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    Decoding India's Defence Procurement: An Analysis of Defence Procurement Procedure 2013
    Decoding India's Defence Procurement: An Analysis of Defence Procurement Procedure 2013
    Decoding India's Defence Procurement: An Analysis of Defence Procurement Procedure 2013
    Ebook252 pages9 hours

    Decoding India's Defence Procurement: An Analysis of Defence Procurement Procedure 2013

    By Wisdom Tree Publishers

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    Situated in a neighbourhood of volatility, latent aggression and instability, military preparedness is of utmost importance to India. Defence Procurement Procedures 2013, seeks to bridge the gap between the necessity of procurement and the absence of a capable indigenous defence industry, while maintaining transparency and public accountability throughout the entire process. This book explores the possibilities provided by public-private partnerships, which have seen many successes in civilian projects, while emphasizing on the need for timely and efficient implementation. Lauded by experts in the field, DPP 2013 seeks to create a sustainable defence industrial base, ultimately leading to self sufficiency in defence production.
    LanguageEnglish
    PublisherWisdom Tree Publishers
    Release dateDec 11, 2014
    ISBN9788183283700
    Decoding India's Defence Procurement: An Analysis of Defence Procurement Procedure 2013

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      Book preview

      Decoding India's Defence Procurement - Wisdom Tree Publishers

      Cover

      DECODING INDIA’S

      DEFENCE

      PROCUREMENT

      Edited by

      Gen (Retd) NC Vij

      PVSM, UYSM, AVSM

      © Wisdom Tree, Individual Contributors

      First published 2014

      All rights reserved. No part of this book may be reproduced, stored in a retrieval system or transmitted in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without the prior permission of the author/s and the publisher.

      ISBN 978-81-8328-370-0

      Published by

      Wisdom Tree

      4779/23, Ansari Road

      Darya Ganj, New Delhi-110 002

      Ph.: 23247966/67/68

      wisdomtreebooks@gmail.com

      Printed in India

      Contents

      Preface vii

      Unravelling DPP 2013: Expeditious Procurement and

      Setting up a Sustainable Defence Industrial Base 1

      Gen (Retd) NC Vij

      Dpp 2013: Opportunities and Challenges 17

      Brig (Retd) Rahul Bhonsle

      Operationalising Dpp 2013: Particular Reference

      to Rfi, Sqr, Rfp and Trials 31

      AVM (Retd) Manmohan Bahadur

      Commercial Aspects: Offsets and Price Negotiation 47

      Lt Gen (Retd) JP Singh

      Establishing a Defence Industrial Base: Through Full

      Participation by Public and Private Enterprises 65

      Vice Admiral (Retd) Anup Singh

      Maximising Opportunities by Public Sector Enterprises 75

      SN Mantha

      Maximising Opportunities by Private Sector Enterprises 83

      Satish K Kaura

      Energising DIB: A Case for Exemptions, Incentives and Benefits 87

      Cmde (Retd) Sujeet Samaddar

      Private Sector as Partner in Attaining Self-reliance 103

      Brig (Retd) Vinod Anand

      DPP 2013 Offers a Road Ahead 109

      Air Marshal M Matheswaran

      Towards Expeditious Procurement and Indigenisation:

      Critical Recommendations 117

      Gen (Retd) NC Vij

      List of Abbreviations 127

      Index 131

      Preface

      AJIT DOVAL

      Despite several initiatives undertaken by Government of India, the stated goal of self-reliance in defence production still remains elusive. One of the main reasons is that for too long, India has been importing over 70 per cent of its armament and hardly any worthwhile technology has been developed indigenously.

      Even when India is willing to spend heavily to ensure that the preparedness of its Armed Forces is commensurate with its strategic challenges, the progress in procurements has been sluggish and tardy. It is partly because defence acquisition is a complex decision-making process that needs to balance out the competing requirements of expeditious procurement, development of an indigenous defence sector and conformity to the highest standards of transparency, probity and public accountability, and partly because of weak implementation in all quarters.

      The Indian Defence Ministry has now undertaken a major initiative to rectify this anomaly through the issuance of the Defence Procurement Procedures 2013 (DPP 2013). This focuses on a two

      viii • DECODING INDIA’S DEFENCE PROCUREMENT

      pronged approach of self-reliance through indigenisation and setting up of a Defence Industrial Base (DIB) within the country.

      DPP 2013 has evoked great expectations amongst all experts and the progress in its implementation is being watched with great interest. At Vivekananda International Foundation (VIF), a study group led by General NC Vij (Retd), former Chief of the Army Staff, and comprising five more senior officers, i.e., Air Marshal Satish Inamdar, Lt Gen JP Singh, Vice Admiral Anup Singh, Air Vice Marshal Manmohan Bahadur and Brig Rahul Bhonsle was set up. This effort of two months, to study this all-too-important subject, culminated in a seminar being held on the subject on 19 July 2013 at our think tank. This was attended by over 120 participants, including those from the three Services, senior Services veterans, former government officials, representatives of the National Security Council Secretariat, representatives of Federation of Indian Chambers of Commerce and Industry (FICCI), Confederation of Indian Industry (CII) and Associated Chambers of Commerce and Industry of India (ASSOCHAM), as well as from the Defence Research and Development Organisation (DRDO) and Defence Public Sector Undertakings (DPSUs). A large number of scholars and experts from other think tanks also attended the deliberations.

      This book is being published as a sequel to these efforts, including the deliberations of the study group and also the proceedings of the seminar.

      I hope this book will contribute meaningfully to the ongoing debate on the subject and also assist policy makers in reviewing and improving their decisions, with the ultimate goal of attaining selfreliance through the setting up of an efficient DIB.

