Latest defence procurement procedure unveiled

New Delhi, Jan 13 (PTI) Defence ProcurementProcedure-2011 was unveiled here today with major changes inthe offsets policy to provide a level-playing field to theprivate sector in warship building.

Under the refined policy, the scope of offsets hasbeen expanded to the "inter-linked" civilian aerospace and theinternal security sector as it was "difficult" to absorb themin the defence industry alone, Defence Minister A K Antonysaid unveiling the DPP.

"Over the last five years, it was getting difficult toabsorb the offsets in defence sector. So, we decided to expandit to the inter-linked civilian aerospace and internalsecurity sectors," he said.

Under the DPP, any foreign company bagging deal worthover USD 300 million has to invest back at least 30 per centof it into Indian defence sector.

After the changes, the investments would be allowed tobe made in the civil aerospace and internal security sectoralso.

The policy change is likely to give a huge fillip tothese two sectors as investments worth billions of dollars areexpected to be made in view of the large number of offsetsdeals to be signed in the near future as India looks to spendover USD 80 billion for defence acquisitions.

On encouraging the participation of private industriesin warship building, the Defence Minister said, "there wouldno nomination for the Defence shipyards as there will becompetition in all the tenders for constructing ships andsubmarines for the Navy."

Asked whether the Government would continue to protectits Defence PSUs, the Minister said, "they alone can''t meetthe ever increasing requirements of the defence forces. Themain thrust of the policy is to create a strong industrialbase combining both public and private sector and promoteindigenisation."

The Ministry has removed the clause for blacklistingvendors for delay in delivery of equipment in fast-trackprocurement cases has been removed but the liquidated damageshave been marginally enhanced to ensure greater accountabilityby vendors.

Acknowledging there were delays in procurement ofdefence systems, the Defence Minister said the purchases weremade using public money and a balance had to be maintainedbetween speedy procurements and transparency.

DPP has been produced by the Ministry to enabledecisions regarding defence capital acquisition for the armedforces to be made in a cost effective, timely and transparentmanner and has evolved through amendments in 2003, 2005,2006, 2008 and 2009.