Defence capital procurement in India runs on a single institutional architecture, the Defence Acquisition Procedure, and on a single first decision inside it: the category under which each acquisition is placed. The draft DAP 2026, released 10 February 2026 to replace DAP 2020 from 1 April 2026, reduces categories from five to four, abolishes offsets, and reframes 'Made in India' as 'Owned by India.' What does the categorisation decision turn on inside the Ministry of Defence, what has changed over a decade of corrections, and how should a foreign OEM read the architecture it is now entering?
For a foreign Original Equipment Manufacturer (OEM), the Defence Acquisition Procedure (DAP) is not a procurement manual. It is the architecture inside which the Ministry of Defence (MoD) decides, case by case, what capability the Indian state will own and what it will merely host on its territory. Every meaningful outcome, who bids, who wins, what is transferred, what is retained, flows from a single upstream decision: the category under which the acquisition is placed. Reading it correctly separates an OEM that enters on terms it can underwrite from one that enters on terms the architecture has already closed.
The categorisation decision is taken at the point of Acceptance of Necessity (AoN), which is the first formal gate any capital acquisition passes through. The AoN is accorded by one of three bodies depending on value: the Service Procurement Board up to ₹300 crore, the Defence Procurement Board between ₹300 crore and ₹500 crore, and the Defence Acquisition Council (DAC) above ₹500 crore. The DAC, chaired by the Raksha Mantri, is the apex body for all high-value acquisitions and was established in 2001 following the Kargil Review Committee. The categorisation recommendation originates at the Service Headquarters (SHQ) that is seeking the capability, is validated by the Integrated Defence Staff, and is placed before the DAC with the Statement of Case and the Services Qualitative Requirements (SQRs). At the AoN stage, the category is not yet fixed; the DAC can and does recategorise, and foreign OEMs that read the process as beginning at the Request for Proposal (RFP) are reading it two stages too late. The institutional window for shaping the category sits between the Request for Information (RFI) and the AoN, which in DAP 2026 is the period the MoD will monitor with formal timelines from the RFI onwards.
The categories themselves encode a hierarchy of institutional preference. DAP 2020 ran five prioritised categories in descending order of indigenisation: Buy (Indian-Indigenously Designed, Developed and Manufactured, or Buy-Indian-IDDM), Buy (Indian), Buy and Make (Indian), Buy (Global-Manufacture in India), and Buy (Global). Each carried progressively lower Indigenous Content (IC) thresholds and progressively greater openness to foreign participation. DAP 2026 reduces these to four by abolishing Buy (Indian). The abolition is not a simplification; it is an institutional statement. Under DAP 2020, Buy (Indian) permitted an Indian vendor to supply equipment with 60 per cent IC even if the equipment was not indigenously designed, which allowed a vendor to claim indigenisation without owning the design. DAP 2026 treats that claim as insufficient. Every capability that can be indigenously designed, developed, and manufactured must now go through Buy-Indian-IDDM, where the IC floor rises from 50 per cent to 60 per cent. Every capability where foreign design or development is unavoidable must go through Buy (Global-Manufacture in India) or Buy (Global), the latter carrying a 30 per cent IC floor for the first time. The middle ground, where Indian manufacture masked foreign design, has been closed.
The corrections of the last decade read consistently once the categorisation is treated as the institutional commitment. The First Positive Indigenisation List (PIL) was notified in August 2020 with 101 items; four further PILs from the Department of Military Affairs have taken the total to 509 items that can only be procured from Indian sources. In parallel, the Department of Defence Production has notified five PILs covering 4,666 items for Defence Public Sector Undertaking (DPSU) procurement. The effect is that for the items on these lists, the category has already been decided before any AoN is placed: Buy-Indian-IDDM, Buy (Indian) where still applicable, or the Make categories. The PIL is the MoD's way of making the categorisation decision upstream of any specific acquisition, and foreign OEMs whose products sit on these lists have been reading the wrong architecture if they have continued to engage as Buy (Global) candidates. The list is the first commitment; the AoN is the second; the RFP is the third. Each subsequent stage progressively narrows what the earlier stages left open.
The Strategic Partnership (SP) Model, introduced in 2017 and retained through DAP 2020 and DAP 2026, pairs an Indian private-sector lead (the Strategic Partner) with a foreign OEM (the collaborator) for long-term domestic production of submarines, fighter aircraft, helicopters, and armoured vehicles. The Strategic Partner holds the prime contract; the foreign OEM supplies the design, technology, and supply-chain linkage. Under DAP 2020, Indian Vendor status required resident-Indian ownership and control with FDI capped at 49 per cent for Buy-Indian-IDDM, Make I, Make II, and SP Model categories. DAP 2026 preserves this requirement and sharpens it: wholly-owned Indian subsidiaries of foreign OEMs cannot qualify as Indian Vendors under Buy-Indian-IDDM, regardless of how much of the manufacturing happens in India. The distinction between "Indian-owned" and "Indian-based" has been made structural. A foreign OEM that entered through a wholly-owned Indian subsidiary and expected that subsidiary to compete in Buy-Indian-IDDM contracts has built into a category it cannot access.
The abolition of offsets in DAP 2026 is the other decisive correction, and the one foreign OEMs have been slowest to register. The offsets regime, introduced in 2005, required a foreign vendor winning a contract above a specified threshold to plough back 30 per cent or more of the contract value into Indian defence by purchasing Indian defence products, investing in Indian firms, or transferring technology. Over two decades, offsets became a principal mechanism through which foreign OEMs claimed to be contributing to Indian defence indigenisation. The institutional record was different. Between 2013 and 2021, about half of offset obligations across 57 contracts, worth approximately $13.52 billion, resulted in either penalties or the threat of them. Between March 2021 and March 2025, only one offset contract materialised. Foreign OEMs exempted under the government-to-government (G2G) route, including the US Foreign Military Sales programme, had no offset obligations at all. The DAP 2026 response is to remove offsets entirely and to embed localisation directly into the contract through IC thresholds, including a 30 per cent IC floor for Buy (Global). Offsets are no longer available as a post-contract instrument through which foreign OEMs can satisfy Indian industrial commitments; the Indian commitment has to be delivered through the procurement contract itself, or it will not be delivered.
