Discussions and Delays

Defence acquisition continues to be plagued by indecisiveness, confusion and red tapism

Jaison Deepak

The discussion around defence acquisition has always revolved around the Defence Procurement Procedure (DPP). The government has been thinking hard to fix procurement while not recognising that the problem is systemic and the whole process of acquisition from formulation of requirements to the procurement of the equipment needs to be looked at from the initial stage.

Defence Acquisition

When procuring a particular class of system, immediately discussion revolves around the gold standards and capabilities of equipment without getting into the relevance of these systems in the Indian scenario and the infrastructure and manpower to support such systems which are built over several decades.

The word ‘Make in India’, initially viewed as encouraging, has become a mere slogan with nobody being able to define its aims in terms of wartime self-reliance or creating jobs. Many a times imported COTS items will have higher performance, reliability, lower cost and higher wartime availability than some ‘made in India’ items produced in small numbers, this explains why Defence Research and Development Organisation (DRDO), public sector undertakings (PSUs) continue to import chips, processors and electric drives instead of setting up a production line locally.


Categorisation Dilemma

The categorisation plans are Buy (Indian-IDDM), Buy (Indian), ‘Buy and Make (Indian)’, ‘Buy and Make’ and ‘Buy (Global)’ where one of the primary differentiates in the categories is Indigenous Content and Design. But again, it is not clear what each individual category specifically aims to achieve and how different it is from the others in doing so.

The definition of indigenous content in terms of cost and its impact on wartime support, availability or even creation of jobs is sketchy at best. Bharat Earth Movers Limited (BEML) ‘coproduced’ WZT-3 Armoured Recovery Vehicles by making up for the indigenous content producing low technology items like ropes, driver periscopes, ploughs, seats.

In Thermal Imaging Equipment, most of the manufacturers find it difficult to meet the criteria as they design the architecture and the software driving it but import all critical components like the detector, processor and drives. These imported components are commercially available these days from the global market and it would be impossible to restrict them by sanctions. So, does it make economic sense to localise these items to meet the ‘indigenous content’ criteria and in the process decrease reliability, availability and consequently, increase cost?

Defence products are very complex and it is very difficult to impart such a one-size-fits-all policies as each acquisition poses different challenges. The emphasis should be laid on the continuity of the supply chain, support and services in any condition and cost whether it is locally made, imported or commercially procured.

Another hurdle is the restriction of the Foreign Direct Investment (FDI) which is placed at 49 per cent to further increase to 100 per cent on a case to case basis. There is a misplaced fear that foreign manufacturers would take over the industry, what is not understood is that most people working there would be Indians with Indian suppliers and if the manufacturer pulls out due to political uncertainty, then the facility, manpower and the supply chain would remain here and can be taken over by local firms or even the government in an emergency. This is to prevent any meaningful localisation and pave the way for complete system imports from foreign Original Equipment Manufacturers (OEMs).


Challenges in Commercial Evaluation

There are several challenges in evaluating the commercial offer presented by manufacturers and they are almost always expensive. The limited production run of the systems and the huge R&D money spent can increase the price of systems. Along with these, there are other hidden factors such as limited available information on the pricing and bids with inflated pricing, and added to these are the ghost costs where the manufacturer keeps the initial purchase prices down and later charges inflated prices for spares and support services.

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