7 April 2016

Security Trends South Asia » India Defence » India’s Defence Procurement Procedure: Missing the Wood for the Trees

Rahul Bhonsle 
Apr 2, 2016 

India’s Defence Procurement Procedure: Missing the Wood for the Trees

The Ninth iteration of the main parts of the Defence Procurement Procedure 2016 (DPP 2016) for the capital acquisition of weapons and systems for the Indian armed forces was issued without much fanfare after a long period of anticipation on 28 March 2016 at the DefExpo in Goa.

Defence Minister Manohar Parrikar announced the release and wisely stated that this was available on the Ministry of Defence website rather than as a paper for this would have diverted all eyes at the DefExpo on the document.

Flattering to deceive, the [incomplete] document that has been the longest in making taking almost three years instead of the usual two plus for issue of the next edition, there are few changes from the previous version, DPP 2013.

Some of the main additions include the creation of a new category Buy Indian Design Develop and Manufactured (IDDM) which will be accorded highest priority in acquisitions.

There is however only a subtle variation from this and the Make category which involves prototype development and to an extent designing. There is some tweaking of the percentage of indigenous content in some categories that has been increased from 30 % to 40 %.

Notably, the proportion of indigenous content in Buy Indian and Buy IDDM is the same at 40%, but the former is likely to be utilised for procurements which are to be made in a short (sic) time span while Buy IDDM will be looking at a long-term time horizon.

The threshold for offsets has now been changed from Rs 300 Crore to Rs 2000 Crore. It is not clear if this is because of the problem of management of offsets or lack of adequate benefit achieved from setting the bar low.

Opinions here differ, some have stated that offsets tend to increase the price of items by as much as 10 to 15 percent, others feel capacity of the Indian industry absorb offsets is restricted. It is amply clear that India has not been able to gain from defence offsets in the manner it was envisaged when first introduced in 2005. The trend indicates that this policy may be abandoned altogether in the coming years. Foreign vendors who have been fighting tooth and nail for dilution of offsets may have won the battle.

There are other new provisions such as importance given to Request for Information (RFI), Essential and Desirable parameters to be addressed in the Request for Proposal (RFP) or tender, criteria for identifying Indian entities and so on are a matter of detail and can be studied by those involved in the process of acquisitions.

While certain Annexures are pending and Chapters on Standard Contract Document and Strategic Partnership will be issued in due course. Apparently the transformation to a new paradigm of procurement that was hoped for given the hollowness profile of the Indian Armed Forces cannot be achieved by DPP 2016.

In fact for this purpose, the Fast Track Procedure (FTP) or Chapter V of the document may have sufficed.

The key point is that India’s DPPs over the years have borne no correlation with the necessity for ensuring preparedness of the armed forces for war with a very limited industrial and manufacturing base in the country.

The present DPP caters for armed forces which is structured on the ideal weapons configuration of 30:40:30 [State of the art: Contemporary: Obsolescence]. Today a back of the envelope calculation would reveal that the Indian armed forces may be fielding a ratio of 10:20:70.

There are also substantial deficiencies. The Indian Air Force which is to field 42 squadrons is capable of less than 30 or so, the Navy does not have requisite number of submarines and is dependent on P8i as a counter submarine platform while the Indian Army’s troops are fighting insurgents with locally procured pouches for rifle magazines doubling up as bullet proof vests.

While the aim of the DPPs consistently and of DPP 2016 remains “to ensure timely procurement of military equipment, systems, and platforms as required by the Armed Forces in terms of performance capabilities and quality standards”, there are so many terms of reference attached within the aim itself such as, ”through optimum utilization of allocated budgetary resources”; and “while enabling the same, DPP will provide for the highest degree of probity, public accountability, transparency, fair competition and level-playing field,” that the primary objective is lost sight of.

With a final sentence, “also, self-reliance in defence equipment production and acquisition will be steadfastly pursued as a key aim of the DPP”.

In principle the terms of reference cannot be faulted, however given many stakeholders in the acquisition process the aim of equipping the military to fight a war is lost sight of particularly in the diffused procurement environment which involves a plethora of agencies many of whom have only narrow expertise in their sphere and lack the vision to make procurement work.

The principle stakeholders – the armed forces either lack the expertise to wade through this maze efficiently or are too meek to push their own agenda

Thus, as the popular idiom missing the wood for the tree goes – the principal factor is lost sight off while the process is mired in detail.

Yes the DPP 2016 is a legitimate rule-based process but it is not tuned to achieve the objective of getting our armed forces ready for war even in the next decade or so

For that a dynamic process will have to be evolved to meet bottom line requirements of the military such as raising a fully equipped Mountain Strike Corps, at least, 35-40 combat fighter squadrons and 12 submarines as rough benchmarks. Only then can we have the luxury of the bureaucratic procedures outlined in the DPP 2016.

Till such time Chapter V of DPP 2016 Fast Track Procedure (FTP) is the most relevant and procurements should be carried out based on the same. In doing so balanced dependency on foreign suppliers must be ensured to avoid being hostage to a country or a company.

It is thus time to get real and not pretend that we want to design, develop and manufacture [Buy IDDM] a weapon system and be prepared to fight an adversary on the Northern Borders who is restructuring his military for war by 2020.

Some foreign suppliers are quite aware of the armed forces predicament and are thus offering to shift entire plants to India hoping to bag huge orders as the production lines are no longer viable in the home countries where militaries have shifted to as different generation of equipment. 

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