Stuck! The wait for India's new defence procurement policy

by Ajai Shukla

Business Standard, 14th July 08

The Ministry of Defence (MoD) has finalised the new rulebook for India’s arms procurement, the Defence Procurement Policy of 2008 (DPP-2008). While domestic defence producers and global arms corporations wait, the unveiling of the policy --- already delayed by several months --- is on hold. That is because the Defence Minister wants to personally announce the new policy amidst suitable fanfare, but he cannot spare the time. Mr Antony is occupied with mustering MPs for the Congress Party’s trust vote in Parliament on the 22nd of July. As a result, many Indian defence companies will be attending the Farnborough Air Show in the UK, from 14th to 20th July --- a major opportunity for defence tie-ups --- without the policy clarity so essential for doing business.

This inauspicious beginning to DPP-2008 raises apprehension that the new policy may fare no better than its predecessor, DPP-2006. The success of any policy is only partly measured by how well it is framed; more important is how it is implemented. DPP-2006 held up as its most important change a new “Make” procedure, through which urgently needed arms or equipment could be developed and manufactured by Indian manufacturers, including private companies. In the lifetime of DP-2006, however, not one piece of equipment was successfully developed under the “Make” procedure.

The MoD must take the blame for that utter failure. Any programme under the “Make” category needs to fulfil a military requirement spelt out under the tri-service Long Term Integrated Perspective Plan, or LTIPP. This 15-year roadmap was originally supposed to detail all modernisation from 2002-2017. Based upon this, the MoD was to plan procurement and funding for the 10th, 11th and 12th Defence Plans for that 15-year period.

None of this happened. A CAG report (No 4 of 2007) reveals that in 2006, with four years of the 10th Defence Plan gone and no LTIPP in sight, the MoD decided to revise the period covered by the LTIPP; it would now be from 2007-2022, covering the 11th, 12th and 13th Defence Plans. The revised LTIPP has still not seen the light of day. Instead, the MoD told the 14th Lok Sabha’s Standing Committee on Defence that the LTIPP would be finalised in 2009.

So the 10th Defence Plan was implemented without the longer-term framework of the LTIPP. The first two years of the 11th Defence Plan have also gone by without an LTIPP. Unsurprisingly, therefore, the 11th Defence Plan, covering the period 2007-2012, has not been approved either. So for the last seven years, tens of thousands of crores have been allocated for defence on a year-by-year basis, without any medium-term or long-term articulation of how this money should be spent.

The lip service being paid to the indigenisation of defence through the “Make” procedure in DPP-2006 and DPP-2008 also stands exposed by the MoD’s failure to nominate suitable private companies as “Raksha Utpadan Ratnas”, or RuRs. These RuRs, promises the “Make” procedure, will get government funding for developing important military equipment. But the nomination of RuRs remains stalled by pressure on the defence minister from the trade unions of defence PSUs, which apprehend that they would be put out of business by a more efficient private sector.

None of this is surprising, considering how little mind space politicians or the public have for the hard calculations of national security. Framing DPP-2008 was relatively easy; the MoD’s more difficult challenge remains to make it yield results.