HEADLINES:
Former Egyptian President Hosni Mubarak is free from jail after six year । Finance Minister Arun Jaitley, who holds additional charge of Defence, elected President of the Institute for Defence Studies and Analysis (IDSA) । He succeeds Mr Manohar Parikkar who resigned to take over as Chief Minister of Goa recently। Hardeep Singh Puri appointed Chairman of the Research and Information System for Developing Countries । Mr Puri is former Indian Envoy to the UN in New York and Geneva । FBI investigating possible Russian interference in 2016 US presidential election, Director Comey confirms । He told House Intelligence Committee there is no evidence of President Obama ordering wiretap of Trump during the election campaign । President Trump has made several allegations against his predecessor, which the powerful heads of FBI and NSA have denied । Finance Minister Arun Jaitley assumes additional charge as Defence Minster । Jaitley replaces Manohar Parrikar who has moved to Goa to head the State’s Government as Chief Minster । BRAHMOS Extended Range (ER) missile successfully test-fired । Prime Minister greets CISF on its 48th Raising Day । INS Tillanchang Commissioned into Indian Navy । INS Tillanchang was commissioned by FOC-in-C Western Naval Command Vice Admiral Girish Luthra at Karwar । India Strategic salutes the humanity on this International Women’s Day । Civil Aviation Minister Ashok Gajapathi Raju dedicates first integrated heliport to the nation । Ms. DR Doley Barman appointed Director of Sardar Vallabhbhai Patel National Police Academy, Hyderabad । 1992 batch IFS officer Gopal Baglay appointed MEA Spokesperson । He replaces Vikas Swarup, who has been appointed Indian High Commissioner to Canada । Raytheon, Tata Advanced Systems to Co-produce Stinger Missile Components । Indian Navy Concludes First Contract under Buy and Make (Indian) Category । Contract signed between Nova Integrated Systems Ltd (NISL), a TASL subsidiary, and Indian Navy for procurement of Surface Surveillance Radars (SSRs) । NISL to indigenously manufacture these state-of-the-art radars in collaboration with Terma, Denmark । ISRO creates history; launches 104 satellites in one go । President, Vice President and Prime Minister congratulated ISRO and its scientists for the historic mission । Indian Navy to decommission aircraft carrier INS Viraat on March 6 । India to spend Rs 2,74,114 crore on Defence । Rs 85,737.31 crore will be spent on equipment acquisition । Russia formally enters IAF’s second round of MMRCA competition । Moscow offers a new MiG-35 variant under Make in India । Alexander M Kadakin, who served as the Russian Ambassador to India for over a dozen years, passed away after a brief illness in New Delhi on Thursday, January 26, 2017. Indian Prime Minister Narendra Modi condoled Kadakin’s death calling him a “great friend of India.” । India Strategic wishes everyone Happy Republic Day । President Pranab Mukherjee takes salute at the beautiful Republic Day Parade in New Delhi । UAE Crown Prince Shaikh Mohammed bin Zayed is the Chief Guest at India’s R-Day celebrations । A highlight of the Parade is also the participation of a UAE armed forces contingent । Prime Minister Narendra Modi laid a wreath at Amar Jawan Jyoti to pay tributes to martyrs । The impressive Parade began with a 21-gun salute to the President, the Supreme Commander of the Indian armed forces । India’s anti-terror force, National Security Guard (NSG) made its debut in the Parade । Dressed in their patent black, NSG commandos jogged passed the saluting base with their faces covered । US President Donald Trump called Prime Minister Narendra Modi late on January 24 । The telephone call is indicative of the vital nature of the India-US strategic partnership between the two countries । Abu Dhabi Crown Prince Sheikh Mohammed Bin Zayed Al Nahyan arrives in New Delhi । Bin Zayed Al Nahyan, who is also the Deputy Supreme Commander of the UAE Armed Forces, was received by PM Modi । Sheikh Mohammed Bin Zayed is the Chief Guest of Republic Day 2017 । Government extends Foreign Secretary Dr S Jaishankar’s tenure by one year । The extension to be effective between Jan 29, 2017 and Jan 28, 2018 । Pravind Kumar Jugnauth takes