Revised Defence Acquisition Procedure 2020 to simplify procurement and boost indigenous manufacturing

Key reforms include gradual scaling of indigenous content for high-tech orders, greater FDI flexibility, simplified testing, and provisions for defence space procurement.

 The first draft of the revised Defence Acquisition Procedure 2020 is expected to be out in a fortnight for stakeholders’ feedback, as the Ministry of Defence (MoD) seeks simplification and shortening of redundant processes of capital acquisition, likely to go up in the coming budget for FY27 from the existing outlay of ₹1.80 lakh crore.

Senior Ministry of Defence officials aware of the development told businessline that a committee headed by the Director General (Acquisition) is ready with the draft of the revised DAP 2020, and it will be made public for comments in the next 15 days before the amended version gets finalised.

Procurement timeline

The Ministry is keen to ensure that the revised DAP is implemented from the next financial year, beginning April 1, thereby reducing procurement time to around 2 years by allowing certain activities to be done in parallel rather than subsequently, as is the norm now.

Industry alignment

It’s learnt that the MoD had shown a draft Procedure to the Society of Indian Defence Manufacturers (SIDM) — the apex body of the Indian defence industry — before putting together the policy reform, which will align with ‘Atmanirbhar Bharat’ and ‘Make in India’, incorporate emerging technologies like AI and quantum, and boost indigenous defence manufacturing.

Revenue procurement

For defence revenue procurement, the MoD released the revised Defence Procurement Manual 2025 on October 23 last year, which came into effect from November 1. The new manual, though the industry still has reservations about its bulkiness, will facilitate revenue procurement of approximately Rs 1 lakh crore by the tri-services in the current FY.

Indigenous content

Sources said that the revised DAP may allow gradual scaling up of Indigenous Content (IC) for high-technology orders over the years, rather than requiring them to meet an upfront, high threshold under the Buy (Indian-Indigenously Designed, Developed & Manufactured) category.

Buy (Indian-IDDM) rules

As per DAP 2020, the Buy (Indian-IDDM) category demands procurement of defence products from Indian vendors that are indigenously designed, developed, and manufactured, with a minimum of 50 per cent IC calculated on the base contract price, excluding taxes/duties. Though this is meant to encourage FDI and joint ventures, it will affect sourcing from domestic supply chains, industry sources believe.

Category merger

Industry sources said its demand for merging the Buy (Indian) category with the Buy (Indian-IDDM) category may occur as part of the overall simplification and rationalisation of processes. In this, the Indian vendor, which is not necessarily an IDDM, must have 60 per cent IC on the base cost of its product.

Level playing field

Like DPM 2025, the DAP will offer a level playing field to both private and public industries, giving away the nomination basis for government-awarded contracts to DPSUs, but only in strategic cases.

The trials and testing, too, will be simplified, with the MoD understood to have proposed accepting certificates of conformance (CoC) from accredited labs for parameters other than core operational ones.

FDI flexibility

The MoD will also introduce greater flexibility in defence FDI to increase foreign investment. The government’s move to allow 100 per cent FDI in defence, however, has been opposed by the Indian industry on the grounds that it is against the well-thought-out plan to make the military sector aatmanirbhar.

Space procurement

For the first time, it’s also expected to fill up the current policy vacuum for defence space procurement. There is no identifiable provision in the DAP 2020 to tap into the Indian space economy, valued presently at $8 billion and intended to reach $40 billion by 2033, said informed sources.

Global hub goal

As per the Ministry, the objective of the DAP review is to establish India as a global defence manufacturing and Maintenance, Repair, and Overhaul (MRO) hub, and to promote design and development in both the public and private sectors, with a focus on start-ups, innovators, and the private industry.

Published on January 21, 2026