This is a link to an article which mentions that 'Harayana families' are now sourcing their supply of brides from all over the nations. Particularly non-North Indian regions.
Agreed, this is a gloomy story and points to a fundamental malaise in the Harayana society at large. However is it possible that there might be a silver lining here. Imagine with marriages between people from regions which are poles apart and primarily from the non-north Indian regions; does any one see a enriching of culture; or a change in the Harayana society; and or a national integration to begin with.
It will be helpful if the study can be expanded to see how these women are integrated into Harayanvi society. Is their treatment better; what is the influence on the household, also how is their mother-side house affected. Is there regular people to people contacts between the bride's family and the Harayana family.
Is there a shift in opinion in the households that had to buy 'brides' from outside the state. What is the status and-or perception of women and more importantly girl children in these 'importing' (sic) households.
These and more questions when answered will reveal whether the situation is actually as black as it seems; or is there a 'proverbial' silver lining to this issue.
This paper was written a long time ago. Was more of a jotting than a essay.
Antarctica, India and China.
The 20th century is arguably the re-birth of Asia after a hiatus of more than 200 years; And at the vanguard of this Asian renewal are the regional behemoths India and China. Combined they hold within themselves 1/3rd of the world’s population. Except for the brief period of time when the European nations subdued and overtook them, for a major period of the known history they have been acknowledged polarities in a co-existing multi-polar world. And this status of power was maintained by wide ranging trade relations and a robust economy. After the end of the era of colonialism these countries are again looking at reclaiming their rightful status as global leaders.
To do this India and China must face and successfully challenge a number of issues primary among which is providing and maintaining a stable and prosperous living standard for a majority of their populations. To achieve this in the present consumption driven economies requires an enormous amount of resources in all forms. Primary among which are human capital, investment, technology and raw materials. Considering their sizes human capital is a non-issue, investment is outside the scope of this discussion while technology has to be home grown. Raw materials are the crucial issue for both these nations for though both have been blessed with a wide variety of natural resources within their national boundaries, technological considerations as well as requirements makes it imperative to scout for resources in other regions. This is evident from the rush and competition between the two nations to curry favour in the continent of Africa to secure mineral resources primarily Oil; As well as the attempts at playing their own version of the ‘Great Game’ in East Asia. Within this perspective Antarctica gains vital importance for India and China as:
1. It is the last piece of virgin land on Earth and as nations aspiring to world leadership they each desire their share.
2. Taking into account the Gondwana theory as well as research carried out in the Antarctic, the white continent is supposed to be very rich in mineral resources. Coupled with the fact that there is no indigenous population in the Antarctic, the continent becomes too tempting an area to be ignored.
3. The vital importance of the Polar Regions to global environment.
4. Research opportunities and suitability as a testing base for technological innovations.
5. With the melting of polar ice, control of emerging sea routes becomes an issue.
This paper attempts to understand the importance of Antarctic to India and China, while looking at the most beneficial system of governance for the Antarctic taking into account the interests of both the nations. Accordingly we first look briefly at the present systems governing the Antarctic, we then look at their relative merits-demerits vis-à-vis Indian and Chinese interests and finally we try to deal with various alternatives.
1. ATS and the Mineral Resources Convention.
Antarctica has been a site of peace and scientific exploration for the last fifty years, largely due to a series of agreements known collectively as the Antarctic Treaty System (ATS). One of the most crucial features of this system has been the freezing of all territorial claims to the landmass of Antarctic. Preceding the establishment of such an organization, seven territorial claims had been made to the landmass of Antarctic. These were: Britain in 1908, New Zealand in 1923, followed by France in 1924, Australia in 1933, Norway in 1939, Chile in 1940 and Argentina in 1927 where it made a series of claims up till 1957 . These claims came to a head in the early to mid 1950’s along with rising cold war tensions between USA and USSR. Involvement of non-claimant states USA and USSR due to their super-power status raised the specter of hostilities occurring on and for Antarctic. Also increasing tensions between Chile, Argentina and Britain over territorial claims raised the possibility of USA having to choose sides; when all these three nations were its allies To alleviate the conflict, all nine of the claimant countries, along with USA and USSR and three other non-claimant nations Belgium, Japan, and South Africa, negotiated the Antarctic Treaty in Washington, D.C. on December 1, 1959. This treaty came into force in the June of 1961. The most salient feature of this treaty was the “freeze” it had put on all territorial claims of all ratifying members. That is it did not destroy any claims, nor prohibit there continuance, it just created a system of status quo, whereby claims were all put in suspended animation and no activity could be undertaken to further such a claim or make a new claim by member states through the duration of the treaty.
