India News and Features Alliance (INFA) - CAG Highlights Irregularities: FLAWED MILITARY PROCUREMENT SYSTEM, by B.K. Mathur, 21 May 2007

Procurement from abroad, off-the-shelf and production under licence or wholly indigenously of machines and weapon systems for India’s armed forces has been a matter of great concern for years no end, rather decades. There have been great scandals galore on purchases from abroad from time to time. Even a Government of the Union has fallen mainly because of a gun deal involving slush money. Such deals have been examined by several Parliamentary Committees and the Comptroller and Auditor General of India (CAG) from time to time. But all the exercises and recommendations have gone down the drain. Only the vested interests have prevailed.

After the Kargil confrontation in 1999, a Group of Ministers, headed by L.K. Advani, had suggested several changes in the procurement system. But not much has changed and the Ad-hocism continues unabated for various reasons, most concernedly the massive costs of the machinery procured from time to time. The Advani Committee had strongly recommended the need for the establishment of a Procurement Board to plan imports or indigenous production of machines and systems for the three Services. What was actually stressed was the need for advanced planning for procurement. Such a Board presently exists but does not seen to be functioning the way Advani Committee had suggested.

The lapse is clearly indicated in the four Audit Reports on Defence Services by the CAG for the year ending March 2006, presented to Parliament on May 14, 2007. The CAG has noted in Report No.4 on “Army and Ordnance Factories: “There was significant amount of unplanned procurement as several items which were not catered for in the Tenth Plan were procured each year. The unplanned procurement increased from two per cent in 2003-04 to 43 per cent in 2005-06 (in terms of value)”. The number of items procured without planning during 2004-06 was 24, valued at Rs.3,361 crore. The Defence Ministry justified this procurement by telling the CAG that “the requirement of these items emerged on the battlefield suddenly and that these items could not be forecast initially and hence were not included in the five-year plan.”

The CAG has, however, noted differently. On closer examination it has found that “many of these items were not exactly in the nature of emergency procurement. Items like Air Target Imitator (ATI), Boot Antimine etc were identified for acquisition by the Army more than a decade before. The Army had proposed for procurement of ATI in 1997 yet it was not included in the Tenth Plan. Similarly Boot Antimine was proposed for procurement in 2000 yet not included in the Tenth Plan (2002-07). Similarly, Extended Range Rockets, Unattended Ground Sensors (UGS), Integrated Field Shelter etc. which were procured without being included in the original Plan, could not be justified as emergent procurement.”

More. The CAG has found with great concern that four items were procured by the Army independently. In doing so, the Army failed to coordinate effectively with the other Services, the Navy and the Air Force, and resorted to independent procurement, instead of planning joint procurements to obtain best value of money.” It has been rightly observed by the Auditors that aggregation for common purchases for tendering is desirable to minimize transaction cost, reduce processing time, avoid multiplicity of repair and overhaul facilities, economy in procurement from bulk buying. The CAG has identified four items which have common use but procured independently. They are Unmanned Arial Vehicle (UAV), Integrated Oxygen / Communication Mask Helenet Skipper Rifles SVD and combat underwater diving Equipment.

Now let us see the Defence Ministry’s shopping skills that take care of only vested interests at the cost of national interest. Not only that. The exercise to serve self first directly affects the growth of the domestic defence industry. Things which can easily be designed and produced indigenously are imported after paying much more than the cost involved in indigenous production. The excuses of “urgent requirements” or the industry’s failure to produce in time are trotted out to justify procurement from abroad at high costs that includes massive under-the-counter payments. The anxiety to run abroad for frequent foreign trips also causes delay in procurements, leading to a situation where an expensive machine becomes obsolete by the time it is finally procured. The most glaring example of this tendency is the acquisition of fighter aircraft for Indian Air Force.

Take another glaring example to prove the point. The history of the indigenous production of a main battle tank, planned way back in 1974. After 33 years of trials and errors 40 tanks, now named “Arjun”, have been handed over to the Army for “trial”. The Army is still not satisfied with the produce; the tank gets heated up fast and do not compare well with the imported ones. Not many may know the real cause for the delay. The tank, called MBT was initially designed in the 1970s and produced for trials with a 1000 hp engine, when it reached the Army about a decade later, improved versions with 1500 hp were available in foreign market. The Indian scientists then began the update exercise to produce a tank on a 1500 hp. engine. That took time, yet the original design remains incomplete to match with the 1500 hp engine. The Arjun may ultimately get discarded by the users.

Despite the fact that the Ministry had prepared the defence procurement procedures for the years 2005 and 2006, they were ignored when it came to implementation. Take, for example, the Rs.673.42-crore project to upgrade the IL-38 maritime reconnaissance plane, signed with a Russian company in 2001. The procurement did not progress as per the schedule owing to delays in the finalization of certain weapon systems and customer supplied equipment. Two of these aircraft were delivered after a delay of 25 months and 16 months respectively. Strangely, these two late-delivered aircrafts are without essential avionics and weapon systems---missiles, bombs and tarpedos---thus limiting their operational capabilities.

About the procurement for the Army, the CAG has noticed “incorrect assessment” of its requirements HHTIS (4062 units) first procured from Israel and later from other sources, including Bharat Electronics. This led to excess procurement for 56 units that caused an avoidable expenditure of Rs.10.16 crore. Same for procurement for the IAF. The Ministry had entered into a Rs.586-crore contract for 20 air surveillance radars to replace obsolete ones. But their acquisition was “considerably delayed”. What is more, the process also deviated from the prescribed procedure. Not only that. As many as ten radars, costing Rs.251 crore and received between March 2005 and August 2006, remained unstalled for non-completion of works services. Consequently, the IAF’s bases continue to operate flights with obsolete radars.

One can go on and on with such flaws, which seem to have become a matter of routine for the Defence Ministry and the three Service headquarters. The continuing malice has prompted the CAG to ask the Ministry once more for a drastic overhaul of the entire defence procurement system. It needs to be done on high priority basis to ensure that the armed forces get the “capabilities” they need to meet the threat perception in a timely and cost-effective manner. In the final analysis, most important in this regard is that the policy planners and their executors must put the national interests above all else, especially the vested interests.---INFA