Thursday, June 13, 2013

India’s New Defence Procurement Procedure: Will it end scams and promote Indigenisation?

Radhakrishna Rao, 
Visiting Fellow, VIF

Scams and scandals surrounding some of the high ticket defence acquisition programmes have not only besmirched the fair image of India but also severely dented the defence preparedness of the country with serious consequence for its long term security.

Indeed, the very fact that the well laid down rules and regulations governing the import of defence hardware were flagrantly violated in the acquisition of 12 VVIP AW 101 helicopters from the Anglo-Italian enterprise Augusta Westland has come as a rude shock to the country. Defence Minister A K Antony recently informed the Lok Sabha (lower house of the Indian Parliament) that the Indian Air Force(IAF) flouted the norms while holding trials of AW 101 helicopter. Going specific, Antony pointed out that “the IAF is responsible for agreeing to hold the trials of VVIP helicopters abroad at locations specified by the vendors.” And flouting all the norms and guidelines involved in the field evaluation trials of imported defence hardware, the trials of Augusta Westland AW 101 chopper were carried out in United Kingdom(UK).

Similarly, the trials of its competitor, Sikorsky S-92 helicopter were conducted in USA.

And when the bribery scandal involving the allegation of the payment of Rs.3,600-million kickback to secure the Rs.36,000-million chopper deal surfaced, questions like how could a helicopter which was supposed to take off with load from an altitude of 45,00-metres with low air pressure was allowed to be tested in the UK ( which incidentally did not have the kind of elevation in the first place) came to the fore. . What is more, an island nation like UK does not offer climatic extremes as found in India—from the freezing cold Siachen base camp in Himalayan heights to the searing hot Jaisalmer located amidst the sprawling Thar desert in the plains of Rajasthan where the chopper is supposed to ferry the VVIP passengers. It stands to reason that a helicopter meant for use in India should be flight evaluated under varying environmental and climatic conditions of the country. Indeed going by the norms of defence acquisition, trials are to be held in the same place where the platform is to be put to use. How then this golden rule was bent and twisted, no one is sure as yet. It is high time that effective and bold steps are initiated to put an end to such a “shocking impropriety” in the defence deals involving foreign vendors.

One more question that remains unanswered is why it was decided to buy 12 helicopters instead of the originally envisaged eight? By all means, the action for buying 12 helicopters remains far from justified. For all the VVIPs in the country are unlikely to fly at about the same time in these helicopters. Clearly and apparently, the alleged involvement of one of the former IAF chiefs in this scandal could have demoralising effect on the defence forces of the country.

Perturbed over the bribery allegations in defence hardware import, India’s Ministry of Defence (MOD) has proposed radical changes in the Defence Procurement Procedure (DPP). It is claimed that the DPP-2013 goes beyond the earlier DPPs in so far as eliminating the behind the scene “murky machinations” of brokers and middlemen is concerned. Perhaps the most significant among the changes suggested in DPP-2013 by the Defence Acquisition Council(DAC), the apex decision making body of the Ministry of Defence(MOD) headed by Antony, is providing the Indian defence industry the first right of refusal to take up a defence project. As such, the DPP-2013 would make it mandatory to explore indigenous options for military hardware and going in for imports only if the domestic players throw their hands up on the timely supplies of quality products. This, change, it is said, would help reduce import by boosting the indigenous production of defence hardware. However, the moot question is whether Indian defence industry has a capability level good enough for taking up some of the challenging defence projects. Perhaps with some hand holding by the Defence Ministry, Indian industry would be in a position to meet the high profile requirements of the Indian armed forces on time.

On another front, the DPP-2013 seeks to create a level playing field for Indian private companies which not long back used to be denied equal opportunity when compared with the state owned enterprises. For long, the Indian Defence Ministry had favoured the public sector enterprises much to the disadvantage of the Indian private players. Fortunately, this mind-set will no more dominate India’s defence production scenario. For instance, the maintenance, repair and overhaul of military equipment has been opened to private players, ending the monopoly enjoyed by the defence Public Sector Units and Ordnance Factory Board(OFB).”The only way forward for the country is the rapid indigenisation of defence production with both the public and private sectors playing pivotal roles in this endeavour. We will make all efforts to create genuine playing field for India’s manufacturing industry vis a vis the global players,” said Antony.

