Decoding Defence Reforms : Nuts and Bolts
Sub Title : Will reforms help if there is no is concomitant accountability?
Issues Details : Vol 15 Issue 3 Jul – Aug 2021
Author : Lt Gen Sanjay Verma, PVSM, AVSM, VSM** (Retd)
Page No. : 23
Category : Military Affairs
: August 5, 2021
India’s defence acquisitions have been laggard and that is to say the least. The Government has ushered in several reforms to better the situation. The key lies in ensuring their earnest implementation. However, will reforms only help if there is no is concomitant accountability? A cogent analysis of this and related aspects
All commentaries on defence capability building have a common narrative-one of inept handling, lack of understanding, tardy processes, long gestation periods, ambitious parameters and so on. For years there never was any ‘Bible’ to guide defence procurements but soon after the Kargil operations and as a fall out of the recommendations of the Group of Ministers on reforming the National Security System, the first Defence Procurement Procedure 2002 was introduced by the MoD. Thereafter in quick succession there have been nine versions of the document with the latest avatar being in the form of Defence Acquisition Procedure (DAP) 2020.
The fact that procedures are ever evolving and concerns of all stakeholders need to be addressed may justify nine versions in a window of eighteen years but then the issues with capability building viz delays in acquisitions, shortage of critical platforms, ammunition, and dependence on imports coupled with alarming emergency procurements tell a different story. The malaise ironically is all pervasive irrespective of the nature, cost or category of procurement.
The intent to give a push to capability building has never been lacking and in fact over the past few years a slew of reforms have been unveiled one after another. The announcement of two Defence Corridors in the budget speech 2018-19 was in keeping up with the emphasis laid on modernising and enhancing the operational capability of the defence forces. The Indian government in May 20 announced landmark policy reforms in eight strategic sectors including defence. The DAP 2020 was in fact a follow-up on these reforms.
As we usher a new decade with the new DAP and host of reforms some of them path breaking and covering the entire spectrum of structure, organisation, policies, procedures as well as budgetary, the question is will there be a change in the landscape?
It is appropriate therefore to review the progress made on reforms announced and examine the challenges which have to be overcome to drive home the requirement of an ‘Elusive Reform’, which if brought in may do away with the need of any recurring reforms.
Reforms and Policy Initiatives May 2020 – ‘A Review’
Targeted towards Atmanirbhar Bharat the canvas was wide to enhance Self Reliance and introduce Policy Reforms in Defence Production as under: –
♦ Make in India’ for Self-Reliance in Defence Production.
- Notify a list of weapons/platforms for ban on import with year wise timelines.
- Indigenisation of imported spares.
- Separate budget provisioning for domestic capital procurement.
♦ Improve autonomy, accountability and efficiency in Ordnance Supplies by Corporatisation of Ordnance Factory Board.
♦ FDI limit in the defence manufacturing under automatic route raised from 49% to 74%.
♦ Time-bound defence procurement process and faster decision making by:
- Setting up of a Project Management Unit (PMU) to support contract management.
- Realistic setting of General Staff Qualitative Requirements (GSQRs) of weapons/platforms.
- Overhauling Trial and Testing procedures.
Positive indigenisation Lists
The first negative list for imports was prepared by the Department of Military Affairs (DMA) in August 2020 for 101 items and coming on its heels in May 2021 albeit now named a second positive indigenisation list contained another 108 items. Full credit to the DMA in compiling these lists with total embargo on imports with timelines indicated. This is a big step towards self-reliance in defence. The first list included towed artillery guns, short-range surface-to-air missiles, cruise missiles and offshore patrol vessels etc and the second list comprises complex systems, sensors, simulator, weapons and ammunitions like Helicopters, next-generation corvettes, airborne early warning and control systems, tank engines, medium power radar for mountains, MRSAM weapon systems etc.
Way Ahead. To give a meaningful boost to indigenisation with the active participation of public and private sector there is a need to identify the items contained in these lists and earmark suitable and competent agencies or relevant industry to undertake the development and productionise with clear indication of numbers and proposed timelines.
