HEADLINES:
IAF already has an order for 22 Apache Attack Helicopters with Boeing । Apaches for the Army are to have the same configuration । There will no more field and firing trials । Army has projected a requirement of 39 helicopters । MoD sanctions combat helicopters for the Army for the first time । Six Apache AH 64E to be given to the Indian Army as a beginning । India Marks 70th Anniversary of Independence Day August 15 । India Strategic Congratulates All Indians Everywhere । HAL Successfully Installs Israeli AESA Radar on a Jaguar aircraft । IAF Bases at Pathankot and Jorhat Upgrading Infrastructure to Receive Boeing Apache Attack Helicopters in 2018 । Dinesh Keskar, Boeing Sr VP Sales for India and Asia Pacific for Civil Aviation, says the region will account for 40% of aircraft sales । China will be the biggest market and India after that । India remembers its heroic martyrs on Kargil Vijay Diwas July 26 । Ram Nath Kovind sworn-in as 14th President and Supreme Commander of the Indian Armed Forces । Iraq Foreign Minister Dr Ibrahim al-Jaafari visits India July 24-28 । He called on Vice President Hamid Ansari, EAM Sushma Swaraj and discussed host of bilateral issues । Indian NSA Ajit Doval visits China to take part in BRICS NSA meet । Indian NSA’s visit comes amid India-China Dokalam stand-off । G20 should collectively oppose terrorism financing, franchises, safe havens, support and sponsors: PM Modi at Informal BRICS leaders meeting in Hamburg, Germany । He appreciated momentum in BRICS under the Chairmanship of President Xi and extended full cooperation and best wishes for the BRICS Xiamen Summit in Sep, 2017 । President Xi appreciated India’s strong resolve against terrorism । The Chinese President also appreciated India’s success in economic and social development and wished India even bigger success । US lifts personal electronics ban on Emirates, Etihad and Qatar airlines । Passengers on these three carriers can now carry their laptops and tablets along with them for flights to all destinations in the US । India, Israel sign 7 agreements including on space technology, agriculture and water conservation । Prime Minister Narendra Modi arrives in Tel Aviv for his 3-day visit to Israel from July 4-6 । The visit, termed as ‘historic,’ is the first ever by an Indian PM to Israel । Israeli PM Netanyahu breaks protocol to receive PM Modi at the airport and accompany him on his engagements । PM Modi visits Holocaust Memorial Museum at Yad Vashem । PM Modi’s visit comes at a time when the two nations are celebrating the establishment of 25 years of their diplomatic relations । Happy 4th of July to all our friends in the U.S । India launches communication satellite GSAT-17 June 29 । GSAT-17 was launched using European Ariane 5 launch vehicle from Kourou, French Guiana । Government gives ‘in principle’ approval for disinvestment of Air India, 5 of its subsidiaries । Prime Minister Modi-headed CCEA gave its approval to fourth tranche recommendations of NITI Aayog on strategic disinvestment of CPSE June 28 । Possible sale of one more Boeing C-17 aircraft to India approved – Pentagon।brating 70 years of Diplomatic Relationship ।
August 21, 2017
Follow us on

Defence Procurement and Blacklisting Policy

By Amit Cowshish Published: November 2016
 

New Delhi. The Defence Acquisition Council (DAC), chaired by Defence Minister Manohar Parrikar, cleared procurement proposals worth around `82,000 crore ($12.35 billion) and also approved the new blacklisting policy in the meeting held on November 7.

The DAC is a high powered body which accords approval in principle – also known as the Acceptance of Necessity (AoN) – for all capital acquisitions, exceed ing `500 crore ($75 million approximately). Proposals for lesser amounts up to `150 crore ($23 million) and `300 crore ($44 million) are approved by the Services Capital Acquisition Plan Categorisation Committee (SCAPCC) and the Defence Procurement Board (DPB), respectively.

Although the DAC meetings get extensive coverage in the media, it is becoming a routine staid affair with proposals worth thousands of crores being accorded AoN in every meeting with hardly any word on the status of the approvals accorded in the previous meetings. If one adds all proposals approved in the last two years since the present government came to power, the total amount may add up to around $50 billion. That is a staggering amount by any stretch of imagination. The question, however, is how many of these approvals have culminated in contracts.

Before the Defence Procurement Procedure (DPP) 2016 brought down the validity of AoNs to six months, every AoN used to be valid for one year within which the Request for Proposal (RFP) had to be necessarily issued to prevent its lapse. This is odd, for the broad time table for procurement activities, given in DPP 2016, allows only eight weeks to issue the RFP from the date the AoN is accorded.

