Military & Aerospace

An Integrated Approach to Defence Procurement
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Issue Vol 27.3 Jul-Sep 2012 | Date : 25 Sep , 2012

Indian Navy's P8I

It is evident that the services need to be more proactive in the process of procurement. It is also obvious that the optimum and cost-effective utilisation of the defence budget must be the basis for all defence purchases. This becomes more apparent considering the rising cost of weapon systems for the three services. Over the years, military expenditure today has increased significantly from what it was some 15 years ago. For example, in the five-year period between 1996 and 2000, India had an average annual defence expenditure of $20 billion. A decade later, between 2006 and 2010, this figure shot up to an average of $32 billion per year. Even the value and size of individual contracts have gone up considerably. The recent purchases for the IAF including the ongoing Medium Multi-Role Combat Aircraft (MMRCA) tender in the final stages of conclusion are by themselves billion-dollar deals.

Recently, the Chief of Army Staff, General VK Singh alleged that he had been offered a Rs 14 crore bribe to approve the case for induction of sub-standard Tatra heavy vehicles for the Indian Army. A day later, after a furore in Parliament, Defence Minister AK Antony ordered a probe by the Central Bureau of Investigation. This case brings to light a more serious inadequacy in the framework of rules and procedure for the procurement of defence equipment for the three wings of the Indian Armed Forces. In spite of all its efforts over the past twenty five years or so, the Indian Army still does not have self-propelled artillery nor does it have the 155 mm calibre guns it needs. It has taken nearly three years to obtain clearance from the government for the proposal to purchase the Pilatus PC7 basic flying trainer aircraft for the Indian Air Force (IAF), a requirement that was extremely critical. Similar delays have been witnessed in the case of acquisition of warships and submarines for the Indian Navy.

India’s defence procurement processes are not in tune with the requirements of the Indian Armed Forces….

These specific instances are a pointer to a broader problem here, that of India’s defence procurement processes not being in tune with the requirements of the Indian Armed Forces. It is not only a problem of bribery and corruption but also of delays in the procurement process which seems to have become endemic and ultimately dilutes the effectiveness of the Indian Armed Forces.

Some other aspects in relation to the scam regarding the Tatra heavy vehicles reveal a disturbing malaise in the approach to the needs of the services. When the Tatra trucks were found deficient in performance at high altitudes by the then Lt. Gen. V K Singh, had no one from the Indian Army reported this deficiency at any time in the previous decades, or had no one from the Indian Army checked whether they were being overcharged for the price of the truck? What kind of indigenisation efforts were put in by Bharat Earth Movers Ltd. (BEML) to try to design a vehicle to operate in Indian conditions? In this instance, if the additional charge per vehicle was reported to be Rs 40 lakh and some 800 trucks were on order per year, then not only would BEML benefit from a profit of around Rs 320 crore annually but more importantly, this amount would not have been available to the Indian Army for other requirements. It is certain that there will be similar stories relating to procurements for both the Air Force and the Navy. The cumulative effect on the budget for the three services if computed meticulously, could well reach staggering proportions!

It is evident that the services need to be more proactive in the process of procurement. It is also obvious that the optimum and cost effective utilisation of the defence budget must be the basis for all defence purchases. This becomes more apparent considering the rising cost of weapon systems for the three services. Over the years, military expenditure today has increased significantly from what it was some 15 years ago. For example, in the five-year period between 1996 and 2000, India had an average annual defence expenditure of $20 billion. A decade later, between 2006 and 2010, this figure shot up to an average of $32 billion per year. Even the value and size of individual contracts have gone up considerably. The recent purchases for the IAF including the ongoing Medium Multi-Role Combat Aircraft (MMRCA) tender for which the Dassault Rafale has emerged as the frontrunner and is in the final stages, are by themselves deals worth billions of dollars.

The DRDO and the defence PSUs have stagnated due to the protection and benign supervision…

Defence Procurement

The primary objective of all defence procurement is to provide the required defence systems to the Indian Armed Forces in the specified timeframe with least expenditure of national resources. This is most effectively achieved when the weapon system is available from indigenous industry. Tragically, this has not been so in India for the past six decades in spite of heavy expenditure on the Defence Research and Development Organisation (DRDO) and defence Public Sector Undertakings (PSUs). This is due to the fact that both the DRDO and very few of the defence PSUs have been capable of contributing to the requirements of force modernisation. The DRDO and the defence PSUs have stagnated due to the protection and benign supervision that results in little accountability, efficiency, innovation, competitiveness, quality control and a host of other criteria which go to make a defence industry vibrant and contemporary.

