The phrase “Atmanirbhar Bharat” boldly displayed on the Defence Acquisition Procedure (DAP) 2020 shows the strong focus on making India self-reliant in defence. This goal becomes more ur-gent after incidents like recent blasts by Hezbollah and delays in vital defence projects. For ex-ample, engines for the Tejas Mk-1A jet and certain equipment were delayed due to export re-strictions by countries like Denmark and global conflicts such as Russia-Ukraine and Israel-Gaza. DAP-2020 emphasizes the use of Indigenous Content (IC), requiring defence projects to have a specific percentage of Indian-made components. Even projects under the Buy Indian (IDDM) or Make categories need at least 50% local content.

Understanding Atmanirbharta

Atmanirbharta, or self-reliance, is currently defined by Indigenous Content (IC). IC is calculated as the base contract cost (excluding taxes, maintenance, and foreign parts). Foreign content in-cludes direct costs and imported services. According to DAP rules, at least 50% of the IC must be Indian-made components like materials, software, or parts.

However, true Atmanirbharta should focus on Indigenous Design (ID), which includes pa-tents, trademarks, core technologies, and copyrights developed by Indian companies. To re-duce dependence on foreign technology, especially during external threats, India must fully control the design and manufacturing processes. This will ensure products truly earn the label of be-ing self-reliant and “Atmanirbhar.”

Impact of Current Procurement Categorisation on Indian Industry

When a product fully designed and developed by Indian companies is categorized under Buy (In-dian) instead of the deserved Buy (IDDM) (as seen in recent emergency procurements), it creates disadvantages for Indian vendors:

1. Competition from Foreign OEMs. Indian companies without Indigenous Design (ID) capabilities may partner with foreign companies (FOEMs) to meet the lower Indigenous Content (IC) requirements under Buy (Indian). This disadvantages Indian companies with true design capabilities.
2. Low-End Local Content. The IC requirements often focus on basic, low-technology parts, while critical technology (the “brain and heart”) remains controlled by foreign com-panies.
3. Unfair Pricing. Big foreign companies can use “predatory pricing” to outcompete small Indian companies, which have invested heavily in developing indigenous designs (ID).
4. Economic and Strategic Loss. Relying on FOEMs leads to significant financial outflow (royalties/license fees) and discourages Indian companies, undermining the vision of At-manirbhar Bharat (self-reliant India).

Issues with the Current Procurement Process

The present process of procurement when it comes to not buying through Buy(IDDM) has a number of issues as brought out in subsequent paragraphs:-

1. a) Including more Vendors to Increase Competition. The standard excuse given is that since the Indian players that have developed the ID and are compliant under Buy (IDDM) are very few (one or two), so we want more competition hence Buy (Indian) categorisation is better. The following needs to be stated:-

(i)            Indian Industry, especially in products that involve electronics has  matured. Though may be only a few, they are learning to stand on their feet after the government has opened up the defence sector to participation by private industry. The private sector OEMs who have struggled to become IDDM compliant are few, and these exceptionally few need hand-holding and support to stand on their feet. After all, even the foreign global giants were once supported by their Governments.

(ii)           The Buy (IDDM) very much allows for a single-vendor situation.

(iii) Not following Buy (IDDM) is undermining indigenous Indian companies that have built the Indian IDs, in favour of collaborators who tie up with FOEMs only to show compliance by giving Vendor Self Certificate of IC.

(iv) If a genuine Indian IDDM company gets an order, it automatically qualifies for export wherein the nation is benefited in terms of foreign exchange earnings and the technological independence inherent to it.

1. b) Single Vendors will Dictate Cost, Another argument is that IDDM players are very few and that may result in single/dominant vendors who will dictate the costs. It is thus believed that  it may be a better option  to have more competition under Buy (Indian) to moderate the prices. The following aspects deserve consideration in this regard:-

(i)            In the present scenario, the indigenous industry is ‘coming-of-age’, so surely the companies who will finally make the grade under IDDM will be far and few and may even be single vendors.

(ii)           Very thoughtfully, therefore, the IDDM procedure under DAP-2020 permits for single-vendor situations. That these companies will take advantage of the single-vendor situation by quoting high costs is indeed far-fetched. The global benchmark costs are easily accessible and the IDDM companies can be forced to match these benchmarks. However, it needs to be understood that the Foreign OEMs have well-established world markets they have been supplying to. On the other hand,  Indian companies would have invested in the R&D for the equipment and the pricing would naturally have the ammortised cost of development which can be brought down if future orders are assured.

