DefInsights - Sugosha Newsletter Apr 2019

DefInsightsVol.2Issue11-Apr2019
A SUGOSHA MEDIA PRESENTATION

DEFENCE POLICY BOOST

CONTENTS

COVER STORY

Defence Procurement Poli- FICCI : AFINDEX 2019
cies Update
P 18
P9
DPP Primer: Part 12
OFB Dhanush Induction
P 20
P7
Business Opportunities
2
P 22
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From the MD’s Desk - Financial Year
2018-19

Mrs. Shanti Kuber Financial year closure has happened and the report card for the Ministry of
Defence appears to be pretty good and encouraging. Many programs have been
pushed through and many are in the pipeline. Despite cash crunch and a low
budget allocation to operate from, many initiatives have been taken.

Some major highlights in terms of acquisitions are in the form of the following :-

Israel Aerospace Industries (IAI) has agreed with India’s Ministry of Defence on the sale of 50 Heron
unmanned aerial vehicles (UAVs) for 500 million U.S. dollars. The Heron, a medium-altitude long-
endurance drone capable of performing strategic and tactical missions, can carry a payload of up to 470
kg, stay in the air for more than 45 hours, reach 35,000 feet high and has a flight range of 350 km. The
total length of the aircraft is 8.5 meters, with a wingspan of 16.6 meters. The Heron is one of the most
operational weapon systems in the Israel Air Force, which uses it for reconnaissance and intelligence
gathering. Last June, Israel signed a 600-million-dollar deal to lease 7 UAVs from the enlarged Heron-TP
model to the German army.

Bharat Electronics Limited (BEL) has won a $33 million (INR 230 crore) contract from Israel's Elbit
Systems Electro-Optics Elop Ltd (ELOP) for Electro Optic Infra-Red (EOIR) payloads during Aero India
2019 air show. The systems are being manufactured under license from, and using the technology
supplied by the Israeli company. The contract includes manufacture and supply of CoMPASS Rev III and
CoMPASS III variants of EOIR payloads for Airborne applications. CoMPASS Rev III is a day-and-night
surveillance system that includes a Colour TV Daylight Camera, 3rd Generation Medium Wave IR
(MWIR) sensor, Laser Target Designator and Range Finder (LTDRF), Short Wave IR (SWIR), internal GPS
and automatic tracking capabilities, as well as command and control capabilities.

Zeus Numerix, whose co-founders, Abhishek Jain and Basant Kumar Gupta with just 40 employees, their
impressive string of technological innovations makes them sought after by the Defence R&D
Organisation (DRDO), BrahMos Aerospace, Hindustan Aeronautics Ltd (HAL) and the Indian Space
Research Organisation (ISRO) for the most challenging simulation and design projects. In 2005, Zeus
Numerix moved out of a small room in the aerospace department of Indian Institute of Technology (IIT)
Bombay and started competing for design projects. Russia asked for Rs 1,300 crore to integrate the
BrahMos missile onto the Sukhoi-30MKI, but Indian firms like Zeus managed to do this for just Rs 80
crore. Partnering Garden Reach Shipbuilders and Engineers (GRSE) in designing an inshore patrol vessel,
Zeus reduced its stealth signature by 70 per cent. Already, Zeus has executed over 200 assignments in
defence for DRDO, DPSUs and major private defence firms in India. These include designing a
framework for “low noise aircraft wing” for Airbus Innovation Works – which funds futuristic
technologies.

TurboTech Defence and Aerospace that designs, builds and maintains aviation and defence equipment,
will produce, at its newly set up Bangalore plant, the “Oil Cooling System and components” for the

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Safran Helicopter Engine (Ardiden 1U Engine), for the use of European and Indian market from 2019. The
first production activities will start from the month of June 2019. Oil Cooling System (OCS) is designed and
developed for Ardiden 1H engine and is the first time in the country such a design activity was successfully
attempted. TurboTech has produced 500+ OCS units so far and successfully accumulated more than 70,000
hrs of snag-free operational flying operating on Advanced Light Helicopter ALH (Mark-III &IV).

Russian weapons manufacturer Kalashnikov, maker of the ubiquitous AK-47 assault rifle, has unveiled a tiny
drone that’s meant to destroy remote ground targets from up to 40 miles (64 km) away by blowing itself up
like a suicide bomber. The drone can reach speeds of up to 80 mph (130 km/h) and stay in the air for up to
30 minutes. The system could give troops on the ground many major advantages: the KUB-UAV is almost
completely silent, and can carry up to 6.6 pounds (3 kg) of explosives.

India has signed a deal with a Russian firm to manufacture 750,000 of these assault rifles which would be
given to the Army’s infantry troops. The guns would replace the existing India-made INSAS assault rifles in
the Army, Air Force and Navy. The Defence Ministry has already signed a contract with American Sig Sauer
for the supply of 7.62*51mm calibre advanced assault rifles. These would be given to soldiers directly
engaged in counter-insurgency and other operations.

Garden Reach Shipbuilders and Engineers (GRSE), one of the prominent PSUs in the sector, has reported a
whopping 116 per cent sales growth during the third quarter due to approval of its finished inventory which
allowed the company to book more revenue. The Mini-Ratna defence PSU is also set to launch its 99th and
100th warship in March and April this year, respectively. Similarly, other companies such as Cochin Shipyard
delivered a 16 per cent growth in sales, followed by Bharat Dynamics (26 per cent).

