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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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During the short meeting, held ‘virtually,’ as the defence minister was down with Covid, the issue of procurement under Buy (Global) category came up for discussion during the DAC meeting. It was decided to firmly push indigenisation or as the government said, Atmanirbharata. The Army plan to buy QR SAMs or Quick Reaction Surface to Air Missiles has been turned from a Buy Global to a Buy Indian order. This means that only Indian firms will be able to supply the three regiments of QR SAMs to the Army’s air-defence system.

A similar decision has been taken for the Articulated All Terrain Vehicles which can be used in high-altitude areas. All 18 of them will be purchased from Indian vendors. This was initially a Buy Global case. The decision about light machine guns for the Army followed a similar pattern. This will also be Buy and Make Indian.

There are, of course, weaponry that are urgently needed and cannot be immediately made in India like tank engines, gun-missile systems, high-quality rifles, not to speak of fighter planes like the Rafale. These issues will again come up for discussion in the next DAC meetings on January 20 and 21.

Under the Buy (Global) category, procurement is done directly from the foreign Original Equipment Manufacturer (OEM). The decision taken will not impact deals already inked under the Buy (Global) route, those being pursued under the government-to-government route and the Foreign Military sales (FMS) route with the US.

Foreign OEMs are now welcome to tie up with Indian firms or set up their own factories to not only supply the Indian military but also for other countries.

The defence services were earlier asked to prepare a list of procurement plans from abroad that could be replaced by indigenous items. Accordingly, each service — Army, Navy, Air Force and Coast Guard — had come forward with a list of such items.

The items in question

One mega deal in this list was the procurement of 14 twin-engine helicopters, for which French firm Airbus was the prime contender. A decision has been taken to shelve this project in favour of the naval utility helicopter (NUH) of the state-run Hindustan Aeronautics Limited (HAL). However, it was not immediately clear what happened to the $3 billion project of the Navy to procure 111 new helicopters of the same class (that is, NUHs).

The Army will now go in for indigenous ATVs that will come handy in both the desert and mountains.

A project to acquire short range missiles from abroad has also been shelved in favour of the Make in India route.

Push for Make in India

Prime Minister Narendra Modi and Defence Minister Rajnath Singh have been emphasising on indigenous defence products. These issues came up for discussion multiple times and the forces were also amenable to this, since alternate items were already available domestically and foreign companies were willing to set up facilities in the country.

Singh, in his talks with his Russian counterpart Sergei Shoigu, made it clear that the way forward was Make in India. Similarly, during his meeting with French Defence Minister Florence Parly, Singh had called on French firms to “either collaborate with Indian companies or simply produce in India”.

This initiative from the government comes at a time when the Centre is coming up with the new Defence Production and Export Promotion Policy which will lay down the way ahead for strengthening defence production within the country and help in their export to friendly foreign countries.

The initiative came after Prime Minister Modi took a review meeting with the Defence Ministry officials including the then Chief of Defence Staff General Bipin Rawat where it was felt that strong measures will have to be taken to ensure that country moves firmly towards Aatmanirbhar Bharat in the defence sector. After the meeting took place, an Additional Secretary-rank officer of the Defence Ministry wrote a note to the three Services saying that “All stakeholders may take an in-principle call that no import of defence items is going forward.”

The Prime Minister has been personally reviewing the progress of Make in India in the defence sector and has from time to time asked officials in both services and the Defence Ministry to ensure that more steps are taken to promote Make in India in defence.

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On 28 September, 2020 defence minister Rajnath Singh unveiled the Defence Acquisition Procedure (DAP) – 2020 in New Delhi. DAP 2020 has been aligned with the vision of the Government of Atmanirbhar Bharat to empower Indian domestic industry through Make in India initiative with the ultimate aim of turning India into a global manufacturing hub.

The first Defence Procurement Procedure (DPP) was promulgated in the year 2002 and has since been revised periodically to provide impetus to the growing domestic industry and achieve enhanced self-reliance in defence manufacturing.

With the new Foreign Direct Investment (FDI) policy announced, DAP 2020 has adequately included provisions to encourage FDI to establish manufacturing hubs both for import substitution and exports while protecting interests of Indian domestic industry. DAP 2020 focuses on simplifying the defence acquisition procedure and institutionalising monitoring mechanism with concurrent actions using digital technologies & data base for selection of best equipment in a transparent and competitive manner giving adequate opportunities to capable vendors.

ALSO READ: Draft Defence Production and Export Promotion Policy 2020

Make in India initiative of the Government of India focuses on increasing participation of Indian Vendors including MSMEs, and therefore “Make” procedure has been further refined in DAP 2020 to make it more objective and time bound with focus on Indian industry especially MSMEs. The new DAP has 12 chapters instead of 8 chapters as per DPP 2016. There are new chapters on: 

•             Acquisition of Systems Products and ICT Systems: Acquisition of Systems and Information & Communication Technology (ICT) products is in a few aspects different from the regular acquisition projects.  The software and hardware elements of these projects usually require periodic up-gradations and intense obsolescence management to maintain tactical dominance in C4I2, EW and Cyber domain.   To provide an efficient and agile acquisition mechanism for acquisition and up-gradation of such products, certain provisions are incorporated in this Chapter, to be read in conjunction with relevant provisions of Chapter-II of Defence Acquisition Procedure.

