India’s Pragmatic Policy on Arms Procurement

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.