INDIA Trends and Developments Contributed by: Uday S. Ahlawat, Gaurav Bhalla and Shramona Sarkar, Ahlawat & Associates
als may still apply. The appropriate licensing authority and approval route should therefore be determined as soon as the product has been conceived. In practice, the analysis should consider the product’s technical specifications, functionality, intended use, and the precise wording of the relevant entries in Press Note 1 (2019 Series), together with the clarification under Press Note 2 (2019 Series). Market access and defence procurement Evolution of the defence acquisition procedure The DAP 2020 introduced a procurement framework intended to give greater preference to Indian indus - try and indigenous production. It categorises capital acquisitions according to the degree of Indian content and the source of procurement and provides different procurement routes for Indian and foreign vendors. The framework also provides for categories and mechanisms intended to support domestic design, development and manufacture. The practical signifi - cance of the DAP 2020 to vendors is that aspects such as eligibility, Indian content, technology transfer, local manufacturing and contractual obligations need to be assessed at the bidding stage. The principal acquisition categories include Buy (Indi - an-IDDM), Buy (Indian), Buy and Make (Indian), Buy (Global-Manufacture in India) and Buy (Global). Buy (Indian-IDDM) gives the highest preference to Indian industry and covers products that are indigenously designed, developed and manufactured, subject to the prescribed Indian content requirement. Buy (Indi - an) covers procurement from Indian vendors where the prescribed indigenous content is met, whereas Buy and Make (Indian) involves an initial procurement from an Indian vendor followed by indigenous pro - duction through transfer of technology. Buy (Global- Manufacture in India) and Buy (Global) provide routes for procurement from foreign vendors, with the former requiring manufacture of the contracted equipment in India. The relevant acquisition category has practical con - sequences for market access in India. It determines who may participate in the procurement, the appli - cable indigenous content requirement, the extent of technology transfer or local manufacture expected,
and − in some cases − the structure of the resulting contract. Indian subsidiaries of foreign original equip - ment manufacturers (OEMs) therefore need to assess their eligibility and the extent to which their Indian operations can satisfy the requirements of the relevant category before participating in a procurement. The DAP 2020 also provides for a “Make” procedure for indigenous development of defence equipment. This includes Make-I projects involving government- funded development and Make-II projects involving industry-funded development, with the latter intended to facilitate industry-led solutions to requirements that may not be readily available through existing procure - ment routes. The “Make” procedure also provides a framework for the procurement of prototypes devel - oped under these categories. The Draft DAP 2026 (which is not yet in force) pro - poses further changes to the procurement framework, including measures intended to simplify acquisition and increase participation by domestic industry. Given that the DAP 2020 has yet to be replaced, bidders should continue to assess procurements against the procedure applicable to the relevant tender. Indigenous content requirements Indigenous content (IC) is a key criterion in defence procurements. The prescribed IC requirement varies depending on the acquisition category. In general, the Buy (Indian-IDDM) category requires the highest level of indigenous content, with the DAP 2020 prescribing a minimum of 50% IC based on the cost of the equip - ment. The Buy (Indian) and Buy and Make (Indian) cat - egories carry their own prescribed IC thresholds, while different requirements apply to categories involving foreign vendors. The IC calculation is not simply a measure of the per - centage of the final product manufactured in India. The DAP 2020 prescribes the methodology for deter - mining which indigenous inputs, components, servic - es and value addition may be counted and excludes specified imported content. Vendors therefore need to map their supply chain and bill of materials against the prescribed methodology before making an IC com - mitment.
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