As India, and indeed the world, battles the Chinese virus pandemic, the Ministry of Defence (MoD), like every other arm of the government is contributing its resources in combating the unprecedented situation. The MoD is trying to lessen the possible financial stresses that the Indian defence sector–especially SMEs and MSMEs–are likely to experience in the immediate aftermath of the current crisis. But every setback brings with it unforeseen opportunities, as Defence Secretary Ajay Kumar points out in this exclusive interview to our Editor-in-Chief Nitin A. Gokhale.
COVID-19 Crisis Can Lead to Reduced Dependence on Imports – Defence Secretary Ajay Kumar
Nitin Gokhale: Ministry of Defence has taken the lead in combating COVID-19 situation by quickly activating all its resources and manufacturing medical equipment etc. Give us some details on how this is helping the national effort.
Dr. Ajay Kumar: Armed Forces have always played a pivotal role in mitigating any national calamity plaguing the country from time to time. COVID-19 is a pandemic of extraordinary scale, affecting not only India but almost the whole of the world. To face this unprecedented challenge all the Ministries and Departments of Government of India are working to their optimum level to contain the adverse effects of COVID-19 and mitigate the sufferings of the people. As far as Ministry of Defence is concerned, right from rescuing stranded Indians from COVID-19 affected areas, such as China, Iran, Italy, Malaysia etc., to providing relief materials all across the country, Armed Forces have put in place all its medical and manpower resources. Force’s Hospitals and Medical Facilities have been dedicated to treating COVID-19 patients and some of its bases have been turned into quarantine centres.
Besides the all-out efforts of Armed Forces, its various organizations and arms viz. Armed Forces Medical Services, Defence Research and Development Organisation (DRDO), Defence Public Sector Undertakings, Ordnance Factory Board, Indian Coast Guard, Cantonment Boards, National Cadet Corps are contributing in their own way to fight this pandemic. More and more ventilators, personal protection equipment (PPE), face shields, N99 & N95 masks, hand sanitizer and other disinfectants and protective gears are being manufactured stopping all the routine work.
Nitin Gokhale: You also held at least one big meeting with the Indian defence industry, big and small at the beginning of the lockdown. What was the outcome?
Dr. Ajay Kumar: We are continuously working with the industry to address the issues raised by them. We had a video-conference on March 27th in which nearly 250 industry representatives participated. We have already extended the timeline for submission of all RfPs/EoIs for all capital acquisition projects which were due during this period. Orders in this regard were issued on March 23, 2020. After the extension of lockdown to 3 May 2020, we have further extended the time for submission of bids to RfPs/EoIs to 1.6.2020. These orders have again been proactively issued on 15.4.2020.
A similar approach is also adopted for revenue procurements by the Department of Military Affairs. All DPSUs agreed to expedite payments to MSMEs. Big Government PSUs and Departments like OFB, BEL, BEML, MDL have already made sure that payments due are being immediately processed once the due is established. Department of Defence Production is working with DPSUs and OFB in this regard.
We have also extended the time for consultations on the draft DPP 2020 which was supposed to end on 17 April 2020. This will provide some more time for the industry to prepare their response to the public consultation process which is underway but some industries were not able to attend to it due to COVID-19 related constraints.
We have also advised to have pre-bid meetings through VC or other remote communication measures like conference calls etc.
There were other issues which were raised by industry which related to MoD and are being looked into by respective Departments. Some of these related to broader cross-sectoral decision for which industry was requested to take up the matter with Ministry of Finance. In this regard, orders have been issued that disruption of supply chain due to COVID-19 would be considered as Force-Majeure and provisions of Force Majeure clause may be invoked wherever necessary.
We are continuously in touch with industry and will work with them in an ongoing manner.
Nitin Gokhale: There is a lot of anxiety and fear in the industry about the likely adverse impact on the sector because of COVID-19. What measures have you proposed/taken to assure the industry of the MoD’s continued support?
Dr. Ajay Kumar: Our endeavour is and will remain to mitigate the impact while continuing to ensure the social distancing and other constraints which COVID-19 has put before us.
The COVID-19 cloud has also had a silver lining for the industry. There have been new opportunities which several companies have come forward and taken advantage of. We are supporting the efforts of these companies.
Several defence companies have come forward to produce COVID-19 related equipment and supplies. For example, BEL is making ventilators and OFB is making sanitizers, PPEs, coveralls and masks. OFB has also started making test equipment for PPEs. These are additions to their planned production plans and should help their bottom line.
Similarly, there are dozens of private companies which are making COVID-19 related equipment or their parts, components. With a surge in demand for these items, these companies should see their revenues. Some of the products made by these industries include Full face shield masks, N99 masks, Bio-suits, Personnel sanitization enclosures, portable backpack sanitizers, PPEs, PPE sealant processing, PPE sealant raw material, sanitizers, trolley mounted large area sanitizers, ventilators, solenoid valve for ventilators, proportional valve for ventilators, differential pressure sensor, pressure regulator, optical encoder, air blender, etc.
