Thursday, 12 December 2013

New defence “Make” procedure heads for clearance

Mr Antony and his former acquisitions chief, Vivek Rae, release DPP-2011

By Ajai Shukla
Business Standard, 12th Dec 13

On Thursday the ministry of defence (MoD) will take an important step towards galvanising indigenous defence capability, when the Defence Procurement Board (DPB) will consider, and probably approve, a new procedure for “Make” category procurements. This will simplify and modify the existing “Make” procedure formulated in 2011.

The “Make” procedure brings together Indian defence companies in designing, developing and building defence equipment that the military requires several years down the road. The MoD pays 80 per cent of the development cost.

The “Make” category is a part of the Defence Procurement Policy, the latest version of which --- DPP-2013 --- was released on Jun 1. Every equipment purchase is “categorised”, depending upon whether the equipment will be developed and built in India (“Buy Indian” and “Make” categories); built in India by an indigenous consortium with foreign technology partners (“Buy & Make Indian”); built in India with transfer of technology from abroad (“Buy & Make with ToT”); or bought over-the-counter from a foreign vendor (“Buy Global”).

The MoD believes that the “Make” procedure, which DPP-2013 explicitly favours, is the key to indigenising the production of complex defence systems. The new DPP-2013 made no changes to the “Make” procedure because the MoD was evaluating far-reaching changes to that specific category.

These changes have now been finalised. After approval by the DPB on Thursday, it will go to the apex Defence Acquisition Council (DAC), chaired by the defence minister. Then it will be promulgated as policy.

The key changes to the “Make” procedure include --- allowing intellectual property rights (IPR) to vest with the companies that develop the intellectual property; laying down clear guidelines for evaluating bids and choosing a company as the development agency (DA); laying down schedules for paying the DA; imposing financial costs on the MoD if equipment specifications are changed during the development process; and writing out the procedure in clear and simple prose.

“Whoever wrote the earlier ‘Make’ procedure was more inclined to aspirational statements about indigenisation. The new document avoids grandiose prose, laying down the procedure in simple, understandable prose,” says an MoD official.

IPR has been a long-running point of dispute, with the MoD insisting on acquiring it, having provided majority funding. The MoD has now realised that it does little with the IPR, while industry would develop the IPR into more advanced systems. While allowing the DA to retain the IPR, the new “Make” procedure gives the MoD a perpetual licence to use it.

Lack of clarity on how the MoD would choose a development agency (DA) has already derailed one “Make” project --- the future infantry combat vehicle (FICV). The new “Make” procedure lays down explicit guidelines for selecting a DA out of the companies that submit a detailed project report (DPR).

The earlier “Make” procedure, while committing the MoD to funding 80 per cent of the development cost, did not specify when funds would be released. The new procedure specifies development landmarks and the quantum of funding that would be paid out at each stage.

Indian DAs have long complained that the military tends to change specifications during development, adding to the cost and delaying the project. The new procedure levies financial penalties for changing specifications mid-way. This could add a measure of discipline to the often ill-considered formulation of specifications. 


Anonymous said...

mid way spec correction... falsify initial spec... derail indigenous effort... open way... foreign kickbacks...

Hari Sud (M.S., B. Sc., P Eng.) said...

It is high time for Defence Minister A K Anthony to exit his job. During his tenure, huge amount of defence stores and hardware was imported and controversy and delays were endless. He is driven by officials and bureaucrats who can find nothing better but delays after delays on factitious complaints.

Take e.g. M 777 from US. It has been approved for three years but the officials and politicians are conniving to delay upon delay. The only reason for delay is that it is Government to Government deal and hence they could not wet their hands with bribes and favours, hence causing delays. In the mean prices have doubled.

The above shows nothing but incompetence and listening to everybody no matter how trivial.

The case VVIP helicopters. It will be mired in delays for years to come. The suppliers is unlikely to return the money or take the helicopters delivered back. The best course would have been to let the deal go thru in exchange for clear and concise details of who got paid how much. The recipient should be in the jail including the Air Marshal. (In China they would be executed). No first class jail for them.

How come the Defence Minister allowed the 155 mm artillery ammunition stock get so low. It was Gen V.K Singh who angrily demanded quick action; then the things moved. It still took one year to place the order.

The Gen V.K. Singh age row in public was an unbecoming of a Defence Minister. He was listening too much to previous Gen JJ Singh and Gen Deepak Kapur to promote their own boy to Commander-in-Chief. They wanted V K. Singh out. Could the Defence Minister not see writing on the wall that the two ex C-in-C are acting to farther the case of their own favoured General. I would say V K Singh was no saint, but Defence Minister, Prime Minister, the two ex C-in-Cs had cornered him. Instead of gracefully retiring he came out fighting.

There are numerous other examples of complete incompetence by the Defence Minister. Granted that he took no money from anybody but he was unable to stop the foreign vendors from bribing the officials and generals.

He should be out today instead of six months.