“It’s about time that the bureaucrats in the MOD and the military leadership in the Service Headquarters opted not only to do ‘the right things’ but also to do ‘the things right’ in as far as the procurement process is concerned.”
- Defence & Technology, July/August 2007, p. 13.

The above remark, perhaps, fairly represents the general feeling of those who are concerned with issues relating to defence procurement in India. These issues mainly revolve around two charges. One is in the form of allegations kick-backs and corruption in high places. And the second relates to delays in the procurement of equipment, resulting in surrender of substantial amounts of allocated funds year after year and thus denying the armed forces the expected state-of-the-art equipment.

While impatience on the part of users and the general public may be justified, there are other relatively unfocused issues and problems that also contribute significantly to these delays or non-materialisation of expectations. Some of these are economic in nature. This article highlights some of these aspects so that the debate is appropriately focused on the problem in its entirety and better solutions can be explored.

It is an accepted fact that delays cost money. Delays in defence procurement in particular can be associated with a number of consequential problems. These include: overall increase in cost due to increase in the project staff, technological obsolescence, changes in the equipment parameters, relatively lesser agility of the expected equipment, greater difficulty of the chances of exports, greater industrial cost, greater risk of the survival of the design, engineering and industrial capacity, and most importantly, denial of up to date equipment to the Armed Forces when they need them.

Several pertinent questions arise in this regard. What is the objective of defence procurement? Is it only to secure better equipment for the Armed Forces? Is it to achieve better value for the tax payers’ money? Is it to ensure the building or preservation of industrial capabilities? Is it to make the defence industry feel good (make things profitable for them)?

One could generally agree that while expeditious securing of better equipment is the primary and explicit objective of defence procurement, other objectives cannot be totally ignored. In which case, if these objectives are to be achieved in the same measure without ignoring any of them, is it really practicable to do so? Are there contradictory objectives within this bunch of individual objectives? Perhaps, to some extent, at least in the short term, though in the long run they should ultimately lead to the same goal. If that is so, the objectives to be achieved are quite complex and multidimensional. At some level in the Government, a delicate balancing has to be done among these possible objectives.

Paragraph 2 of the Defence Procurement Procedure 2006 of the Ministry of Defence (MoD) states that the ‘Aim’ is “to ensure expeditious procurement of approved requirement of the Armed forces in terms of capabilities sought and time frame prescribed by optimally utilizing the located budgetary resources.” While achieving the same, it will demonstrate the highest degree of probity and public accountability, transparency in operations, free competition and impartiality. In addition, the goal of achieving self reliance in defence will be kept in mind. Excellent intentions indeed!

In the defence procurement loop, there are three distinct players: (a) Users, i.e., the Services; (b) the Procurement agency, the MoD or Service Headquarters or Commands; and, (c) the market/defence industry or the suppliers.

The Services initially conceptualise the needs and type of equipment required by them now and in the future. At any point, the equipment that they possess can be broadly categorized into: (i) the lowest tier or obsolete technology, which needs to be phased out; (ii) the middle tier consisting of mature technology, still relevant and having considerable residual value; and (iii) the upper tier consisting of state-of-the-art equipment which act as force multipliers and are generally expensive. It is the last of these categories that is generally in demand to cater for future threat perceptions, an equipment or technology that may or may not be available in the defence market. Once these requirements are finalised and approved at appropriate levels, they are passed on to the Procurement agency, namely, the MoD or the Services Headquarters for action. In this connection, it may be noted that the procurement agency like any other mechanism has its own elements of the structure, processes and culture: be this the Ministry or the Services Headquarters. Ultimately, the demands get transferred to the Defence industry or market for supply to the Users.

Since the public debate mainly focuses on procurement agencies, considerable changes have been brought about in their functional relationship with the users. These reforms are either in the form of changes in the structure and processes, which include amongst others, integration of the Services Headquarters with the Ministry, the creation of a separate defence acquisition channel, and the initiation of substantial improvements in the procurement processes in the form of introduction and improvement of Defence Procurement Manual/Procedure etc. Another significant improvement is the increasing delegation of financial powers to the Services. The latest in this process, which began in 1975, is the revision of financial powers of 2006 in which the procurement of capital items have been delegated to the Services Headquarters.

