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New blacklisting policy, projects worth Rs 83,000 crores cleared by Defence Ministry

<!– /11440465/Dna_Article_Middle_300x250_BTF –> The Defence Ministry on Monday cleared a new blacklisting policy that will do away with blanket bans on companies indulging in corrupt acts and approved projects worth over Rs 82,000 crore for purchase of fighter aircraft, tanks, rockets and mini drones.Contrary to expectation, the Defence Acquisition Council, chaired by Defence Minister Manohar Parrikar, did not take a decision on the Navy’s proposal to purchase 12 US2I amphibious aircraft from Japan, though the issue came up for discussion. However, it is expected that there would be some forward movement on this issue during Prime Minister Narendra Modi’s upcoming visit to Tokyo on November 11-12.The DAC also gave Acceptance of Necessity (AoN) to Indian Air Force’s plan to purchase 83 Tejas Mark 1A aircraft at a cost of Rs 50,025 crore, Defence Ministry sources said. It also accorded AON for the purchase of 15 Light Combat Aircraft being manufactured by HAL for the Army and Air Force for a tentative cost of about Rs 2,911 crore.AoN was also given for the repeat order of 464 Russian origin T90 tanks which are being manufactured by the Ordnance Factory Board for Rs 13,448 crore, besides for procurement of 598 mini UAVs at a cost of Rs 1,100 crore. However, the most significant take away from the DAC is the clearance of the new blacklisting policy.Though Defence Ministry officials remained tight-lipped about the features of the new policy maintaining it will be put up on website in the next few days, sources said it will ensure that while companies are dealt with harshly, it will not affect the modernisation process. As per the new policy, the focus is on graded blacklisting and fines. This means that if a defence conglomerate is caught doing wrong in a particular project, it will be banned for a specific number of years from dealing in that particular segment only.It can continue to pitch for projects in other segments. “It will be a product specific ban rather than blanket blacklisting. Also, there will be an option for heavy penalties besides those in contract and even individuals can be banned,” a source said.The new policy would also allow many of the stuck programmes, like the heavy weight torpedos for the six Scorpene submarines, to move ahead with clarity. “The DAC considered and approved the guidelines for suspension or banning of business dealings with entities,” a Ministry source said. For the first time, the Ministry accorded AoN for two Indigenously Designed, Developed and Manufactured (IDDM) products – LCA and Tejas.The LCA cost will include those for simulators and auxiliary equipment. While the IAF will receive 10 LCH, the Army will get 5 to begin with. The mini UAVs approved for the Indian Army will come under the “Buy Indian” category and the force will now issue a tender for the same.The DAC also cleared the way for the issuance of tender for six additional regiments of the Pinaka rockets for Rs 14,633 crore, sources said. Each regiment consists of three batteries of six Pinakas and each Pinaka battery comprises six launcher vehicles, each with 12 rockets, six loader-replenishment vehicles, three replenishment vehicles, two Command Post vehicle (one stand by) with a Fire Control computer, and the radar.

Army to institute in-house weapon design bureau

Following in the footsteps of the Navy that has an in-house design bureau, the Indian Army too will form one.The new body will work in sync with DRDO and ordnance factories to achieve Army’s modernization and indigenisation programme in line with the Make in India thrust.Chief of Army Staff General Dalbir Singh Suhag while pointing to modern weaponry shortage in the world’s third largest force said here on Wednesday that in “eight years, not a single piece of artillery guns have been added to our inventory”.”The security environment facing the nation is becoming more complex and dynamic. I have told all army commanders to do a security audit. Further, in our efforts to fastrack technological progress, a new Army design bureau is being set up,” he said.<!– /11440465/Dna_Article_Middle_300x250_BTF –>Suhag’s statement comes close on the heels of government’s announcement of changes in the Defence Procurement Procedure (DPP) that too prominently underlines indigenisation through new platforms like the Buy Indian (IDDM) or Indigenously Designed, Developed and Manufactured.Though modernisation of Indian Armed forces has been detailed under the Long Term Integrated Perspective Plan (LTIPP), 2027, Army’s equipment modernisation expenditure has seen a dip over the years, according to a report of the Parliamentary standing commitee on defence.Mounted Gun System (MGS) for the Artillery, Air Defence Guns, Light Armoured Vehicle Multipurpose Vehicle (LAM-V) for the mechanised forces and mine ploughs for the T-90 tanks, among others, currently are part of Army’s procurement proposals.Navy, on the other hand, has articulated significant modernisation plans through its in-house organisation, directorate of naval design. The directorate designed warship, INS Vishakhapatnam is 65 percent indigenous. The directorate has so far been involved in designing 119 ships of the Indian navy. Indigenous aircraft carrier INS Vikrant (IAC -1) , and a nuclear submarine INS Arihant, both under construction, too add feathers to the directorate’s contribution so far.