(iii)          Another argument is that we do not want ‘dominant players’. We want more competition (under Buy-Indian) which is a lop-sided argument. India requires ‘dominant players’ who not only can meet Indian demands but could also become ‘global champions’ for the world for their IP-owned products earning precious foreign exchange for the country.

(iv) In Defence & Aerospace procurements, there is usually only one buyer, i.e., Indian Armed Forces; thus, expecting multiple players is incorrect. What to talk of one country, the fact is that the world over, there are only a few sellers of major defense products. Therefore, the argument of having multiple players must be seen in its correct perspective.

The bottom line is that India must protect and support genuine IDDM companies against foreign competitors to ensure technological independence, nurture global champions, and fulfill the vision of Atmanirbhar Bharat.

2020. c) Lack of time. The argument of lack of time (especially during the procurement under the EP/FTP route etc.) for carrying technical scrutiny of the vendor’s claim of IC and indigenous design (and hence going for Buy Indian) cannot stand the test of logic. Verification of IDDM (the software, mechanical and electronics designs, etc.) claims can be done very quickly by competent officers during the trials. It would be very pertinent to levy heavy penalties on companies that make false claims, including blacklisting and forfeiting the deposits, if any. A ‘lack of time’ plea cannot be allowed to kill the rightful aspiration of a genuine IDDM player with an Indian ID. Atmanirbharta is too sacrosanct to be allowed to be violated by giving such counter-arguments. If Atmanirbharta is to grow and IDDM becomes a hard reality, Indian companies with Indian IP or AHSP diligently developed by investing hugely against tight budgets that meet the user requirement must be promoted as enshrined in the spirit of Buy (IDDM) in DAP 2020.

Recommendations

1. The criteria for Indigenous Content should not be on a cost basis, but keeping the spirit of Atmanirbharta in focus, should be rightfully based on ID. The Indian entity must own the design of the main equipment and should have the technology and capability to implement equipment upgrades. Indigenous Design should be verified (via documents/on-site inspection) by a team duly nominated by the Ministry of Defence. The ID for a typical electronics system could be broadly covered/ascertained in the following manner:

• Patents on systems and methods if any, Chipsets/RTL IP, board level Hardware schematics and Gerber that captures the design know-how, Software modules and stacks that are indigenously designed and developed, Matlab modules for signal processing and waveforms.
• In addition to the above, weightage be given to R&D work (documented) undertaken in various other projects, EMS capabilities like PCB manufacturing, assembly, processes-driven approach, certified infrastructure etc.
• III. Suggestion is to evolve the ‘weighted average’ approach for measuring the depth of design know-how and dependency on foreign agencies for sourcing of materials/parts/components necessary for industrialization and product support right up to the end of equipment life.
• Increased interaction with detailed in depth assessment/study should be undertaken to understand the capability/strength of the industry to develop the system.
• The requirement of defining critical- niche- technology which should come under the ambit of Indigenous design should be worked out in consult with the industry during the EOI/RFI process and clearly elaborated in the RFP.

1. Buy (IDDM) should be the first option for any procurements. Even if there is only one vendor who can meet the requirement, the option should be exercised after being duly convinced of the capability to deliver the desired equipment in the time frame. The capability to Design, develop and manufacture these equipment/products should be surveyed, assessed and recorded.
2. Only after ruling out the option of Buy(IDDM) should the three services explore the remaining options like Buy(Indian) etc.
3. Present procurement procedure only caters for L1 criteria which is selection based only on commercial basis. It is recommended that selection of vendor should also cater for better specifications offered by Indian industry (T1). T1 should be provided 50% weightage in vendor selection with 50% weightage given for price quotation. The criteria will ensure that armed forces get best of available technology.
4. In tenders where the Buy(IDDM) vendor with indigenous design has participated & is not the lowest bidder by price (i.e. the ‘L1 bidder’), he should be allowed the option to match the price of the L1 bidder.
5. Meeting the IC criteria of 60% in Buy (Indian) is extremely difficult given the conditions as laid down in para 1 of Appendix B to Chapter I, DAP- 2020. Internal audits may please be undertaken in random cases, of projects implemented, to ascertain the correctness of the above certification by the vendors.
6. If an equipment is available with indigenous technology, BNE or BFE option from the vendor having the indigenously developed equipment should not be foreclosed.
7. Consortium of two or more vendors should be encouraged for achieving higher indigenous design component.
8. Indigenous design as defined in the RFP can be quantified either by a value or as percentage and can form an assessment methodology in TEC or as part of EPP.