However, what is largely left unattended is the relationship between the Users and the Procurement Agencies on one side and the market/defence industry on the other side. Till date, policy measures that are in place are the opening of defence production to the private sector with Foreign Direct Investment permissible up to 26 per cent but subject to licensing (since May 2001). Till May 31, 2005, 22 licenses/Letters of Intent were issued to 22 private firms. Important items in these licenses include design, development and manufacture/production of small items like protective products (suits, gloves, tents, bullet proof vests, jackets) to heavy and complex hi-tech items like armoured vehicles, warships, submarines, mobile launchers etc. Then there is the institution of the Raksha Udyog Ratna/Champion in defence production. Of course, one could also cite the direct interaction of Services with industry like Army-CII [Confederation of Indian Industry] dialogue.

Given that these policy measures have been in place for some years now, not much tangible outcomes are noticeable in the public domain. The procurement figures below, from the report of a committee on review of financial powers delegated to Services, fairly seems to represent the state of the relationship between the demands of the Services and the degree of response from the Market/defence industry.

The basic idea of delegation of financial powers to the Services was to shorten the time gap between demand and supply, thus enabling them to directly interact with the market (defence industry) and facilitate the purchase of requirements from sources other than Government production agencies. But the above table shows that Government production agencies continue to be the dominant procurement source, followed by imports particularly in the case of the Air Force which is a ‘High Tech force’. This shows that domestic defence industry is yet to respond adequately to the expectations of the Government or the Services, which continue to be dependent on Government suppliers and imports that are always costly and time consuming. As such, when there is room to cut down delay in the procurement process, reform the structure and streamline procedures, the fact that the market is not able to respond to the demands of the Services has to be recognised and appreciated.

When one talks about defence procurement, it could cover a wide variety of items and equipment. While some of these procurements could be of simple stores of non- military or semi-military nature, there could also be complex hi-tech systems. Procurements in the former category may be relatively easy and attendant issues may remain relatively unnoticed in the public debate. But the hi-tech category draws public attention and sometimes gets ill-formed and unjustified adverse comments. Of late, the Government has come up with formal categorisation of these items and the general guidelines for its procurement in the Defence Procurement Procedure of 2006.1

The economics of defence technology has a certain degree of peculiarity. Apart from the need for heavy investment in infrastructure and production facilities, defence technology has the propensity for rapid obsolescence, and for ever demands sustained investment in research and development for upgradation. Unlike most other technologies in the civilian sector, a success in a particular military technology does not increase its market size literally and the possibility of bringing down the unit cost is virtually ruled out. In fact, since the improved technology does or is capable of performing higher functions with fewer physical numbers, the unit cost increases with improved technology instead of bringing down the cost. On the other hand, horizontal expansion of the market size even theoretically remains restricted to a potential of 200 customers (countries). Then the system integration of machines or complex weapons systems is a major problem area.

These factors generally inhibit the private sector from entering the defence arena. In case an item is not accepted or does not get orders for a reasonable quantity, the cost of investment would turn out to be too high and risky for ordinary business ventures. Moreover, the manufacture of many equipments and items will not become sustainable unless these also have civilian applications. This situation also results in intense competition between various defence businesses. Competition has, in fact, compelled the consolidation of defence industries in North America and Europe after the Cold War. In order to enable suppliers to capture a greater share of the market on the one hand and on the other to help buyers extract the maximum benefits, the concept of ‘Offset’, even to the extent of 50 per cent of the total value of orders, has come into being.

In this situation, one finds that defence technology has its own peculiarity and its consequential economic dynamics in the defence market/industry. It obviously does not fall into what may be called ‘Perfect market place’ as the market forces of demand and supply are not able to operate logically. The policy behaviour of the Governments acting themselves as goal keepers in production, import and export is an added dimension. There is therefore bound to be ever greater shortages and delay of supply, a situation that is likely to be quite severe for countries like India for some years to come if not for decades.

This being the situation, it is not fair to place the entire blame for delays on the procurement mechanism or agencies or the operating functionaries. This is particularly so when the industrial base is in the process of establishing its credibility. Of course, a substantial portion of the delay is contributed by the system and its functionaries. Even in advanced countries like the UK, a similar situation is prevalent though the degree of delay may differ. For example, the much talked about idea of ‘smart acquisition’ procedure (October 2001) captured by the slogan ‘faster, cheaper and better’, which aims to establish closer customer/supplier relationship, has attracted the adverse comment of the House of Commons Defence Committee, which stated that the armed forces are being let down as a result of ‘endemic’ and systematic’ problems in the defence procurement agency. The committee is also reported to have highlighted that there was an average delay on major projects of 18 months and in-a year increase of some 3.1 billion pounds.

It is therefore imperative that the discussions and debates on defence procurement should be wider than what it is today and must include the connected economic dynamics involved, including the policy measures essential for building a wider domestic defence industrial base.

