MoD:Defence Procurement Policies Issues and Discussions

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ramana
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MoD:Defence Procurement Policies Issues and Discussions

Postby ramana » 04 Oct 2017 20:04

A long felt need for this thread. Despite the many years of BRF we have not explored the MoD procurement processes and polices.

Thanks to new member Vidur for giving us pointers.
Will X-post his posts here.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ramana » 04 Oct 2017 20:13

First post:

Vidur wrote:
deejay wrote:
Since the acquisition committee has sanctioned 83 MK1A it is mostly up to Finance Ministry. MOD moves the files for approval. I think it is just stupid that the second approval of finance ministry is required for the final order. Either the first or the second FinMin approval needs to be done away with. IMHO, the first approval should clarify on when and how from the FinMin side.

I will defer to Vidur jee on this. I was trying to make a decision tree kind of thing for the current approval process and found myself missing (authoritative) info on this. If Vidur jee can share something then we can have a flow chart to refer and be sure where is the current bottle neck for each procurement process by just plotting the last known approval.


Indranilji, as a moderator I wish you would make some effort to understand the DPP and the financial sanctions process. IAF and MOD have different roles both of which have been adequately discharged in this case. I am attaching DPP 2016 (without amendments) from the mod.nic.in website. http://mod.nic.in/sites/default/files/DPP-2016.pdf. Kindly read. You will note on page 6 the different steps of the process. Each has several sub steps. Point j is what Deejayji is referring to.

I also refer you to my post in another thread which enumerates the issues with the defence planning and financial sanction process. Kindly read in conjunction to above and you will be able to understand the situation. I will not be able to make these points again so kindly request you to spend some time reading them.




Second Post:

Vidur wrote:
Indranil wrote:

On the other hand IAF/MoD say wonderful things in public, but have not formally sanctioned it yet. That is the ground reality.


Incorrect. Sanctioning authority (MOD level) is DAC not IAF and DAC approval has indeed been given. After that comes financial sanction from MOF, CNC etc. All other relavent information is in my above post.

Request to all posters - kindly visit mod.nic.in and read the procurement policy and manuals and annual reports.


Some other useful material http://www.indiandefencereview.com/10-q ... o-ask-mod/
http://www.indiandefencereview.com/13th ... -the-past/ . The second article is a must read for any serious student of defence planning, financial sanctions and approvals in India.



Also note we have Military Acquisitions, Partnerships & Developments since 2009 but it is more about collaborations to make in India. Not MoD Procurement policy and processes per se.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ramana » 04 Oct 2017 20:14

There are numerous CAG reports on the functioning of the MoD wrt OFB, arms procurement and usually have lessons learned.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Vidur » 04 Oct 2017 22:33

Posting this post as it has some relevent points I think.

I am sharing some thoughts as promised. These are my personal thoughts and certainly not an official view. Please take them as such. There maybe some spelling mistakes and grammatical errors. Please excuse those. It was written in a few snatched moments and is completed late at night.

A. State of Nation at independence

1. India contributed 24 pct to world GDP in 1700. By independence this had reduced to 2 pct. The coinciding of the industrial revolution with colonisation had lead to asset stripping, de-education and deindustrialisation. This was facilitated by among other things cultural colonisation. Terms of trade (market value of domestic produce vs imports) had moved against India. This means that the labour of the Indian producer had been severely devalued.
2. Famines had raged through the raj era and the nation was in steep poverty. Therefore the first imperative was becoming self sufficient in food followed by reindustrialisation.
3. The institutions of the nation were colonial creations meant to facilitate the move of raw materials to the factories of England and create a stable environment in the colony. Railways were created for this purpose not to promote economic growth. The facilitation of the freedom movement was an unintended consequence. The ICS (predecessor of the IAS) was the means by which the empire was taken to the grass roots. The main objectives were revenue collection, maintaining law and order and facilitating the colonial exploitation. Welfare of the subjects was never an objective. The Imperial Police Service were enforcers and spent most of their time battling independence movement. The army was the backstop to civil authority but its domestic role had steadily reduced after the Afghan wars.
4. I will skip the crucial but controversial topic of the vision for a new India and confine myself to administrative experience of the leaders of the new nation. It was non existent. According to Freedom at Midnight, Nehru had asked Mountbatten to take over charge of the government during post partition riots. In his words 'we have spent our life agitating against you. We can barely keep a fully functional government going. We cannot handle this situation.'
5. The freedom movement's non violent genesis and the imprint of the Nehruvian Gandhian philosophy in strategic affairs is known to all. This resulted in a active disdain for national security and unwillingness to educate themselves in these issues.

Into these circumstances was the nation born.

B. Post Independence till 2000

1. Five year plans were launched to ensure that the goals of Food sufficiency and industrialisation was achieved. They were shepherded by the steel frame of the bureaucracy at the policy level and significant success was achieved. India became self sufficient in food grains, and lead by the public sector in basic industries we gained significant success in steel and coal. Other areas of success were large irrigation projects and to some extent rod construction. Land reforms were also attempted in a big way but with varying success (due largely to corruption at district level)
2. The planning framework was an important driver of the above achievements. National will was shown in setting up targets and these were tracked, accountability fixed and success achieved. Finances for the plan were integrated into the budget (plan expenditure/non plan expenditure). Social movements came up to support the process and the film industry played its part through many movies. The planning process worked in the first few 5 year plans because of this comprehensive application of national will at all important levels - policy, budget, institutional, political, district, state, social.

3. At the grass roots the charter of the DC was changed from ruling to development. The development organisation now grassroots till the block level. The DC of today has to work with all government departments (irrigation,health, education, pwd,sugar) to deliver the development goals. He has direct control only on revenue, everything else is a collaborative effort. Often work is seen to be done than actually done.

4. The colonial institutions of the IAS/IPS were used to run the country with almost no substantive reform and as time passed, naturally a system designed for exploitation changed from exploitation for the colonial master to exploitation for the system - Indian politicians and bureaucrats.That is why transmission mechanisms didn't work and poverty was not alleviated till the economics reforms of the 90s started. The steel frame is now rusting an in dire need of replacement. Coalition politics and regional leaders of starting in the 90s significantly increased metal fatigue and did heavy damage to the steel frame.

5. While we managed to build basic industries like steel and coal and power generation and did some good civil engineering feats, the public sector had not been able to build a real manufacturing base. And the private sector was used to a license raj diet of protection, trading and rent seeking.

6. Having looked at the background let's move on to defence. It was never on the agenda. Politically the agenda was active anti defence for ideological reasons. There were no long term plans for building a defence industry, no national will and no funding. The shocks of 62 and 65 and the regime change lead to a change and an attempt was made to do defence planning in the same way as 5 year plans. The first defence plan was launched in the late sixties. We are currently in the 13th plan. Some notable characteristics of defence plans - there was little political will, not supported in the annual budgetary process with the result that it became a largely paper exercise, MOF permission was needed at multiple stages which was very hard to get (the 12th plan had to be abandoned for this reason), it was run by the bureaucracy with little input allowed from the forces, no accountability and most importantly no national will. It is no wonder then this remained a paper exercise and becomes a bigger farce as time passes.