The advantages of the Antarctic Treaty System have been summarized as follows :
(a) It is open to accession by any Member State of the United Nations, or any country which may be invited to accede with the consent of the Consultative Parties--it is thus as universal as the interest of States in Antarctica;
(b) It is of unlimited duration and establishes Antarctica as a region of unparalleled international co-operation in the interests of all mankind;
(c) It is based on the Charter of the United Nations, promotes its purposes and principles and confirms Antarctica as a zone of peace; it is, in fact, the only effective, functioning nuclear weapons-free zone in the world today;
(d) It excludes Antarctica from the arms race by prohibiting any measures of a military nature, such as the establishment of military bases and installations, the carrying out of military maneuvers or the testing of any types of weapons, including nuclear weapons, and forbids the dumping of nuclear waste;
(e) It encourages and facilitates scientific co-operation and the exchange of scientific information, which is made available for the benefit of all states;
(f) It protects the natural environment of Antarctica, including the Antarctic ecosystem;
(g) It provides for a comprehensive system of on-site inspections by observers to promote the objectives and to ensure compliance with the provisions of the Treaty;
The immediate and the most important use however has been the averting of international strife and conflict over Antarctica; by putting aside the question of claims to sovereignty in Antarctica, thereby removing the potential for dispute. However it should be noted that the original seven claimants still continue to hold their territorial claims on the Antarctic. Further among the original five non-claimant nations USA and USSR reserved the right the right to make claims in the future. This was acknowledged and sanctified in Article IV of the treaty. The USA and USSR assume a unique place among the treaty members, for they follow a ‘no claims’ policy whereby they assert no claims and acknowledge no claims by others, while still reserving the right to make future claims. The other non-claimant states have to agree to the frozen claims while not acknowledging the claims of the of claimant nations, however not having the equivalent right of USA and USSR (now Russia) to make future claims. India and China ratified the treaty and became members in 1983. By ratifying the Treaty, these countries agreed to the compromise in Article IV to freeze past territorial claims and also agreed not to advance any new claims of their own. Over the years, this compromise of disallowing anyone to make claims on the Antarctic has spawned a variety of theories in support of keeping the continent unclaimed. These theories range from the idea of ‘global commons’ whereby all the nations have a say, to the idea of an ‘environmental park’ to the idea of a UN trust administered territories. All these theories have as their core shifting the focus of no claims from a compromise to other philosophical and practical ideas.
From the time of its creation the Antarctic Treaty has grown to have 26 consultative parties and 17 contracting parties . Over the years the Antarctic Treaty mechanism has included the recommendations and policies which have been passed at the yearly meetings by the member states. The treaty thus now encompasses the original article and the subsequent policies and resolutions and is hence known as the Antarctic Treaty system. Special conferences were held over the years to develop various Protocols, some of which the Consultative parties eventually ratified. So long as all Consultative parties ratify a protocol, these measures become part of the ATS.
The first successful, large-scale addition to the Antarctic Treaty was the 1964 Agreed Measures for the Conservation of Antarctic Flora and Fauna. Next was the 1972 Convention for the Conservation of Antarctic Seals (Seals Convention). After the Seals Convention entered into force in 1978, the Convention on the Conservation of Antarctic Marine Living Resources (CCAMLR) was discussed in 1980 and was ratified in 1982.
One of the most recent measures to deal with an Antarctic issue was the Convention on the Regulation of Antarctic Mineral Resources (CRAMRA) which took six years of negotiations to finalise; from 1982 to 1988. With increasing access to the continent and advances in technology, access to mineral resources seems to be the issue that might disturb the status quo of the ATS. The member states have placed a lot of emphasis on creation of the Antarctic Minerals Convention. There primary concerns were:
To protect the Antarctic environment and
To preserve the Antarctic Treaty regime.
Accordingly the member states of ATS developed several principles for the creation of a governance system regarding mineral exploitation.
As summarized by Christopher Joyner, a noted commentator in this area, the principles are as follows:
(1) The [Consultative Parties] should continue to play an active and responsible role in dealing with the question of Antarctic mineral resources.
(2) The protection of the unique Antarctic environment and its dependent ecosystems should be a basic consideration.
(3) The Antarctic Treaty must be maintained in its entirety.
(4) The interests of all mankind should not be prejudiced.
(5) The balance of interests embodied in Article IV of the Antarctic Treaty [freezing claims of territorial sovereignty to Antarctica] should not be endangered.