India on Thursday, March 07, 2019 sealed a $3 billion deal with Russia for leasing of a nuclear-powered
attack submarine for the Indian Navy for a period of 10 years. The two countries signed an inter-
governmental agreement capping months of negotiations on price and various other aspects of the deal.
Under the pact, Russia will have to deliver the Akula class submarine, to be known as Chakra III, to the Indian
Navy by 2025. India Navy has taken two more submarines from Russia on lease. The first Russian nuclear-
powered submarine christened INS Chakra was taken in 1988 under a three-year lease. A second INS Chakra
was taken on lease in 2012 for a period of 10 years. The lease of Chakra II will expire in 2022 and India is
looking at extending the lease.

Ordnance Factory Board is looking to revive the anti-aircraft guns production at its facility in West Bengal. It
has also received demand for production of ‘some items’ in the wake of India’s escalating border tension
with Pakistan. The revival of anti-aircraft guns will be done at OFB’s Cossipore Gun and Shell factory.
Meanwhile, OFB has received order worth ₹1,000 crore for production of 114 ‘Dhanush’ artillery guns from
the Indian Army and the Defence Ministry. The steel forging and casting for the main components like gun
barrels will take place in metal and steel factory at Ichapore. OFB’s cumulative order book stands at around
₹50,000 crore.

Defence Minister Nirmala Sitharaman has appointed a naval officer as the in-charge of a committee
entrusted with the task of carrying out the Rs 50,000 crore project to build six conventional submarines in
the country. Defence Acquisition Council had last month cleared the project to build six diesel-electric

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submarines under the ambitious strategic partnership policy to meet Navy’s requirements. An Empowered
Project Committee (EPC) under the Indian Navy’s Controller of Warship Production and Acquisition has been
formed to steer the mega project from a formulation of guidelines for procurement till its culmination. The
EPC also has several other officers in it including the Joint Secretary and Acquisition Manager (Maritime
Systems) from the Acquisition Wing along with the Joint Secretary (Naval Shipyards) to implement the
project.

The defence ministry has approved a new Information Warfare branch in the army to combat misinformation
and false propaganda being spread through social media for adverse psychological impact. The Information
Warfare branch will be headed by the Lieutenant General rank officer and will come under another newly
created appointment- Deputy Chief of Army Staff (Strategy).

The air force has lost 16 aircraft in the financial year – ranging from helicopters to combat jets and trainers –
to varying incidents that marks it as a low on the safety front. Two of these losses are combat-related, the
MiG 21 Bison and the Mi-17V5 that went down on February 27, while the rest have occurred during routine
missions. The air force has committed liabilities in the 2019-2020 financial year – part payments due for
procurement like the Rafale fighter jets that have already been made - to the tune of Rs 47,000 crore. Against
this, the air force has been allocated just over Rs 39,000 crore, which cannot cater for replacements unless
there is a mid-year augmentation of funds. In last three financial years between 2014-15 and 2016-17, a total
of 35 defence aircraft, including 11 helicopters were lost to accidents.

The principal project to buy 400x155mm/52 calibre towed guns followed by the indigenous manufacture of
another 1,180 guns had been mired in controversy for a long period of time. However, finally there is some
light at the end of the tunnel. As per reports, the MOD has revised its procurement policy to give priority to
Indian companies both private and public in defence acquisition, with emphasis on indigenous production. In
view of this a number of private players are taking a calculated plunge into this arena. Major private
companies such as Bharat Forge, Tata Powers and Larsen & Toubro, have shown an interest in the indigenous
design and development of modern artillery gun systems and are reportedly entering into Joint Ventures
with foreign companies such as French Nexter, Korean Samsung Teckwin Israeli Elbit and South African Denel
(even though presently blacklisted), who already have the expertise and technology in the manufacturing of
such gun systems. Trials are already in progress with Elbit Systems (earlier Soltam) ATHOS 155/52 calibre and
Nexters TRAJAN 155/52 calibre Towed Gun Systems. As per reports, the trials are expected to be completed
early next year. The outstanding feature of these trials is the involvement of Indian private sector defence
companies who have tied up with the foreign vendors making this project in the category of ‘Buy and Make-
Indian’. In the above case, Bharat Forge has tied up with Elbit and Larson & Toubro with Nexter. This is a
positive development and with the Indian Companies playing a key role in these ventures, there should be no
scope for a roll back.

Induction plan for the S 400 Triumf, induction of the Apaches, NASAMs, MH 60 R, AK 203 and so many more
highlight the fast pace of acquisitions in the sector.

Future looks bright and we are likely to see this sector grow exponentially in the forthcoming decade, given
the fast pace in reforms undertaken as well as the geo-political scenario.

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OFB ‘DHANUSH’ 155mm ARTILLERY GUN:
INDUCTION INTO INDIAN ARMY

Lt Gen Anil Kapoor, VSM

On 8th April 2019, at a ceremony organized at the Gun Carriage Factory, Jabalpur, the first six “Dhanush”
Guns were handed over to the Indian Army.
The Guns were flagged off by Shri Saurabh Kumar, Director General Ordnance Factories and Chairman of the
Ordnance Factory Board. The Chief Guest of the function was Dr. Ajay Kumar, IAS and Secretary Defence
Production to the Government of India and the Guest of Honour was Lt. General P.K. Srivastava, PVSM,
AVSM, VSM, the Director General of Artillery. Lt. General R. S. Salaria, VSM, Commandant School of Artillery,
Major General Manmeet Singh, M.G. Artillery HQ Western Command Chandi Mandir among others graced
the ceremony.
The “Dhanush” 155mm x 45 Calibre modern artillery gun system, developed jointly with the Indian Army
and manufactured by the Ordnance Factories received bulk production clearance in February and the initial
order of 114 Guns was placed on the OFB.
Significant contributions have also been made by the DRDO, public sector units such as the SAIL and BEL and
several private sector firms.

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“Dhanush” incorporates the latest features such as an inertial navigation system, an on-board ballistic
computer, direct day and night firing system, a modern target acquisition system and a communication
system that makes the weapon compatible with the Army’s project “Shakti”.