7. Despite a sprawling Defence industrial organisation ranging from DPSUs to Ordnance Factories and DRDO we had not managed to create a real defence industrial base. Despite Investment of significant resources in terms of land, labour and financial funding the DPSUs and OFB were not able to even produce consistent and high quality output of license produced equipment and munitions. Safe to say they were not in a position to build new weapon systems of an acceptable quality.

8. One important reason is that mass production, especially of advanced products, is a complex task and is best handled by the private sector. Since we were not able to build a private sector manufacturing base (license permit raj) there was no eco system for the PSUs to act as lead integrators even if they wanted to. We built basic industry through planning and software through the Private Sector but failed in manufacturing. That is why we have had success in missiles and mission computers but not in small arms. Without an eco system defence manufacturing is a pipe dream. We have spent decades in importing products adding a margin and passing them off as domestic produce. License production for decades has not helped us to absorb technology or leapfrog technology. Flagship programs like the LCA drew little benefit from decades of license production. Every aspect from aerodynamic design, to materials, to testing had to be learnt from scratch. The lack of a domestic manufacturing base and an eco system extended the timelines. Even program management had to be learnt because the Public Sector had never done it and we did not have a private sector manufacturing base. There are no short cuts.



C. Current Challenges

1. There is little expertise or interest in defence matters at the policy level. Defence is a long term project and politcial horizons are much shorter term but even if the government of the day wants to formulate a vision he ministry simply does not have the expertise to formulate one. A typical IAS officer comes to the ministry for a 3-4 year deputation and has no grasp of the complex issues he is rqeuired to grapple with. And it is rather unfair to expect him or her to . He has been trained in a different milieu with a different ethos - administering, firefighting, keeping all stakeholders happy, brushing issues under the carpet. What is called for is deep domain expertise, an empathy with national deference and defence personnel and a build and can do attitude. But we are administrators not builders and have grown up in a system that is designed to stop something from happening not to bring about radical change. There is also an institutional disdain for defence issues and the services in the bureaucracy, And even if a rare officer due to sheer personal interest manages to surmount these issues, by the time he or she is up the curve and able to make a difference, they move out. Therefore the biggest challenge getting political will for change and staffing the ministry with the right people.

2. The second challenge is the decision making process and the multiple levels of sanctions required. It would take me days to finish this note if I had to cover it all but I refer you to three data points. Firstly, the previous RM Shri Manohar Parikkar is on record in a TV interview questioning the need for dual MOF approval and saying he has no control on it , second I have referred to the abandoning of the 12th defence plan in para B (6) above. Lastly I refer you General VK Singh's statement of snakes and ladders, a very clear statement of the problem. The process needs a complete revamp.

3. Defence spending needs to go to atleast 3.25% of GDP ideally 3.5% of GDP. It is a waste of time and energy to talk about building a national defence base if there is no budgetary provision for it. And this spending level must be made statutory and sanction must automatically come as per the plan so that MOF cannot turn the tap off on approved projects to balance the annual budget. The 5 year defence plans make sense only if funds are sanctioned like they were for the 5 year plans. What is happening now is that services plan according to the 5 year plan and then project a need, it goes thorugh a tortuous approval process and then it is completely at the mercy of the Finance Ministry. It is better to abandon the whole planning process and save time and resources than to continue with this charade. But it is all not Finance Ministry's fault. They follow the political masters.

4. Addressing the above 3 points are necessary but no sufficient conditions in building a domestic defence industry. Reforming the public sector, making it accountable in a competitive market and building a big private sector industrial base has to follow. A level playing field has to be created for the private sector. A lot of promises have been made to them and many entrepreneurs have come forward and put skin in the game but they have been starved of orders. Projects earmarked for private sector keep getting diverted to the public sector. They will soon loose hope. There are cases where they supply to foreign governments but have failed to navigate our system. Shri Parrikar brought one of these cases to the public domain. There are many more.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby KrishnaK » 04 Oct 2017 23:57

Vidur wrote:4. The colonial institutions of the IAS/IPS were used to run the country with almost no substantive reform and as time passed, naturally a system designed for exploitation changed from exploitation for the colonial master to exploitation for the system - Indian politicians and bureaucrats.That is why transmission mechanisms didn't work and poverty was not alleviated till the economics reforms of the 90s started. The steel frame is now rusting an in dire need of replacement. Coalition politics and regional leaders of starting in the 90s significantly increased metal fatigue and did heavy damage to the steel frame.

5. While we managed to build basic industries like steel and coal and power generation and did some good civil engineering feats, the public sector had not been able to build a real manufacturing base. And the private sector was used to a license raj diet of protection, trading and rent seeking.


Here's another reason for lack of poverty alleviation - one that's advocated by our current CEA. India became a democracy with universal suffrage at a every early stage in its economic development. With most of the voting population dependent on the government for handouts, they voted to redistribute instead of investment in public goods. Other democracies mostly the west only had voting rights for property owners till they industrialized. As such, they had grown their capacity, even to redistribute, before they started redistribution. As for coalition politics, this could've been a result of Indians becoming self sufficient in food and the sheen of the Congress as the sole mai-baap fading.

I think the lack of a strategic vision accusation has the same reason - the combination of economic development, or lack thereof and democracy pretty much hobbled any ambitions the politicians might have had. From the wiki - the incomplete INS Vikrant was purchased in 1957, and construction was completed in 1961. Well before 1962. While I'm not ignoring Nehru's blunders leading upto and during 1962, but he wasn't exactly lacking in strategic vision for India.

In all countries with strategic vision there's a very strong co-relation with a large portion of their prosperity related to international trade. The economic motive exists before the articulation and establishment of a strategic military vision. Otherwise it'd be hard to sustain such narratives, as India often finds.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ramana » 05 Oct 2017 02:20

Vidur, There must be a permanent bureaucracy somewhere deep in Delhi. Cant rely on transient IAS officers.

What about the second rung officers in MoD are they permanently attached to the Ministry? How does MHA do it?

thanks for taking the time to pen you thoughts.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ramana » 05 Oct 2017 02:24

There is process called Business Process Mapping which looks at the series of steps in a process and gets to reduce the bottle necks.
Toyota was the original to introduce Kaizan.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ShauryaT » 05 Oct 2017 04:48

Vidur: Some thoughts from your post. There is a dirty little secret for that MoF babu embedded in MoD. See, the MoD is one of the biggest departments of the GoI. Historically averaging about 15% of government spend, give or take a few points. Our budgetary provisions are an estimate only and not actual provisions. The discretionary i.e.: non committed parts, or IOW a major part of the capital and maintenance budget is really up for grabs and this is what happens. A new dole is announced, loss of revenues of GoI and guess who has the biggest allocated pot to raid from? MoD. Hence projects get stalled mysteriously. Monies are "surrendered", etc.

NDA I under JS in 2004 allocated about 5,000 crores as a non-lapsing capital budget to address this issue, however UPA disbanded the idea and NDA2 surrendered some 7,000 crores last year amidst a declining capital budget!

DPP is fine, what is missing is political will. Someone like Gadkari who is into making things happen is needed or Swaraj who can run circles around Jaitley and can even resist the PM.

Ramana: Do not think we have specialized cadre, these are generalists who may develop specialization by default rather than design, AFAIK.

