Events

IDSA organized a two-day national seminar on defence acquisition on April 26-27, 2010. Delivering the Keynote Address, Admiral Nirmal Verma reiterated that the armed forces required speedy defence acquisition. He apprised the audience of the initiatives that the government had taken in the wake of the Kargil conflict to ensure speedy acquisition. Emphasizing the important role of complete and accurate information, he highlighted the lacklustre attitude on the part of vendors in giving full information beforehand, which caused inconvenience at the time of actual acquisition. Admiral Verma also insisted on the need of aligning the country’s time-frame of acquisition with global standards. Finally, he remarked that defence acquisition in India had considerably improved in the last decade or so and would continue to improve further since the country wanted its soldiers to use the right capability at the right time.

Earlier, the Director General of IDSA noted in his opening remarks that the money spent on arms acquisition had gone up from Rs. 10,000 crore to Rs. 40,000 crore and that it could go up to Rs. 50,000 crore, and that India was the second largest importer of defence equipment in the world. But acquisitions have been delayed on most occasions. He underscored the need for an integrated process for smooth acquisition. He pointed out that all the developed countries followed the integrated process for acquisition. But, in India, the army alone has 10 or 11 acquisition agencies with each having 10 or 11 levels of approvals. According to him, the answer to this problem lies in integration. However, there were always vested interests involved which resist change. He also argued that scandals should not be allowed to come in the way of acquisitions.

In his speech, Shri Vinod Mishra, Distinguished Fellow, IDSA, suggested the option of keeping 20 to 25 per cent of the budget aside for fast-track acquisition. According to him, long-term order book, assured orders, and association with best of Indian private players and best of class abroad are a way forward. Besides, offset tracking and DPP require attention.

Rajkumar Singh, Secretary (Defence Production), Ministry of Defence, delivered a special address in the inaugural session. He was of the view that delays in acquisition had been reduced. And that the government was doing better than earlier. Last year, the money allocated for acquisitions was not surrendered. He said that, in fact, the money was generally not surrendered. The utilization of unspent money is a subject of an ongoing interaction between Defence Ministry and Finance Ministry. At the end of the inaugural session, Dr. Thomas Mathew, DDG, IDSA, gave the vote of thanks.

Ambassador R. Rajagopalan chaired the first session. In this session, Dr. K. G. Narayanan, Former Chief Advisor, DRDO, spoke at length about India’s security scenario and its defence requirements. He argued that there were many stakeholders in India’s defence industrial base and acquisition, but the armed forces remained at the core. They have valid concerns about time-bound and speedy delivery of arms. He emphasized that delay in arms supply was counterproductive and thus has to be stopped. He also pointed out that, in commonsensical parlance, there was confusion between acquiring high technology and acquiring technology as such. Brig. (Retd.) Anand Mehra, Advisor (Marketing), BEL, highlighted the basic differences between commercial industry and defence industry. He said that they differed on many counts such as the size of market, public accountability and political considerations. Unlike ordinary commercial market, technology is not proven and matured in the defence market. He opined that defence business is generally supposed to be predisposed to fraud. Besides, unrealistic SQR, ‘play safe’ attitude, a large number of decision centres, and long wait for acquisition are some of the important weaknesses of Indian defence acquisition. However, the good thing is that the government is serious about these issues and is willing to make the acquisition process more efficient. He concluded his presentation by saying that rather than making defence industry free for all, there should be some government rationalization. The government must retain the right to regulate entry, exit, merger and acquisition in the industry, at least in the initial years; and successful procurement, not adherence to procedures, should be the criterion to measure success in the field of arms acquisition.

Subimal Bhattacharjee, Country Head, General Dynamics International Cooperation, explained the rationale for having a vibrant and robust defence industry. According to him, it serves military needs, and social and economic responsibilities. It helps focus on independent capabilities and improve national postures. He argued that in view of utilizing resources optimally, streaming procurements and filling up existing gaps, the defence industrial base needed to be strengthened. According to him, although, as of now, there is a predominance of Defence Public Sector Undertakings (DPSUs), there exists an emerging but strong private sector in the domestic defence market. Besides, participation of foreign vendors is also increasing.