Weighing less than 13 tonnes, with a high ground clearance of 400 mm, a range of elevation from -3° to 70 °
and an arc of traverse of 60°, “Dhanush” is the most maneuverable artillery system and can be deployed in
any terrain.

“Dhanush” will provide the much needed muscle to Indian Army in the days to come.

Advanced Features of Dhanush

“Dhanush”, the indigenously developed and manufactured 155mm x 45 Calibre modern artillery Gun system
has achieved significant technological milestones that have set it on an independent developmental
trajectory. “Dhanush” has evolved as a most modern gun system in its own right, independent of its lineage.

“Dhanush” weighs 700 Kg more than the 155mm/39 Calibre BOFORS and has an 877mm longer barrel. It has
a larger chamber volume of 23 liters as compared to 19 liters of the BOFORS.

Some of the important functional differences and the underlying technologies are as under :

1.Range: The new barrel design and modified double baffle muzzle brake (MDBMB) system has led to an
enhancement of range from 27 Km to 38 Km. The MDBMB limits the stress on the structure to 155/39 levels.

2.Charge: Modification in the loading trough and loading tray enables “Dhanush” to accommodate the large
diameter of the bi-modular charge system (BMCS).

3.Laying: “Dhanush” has an auto laying system based on the Fire Control Computer System as compared to
the manual system of the Bofors Gun.

4.Sighting System: “Dhanush” has Advanced Gun Sighting System with a day camera (CCD), a night camera, a
laser range finder (LRF) and NFOV and WFOV as compared to the optical day and night sight of Bofors.

5.Ballistic Calculation: “Dhanush” has an on-board Advanced Tactical Computer as distinct from Bofors
where the ballistic calculations were done at the command post.

6.Gun Recording: “Dhanush” has an Inertial Navigation System (INS) and a GPS as against the theodolite
based system of the Bofors.

7.Gun Positioning : “Dhanush” has an Advanced Gun Alignment and Positioning System (AGAPS) which relies
on the INS, GPS, CPU and odometer.

8.Muzzle Velocity Recording : “Dhanush” has an on-board muzzle velocity recorder (MVR) as distinct from
the off-board system of the Bofors.

9.Back-up Sight: “Dhanush” has a direct and indirect sighting system based on a day and night sight (RS 420)
and an indirect sight 104A developed by the Ordnance Factory Dehradun in addition to the Electronic
Sighting System.

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Defence Procurement Policy Updates

Since the release of 2016 edition of DPP, numerous positive measures have
been implemented by the policy makers in order to promote defence
manufacturing. These changes have been made in the areas of Industrial
Licence, Export Clearance and FDI in defence sector. Let us glance at some
of these policy changes over the last couple of years

By Sohil Patel Defence Procurement Procedure
updates to the DPP 2016:
The current version of the Defence Procurement Procedure for capital
procurements of the Armed Forces was released in July 2016, which is
referred to as DPP 2016. Since its release in 2016 there have been some
significant additions in terms of chapters, annexures, appendices and
amendments. Here is an analysis of the important amendments and

A. New Additions
The following chapters have been appended to DPP 2016

Chapter IIIA Procedure for ‘Make II’ Sub Category of ‘Make’ Procedure
Chapter VII Revitalising Defence Industrial Ecosystem through Strategic Partnerships

The following appendices have been appended to DPP 2016
Appendix J (Chapter II) Guidelines on Procedure for Imposing Liquidated Damage (LD) in
Upgradation/ Alteration cases
Appendix A (Chapter IIIA) Indicative Evaluation Criteria for Short-listing of Development Agencies
Appendix B (Chapter IIIA) Tentative Timelines for ‘Make-II’ Projects
Appendix A (Chapter VII) Ownership Structure
Appendix B (Chapter VII) Minimum Qualifying Criteria

Chapter IIIA Procedure for ‘Make II’ Sub Category of ‘Make’ Procedure

Chapter IIIA was included to simplified procedure for sub-category 'Make-II' as it does not envisage any
funding by the Government for development of prototype. Following are the key highlights of this chapter:

• The industry can suggest projects, especially among those items which are currently being imported.
Start-ups or individuals can also suggest proposals. Service Headquarters will also list out a series of
projects which can be undertaken as ‘Make-II’ projects under the new procedure.

• The potential ‘Make-II’ projects will be approved by a collegiate comprising of DRDO, HQ (IDS),
Department of Defence under a committee chaired by Secretary (Defence Production). Based on the in-
principle approval agreed by this committee, the projects will be hosted on Ministry of Defence/
Department of Defence Production’s website inviting industry to participate.

• There will be no limit to the number of industry who may respond to the EoI for development of the
prototype subject to meeting the minimum qualification criteria. The design and development time of
12 to 30 weeks is granted to industry to offer the prototypes.

• There is no limit to the number of industry players who may show interest and offer prototype.

April 2019 | DefInsights | 9

• After this period, a commercial RFP will be issued. Once the RFP is issued, it shall not be retracted. The
industry which wins the bid, is assured of an order.

• Service Headquarter (SHQ) will constitute a Project Facilitation Team for facilitating the process under
this procedure.

• The case will be progressed even if there is single entity offering an innovative solution.
• The industry which develops the product will retain the title and ownership and all other rights in

intellectual property. However, for some specified reasons like National Security, Government shall have
‘March-in’ rights.
• Normally, there shall be no negotiations by Contract Negotiation Committee (CNC) in multi-vendor
contracts.
• ‘Make-II’ procedure reduces the total time from in-principle approval to placing of order by 50 percent.
The estimated time to finish the whole process has come down to 69-105 weeks.
• Projects involving developmental cost of less than three crores will be reserved for MSME.

