Defence procurement: India

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This is a collection of articles archived for the excellence of their content.

Purchases for Defence


Defence purchases

1962 to 2017, A brief history of defence procurements India Today , 31/7/2017

2008-2015: Defence purchase

India second largest arms purchaser after Saudi Arabia: Report, Dec 27, 2016: The Times of India


Between 2008 and 2015, India purchased defence equipment worth $34 billion, a report says

In the same period, Saudi Arabia's purchase was worth $93.5 billion

This report comes even as India embarks on a massive modernisation plan for its defence forces

As India embarks on a massive modernisation plan for its defence forces, it has emerged as the second largest purchaser of arms among developing nations after Saudi Arabia, a Congressional report has said.

Between 2008 and 2015, India purchased defence equipment worth $34 billion, which is a distant second after Saudi Arabia's $93.5 billion, said the report 'Conventional Arms Transfers to Developing Nations 2008-2015' released by Congressional Research Service (CRS).

As the name reflects, CRS is an independent bipartisan research wing of the US Congress. It prepares reports on a wide range of issues for lawmakers to make informed decisions. CRS reports are not considered official reports of the US Congress.

"Saudi Arabia was the leading developing world arms purchaser from 2008-2015, with agreements totalling $93.5 billion. India was the second largest developing world arms purchaser from 2008 to 2015, making arms transfer agreements totalling $34 billion during these years (in current dollars)," it said, adding these increases reflect the military modernisation efforts by India.

In its report, CRS highlights recent Indian efforts to diversify its procurement of arms, of which the US has been a major beneficiary. "It is notable that India, while the principal Russian arms customer, during recent years has sought to diversify its weapons supplier base, purchasing the Phalcon early warning defense system aircraft in 2004 from Israel and numerous items from France in 2005, in particular six Scorpene diesel attack submarines. In 2008, India purchased six C130J cargo aircraft from the United States," CRS said.

In 2010, the UK sold India 57 Hawk jet trainers for $1 billion. In 2010, Italy also sold India 12 AW101 helicopters. In 2011, France secured a $2.4 billion contract with India to upgrade 51 of its Mirage-2000 combat fighters, and the US agreed to sell India 10 C-17 Globemaster III aircraft for $4.1 billion, it said.

"This pattern of Indian arms purchases indicates that Russia will likely face strong new competition from other major weapons suppliers for the India arms market, and it can no longer be assured that India will consistently purchase its major combat systems," CRS said. Indeed, India in 2011 had eliminated Russia from the international competition to supply a new-generation combat fighter aircraft, a competition won by France.

In 2015, Russia and India agreed to a contract in which India would procure at least 200 Ka-226T helicopter, the report said. With India reducing its reliance on Russia on arms purchase, Moscow is looking for other options, it added.

2013-16: Defence purchase

India’s defence exports, 2013-16, country-wise and year-wise; Graphic courtesy: The Times of India, August 2, 2016

India Today

April 27, 2015

Shekhar Gupta

Defence deals create controversy because they are small, piecemeal, with many vendors. India must get over its post-Bofors paranoia

Prime Minister Narendra Modi's dramatic purchase of 36 Rafale jets has drawn extreme comments. One, that this is a bold, gutsy decision of a leader who is not afraid to break the multiple logjams in defence acquisitions. Two, that it is a panicky decision to fill a crucial gap in a fast-depleting Indian Air Force Order of Battle (ORBAT) with obsolescence of the entire MiG series (MiG-29 apart), and is typical of our bandaid-tourniquet doctrine of defence purchases.

This is a gutsy decision which breaks a stalemate and ends, at least for the moment, the vicious lobbying, leak-versus-leak battles in New Delhi. But there is also merit to the second view. How did India paint itself into such a corner, weakening its strategic posture? It ended up making possibly a $5 billion purchase off-the-shelf in a wartime-like haste, embarrassing for the aspiring globaliser fielding the world's fourth largest army and listed, traditionally, as the top military importer in the world.

Stockholm-based SIPRI, which estimates import data in terms of constant 1990 value dollars, puts the value of India's total arms imports in five years (2010-14) at a little over $21 billion, and about three times the second largest, Saudi Arabia. Pakistan is a little bit behind, with just over a fourth of India's arms import bill, although that figure could need some correction for the complexities of putting a realistic value of imports from the US and China, both "special relationship" suppliers. The SIPRI figures look accurate if we compare them with the only reliable rupee data available with us, in the form of answers to Parliament questions: Arun Jaitley said India's arms imports were around Rs 83,000 crore in the past three years, and Manohar Parrikar said Rs 1,03,000 crore in five years, or $16 billion. But if you think 1990 rupee-dollar, SIPRI' s $21 billion would be in the ballpark. Two points arise from this. First, that Modi's decision to order these Rafale jets off-the-shelf was wise and brave, like a senior doctor risking immediate surgery to save a deteriorating patient. The second is a question. How did the fourth largest military machine in the world get itself in the ICU in the middle of the night over a weekend needing emergency surgery? The most telling statement of all came from General V.P. Malik, in the early days of Kargil in 1999 when he said in frustration: "We will fight with what we have." He was the chief of one of the world's largest and finest armies.

