Defence Procurement Policy Business Essay

Published:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

… equipment remained under the purview of Government right from its inception. The Industrial Policy of the country had kept defence production in the public sector since the first Industrial Policy outlined in the Industry Policy Resolution of 1948. The Industries (Development & Regulation) Act, 1951 gave statutory base to the Industrial Policy. The considered decisions …

http://www.ciidefence.com/defenceindustry.asp

… has been under the purview of Government right from its inception. The Industrial Policy of the country had kept defence production in the public sector since First Industrial Policy outlined in the Industry Policy Resolution of 1948. The Industries (Development & Regulation) Act, 1951 gave statutory base to the Industrial Policy. Under this policy …

… considered decisions made of successive governments in favour of this policy left India dependent on foreign industries for its military hardware for almost 50 years.

Self-reliance does not preclude accessing external sources for technology and systems, or external help in any stage of the production cycle. It is the degree of dependency on external sources that is tested in the case of India's quest for self-reliance. India opted to choose an incremental path, in which it was necessary to continue to meet urgent requirements through imports while striving hard on achieving indigenous capabilities in defence production. However, the level of dependency over the years tilted in favour of imports over indeginisation owing to limited R &D capabilities, delayed project execution, substandard products and corruption.

3. The Chinese aggression in 1962 almost took the country by surprise and the lack of preparedness was evident from the outcome of the war. The war highlighted the shortcomings in the armed forces in terms of state of the art equipment and clothing and the need for self-reliance and self-sufficiency in defence production.ÿ Many believed this would be the watershed event in the history of Defence Production. To a certain extent it did have an influence and the defence production mechanism was revamped and the Department of Defence Production was set up. Among others the Department of Defence Supplies was created to forge linkages between the civil industries and defence production units. The period between1962 - 1990 also witnessed the setting up of 16 new OFs, but, little progress was made in the private sector which continued to contribute towards lower end technology products.

4. It was not until …

Students Paper:

… not until the era of liberalization, which began in 1991 that the role of private sector and also that of competition, both domestic and international started playing …

http://www.ciidefence.com/defenceindustry.asp

… industrialization. Since the era of liberalization, which began in 1991, the role of private sector and also that of competition, both domestic and international is playing …

… started playing a much greater part …

Students Paper:

… greater part in the national economy. Naturally, this also meant changes in policy for Defence production.ÿThe 1990s …

http://www.ciidefence.com/defenceindustry.asp

… greater role in the national economy. Naturally, this also meant changes in policy for Defence production.ÿ

Production …

… .ÿThe 1990s witnessed a series of far-reaching initiatives in the field of national security, of which defence industry was a critical component. This did lead to increased participation from the private sector in defence production , but, it was only by the turn of the century that the Indian manufacturing sector became internationally competitive with highest quality standards, efficiency and manufacturing facilities.

5. In 2001, the Defence Industry sector in India was opened to 100 % Indian private sector participation with foreign direct investment permissible up to 26 %. The Indian Defence Industry in the private sector is now gradually assuming the role of system integrator and manufacturer of complete defence equipment and systems. This is a major …

Students Paper:

… a major shift in the role of private sector in India from …

http://www.ciidefence.com/defenceindustry.asp

… a paradigm shift in the role of private sector in the field of …

… India from its earlier supporting role to the public sector by supplying raw materials and components, sub-systems etc. …

Students Paper:

… systems etc. With this policy change all defence related items have been removed from Reserved Category and transferred to the licensed category, as a result of which private sector can manufacture all types of defence equipment after getting a licence. Consequent to the Government's announcement about the policy change, Department of Industrial Policy & Promotion (DIPP) in consultation with Ministry of Defence, issued detailed guidelines regarding the modalities for consideration of applications for grant of Industrial Licence. After the announcement of policy changes, there has been a paradigm shift in the role of private sector in the field of indigenisation, i.e., from the role of supplier of raw materials, components, sub-systems, they have now become partners in the manufacture of complete advanced equipment/system. The basic objective of allowing private sector participation is to harness available expertise in the private sector towards the total defence efforts and search for self-reliance. In-built advantages of the private sector are its reservoir of management, scientific and technological skills coupled with its ability to raise resources. The involvement of private sector with its world-class expertise and high technology would not only augment India's indigenous defence production capability but also lead to creation of employment and infrastructure in the country, giving a strong impetus to the economy.

6. Indigenisation …

http://www.ciidefence.com/defenceindustry.asp

… both subject to licensing. Now with this policy change all defence related items have been removed from Reserved Category and transferred to the licensed category, as a result of which private sector can manufacture all types of defence equipment after getting a licence. Consequent to the Government's announcement about the policy change, Department of Industrial Policy & Promotion (DIPP) in consultation with Ministry of Defence, issued detailed guidelines regarding the modalities for consideration of applications for grant of Industrial Licence. After the announcement of policy changes, there has been a paradigm shift in the role of private sector in the field of indigenisation, i.e., from the role of supplier of raw materials, components, sub-systems, they have now become partners in the manufacture of complete advanced equipment/system. The basic objective of allowing private sector participation is to harness available expertise in the private sector towards the total defence efforts and search for self-reliance. In-built advantages of the private sector are its reservoir of management, scientific and technological skills coupled with its ability to raise resources. The involvement of private sector with its world-class expertise and high technology would not only augment India's indigenous defence production capability but also lead to creation of employment and infrastructure in the country, giving a strong impetus to the economy. It must …

… .

