In the new Defence Acquisition Procedure (DAC) 2020, which was released earlier this week, the Ministry of Defence (MoD) has decided to remove the offset clause requirement in Inter-Governmental Agreements (IGA). “The DAP 2020 promises to be different but its implementation will determine whether it is indeed so or the change in name is just more old wine in a new bottle”

In the new Defence Acquisition Procedure (DAC) 2020, which was released earlier this week, the Ministry of Defence (MoD) has decided to remove the offset clause requirement in Inter-Governmental Agreements (IGA). And has also revised facilitating preference to defence majors who are willing to manufacture products in India over relevant components.

“With ‘Atmanirbharta’ (self-reliance) now the national priority, adequate provisions have been included in the document to support this initiative. These include steps to ensure that the recent list on which an import embargo has been placed have also been catered for as also the provision for foreign OEMs to manufacture in India through their subsidiaries. New categories of the acquisition have been introduced which include leasing of equipment and the Strategic Partnership model continues, relatively unchanged. Lifecycle support, long overdue, has also been included,” Commodore Anil Jai Singh, Indian Navy Veteran & Vice President Indian Maritime Foundation tells Financial Express Online.

What Has CAG Said About Offsets?

Just last week, the Comptroller and Auditor General (CAG) in its report tabled in the Parliament had observed that under the close to Rs 60,000 crore deal for 36 Rafale fighter jets, French defence companies including the Dassault Aviation and MBDA have till date “not confirmed” the transfer of technology to the Defence Research and Development Organisation (DRDO). Under the agreement that had been inked, almost 50 per cent offset clause was to be executed by the French defence majors.

Expert View

The Indian Navy Veteran, Commodore Anil Jai Singh, says, “After two drafts and consultations with stakeholders including foreign and domestic industry (selective, to say the least), the MoD finally released the Defence Acquisition Procedure (DAP)2020 which will came into effect from 01 October 2020.”

“Ambitious indigenisation percentages have been assigned to each category. Indian industry which drives this endeavour, however, baulks at making the necessary investment in absence of adequate return on investment and economy of scale. The quality of indigenisation is therefore often the first casualty. These and various other provisions are well-intentioned to improve the entire process which has been ongoing since this procedure was first promulgated in 2002 through numerous editions that have followed.”

However, according to him the proof of the pudding will lie in the eating. “In the 18 years so far, successive iterations of this document have flattered to deceive and on many counts have fallen far short of expectations in delivering the desired objectives. To just highlight a few, the ‘Make’ procedure was introduced in DPP 2006 but not a single project of those initiated has yet seen the light of day with consequential effects on the country’s defence preparedness. The success rate of other categories where indigenization was the key is also not encouraging.”

The document’s credibility comes into question on two major counts – the promulgated timelines for processing a contract have rarely been met affecting planning considerations, and budgetary allocations resulting in a huge backlog of committed liabilities which is directly affecting modernisation plans of all the three services. “Perhaps, most glaring is the fact not a single big-ticket acquisition be it submarines, fighter aircraft, tanks, heavy artillery, attack helicopters, Long Range aircraft, heavy-lift aircraft etc has been acquired through the DPP route and has instead come through G2G arrangements from their countries of manufacture as a result of which little has been achieved either in terms of Transfer of Technology or indigenous manufacturing,” Commodore Singh opines.

In conclusion he says, “The DAP 2020 promises to be different but its implementation will determine whether it is indeed so or the change in name is just more old wine in a new bottle.”