To delve into this maze of contradictions, one needs to write a couple of tomes. Some have been written too. My favourite is “Arming without Aiming”, jointly written by the foremost expert on South Asian militaries, Stephen P. Cohen, and Sunil Dasgupta (who worked with me in this magazine two decades ago as a young reporter learning to cover defence). Both are based at Brookings in Washington now and bemoan lack of a culture of strategic thinking and planning in India. The Indian doctrine, they imply, is purely tactical, episodic, immediate-need-based, and conforms to the basic Indian approach to all infrastructure: create shortages and then keep planning to deal with them. My own most telling insight on this sits in my rather flimsy personal archives. It is a handwritten note scribbled with a pencil on a scrap from Jaswant Singh. "I headed the parliamentary committee to examine India's military-strategic doctrine," wrote Jaswant Singh. "We concluded there was no strategy and no doctrine."

There is zero evidence this has changed. Because if it had, we would not be buying frontline fighters off-the-shelf as if picking groceries at a supermarket after 17 years of debates, controversies and near-scandals. This has been the consistent history of our defence purchases except, say, a remarkable 1985-89 phase under Rajiv Gandhi which, sadly, became a problem and made our fear of buying an incurable virus. The result of this piecemeal approach is that our armed forces are under a constant stress with shortages. The same disease had plagued us during, and in the course of, every war, even if we leave out 1962 as an exception. We believe in 1971 Indira Gandhi and Jagjivan Ram gave the armed forces a free hand and time to build up fully before going to war. This included emergency, bulk import of used Soviet-made T-55 tanks from Poland, induction of heavy, but short-legged Sukhoi-7s for close support (it ended up with the highest attrition rate). And now, scholar Srinath Raghavan tells us in his wonderfully researched and written 1971: A Global History of the Creation of Bangladesh that on the eve of 1971 the government of our greatest anti-Zionist, pro-Palestinian leader ever, Indira Gandhi, secretly pleaded with the Israelis for crucial weaponry, including long-range mortars, though we did not have diplomatic relations with them. Of course, the Israelis helped as they had done twice in the past.

Remember the initial setbacks IAF suffered in Kargil, when two MiGs and a Mi-17 attack helicopter were lost and all crew were killed, except one taken POW? A fourth, a sturdy photo-reconnaissance Canberra (since retired), was nursed back to base by a deft crew. All were hit by shoulder-fired missiles. It needs to be said that it was because IAF commanders were still operating in old derring-do, precise, daylight, low-level strike missions of the pre-missile age. The result was losses while very little was achieved with old-fashioned bombs, rockets and strafing. Once again, tactics changed after setbacks (recall the loss of all four obsolete Vampires sent out over Chamb in the first air battle of 1965, not to be used again in that war).

Again in 1999, the IAF suffered no casualty in nearly 50 days of more effective operations after the first few. It not only changed tactics, but also imported-again from Israel in an emergency-laser pods to rig on Mirage-2000s to carry out precision bombing of Pakistani positions at night. If you scratch your memory, or look at archives, those are the videos the IAF displayed at one of the press conferences in the decisive phase of that war and when the tide turned.

This isn't meant to be a comprehensive litany of our short-termism. It is to explore a limited question, with apologies to Erica Jong: Why this fear of buying? Since 1987, one reason is the Bofors syndrome. Every defence purchase is fraught, delayed or "thrown in orbit" as Lutyens description goes for sending a file into a permanent spiral of indecision. This makes New Delhi the easiest playground for arms dealers, middlemen (by whatever name you call them) and a new phenomenon, the dedicated, B-to-B, arms bazaar media. Public is confused between negotiations, shifting requirements, a constant whiff of scandal and a belief that the system is owned by this massive, evil arms trade. At the same time, we continue importing more than any other nation in the world. You want a paradox: A.K. Antony, our most risk-averse, most anti-US defence minister since 1991, ended up buying more from the US, and directly, on government-to-government basis and off-the-shelf (C-130s, C-17s, P-8Is) than in our entire independent history. Modi has resumed that de-risked, emergency buying tradition, though with great dash.