Chapter VII Revitalising Defence Industrial Ecosystem through Strategic Partnerships

The policy on Strategic Partnerships in Defence sector was approved by Defence Acquisition Council (DAC) in
May, 2017. It was promulgated on 31.05.2017 as Chapter-VII of Defence Procurement Procedure (DPP) –
2016 titled as ‘Revitalising Defence Industrial Ecosystem through Strategic Partnerships’. The policy is
intended to institutionalise a transparent, objective and functional mechanism to encourage broader
participation of the private sector, in addition to DPSUs / OFB, in the manufacture of defence platforms and
equipment such as aircraft, submarines, helicopters and armoured vehicles.

It will serve to enhance competition, increase efficiencies, facilitate faster and more significant absorption of
technology, create a tiered industrial ecosystem, ensure development of a wider skill base and trigger
innovation, leading to reduction in dependence on imports and greater self-reliance in meeting national
security objectives. The following four segments have been identified for acquisition under Strategic
Partnership (SP) route:
• Fighter Aircraft
• Helicopters
• Submarines
• Armoured Fighting Vehicles (AFVs) / Main Battle Tanks (MBTs)

Here are the key highlights of this chapter:

The SP is expected to play the role of a System Integrator by building an extensive eco-system comprising development
partners, specialised vendors and suppliers, in particular, those from the MSME sector.

The selection criteria for Strategic Partners (SP) will be based on the inherent capacity and ability of the vendor to
emerge as a systems integrator and to set up a vendor network for sourcing.

To ensure that larger number of companies participate in the process of defence manufacturing in the private sector,
and the SP maintains focus on a core area of expertise, only one SP will generally be selected per segment.

Cooperative arrangements including transfer of technology and teaming arrangements between DRDO/OFs/DPSUs with
the SP could be envisaged to enable defence related capacities to be developed in the country or for other reasons as

dec1id0ed by MoD.

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Conditions on Applicant Company
• Should be an Indian company (as defined under the Companies Act, 2013), owned and controlled by
resident Indian citizens.
• The management of the Applicant Company should be in Indian hands with majority representation on
the board of directors.
• A company shall be considered as ‘Owned’ by resident Indian citizens if more than fifty percent (50%) of
the capital in it is directly or beneficially owned by resident Indian citizens and/or Indian companies.
• The maximum permitted FDI shall be forty nine percent (49%).

Role of Original Equipment Manufacturer (OEM)
• The SP will require manufacturing and ToT assistance from a foreign OEM, this tie-up can be achieved in
the form of a JV, equity partnerships, technology sharing, royalty or any other mutually acceptable
arrangement between the companies concerned.
• The OEM will be jointly responsible along with the SP for certification and quality assurance of the
platforms supplied to MoD.
• To facilitate selection of OEMs, MoD will implement a process of shortlisting of OEMs for each segment
simultaneously with the process of identifying SPs. This shortlisting of eligible OEMs will be through a
Request for Information (RFI).
• Contract between the SP and OEM will cover provisions for protection of classified information and
technology transferred by the OEM.

The selection procedure for a Strategic Partner is depicted in the diagram below

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Indigenisation Roadmap
 Indigenisation Content Requirements - The SP shall commit to a plan to indigenise, in terms of value of
production, manufacturing of the platform over a set period for each platform as defined in each RFP.
 Eco-system of Domestic Manufacturers – The SP shall develop tiered industries in each segment by
entering into teaming agreements and development partnerships with other industries, including micro,
small and medium enterprises (MSMEs), DPSUs, OFs, other PSUs, DRDO and foreign companies that are
part of the global supply chain in the relevant sector.
 R & D Roadmap – The SP shall formulate a research and development roadmap to achieve self-reliance
within the country in respect of the 453 Segment. The road-map is to be mutually finalised along with the
MoD.

B. Amendments to Existing Chapters
Following table depicts the significant amendments to the existing chapters and annexures (this is not an exhaustive
list)

Para Reference DPP 2016 Amendment
Para 10.2
Chapter II On meeting the Essential Parameters - B On meeting the Essential Parameters - B
as per contract terms, the Additional as per contract terms, the Additional
Para 18 Bank Guarantee will be released and Bank Guarantee will be released and
Chapter II returned to the contracted vendor. returned to the contracted vendor.
Essential Parameters - B will not be Essential Parameters - B may be
Para 57 evaluated at the FET stage, even if any evaluated at the FET stage, if any
Chapter II equipment, as claimed by the vendor(s), equipment, as claimed by the vendor(s),
can meet them. can meet them and are willing to get
12 their equipment trial evaluated for
After evaluating the recommendations Essential Parameters B at FET stage (a
of the SHQs/initiating departments, the written undertaking in this regard will be
SCAPCC will refer the cases for obtained from the vendor by SHQ)
according AoN to SCAPCHC for an After evaluating the recommendations of
estimated cost up to ₹150 Crores. For the SHQs/initiating departments, the
cases beyond ₹ 150 Crores, the SHQs/ SCAPCC will refer the cases for according
initiating departments will refer cases AoN to SCAPCHC for an estimated cost
to the SCAPCHC, which will carry out (including all taxes and duties) up to
categorisation, based on the ₹300 Crores. For cases beyond ₹ 300
recommendations of SHQs/initiating Crores, the SHQs/initiating departments
departments and refer the cases upto ₹ will refer cases to the SCAPCHC, which
300 Crores to the DPB and beyond ₹ will carry out categorisation, based on
300 Crores to the DAC for accord of the recommendations of SHQs/initiating
AoN. departments and refer the cases upto ₹
The DG (Acquisition) will formally 500 Crores to the DPB and beyond ₹ 500
accept the report of the TEC, after due Crores to the DAC for accord of AoN.
examination by the TM concerned.
Issues, if any, raised by the TM on the For MoD cases, approval of the TEC shall
TEC Report should be addressed in a be done by the SHQ only in case all
collegiate manner with the SHQ. For vendor(s) are found compliant. However,
delegated power cases, the TEC report in case any vendor(s) is found non
will be accepted by the respective CFAs compliant at the TEC stage, approval of
at the SHQs. DG (Acq) will be obtained prior to
progressing the case further. For
delegated powers cases, TEC will be
approved by the SHQ