over as Mauritius Prime Minister । Prime Minister Modi congratulated the newly-appointed Mauritian PM । Donald Trump takes over as US President । Promises transfer of power to people । Turkish Boeing 747 cargo plane crashes in Kyrgyzstan with 37 onboard; all killed । Astronaut Gene Cernan, 82, the last man to walk on moon, passes away । India marks Army Day । President, Prime Minister and Defence Minister greet the Army । Army Chief Gen Bipin Rawat takes salute at the impressive Army Day Parade । Gen Rawat says India wants peace but if attempts are made to disrupt it, then “we will display our power” । He says emphasis is on newer technology weapons and systems for the Army । Space connectivity is also high on Army’s agenda । This is the 69th Army Day, marking the time when an Indian Chief, Gen KM Cariappa took over the command after Independence । Indian Navy launches its second Kalvari class submarine INS Khanderi in Mumbai । India Strategic wishes all its readers and viewers a very Happy New Year । India successfully test fires Agni 5 long range missile | IAF gets Government approval for one more C 17 strategic Lift aircraft | IAF has got 10 C 17s, but had initially planned for more than 20 | Lack of timely approval made IAF slash figure to three but by then Boeing closed factory | IAF will get the last one in production | Syrian government of President Assad takes full control of Aleppo | Lt Gen Bipin Rawat appointed the next Army Chief and Air Marshal BS Dhanoa the Air Chief | The appointments are effective December 31 afternoon | Both are Vice Chiefs of Staff at present in their respective Services | 48 killed in a PIA ATR-42 aircraft crash in Pakistan | The twin-engine propellor aircraft was on way from Chitral to Islamabad | India marks Navy Day | Prime Minister Narendra Modi greets all Navy personnel, and salutes their bravery on Indian Navy annual day | PM Modi, Afghan President Ashraf Ghani jointly inaugurate Heart of Asia Ministerial Conference at Amritsar (India) Dec 4 | Need of the hour is to identify terrorism and bring stability in the region, says PM Modi | India’s commitment to Afghan is absolute, Mr Modi said addressing 6th HoA Ministerial Conf | Afgan Prez accused Pakistan of sheltering terror, and thanked India of financial aid | HoA Conf began at Amritsar Dec 3 | INS Vikrant likely to be operational in 2018 | Vikrant to operate both Russian MiG-29K and Western origin Aircraft | Indian Navy to mark 2017 as the year of submarine: Adm Lanba class=”gap”>| Gujarat-cadre officer Rakesh Asthana to take over as CBI Director after Anil Sinha, who retires Dec 2 | Gen Qamar Javed Bajwa is Pakistan’s new army chief | Gen Bajwa took over from Gen Raheel Sharif Nov 29 | The outgoing chief stressed all should work together “against external and internathreats” | Plane carrying Brazilian football team crashes in Colombia | Cuba’s revolutionary leader Fidel Castro dies. He was 90. | Castro had challenged the US might and invited Soviet presence next door to the US | US-Cuban relations have normalized now after half a century | Defence Minister Manohar Parrikar Commissions INS Chennai into Indian Navy Nov 21 | INS Chennai is a Project 15A Guided Missile Destroyer | This is the 3rd and last ‘Kolkata’ class destroyer indigenously designed by DND and constructed by MDL, Mumbai | India successfully tests nuclear capable Prithvi-II missile in Odisha | India becomes associate member of European Organization for Nuclear Research (CERN), Geneva | Defence Minister Manohar Parrikar inducts four Indigenous Naval Systems | The 4 Indigenous Naval Systems – ABHAY, HUMSA UG, NACS and AIDSS – were indigenously developed by DRDO | These Indigenous Naval Systems will boost underwater surveillance capability of the Indian Navy | India, Japan sign Civil Nuclear Deal | The Deal signed during PM Narendra Modi’s visit to Japan Nov 10-11 | With this Deal, Japan is able to export N-technology to India for peaceful uses | PM Modi calls the Deal “a historic step to build a clean energy partnership between India, Japan” |
March 27, 2017
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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.

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