A careful study of these principles shows that more than resolving the issue of mineral exploitation the members are concerned more about the survival of their interests and claims in the region.
The convention was never brought into force as it was never ratified. Consensus was never achieved for this convention and with the withdrawal of support of ‘France and Australia’ ostensibly for environmental reasons, the convention did not become a part of the ATS.
The failure raises various questions regarding the Antarctic treaty system and the impact and need for a convention on mineral resource exploitation.
More generally, it has raised questions of whether the treaty regime, which has worked successfully for 25 years, can survive. Some of these questions go to the very root of the principles that the member nations had evolved to guide the mineral exploitation convention.
It creates doubt about the ability of the members to establish a mineral exploitation regime, which satisfies both the ATS members as well as the UN general body. It also casts a doubt on whether territorial claims, international community claims and environmental concerns can be dealt with effectively within the ATS structure.
After the failure of the Convention on Mineral Resource exploitation, a new protocol was negotiated in Madrid, which proposed that instead of regulating mineral resources in the Antarctic, the ATS would outright place a moratorium of 50 years on all mineral resource exploration and exploitation. This ban could be overturned or modified if the ATS members felt the need to do so. Such a move placed the issue of mineral resource exploitation on the back burner, thereby allowing a breather to the member states. Such an action of postponement of the issue is generic to the ATS, whose survival is dependent on the avoidance of all sources of conflict.
2. Chin-India perspective of the ATS and the region.
Antarctic problems are going to assume greater significance in the Indian Ocean region with the focusing of world opinion in the UN, NAM and other fora. Mineral and living resources on the Antarctic are attracting the attention of the world as probably being the last great land rush on our planet. Until the 1980’s the ATS was largely insulated from the world and was quietly managed by the 14 Antarctic Treaty members. As argued above this was a compromise system among the various claimants and led to a creation of a two tier system. A nation could get a consultative status if it had undertaken substantive scientific research on the continent. Due to the remoteness and hostile climate technological sophistry and significant financial expenditure became de facto requirements, prohibiting a number of countries from participating in the ATS. This exclusivity drew increasing amounts of criticism from the developing world, who demanded internationalization of the continent on the principle of ‘common heritage of mankind’. Increasing demand in the 1980’s caused concern to the ATS member states.
It was in such an atmosphere that the first Indian scientific expedition reached the Antarctic in 1981-82. While the Indian government maintained that its expedition was purely scientific, the members of the ATS grew apprehensive. Indian observers themselves believed that India would challenge the dominance of Antarctic by a few nations and take up the cause of internationalizing the continent according to principles of ‘common heritage of mankind’. There was therefore wide spread disbelief in India itself when it was immediately granted consultative status .
The treaty powers were keen to deflect criticism of the treaty and expand the participation to include at least those countries that could not be excluded for too long. Thus both Brazil and India were granted consultative status followed by China. India and China by joining the ATS have placed themselves in a delicate situation with regard to their claims to be representatives of the Third World. This is especially true for India, who leads regional and multi-lateral third world agencies such as NAM and SAARC as well as the BRIC nations and other coalitions.
However looking at the general behavior of India and China in the ATS and their respective agencies as well as the UN, it seems that they are both pursuing to an extent identical policies of not actively supporting oppositions to the ATS while at the same time attempting to maintain their moral high ground as representatives of the Third World.
For example the PRC supports the existing Treaty system because over the years the Treaty has demonstrated “the validity of its purpose and principles,” as noted by a PRC representative to the UN. A similar sentiment is echoed by the Indian side as evidenced from the continued and active participation in the treaty system. India is in the process of setting up its second research system while China is establishing its third station .
The secrecy of the minerals regime negotiations and the scarce publicity concerning Indian and Chinese Antarctic activities makes a reliable examination of their respective positions difficult. However taking into account the context of their accession to the Treaty and subsequent practices some assumptions might be made about the merits and demerits of the ATS to the interests of India and China.
Merits of the ATS:
That it creates a common territory, disallowing any territorial claims to be made or built upon; while at the same time restricting these benefits to an exclusive club of members. It also creates a free zone for the enjoyment of any future benefits gained through negotiations or conciliation.
As for being a member, one requires substantial investment, a high entry barrier is automatically created, whereby only nations having considerable economic, technological prowess become members. This achieves two purposes:
• Creates an exclusive club, while maintaining the façade of equality of access.
• Due to the high entry barrier, only strong political, economic powers would become members, thus augmenting the capacity of the ATS to resist third world challenges.
