranty period.

CONCLUSION:

The DPP is an evolutionary document with its intent to increase indigenization it will continue to benefit stakeholder’s interaction and inputs. It includes many progressive clauses and it brings forward new concepts and procedures such as leasing of equipment as a new mode of acquisition, smoother execution of contracts and long term sustainment contracts for entire lifecycle of the product. It also achieves the objectives of Make in India with positive incentives towards investment in development and growth.

[1] FDI Statistics, Department Of Industrial Policy and Promotion

[2] Defence production Policy, Department of Defence Production (January 2011)

[3] India Today Web Desk, From Bofors to Rafale: Dubious defence deals that rocked India, India Today (2019)

[4] Raksha Mantri Shri Rajnath Singh unveils draft of Defence Procurement Procedure 2020

Author:

Shweta Tated, Legal Intern (July 2020)

Shweta Tated is an intern at Legal Desire. She’s pursuing her 3 Year LLB course from DES.Shri.Navalmal Firodia Law College (Ferguson College), Pune. She’s a Final Year student. She has subsequently completed her internship at Shivaji Nagar District Court, Pune.Corporate,Contract,Family,Evidence,IPR and Property Laws are the subjects of her interest. Her objective is to obtain excellence in legal service and also to utilize herself as a resource for all kinds of challenges by upgrading her knowledge and skills from time to time.