sudhir007
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In defence, take your time but hurry
On the art of gun fighting, American Old West cowboy Wild Bill Hickock said, Take your time in a hurry. Indias defence procurement authorities would also do well to heed the legendary gunfighters advice. While defence bids need to be carefully scrutinised, decisions need to be made fast and contracts signed quickly, lest we lose out to other countries.
With global annual military expenditure topping $1,500 billion, and even though every fiscal Indias defence ministry returns big amounts of the budget allocation back to the government,
India is the largest emerging economy arms importers with the exception of China.
India also has a vast amount of unused defence production and development capability. We must ensure that this is fully utilised. This would require the support of armed forces, bureaucracy and industries, both in private and public sectors. Foreign tie-ups are a must in this day and age, but tech transfer and local production are equally essential.
Following the 1999 Kargil War, India signed arms deals worth $50 billion in the span of a decade for fighter planes, warships, tanks, missiles, radars etc. In the past three years alone, the defence ministry signed contracts worth Rs 1,35,000 crore. Purchases include jet fighters, warships, submarines, radars, tanks, missiles, weapon systems and platforms, mostly from France, Russia, Israel and the US. But the government really needs to loosen its FDI policywhich is stuck at 49% in the defence sector.
As of now, even meeting 50% of our defence requirements will take a lot of doing. One reason is that since Independence, the defence sector has been the preserve of the public sector, which has just not been up to the mark.
We have a responsive government that is adapting to the changes in the industry. As a result, every year, since 2005, the government has tried to finetune the defence procurement policy (DPP), with the ultimate objective of producing everything in India, yet providing the most modern equipment and technology to our armed forces.
The main thrust of DPP 2010, expected later this year, is to usher in an orientation change, ensuring that most weapon systems and platforms required for the nations security are produced indigenously. Also, the new DPP should ensure faster results. Some of the issues expected to be addressed in the new DPP are ways to avoid delays in procurement.
The industry need not have any apprehensions, as the government has always kept its interests in mind while formulating the procurement policy. This is why the clause of offsets was introduced in DPP 2007 and the private sector has already started getting orders from the armed forces. A lot of Indian companies have started receiving RFPs from the services, particularly in the IT sector. A new DPP came into effect last November that aimed to bring transparency and probity into arms purchases, envisaging an enhanced role for independent monitors to inspect complaints relating to violations of the Integrity Pact.
India still suffers from the lack of a cohesive national security strategy and inadequate coordination between defence planning and economic development. Long-term planning is still a sum total of respective service plans. Also, in the absence of the chief of defence staff, there is a lack of inter-services prioritisation.
The key issues requiring immediate attention include the need for formal prior approval for five-year defence plans, better management of the defence revenue and capital acquisition budgets, streamlining the defence procurement process and better human resource management.
Soon, the government will also release a comprehensive defence production policy (DPrP), on the lines of the DPP that is revised every year to strengthen the countrys defence-industrial base (DIB). According to the government, both the DPrP and DPP will give a new impetus to indigenisation, since the countrys ultimate goal is self-reliance. It will give more opportunities to Indian companies that can form joint-ventures with foreign companies.
Also, some changes in the MAKE Policy, which concerns product design, are expected since there is need for funding the industry for improvement, as is done in the West and in Russia.
To encourage private sector participation, the defence production secretary has said that the government is willing to fund up to 80% of the development costs of some systems if private companies enter the fray. The government is confident that the huge defence offsetsa foreign vendor who bags an arms deal worth over Rs 300 crore must plough back at least 30% of the contract value into Indiawill go a long way in strengthening the countrys DIB, with the private sector cornering a major chunk of the spoils.
As of today, 10 offset contracts have been signed, collectively worth Rs 8,200 crore, wherein 31 private firms have benefited, apart from ordinance factories and public sector undertakings. There are 41 offset contracts worth over Rs 49,000 crore that are expected to materialise in the next couple of years.
Since 2005, when the defence ministry mandated that every foreign purchase above Rs 300 crore would impose on the vendor an offset liability of 30% of the contract value, global arms majors have scurried to tie up with Indian defence manufacturers. In 2007, a mere Rs 243 crore worth of offsets were firmed up. The figure rose ten-fold to Rs 2,598 crore in 2008. In 2009, the defence offsets facilitation agency okayed Rs 4,870 crore and counting worth of offsets.
Interestingly, 94% of all planned offsets are in the aerospace sector. The remaining 6% cover naval systems. The $10 billion tender for the purchase of 126 medium fighters has been a major driver in encouraging offsets.
So far, so good. But the bane of the defence establishment remains its inability to formulate long-term strategic plans to build military capabilities in tune with Indias geostrategic aspirations. Take the much-touted long-term integrated perspective plan (LTIPP) for the armed forces. The draft LTIPP for 2002-17 was junked because it could not be finalised in time. The new upgraded LTIPP for 2007-22 is still in the works.
