January 24, 2017

Disappointing private industry, MoD handing Rs 5,000 crore BMP-2 upgrade to Ordnance Factory Board

On Tuesday, in a negative signal that will resonate discouragingly through India’s private defence industry, the ministry of defence (MoD) plans to kill competitive tendering for a Rs 5,000 crore project to upgrade the army’s 1,500 BMP-2 infantry combat vehicles (ICVs). Instead the project is being gifted to the Ordnance Factory Board (OFB), without competition.
Capable private firms like Larsen & Toubro, Tata Motors, the Mahindras, Reliance Defence and Alpha Design Technology Ltd (ADTL) are being entrusted with designing, developing and manufacturing a high-tech Future Infantry Combat Vehicle (FICV) for the army, a “Make in India” contract about to be awarded. But they have been eliminated, without explanation, from the relatively simple task of upgrading the BMP-2 to grant it a lease of life until the FICV enters service.
This despite repeated assurances from Defence Minister Manohar Parrikar that he will treat private defence firms as partners on par with defence public sector undertakings (DPSUs) and the OFB. Successive Defence Procurement Policies (DPPs) have promised a “level playing field” for the private sector. Prime Minister Narendra Modi too has exhorted private industry to spearhead “Make in India” in defence.
Despite the MoD’s “nomination” of the OFB for the BMP-2 upgrade, private defence firms are fighting to remain in the fray. On Friday, industry chamber, Ficci, wrote to the MoD, requesting permission for industry to present its case at a crucial Tuesday meeting of the Services Capital Acquisition Plan Categorization Higher Committee (SCAPCHC), which will rule on who will upgrade the BMP-2.
After silence from the ministry, industry representatives met MoD officials on Monday afternoon to press their case. Sources say permission has been granted.
“If the ministry hands the OFB the BMP-2 upgrade on a platter, it will prove what we have always feared --- that we will always get step-motherly treatment because there is no political will to expose the DPSUs and OFB to market competition”, says a private industry CEO, bitterly.
The BMP-2, which the Indian Army calls the Sarath, is a tracked, armoured vehicle that carries three crewmembers and a “stick” of seven fully armed infantrymen. It can move cross-country at 45 kilometres per hour, keeping up with tanks and providing mechanised formations with mobile infantry to occupy the ground that tanks overrun.
Since the BMP-2 upgrade was first announced last March, it was to be a competitive programme featuring the private sector. Between March-June 2016, the army issued four separate Requests for Information (RFIs), soliciting interest from private firms in fitting the BMP-2 with a new, more powerful engine than its current 300 Horse Power engine; increasing its firepower with newer, more capable gun controls and electronics; and fitting a more modern, accurate anti-tank guided missile (ATGM) than the old Konkurs missiles it currently carries.
More than 20 private defence companies responded to the RFIs of May-June 2016, many of them having already built up technological capabilities and infrastructure for the FICV development project, a separate Rs 50,000 crore tender under the “Make” category. They offered to upgrade the BMPs within three years, with indigenisation of at least 50 per cent. Yet, these were ruled out to make way for the OFB.
Contacted by Business Standard to explain the rationale for privileging the OFB, the MoD has not responded.
Meanwhile, since late 2015, the army has pursued a separate proposal to indigenously upgrade the BMP-2’s power pack --- which includes the engine and transmission. It is unclear how, if at all, this relates to the current BMP-2 upgrade project.
India has operated BMP-1 and BMP-2 ICVs since the early 1980s. Russia has been persuading New Delhi to buy its readily available new BMP-3 ICV, rather than going in for the FICV. But the MoD has stuck to the path of indigenisation.
“The opportunity to upgrade the BMP-2 will hone our abilities to deliver the FICV. We will request the MoD one last time on Tuesday to provide a level playing field to the private sector, as successive DPPs have stipulated”, says a private sector official.

  Ajai Shukla

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