The government granted emergency powers to the defence forces to procure weapon systems via the ‘Make in India’ route amid tensions with China that lingered for over two years. The government’s nod was given on 22 August, to resort to fast track route at a Defence Acquisition Council (DAC) meeting chaired by Defence Minister Rajnath Singh. These powers have been invoked in recent times to upgrade, and indigenise, military arsenal in a timebound manner.

Emergency powers were granted to the forces by the Narendra modi administration post the terror attack at Uri in 2016. Rs 11,000 worth of contracts were inked post that security crisis.

However, the procurement done post Galwan eclipses the Uri figures. In 2020, the government had allowed the forces to bolster capital (with a ceiling of Rs 300 crore per acquisition) as well as spend from the revenue budget.

Emergency powers to shop for arms and ammunition are usually invoked during the time of conflict. Post the Galwan clashes in 2020, China was deemed a real threat and the Army set upon a shopping spree to upgrade its armoury. The focus has been on indigenisation as well as modernisation of Indian armed forces.

Post the clashes in eastern Ladakh, the Army was procuring armour-piercing fin-stabilised discarding sabot (APFSDS) ammunition fired by the T-72 and T-90 main battle tanks, additional Heron drones, Man Portable Air Defence System (MANPADS), mines and high altitude clothing, among other things.

The government had capped capital acquisitions (such as tanks, aircraft etc) to Rs 300 crore for each acquisition. But capital acquisition usually takes time – the weapon systems that are procured under it need multiple trials and permissions even when fast-tracked.

The government has also in recent years permitted the forces to upgrade their current systems by spending from their revenue budget. Each of the expenditure under this category is capped at Rs 500 crore. The defence forces dip into their revenue budget to buy spares, ammunition and other military equipment that is considered critical for their operational needs.

Following the emergency procurement nod, the armed forces will have to place their orders within six months (that is by February-March) after which the deliveries to them will be made within a year. Imports are discouraged but will be permitted if absolutely necessary.

Emergency powers in the past have been used to purchase ‘Heron’ unmanned aerial vehicles (that are now keeping a watch on Chinese movements in Ladakh and the north east) and also small arms such as the Sig Sauer assault rifles. The forces have also got missiles that can hit ground targets from long ranges.

The French Rafale fighter jets were also fitted with the HAMMER missiles under this procurement route. France had agreed to supply them at a short notice. These missiles have the capability of destroying any target within the range of 60-70 km.

The armed forces have a long list of equipment to buyand the emergency powers give them the liberty to source the best systems and shrink the time period to receive them.

With the Ministry of Defence (MoD) ensuring that emergency financial powers allocated to the armed forces for quick contracting of weapon systems arenot used for imports, a significant opportunity has opened up for domestic companies, with officials saying that dozens of proposals are under discussion and the focus is on industry-led design and development.

It is learnt that several dozen projects are under discussion, with the private sector set to deliver a variety of weapons including swarm drones, long-range rockets, next generation mines, armed unmanned aerial vehicles and artificial intelligence-enabled systems.

The focus will be on industry-led design and development, with proposals already received from companies. A high-level meeting in South Block this week is expected to further accelerate this process, for which the government has already allocated 25% of its annual research and development budget.

One of the proposals under discussion is a new tactical surface-to-surface missile, which will be a first of its kind project to be developed by the private sector. Being proposed by Economic Explosives Ltd, the 250 plus km range missile would be exponentially cheaper than the Brahmos and is fully indigenous. The ministry is also reviewing a proposal by the same company for guided Pinaka rockets, with a range of up to 150 km and new generation mines.

The bar on imports under the emergency route was imposed after several rounds of internal discussions where it was agreed that capacity exists in the domestic sector to deliver on urgent requirements of the armed forces.

The corporatisation of the Ordnance Factory Board has allowed its newly created entities to create private sector partnerships and changes are expected in other large public sector units to gear up for a similar future.

