The good news is that the UPA Government has come out with a new defence procurement procedure which, Defence Minister Pranab Mukherjee promises, will end all corruption, delays and ensure greater transparency in defence deals. The bad news is that the Government has virtually frozen all defence acquisitions for over a year now, scattering deadlines by several years. Deals on the verge of closure have not been signed as the bureaucracy, paralysed by fear of the Central Vigilance Commission and the UPA's witchhunts against the previous NDA government, goes slow on signing fresh deals. The CBI has filed an fir against South African arms firm Denel and is investigating 37 deals signed by the previous government.

PICTURE SPEAK

ARMS BAZAAR: Aircraft on display at the Aero-India 2005 in Bangalore

Despite Prime Minister Manmohan Singh's assurance that "we have to make every effort to ensure that these recent events do not create a disincentive for taking timely decisions regarding armaments", that is exactly what has happened. Stuck in the pipeline are deals for buying over six hundred 155 mm howitzers, Smerch long-range rocket systems and Heron Unmanned Aerial Vehicles (UAV) for the army. The navy, which will retire over 50 per cent of its current strength of 15 submarines in a decade, is gnashing its teeth over the ministry's rethink on buying Scorpene submarines from France. Each of these deals has been painstakingly negotiated over the past decade.

Since the UPA came to power in May last year, only three deals finalised during the NDA's tenure have been cleared-the upgrade of the navy's fleet of 14 Sea Harrier aircraft, the purchase of Derby beyond-visual-range missiles and extended range Grad rockets for the army.

The reason could well be DPP (Defence Procurement Procedure)-2005. It comes into effect only on July 1, but it may already be in operation. Senior bureaucrats cite one of its key provisions-the prevention of a single- vendor situation-as a reason for the Government's reluctance to process the deals for the UAVs and the submarines.

The armed forces think the new DPP is "old wine in new bottle", essentially a modified version of the procedure introduced by the NDA government in 2002, the first to bring in greater transparency into weapon purchases by declassifying and revising procurement methods. Even the integrity clause bandied about by Mukherjee-foreign arms firms have to promise not to pay kickbacks-is being regarded with cynicism in military circles. Here's why. Defence procurement in India is an industry by itself. Each year the armed forces buy nearly Rs 34,000 crore worth of arms. To get an idea of how big this is, it is six times the annual turnover of Infosys.

POLICY SHIFT

Qualitative requirements to be made more broad-based to avoid single-vendor situations. Open tendering for items bought commercially off the shelf (cots). Arms sellers have to sign a no-bribery clause, promising not to pay bribes to secure contracts. For deals above Rs 300 crore, arms dealers must provide offsets for the Indian industry. Qualitative requirements for military equipment common for all three services. More objective evaluation criteria in line with the suggestion of the Ministry of Finance by incorporating discounted cash flow and exchange rate variation techniques.

But often the process of buying these arms is so opaque and beset by delays-it has been described as the fiercest enemy of the armed forces itself. They say these delays cause far greater concern than kickbacks because they severely affect defence preparedness and the ongoing modernisation drive. The deal for buying 66 advanced jet trainers from the UK, signed last year, was historic because it came nearly two decades after the IAF first floated the requirement.

The new policy only sets a "broad time frame" of two to three years, including trials for major acquisitions. The armed forces aren't amused. "Our procedures are so convoluted. If they are dutifully followed, nothing can be procured within any time frame," says a senior defence official. "It takes one year to get a simple yes from the government. By then it is time to surrender our budgetary allocation to the Finance Ministry because we haven't bought the weapon system. The process starts all over again," he says.

The DPP 2005 doesn't speak on the crucial aspect of educating the bureaucrats and servicemen who staff the MoD's Defence Procurement Board (DPB) set up in 2002. The UK, for instance, has a full-fledged minister for defence procurement and an organisation structured along corporate lines. The US has a special defence acquisition college where graduates are trained in every aspect of defence acquisition. But in India, officials handling the key acquisition process confess they are clueless about the commercial aspects that govern contracts and acquisitions. "I wouldn't know what jargon like DCF (discounted cash flow) and ERV (Exchange Rate Variation) mean. I am trained by the services to be a soldier, not a contractor," says a defence procurement official.

The last paragraph of the main text, say defence officials, which promises to "review procurement procedures every two years" has an ominous ring. "The report lays down a deadline of two to three years for the acquisition of major weapon systems, but at the same time promises to review the system itself. This is major cause for concern as procedural changes could further delay acquisitions," they add. The new DPP introduces some radical innovations like defence offsets which means if India buys arms from a foreign company worth over Rs 300 crore, then the foreign firm has to invest 30 per cent of the value of the contract in India. It also tries to standardise requirements for all the three services to avoid blunders like the purchase of UAVs. Five years ago, the Indian Army, navy and air force bought the same Searcher-II UAVs from the same Israeli firm individually and at different rates.

Former army vice-chief Lt-General Vijay Oberoi says that the new procurement policy is silent on another critical area, of insulating the armed forces from this shut-the-pipeline syndrome, which follows defence scandals from Bofors to Denel.

While Bofors and HDW were acquitted by the courts after nearly two decades of legal wrangling, it is the armed forces that has suffered the most-the navy has a critical hole in its submarine fleet while the army is yet to get the howitzers it asked for over two decades ago. "The Government must ensure the deal continues even if there is corruption while securing the contract. Punish the guilty without derailing the acquisition process," adds Oberoi. The bad news is that nobody seems to be listening.

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