Defence Procurement Procedure Amended to Encourage Indigenous Defence industry

(Source: Press Information Bureau India; issued October 29, 2009)

A new category of “Buy and Make (Indian)”

Under the existing procedure, if an item is categorized as ‘Buy and Make’, a production agency is identified by the government for transfer of technology. The process requires negotiations by the Ministry of Defence (MoD) with the foreign Original Equipment Manufacturer (OEM). Negotiations are carried out both for the “Buy” component as well as the “ToT” component. Past experience has shown that this has not helped in building up higher technical capabilities. The technology transfer has been essentially transfer of engineering skills for production of some of the non critical components. The critical items are invariably obtained from the foreign OEM. This method has also not encouraged formation of Joint Ventures (JVs) or alliances for co-production with Indian companies.

In my view, the above strikes the “nail on the head”. The so-called ToT is merely a euphemism for “Technician training on how to assemble the imported kits and how to operate the assembly machinery”.

The amendment in DPP-2008 introduces a new category named, ‘Buy and Make (Indian)’ to overcome the above situation. If a project is selected by the Defence Acquisition Council to be categorized as ‘Buy and Make (Indian)’, Indian firms, both public and private, will play a lead role in negotiating and obtaining technology and co-production arrangements with the foreign OEMs. As such, the RFP will be issued to the Indian firms and not to the foreign OEM.

Indian firms identified to have requisite technical and financial capabilities would be required to submit project proposals indicating detailed roadmap for development and production of the items over its life cycle. They will also be required to spell out the proposed production arrangement with the foreign OEM along with the content of the T0T. The product so manufactured and supplied by the Indian company must have 50% indigenous content.

See, the definition or rather interpretation of “indigenous content” is very wrong. For example, newspapers report about the “indigenously manufactured” Su-30 MKIs. Arey, simply because the Russian manufacturing equipment is on Indian soil, using only labor and raw materials locally, it doesn’t make the Su-30 any indigenous. This is the same mistake committed by calling Nokia handsets or Hyundai cars assembled in Chennai, as “indigenous”. No doubt they are exported also, but people across the world buy them because its a Nokia or a Hyundai — and not by looking at the Made-in-India label. And the major chunk of the revenue goes back to Finnish and S. Korean shores, and very rightly so.

So, coming back to defence, private companies will do no more than setup assembly lines of foreign products in India, and tell the government, “Look all these components were manufactured locally. So, they’re indigenous”. When the fact is, they’re NOT.

Now even if the manufacturing equipment, of say, the various components of the Su-30 are designed & manufactured in India, the aircraft still remains Russian, because it is a Russian design. This argument can easily be extended to radars, avionics, engines, helicopters that are licence-produced by various public-sector firms in India.

The approach under this category is more akin to ‘Make’ procedure; albeit, the development and production would not be through indigenous R&D but through transfer of technology from the foreign OEM. This change in DPP-08 would enable pro-active participation of Indian industry in manufacturing defence products through co-production arrangements, such as JV, with foreign manufacturers and through transfer of technology.

The fallacy with the above statement is that it naively assumes that foreign companies will readily disclose or divulge their closest technological secrets merely by handing them a sum of money. The fact is, that be it single blisk technology for engines, or the “intricate” material science of AESA radars, or technology of seeker heads of missiles, NO foreign company in it’s right mind will ever share this technology with India, no matter what sum they’re given.

An ‘Integrity Pact’ is presently required to be signed between government and the vendors for all procurement schemes over Rs. 100 crores. This is a binding agreement between the government department and bidders for specific contracts in which the government promises that it will not accept bribes during the procurement process and bidders promise that they will not offer bribes. The existing provision provides for appointment of Independent Monitors (IM) in consultation with the Central Vigilance Commission. The role of Independent Monitors was, however, very limited and undefined.

“Promise they will not offer and accept bribes”. I think nothing could’ve been more childish and banal than this.