The 17th South Korean Presidential elections were concluded on December 19, 2007. The last serving President Roh Moo-hyun could not contest these elections as he had completed two terms in office. Roh Moo-hyun belonged to the Centrist Reformists Democratic Party, formerly called Millennium Democratic Party (MDP), or Saecheonnyeon Minju-dang, but changed its name to the present form on May 6, 2005. The MDP lost popularity when Roh was impeached in March 2004 by the National Assembly for illegal electioneering and incompetence.

Lee Myung-bak of the Grand National Party won by a majority of 48.7 per cent votes. Lee is a former Hyundai executive and the Mayor of Seoul. He is seen as a pro-business candidate and one who symbolises Korea’s economic success story. He defeated rivals Chung Dong-young, 26 per cent (United New Democratic party) and Lee Hoi-chang, 15 per cent (Independent). This is a landslide victory in the history of presidential elections in South Korea. Lee promised to become the economy president of the country.

South Korea is facing a major economic crisis as it is squeezed between two economic giants — high-tech Japan and low-cost China. Lee’s call for economic growth is perceived by many as an attempt to revive the ‘old Korea’ which was capable of producing jobs.

The general perception is that Foreign Policy was not the driving factor in these elections. The primary concern was on domestic-economic issues. Lee’s landslide victory suggests a rejection by the electorate of the economic policies pursued in the last ten years. People were also not very happy with the stand taken by Roh towards North Korea.

When Lee officially joins office in February 2008, there are a number of issues that he has to look at the domestic and international fronts. On the domestic front, Lee has promised that he will try and boost economic growth. Given his business background South Koreans are hopeful that he will be able to design suitable economic policies. He has already promised people that he will work towards raising the position of the South Korea among the top seven economies of the world and also increase the growth rate to 7 per cent per annum.

On the international front, the relationship with North Korea is a much debated one. The policy pursued during the last ten years is not very much appreciated by the people. Lee has promised that he will provide aid to North Korea only if Pyongyang reforms its weak, state-run economy. The North should also continue to keep its promise of dismantling its nuclear weapons programme. Lee has also said that he intends to review the ‘Sunshine Policy’. This approach is bound to automatically bring him a lot closer to the United States. Lee has also added another qualification that is unlikely to please Pyongyang, namely, his government will review the agreements made between Roh and Kim at the October summit for economic and other cooperation. Lee asserts that that this deal was "sealed in principle" but lacks in details.

But at the same time he has also made it clear that his government intends to fully engage North Korea, though he wants the talks to take place in the South this time. The two previous rounds of talks were held in North Korea. Outgoing President Roh was heavily criticised for consenting to Pyongyang’s demand for holding the second round of talks in North Korea. It is believed that this added to the already existing propaganda of South Korea being a tributary of the North.

The future course of the Six Party Talks has come under much debate and introspection after Lee’s victory. For, Lee has stated that he will continue to provide economic aid to the North only after the latter confirms its intent to give up its nuclear programme. He has also decided to restart the focus on human rights, which was ignored by his predecessor. His stand will become much clearer in March 2008, when he will consider the North’s demand for food and fertilizer.

Lee’s stand on North Korea will be highly appreciated in the United States. Lee is also a strong supporter of the United States South Korea Free Trade Agreement. During the campaign, Lee had proposed economic reforms that will help to achieve this. He is in favour of reduced trade barriers, lower taxes and enhanced transparency. He also believes that strong bilateral relations with the United States will help in maintaining peace and stability and that a closer military alliance will help deter North Korea.

US policy makers were generally suspicious of Roh, who had asked during the 2002 campaign ‘What is wrong in being Anti-American?’ Roh had also cashed on the surge of anti-American feeling in the aftermath of the tragic death of two Korean school girls who were run over by a US armoured vehicle. Roh’s proposal of South Korea playing the role of a balancer in Northeast Asia was viewed by Washington as an attempt to undermine the US-South Korean alliance. On top of all this were the contentious negotiations to restructure the US-South Korea military alliance, including the transfer to Seoul of wartime operation control (OPCON) over South Korea.

All these had strained the relationship with the United States. This also helped North Korea to play them off against each other. If bilateral relations between South Korea and the United States improve under the Lee presidency, North Korea will have fewer opportunities to renege on its promises. Thus one can foresee a change in the overall political situation in East Asia.

On the Chinese front, Lee has asserted that he will make all efforts to improve this important relationship. He has promised to work towards building mutual trust and work together to bring about peace and stability in Northeast Asia.

