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Conference Report


 

 
 

Streamline Defence Procurement Procedure

The day-long conference on the Defence Procurement Procedure organised by
SP Guide Publications in collaboration with ORF in New Delhi on May 2, 2012, emphasised on the need to streamline our defence procurement system in order to get the best equipment for our soldiers and reap maximum benefit in the future

By Sucheta Das Mohapatra

 

In Focus

Since its introduction in 2002 and followed by several amendments till date, the Defence Procurement Procedure of India has been a subject of deliberation amongst defence experts, original equipment manufacturers (OEMs), public and private sector enterprises, etc. And despite being a progressive version, DPP 2011, has been a subject of much debate, with demands for streamlining the procurement procedure coming from all quarters. Keeping this in view, SP Guide Publications in collaboration with Observer Research Foundation (ORF) organised a workshop on Defence Procurement Procedure (DPP) at Hotel Oberoi in New Delhi on May 2.

The presence of Manish Tewari, MP and Member, Parliamentary Standing Committee, MoD at the conference demonstrated the government’s interest in bringing constructive changes in the defence procurement process.
 

The day-long conference witnessed industrialists, diplomats, bureaucrats, policy makers, defence personnel, politicians, etc pondering and talking about “Streamlining the Defence Procurement System”. The conference began with Lt General (Retd) Nirbhay Sharma, Distinguished Fellow, ORF, emphasising on the need for transparency in the defence procurement system. Giving his welcome remarks, Sunjoy Joshi, Director, ORF, questioned, “Should DPP remain aloof from strategic parameters?” “Our domestic policies today will define the country’s military environment in the future,” he said and invited the speakers to discuss on the operational framework that will reap maximum benefit in the future.

Former Secretary, Defence Production and Chairman Task Force on Defence Modernisation and Self-Reliance, Ravindra Gupta gave out details of the mandate of the Task Force set up by the National Security Council to focus on issues pertaining to defence modernisation as well as self-reliance. He said the focus is on modernisation and self-reliance, and how to leverage from both the public and private sector. He, however, held that there is diffidence at all levels of government to move smoothly and the self-reliance index has only moved slightly. “We have indulged in purchase and not acquisition. The acquiring capability has not been acquired,” he said and added that unfortunately the political will for defence technology is lacking and the Offset clause has so far not been exploited well to get the required capabilities. “The “Make and Buy” in DPP 2011 is good to bring the private sector in the defence fold,” he opined and added that ideally request for proposal (RFP) should be issued to the Indian companies through foreign collaboration.

 
Naveen Jindal‘It is necessary to equip our forces with the latest and the greatest equipment. We should take the delays out and get the best equipment for our soldiers.’
— Naveen Jindal, MP and Member, Consultative Committee, MoD
 

A.K. Chopra, Financial Advisor (Defence Services), Ministry of Defence, admitted that there are conflicting interests and a balance has to be struck. He said that deficiencies exist both in the services and the bureaucracy. He spoke about the roadblocks and the need for substantial delegation of power. He emphasised on the need for collegial decision-making but added that there are still issues where agencies have to act on their own.

Session I

The first session of the conference was on “Evaluating Defence Procurement Procedure", which was chaired by Vinod Dhall, Former Secretary, Ministry of Corporate Affairs and Former Chairman, Competition Commission.

 
‘Our Defence Procurement Procedures need to be streamlined so that our armed forces do not remain in a state of flux; dealings remain transparent and clearer for overseas and domestic suppliers; our men in uniform working 24x7, receive the best solutions to be equipped with and are thereby capable to handle any kind of challenges coming from any quarters; offsets and alike elements of DPP should work as enabler rather than disabler; and decisions are taken on time so that situations do not go out of hand/out of control.’
— Jayant Baranwal, Editor-in-Chief, SP Guide Publications
 

Dhall said that though the procurement system has evolved over the years, no statistical record of procurement is available. He emphasised on the need for a dedicated department within the Ministry and a public procurement portal. He spoke on the silent reforms taking place in the public procurement domain and the Public Procurement Bill which has been approved by the Cabinet and would soon be introduced in the Parliament. The law will enable setting up of an e-portal and will provide greater accountability and transparency in public procurement.

Speaking on “Broader Context of Arms Procurement Reforms”, Ravindra Pal Singh, Defence Analyst and former Project Leader on Arms Procurement, SIPRI, said that there is no consistency in the national security policy-making in India. He said the procurement process is not moving fast enough in India as compared to other democracies. He questioned who scrutinises the decisions or the macro processes and giving an example of the DRDO Chief’s role, said that he is triple headed and hence there is the need for decentralisation. “There is also the need to develop indigenous capacity based on engineering skills and operational research.”

Jayant Patil, Executive Vice President and Member of the Board of Heavy Engineering, Larsen & Toubro, expressed dissatisfaction at no commensurate increase in offset stipulation. “Taxation of offset is a big issue,” he said and added that the cost differentiation in a product manufactured in India and elsewhere globally is 35 per cent. Patil said that at 26 per cent foreign direct investment (FDI), no genuine technology would come to India. “DPP needs to address level playing field in taxes and duties regimes; foreign exchange rate variation, terms of payment, etc.” He said that it is the Department of Defence Production which decides but here again is the question of “who judges the judges”.

‘DPP involves both aspects — procurement and industrialisation’

— Dr Vivek Lal President and CEO,
Reliance New Ventures

 
Addressing the same session, Dr Vivek Lal President and CEO, Reliance New Ventures, gave out the “Private sector perspective on DPP” and said that DPP involves both aspects—procurement and industrialisation. “For the ability to create products and services, the tools have to be at every stage of development of the product. Offset is a catalyst across the globe and the really successful ones have been discontinued after it met its objectives. There is a cost to offsets and hence it is important to be clear as to what it wants to achieve.” He also highlighted on the “people aspect” and said that the setting up of a complex value chain requires specifically educated and trained people.

