What’s in the news?

• The Defence Ministry has removed the offset clause requirement in Inter-Governmental Agreements (IGA) in the new Defence Acquisition Procedure (DAC) 2020.

New Defence Acquisition Procedure (DAC) Features:

For making the process faster

• Project Management Unit– To streamline the acquisition process and for contract management
• There will be no offset clause in government-to-government, single vendor and Intergovernmental Agreements (IGA).
• Under the new policy offset guidelines have been revised, wherein preference will be given to manufacture of complete defence products over components and various multipliers have been added to give incentivisation in discharge of offsets
  • Multiplier value refers to a factor applied to the actual value of an offset transaction to calculate the offset credit value earned. Buyers use multipliers to provide sellers with incentives to offer offsets in targeted areas of their choice. The standard multiplier value is 1.
• Scope of trials will be restricted to physical evaluation of core operational parameters, other parameters may be evaluated based on vendor certification, certification by accredited laboratories, computer simulations of parameters

For making India a manufacturing hub

• A new category – ‘Buy (Global-Manufacture in India)’ to encourage foreign OEMs to set up “manufacturing or maintenance entities through its subsidiary in India”. The new guidelines encourage the manufacturing of the entire equipment rather than just components and spares.
• This will bring FDI and will create more jobs

For helping Indian businesses

• Category- Buy (Indian Indigenously Designed Developed and Manufactured -IDDM)– this is exclusively for Indian sellers.
• Indigenisation of Imported Spares
• Notified items will be banned for import 

Additional Details

• Defence Procurement Procedure (DPP) was promulgated first in 2002
• It contains policies and procedures for procurement and acquisition from the capital budget of the Ministry of Defence  for the Army, Navy, Air Force and the Coast Guard.

What is an offset clause?

• Under defence offset, a foreign supplier of equipment agrees to manufacture a given percent of his product (in terms of value) in the buying country. Sometimes this may take place with technology transfer.
• To develop the Indian defence industry and bring in high technologies, the offset policy was adopted by India in 2005 for all capital defence purchases above Rs 300 crore made through imports. The foreign vendor, or Original Equipment Manufacturer (OEM), was required to invest at least 30 per cent of the value of the purchase in India’s defence or aerospace sectors.

Other Defence Initiatives:

Defence Production and Export Promotion Policy 2020 (DPEPP 2020)

• to provide a focused, structured and significant thrust to defence production capabilities of the country for self-reliance and exports.
• to achieve a turnover of Rs. 1 lakh 75 thousand Crore including an export of Rs. 35 thousand Crore in the Aerospace and Defence goods and services by the year 2025.
• Developing a dynamic, robust and competitive Defence industry, including Aerospace and Naval Shipbuilding industry to cater to the needs of Armed forces with quality products has also been clearly laid out in the new draft policy.
• Efforts will be made to create an environment that encourages Research and Development, rewards innovation, creates Indian IP ownership and promotes a robust and self-reliant defence industry.
• The Ministry has also laid emphasis on reducing dependence on imports and taking forward the Make in India initiatives through domestic designs.

Innovations for Defence Excellence (iDEX) Initiative

• iDEX aims at creation of an ecosystem to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, start-ups, individual innovators, R&D institutes & academia. And provide them grants/funding and other support to carry out R&D which has good potential for future adoption for Indian defence and aerospace needs.
• iDEX will be funded and managed by a ‘Defence Innovation Organization (DIO)’ which has been formed as a ‘not for profit’ company as per Section 8 of the Companies Act 2013 for this purpose

Artificial Intelligence in Defence- 

• N Chadrasekharan Task Force was set up in 2018 to study the use of AI in national security.

Mission Raksha Gyan Shakti

• Aimed to boost the IPR culture in the sector of indigenous defence.

Reference:

1. https://www.thehindu.com/news/national/changes-to-defence-procurement-procedure-approved/article25041209.ece