The problem starts from the higher levels. The world of today really does require an army of specialists and very few generalists and even the generalist should have been a specialist early on. IAS starts the other way around the first 10 years are spent in the field hopping around everywhere. Anyways, serious administrative reforms is a topic of its own. MoD is the right place to start building specialist cadre and some serious integration between service HQ and its civilian counterparts, led by the politician.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Vidur » 05 Oct 2017 21:34

ramana wrote:Vidur, There must be a permanent bureaucracy somewhere deep in Delhi. Cant rely on transient IAS officers.

What about the second rung officers in MoD are they permanently attached to the Ministry? How does MHA do it?

thanks for taking the time to pen you thoughts.


IAS and IPS officers are allotted a parent state cadre which is where they serve an important part of their career. Initial training happens in the state cadre and first posting is usually as a SDM. Future postings are across a range of roles - district, division, state capitals and various PSUs and authorities. During the course of the career there are central deputations. The ratio of time spent over a career is roughly 66/34 in states vs centre. Depending upon the relative honesty/dishonesty and ease/difficulty of serving in central vs state officers make bids for either states or centre. These days the pendulum has swung towards officers making a beeline for states.

Defence ministry is not a cherished posting except at very senior levels. Defence Ministry is also staffed by allied services as I have mentioned before - IDS and IDSA. They also rotate in plum postings like CEO (Cantonement Executive Officers) in various cantontments. With respect I do not believe they have any capability whatsoever for the role. If we are to stick with civil servants running MOD then IAS is a far better choice and perhaps IDSA in some cases to manage the financial aspects.

However I do not believe that the civil service is the option even if its more static or dedicated bureaucratic cadre. I would suggest :

- an increase in defence budget to atleast 3.5% of GDP with a statutory allocation to defence which cannot lapse and cannot be returned to MOF
- much more control to the defence forces over the budget and procurement and a rationalization of the procurement proceedure
- lateral hires and armed forces deputation to MOD instead of IAS and allied services

These are quite controversial steps and that there may be good reasons to not do them but I have suggested them purely as a theoretical exercise.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Vidur » 05 Oct 2017 21:50

I had given this link before and strongly recommend reading this. http://www.idsa.in/idsacomments/13th-fi ... ish_310717

Shauryaji , To ensure that quality of the discussion is maintained I would suggest readers please read the links posted before including the DPP from mod.nic.in. You will excuse me if I only respond to questions that show some reserach and application.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Vidur » 06 Oct 2017 13:07

KrishnaK wrote:
Vidur wrote:4. The colonial institutions of the IAS/IPS were used to run the country with almost no substantive reform and as time passed, naturally a system designed for exploitation changed from exploitation for the colonial master to exploitation for the system - Indian politicians and bureaucrats.That is why transmission mechanisms didn't work and poverty was not alleviated till the economics reforms of the 90s started. The steel frame is now rusting an in dire need of replacement. Coalition politics and regional leaders of starting in the 90s significantly increased metal fatigue and did heavy damage to the steel frame.

5. While we managed to build basic industries like steel and coal and power generation and did some good civil engineering feats, the public sector had not been able to build a real manufacturing base. And the private sector was used to a license raj diet of protection, trading and rent seeking.


Here's another reason for lack of poverty alleviation - one that's advocated by our current CEA. India became a democracy with universal suffrage at a every early stage in its economic development. With most of the voting population dependent on the government for handouts, they voted to redistribute instead of investment in public goods. Other democracies mostly the west only had voting rights for property owners till they industrialized. As such, they had grown their capacity, even to redistribute, before they started redistribution. As for coalition politics, this could've been a result of Indians becoming self sufficient in food and the sheen of the Congress as the sole mai-baap fading.

I think the lack of a strategic vision accusation has the same reason - the combination of economic development, or lack thereof and democracy pretty much hobbled any ambitions the politicians might have had. From the wiki - the incomplete INS Vikrant was purchased in 1957, and construction was completed in 1961. Well before 1962. While I'm not ignoring Nehru's blunders leading upto and during 1962, but he wasn't exactly lacking in strategic vision for India.

In all countries with strategic vision there's a very strong co-relation with a large portion of their prosperity related to international trade. The economic motive exists before the articulation and establishment of a strategic military vision. Otherwise it'd be hard to sustain such narratives, as India often finds.


India became a democracy at a very early stage in its MODERN ECONOMIC DEVELOPMENT. Colionalism devasted our economy which was the world's leading economy so we had to start from scratch again.

Nehru did have a strategic vision. Just the that it was wrong !

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby nam » 06 Oct 2017 14:01

Vidur wrote:- an increase in defence budget to atleast 3.5% of GDP with a statutory allocation to defence which cannot lapse and cannot be returned to MOF


3.5 is double of current budget and given the state of MOD which gave back roughly 1 billion last year, they will start giving back 50 billion. GoI will use the same money on year after budget and MoD will give back 49 billion! :rotfl:

I don't see MoD procurement improving in 2 years.

Increasing it to 3.5 will be used to import stuff, as cost will not be a factor. As simple as that.

In my view, we should increase it indirectly. For example LCA. If IAF can order 83 which is quite a big number, what is the problem in ordering 400? Nothing. we spend money on increasing production to 50 per year. So we increase defense budget to augment production & numbers.

It is completely different story if IAF wants 400 or not. Same with Arjun. It does not matter IA want 500 Arjun or not, GOI orders 500.
Same with WLR Swathi. Why 26? why not 100? Is it excess, sure. We will sell off surplus to Afghanistan.

The nonsense of piecemeal orders, specially for local products should stop.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Vidur » 06 Oct 2017 14:12

nam wrote:
Vidur wrote:- an increase in defence budget to atleast 3.5% of GDP with a statutory allocation to defence which cannot lapse and cannot be returned to MOF


3.5 is double of current budget and given the state of MOD which gave back roughly 1 billion last year, they will start giving back 50 billion. GoI will use the same money on year after budget and MoD will give back 49 billion! :rotfl:

I don't see MoD procurement improving in 2 years.

Increasing it to 3.5 will be used to import stuff, as cost will not be a factor. As simple as that.

In my view, we should increase it indirectly. For example LCA. If IAF can order 83 which is quite a big number, what is the problem in ordering 400? Nothing. we spend money on increasing production to 50 per year. So we increase defense budget to augment production & numbers.

It is completely different story if IAF wants 400 or not. Same with Arjun. It does not matter IA want 500 Arjun or not, GOI orders 500.
Same with WLR Swathi. Why 26? why not 100? Is it excess, sure. We will sell off surplus to Afghanistan.

The nonsense of piecemeal orders, specially for local products should stop.


Sir what part of 'statutory allocation which cannot be returned to MOF' did you not not understand. Have you read the article on five year plans.

I will refrain form further attempts to give information.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby nam » 06 Oct 2017 14:33

Sirji, probably I did not word it properly. The extra money will go in a non-lapse fund, which GOI will use for next year's budget. If MoD puts back 50 billion in year one into this fund, then the same will used in the next year budget of 100billion.

After year 2, 49 billion will be put back in the fund. If GoI was generous enough to use this fund as top up, then Mod would put back 99billion in year 2.

The core of the problem is not funds. It is the mess in MoD. Non-lapsed fund is a perfectly good idea. However until the process to use this fund is improved, it will become a counting exercise.

So my suggestion is, if we manage to order something, we do it in large numbers so that we don't have to repeat the babudom process.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Vidur » 06 Oct 2017 15:30

nam wrote:Sirji, probably I did not word it properly. The extra money will go in a non-lapse fund, which GOI will use for next year's budget. If MoD puts back 50 billion in year one into this fund, then the same will used in the next year budget of 100billion.