6. Indigenisation in defence production is now one of the major thrust areas of the Government. Consequently, our efforts are now directed towards reduction of defence imports and promoting indigenization in defence production sector with the active support of the Indian Defence Industry, both in the public as well as in the private sector. Various steps have been taken in this direction. Government has been periodically reviewing the Defence Procurement Policy with a view to lend greater transparency and impartiality as well as to speed up the acquisition process. The last such review has been undertaken recently, as a result of which amendments to the Defence Procurement Procedure 2008 - effective from November 2009 have been introduced.

7. …

Students Paper:

… introduced.

7. Procurement of defence equipment is a highly specialised activity needing extraordinary professional skills and unique attributes. It is an intricate and multifaceted process. It is not a routine governmental activity that can be performed by all with desired results. Some of the major peculiarities are as follows: -

ÿ

(a)ÿÿÿ Funds involved are very large and the quality of equipment selected has a profound influence on national defence potential.

(b) There …

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

… to appreciate that procurement of defence equipment is a highly specialised activity needing extraordinary professional skills and unique attributes. It is an intricate and multifaceted process. It is not a routine governmental activity that can be performed by all with desired results. Some of the major peculiarities are as follows: -

ÿ

ÿÿÿ Funds involved are very large and the quality of equipment selected has a profound influence on national defence potential.

There is …

… .

(b) …

Students Paper:

… potential.

(b) There is no open tendering. Invitations are sent to a few selected vendors. A fine balance has to be maintained between need for generating competition and security requirements.

(c) Most …

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

… defence potential.

There is no open tendering. Invitations are sent to a few selected vendors. A fine balance has to be maintained between need for generating competition and security requirements.

Most of …

… .

(c) …

Students Paper:

… requirements.

(c) Most of the sophisticated equipment has to be imported as the indigenous defence industry is still in a nascent stage.

(d) There …

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

… security requirements.

Most of the sophisticated equipment has to be imported as the indigenous defence industry is still in a nascent stage.

There are …

… .

(d) …

Students Paper:

… stage.

(d) There are a limited number of producers in the world market and still fewer are ready to part with their top of the line products. The problem gets compounded where technology transfer is sought as an essential part of the package.

(e) Major …

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

… nascent stage.

There are a limited number of producers in the world market and still fewer are ready to part with their top of the line products. The problem gets compounded where technology transfer is sought as an essential part of the package.

Major weapon …

… .

(e) …

Students Paper:

… package.

(e) Major weapon producers in the world are, in fact, systems integrators only. Various sub-assemblies are produced in different countries. This complicates the issues while negotiating life cycle support for the equipment, as the export policies of all of them have to be factored in.

(f) Countries …

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

… the package.

Major weapon producers in the world are, in fact, systems integrators only. Various sub-assemblies are produced in different countries. This complicates the issues while negotiating life cycle support for the equipment, as the export policies of all of them have to be factored in.

Countries have different norms for …

… .

(f) …

Students Paper:

… in.

(f) Countries have different norms for issuance of licence for export. Many impose riders on the usage of equipment. Yet, there are countries whose domestic laws preclude assured subsequent sustenance of the equipment bought.

(g) There …

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

… factored in.

Countries have different norms for issuance of licence for export. Many impose riders on the usage of equipment. Yet, there are countries whose domestic laws preclude assured subsequent sustenance of the equipment bought.

There are strong political …

… .

(g) …

Students Paper:

… bought.

(g) There are strong political and corporate lobbies at work to push their products. Defence procurements are intrinsically linked to a nation's foreign policy and diplomatic interests.

(h) As …

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

… equipment bought.

There are strong political and corporate lobbies at work to push their products. Defence procurements are intrinsically linked to a nation's foreign policy and diplomatic interests.

As there …

… .

(h) …

Students Paper:

… interests.

(h) As there is an element of secrecy in the procurement process, all decisions come under scrutiny subsequently. Therefore, it becomes essential to follow the procedure diligently. Deviations, if any, have to be accounted for. All decisions have to be and must be seen to be above board and in the country's interest. This also …

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

… and diplomatic interests.

As there is an element of secrecy in the procurement process, all decisions come under scrutiny subsequently. Therefore, it becomes essential to follow the procedure diligently. Deviations, if any, have to be accounted for. All decisions have to be and must be seen to be above board and in the country's interest.

Selection of …

… . This also makes the staff dealing with procurement over cautious, especially due to number of still ongoing inquiries after Tehelka.

(j) …

Students Paper:

… Tehelka.

(j) Selection of the most suitable equipment is a complex and time-consuming process as a large number of functionaries are involved.ÿÿ

(k) Fine …

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

… country's interest.

Selection of the most suitable equipment is a complex and time-consuming process as a large number of functionaries are involved.ÿÿ

Need for …

…

(k) Fine balance has to be maintained between asking for state of the art technology and availability of such technology for sale, while preparing the QRs.

