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Money and the military

India’s defence spending has been caught in a web of procedures linked to public sector behemoths, even as it courts global firms and boosts private sector in the area amid controversies. HT takes stock.

business Updated: Apr 04, 2012 00:54 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times

Which are the agencies involved in defence production and purchase in India?
The ministry of defence (MoD) is the final authority on defence purchases. The department of defence production oversees purchases. The department is vested with the overall responsibility for growth of indigenous defence industry as well as framing of policies.

What is the present state of the Indian defence industry?

In India, there are nine defence public sector undertakings, with each of them catering to a specific class of items such as Hindustan Aeronautics Ltd for aircraft and helicopters. There are also about 40 ordnance factories or departmental manufacturing facilities and about 90 private companies licensed to manufacture a wide range of items.

What role do ordnance factories play in defence production?
The ordnance factories are strategic and dedicated production base for armoury. The product range includes small, medium and heavy calibre guns, propellant, explosives, armoured vehicles such as T-90 and Arjun, transport vehicles and parachutes and troop comfort equipment among others.

Who runs India’s indigenous missile development programme?
Bharat Dynamics Ltd is the primary production agency for all missiles developed by the Defence Research and Development Organisation (DRDO).

What is the current state of the domestic private defence industry?
The defence industry was opened for the private sector in May 2001 with foreign direct investment (FDI) allowed up to 26% subject to licensing. Guidelines for licensing of production of arms and ammunition were notified in January 2002. Many private companies such as the Tata Group, Larsen and Toubro, Mahindra Group, and Wipro have already entered into agreements with foreign companies for manufacturing items as diverse as helicopter cabins and armoured vehicles.

What are the guiding principles of the defence procurement process?

Defence procurement procedures (DPP) and accompanying policies have to balance three competing aims: facilitate the expedient acquisition and scaling up of new technologies and capabilities for the Indian armed forces, conform to the highest standards of transparency, probity and public accountability and develop an indigenous Indian defence industry capable of providing near autonomy in defence production.

Why has India being spending less than annual allocation in defence?
Over the last decade, every year, sizeable funds have been surrendered as ‘unspent’ and returned to the finance ministry. A major reason for the under- spending is the time frame allotted to the Services for the expenditure.

Currently, the procurements undertaken by the MoD are done according to the Annual Acquisition Plans (AAP) and the Services Capital Acquisition Plan (SCAP). Given the estimated length of a typical acquisition, it is sometimes difficult to plan in which particular year a major procurement spend will be incurred. This can lead to under spending of the allotted budget if the spend fails to materialise in the relevant planned years but is deferred to later years.

The surrendered amount is relocated to the finance ministry and may not be available for the MoD under the following year’s budget. There has been a demand to introduce the concept of rolling budgets, allotting the under- spending to the following year’s budget in order to ensure that on-going procurements are not stopped for lack of funds.
What are Indian Army’s acquisition plans over the next 10 years?

Army’s 10–year acquisition plan includes ultra light howitzers, towed and wheeled 155m guns, self-propelled tracked and wheeled guns, mounted gun systems, air defence guns, surface to air missiles with different ranges, futuristic infantry combat vehicles, artillery rockets, assault rifles, battle field surveillance radars, weapon locating radars and night vision equipment among others.

What is India’s biggest military deal?
India has picked French firm Dassault Aviation’s Rafale fighter jets over Eurofighter Typhoon in a hotly contested deal of 126 advanced combat aircraft in deal worth $18 billion (R90,000 crore).

What’s next in the fighter aircraft arena?
India and Russia are jointly developing 5th generation fighter aircraft and will spend $300 billion (Rs 15 lakh crore) on 300 planes.

First Published: Apr 03, 2012 22:48 IST