Performance Audit Report of the CAG on Capital Acquisition in IAF states,“There were severe delays at various stages of the acquisition process. Against three years envisaged in Defence Procurement Process, four cases took more than three years and seven cases took more than five years to reach the contract conclusion stage. Delays in acquisition was essentially due to a complex and multi-level approval process, where objections could be raised at any stage. Overall the capital acquisition system, as it exists, is unlikely to effectively support the IAF in its operational preparedness and modernization”.
Bharat Shakti/Rohit Pandita
Today, Indian Air Force (IAF) is down to 30 squadrons against an authorisation of 42 and this number is going to go down further over next few years. IAF’s proposal to procure 126 Mirage 2000-5 was converted into multi-vendor 126 MMRCA as per extant procedures to increase vendor base and competition. Finally, the procurement was cancelled 15 years after it was conceived. Did the nation benefit? It only proved how good the system was at adhering to procedures even at the cost of national interests. If the original IAF’s proposal had been accepted, today IAF would have had 37 fighter squadrons with 10 Mirage 2000 Squadrons and an ability to absorb Tejas production delays.
IAF’s multi-vendor procurement history is not very inspiring. ‘AW-101’ VVIP helicopters, ‘PC-7’ basic trainer aircraft, ‘Chinook’ heavy lift helicopters and ‘Apache’ attack helicopters were contracted off multi-vendor procurement. ‘AW-101’ contract was later cancelled due to alleged corruption. Attack helicopter was procured off a resultant single vendor case. MMRCA procurement failed, case to procure six more Flight Refueling Aircraft initiated in 2006 failed twice after contract negotiations and continues to languish while case to procure Software Defined Radios, vital for airborne networking,initiated in 2011 was contracted in 2017.
The Government is responsible for equipping and modernising IAF with requisite operational capabilities so that it can deter our adversaries and overwhelm them when required. Why is the entire system unable to fathom the gravity of planned procurements not materialising? It is evident that the Defence Procurement Procedures (DPP) and its processes are the root cause for this state of affairs as also emphasised in the CAG report. Instead of exploiting the large value defence equipment imports to enhance strategic and diplomatic leverage, DPP focuses more on involving every possible vendor in complex procurements, which thereafter is generally followed by a struggle to provide them all a level playing field.
To realise the vision of ‘Make in India’, DPP 2016 accords top most priority to indigenously designed and developed defence equipment and exclusively reserves certain category of ‘Make’ projects for Micro, Small & Medium Enterprises (MSME).This provision will certainly enhance procurement of made in India products but unfortunately,fighter aircrafts still need to be imported. The lengthy bureaucratic procurement processes have, till now only adversely impacted capability building of IAF by delayed decisions and repeated piecemeal observations/objections. Keeping in view our past experience and very serious remarks made in the CAG report, there is a need to examine if the extant DPP can contribute positively to the ‘Make in India’ initiative in respect of fighter aircraft manufacturing.
Bharat Shakti/Rohit Pandita
The case to procure 114 fighter aircrafts through strategic partnership model is aimed at enabling Indian private companies to manufacture fighter aircrafts under ‘Make in India’ initiative. In this case,the strategic partner will be the lead integrator and would create an eco-system comprising of Tier I, II and III partners, specialised vendors and suppliers, in particular from MSME sector. It is expected that such a model will help create a self-sustaining Indian aviation industry capable of supporting IAF, exporting fighter aircrafts and becoming part of its global supply chain. This procurement has the potential to redefine the future of Indian aviation industry and, therefore, should not be treated as a routine procurement under the DPP.
This procurement is likely to be progressed as a multi-vendor procurement as per DPP, to bring in more numbers of Indian strategic partners along with their supporting global vendors to increase the vendor base and competition, a major DPP requirement.Aircraft manufacturers rarely get an opportunity for such a large order. Multi-vendor procurement for such complex aircraft is fraught with risk as few vendors may try to revive their sagging order book by offering the assembly line at a throw away price for an aircraft not selling well and difficult to maintain/sustain in an effort to emerge as the lowest bidder, which is the most crucial DPP requirement to obtain a contract. CAG report also mentions about IAF procurements falling in the trap of ‘Lowest Price Technically Acceptable’.
