Defense procurement

TOPIC: Defence Procurement

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By: Harveer Singh

Issues in Defence Procurement for India

Black Listing of the Firms due to

Corruption Cases.

Technology Shortcomings

Opaque Procurement process due to

sensitive technology

Lack of Market price signalling leading to

corruption

Lack of Indigenous research, design and

development.

2 HARVEERSIR for GSSCORE

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India remains the world’s largest importer of arms,

importing 14% of global imports of weaponry

between 2011-2015.

India’s primary supplies are Russia, Israel, France,

and the United States.

The government of India is looking to reduce

dependency on foreign arms manufacturers and to

catalyze domestic manufacturing capabilities.

The ‘Make in India’ initiative is seen as a launch pad

for the structural and regulatory changes needed to

boost India’s defence-industrial base.

HARVEERSIR for GSSCORE

Dhirendra Singh Committee

(May 2015)


Dhirendra Singh Committee..contd..

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The committee proposed three models for cooperation

with the private sector: Strategic Partnerships,

Developmental Partnerships and Competitive

Partnerships.

Within this model, there would be six groups of Strategic

Partnerships: aircraft, warships, armored vehicles,

complex weapons, surveillance, and critical materials.

In order to prevent “conglomerate monopoly,” the

Committee suggests identifying one or two private sector

companies for each of the six Partnerships to limit

competition.

The committee also recommended ending the practice of

single bid rejections.


Dhirendra Singh Recommends: # Strategic

Partnership Model

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Strategic is like RUR (Raksha Udhyog

Ratna)

Only one SP should be permitted in one

segment.

Based on the recommendations of

Kelkar Committee



Emphasis on Greater Indigenisation

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Make in India’ should not “become

assemble in India with no IPR [intellectual

property rights] and design control and

thereby perpetuating our dependence on

the foreign suppliers.”

To guard against such a situation, the

experts group has emphasised on

progressively increasing the indigenisation

content

Single window clearances and faster

processes to obtain industrial licences

have also been proposed.



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Industry Friendly Procurement : Streamlining the acquisition process and structure so as to create more opportunities.

It also recommended for Conducive Financial Framework.

Calls for a level playing field for the private sector by way of bank guarantees, payment terms, taxes and duties.


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Slide Intentionally Left Blank


##Raksha Udyog Ratna (RUR) concept

While making their demand to Kelkar Committee

(2004-06) Industry wanted be treated at par with the

public sector as regards receipt of imported

technology, fulfilment of offset obligations and joint

development with Defence Research and

Development Organisation.

Govt gave it a go ahead with the concept of Raksha

Utpadan Ratnas (RUR)

The Selection Committee of RUR was constituted

in May 2006 under Mr Prabir Sengupta.

Committee gave its recommendations and the

report is under review


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the ‘strategic partnership model’

(SPM) with the Indian private sector

for the platforms, weapons, networks

and materials is significant.

This will enable private companies to

front-end and manage complex

defence projects at par with DPSUs.

It calls for a focus on private sector

R&D. HARVEERSIR for GSSCORE

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VK Aatre Task Force 2016

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Related to Strategic Partnership

Dhirendra Singh Committee had also

suggested the setting up of a Task

Force to “lay down the criteria in

details for selection of SPs

VK Aatre Task Force deals with the

detailed criteria for selecting Strategic

Partners (SPs)


10 segments in two groups from which SPs

would be selected

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for Group-I, the Task Force has suggested the selection of only one SP in each segment, whereas the number can go up to two in Group-II segments.


Financial Norms

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For Group-I

A consolidated turnover of Rs. 4,000 crore for each of the

previous three years,

Consolidated capital assets of Rs. 2,000 crore in the last

financial year,

Consolidated revenue growth of a minimum of five per

cent in at least three of the previous five years.

For Group-II

consolidated turnover and capital assets are Rs. 500

crore (last 3 Years) and Rs. 100 crore, respectively.


Other Recommendations

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technical norms : past performance,

engineering and manufacturing capability,

R &D culture, infrastructure facilities, HR

structure and practices, quality control

system etc.

a maximum foreign direct investment (FDI)

of 49 per cent.

an independent regulator and a specialised

wing in the MoD to deal exclusively with

the chosen SPs.HARVEERSIR for GSSCORE

Critique

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the Task Force has also limited the

participation of SPs to ‘Buy and

Make’ contracts involving transfer of

technology.

the SPs, in the present scheme of

things, are not substitutes for the

inefficient DPSUs and OFs

SOURCE: IDSAHARVEERSIR for GSSCORE

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DPP 2016

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Aim:To ensure timely procurement of defence

(military) equipment, systems, and platforms

required by the armed forces through optimum

utilization of allocated budgetary resources.

Scope: It will cover all capital acquisitions

undertaken by the Union Ministry of Defence,

Defence Services and Indian Coast Guard (ICG)

both from indigenous sources and import.


Capital Acquisitions Schemes.

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Buy scheme: Outright purchase of equipment and procurements under BUY scheme are

further categorized as Buy (Indian- IDDM), Buy (Indian), and Buy (Global).

IDDM stands for Indigenously Designed Developed and Manufactured.

Buy and Make Scheme: The procurements are categorized as Buy and Make and Buy and Make (Indian).

Make category Scheme: It seeks developing long-term indigenous defence capabilities and procurements.

It empowers Defence Acquisition Council (DAC) to take a fast-track route in order to acquire weapons, which were limited to the armed forces till now.


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Procurement of defence equipment:

Arranged in decreasing order of

priority are categorized as

(i) Buy (India-IDDM). (ii) Buy (Indian). (iii)

Buy and Make (Indian). (iv) Buy and

Make. (v) Buy (Global).

Buy (India-IDDM) seeks to boost

indigenous production.


Upto 90% Government funding for private

Research & Development (R&D) through

Department of Defence Production.

Recognition of the Micro, Small and

Medium Enterprises (MSME) as

technology developers.

Offsetting from 300 crores to 2000 crores.

***Offseting push up cost by 16 % for the

suppliers. Single BID procurement would now be

considered.22 HARVEERSIR for GSSCORE

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SHQ would be owning and would be responsible for

MAKE projects.

Long term Perspective Plan of 15 Years for “Make”.

Make-PMU in at all SHQs and Cpast Guard.

Make projects into two Categories: Make-I (Govt

Funded) and Make-II (Industry Funded)

Under Make-I: upto 90% Funding by the govt.

MSMEs first right to undertake prototype of less than

10 crores.

L-1 T-1 Method for Defence Procurement.


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Thank You


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In 2015, the government issued 56 licenses that

authorized multinational companies such as The

Mahindra Group, The Tata Group, and Pipavav to set

up production units.

The reforms seem to have gained the confidence of

the global defense industry, with $3.5 billion entering

the Indian economy in foreign investments.

In the first half of the 2015-16 , $64 million of military

equipment purchased- a threefold increase over last

year’s $19 million.

100% FDI under approval route.

Source: Albright StonebridgeHARVEERSIR for GSSCORE

Defense procurement

Economy & Finance

Transcript of Defense procurement