INTRODUCTION

Procurement of defence equipment is one of the most crucial parts in shaping India’s military capabilities, given the country’s complex security environment and rapidly evolving technological landscape. Historically, India has relied heavily on imports to meet its defence requirement, with 65-70% of its equipment sourced from foreign countries.¹ Between 2019-2023, India was the world’s largest arms importer, accounting for 9.8% of global imports.² This dependence on foreign suppliers has at times resulted in the denial of critical equipment during periods of military escalation due to diplomatic considerations.³ To address this, the Indian government revised the procurement policy and launched initiatives to foster self-reliance and incentivise domestic manufacturing.⁴ In the FY 2024-25 budget, INR 1,05,518.43 crore was allocated for procurement from domestic industries,⁵ which has led to a notable increase in production, reaching approximately INR 1,27,000 crore annually.⁶ In the FY 2025-26 budget, a similar amount has been earmarked for procurement through domestic industries.

The defence procurement process in India is governed by two primary manuals: the Defence Acquisition Procedure (“DAP”) and the Defence Procurement Manual (“DPM”). DAP applies to high-value acquisitions funded through the capital budget and deals with the acquisition of missiles, ammunition, advanced military systems, and technology platforms. In contrast, the DPM covers procurement activities of secondary goods such as equipment, spares, etc, and services such as transportation, insurance, etc., for all wings of the armed forces. The capital acquisition schemes under the DAP are classified into several categories, in the interest of brevity this note will focus on the categories of ‘Buy’ and ‘Buy and Make’.

PROCEDURE FOR CAPITAL ACQUISITION FOR BUY’ AND ‘BUY AND MAKE’ UNDER DAP

The acquisition process begins with the Ministry of Defence (“MoD”) or Service Headquarters (“SHQ”) issuing a Request for Information (“RFI”) to assess suitability of products from vendors for meeting operational requirements and aid in drafting Services Qualitative Requirements (“SQR”). Based on RFI responses and comparisions of similar products in the global/domestic market, SHQ finalises the SQR. The Defence Acquisition Council (“DAC”) then grants an Acceptance of Necessity, valid for 6 months for ‘Buy’ schemes and 1 year for ‘Buy and Make (Indian)’ or turnkey projects. Within this period, a Request for Proposal (RFP) is issued under a Single Stage – Two Bid System (technical and commercial bids in separate envelopes). Technical bids are evaluated by a Technical Evaluation Committee (“TEC”) within 4 weeks, followed by Field Evaluation Trials (“FET”). Staff evaluation is then conducted wherein the FET  results are analysed and equipment is shortlisted for service introduction, and approvals from DG (Acquisition)/CISC/VCOAS/VCNS/DCAS/DGICG  are sought if issues like non-compliance or Transfer of Technology arise. For acquisitions over INR 300 crore, a Technical Oversight Committee (“TOC”) may be formed to ensure compliance with procurement procedures and addresses grievances and will submit its report to the defence secretary within 30 days. The ADGs Acquisition Technical will inform all vendors about their status after the TEC, Staff Evaluation, or TOC Report and the conducting SHQ will notify vendors regarding the FET. Benchmarking is done before opening commercial bids by the Benchmarking Committee or Contract Negotiation Committee (“CNC”) identifies the most suitable vendor and negotiates the contract. Post-contract management, including quality assurance and payments, is handled by SHQ and monitored by the acquisition wing of the MOD.

SUB-CATEGORISATION OF “BUY” AND “BUY AND MAKE”, AND ORDER OF PRIORITY

“Buy” and “Buy and Make” have been further divided into sub-categories, and such sub-categories have been classified into an order of priority basis the degree of indigenisation. “Buy” has been sub-classified into “Buy (Indian – IDDM)”, “Buy (Indian)”, and “Buy (Global)”; and “Buy and Make” has been sub-classified into “Buy and Make (Indian)” and “Buy (Global – Manufacture in India)”. The classification is captured in descending order of priority below: 

1. Buy (Indian – Indigenously Designed, Developed and Manufactured (“IDDM”))
2. Buy (Indian)
3. Buy and Make (Indian)
4. Buy (Global – Manufacture in India)
5. Buy (Global)

Under DAP, vendors qualifying for a higher category can still participate in a lower category subject to the vendor meeting the requirements of the lower category.

