By Col Ajit singh (Retd)
The continuing delay in Army plan to procure different variants of Ammunition from Private Sector by establishing the manufacturing facility and supplying for a contractual period of ten years under “manufacture of ammunition for Indian Army by Private Indian industry”- initiative of Govt of India seems to going nowhere.
The Indian Army issued Request for Proposals (RFP) for 8 different variants of Ammunition as under for establishing the manufacturing facility and supplying for a contractual period of ten (10) years under “manufacture of ammunition for Indian Army by Private Indian industry”- initiative of Govt of India.
The RFP had laid down certain Financial and Technical criteria to filter the bidders. The ammunition was proposed to be procured under a long-term contract over a period of ten years from the manufacturer to whom the contract was awarded. The Industry was allowed to import technology from foreign OEMs with certain stipulations laid down for indigenization of critical technologies. In the initial issue of these RFPs, only private Indian Industry was asked to participate in the tenders. Subsequently, however the RFPs were modified to allow PSUs to participate in the tenders.
Indigenization Road Map
An indigenization road map was included in all the RFPs. Basically in each RFP, certain critical technologies were identified, which would have to be indigenized over a period of two years, extendable to four years after payment of certain penalties. In simple terms, this meant that the successful bidder could import ammunition from the foreign OEM for a period of two years extendable to a maximum of four years while it set up manufacturing facilities in India. At the end of the stipulated period, this company would have to have a complete assembly plant in place and manufacturing facilities for the specified critical technologies. After indigenization of critical technology of the ammunition, the successful bidder would have to get the product/subsytem evaluated to meet the quality requirement.
Anomalies in the RFPs.
After issue of the tenders, and two pre bid meetings a total of eleven corrigendums were issued and response date extended to 12 April 2018. After opening of technical bids, several letters were issued by MGO Branch and by DGQA seeking clarification on the proposal submitted by the industry. There were several anomalies in the RFPs which were brought out by the Industry. Some of the glaring anomalies which still exist are given below:-
A) RFP for 40 mm MGL/UBGL Grenades
The RFP covers the production and supply of both MGL and UBGL grenades. The Multi Grenade Launcher(MGL) is a western design weapon which uses a 40x 46 mm breech loading grenade. The Under Belly Grenade Launcher(UBGL) is of Russian design which is fitted under a rifle and fires a VOG 25 grenade. The VOG 25 grenade is a muzzle loading grenade made using Russian technology. The only thing common between the two grenades is the caliber ie 40mm. These two completely different grenades, one using western technology and the other using Russian technology have been combined in the same RFP. This is going to lead to a multitude of problems for the successful bidder as follows:
- It will have to set up two separate manufacturing and assembly lines which will have nothing in common between them.
- The propellants, explosives, detonators all will be different between the two types of grenades.
- There will be two groups of foreign specialists, one group from a western company and the other from an eastern bloc company which will be present in the premises of the Indian company advising, supervising and testing the products at every stage of production. Given the mutual suspicions between the two groups, the Indian vendor will face major headaches keeping the two groups separated. There will be risks of industrial espionage, loss of trust and accusations of not maintaining security of technology acquired by the industry.
- The situation has been further complicated by the recent contract for 700,000 AK203 Assault rifles to be manufactured in India. These weapons will be configured to accept the Russian UBGL using VOG 25 grenades. At the same time, all paramilitary forces have standardized their procurement of 40mm UBGLs using western technology (40x46mm breech loading grenades).
It would have been more prudent to have separate RFPs for these two types of grenades. However, if the army was keen on reducing the number of RFPs, it would have been better to combine the VOG25 with the VOG 17 as both are of Russian origin, certain parts of the fuse are common, propellant and explosives would be similar and the problems envisaged above about security would have been eliminated.