After year 2, 49 billion will be put back in the fund. If GoI was generous enough to use this fund as top up, then Mod would put back 99billion in year 2.
.


I repeat what part of 'statutory allocation which cannot be returned to MOF' did you not understand

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby nam » 06 Oct 2017 16:55

Vidur wrote:
nam wrote:Sirji, probably I did not word it properly. The extra money will go in a non-lapse fund, which GOI will use for next year's budget. If MoD puts back 50 billion in year one into this fund, then the same will used in the next year budget of 100billion.

After year 2, 49 billion will be put back in the fund. If GoI was generous enough to use this fund as top up, then Mod would put back 99billion in year 2.
.


I repeat what part of 'statutory allocation which cannot be returned to MOF' did you not understand


Where did I say give it back to MoF? You keep money anywhere you want, it is GOI's money. It is GOI who decides MoD's budget and what to do with such a fund. And it is GOI to decide, if it will part of next year budget or not.

If it does it through MoF or MoD what difference it makes?

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ShauryaT » 07 Oct 2017 19:15

Vidur wrote:I had given this link before and strongly recommend reading this. http://www.idsa.in/idsacomments/13th-fi ... ish_310717

Shauryaji , To ensure that quality of the discussion is maintained I would suggest readers please read the links posted before including the DPP from mod.nic.in. You will excuse me if I only respond to questions that show some reserach and application.
Vidur ji: Do not know what gave you the impression that i do not follow the acquisition process based on the five year plans, interlinked with the LTIPP, our budgets and the actual decision making process. The reason I was slightly dismissive of the DPP is because it needs empowered political will to make something happen - especially in the MII realm with private industry, do you disagree? The five year defense plans are not funded. My point was we do not even have a non-lapsing capital budget, did i say something wrong?

You seem to have some work experience in the bureaucracy but why assume that others do not know anything. If I have something specific that is not correct let me know. Your choice not to answer is perfectly your prerogative but this is a forum where we exchange information and ideas. I can easily link 6 dozen papers on the matter.

Have been following the details of our processes in defense from eons and that IDSA link, oh well, I am an IDSA member and order ALL the IDSA publications (off line versions for over a decade now) and have been reading them for a long time. MOST of the IDSA stuff is low level information, which is fine. Not analysis and insight, like the above link included. So, sorry, I do not place the same value on IDSA. Also, your view that we should fund the defense budget at 3.5% of GDP is shall I say, unrealistic and likely never to happen, except for a catastrophic event. (See as a point, I could have easily said you have no knowledge of what you are talking of and chosen not to engage?). Let us move on. You have essentially confirmed the answer I gave to ramana's question - the specialization in IAS is by default not by design and the first 10 years or so is spent shafting around.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ShauryaT » 07 Oct 2017 22:40

nam wrote:If it does it through MoF or MoD what difference it makes?
Nam: It does make a difference to MoD. MoF has to manage the finances of 64 other ministries and MoD is just one of them. A non-lapsing capital budget will ensure that monies if for some reason, not spend in the financial year are not surrendered and at least a portion of this is available next year, in addition to the new budgetary provisions. IOW: If next year MoD needs that extra 5,000 crores the monies are there and MoF cannot say no, you have reached your limit for this year.

Anyways, my other thing is this whole chimera of "surrendering" capital budgets year after a year is an MoF shenanigan to raid MoD budgets and spend it somewhere else.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Bala Vignesh » 08 Oct 2017 01:28

Vidur sir,
Any idea what does the Mr.Cowshish mean by augmenting financial resources in the last para of the article??

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby nam » 08 Oct 2017 03:43

ShauryaT wrote:A non-lapsing capital budget will ensure that monies if for some reason, not spend in the financial year are not surrendered and at least a portion of this is available next year, in addition to the new budgetary provisions. IOW: If next year MoD needs that extra 5,000 crores the monies are there and MoF cannot say no, you have reached your limit for this year.

Anyways, my other thing is this whole chimera of "surrendering" capital budgets year after a year is an MoF shenanigan to raid MoD budgets and spend it somewhere else.


I don't claim to be an expert however MoD will not have a sudden need of say 1 billion and it would have to beg MoF for it. That's not how it works. If such a need arises then CCS will step in and approves, as it happened in the 3 billion dollar of emergency purchases post surgical strikes.

Large ticket vendors are never paid in one go. It is always multi year payment depending on the deal. So MoD would know before hand what is the planned CapEX for the next fiscal year.

Annual budget of MoD is Planned Opex + Planned Capex + some additional funds. MoF cannot refuse this budget because we have committed to pay the vendors. It is not a case of deciding a random budget and asking MoD to manage within it. So far our planned expenditure comes within 1.7% GDP.

What is the point of MoF giving 3% GDP of budget to MoD when it has no planned fiscal expenditure for such amount?

Has it ever happen that a major equiment was RFI'ed,RFP'ed,contract negotiated and signed inside a fiscal year? which might create a sudden need for funds? If we consider 10% downpayment of 1 billion which is usually returned, then it is a case of sudden contract of 10 billion!
Even rifles take longer than a year to conclude.

The core issue is MoD process, not funds. If MoD manages to conclude contracts where it's next fiscal commitments crosses 3% of GDP, then MoF has no choice but to make Indian Defence budget at 3% GDP.

This is why I mentioned, MoD needs to stop piece meal orders. We are ordering 83 LCA MK1A. Why specifically 83 I have no clue. Let's ignore capability argument for a moment, why not 200? or 300? This will push MoD's next fiscal CapEX expenditure much higher and MoF has to pay for it. It also prevent another round of chai biscuit RFP process for the babus. I don't know if this will ever happen.

If there is a local MIC, we can have even 5% gdp as defence budget. Until then just randomly increasing defence will only result in large import orders, as cost will not be a factor for the babus.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ShauryaT » 08 Oct 2017 05:56

Nam: Please search for reports on what is there in LTIPP, you will not get it directly. It is a classified document. It is a 15 year acquisition plan, split into three five year plans. They are unfunded. The question is not about a sudden need for $1 billion. That amount can be consumed by MoD in split seconds.

As for the reported $3 billion purchase, there was no corresponding budget increase due to that decision, AFAIK.

Our needs are huge. MoD surrenders multiple 1000's of crores every year and this is on top of a slide in our committed liabilities, up from 60% of the capital budget a decade back to about 95% today. A squeeze on capital budget growth has been in play for long. MoD surrenders monies even within this narrow margin.

I am sorry, the core issue is funds the bureaucratic process and tweaking will go on.

Also go through the bits of the Shekatkar committee reports (again classified), it forms the back bone of the new DPP. You will get an idea of the huge needs we have. You are conflating budgets with indigenization policy. There is no such thing as MoF has to pay for it, because MoD demands. The budget is the one ring to rule them all.

Attaching a link, with some meaning to the numbers. http://www.defproac.com/?p=2079

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby nam » 08 Oct 2017 17:33

ShauryaT wrote:I am sorry, the core issue is funds the bureaucratic process and tweaking will go on.



May be I am missing something, if there are shortage of funds, why is MoD not able to spend the funds allocated?