Impediments In Procurement

8. Preparation of GSQR. A comprehensive study of recent cases reveals that faulty formulation of SQRs has been the principal cause for delay in most instances.ÿThe SQR is really the basic building block on which the complete edifice of the procurement system is based. The entire procurement process is directed towards getting the equipment, which satisfies the laid down SQRs. Deviations to SQRs can only be sanctioned by the Defense Minister on the recommendations of the Defense Procurement Board (DPB), and is a highly complex and time-consuming process.ÿPoorly conceived, formulated and drafted SQRs create confusion, lend themselves to misinterpretations, vitiate the environment, and cause immense delays. At times, the whole process has to be aborted at an advanced stage or a number of special dispensations obtained to regularize infirmities.

9. In order to prepare the SQR, the dealing directorate collects all available books on the equipment and glossy catalogues of the manufacturers. The best characteristics of all known equipment are compiled as essential requirements. Generally, there is a penchant to include as many features as possible to demonstrate enormity and exhaustiveness of the work done. As the draft travels upwards in official hierarchy, it gathers more parameters. Every officer feels that he must contribute his bit by suggesting additional provisions. The process thus goes on. Once the draft is circulated to other members of the approving committee, it receives further stipulations from the maintenance agencies, development organization and the quality control people. The final SQR takes the shape of a well-compiled `wish list' of utopian dimensions. Highly ambitious capabilities are sought without reference to their viability and achievability. Ambiguous characteristics like it should be rugged, it should be able to withstand field conditions etc, are invariably included in the SQR.

10. AoN Stage. The major reasons for delay in granting AoN are the political condition/ will and inability to justify the case by SH. In addition, turf war between services, objections by DRDO/ DDP etc also contribute to the delay.

11. Issue of RFP. RFP is a tender forwarded to selected vendors with a fixed date (usually three months) for response as per given format. Some of the reasons for causing delay are as under:-

(a) Vendor Base Analysis. Due to security reasons the RFP is not open to all like a normal tender, but is forwarded to selected vendors. Vendor base analysis is carried by the SHQ. In cases where costly and complex equipment are involved, invariably cases land up as single vendor cases or complaints from vendors are received for not including them in the vendors list, which leads to withdrawal of RFP thus delaying the case

(b) RFP includes various clauses like warranty, product support, offset, patent right, ToT, payment terms, exchange rate variation, integrity pact, fall, option clauses etc. there are cases wherein because these clauses were not formulated properly, RFP had to be withdrawn due to multiple interpretation of the clauses.

(c) Requirement of ToT/ MToT. The case requiring Tot/ MToT delay the RFP as there is a need to take inputs/ comments from experts. Moreover, more such cases are dropped as less number of vendors are willing to part with the technology.

12. TEC. Major reasons for delay are as under:-

(a) Delayed/ lack of response from the vendors to the queries of TEC.

(b) Need to avoid rejection of vendors on small issues and abide by the DPP wherein the equipment has to comply with all RFP SQR parameters.

(c) Requirement of taking departmental views of maintenance agency, production agency, DGQA etc, which is time consuming.

(d) Lack of accountability of MoD officials to stick to the time allotted for processing the file.

13. Trials. Present system of trials is very time consuming and involves number of agencies. Trials involve user trials (may include summer and winter trials), Technical and Environmental Evaluation, Maintainability Evaluation Trial (MET), EMI/EMC Evaluation and may be secrecy trials in certain cases. Facilities and agencies for these trials are located at different locations resulting in vendor moving his equipment to these locations.

14. Most of the trials are conducted at `No Cost No Commitment (NCNC) basis. Trials involve huge amount of expenditure by the vendors due to which number of vendors are not willing to participate in the trials.

15. Number of times the facilities required for trials are not available or are not adequate in order to keep pace with the number of equipment required to undergo the trials resulting in further delaying the trials.

16. More often than not the trial units are detailed solely on the basis of their location and units consider trials to be an irksome bother and treat them in a perfunctory manner. There is a tendency on the part of trial units and intermediate commanders to introduce new elements thereby vitiating the report. Focus of the trial team is invariably on finding the faults with the equipment with the of aim of recommending improvements without realizing that the equipment will be rejected with such report.

17. There is a tendency to validate same QR by more than one agency and giving contradictory opinions.

18. CNC. During the CNC …

Students Paper:

… the CNC invariably a battery of corporate lawyers, financial experts and executives trained in negotiation techniques represent the vendors. On the …

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

… for commercial negotiations. Invariably, a battery of corporate lawyers, financial experts and executives trained in negotiation techniques represent the vendor. They are …

… . On the other hand the staff negotiating with them lacks negotiating skills and financial knowledge. As per procedure, there is a need to bench mark the price before opening the commercial offer of the vendor. Due to poor financial knowledge, at times benchmarked price is totally different from the price quoted by the vendor, resulting in prolonged negotiations

19. Post Contract Delays. Inability of the vendor to produce the equipment in large quantity, especially complex equipment like guns , tanks, aircrafts etc.

20. Requirement of Pre Dispatch Inspection (PDI) and Joint Receipt and Inspection (JRI) by specialists which is time consuming.

21. Certain govt rulings like necessity of dispatching the equipment through Shipping Corporation of India, add to the delay.

22. Misc.

(a) Tenure. The officials involved in procurement have limited tenure with no back ground knowledge of the procedures. This is true for officials in SHQ as well as in MoD. This has been found to be one of the causes for slow acquisition process.