Ministry officials say that the recent geopolitical situation has reaffirmed the need for self-reliance, given the uncertainties in supplies and spares due to the Russia-Ukraine crisis. Dependence on foreign sources for vital equipment, they say, can be leveraged and impact strategic sovereignty of the country.

Revised estimates in the budget documents shared earlier this year show that the armed forces spent over Rs 21,000 crore on top of last year’s budget allocation amid the tensions at the Line of Actual Control (LAC) with China. In 2021, the armed forces spent Rs 20,776 crore on the emergency purchase of weapons and systems to beef up its capabilities at the northern border.

As the deadlock lingers for over two years in a row, India is strengthening its preparedness and continues to build border infrastructure to support its troops.

Usual Procurement Route

The Defence Acquisition Procedure 2020 (DAP 2020) guides all capital or equipment procurements and upgrades by the military. It was first initiated in 2002 to streamline military hardware procurement in a timebound manner. However, even in its eighth edition since 2002, the DAP 2020 is still a lengthy and cumbersome procedure that many defence experts have called to reform.

It stipulates a time frame of 74-106 weeks to complete a procurement but rarely achieves that target.

Usually a request for Information (RfI) is placed for the concerned platform sought to be purchased after which specifications are issued for it then responses are received. Several bureaucratic steps later, technical assessments and field trials are conducted. An oversight committee would endorse these procedures. After more bureaucratic hurdles a contract would negotiated, endorsed then finally inked.

As per the normal procedure, the defence secretary can clear purchases upto the limit of Rs 500 crore. The defence minister can approve expenditure with a ceiling of Rs 2,000 crore while for the finance minister this figure is pegged at Rs 3,000 crore. Anything beyond this amount would be deliberated by the Cabinet Committee on Security headed by the prime minister.

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As the Russia-Ukraine conflict renewed focus on India’s dependence on the former Soviet Union nation for weapons and ammunition, the government has moved to further promote its “Make in India” programme in the defence sector by lessening imports from foreign companies. It amended the Defence Acquisition Procedure (DAP) 2020 to make it mandatory to meet all modernisation requirements of the Indian Army, Navy and Air Force as well as the Indian Coast Guard with indigenously manufactured equipment “irrespective of the nature of procurement”.

“Import of defence equipment and sourcing from foreign industry of capital acquisitions should only be an exception and undertaken with specific approval of Defence Acquisition Council (DAC) or the Defence Minister,” according to a press release issued by the government in New Delhi. Defence Minister Rajnath Singh, himself, heads the DAC.

The Ministry of Defence (MoD) had earmarked 64 per cent of its Capital Acquisition Budget for domestic industry in the financial year (FY) 2021-22. It, however, surpassed the target and utilised 65.50 per cent of Capital Acquisition Budget for procurement of defence equipment indigenously manufactured in India.

The DAC also approved other amendments in the DAP 2020, including the one to dispense with the requirement of the Integrity Pact Bank Guarantee (IPBG) for domestic defence companies participating in a government procurement process. According to the amended procedure, the Earnest Money Deposit (EMD) would be taken as a bid security for all acquisition cases with Acceptance of Necessity (AoN) cost more than Rs 100 crore. The EMD will be valid for the selected vendor up to signing of contracts and returned to remaining vendors post declaration of selection.

“Post contract, Integrity Pact will be covered through the Performance Cum Warranty Bank Guarantee (PWBG). Further, as per extant Government of India policy, EMD is not required from Micro and Small Enterprises (MSEs),” stated the MoD, after acting on an advice from the Ministry of Finance to reduce the financial burden on the country’s defence industry.

The DAC also approved amendments in the DAP 2020 to encourage wider participation and broad base indigenous defence manufacturing sector in the country. The total order quantities in acquisition cases would be split between short-listed vendors, wherever viable. Further, the other technically qualified bidders, who would not be awarded the contract, would be issued a certificate by the defence services, indicating that the product had already been successfully trial evaluated, to facilitate vendors to explore other markets.

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