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Dysfunctional Operating Environment in Defence: The Malaise

Amit Cowshish is a former Financial Advisor (Acquisition), Ministry of Defence and a former Distinguished Fellow, Institute for Defence Studies and Analyses (IDSA), New Delhi. Click here for Detailed Profile
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  • October 27, 2014

    It is less frustrating to deal with restrictive rules and procedures than to operate in the absence of, or in accordance with confusing, rules and logic-defying procedures.

    Take, for example, the power to procure armament store from abroad. As per the ministry of defence (MoD) letter of 2006 on delegation of financial powers1, vice-chief of naval staff (VCNS) can sanction expenditure up to INR 12 crore on each occasion. But there is a rider. This power can be exercised only ‘after obtaining import clearance and ensuring full rupee backing and within the annual ceiling laid down by MoD (Fin)’. The MoD letter does not specify who is authorised to accord import clearance and how is the rupee backing to be ensured. It is doubtful if any annual ceiling is laid down by MoD (Finance) or if there is anyone who could explain why this is required. It is a puzzle how these powers are being exercised.

    The inanity does not end with this. A procurement proposal exceeding INR 12 crore has to go to MoD, where it is sanctioned by the joint secretary if the estimated cost is up to INR 25 crore, by the Additional Secretary if it is up to INR 50 crore, by the Defence Secretary if it is up to INR 100 crore and by no less than the minister himself if the cost involved exceeds INR 100 crore.

    These competent financial authorities (CFAs) exercise their financial power with the concurrence of the integrated financial advisors (IFA) at the naval headquarters (NHQ) and that of the finance division at MoD. There is no concept of level-jumping. Thus, if a proposal requires the approval of the minister, it must go through every level within MoD and MoD (Finance) before it reaches him. Even if it is assumed that everyone acts on the proposal with super alacrity, it is bound to take some time for a proposal to get sanctioned. This makes little sense as there is hardly any value addition at the several levels through which the proposal has to move.

    The problem is not confined to the way the financial powers are delegated within the MoD and at the NHQ. The manner in which powers are delegated down the line appears equally fatuous. If there are three CFAs at MoD and two at the NHQ for sanctioning maintenance, repair and refit of ships and other vessels (including submarines), there are at least seven at the command and lower levels, starting from Chief Hydro and ending with the commander-in-chief. Thus, in all, there are as many as twelve competent financial authorities from top to bottom who exercise financial powers to sanction repairs and refits. This does not include the minister who alone is empowered to sanction repairs involving expenditure in excess of INR 20 crore when the ship is abroad in foreign waters.

    A widely held belief among the CFAs, especially at the lower levels, is that their ability to act with speed is greatly hampered because they have to seek financial concurrence before according the approval which is a veritable bottleneck. To be sure, up to a certain extent, financial powers delegated to the services can be exercised without the concurrence of integrated finance but such powers are very limited. For most part, the powers are exercisable only with financial concurrence. Therefore, any dissonance between the CFAs and the IFAs can easily slow down the processing of a proposal. This is a matter of serious concern.

    This is not how things were expected to turn out when the financial powers started being delegated down the line in 1990s under what was then called the new financial management strategy. To ensure that obtaining financial concurrence does not become a stumbling block, CFAs were given the authority to overrule the IFAs. This continues to be the case even now. To bring about accountability, the CFAs also have been given a say in finalisation of the annual reports of the IFAs either as the reporting officers or the reviewing officers. But this has not no dent on the impression that the IFAs exercise authority without any responsibility.

    The problem is largely on account of the difference in organizational ethos of the CFAs and the IFAs which often results in a conceptual parallax on a number of expenditure proposals. The ambiguity inherent in what constitutes financial scrutiny of an expenditure proposal, as also the focus of the service officers at the operational level being on the end-result rather than procedural niceties, does little to remove this parallax.

    Whatever be the reason, the IFA system is not as well integrated with the services as it should have been. There are examples to the contrary but mostly such success stories are the result of good chemistry between the CFA and the IFA rather than on account of institutional factors.

    Another reason that accounts for the dysfunctional operational environment is the lack of focus in MoD on issues that have a bearing on administrative and financial empowerment of the services. The orders on decentralization of administrative powers have not been reviewed for almost fifteen years and those on delegation of financial powers for the last eight years.

    There is no single agency in MoD to deal with these issues holistically. Generally, matters related to administrative powers are processed separately for each service by the administrative wings concerned with little concern for commonality.

    In 2009-10, the finance division was asked to review the financial powers for all the services holistically, which it did, but once the task was completed and report approved by the minister, the administrative wings went into a sulk claiming, contrary to the facts, that they had not been consulted by the finance division. Such puerility is in no one’s interest.

    Review of the Defence Procurement Manual, 2009, which impacts the services down the line as it prescribes the procedure for procurement of goods and services from the revenue budget, faces a similar fate.

    Empowerment – both administrative and financial – is not a one-time exercise. The needs and requirements change. The circumstances change. Therefore, there is a grave danger of the empowerment lagging behind the newly emerging needs and requirements unless there is an quick-reaction mechanism in place to review the scheme of decentralization and delegation of powers as and when the need arises. This is true not just of the Indian navy, whose former chief brought this issue to the fore through his interview to an English channel earlier this month2, but of all the services, as well as the coast guard, and probably other departments also.

    This is not to suggest that the former chief’s angst was entirely on account of these mundane issues. There are larger issues that need to be addressed but the root cause of what he described as the ‘dysfunctional and inefficient’ operating environment is the services having to seek the ministry’s approval for a variety of activities that form the core of their day-to-day functioning. This is amply clear from his statement that while professional competence, accountability and responsibility is with the service that is not the case with authority in terms of the power to approve something.

    This, therefore, is an area which merits immediate attention in MoD.

    Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India

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