The only way to fight phobias is to face them. It is fashionable to curse Rajiv for Bofors and more, but the truth is, 1985-89 was the only period in our history that weapon acquisitions were proactive, futuristic and redefined the largely defensive tactical doctrines until then. Sundarji's Brasstacks and Checkerboard were aggressive and aimed at delivering crushing blows in enemy territory than merely protecting your own. The fear of Bofors has blighted South Block since. But think. In a war even today, bulk of the hardware the three forces will field was ordered by Rajiv, from Mirages to T-72 tanks to new series MiGs, BMP armoured fighting vehicles and, of course, Bofors artillery. In these years our defence budget crossed that Lakshman Rekha of 4 per cent of GDP.

Today it is well below 2 per cent of a growing GDP, and quite adequate. For a reality check, our five years' defence imports are two-thirds of our gold imports in a year and, more tellingly, less than a tenth of the import bill of Reliance Industries and about a seventh of Indian Oil Corporation, a PSU. But controversy dogs only defence imports not because they are huge, but because they are small, piecemeal, with many vendors, and the "system", wrapped-in-latex post-Bofors, is petrified of handling it. If you give up that fear, you can embark on another systematic modernisation as in 1985-89.

2017 : Defence Imports

Sandeep Unnithan , Unmade in India , “India Today” 6/3/2017

Imported Backbones

See graphic:

Imported Backbones

2019: India no.3 in expenditure

Rajat Pandit, India now 3rd-biggest military spender in world: Think-tank, April 28, 2020: The Times of India

Total global military expenditure rose to $1,917 billion in 2019, an increase of 3.6% from 2018
From: Rajat Pandit, India now 3rd-biggest military spender in world: Think-tank, April 28, 2020: The Times of India

NEW DELHI: India has for the first time emerged among the top three nations in the world in terms of military expenditure, though the US spends more than 10 times and China almost four times its defence budget.

Latest data released by global think-tank Stockholm International Peace Research Institute (SIPRI) shows the total global military expenditure rose to $1,917 billion in 2019, an increase of 3.6% from 2018.

The five biggest spenders were the US ($732 billion), China ($261 billion), India ($71.1 billion), Russia ($65.1 billion) and Saudi Arabia ($61.9 billion), together accounting for 62% of the global military expenditure. “This is the first time that two Asian states (China was second in 2018 also, but India was fourth) have featured among the top three military spenders," said SIPRI.

India’s annual military expenditure, of course, includes a huge pension bill for around 3.3 million retired veterans and defence civilians. In the 2020-21 defence budget, for instance, the pension bill amounted to almost $18 billion out of the total $62 billion.

Moreover, apart from the ballooning pension bill, the revenue expenditure for the day-to-day running costs and salary bill of the 1.5 million strong Indian armed forces by far outstripped the outlay for military modernization.

India has also put on hold new major deals for weapon systems in the backdrop of the government currently grappling with the huge financial impact of the Covid-19 pandemic in the country, as was reported by TOI.

In effect, Indian armed forces, despite the country being the world’s third-largest defence spender and the second-largest arms importer behind only Saudi Arabia, continue to suffer from critical operational shortages on several fronts, ranging from fighters and submarines to basic infantry weapons and night-fighting capabilities.

It also reinforces India’s persisting failure to build a strong indigenous defence industrial base (DIB), which can make the country strategically vulnerable if supplies are choked in times of conflict.

SIPRI, on its part, said China’s military expenditure reached $261 billion in 2019, a 5.1% increase compared with2018, while India’s grew by 6.8% to $71.1 billion. “India’s tensions and rivalry with both Pakistan and China are among the major drivers for its increased military spending,” it said.

Pakistan was ranked at the 24thposition, with a military expenditure of $10.3 billion. In addition to China and India, Japan ($47.6 billion) and South Korea ($43.9 billion) were the largest military spenders in the Asia and Oceania region. “Military expenditure in the region has risen every year since at least 1989,” said the SIPRI report.

“India’s expenditure has grown by 259% over the 30-year period, 1990–2019, and by 37% over the decade 2010–19. However, its military burden fell from 2.7% (if defence pensions are taken into account) of GDP in 2010 to 2.4% in 2019,” it added.

Pakistan’s military expenditure, in turn, rose by 70% over the decade 2010–19, to reach $10.3 billion. Its military burden increased from 3.4% GDP in 2010 to 4% in 2019, it said.

China’s military expenditure reached $261 billion in 2019, a 5.1% increase compared with 2018. “China’s military expenditure has increased continuously since 1994 (for 25 consecutive years). The growth in its military spending has closely matched the country’s economic growth. Between 2010 and 2019, China’s military burden remained almost unchanged, at 1.9% of its GDP,” said SIPRI.

2017- 22

Rajat Pandit, February 3, 2023: The Times of India

NEW DELHI: India procured military hardware worth Rs 1.93 lakh crore (almost $24 billion) from abroad in the last five years, which included helicopters, aircraft radars, rockets, guns, assault rifles, missiles and ammunition from countries like US, Russia, France, Israel and Spain, among others.