Besides, the language used is so forgiving and even “sanguine”, that it seems as though the offenders will get away with just a rap on their knucles. The language should’ve been more stringent like “…any attempt to bribe or subvert the normal acquisition process to gain undue favours would invite cancellation of the licence for a period of 15 years…”

All in all, this procedure merely shifts the licence production regime from the public sector to the private sector. There is no provision in it to foster or nurture our own Lockheeds or Thales in the making. The emphasis is on the same old “raga” of foreign JV and little else.

Licence production has a new name today : Joint venture.

That report says that has been sent to Russia , to quote it once again

The above is accurate. It’s only that HAL will negotiate with Sukhoi on behalf of IAF, as it has been doing unsuccessfully since Jan 2006.

IAF is under an “illusion” that it’s ASRs or whatever are being “fought for” by HAL on it’s behalf. In actuality there is nothing left in the PAK-FA or FGFA that will be IAF-specific. The only difference between the Russian PAK-FA and so-called Indian FGFA will be a twin-seat for FGFA.

However, I have a suspicion that IAF is aware of this fact also. Import-centric that it always has been, it will end up importing the FGFA anyway. Basic ASRs to quite an extent sabhi fighters mein hote hi hain; one only has to look for them.

Sure DRDO can promise the moon and they end up with joint development of Brahmos for hypersonic vehical.

Sir, hypersonic Brahmos is a different project altogether.

Actually, the IAF wants the moon, and DRDO does deliver; but if the goalposts (or, moonposts rather) are “unscrupulously” changed, DRDO cannot help it.

According to the ToI article posted by Austin, India and Russia, after protracted negotiations and some glitches, are now going full steam ahead to finalise the joint project for the stealth fifth-generation fighter aircraft (FGFA). Since FGFA is a Russian concept and the joint project is yet to be finalised, isn’t it logical to assume that ADA/HAL etc. could not have had any INPUT (be it design or development) into this project so far?

The above is well known. India has not yet formally entered the project, and has not yet funded a single nut-bolt in the PAK-FA, that will make it’s debut flight a few months from now.

Finally, Antony, on his part, has already declared India wants the FGFA’s development to be completed by 2016 to ensure IAF can begin inducting it by 2017. Now I dont know if this is also a part of ASR or not, but what sort of contribution would Indian aviation industry be able to make to this 5th generation 50:50 project in 6-7 years times, be it the development of Radar, Engines, Stealth, Avionics etc.?

None. HAL’s chairman Mr. Nayak has admitted that the Indian and Russian versions will have little or no difference. He was responding to some very pointed questions about Sukhoi’s chief Mr. Pogosyan bluntly stating that other than minor software differences, there will be no difference in the Russian PAK-FA and FGFA (thus implying little or no IAF-specific changes and nil workshare for HAL).

Now regarding the Indian FGFA , Indian contribution there could be quite a bit..ala MKI even more than that.

The above is inaccurate. As per this interview of HAL chief, Mr. Nayak, admitted that there will be little difference between the Indian FGFA and Russian PAK-FA. He was responding to a question about Sukhoi’s chief saying that other than minor software differences, the Russian PAK-FA and Indian FGFA will be identical.

Its clear that India is paying 50% of the money atleast for the Indian version and also will get some of the workshare which is most probably productionizing some components for the Russian and Indian version and also more advanced work on the Indian version.About the Russian only version ..as I said there is very little India can contribute if at all.

Please note that “Productionizing some components” amounts to licence production, and NOT workshare.

But in HAL’s new lexicon, licence production is called Joint Venture. This amounts to clear lying on it’s part.

A joint venture is of the kind when Northrop/Lockheed consulted Russia’s Yakovlev to buid the STOVL variant of F-35 JSF, and contracted UK’s BAe for EW suite.
The so-called FGFA does not even remotely have this kind of partnership. All HAL will do is pay a fee to Sukhoi to licence produce the same in India; however, on paper it will be called a “joint venture”, instead of licence production.

This reminds us of the Chinese FC-1, which Pakistan insists is a Joint-Venture. It has even given it it’s own name :- Joint Fighter 17 (JF-17), whereas the Chinese are content calling it Fighter China 1 (FC-1). Other than funding it, and buying an assembly line at PAC Kamra, Pak has nil contribution in it.
Something similar with the FGFA :- local Indian name is different from the Russian one. No visible Indian scientific input, though the Indian side insists that it is a “joint venture”.