Lee has also sent his older brother to Japan as an envoy. Diplomatic ties between the two countries have not been very smooth because of a number of historical and territorial disputes. Relations became particularly strained after Koizumi’s repeated visits to the Yasukuni Shrine. Lee has been emphasising upon strengthening the triangular relationship between Seoul, Washington and Tokyo. But this could potentially strengthen ties between North Korea, China and Russia.

South Korea seems to be at the crossroads of political and economic transition. It appears that Lee will try and change his country’s political positioning in the international domain. Even before formally taking office, he has started making efforts to mend strained political relationships. It is to be seen how far he will succeed in his agenda and the impact this has on international relations in North East Asia.

The year 2008 started with oil prices touching a historic high of US $100 a barrel. This is partly a reflection of the high demand for energy. Today, many countries are factoring ‘energy’ into their planning, be it hydrocarbons or other forms of energy. But in the case of India it appears that its energy future would be decided more by politics than actual energy needs. In the first week of 2008, an Indian delegation has completed the third round of negotiations with the International Atomic Energy Commission (IAEA) on India-specific nuclear safeguards. It is expected that these talks with the Vienna based nuclear watchdog are likely to conclude by the end of this month. After this the fate of the Indo-US nuclear deal will entirely depend on the position taken by the left parties.

Interestingly, over the last few months both the pro- and anti-nuclear deal lobbies have expressed their views on the fate of India’s nuclear weapons programme in the backdrop of this deal. But nobody has questioned the efficacy of nuclear weapons in the 21st century. This is mainly because everyone believes that nuclear weapons ensure security through their deterrence potential. Also, since nuclear weapons have acquired a larger than life image, it becomes unfashionable to challenge the efficacy of these ‘aged’ weapons. In fact, some analysts are propagating the bizarre idea that India needs more and more numbers of nuclear weapons to protect its interests.

Of course, it cannot be denied that the nuclear bombing of Hiroshima and Nagasaki were instrumental in bringing the Second World War to a speedy end. Also, the devastation caused by nuclear weapons created much fear in the minds of many and, as a result, even today nuclear weapons are seen as ultimate weapons. But the big question is whether in the 21st century, when military technology has progressed exponentially, it is worthwhile to depend on this rudimentary technology of the 1940s?

Even today many nuclear weapons in the arsenals of states are essentially based on designs evolved during the Cold War. They had specific relevance in a specific era. India has already declared a moratorium on nuclear testing and is unlikely to test in the near future. If this is indeed the reality, it is not clear of what use is romanticising our existing nuclear stockpile which is based on very limited testing? If proliferation politics is not permitting us to produce state-of-the-art nuclear weapons, then how long are we going to contend that our existing stockpile is providing us a psychological sense of security?

If this is the case, it is further not clear why we are holding our nuclear energy requirements a hostage to nuclear weapon policies? Luckily, modern day technology offers India viable alternative solutions. There is a need for the Indian polity and the security establishment to look beyond nuclear weapons. The Indian state has to move beyond the view that only nuclear weapons can assure deterrence. There is a need to look for more viable options which could offer more military strength and deterrence potential.

In the 21st century it is not essential to do nuclear testing only to showcase military might. This can be done by non-nuclear means as well. By doing this, a state could even display its ‘power of deterrence’ without breaking the so-called global nuclear pretence. During the second week of September 2007, Russia tested the world's most powerful vacuum bomb, which unleashed a destructive shockwave with the power of a nuclear blast. Russians have dubbed this weapon the "father of all bombs". It is said that the explosion was the biggest non-nuclear explosion in the world.

Before the start of the Iraq war in 2003, the United States had carried out the Massive Ordnance Air Blast, or MOAB, which, incidentally, is also known as the mother of all bombs. It has been reported that the bomb carries 18,000 pounds of tritonal explosives, which have an indefinite shelf life. Such weapons are essentially conceived as psychological weapons, just like nuclear weapons. Apart from this, there are microwave bombs like E-bombs that emit powerful pulses of energy capable of destroying enemy electronics, disable communications, and block vehicle ignitions.

India could also invest in Directed Energy Weapons like high energy lasers, particle beam and high power microwave weapons, which, designed properly, could give nuclear weapons a run for the money. Also, the recent anti-satellite test carried out by China implies that deterrence need not remain restricted to nuclear weapons only. A state’s deterrence potential could be shown by other means as well.

This is not to argue that India should give up its nuclear weapons. Given that nuclear weapons are already in its arsenal, India needs to invest more in modern military technologies that could offer more deterrence value than nuclear weapons. Ultimately, deterrence lies more in the mind than in military laboratories. There is a need to start a rigorous debate on identifying non-nuclear means of deterrence. More importantly, the time has come to ensure that India’s energy needs do not remain subservient to its security needs.

