Friday, August 16, 2019

DEFENSE CAPITAL PROCUREMENT AND NATIONAL THREAT PERCEPTION



  1. Introduction - Army Navy Airforce carries out big ticket capital procurement based on Defence Procurement Procedure (DPP) (Attached are Salient features of DPP as Annexure I). An important aspect of procurement process is Acceptance of Necessity (AoN). AoN is defined as follows - The services based on Staff Requirments makes a case before Defence Acquisition Council (DAC) and only after council accepts the necessity, a go ahead for procurement is given. This ensures acquisition is based on a national necessity and not subjective – an individual or head of institution and his whims and fancies. AoN has a validity of six months upwards depending upon which category acquisition is being made. A bench mark or ball park price is decided by a committee which is used not only for negotiations but also for projecting the budgetary requirements for the government to be included in making of the finance budget.

  1. Present Scenario - Currently it is felt that this AoN (s) given to the services are not well coordinated. In the sense the capital procurement based on threat perception of each service is good, but better would be capital procurement for three services based upon National Threat Perception (NTP). This will ensure following – Capital procurement would be more focused for the NTP and any kind of repetitions or any kind of attempt at expanding individual service inventory due to false possessiveness would be curbed. By doing this defense capital procurements of our nation can save thousands of crores of National exchequer. There are many examples to suggest this, but only one example is given here other examples cannot be elucidated here due to security reasons.  

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2.    Smart Fighter Planes - (I am quoting the 4 b. para from a letter sent to Late Manohar Parrikar by me, Thankfully only 36 Rafales were decided to be inducted instead of 100 + as per earlier UPA regime program) --------“Along with technology the combat scene has under gone a change and military aviation has grown into a superior tactical and strategic arm. Present day fighter aircrafts carryout tasks of several aircrafts in one single modern fighter aircraft. With the fantastic capabilities, the emphasis is not on numbers but it is on ‘smart’ capability. This can be seen from the fact that the Royal Air Force and the French Air Force, undertake world-wide commitments with just 225 aircraft of two types each, the French Air Force with the Rafale and Mirage-2000 and the Royal Air Force with Tornadoes and Typhoons. Now we have got a smart plane in Rafale. I heard a former Chief of Air Staff saying they require more Rafales. It is natural to ask for moon as a head of organization. No head of the organization would sincerely trim the organization except for private entrepreneurs. For public funded organizations we see that they get inflated over a period of time. There are 42 squadrons of MIG now slowly getting depleted. No Chief of Air Staff would say that with smart fighter planes we don’t require so many squadrons. Every organisation on public money tends to grow and never try to scale down the force. As a head of the three services I urge to look into this aspect - do we really need all 42 squadrons. 42 Squadrons were when MIG of low technology fighter was available.  I know that cutting down number of squadrons is not easy and opposition may make mountain out of a mole. At the same time there is no need to equip all squadrons with costly smart planes. That way we can have a healthy mix of smart and not so smart planes.” 

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3.    Tailpiece –As a nation we need to curb the tendencies of expanding the kingdom beyond requirement of NTP by each service and therefore the necessity to important to coordinate the Capital Procurement efforts for all three services. Procurement necessities based upon NTP when viewed from a platform which is at least one level above the Army Navy Airforce services would result in optimum procurement and coordinated spending. This will effect in savings in thousands of crores of Inventory which is over and above that of NTP requirement just to satisfy individual services hunger to expand their domain.

4.    Proposal - The NSA or CDS should be the level to decide coordinated capital procurement based upon the NTP.

Annexure I

The Salient Points of DPP

(a)  Long Term Integrated Perspective Plan  (LTIPP) - Procurement or Acquisition process of capital equipment starts LTIPP - with a service (Army, Navy and Airforce) asking for an equipment based on its threat perception and how the services should remain fighting fit in the next fifteen years. This long term plan is then shared with Indian industries so that they can decide, plan and be ready to participate. There are medium term plans of 5 years and yearly plans. The inputs are given to Ministry of Defence (Finance) and Finance ministry for getting budgetary support in yearly finance bill (budget).
                                     
(b)  Request for Information (RFI) – The acquisition process starts with RFI as the equipment which Army Airforce and Navy requires is unique according to threat perception and not available in open market or even if available it has to be changed as per threat perception – typical example 1 – Single engine helicopter that can hover at 6 km altitude (for Siachen Glacier) and carry 150 kg of payload – such an helicopter is not easily available in world market so it has to be designed and developed. Example 2 Nuclear Biological and Chemical detector - not available in open market and where available, that country would not allow for export of such a detector due to their country’s policy or not available due to sanctions.

(c)  General / Air/ Naval Staff Qualitative Requirements (GSQR/ ASR/ NSQR) - is a classified document and is based on threat perception gathered, acquisitions made by adversaries, their development plans and information about contemporary technology and equipment available. The documents consist of specifications of equipment which the services would like to acquire to remain fighting fit. Broadly care is taken that single vendor situation is not arised.

(d)  Acceptance of Necessity (AoN) - The services based on Staff Requirments makes a case before Defence Acquisition Council (DAC) and only after council accepts the necessity goes ahead for procurement is given. This ensures acquisition is based on a national necessity and not subjective – an individual or head of institution and his whims and fancies. AoN has a validity of six months upwards depending upon which category acquisition is being made. A bench mark or ball park price is decided by a committee which is used not only for negotiations but also for projecting the budgetary requirements for the government to be included in making of the finance budget.

(e)  Request for Proposal (RFP) - is made and it is kept as open source so that anyone interested can peruse, participate and field their equipment. 

(f)   Technical Evaluation Committee (TEC) - evaluates the equipment and out of many vendors some vendors who comply to the Staff requirements on paper are short listed. The short listed vendors are called for field trials and the claim is verified against the staff requirements.

(g)  Offsets - The key objective of the Defence Offset Policy is to leverage the capital acquisitions to develop Indian defence industry by fostering development of internationally competitive enterprises, augmenting capacity for Research, Design and Development related to defence products and encouraging development of synergistic sectors like civil aerospace and internal security. As per DPP for acquisitions more than 2000 cr, 30% of the cost of the project to be ploughed back to Indian businesses so that Indian business and industry grows. It is to be noted that in case of Rafale the offset is made 50%, which is more than stipulated in DPP. 

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