(b) Requirement of Integration of Equipment. Most of the time there is a requirement to integrate the equipment being procured with the in service equipment. This leads to less number of vendors willing to come forward for bidding and also failure of the project due to inability of a willing vendor to integrate the equipment successfully.

(c) Influence by Variour Lobbies. Various political and corporate lobbies try to influence the case fro their vested interest. At times retired army officers are also involved in the same. Frequent complaints/ anonymous letters are received by RM/MoD/ SHQ resulting in tremendous time being spent by the staff to resolve the issue/ prepare replies and number of times cases are dropped due to such complaints.

(d) Political Situation in the Country. Political situation in the country plays a major role in the procurement as major decisions of granting the AoN is taken by the DAC. It has been seen that no such decisions are taken by the DAC when govt is about to change or the ruling party is busy in a major political activity like by polls etc.

(e) Need for Indigenisation. There has always been a quest for self-reliance. India, for a long time, has always been encouraging indigenous production. However, it has been only depending on PSUs and DRDO, which somehow have not performed upto the expectations. Delayed projects, poor quality products have been the trademark of these organizations.

(f) Dealing With Irregularity. Due to the sheer amount of money involved, defence deals and irregularities/ bribes/ corruption always go hand I hand. It has been seen that while dealing with irregularity, the action taken by the govt were in such haste that modernization of the forces has suffered. In many cases major vendors have been banned while the enquiry is going on. While taking such actions, govt should keep national interest in mind. In the case banning of Bofors, we lost in terms of utilizing the technology transfer for which money was already paid. Latest case of banning of Singapore Technology has put our acquisition of 155 mm ULH on hold.

http://www.ciidefence.com/defenceindustry.asp?id=1

Deba R. Mohanty Changing Times?India's Defence Industry in the 21st Century

R. D. Pradhan, Debacle to revival: Y.B. Chavan as Defence Minister, 1962-65, Orient Blackswan, 1999, pp.134

ÿ

Kaushik Roy, Armed Forces of Independent India 1947-2006, Manohar Publishers and Distributors, 2010, pp.319.

http://www.ciidefence.com/defenceindustry.asp?id=1

http://www.defense-aerospace.com/article-view/verbatim/112343/indian-ministers-talk-up-defense-opportunities.html

http://www.ciidefence.com/defenceindustry.asp?id=1

http://www.defense-aerospace.com/article-view/verbatim/112343/indian-ministers-talk-up-defense-opportunities.html

List of plagiarised documents

    

13%

http://www.ciidefence.com/defenceindustry.asp

    

13%

http://eng.expoclub.ru/db/exhibition/view/4631/

    

13%

http://www.scribd.com/doc/17129069/Defence

    

12%

http://www.bharat-rakshak.com/SRR/2005/03/37-quality-of-acquisition-staff-a-key-factor-in-defence-procurements.html

    

9%

http://www.bharat-rakshak.com/SRR/Volume12/suman.html

    

9%

http://www.bharat-rakshak.com/SRR/index.php?option=com_contentHYPERLINK "http://www.bharat-rakshak.com/SRR/index.php?option=com_content&task=view&id=15&Itemid=1"&HYPERLINK "http://www.bharat-rakshak.com/SRR/index.php?option=com_content&task=view&id=15&Itemid=1"task=viewHYPERLINK "http://www.bharat-rakshak.com/SRR/index.php?option=com_content&task=view&id=15&Itemid=1"&HYPERLINK "http://www.bharat-rakshak.com/SRR/index.php?option=com_content&task=view&id=15&Itemid=1"id=15HYPERLINK "http://www.bharat-rakshak.com/SRR/index.php?option=com_content&task=view&id=15&Itemid=1"&HYPERLINK "http://www.bharat-rakshak.com/SRR/index.php?option=com_content&task=view&id=15&Itemid=1"Itemid=1

    

8%

http://www.defense-aerospace.com/article-view/verbatim/112343/indian-ministers-talk-up-defense-opportunities.html

    

8%

http://www.defense-aerospace.com/articles-view/verbatim/4/112343/indian-ministers-talk-up-defense-opportunities.html

    

6%

http://indiacurrentaffairs.org/growth-of-private-defence-industry-encouraging-raj-kumar-singh/

    

6%

http://www.defpro.com/news/details/13190/print/

    

6%

http://www.info4security.com/story.asp?storycode=4124164

    

3%

http://mod.nic.in/product⊃p/body.htm

    

3%

http://undergroundmines.blogspot.com/2010/06/mod.html

    

3%

http://www.freemarketsdefence.com/show_content.asp?cid=10

    

2%

http://www.businesswire.com/news/home/20101222005342/en/Research-Markets-Competitive-Analysis-Industrial-Computer-Market

    

2%

http://finance.optonline.net/optonline/?GUID=16201136HYPERLINK "http://finance.optonline.net/optonline/?GUID=16201136&Page=MEDIAVIEWER"&HYPERLINK "http://finance.optonline.net/optonline/?GUID=16201136&Page=MEDIAVIEWER"Page=MEDIAVIEWER

    

2%

http://www.globalsecurity.org/military/world/india/industry.htm

    

2%

http://www.info4security.com/story.asp?storycode=4124163

    

