NEW DELHI: To encourage “aatmanirbharta” (self-reliance) in defence manufacturing and reduce the financial burden on local industry, India on Monday announced that all modernisation requirements of the armed forces will be met indigenously, and domestic industry will not have to furnish “integrity pact bank guarantees” for acquisitions costing more than ₹100 crore.
These were among the key changes brought in by the amendment of the Defence Acquisition Procedure (DAP) 2020 based on the approvals given by the Defence Acquisition Council (DAC) – India’s apex defence procurement body.
“Going forward, all modernisation requirements of the defence services and the Indian Coast Guard are to be indigenously sourced irrespective of the nature of procurement. 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,” the defence ministry said in a statement on Monday.
The requirement of “integrity pact bank guarantee” has been done away with on the advice of the finance ministry while maintaining safeguards to check wrongdoing in the defence business. An integrity pact prohibits paying or receiving bribes and the bank guarantee can be encashed by the government in case of violations.
“Instead, earnest money deposit (EMD) will be taken as a bid security for all acquisition cases with Acceptance of Necessity (AoN) cost more than ₹100 crore. EMD will be valid for the selected vendor up to signing of contracts and returned to remaining vendors post declaration of selection. Post contract, integrity pact [to check corruption] will be covered through the Performance cum Warranty Bank Guarantee (PWBG),” the ministry statement said.
Under India’s defence procurement rules, AoN by the defence acquisition council is the first step towards buying military hardware.
The defence ministry will also encourage wider participation of the indigenous defence manufacturing sector in the procurement process to boost “aatmanirbharta”.
“To encourage wider participation and broad base indigenous defence manufacturing sector in the country, the total order quantities in acquisition cases are to be split between shortlisted vendors, wherever viable,” the statement said.
“Further, the other technically qualified bidders who have not been awarded contract will be issued a certificate by the services indicating that the product has been successfully trial evaluated to facilitate vendors to explore other markets,” it added.
The government is creating an ecosystem to boost defence manufacturing in the country with the long-term aim of setting up a robust military-industrial complex, said former director general of military operations Lieutenant General Vinod Bhatia (retd). “The military-industrial complex will not only be capable of meeting India’s military needs but will also help the country export military hardware,” he added.
The new measures come on the back of a series of steps taken by the government to promote self-reliance in the defence sector.
India has imposed a phased ban on the import of 310 different weapons and systems during the last two years. These weapons and platforms will be indigenised in phases over the next five to six years.
Last week, the defence ministry said it exceeded its target for indigenous defence purchases in 2021-22 indicating a major boost to the country’s push towards self-reliance
The defence ministry earmarked 64% of the capital acquisition budget for the domestic industry in 2021-22 but it was able to “overachieve this target” and local military purchases accounted for 65.5% of the capital budget, according to data from the defence ministry.
The total capital expenditure for 2021-22 stood at ₹1,14,910 crore of which, ₹75,140 crore was spent on local weapons and systems. The rest of the money was spent on weapons from foreign sources.
