“Are things moving in [the] MoD [Ministry of Defence]?” is the question on everyone’s lips in defence seminars these days. It’s time for a reality check after the recently concluded DefExpo (which was the ninth in the series of biennial land, naval and internal homeland security systems exhibitions), and the newly released Defence Procurement Procedure (DPP) 2016.
It all boils down to the “environment” created by the government with three clear signals from the Union Defence Minister, Manohar Parrikar. First, the government can claim credit for demonstrating intent to energise the procurement process by accepting many of the suggestions of the Dhirendra Singh Committee set up to make recommendations to revamp the DPP. The introduction of a new category of Buy Indian (or IDDM, Indigenous Design Development and Manufacture), the graded acceptance of better quality through the introduction of an “enhanced” performance parameter clause, and the sudden energisation of private players in defence manufacturing are some cause for cheer.
Second, many of the rules that hitherto put the private industry at a disadvantage vis-à-vis the Defence Public Sector Undertakings (DPSU) have been modified or removed. Thus, “nomination” of a DPSU for absorbing transfer of technology has been done away with and the tax exemptions withdrawn, which effectively makes pricing more competitive.
Boosting MSMEs
Third and most important, there is visible incentivisation of Micro, Small and Medium Enterprises (MSME) in many spheres. Their energetic response to the government’s initiatives is seen in their setting up of a Defence Innovators and Industry Association to “interact with Government decision-makers to ensure a policy that encourages design and development of defence equipment with IP [Intellectual Property] ownership in Indian companies”. This bodes well for the future since MSMEs, which are the Tier-II and -III suppliers, are the crucibles of innovation and the true determinants of indigenisation.
So far so good. But there is still a huge amount of work left. Acceptance of some of the far-reaching recommendations of the Dhirendra Singh Committee, even at the expense of expending political capital, is the need of the hour. There are four key requirements. Foremost is the creation of a Procurement Executive (PE) outside the government. The thought that the PE should be autonomous is a radical suggestion, but desperate times call for desperate measures. To quote the committee, “Steps should be initiated without further ado to set up a specialised structure outside the formal structure of the Ministry of Defence.”
Second, the acceptance of selecting strategic partners in six key sectors (aircraft, ship building, et al. ) is good but would require diligent implementation. Opposition to this has already begun, but the laissez-faire approach of “anyone can make a complex item, so keep an open competition” has to be turned round through transparent, affirmative selection of private players who have the capability and capacity to deliver. Decades of pumping in billions in the research and development (R&D) budget of the Defence Research and Development Organisation (DRDO) has resulted in very little, and meandering in future through open competitions in these vital sectors would lead to the same results.
Third, the empowering of the private sector by letting them lead in large ‘Make in India’ projects, with support from the DRDO, is unique as is the suggestion to give weightage to quality by following the L1T1 concept (selecting better technology, not necessarily at the lowest price) in the techno-commercial bid evaluation; both will incentivise them no end and result in true R&D generation. The challenge lies in its implementation in letter and in spirit.
Last, all good intentions will come undone if acquisition manpower remains untrained. The process has been ad hoc at best. Despite noble intentions, the tough world of defence procurements has seen us being bested in terms of selection of equipment, the contracting procedure, acceptance and the follow through in-service. All foreign manufacturers have dedicated professional procurement teams with decades of experience. Unfortunately, two years of this government have elapsed with absolutely no movement in this area.
Must be ‘election-proof’
With the new DPP in place, one hopes that it empowers the procurement process to become election-proof — national security cannot be held hostage to ineffective functioning of personnel who constitute the MoD and the political system. The DPP should commit to action the people tasked with procuring capability for the war fighter so that the momentum of defence procurements cannot be derailed. The state of preparedness of the defence forces has to be an activity in continuum, with or without bipartisan support.
So, is there light at the end of the tunnel? Well, DefExpo this year did attract more participating countries — 46 from 30 in 2014 — but the proof of the pudding lies in Indian private enterprise now driving linkages with foreign manufacturers for technology and business. There has been a surge in the number of defence licences being issued by the MoD, and it is heartening to see majors like the Tatas, Reliance, L&T, Mahindras, and so on set up shop in varied defence manufacturing areas. Despite speed bumps like the delayed Rafale Fighter deal, the Avro aircraft replacement and mid-air refueller aircraft contracts, sentiment is positive. Procurement for defence can be as cruel as it gets, as there is no place for sentiment, just the brute successes in R&D and finished products. The energies generated following DefExpo and the new DPP-2016, if converted to actual, professional R&D, would be true indicators of the government being on the right track in enabling defence indigenisation and regaining its strategic autonomy.
Manmohan Bahadur, Air Vice-Marshal (retired), is a Distinguished Fellow at the Centre
for Air Power Studies, New Delhi. The views expressed are personal.
The incentivisation of Micro, Small and Medium Enterprises bodes well for the future since they are the crucibles of innovation
