Taking everyone by surprise, the Ministry of Defence released a draft Defence Acquisition Procedure, DAP 2026, on 11 February, inviting comments from the stakeholders by 3 March. A procedure for the acquisition of aerospace systems will be added to the manual later on.
Considering that it took more than six months for the high-powered committee to review the currently-in-force procedure of 2020, offering a three-week window for getting to the bottom of a document running into two volumes and 800-odd pages seems more of a formality. It can’t be a serious attempt to elicit considered views on the proposed changes.
Be that as it may, the objective of the changes remains the same as that of the existing manual, which is the timely acquisition of military equipment, systems and platforms with due regard to performance, capabilities, quality standards, and optimum utilisation of allocated budgetary resources. However, the proposed changes intend to shift the focus from ‘Make in India’ to ‘Owned by India’. This reorientation is predicated on a greater emphasis on co-development and Intellectual Property (IP) ownership as the basis of acquisition decisions.
While co-production and IP ownership are not new ideas, the procedures appear to have been refined to make their implementation more credible. In particular, they aim to ensure that Indian entities engaged in co-development retain source codes, critical design data, and the legal right to upgrade the equipment.
Massive scale of the document
The first of the two volumes contains procurement policies and procedures, while the second volume is essentially a ‘Handbook of Guidelines & Annexures’. It contains relevant instructions, formats and appendices related to various procedural aspects for the guidance of personnel engaged in capital acquisitions across the Ministry of Defence, services and other related departments. The sheer volume of this document and the complex instructions it contains are overwhelming.
Lack of textual clarity, difficulty in ensuring uniformity in interpretation, multiplicity of the agencies involved in the acquisition process, with each one of them following a different chain of command, absence of an overarching procurement organisation, absence of outcome-oriented execution of financially viable acquisition plans, and a host of other factors have been the bane of acquisition programmes in the past. Most of these issues have apparently not been addressed.
Much is made of the multiple stages that constitute a typical acquisition cycle. Several of these stages, such as formulation and approval of Services Qualitative Requirements, technical and staff evaluations, field trials, and contract negotiations, are prone to delays. As none of these stages is dispensable, acquisition programmes will continue to follow more or less the same routine as before. However, refinements of the processes linked with these stages could help reduce delays.
Meanwhile, the five existing procurement categories—Buy (Indian–Indigenously Designed, Developed and Manufactured), Buy (Indian), Buy and Make (Indian), Buy (Global – Manufacture in India), and Buy (Global)—have been reduced to four by dropping the ‘Buy (Indian)’ category. Alongside, the ‘Buy and Make (Indian)’ category has been redesignated as ‘Buy (Indian) and Manufacture in India’, more for effect than for substance.
A new category called Low-Cost Capital Acquisition (LCCA) has been introduced for the acquisition of equipment from Indian vendors for trial and evaluation before inducting it in bulk. The financial powers for LCCA have been delegated to the Services Procurement Board. It is unclear why this facility has been extended to procurement from foreign vendors.
A Long-Term Bulk Acquisition (LTBA) procedure has also been introduced for the acquisition of capital-intensive, hi-tech and complex equipment, systems, platforms and ammunition, from Indian and foreign sources over a long term and in multiple tranches, with provisions for progressive indigenisation and upgrades.
Indigenous Content requirements
All equipment purchased by the Ministry of Defence under various categories must have the prescribed percentage of indigenous content (IC), which has been progressively increased over the years despite reports of the vendors struggling to achieve the mandated thresholds. In general, this percentage has now been uniformly increased to 60 per cent. Even foreign vendors supplying equipment under the Buy (Global) category, which carried no IC obligation, will now have to ensure an IC of 30 per cent in their products.
The requirement of defence offsets is conspicuous by its absence in the draft DAP 2026. Under the earlier framework, foreign vendors were required to plough back a certain percentage of the contract value into the Indian defence sector by procuring eligible Indian-made defence products, investing in Indian companies in kind or cash, or via transfer of technology (ToT).
Introduced two decades ago, the offset policy increasingly lost its relevance, partly because it did not result in any meaningful ToT. The vendors opted for easier options to discharge their offset obligations, and later, because of the exemption granted to all foreign procurements under inter-governmental agreements, including the Foreign Military Sales Programme of the US Government, from offsets.
In the circumstances, the reason underlying the phasing out of defence offsets is understandable, but it is unclear why the same logic was not applied to the Strategic Partnership Model (SPM) and Make I procedure. Adopted in 2017 for a roll-out in four manufacturing segments—aircraft, helicopters, submarines, and armoured fighting vehicles/main battle tanks—not a single SPM project has matured since then.
Likewise, under the Make I procedure—an offshoot of the original Make procedure, introduced almost two decades back to promote indigenous prototype development of futuristic equipment by harnessing available technologies—no major project has fructified so far.
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Claims, principles, and the test ahead
It will take a while to assimilate the nuances of draft DAP 2026, but the Ministry of Defence claims to ensure that ‘acquisition decisions are strategically aligned with national security priorities, procedurally sound, economically prudent and geared toward long-term industrial transformation’.
The guiding principles that underpin the proposed framework include self-reliance via indigenisation, cost-effectiveness and life-cycle value, transparency and fair competition, ease of doing business, accountability and oversight, flexibility, and responsiveness.
Considering that all previous versions of the procurement procedure since 2002 were also guided by analogous objectives and principles, the efficacy of the proposed procedural framework would depend on how far it helps in speeding up efficient decisions at each stage of acquisition.
Amit Cowshish is former Financial Advisor (acquisition), distinguished fellow, IDSA. Views are personal.
(Edited by Ratan Priya)