India’s Pragmatic Policy on Arms Procurement

Livemint     30th September 2020     Save    
QEP Pocket Notes

Context:  Recently, the Defence Minister unveiled a new defence acquisition procedure to replace norms issued in 2016.

Implications of new defence acquisition procedure:

  • Help in achieving the country's goal of self-reliance
  • Benefits Indian vendors: Several categories of arms would now be reserved exclusively for "Indian vendors".
  • Indian vendors are defined as firms that are owned by resident citizens with foreign equity participation no greater than 49%
  • Promotes Technology transfer and local manufacturing: The new purchase category pushes for  acquisition from a foreign supplier entailing technology transfer and local manufacturing
  • Indigenization of inputs worth at least half the contract's value.
  • Dropping of mandatory "offset clause": which had complicated our defence purchases and acted as a drag on technology upgradation. 
  • Flexibility in leasing: Armed forces have been granted the flexibility to lease military equipment such as light transport aircraft and unmanned aerial vehicles. 

Issues with offset clause

  • Failed to achieve the goals: of creating a production base and generating jobs. 
  • Comptroller and Auditor General (CAG) report:  of the offsets worth ?19,223 crores expected till December 2018, only ?11,396 crore had shown up.
  • Overpricing: Inflation of costs by vendors to cover their offset commitments, thus pushing up our acquisition bills.
  • Room for corruption: 30% stipulation made all major arms deal vulnerable to allegations of this reverse-flow channel being a conduit for kickbacks disguised as sub-contracts for favoured firms. 
  • For E. g-  the recent Rafale controversy.

Way Forward:

    • More than self-reliance: The country's revised rules for the purchase of military equipment aim for self-reliance, but also seem designed to ease and hasten acquisitions from abroad. 
  • Dealing with threats: As geopolitics in Asia gets fraught with tension, the threats faced by our country lend urgency to the cause of defence preparedness.
  • Our armed forces deserve the equipment they demand without any delays caused by a complex acquisition rigmarole
QEP Pocket Notes