Indeed, at long last, the Defence Ministry has started looking at the Indian industrial capability in a holistic manner by suggesting private-public participation for high ticket defence contracts.

Further, the DPP-2013 also favours the growing participation of Indian industry in defence production either directly or through a joint venture with foreign partners. In the ultimate analysis, the objective of this new defence procurement procedure is to “infuse greater efficiency in the procurement process and strengthen the defence manufacturing base in the country”. As part of the plan to boost home grown defence production capability, the 41 units under India’s Ordnance Factory Board(OFB) are being upgraded and modernized with an investment of Rs.150,000-million.According to an evaluation by Stockholm International Peace Research Institute(SIPRI), OFB was the world’s 46th largest arms manufacturer in 2010.

Indeed, in the aftermath of Augusta Westland chopper acquisition scandal, Antony, known for his clean image and uncompromising personal integrity, has been repeatedly stressing the point that the imports will be the last option and indigenization of fighting equipment and defence systems is the only answer to do away with scandals involved in overseas defence purchase. According to SIPRI, in terms of the import of defence hardware, India has in the last decade overtaken China to emerge as the largest arms importing country. Rightly, Antony has strongly advocated that India should reverse the trend of 70% defence imports in favour of domestic sources and bring down imports to 30%. As it is, Antony had recently informed the Indian Parliament that “Between April 2012 and Feb.2013, the country’s provisional expenditure on defence import was Rs.251,260-million which is the highest in the last three decades.”

With a view to end impropriety and malpractices involved in the defence purchase, with immediate effect, all decisions that require bypassing the standard procedures will have to be approved by DAC. Further, it has been decided that specifications for any tender will have to be frozen at the “acceptance of necessity” (AON) level. These changes incorporated in DPP-2013 are expected to expedite the acquisition process and increase transparency in all their manifestations, says Antony.
Against this backdrop, the recent initiative by the state owned Defence Research and Development Organisation (DRDO) to develop an advanced military howitzer by involving Indian industries in both the private and public sectors augurs well for boosting the indigenous defence production base. As it is , DRDO has been actively pursuing the development of 155-mm,52 calibre Advance Towed Artillery Gun System(ATAGS) at its Pune based Armament Research and Development Establishment(ARDE).Enhanced fire power at longer ranges, higher accuracy and improved survivability are some of the conspicuous features of this new battlefield system.

Significantly, after the scandal surrounding the import of Bofors gun in 1980s created a big political storm in the country, no new artillery system was acquired with serious consequences for the combat readiness of the Indian army. However, the hope for the Indian army is that state owned OFB has decided to manufacture the Bofors guns indigenously at its Jabalpur facility. As it is, sometime back OFB was able to get hold of the blueprint of the Bofors guns it had acquired from the Swedish arms manufacture. There is no denying the fact that it is the fire power of Bofors guns that saved the day for the Indian army during the 1999 Kargil skirmish. ”It took 15 long years for the Indian Government to recover from the shock of Bofors scandal. The adverse fall out of the scam are the loss of credibility of the top leadership of the services among the troops and the public; ban on defaulting company that is likely to affect major projects, thereby delaying modernisation and further slowdown in decision making by bureaucrats which is the worst factor,” says Major General Mrinal Suman, an expert on Indian defence issues.

Of course, Antony is fully well aware that in this age of globalization, “zero import” is out of question. Stating that maximum fighting equipment should be acquired from indigenous sources, Antony noted that India will have to give a second look at its defence production base and procurement policy with a view “speed up indigenisation on time”. In Antony’s own words, “we have to further tighten our mechanism. Whenever allegations are made, we have to go to the root and find the truth and punish the guilty. We cannot waste a single penny of Indian taxpayers’ money for greedy players”.

With a view to help the domestic industry take up the challenge of meeting the requirements of Indian defence forces on time and with adherence to the highest quality standards, DAC has approved the release of a public version of its 15 years perspective document outlining the “Technology Perspective and Capability Roadmap”(TPCR). As envisaged now, the TPCR will provide useful guidance to the Indian defence industry for boosting its infrastructure capability and enhancing its research and development base. Meanwhile, in a development that could help end the long monopoly of imported Tetra trucks—whose acquisition earned notoriety for impropriety from the word go—a consortium of Indian companies has emerged as the lowest bidder in the first in a series of Indian army tenders to procure specialized vehicles.

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