July 29, 2015

Committee wants MoD to look upon private industry as an ally

Stressing on the 'Make in India' initiative, a Ministry of Defence appointed committee has recommended enhanced private sector involvement in materiel procurement by granting manufacturers tax and import concessions. Rahul Bedi reports for Rediff.com
A Ministry of Defence appointed committee has recommended wide-sweeping changes to India's cumbersome materiel procurement and manufacturing procedures, which have long delayed military modernisation.Headed by retired home secretary Dhirendra Singh, the 10-member committee, comprising former service officers and technical experts that was constituted in May, submitted its report to Defence Minister Manohar Parrikar last week.

Officials said its recommendations would be incorporated into the Defence Procurement Procedure-2015 -- the eighth edition after the first DPP-2002 -- that the MoD is likely to release by the year-end.

Parrikar has promised that the revised document will be more comprehensive than the previous 351-page DPP-2013, which for many domestic and overseas vendors, is difficult to fully comprehend.

The final DPP-2015 version will follow extensive consultations within the MoD and also with related departments associated with the final document, like the law, finance and industries ministries, officials said. 
Industry sources said the 200-page report, prepared after interaction with the services and local and overseas defence company executives, stresses the 'Make in India' initiative to promote indigenous defence production through enhanced private sector involvement. It aims to achieve this by granting private manufacturers tax and import concessions, similar to those hitherto enjoyed by inefficient State-owned entities that have monopolised India's defence-industrial sector for decades.

These include the 39 Ordnance Factory Board plants and nine Defence Public Sector Units.

The committee has suggested that the MoD accord the private sector 'strategic partner' status for varied military programmes in a structured and permanent arrangement, given its agility, efficiency, innovation and modern management practices.

This propensity, it states, applies particularly to absorption of technology from overseas original equipment manufacturers via joint ventures, which the committee believes the private, not the public sector, is better equipped to manage.

The committee reportedly advises the MoD not to look upon private Indian industry as a 'competitor,' but an 'ally,' regularly sharing with it information regarding the services overall requirements and programmes.
 Private industry has welcomed these suggestions, but is believed to be at variance with the committee over its proposal that the MoD restrict each 'strategic partner' to a solitary system or platform type.

They argue that this would neutralise their multiple technical capabilities developed at great expense over time and restrict their expansion, as would the recommended ban on cross-holdings by them, without prior government permission.

The committee is believed to have suggested compressing the entire military acquisition process into a shorter time frame -- it can take up to a decade or longer for contracts to be completed -- and urged the military to formulate 'realistic' qualitative requirements for equipment.

The services, especially the Indian Army, are prone to framing over ambitious QRs for weapons and related systems, which simply do not exist anywhere in the world.

According to Parliament's Standing Committee on defence report in 2012, as many as 41 of the army tenders were withdrawn or terminated in recent years, due to unrealistic QRs. This has left the force in a shambolic state, with regard to even basic equipment like assault rifles and carbines for its nearly 360 infantry units.According to the committee the current practice of terminating a tender, simply because there is only one vendor available, needs reviewing, as does the procedure of selecting the lowest bidder or L1.


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