This document discusses issues related to defence procurement in India and reforms that have been proposed to address these issues. It summarizes recommendations from committees such as the Dhirendra Singh Committee and VK Aatre Task Force aimed at increasing indigenization, introducing a strategic partnership model with the private sector, and improving transparency in the procurement process. Key reforms in the new DPP 2016 policy are outlined, including expanded funding and recognition for private sector R&D and different categories for 'Buy,' 'Buy and Make,' and 'Make' procurements prioritizing indigenous development and production.

1. TOPIC: Defence Procurement
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By: Harveer Singh

2. Issues in Defence Procurement for India
 Black Listing of the Firms due to
Corruption Cases.
 Technology Shortcomings
 Opaque Procurement process due to
sensitive technology
 Lack of Market price signalling leading to
corruption
 Lack of Indigenous research, design and
development.
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 India remains the world’s largest importer of arms,
importing 14% of global imports of weaponry
between 2011-2015.
 India’s primary supplies are Russia, Israel, France,
and the United States.
 The government of India is looking to reduce
dependency on foreign arms manufacturers and to
catalyze domestic manufacturing capabilities.
 The ‘Make in India’ initiative is seen as a launch pad
for the structural and regulatory changes needed to
boost India’s defence-industrial base.
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4. Dhirendra Singh Committee
(May 2015)
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5. Dhirendra Singh Committee..contd..
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 The committee proposed three models for cooperation
with the private sector: Strategic Partnerships,
Developmental Partnerships and Competitive
Partnerships.
 Within this model, there would be six groups of Strategic
Partnerships: aircraft, warships, armored vehicles,
complex weapons, surveillance, and critical materials.
 In order to prevent “conglomerate monopoly,” the
Committee suggests identifying one or two private sector
companies for each of the six Partnerships to limit
competition.
 The committee also recommended ending the practice of
single bid rejections.
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6. Dhirendra Singh Recommends: # Strategic
Partnership Model
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 Strategic is like RUR (Raksha Udhyog
Ratna)
 Only one SP should be permitted in one
segment.
 Based on the recommendations of
Kelkar Committee
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7. Dhirendra Singh Committee..contd..
Emphasis on Greater Indigenisation
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 Make in India’ should not “become
assemble in India with no IPR [intellectual
property rights] and design control and
thereby perpetuating our dependence on
the foreign suppliers.”
 To guard against such a situation, the
experts group has emphasised on
progressively increasing the indigenisation
content
 Single window clearances and faster
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8. Dhirendra Singh Committee..contd..
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 Industry Friendly Procurement :
Streamlining the acquisition process and
structure so as to create more
opportunities.
 It also recommended for Conducive
Financial Framework.
 Calls for a level playing field for the
private sector by way of bank
guarantees, payment terms, taxes and
duties.
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9. 9
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10. ##Raksha Udyog Ratna (RUR) concept
 While making their demand to Kelkar Committee
(2004-06) Industry wanted be treated at par with the
public sector as regards receipt of imported
technology, fulfilment of offset obligations and joint
development with Defence Research and
Development Organisation.
 Govt gave it a go ahead with the concept of Raksha
Utpadan Ratnas (RUR)
 The Selection Committee of RUR was constituted
in May 2006 under Mr Prabir Sengupta.
Committee gave its recommendations and the
report is under review 
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 the ‘strategic partnership model’
(SPM) with the Indian private sector
for the platforms, weapons, networks
and materials is significant.
 This will enable private companies to
front-end and manage complex
defence projects at par with DPSUs.
 It calls for a focus on private sector
R&D.
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12. 12
Slide Intentionally Left Blank
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13. VK Aatre Task Force 2016
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 Related to Strategic Partnership
 Dhirendra Singh Committee had also
suggested the setting up of a Task
Force to “lay down the criteria in
details for selection of SPs
 VK Aatre Task Force deals with the
detailed criteria for selecting Strategic
Partners (SPs)
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14. 10 segments in two groups from which SPs
would be selected
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 for Group-I, the Task Force has suggested the selection
of only one SP in each segment, whereas the number
can go up to two in Group-II segments.
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15. Financial Norms
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 For Group-I
 A consolidated turnover of Rs. 4,000 crore for each of the
previous three years,
 Consolidated capital assets of Rs. 2,000 crore in the last
financial year,
 Consolidated revenue growth of a minimum of five per
cent in at least three of the previous five years.
 For Group-II
 consolidated turnover and capital assets are Rs. 500
crore (last 3 Years) and Rs. 100 crore, respectively.
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16. Other Recommendations
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 technical norms : past performance,
engineering and manufacturing capability,
R &D culture, infrastructure facilities, HR
structure and practices, quality control
system etc.
 a maximum foreign direct investment (FDI)
of 49 per cent.
 an independent regulator and a specialised
wing in the MoD to deal exclusively with
the chosen SPs.
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17. Critique
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 the Task Force has also limited the
participation of SPs to ‘Buy and
Make’ contracts involving transfer of
technology.
 the SPs, in the present scheme of
things, are not substitutes for the
inefficient DPSUs and OFs
SOURCE: IDSA
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19. DPP 2016
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 Aim:To ensure timely procurement of defence
(military) equipment, systems, and platforms
required by the armed forces through optimum
utilization of allocated budgetary resources.
 Scope: It will cover all capital acquisitions
undertaken by the Union Ministry of Defence,
Defence Services and Indian Coast Guard (ICG)
both from indigenous sources and import.
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20. Capital Acquisitions Schemes.
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 Buy scheme: Outright purchase of equipment and
procurements under BUY scheme are
 further categorized as Buy (Indian- IDDM), Buy (Indian), and
Buy (Global).
 IDDM stands for Indigenously Designed Developed and
Manufactured.
 Buy and Make Scheme: The procurements are
categorized as Buy and Make and Buy and Make
(Indian).
 Make category Scheme: It seeks developing long-term
indigenous defence capabilities and procurements.
 It empowers Defence Acquisition Council (DAC) to take a
fast-track route in order to acquire weapons, which were
limited to the armed forces till now.
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 Procurement of defence equipment:
Arranged in decreasing order of
priority are categorized as
 (i) Buy (India-IDDM). (ii) Buy (Indian). (iii)
Buy and Make (Indian). (iv) Buy and
Make. (v) Buy (Global).
 Buy (India-IDDM) seeks to boost
indigenous production.
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22.  Upto 90% Government funding for private
Research & Development (R&D) through
Department of Defence Production.
 Recognition of the Micro, Small and
Medium Enterprises (MSME) as
technology developers.
 Offsetting from 300 crores to 2000 crores.
 ***Offseting push up cost by 16 % for the
suppliers.
 Single BID procurement would now be
considered.
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 SHQ would be owning and would be responsible for
MAKE projects.
 Long term Perspective Plan of 15 Years for “Make”.
 Make-PMU in at all SHQs and Cpast Guard.
 Make projects into two Categories: Make-I (Govt
Funded) and Make-II (Industry Funded)
 Under Make-I: upto 90% Funding by the govt.
 MSMEs first right to undertake prototype of less than
10 crores.
 L-1 T-1 Method for Defence Procurement.
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Thank You 
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 In 2015, the government issued 56 licenses that
authorized multinational companies such as The
Mahindra Group, The Tata Group, and Pipavav to set
up production units.
 The reforms seem to have gained the confidence of
the global defense industry, with $3.5 billion entering
the Indian economy in foreign investments.
 In the first half of the 2015-16 , $64 million of military
equipment purchased- a threefold increase over last
year’s $19 million.
 100% FDI under approval route.
Source: Albright StonebridgeHARVEERSIR for GSSCORE