India can now take military equipment on lease

From warships to transport aircraft, India now can formally take military equipment on lease from a friendly country. Ministry of Defence has come up with a new Defence Procurement Procedure (DPP) 2020 wherein "leasing" provision has been introduced as a new category for acquisition to existing 'buy and make' categories.

Unveiling the Draft Defence Procurement Procedure 2020 on Friday, Union Defence Minister Rajnath Singh said, "I had constituted a review committee in August 2019 to revise the present DPP-2016. It gives me immense pleasure and satisfaction to announce that the draft of DPP 2020 has been prepared."

Last changes in DPP were made in 2016. The draft Defence Procurement Procedure (DPP) 2020 has been put in public domain. "In new Draft Defence Procurement Procedure 2020, we have simplified the procedure and reduced the timeline to ensure probity, transparency and accountability," Singh said.

The Minister said that life cycle support of procured equipment and platforms in this new procedure has been taken up strongly.

The Minister said that introduction of a strategic partnership model to progressively build capabilities of private sector and a new category of Buy with highest priority became a defining feature in DPP 2016," said Singh, adding that under this model several projects of national importance such as production of 111 naval utility helicopters and construction of six P-75 (I) submarines have shown considerable progress.

Singh said, "The DPP 2020 is aligned with the vision to empower private industry through Make in India initiative with ultimate aim of turning India into a global manufacturing hub."

He also stressed that indigenous content stipulated in various categories of procurement has been enhanced to support Make in Indian initiative.

Giving details about the changes made, Director General (Acquisition) Apurva Chandra said for the first time leasing is introduced as another category for acquisition as it provides for an innovative technique for financing of equipment.

"Leasing provides means to possess and operate the asset without owning it and is useful to substitute huge initial capital outlays with periodical rental payments," said Chandra, adding that leasing would be permitted in two sub-categories that Lease (Indian) and Lease (global).

Earlier India took various equipment on lease from friendly countries, especially Russia, on personal request. For instance, Indian Navy has taken nuclear-powered submarine INS Chakra into its fleet in 2012 on lease. The government had then said the step to get INS Chakra reflects the high level of cooperation and strategic partnership between India and Russia.

The Director General (Acquisition) also pointed that a new category Buy (Global-Manufacture in India) has been introduced with outright purchase of equipment from foreign vendors for quality considered necessary with minimum 50 per cent indigenous content on cost basis of total contract value and balance to be manufactured in India.

He also said that revised defence offset guidelines have been proposed to attract investment in defence manufacturing, including in Defence Industrial Corridors through FDI or direct investment or joint investment or through the non-equity route for co-production, co-development and production or licensed production of defence products.