With the year-old Defence Procurement Policy (DPP) not working as expected, the Government of India is planning to come up with a new policy soon. This was revealed by Mr. Amit Cowshish, Financial Advisor (Acquisition) and Additional Secretary, Department of Defence Finance.
With the year-old Defence Procurement Policy (DPP) not working as expected, the Government of India is planning to come up with a new policy soon. This was revealed by Mr. Amit Cowshish, Financial Advisor (Acquisition) and Additional Secretary, Department of Defence Finance, Ministry of Defence at a one-day-long defence procurement workshop on "Streamlining the Indian Defence Procurement System’, organised by Observer Research Foundation (ORF) and SP Guide Publications on 2 May in New Delhi.
Mr. Amit Cowshish said the DPP is under review and some of the issues of the industry might be addressed when the new DPP is announced. "I hope some of the issues the industry has raised may be addressed in the new DPP’, he said.
Mr. Cowshish suggested creation of a permanent professionals body to select the right vendors, brining in continuity, transparency and accountability. He admitted that a paradigm shift in the policy of defence acquisitions was necessary.
Earlier, in his opening remarks, Mr. Sunjoy Joshi, Director, ORF, set the tone for the proceedings as he pointed out that the Indian defence procurement system was drifting into an era of being dictated by procedures, processes, systems and protocols over substance. Describing the current state of India to the character of Joseph Heller’s famous book, Something Happened, Bob Slocum, who finds himself in an inexplicable irrational state staring into the abyss of uncertainty despite having everything in life going for him, Mr Joshi said India too is in such a state, indicated by the focus given on rituals.
Mr. Joshi said we should not allow process and protocol alone to decide our strategic acquisitions and political leadership is certainly a key component in defining the end goals that process and protocol must at all times serve, rather than become, masters of.
He said the myriad decisions made not just on defence procurement and offsets, but the wider framework of our industry policy in the context of manufacturing and services, patents and labour, economic restructuring and reform, all bear upon and influence the who and how of our engagement with the world. It is here that our own domestic policies and programmes impinge upon and determine what shall be the shape and weight of the military industrial complex of tomorrow.
Mr. Joshi pointed out that India is one of the world largest importer of defence equipment and hardware. As per some reports, in the previous year we have acquired the tag of the largest importer. "This reality reflects our growing needs and the overwhelming opportunity for the domestic sector to step in. At present over 70% of all Indian defence equipment are imported and the volumes of imports are likely to remain significant over the next decade at the very least. Hence it is incumbent upon us that we put in place processes that enhance the level of transparency and ensure a level playing field for all players; something that the DPP professes to achieve,’ he emphasised.
Saying the defence sector is a niche area with high risks with very large start-up capital and the time to recover investments fairly lengthy, Mr Joshi posed a significant question: how beneficial in the long run is our obsession with the idea of Offsets, which have their own limitations? And Are there then alternative modes that could better enhance indigenous skills, capacities and capabilities?
He pointed out that India imports close to 70 per cent of all its military hardware. At present, the nation is slated to import close to $ 100 billion over the next decade to meet the needs of the armed forces.
Mr. Joshi’s opening remarks were followed by two special addresses - one by Mr. Ravindra Gupta, Chairman of the Task Force on Defence Modernisation and Self-reliance, and Mr. AK Chopra, Financial Advisor to the Ministry of Defence.
Mr. Gupta also highlighted the need for paradigm shift in the procurement policy. Mr. Gupta said there was a need to shift our focus from mere purchase to acquisition with technology transfer. He said that the taskforce that he was heading was also focusing on the possible leverages that the nation can capitalise from the on-going and proposed military acquisition drive. Currently our nation purchases hardware and does not necessarily acquire technology, since acquiring technology also hinges on the capacity to absorb the technology that’s been transferred. One of the reasons for this shortfall is that the Defence Public Sector Undertaking (DPSU) invariably lack R&D facilities. They also lack the political impetus and financial resources that has been showered on space research and atomic energy departments.
Mr. Gupta said the Task Force, headed by Mr. Naresh Chandra, would submit its report soon.
Mr. AK Chopra said that the DPP as a concept was first put forth in 1992 by the Parliamentary Standing Committee on Defence, but it gained momentum only after the Kargil conflict. Earlier our country did not have a proper procurement system and acquisitions were done in an ad hoc basis. In this context, he suggested an improvement to the existing DPP by having an in-house mechanism to address the queries of all stake holders, thus improving efficiency of the DPP. He pointed out that the quality requirements and estimation of costs were some of the major hurdles causing delay in approvals.
Two important political leaders, Mr Manish Tewari, Member of Parliament and Spokesperson, Congress, and Mr. Naveen Jindal, also Member of Parliament - both members of Parliament Committee on Defence -- also spoke on the problems facing defence procurement and made valuable suggestions.
The first session for the day was dedicated to evaluating the DPP. A few of the key points that emerged during this session was the requirement to streamline and organise the procurement arm of the government, since it was vast in both nature and scope. Thus there existed a requirement to have a standard procedure for this process. A law that defined the liability of both the state and the vendor if there arose any discrepancy- was also suggested. It was also felt that there exists a greater need for accountability, transparency and efficiency in the entire process while on the other hand the DPP needed to differentiate between threat dependent perspective to a threat independent perspective.
The other areas that were touched were the ones that arose from FDI. With FDI in defence being a meagre 26 % at present, this has made negligible impact in attracting foreign investment. At the same time the terms of reference for offsets and transfer and technologies have become stringent and more demanding. Thus there is a need to set goals and objectives that are in tandem with export control and export laws.
Mr Tewari, in his luncheon address, contested the general belief that the DPP was flawed and said that there were myriad issues that needs to be addressed.
The second and final session of the day focused on identifying the core concerns in defence procurement. The primary issues that were identified included the time taken in executing a contract with delays commencing from the time of evaluating to awarding the final contract. There was also a delay in formulating the quality requirements of the armed forces, which in many ways was quite complex and stringent.
The other area that was focused was offsets. The speakers opined that the current offset policy was not in consonance with international practice of having 100 % offset. The other drawback was that India did not have an overseeing agency to monitor offsets as well as capitalise on gaining technology. At the same time there was a need to build the ability to absorb on the offset issue to the maximum. The nation needed to focus on transfer of technology and offsets and gain from these aspects. This however would be possible if there was adequate investment in domestic R&D to develop indigenous technologies for addressing domestic needs.
In the valedictory address, by Mr. Naveen Jindal admitted that delays in defence procurement leading to unutilised defence outlays amounting to more than 8000 crore has really affected the modernization of Indian defence forces.
Mr. Jindal pointed out that during his trips to ordnance factories, he has found that the factories have very good factories but the designs they use are obsolete. Some of them are so obsolete that they were kept in museums in countries like the United Kingdom, he said.
Stressing on the need to buy latest technology and modernise weapons, Mr. Jindal said we still produced rifles like INSAS while most of the major countries use much modern technologies which are available in the market. There is a world of difference. It is like using an Ambassador (car) and a Mercedes. In the case of rifles, there is not much difference in the cost,’ he remarked.
Mr Jayant Baranwal, Chairman of SP Guide Publications, delivered the vote of thanks.
(This report is prepared by Sripathi Narayanan, Research Assistant, Observer Research Foundation)
Click Here: Opening Remarks by ORF Director
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