The link you have provided shows the case of 2014-15 where Capital was under-spend by 12623 crores. roughly 2 billion. It then moved 6k crores to OpEx before surrendering the remaining.

So what was the reason? Simple. MoD asked MoF for CapEX allocation (committed + planned new order) for new fiscal. The babus at MoD were not able to sign the planned new order, due to which the funds allocated was not used.

Next fiscal, they promised to sign this pending order + asked for more money for another new order. Babus then manage to sign the pending order, but could not sign the new order. So they had to surrender the funds allocated for the new order!

I picked up LCA as an example. Nothing to do with indenisation. If you are convinced about an equipment, makes no sense to order piece meal, local or imported.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ShauryaT » 08 Oct 2017 21:32

My charge is the supposed delays in bureaucratic processes is deliberate and at the instance of the MoF. Furthermore, this is not something unique to just the MoD. A few 1000 crores over spent in one ministry (say MNREGA or MUDRA), less than forecasted collection on revenue and there are raids across all ministries in an attempt to meet the overall budgetary forecasts of the government. It is funds, which are the key issue not the process - who's tweaking will continue. Rhetoric of governments apart, except for NDA 1, there has been a continuous slide in the funds allocated to defense.

The defence budget for FY18 shows a nominal increase of 5.8 per cent over the last year’s allocation. If an annual inflation rate of four per cent is assumed, the real increase is only of 1.8 per cent. As noted by the defence secretary, “for 2017-18, the allocation is much less than the projection both for Defence Services as well as the MoD Civil and Miscellaneous Estimates”. Commenting upon the discussions between the defence and finance ministries for additional allocation of funds, the Standing Committee said that it was “distressed to note that no positive response has been received from the Ministry of Finance regarding augmentation of budgetary allocation to the Ministry of Defence”.

Defence allocation: A battle for funds

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ShauryaT » 09 Oct 2017 01:48

Defense Equipment Procurement Process

The link provides a comparative prospective of the procurement process between India and major countries.

PS: For some reason I cannot copy from the site.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ramana » 09 Oct 2017 05:47

Guys please dont talk to each other. Let Vidur speak.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ramana » 20 Oct 2017 22:59

A NDTV interview with Admiral D.K. Joshi which was taken down by the site and now being discussed in media.




http://www.ndtv.com/article/india/veste ... ipt-607103
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'Vested Interests Have Stalled Reforms,' Former Navy Chief Admiral DK Joshi Tells NDTV: Full Transcript
All India | Reported by Nitin Gokhale | Updated: October 15, 2014 22:22 IST

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'Vested Interests Have Stalled Reforms,' Former Navy Chief Admiral DK Joshi Tells NDTV: Full Transcript
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Here is the full transcript of NDTV's interview with Former Navy Chief Admiral DK Joshi.

NDTV: What prompted the government to accept your resignation with such haste?

Admiral DK Joshi: On the speed of its acceptance I really have no comments. In my letter I had requested that it would be with immediate affect. I said it should be done immediately. No issue with that but that it was accepted in a couple of hours amused me that there was such haste to pin it on someone.

NDTV: That it was accepted within 10 minutes I am told

Admiral Joshi: It took a couple of hours, certainly not 10 minutes but fairly quickly

NDTV: That was Mr Antony's reaction

Admiral Joshi: There was I think surprise. Nothing more.

NDTV: Normally one would think that such a resignation would be taken to the Cabinet Committee on Security, at least to the Cabinet or to the Prime Minister. Do you think that happened?

Admiral Joshi: Well I wouldn't comment on the process that may or may not have been followed, but that it took just a couple of hours should perhaps provide an indication of the route it took.

NDTV: But was it done to get rid of the problem and not let the problem get beyond you to the Minister and to the MoD?

Admiral Joshi: it would appear that the haste with which it was accepted perhaps there might have been consideration that what happens if this fellow changed his mind?

NDTV: But what really pushed you into resigning?

Admiral Joshi: The root cause is this dysfunctional and inefficient business model that we have, wherein professional competence, domain expertise, accountability, responsibility and authority, these all reside in separate silos in different locations. While professional competence, accountability, responsibility is with the service that is not the case with authority. And by authority I really mean the power to approve something, empowerment to approve something or the other. For example, change of submarine batteries, which are available indigenously or for commencing refits and repairs of ships, aircraft, submarines in Indian yards, the service does not have that empowerment. That's a broad construct as a background. Where there is authority there is no accountability. And where there is responsibility there is no authority.

You don't have to accept this coming from me. For more than a decade now recognising fully that higher management of defence needs reforms, several expert committees have been formed. Virtually all their recommendations have been identical, but vested interests have ensured that the more substantive ones, which bring authority and accountability together, have not been approved. Some peripheral ones have been progressed but nothing substantive.

You will be, for example, told listen we have created HQ IDS. But it's a headless wonder, its head was never appointed. I have been CISC, CINCAN tenure. I know it very well. Then they will tell you how the service HQs have been named as Integrated HQs, Ministry of Defence, but as the then Defence Secretary told the Standing Committee on Defence, the changes were mostly cosmetic as indeed they are.

NDTV: When you say vested interests, who do you mean? Let's get it out

Admiral Joshi: Vested interests, to you and your perceptive listeners are very clear. These are the ones who wield the authority without accountability. With that as a backdrop in my letter, I had said I am accepting the moral responsibility for the dent caused to the professional image of the navy on account of a few accidents and incidents. Image is the key or the operative word here. Many things go into making or demolishing of the image. Chief among them is the professional conduct of the service. There is no denying the fact there were issues there. But correctives were put in place. But apart from that there were many factors external to the service, which were entirely beyond my control. For example, the support extended to the service and by support I do not mean charity or favours being done. Was your proposal for replacement of submarine batteries being approved in time? Were your ships offloading done in time? Was the ordinance for armaments being purchased in time? And the answer to all of them is known. And all these have an effect on image and morale of the service. Now submarine batteries, changing of the batteries is not a minor issue like two guys lift a car battery and start off the car. It requires crane effort, degutting of a submarine, often shifting them from one coast to the other. What also has to be seen is the impact on submarine arm for instance. Having been told you are an elite arm, run deep and run silent, we can't even provide them with replacement batteries in time. A more untenable and ridiculous example cannot be given. Or we can't give refits to ships in our own shipyards in time. This is the support I am talking about.

Another dimension of this support is when things go wrong and occasionally they will, in any high technology enterprise things will go wrong occasionally, does the establishment support you or does it rush to make 'frittering away of national resources' kind of statements? Again it impacts the image. Also the power of the media; the power of the media to make or mar the image is unquestionable. Within that what I wish to illustrate is that may be two or three relatively junior and reporters are able to drown out the voice of reason of the rest of the mainstream, national media entirely, because of our tendency to believe what is sensational, and not what is well-reasoned and mature reporting.

For example there was one TV reporter. When the Sindhurakshak tragedy, where every channel was showing the submarine on fire, it was a national tragedy really. But the fate of those trapped inside was not known. This reporter is standing on top of Raisina Hill and telecasting a news that we are told that the Navy Chief is headed to Bombay, but we do not know if he will visit the site of the accident, because when the Uttaranchal, not Uttarakhand, tragedy happened the Navy Chief did not go there, although he is a native from that place

NDTV: That's a personal attack

Admiral Joshi: Apart from being a personal attack it brings out the level of education and maturity of this reporter. Does he feel Navy Chief is headed to Bombay to join Bollywood or trade shares in Bombay Stock Exchange?

