Defence Acquisition Procedure

• IAS NEXT, Lucknow
• 27, Apr 2022

Reference News:-

Defence Acquisition Procedure (DAP) 2020 has been amended based on the approvals accorded by Defence Acquisition Council (DAC) in respect of the following:

1. Going forward all modernisation requirements of the Defence Services and Indian Coast Guard are to be indigenously sourced irrespective of the nature of procurement.
2. Import of defence equipment/sourcing from Foreign Industry of capital acquisitions should only be an exception and undertaken with specific approval of DAC/Raksha Mantri.
3. Requirement of Integrity Pact Bank Guarantee (IPBG) has been dispensed with. Instead, Earnest Money Deposit (EMD) will be taken as a bid security for all acquisition cases with Acceptance of Necessity (AoN) cost more than Rs 100 crore. 

DAP 2020:

• The new policy superseded the Defence Procurement Procedure of 2016 from October 1.
• The DAP contains policies and procedures for procurement and acquisition from the capital budget of the MoD in order to modernise the Armed Forces including the Coast Guard. 

Highlights of the new policy:

1. 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. 

1. 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. 

1. 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. 

1. 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.)

1. 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.