MoD breaks its own rules to favour its PSU

The Samyukta EW system, in which the DRDO partnered Tata Power SED to create fully-indigenous Control Centres

(3-article series on: DPSU Dadagiri: hanging onto monopoly)

By Ajai Shukla

Business Standard, 12th Feb 2010

Uncertainty hangs over one of India’s most strategically vital Electronic Warfare (EW) programmes after the Ministry of Defence violated its own procurement rules by handing it over on a plate to Bharat Electronics Limited (BEL).

The Rs 2000 crore project for developing a “Track and Wheel Based EW System” was first offered to several vendors (MoD letter No B/50529/TWBEWS/ SURAJ dated 12th June 08). Three months later, inexplicably, the MoD discarded competitive bidding and categorised the system as “BUY INDIAN BEL”. No such category exists in the MoD’s Defence Procurement Procedures of 2006 and 2008 (DPP-2006; and DPP-2008). The CAG, the CVC and the Ministry of Finance have repeatedly stressed on the need to ensure multi-vendor bidding.

In doing BEL this favour, the MoD overlooked the claims of companies like L&T, Axis, and Tata Power Strategic Electronics Division (SED), the firm that Dr APJ Abdul Kalam, called up IN the late 1990s to help develop the Samyukta, India’s first major EW system. So vital was Tata Power SED to the Samyukta that, at a time when the private sector was not allowed into defence production, a special gazette notification designated the company a “Gazetted Work Centre” for the Samyukta.

Emailed a questionnaire on this violation of rules in favour of BEL, the MoD has not responded.

Electronic Warfare is modern warfare’s crucial fourth dimension. The winner of the physical contest on land, sea and air, is increasingly decided through an unseen battle fought over the electromagnetic spectrum. In this Electronic Warfare (or EW), each side scans the enemy’s radio, radar and data transmissions, taking in his operating frequencies and monitoring his plans. At a key point in battle those frequencies are crippled by powerful electromagnetic surges, leaving the enemy directionless and blind.

For obvious reasons of security, serious militaries all demand indigenous EW systems. In the Samyukta project, Tata Power SED produced an entirely Indian Control Centre, the heart of the system. Rahul Chaudhry, CEO, Tata Power SED, elaborates, “Our engineers wrote a million lines of code for the Samyukta. We also produced the ruggedised control workstations, entirely renouncing any support from foreign entities.”

In contrast to Tata Power SED’s indigenous effort, Business Standard has learned that BEL’s share of the Samyukta, including the crucial radio sub-systems, imported the bulk of its components from vendors that included Thales (France); Rhode & Shwartz (Germany); and Elisra (Israel).

But the Minister of State for Defence Production, MM Pallam Raju, justifies this preferential treatment to BEL, one of its 8 Defence Public Sector Units (DPSUs), the profit of which goes to the MoD. Pallam Raju told Business Standard, “I think that we have a responsibility to the DPSUs since [their] ownership rests with the Government of India… I have observed the capabilities and capacities built up in the DPSUs, and it will be very difficult to replicate them today. So having built up these capabilities and capacities, it is important to utilise these assets in the service of the nation.”

BEL’s windfall in being assured a large order of the “Track and Wheel Based EW System” will allow it to aggressively subsidise several other EW projects that are being tendered, including the Rs 1300-1400 crore “Integrated Electronic Warfare System (IEWS) for Mountain Terrain” and the IEWS for Cross Country and Desert Terrain.

Private industry sources complain that this extraordinary favour to BEL comes even as the military courts the private sector in building defence industrial capability. In July 2005, the Headquarters Integrated Defence Staff (HQ IDS) shared its long term perspective plan --- entitled “Technology Development for Joint War Fighting Capability” --- with private industry, after which several private companies sunk money into developing the identified technologies, including EW technology.

With BEL poised to corner the profit, private companies that sank tens of crores into technology development say they have no option but to market their crucial software codes. Overseas EW integrators are looking for suitable Indian software as a method of discharging their offset obligations. That entails the danger of EW software codes finding their way into commercially available EW systems, available to countries inimical to India.

(Tomorrow: On a short fuze: ECIL’s explosive strategy)