2%

http://digitalproducer.digitalmedianet.com/articles/viewarticle.jsp?id=1296531

    

2%

http://finance.minyanville.com/minyanville/news/read?GUID=16201136

    

2%

http://finance.sfgate.com/hearst.sfgate/news/read?GUID=16201136

    

2%

http://www.pcb007.com/pages/zone.cgi?a=73442

    

2%

http://finance.nrn.com/nrn/news/read?GUID=16201136

    

2%

http://financial.businessinsider.com/siliconalleymedia.clusterstock/news/read?GUID=16201136

    

2%

http://finance.bnet.com/bnet/news/read?GUID=16201136

    

2%

http://markets.about.com/about/news/read?GUID=16201136

    

2%

http://markets.sltrib.com/mng-sltrib/news/read?GUID=16201136

    

2%

http://investor.wedbush.com/wedbush/news/read?GUID=16201136

    

2%

http://www.pr-inside.com/research-and-markets-get-a-competitive-r2319362.htm

    

1%

http://www.business-standard.com/common/news_article.php?leftnm=pressHYPERLINK "http://www.business-standard.com/common/news_article.php?leftnm=press&bKeyFlag=BO&autono=332584"&HYPERLINK "http://www.business-standard.com/common/news_article.php?leftnm=press&bKeyFlag=BO&autono=332584"bKeyFlag=BOHYPERLINK "http://www.business-standard.com/common/news_article.php?leftnm=press&bKeyFlag=BO&autono=332584"&HYPERLINK "http://www.business-standard.com/common/news_article.php?leftnm=press&bKeyFlag=BO&autono=332584"autono=332584

    

0%

http://mod.nic.in/samachar/sept15-02/html/ch9.htm

    

0%

http://anja-athirdeye.blogspot.com/2009_06_01_archive.html

    

0%

http://21stcenturysocialism.com/article/how_china_rises_01546.html

    

0%

http://www.inhouselawyer.co.uk/index.php/india/6921-new-rules-for-indias-defence-procurement

    

0%

http://www.defence.pk/forums/military-forum/48238-evolution-defence-trade.html

    

0%

http://maravi.blogspot.com/2010_05_23_archive.html

    

0%

http://164.100.24.167/book2/reports/indus/185threport.htm

    

0%

http://www.raf.mod.uk/pmdair/rafcms/mediafiles/FD08F7B9_5056_A318_A8ACF0E45FD99272.doc

    

0%

http://www.docstoc.com/docs/38407455/DEFENCE-ENVIRONMENT-AND-SAFETY-REPORT

    

0%

http://prosperingindianpowersector.blogspot.com/2010_12_01_archive.html

    

0%

http://www.docstoc.com/docs/13351830/Strategic-defence-review-white-paper

    

0%

http://www.tribuneindia.com/2006/20061025/cth1.htm

    

0%

http://www.iob.in/uploads/rfp8-2008.doc

    

0%

http://www.slideshare.net/shonethattil/indian-cement-industry-report

    

0%

http://www.zimbabwesituation.com/nov30b_2007.html

    

0%

http://gpa.gaports.com/purchasing/webbids.nsf/8882dbdb9fa692498525697400733def/54554b8216d4c7a7852570fa0055a28b/$FILE/ATAMS%20RFP%201.18.06.doc

    

0%

http://www.financialexpress.com/news/column-allow-fdi-in-defence/567429/

    

0%

http://www.scottish.parliament.uk/business/pqa/wa-08/wa0306.htm

    

0%

http://www.scribd.com/doc/33304214/Indian-Cement-Industry-Report

    

0%

http://maravi.blogspot.com/2008_12_14_archive.html

    

0%

http://forum.pakistanidefence.com/lofiversion/index.php/t27425-550.html

    

0%

http://www.docstoc.com/docs/39845376/SIERRA-LEONE-VISION-2025-SWEET-SALONE

    

0%

https://www.centralbankofindia.co.in/Site/TenderFile.aspx?ID=575

    

0%

http://gabbai.com/category/academic/engd-thesis

    

0%

http://www.pprune.org/archive/index.php/t-163033.html

    

0%

http://worldwidescience.org/topicpages/a/acquisition+system+proposal.html

    

0%

http://www.zimbabwesituation.com/dec10a_2005.html

    

0%

http://www.niassembly.gov.uk/record/reports2009/090921.htm

    

0%

http://taxindiaonline.com/RC2/union_budget/bspeech/bs1986.htm

    

0%

http://www.pprune.org/archive/index.php/t-109805.html

    

0%

http://theindiaeconomy.blogspot.com/2009_03_01_archive.html

    

0%

http://www.skyscrapercity.com/archive/index.php/t-1050393.html

    

0%

http://www.parliament.uk/deposits/depositedpapers/2010/DEP2010-0973.doc

    

0%

http://www.theshillongtimes.com/c-16-Oct.htm

    

0%

http://www.publications.parliament.uk/pa/cm200506/cmselect/cmdfence/uc824-ii/uc82402.htm

    

0%

http://www.scribd.com/doc/12712608/Country-Survey-Pakistan

    

0%

http://theindiaeconomy.blogspot.com/feeds/posts/default?orderby=updated

    

0%

http://www.faqs.org/sec-filings/091102/MANNKIND-CORP_10-Q/

    

