MSMEs and Start-Ups are being encouraged by the Department of Defence Production through various innovative ideas like the iDEX and Def Expos. However, the need of the hour is to directly connect these MSMEs and the Start Ups with the Military

The Indian Potential

India’s contribution towards World GDP declined from a steady 25-30 % a century and a half ago to less than 2% after colonisation. The share in the World growth has again picked up and with over 7% contribution today, India is the fourth largest economy of the World after US, China and UK + EU together.

India has displayed its capabilities in reaching the Moon and has planned a most innovative “Mars” mission and  is one of the few countries to have designed and produced a fourth-plus generation fighter aircraft, nuclear submarine, successful SAM system, MBT, an ICBM and an indigenised Ballistic Missile Defence System. Still India is producing and delivering less than 50% requirements towards the Military Capability and that too in low end technology.  Despite the National thrust towards innovation and self-reliance, India, in the last decade, has become one of the biggest Arms importers of the World.

Today the National leadership is ready to take bold and long-lasting economic decisions towards making India a self-reliant Nation. The initiatives – “Make in India” in 2014 and “Atmanirbhar Bharat Abhiyan” announced on 13 May 2020 – are highly achievable.

On 13 May 2020, Prime Minister Narendra Modi said that the country should view the Covid-19 crisis as an opportunity to achieve economic self-reliance. In his address to the nation, he stressed on the importance of promoting ‘local’ products and named the mission – ‘Atmanirbhar Bharat Abhiyan’ (or Self-reliant India Mission).

The giant vision of a self-reliant India, which is beaming with pride and capable of giving the world a direction, reiterates loud and clear that the 21st century being that of India is not just a dream, it is also a responsibility for India to show a path to the world.

The cherished goal of the ‘Mission Atmanirbhar Bharat’, is based on five pillars moving steadfastly from local to global.

The Self-Reliant India Mission aims towards cutting down import dependence by focussing on substitution while improving safety compliance and quality of goods to gain global market share.  The Mission is also expected to complement ‘Make In India Initiative’ which intends to encourage manufacturing in India and focuses on the importance of promoting ‘local’ products, based on five pillars namely:-

♦ Economy.

♦ Infrastructure.

♦ System.

♦ Vibrant Demography.

♦ Demand.

Military Capability Building Process

As per the Constitution of India, the Ministry of Defence is responsible for National Security and also to provide Militarily Capability to counter National Threats.  To achieve this objective all the four Operational Departments of the Ministry, namely; ‘Department of Military Affairs’; ‘Department of Defence’; ‘Department of Defence Production’; and ‘Department of Defence R & D’ work in unison and carry out:-

♦   Military Threat Analysis.

♦   Draw a National Military Security Strategy.

♦   Strategise the required Military Capability.

♦   Identify Capability Voids.

♦   Prepare a long term and immediate weapon induction priority plan.

♦   Procure best weapon systems to counter the perceived threats.

♦   Build capability before the perceived manifestation of the threat.

To achieve the above desired state, Departments of the MoD steer the procurement cycle to acquire the best weapon systems by optimally utilising the allocated budgets as per the financial guidelines of the Government of India. It is, thereafter, the collective responsibility of all the Departments of the MoD to build the National Military Capability by timely induction of right weapon systems to counter the threat envisaged by the Nation.

The Acquisition Entities

There are three different entities which are responsible for arming a soldier and they are, the Defence Industry; the Military and the Acquisition Managers.

After the recommendations of Kargil Review Committee and the Parliamentary Committee headed by Mr LK Advani, in 2002, an Integrated Military Headquarters (HQ IDS) and an Acquisition Wing under the DoD were created to form an eco-system to equip the Armed Forces.

The Acquisition Wing promulgated its first Defence Procurement Procedure; DPP-2002.  However, within two years DPP-2002 changed to DPP-2004; upgraded to DPP-2006; to DPP-2008, to DPP-2011 and to DPP-2013. A new DPP came out almost every second year, maybe because it fell short of satisfying the felt need of both the Industry and the Military.

Mr Manohar Parrikar, the then RM, took up on himself and came out with a new version as DPP-16, which was transparent and focused on National Vision of ‘Make in India’. However, within 47 months even that DPP underwent 47 amendments, forcing the MoD to come up with a new and more inclusive version of the Procurement/Acquisition Procedure.

On 20th Mar 2020, Acquisition Wing released an amended version of DPP-16 as Draft DPP-2020, however, both the Defence Industry and the Indian Military gave thousands of suggestions, which were more creative and in line with ease of doing business.  All the observations were deliberated upon and finally in Sep 2020, the Hon’ble RM promulgated the Defence Acquisition Procedure (DAP-2020).

While writing a new DAP if only piece meal tweaking of the acquisition process is resorted to, then it would surely fall short of the National aspirations. National Leadership is concerned, because despite a DAP, presumably in sync with ‘Make in India’, our military hardware import dependency is not reducing and thus measures like ‘Negative Import List’ are being resorted to.

National Capability Building Process requires a Systems’ Approach to realign the entire eco-system with the bold National Vision and simplify the Acquisition Process. To achieve the National Vison, we have to re-create a new eco-system and not resort to para wise amendments of the existing DPP/ DAP.

Defence Acquisition Procedure

The aim of the Defence Acquisition Procedure is to ensure timely procurement of military capability as strategised and prioritised by the Armed Forces.  The procurement process should optimally utilise the allocated budgetary resources, provide highest degree of probity, public accountability, transparency, fair competition and level-playing field. In addition, under the ‘Make in India’ initiative, steer the process towards self-reliance in production of defence equipment and steadfastly pursue the ultimate aim to develop India as a ‘Global Defence Manufacturing Hub’.