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Para Reference DPP 2016 Amendment

Para 69 a Benchmarking by Costing Committee On
Chapter II receipt of Trial Report by SHQ,
concurrent benchmarking will be carried
And out by a Costing Committee headed by
the Advisor (Cost) and reps of concerned
Para 14a SHQ Directorates. This process will be
Chapter V automatically undertaken once SHQ
informs Advisor (Cost) about receipt of
Trial Report. Along with this information,
SHQ will also provide Advisor (Cost) with
details of reps of SHQ Directorates
nominated as members of the concerned
Costing Committee. The
recommendations of the Costing
Committee may be accepted as such /
deliberated upon by the CNC post
approval of GS Evaluation and
promulgation of CNC. Till then, the
Costing Committee benchmark models
and costing data will be kept in a sealed
cover.

Para 72 b …....by DRDO/DPSUs/OFB with the …....by DRDO/DPSUs/OFB with the
Chapter II approval of DAC. approval of DAC. The AoN will be valid till
six months from date of approval of SQR
Para 72 c (post freezing of PSQR after successful
Chapter II developmental trials / UATT) by relevant
SEPC.

Once the prototype is ready, the PSQRs Once the prototype is ready, the PSQRs
would be frozen and User trials of the would be frozen and Commercial RFP
prototype would be conducted by SHQ would be issued to Development-cum-
followed by Staff Evaluation to be Production partner of DRDO or the DPSU
approved by VCOAS/VCNS/DCAS/DG which has undertaken the Design and
ICG. The Staff Evaluation would also Development project or to Production
recommend validation trials, if felt Agency(s) (PA) nominated by them.
necessary. Indent would be placed on OFB in cases
where it has undertaken the Design and
Development. These cases would not be
treated as single vendor cases.

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Para Reference DPP 2016 Amendment
Para 74
Chapter II Technical Oversight Committee TOC Technical Oversight Committee It is
must provide expert oversight over expected that oversight should be part of
Para 75 the technical evaluation process. The the normal process of higher level
Chapter II Acquisition Wing will constitute a TOC approvals within SHQ/ Acquisition Wing.
for all acquisition proposals in excess TOC, when constituted, must provide
Para 86 a of ₹ 300 Crores and for any other case expert oversight over the technical
Chapter II recommended by the Defence evaluation process. The DG(Acq) may
Secretary/DPB/DAC. constitute a TOC for acquisition cases in
excess of ₹ 300 Crores and for any other
The CNC will be constituted after the case recommended by the Defence
Staff Evaluation report has been Secretary/DPB/DAC. Technical Oversight
accepted. Initial activities of the CNC through a special committee would be
shall include benchmarking and all resorted to in multivendor cases where a
other activities prior to the opening of complaint has been received and not for
commercial bid. Single Vendor Cases and cases where only
DPSU(s) / OFB are participating.

The CNC will be constituted after the Staff
Evaluation report has been accepted.
Initial activities of the CNC shall include
deliberation / acceptance of
benchmarking recommendations of the
Costing Committee and all other activities
prior to the opening of commercial bid. In
cases where no field evaluation is to be
undertaken, no separate costing
committee may be constituted and the
entire benchmarking activity will be
undertaken by the CNC. In such cases the
CNC would be constituted within a week
of acceptance of TEC Report by the
competent authority.

Authority for Retraction of RFP. Cases
that are retracted or foreclosed due to
change in operational philosophy, change
in prioritisation for procurement and
budgetary constraints will be approved by
AoN according authority. Retractions and
foreclosures for reasons other than above
including those at GS Evaluation stage
(Refer Para 70 above) may be approved
by DG(Acq) & VCOAS/VCNS/DCAS/ DGICG
for MoD & Delegated powers cases
respectively. The case for retraction need
not be fielded in SCAP cycle, but directly
in the committee which accorded AoN
initially.

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Para Reference DPP 2016 Amendment

Para 95 a Liquidated Damages (LD)
Chapter II (a) In the event of the Seller's failure to
submit the Bonds/ Guarantees/
Documents or/and supply/ perform the
items/services as per Delivery schedule
specified in the contract, the Buyer may,
at his discretion, withhold any payment
until the completion of the contract. The
Buyer may also deduct LD as per Para 6 of
Appendix L to Schedule I of Chapter II.
(b) In cases where Seller offers to carry
out upgradation/ alteration in the
specifications of equipment as concluded
in the contract, imposition of LD Clause
will be as per Guidelines at Appendix J of
Chapter II

Para 95 b Financial Evaluation of Amendments to
Chapter II Contracts under Execution. In cases of
amendment to contracts, the
assessments of the financial implications
of the proposed contract amendments
may be done through a Professional
Officers Valuation (POV), including in
contracts concluded within the delegated
powers of Services. POVs will however be
restricted to contract amendment cases
involving change of equipment /
component or its modification.

