Mired in red tape

DEFENCE PROCUREMENT: The Defence Procurement Board should decide on a cut-off date for conclusion of the acquisition contract and ensure accountabilit

Mired in red tape
On May 1, 2015, Defence Minister Manohar Parrikar appointed a 10-member committee headed by former home secretary Dhirendra Singh to review defence procurement policies and procedures and to recommend fresh guidelines with a view to giving an impetus to ‘Make in India’ and remove bottlenecks.

The committee made several far-reaching recommendations, including the nomination of select Indian companies as strategic partners of the government to assume the role of ‘prime integrators’ of defence technology for complex projects at par with DPSUs and ordnance factories. The committee is also of the view that the indigenisation ratio of ‘Buy (Indian)’ acquisitions should be progressively increased with each revision in the Defence Procurement Procedure (DPP).

No country that is not substantially self-reliant in defence technology can aspire to become a dominant military power in its region and, in due course, on the world stage. The MiG aircraft, tanks and other major weapons platform were manufactured under licence, but there was no transfer of technology(ToT).

For that matter, no technology has been transferred by the US companies despite US$ 10-12 billion worth of weapons’ acquisitions. However, purchases from the US were mostly government-to-government deals and ToT was not part of the contract. Defence technology is proprietary; the selling company’s government must be willing to allow the transfer and the buyer must be prepared to pay for it.

The essence of all efforts to achieve self-reliance lies in acquiring defence technology through original research or by gaining access to it through ToT. No country will give India strategic technologies, such as nuclear warhead and ballistic missile technologies, know-how on building nuclear-powered submarines and ballistic missile defence technology (BMD), among others.

For the development of hi-tech weapons platforms like fighter-bomber aircraft and sophisticated defence equipment like over-the-horizon (OTH) radars, there should be no need to reinvent the wheel. These should be developed jointly in conjunction with India’s strategic partners. The route adopted should be to form joint venture (JV) companies between defence PSUs (DPSUs) and private sector companies and international defence MNCs. In these cases, the role of the DRDO and the Services HQ should be mainly supervisory and to act as facilitators.

The design and development of low-tech items should be outsourced completely to the private sector. Services HQ should establish their own Design Bureaus to inculcate a technology development culture. They should initiate R&D projects in their training institutions, especially for the purpose of product improvement during the life-cycle of weapons systems and defence equipm-ent. At present, very little innovation is taking place within the Services, perhaps with the singular exception of the navy.

In 11 years, the DRDO budget increased from Rs 3,443 crore to Rs 14,354 crore for FY 2015-16, that is six per cent of the defence budget. At present, there are far too many DRDO laboratories. There is a need to rationalise the justification for these and close down those whose work can be outsourced to the private sector. The Rama Rao committee’s recommendations on the functioning of the DRDO must be expeditiously implemented after scrutiny by the Defence Technology Board.

At the policy level, many contentious issues need to be resolved, including the privatisation of most of the ordnance factories and the defence PSUs. Publicly owned manufacturing facilities are always inefficient and seldom meet the laid down production targets. They also lack dynamism and normally develop a risk averse professional culture.
Though FDI in defence manufacture has been increased from 26 to 49 per cent, this is still not attractive enough for the MNCs to invest in India. They prefer to have a controlling stake. This policy should be reviewed by the government, but adequate regulatory measures should be built in to guard against the pitfalls of permitting majority stake.

Disadvantageous offset policy

The present offsets policy has not worked to India’s advantage. The defence industry’s ability to absorb 50 or even 30 per cent offsets is limited at present. It may be more prudent to consider offsets only in cases where the benefits expected to accrue, will outweigh the additional costs. While exports of defence equipment have been permitted, the procedures for according the approvals that are necessary and the regulatory framework need to be streamlined.

At present, the time frame for the acquisition of defence equipment is excessive. The inconclusive negotiations for the Rafale fighter aircraft are an example. The present acquisition time must be cut down to less than one-third. The Defence Procurement Board should decide on a cut-off date for the conclusion of the acquisition contract and ensure accountability. The government should examine the feasibility of establishing Defence Economic Zones (DEZs) to provide incentives for indigenous defence manufacture. There is an inescapable need to establish an Institute of Defence Acquisition under the CoSC.

The DPP document is too long and must be cut down to not more than 12 to 15 pages. There is an urgent need to cut red tape, improve time-lines for the conclusion of contracts, ensure better quality control, involve armed forces officers more effectively at every stage of the acquisition and introduce greater transparency in the acquisition process.

As the full report of the Dhirendra Singh committee is not yet available in the public domain, it is not clear whether the committee has undertaken a holistic review of the entire gamut of defence procurement, including the DPP, the production process, R&D, the offsets policy, timely conclusion of contracts, quality control and accountability. The committee’s recommendations must be widely debated before these are considered by the Defence Procurement Board.

The procurement of defence equipment is an extremely important facet of preparedness for future conflict and must be streamlined to obtain maximum value from every rupee spent on the acquisition of weapons and equipment.

(The writer is former Director, Centre for Land Warfare Studies, New Delhi)

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