Is this a phenomenon pervading the sub-continent ?

Abhimanyu , we are saying the same thing , but the way you are trying to put it is , if IOC passes and FOC gets delayed blame it on the IAF

Let me repeat it , IOC and FOC will be jointly taken by ADA/IAF , IOC will get the basic flight paramaters , basic weapons testing done.

I think IoC itself is the rigorous validation of the ASRs in about 2000 flight-tests. It is given by the manufacturer.
FoC is the air-force specific certificate. Suppose if USAF decides to purchase Tejas as a training/enemy simulation platform; then it will have to pass USAF’s FoC equivalent certificate before being inducted. It can ask ADA for some minor modifications at that stage.

Even Dhruv has to undergo some European certification, before it can be sold to European and North American markets. This is pending. But it already has HAL’s IoC, and the Ecuador Air Force is satisfied with it’s own tests in the Andies mountains, and didn’t ask for the European or any third party certificate before purchasing 9 Dhruvs.

Sure you can nitpick it and make it look like its just a routine flirty affair with FGFA.

But the IAF , HAL and GOI interviews on this they have decided to go for FGFA as their 5th Gen Fighter.

IAF has only expressed hope that FGFA will be introduced in the IAF by 2017.

However, the talks between HAL and Sukhoi are almost stalled (Fakhruddin says there are differences between HAL & Sukhoi) . These negotiations have been going on for almost 4 years now, without success.

There is no need to do something from scratch , as there is nothing great ADA will come from scratch that FGFA will not be able to match.

There is no point duplicating , just because there is something to do from scratch , least of all a complicated project like 5th Gen fighter.

In the same way, there is nothing the FGFA will provide that MCA won’t have. Thus, FGFA will be a redundant addition in the IAF. So, why pursue it ?

The single biggest disadvantage of FGFA is that the IAF wanted to be on the design board from the very start. But Russia has gone alone and completed the PAK-FA, without any IAF or HAL inputs till date. So, will the IAF get all that it wants from FGFA ? Will all it’s ASRs be met, or will have to compromise ? Will a jet designed for the Russian Air Force’s ASRs, necessarily be suitable for the IAF too ?

Now IAF is looking for new AJT ,this is an opportunity for ADA and a low risk project , instead of Importing yet another AJT . ADA should develop one inhouse , compared to the flight of fancy MCA , the new gen AJT is more of doable in 5 – 8 years schedule.

Note that even though we have NAL’s Hansa ab-initio trainer and HAL’s Sitara IJT, the IAF for reasons unknown, prefers the import route.

Regarding Mirage upgrade , both sides will come to some final agreement , IAF badly needs mirage and needs to get it upgraded . Dassult needs business and M2K is good money.

As ante_climax posted above, the deal is nearly off because the price quoted by Dassault is very high.

Not really, IAF is mature and does not buy flight of fancy from R&D and scientist.

In my view, the ADA has delivered and the IAF is squarely responsible in dereliction of it’s responsibility in co-operating with ADA and taking over the project management of Tejas. By this, it has jeopardized the security of the country to an extent.

ADA has to prove the Tejas Mk1 is good as a operational fighter by passing FOC and then get the definative Mk2 off the drawing board and get the trials and induction done asap.

The above is inaccurate. FoC is always given by the Air Force. ADA has proven it can construct a fighter jet as per the specifications of IAF. Even Kaveri meets specifications laid out in 1989. However, the ADA/DRDO are always running on a “steepening treadmill” because the IAF demands a “picture perfect” fighter jet from start and so keeps demanding new inputs midway.

The only impediment in Tejas currently is top speed, which is in turn a result of increased weight over the years. This will be handled in Mk.2.

snecma was not willing to give in key technologies and I believe a team of DRDO rejected the offer , Snecma wants to make good money out of royalty and not willing to share key technologies.