NDTV: That's an unfortunate part of the media.

Admiral Joshi: Precisely. And for a so-called defence correspondent he does not even know the names of our border states. And what he perhaps was implying is that service chiefs should intervene in natural disasters if they are natives of that state.

Then there were these two newspapers. One of course was the one which had invented the coup theory, and this reporter was darling of the foreign vendors, and to show his importance he would author articles like the reporter is in country abc at the invitation of xyz. Then there was another paper which had a banner headline 'VikramAditya is unable to refuel from tanker at sea. The ship is incapable of navigating at high seas at 56 km an hour'. Any kindergarten kid will tell you we don't measure distances for ships in nautical miles and knots. That is the level of knowledge and professional grasp of this reporter. It was a blatant lie.

Here were Chiefs of foreign navies calling me and congratulating me, 'what an achievement. You had taken over the ship in Arctic conditions in the month of December-January, and without any prior work up it refuelled several times with our tanker and touched Karwar, the first port it entered. It was widely reported by the media a week earlier than this headline. So a blatant lie; so a point I am bringing out is that largely ignorant, relatively junior reporters are able to drown out the reports of mature reporters.


NDTV: But going beyond those headlines, were the Ministers and those in the authority also guilty of believing those reports, rather than asking you what exactly was happening?

Admiral Joshi: Well when you issue statements like frittering away national resources I think its a very damning indictment of a service. To begin with frittering away sort of implies willful waste, and when related to an armed force it is tantamount to treachery.

Now the sensible media at that point in time had erupted and said this is a most unfortunate and unwarranted statement and rather than rendering support to the service, I remember the phrase used that time was 'clearing the yard arm should not have been done, it was being attacked. But that voice was drowned out. This trio ad nauseam getting onto the hourly chant of Navy frittering away national resources, accidents in 4 days, 5 accidents in 6 days, was able to cloud the minds of even learned people to such an extent that when this 56 km an hour headline appeared, one of the Cabinet Ministers rang me and said Chief, what is this that I read about trouble with Vikramaditya? I had to tell him if we had to believe this report, then the ship has sailed on love and fresh air, because the indisputable fact remains. The ship had not entered any port and the ship had refuelled several times! But that is the power of negative reporting, particularly when they are fed constantly.

NDTV: So was it an inside job, a sort of soft coup from within? Were you forced into a corner?

Admiral Joshi: I don't think there was nothing internal from the service. But that feeds were being given is indisputable. We know who was constantly feeding this so that should something go wrong, the service is the villain. Knights are knights in shining armour. There was a job of a particular agent of the establishment to continuously feed this news. But of course that is not the reason why I put in my papers. Like I said, I took responsibility only for the in service aspects, but they were circumscribed by the events that I described.

NDTV: But I want clarification from you. Does the gap, the cleavage between MOD and service HQ remain as wide as we know or perceive it to be?

Admiral Joshi: You have already said it. And all your perceptive viewers know that

NDTV: So what would you want on defence reforms?

Admiral Joshi: Nothing. You don't have to go by my stand. You dust these reports and implement their recommendations. They prescribe to you what needs to be done to bring authority and accountability together, wherever it has to reside.

NDTV: Let's look at a larger question. A Chief's resignation is not a matter to be sneezed at. Was it an emotional decision to go out mid way?

Admiral Joshi: Sentiments and emotions were certainly involved, but it was driven purely by practical consideration and realisation of on ground situation.

NDTV: Was it frustration at the functioning? Was it building up?

Admiral Joshi: It was building up for a long long time. One had been watching the way the cookie crumbles and that is long before one becomes the Chief.

NDTV: Where do we go from here? People have said you brought it upon yourself by being harsh on your juniors, and then had no choice but to quit when things became worse.

Admiral Joshi: Was there pressure on me on account of actions taken against erring subordinates? No. The actions were taken only in respect of serious professional lapses, and that by itself did not put me under any pressure. But again, limiting myself to in service, I have always believed that beyond a point moral responsibility has to travel upwards. And this is what I told my Flag Officers, that while I relived many officers at some point in time the Captain of a good ship navy has to leave.

NDTV: I again come back to the same question. What next? Where do we go from here? How should the reforms come?

Admiral Joshi: Hard decisions need to be taken.

NDTV: Are you in favour of more tri-service jointmanship?

Admiral Joshi: Of course

NDTV: I still have to get that answer. When you took the decision, looking back could you have done it differently?

Admiral Joshi: No I would not have. The operating environment was dysfunctional and I felt being a service chief is not just about preening about on national TV, take a salute on Republic Day. People tell you oh you looked so smart in your uniform. In actual fact you are unable to get a set of batteries for your submarines and to my mind that was a completely untenable situation for continuation as a Chief, it had been building up.

NDTV: Did the Defence Minister ever ask you relevant questions? Are our politicians capable of understanding defence issues?

Admiral Joshi: I know where you getting at, but those who know me will tell you that I am not a sort of person who will take the complaint only once to the higher authority and keep quiet about it.


Story First Published: October 15, 2014 13:05 IST

................................ Advertisement ................................



So wilful neglect by A.K.Anthony for whatever reasons along with motivated media made the Admiral resign.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby shiv » 21 Oct 2017 09:25

Please allow me to say what occurs to me - this is not specifically about Defence procurement, but is more in the nature of a general Indian malaise which I suspect plays a role in defence procurement as well.

My thoughts were sparked off by the regular use of the term "world class" when trying to describe and compare some Indian product or achievement. When an individual uses the term "world class" in this sense it indicates that there is an admirable but undefined goal that is called "world class" where the best of the world sits and India is only striving for that, not getting there. Like Achilles and the Tortoise - India will never actually get there as long as Indians do not see themselves as able to set a standard. There is a deep sense of negativity about India among educated Indians. Even today's paper says that 1 on 6 pollution deaths in in India. But hello? One in six people in the world is Indian

This negativity about India extends to the armed forces and the bureaucrats. For me - it is easy to see how bureaucrat who wants to support import and oppose local procurement probably feels that he is being patriotic in opposing corrupt incompetent fellow Indians from getting business. Maybe it was on BRF earlier today, and maybe it was in the munitions thread. I saw a telling comment - allegedly by a bureaucrat who supported import of ammunition who said "The source of ammunition is not the issue, but how it is deployed". The comment is wrong on so many counts it sometimes makes me despondent about how we have raised 4-5 generations after 1947 to see India with negativity that nothing Indian can be good.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby srai » 22 Oct 2017 07:24

How delayed acquisition of 2 indigenous weapons systems has sent Indian defence into a tailspin
Two completely indigenous weapon platforms go even beyond Make in India programme, where equipment can be assembled within the country by a foreign company that owns the designs.

By Sandeep Unnithan | October 19, 2017

The Akash Surface to Air Missile (SAM) and Pinaka Multi Barrel Rocket Launcher (MLRS) are shining stars on the bleak Indian defence landscape where nearly 70 per cent of defence equipment is imported. This is because these two completely indigenous weapon platforms go even beyond the NDA government's Make in India programme, where equipment can be assembled within the country by a foreign company that owns the designs. Yet, for over a year now, orders worth over Rs 19,000 crore for these indigenously designed developed and manufactured (IDDM) weapon systems have been caught up in South Block's red tape. The armed forces' intent to buy additional Akash and Pinaka systems are yet to translate into contracts.

