1. I have a dream.
2. Our soldiers fighting CI Ops in J&K and in North East will wear light weight bullet proof jackets and helmets and NOT the present heavy staff and the DRDO invented patkas. My dream is triggered by a recent news item Army Plans to Field New Protective Vest, Armored Shirt in 2019 available at http://strategicstudyindia.blogspot.in/2016/02/army-plans-to-field-new-protective-vest.html
3. India continues to remain the world's largest arms importer, accounting for 14% of the global imports in the 2011-2015 time frame, India spent a whopping Rs. 83,458.31 crore on arms imports in a matter of three years ending 2013-14 The latest data on international arms transfers released by a global think-tank, Stockholm International Peace Research Institute (SIPRI), also shows India's arms imports remain three times greater than those of its rivals China and Pakistan. Its biggest suppliers are Russia, the US, Israel and France. Russia accounts for 70% of our arms import. But the situation is fast changing and US is fast grabbing the lucrative market. Russians also are exploiting Pakis by offering them latest armed helicopters. After India, China ranks second in the global arms import list with 4.7%, China used to top the imports chart earlier but has gradually built a stronger DIB over the last couple of decades to even emerge as the world's third largest arms exporter after the US and Russia. Incidentally, Pakistan is the main recipient of Chinese arms exports, notching up 35% of the total, followed by Bangladesh (20%) and Myanmar (16%). Russia, in turn, is China's largest arms supplier with 59%, followed by France (15%) and Ukraine (14%). Noting that India's arms exports has jumped by 90% between 2006-2010 and 2011-2015, SIPRI reiterated the well-acknowledged fact that "a major reason for the high-level of imports is that the Indian arms industry has so far largely failed to produce competitive indigenously-designed weapons".
4. The present Govt quickly and rightly realised the best bet in Make in India initiative is the defence sector. While this initiative is better than purchasing outright from foreign vendors there are lot of issues. General Electric Co has won a $2.6 billion (nearly Rs 17,271.8 crore) contract to supply India's railways with 1,000 diesel locomotives. If GE makes railway engine in India who benefits. Well, there will be some highly skilled people who will get job in the most sophisticated and automated factories, there will be some suppliers of small items and ancillaries, some people will give vehicles on rent and all that. At least something will happen. The ratio of funds required and employment generated is huge. It is going up and not going down in any hi tech manufacturing field. It is the services which generates max employment. In the United States 70 percent of the workforce works in the service sector; in Japan, 60 percent, and in Taiwan, 50 percent. United States employment as estimated in 2012, is divided into 79.7% in the service sector, 19.2% in the manufacturing sector and 1.1% in the agriculture sector. But larger issue is we have to design our own staff. Otherwise GE or its ilk will get all the money using our cheap labour force making them as sweat shops workers. Who is going to have the IPR. Are they going to transfer those rights. BIG NO. I am not clear on many issues of defence acquisition.I am flagging these issues in following paragraphs.
We have nine DPSUs. 41 ordnance factories are spread across 26 different locations and employ close to 1,25,000 people. A recent report tears into the Department of Defence Production. “The DDP, which on behalf of the Services and the MoD would have been the instrument of indigenisation, became primarily a custodian of a large collection of ordnance factories and de-facto owner of shipyards, aircraft factories etc.” This resulted in a conflict of interest, the report says.
5. We have this offset policy since 2006. 30% worth of orders have to be sourced locally. 19 contracts worth 16,000 crores ($3 billion) have been signed since 2006. It is expected that there will be offset of $30 billion out of $100 billion worth of defence imports now. Due to offset clause cost of equipment is increased. People in the know of things is of the opinion that even say 3% increase in cost gets compensated if you see overall life cycle cost. Due to the offset clause large number of Small and Medium Sized Enterprises have come up. They have tied up with the foreign vendors and are manufacturing locally number of high tech components and sub assemblies. However, it is the vendors who select offset programs and partners and in many cases Indian critical needs are not catered for. Mostly low tech components/sub assemblies are made here. Since the offset clause is not getting fully utilised, the defence industry lobby is now demanding to expand the scope of offset to non military fields cancelling the very concept of getting high technology for the indigenous defence industry. They, tongue in check, will give examples of some countries exporting rice in place of defence offset. We can export potatoes to compensate for offsets. Rafael has 50% offset clause. Can anybody tell me what is going to happen to this 50%.
6. I can understand initially we were not very well conversant with the laws, process, negotiation, enforcing penalty, audit etc. But 10 years have passed. By now we should be expert on these issues. I want to know how much offset clause has delivered. How much vendors have not done. How have we penalised them. What is the audit methodology? It is not that the private sector is paragon of virtue. If a particular vendor does not fulfill the contractual obligations, he sould be punished. There is enough provision built into the contract. It should not be like NPA of banks. People outside have a feeling that once a contract has been signed, little effort is paid to enforce contractual obligations and vendors get away with blue murder. This feeling must be proved wrong.
Foreign Military Sales (FMS) Route
7. Of late more and more defence equipment are being procured through Foreign Military Sales (FMS) Route. As the existing procurement process is extremely complex, cumbersome, riddled with so many loop holes FMS is becoming a preferable option to bypass these procedures. If you ask an army soldier, he would say damn the procedure. I want it now. I am naked. For example, say Air Defence Equipments. FMS piggybacks on the seller country’s own acquisition process. It gives some sort of sovereign guarantee, there is no middlemen. Since the equipment is already in use, the logistic, training, support etc are well established.
8. However these are serious issues involved which need to be discussed.
9. From 2002 to 2011 DPP was changed seven times in nine years. The latest change is in the offing. Media reports indicate number of path breaking changes are being made to make DPP simpler and necessary concern of all stake holders have been addressed. The new Defence Procurement Procedure (DPP), which will be notified within a couple of months gives top priority to a new indigenous design, development and manufacturing (IDDM) category under "Buy Indian", will help bolster the indigenous DIB. Under it private sector companies will be chosen for "strategic partnerships" in six broad areas ranging from aircraft and warships to tanks and guided missile systems. The "strategic partnership model" is designed to create capacity in the private sector, in tie-ups with foreign collaborators, over and above the capacity and infrastructure that exists in defence PSUs These are very welcome steps, long overdue. Point is will the latest DPP make sure that we do not have to go through FMS route because of procedural delays. There is a great fallacy here. Government only makes the policy. Then it says, it is too complex and time consuming. So damn the process and go for FMS route! DPP is based on fundamental principle of transparency, free competition and impartiality. FMS abandons open competition, procures equipment on single vendor basis. Every FMS deal violets all the above principles. People have serious misgivings on FMS. Some of them are enumerated below.