Laxman Kumar Behera, Associate Fellow, IDSA, underscored a perceptive change that had taken place after 2001. According to him, before 2001, private players were basically supplying raw materials, parts and components to DPSUs, whereas since 2001, they were not only participating in manufacturing activities but are also acquiring foreign companies. In this context, he mentioned Mahindra’s simultaneous acquisition of two companies. As to the scope for private participation in defence industry, he said that it was difficult to map, but there was good scope. He also identified some key areas where private companies could play an important role. According to him, foreign companies are not interested in investing in an Indian company with a 26 per cent upper cap of FDI, which would leave them without any control of the company. He argued that when FDI was allowed in this field, it was done mainly to get technology, not because of any financial considerations. According to him, the upper cap for FDI should be 49 per cent. He was of the opinion that because of favouritism shown by the defence production department towards its own companies, private companies get discouraged.

Air Marshal S.C. Mukul chaired the second session. Professor Dinesh Kumar, IIM, Bangalore, made the first presentation in this session. He put forward the idea of performance based logistics. Besides, he made a strong point that what is wanted is capability, not a weapon; and how to change the process to get the right capability was the fundamental question. Air Marshal (Retd.) P. K. Nagalia argued that we should understand the whole business of defence requirement by braking down the system into two parts; one being the existing inventory and another being what we want to procure. He further argued there was a strong case for digitization of Indian arms depots. He also put forward the suggestion that every item in the inventory should be given a unique identification number, readily available for all the three services. He argued that training should be cost-effective. His suggestion was that simulators should extensively be used to impart training in order to avoid damages to equipment. Interestingly, he stated that the government generally makes 90 to 95 per cent of all payment in advance which leaves very little incentive for timely supply by the supplier. Vice Admiral Ganesh Mahadevan averred that logistics was sine qua non for our forces, and it is a subject of primary importance which needed urgent attention. He concurred with Professor Dinesh Kumar that soldiers are paid to fight, not to repair weapons. But he added that they were legitimately anxious whether their weapon was being repaired properly. He argued that logistics covered the entire life cycle of a weapon. Incidentally, he noted that the Indian Navy would have to have its own designing organization. Besides, the Navy has successfully moved its aviation into PB2.

Shri Shashi Kant Sharma, Director General (Acquisition), Ministry of Defence, chaired the third session. In this session, Wg. Cdr. (Retd.) Neelu Khatri, Defence Advisory Services, KPMG, identified some grey areas like consideration of life cycle cost and government categorization of defence production in India. She went beyond conventional understanding, or rather consensus, about these areas and tried to explain that prevalent Indian understanding about them may not be the best. Citing global examples, she said that caring for life cycle cost may not be advisable from an economic point of view. Besides, the categories of defence production like ‘make’, ‘buy and make’, and ‘buy’ need to be simplified. Lt. Col. Peter Garretson, Visiting International Fellow, IDSA, presented the American experience in defence acquisition. Another participant in this session was Dr. Vivek Lall, India Country head of Boeing Integrated Defence systems.

Dy. CAG Ms. Rekha Gupta chaired the fourth session. She said that although media was always keen on picking up CAG’s report and selectively highlighting its contents, CAG had never been overenthusiastic to bring anybody to book. In this session, Financial Advisor (Acquisition) & Additional Secretary, Ministry of Defence S. Chandrasekaran underscored the point that while some perceptions regarding defence acquisition and its delay were valid, others were unfounded. One has to be judicious when putting forward suggestions to fix the problem. He argued that a balance should be struck between the existing structure of acquisition and improvements required in it. Officer-on-Special-Duty to CVC Shri K. Subramaniam presented perspectives of two key oversight agencies – CVC and CAG. He reiterated that these agencies are driven by the cause of good governance, transparency and efficiency imperatives. These imperatives, in turn, emanate from one paramount concern – ensuring ‘value for money’. He pointed out that the oversight does not delay acquisition as it is very minimal in India. The CVC thoroughly investigates only those transactions that are above Rs. 75 crore. He argued that there were three major sources of delay: formulation of faulty service quality requirements (SQRs), delay in trials, and complex and cumbersome approval structure. He pointed out that a proposal had to secure approval from 60 to 62 approval points. Besides, the fact that procedures of approval are followed in letter and not in spirit also adds to the problem. He made a case for a professional and specialized cadre for the oversight agencies because it was difficult for them to distinguish between what was bonafide procedural deviation and what was irregularity. Such a cadre will be able to tide over many of the acquisition oversight related problems. Defence analyst and former Project leader on Arms Procurement, SIPRI, Ravinder Pal Singh argued that the problems related to oversight mechanisms lay in the fact that all oversight examinations were done post facto. About literal adherence to the procedures, he averred that rule of law had to be followed, not law of rule.