0%

http://www.skyscrapercity.com/archive/index.php/t-209449-p-2.html

    

0%

http://www.npac.com/documents/docs/il_rfp.doc

    

0%

http://www.docstoc.com/docs/37658864/DEFENCE-and-SECURITY

    

0%

http://blog.nsnet.com/index.php?itemid=671

    

0%

http://finance.boston.com/boston/action/getedgarwindow?accesscode=95013503002984

    

0%

http://www.stepaheadresearch.co.uk/uploads/files/SW%20ICT%20Large%20Organisations%20-%20final%20draft%207%20August.doc

    

0%

http://www.defence.pk/forums/military-forum/60695-crossing-borders.html

    

0%

http://scottish-parliament.net/business/motionsAndAmendments/motions.htm

    

0%

http://www.wordsword.in/defence%20industry.htm

    

0%

http://www.www1.zimbabwesituation.com/jun23b_2006.html

Master document text

CHAPTER IV

DEFENCE PROCUREMENT POLICY

A nation's military strength is determined by its economic might, as the Industry provides the military with the wherewithal to fight the nation's wars. India's desire to achieve self-reliance has always been there, but, constraints of technology and resources have prevented the process from fructifying to the extent desired. Since independence, the policy relating to Strategic Defence Production has been evolving. Production of defence equipment remained under the purview of Government right from its inception. The Industrial Policy of the country had kept defence production in the public sector since the first Industrial Policy outlined in the Industry Policy Resolution of 1948. The Industries (Development & Regulation) Act, 1951 gave statutory base to the Industrial Policy. The considered decisions made of successive governments in favour of this policy left India dependent on foreign industries for its military hardware for almost 50 years.

Self-reliance does not preclude accessing external sources for technology and systems, or external help in any stage of the production cycle. It is the degree of dependency on external sources that is tested in the case of India's quest for self-reliance. India opted to choose an incremental path, in which it was necessary to continue to meet urgent requirements through imports while striving hard on achieving indigenous capabilities in defence production. However, the level of dependency over the years tilted in favour of imports over indeginisation owing to limited R &D capabilities, delayed project execution, substandard products and corruption.

3. The Chinese aggression in 1962 almost took the country by surprise and the lack of preparedness was evident from the outcome of the war. The war highlighted the shortcomings in the armed forces in terms of state of the art equipment and clothing and the need for self-reliance and self-sufficiency in defence production.ÿ Many believed this would be the watershed event in the history of Defence Production. To a certain extent it did have an influence and the defence production mechanism was revamped and the Department of Defence Production was set up. Among others the Department of Defence Supplies was created to forge linkages between the civil industries and defence production units. The period between1962 - 1990 also witnessed the setting up of 16 new OFs, but, little progress was made in the private sector which continued to contribute towards lower end technology products.

4. It was not until the era of liberalization, which began in 1991 that the role of private sector and also that of competition, both domestic and international started playing a much greater part in the national economy. Naturally, this also meant changes in policy for Defence production.ÿThe 1990s witnessed a series of far-reaching initiatives in the field of national security, of which defence industry was a critical component. This did lead to increased participation from the private sector in defence production , but, it was only by the turn of the century that the Indian manufacturing sector became internationally competitive with highest quality standards, efficiency and manufacturing facilities.

5. In 2001, the Defence Industry sector in India was opened to 100 % Indian private sector participation with foreign direct investment permissible up to 26 %. The Indian Defence Industry in the private sector is now gradually assuming the role of system integrator and manufacturer of complete defence equipment and systems. This is a major shift in the role of private sector in India from its earlier supporting role to the public sector by supplying raw materials and components, sub-systems etc. With this policy change all defence related items have been removed from Reserved Category and transferred to the licensed category, as a result of which private sector can manufacture all types of defence equipment after getting a licence. Consequent to the Government's announcement about the policy change, Department of Industrial Policy & Promotion (DIPP) in consultation with Ministry of Defence, issued detailed guidelines regarding the modalities for consideration of applications for grant of Industrial Licence. After the announcement of policy changes, there has been a paradigm shift in the role of private sector in the field of indigenisation, i.e., from the role of supplier of raw materials, components, sub-systems, they have now become partners in the manufacture of complete advanced equipment/system. The basic objective of allowing private sector participation is to harness available expertise in the private sector towards the total defence efforts and search for self-reliance. In-built advantages of the private sector are its reservoir of management, scientific and technological skills coupled with its ability to raise resources. The involvement of private sector with its world-class expertise and high technology would not only augment India's indigenous defence production capability but also lead to creation of employment and infrastructure in the country, giving a strong impetus to the economy.

6. Indigenisation in defence production is now one of the major thrust areas of the Government. Consequently, our efforts are now directed towards reduction of defence imports and promoting indigenization in defence production sector with the active support of the Indian Defence Industry, both in the public as well as in the private sector. Various steps have been taken in this direction. Government has been periodically reviewing the Defence Procurement Policy with a view to lend greater transparency and impartiality as well as to speed up the acquisition process. The last such review has been undertaken recently, as a result of which amendments to the Defence Procurement Procedure 2008 - effective from November 2009 have been introduced.

