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“Make” Procedure in Reverse Circles

Delayed implementation of “Make” procedure to ensure participation of Indian private industries in defence production and frequent changes has denied the country, the critical technologies and has stalled the indigenization process. The author elaborates the overall impact of this delay and request changes.

The Indian MoD took a rather bold albeit delayed decision to incorporate the 'MAKE' procedure in 2006. Then in 2016, a fresh impetus was provided to the rather dormant 'Make Procedure'. Some of the major changes incorporated were:

  • The planning process was streamlined with a separate and dedicated section in the DPP introduced for the 'Make' projects.
  • The TPCR being made more useful by articulating the details of acquisition over the next 15 years.
  • Making the SHQ's owners of the 'Make' category and ensuring that timely decisions are made.
  • Clearing all ambiguity vis a vis the eligibility criteria for participation.
  • Establishing a dedicated 'Make Project management Unit' within the SHQ's.
  • Introduction of different categories of 'Make' projects, MoD funded, self -funded and MSME's only.
  • And last but not the least, enhance the level of MoD funding from 80 to 90% for the 'MoD' funded category.

Several of the above changes were brought as per the recommendations of the 'Expert Committee' report and others from past experience. Overall all of these changes were welcomed whole heartedly by the private sector. Statements from the MoD such as 'Make projects will be the pillar of the Make in India initiative' and that the SHQ's have prepared a list of over two dozen MAKE projects further invigorated the fledgling private sector. However, like all things, it was 'Too Good To be TRUE' and we will highlight this adage with two distinct examples.

Firstly, the current status of the 'Make Projects'.  There were three 'Make' projects, although delayed, at different stages of the hybernation in the process.. The details are in suceeding paras.

 Secondly, the advent of the 'Make-II' category: As stated earlier, in DPP 2016 the 'Make' category was further expanded to include 'self-funded' projects, primarily for import substitution. This was called 'Make-II' and clearly it was meant for projects not at the scale of 'Make-1' that were to be funded by the MoD for up to 90% of the D&D cost.

In June 2018, the MoD released an amendment to the DPP 2016 that stated that going forward, the only type of 'Make' projects that would be released would be under 'Make-II' and small projects under INR 3 crores for MSME's. Thus there would be NO projects that would be funded by the MoD. This definitely is proving to be a great dampener for the private sector as economically speaking, there is no private player in the nation that can self-fund projects such as the FICV or the TCS, much less turn them into viable business cases!

Why are we in this 'stalemate?

The changing track also points to the loss of credibility of the MoD its intents as well the Indian defence firms with their foreign partners, in after having pursued the projects for over a decade. Most of the companies have absolutely no interest in paying their own development costs.   The firms volunteering to do the FICV project at their own cost are primarily those who were eliminated during evaluation of the FICV bids. This is simply a move by known disruptive players to scuttle the contract and start it afresh.

This is clear case of vested interests delaying the project for some reason or the other.  Even after a decade of formulating "Make" procedure we are still in the dark and reinventing the cycle once again. No accountability has been fixed for operational preparedness besides the delay and cost escalation. The acquisition process cannot be delayed to the extent that nothing gets procured.

Of course, nobody really mentions the clear case of 'conflict of interest'. Joint Secretaries from the DDP are in the Board of Directors of every DPSU and as such they protect the business interests of the DPSUs and dilute their accountability whenever there is a massive delay, which unfortunately is very often. Some-time ago, the designation of these same JS's was changed from JA-HAL to JS Aerospace; from JS-BEL to JS Electronics and others as well. Such re-designations were to pass the message that the JS is not just responsible for the respective DPSU's but for the wider indigenous industry. Alas there has not been a single case where these thoughts have been transformed into action. Time and time again we have seen that queries have been raised only when the  DPSU's have been either eliminated or not considered in a competition, no voice is raised in favour of the private sector when a project is given on a 'nomination' basis to the  DPSU's.

DRDO & DPSUs have a very poor track-record when it comes to technological spinoffs, which in turn inhibit  production-levels. Such an act is against national interest and criminal breach of trust in their assigned mandate. Need is to revamp the Defence Production & Supplies as only facilitating entity  to all in defence manufacturing  than only a level playing-field will emerge. Although it is agreed that there is no point in the needlessly duplicating effort, but the fact remains that nowhere in the past the DRDO or DDP met requirements despite all the infrastructure, in given time and cost. No one till now has addressed the issue of utilizing the infrastructure and no one has been held accountable for not utilization of capacities. DPSUs/OFB needs to be fully publicly-listed entities and DDP should have no financial or managerial control over them.

So what does this tell us? Is the MoD-funded 'Make' category a thing of the past? Is the concept of 'Make in India' as far as the defence sector is concerned a lost cause? Will the MoD continue to perceive the private sector as 'alien' and go to any extent to protect its own wards, the DPSU's?

Possibly the final nail in the coffin of 'MAKE' projects can be found from the budgetary allocation made for such projects. In 2016-17, for the Army it stood at INR 217.49 crores; for 2017-2018, it crashed to INR 30 crores, whilst not a single penny was actually spent. And finally in 2018-19, this allocation was further halved to INR 14.55crores. It is interesting to note that even though the Air force did not release a single 'MAKE' project, it spend INR 14.55 crores in 2017-18 and has a budgetary allocation of INR127.29crores for the current fiscal year, 2018-19.

Impact of Delay

It has now been almost 15 years, since the recommendations on the "Make" procedure were partially accepted, however, very little has happened to augment the desired objective of exploiting the full potential of this category, whereas, the time lost so far were good enough time for development of any new platform . Due to indecisiveness by the MoD, progress in the desired direction and this crucial delay has denied the country the critical technology & delayed the modernization process which in turn has stalled the indigenization process. This is clear case of vested interests delaying the project for some reason or the other.  Even after a decade of formulating "Make" procedure we are still in the dark and reinventing the cycle once again. No accountability has been fixed for operational preparedness besides the delay and cost escalation. The acquisition process cannot be delayed to the extent that nothing gets procured, if at all, it is so late that the technology reaches obsolescence stage by the time equipment is inducted into service.

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