India has inked 264 capital acquisition contracts for military equipment since 2017-2018, which included 88 deals with foreign vendors accounting for 36% of the total value, junior defence minister Ajay Bhatt told Lok Sabha in a written reply.

The procurements from foreign vendors was Rs 30,677 crore in 2017-18, Rs 38,116 crore in 2018-19, Rs 40,330 crore in 2019-20, Rs 43,916 crore in 2020-21 and Rs 40,840 crore in 2021-22. The Rs 59,000 crore deal with France for 36 Rafale fighters, which was inked in September 2016, does not figure in this list.

Bhatt, on his part, said, “The Defence Acquisition Procedure-2020 with a focus on `Atmanirbhar Bharat’ and `Make in India’ introduced major policy initiatives for boosting indigenous defence capability and reduction of reliance on imports.”

“Further, DAP-2020 provides the highest preference to Buy Indian (IDDM) category of acquisition and Buy Global is only permitted in exceptional situations with specific approval of the Defence Acquisitions Council or the defence minister,” he added.

In a separate answer, Bhatt said the DRDO is working on 55 `mission mode’ projects at a total sanctioned cost of Rs 73,943 crore. These projects are in the areas of nuclear defence technologies, air-independent propulsion (AIP) for submarines, combat suites, torpedoes, fighter aircraft, cruise missiles, unmanned aerial vehicles, gas turbine engine, assault rifles, warheads, light machine guns, rockets, advanced towed artillery gun systems, infantry combat vehicles, surface-to-air missiles, anti-ship missiles, anti-airfield weapons and glide bombs.

As reported by TOI earlier, India remains ahead of Russia and the UK as the third largest military spender in the world, but far behind China that spends four times and the US 10 times its defence budget.

The government has taken some steps to get India out of its strategically-vulnerable position as the world’s largest arms importer, accounting for 11% of the global weapons imports. But there is still a long way to go.

DRDO, defence PSUs and ordnance factories need to deliver much better in a cost-effective manner, while a much larger participation from the domestic private sector is required, with global majors setting up production facilities in India.


Rajat Pandit, Oct 9, 2023: The Times of India

The armed forces have inked contracts worth around Rs 23,500 crore under emergency capital procurements in just the past one year to plug critical operational gaps amid the continuing military confrontation with China in eastern Ladakh, which now is into its fourth year.

The emergency procurements (EPs) include a wide array of missiles and remotely-controlled weapons, loiter and precision-guided munitions, drones and counter-drone systems, satellite and other communication systems, surveillance equipment and radars, personal protection gear and all-terrain and high-mobility reconnaissance vehicles.

"The revenue EPs, which are substantial, are separate. EPs followed a fast-track procedure. They are different from big capital acquisition cases that follow the normal long-winded procurement procedure," a defence establishment source said.

The armed forces have reason to be pleased. The Army alone chalked up over 70 capital acquisition deals worth nearly Rs 11,000 crore in the EP-4 tranche from September 2022 to September 2023.

The IAF, in turn, inked 65 contracts worth over Rs 8,000 crore, while it was 35 cases worth Rs 4,500 crore for the Navy in this timeframe, sources said. Unlike the first three tranches that also saw deals with countries like Russia, Israel and France, the last EP-4 was reserved for procurements only from domestic manufacturers.

Earlier, apart from domestic sources, the EPs ranged from the French 'Hammer' air-to-ground precision-guided munitions for the new Rafale fighter jets, which are designed to destroy bunkers and shelters at a range of 20 to 70-km, to Israeli 'Heron' Mark-2 unmanned aerial vehicles and 'Spike' anti-tank guided missiles.

The government had first delegated capital and revenue financial powers for a limited time to the Army, Navy and IAF for "emergency and critical contracts" to build stocks and spares in the aftermath of the Uri terror attack in September 2016, which led to some tensions with Pakistan.

Those emergency powers were later renewed after the multiple Chinese intrusions into eastern Ladakh in April-May 2020. Overall, the Army has inked 140 contracts worth Rs 17,500 crore under the capital EP mechanism, which includes 68 deals worth Rs 6,500 crore in the first three tranches.

With operational utility of drones and AI-enabled drones being driven home by recent conflicts from Armenia-Azerbaijan to the Russia-Ukraine one, Army spent close to Rs 1,500 crore for 14 projects on drones and counter-drone systems in first three EP tranches.

Another Rs 2,000 crore was then spent on 10 more such projects in EP-4.