7. Procurement of defence equipment is a highly specialised activity needing extraordinary professional skills and unique attributes. It is an intricate and multifaceted process. It is not a routine governmental activity that can be performed by all with desired results. Some of the major peculiarities are as follows: -

ÿ

(a)ÿÿÿ Funds involved are very large and the quality of equipment selected has a profound influence on national defence potential.

(b) There is no open tendering. Invitations are sent to a few selected vendors. A fine balance has to be maintained between need for generating competition and security requirements.

(c) Most of the sophisticated equipment has to be imported as the indigenous defence industry is still in a nascent stage.

(d) There are a limited number of producers in the world market and still fewer are ready to part with their top of the line products. The problem gets compounded where technology transfer is sought as an essential part of the package.

(e) Major weapon producers in the world are, in fact, systems integrators only. Various sub-assemblies are produced in different countries. This complicates the issues while negotiating life cycle support for the equipment, as the export policies of all of them have to be factored in.

(f) Countries have different norms for issuance of licence for export. Many impose riders on the usage of equipment. Yet, there are countries whose domestic laws preclude assured subsequent sustenance of the equipment bought.

(g) There are strong political and corporate lobbies at work to push their products. Defence procurements are intrinsically linked to a nation's foreign policy and diplomatic interests.

(h) As there is an element of secrecy in the procurement process, all decisions come under scrutiny subsequently. Therefore, it becomes essential to follow the procedure diligently. Deviations, if any, have to be accounted for. All decisions have to be and must be seen to be above board and in the country's interest. This also makes the staff dealing with procurement over cautious, especially due to number of still ongoing inquiries after Tehelka.

(j) Selection of the most suitable equipment is a complex and time-consuming process as a large number of functionaries are involved.ÿÿ

(k) Fine balance has to be maintained between asking for state of the art technology and availability of such technology for sale, while preparing the QRs.

Impediments In Procurement

8. Preparation of GSQR. A comprehensive study of recent cases reveals that faulty formulation of SQRs has been the principal cause for delay in most instances.ÿThe SQR is really the basic building block on which the complete edifice of the procurement system is based. The entire procurement process is directed towards getting the equipment, which satisfies the laid down SQRs. Deviations to SQRs can only be sanctioned by the Defense Minister on the recommendations of the Defense Procurement Board (DPB), and is a highly complex and time-consuming process.ÿPoorly conceived, formulated and drafted SQRs create confusion, lend themselves to misinterpretations, vitiate the environment, and cause immense delays. At times, the whole process has to be aborted at an advanced stage or a number of special dispensations obtained to regularize infirmities.

9. In order to prepare the SQR, the dealing directorate collects all available books on the equipment and glossy catalogues of the manufacturers. The best characteristics of all known equipment are compiled as essential requirements. Generally, there is a penchant to include as many features as possible to demonstrate enormity and exhaustiveness of the work done. As the draft travels upwards in official hierarchy, it gathers more parameters. Every officer feels that he must contribute his bit by suggesting additional provisions. The process thus goes on. Once the draft is circulated to other members of the approving committee, it receives further stipulations from the maintenance agencies, development organization and the quality control people. The final SQR takes the shape of a well-compiled `wish list' of utopian dimensions. Highly ambitious capabilities are sought without reference to their viability and achievability. Ambiguous characteristics like it should be rugged, it should be able to withstand field conditions etc, are invariably included in the SQR.

10. AoN Stage. The major reasons for delay in granting AoN are the political condition/ will and inability to justify the case by SH. In addition, turf war between services, objections by DRDO/ DDP etc also contribute to the delay.

11. Issue of RFP. RFP is a tender forwarded to selected vendors with a fixed date (usually three months) for response as per given format. Some of the reasons for causing delay are as under:-

(a) Vendor Base Analysis. Due to security reasons the RFP is not open to all like a normal tender, but is forwarded to selected vendors. Vendor base analysis is carried by the SHQ. In cases where costly and complex equipment are involved, invariably cases land up as single vendor cases or complaints from vendors are received for not including them in the vendors list, which leads to withdrawal of RFP thus delaying the case

(b) RFP includes various clauses like warranty, product support, offset, patent right, ToT, payment terms, exchange rate variation, integrity pact, fall, option clauses etc. there are cases wherein because these clauses were not formulated properly, RFP had to be withdrawn due to multiple interpretation of the clauses.

(c) Requirement of ToT/ MToT. The case requiring Tot/ MToT delay the RFP as there is a need to take inputs/ comments from experts. Moreover, more such cases are dropped as less number of vendors are willing to part with the technology.

12. TEC. Major reasons for delay are as under:-

(a) Delayed/ lack of response from the vendors to the queries of TEC.

(b) Need to avoid rejection of vendors on small issues and abide by the DPP wherein the equipment has to comply with all RFP SQR parameters.

(c) Requirement of taking departmental views of maintenance agency, production agency, DGQA etc, which is time consuming.

(d) Lack of accountability of MoD officials to stick to the time allotted for processing the file.

13. Trials. Present system of trials is very time consuming and involves number of agencies. Trials involve user trials (may include summer and winter trials), Technical and Environmental Evaluation, Maintainability Evaluation Trial (MET), EMI/EMC Evaluation and may be secrecy trials in certain cases. Facilities and agencies for these trials are located at different locations resulting in vendor moving his equipment to these locations.