The above is inaccurate. DRDO has decided to go ahead with the Snecma-JV despite IAF’s objections, because it disagrees with the IAF’s contention that there will be no ToT (but it has agreed to install a GE or Eurojet in Tejas).

Both ADA and IAF should/will work in co-ordination to get IOC and then FOC , FOC is the key benchmark for Tejas mk1 and ADA/IAF will be working jointly.

Its better ADA focus on getting FOC of Tejas Mk1 done and get the definative Mk2 off drawing board to production and Naval Teas from development to IAC.

Please note that FoC is granted by the user Air Force. ADA’s job ends at IoC.

Yes they can get all that small team and start work , once PAK-FA gets going , two years down the line the small team will dissapear and IAF will rightly put its fund and effort on FGFA and what ever that small team manages to do ( if it ever does ) that would get reflected on FGFA

Arey, what is “right” about FGFA ? It’s main USP that it is a “joint development” between India and Russia is absolutely false. It is a fighter made as per the needs and requirements of the Russian Air Force. IAF will tweak it’s ASRs and tactics to accomodate this fighter — as it has always done.

IAF wanted to be on board the FGFA from the drawing board. Instead, the PAK-FA is ready, and will take flight in the coming months—without an “iota” of IAF’s QSRs. This can be undone if it joins the MCA, which it can mould from “scratch”.

MOSCOW: India and Russia will launch the joint fifth generation fighters by year end…[/quote]
We may observe what is exactly mentioned in the news report below.

The protocol provides for completion of formalities by the year end to launch the joint designing, development and production of fifth generation fighter aircraft project.

The “completion of formalities” is the ongoing negotiations between the HAL and Sukhoi. These have been going on since 2006 and some past “euphoria” has already passed.

Indo-Russian Agreement soon on PAK-FA .. 8 Feb, 2007

India’s role in Sukhoi project questioned.. June, 2006

The 2009 deadline is also similar to these past deadlines of 2007 and 2008. It is clear that the negotiations are reaching nowhere, as there are very serious questions on what exactly will India contribute to the PAK-FA, other than finance. Entering a project so late, when it’s first prototype is about to debut, makes any talk of Indian scientific contribution meaningless.

I think IAF must abandon this PAK-FA, and commit fully to the indigenous MCA only.

ADA/HAL would be kept busy and focus on delivering the Tejas Mk1 and then the definative Tejas MK2 and later a advanced variant of Tejas Mk3 , the work is enough to keep them busy for ~ 1 and half decade.

The above is inaccurate. As far back as 2005, it has been suggested that the management of Tejas must be taken over by the IAF, as ADA’s job is only to innovate and demonstrate the technology. This, the IAF has failed to do which is why the Tejas has been delayed.

IN PERSPECTIVE
(Problems of LCA Management)

By Bidanda M Chengappa

The DRDO has completed its contribution to the LCA project and the IAF, as the user, should take it over. Speculation that Mr P S Subramanyam will take over as the new Programme Director (PD) of the Aeronautical Development Agency (ADA) and manage the 20-year-old Light Combat Aircraft Project makes one wonder about the absence of a full-time Director General (DG) for the ADA. Today the Scientific Adviser (SA) to the Defence Minister and the Director General of the Defence Research and Development Organisation (DRDO), Mr M Natarajan, is also the DG of the ADA in a part-time capacity. The SAs have always concurrently held the position of the DG- ADA and thereby denied the programme full attention, so necessary at this stage. Perhaps the perquisites available to the DG-ADA with foreign trips and financial control over a big budget have made the SAs reluctant to make it an independent appointment.
Mr Natarajan is a tank man who had earlier steered the Main Battle Tank 90 ‘Arjun’ programme as the Director, Combat Vehicles Research and Development Establishment, Avadi. As an IIT qualified mechanical engineer, Mr Natarajan has all along been land-oriented in his outlook having dealt with tank technology. While scientists are good at design and development they need not necessarily make phenomenal project managers.

Background Lacking

Unlike operational military pilots, the scientists tend to lack an operational aviation background, so necessary to comprehend the nuances of aircraft development. The only exceptions are Israeli defence scientists who by virtue of being ‘citizen soldiers’ have an element of military operational orientation that supplements their core competence in design and development of weapon systems.