Para B FOR SERVICES & COAST GUARD-UPTO ₹ FOR SERVIC S & COAST GUARD-UPTO ₹
Appendix G 150 CRORE 300 CRORE
Chapter II 1. Officer nominated by VCOAS/VCNS/ 1. Officer nominated by VCOAS/VCNS/
DCAS/CISC/DG ICG - Chairman (Not DCAS/CISC/DG ICG - Chairman
below the rank of Brig/Equivalent) (a) Cases above Rs 50 Crore and upto Rs
300 Crore to be chaired by Major
General / Equivalent
(b) Cases upto Rs 50 Crore to be chaired
by officer not below the Rank of
Brigadier / Equivalent

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Para Reference DPP 2016 Amendment

Para 8.1 At present, the amount of Estimated Cost of Procurement Scheme
Annexure I to Integrity Pact Bank
Appendix M Guarantee is ₹ 5 Lakh in cases (Crore Rs) Above (Not including) To
and where the cost
Para 9 as estimated by the Buyer is (Including) IPBG Amount
Annexure I to above ₹ 20
Appendix H to Crore and below ₹ 100 Crore, - 20 Nil
Schedule I ₹ 1 Crore above ₹ 100 Crore and
up to ₹ 300 Crore and ₹ 5 Crore 20 50 10 Lakh
above ₹ 300 Crore and up to ₹
5000 Crore and 50 150 30 Lakh
₹ 10 Crore if above ₹ 5000 Cr.
150 300 70 Lakh

300 1000 2 Crore

1000 2000 5 Crore

2000 3000 10 Crore

3000 5000 15 Crore

5000 - 25 Crore

Industrial License

Manufacturing in defence sector is governed through industrial licensing under The Industries (Development
and Regulation) Act, 1951. Before 2001, manufacturing in defence sector was limited to public sector
companies (OFB & DPSUs). However, in 2001, the Government allowed 100% Indian private sector
participation in defence manufacturing sector subject to licensing under IDR Act.

DIPP vide their Press Note No 3 of 2014 Series dated 26/06/2014 has notified on their website
(WWW.dipp.nic.in) a list of items requiring industrial license for manufacture from defence angle. Defence
industrial license is not necessary for the items which have dual use except those items which are mentioned
in the said Press Note.

Industrial license is not required for undertaking manufacturing of items such as parts, components, castings,
forgings, and test equipment etc. Further, an industrial license is only required for manufacturing of the
items listed in the defence products list (Press Note 3 of 2014 Series).

Vide DIPP’s Press Note 10 (2015 Series) dated 22/09/2015, the initial validity of Industrial license for defence
sector has been revised to 15 years, which is further extendable upto 18 years.

Further, MHA vide notification dated 14.12.2018 in supersession of their earlier notification S.O. 1636(E)
dated 19.05.2017 had revised the schedule of items requiring Industrial licence under delegated powers to
Secretary (DIPP) under Arms Act/Arms Rule according to which “Tanks and other armoured fighting vehicles”
and “Arms and ammunitions and allied items of defence equipment; other than small arms of caliber 12.7
mm and above” are only licensable under Arms Act, 1959/Arms Rules 2016”.

The other defence items viz. “Defence Aircrafts” and “Warships of all kinds” now de-notified from Arms
Rules 2016 due to their non-coverage under the said rules has been notified by DIPP vide Press Note 1(2019

16

16 | DefInsights | April 2019

Series) dated 1.01.2019 along with other licensable defence items under I(D&R) Act, 1951. The list of
defence items which now falls under the I(D&R) Act, 1951 may be seen under the said press note.

Defence Export Licence

The Export policy in India for the manufacturing and exporting of components and equipment of critical
defence platforms categorised as dual-use items and technologies, are either completely prohibited or
permitted under license, only. DGFT vide Notification No. 5/2015-2020 dated 24th April, 2017, has notified
the Munitions List in Category 6 of Special Chemicals, Organisms, Materials, Equipment and Technologies
(SCOMET).

Unless prohibited, export of Munitions List items is permitted against an Authorisation issued by the
Department of Defence Production. A Standard Operating Procedure (SOP) has been issued by the
Department of Defence Production to this effect, explaining the process and criteria of obtaining a No
Objection Certificate(NOC) for export of restricted items.

FDI in Defence

FDI policy applies to any organization that is looking for establishment of branch office, liaison office or
project office or any other place of business in India if the principal business of the applicant is Defence,
approval of Reserve Bank of India is not required in cases where Government approval or license/permission
by the concerned Ministry/Regulator has already been granted.

The latest release in August 2017 of the FDI policy allows the following investment in Defence sector

 49% is automatic approval

 50 -100 % allowed with Government approval.

Other Conditions as per the most recent press note are as follows:

 Infusion of fresh foreign investment within the permitted automatic route level, in a company not
seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing
investor to new foreign investor, will require Government approval.

 Licence applications will be considered and licences given by the Department of Industrial Policy &
Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of
External Affairs.

 Foreign investment in the sector is subject to security clearance and guidelines of the MoD.

 Investee company should be structured to be self-sufficient in areas of product design and development.
The investee/joint venture company along with manufacturing facility, should also have maintenance
and life cycle support facility of the product being manufactured in India.

Key enablers of the FDI policy

 100% FDI in defence sector : FDI upto 49% under Automatic route

 Requirement of single largest Indian ownership of 51% of equity is removed

 03 years of lock in period for equity transfer has been abolished

April 2019 | DefInsights | 17

Africa India Field Training Exercise (AFINDEX)
2019 : Defence Equipment Display

General Bipin Rawat, PVSM, UYSM, AVSM, YSM,
SM, VSM, ADC, Chief of Army Staff of Indian Army
inaugurated Defence Equipment Display on
March 27, 2019 at Aundh Military Station, Pune.
The equipment display was organised by the
Federation of Indian Chamber of Commerce and
Industry (FICCI) in association with the Army
Design Bureau (ADB) on March 26 – 27, 2019 at
Pune, concurrent to Africa – India Field Training
Exercise (AFINDEX) 2019 which had participation of
17 African Nations.
On his visit to equipment display General Rawat
was accompanied by Lt Gen SK Saini, AVSM, YSM,
VSM, GOC-in-C, Southern Command; General Ibra
Boulama Issa, Dy Chief of Defence Staff, Niger and
other senior Army officials from African Nations.