New Defence Procurement Procedure to push ‘Make in India’ initiative

Over a year after the government promised a new Defence Procurement Procedure (DPP), a top body of the Defence Ministry on Monday, approved a new policy document in this regard which provides for increase in contract threshold from Rs 300 crore to Rs 2,000 crore for offsets, tweaking the L1 policy and pushing the ‘Make in India’ initiative.The new document – DPP 2016 – which will take at least another two months for it to be notified, allows government funds up to 90 per cent of development costs to private companies to push research and innovation, and aims to enhance private sector participation and speed up procurement process.<!– /11440465/Dna_Article_Middle_300x250_BTF –>It has also brought down the Acceptance of Necessity (AoN) validity to six months from earlier one year, which means that the forces will have to issue tenders faster.However, the Defence Acquisition Council, chaired by Defence Minister Manohar Parrikar, deferred decisions on critical issues of blacklisting, agents and selection of sector-wise strategic partners.”We have finalised the DPP 2016. The major part of the changes have been approved today. What is now left is minor changes,” Parrikar said addressing reporters.The significant change in the DPP has been the decision to raise the contract threshold of Rs 300 to Rs 2,000 crore for offsets. This means that only those deals which are worth over Rs 2,000 crore will have an offset obligation.”We currently have signed offsets worth USD 5 billion and another USD 8 billion is in pipeline. We may not be able to absorb all of this. Moreover, offsets also increase the cost of the product by 14-18 per cent,” Parrikar said explaining why the threshold has been increased.The Defence Ministry has also approved changes its L1 policy of selecting lowest bidder. Under the new move, 10 per cent extra weightage will be given if a system displays better qualities than required.Another major change in the DPP is the policy to fund Indian private entities in Research and Development to encourage more local development.”Medium and small scale industries will get opportunities,” he said, adding that the Department of Defence Production will fund up to 90 per cent of the R&D. Remaining 10 per cent of the development cost would be reimbursed, if the RFP for the equipment developed is not issued within 24 months from the date of successful development of prototype,” he said.Under the new DPP, a new category called the ‘IDDM’ or ‘Indigenously Designed, Developed and Manufactured’ platforms has been created. This category, with at least 40 per cent indigenous content, will get top priority and will be first to be chosen for tenders. Under the new DPP, Make (Indian) category has been divided into three parts. One is 90 per cent government funded while the second is industry funded and third reserved for medium and small enterprises.Parrikar also made it clear that in cases of single vendor, when the requirements are specific, it will go through. He said that the DPP will apply to only new projects and not to those which are already in process.Parrikar also said that the blacklisting policy will be different from the defence procurement policy and will be issued separately. He said that only those companies that have been cleared by CBI will be taken off the blacklist. Parrikar also took dig at former Defence Minister A K Antony saying he will will not keep companies on blacklist to protect “so called image”.The Minister said that only firms with majority stake and controlled by resident Indians will be eligible for projects under Make category.”Companies need to be registered for five years, three years in case of MSMEs. Companies need to have a minimum credit rating of B++, issued by recognised rating agencies.”For projects with development costs equal to or exceeding Rs 5,000 crore, a minimum ‘net worth’ of 5 per cent of the development cost, subject to maximum of Rs 1,000 crore, should be there. In all other cases, positive net worth is the minimum eligibility criteria,” Parrikar said.