The Indian Army has exclusively signed capital procurement contracts with local firms for two consecutive financial years, 2022-23 and 2023-24.

What Happened: The Acceptance of Necessity (AoN), a preliminary step in the procurement process, was accorded to 83% of Indian firms and 17% of foreign vendors in 2023-24, the Print reported. However, it is yet to be clarified whether contracts with foreign vendors that received AoN were executed or redirected to Indian companies.

In the fiscal year 2022-23, no AoN was extended to foreign companies. This marks a significant shift from five years ago when 57% of the Army contracts were awarded to Indian firms and the remaining 43% to foreign vendors.

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The Indian Army is reportedly concentrating on indigenising the maintenance of weapon systems, including spares and ammunition. However, exceptions are made for ammunition for legacy weapon systems nearing obsolescence and weapon systems with high cost but low demand.

The shift in procurement strategy follows the government’s introduction of several negative import lists in 2020, later renamed as the ‘positive indigenisation list’. The Ministry of Defence also mandated the services to procure 50% of contracts from the domestic industry in the first three tranches, raising the ceiling to at least 75% in the fourth tranche.

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