Government of India issues revised Defence Procurement Procedure - 2008

New Delhi: The government on Friday came out with a revised Defence Procurement Procedure (DPP) intended to streamline acquisition of military hardware and software in "a more transparent manner". India is projected to invest a massive $30-50 billion towards modernising its armed forces during the 11th Plan period (2007-2012).

The 248 page set of instructions and guidelines will become operational from 1 September 2008.

According to defence minister, AK Antony, 'the present document is the outcome of the experience and feedback gained in the implementation of the existing procedure'.

'We have learnt a lot of lessons from the past and we don't want to repeat the mistakes. That is why every now and then, we are trying to improve the Defence Procurement Policies,' Antony said.

The DPP-2008 seeks to rationalise licensing conditions, introduce offset banking, list defence products and exempt from offset acquisitions under fast track procedures.

The new offset policy has been revised to include offset credit banking, which will enable foreign vendors to create offset programmes in anticipation of future obligations. This will also enable foreign industry and their Indian offset partner to have long term arrangements to discharge offsets and will thus enhance the capacity of the Indian industry to absorb offsets.

Under the banking guidelines, a vendor will be able to discharge the banked offset credits for the RFPs which have been issued within two to two and half years depending upon the date of issue of RFP. The offset obligations are to be fulfilled coterminous within the period of main contract.

If a vendor is able to create more offsets than his obligations under a particular contract, the surplus offset credits can be banked and would remain valid for the period of two financial years after conclusion of the said contract.

A list of defence products has been added to facilitate the foreign vendors in implementing their offset obligations.

Acquisitions under the fast track procedure have to be implemented in a short time to meet imminent operational requirements. These have been exempted from the requirement of offset.

Offsets are compensatory, reciprocal trade agreements for industrial goods and services applied as a condition of military-related export, sales and services. (See: Highlights of DPP-2008)