The new Defence Procurement Policy, intended primarily to improve indigenous procurement, but left out the most significant reform it had been promising. The DPP-2016

, made public to coincide with the latest edition of Def Expo in Goa, was expected to herald a new era in the way India’s private sector participates in defence procurement.


The Defence Minister said the policy had taken care of some of the issues raised by foreign companies and in another two or three months, the Ministry would take care of a few more issues that were pending. The new DPP can push the agenda of Make in India in a big way. While the FDI limit remains 49 per cent through the automatic route, a higher percentage can be considered on special cases, he said. The DPP recognises the role of small and medium enterprises in the sector, and a further boost will be given to it.
Pointing out that self-reliance is “a major corner-stone on which the military capability of any nation must rest,” the DPP says it is of “utmost importance that the concept of ‘Make in India’ remains the focal point of the defence acquisition policy/procedure.”
Under the new DPP, the government has introduced a newly incorporated procurement class called “Buy (Indian-IDDM)”, where IDDM stands for Indigenous Designed Developed and Manufactured.
The category refers to the procurement from an Indian vendor of either products that have been indigenously designed, developed and manufactured with a minimum of 40 per cent indigenous content or products having 60 per cent of it on a cost basis but not designed and developed indigenously. The policy has also significantly liberalised the offset liability for foreign vendors, which makes it compulsory for companies to invest, or source, at least 30 per cent of the contract value in India.
This will change India from being a destination for low-cost manufacturing, to being a starting place for cutting-edge innovation; from being a consumer of out-dated equipment to being a producer of trail-blazing technology; from being the world’s largest importer to being a leader in export of defence equipment.