Context: Recently,The Defence Ministry released a draft of its new procurement policy, which, for the first time, allows for lease of defence equipment, pushes for more indigenous content and brings in after-sales support under the contract of capital acquisition.
Background

• The draft DPP was prepared by a committee headed by the Director General (Acquisition), which was set up in August 2019.
• The DPP 2020 when finalized would supersede DPP 2016. 
• The draft is open for further suggestions from industry before being finalized for promulgation. 
• The finalized DPP 2020 will come into effect from April 01, 2020 and will remain in force till 31 March 2025.

Leasing as a new category of acquisition

• In addition to the existing ‘Buy’ and ‘Make’ categories, the draft DPP 2020 has introduced leasing of defence equipment as a new category for acquisition.

Leasing will be permitted under two categories:

• Lease (Indian) where Lessor would be an Indian entity and is the owner of the assets.Lease (Global) where Lessor is a Global entity. 
• This category of acquisition would be mainly useful for military equipment not used in actual warfare like transport fleets, trainers, simulators, etc,.
• Leasing will help substitute huge initial capital outlays with periodical rental payments.

Higher Indigenous content: The draft proposes increasing the indigenous content mandated in various categories of procurement by about 10% to support the ‘Make in India’.A simple and realistic methodology has been incorporated in the current DPP for verification of indigenous content.
‘Buy’ (Global – Manufacture in India) category: Another new category introduced in the Draft DPP includes the ‘Buy’ (Global – Manufacture in India) with minimum 50% indigenous content on cost basis of total contract value. This will help ensure indigenous development of the technology and resources.
After-sales support: A major proposal in the new DPP includes making after-sales support, a part of the capital acquisition contract.The scope and options for product support have been widened to include contemporary concepts like Performance Based Logistics (PBL), Life Cycle Support Contract (LCSC) and Comprehensive Maintenance Contract (CMC) to optimise life cycle support for equipment.
Post Contract Management: Given the long time of defence deals and the fast evolution of technology, Post Contract Management has been emphasized on in the current DPP to provide clear guidelines for the contracts signed.
Other provisions: There are incentives for local material and software purchases and emphasis on product export under offsets.
All these modified offset guidelines proposed to give emphasis on export of products rather than components. Higher multipliers proposed for procurement from MSMEs and units established in Defence Industrial Corridors. Higher multipliers proposed for Transfer of Technology to private Companies / DPSUs / OFB and DRDO.