India: Defence Procurement Procedure 2016 – Renewed Focus On Indigenous Production

Last Updated: 8 November 2017
Article by Amit Cowshish

The revised Defence Procurement Procedure 2016 (DPP), which will regulate all capital acquisition programmes initiated on or after 01 April 2016, seeks to leverage India's buying power with a renewed focus on indigenous production of defence equipment by the Indian industry. At least five changes made in the DPP clearly point in this direction.

'Buy (Indian Designed, Developed and Manufactured)' – a new procurement category

This new procurement category, introduced in DPP 2016, replaces 'Buy (Indian)' as the most preferred mode of procurement in the hierarchy of procurement categories which also includes 'Buy and Make (Indian)', 'Buy and Make' and 'Buy (Global)' in the decreasing order of preference, apart from a stand-alone 'Make' category that is not a part of this hierarchy.

This category is meant for outright purchase of equipment designed, developed and manufactured in India by the Indian vendors with a minimum of 40 per cent indigenous content. If, however, the equipment is not designed and developed in India, it can be purchased under this category only if it has indigenous content of 60 per cent.

This conflicts with the 'Buy (Indian)' category under which equipment, whether or not designed and developed in India, can be procured provided it has a minimum of 40 per cent indigenous content. Hopefully, this issue will get resolved in due course but what is important is the trust reposed by the Ministry of Defence (MoD) in the potential of the Indian industry to manufacture defence equipment in India, even if it is in collaboration with the foreign Original Equipment Manufacturers (OEMs), and to achieve indigenisation to the extent of 40/60 per cent.

The Indian industry and the OEMs will, therefore, do well to ensure while entering into technology transfer or other arrangements that the equipment made in India meets the requirement of indigenous content to qualify under both these categories irrespective of whether or not it is indigenously designed and developed, leaving MoD with no option but to buy it from an Indian vendor.

Making it easier for the private industry in the 'Buy and Make' cases

Under the 'Buy and Make' category, the OEM, selected by following the laid down procurement procedure, is required to tie up with the Indian Production Agency (PA) nominated by the MoD to manufacture the equipment in India under the 'make' portion of the contract.

In the absence of an internal procedure for selecting private sector entities to be nominated as PAs, contracts under this category have generally been awarded to the Defence Public Sector Undertakings DPSUs) in the past. This is now set to change as a new provision in the DPP empowers the MoD, if it so decides, to provide an option to the OEMs to select PAs on their own.

This model has been adopted by the MoD in the past in Avro-replacement programme of the Indian Air Force, though that procurement programme is yet to see the light of the day.

Strategic Partnership (SP) Scheme

The chapter on the SP scheme, which was not included in the DPP when it was promulgated in 2016, was finally notified more than a year later in May 2017. This scheme envisages two parallel actions by the MoD: selection of platforms made by OEMs meeting the MoD's requirements and short listing of potential Indian companies which could tie up with the selected OEMs to manufacture the platform in India through technology transfer.

Once this action is completed, the Indian companies, identified as potential SPs, will be called upon to participate in the tendering process and the contract will be awarded to the lowest bidder. The scheme is initially slated to be adopted in four segments: fighter aircraft, helicopters, submarines and armoured fighting vehicles/main battle tank. There are several imponderables in the scheme but it does open up new vistas for the Indian industry.

Refinement of the 'Make' procedure

The projects under the 'Make' procedure are intended for indigenous design, development and manufacture of prototypes of futuristic equipment, weapon systems and other platforms by the Indian companies, with or without collaboration with the foreign companies, with substantial funding of the cost of development of the prototype by the MoD. Although not a single contract has been awarded under this category since 2006 when it was first introduced, the changes made in DPP 2016 could give a boost to the 'Make' projects.

For one thing, the category has been split into two sub-categories. Under the first sub-category, the extent of funding has been increased from 80 to 90 per cent and a provision has been made for payment of a mobilisation advance. The second sub-category comprises projects which will have to be undertaken by the industry without any funding by the MoD.

The remaining 10 per cent of the cost of development in respect of the projects under the first sub-category and full cost of development of the prototype under the second category will also be reimbursed by the MoD to the developers if the Request for Proposal (RfP) is not issued within two years of successful development of the prototype.

Projects with cost of development up to Rs 10 crore under the first sub-category and Rs 3 crore under the second, will first be offered to the Micro, Small and Medium Enterprises (MSMEs). The ball has already been set rolling by the MoD with a long list of 30 potential 'Make' projects as on 30 March 2017.

Essential and Enhanced Parameters

To make life easier for the vendors, they will now not be required to customise the equipment before offering it for field evaluation trials which is an important stage in the procurement process. Instead, they will be permitted to offer the equipment for trials based on 'Essential Parameters A', which will be specified in the RfP based on a careful study of the features that are normally available in the equipment available in the market commercially off-the-shelf (COTS).

After selection of the vendor whose equipment qualifies the field trials and whose commercial offer is the lowest and award of the contract to such vendor, it is only this vendor who will be required to incorporate 'Essential Parameters B' – also indicated in the RfP – in the equipment offered by him for trials before commencing the delivery.

Another provision made in the DPP will now make it possible for the MoD, in those cases where it decides to invoke it, to give weightage if the equipment offered by a vendor has enhanced technical parameters. This weightage will be given only for the purpose of determination of the lowest offer (L1). The desired 'enhanced parameters' and the weightage formula will be indicated in the RfP. This will make it possible to award the contract on what is typically called L1-TI basis for procurement of equipment that is technologically superior to the equipment offered by the lowest bidder.

Likely impact

It is too early to assess the impact of these changes as much will depend on MoD's dynamism in taking pragmatic decisions.  One thing is sure, though: the future of long-term business relationships between the Indian industry and the OEMs lies in creating capacities in India for co-development/co-production and life-time sustenance/upgradation of equipment as India is firmly set on the course to making itself a manufacturing hub and achieving self-reliance in defence with defence procurements potentially ranging between one and one-and-half lakh crore in the course of the next ten years.

Amit Cowshish, Partner ( )

*The views expressed are personal and may not necessarily reflect the views of the Firm.

Dua Associates, 704-705, Global Business Park, Tower 'B', Mehrauli - Gurgaon Road, Gurgaon - 122002 (Haryana), India

Tel:  +91 124 2803366-7

Fax: +91 124 2803370

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.