The defence PSUs have opted for the more convenient option of ‘licensed production’, rather than to follow the hazardous path of original design with the attendant risks and accountability. The important aspects that need to be addressed are the requirements of a long term perspective plan, of cost effectiveness, of transparency and the need for a holistic approach to overcome these deficiencies.

India needs to have in place a Long Term Integrated Perspective Plan (LTIPP) covering a period of 15 years…

The Acquisition Process

India needs to have in place a Long Term Integrated Perspective Plan (LTIPP) covering a period of 15 years. It is reported in the media that A K Anthony, the Minister of Defence had recently approved the LTIPP for the three services. In an earlier issue of the Indian Defence Review, Major General Mrinal Suman, in an incisive article titled ‘Defence Procurements Grapple With The Twin Problems Of Time And Cost Overruns’ had stated that, “The Defence Procurement Procedure – 2011 (DPP-2011) mandates that the future needs of the armed forces must be shared with the industry. For that, a public version of a perspective document outlining the technology perspective and capability road map covering a period of 15 years is required to be made public. As can be appreciated, such a document can at best be of limited value. It is purely indicative in nature and does not contain concrete demand projections. Additionally, absence of assured commitment of funds and frequent changes in priorities, reduce the sanctity of the perspective plans. Thus no prospective producer can bank his investment decision on it.”

The Indian Armed Forces under the Ministry of Defence (MoD) need to address these concerns by giving concrete demand projections and setting aside funding for these projections. It is not known if these aspects have been addressed in the LTIPP. Such a formulated approach, when published and available to the DRDO, Defence PSUs and private sector players will enable them to formulate plans to move in a steadfast manner on the road to self-reliance.

Let us look next at the various steps the acquisition process ought to go through:

  • Conversion of the shortfalls in capability to arrive at the requisite performance parameters.
  • Selection of the most suitable and cost-effective option that can deliver the weapon system in the given timeframe.
  • Acquisition, induction and support for the selected weapon system.

Performance Parameters of the Weapon Systems

The first part is the responsibility of the user Directorate of the service, be it operations, maintenance and logistics dealing with the selection. Defining the performance parameters is the first part and this is an area where the defence services are often blamed for demanding unrealistic performance attributes. This could be so as the services are required to utilise the weapon system over its life cycle, which could vary from ten to even 40 years and possibly longer with mid-life upgrade. Hence, when the Services HQ carries out the survey, it looks for technologies which will enable the services to preserve the fighting edge against adversaries over the life cycle of the weapon system. The DRDO and Defence PSUs have a part to play while framing the Qualitative Requirements (QRs). Based on the LTIPP, these organisations should be able to give suggestions on the QRs, as well as set the time frame for indigenous development. This has been done earlier in the case of the Integrated Guided Missile Development Programme but not for the entire range of weapon systems based on the LTIPP.

Selection of the Optimum & Cost-Effective System

This phase has two parts, namely the technical and the commercial. The technical part has generally been handled in a professional manner practically for most defence purchases. Witness the Bofors gun which served the country well in the Kargil conflict, though it is still mired in controversy for other reasons. It is the commercial part which needs the element of transparency as also a professional approach. Take the case of the Medium Range Air-to-Air missile, which was part of the inventory some twenty years ago. Since this missile was then contemporary, the DRDO would not have had much knowledge of its material and technological aspects and its cost. It was natural therefore to depend on the foreign Original Equipment Manufacturers (OEMs) for information on capability and costs which naturally would benefit them. If the DRDO and the IAF had together formulated a long term plan with funds and accountability, the IAF would have been better placed during discussions on the cost, capability and support requirements for the missile. The next step on the road to indigenisation is for the individual service, the DRDO, the concerned industry, public or private, as well as the foreign vendor to agree upon a road map for transfer of core technologies to India.

Absence of assured commitment of funds and frequent changes in priorities, reduce the sanctity of the perspective plans…

A good example to follow would be that of the model adopted by Embraer company of Brazil, one of the leading designers of regional airliners and executive jets, and one in which the US has a stake. There is a need for a more flexible approach towards foreign participation. Perhaps, there is also a need to enhance Foreign Direct Investment (FDI) in defence industry from the current level of 26 per cent to around 50 per cent to allow excess capacity to be exported and other such incentives, so that the combination of the latest technologies with India’s low labour costs and technological capability, can provide a winning formula for both the foreign partner and the Indian industry.