Be that as it may, excessive focus on the value of proposals approved in principle by DAC has overshadowed the fact that by themselves, AoNs do not guarantee procurement of equipment. These have to be converted into contracts. There is little information available on the number of AoNs accorded so far and the ones that fell through because the RFPs could not be issued within six months, as also the progress of those that did not. At any rate, the journey from AoN to signing of contract is long and arduous; many an AoN has fallen prey to the rigours of this journey and never reached the destination.

Going by the information provided from time-to-time by MoD to Parliament or contained in the reports of the standing committee on defence, the rate of conversion of AoNs into contracts has not witnessed any spurt. In 2012-13, MoD had signed 73 contracts for procurement of defence equipment. This figure came down to 42 and 47 respectively, in the two succeeding years. During the last six months of 2015-16, 28 contracts were signed. Even if this is taken as the yardstick, the total number of contracts signed during 2015-16 would be around 56 – much below the number of contracts signed in 2012-13.

It is important, therefore, that in its monthly meetings DAC takes stock of progress of AoNs accorded in the past that are yet to culminate in contracts and resolve any issues that might be hindering the progress in specific cases.

The benchmark for assessing the progress of cases already exists. The DPP envisages a time frame of 74-114 weeks –an additional 12 weeks if winter trials are also contemplated – from AoN to signing of the contract. Unless every single AoN is monitored by DAC, especially those which entail manufacturing in India, this time frame will remain only on paper, which has largely been the case so far.

Once in a while, DAC also takes up other policy issues, such as approval of the Long Term Integrated Perspective Plan (LTIPP), Defence Five Year Plans, and revised versions of the Defence Procurement Procedure.

In its November 7 meeting, DAC also approved the much awaited policy on blacklisting of defence companies involved in bribery and other transgressions. The policy is expected to be uploaded on the ministry’s website within a few days. Though not the main cause, blacklisting of companies in the past has indeed resulted in MoD scoring many a self-goal. Several procurement programmes, ranging from ammunition to guns, ran aground because of the blacklisting of the potential suppliers. More damaging is the long period of suspension of dealings with the potential supplier preceding the actual blacklisting.

There have been instances of dealings with companies being put on hold even if there were no allegations against them but they happened to be the sister concern of another company facing corruption charges. Suspending dealings with or blacklisting an entire group of companies for wrong doing on the part of one of the subsidiaries is counterproductive. For example, India’s new conventional submarine, INS Kalvari has sailed out into sea for trials without being equipped with the Black Shark torpedoes because the Italian firm WASS that makes the torpedoes happens to be a subsidiary of Finmeccanica, the holding company of AgustaWestland which figures in the bribery scandal surrounding purchase of VVIP helicopters.

It is almost certain that the new policy will do away with indiscriminate blacklisting of the entire group of companies if there are charges of bribery against some other subsidiary of the same group. The new policy is also expected to prescribe graded penal action, from payment of hefty fines to blacklisting for one to ten years, depending on the nature of transgression. Some reports suggest that companies may be blacklisted for one year at a time. The much-awaited policy could have a provision for fast track investigation into allegations and for taking the duration of investigation into account while prescribing the ban. These are important decisions but unless the policy is worded unambiguously and the procedure for handling allegations of bribery is laid down with absolute clarity, its implementation could pose unforeseen challenges.

There are many challenges in this. For one thing, MoD does not have an investigative mechanism of its own. It will have to depend largely on the Central Bureau of Investigation and the foreign investigation agencies. Given this constraint, it is difficult to visualise how will MoD ensure a speedy investigation.

No penal action is normally taken unless a show cause notice is issued to the offender. There has to be absolute clarity about the manner in which the response to such notices will be processed in MoD, failing which the tendency will be to seek the advice of the investigating agencies and the law ministry. This could become a never ending exercise. Clear guidelines will also need to be laid down for deciding the quantum of punishment to make sure that the officials responsible for taking action against the offending companies do not hesitate in taking decisions in the fear that their decisions could be questioned on the grounds of subjectivity.

It is a good idea to have a clear policy on blacklisting but considering that the current trend of wearing rectitude on one’s sleeves, execution of the policy could run into difficulty unless there is political consensus on it, cutting across the party lines.

The fear is that it may be too late for that.

– The author is a former top official of the Ministry of Defence, who dealt directly with military acquisitions till a couple of years ago.

Email*

SPOTLIGHT

dgmo

Indian Army Strikes Terrorist Camps in POK

New Delhi. India struck seven terrorists camps in Pakistan Occupied Kashmir on September 28, ten...

spotlight4

India Successfully Launches 20 Satellites in Single Flight

Sriharikota/New Delhi. In its 36th flight ISRO’s Polar Satellite Launch Vehicle PSLV-C34 successfully launched the...

UPCOMING EVENTS

Logo
banner 109x75
Defcom_India_2017

Our Archive