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Bye to buy


Over the past decade India has been so serious about modernising its military that today it is has the dubious distinction of being the world's largest importer of weapon systems. It has some of the world's largest import contracts for fighters, missiles, submarines and other equipment. On the flip side, India is the only major world military power that does not have a successful indigenous fighter, tank or submarine. Of late, however, frantic efforts are under way to effect a dramatic reversal in India's overdependence on foreign military equipment.

The sudden policy reversal has been brought about by the latest scandal over alleged kickbacks in the purchase of AgustaWestland VVIP helicopters. The thinking now is that indigenisation is the only sure way to reduce the involvement of powerful arms dealers and stem the massive kickbacks flowing into various levels of the acquisition process in India. Critics of the move say this in itself will not eradicate corruption, and that in any case, it would be too little, too late. 


But there is no denying that the over-dependence on imports has brought with it a powerful clique of arms dealers. Though many of them have been active in the market as illegal agents for various defence companies since late 70s, they have never had it so good. With contracts running into several billions, their commissions run into hundreds of crores. For example, in the purchase of VVIP helicopters from Finmeccanica group company AgustaWestland, the alleged kickback was over Rs 350 crore. That kind of money makes them capable of buying political influence, as well as military and bureaucratic blessings.

Despite protestations by many within the system, the reality is that corruption in defence deals is a reality. Not a single foreign deal goes through without some kind of favour being doled out to various stakeholders. Honest officials in acquisitions who do not want to be caught in the mess either keep quiet, or opt out of the cesspool.


In response to this reality, the Ministry of Defence has come up with several crucial amendments to the Defence Procurement Procedure and Manual, which governs the way India buys military wares. Despite initial protests from the military, all three services have fallen in line with most of the amendments being pushed at the instance of defence minister A K Antony.

Over the past few weeks, various committees met on numerous occasions to recommend a set of amendments to the Defence Acquisition Council, the apex body on the matter which is headed by Antony. The DAC has already completed one detailed round of consultations and approved several of these amendments. A final meeting is expected on April 20, where further amendments would be approved. Later, the ministry is expected to closely examine production capabilities within India and the larger questions of self-reliance.

The most important amendment approved is to officially place Buy (global), which is outright purchase of an item from abroad without any transfer of technology (TOT) as the last option. The second last option being Buy and Make (global), where global purchase also includes TOT. Officially, the MOD has now decided to place Make (Indian), Buy (Indian) and Buy and Make (Indian) as the top priorities for purchases. If a service wants to buy from a foreign vendor then it has to put it in writing, explaining the reason for imports.

The government has also put in place strong conditions for approving any Acceptance of Necessity (AON), the first step in an acquisition, and has decided that GSQR (general staff qualitative requirement) will have to be final and ready when AON is granted. This would ensure that the requirements are not further manipulated to suit various vendors, as has been the case in most procurement.


The move is expected to have several noticeable impacts - more Indian private sector players getting into military manufacturing, forcing the defence PSUs and ordnance factories to be more competitive, and overall driving indigenous military research and manufacturing capability.

Today, almost 65 per cent of the Indian military's requirement is imported. The 35 per cent indigenous content is mostly done by the defence PSUs and ordnance factories, where there are serious quality issues and a complete lack of innovation. In fact, many of these government run companies are acting as mere middlemen, importing total systems from foreign vendors, putting their own stamp and supplying it to the military.

The military research agency, DRDO, has failed to keep pace with the need for constant technological innovations. In recent years, DRDO has also been getting into joint development programmes with foreign vendors in very opaque ways, with no visible technological gains for India as was being claimed by them.

"If we have to trigger a major indigenisation drive we will have to overhaul DRDO, the defence PSUs and corporatise the ordnance factories. Those are our biggest assets, as well as our biggest weaknesses, " says a senior military officer involved in acquisitions. He says India will also have to look at comprehensively overhauling the entire food-chain in military production-from the technology institutes providing specialised staffers and researchers to the way private sector is involved in military development.


Despite all the right noises being made by the MOD, many in the private sector are not impressed. "It is not as if the existing policies do not have enough provisions for increasing indigenous capabilities. Rhetoric is one thing, implementation is another, " says a senior executive in an Indian firm involved in defence sector for years. He points out that the culture of giving contracts to PSUs on a "nomination" basis continues, while the private sector waits impatiently. The Vijay Kelkar committee, which had in 2005 drawn out a detailed roadmap for increasing indigenisation and private participation, had several path-breaking recommendations. "They were mostly accepted, but very few have been implemented, " he said.

The biggest grouse of the private sector is the lack of a level playing field and the assurance of long-term contracts, which exists in most other countries. Indian private sector companies such as Larsen and Toubro and Tata Power SED have been sailing along with occasional contracts. Many others have been waiting in the wings. All three major programmes - Battlefield Management System (BMS), Tactical Communication System (TCS) and Future Infantry Combat Vehicle (FICV) - meant exclusively for Indian companies, under Make (India), have been delayed endlessly.

Despite the dominant position enjoyed by defence PSUs, DRDO and ordnance factories, as well as the strangle-hold of arms dealers, India has no other way forward but to develop its own indigenous capabilities if it has to secure a robust economic future.
For a nation of its size, with such complex security scenario around, strategically Indian Ocean washing its shores, dependent on import of fuel and export of numerous items, there is only one way forward. Develop a robust military-industrial complex within, with active participation of private sector, and churn out technological innovations and remain at the cutting edge of technological innovations. If not, the humiliations of the past could revisit us sooner than predicted.

Reader's opinion (1)

Birbal SinghApr 22nd, 2013 at 11:16 AM

Indigenisation of our defence hardware production is welcomed from the security point of view and sustainability, but doing so just to stop corruption may compromise security... so it should be a well planned effort

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