The new Defense Acquisition Procedure (DAP), approved by the Defense Ministry on Monday, has eliminated the need for foreign companies to invest at least 30 percent of the contract value in the Indian manufacturing sector if the deal is being signed. processing under government for government or single provider case.
Officials said this could result in savings, as anecdotal evidence suggests that foreign companies raise the contract price by 8-10 percent to accommodate the compensation clause. However, competitive multi-vendor procurement cases will continue to have the offset clause.
“No compensation has led to a technology transfer, most of it has to do with the purchase of products, as noted in a recent report by the Comptroller and Auditor General,” said Managing Director (Acquisition) Apurva Chandra in response to a query. by ET.
The official discussed aspects of the new DAP, in which significant changes have been made with the creation of new procurement categories to promote Make in India. As reported, a recent CAG report has been critical of the compensation policy, saying it has failed to bring in state-of-the-art technology, pointing to the Rafale fighter jet deal, where discussions have started on the exchange of engine technology.
The Rafale deal had faced controversies over France’s selection of compensation partners, after the opposition alleged favoritism towards Reliance Defense, which is executing part of the compensation worth $ 3.5 billion.
Officials noted that major Russian contracts under the government-to-government route did not involve offsets and said the amount of offsets is likely to drop significantly in the coming years. This reduction is expected to occur in conjunction with an increasing proportion of acquisitions made under the Make in India route.
Among other changes, the military will now be able to lease a variety of equipment, reducing acquisition time and costs. The armed forces can rent any equipment such as transport planes, trainers, or simulators. Given inadequate budget allocations, the option will be helpful for forces to obtain equipment on short notice.
The Ministry of Defense has also clarified in the new DAP that only companies that are more than 50 percent Indian-owned will be able to participate in Make in India’s key procurement categories. This includes the Strategic Partnership policy, Make I and 2 categories, and Designed and Manufactured in India (IDDM).
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