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Procurement Problems Await Next Indian Government

Apr. 12, 2014 - 03:45AM   |  
BJP Leader Narendra Modi Campaigns In Gujarat
Bharatiya Janata Party leader Narendra Modi gestures to supporters on April 9 in India. The country is in the midst of a nine-phase election from April 7 through May 12, and Modi's party leads in the polls. (Kevin Frayer/Getty Images)
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NEW DELHI — As India spends the next month undergoing general elections, military officers and experts are optimistic the front-runners to take over the government will boost defense spending, speed procurement of needed weaponry and overhaul the country’s arms production policy.

Indian voters headed to the polls April 7 to choose representatives to the country’s lower house of Parliament, which in turn determines the country’s leadership over the next five years.

Exit polls predict that the opposition Bharatiya Janata Party (BJP), led by Narendra Modi, will likely form the next government. The ruling United Progressive Alliance government, led by the Congress Party, is lagging in the polls.

BJP’s election manifesto, released April 6, says, “The BJP will strengthen the Defence Research and Development Organisation, encourage private-sector participation and investment, including foreign direct investment [FDI] in selected defense industries.”

Overseas defense companies wanting to forge a joint venture with domestic firms are limited to 26 percent equity. The Cabinet Committee on Security, led by the prime minister, can increase that limit on a case-by-case basis.

Officers and experts say that because the defense budget has stayed flat at $14 billion for the past three years, with key acquisition programs stuck in the Defence Ministry’s bureaucracy, the military has a critical shortage of ammunition and gaping holes in its air defense systems.

Many blame Defence Minister A.K. Antony, whose tenure began in 2006, for the problems.

In the past seven years, $9 billion worth of tenders for various defense projects have been canceled midway during procurement; half a dozen overseas defense companies have been blacklisted on charges of alleged corruption; and more than 50 complaints against various defense deals have been sent to the country’s anti-fraud agency , a MoD source said.

All of these steps, which were aimed at promoting transparency and weeding out corruption, led to shortages of weaponry and equipment, and prices of some systems have gone up by 100 percent after the cancellation of the tenders.

The canceled tenders include a $720 million VVIP helicopter deal with AgustaWestland, due to charges of corruption. A midair refueler tender worth more than $250 million was issued in 2007, canceled in 2009 and restarted in 2010.

A tender for the purchase of 197 light utility helicopters, needed urgently by the Indian Army and Air Force, was canceled in 2008 and issued again in 2009. However, the fate of the program is still not known as the commercial bids have yet to be opened.

“Everything went wrong,” said Shyam Kimar Singh, a retired Indian Navy captain, referring to Antony’s tenure. “Hardly any capital procurement cases went through except a few offshore patrol vessels for the Coast Guard. No case has seen the light of day in the ‘Buy and Make Indian’ category. The mine countermeasures vessels project [is an example] of poor decision-making.”

A MoD official, however, said Antony has presided over some of the most eventful years in the checkered history of the Indian armed forces and has added potent muscle to their capabilities. The years have seen landmark acquisitions, and many more are in the pipeline.

“Amongst the three forces, the Indian Navy perhaps acquired the maximum number of platforms and systems toward its goal of acquiring a blue-water capability,” the official added.

The MoD has, however, made efforts through policy changes to give preference to domestic firms through the Defense Production Policy (DPP), which is now reviewed each year.

New Policies, Little Implementation

“I think, the last five to seven years were the period for strengthening the policy aspects,” said Laxman Kumar Behera, a research fellow with the Institute for Defense Studies and Analyses (IDSA). “We had quite a few new policy measures, such as the first ever Defense Production Policy, joint venture policy for defense public sector undertakings, [and the] technology perspective and capability road map.”

Behera, however, acknowledged, “the MoD was [a] little lethargic in implementing some of the policy measures. For instance, no action plan has been made after the production policy [since it] was announced in 2011. Similarly, the MoD could initiate no major program under the ‘Make’ and ‘Buy and Make Indian’ categories, which are critical for self-reliance.”

Since India imports nearly 70 percent of its weapons, the government has used policy changes to push domestic defense production. However, with foreign direct investment capped at 26 percent, no major joint venture has been forged.

“The private sector will see a bigger role in defense production, and DRDO will push through major tie-ups with overseas defense companies to absorb high-technology systems,” said Mahindra Singh, a retired Army major general and defense analyst.

While expectations are high that the next government would pull the defense sector out from “near stagnation,” Rahul Bhonsle, a retired Indian Army brigadier general and defense analyst, said, “the new government should address the systemic inadequacies [and] archaic procedures of doing business within the armed forces as well as [with] the Ministry of Defence, DRDO, et al, increase the defense budget for acquisitions and establish a genuine level playing field for private-sector participation.”

Experience, the defense analyst said, suggests that a mere change of government will not propel India to buy weapons quickly.

“The delay in weapons procurement is a systemic problem,” Behera said. “I do not think any change in political guard will drastically improve the situation.

“The system is so bureaucratized with little accountability that mere tinkering of the defense procurement procedures will hardly better the situation,” he said. “A big political move is necessary to completely overhaul the procurement system with a clear line of accountability.”

Bhonsle said there is enough on the policy front that should now be reflected on the ground. “The policy framework is adequate; the ability of the system to deliver on the policies is, however, highly suspect and will have to be considerably gingered up through genuine reforms at the grass roots rather than lip service.” ■


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