Defence Procurement / Acquisition Regulator
The requirement of the defence procurement regulator was highlighted by the report of the Parliamentary standing committee which highlighted contradiction between actual defence procurements and budget estimates. To resolve such issues experts are of the opinion that the upcoming union Budget 2018 may announce a regulatory body for defence procurement.
Overall structure of defence procurements in India
Defence procurement is falls under the Department of Defence production (DPP).It takes place in accordance with the procedures mentioned in the Defence Procurement Policy.DPP defines the heads under which the acquisitions are to be done and provide guidelines regarding the procurement of those acquisitions. The procedure laid down in DPP was revised in 2016 which included a new category-‘Buy Indian-IDDM (indigenously designed developed and manufactured)’ to promote domestic manufacturing. Principally DPP conveys the manner through which procurement by the defence will be done. Following are the categories placed in decreasing order of priority:
- Buy (Indian-IDDM)
- Buy (Indian)
- Buy and Make (Indian)
- Buy and Make
- Buy (Global)
- Make
Buy (Indian-IDDM)
It is the new category added in the changed made in 2016 in DPP to give a fillip to make in India project of the government. It mandates that the product should contain at least 40% indigenous content if its designed, developed and manufactured in India. If it is not indigenously designed and developed then it should contain at least 60% indigenous content.
Buy (Indian)
It refers to the procurement of products from an Indian player having a minimum 40% indigenous content.
Buy and Make (Indian)
Indian company will tie up with the foreign OEM (original equipment manufacturers) and manufacture the equipment in India involving the transfer of technology. The acquisition under this category requires a minimum of 50% indigenous content.
Buy and Make
It involves procurement of equipments from a foreign vendor followed by indigenous production with transfer of technology. Condition of minimum Indigenous content will differ from contract to contract basis.
Buy(Global)
It refers procurement which is done from the foreign players and government to government route is adopted for such acquisitions
Make
It intends for indigenous design, development and manufacture of equipments with or without foreign collaboration. Here the projects are further subdivided with substantial funding coming from Ministry of Defence. In first category, government will refund 90% of the development cost. In second category, government will refund 100% of the development cost. Third category is reserved for MSMEs.
Need for defence procurement regulator
Today India is one of the largest importers of arms and other equipments. It is partially due to some of the mismanagements and unorganized patterns in our own country. First, the money we spend on our defence preparedness is far too less in comparison to most of the countries. Second, whatever money is sanctioned by the government is left underutilized by the Ministry of defence. It shows lack of effective institutional mechanisms for financial planning as well as for monitoring utilization of funds. Third, there is poor inter ministerial communication between Ministry of defence and ministry of finance and armed forces. Due to which there is delay in clearance of proposals by ministry of finance sent by defence ministry. In turn the finance Ministry blames defence ministry for underutilization of funds. Thus there is a spree of accusations and the overall consequence is that today our armed forces are grossly unequipped. It is high time we reflect on the question that are we spending enough money to ensure that the armed forces are combat ready.
How could a regulator help?
An independent defence regulator will improve coordination between different ministries. It will force all decision making entities to agree on a plan that is in line with the future requirements of the armed forces and finances of the country.
It will also ensure proper acquisition decisions by MoD, MoF, and armed forces. Most importantly planning and implementation of the procurement policy can better be overseen. Therefore the shortfalls can be resolved better by an independent regulator for defence acquisitions.
