No More R&D Delays For Defence Companies! MoD Eases Norms For Defence Spares, Maintenance

Defence Minister Rajnath Singh has given the green light to the Defence Procurement Manual (DPM) 2025. This initiative, part of the Year of Reforms, aims to speed up revenue procurement for the armed forces. It also seeks to bolster domestic industry through streamlined processes, encourage innovation, and ensure fair competition between public and private sectors.

The Ministry of Defence (MoD) is in the process of updating the Defence Acquisition Procedure (DAP) 2020. This document outlines procedures for acquiring capital assets like jets and warships. The revised version is expected by the end of 2025. The DPM, last updated in 2009, governs procurement for defence services and MoD organisations.

Focus on Self-Reliance and Innovation

The revised manual aims to achieve self-reliance in meeting the armed forces' needs under revenue operations. It promotes collaboration with public and private industries and academia for indigenisation of defence items. Institutions like IITs and IISc are key partners in this effort.

To support innovation, a new chapter has been added to encourage indigenisation through in-house design and development. The MoD emphasises active participation from micro, small, and medium enterprises (MSMEs) as well as startups.

Simplified Processes and Financial Support

The updated DPM addresses working capital challenges faced by industries by offering supportive financing options. Unnecessary penalties have been relaxed to ease financial burdens on businesses. Several provisions have been introduced to enhance research and development efforts by industry, academia, and defence public sector undertakings (DPSUs).

Development contracts have seen relaxed norms with no liquidity damages during the prototype phase. Post-development damages are minimal at 0.1%, capped at 5%. Only significant delays will incur maximum damages of 10%.

Encouraging Open Competition

To ensure fair competition, the revised manual removes the need for a no-objection certificate from select DPSUs before open bidding. Tenders will now be awarded purely based on competitive criteria. An assured guarantee of orders will be provided for up to five years, extendable under special circumstances.

The armed services will offer support by sharing technical knowledge and existing equipment with suppliers. This approach aims to foster jointness among the three services, aligning with government goals.

Empowering Local Authorities

The revised document empowers Competent Financial Authorities at field levels to make decisions regarding delivery period extensions without needing higher authority approval. This flexibility allows them to consult financial advisors regardless of delay duration.

The MoD's reforms aim to simplify processes, ease financing issues, reduce penalties for industries, and encourage MSME participation. By removing mandatory NOCs from DPSUs and awarding tenders via open competition, these changes promote a more competitive environment.

This comprehensive update seeks not only to streamline procurement but also to boost domestic capabilities in defence manufacturing through collaboration with various stakeholders.