•             Leasing: Concept of Leasing has been introduced to substitute capital expenses with small rental payments for defence equipment not directly involved in warfighting.

•             Other Capital Procurement Procedure: This chapter would lay out procedure on other capital expenses such as: overhauls, refits, upgrades and replacement of items of Capital nature. The procurement under this chapter will be as per list of items (as amended from time to time), which will be drawn up by HQ IDS and respective SHQs and promulgated by DG (Acquisition) in consultation with MoD (Finance).

•             Post Contract Management: This involves ensuring compliance with the terms and conditions of contract, managing contractual amendments, quality assurance, timely payment and deliveries, and resolving claims and disputes.

In the categories of procurement, the categories of Buy(Indian-IDDM), Make I, Make II, Production Agency in Design &Development, OFB/DPSU and SP model will be exclusively reserved for Indian Vendors meeting the criteria of Ownership and Control by resident Indian Citizens with FDI not more than 49%. This reservation will provide exclusivity in participation to domestic Indian industry. Impetus has been given towards developing indigenous defence industry by increasing IC percentages (%) in categories of procurement. The revised IC percentages are as follows:

Project Management Unit

One of the important announcements as part of the Defence Reforms announced in the Atmanirbhar Abhiyan, setting up of a PMU has been mandated to support contract management. The PMU will facilitate obtaining advisory and consultancy support in specified areas to streamline Acquisition process. The PMU will also support in setting up realistic GSQRs and simplification of trial procedures.

Another key focus areas of the review was to implement Ease of Doing Business. with emphasis on simplification, delegation and making the process industry friendly with certain specific provisions incorporated:-

•             Procedural Changes: Single stage accord of AoN in all cases upto Rs 500 crores has been instituted thereby reducing time. FTP cases, post accord of AoN, will be progressed as per delegated powers thereby reducing the procurement cycle considerably. In Planning Process, LTIPP has been re-designated as Integrated Capability Development Plan (ICDP) covering planning period of ten years instead of 15 years.

ALSO READ: Reforms in Defence Procurement Announced

•             Request for Proposal (RFP) and Standard Contract Document (SCD): Certain measures to provide clarity and alignment of requirements as also enabling provisions have been incorporated in the RFP and SCD in terms of Flow Chart drivenguidelines, provision of in-storage preservation and termination of contracts in cases where projects are not progressing as per pre–defined milestones.

A separate dedicated chapter has been incorporated in the DAP 2020 for acquisition of systems Designed and Developed by DRDO/DPSUs/OFB. A simplified procedure with Integrated Single Stage Trials to reduce timelines and laying greater emphasis on evaluation through certification and simulation. Aspects of Spiral Development have been incorporated.

The Government of India.s new DAP 2020 document will certainly instil a confidence and will meet aspirations of stakeholders across the spectrum.

Comments

Defence Acquisition Procedure is based on the concept of “Womb to “Tomb” and has certain unique aspects such as supplier constraints, technological complexity, foreign suppliers, high cost, foreign exchange implications and geo-political ramifications, and therefore is not a standard open market commercial form of procurement. While maintaining highest standards of transparency, probity and public accountability, a balance between competing requirements such as expeditious procurement, high quality standards and appropriate costs needs to be established. As a result, decision making pertaining to defence acquisition remains distinctive and complex.

Atmanirbhar Bharat initiative, further accentuated by policy reforms in the defence sector as part of Phase IV ‘New Horizons of Growth’ is focussed towards enhancing self-reliance in defence production, indigenisation of spares, overhauling of trial and testing procedures based on realistic Services Qualitative Requirements (SQR) and requisite monitoring by Project Management Unit (PMU) for time bound procurement. There is a need to institute enabling provisions for utilisation and consolidation of design, development and manufacturing infrastructure available in the country. A need has also been felt, for identifying strategic partners for promoting defence production in the private sector. The FDI policy statement of enhancing FDI through automatic route from 49% to 74% in defence should enable ‘Manufacture in India’ a lucrative option for foreign equipment manufacturers.

Make in India initiative of the Government of India focuses on increasing participation of Indian Vendors including MSMEs, and therefore “Make” procedure has been further refined in DAP 2020 to make it more objective and time bound with focus on Indian industry especially MSMEs. Cutting down permissible timeframes for various activities and institutionalising robust mechanisms to monitor for probity at various stages of the acquisition process are the attributes of this DAP.

While the Defence Acquisition involves long gestation periods, where as the needs of the Armed Forces being non negotiable, flexibility in the procedure has been provisioned for, to ensure timely availability of important equipment. But the proof of the pudding will be in the eating.

DAP 2020 may be a product of extensive analysis, deliberations, interactions and focused formulations, to further ‘Self Reliance’ of the country in the defence sector and implement ‘Ease of Doing Business’ with emphasis on simplification, delegation, reduced timelines and making the process as industry friendly as possible, but again, mindsets also need to change.

Category              DPP 2016             DAP 2020
Buy (Indian-IDDM)          Min 40%               Min 50% 
Buy (Indian)       Min 40%               Indigenous design – Min 50%
                                Otherwise – Min 60%
Buy & Make (Indian)      Min 50% of Make         Min 50% of Make  
Buy(Global- Manufacture in India)           –         Min 50% of Buy plus Make
Buy (Global)       Min 30% for Ind vendors   Min 30% for  Indian vendors

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