Shortening Capital Procurement Time
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Shortening Capital Procurement Time

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by Lt. Gen Prakash Katoch

June 6, 2021, had surprise headlines in newspapers that read “Indian defence ministry steps up to reduce acquisition timelines by half”. Simultaneously, Defence Secretary Ajay Kumar tweeted: “Acquisition Wing MoD & Services have worked out several steps to speed up acquisition. These are steps towards reducing av. Time of capital acquisitions by – 50%.”

Media reports that the decisions taken for speedier capital acquisitions include:

All stakeholders, including the Acquisition Wing, Defence Research and Development Organization (DRDO) and the Services (Armed Forces) will work together from the stage of project formulation to avoid subsequent differences

Delays in acquisitions would attract reviews by the Director General (Acquisition) and the Vice Chiefs of the respective Armed Forces, to fix responsibility for such delays

Trials directives would be fixed within two weeks of the Technical Evaluation Committee (TEC) approval of the competing offers

Acquisition Wing would, in consultation with the respective Armed Force, specify upfront tests for which simulation or third party certification or lab tests would suffice

Any approvals for procurement, not acted upon within one year of such nod, would lapse

The issue to note is that the above pertains to only capital procurements, not all defence procurements. Capital acquisitions have always been the forte of the Defence Secretary, and continue to remain so even after establishment of the Directorate of Military Affairs (DMA) headed by the Chief of Defence Staff (CDS) within the Ministry of Defence (MoD). Aim of the above decisions as per the defence secretary is to halve the average time it has hitherto taken to finalize capital procurements.

Ajay Kumar served as Defence Production Secretary from December 1, 2017 to August 23, 2019, from where he moved as Defence Secretary and continues serving in that appointment to-date. So the first question is how come the sudden urge to reduce the approval time for capital acquisitions; did he not feel the requirement earlier even after the Chinese aggression in May-June 2020 and the flurry of defence procurements last year?

The second question arising is how the magical target of cutting the approval time by 50 percent has been arrived at referring to reducing the average hitherto taken to finalize capital procurements but without mentioning what that average time has been; isn’t this typical bureaucratic language? Take the case of the six submarines costing $5.9 billion for which the acceptance of necessity (AoN) was accorded in 2015 and the issue of RFP has just been approved with the cost having jumped to $7 billion as per a media report. So what was the average approval time earlier for capital procurements and how was it arrived at?

Is the above sudden decision of MoD because of public awareness about cases like the six submarines taking years from approval of AoN to issue of RFP with cost escalation over one billion dollars? Over the years every Defence Procurement Procedure (DPP) or Defence Acquisition Procedure (DAP) issued by the MoD has been accompanied by the rhetoric it is the ultimate. But much has been happening behind the scenes.

On September 23, 2020, a report by the Comptroller and Auditor General (CAG) tabled in Parliament revealed that of the 46 offset contracts signed for Rs 66,427 crore till December 2018, only Rs 11,396 crore offset obligations were discharged by vendors, which is 59 percent of the Rs19,223 crore worth offsets that should have been discharged. To top this, MoD accepted only Rs 5,457 or 48 percent of the Rs 11,396 crore offsets offered – raising the overall deficit by December 2018 to Rs 13,766 crore. CAG also pointed out that the rate of offset discharge has been Rs 1,300 crore per year.

In addition there was furore over the offsets in the 36 x Rafale fighter jets deal. Reliance Defence issued a press release that read: “The India-France deal signed on September 23, 2016 for 36 Rafale fighter jets valued at €7.87 billion (about Rs 60,000 crore) has 50 percent offset obligation (about Rs 30,000 crore) and Dassault Reliance Aerospace Limited (DRAL) will be a key player in executing offset obligations. Government clarified that Reliance was not the only offset partner.” However, DAP 2020 has dropped the offset clause completely.

The DAP 2020 was released by the Defence Minister on September 30, 2020 while Ajay Kumar had already served for more than one year. So why is the above procedure now being talked about for cutting dawn the approval time for capital procurements by 50 percent not part of DAP 2020? A closer examination would reveal this bureaucratic mumbo-jumbo is full of loopholes, possibly intentional, as may be deduced from the following paragraphs.

The requirement of all stakeholders working together from the stage of project formulation has been there ever since. How it is implemented is the crux. Delays in acquisition are primarily because of back and forth movement of files and the bureaucracy is adept at avoiding blame. The blame will always be thrown at the Services no matter what the actual reason is; can Vice Chiefs affix blame on MoD or entities like DRDO under MoD? Fixing of trials directives with TEC approval is fine but on numerous occasions the MoD-appointed TEC has lingered on for long and the competent authority (MoD itself) has sat on the file to accord approval for months on end.

Laying down specifying upfront tests where simulation or third party certification or lab tests would suffice is a Trojan horse that smells bad. Capital acquisitions are not like the Covaxin shot given to the Prime Minister which has forced him to attend the G-7 Summit virtually instead of in-person like all leaders because Covaxin is not internationally approved yet. Covaxin will be approved eventually but capital acquisitions stay with Armed Forces not for years but number of decades. That is why the Army has a complete Corps nominated to undertake trials. There have been many occasions when products of the governmental defence industry have not got through comprehensive trials. Simulation and third party certification should never be accepted in case of capital acquisitions.

Ajay Kumar may have had the brainwave of simulation and third party simulation for promoting Atmanirbhar which no doubt should be the prime focus for us. However, this does not imply pushing through sub-standard weaponry and equipment to the Armed Forces especially when China is fielding high end technology with the PLA. Similarly, the threat that any approvals for procurement not acted upon within one year of such nod, would lapse is the double edged handle to force the process to start all over again. Why can monthly monitoring not be done by MoD’s Acquisition Wing in this digital age?

A joke circulating is that the ancient mummy of a bureaucrat discovered was found wrapped in red tape. How much of red tape will get pruned in capital procurement only time will prove but the brash announcement of cutting it by half appears more of rhetoric. Hopefully there is some measure of sincerity in such announcements. There should be no shortcuts to state-of-the-art equipping the Armed Forces given the threats we are faced with.

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