The categories are detailed below:

For context, an Indian vendor refers to any entity registered or incorporated under Indian laws, such as companies, partnerships, proprietorships, or societies. If the Indian vendor’s products require an Industrial License (“IL”) as per Press Note 1 (2019 Series)⁷, they must comply with both defence industry regulations and the licensing requirements issued by the Department for Promotion of Industry and Internal Trade (“DPIIT”). For defence products that do not require an IL, the vendor must adhere to the relevant industry regulations. 

IC refers to the portion of the total cost of acquiring equipment that is sourced within India. It excludes costs related to imports, foreign services, and payments like royalties and licensing fees made outside India. IC includes the cost of equipment, spare parts, special maintenance tools, and test equipment. 

CONCLUSION

India’s defence procurement process under the DAP is a strategic framework designed to enhance the nation’s military capabilities while fostering self-reliance through initiatives like “Make in India” and “Aatmanirbhar Bharat”. By promoting domestic manufacturing, ensuring greater indigenous content, and encouraging innovation, India is steadily reducing its reliance on foreign arms imports. As India continues to modernise its armed forces, the focus on indigenisation and fostering long-term partnerships with private industry is set to transform the defence landscape, creating a robust, self-sustaining defence ecosystem that meets both current and future challenges.

DAP, while aiming to boost self-sufficiency, has several critical shortcomings that need addressing. First, its IC requirements, based on cost, fail to distinguish between imports made out of necessity and those made for convenience. This rigid framework forces manufacturers to manipulate pricing or even engage in white labelling to meet the IC thresholds, undermining the goal of genuine indigenisation.⁸ Additionally, the procedural complexity of DAP, due to the proliferation of overlapping procurement categories, creates confusion and slows down decision-making. Categories such as “Buy (Indian)” and “Buy (Indian-IDDM)” could be merged for simplicity.⁹

Moreover, the focus remains on the finished product rather than the development of critical technologies. To truly achieve self-sufficiency, the emphasis should shift towards fostering local R&D and manufacturing of high-tech components that are still imported.¹⁰ The current system does not sufficiently encourage the development of indigenous capabilities in these areas. Unless DAP addresses these issues, it risks undermining its objective of strengthening India’s defence industry and improving military preparedness.

[1] Pieter D. Wezeman et al., “Trends in International Arms Transfers, 2023,” SIPRI Fact Sheet, March 2024 https://www.sipri.org/sites/default/files/2024-03/fs_2403_at_2023.pdf

[2] Pieter D. Wezeman et al., “Trends in International Arms Transfers, 2023,” SIPRI Fact Sheet, March 2024 https://www.sipri.org/sites/default/files/2024-03/fs_2403_at_2023.pdf

[3] Sage Journal: India’s Quest for Defence Indigenisation: A Case Study of the Indian Navy https://journals.sagepub.com/doi/full/10.1177/23477970231207255

[4] Observer Research Foundation – India’s Defence Industry: Achievements and Challenges https://www.orfonline.org/research/india-s-defence-industry-achievements-and-challenges#_edn1

[5] PIB: Rs 6.22 lakh crore allocated to MoD, highest among Ministries, in Regular Union Budget 2024-25; 4.79% higher than FY 2023-24 https://pib.gov.in/PressReleasePage.aspx?PRID=2035748

[6] PIB – Marching Towards Atmanirbharta: India’s Defence Revolution https://pib.gov.in/PressReleasePage.aspx?PRID=2069090

[7] Press Note 1 (2019 Series) – DIPP https://pib.gov.in/newsite/PrintRelease.aspx?relid=187164

[8] Economic Times – Defence Acquisition Procedure- 2020: Need to revisit the provisions defining Indian https://government.economictimes.indiatimes.com/news/defence/defence-acquisition-procedure-2020-need-to-revisit-the-provisions-defining-indian-content/99906162

[9] Observer Research Foundation – Defence Acquisition Procedure 2020: Imperatives for Further Reformshttps://www.orfonline.org/research/defence-acquisition-procedure-2020-imperatives-for-further-reforms

[10] ETV Bharat – Defence Acquisition Procedure: Achievements and Challenges https://www.etvbharat.com/english/opinion/opinion-news/defence-acquisition-procedure-achievements-and-challenges/na20231215131827455455882