Uttar Pradesh is emerging as a terror hub in the country. The January 1 attack on a Central Reserve Police Force (CRPF) camp in Rampur by four militants belonging to the Lashkar-e-Taiba (LeT) is the latest in a series of terror-related incidents to rack the state during the last year. Six serial blasts were earlier trigged on November 23, 2007 by militants belonging to the Harkat-ul-Jihad-i-Islami (HuJI), targeting the Varanasi court premises, the lawyers’ chambers in Faizabad, and a civil court in Lucknow. Two live bombs were also recovered and subsequently defused. Six months earlier, on May 22, 2007, three serial bombs ripped through the Golghar area of Gorakhpur.

Over the last several months, quantities of arms have also been recovered from several places in the state. On July 27, 2007, the Special Task Force (STF) of the state police recovered two kilograms of RDX and two detonators from an industrial area on the Lucknow-Kanpur road in Unnao district. Two weeks earlier, it seized a cache that included two kilograms of RDX sticks, ten hand grenades and ten detonators in Mohanlalganj. And the Railway Police recovered about 10 kilograms of explosives and 20 litres of ammonium nitrate from the waiting room of the Faizabad railway station on May 23.

Several fundamentalist militant groups are active in Uttar Pradesh, including HuJI and LeT, which became evident from a series of incidents in recent months. On December 23, 2007, the STF, after engaging in cross-fire with two LeT militants on Dewa road, some 18 kilometres from Lucknow, recovered two AK-47 rifles along with their cartridges, 10 hand grenades, a fuse, a detonator, a suicide belt and a map with notings. In a joint operation a day earlier, UP police and security agencies arrested two HuJI operatives with 1.25 kilograms of RDX, six detonators and ammonium nitrate rods at Barabanki railway station. One of the men arrested turned out to be Tariq, the UP chief of HuJI who was involved in the November 23 serial blasts. Two other HuJI militants had earlier been arrested in the state on June 21, 2007, and seven kilograms of RDX, six detonators, five watches including three improvises watches equipped with timer wire, two batteries and a remote switch were recovered from them.

These militant groups also seemed to be engaged in targeting high profile political leaders. On May 13, a letter suspected to be written by a LeT militant was recovered from a cinema hall in Meerut, which threatened to kill Sonia Gandhi and the then President A.P.J. Abdul Kalam. The letter also contained the threat to blow up the railway station and several cinema halls in Meerut as well as the railway station in Delhi, India Gate and Delhi’s international airport. Recently, on November 16, three Jaish-e-Mohammed (JeM) militants were arrested from the district court premises of Lucknow for plotting to kidnap Congress leader Rahul Gandhi.

The activities of these groups are being facilitated by sleeper cells of the Student Islamic Movement of India (SIMI), which help outfits like HuJI recruit cadres. Such sleeper cells are active in Jaunpur, Allahabad, Kanpur, Lucknow, Ambedkar Nagar, Aligarh, Azamgarh, Sonauli, Ferozabad and Hathras. Here, it is worth noting that the Intelligence Bureau has issued a warning that the Hapur-Moradabad-Bareilly-Rampur belt in western UP is most vulnerable to terrorist action, given that several terrorist modules are suspected to be operating in these parts.

According to a November 25, 2007 statement issued by the central government, Uttar Pradesh tops the list for the highest number of jihadi attacks – outside of Jammu & Kashmir – in the past few years. Minister for Legislative Affairs, Lalji Verma, stated in the UP Assembly on July 2, 2007 that 34 districts in the state, including Lucknow, face the threat of terrorism.

In response to this emerging threat, the state government has set up 39 special cells, though it appears that these have not so far been as effective as they were expected to be. In late November, the state government established a special Anti-Terrorism Squad (ATS) with a technical intelligence wing in Lucknow. Chief Minister Mayawati has sanctioned Rs. 67.5 million to purchase sophisticated hi-tech equipment for the team to enable it to meet the advanced techniques used by terrorist groups operating in the state. The ATS will have units located in all police zones including Allahabad, Bareilly, Gorakhpur, Kanpur, Meerut and Varanasi. In addition, after the serial blasts in November, the state government has decided to deploy as many as 25,000 Home Guards across the different court premises in the state.

It is essential that the entire security apparatus of the state, including the STF and the recently established ATS, are suitably trained and equipped to counter the growing threat posed by terrorists. In addition, the state government should also ensure that its various arms share information and intelligence and co-ordinate their activities. Most important, policing has to be improved at the grassroots level through special training programmes and police personnel immunised from political pressure.