Indigenous purchases

2018- 23

Consumer savings from impact of online travel agencies, 2019-21
From: [From the archives, June 2, 2023: The Times of India]

See graphic:

Consumer savings from impact of online travel agencies, 2019-21

Irregularities connected with procurement

Major scams, till 2016

From the archives of The Times of India

CBI has investigated several cases of ‘manipulation’ by arms dealers. Though the Bofors scandal is closed, the agency is investigating some arms procurement deals. Many of the probes are directly linked to the Tehelka tapes. A few of the cases are also linked to defence purchases that were mentioned in the tapes. Based on the conversations, the CBI is investigating at least three major defence deals, where arms dealers and officials are accused of manipulating the procurement processes. However, the probe has been going on at snail’s pace. In one case, the agency has closed the probe.


CBI filed the FIR in April, 2007, naming arms dealer Sudhir Choudhrie, Samata Party leader R K Jain and others

Charges | They influenced the MoD’s decision in the contract for upgrade of 130 mm field guns to 155 mm. The contract was awarded for $47,524,137 to Soltam Ltd, Israel

Status | The CBI closed the case in 2011, saying it couldn’t gather any evidence to substantiate its claims. The trial court ordered the ED to investigate the money trial to Choudhrie

Some defence scams and impact on military modernisation
The Times of India


CBI filed the FIR in October, 2006, naming Suresh Nanda, former defence minister George Fernandes, his Samata Party colleagues Jaya Jaitly and R K Jain and ex-Naval chief Admiral Sushil Kumar

Charges | Nanda allegedly paid bribes to Jaitly and Jain for ensuring the purchase of Barak Missiles from Israel for Rs 1,125 crore, overruling DRDO’s objections. Among the recipients of suspected remittance for the deal is Sudhir Choudhrie

Status | Probe going on for five years


CBI filed an FIR in October, 2006, naming Suresh Nanda and R K Jain

Charges | Officials ignored the lowest technically suitable offer for purchase of 87 ARVs, and the open tender was scuttled. Later, it was given to a defence PSU that was procuring the vehicle from Unimpex, whose Indian agent was Nanda

Status | Investigations are going on


The CBI arrested former Ordnance Factory Board chairman Sudipto Ghosh and several middlemen in 2009. The CBI filed an FIR naming Ghosh and many defence firms

Charges | Ghosh was collecting kickbacks through middlemen from various defence firms for clearing contracts with the Ordnance Factory Board

Status | The CBI filed charges in the case a few months ago. MoD has blacklisted six defence firms, including Israel Military Industries, Rheinmetall and Singapore Technologies Kinetics

2009 deal for Poseidon naval aircraft

Rajat Pandit, CAG slams UPA’s 2009 deal for Poseidon naval aircraft, August 8, 2018: The Times of India

The CAG has punched several holes in the $2.1billion deal for eight American Poseidon-8I maritime patrol aircraft signed by the UPA regime in January 2009, holding that the Boeing-manufactured planes were wrongly declared cheaper than their European competitor. The report comes amid the ongoing BJPCongress slugfest over the Rafale fighter deal inked by the NDA government.

The CAG may not yet have finalised its audit of the Rs 59,000 crore contract for 36 French Rafales inked in September 2016, but its latest report tabled in Parliament on Tuesday tore apart the P-8I deal on several counts. They range from Boeing’s higher price and shoddy discharge of offsets to the aircraft’s limited radar coverage and “partially fulfilled” anti-submarine warfare (ASW) capabilities in the absence of no contract being inked for Mark-82 bombs.

While this may give some ammunition to BJP to attack Congress, the fact also remains the NDA government had inked another $1.1 billion deal for four more long-range P-8Is in July 2016 after the first eight were inducted by the Navy in 2013-2015. The Navy, in fact, is so gung-ho about the P-8Is that it has pitched for another dozen such aircraft, which are packed with sensors and armed with Harpoon Block-II missiles, MK-54 lightweight torpedoes, rockets and depth charges, to detect, track and destroy enemy submarines in the entire Indian Ocean Region.

But the report blames UPA’s defence ministry (MoD) for “incorrectly” judging P-8I as the L-1 (lowest bidder) over the A-319 aircraft fielded by EADS (European Aeronautic Defence and Space Company) CASA Spain. “While evaluating bids for conclusion of contract, the MoD enhanced the financial bid of EADS to cater for 20 years of product support (by extrapolating its figures), while ignoring this element in respect of Boeing,” it said.

Penalties for defence deal graft

The 2016 norms

Some of the major defence equipment to be procured between 2016 and 2025

Rajat Pandit, Graded penalties in, blanket ban out for defence deal graft, Nov 08 2016 : The Times of India

Blacklisted Cos Now Allowed To Go In Appeal

India will no longer impose blanket bans on armament companies suspected of corruption. In a significant change in policy , companies will be blacklisted only for one year at a time, instead of the existing norm of 10 years at a go, with fast-track investigations into the charges against them.

