Context

The government issued the draft Defence Procurement Procedure (DPP) 2020 on Friday, wherein it introduced "leasing" as another category to get defence equipment at affordable rates.

About

• The Defence Procurement Procedure(DPP), as it is commonly referred to, provides the guidelines for all capital acquisitions to be made by the Ministry of Defence including the Armed Forces.
• The DPP was first introduced in 2002 to provide probity, transparency and a structured procedure which would streamline the procurement of military hardware for the Armed Forces in a time bound manner.
• While the DPP has definitely succeeded in introducing probity and transparency and has greatly diminished the influence of shady arms dealers much to the benefit of the system and the Armed forces, the rigidity of the procedure has been detrimental to the acquisition process.
• The DPP has been a work in progress since its initiation in 2002 and though successive iterations in 2006, 2008. 2011, 2013 and 2016 have ‘improved’ upon the initial document; the results have flattered to deceive.

What’s in the new DPP?

• In the new DPP, a new category of "Buy (Global-Manufacture in India)" has been introduced, which is on number five priority-wise.
  • Foreign vendors' products that have a minimum of 50 percent indigenous content will come under this new category.
• Long-term support: The DPP 2020 also envisions long-term product support -- which would be three to five years after the warranty period is over.
  • To sustain and support platform/equipment through its operational life-cycle, the service headquarters will ensure that product support requirements for at least 3 to 5 years beyond the warranty period will be procured along with the main equipment.
• Promoting domestic industries: To facilitate greater participation of the Indian industry and develop a robust defence industrial base, use of indigenous raw materials, special alloys and software has been incentivised.
• Price variation clause: Moreover, a "price variation clause" has been introduced that will be applicable to all cases where the total cost of contract is more than Rs 1,000 crore and the delivery schedule exceeds 60 months.
• Leasing: Leasing is introduced as a new category for acquisition, in addition to the existing 'Buy and Make' category to substitute huge initial capital outlays with periodical rental payments.
  • Leasing is permitted under two categories i.e lease (Indian), where the lessor is an Indian entity and the owner of the assets, and lease (global), where the lessor is a global entity.
    
    

Significance of DPP:

• Empowering private industries: The DPP-2020 is aligned with the vision of the government to empower the private industry with the ultimate aim of turning India into a global manufacturing hub.

Promoting ‘Make in India’ initiative: Moreover, the indigenous content stipulated in various categories of procurement was enhanced to support the "Make in India" initiative.