14 JANUARY 2016
Incremental steps not enough
The Defence Acquisition Council has approved a revised Defence Procurement Procedure (DPP), aimed at boosting indigenous defence procurement and encouraging better participation from the Indian private sector. The Council is headed by Defence Minister Manohar Parrikar and includes key stakeholders of the defence establishment. Among its key decisions is a proposal to introduce a new category of acquisition termed Buy Indian (or IDDM, indigenous design development and manufacturing), which would become the most preferred acquisition category. Under Buy Indian, domestically designed equipment with 40 per cent indigenous components or foreign-designed equipment with 60 per cent local components will be considered. The new DPP has significantly increased the offset threshold for foreign contracts from Rs. 300 crore to Rs. 2,000 crore (with 30 per cent of the contract value to be procured from within India), while it has certain provisions for encouraging Micro, Small and Medium Enterprises. At first glance, the DPP is an incremental improvement over recent efforts to reduce India’s import dependence, which stands at 65 per cent of total defence procurement, to help create a robust military industrial complex within the country.
It is imperative that India succeeds at the earliest in creating a cutting-edge domestic military industrial base: no major nation state has transitioned to becoming a developed economy without one. Such a complex would create not only latest war machines but also hothouse innovations and technologies to improve overall scientific capabilities, and make India self-reliant at least in critical areas. If the ambition is to truly make Make in India a reality in the defence sector, then the DPP falls significantly short of expectations. Many private sector participants have been flagging a host of issues, and inbuilt biases against indigenisation. There are two key impediments to India’s private sector becoming active participants in defence R&D and production: the monopoly enjoyed by defence public sector units, and the favours that foreign suppliers enjoy. DPSUs are the workhorses of the sector as well as the biggest drag on indigenous military research. A significant number of them are merely assembling foreign kits. Given India’s over-dependence on foreign military vendors, several biases have crept in favouring them in procurements. A foreign vendor gets most of his payment on self-certification of project progress, while Indian vendors have to wait for a government inspector’s certification, which can delay payments by several months. A foreign vendor enjoys upfront customs duty exemption, while the excise duty exemption for a local supplier is a reimbursement months after he has supplied an item. The new DPP may work towards expanding the number of participants in military tenders, but it may not help dramatically improve the present environment for all participants. Going by the present trend, the $100 billion and more that India will spend over the next decade will mostly end up in foreign markets. Political boldness and radical reform are needed in defence procurement. Neither is visible in the new DPP.
Mixed legacy of the Obama years
In a speech long on past achievements and short on policy promises for his final year in office, U.S. President Barack Obama delivered his seventh and last State of the Union address to a House of Representatives chamber on Tuesday. Equally dedicating his time at the pulpit to defending his two-term record in office and to laying out a vision consistent with the liberal paradigm of the Democratic Party, Mr. Obama posed four definitive questions, the answers to which he said would determine how much progress the U.S. would make in the years ahead. First, on how the U.S. middle class finds sufficient opportunities in the new economy to secure its prosperity; second, on how the U.S. harnesses the power of technology to tackle climate change; third, what are the means to secure the safety of Americans at home and abroad without getting trapped in any military “quagmires”; and fourth, how could America's leadership foster a less hateful, less anti-minority brand of national politics? In the face of the Republican Party’s attitude of “rancour and suspicion”, Mr. Obama has deftly navigated a path forward on domestic priorities including healthcare reform, economic revival, and sustainable technologies in the energy sector. Yet his record on foreign policy is more patchy and complex. The partial realisation of the dream of America leading a multilateral world sits rather uncomfortably with notable cases of stasis and deepening conflict.
An unequivocal feather in Mr. Obama’s cap is the détente with Iran, which, on his watch, has rolled back its nuclear programme, shipped out its uranium stockpile, and helped the world step back from the brink of war. So too is the revival of formal diplomatic ties with Cuba last summer which, after more than 50 years of isolation and economic embargo, witnessed the relaxation of travel restrictions but awaits a nod from the Republican-controlled Congress before trade can be fully opened up. At the macro level, seven years since the end of Bush-era unilateralism, the adoption of multilateral, regionally focussed and hemispheric political models have certainly come into vogue under the able guidance of the Obama machine. Yet, even as multilateralism has thrived, bilateral crisis-resolution has taken a back seat. With Russia, the legitimate concerns of an important strategic player are reduced to sound bites and talking heads on U.S. news channels. Consequently in Ukraine and Syria there is often a hair-trigger situation. Washington’s China engagement was more reactive than proactive, and led to more aggressive positions in the region. The unravelling security prospects of Afghanistan and the festering Palestine-Israel conflict were inconsistently addressed over the two presidential terms. India, though, turned out to be the classic partner for Obama’s America — there was enough bilateral economic depth to keep ties strong, and the shared idiom of pluralistic democracy held the two nations together in a close but light strategic embrace.