Striking a balance between the need to effectively punish corruption while ensuring that military modernisation does not get adversely impacted, the defence ministry approved a new liberalised blacklisting policy on Monday with graded punishments and fines commensurate with the kind of wrong-doing committed by arms companies.

The defence acquisitions council (DAC), chaired by defence minister Manohar Parrikar, approved the new guidelines for suspension or banning of business dealings with arms companies, which will be made public in the next few days.

The DAC also accorded initial approvals or “acceptance of necessity“ to modernisation projects worth Rs 82,117 crore.The approvals, which will eventually lead to actual contracts or deals being inked, range from the procurement of 83 Tejas Mark-1A fighters and 464 T-90 tanks to six additional regiments of the indigenous Pinaka multiple-launch rocket systems. But the clear takeaway was the new blacklisting policy .Under the earlier wholescale banning of arms companies, which especially became the norm under defence minister A K Antony , military modernisation projects often went for a complete toss and compromised operational readiness.

“Under the new policy , the decision to blacklist a company will not be an executive one. It will be done in a collegiate manner by a committee, which will also include the vice-chiefs of the Army , Navy and IAF,“ said a source. “The operational implications of blacklisting a company will be considered before a final decision is taken. Blacklisting will be for a specific equipment or service, without blanket bans,“ he added.

Under the new nuanced blacklisting norms, procurement of spares for platforms and equipment already purchased from a company under the scanner will be allowed.

Companies already blacklisted will now also be able to appeal to the government for a review based on merits of a case. Moreover, blacklisting will be done with the aim to complete investigations into the charges against a company within six months. “If the period of suspension for blacklisting has to be extended, it will have to be recorded in writing,“ said the source.

Four major global firms like Singapore Technologies Kinetics, Israeli Military Industries, Rheinmetall Air Defence, Zurich, and Corporation Defence, Russia, for instance, are blacklisted till 2022.

Liberalised Blacklisting Norms

Rajat Pandit, India changes policy, can now deal with banned arms firms, Nov 22 2016 : The Times of India

Govt Unveils Liberalised Blacklisting Norms

Under its new liberalised blacklisting policy for arms companies, India will now be open to doing business even with a banned firm if there is no alternative available to its weapon system or equipment in the market.

This will be allowed, on the grounds of national security, operational military readiness and export obligations, after the vice-chief of the Service concerned (Army , IAF or Navy), the chief of the integrated defence staff or the additional secretary (defence production) signs a certificate to that effect and gets permission from the “competent authority“ (defence minister).

The new “guidelines for penalties in business dealings with entities“, finally made public on Monday after months of deliberations, make it clear that India will no longer impose blanket bans for 10 years on erring companies as was the norm under the previous UPA regime. The earlier wholescale bans, of course, often proved counter-productive by derailing military mod ernisation projects.

Instead, under the new graded system of fines and bans in order to strike a balance between probity and operational requirements, the period of suspension of business dealing with an arms company shall not or dinarily exceed one year pending a probe into the corruption allegations, as was first reported by TOI earlier.

With a review of the suspension order being undertaken within six months, the defence minister will decide if the subsequent period of suspension has to be extended for six months at a time.

“Banning of business dealings“, in turn, may be ordered only if a company accepts its misconduct, the CBI files a chargesheet againstit or a court or tribunal finds it guilty.

This ban period will not be less than five years if there is violation of the precontract integrity pact, the company is found resorting to corrupt practices, unfair means and illegal activities during any stage to bag a contract, or if national security considerations warrant the step.

But the ban period will not “ordinarily exceed three years“ for “non-performance or under-performance“ or any other ground required in “public interest“. The company with which business dealings are suspended or banned will, however, be allowed to take part in new tenders for spares, upgrades and maintenance for weapon systems supplied earlier.

The new policy holds the “order of suspensionbanning of business dealings with an entity may be extended to its allied firms“ only by a specific order of the defence minister.

“The entity with which business has been suspended or banned will also not be permitted to transact contracts under a different name or division, either through a transfer of assets to another legal entity,“ it says.

2018: Israeli, Italian, British, S African firms blacklisted

Rajat Pandit, Israeli, Italian, British, S African arms firms in def min’s graft list, February 20, 2018: The Times of India

Four foreign and two Indian arms companies remain blacklisted or “debarred” by the government, while dealings are “suspended” with another 14 and “restricted” with four, according to a fresh vigilance circular issued by the defence ministry (MoD).

Global arms majors Singapore Technologies Kinetics (STK) and Israel Military Industries (IMI) fall in the first category of blacklisted firms, while Denel (South Africa), Leonardo SpA (erstwhile Italian conglomerate Finmeccanica) and its UK-based subsidiary AgustaWestland International are present in the “suspended” group.

