Topics Covered: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
New Defence Acquisition Procedure of 2020 (DAP 2020):
DAP 2020, which will govern the procurement of defence equipment from the capital budget, was recently unveiled.
- The new policy will supersede the Defence Procurement Procedure of 2016 from October 1.
Highlights of the new policy:
- Reservations for Indigenous firms:
The policy reserves several procurement categories for indigenous firms.
- DAP 2020 defines an “Indian vendor” as a company that is owned and controlled by resident Indian citizens, with foreign direct investment (FDI) not more than 49 per cent.
- New Buy (Global–Manufacture in India) category:
This stipulates indigenisation of at least 50 per cent of the overall contract value of a foreign purchase bought with the intention of subsequently building it in India with technology transfer.
- Meeting the difficult indigenisation requirement would force the vendor to build the equipment in India, rather than supply most of it ready-built from abroad.
- Greater indigenous content:
It promotes greater indigenous content in arms and equipment of the military procures, including equipment manufactured in India under licence. In most acquisition categories, DAP-2020 stipulates 10 per cent higher indigenisation than DPP 2016.
- Measuring indigenous content:
Indigenous content will now be calculated on ‘Base Contract Price’, that is Total Contract Price, less taxes and duties.
- Import embargo list:
The “import embargo list” of 101 items that the government promulgated last month has been specifically incorporated into DAP 2020. (An embargo is a government order that restricts commerce with a specified country or the exchange of specific goods.)
- Offset liability:
The government has decided not to have an offset clause in procurement of defence equipment if the deal is done through inter-government agreement (IGA), government-to-government or an ab initio single vendor.
- The offset clause requires a foreign vendor to invest a part of the contract value in India.
- What is offset liability?
- What is Base Control Price?
Discuss the significance of the policy.