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DEFENCE PROCUREMENT AFTER GOOD START – LOSING MOMENTUM

The new Government has set the ball rolling with the DAC meeting regularly and according AoN to the projected and necessary requirements of the Armed Forces. However, the follow up action on issuance of RFP is not keeping pace, resulting in derailing the procurements and further hampering the operational preparedness of the Armed Forces.

The key purpose of all defence acquisitions is to provide the required equipment/technologies to the Defence Services in the specified/requisite timeframe and reasonably priced. Unfortunately, this has not been so in India in the past few years. Most of the major procurements have got stuck in the bureaucratic tangle. Though, in some of the cases MoD may have valid reasons to hold the process of procurement, however, in number of cases, delay could have been avoided, if the concerned authorities, at various stages, had followed the timeline. This has not only derailed the modernization plans of three services but has also escalated the actual cost of procurement.

Procurement Process Cycle

The procurement cycle of defence equipment is unduly long. besides years are taken by Service HQ to formulate the QR and processing through its various committees. The Acceptance of Necessity (AoN) by DAC is as a major step the procurements by the MoD. Fig depicts the number of committees involved in the procurement process right from issuance of RFI to AoN and finally to the issuance of RFP and inking of the contract.

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The DAC is basically the apex decision-making body of the Defence Ministry for clearing defence procurement proposals forwarded by the Indian Defence Forces thereby granting them Acceptance of Necessity (AoN) for various acquisitions, clears the way for the tendering process to start. After this, the very next step required to be taken as per the procedure is the issuance of the Request for Proposal (RFP). The DPP gives out the timeline for the procurement processes which include the slippages. Timeline is as under:

Stage of ProcurementTime Line as per DPP-2013 (in weeks)Time Line as per DPP-2013 (Cumulative Time) Proposed Time Line
Acceptance of Necessity (AoN) --- - To
 Initiation of draft RFP for collegiate vetting at MoD  04 To+04
 Issue of RFP  04 To+08

As per the timeline given in DPP 2013, the draft RFP is required to be initiated within four weeks of the AoN for collegiate vetting in the Ministry of Defence (MoD) and the vetted RFP is required to be issued within the next four weeks. This implies that the RFP should normally be issued within eight weeks of the AoN.
However, nothing could be farther away from reality than the expectation that the RFP would normally get issued within eight weeks of the AoN.

Recent Procurement Decisions: An Analysis

The adage “Well begin is half done” is universally quoted but does not seems to be true for Indian MoD. With the new Government coming into power last year and its expressed desire to put the defence acquisition process on track while promoting indigenous defence industrial base; it was felt that things could change for better for the Armed Forces. And though, the DAC began in a fast paced manner by clearing a number of defence proposals and giving AoN to over 44 new defence acquisition proposals, worth Rs 1,19,719.53 Crores (as per Government/Pib Data till Feb 2015). However, the follow-up has been disparately slow as a result there is no significant progress on issuance of RFP on the projects granted AoN by DAC even after 4 months. These are still just mere names in files and have to be eventually turned into concrete projects on the ground. Some of the major programmes that had been given DAC approval and AoN given are mentioned in the Table.

ProgrammesQtyWorthRemarks
155mm/52 caliber mounted gun system for the Indian Army 814 Rs 15750 Crores DAC clearance given in Nov 2014. The programme is under Buy-Make (Indian)
Project 75I Conventional Submarines for Indian Navy 6 Rs 50000 Crores AoN given in Aug 2014. Construction of 6 submarines by Indian Shipyards through technology transfer arrangement with a foreign submarine manufacturer.
Refit of Submarines for Indian Navy 6 Rs 4800 Crores DAC clearance granted in Aug 2014. Refit to be done for four Russian-origins, Kilo-class, and two German-origins HDW submarines. Of the Kilo-class vessels, two will be refitted in Russia, and the other two by MDL.
Sonars for Indian Navy 11 Rs 1770 Crores DAC clearance in Aug 2014. To be bought from abroad and used on 11 warships - seven frigates being built under Project 17A, and four destroyers being built under Project 15B.
Midget Submarines for Indian Navy 2 Rs 2000 Crores AoN given in Aug 2014. To be built by HSL.
Survey Vessels 4 Rs 2324 Crores DAC clearance given in Dec 2014. RFP yet to be issued.

Matter of fact it has been months since their clearance but till date these programmes have not reached the stage of issuing of the tender. The consequences are quite obvious. The longer it takes to acquire a platform, equipment or weapon system could keep the armed forces deprived of the capability they urgently need or it could lead to unconscionable delay in upgradation/life extension of legacy systems. The procurement of artillery guns and the construction of six submarines under Project 75I substantiate this fact.

