DPP-13 to liberalise defence procurement

India defence budget
With the Defence Ministry reluctant to bow down to the Commerce Ministry's demand for an increase in FDI, the new Defence Procurement Policy (DPP-13) will be a watered down version - compromise formula arrived between the two ministries.

Sources told FE, "The Ministry of Commerce had been pressurising the MoD for raising the cap on FDI, however, the new Defence Procurement Policy (DPP-13) that is coming out next month will emphasis will be laid on domestic weapon production over imports in an effort to create more opportunities for the private players to play a crucial role in the defence sector."

The new Defence Procurement Policy (DPP-13) would liberalise defence procurement further. This conformed to industry expectations, as it has been the trend in successive modifications to the Defence Procurement Policy (DPP-13) in 2005, 2006, 2008 and the currently valid Defence Procurement Policy (DPP)-2011.

Last week, defence minister AK Antony announced, "the government is going to have a second look at both the defense procurement procedure and the defense production policy and amend it in a manner so that the industry can take more interest in defense production."

The defence minister is now seen urging both the armed forces, public and private sector to synergise their competencies in creating capabilities for technologies in niche areas. "This would promote self-reliance and foster our endeavor towards modernization. It is important that the private sector emerges as a major player, fully geared to meet various operational requirements of our Armed Forces with requisite knowledge, expertise and wherewithal."

"A strong and vibrant partnership between the public and private sector is crucial for delivering the much-needed defence technological upgradation."

However, defence experts opine, "in an effort to boost homemade production, the government has been saying this for a decade, and yet it still imports a majority of its weapons because the domestic industry is not ready to produce high-tech equipment."

According to officers, the private industry should focus less on the high value, high technology weapons platforms (e.g. aircraft and tanks) on which the big defence money is spent. Instead, should should emulate the auto parts industry by setting up manufacturing units that were part of a global supply chain. These small units would form the backbone of a countrywide defence industrial base.

In the MoD's planning, such a defence industrial backbone is crucial for maintaining, repairing, overhauling and upgrading the complex defence platforms that are currently being bought overseas and manufactured under licence in India.

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