B) RFP for Electronic Fuses
This RFP envisages the production and supply of different types of electronic fuses for three calibers of artillery guns. These are as follows:
- 105 mm-Time and Proximity Fuses
- 130mm- PD and Proximity Fuses
- 150mm - PD, Time and Proximity fuses
As per the RFP all three types of fuses should be electronic fuses. The RFP specifies that the Time Fuse and Proximity fuse should be programmed through an inductive fuse setter. However in the PD fuse, the use of a fuse setter has been done away with and a mechanical switch has been mandated for selection between SQ mode and Delay mode of operation. Not only this, it was also specified that there was no requirement of a safe mode in a PD fuse. In addition to the above, the mode of achieving the delay mode has not been specified. It has been left to the vendors who are free to use a chemical delay if they so desire. During the pre bid meetings, some companies raised this issue and requested that the option of using a fuse setter for selection of operation modes in a PD fuse should be allowed. The MGO Branch in its wisdom turned down this request. This means that the PD fuse can be a mechanical fuse in all aspects of operation and the supplier can get away with calling its fuse an electronic PD fuse so long as it uses a battery and an electric detonator to initiate the explosive train. This leaves a feeling that the RFP for PD fuses has been tailored to suit a particular vendor. This feeling is reinforced if we consider the RFP for electronic fuses issued in 2012 in which a fuse setter was specified the for checking the mode of operation set in the PD fuses and also a safe mode was mandated.
C) RFP for 23 mm Ammunition
23 mm Ammunition is a Russian origin ammunition which is used in the ZU23-2 and ZSU23-4 Shilka guns. The OEM for this ammunition is a Russian company. However in the first prebid meeting, it was specified that the fuse to be supplied with the ammunition should be the MG 25 or an improved version. The MG 25 fuse is a Bulgarian fuse made by Arcus, Bulgaria. By specifying the fuse MG 25, the RFP ties down all Indian vendors to approach Arcus for providing the technology for the ammunition. The option of using a fuse which is better than the MG 25 does not stand to reason as the operational parameters of the fuse and ammunition have been laid down in the RFP. The term 'improved fuse' is open to interpretation and does not make any sense. There may also be a situation that by specifying the MG 25 as the preferred fuse, an Indian company tying up with the OEM (the original Russian manufacturer who holds the IPR for this ammunition) will be rejected as it does not use the MG 25.
In spite of almost one and a half years having passed from the date of submission of the bid, the indentor has not yet finalized their evaluation and the companies have not yet been asked to submit their trial samples. This continuing delay in the finalization of the technical evaluation is having severe negative financial and technical effects on the participating companies. Some of the important issues are as follows:
a) The EMD and Integrity pact submitted by the participating companies were to be valid for two years. One and a half years have elapsed since bids were submitted. On completion of technical bid evaluation, successful bidders will be given 120 days to submit their samples for trials. The evaluation trials and finalization of trial results will take at least one year. This means at a minimum another one and a half years before the commercial bids are finalized. The financial bids submitted by the participating companies will expire in six months, well before the completion of the evaluation process. This means that all these companies will be asked to extend their financial bids for another two years or so. These companies have huge sums of money locked up in the EMD and BG for Integrity Pact submitted by them for which they are not earning any interest. Many of them have submitted Bank Guarantees for which they are paying a large amount of interest to the banks.
b) The participating companies have tied up with foreign OEM companies to supply samples for the trials and plan for subsequent bulk production in case they are awarded the contract. Due to the uncertainty in the sample submission dates, it is quite likely that many OEMs have already manufactured the trial samples. Ammunition manufacturing companies have limited storage space in their magazines. This additional ammunition is going to stress their storage capacity which in turn will lead to higher costs for procuring trial samples by the Indian companies.
c) Except in the tender for electronic fuses, in all other tenders only two to three companies have submitted bids. Each company has thus a 33 percent to fifty percent chance of being selected as the successful bidder. This means that many companies which are confident in the validity of their bids, would have already started the process for identifying sources of raw material, procurement of plant and machinery, construction of infrastructure etc in the hope that they would be successful in their bids. These companies have therefore incurred huge costs which do not seem to be leading anywhere. Many of the companies which have participated in the tenders are SMEs and are being unduly stressed financially by the continuing delay.
There are several observations in all the RFPs. The RFP for 125mm Tank ammunition was withdrawn. Several companies which were interested in offering this ammunition must have spent a large amount of manpower, time and money in preparing their bids. Now DRDO has asked for industrial participation of private industry to produce their design. Not clear if it was pre planned. The cavalier attitude of preparing shabbily conceived RFPs which require several modifications, issuing RFPs and then cancelling them, time over runs in finalizing the contracts etc has to come to an end. The MoD/ Defence forces could earlier get away with this sort of lackadaisical approach towards defence procurement as the suppliers were either the OFB or government owned PSUs where costs were not a factor to be considered.
There is a need for a drastic change in the mindset, behavior and operating procedures of the Indian MoD and the defence forces if they want to set up a reliable military industrial complex which will meet the defence requirements of the nation and also become a successful exporter of defence equipment.