The armed forces will soon be allowed to take a variety of equipment on lease, cutting down acquisition time as well as costs as the defence ministry is revising its procurement rules to bring in some much needed changes.
The draft Defence Procurement Policy, released by Defence Minister Rajnath Singh, has special incentives for Indian designed and developed products, promotes the use of offsets for exports and has introduced a new category that will encourage foreign vendors to set up manufacturing facilities in India.
A significant change has been the provision to lease equipment like transport aircraft, trainers and simulators that do not have a direct combat role. “Leasing has been introduced as a new category for acquisition to substitute huge initial capital outlays with periodical rental payments,” the defence ministry has said.
Given the inadequate budgetary allocations, the option will come in handy for the forces to obtain equipment at short notice. Options for leasing trainer aircraft and transport helicopters have been made in the past to the ministry but were not taken up in the absence of a policy.
The ministry has also incorporated lessons from the past by formulating new `trial wings’ under different services of the armed forces that will specialise in conducting field evaluations. These wings will have personnel that will be given training to ensure a fair competitive process. In the past, trial teams have been manned by officers drawn from different roles, often resulting in the results being under par.
“Field Evaluation Trials to be conducted by specialised trial wings and the objective of trials will be to nurture competition rather than elimination for minor deficiencies,” the ministry has said.
The draft policy, which will be finalised after receiving inputs from the industry, also plans to increase the Indigenous Content (IC) stipulated in various categories by 10% to support the ‘Make in India’ initiative.
Significantly, there is a specific assurance in the policy to jet engine manufacturers and chip manufactures that the entire Indian market will be open if any company sets up a manufacturing unit domestically.
This would mean that if a company sets up shop here to manufacture, say fighter jet engines, it will be assured that the engine would be incorporated on the suitable home developed platform without a competition. The engines made here would be termed as `buyer nominated equipment’, meaning that they will compulsorily have to be fitted onboard the suitable platform.
While imports have already been at the bottom of the procurement priority list, they have been further pushed back with a new category to be introduced – Buy Global, Manufacture in India. This would require a minimum 50% indigenous content on cost basis of the contract value.
Other changes include new rules for the procurement of software and systems related projects where obsolescence is rapid, requiring a flexibility in approach. New rules on product support will incorporate new concepts like Performance Based Logistics (PBL), Life Cycle Support Contract (LCSC) and Comprehensive Maintenance Contract (CMC).
“With the experience gained by the industry and the Ministry of Defence (MoD), it is now time to take further steps to strengthen ‘Make in India’ initiative, refine Life Cycle Support of procured equipment & platforms and hasten the defence acquisition process by further simplifying the procedures & reducing the overall procurement timelines.” Defence Minister Rajnath Singh said at a ceremony to release the draft policy.