      Ajit Doval is former Director, Intelligence Bureau of India. He is Director, Vivekananda International Foundation.

      Unravelling DPP 2013:

      Expeditious Procurement and Setting

      up a Sustainable Defence Industrial Base

      GEN (RETD) NC VIJ

      Whoever said the pen is mightier than the sword, obviously never encountered automatic weapons.

      —Douglas MacArthur, former General, US Army

      ilitary preparedness of any nation can be assessed through appreciation of three related factors. These are: (i) security environment of that country involving both external and internal dimensions; (ii) budgetary allocations matching its specific needs, and finally (iii) its defence industrial base and procurement procedures.

      Defence Procurement Policy 2013 (DPP 2013) covers only one (the third point) but a crucial part of this spectrum in which we have constantly struggled with dismal results. In this article, an attempt has been made to analyse DPP 2013 and examine as to whether and how the revised Defence Procurement Policy (DPP) can lead us towards expeditious procurement and indigenisation.

      2 • DECODING INDIA’S DEFENCE PROCUREMENT

      INDIAN SECURITY ENVIRONMENT

      Indian Armed Forces face unique security challenges which warrant high level of operational preparedness at all times, be it in peace or war. India’s regional environment is fraught with instability. There are a number of conflicts raging along our periphery. The protracted militancy in Afghanistan, from where the International Security Assistance Force (ISAF) is pulling out in 2014 without being able to restore stability, is of great concern. The Afghanistan-Pakistan border region, with a strongly entrenched Taliban, which has a footprint on both sides of the Durand Line, may well implode with a return of the Al Qaeda and their supporters. Whereas the situation along our western borders can never be taken as settled irrespective of which government is in power in Pakistan, the proxy war in Jammu & Kashmir (J&K) is certainly likely to get a further fillip as a result of the disturbed situation in Afghanistan.

      The Chinese intrusions in April 2013, in Depsang Valley and later in Chumar areas in Ladakh, have once again reminded us that we can take the menace along our northern borders lightly only at our own peril. Besides this, an assertive China in the Indo-Pacific region, which is increasingly entering the waters of Indian Ocean under the pretext of anti-piracy operations, has only further added to the gravity of the situation. The threat becomes more pronounced as the Chinese are modernising rapidly and their defence budget is estimated to be between USD 160-210 bn, which makes it over four times of ours.

      EQUIPPING OF OUR DEFENCE FORCES

      Under the given security backdrop of a security threat over ‘two fronts’, equipping of our defence forces with the latest technology weapons becomes a security imperative, which has got to be ensured under all circumstances and with no scope whatsoever of any compromises. Thinking and planning ahead with expediency need

      UNRAVELLING DPP 2013 • 3

      to be the guiding principles. It is also necessary that raising of the recently approved ‘Mountain Strike Corps’ is completed in maximum of two to three years, rather than the planned seven years, a time period which may become strategically too long. All in all, we must have net-enabled Armed Forces, with a high degree of surveillance and rapid deployment capabilities, sustained mobility and lethal fire power, capable of operating seamlessly on land, sea and aerospace domains in an operational environment of informatisation, over the next five to eight years.

      DEFENCE BUDGET

      Equipping Armed Forces is not just about the Defence Procurement Procedures; there are critical issues that are outside the domain of defence procurement. The first and foremost is the defence budget. The current allotment is below 2 per cent of the Gross Domestic Product (GDP) and is just not good enough to equip the Armed Forces anywhere close to the desired standards, leave aside, (i) building requisite defence capabilities, as well as, (ii) setting up sound research and development facilities; and (iii) creating a defence industrial base.

      In the past three years, given the variation in exchange rates, inflation and related factors, the defence budget is virtually stagnant at approximately USD 37 bn. Of this, approximately USD 12.85 bn are generally allotted for capital acquisitions. The bottom line requirements of the Armed Forces are, as per open sources, Army, USD 62 bn, Navy, USD 38.52 bn and the IAF, USD 48 bn, making a total of approximately USD 150 bn. This means that at the present scale of allotments and assuming that all factors remain constant and all the allotted money is spent, which is highly improbable, meeting the bottom line requirement itself will require a minimum of twelve years. In actual fact, 10-15 per cent funds on an average, go unutilised annually and at times budgetary cuts are imposed midway through

      4 • DECODING INDIA’S DEFENCE PROCUREMENT

      the financial years due to tight fiscal situations. With all these factors built in, the safer bet of a time frame for this preparedness level to be achieved will be closer to fifteen years or so, which is definitely too late and too little in our context.

      PROBLEM OF OBSOLESCENCE AND UPGRADATION

      Other set of problems which is almost as serious in nature as equipping is the urgent need for finding resources and facilities for overcoming obsolescence and ensuring timely upgradations and modernisation in a ‘ten year cycle’. Unlike in the past, the technology is now getting outdated in a cycle of fifteen to twenty years rather than erstwhile thirty to forty years. Taking that into account, India has already missed two ‘technology cycles’ and in the process two ‘acquisition cycles’ and thus the hollowness gap is widening. There is, thus, a crying need for enhancing the defence budget appreciably, so as to provide enough resources for making up the deficiencies, ensuring timely upgrades and at the same time equipping the Armed Forces with the latest technology weapon systems. The big question is whether there is a real understanding of the magnitude of the problem at the level of national leadership; enough accountability to pressurise concerned people to perform with utmost determination to take up the challenge or will it be once again left to the ‘Services Chiefs’ to resign to the harsh reality that ‘they have to deliver with what they have’!

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