Bharat Shakti/Rohit Pandita
The six aircraft likely to participate in the competition are well known and enough data is available in open domain on each of these aircraft and their manufacturers, their capabilities, numbers sold, serviceability statistics, maintenance problems and predicted saleability. All these factors can not be definitively captured in a Request for Proposal (RFP) but need thoughtful consideration while choosing the aircraft for manufacturing in India. Some manufacturers are unable to sell their aircraft and sustain serviceability evoking adverse comments from their customers. It will be naive to believe that serviceability and saleability of aircraft manufactured by India will be better than that of its original manufacturer just because the aircraft emerged as the lowest bidder in the procurement process.
There is likely to be acceptable differences between aircraft performance and capabilities in a multi-vendor procurement because the Air Staff Qualitative Requirements will be prepared for minimum acceptable performance to encourage maximum vendor participation and competition, a prime DPP requisite. However, there is likely to be very large variations in manufacturing technologies, serviceability, maintainability, transfer of technology and support for creation of the envisaged aviation eco-system in India. The need to provide a level playing field to all participants requires stating everything upfront in the RFP for even such a complex procurement. It may not be feasible to identify the aircraft with best long term ‘operational-techno-commercial’ option for manufacturing in India through a multi-vendor procurement because it is not feasible to definitively state/capture all aspects in the RFP. A large number of issues would emerge later during the evaluation and negotiation processes and not much can be done at that time against what is already stated and/or not-stated in the RFP. Thus, the requirement to provide a level playing field to all participating vendors will deny the opportunity to critically analyse and resolve long-term interests in the procurement even at the cost of final benefits to the nation and IAF. Ensuring level playing field between Indian and foreign vendors is understandable but to make complex procurement of fighter aircraft hostage to broader participation ensuring level playing field is very intriguing.
Sustained aircraft manufacturing requires large market, therefore, exports over and above IAF orders are important. Initially, during the aircraft manufacturing phase the envisaged eco-system needs to simultaneously support both production and spares supply chains. Later,after completion of manufacturing orders the eco-system needs to only support the spares supply chain for decades. Thus, benefits to indigenous aircraft industry will be directly proportional to the number of aircraft operating globally, which needs serious consideration. There is also a necessity to look into the feasibility and capability of aircraft manufacturers to support indigenous fifth generation fighter aircraft programme.
Bharat Shakti/Rohit Pandita
All aircraft manufacturers need to obtain mandatory clearances, authorisations and licences from their government(s) to share/sell such complex technologies to Indian industry, therefore, involvement of the manufacturer’s government is a must. To derive maximum advantage from the 114 fighter aircraft procurement,it will be best for Indian government to choose an aircraft through internal consultations and, thereafter, process its procurement through an Inter-Governmental Agreement (IGA). In addition to contracting the best‘operational-techno-commercial’ deal in this procurement, there is a need to also seek strategic and diplomatic leverages over and above a contractual commitment to support in design and development of ‘Advanced Multi-role Combat Aircraft (AMCA)’, the indigenous fifth generation fighter aircraft. Therefore, assessment of aircraft manufacturer’s competence to provide fifth generation technologies should be an essential criterion for the procurement.
Only paragraph numbers 104 to 106 in DPP 2016 elucidate IGA procurements with primary focus on direct purchase without any relationship to ‘Make in India’ initiative. There is a need to review the provisions of DPP to enable procurements through IGA with‘Transfer of Technology’ through ‘Strategic Partnership Model’ specifying all mandatory clearances, authorisations and licences from the other government to help set up manufacturing and eco-system as envisaged by the Indian government. Such changes will help initiate procurement case(s) without the need for approvals for any deviations from DPP.
It is very important for IAF and MoD to tread carefully on the strategic partnership model route and choose the best aircraft that can counter aircraft being inducted by our adversaries today and over the next three to four decades.Such an opportunity does not come very often. The right aircraft choice will help the country kick start fighter aircraft manufacturing under the ‘Make in India’ initiative and grow as a global aviation hub. Or else, the country is likely to stagnate where it is today after having bought ‘Transfer of Technology’ for numerous aircraft over the last 70 years.
Air Marshal SBP Sinha PVSM AVSM VM (Retd)
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of BharatShakti.in)