Shri Vinod Mishra, Former Secretary (Defence Finance), Ministry of Defence and Distinguished Fellow, IDSA, chaired the last session. In this session, Deputy Director General, IDSA, Dr. Thomas Mathew pitched for a calibrated offset policy so that India could gain maximum benefit out of scarce recourses that it had. He recounted the lack of FDI in Indian defence market as a major dampener. He strongly argued for liberalizing the FDI regime in Indian defence industry. According to him, the FDI in the defence industry could be allowed up to 100 per cent, though in a calibrated fashion. Dr. G Balachandran, Distinguished Fellow, IDSA, challenged figures and data on Indian defence industry that were being accepted at face value. He raised several pertinent methodological questions. Regarding offsets, he said that they had their gains and pitfalls. He cautioned that defence trade was a highly regulated trade. Companies are bound by the laws of their respective countries. He made this point in the particular context of the United States and said that the FDI coming from there would not automatically ensure any technology transfer. We have to see whether the US laws permit the transfer of technology that we may be looking for. The last speaker at the seminar was Dr. Jeykar Vedamanickam who represented HAL Corporate Offices as its GM (Marketing).

Concept Note and Programme

Report prepared by Prashant Kumar Singh, Research Assistant, Institute for Defence Studies and Analyses, New Delhi

Chairperson: Admiral (Retd.) P S Das
Discussants: Cmde Ashok Sawhney and Cdr Shishir Upadhyaya

Paper Summary

India’s forward presence in the eastern Indian Ocean is enabled by the Andaman and Nicobar Islands. The location and geography of these Islands impart them with immense strategic importance. The archipelago forms India’s southeast frontier. It is also nearer to Southeast Asia than to the Indian mainland (approximately 1200 km away). The 780 km linear extension of the island gives it an extensive north-south spread in the Bay of Bengal, ideal for generating domain awareness, which could be utilized for countering traditional and non-traditional threats. The propinquity of these islands to the busy shipping lanes, especially Malacca strait, not only provides India with an opportunity to play an important role in the security of the sea lines of communication, but also to use these islands as a transshipment hub, a bunkering facility or a duty free port. Proximity of the archipelago to the Southeast Asian countries enables India to foster friendly relations by engaging them through joint operations. It also helps India in keeping abreast of the political and military developments in its extended neighbourhood.

At the same time, the physical distance and remoteness of the Andaman and Nicobar Islands from the Indian mainland contribute to their vulnerability to both conventional and non-conventional threats. At present, the probability of a conventional threat to the island chain from its immediate neighbours appears remote. However, a military threat to the islands could emanate in the form of a possible intervention in the Bay of Bengal by an extra regional power, especially China, given its dependence on sea borne supply lines in the Indian Ocean and the need to secure them both from non-state actors and potential adversaries such as the United States and India. Towards this end, China has been diligently developing port and other infrastructural facilities in the Indian Ocean littoral. While China and the littoral states have maintained that the infrastructure being established is purely for commercial use, utilization of these facilities by China during a conflict cannot be ruled out. And as part of its distant sea defence strategy, China now seeks to project its naval supremacy as far as West Asia and to the shipping lanes of the Pacific by deploying warships as escorts for its commercial vessels. Moreover, for tracking India’s capability and strengths in the Bay of Bengal, China has been allegedly engaged in gathering intelligence stealthily through various means. Existence of a Chinese naval fleet in the vicinity would also greatly limit the range and extent of Indian naval operations.