The armed forces need both vitally. The Indian Air Force needs the Akash - a supersonic, all-weather surface-to-air missile which can shoot down enemy aircraft, helicopters, drones and cruise missiles 30 kilometres away - to protect airfields and vital installations. Its Pechora missiles acquired from Russia over 30 years ago are nearing the end of their lives; the army needs six more Pinaka regiments to augment its firepower. A single salvo from a Pinaka regiment of 18 launchers can saturate an area of one square kilometre, 35 km away.

But it is within Indian industry that these indigenous platforms have delivered their true force multiplier effect. The Akash system is over 96 per cent indigenous and sources its components from 330 Indian industries. The Pinaka, 92 per cent local, supports 43 Indian industries.

Pinaka: Multi-barrel rocket launcher
Pinaka: Multi-barrel rocket launcher

These orders are so substantial and the downstream effect on the defence ecosystem so huge that one private sector CEO calls them the equivalent of a stimulus package for Indian industry, a massive booster shot that would create jobs in the high-tech sector, spur innovation and garner huge tax revenues for the government. And it is here that the delays are making their absence felt.
This, particularly since the outlook for three other massive 'Make India' projects for the army-exclusively meant for Indian industry, both public and private sector-is so bleak and the progress on them so slow that industry has stopped bothering about them. The orders for the Futuristic Infantry Combat Vehicle (FICV), a Rs 26,100 crore project to replace all of the Indian army's 2,600 BMP Infantry Combat Vehicles, Tactical Communication System (TCS) and the Battlefield Management System (BMS), were meant to seamlessly integrate soldiers with their fighting formations and transform the way the Indian army fought wars when they were mooted a decade ago. They called for consortiums of public and private sector industry working to develop indigenous prototypes that would then be turned into series production.

These projects, collectively worth over Rs 1 lakh crore or one percentage point of India's GDP, would have delivered a substantial long-lasting boost to indigenous industry, particularly the development of indigenous electronics and spurred job creation. One private sector CEO estimates that every Rs 1 crore invested into the Indian industry has the effect of creating 25 jobs-six in the high-tech sector and 20 in the unskilled sector. "In the past 11 years, not one of these projects, FICV, BMS or TCS, has moved to the development stage, forget production," the CEO says.

The DRDO's indigenously developed Advanced Towed Array Gun Systems (ATAGS), a 155x52 mm towed howitzer developed with the private sector, saw one of its prototypes shoot a shell out to 48 km at the Pokharan test ranges on September 15, a world record for a gun of its class. But this gun, too, is still years away from mass production.

The only substantial Make in India programme in the three-and-a-half year term of the NDA government has been a Rs 4,500 crore order for 100 K-9 Vajra-T 155/52 self-propelled artillery guns placed on a consortium of private sector L&T and South Korea's Hanwa Tecwin. L&T undertook to manufacture all 100 guns within the country, effectively converting a 'Buy Global' project into a Make in India project.

The sole low-hanging fruit for Indian industry in the near term are repeat orders of the Akash and Pinaka. But thanks to bureaucratic delays, it now seems that even these aren't coming in a hurry.

The Union ministry for defence sent out requests for proposals (RFPs) for six regiments of Pinaka MBRLs worth approximately Rs 4,500 crore in March this year. The two firms, Tata Power SED and L&T, submitted their bids in April 2017. As per the terms of the RFP, the lowest bidder will get four systems and the other bidder, two systems. The rockets, which cost approximately Rs 3,000 crore, are to be ordered separately from the Ordnance Factory Board (OFB). Seven months later, the bids are yet to be opened and a Pinaka order seems unlikely before March 2018.

A similar fate seems to have befallen the Akash. The order for seven squadrons of Akash short range missiles for the IAF worth Rs 6,000 crore is still in the pipeline nearly 15 months after it was mooted by the government.

The IAF is presently conducting a cost audit of the Akash, first of prime contractor Bharat Electronics Limited (BEL) and later of Bharat Dynamics Ltd (BDL), which manufactures the missiles. Project officials say the meetings have been dragging on endlessly for over a year now and the IAF is believed to have questioned the high price of the Akash. In September, IAF officials at a meeting within Air Headquarters even questioned the utility of the Akash when the IAF was getting five S-400 'Triumf' SAM missiles from Russia which had a range of over 400 km. The comparisons, project officials point out, are unfounded. The Akash is a point-defence missile while the S-400 is an area defence weapon.

/2017October/missilel_102017010833.jpg
/2017October/missilel_102017010833.jpg
Akash, part of the Integrated Guided Missile Development Programme (IGMDP) in 1983, cleared its user trials in 2007, nearly 24 years later. The Pinaka had a much shorter development cycle, initiated in 1986, completing its successful trials 12 years later. Bureaucratic delays have also played a part. The IAF placed its first orders for the Akash missile in 2011, nearly four years after the user trials while the army order for the first Pinaka regiment came in 2006, over a decade after field trials had been completed and the army had raised its first regiment.
The two projects are cited as perfect examples of public-private sector partnerships. BEL in Bengaluru is the prime contractor for the Akash while Tata Power SED and L&T are the prime contractors for the Pinaka. Each of them, in turn, engages several other private sector firms down the value chain. Project officials estimate that at least half the cost of the orders will be ploughed back into the country in the form of taxes and salaries. "You're talking of value-addition at the highest level because R&D creates its own multiplier effect in the economy," says a private sector CEO. Delays in the Pinaka contract have been legendary. The first contract for two regiments came in 2006 after six years. The second contract, for two additional regiments, was signed last year, five years after the Request for Proposals went out. The contract was concluded at 2011 prices thanks to bureaucratic delays. Private industry officials say they need the contract for an additional six regiments, for the contract values to make sense.

The huge time lag between repeat orders is illustrative of the dangers of a monopsony (where the government is both the largest maker and the only consumer) which disincentivises the private sector.

The stop-start malaise has endured despite the NDA government's commitment to indigenous systems and the fact that all its three defence ministers, Manohar Parrikar, Arun Jaitley and Nirmala Sitharaman, have enthusiastically backed Indian systems.

Defence minister Parrikar firmly backed the Akash and the Pinaka. He cancelled the army's import of two regiments of Quick Reaction surface-to-air missiles and insisted that the army buy the Akash instead, initiating the case for buying 10 regiments of Pinakas in 2016. But with Parrikar's departure from South Block in March this year, both indigenous systems lost a champion, and bureaucratic delays pushed the acquisition cases further down the horizon.

"We need a secretary-level official to monitor indigenous defence products. The job of the MoD's department of defence production has to change from running the department to pushing indigenous industry," says Rahul Chaudhry, chairman of the Defence Innovators and Industry Association (DIIA) and CEO, Tata Power SED.

The Akash has not been without its share of controversy. A CAG report tabled before Parliament in July this year found that the missiles had a 30 per cent failure rate. A senior Indian industry official associated with the project called it part of the 'stabilisation process of an indigenous product'.

Swift orders are essential to continue the pace of production. Red tape has delayed Indian defence orders to a point when original equipment manufacturers have closed down their production lines.