18

18 | DefInsights | April 2019

The equipment display by Indian stakeholders showcased more than 300+ indigenous products covering
Small Arms and Munitions; Surveillance and Security Management Equipment; Communication Equipment;
Body Protection Armour; Light and Heavy Vehicles; Bullet Proof and IED Protected Vehicle; Simulators; IED
Detection Equipment; System Engineering; Counter Terrorism related equipment and Prosthetics & Artificial
Limbs that could be offered to the African Nations.

The show which opened on March 26, 2019 was visited by the army contingents from Benin, Botswana,
Egypt, Ghana, Kenya, Mauritius,
Mozambique, Namibia, Niger, Nigeria,
Senegal, South Africa, Sudan, Tanzania,
Uganda, Zambia and Zimbabwe besides
senior officials from Southern
Command and Army Headquarters.

Major players at Equipment display
included DRDO, OFB, BEL, BEML, Bharat
Forge, SM Group, MKU Ltd. Other
exhibitors were Altair Technologies,
Economic Explosives, Narendra
Explosives, GRSE, Midhani, Minerva
Special Vehicles, Garware Chemicals,
Nucleonix Systems, Entremonde
Polycoaters, Rise Legs, Tonbo Imaging,
Kotkar Energy Dynamics, Decagon,
Vehant Technologies.

April 2019 | DefInsights | 19

Defence Procurement Procedure Primer

Part 12 - Establishing Maintenance Infrastructure
With an Indian Firm - Appendix H to Schedule I to

Chapter II

The Govt of India, Ministry of Defence would like to establish the depot level
maintenance (third line) and the life time support for the equipment be
carried out through an Indian private/public firm.

Scope of Maintenance: The selected Indian Entity should be able to

By Sohil Patel (a) Carry out depot level repairs to include repair of major assemblies, sub-
assemblies and of the equipment.

(b) Provision of spares for the unit level, field level and intermediate level repairs for the entire life cycle of the

equipment. The scope of these repairs is elaborated subsequently.

Maintenance Infrastructure

To enable the Indian entity to provide life time maintenance support in terms of spares and depot level, it is
essential that the facilities, as given in the subsequent paras, are established/available in India at the
premises of the selected Indian entity.

General.

(a) ToT shall be provided to the designated Maintenance Agency for “D” level maintenance of aircraft
including:-

(i) Airframe

(ii) Engines

(iii) Accessories (Equipments)

(b) Full ToT for the following systems for overhaul and repair is mandatory:

(i) Air Frame including metallic and composite structures, empennage,

(ii) Canopy, Radome, Special process, Casting & Forgings

(iii) Flight Control Systems including FBW hardware and software

(iv) Landing Gear system including all castings and forgings

(v) Electrical and Avionics systems including Cockpit display systems

(vi) Instruments, Communication and Navigation equipment, Power generation and distribution
systems.

(viii) Hydraulic System including pumps, servo actuators along with its spool & sleeve

(ix) Wheels and brakes system
(x) Fuel System including inflight refueling

(xi) Environment system including OBOX, Pneumatic system

20

20 | DefInsights | April 2019

(c) The ToT shall be for “D” level maintenance to cover Airframe, Engines, Avionics and other aggregates.

(d) The OEM is required to provide the latest version of configuration control document which will
provide detailed breakdown of the product structure in terms of lower level subsystems

(e) Vendor should submit an undertaking that he would provide & support complete ToT for
maintenance to the buyer

(f) Vendor should submit an agreement that the buyer or his authorised Indian organisation reserves the
right to approach directly the OEMs of the Sub- Systems for similar ToT agreements.

Documentation
() The ToT Documentation to be provided by the OEM shall be in English language in Electronic and

hardcopy formats and include documentation under the following heads:-

(i) “D” level Maintenance documentation in ATA100/ATAi Spec 2200.

(ii) Engineering documentation including special process.

(iii) Software documentation including source code, build environment and utilities.

(iv) Details of Special tools and Test equipments, Jigs & Fixtures.

(v) OEM’s Standard Technical Manuals.

(vi) Illustrated parts catalogue with price list.

(vii) Source identification for BOIs and subcontracted items; standard parts consumables etc.

(viii) Mandatory spares replacement lists and price catalogue for O, I and D level maintenance.

(b) The OEM is required to furnish 'Compliance Statement’ in respect of each type of Documentation
listed above.

(c) The documentation to be supplied by the OEM shall be that which is used by the OEM or its sub
contractors for the purpose of maintenance of the licensed product in their Plant.

(d) The OEM shall also provide the data in respect of MTBF, MTBO, MTBR and Reliability of the product
being offered.

(e) Labour Hours: OEM should indicate their stabilised labour hours and Turnaround time for each 3
levels of maintenance clearly indicating the learning curve adopted.

Special Technologies/Processes.
The OEM shall mention in the ToT proposal about special technologies and special coatings and treating
processes along with details of plant and machinery vis- à-vis specific components/assemblies. For
identifying the augmentation needs to 157 plant and machinery available with the production agency, if
required vendor specialists shall visit production agency before submission of technical and commercial
bid.

Capital Investment.
OEM to provide their assessment of plant and machinery required including floor space required for the
3 levels of maintenance assuming that this project will be handled as an ab-initio green field project.