Acquisition, Induction & Support for the Selected Weapon System

The Indian Armed Forces have shown their ability to absorb high technology weapon systems. Witness the ease with which the Mirage-2000 and Su-30 MKI have been inducted into the IAF. The Indian Navy has inducted and operated the HDW and other submarines with similar ease. The Indian Army has also displayed a high level of competence in handling the Bofors gun and other high technology weapon systems. Acquisition and induction have not been a problem for the Indian Armed Forces, but provision of spares has been especially the lack of response by the Russians in relation to product support for aircraft and other weapon systems acquired from them. The Western vendors have been no better and hence it is important for the three services to be adequately knowledgeable.

The defence services are often blamed for demanding unrealistic performance attributes…

This knowledge applies also to the quantity and cost of spares supplied by foreign vendors. With the road map for transfer of technologies serving as template, the DRDO would involve itself with the new induction, especially in relation to core technologies of engines and radar in the case of all the three services, stealth technology and night vision devices enabling them to be aware of all the problems associated with the core technology and methods of coping with them. This interaction can go both ways, where engineers and technicians from the services interact with the foreign vendors and the concerned PSUs are able to assess the reliability and cost of components as also that of production so that there is mutual confidence. Also, the charges for the entire weapon system as well as that of the spares would be reasonable. Apart from this, during its service life, such close monitoring will allow the services to arrange for buyback of extra spares that have been sold. Both the foreign vendor and the public or private player will be more open and transparent in their dealings with the three services. Cases of overcharging will reduce as the services gain more knowledge and as they monitor more closely all aspects of induction, operation and maintenance of these systems.

The joint development of the Medium Transport Aircraft (MTA) could serve as an example wherein along with the induction of the C-130J Hercules, where HAL designers and engineers working on the MTA, could visit the C-130 Squadron to understand the modifications on this aircraft and incorporate relevant changes in the MTA. Conversely, IAF engineers and technicians posted to the Hercules unit and with earlier experience on An-32 and IL-76 aircraft of Russian origin, as also on the British HS-748 Avro, could suggest relevant changes in the design of the MTA, to make it a more efficient and effective platform. Also an understanding could be obtained of the way the Americans address the operational and maintenance challenges encountered.

A good example to follow would be that of the model adopted by Embraer company of Brazil…

Such an approach will ensure that both knowledge and cost effectiveness are addressed, which in turn will build up mutual understanding and respect of each other’s knowledge and capabilities. Other important considerations can be resolved in the following manner. We need a rolling modernisation and acquisition board consisting of representatives from the services, the DRDO, the industry, finance and other agencies and operate as a cohesive body and where around one-third retire every five years. This will ensure continuity in policy and its execution. The parliamentary committee on defence needs to question the delays in acquisition of critical weapon systems and make their reports available in the public domain. Perhaps it is time for the concerned Chiefs of Staff to take a firm stand whenever there are inordinate delays. Defence deals call for more transparency and oversight.

Finally, it needs to be ensured that the parking of funds from each service to a particular PSU, if they are taking place, be stopped, for it is not the sensible and correct way to handle vast amounts of funds.

Conclusion

Delays and higher costs have been the bane of defence procurement. Through interaction with foreign vendors, the DRDO and Public or Private sector vendors, the services can gain knowledge on operational, maintenance as well as cost aspects of a weapon system. Such regular and continuous interaction will also provide the necessary impetus to the drive towards indigenisation.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Air Marshal Raghu Rajan

former Dy Chief of Air Staff, has flown fighter and transport aircraft as well as helicopters.

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One thought on “An Integrated Approach to Defence Procurement

  1. I ask to question for Honorable Air chief Marshal N.A.K. Browne, Last two years we are listening continue to we finalized the MMRCA deal. But as of current scenario this is not possible current fiscal year. I think complete the deal next two or three years and our Brave Air Force Pilates Flying MIG21, MIG27, MIG29 Russian Origin Aircraft. And another question is when we finalized the technical evaluation Govt. and Indian Air force Officers says 1st Aircraft enter in service 2nd Quarter or 3rd Quarter in 2014. But as now Defence Officials and Indian Air force Officers change the statement they said 1st Rafale fighters Aircraft enter in service 2016. They speak true God knows because of this is Indian Defence Ministry and Indian Defence Officers tendency. Our procurement process is very slow and when they have placed the order. Govt. & Indian Defence Officers not taken care delivery of timeline they have extend the time line two or three years. Sir, you can see also past experience in Scorpion submarine deal and we see in Rafale fighters Aircraft deal. Please take necessary action before your retirement.

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