How Modi government will attract private players to defense industry
What's the story
The Indian government is considering a major shift in its defense procurement strategy. A senior official has revealed to Moneycontrol that the government is looking to replace the current nomination-based system with open tendering for certain key segments. The move is aimed at increasing competition and encouraging participation from private players, including micro, small and medium enterprises (MSMEs).
Contract overhaul
Current procurement process and proposed changes
Currently, many defense procurements are done on a nomination basis, with contracts directly awarded to public sector undertakings like Hindustan Aeronautics Ltd (HAL) and Mazagaon Dock Shipbuilders. The proposed shift to open tendering could change the game by creating a more competitive environment. It would give private players easier access to contracts and spur innovation in India's defense sector.
Policy revision
Review of defense offset policy
Along with the tender reforms, the Centre is also reviewing its defense offset policy. This policy mandates foreign defense suppliers to reinvest 30% of the contract value in India. The move is part of a broader effort to make procurement rules more industry-friendly and flexible. The revision comes as India steps up its defense modernization efforts and private industry capacity expands.
Procurement guidelines
Defense Acquisition Procedure 2020 under review
The Defense Acquisition Procedure (DAP) 2020, which is under review, is the defense ministry's overarching policy framework for planning, approving, and executing military equipment and systems procurement. It lays down guidelines for categories such as "Make in India," offset requirements, and acquisition models for domestic and foreign vendors. The revision of DAP is part of a broader attempt to make it more industry-friendly.