To be concluded in Part 13

April 2019 | DefInsights | 21

Business Opportunities : April 2019

SL TENDER TITLE SUBMISSION ORGANISA- TENDER ID ENQUIRY
CLOSING DATE TION/ 12901ME1819R388 TYPE
NO AGENCY
29th April 2019 RFP-Open
1 Control and Display Electronics IRDE-DRDO
for Weaponization RFP-Open
29th April 2019 IRDE-DRDO 12901AB1819F301
2 Development of SWIR Optics

3 Fabrication and Supply of Para- 29th April 2019 ADRDE- ADRDE/QMS/MMG/ RFP-Open
PM/8/PAS/295 RFP-Open
chute System for SARK as per DRDO RFP-Open

Scope of Work, ATP And Drawing
4 Online Invitation of Bids for De- 23rd April 2019 CABS-DRDO CABS/19ATT278/18-19

velopment of AISARDS

5 Development of Dynamic Model 29th April 2019 ADRDE- ADRDE/QMS/MMG/
PM/8AEG/293
and Control Laws for Airship as DRDO

per Scope of Work

6 Development, Supply, Installa- 16th May 2019 CFEES-DRDO CFEES/19DCT001/18- RFP-Open

tion and Commissioning of Fire 19/049

Training Simulator

7 Ultrasonic Machine for Cleaning 06th May 2019 DMRL_DRD DMRL/19ATT294/G-I/18- RFP-Open

of Porous Carbon Fibre Compo- O 19

sites

8 Supply and Installation of Pulse 02nd May 2019 RDEE-DRDO N0263 dt. 26.03.2019 RFP-Open

Welding Machine with Robotic

Interface pulse

9 Development of Modules for HR 23rd April 2019 MTRDC- MTRDC/17384 Open-

Training System DO Part and MT DRDO Limited

system

10 Components of CCD Based Muz- 29th April 2019 IRDE-DRDO 12901ME1819R431 RFP-Open

zle Bore Sight RFP-Open
11 PXI Based Automation and 16th April 2019 GTRE-DRDO GTRE/MMG/

Checkout System for PRSU BMR2/2479/18
12 Invitation for Expression of Inter- 29th April 2019 Defence DL/MMD/1602/2018-19/ EoI

est for Vibration Test Assembly Laboratory - EOI/003

Integrated with Climatic Cham- Jodhpur

ber SSCC/QM/TENDER/30/19- RFP-Open
13 RFP for Supply of Clothing items 13th April 2019 DoD

14 Upgradation of 140 series Engine 29th April 2019 20 RFP-Open
BEML, En- 6300026652

gine division,

Mysore

15 Supply of service for Electrical 22nd April 2019 DDP - For 3135/PV/OTE-I M/2018- RFP-Open

Maintenance Services NADP Amba- 19/16

(Manpower and Electrical Mate- jhari

rial)of NADP for the period of

one year

22 | DefInsights | April 2019

Business Opportunities : April 2019

SL TENDER TITLE SUBMISSION ORGANISA- TENDER ID ENQUIRY
NO CLOSING DATE TION/ TYPE
AGENCY TE No.263-M/EO
16 Supply of 01 no. Computerised 1st May 2019 (OTE), dtd. 02-04-2019 RFP-Open
Automatic Spring Load Testing Gun and Shell
Machine Factory Cos- OCFS/PV/EOI/ EoI
sipore Kolkata REG/2019/08
17 Expression of Interest for Regis- 29th June 2019 RFP-Open
tration Ordnance 2519_0181_E-22460
Clothing Fac-
18 Design and Development of 23rd April 2019 tory

HAL-

Stand for Incoming Inspection of

Electro-Pneumatic Valves HAL 2519_0180_E-22459 RFP-Open
19 Design and Development of Fix- 23rd April 2019

ture for Measurement of Pres-

sure

20 Procurement of Marine Tele- 18th April 2019 IHQ of MOD MAT/LPNS/ RFP-Open

communications FMGSGO Ca- (Navy) MCD/2260/2018

bles for ND(V)

Supply, Customisation and sup- Indian Coast CGHQ/IT/NGFW/2018
21 port of Next Generation Firewall 23rd April 2019 Guard -19

and SD_WAN IT/3014/DCDR-SDDC RFP-Open

Procurement of Item, services

22 for software defined Data centre Indian Coast RFP-Open
(SDDC) along with Backup, Re- 23rd April 2019 Guard EoI

covery and Replication, Indian Navy AH/9640/NUH/EPC

23 Procurement of Naval Utility 15th April 2019

Helicopter under Strategic Part-

nership Model

Supply and Commissioning of 18th April 2019 MDL GM(M)/ RFP-Open
RB/2000007274 RFP-Open
24 Multi Gas Detector Ordnance
Factory Va- 126PMETT19000197
Design, Fabrication/ Manufac- 26th April 2019 rangaon

25 ture, Supply, Erection, Commis-

sioning and Testing of Evapora-

tive Air cooling system Ordnance 127PMETT19000419 RFP-Open
Special Purpose Hyd. Pressure 17th April 2019 Factory Am- EoI
bajhari GTRE/MMG/PPC/
26 Testing Equipment with Handling EOI/02/18-19
GTRE-DRDO
Robot - 01 No. Assembly, 30th April 2019
27 Manufacturing,

Testing and Supply of High Speed

Gearbox

28 Procurement of Gum Boots and 10th April 2019 IHQ of MOD DPR/175021/A RFP-Open
(Navy)
Safety Shoes (high Ankle) Non

Skid

29 Development of Indigenous Rub- 10th April 2019 IAF 11BRD/777/11/Tech/ RFP-Open
Indg/PC-2
ber Compounds PXE, Chandi- Global Ten-
pur PXE/19FET003/18-19/ ders
30 Muzzle Velocity Doppler Radar 09th May 2019 CP

(MVDR)

April 2019 | DefInsights | 23

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to mankind, the Mahabharata. We derive our passion from Sugosha to follow the path of Dharma
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