Defence acquisition overhaul on cards with graded local content, single-vendor mode: Report

Another key recommendation aims to encourage home-grown innovation and R&D through a special single-vendor procurement route for Indian entities. (Photo for representational purpose only)

India's defence procurement framework may be set for a major overhaul, with the government weighing a shift to phased indigenous content norms, a limited single-vendor route for domestic suppliers and a structured vendor qualification system, The Economic Times has learnt.

A high-level committee was constituted in June under the Director General (Acquisition), with former bureaucrat Apurva Chandra as adviser, to review the Defence Acquisition Procedure (DAP) 2020 and draft a faster, more responsive DAP 2025. The mandate is to accelerate procurement for military modernisation while aligning acquisition rules with Aatmanirbharta and Make in India objectives, the ET report said on Tuesday.

Sources cited by The Economic Times said the panel has held multiple rounds of deliberations and prepared an initial draft of recommendations. One of the most far-reaching proposals relates to the indigenous content (IC) norms across the five acquisition categories defined under DAP 2020.

Under the existing framework, stringent upfront IC thresholds apply-over 50 per cent for the top-priority Buy (Indian-IDDM) category; 50-60 per cent for Buy (Indian); 50 per cent for Buy (global manufacturer in India); 50 per cent IC in the 'Make' portion of Buy and Make (Indian); and over 30 per cent for Indian vendors under Buy (Global). The panel has proposed replacing this upfront requirement with a graded or phased approach spread over several years, The Economic Times has learnt.

For instance, in the IDDM category, a vendor could be allowed to begin with 30 per cent indigenous content in the first year, rising to 40 per cent over the next two to three years and eventually meeting the 50 per cent threshold. This approach is seen as reducing entry barriers and giving domestic partners more time to build capacity, The Economic Times reports.

Another key recommendation aims to encourage home-grown innovation and R&D through a special single-vendor procurement route for Indian entities. This mechanism would apply to specialised, lower-cost equipment, materials or technologies of urgent operational need, capped at Rs 100 crore per procurement, The Economic Times has learnt. Such equipment could be inducted for immediate use by the armed forces, cutting procedural delays and speeding up access to critical capabilities.

If systems supplied through this route-such as night-vision devices or small drones-successfully meet field trials and performance benchmarks over the next five to six years, they could be moved to a fast-track procurement channel for larger orders. The intent is to ensure timely availability of technology, promote cost-effective import substitution and strengthen indigenous manufacturing, The Economic Times notes.

The panel has also suggested expanding the scope of indigenous content to include Buyer Nominated Equipment (BNE), or sub-systems integrated into larger platforms already in service, in line with import-substitution goals. Additionally, components developed in India but processed overseas and re-imported as part of new acquisitions should also qualify as indigenous content, the panel has proposed, The Economic Times reports.

To address repeated delays caused by litigation and vendor disqualifications, the committee has recommended introducing a clearly defined vendor qualification framework alongside DAP 2025. This would ensure that only serious, technology-ready manufacturers participate in tenders, reducing procedural bottlenecks, The Economic Times has learnt.

The draft also calls for greater use of iDEX-style collaborations and joint ventures to accelerate advanced technology development. In such arrangements, defence licences would be issued to manufacturing partners, while collaborations would help indigenous firms that have technical expertise but lack capital or production scale, The Economic Times reports.

Finally, the panel has proposed incentives to promote technology transfer and capability development in areas such as semiconductors, advanced materials and emerging technologies. These measures are intended to deepen India's defence industrial base while supporting long-term self-reliance goals, The Economic Times notes.