Separate Budget Provisioning for Domestic Capital Procurement
As per announcement made by Union Defence Minister Rajnath Singh at a seminar on defence budget organised by the Society of Indian Defence Manufacturers (SIDM) the Defence Ministry has decided to earmark around 64 per cent of its modernisation funds under the capital acquisition budget for 2021-22 – a sum of over Rs 70,000 crore – for purchases from the domestic sector. This marks an increase from the earlier 58% allocation for similar procurement in the budget of 2020-21. While the intent and optics is well appreciated, earmarking an allocation in the budget for ensuing year and its utilisation within the FY have different dynamics. As per the SIPRI figures imports have decreased by 33% between the period 2011-15 and 2016-20 but the same figures would tell a different story had some of the big-ticket projects in advanced stages had fructified in an appreciable time frame. These include Artillery Guns, Air Defence Systems, Helicopters besides a few others.
Way Ahead. The intention is good and if allocation has to match the utilisation the finalisation of cases within the financial year should be ensured. Further a budget allocation specific to a scheme at the time of Acceptance of Necessity with time bound utilisation may be more prudent.
Corporatisation of Ordnance Factory Board
The MoD deserves accolades in as far follow up of the reforms is concerned but the concern is what after the follow up. The Corporatisation as promised has been announced with the setting up of an empowered GoM. But having acknowledged that the model of Ordnance factories working was not correct will Corporatisation mitigate all what was ailing?? There has been visible enthusiasm but merely expecting a reorganisation and restructuring into seven entities to transform these into productive and profitable assets which will deepen product specialisation, boost performance, improve quality, cost efficiency and accountability all together may be expecting a little too much.
Way Ahead. Success of a few PSUs may be the guiding mantra but what is required is introducing a cultural shift in individual behaviour, personality, attitude, commitment, skill sets, motivation along with modernisation of infrastructure and quality controls for setting towards the desired end state. Further, the disconnect with the Unions and the work force need to be plugged highlighting a dire need of a consultative framework.
Enhancing FDI Limit 74%
In May 2001 Defence manufacturing, which was hitherto reserved for the public sector, was opened to Indian private sector participation, with Foreign Direct Investment up to 26%, which rose to 49% in 2016 and to 74% in May 2020.Through FDI, domestic companies are benefited by way of enhanced access to supplementary capital and state-of-art-technologies, and also exposure to global managerial practices resulting in employment generation and accelerated growth of the sector. Review of FDI policy is an ongoing process and changes are made in the FDI policy regime, from time to time, to ensure that India remains an attractive investment destination but still the inflows have not been as desired.
Way Ahead Investment can only flow in with ease of doing business, reasonable visibility in the requirement and trajectory of processing, improving prospects for big ticket investments and a clear identification of core technologies and areas of investments.
Time-Bound Defence Procurement and Faster Decision Making
This to put it bluntly is the bane of the system. The three aspects for implementing time bound procurement and faster decision making which have been highlighted are Setting up of a Project Management Unit (PMU), Realistic Setting of Qualitative Requirements (QR) and Overhaul of Testing and Trial procedures. Are these the only & real pitfalls? An announcement of a project management unit was made in Apr this year though the structure, mandate and reach of this project management unit is yet to be known. But the moot question is that within the given framework of the DAP and the existing structures both within the Services and the MoD including the Defence Procurement Board and Defence Acquisition Council what is it that is stopping them from monitoring, reviewing and hastening the process and how will this PMU help. Setting up of realistic QRs is quite in the air and yes, some merit may be there in the concern but two issues are pertinent. First, no QR is promulgated without explicit acceptance of a plethora of stakeholders and secondly how many cases of procurements have fallen due to QRs failure? Similarly, concern over tardy trials and testing is genuine but it is to be realised that given the tough operational environment and diversity in the exploitation the processes cannot be diluted.
Way Ahead While the intent for time bound procurement and faster decision making cannot be questioned the fact of the matter is that the answer lies somewhere else and not solely in the three measures highlighted. That can only come in when an ‘Elusive Reform’ is brought in (being discussed later).