Several new technologies have also been offered by companies and startups. For example, a startup in Kochi has come up with N95 masks which is totally new technology and was not there earlier in the country. A startup in Delhi in collaboration with IITK has come up with new ventilator system. Sree Chitra Tirunal Institute of Medical Sciences and Technology, Thiruvananthapuram has found a new testing kit which is much faster and more cheaper. If necessity is the mother of invention, we have seen this truly happen in this COVID-10 crisis. The innovation eco-system has grown over last few years has been very active especially in terms of medical devices and equipment. But this development of innovation ecosystem augurs well for defence and aerospace sectors as well. We encourage such innovation.
Nitin Gokhale: MSMEs and SMEs will be the hardest hit in the current situation. How will you help them?
Dr. Ajay Kumar: We have advised OFB and Defence PSUs to clear all eligible payments to MSMEs on priority. Most PSUs and OFB have assured that this will be done. Wherever there is a pending payment which is linked to payment to be released from Government to the Defence PSUs, efforts are being made to ensure that those payments are released at the earliest now that the budget for 2020-21 has also become available. I would like to say that the Department of Defence Production is continuously working in this regard.
Similarly, on the revenue side, payments to MSMEs are being prioritized. Department of Military Affairs is monitoring these and making sure that these are done as soon as possible.
Nitin Gokhale: Will the economic slowdown affect defence budget? How deep will be its impact on India’s military preparedness and modernisation.
Dr. Ajay Kumar: It is too early to make an objective assessment of the impact of COVID-19. We have coped up with flattening of the spread of COVID-19 and we also hope that we will be able to reduce the adverse impact of COVID-19 on economy better than other major economies.
Nitin Gokhale: Recently, the Raksha Mantri held a meeting on possible implementation of the Shekatkar Committee report. Will its implementation help in rationalising costs and redeployment of resources–both human and financial?
Dr. Ajay Kumar: Shekatkar Committee has made comprehensive set of recommendations spanning several aspects of Defence organizations. These recommendations are analyzed by respective Secretaries in the Ministries, in consultation with respective stakeholders and appropriate decisions are taken.
One of the important recommendations of the Shekatkar Committee was the appointment of CDS. This was fulfilled with the appointment of first CDS on 1.1.2020. This has resulted in a large number of long-pending reforms towards jointness and rationalization of Armed Forces being taken up on priority.
Nitin Gokhale: The MoD has published a draft DPP-2020. What in your view is different in this edition than before?
Dr. Ajay Kumar: The draft DPP tries to bring in several new reforms in the Defence Procurement Procedure. Some of these reforms include:
- For the first time, preference has been given to the Indian software industry.
- Several steps to promote start-ups in defence and aerospace have been taken. Including process for procurement of technologies/solutions developed through the iDEX process by start-ups.
- Promotes development, certification, manufacturing and use of indigenous materials in defence and aerospace.
- Introduces “Make-3” as a method of promoting Make in India by Indian firms taking ToT from foreign OEMs. Make 2 only allows indigenous design and development and therefore there was no opportunity for the industry to do import substitution through ToT with global partners.
- Introduces “Leasing” as an option, in addition, to Buy and Make. This would be relevant to non-mission critical operations and support services.
- “Third Party Testing” has been introduced for the first time, thereby enabling testing to be done by agencies other than DGQA. DGAQA etc.
- Have introduced the “Buy Global Make in India” clause, which would enable Make in India by companies from whom we are buying presently.
- Price variation clause has been introduced for the first time for procurements above Rs 1000 crores and where delivery is more than or equal to 60 months. Earlier there was no such provision and each case used to be processed for approval of highest authority leading to subjectivity and delay.
Nitin Gokhale: Do you see the current crisis as an opportunity to boost Make in India in defence?
Dr. Ajay Kumar: As mentioned above, the development of India’s innovation ecosystem is a big collateral benefit to the present crisis. Since many of the start-ups are also those working in defence and aerospace sectors, we see the direct synergy between their innovation in COVID-19 related problem solving and other problems which they may have to solve for defence.
We also see that global supply chains will be under pressure and therefore there will be greater thrust on the indigenous supply chain. We have already seen some trend towards looking for parts, components presently being sourced globally, whether there could be indigenous substitutes for the same. This should lead to reduced dependence on imports.
Some of our Defence PSUs like BEL, OFB and now BDL are taking up COVID related manufacturing. This is a big global opportunity and should enable them to maximize their production in these areas, both for India’s internal requirement but also for the global requirement. This is an additionality to their planned production and should provide them with a new line of products for the future as well.
Nitin Gokhale: Thank you very much Dr. Ajay Kumar