The only DG-ADA full time so far was Dr S R Valluri briefly for under a year in 1985. Thereafter the dynamic and determined Dr Kota Harinarayana remained the Programme Director (PD) of the ADA for 15 years. The disadvantage between a part-time and a full-time DG-ADA for the LCA programme is evident. A case in point is that of Mr Ashok Baweja, the present Chairman of HAL, who was earlier the first full-time Director of Design and Development (D&D) of HAL. Till then for over a decade there was no full-time Director of D&D except for concurrent appointments. Mr Baweja, while in that appointment, managed to accomplish the certification of the Advanced Light Helicopter –– both civil and military versions and Intermediate Jet Trainer. He also accelerated the LCA programme. Similarly, a full-time DG-ADA for the LCA programme would remain focussed on the programme and push through obstacles better as the appointment is equivalent to the rank of a Secretary to the Government of India. A programme director in contrast is only of the rank of a joint secretary (now raised to additional secretary) and is at a disadvantage within the hierarchy conscious technocracy in New Delhi. In the mid-1990s, Air Marshal P M Ramachandran (Retd), was earmarked for appointment as the DG-ADA, but for inexplicable reasons it did not materialise. The Air Marshal as a competent test pilot may have successfully driven the programme to fruition. Instead the PD-ADA, Dr Kota Harinarayana, was elevated to the position of a Distinguished Scientist in January 1996 equivalent to a special secretary. In view of these considerations the IAF is not in the driver’s seat and lacks control which explains why it has not yet put its money into the LCA programme.

Clearly the DRDO has completed its contribution to the LCA project and at this stage, therefore the IAF, as the user, should assign one of its men to assume the role of a project manager to drive the project towards production. Unlike the IAF, the Indian Navy has always had a tight control over its R&D agencies with higher indigenisation levels compared to the air force or army. For instance, the prestigious Advanced Technology Vessel Project to develop a nuclear submarine is always headed by a three-star ranked Vice Admiral and not a DRDO scientist. Operational experience is critical to the project. The recent appointment of an Air Marshal as an Adviser to the DG-ADA is only notional in nature.

Project Management

In the Western industrialised countries, which have perfected the art of project management, the R&D agencies only design and develop armament technologies. And the military as the user agency has the highest stakes in such weapon development projects because it contributes directly to their operational capabilities. {IAF has never learnt this; all they know is to float global tenders and import.}

Hence the military assumes the role of a project manager and drives the industry towards production of the weapon system. However in the LCA project, the DRDO is the fund manager, project manager and monitoring authority and hence should not become a non-starter owing to the politics of military aeronautics between the DRDO, HAL and the IAF.[/COLOR] The LCA has spent Rs 4 crores of the tax-payers’ money and hence the project should be managed with care. The right man for the right job is important.

The M-MRCA Contest
Capability for the IAF, an opportunity for India
By Adm. Arun Prakash (retd)

Moreover, the armed forces are now reasonably sure that neither the DRDO nor the defence PSUs are interested in working alongside them to achieve common goals. Therefore, forecasting operational imperatives, and seeking to develop timely capabilities is not a pursuit that the three Services have, so far, found productive; unlike others world-wide.

Sir, I may disagree with you here. The opposite can also be said to be true i.e. the armed forces have often found to be non-cooperative with DRDO. Examples abound primarily in some of the most strategic projects like Arjun and Tejas. If the armed forces think all they have to do is just give a list of requirements and sit back, they’re mistaken. Also, for the sake of long-term indigenization, even if the indigenously made equipment does not match equivalent western equipment in all ways, then too an effort can be made to induct.
There is a difference between dated equipment and obsolescent equipment.

but the MoD needs to guard against any attempts, by DRDO or other agencies, to circumvent the due processes.

I don’t know how DRDO “circumvents” the process, but I think it’s attempt to develop something for the first time involves R&D and none of the DPP processes — this may be percived by the armed forces as “circumvention”.