Engine manufacturer Rolls Royce, Tatra truck manufacturer (Czech Republic) and Israeli firms Rafael and Israeli Aerospace Industries (IAI) are the four companies with whom “restricted procurements” are allowed on the basis of operational urgency, national security and non-availability of other alternatives. All these four firms have several on-going projects in India.

“The vigilance circular reiterates to all stakeholders, including Service headquarters, about the status of the firms concerned. The categories — debarred, suspended and restricted procurement — have been clearly demarcated for the companies caught in corruption and other cases,” said an official.

Apart from STK and IMI, the other blacklisted firms are Rheinmetall Air Defence (Zurich), Corporation Defence (Russia), T S Kisan & Co (New Delhi) and R K Machine Tools (Ludhiana). No business dealings are allowed with these six firms till 2022.

Recurring scandals around global artillery manufacturers, which started with the Swedish Bofors one in the mid-1980s to Denel, STK and Israeli Soltam in later years, ensured the Army did not induct a single modern 155mm howitzer for over 30 years. BAE Systems, which now owns the original Bofors firm, has only now begun preliminary deliveries of M-777 ultra-light howitzers for testing under the $737 million deal inked with the US for 145 such guns, as earlier reported by TOI.

MoD has not yet blacklisted Leonardo SpA and AgustaWestland, which are enmeshed in the infamous VVIP helicopter scandal here. Former CEOs of the two companies, Giuseppe Orsi and Burno Spagnolini, were last month acquitted by an Italian court on the grounds of insufficient evidence. But the CBI is pursuing the case against ex-IAF chief S P Tyagi and others for alleged corruption in the Rs 3,546 crore deal inked in 2010 to supply 12 VVIP helicopters to India.

The other firms involved in the helicopter case, IDS (Tunisia), Infotech Design Systems (Mauritius), IDS Infotech (Mohali) and Aeromatrix Info Solution (Chandigarh), also figure in the “suspended” firms’ list. Six firms connected with the main accused in the naval war-room leak case of 2005 re also in this category.

Policy/ methodology for Procurement/ imports

Stages of signing a military contract

Stages of signing a military contract; Graphic courtesy: [From the archives of India Today]
Stages of signing a military contract; Graphic courtesy: [From the archives of India Today]

See graphics:

Stages of signing a military contract' 1 and 2

Govt-to-govt deals with US: Army chief cautions

Army chief warns against govt-to-govt deals with US

Josy Joseph

Times of India May 25, 2010

New Delhi: For the first time since India began bigticket defence purchases from the US through gover nment-to-government route, a senior member of the security establishment has red-flagged them, calling attention to the serious pitfalls of it.

In an unusual reflection of Army’s frustration with its past FMS (foreign military sales) purchases from the US, Army chief General V K Singh has written to defence minister A K Antony, cautioning the government about the troubles with FMS.

Over the past few years, the Indian defence establishment has been using the FMS programme of the US government to carry out major defence acquisitions.

In these non-tender purchases, the US government procures the equipment on behalf of the Indian government from its military companies, and takes a commission for the services rendered through Pentagon’s Defense Security Cooperation Agency (DSCA).

The purchase of AN/TPQ-37 firefinder weapon-locating radars for the Army in 2002 was the first major deal that India did with the US under FMS in several decades. Ever since, India has been buying several major defence systems regularly, and the total contract value of US systems bought under the FMS deal runs into several billion dollars.

The Army chief ’s letter of caution comes at a time when the two sides are in the final stages of finalizing two major FMS purchases — one for the Army and the other for the IAF. The Army is proposing to buy 145 ultra light howitzers worth about $647 million, mostly for deployment along the China border, while the IAF is planning to buy 10 C-17 transport aircraft at a cost of over $2.2 billion.

Singed by the troubles with past FMS contracts, the Army top brass is now discussing the possibility of hiring corporate lawyers well versed in international negotiations and contracts to come on board for scrutinizing the upcoming contract for howitzers, authoritative sources said. These lawyers would ensure that the past troubles are kept away, source said.

Gen Singh is believed to have pointed out to Antony Army’s trouble with maintenance of a dozen weaponlocating radars bought from the US firm Raytheon. At times, up to two-thirds of the radars have been in want of maintenance, Army sources said.

Gen Singh’s letter to Antony is an unusual step, and was “forced by the troubles we have with maintenance of the radar systems”, an Army source said.

India has been using the non-tender, FMS route to buy big-ticket defence items from the US since 2002, when the radars became the first items to be bought under the scheme in recent memory. Over the past eight years, the military has carried out a host of acquisitions through the route. Among them were the $2.21 billion purchase of eight Boeing P-8I maritime reconnaissance aircraft, $962 million deal for six C-130J Hercules transport aircraft for IAF and $88 million for USS Trenton and accompanying helicopters for the Navy.

