» Business » Can Parrikar overhaul defence procurement?

Can Parrikar overhaul defence procurement?

By Brigadier S K Chatterji (retd)
March 28, 2016 08:49 IST
Get Rediff News in your Inbox:

The Bofors gun


As the DefenceExpo gets underway in Goa, Brigadier S K Chatterji (retd) says the proposed Defence Procurement Procedure 2016 should ensure that the Indian defence industry is on the path to design, develop and make in India.

Defence Minister Manohar Parrikar had assured the defence industry that the new Defence Procurement Procedure-2016 would be released on April 2. However, in spite of the date drawing perilously close, the entire provisions of DPP-2016 have not been cleared in the Defence Acquisition Council meetings.

From releases in the media it is apparent that Parrikar, having freed defence procurement from the Gordian knot, is now attempting a path-breaking document that sheds legacy methodologies which had slowed defence procurement to a crawl, while simultaneously bringing in accountability in the system.

The document is also expected to address certain new issues and old problems. Predominant among these are the aspect of nominating strategic partners for major projects, provisions for blacklisting/penalties, and reorienting the military-related functions. A few important aspects are discussed further.

The aspect of nominating strategic partners is one of the major issues the ministry of defence is grappling with. Countries with highly developed defence industries depend heavily on huge corporate conglomerates to drive defence research and futuristic combat platform design and manufacture.

The case of the American F-35 single-seater, single-engine, all weather, stealth multirole fighter aircraft makes an interesting study. The F-35 originates from X-35 which was the winner in the joint strike fighter programme. Currently, the US-based Lockheed Martin leads the project with Northrop Grueman, BAE Systems and Pratt & Whitney as industry partners.

The project is funded not just by the American government, but also a few NATO allies and even Turkey. It is the costliest project globally and has had both cost overruns and time delays.

Obviously, such a new generation fighter aircraft would not have reached the current state where it is scheduled for operational deployment within the year, had such vast resources not been congregated and government support extended.

If India has to develop capacities, we cannot just bank on defence public sector undertakings. Most of the DPSUs have their hands full for the next couple of years; a decade in some cases.

Obviously, to keep the pace of modernisation going, a family of corporate entities capable of pumping in the investments required to make big budget forays like tanks, aircrafts, helicopter, submarines etc, are required.

They would be ready to invest only in long term strategic partnership models. These strategic partners will in likelihood have a greater role tomorrow in design and development of futuristic weapon systems also.

However, we have also to ensure that while allowing the big fish a rich diet, the small ones don't get swallowed by the former's greed or are forced to close shop with diminishing profits in a competitive market. Simultaneously, innovators, irrespective of their capitalisation capabilities, will need government support and assured returns.

The extracts of the new DPP, as made known so far, conveys that up to 90 per cent funding for make-in-India category projects will be by the government. Though such a policy allows companies with expertise to undertake any 'make' project, however big it may be, for bigger projects there is bound to be a greater reliance on those identified as strategic partners since they have the wherewithal to be called robust.

For both the big and small players, a high degree of accountability needs to be built into the system. The Rs 95 trillion Indian banking sector is already saddled with a huge heap of non-performing assets. Most of these are on the balance sheets of government banks. The creditors are largely from a cross section of Indian industry.

The aspects of strategic partnership, of course, calls for a degree of trust and major funding. However, defaulters, especially wilful ones, will need to be dealt with speedily to obviate the possibility of a plethora of scams.

The other big issue that the procurement process has suffered from for over a decade now has been the aspect of blacklisting. The in vogue DPP-2013 has no guidelines to offer on the multiple issues that require the government to initiate action against an industry for inappropriate or unethical activities.

The absence of guidelines has led to a chaotic state in certain areas, a typical example being the acquisition of 155 mm guns for the artillery. The MoD, over a period of time, blacklisted almost every reputed artillery gun manufacturer, globally.

Innumerable orders were cancelled, as soon as a whiff of unethical practices appeared in the media. However, if the principle of 'it takes two to tango' is applied, the fact that not a single official of integrated headquarters of the MoD was even censured in most such cases, indicates that either such allegations were frivolous, or the government of the day did not pursue them wilfully.

The new DPP is apparently addressing the issue with due diligence and a system of fines, while continuing with the procurement process even as such allegations are received and investigated, will be the guiding principle.

The system has also to ensure that recipients of favours in the government procurement organisations are most severely dealt with to deter officials from getting involved in unethical practices. Keeping our own house clean is the greater imperative if graft is to be eliminated.

The next major issue is the time taken to complete an acquisition process, up to the tendering stage. There are multiple factors that lead to the whole process being extended with some estimates pegging the average at seven years.

A few issues that can be highlighted include the timelines for technical evaluation and its necessity. The whole processing by the technical evaluation committee is given 20 weeks. There is a school of thought, subscribed to by many experienced professionals, who question the necessity of a TEC at all. The technical bid is definitely required, but with user trials being as extensive as our services undertake, TEC could well be scrapped.

Another activity that consumes a huge time slab is field trials. A period of 20 to 45 weeks is allocated for the purpose. However diversified the trial format be, surely 45 weeks cannot be spent on this singular activity.

We also have all kinds of equipment, some of them already in operational use by other armies, some that are state of the art and require extensive testing, equipment that is very basic in terms of technology etc.

To subject every piece of equipment, be it small or big, off the shelf, breaking new frontiers or very basic to the same rigour is uncalled for.

There is a requirement of a more flexible approach. The trial duration is best arrived at during the contract negotiation stage by the services giving its time requirement with justifications.

The objectives of the new DPP-2016 need to include the requirement of building an ecosystem that nurtures the growth of our Micro, Small and Medium Enterprises, while encouraging innovators. It needs to ensure that the Indian defence industry is on the path to design, develop and make in India, while also creating facilities for testing and maintenance support.

The billions of dollars that we will need to spend on our defence should go primarily to the Indian economy and also create the jobs that make in India champions.

Brigadier S K Chatterji (retd), an artillery officer, is currently the Editor-in-Chief,

Get Rediff News in your Inbox:
Brigadier S K Chatterji (retd)

Moneywiz Live!