The institutional shift the MoD has made over a decade is from "Made in India" to "Owned by India." DAP 2020 measured indigenisation through IC percentages and offset obligations; both proved manipulable. IC could be gamed through bill-of-materials engineering; offsets could be discharged through low-value equipment purchases or indefinite deferment. DAP 2026 replaces these with Indigenous Design (ID) as a formal, mandatory, and audit-grade requirement. ID is defined with detailed criteria, verified by the MoD within two years of contract award, carries a price credit of up to 15 per cent for genuinely indigenous design and proportionate penalties for false claims with forfeiture of the performance-cum-warranty bank guarantee, and attaches to ownership of source code, critical design data, and upgrade authority. The verification is not declaratory; it is procedural. Technology Readiness Levels (TRLs) are now formally integrated into the category: TRLs 5-9 map to Buy-Indian-IDDM, TRLs 8-9 to Buy (Indian) and Manufacture in India and Buy (Global) and Manufacture in India, and TRLs 1-5 to the Make and Design & Development categories. The TRL is the capability maturity lens; the ID is the ownership lens; the IC is the content lens. Together they tell a foreign OEM which category it can credibly enter and which categories are closed to it.
The Make ecosystem and Innovations for Defence Excellence (iDEX) have moved from peripheral to mainstream, and the change matters for foreign OEMs considering joint ventures or technology partnerships. Make-I projects for high-risk, critical technologies receive up to 70 per cent government funding for prototype development (capped at ₹400 crore per Development Agency), with provision for 100 per cent funding in select cases. Make-II is industry-funded with assured orders on successful prototype. iDEX and the Technology Development Fund (TDF), under DAP 2026, receive five years of assured orders and a Minimum Pilot Order Quantity commitment that is meaningful in scale. A foreign OEM that partners with an Indian startup or Micro, Small and Medium Enterprise (MSME) on a Make-I or iDEX prototype now has a clearer conversion path to a procurement contract than at any point since 1998. The constraint remains ownership: the prototype's Indigenous Design has to be genuine, and the foreign partner's role has to be subordinate to the Indian Development Agency's design authority.
Government-to-government agreements and strategic partnerships have become the preferred channel for high-complexity platforms where genuine technology transfer is required. The G2G route, institutionalised through the Defence Acquisition Procedure and operationalised through bilateral defence agreements, bypasses commercial tendering and allows the Indian state to negotiate technology transfer, IP, and export rights directly with the partner government. The two working examples are the BrahMos supersonic cruise missile with Russia, where India holds 50.5% in BrahMos Aerospace and the Philippines export demonstrated the value of negotiated IP and export rights, and the Barak 8 surface-to-air missile with Israel, jointly developed by DRDO and Israel Aerospace Industries; both show that joint development and IP are achievable through G2G negotiation, while Barak 8 also illustrates the practical limits of joint-venture export arrangements when terms are not precisely defined upfront. Current G2G conversations include Safran's partnership with the Defence Research and Development Organisation's Gas Turbine Research Establishment for Advanced Medium Combat Aircraft engines, the India-UK electric naval engine project with Rolls-Royce advanced during Prime Minister Starmer's October 2025 visit, General Atomics' MQ-9B assembly arrangements, and Dassault's Rafale Maintenance, Repair and Overhaul and fuselage facilities. These are the channels through which foreign participation in "Owned by India" platforms is actually happening; an OEM engaging only through commercial procurement has not read the channel carrying the largest programmes.
For a foreign OEM reading the architecture DAP 2026 has composed, the sequencing of engagement is specific and, if read wrongly, closes doors. The entry point is the Integrated Capability Development Plan (ICDP), a 10-year horizon document that DAP 2026 formalises alongside a two-year rolling Annual Acquisition Plan. The ICDP signals what capabilities the Services will seek, the likely categorisation, and the TRL maturity expected. The second entry point is the RFI, which precedes the AoN by roughly 12 to 18 months and is the OEM's formal opportunity to demonstrate capability and to influence the SQR. The third is the categorisation period between the RFI and the AoN, during which the DAC is weighing whether the acquisition fits Buy-Indian-IDDM, Buy (Global-Manufacture in India), Buy (Global), or Make/iDEX. A foreign OEM engaging at the RFP stage has arrived after the three decisions that most determine the outcome have been taken; by the DAC's AoN decision, the category is fixed and the OEM's options are fixed with it.
The broader institutional observation is that the MoD has moved from a regulator that tolerated manufacturing-in-India as a proxy for indigenisation to a regulator that treats ownership of design, IP, and upgrade authority as the only metric that counts. This is not a softening of the architecture; it is a hardening of it. The iDEX, Make, and SP Model pathways have been opened wider, the PILs broadened, the financial criteria eased; these are the surface changes foreign OEMs have welcomed. The structural change is that the middle ground, where foreign OEMs extracted commercial value without transferring what the Indian state considered "ownership," has been removed. DAP 2026 is the institutional formalisation of a decade of learning that the earlier architecture was being gamed. A foreign OEM entering the Indian market under DAP 2026 has to decide at the start, not at the RFP, whether it is willing to transfer design authority. If it is, the architecture rewards it through G2G, SP Model, and Buy (Global-Manufacture in India). If it is not, Buy (Global) at 30 per cent IC is the residual space, and that space is being steadily narrowed by the PILs.