The last reform was a procurement procedure reform which came in the form of DAP 2020. It is exhaustive and rightly incorporates and focuses on all reforms and policy announcements made earlier in the year including the setting up of a project management unit to make the procurement process time bound. With considerable diligence and involvement of all stakeholders the document has attempted to improve the capital acquisition procedure with enhanced stress on indigenisation and introduced some conceptual, structural and procedural changes and also broadened the scope to cover all possible avenues of procurement.
The Challenge and the Need of an Elusive Reform
The reforms correctly identify and target the structure, policies, procedures and budget. A review above indicates that though they are indeed in the right direction they still need a lot of fine tuning and refinements in the implementation if they are to yield any positive outcome. Beyond this one has to realise the challenges in defence procurement and why despite reforms things are not on track. Without getting into micro-issues what is it that ails the process? At a macro-level, planning, defining the need, threat analysis, capability requirements, processing, approvals, budgetary considerations etc involves multiple stakeholders who have ‘little to converge’. Fundamental questions need to be answered- like who assesses capability of R&D, potential of Indian defence industry, needs of the services, process and procedural infirmities involving stakeholders cutting across finance, industry, commerce, and labour and more importantly within the MoD that is the Services, Defence Production, Defence Finance, Defence Acquisition, DRDO and the list goes on and on!
The challenge lies in synchronising these efforts cutting across all the stakeholders and give timely directions and decisions at the apex level. Each stakeholder has a responsibility which goes beyond raising observations and taking recourse to the rule book without finding solutions. Hence, none of the reforms and stated intentions can materialise in the manner expected until an Elusive Reform- Accountability is ushered in the complete process. Sadly, in the entire process there is not a single individual, agency, organisation which is accountable for anything! This accountability will define success or failure of the reforms. Creating an accountable culture with clear goals backed with mutual trust and psychological safety cutting across all stakeholders is imperative.
So how can this accountability be ensured? An empowered monitoring mechanism cum decision-making authority cutting across all stakeholders may be a solution. This is definitely beyond the scope of the project monitoring unit announced and proposed to be set up. One may also say that this task is laid down in the present framework of the DAP where there is periodic monitoring and review legislated within the charters of the existing structures and provisions. But the problem is again of a large number of stakeholders being involved. And thus, the need for constituting an overarching setup. Before attempting to give shape or structure to the authority/unit or body which needs to be constituted the charter, scope and tasks will need to be defined.
Listing the broad tasks which need steering and laying down of a clear road map at apex levels:
♦ Assessing the capabilities, task and direction of each stakeholder.
♦ Assessing the technology base of the industry as also having a national harnessing of R&D potential of the country.
♦ Aligning the needs of the Services to pragmatic threats and acquisitions.
♦ Monitoring and reviewing the achievement of each defence reform announced in a quantifiable parameter and assigning responsibilities for each.
♦ Time bound targets and deliverables in terms of budgetary requirements, capability development, technological enhancements, reinforcing industrial infrastructure with an eye on export potential.
♦ Conflict or perception resolution amongst stakeholders with focus on expeditious resolution of issues and bottlenecks.
♦ Review all ongoing cases where finalisation is held up! There are cases which are in this stage since two-three years.
♦ Review all cases held up for some policy issue or others even under the ambit of Inter Government Agreement etc. The need is to move ahead whichever way so that clarity emerges both for the user and suppliers.
♦ Review all cases where AONs have been taken and ascribe non-negotiable timelines.
A perusal of the above reflects that the entire capability development system has been a hostage to processes and does not have the wherewithal to assign responsibility and accountability for the outcomes. If the above is addressed there is bound to be traction to the process with momentum to capability building. Accountability and empowered monitoring hold the key, if brought in we may not need any reforms thereafter!!! We may even think of having empowered monitoring at the PMO level to help us realise the Hon’ble Prime Minister’s vision of Atmanirbhar Bharat.