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February 3, 2017

Defence procurement delays: Panel to tell Manohar Parrikar to create unit outside MoD to fast-track purchases


To overcome the perennial problem of delays in defence procurement, unspent budgets, allegations of corruption and botched deals, an expert committee established by the government has recommended the creation of a new, independent organisation outside the Ministry of Defence to undertake defence procurement. The committee, headed by retired IIM professor Pritam Singh, will submit its report to Defence Minister Manohar Parrikar next week.

“We have given this new organisation full ownership of the acquisition process by bringing legal, financial, costing and technical experts under one roof. Independent of the Ministry (of Defence), they will not be constrained by government rules. This professionalisation of the process will bring down the time taken to complete defence acquisitions. We have also recommended adequate internal checks and balances to reduce corruption,” a member of the expert committee said.

The Indian Express spoke to two members of the committee who said that the report, running into more than 300 pages, was ready last month. They have discussed the report with the Defence Secretary since Parrikar was busy with assembly elections in Goa.

Defence acquisitions have been stuck in a long-drawn spiral with major procurements like the Rafale fighters or M-777 howitzers taking nearly a decade to fructify. This is the state of government-to-government deals while the situation with the open tender processes has been worse, with allegations of corruption and subsequent blacklisting of firms.

This is reflected in the quantum of unutilised funds of defence procurement. In the last ten years, the Ministry has been unable to utilise R54,416 crore from its capital acquisition budget.

This includes the current financial year, in which an amount of R6,886 crore from the capital budget has been transferred for revenue spending of the defence services, according to Budget documents placed before Parliament Wednesday.

The nine-member expert committee was formed by the Ministry in May last year with the mandate for ‘Restructuring of the Acquisition wing to make it more effective’. It was embroiled in controversy when the head of the committee, former Director General (Acquisition) Vivek Rae, resigned in October after fundamental differences with other members over the proposed defence procurement organisation.While Rae wanted this new organisation to be a part of the Ministry, other members were determined to keep it independent of the government.

In its recommendations, the committee has proposed that a new organisation, tentatively called the Defence Capital Acquisition Authority, will be fully responsible for the entire process of acquisition after the operational requirements have been identified by the defence services.

Operating independently of the Ministry, it will be manned by people with specific qualifications which will include experts from outside the government who are fit to serve in these positions.

The report says that “at the highest level, there will be a seamless integration between the MoD and this organisation” where the “decision-making will be collective and collegiate”.

“This organisation will convert all acquisition schemes and programmes into projects, which will be the responsibility of a project management team from the start to finish. Project which are of different service, say UAVs for the army and the air force, will be clubbed together as one single project,” a member of the expert committee said.

Loosely based on features drawn from similar organisations in France, the UK, Australia and South Korea, this new organisation will combine several functions currently undertaken by different agencies: service headquarters are responsible for defining the technical features of weapon systems and undertaking trial evaluation, Director General Quality Assurance for quality assurance, the office of DG (Acquisition) for contract negotiation, Department of Defence Production for industrial development and DRDO for sponsoring research on futuristic technology. The capital acquisition wing of the Ministry will, however, be completely subsumed in this new organisation.

The committee has recommended that the government should not rush into the process of creating this organisation to disrupt ongoing procurements. While timelines have been left open for further deliberation, it has proposed two years to complete this exercise.

 financialexpress

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