It has been more than two months since the experts' committee set up by the ministry of defence (MoD) to suggest a policy framework to facilitate Make in India in defence and amendments in the Defence Procurement Procedure (DPP) 2013 to align it with this new mantra submitted in its report. While speculations abound about what is being done, the larger picture is far from being clear.
The committee has made recommendations concerning what it calls the triad of vectors: policy, procedure and the institutional setup responsible for defence production and procurement. It would be naive to expect that all these recommendations would either be acceptable to all concerned or that it would be possible to implement even the acceptable recommendations immediately.
There are gaping holes in India's military capabilities that need to be plugged. The MoD cannot afford the luxury of taking forever to remedy the build up the military capabilities. But the time is running out as it will take a long time for any changes to start showing results. That precisely is the reason why the ministry ought to think of a phased plan for bringing about much needed change in the existing regimen of defence production and procurement.
There are far-reaching policy changes recommended by the committee. Not all of them, however, are within MoD's remit. The recommendation to create a dedicated procurement organisation outside the ministerial structure of the government of India is a case in point.
Or, consider the recommendation that deemed export status should be granted for direct purchase from the Indian industry or that investment by foreign original equipment manufacturers in SEBI-regulated alternative investment funds (AIFs), whose sole objective is to invest in the Indian companies eligible to be offset partners under the offset guidelines, should be considered as eligible means of discharging the offset obligations.
Some of these recommendations are more in the nature concepts than executable prescripts. In any case, keeping aside the merits of such recommendations, their implementation is beyond the remit of the MoD.
The ministry will also find it difficult to implement recommendations that have political ramifications, such as corporatisation of the ordnance factory board, suggested by many a panel in the past also.
It will, be more prudent to focus on the policy recommendations that are within the MoD's remit and which can be easily converted into actionable instructions/guidelines, as also the procedural changes that do not require any outside approval.
It is significant that the committee has not proposed any change in the basic architecture of defence procurement regimen that has been evolved assiduously over the years in consultation with various stakeholders and after several iterations. There is a certain amount of comfort in following the procedure that everyone is familiar with.
This implies that the existing system of classifying acquisition programmes as "Buy", "Buy and Make", and so on, will continue. One of the existing procurement categories is the "Make" category that entails indigenous design and development of prototypes of complex and high technology products for the future. A majority of the acquisitions will not fall in this category. The "Make" procedure, which is a part of DPP 2013, can, be delinked and notified separately as it is dependent on working out the modality of implementing several associated concepts such as identification of strategic partners for undertaking such projects.
The concept of strategic partners is similar to the concept of Raksha Udyog Ratnas that was dumped at the last moment because of unspecified reasons. While those concerns continue to be relevant, the recommendation to limit the number of projects that could be awarded to a strategic partner is unlikely to find resonance with the resurgent Indian private sector. Fortunately, most of the suggested procedural changes are not dependent on larger policy decisions being taken by the government. The recommended changes also have the widest possible acceptability as these have been made after consultation with the industry.
Consequently, these changes can be made independent of the larger policy-related changes without disturbing the equilibrium of the DPP. In fact, it is these changes that will have an immediate impact on the acquisition proposals worth close to two lakh crore rupees that have been given approval-in-principle by the defence acquisition council in the last one year or so.
Simplifying the procedure for approval of minor changes in the specifications of the equipment, authorising the services headquarters to approve the technical and staff evaluation reports, mandating that the procurement programme need not be cancelled if only vendor eventually qualifies the technical trials, doing away with negotiations with the lowest bidder in multi-vendor situation, payment to the Indian vendors through inland letters of credit, and improving the model contract template are some of the seemingly mundane procedural changes that will have immediate impact on the procurement process, at least by cutting the unconscionable delays.
Mark Twain was right when he said, "The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one." MoD will do well to heed his advice.