Let us consider the case of Project 75I under which six new advanced stealth diesel-electric submarines are to be built for the Indian Navy. The AoN for the Project 75I has lapsed number of times and thus the procurement process has remained stalled over the years due to which the Navy submarine fleet strength is precariously low at 13 vessels against the requirement of a fleet of 24 submarines. This project first had got AoN way back in November 2007 but since then awaiting issuance of tender. In July 2010 the programme was given a fresh AoN and since then, the AoN has lapsed twice, the latest one being in March 2013. The AoN had got lapsed because the tender/RFP was not issued within the two-year period. Once the AoN has lapsed, fresh approvals are again to be obtained for the AoN. The latest AoN was given by the new Government last year in Oct; however, the tender for this already long-delayed project is still nowhere close to being issued even after eight months down the line. It is now obvious that the cost of the project has been increasing, mainly due to the escalation in prices of the vessels in the last two years and the fluctuation in the value of the rupee against dollar. The programme now is expected to cost Rs 80000 Crores which was initially to cost Rs 50000 Crores years back, had timely decision with regards to issuance of RFP had been taken after the granting of AoN.

There is no denial that the DAC has become vibrant under the current Government's regime and has been meeting on a regular basis coupled with fast-tracking crucial decisions. It has also revived several prolonged defence projects, which were virtually stuck for the last few years. The approvals/clearances only reflect the start of the procurement cycle which is likely to extend up to three years or more. Though, in the last one year the Government has cleared many programmes but the effect on the ground is unlikely to be visible in the next few years. The Government needs to understand that acquiring defence capability and maintaining operational preparedness cannot be done by way of merely sanctioning of proposals but what matters is making a decisive difference by accelerating the next steps of the procurement cycle. This entails moving the complacent bureaucracy through political will towards accountability.

The delayed procurement process could result in serious fallouts by way of time and cost overruns, besides the inducted technology becoming outdated. Other fallouts that result from the delays in procurement process include operational ramifications, kickbacks etc. The Government must thus take all requisite steps to ensure that unnecessary delays are avoided and the timeline are adhered.

Way Forward

Our procurement procedures and the methodology of induction of new weapons and other systems need to be streamlined. The Government has recently set up a 10 member Committee of an inter-disciplinary group to review DPP-13 and has been asked to submit its recommendations by June end. The terms of reference given to the committee are:

  • Evolve a policy framework to facilitate 'Make in India' in Defence Manufacturing and align the policy evolved with the DPP 2013.
  • To suggest requisite amendments to DPP 2013 to remove the bottlenecks in the procurement process and also simplify/rationalise various aspects of defence procurements.

While the report and Govt acceptance on renewal of policy framework to facilitate 'Make in India' in defence sector is eagerly awaited, the expectations from the Industry segment are to simplify/rationalise the procurement procedures and remove the bottlenecks for long term association.

The DPP needs to reflect the political thrust towards enhancing domestic procurement and boosting purchase of equipment from indigenously designed and developed sources. It is hoped that the new DPP, would tackle all these aspects through simplification, simultaneity and micro management of disparate activities and unambiguous enunciation of the procedure that problems of retraction and delay can be surmounted. MoD needs to focus on how to make it speedy & conclusive. Institutionalisation of reforms through the structures will ensure manifestation of outcomes.

To be able to realize the potential, the policy and procedures need to have futuristic outlook with commensurate resource allocation. Defence procurement be fully insulated from competitive pressures, by removing the inevitable distortion of competition by nomination. If the present Government intends to stream line the procurement process, then it needs to fasten the decision-making at the top. Also procedural changes have to be made with a view to making the system more efficient. Lack of accountability is also one of the reasons resulting in derailing the procurement process including issuance of the tender/RFPs. Although there has been an attempt at ensuring accountability by way of prescribing a detailed timeframe for each of the procurement stage; however this has not been adhered.

In the present procurement methodology, the numerous procurement functions are dispersed between the service headquarters and the acquisition wing of the MoD. However, The Director General (Acquisition), who heads the acquisition wing does not have the full responsibility to ensure accountability, as many of the acquisition functions, such as formulation of QRs, trials, offsets etc, are beyond its power and purview. In other words, if something goes wrong, there is not a single authority other than the defence minister that can be held responsible. There are too many committees and with multiple members and each having its own interest. The Offsets are responsibility of DDP, which is more concerned with production in Govt sector and not much interested in creating capability. The Govt needs to decide who will have the lead role in final decision in creating capability. Government should try and lessen the numerous committees that a defence proposal has to go through as this will help in reducing the time. Further, every acquisition that gets inordinately delayed or cancelled must be questioned and should be analyzed to identify the reason and thereafter necessary and immediate action should be taken.

Ritika Behal

Ritika Behal

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