Defence website Stratpost.com reported in 2013 that India's nearly Rs 5,000 crore order for 145 M-777 howitzers saw a 37 per cent cost escalation of roughly Rs 1,200 crore because the manufacturer, BAE Systems, had to restart a production line it had shut down.

This is also the case with the Akash and Pinaka. "The order for the seven squadrons of Akash were to have come in March 2015, over two years ago. But we are now sitting idle on the Akash. Our supply chain is also sitting idle," says the head of a private sector firm who supplies components to the Akash programme. Another contractor for the Pinaka rocket launcher system says he had last sourced components from his supply chain in 2009 soon after completing the last orders. "If I get the Pinaka order today, it would have been nearly a decade and I will have to locate all those old vendors."

Support for indigenous projects ensures advanced versions can come off the line quickly. In January this year, the Armament Research and Development Establishment of the Defence Research and Development Organisation (DRDO) successfully tested a modified Pinaka Mark-2 rocket. With the addition of navigation, guidance and control kit, the earlier rocket was converted into a mini missile with fins and a guidance kit and capable of hitting targets 55 km away. The Pinaka will eventually have a range of 80 kms. The DRDO completed the project in less than a year, without waiting for a formal government sanction. Which was just as well considering the bureaucratic delays. An Akash-2 missile with an advanced seeker and enhanced 40 km range, is under development. Given the delays in the acquisition process, however, their swift induction is by no means guaranteed.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ramana » 25 Oct 2017 04:08

X-Post...
Gagan wrote:The way south korea built its sub building capabilities, to eventually branch out into customizing the designs it built, and now to building its own designs. This is the exact route that nations need to take.
India should have never stopped after building those U209s, but I have to complement the netas and babus who royally effed up everything. These guys have been bribe takers par excellence - but will not think twice and scuttle domestic capabilities at the drop of the hat. Why would they not, it gave them more excuse to import in the future too no?

WRT Defence Ministers - some of the great lords we've had, OMG! They did everything they could to destroy India's Mil-Industrial complex by delaying, scuttling important programs. Makes one wonder, why they were sent to be Defence Ministers? Perhaps to reign in the Military and use procurement to fill the coffers via bribes

Vidur
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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Vidur » 26 Oct 2017 10:33

Re above posts - The main issues are :

1. Dysfunctional structure - the players with the highest domain expertise and stake have the responsibility but no authority - services, the players with the lowest domain expertise and moderate stake constitutionally have both the responsibility and authority but assume niether - political leadership, the players with fairly low domain expertise and no stake have taken the authority but have no responsibility - civil servants

2. Our systems and proceedures are designed to answer the question 'why not do it' not 'how to do it'. The design paradigm that has come up with the DPP (building a complex submarine) is the same that designed administratvive proceedures to sanction a school building in a taluka. Niether work systematically

3. Defence budget is too low

4. Defence is a long term project and budgetary sanctions are annual balancing of accounts. Its fitting a square peg in a round hole

5. There is no national interest or sense of emergency in addressing defence issues. There is very little understanding of defence issues in the government , what to say about the media and the general public. BRF is a good example.

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Vidur » 26 Oct 2017 11:44

Bala Vignesh wrote:Vidur sir,
Any idea what does the Mr.Cowshish mean by augmenting financial resources in the last para of the article??


It means increasing the budget.

I saw an unfortunate comment by a moderator on another thread so I have decided to not participate in discussions for some time. But I do believe I have answered all questions on this thread. There is no more information I can add for now.

Would again urge interested posters to do research. That reminds me one poster was confusing IDSA the Indian Defence Service of Accounts with the think tank Institute of Defense Studies and Analysis !

ramana
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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ramana » 26 Oct 2017 18:56

Vidur, US also had same annual budget issues.

So they have a contracting structure.

Funds are released on progress payments basis. A contract is spread over four years.
funding is~ 10%,30% 50%, and 10%. It varies with the hardware.
The bulk of production happens in third year.
So some sort of contracting structure has to be worked out. The Accounts officers are quite clever.


ShauryaT
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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ShauryaT » 27 Oct 2017 18:57

Vidur wrote:Would again urge interested posters to do research. That reminds me one poster was confusing IDSA the Indian Defence Service of Accounts with the think tank Institute of Defense Studies and Analysis !
:) In fairness, you linked to a paper from the IDSA - the think tank! Will read up more on the defense accounts service and what they do.

ramana
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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ramana » 27 Oct 2017 21:03

He is not coming back.

Bala Vignesh
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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Bala Vignesh » 27 Oct 2017 21:18

ramana wrote:He is not coming back.

Damn that sucks!! The one person with the actual know how on the workings of the beaureocracy in the forum is gone. Goes to show how much the forum standards have fallen.If there ever was a clarion call for reforms, its this.
Just my 2 cents on this.

ShauryaT
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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ShauryaT » 27 Oct 2017 21:32

ramana wrote:He is not coming back.
Que Pasa?

ShauryaT
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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ShauryaT » 27 Oct 2017 22:01

OK, I read the LCA thread. Vidur ji: I will just share some online experiences of a few I know and how they cope. I have met with many Admirals and Generals and many have. The most successful online are those who leave their positions at home and discuss things as mere citizens. In that all are equal and if you can share your experiences, you are most welcome. Welcome to Indian democracy on steroids on BRF!!

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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby ShauryaT » 31 Oct 2017 08:16

Govt relaxes arms rules to boost indigenisation

Govt relaxes arms rules to boost indigenisation

In order to boost indigenisation in manufacturing arms, the government has liberalised Arms Rules by doing away with renewal of licence every five year. Now, licenses once issued to arms manufactures will be valid for life time.

This change is said to strengthen the 'Make in India' initiative that will encourage investment in the manufacturing of arms, ammunition and weapon systems in the country.

The condition that small arms and light weapons produced by a manufacturer should be sold to the central government or the state governments with the prior approval of the Home Ministry has also been done away with.

"The liberalised rules will apply to licences granted by the Home Ministry for small arms and ammunition, and those granted by the Department of Industrial Policy and Promotion (DIPP), under powers delegated to it, for tanks and other armoured fighting vehicles, defence aircraft, space crafts, warships of all kinds, arms and ammunition and allied items of defence equipment other than small arms," the Home Ministry said in a statement.

The decision comes following a proposal from the Defence Ministry to do away bureaucratic delays. A number of industry leaders had recently conveyed to Defence Minister Nirmala Sitharaman their disappointment over delays in grant of licence for setting up of manufacturing facilities for military equipment and platforms.

The new rules, which came into effect on October 27, are expected to encourage the manufacturing activity and facilitate availability of world-class weapons to meet the requirement of armed forces and police forces in sync with the country's defence indigenisation programme.

Under the new rules, enhancement of capacity up to 15 per cent of the quantity approved under the licence will not require any further approval by the government. The manufacturer will be required to give only prior intimation to the authority, the statement said.

The licence fee has been reduced significantly. Earlier the licence fee was Rs 500 per firearm which added up to very large sums and was a deterrent to seeking manufacturing licenses. The licence fee will now range from Rs 5,000 to the maximum of Rs 50,000.


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Re: MoD:Defence Procurement Policies Issues and Discussions

Postby Austin » 31 Oct 2017 11:12

‘Make In India’ projects come undone; defence plans worth Rs 3.5lakh crore stuck

https://economictimes.indiatimes.com/ne ... 351270.cms


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