Doors are now open for Indian industry to participate in Defence research development and production: Pranab Mukherjee
DPP-2006 &DPM-2006 released
Following is the full text of the speech delivered by Defence Minister
Shri Pranab Mukherjee while releasing
Defence Procurement Procedure (DPP) -2006 and Defence Procurement Manual (DPM)
- 2006 here today.
“At the outset, I extend a warm welcome
to you all at this function for the release of DPP – 2006 and DPM – 2006.
It is also a moment of great personal satisfaction for me as it marks
the completion of the policy reforms process that I had initiated two years
ago. DPP – 2006 is now a comprehensive
document with clearly stated norms and guidelines on ‘Buy’,
‘Buy and Make’ and ‘Make’ procedures. It also
includes shipbuilding procedure
and Fast Track Procedure for acquisitions.
The Offset Policy is firmly in position. The long pending request of the Indian industry for a level playing field has also been addressed
and necessary orders providing a level playing field have been issued and
now are a part of these two documents. With
these measures, we have effectively opened the doors for the Indian industry
to participate in defence research, development and production.
The acquisition of defence equipment
is a complex and intricate process. This is necessarily so as defence equipment
is expensive involving commitment of substantial public funds. Defence acquisitions,
owing to its special features and characteristics, involve a long and deliberate
process that starts with the enunciation of qualitative requirements by the Services. This is followed by the
acceptance of necessity, identification of vendors, issuance of requests for proposals, technical evaluation of vendors, extensive trials, technical evaluation, evaluation
of commercial quotes and final
selection of acceptable equipment.
This process is to ensure that the country gets best value for money.
To achieve this objective, it is essential that proper procedures for acquisition
are laid down and adhered to. These procedures provide the guidelines and
norms that would govern the selection of an equipment and its subsequent acquisition.
They provide the template against which all steps taken in the acquisition
process can be examined for their correctness. Strict adherence to laid down
procedures, therefore, ensures the highest degree of probity and public accountability.
It creates the conditions required for transparency,
free competition and impartiality. Procedures lay down the
‘rules of the game’ and eliminate adhocism.
These procedures help expedite acquisitions of approved equipment in terms
of capabilities sought, within the timeframe prescribed, while optimally utilizing
budgetary resources allocated for the modernization of our Armed Forces.
It was with this objective in my mind that I initiated the review of
procedures governing the acquisition of defence equipment soon after assuming
office as Defence Minister. This initiative resulted in the promulgation of
the Defence Procurement Procedure 2005 (Capital Procurement) and Defence Procurement
Manual 2005 (Revenue Procurement). Some of the salient features of these procedures
included the following :-
i)
Broadbased qualitative requirements for avoiding single vendor
situations;
ii) Standard
contract terms stated upfront as part of Request for Proposal (RFP);
iii) Open tendering
of commercially off the shelf items;
iv) Provision
for Joint Services Qualitative Requirements (JSQRs) for equipment common to
all three Services;
v) Objective
evaluation criteria by adopting techniques
like Discount Cash Flow (DCF) where
payments are to be made over a period of time.
vi) Clear timeframe
for each stage and process of procurement to cut down delays and bringing
in accountability; and
vii) General guidelines
for assessing the reasonability of prices.
These procedures
have now been in force in the Ministry of Defence for over a year.
Based
on the experience gained in their implementation, it was felt that DPP 2005 and
DPM 2005 should be reviewed and further improvements made for achieving
enhanced transparency in the acquisition process while ensuring greater public
accountability. Some features now being introduced in Defence Procurement
Procedure 2006 (Capital Procurement)
and Defence Procurement Manual 2006 (Revenue Procurement) include the following
: -
(i) major decisions would
be taken simultaneously in a collegiate
manner by the Defence Acquisition Council;
(ii) the generic requirements of the three
Services would be placed on the website
of the Ministry of Defence to enable vendors to register themselves on the
internet;
(iii) increased transparency in the conduct of field trials, wherever
required;
(iv) the requirement of a pre-contract integrity pact in all contracts over Rs. 100 crores.
