Hyderabad: The Ministry of Defence (MoD) on November 30, approved defence acquisition projects worth Rs 2.23 lakh crore, to significantly enhance the combat capabilities of army, navy and air force, of which, acquisition worth Rs 2.20 lakh crore (98% of the total procurement) will be sourced from domestic industries.
This will give a substantial boost to the Indian defence industry towards the aim of achieving the goal of 'Atmanirbhar Bharat'. Even though approvals are ready, India's entire weapon acquisition process is beset with huge delays, complex procurement procedures and different sets of rules. Even though appreciable attempts have been made towards streamlining the defence procurement, the model needs further deliberations.
Initially, the responsibility of developing the defence production in India was taken over by the government through the industrial policy pronounced in 1956. Later, the inability of the public sector units to bridge the gap in capabilities of armed forces, promise of the private industry due to liberalisation of the Indian economy and also the disintegration of USSR show the way the procurement planners to look for alternatives.
In absence of clear policies and guidelines, the first formal document to guide the present procurement procedures was published in the form of 187th report of Public Accounts Committee in 1989, which led to certain guidelines being issued in 1992. Later, in 2001, after Kargil war, the Defence Acquisition Council (DAC), the highest decision-making body for deciding on new policies and capital acquisitions for the army, navy, air force and the coast guard was formed by the Group of Ministers recommendations.
In 2002, Defence Procurement Procedure (DPP) was introduced which was the guiding document ever since. The DPP has been revised eight times in the 18 years since it was first issued in 2002. In 2020, the DPP has been re-named and introduced as Defence Acquisition Procedure (DAP 2020), which marks a significant departure from the eight versions that preceded it.
The DAP 2020 replaces the previous DPP 2016, thereby laying down a framework of procedural guidelines for carrying out defence deals. The introduction of DAP 2020 has been projected as a beaconing move towards the existing government’s plan of Atmanirbhar Bharat.
The DAP 2020 has removed the offset clause requirement in inter-governmental agreements (IGA) and has introduced a new category for leasing of military equipment. Under the offset clause, a foreign company that got a defence deal is supposed to invest at least 30% of the contract value in India, thus developing skills and bringing in technology, while also generating employment.
The offset policy which was adopted for 17 years is criticized for its failure to produce the intended results because they incurred auxiliary costs whilst not equipping local enterprises with any knowledge or expertise. So, it was probably reasonable to allow leasing of equipment to have done away with supplementary costs.
The DAP has over a period of time added more and more layers to defence procurement system and increased the complexity leading to delays in procurement. The DAP stipulated a time frame of 74-106 weeks within which to complete procurements. These deadlines were rarely stuck on. For instance, 66 BAE Systems Hawk 132 advanced jet trainer inked in 2003 took nearly two decades to finalise, while the deal with Airbus Defence and Space to supply 56 C295 MW medium transport aircraft to the Indian air force took over a decade to become productive before it was confirmed in September 2021.
The DAP, specifies a complex 12-stage procedure for procurements including the grant of acceptance of necessity, request for proposal, technical evaluation, trail, general staff evaluation , contract negotiation and approval. At the state of contract negotiation, before the contract was eventually inked, a committee was instituted to negotiate the equipment cost depending on the amounts involved. This leads to multiple layers of approval, where chiefs of army, navy and air force were authorised to approve military purchases up to Rs 300 crore; the defence secretary up to Rs 500 crore; the defence minister up to Rs 2,000 crore; the finance minister up to Rs 3,000 crore and any acquisition more than that amount needed authorization by the Cabinet Committee on Security headed by the Prime minister.
During the last three financial years (2020-21 to 2022-23), 122 contracts have been signed for capital procurement of defence equipment, out of which, 100 contracts accounting for 87% of total contracts value, have been signed with Indian vendors for capital procurement of defence equipment. While it is true that DAP 2020 has indeed provided the indispensable impetus to the indigenization of the defence sector, in contrast to the previous hybrid model of cooperation, it also cannot be denied that lacunae exist and they need to be dealt with.
The DAP 2020 has included provisions in the acquisition procedure to encourage self-sufficiency by requiring minimum Indian content in products purchased under various categories like ‘Buy’ (Indian), ‘Buy and Make’ (Indian) and ‘Buy’ (Global – Manufacture in India). Except for Buy Global, which requires 30% Indian content and is invariably applicable for large projects or government to government transactions, all other categories require a minimum of 50% Indian content on a cost basis.
Indian military experts argue that this provision primarily contains two faults that must be examined critically. Firstly, it makes no distinction between whether imported content is imported for convenience or compulsion, and secondly it determines Indian content on the basis of cost. Therefore, defence experts opine that DAP 2020 need revisit the provisions defining Indian content because self-sufficiency cannot be achieved through the use of borrowed technology rather than focusing solely on the finished product, the emphasis should shift to the development of critical technologies that go into making that product but are still imported. Manufacturers in India must invest in research and development to begin producing components that are currently imported.
Defence procurement in India has come a long way since independence and today the government is persistently refining and reforming this procurement process and it is tuning its some best practices to prevent delay in decision-making process. However, still system seems to be largely flawed and needs further careful considerations. Therefore, an appreciable attempt should be made towards streamlining the defence procurement to follow a unified control system of procurement pursued in countries like UK, France and Australia.
France, in particular, has integrated and centralized procurement structure, which has the dual responsibility of arms acquisition and defence industrial development. The Kelkar Committee (2005), appointed by the MoD also suggested an examination of the possibility of following the French system.
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