Friday, 27 May 2016

Three new defence ministry committees search for radical reform

By Ajai Shukla
Business Standard, 26th May 16

The defence ministry’s drive for policy reform has gone into a cul-de-sac of committees and sub-committees. With cautious ministry bureaucrats reluctant to embrace radical reform; and with private companies undercutting each other for fear of getting left out of the inner circle, Defence Minister Manohar Parrikar has convened a set of independent committees, whose recommendations could provide the cover needed for root-and-branch reform.

The committees include one charged with reshaping the basic patterns of defence spending; another with galvanising defence procurement by restructuring the ministry’s acquisitions agency; and five sub-committees that evaluate how to bring in the private sector.

The first committee --- a 12-member body, headed by Lieutenant General (Retired) DB Shekatkar --- will recommend measures to “rebalance” defence allocations between revenue and capital expenditure. With just 25 per cent of the defence budget available for equipment modernization after 75 per cent goes on running expenses, especially on a bloated manpower bill, the committee will look at how to cut down manpower without reducing the military’s combat capability.

Fifteen years ago, a committee headed by former army vice chief, Lt Gen Chandra Shekhar, had similarly examined cutting down the army’s logistical and training establishments, with greater reliance on new civilian infrastructure. Little of that was implemented. But while the Chandra Shekhar committee scrutinised only the “non-field force”, the Shekatkar committee will evaluate the sensitive issue of combat units, including the requirement for a new mountain strike corps that would add another 50,000 troops to the army.

Parrikar has come around to the conviction that the army carries too much flab, which can be trimmed. For example, it is authorised manpower and workshops for repairing its fleet of jeeps and heavy lorries. With the old purely military vehicle models replaced by Maruti Gypsies, and Leyland and Tata trucks, greater reliance could be placed on civilian repair infrastructure that has come up even in areas like Ladakh, Kashmir and Arunachal Pradesh.

Similarly, the army carries a large number of transport battalions, which have trucks for hauling equipment, such as artillery ammunition and fuel, during war. Today civilian trucks could be requisitioned for mobilisation, since trucking agencies now operate in areas they never did before.

Signalling that the ministry is examining the military dimension seriously, the Shekatkar committee includes several military officers, such as Lt Gen (Retired) Vinod Bhatia, a former military operations chief who now heads the tri-service think tank, the Centre for Joint Warfare Studies.

A second committee has been constituted under former petroleum secretary, Vivek Rae, to study “the setting up of a Defence Procurement Organisation in the Government of India.” The committee is required to suggest the functional mandate of the proposed procurement body, its organisation and staffing, and to suggest how autonomously it could function.

Vivek Rae, who served as the defence ministry acquisitions chief, is intimately aware of the flaws of the current organisation, which numerous commentators have criticised as hamstrung by caution and procedure, most of them laid down by the ministry itself, in successive defence procurement procedures (DPP).

The nine-member Vivek Rae committee also includes a mix of military and civilian officials. However, it does not incorporate expertise from the private defence industry, a possible shortcoming, given the increasingly important role of private industry in meeting India’s equipment requirements.

Says a private industry CEO, on condition of anonymity: “If a new procurement body is to make a major difference, it must be charged with developing private defence industry. Currently, private industry is a step-child of the Department of Defence Production (DDP), which lavishes its attention on its public sector units. Procurement is tightly linked with private industry development and with offsets, and these must come under the new body.”

It is still unclear whether the defence ministry itself could carry out such major restructuring, or whether an act of parliament would be needed.

A third group of sub-committees was constituted on May 24 to salvage the “strategic partners” (SPs) model for private sector participation in “Make in India”, which the Dhirendra Singh committee had recommended last year and which was further given shape by the VK Aatre Task Force early this year.

They had recommended nominating chosen private sector companies as SPs, to manufacture defence equipment in India under licence from global vendors. The SPs were to be selected in ten fields of technology, based on laid down criteria.

However, private sector companies that were not making the criteria have stalled the selection process, arguing with some justification that the criteria were arbitrary. This process has now been revived, but pared down to just five technology areas.

