The Hindu Business Line : Defence: Govt to partner industry

OPENING UP: The Defence Minister, Mr Pranab Mukherjee, at the `Defence Procurement Procedure 2006' release function in New Delhi on Wednesday. — S. Subramanium

New Delhi , Aug. 30

The Defence Ministry on Wednesday announced a new procurement procedure that would allow the Indian industry to participate in defence research, development and production. Under this new procedure, the Government will partner with Indian industry for the development of defence equipment and systems along with sharing of costs.

Releasing the Defence Procurement Procedure (DPP) 2006 here, the Defence Minister, Mr Pranab Mukherjee, said, "This bridges a critical gap that existed till now and would provide the requisite framework for increased participation of Indian industry in the defence sector.'' The new DPP would be implemented from September 1.

At present, the companies that have an engagement with the defence sector include L&T, Tata Motor and Tata Power, Kirloskar, Ashok Leyland, and Mahindra and Mahindra. While no domestic private company manufactures any weaponry or ammunition, they manufacture and supply rocket launchers, weapon systems, engines for Naval ships and heavy vehicles for the defence sector.

Under the new DPP, strategic, complex and security sensitive systems would continue to be projects under the Defence Research and Design Organisation (DRDO), while low technology mature systems would be categorised as "Buy Indian'' and must have minimum 50 per cent indigenous content. High technology complex systems would be undertaken by Indian industry, defence public sector undertakings or ordnance factories or a consortium of these on a level-playing field basis.

Explaining the new procedure, Mr Mukherjee said there would be sharing of development costs with two identified vendors, to be chosen through a transparent selection process. The prototypes developed by the two vendors would be evaluated technically and commercially before final selection. After the successful prototype has been identified, the procedure provides for the placement of a minimum order quantity on the successful vendor.

The Minister added that the DPP 2006 was a comprehensive document with clearly stated norms. Besides, the offset policy was for all contracts above Rs 300 crore, the Minister said.

Also, to provide a level playing field between foreign and Indian vendors, the new procedure will compare c.i.f. prices of foreign vendors with the indigenous vendor's offer, after deducting excise duty, sales tax and local levies.

The procedure for indigenous warship building has also been reviewed with the objective of integrating systems acquired from different sources with indigenous systems on the same platform.

Besides, to expedite the acquisition of defence equipment, a revised and revamped fast track procedure has been formulated, which adopts a `top down' approach in which all critical decisions are taken in a collegiate manner by the Defence Acquisition Council. Moreover, the generic requirements of the three services would be placed on the Ministry's Web site so that vendors could register. There would also be an Integrity pact for all contracts above Rs 100 crore.