The indigenous Tejas LCA, which was to have been the MiG-21 replacement, has suffered huge slippages, further upsetting the IAF force-planning process.

Sir, please note that the IAF too is directly responsible for about half a decade of delays on the Tejas. From delaying the go-ahead for 3 years in 1993, to arguing with ADA over which firm to choose for the FBW consultancy, to suddenly demanding changes in the wing-loading in 2004 (thus forcing ADA to go back to drawing board), to an 11th hour demand in increasing the engine thrust — the IAF has not exactly been a hand-to-shoulder collaborator on the Tejas; more like an indifferent and aloof spectator.

The Pak Air Force is slated to receive 36 J-10s and aims to acquire 10-12 squadrons’ worth (200-250) of the lightweight multi-role JF-17 ‘Thunder’. The Thunder, a collaborative project of the Chengdu Aircraft Industries and the Pak Aeronautical Complex, will become the future mainstay of the PAF.

Sir, these acquisitions by Pak are long term and will take atleast 15 years to fructify fully. By that time, the IAF too would have increased it’s squadron strength.

For one, M/s Dassault Aviation were now producing the more advanced and definitive Mirage-2000-5 version, which was a substantially different machine. They were also on the verge of closing down the Mirage-2000 production line, unless some firm orders were forthcoming soon. Moreover, the MoD was aware of these factors and consistently refused to treat the IAF proposal as merely a ‘repeat order on a past supplier’ envisaged in the ‘Fast Track Procedure’ of DPP 2006. They insisted that since this was going to be a new aircraft, the IAF should follow the standard process of drawing up an ASR and then floating an RFP.

Displaying misplaced optimism in the face of steadfast MoD opposition, the IAF persevered and, possibly, lost a precious two-three years in its futile quest for additional Mirages. In hindsight, following due processes, in this time-frame the Service could have gone well down the M-MRCA acquisition route by now, and mitigated its problems.

I was under the impression earlier that the IAF infact delayed sending the RFP to Dassault. This is because SP Tyagi once “lamented” that, he regretted that the RFP was not sent in his tenure. From the above, it is clear that the Defence Ministry was solely responsible for the delay in the acquisition of Mirage-2000-V.

The recently retired Air Chief is quoted by a magazine as having summed up M-MRCA request for proposals in the following words: “Broadly speaking, we want a medium weight, multi role combat aircraft that can undertake air defence, ground attack, maritime attack (anti-ship) and reconnaissance roles with ease. We want the aircraft to have adequately long-range and endurance to meet our operational requirements with additional mid-air refuelling capability and ease of maintenance and low life-cycle costs.” Additionally, the IAF has indicated its preference for the active electronically scanning array (AESA) radar, in preference to the earlier less capable mechanically scanning sensors.

Intriguingly, and perhaps for geo-political reasons, the RFP seems to have cast its net too wide; including two distinctly different categories of aircraft in the same competition. Firstly, new 4th generation machines (MiG-35, Gripen, Eurofighter and Rafale) have got mixed up with aircraft which first flew in the 1970s and now are in the ‘sunset phase’ of their service life (F-16 and F/A-18). Secondly, single-engined lightweight fighters in the USD 30-50 million cost range (F-16, Gripen and MiG-35) will be vying with larger twin-engined heavy-weight fighters in the USD 60-120 million range (F/A-18, Rafale and Eurofighter).

I agree with this view. Firstly, the term “medium weight” is quite subjective and given that the 16 ton Gripen is vying with the 31 ton F-18 Super Hornet, the IAF itself is undecided what it means by the so-called medium weight jet.

Ex-Chief SP Tyagi once said that the MRCA would “fill the gap” between the “light” Tejas and “heavy” Su-30 MKI. However, the Su-30 MKI is in reality a mini-bomber if we go by the weight standards of western fighter planes. This is because of a peculiarity of Russian designs, that tend to be much larger and heavier than their equivalent western counterparts. As an example, the Su-30 MKI’s American equivalent is the F-15E Strike Eagle, which is nearly 3 tons lighter than it, as also smaller in size.

Thus, the IAF can reconsider it’s light-medium-heavy doctrine.