Business Standard: 19th May 08
At 2 pm on 28th May, red-faced MoD officials in the Berlin Air Show could stumble yet again on an international stage. At a keenly anticipated two-hour seminar on “Opportunities in the defence sector in India”, a global audience of arms company executives will find a panel of top MoD officials explaining an old, soon-to-be-outdated set of procurement rules, rather than the much-awaited new rulebook. The new Defence Procurement Policy – 2008 (DPP-2008) was promised more than a year ago.
The latest delay has surprised even the MoD, which had confidently predicted that DPP-2006 would be ready for Berlin (Business Standard, 8th May 08). This delay, it now emerges, has arisen because the MoD failed to consult with the army, navy and air force while drawing up the new rules. A meeting of the high-level Defence Procurement Board (DPB) last Friday, which was expected to clear the DPP-2008, found itself dealing instead with some 40 points raised by the three services.
The MoD, in a hurry to push through the draft DPP-2008, has conceded many of the points raised by the military. But the DPB meeting on Friday, chaired by Defence Secretary Vijay Singh, was forced to put off the consideration of several remaining issues to another DPB meeting on 23rd May. With Mr AK Antony departing for Berlin on 26th May, sources indicate that time has run out for obtaining final clearance from the top-level Defence Acquisition Council (DAC) and then promulgating DPP-2008 through the defence minister.
MoD sources admit a serious miscalculation in not consulting the three services while drafting the new regulations, since the points raised at the latest DPB meeting are entirely valid. Senior army officers point out that the new rules will directly affect the flow of weapons and equipment to the military; their inputs, they say, are relevant and necessary.
For example, the army pointed out that when a joint venture (JV) between an Indian and a foreign company wins a contract to build military equipment in India with technology supplied by the foreign partner, the Indian JV partner should automatically be entitled to manufacture the equipment. Currently, paragraph 19 of the draft DPP-2008 allows the MoD to “nominate” any Indian entity to manufacture the equipment.
Many of the JVs currently being tied up are rooted on the premise that the Indian partner will automatically have the right to manufacture the goods for which a contract is won. In this context, says a private Indian defence manufacturer who does not wish to be named, the MoD can hardly retain the right to “nominate” a company (traditionally a defence PSU) for manufacture.
If the MoD is, as seems likely, unable to promulgate DPP-2008, it will be only the latest failure to meet an important deadline. Already, at the Defexpo India 2008, in February in Delhi, arms vendors had been disappointed that the new rules were not yet ready. DPP-2008 will govern the purchase of an estimated Rs 300,000 crores worth of military equipment over the next five years.