The Government of India has taken steps to streamline the process of obtaining approval for private manufacturing of defense and aerospace equipment. The steps include bringing such equipment under the licensing authority of the Department of Industrial Policy and Promotion (DIPP), part of the Ministry of Commerce and Industry, and reclassifying the items in three categories. This major move is expected to benefit both domestic small and medium enterprises (SMEs) and foreign Original Equipment Manufacturers (OEM) looking for partnerships.
Reclassification under IDRA Act
The equipment in question is now segmented into three distinct categories, namely defense aircraft, different types of warships, and other allied defense equipment. Previously, these items were governed by two acts, the Industries (Development and Regulation) Act, 1951(IDRA act) and the Arms Act, 1959. Now, however, these defense items no longer need a license under the Arms Act and are solely covered by the IDRA act, simplifying the procedure.
Impact on Warship Manufacturing
One key change is the inclusion of all types of warships, both surface and subsurface, in the listing. This inclusion is not just significant domestically but is also anticipated to be beneficial for foreign OEMs searching for Indian private sector partnerships. These partnerships could, in turn, provide a boost to Indian industry, particularly SMEs, further driving economic growth.
Revision of the Defense Procurement Procedure
In its quest to streamline defense manufacturing, the government instituted the Dhirendra Singh Committee in May 2015. Its purpose was to review the existing Defense Procurement Procedure (DPP) from 2013. Subsequently, based upon the committee’s recommendations, the DPP-2016 was launched, replacing the earlier version. The newer model emphasizes the promotion of indigenous design, development, and manufacturing of defense wares, giving a fillip to the ‘Make-in-India’ initiative.
Introduction of New Procurement Class
As part of DPP-2016, the government has introduced a new procurement class named “Buy Indian (IDDM).” Here, IDDM represents ‘Indigenous Designed Developed and Manufactured.’ Once the DPP is operational, this class will take precedence in all acquisitions. Moreover, the ‘Buy (Indian)’ and ‘Buy and Make (Indian)’ categories have been given preference over their global counterparts.
| Procurement Category | Preference Order |
|---|---|
| Buy Indian (IDDM) | 1 |
| Buy (Indian) | 2 |
| Buy and Make (Indian) | 3 |
| Buy (Global) | 4 |
| Buy & Make (Global) | 5 |
Establishment of the Strategic Partnership Model
The Ministry of Defence has developed a new Strategic Partnership (SP) model under the amended Defense Procurement Procedure (DPP). This model, designed to boost private sector participation in defense manufacturing, covers four specific sectors – aircraft, submarines, helicopters, and armored vehicles. It aims to improve competition, increase efficiencies, accelerate technology absorption, reduce reliance on imports, and bolster self-reliance in the defense manufacturing sector. Thus, the SP model serves as an added category to the existing ones, and its implementation is expected to bring about significant changes in the defense manufacturing landscape.