 

‘A paradigm shift is required to ensure that right vendors are selected in a transparent and accountable manner.’

— Amit Cowshish, Financial Advisor
(Acquisition) and Additional Secretary,
Department of Defence Finance, MoD

Amit Cowshish, Financial Advisor (Acquisition) and Additional Secretary, Department of Defence Finance, Ministry of Defence, spoke on “DPP: Addressing Key Areas and Looking Ahead”. He emphasised on the need to create a permanent professional body to choose vendors. On the “Buy and make” category in the DPP, he questioned why guidelines should be laid for the private sector and why cannot it to be left to the OEM. He expressed doubts about the extent of indigenisation which involves cost. Cowshish informed that the DPP is now being reviewed by the government in light of the issues raised by the industry players and indicated that the new DPP would look at broadening the scope of offsets and bringing ToT under its ambit. “A paradigm shift is required to ensure that right vendors are selected in a transparent and accountable manner.”

On being suggested by Lt General (Retd) P.C. Katoch, former Director General, Directorate General of Information System, Indian Army, about setting up a body of experts to look at the procurement process, Cowshish said that a similar suggestion had come from the Kelkar Committee as well and there is certainly the need for a permanent body of experts to look at the procurements.

Session II

The post-lunch session began with a special address by Manish Tewari, Member, Parliamentary Standing Committee on Defence who spoke vividly on different aspects of defence procurement. His words demonstrated government’s interest in bringing constructive changes in the defence procurement process.

 

‘There is no accountability on delays. I regret to say that there is no evaluation logistics’

— Vinod K. Mishra, Former Secretary,
Department of Defence Finance
and Distinguished Fellow, IDSA

The second session was on “Defence Procurement-Core Concerns” which was chaired by Vinod K. Mishra, Former Secretary, Department of Defence Finance and Distinguished Fellow, IDSA. Mishra expressed dissatisfaction at the lengthy evaluation timeframes in India. “There is no accountability on delays. I regret to say that there is no evaluation logistics.”

Major General Mrinal Suman, former Technical Manager (Land Systems) and Consultant, Confederation of Indian Industry (CII) spoke on “Defence Offset”. He said that the policy has no spelt out objective or aim and that is its ‘weakness’. On the future trends of offset, he said that offset is here to stay. “It is an addiction and difficult to wean away. The reforms are likely to continue but no radical political change can be expected. No national offset policy is in the offing.” “Integrity and probity, wasteful programmes, adverse effects on main contract, dilution of focus, etc are issues of concern,” he said. He concluded by emphasising on the need for transparency in offset by making it public.

“The level of FDI has nothing to do with the level of transfer of technology (ToT) you would get,” emphasised G. Balachandran, Visiting Fellow, Institute for Defence Studies and Analyses, while speaking on “Translating ToT Into Real Dividends”. “Research and development (R&D) is an essential element in technology transfer. Indian R&D is very narrow and unless the R&D increases, ToT has no value,” he held.

S.N. Mishra, Additional Secretary and senior CDA, Southern Command, Ministry of Defence (MoD), was unable to attend the conference. However, his paper on “Examining Practical Issues In Defence Procurement” was read out for the audience.

On being questioned by Jayant Baranwal, Editor-in-Chief, SP Guide Publications, about the concerns of OEMs on technology transfer at low cost, Suman said that it is indeed a concern for the OEMs. “In India, we have not permitted trade in offset. While the Defence Offset Facilitation Agency (DOFA) is understaffed, the Acquisition Wing is overloaded with work. The country must have a single window to listen and thereafter make changes.”

The session ended with the assertion that offset has a cost element to it and that gaps in capability outlays have become far more significant.

The second session was followed by a valedictory address by Naveen Jindal, Member, Consultative Committee, MoD. He said that it is necessary to equip our forces with the latest and the greatest equipment. He cited the example of 9mm guns still being used by the paramilitary forces in India, which has been long discarded by other countries. He said that the use of the equipment is also important other than acquisition. “Are we training our people on how to use the equipment?” he questioned and added that rather than wasting time, why not give our soldiers the latest equipment. “If we can make it indigenously its fine, or else we should acquire it. We should take the delays out and get the best equipment for our soldiers.” Jindal admired SP Guide Publications for organising the workshop and expressed his liking for the informative magazines published by SP’s.

The day ended with vote of thanks by Jayant Baranwal, Editor-in-Chief, SP Guide Publications. He said that it is necessary that our defence procurement system be streamlined so that our armed forces do not remain in a state of flux. “We must receive the best solutions capable to handle any challenges and Offset should act as an enabler and not a disabler.” He reiterated that decisions need to be taken on time and added that “we need not always have to reinvent the wheel, which may take longer than acquiring it. We must optimise our key resources”.

 

 

 
View More Photos     
The conference began with Lt General (Retd)
Nirbhay Sharma, Distinguished Fellow, ORF,
emphasising on the need for transparency in
the defence procurement system
Sunjoy Joshi, Director, ORF, welcoming the
guests and audience
Amit Cowshish, Financial Advisor (Acquisition)
and Additional Secretary, Department of
Defence Finance, Ministry of Defence
addressing the session
Dr Vivek Lal President and CEO, Reliance
New Ventures, giving out his thoughts on DPP
Manish Tewari, MP and Member, Parliamentary
Standing Committee on Defence
addressing the conference
Naveen Jindal, Member, Consultative
Committee, MoD giving the valedictory
address
Delegates at the workshop
SP's Editor-in-Chief, Jayant Baranwal giving
the vote of thanks
View More Photos  
 
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