However, currently what seem to be a cause of immediate concern are non-conventional threats like poaching, illegal settlements, gunrunning and use of A&N’s uninhabited islands as hideaways by terrorist groups and smugglers, and natural disasters. Poaching has emerged as the biggest problem for the Andaman and Nicobar Islands. Several factors have contributed to the emergence of these islands as a magnet for poachers. Firstly, the fishing industry in the islands is underdeveloped. Secondly, the existence of isolated and uninhabited islands scattered far and wide serves as ideal hideaways for poachers. And finally, the existing policy of detaining the arrested poachers in a camp, and then repatriating them to their country in conformity with international law, has taken away the element of deterrence. Another security concern for the Andaman and Nicobar Islands is the issue of illegal settlements. The trend of illegal Bangladeshi settlers has increased in the aftermath of the Tsunami Rehabilitation work. Dearth of labourers has meant that they are hired from the mainland but who continue to reside in the Island group permanently. The misuse of the Andaman Sea and various uninhabited islands of the archipelago for drug trafficking and gunrunning remains another issue of grave concern. Anti-smuggling operations have revealed that many islands of the archipelago are used as sanctuaries or trans-shipment bases by gunrunners, terrorists and insurgents. The Andaman and Nicobar Islands are also prone to natural disasters such as earthquakes and volcano eruptions. The Tsunami of 2004 bears testimony to the destruction of life and property caused by gigantic sea waves, especially to the Nicobar Islands.

Following the India-China border in 1962 war, the security of the Andaman and Nicobar Islands was reviewed and the Indian Navy was assigned the responsibility of defending the Island territory. This led to the establishment of a forward naval base, INS Jarawa, at Port Blair in 1964. In 1981, INS Jarawa was rechristened as FORTAN. In 2001, the Group of Ministers’ Report on ‘reforming the national security system’ recommended replacing FORTAN with a joint Andaman and Nicobar Command. Broadly, the functions of ANC can be divided into three categories - military, diplomatic and constabulary. The military role, especially during peace time, involves maintaining deterrence through Maritime Domain Awareness (MDA), ensuring physical presence in the area of interest, and conducting joint exercises. On the diplomatic level, ANC has been involved in initiatives like Milan, a biennial gathering of navies of the Indian Ocean Region (IOR) for the purpose of promoting regional cooperation and mutual understanding of maritime issues of common concern. Constabulary function for the ANC primarily involves enforcement of the rule of law at sea and conducting low intensity maritime operations to prevent poaching, illegal migration, narcotics and arms smuggling.

Challenges to securing the Andaman and Nicobar Islands come from a variety of factors. Prominent among them are a difficult topography, inadequate infrastructure and manpower, lack of coordination, inefficient intelligence and pervasive under-development. Concerted efforts are being made by the government to plug the infrastructural gaps for enhancing surveillance, air defence and coastal security. Assets and manpower are being strengthened. For example, plans are afoot for building two air bases at Shibpur and Campbell Bay after the airstrips there are lengthened and night operation facilities are provided to enable them to operate all types of aircraft round the clock. A proposal for establishing additional Coast Guard stations at Havelock and Ranggat has been forwarded. The marine police have completed vulnerability gap analysis and have proposed the augmentation of manpower and assets. Besides the development of infrastructure, grey areas that hamper the effective functioning of the security forces need to be addressed. Firstly, better coordination between various security agencies, especially between Coast Guard, police and forest department has to be ensured. A MDA among them should be created and the SOP needs to be standardized at the earliest. For the intelligence gathering process both HUMINT and TECHINT need to be made strong and fluent. Above all, a holistic development of the Andaman and Nicobar Islands has to be undertaken. Tourism can act as a catalyst for the development of the islands as a tourist hub.

Discussion and Suggestions

• There needs to be a change in India’s attitude towards Andaman and Nicobar. Instead of defending it, Andaman and Nicobar islands should be viewed as the first line of defence.
• The main aim of India in Andaman and Nicobar region should be to assess the threats from China and Pakistan and build measures to counter them.
• The importance of the trade routes surrounding the archipelago is bound to increase as India’s trade with China and ASEAN is set to increase in future.
• India has not fully realized the importance of the 10 Degree Channel and 6 Degree Channel, while China is fully aware of the importance of these two important trade routes.
• The isolated location of these islands is the major problem that India faces.
• A highly efficient surveillance network is a must to monitor non-conventional threats.
• The communication network needs to be developed to carry out efficient surveillance and monitoring.
• More manpower and modernization of equipment is a must.
• People are as vital an aspect as they can be in the region and genuine attention needs to be paid to grievances of the tribal people of Andaman and Nicobar Islands.
• The internal political disturbances in South East Asian nations could have a spill over effect on the archipelago.
• Biological threats, diseases like, malaria, SARS, etc. should also be considered as part of non-conventional threats.

Report prepared by Sana Hashmi, an Intern at IDSA.

Venue: Seminar Hall No. 1, IDSA Complex
Speaker: Shri Gurcharan Das