By Kabir Narang
Recently, a government-recommended committee of experts has suggested the creation of an institution that operates outside the confines of government intervention. The committee, headed by retired IIM professor Pritam Singh, is to submit its report around this week. Its primary function will be to undertake defence procurement.
Need for an autonomous committee
The acquisition of military equipment has been relentlessly stifled. Budgets have been poorly allocated causing a sort of information asymmetry between the concerned ministries and the public at large. Corruption has also made various deals fail. The slack has come to such a level that the procurement cycle has been seriously dampened with the purchase of Rafale fighters or M-777 howitzers taking nearly a decade to materialise.
The institution will be independent of the Ministry of Defence, take absolute control of the acquisition process and have a self-regulating system of checks and balances in order to inhibit corruption and ensure efficiency.
Hence, an entire plethora of technical, financial, costing and legal experts have been brought together to optimise the buying processes, and scrutinise the tendering and competitive bidding process by which the goods are sought out. The other aims include minimising risk while ensuring timely delivery of the desired equipment.
As previously mentioned, defence procurements also face the problem of unutilised funds. The evidence follows: In the past decade, the Ministry of Defence has been unable to utilise Rs 54,416 crore from its capital acquisition budget. According to the budget provisions placed before Parliament recently, an amount of Rs 6,886 crore has been transferred from the budget for revenue spending of the defence services. The DPO plans to streamline, and optimally use its allocated endowments.
[su_pullquote]Independent of the Ministry of Defence, DPO will have technical, financial, costing and legal experts to optimise the buying processes and scrutinise the tendering and competitive bidding to ensure optimal use of allocated endowments.[/su_pullquote]
A project management approach is to be taken with the acquisition schemes. Each one will be turned into a separate project and will have its workflow monitored and analysed by a project management team.
This new committee first garnered attention when, the then head of the Defence Acquisition committee, former Director General Vivek Rae resigned in October 2016, after having staunch differences with the other committee members over the conviction that the Defence Acquisition Authority should be answerable to the Ministry of Defence. The other members of the committee held fast to their belief that the opposite should hold true; the entity was to remain free of political influence in order to prevent bureaucratic red-tape that would hamper the progress of defence acquisitions.
Defence Minister Manohar Parrikar took the lead in the creation of autonomy for the Defence Procurement Organisation after Vivek Rae resigned. | Photo Courtesy: Hindustan TimesStructure
The DPO is to consist of several sub-organizations whose purposes range from providing approval for long-term capital acquisition projects to carrying out amendments in budgetary provisions to recommending suitable technology for research and development and overseeing domestic defence manufacturing. These include the Defence Acquisitions Council (DAC), Defence Procurement Board (DPB), Defence Production Board, Defence Research and Development Board, and the acquisition wing.
Government support
[su_pullquote]The Government is giving necessary boosts in terms of policies and allocation to promote transparency and speed in the acquisition process in order to combat obsolete equipment.[/su_pullquote]
The Government has given the necessary boosts in terms of policies and allocation. Defence Minister Manohar Parrikar, will compliment the creation of this new entity and has also unveiled a new Defence Procurement Procedure (DPP) to promote transparency and speed in the acquisition process in order to combat obsolete equipment.
The Cabinet Committee on Security (CCS) has increased the financial powers of the Defence Minister. Initially, the Defence Minister was only allowed to clear deals up to Rs 500 crore. His limit has now been extended to Rs 2000 crore. The Defence Secretary has also been given the power to undertake deals up till Rs 500 Crore. This augments the streamlining and pace with which defence capital can be acquired.
Make in India in Defence will boost MSME sector. | Photo Courtesy: The Hans IndiaThe Centre is also giving impetus of growth to MSMEs in an effort to move away from India’s trade habit of importing about 60% of its defence components. For example, the MoD is working with the government to promote clusters in Nasik for aircraft components and forging and foundry sites for tanks and combat vehicles in Kolhapur and Pune respectively. India’s defence budget also received a boost of 6.2 percent in the Budget 2017 speech delivered by Union Finance Minister Arun Jaitley.
Looking forward
The decline in allocation for capital acquisition for defence equipment, an examination of past defence budgets, the national security affairs at the moment and the irrefutable evidence that the defence expenditure, as a percentage of GDP, has shown a continual decrease since 2013-2014, warrants the creation of the DPO.
It follows the central bank model of avoiding bureaucracy by maintaining distance from the government. We can only hope that the future administrations avoid meddling in the affairs of this absolutely-independent institution, as they did by creating a larger panel of governors in the RBI, increasing the chance of political infiltration; circa 2016. Sorry, Mr. Rajan. Hopefully, the country will be a facilitator of independent thought eventually.