(v) procedure for
implementing ‘offset’ provision for
all contracts over Rs. 300 crores in respect of Capital Schemes. During the 11th Plan period, it
is estimated that an amount of Rs. 45,000 crores would become available by way
of offsets;
(vi) provision of level playing field for indigenous
vendors, vis-à-vis foreign vendors by comparing CIF prices of foreign
vendors with the indigenous vendor’s offer - less excise
duty, sales tax and local levies; and
(vii) no negotiations to be
conducted with the L-1 vendor identified in a multi-vendor situation as per
guidelines issued by Central Vigilance Commission.
While DPP – 2005 covered the ‘Buy’ & ‘Buy
and Make’ procedures, one area that had not been addressed so far was a procedure
for the acquisition of defence equipment developed based on indigenous research
and design. This lacuna has been addressed in the DPP 2006, which includes
a separate procedure for the ‘MAKE’ category. In formulating this procedure, we have relied upon
the recommendations of the Kelkar Committee and the Sixth Report of Standing
Committee on Defence (14th Lok Sabha). The ‘MAKE’ procedure
has been designed to enable Indian industries to develop high technology complex
systems and undertake upgrades required by the Armed Forces, considering that
such technology is well guarded and not freely available. The ‘MAKE’
procedure provides for the sharing of development costs with the two vendors
identified, following a transparent selection process. The prototypes developed
by the two identified vendors would be evaluated technically and commercially
before final selection. After the successful prototype has been identified,
the ‘MAKE’ procedure provides for the placement of a minimum ordered quantity
on the successful vendor. The ‘MAKE’ procedure bridges a critical gap that
existed in our defence procurement procedures and paves the way for increased
participation of Indian industry in the defence sector and for attaining the
goal of self reliance in defence production.
To expedite the acquisition of defence equipment
required on urgent operational basis, a Fast Track Procedure had been promulgated
in 2001. Based on the experience gained in its implementation since then,
a revised and revamped Fast Track Procedure is now being promulgated as part
of DPP 2006. While defence acquisition process is long, deliberate and arduous,
it is recognized that urgent operational requirements do arise from situations
that may be foreseen as imminent, or in circumstances when a crisis emerges
without prior warning. Consequently, the revised Fast Track Procedure has
adopted ‘a top down’ approach in
which all critical decisions are taken in a collegiate manner by the Defence
Acquisition Council. The objective
of this procedure is to provide our Armed Forces with the equipment they need
to meet urgent operational requirements within the shortest possible time.
The revised Fast Track Procedure is now a part of DPP 2006.
A separate procedure for Indigenous Warship
Building was promulgated in 2004 based on the fact that warship building is
a capital and technologically intensive activity that cannot be strictly categorised
as ‘Buy’ or ‘Buy and Make’ or ‘Make’. This procedure has also been reviewed
and revised with the objective of integrating systems acquired from different
sources with indigenous systems on the same platform. The primary objective
is to ensure that futuristic weapons and censors are deployed while minimizing
time and cost overruns in the indigenous construction of naval ships. This
revised procedure finds place in the Defence Procurement Procedure 2006 as
the Indigenous Naval Ship Building Procedure.
It has been our consistent effort that all delays in the modernization
of Armed Forces are eliminated and funds earmarked for modernization are spent
fully and on time. The successive revisions of Defence Procurement Procedures
have been an important means for achieving this objective. It is pertinent
to note that in the last two years, the utilization of allocations in the
Defence budget has been consistently around 99% with reference to the RE.
With these words, it gives me great pleasure to promulgate the implementation
of the Defence Procurement Procedure 2006 and Defence Procurement Manual 2006
with effect from September 1, 2006.
Thank you.
“
SKS/RAJ
(Release ID :20385)