Defence Acquisition Council and Defence Acquisition Procedure

Context: The Defence Acquisition Council (DAC) accorded Acceptance of Necessity (AoN), the first step in the procurement process, for proposals worth ₹84,560 crore.

About Defence Acquisition Council

Defence procurement in India is at present governed by the Defense Procurement Procedure 2016 and the Defense Acquisition Procedure 2020.

Defence Acquisition Procedure 2020

• It outlines a policy for banning the import of certain weapons and platforms.
• The policy emphasises increasing Foreign Direct Investment in defence manufacturing and prioritises the indigenization of manufacturing processes.
• The procedure introduces innovative concepts such as integrating artificial intelligence in defence systems, utilising indigenous software, and encouraging innovation among Start-ups and MSMEs for defence procurement.
• DAP 2020 categorises procurement into several types: Buy (Indian – Indigenously Designed Developed and Manufactured), Buy (Indian), Buy and Make (Indian), Buy (Global – Manufacture in India), and Buy (Global).
  • The policy raises the minimum Indigenous Content requirement in all defence projects, mandating an increase from the previous 40%-50% to a new threshold of 50%-60%.
  • In cases of procurement categorised as Buy (Global), it allows foreign vendors to meet a 30% Indigenous Content threshold by partnering with Indian companies.

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Key Features of Procurement Policy

• Promote Indigenous Capabilities: Defence Procurement Procedure 2016 introduced a new category of capital procurement ‘Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}’ to promote indigenous design and development of defence equipment.
• Make and Innovation: Make I/II/III are government and industry-funded efforts towards achieving greater indigenization of manufacturing. iDEX (Innovation for Defense Excellence) set up under DAP 2020 aims to provide support to Startup industries working towards Defense Indigenisation.
• Private Participation in Defense: Defense Acquisition Procedure 2020 provided a level playing field for Indian Private Defense Industries
  • Capital acquisition prescribed under DAP 2020 allowed Indian companies both private and public to participate in the acquisition process.
  • Indian private shipyards have also been made eligible for bidding on projects along with PSU shipyards.
  • Trial and testing procedures have been overhauled to nurture competition based on principles of transparency, fairness and equal opportunities for all.
  • Industry-friendly commercial terms have been introduced
• Local procurement: Dept of Defense production notifies items under Public Procurement Order 2017, items for which procurement shall be done from local suppliers only, irrespective of the purchase value.
• Providing access to critical technology: Offset reforms have been included in the Defence Acquisition Procedure (DAP) 2020, to attract Investment and Technology for defence manufacturing.
  • Investments have been incentivized through higher multipliers for the transfer of technology/critical technologies under offset discharge.
• Increased FDI in Defense sector: FDI in Defense manufacturing was increased to 74% under the automatic route and 100% under the Government route to increase production in the defence sector.
• Encourage MSME in Defense sector: DPP 2016 provided greater impetus to the Micro, Small and Medium Enterprises (MSMEs), by reserving certain categories of ‘Make’ projects exclusively for them

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