Indian Defence Review

Credit is due to the Indian Ministry Of Defence (MoD) for its continuous endeavour to streamline the defence procurement procedures. There have been three revisions during the last four years. The latest, Defence Procurement Procedure—2006 (DPP-2006) is a very comprehensive document. The stated objective of the DPP-2006 is threefold:-

The Government has not been able to put in place a responsive, dynamic and effective defence procurement regime. The complete process suffers from indifference, apathy, inefficiency and lassitude. Old bureaucratic mindsets and penchant for status-quoism inhibit forward thinking.

Additionally, MoD has declared its aim to have 70 percent of defence requirements sourced from indigenous sources by 2010.Realising that this aim would remain a pipe dream unless the private sector was co-opted, the defence industry was thrown open to the private sector in May 2001. The Government also permitted 100 per cent equity with a maximum of 26 per cent Foreign Direct Investment (FDI) component, both subject to licencing. Subsequently, detailed guidelines for the issuance of licence for the production of arms and ammunition were issued in January 2002.

However, despite all efforts, there has been no speeding up of the procurement process. Funds continue to get surrendered while the services remain deprived of critical equipment. Decision making continues to be highly sporadic and erratic. Questions are still raised regarding lack of transparency and objectivity of the process. Competition remains limited. Comptroller and Auditor General of India has faulted the system for overuse of single vendor provisions. There has been no appreciable increase in indigenous defence production. India continues to depend on imports for all major requirements while the indigenous production is limited to low-tech low-end items and a few products based on bought technology.

The Impediments

There are a number of reasons for the unsatisfactory state of affairs.As will be seen subsequently, the Government has not been able to put in place a responsive, dynamic and effective defence procurement regime. The complete process suffers from indifference, apathy, inefficiency and lassitude. Old bureaucratic mindsets and penchant for status-quoism inhibit forward thinking. Deficiency of quality procurement staff is another major contributory factor. Doing business with the defence continues to be a highly complex and daunting task for the companies.

Attitudinal Problems

Rather than considering them as partners in enhancing the nation’s defence preparedness, companies are treated as adversaries who should be kept at an arm’s length. Many Government functionaries still view businessmen as unprincipled and scheming characters who are out to make a quick buck. They feel that businessmen vitiate the environment through unethical dealings. This adversarial relationship results in total lack of communication resulting in misapprehensions, and thereby giving rise to doubts about the transparency and fairness of the process. Many aspiring entrants lose heart and get dissuaded.

Also read: India’s Defence Procurement Procedure (DPP) prevents procurement

There is no Government agency to guide prospective vendors as regards procurement processes, impending tenders and contact points for further information. Moreover, Indian companies are unable to obtain appointments with procurement functionaries to discuss genuine issues. According to some vendors, they are openly shunned.

No Public Declaration of Long Term Acquisition Plans

DPP-2006 mandates that based on the Defence Planning Guidelines, Headquarters Integrated Defence Staff (HQ IDS), in consultation with the Service Headquarters (SHQ), would formulate Long Term Integrated Perspective Plan (LTIPP) for 15 years. HQ IDS would also break down the broad capabilities so as to list out the programmes and projects needed to be taken up to achieve the capabilities required. Five Year Defence Plans, flowing from LTIPP, would also include Five Year Services Capital Acquisition Plan (SCAP). SCAP would indicate the list of equipment to be acquired, keeping in view operational exigencies and the overall requirement of funds.

Rather than considering them as partners in enhancing the nations defence preparedness, companies are treated as adversaries who should be kept at an arms length.

Though DPP-2006 lays down guidelines for perspective planning, it is totally silent about making it public. In all probability, it will remain a classified document and the defence industry will never learn of long term procurement plans. This is a matter of major concern.

Long term perspective plans help all prospective vendors to identify areas of interest and initiate necessary action well in advance, as detailed economic viability studies are essential for all investment decisions. Scouting for technology partners and establishment of required infra-structure are also time consuming activities. It is, therefore, imperative that necessary information be disseminated well in advance to enable companies to do preparatory work and be ready to participate in tenders when issued.