Indigenous defence products, a must

The government has tried to align the new Defence Procurement Procedure (DPP), announced by Defence Minister Manohar Parrikar, with the framework and objectives of its Make in India policy. The new DPP is yet to be notified but its important elements are clear. Most of it is based on the recommendations of an expert committee under former home secretary Dhirendra Singh. The highlight of the DPP is the emphasis on indigenous design, development and manufacture. It also proposes to encourage the small scale sector to take up a bigger share of manufacture than now. The existing policy had promoted indigenous manufacture but the new DPP goes further to lay down procedures that give greater priority to local production and incentivise the private sector in manufacturing and R&D efforts in the area.

To implement the new policy, the DPP has created a new category called Indigenously Designed, Developed and Manufactured (IDDM) products which will get preference over arms and equipment designed and made abroad. A company will be considered Indian only if it is controlled and operated by Indian nationals, so that there will not be any scope for legal disguises. Mandatory stipulations on local content will also ensure that the indigenous element gets due representation even if the design is foreign. These prescriptions are expected to give a push to design and manufacture of equipment within the country. They may take production away from licensed manufacture to local design and development. However, foreign companies may be pleased that the offsets limit has been raised from Rs 300 crore to Rs 2,000 crore. They were requi-red to procure 30 per cent of suppliers from Indian partners if they won a contract for Rs 300 crore and above. Raising this limit was a practical measure because the provision would have acted as a hindrance in many cases. However, this may also lead to reduction of investment by foreign companies.

Policies on blacklisting of foreign companies and agents for misdemeanour and selection of strategic partners in manufacturing have yet to be finalised. They will also have a bearing on the working of the DPP. India is the world’s biggest arms importer. If a good part of the arms and equipment is developed and produced within the country, that will reduce the import bill. It will give a boost to domestic industry and raise its standards. More importantly, it will also help avoid dependence on foreign vendors and countries, which can be fatal in emergencies. However, the entrenched psychology of preference for foreign arms and equipment has to change and industry has to acquire greater skills.