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DEFENCE PROCUREMENT: A REALITY CHECK

Recently, a defence ministry's report has picked up holes in India's arms-buying procedures and has painted a grim picture of how unreasonable delays are hindering the military's modernisation at a time when several key programmes are running years behind schedule and remain stuck on the drawing board.

The recent admission in Government circles on 'Make in India' not taking off in Defence production for myriad reasons ranging from multiple and diffused structures with no single point accountability, multiple decision heads, duplication of processes avoidable redundant layers doing the same thing over and over again, delayed comments, delayed decisions, delayed execution, no real time monitoring, no programme project based approach, tendency to fact-find rather than to facilitate. The points made by the report are not new or unknown to MOD or Govt, most of these have been highlighted earlier and suitable recommendations made by various committees. The real issue is that such recommendations were never followed by vested interests. Resultantly no major 'Make in India' defence project has actually kicked off in the last three to four years due to lack of requisite political push and follow-through, bureaucratic bottlenecks and long-winded procedures, commercial and technical squabbles. With virtual freeze, the services will have difficulties in even maintaining the present level of capability, forget modernisation.

The late realization of known facts through an internal report of MoD, that only 8-10% of 144 proposed deals in the last three financial years fructified within the stipulated time periods.

The average time taken by these 133 schemes was 52 months, which is more than twice the laid down duration of 16-25 months stipulated in the defence procurement policy

There is a tendency to set up another committee rather than to facilitate the process. Consequently, the entire 'Make in India' policy in the defence production sector continues to languish due to procedural delays, without taking off in any concrete manner.

Increasing Import Dependence

The other important issue need to be considered is, whether the increasing import dependence is by design or default? Some interesting facts which have come to light recently makes one think are we serious about Self Reliance? Persisting failure to build a robust defence production industry has ensured that India continues to remain in the strategically-vulnerable position of being the world's largest arms importer, accounting for 12% of the global imports from 2013-2017.India has spent over $75 billion in arms deals over last 15-16 years sourcing about 65% of their requirements ex import. Arms imports by India increased by 24% between 2008-2012 and 2013-2017 periods, as per SIPRI data.

The others top Arm importers are Saudi Arabia, Egypt, UAE, China, Australia, Algeria, Iraq, Pakistan and Indonesia. The largest arms suppliers to India from 2013-2017 were Russia (62%), US (15%) and Israel (11%).

 

Procurement Pattern

In recent past 70 capital acquisition contract worth over Rs.1.3 lakh crore inked with foreign vendors since 2014 and 120 contracts worth Rs. 1.17 lakh crore inked with Indian vendors since 2014.  90% of domestic acquisitions are from 5 defence PSUs, for shipyards & 41 ordnance factories and about 10% from private sector.

Successive governments have failed to drastically overhaul the DRDO, defence PSUs, four shipyards and ordnance factories to ensure they deliver without huge cost and time overruns. The much touted slogan to revive, revitalise and made a lot more dynamic remained on paper. Sadly India has also made little headway in getting its private sector to take to defence production under 'Make in India' policy with foreign collaboration, with no major defence production project actually taking off in the last four years.

'Make in India'

The fact remains that no major 'Make in India' defence project has actually kicked off in the last three to four years due to lack of requisite political push and follow-through, bureaucratic bottlenecks and long-winded procedures, commercial and technical squabbles. Make in India story for the defence sector seems to be more or less over, with not a single major project taking off. Given the pace at which things are moving, the NDA government is unlikely to sign off on any of the mega plans it had to award contracts to the private sector for manufacturing fighter jets, submarines and tanks.

Time Lines

The procurement delays from the formulation of technical requirements to the final approval by the competent financial authority like the Cabinet Committee on Security, amount to 2.6 to 15.4 times the laid down deadlines for various projects.

Redundant Stages

There are number of redundant stages in procurement process which need to be done away. Look at the number of committees or collegiate Vettings with in MoD and Services HQ. The number of such committees have been increasing with each expert committee and revision of DPP.

Some of these committees such as Collegiate committee for Phase wise vetting of QR, SCAPCC/ SCAPCHC, Technical Oversight Committee (TOC) etc are mere duplicated efforts.  Why a file need to go to Finance Ministry when the proposal is within MoD allocated Capital Budget and it has to approved by CCS where the Finance Minister could be a member.

Foreign Preference

An interesting observation, strangely the purchases being made from foreign vendors have been processed much faster by the ministry over schemes meant for Indian companies.  The 'Buy Global' schemes took less time to mature than 'Buy Indian', which is somewhat surprising. Moreover, none of the 'Buy and Make India' or 'Buy and Make' schemes fructified on time, the delay being medium in case of the former, i.e. 87 months against the authorized time period of 16 months. (Refer Fig: Relative Time Taken for Foreign Vs Indian Pvt. Sector Procurement.)

Private Sector Dilema

The dilemma faced by the private sector, which sees huge opportunity on one side and a lack of orders by the government on the other, on top of it MoD has continued to favour the public sector for all major deals in comparison to the facilitation for the private sector. To provide direction and information about the requirements of the service's needs, MoD in mid Feb 2018 has issued Technology Perspective Capability Roadmap (TPCR)  a long term plan of acquisitions.

Lack of Synergy

There is a lack of synergy between stakeholders including the DRDO, the defence ministry and its financial departments. Services HQ Need to work in synergy rather than “independent silos” for a common use platform for cost effective logistics and it must be co-ordinated by HQ IDS.

Flawed Indigenisation

Every Govt has failed to reduce India' dependence on arms import. There has been an unwillingness to drastically reform the state owned defence firms which largely assemble imported kits or make substandard weapons.

Way Forward

With India planning major procurement of military hardware and software worth billions of dollars in the coming years, the defence ministry has finally realised that the mere creation of a Defence Production, Procurement or Acquisition Wing will not bring about speed in defence acquisitions unless backed by concrete measures. The ministry is now fine- tuning major changes in the procurement procedure to make it swifter, less cumbersome, more transparent and responsive to needs of the Armed Forces. Following measures have been recommended in the said report:

  • The existing procedure, with over 50 clearance steps, really bogs down decision-making. The red-tape and repeated cycles of decision- making are now being drastically cut. Hopefully, the new "simplified" process is likely to be fully in place in another couple of weeks.
  • The streamlining includes the procedures followed for shortlisting of vendors; formulation of parameters like General Staff Qualitative Requirements (GSQRs), Joint Staff Qualitative Requirements (JSQRs) and Operational Requirements (ORs); ordering of field trials; and general staff evaluations.
  • A ''standard contract document'' has been finalised as a model contract. This will cut a lot of delay,"
  • As for the persistent problem of unspent budgetary funds, officials say the defence ministry is pushing for the creation of a "non-lapsing fund" for procurements.
  • Regular updates needed to be shared by the defence ministry to avoid these delays.
  • It lists a series of remedies to de-clutter the process, revolving around "accountability" and "ownership", to ensure the purchase of weapons can realistically be expected
  • Need for a "tectonic change in mindset of the ministry officials and the need of the hour is assigning responsibility and accountability."

Need to adopt a project management approach for large projects under 'Make in India' that would make a single agency responsible for delays and lapses. Regular updates and monotoring needed to be shared by the defence ministry to avoid these delays and the need for full automation of the procurement process.

Article published in Magazine issue “Mar-Apr 2018 “

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