Of Matters Military. Mrinal Suman
and was a welcome move. Similarly, evolution of security guidelines would help ensure protection of security sensitive information shared with the private sector. More importantly, it would eliminate opposition to the entry of the private sector in defence production on grounds of lack of security consciousness.
All countries are struggling to streamline their procedures for defence procurements. In India’s case, complexities increase multi-fold due to three factors – bulk of major equipment is imported, field trials have to be carried out in varied terrain/climatic conditions and the procurement regime does not enjoy high credibility. Therefore, MoD ought to have mustered courage to introduce radical reforms, minor tinkering being inconsequential. Some of the major issues that remained neglected are flagged below:-
(a) Surfeit of categories had created utter confusion. Most categories defied logic. They were highly convoluted, complex and impractical. Both ‘Make’ and ‘Buy and Make (Indian)’ were bereft of any genuine developmental effort. Both had failed to produce results and not a single case had made any progress under these two categories.
(b) Mediocrity of acquisition staff had been the bane of the Indian procurement regime. Even CAG was forced to highlight the fact that defence acquisition was a cross-disciplinary activity requiring expertise and criticised the system of entrusting acquisitions to unspecialised personnel posted for three-year tenures.
(c) DRDO was like an albatross around the services’ neck. It promised a lot but delivered little. DPP accorded undeservedly overriding powers to DRDO, especially in categorisation of proposals. Worse, the much-trumpeted restructuring of DRDO had been a meaningless exercise.
(d) Indian offset policy needed simplification. With a view to favour the public sector, MoD has promulgated guidelines that had woven a complex web of conflicting and confusing provisions that were bound to lead to multiple interpretations and squabbling.
(e) FDI cap at 26 percent made it a highly unattractive proposition. Defence industry covers too vast a spectrum of technologies and sub-technologies to be considered a single entity for determining upper limit of foreign equity holding. India should have adopted a flexible and technology-specific approach. All joint venture proposals should be assessed on the basis of nature, level and depth of the know-how involved and categorised accordingly for the fixation of FDI cap.
It needs to be recalled here that prior to the promulgation of the current genre of the procurement procedure in 2002, every procurement proposal was first vetted by DRDO for local development and production. Unless DRDO expressed its inability, other options could not be explored. DRDO invariably made tall promises which were never fulfilled. Consequently, modernisation of the armed forces suffered.
It is certainly a commendable objective that the armed forces be equipped with indigenously produced defence systems. However, to achieve that, the Indian industry has to perform. It is easy to mandate that indigenous production will be the first option and imports the last resort. Such a directive presupposes availability of the necessary technological competence with the Indian industry to produce the required equipment in the given timeframe.
Commendable objectives of DPP-2013 notwithstanding, it must be ensured that Indian soldiers are not made to fight with outdated weaponry because of the indigenous industry’s inability to deliver.
Defence Procurement Procedure – 2016
An expert committee under Dhirendra Singh was constituted on 01 May 2015. The Committee was tasked to evolve a policy framework to facilitate ‘Make in India’ in defence manufacturing and align the policy evolved with the Defence Procurement Procedure (DPP); and to suggest the requisite amendments in DPP-2013 to remove the bottlenecks in the procurement process and also simplify/rationalise various aspects of the defence procurement. DPP-2016 has been formulated with the experience gained by the government in the defence procurement process and the recommendations of the Dhirendra Singh Committee. DPP-2016 was promulgated in April 2016 and continues to be operative to date. Hence, it has been discussed at length.
Salient Aspects of DPP-2016
DPP-2016 claims to strive to strike a balance between competing requirements such as expeditious procurement, high quality standards and appropriate costs; while maintaining highest standards of transparency, probity and public accountability. With a view to achieve self-reliance in design, development and manufacturing, DPP-2016 focuses on institutionalising, streamlining and simplifying defence procurement procedure. The professed aim is to give a boost to ‘Make in India’ initiative, by promoting indigenous design, development and manufacturing of defence equipment, platforms, systems and sub-systems.
‘Make’ procedure has also been refined to ensure increased participation of the Indian industry. Enhancing the role of MSMEs in defence sector, cutting down permissible timeframes for various procurement activities and institutionalising probity norms have also been given due importance. Some salient aspects of DPP-2016 have been highlighted hereunder.
Categorisation of Acquisition Proposals
Capital acquisition schemes will be classified as ‘Buy’, ‘Buy and Make’ and ‘Make’. ‘Buy’ scheme refers to an outright purchase of equipment. It has three sub-categories – ‘Buy (Indian-IDDM)’, ‘Buy (Indian)’ and ‘Buy (Global)’. ‘Buy (Indian-IDDM)’ is a newly introduced category and relates to the procurement of products designed, developed and manufactured in India with a minimum of 40 percent Indigenous Content (IC) on cost basis of the total contract value. Products which may not have been designed and developed indigenously also fall in this category provided they have 60 percent IC.
‘Buy (Indian)’ category refers to procurement of products from an Indian vendor having a minimum of 40 percent IC on cost basis of the total contract value. ‘Buy (Global) category implies outright purchase of equipment from foreign or Indian vendors. In case of procurement through foreign vendors, government-to-government route may be adopted for equipment meeting strategic/long term requirements.
‘Buy and Make’ scheme means initial procurement of limited quantity in fully formed state, followed by indigenous production through Transfer of Technology (ToT). Under this scheme, the procurements are subcategorised as ‘Buy and Make (Indian)’ and ‘Buy and Make’.
‘Buy & Make (Indian)’ category refers to an initial procurement of limited quantity of equipment in fully formed state from an Indian vendor engaged in a tie-up with a foreign Original Equipment Manufacturers (OEM). The bulk quantity will be manufactured indigenously with ToT. Under this category, a minimum of 50 percent IC is required on cost basis of the Make portion of the contract. On the other hand, ‘Buy & Make’ category refers to an initial procurement of limited quantity of equipment in fully formed state from a foreign vendor, followed by indigenous production by an Indian production agency through ToT.
‘Make’ aims at developing long-term indigenous defence capabilities. It entails manufacture and upgrade of those systems that are designed, developed and manufactured by an Indian vendor. Depending upon factors such as Indian industry’s capability, access to technology, time frame required and available for development; ‘Make’ category of procurement would be pursued in isolation, in sequence or in tandem with any of the five categories under ‘Buy’ or ‘Buy & Make’ classifications.
Under DPP-2016, in decreasing order of priority, the procurement of defence equipment would be categorised as: ‘Buy (Indian–IDDM)’, ‘Buy (Indian)’, ‘Buy & Make (Indian)’, ‘Buy & Make’ and ‘Buy (Global)’. Reasons for not adopting a higher priority route for procurement have to be recorded in writing.
Services Qualitative Requirements
All capital acquisitions will be based on Services Qualitative Requirements (SQR), which lay down the fundamental user requirements in a comprehensive manner. SQR would be drafted by the user directorate at Service Headquarters (SHQ). SQR need to be detailed, realistic, achievable and verifiable. They must avoid ambiguity of any type. SQR must be broad based