On the art of gun fighting, American Old West cowboy Wild Bill Hickock said, Take your time in a hurry. Indias defence procurement authorities would also do well to heed the legendary gunfighters advice. While defence bids need to be carefully scrutinised, decisions need to be made fast and contracts signed quickly, lest we lose out to other countries.
With global annual military expenditure topping $1,500 billion, and even though every fiscal Indias defence ministry returns big amounts of the budget allocation back to the government,
India is the largest emerging economy arms importers with the exception of China.
India also has a vast amount of unused defence production and development capability. We must ensure that this is fully utilised. This would require the support of armed forces, bureaucracy and industries, both in private and public sectors. Foreign tie-ups are a must in this day and age, but tech transfer and local production are equally essential.
Following the 1999 Kargil War, India signed arms deals worth $50 billion in the span of a decade for fighter planes, warships, tanks, missiles, radars etc. In the past three years alone, the defence ministry signed contracts worth Rs 1,35,000 crore. Purchases include jet fighters, warships, submarines, radars, tanks, missiles, weapon systems and platforms, mostly from France, Russia, Israel and the US. But the government really needs to loosen its FDI policywhich is stuck at 49% in the defence sector.
As of now, even meeting 50% of our defence requirements will take a lot of doing. One reason is that since Independence, the defence sector has been the preserve of the public sector, which has just not been up to the mark.
We have a responsive government that is adapting to the changes in the industry. As a result, every year, since 2005, the government has tried to finetune the defence procurement policy (DPP), with the ultimate objective of producing everything in India, yet providing the most modern equipment and technology to our armed forces.
The main thrust of DPP 2010, expected later this year, is to usher in an orientation change, ensuring that most weapon systems and platforms required for the nations security are produced indigenously. Also, the new DPP should ensure faster results. Some of the issues expected to be addressed in the new DPP are ways to avoid delays in procurement.
The industry need not have any apprehensions, as the government has always kept its interests in mind while formulating the procurement policy. This is why the clause of offsets was introduced in DPP 2007 and the private sector has already started getting orders from the armed forces. A lot of Indian companies have started receiving RFPs from the services, particularly in the IT sector. A new DPP came into effect last November that aimed to bring transparency and probity into arms purchases, envisaging an enhanced role for independent monitors to inspect complaints relating to violations of the Integrity Pact.
India still suffers from the lack of a cohesive national security strategy and inadequate coordination between defence planning and economic development. Long-term planning is still a sum total of respective service plans. Also, in the absence of the chief of defence staff, there is a lack of inter-services prioritisation.
The key issues requiring immediate attention include the need for formal prior approval for five-year defence plans, better management of the defence revenue and capital acquisition budgets, streamlining the defence procurement process and better human resource management.
Soon, the government will also release a comprehensive defence production policy (DPrP), on the lines of the DPP that is revised every year to strengthen the countrys defence-industrial base (DIB). According to the government, both the DPrP and DPP will give a new impetus to indigenisation, since the countrys ultimate goal is self-reliance. It will give more opportunities to Indian companies that can form joint-ventures with foreign companies.
Also, some changes in the MAKE Policy, which concerns product design, are expected since there is need for funding the industry for improvement, as is done in the West and in Russia.
To encourage private sector participation, the defence production secretary has said that the government is willing to fund up to 80% of the development costs of some systems if private companies enter the fray. The government is confident that the huge defence offsetsa foreign vendor who bags an arms deal worth over Rs 300 crore must plough back at least 30% of the contract value into Indiawill go a long way in strengthening the countrys DIB, with the private sector cornering a major chunk of the spoils.
As of today, 10 offset contracts have been signed, collectively worth Rs 8,200 crore, wherein 31 private firms have benefited, apart from ordinance factories and public sector undertakings. There are 41 offset contracts worth over Rs 49,000 crore that are expected to materialise in the next couple of years.
Since 2005, when the defence ministry mandated that every foreign purchase above Rs 300 crore would impose on the vendor an offset liability of 30% of the contract value, global arms majors have scurried to tie up with Indian defence manufacturers. In 2007, a mere Rs 243 crore worth of offsets were firmed up. The figure rose ten-fold to Rs 2,598 crore in 2008. In 2009, the defence offsets facilitation agency okayed Rs 4,870 crore and counting worth of offsets.
Interestingly, 94% of all planned offsets are in the aerospace sector. The remaining 6% cover naval systems. The $10 billion tender for the purchase of 126 medium fighters has been a major driver in encouraging offsets.
So far, so good. But the bane of the defence establishment remains its inability to formulate long-term strategic plans to build military capabilities in tune with Indias geostrategic aspirations. Take the much-touted long-term integrated perspective plan (LTIPP) for the armed forces. The draft LTIPP for 2002-17 was junked because it could not be finalised in time. The new upgraded LTIPP for 2007-22 is still in the works.