Thousands of MSMEs and Start-Ups are being encouraged by the Department of Defence Production through various innovative ideas like the iDEX and Def Expos. However, the need of the hour is to directly connect these MSMEs and the Start Ups with the Military. A path breaker solution is required to boost the initiative of this bubbling Indian Defence industry to seamlessly integrate with the Military for their immediate hardware requirements. Promulgation of ‘Negative Import Lists’, with an inclusive approach, would not require the ‘Defence Indigenisation Committee’, which is authorised to roll back on the promulgated ‘Negative Import List’.

Re-defining Indian

Keeping in line with the National vision of ‘Make in India’ and to the cater for the ‘Military Capability Voids’, the source of Capital Acquisition could be broadly classified as just:-

‘Indian’ or ‘Not-Indian’.

Indian. For a product to classify as Indian and fulfil the ‘Make in India’ vision, the vendor and his weapon system should provide either or all of the following:-

♦   Production Line set up in India.

♦   Technology is owned by an Indian firm.

♦   Jobs are created for Indians.

♦   Taxes are paid to Indian Govt.

♦   Supply chain management is set up in India.

♦   Comes to the market as an ‘Indian Brand’.

Priority of procurement from the ‘Indian’ classification could be:-

♦ Priority – I:  Designed, Developed and Manufactured in India; or

♦ Priority – II:  Developed and Manufactured in India; or

♦ Priority – III: Acquired and Manufactured in India; or

♦ Priority – IV: Partnered with a foreign vendor but manufactured in India.

All the above, under the category ‘India’, will satisfy the National vision of ‘Make in India’ and should be analysed and certified by Department of Defence Production. A vendor data base categorising all the Indian vendors needs to be captured by the department and hosted on an e-portal. The Department should set up guidelines for the industry to ensure the capabilities specified above and screen them to qualify under the categories of ‘Indian’ before being put on the e-portal.

Not-Indian. An equipment which doesn’t fulfil the National vision of ‘Make in India’ should be classified as ‘Not-Indian’, whereby’, neither the technology comes to India, nor the manufacturing line is set up in India nor does it service the route to self-reliance and could be:-

♦   A temporary manufacturing line in India to deliver a capability or,

♦   An out-right import from a foreign vendor.

‘Defence MSME and Start-Up Portal’ (DMSP)

Time has come to capture the data of the products being launched / under R&D / still on the drawing boards of a MSME or a Start-Up and make it visible to the Military through a web portal.

‘DMSP’, should capture every Defence related product / equipment being manufactured by the Indian vendors and must be initiated under the authority of Department of Defence Production.

DDP after verification, should upload the product and the vendor details on the portal:-

♦   The detailed specifications of the product.

♦   Per unit cost and any other pricing mechanism.

♦   Production capacity.

♦   Delivery capability.

♦   Life Cycle support and upgrade packages.

♦   Source of technology.

♦   Company’s registration details under the Indian Companies Act.

♦   Its balance sheets and source of funding.

♦   International engagements for technology, IPR, funding & exports, etc., if any.

All Delegated Power Cases for procurement should first be initiated through DMSP route and the following recommended procedure would maintain the basic sanctity of DAP:-

♦   Accord the AoN as per the procedure laid down in current DAP.

♦   SQRs generated by the User Directorate should be compared with the specs of the product on portal by a ‘Spec QR Comparison Committee’ nominated by the user directorate, to ensure that the equipment meets the requirements.

♦   After the approval of the above report by the SHQ, the trial matrix should be hosted by the respective SHQ and then invite the vendors on a specified date for the Field Evaluation Trial. The trial should be conducted by the user directorate and the report be approved by the respective PSO.

♦   The vendor who passes the FET and is L1, could be invited for a Cost Negotiation by a CNC, constituted by the CFA.

♦   If a vendor fails the FET, the reasons for his failure must be hosted by the Department of Defence Production on the same page where his data appears on the portal. The vendor should not be disqualified from future participation, but the reasons for failure should be known to the next CFA prior to the procurement initiation. Justification for disqualification should facilitate the vendor to improve on his product for future participation. The improvement brought about in the product should also be hosted on the page along with the revised Specs.

♦   After a vendor musters the FET and the CNC is completed, the case, on the Portal itself, should move to the respective IFA (Capital), who should, in a given time frame, carry out his financial vetting as per the guidelines of MoD (Finance).

♦   On the completion of the formalities by the IFA on the digital platform, the CFA could directly place the supply order and make the payment through the portal itself, as it happens on the GeM.

A Standard Contract Document, as recommended in the DAP should be entered into.  The date of signing of the contract would then be the effective date of contract for the acquisitions and the delivery schedules.

Conclusion

This revolutionary procedure would not only speed up the acquisition process to build military capability for all the delegated power cases but also give direct boost to the MSMEs & Start-Ups. The normal procedure of the DAP is not only tedious but also stretches the acquisition cycle, which adversely affects the small investors, as well as the capability voids.

For an inclusive approach towards the promulgation of the negative import list, all the Defence acquisitions of the previous decade, below a certain amount, from the foreign vendors should be declassified to the industry. The industry could come forward with their capability and the timelines to deliver the equipment.  If the product and the timelines suit the Military and the costing suits the Acquisition Managers then the product should automatically qualify for inclusion in the ‘Negative Import List’.   The procurement could then follow the ‘Defence MSME and Start-Up Portal’ route.