14. Most of the trials are conducted at `No Cost No Commitment (NCNC) basis. Trials involve huge amount of expenditure by the vendors due to which number of vendors are not willing to participate in the trials.

15. Number of times the facilities required for trials are not available or are not adequate in order to keep pace with the number of equipment required to undergo the trials resulting in further delaying the trials.

16. More often than not the trial units are detailed solely on the basis of their location and units consider trials to be an irksome bother and treat them in a perfunctory manner. There is a tendency on the part of trial units and intermediate commanders to introduce new elements thereby vitiating the report. Focus of the trial team is invariably on finding the faults with the equipment with the of aim of recommending improvements without realizing that the equipment will be rejected with such report.

17. There is a tendency to validate same QR by more than one agency and giving contradictory opinions.

18. CNC. During the CNC invariably a battery of corporate lawyers, financial experts and executives trained in negotiation techniques represent the vendors. On the other hand the staff negotiating with them lacks negotiating skills and financial knowledge. As per procedure, there is a need to bench mark the price before opening the commercial offer of the vendor. Due to poor financial knowledge, at times benchmarked price is totally different from the price quoted by the vendor, resulting in prolonged negotiations

19. Post Contract Delays. Inability of the vendor to produce the equipment in large quantity, especially complex equipment like guns , tanks, aircrafts etc.

20. Requirement of Pre Dispatch Inspection (PDI) and Joint Receipt and Inspection (JRI) by specialists which is time consuming.

21. Certain govt rulings like necessity of dispatching the equipment through Shipping Corporation of India, add to the delay.

22. Misc.

(a) Tenure. The officials involved in procurement have limited tenure with no back ground knowledge of the procedures. This is true for officials in SHQ as well as in MoD. This has been found to be one of the causes for slow acquisition process.

(b) Requirement of Integration of Equipment. Most of the time there is a requirement to integrate the equipment being procured with the in service equipment. This leads to less number of vendors willing to come forward for bidding and also failure of the project due to inability of a willing vendor to integrate the equipment successfully.

(c) Influence by Variour Lobbies. Various political and corporate lobbies try to influence the case fro their vested interest. At times retired army officers are also involved in the same. Frequent complaints/ anonymous letters are received by RM/MoD/ SHQ resulting in tremendous time being spent by the staff to resolve the issue/ prepare replies and number of times cases are dropped due to such complaints.

(d) Political Situation in the Country. Political situation in the country plays a major role in the procurement as major decisions of granting the AoN is taken by the DAC. It has been seen that no such decisions are taken by the DAC when govt is about to change or the ruling party is busy in a major political activity like by polls etc.

(e) Need for Indigenisation. There has always been a quest for self-reliance. India, for a long time, has always been encouraging indigenous production. However, it has been only depending on PSUs and DRDO, which somehow have not performed upto the expectations. Delayed projects, poor quality products have been the trademark of these organizations.

(f) Dealing With Irregularity. Due to the sheer amount of money involved, defence deals and irregularities/ bribes/ corruption always go hand I hand. It has been seen that while dealing with irregularity, the action taken by the govt were in such haste that modernization of the forces has suffered. In many cases major vendors have been banned while the enquiry is going on. While taking such actions, govt should keep national interest in mind. In the case banning of Bofors, we lost in terms of utilizing the technology transfer for which money was already paid. Latest case of banning of Singapore Technology has put our acquisition of 155 mm ULH on hold.

http://www.ciidefence.com/defenceindustry.asp?id=1

Deba R. Mohanty Changing Times?India's Defence Industry in the 21st Century

R. D. Pradhan, Debacle to revival: Y.B. Chavan as Defence Minister, 1962-65, Orient Blackswan, 1999, pp.134

ÿ

Kaushik Roy, Armed Forces of Independent India 1947-2006, Manohar Publishers and Distributors, 2010, pp.319.

http://www.ciidefence.com/defenceindustry.asp?id=1

http://www.defense-aerospace.com/article-view/verbatim/112343/indian-ministers-talk-up-defense-opportunities.html

http://www.ciidefence.com/defenceindustry.asp?id=1

http://www.defense-aerospace.com/article-view/verbatim/112343/indian-ministers-talk-up-defense-opportunities.html

Writing Services

Essay Writing
Service

Find out how the very best essay writing service can help you accomplish more and achieve higher marks today.

Assignment Writing Service

From complicated assignments to tricky tasks, our experts can tackle virtually any question thrown at them.

Dissertation Writing Service

A dissertation (also known as a thesis or research project) is probably the most important piece of work for any student! From full dissertations to individual chapters, we’re on hand to support you.

Coursework Writing Service

Our expert qualified writers can help you get your coursework right first time, every time.

Dissertation Proposal Service

The first step to completing a dissertation is to create a proposal that talks about what you wish to do. Our experts can design suitable methodologies - perfect to help you get started with a dissertation.

Report Writing
Service

Reports for any audience. Perfectly structured, professionally written, and tailored to suit your exact requirements.

Essay Skeleton Answer Service

If you’re just looking for some help to get started on an essay, our outline service provides you with a perfect essay plan.

Marking & Proofreading Service

Not sure if your work is hitting the mark? Struggling to get feedback from your lecturer? Our premium marking service was created just for you - get the feedback you deserve now.

Exam Revision
Service

Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.