Goodies Galore

The defence modernization fund will benefit arms dealers more than the soldiers

Pravin Sawhney

There is good news for the for foreign arms manufacturers. India has recently announced a non-lapsable Rs 25,000 crores (Rs 250 billion) Defence Modernisation Fund (DMF) for a period of three years. This amount will be over and above the annual defence allocations. Unlike the latter, this amount will be spent in full for acquisitions, mostly from abroad. However, it is unlikely that the defence forces will get value for money. Despite a few reforms, the defence procurement procedure still remains ad hoc and unprofessional. For this reason, the armed forces will continue to duplicate their capabilities in surveillance. Electronic warfare equipment, air defence, Special Forces, ballistic missiles and so on. This obviously will be at the cost of inadequate resources to priority areas like aerospace, low intensity warfare, and combined Special Forces.

The government’s announcement of the DMF has met the services’ long held demand for a minimum two-year acquisitions cycle for annual defence allocations. The services had argued that the acquisition process, which includes short-listing of vendors, floating global Requests For Proposal (RFP), calling items for field and user trials both during summers and winters, technical negotiations, price negotiations and drawing up of contracts, cannot be accomplished in one calendar year. Particularly when the monies actually come in hand around the month of June. This has often resulted in short cuts being adopted in the mandatory procedures for fear that the money. If not expended during the financial year. May laps to the Consolidated Fund of India.

In any case, the annual defence budget caters little for new acquisitions and replacements. For example, in 2003-2004, Rs 65,000 crores (Rs 650 billion) were allocated to defence. Out of this, some Rs 40,000 crores (Rs 400 billion) were for revenue expenditure and the balance were under the capital head. The latter is meant for acquisitions for new assets, those which are not scaled and are not in the inventory. Acquisition of items meant as replacement of equipment which is already on the inventory is done out of the revenue budget, about Rs 3,000 crores (Rs 30 billion) were given away as instalment for contractual liabilities on account of equipment purchased earlier. After taking out the share of the Defence Research and Development Organization (DRDO), the married accommodation projects, the ex-servicemen’s contributory health scheme and a few other such commitments, the three services were left with Rs 1,200 crores (Rs 12 billion) for capital expenditure, Considering this was a small amount and could not be allocated to the services according to the pre-determined and approved acquisition plan, it was distributed equally to the services, leaving none of them happy to pursue any worthwhile plan. Problems got compounded when the services were unable to finish the laborious acquisition procedure in one financial year. This resulted in about Rs. 6,000 crores (RS 60 billion) being returned to the Consolidated Fund of India as unutillised amount for 2003-2004.

To overcome these acquisition hurdles, the government, following the Group of Ministers report, has taken a few good steps. These include the setting up of a Defence Acquisition Council (DAC) headed by the defence minister, the formation of the Defence Procurement Board (DPB) under the defnece secretary, the creation of the post of Special Secretary Acquisitions (SSA), and a Fast-Track Acquisition (FTA) procedure for operationally urgent equipment. An example of the FTA are the purchase of about 3,35,000 sets of Individual Protection  Equipment for Nuclear, Biological and Chemical Warfare by the DRDO. The need for this equipment was felt during Operation Parakram, the 10-month military stand-off between India and Pakistan, and the equipment has started arriving at the central ordnance depot in Kandivili (Mumbai). Moreover, the annual authorization of the defence minister has been increased from Rs 50 crores (Rs 500 million) to Rs 500 crores (Rs 5 billions) for the capital budget, and the services have been permitted to spend upto Rs 25 crores (Rs 250 million ) from the revenue budget. The services’ demand that they should have same powers as the defence secretary to spend up to Rs 25 crores (Rs 250 million) from the capital budget have not been met.

The above reforms, however, have failed to produce the desired results. In the DPB, except for the SSA, there are no permanent members. The batter meet on an ad hoc basis (usually once in two to three months) to review procurements for the services. The SSA with a small staff drawn from the service and finance can, at best, review the demands of the services and put it up to the DPB for consideration. It does not have the capability to oversee procurements from ‘cradle to tomb’ implying the induction of an equipment, its maintenance, upgradations, and finally its disposal after completing the lifespan in service. Like in the UK and France, there is a need for a separate Integrated Procurement Agency (IPA), which is empowered on behalf of the DAC. Working under the defence minister and with the help of Integrated Project Teams meant exclusively for various acquisitions, the IPA should have financial and administrative personnel.

Unfortunately, the demands of the service itself are ad hoc, unplanned and kneejerk reactions to what the adversary has procured, and often lead to duplications. For example, all three services have recently acquired Unmanned Arial Vehicles by paying different amounts for the same products. All services have set up their own UAV maintenance facilities. Similarly, all three services are building up their respective Special Forces, which include their equipment and training, in complete isolation. All this does not auger well for a cost-effective utilization of the DMF.

What should the government do to ensure that DMF benefits the services as much as the foreign arms companies? The Integrated Defence Staff (IIDS), which has members from all three services, prepares plans for strategic procurements, which are not incremental, but are programme based. These painstakingly prepared plans lie unattended for two reasons: First, the government does not give any financial commitment beyond a year’s allocation. This drawback has been obviated by the formation of the DMF for three years. And second, the Chiefs Of Staff Committee (COSC) to whom the IDS reports, comprises service chiefs who have the interest of their own service uppermost on mind. This requires a Chief of Defence Staff (CDS), who alone can ensure that the three-services discard parochialism and accept a programme-based acquisition plan, at least for a three year period. Ideally, we should also have a full-time National Security Council which can help the CDS formulate strategic acquisition plans for long periods. However, for the present, the government should seriously consider the formation of CDS and IPA.



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