In the recently concluded Defexpo 2008, the fifth international land and naval systems exhibition at New Delhi, some 479 companies from 30 countries are reported to have participated. The growing importance of this and the bi-annual Aero India show at Bangalore is not surprising, considering that India has bought defence hardware worth $25 billion since 1999, and is expected to spend another $30 billion for the ongoing modernization of its armed forces by 2012. This, along with the United States of America’s willingness to participate in supplies of military equipment to the Indian armed forces, has made these shows amongst the more popular international events for the arms bazaar. If to these is added the huge growing demand in the civil aviation sector, it would be fair to assume that no large international aerospace/defence supplier would want to be denied a share of this exciting action. This is borne out by the healthy participation during the last Aero India 2007 and now Defexpo 2008.

This interest in the world’s arms market puts the onus on the ministry of defence to become a responsible buyer, whose policies and procedures favour a level playing field, adequate external transparency and are not driven by ad hocism. These then must be backed by suitable institutional and organizational changes such that the armed forces procurement plans and programmes are executable within the policy framework and through a corporate management approach, not a bureaucratic one. That should not become a drag on the commercial enterprises we choose as our suppliers. The last is important, because arms purchases today are more than mere commercial deals. While the initial competition may be intense, once a fair choice has been made, the programme must also run as a mutually supportive partnership. That is why the defence minister said that “for our defence industry to expand and to be able to meet critical technological requirements of armed forces, there is need for far greater synergy between private players and the government”.

We must also not forget that all arms deals today involve respective governments as well, even if indirectly. All the more reason that we should be viewed as a nation with which international and national arms companies find it mutually beneficial to do business. One word of caution though. The arms market is both a sophisticated and a cruelly competitive one. Coupled with this, our own past, where arms deals became political football at the slightest pretext, has depleted confidence to a level where the system would prefer not to take decisions.

We already have an embarrassing case, after the first defence procurement procedure was issued in 2006, when the army’s helicopter negotiations had to be halted after the supplier had been selected. While one is not privy to the merits of the case, it caused embarrassment not only to the MoD as the chosen company went public crying foul, but also to the ministry of external affairs, which felt the diplomatic fallout. Worse, it dented the credibility of the system. In such an overcautious environment, it is easy to overplay transparency to the detriment of our internal security and procurement interests.

It is in this context that some of the statements made by the defence minister during this expo need discussing. He announced that a new defence procurement policy will be unveiled by April, stating that “we have been fine-tuning and improving the DPP based on periodical reviews and the current procurement procedure is also under review to make it more transparent and user-friendly”. It needs recalling that the DPP was first issued in 2006 by the then defence minister. Since then there have been many discussions, and the review is a possible fallout of various inputs. While this is all to the good, the tender for the biggest of all deals relating to 126 multi-role combat aircraft stands issued for some months and responses are due in March, after some six months of study by vendors. Shifting the goalpost even as responses are being finalized appears neither a transparent nor a user-friendly method.

In the midst of an effort to project the spirit of following a transparent and user-friendly policy, the defence minister also stated, “In the past the IAF was not willing to accept even one light combat aircraft. But now after trials, they have agreed to induct two squadrons. This is a breakthrough.” While the minister’s enthusiasm is understandable, what has not been said is that the Indian air force has no choice and is committed to an aircraft that has still to achieve its initial operational clearance. Such preferential treatment would clearly not be afforded to a private supplier. But this is where the contradictions and compromises in our efforts at level fields and transparency begin to surface. Here, at least, there is a justification, as the aircraft has been developed out of our own funds and needs to be supported. What of our Russian procurements?

There has been enough media coverage of some major contracts with the Russians running into contractual problems because of monumental cost escalations. That some have already been renegotiated while other negotiations are on indicates that we have a different yardstick for the Russians. If such a situation ever arose with a private supplier, national or international, the MoD would have no hesitation in going to arbitration as per normal contract clauses.

In addition, there is a department of public enterprises notification which requires Central public enterprises to be given purchase preference, if their price is within 10 per cent of the lowest, and the defence procurement manual stipulates a price preference of 15 per cent for small-scale enterprises.

These specific cases are being mentioned because the international arms dealers are watching us and want to be assured that they are competing on a level playing- field. The above instances indicate that we have a multi-level field. One for our defence public sector units, another for Russians and yet others for our Central public enterprises and small-scale enterprises. The last is for all the others, whom we are wooing the most because of the technological and operational superiority of their weapon systems. The examples are enough to create a serious doubt in their minds. It is perhaps with these sentiments that the former US defence secretary, William Cohen, who heads the Cohen group of companies, said at the Defexpo that the American companies had impressed upon the US defence secretary, Robert Gates, that he should ensure that US companies get a level playing-field and fair evaluation in bidding for Indian contracts. One wonders, if this will result in yet another level.

What seems to be coming in the way of accelerated progress in modernizing our defence procurement set-up is the gap between the government’s policy objectives and its ability to translate these into reality. No policy, however laudable its objectives, can be implemented in a vacuum. This is more so in the world’s arms market, which is technology-intensive, lucrative, cruelly competitive and invariably has respective governments involved in some way or the other. In such a business environment, neither the user service nor the MoD can afford to follow ad hoc procedures. While this makes it imperative to have policies that are clearly defined, it will be idle to expect that these can cover every contingency. There is merit in allowing the executors of policy to innovate and be flexible, even though traditional bureaucracy is not comfortable with that.

This is where the biggest challenge lies. A major impact of the Bofors syndrome was to freeze the defence procurement decision-making system. The greatest casualty has been modernization of the armed forces. Even as the government chose to break out of this self-inflicted confinement by formalizing the defence procurement policies and procedures and introducing transparency, it has failed to reform the organizational framework so that corporate management culture is introduced to enable us to deal with some of the most sophisticated national and international players.

The dichotomy is this. We are wanting to play by the market rules without adopting a corporate management culture. Sandwiched between the bureaucracy and the arms market, the armed forces will continue to be starved of modernization, no matter how worthy our intentions may be.