The new DAP, which will come into effect on October 1, seeks to empower the national defense industry through the ‘Make in India’ initiative with the ultimate goal of turning India into a global manufacturing hub, said the minister of defender Rajnath Singh.
Defense Ministry officials, in turn, admitted the 15-year compensation policy, according to which at least 30% of the total value of the contract had to be reinvested in India as reinvestments, “charged additional costs” on the contracts and it failed to bring critical military technology into the country. Foreign companies are known to raise the contract price by 8-10% to meet their compensation commitments, they said.
“Therefore, the offsets will not be applicable in the future in government-to-government agreements, IGA (intergovernmental agreement) and ab initio single vendor agreements,” said CEO (acquisitions) Apurva Chandra.
This is significant in light of the latest CAG report, presented in Parliament last week, which criticized French companies Dassault Aviation and MBDA for failing to meet compensation obligations so far by offering “high-tech” to India. under the 59,000 crore rupee Rafale fighter. agreement signed in September 2016.
The CAG had called for a major overhaul of the entire compensation policy, stressing that it had “barely met the objectives” of incorporating advanced technology, attracting FDI and strengthening the national defense industrial base.
Under the new DAP, offsets will continue in agreements that have multiple vendor competition and bidding. “The compensation guidelines have been revised, in which preference will be given to the manufacture of complete defense products rather than just components in India. Various multipliers have been added to incentivize the offloading of offsets, ”said Chandra.
The other big takeaway from the new DAP was the introduction of the new lease provision, which will allow the armed forces to rapidly hire transport aircraft, air refueling aircraft, helicopters, simulators and the like for urgent operational requirements without great cost initials. and paying for its maintenance.
The DAP also places greater emphasis on “time bound” defense procurement processes and “faster decision making” by establishing a project management unit, developing GSQR (General Staff Qualitative Requirements) Realistic and verifiable review and test procedures and breathless testing. With the military framing impractical technical parameters in its search for advanced weapons, the time-consuming search often ends nowhere.
The DAP also provides for a single-stage AoN (acceptance of need) agreement in all cases up to Rs 500 million to reduce delays, while incorporating new provisions on information and communication technology, post-management contract and acquisition of systems designed and developed by DRDO, Ordnance Factory Board and defense PSU.
With the recent decision to increase the FDI limit to 74% from the 49% existing in the defense production sector through the automatic dispatch route, the DAP incorporates a new category called ‘Purchase (Global – Manufacture in India). “This will encourage foreign companies to establish manufacturing / maintenance entities through their subsidiaries in India, while allowing the necessary protections for domestic industry,” said an official.
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