Framework legitimizes the role of defence agents

Engagement of agents in the Indian defence sector has historically been fraught with regulatory complexity and uncertainty. Previously, the regulatory framework surrounding the engagement of agents bore the imprint of the infamous three decade old Bofors scandal. Despite various attempts by the government to provide regulatory clarity, original equipment manufacturers (OEMs) found it increasingly difficult to understand the legal framework within which agents could be engaged in the defence sector.

Recognizing their need, and the important role that agents play in this sector, the Defence Procurement Procedure 2016 (DPP 2016) lays down a framework for the engagement of agents by foreign OEMs for marketing their equipment in India, either on a country-specific basis or as a part of a global or regional arrangement.

The DPP 2016 expressly allows the use of agents by foreign OEMs, albeit with strict oversight and a requirement to comply with a comprehensive disclosure regime. OEMs are required to disclose at the time of submission of offers (or within two weeks of the engagement of an agent): full details of the agent; their scope of work, date and period of engagement; and details of specific responsibilities entrusted to the agent.

Authors: Aditya Patni and Tarang Shashishekar, Khaitan & Co