The IAF is currently in the final stages of negotiations for purchase of $2.2 billion worth 10 C-17 aircraft and the Army is finalizing the purchase of howitzers.

The process of procurement

‘Process badly broken, delayed’: MoD internal report, 2018

Arms buy process badly broken, delayed: MoD internal report, February 27, 2018: The Times of India

India’s agonisingly slow process of defence procurement: the extent of the problem in 2018
From: Arms buy process badly broken, delayed: MoD internal report, February 27, 2018: The Times of India

India’s entire weapons acquisitions process is badly broken and beset with huge delays, says an internal defence ministry report, pointing out that only 8%-10% of 144 proposed deals in the last three financial years fructified within stipulated time.

The critical power-point presentation, prepared by junior defence minister Subhash Bhamre for PM Narendra Modi late last year, says the procurement process is dogged by “multiple and diffused structures with no single point accountability”, duplication of processes, avoidable redundant layers doing the same thing again and again, delayed execution, no real-time monitoring and no project-based approach, among other things, said sources.

“The presentation said there is a tendency to find faults rather than to facilitate the process,” said a source. Consequently, the entire ‘Make in India’ policy in the defence production sector continues to languish due to procedural delays, failing to take off in any concrete manner. Cognisance should be taken of the “hard, uncomfortable facts” to ensure “correctives” are put in place, with proper responsibility and accountability being fixed, says the presentation.

The ministry refused to say anything on the issue on Monday, and messages to Bhamre went unanswered. But the fact remains that no major Make in India defence project has actually kicked off in the last three to four years due to lack of the requisite political push and follow-through, bureaucratic bottlenecks and long-winded procedures, commercial and technical squabbles, as was reported by TOI in October last year.

From fighters, drones and helicopters to submarines, minesweepers and artillery howitzers, the armed forces continue to grapple with major operational gaps due to the convoluted procurement procedures and the lack of adequate modernisation budgets in the face of ballooning pay and pension bills.

The presentation points out that the delays, which begin right from formulation of technical requirements in tenders through SQRs (staff qualitative requirements) to final approval by the competent financial authority like the Cabinet Committee on Security, amount to 2.6 to 15.4 times the laid down deadlines for various projects.

It takes around 120 weeks on an average to clear files after a tender or RFP (request for proposal) is finalised — six times the laid-down norm by the MoD in 2016. In one case, this took almost eight years. Similarly, the contract negotiation committee stage witnesses delays about 10 times more than allowed.

The lack of synergy among the Army, Navy, IAF and Coast Guard, as well as the tendency of different MoD wings to work in “independent silos”, are the other factors that impede military modernisation, the sources said.


Defence: Inform vendors of reasons for withdrawal, rejection of proposals

Rumu Banerjee, Tell vendors reason behind nixing defence proposals: CIC , August 6, 2017: The Times of India

In an order aimed at increasing transparency in defence procurement, the central information commission has said informing vendors of the reasons for withdrawal or rejection of proposals would go a long way in making the process more accountable.

Information commissioner Divya Prakash Sinha has noted that scams and kickbacks reported in the public domain made it necessary to make procurements as transparent as possible.

Sinha was ruling in an appeal before the CIC filed by an appellant who wanted details of a tender that had been floated by defence ministry , and the policy adopted regarding return of equipment before convening of the contracts negotiation committee (CNC). Sinha, while agreeing with the public information officer's contention that the information could not be shared under section 8(1)(d) of the RTI Act, however held that the section 8(1)(d), concerning provisions for protection of trade secrets or intellectual property rights, required a closer look.

“Commission is of the considered opinion that there should be greater transparency and accountability in the process of defence procurement, in as much as the vendors should be apprised of the reason for withdrawal of proposals or rejection of proposals,“ Sinha said. He said that “more and more disclosure should be encouraged in such cases to avoid casting aspersions on the procurement process“.

Sinha cited the defence ministry's procurement policy , which stipulates that compliance or otherwise, vis-a-vis the request for proposal parameters, would be communicated to all vendors at trial location itself. The appellant had asked for data on a project being helmed by PMO Suraj, the nodal agency in Army for managing all projects of electronic warfare (EW) systems.

Weaponry, equipment with Indian Army

2016/ Howitzers, ultra-light: the acquisition of

i) The Indian Army in 2016 (strength, budget, capital, pensions),
ii) The acquisition of ultra-light howitzers
The Times of India

See graphic:

i) The Indian Army in 2016 (strength, budget, capital, pensions),
ii) The acquisition of ultra-light howitzers

See also

Defence production, India: 1

Defence production, India: 2 (ministry data)

Central Information Commission: India

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