Buying arms: a fool-proof guide

Efforts towards diversification and greater private sector participation did not succeed in the past on account of systemic hurdles. First, irrespective of the source of procurement, no change is possible unless there is certainty about the defence budget in the ensuing 10-15 years, considering the time involved in developing/productionising new equipment. Second, once there is assurance of allocations within a 15-year perspective, the defence services — based on validated threat assessments — must evolve a fully integrated procurement plan which cannot be subjected to any subsequent modification by successive chiefs of staff or defence ministry echelons. Third, there must be a clear definition of the specifications/qualitative requirements of every weapon system, platform, equipment, etc., required.

Four, once there is full clarity about the specifications and time frame within which a given item must be supplied, there must be a techno-economic task force to decide whether it may be purchased from within the country; imported from a reliable supplier abroad with or without transfer of technology, a co-production arrangement, etc; developed by DRDO and productionised by a defence or private sector unit to whom technology and detailed drawings will be transferred; developed by DRDO in collaboration with a foreign party and productionised, with or without collaboration with the latter, in a defence or private sector unit; or any other arrangement which is technically and financially viable and assures delivery to the concerned service within the committed time frame.

Briefly, decisions regarding “make or buy” would require to be arrived at by the aforesaid task force after most careful deliberation of all aspects. It is relevant to reiterate that such decisions cannot be taken by processing proposals on files to be examined by defence and finance officials, invariably leading to long delays, notwithstanding the cost escalation and denial of supplies that may have grave operational consequences. Fifth, the procurement agency must not be headed or manned by functionaries who are tenure-bound. This vital wing of the defence ministry would require to evolve negotiating skills and build up expertise which must not be fractured by shifting officers every now and again, as in the past.

Sixth, it would be necessary to have a foreign economic relations wing, that would enable securing the fullest possible advantage of the set-off approach before concluding any import agreement. Seventh, the policy with regard to export of defence equipment and materials must be reviewed and pragmatically rationalised, keeping in view the changing world situation. The so-called “negative list” of items/ countries would need to be pruned, remembering that the indigenous development/production of any major weapon system would become far more economically viable if it is permissible to also export it.

Alongside the reforms to be suggested by the Kelkar Committee it would be useful to review the capacities of the 40 ordnance factories and 8 defence PSUs and objectively decide to wind up at least those factories whose products can be safely procured from the private sector, like garments, boots, transport, vehicles, and so on. Further, it may be useful to merge certain factories and upgrade their viability. All the factories and defence PSUs which require to be retained must be modernised on a time-bound basis and their staffing patterns critically reviewed to reduce production costs. If the defence ministry succeeds in establishing statutorily mandated 5-10-15 year defence plans, it would be necessary for each production unit to have a validated annual production plan and a mandate to reduce the unit cost of every item produced. Both the factories and defence PSUs can benefit greatly if they are made active partners in promoting exports.

If the intended reform is to be achieved, another closely-related area that must be simultaneously reviewed is the Directorate General of Quality Assurance (DGQA). If the private sector is expected to play a larger role many valuable entrepreneurs may not be able to survive the rigours of DGQA, whose philosophy would need to be harmonised with the self certification systems which are reliably enforced by all the better known private sector entrepreneurs. Reducing the existing role and size of the DGQA would also engender significant budgetary savings.

Yet another factor, a virulent systemic hurdle, is the antediluvian prescription that any purchase decision must be based on bids/quotations procured from at least three possible vendors. In my past experience I have seen some rare opportunities being lost because we could not find even a second bidder!

In earlier years, the defence ministry received excellent support from leading private sector entrepreneurs, particularly L&T, in times of duress. These linkages were not sustained and built upon because of budgetary constraints. In this context I would reiterate that no worthwhile private sector partner would be willing to make large investments in establishing capacities unless there is adequate assurance that there would be an uninterrupted flow of orders for supplies at a given minimum scale. And this will not happen, unless there is near certainty about allocations for defence within a 5-10-15 year cycle and, further, there is corresponding clarity and certainty about the items needed within the aforesaid cycle.

Finally, the envisaged reforms would materialise if corresponding change is brought about in the organisation and work culture of existing echelons involved in the process.

The writer was secretary, defence production; defence secretary and home secretary