Each of these five areas --- armoured fighting vehicles; aircraft and helicopters; submarines; ammunition, including smart ammunition; and “macro process management of issues”, will be considered by a separate sub-committee. The conclusions are to be presented to the defence minister by June 4.

Fifteen years after the private sector was allowed into defence production in 2001, there is still little clarity about the nature and modalities of participation. In 2006, the Kelkar Committee made recommendations, which most experts had regarded as workable and fair. However, the Raksha Udyog Ratna model of private sector participation it proposed was not implemented.

Meanwhile, Eight DPPs, the most recent one being DPP-2016 part-released this year, have failed to galvanise private sector participation. The waters have been further muddied by a series of proposed procurement models, none of which have satisfied --- the Indian Designed, Developed and Manufactured (IDDM) procurement category in DPP-2016; the “Make-1” and “Make-2” categories in the same document; and now the SP model.


Anonymous said...

Lt Gen Shekhetkar-OMG!!!

Alok Asthana said...

Committees are useful ONLY if their recommendations are binding, and that too in a fixed time frame e.g. the Lodha committee report. Why do retired Generals take up such tasks knowing fully well what will become of them? As said, most recommendations of the report by Gen Chandra Shekhar are still gathering dust even after so many years. Maybe Manohar should prove his credibility by first implementing those. Committees and investigations without the backing of law are a farce.

Anonymous said...

Govt needs to disclose names of those companies who are behind more than 450,000 crores NPAs in PSU banks. These companies which are incurring losses and have huge debts have to be barred from any defense manufacturing program.
Mr.Parriker also needs to explain why there is such a mad rush to rope in Pvt Cos which have absolutely no expertise or competence in defense, when there are more than 40 OFBs, several DPSUs and 5 naval shipyards?? How does he explains this unnecessary duplication of time, effort and money?

Ravi said...

This is just another example of our ability to do things butt-backwards.

The problem is not inefficient use of manpower. It is the piddly percent of GDP allocated for defense. Ajai has often mentioned how the percentage keeps down: IIRC, the latest is 1.65%, which is absolutely unacceptable for a nation that faces threats on its western, northern, and southern frontiers, plus a potential threat from the easy.

India will make a grave mistake if it gives up the second mountain strike corps, given China's expanding rail-net in Tibet and near Ladakh. India has already crippled itself in the matter of military modernization.

China spends $160-billion + on defense. How exactly are we supposed to match that as well as retain our options against Pakistan, when we refuse to spend even 3%?

Folks, including the army, dont seem to understand that India is actually short of combat support troops like engineers and artillery. It is also very short of road construction engineers needed for wartime.

Raising defense to 4% of GDP is critical.

The Govt (previous and present)theory that we need to spend on development so defense must take tenth place or whatever is so hilarious we could get hernias laughing. If the government would wise up, we can grow 10%/year for 30-years. As for the present, I'd love it if the government would explain how its enormous subsides to gain votes are helping growth. Ditto the fantastic levels of corruption and inefficiency.

Our GDP is approaching $2.5-trillion (2017, World Bank). Its not a question of resources, its a question of will.

Ravi said...

Anon, what is an NPA - Non-Performing Account? Money taken as loans and written off as non-payable? Do you think it would make more sense to privatize the ord factories then have the private sector duplicate the effort? Last, can you explain your comment on LGen Shekhetkar? Who is he? Thank you.

Alok, very good point. Who was Gen. Chandrashekar and what was his report?

Anonymous said...

What has happened to implementing Subrahmaniam Committee report? Babus will not allow to alter status quo !

Anonymous said...

@Ravi you want to gift OFBs and DPSUs to those behind NPAs of PSU banks? Now you know why India and Indians have been slave to foreigners for last 1000 years?

Anonymous said...

I think the main issue is that this govt wants to have a look at things afresh because so many things have changed so no harm in having comittees one after the other. The problem lies in accountability and also media must hound the RM as to what happens to these comittee findings. rather than asking the usual nonsensical question on when Rafale will be signed they must ask pointed questions like on these reports or on reforms or CDS etc. Maybe Ajai you should arrange to interview RM and ask the very pertinent questions you put forth in your blog :).
Only time will tell how much RM delivers but there is no doubt that he inherited the worst possible mess in MoD.