Creates an arena for the participation of non-claimant states like India-China on par with original claimant states like Britain, Australia. Passing resolutions on the basis of consensus is one example of this.
By imposing and maintaining a status quo, provides crucial time to India and China, to increase participation in Antarctic and create basis for an eventual territorial claim.
Demerits:
The inherent inequality of Article IV, whereby territorial claims are frozen not destroyed. Also though territorial claims cannot be utilized neither can they be prejudiced.
China and India might be placed in a disadvantageous situation for, due to the exclusiveness of the ATS, they might have to primarily deal with claimant states or their allies.
Problem of addressing the dilemma of being leaders of third world nation conglomerates, while seeking to strengthen claim in an exclusive club.
Accordingly we can categorise Antarctic interests of India and China as follows:
Political.
Resource Considerations.
Environmental, Scientific Interests.
Within these interests would be included areas such as ensuring access to all of Antarctica, especially in areas where mineral resources might be present. Attempt to create a basis of territorial claims, while preventing the manifestation of existing ones. Prevent the continent from becoming a center of discord and ensuring its use for peaceful purposes. Continue the present structure for scientific research and increase co-operation in data sharing. Safeguard the role of Antarctic in maintaining global environment
Above discussions show that the ATS is at least partially an exclusive club, which has an impressive record of maintaining and governing the Antarctic for over 40 years now. India and China have been included within this organization more to buy their acquiescence rather than any recognised claim. Existence of such claim and ability to act upon it has been the primary consideration for membership when the ATS was founded. Even today lack of a territorial claim acts as an added disadvantage when negotiating about aspects of the continent. This is especially so when the issue concerns mineral resources and commercial exploitation. Keeping this in mind let us look at the alternatives that are open to India and China. For the purpose of this article whereby possibility of exploitation is a necessary requirement, there are three options:
1. Create and assert a territorial claim in the Antarctic.
2. Support earlier models of treating Antarctic as ‘common heritage of mankind’, or as a world park, or bring it under the auspices of the UN trust administered territories or
3. Look for solutions within the existing framework of ATS.
The first option of asserting territorial claims is the most aggressive and one which can if successfully concluded promises to give substantial and immediate benefits. However for it to be successful there has to be taken into consideration:
1. Competing territorial claims which have been existing before the claims of India-China.
2. Lack of existence of any territorial continuity, early expedition or even of any continental shelf or of pre-existing rights passed on to the present states. Even the sector principle is not of much use as it does not enjoy a wide recognition in international law.
3. Opposition of the other nations besides the Treaty members, to such an action.
Such an action by India and china would open veritably the Pandora’s Box as all competing claims that have been exiting before the assertion by India-China would be brought forth. The status quo would be destroyed and we would be back in the 1950’s when tensions’ regarding Antarctic territories was leading to war. Most importantly such an action would require that both the nation’s first withdraw from the ATS, this would not only leave them without a support base but would also be of limited benefit, as under international law, discovery without effective occupation at beast creates inchoate land and would be ineffective when other claimants have already exercised their claims to sovereignty. Though exceptions to this rule exist in international law in the cases of “the Clipperton Island Award ; The Palmas Island Case ; the Legal status of the coast of Eastern Greenland ”. These cases stand for the proposition that while sovereignty is generally exercised over people, there is no valid reason for requiring actual settlement and possession of territory in uninhabited areas. Rather, effective administration is all that is reasonably necessary to establish occupation. Assuming a state that effectively administers a territory, establishes legal order, and protection over it, physical possession of every portion of that territory should not be required. Such a theory would give a legal basis for the assertion of territorial claim by India-China.
However the negative results of such a claim in the present situation are far too many. As one U.S. Government analysis stated:
“A U.S. claim could take one of several forms. Delineation of a U.S. claim to full sovereignty, even if we could identify our major interests at this time, might prove to be an abortive effort because of the lack of internationally agreed rules for acquiring sovereignty in the Antarctic. It would also be a sharp break with our past policy of refusing to recognize claims to sovereignty when not accompanied by occupation. More important, the principles underlying any selection of the precise areas of superior U.S. 'rights' would be applied elsewhere as a yardstick of comparison by other powers, possibly to our disadvantage. Inferior U.S. 'rights' outside the area of a 'sovereignty' claim would be impaired, at least by implication, even though they might eventually acquire significance as the result of further U.S. activities, or through default by other powers.”
This same analysis could be extrapolated to the situation if India or China made territorial claims. Thus, assertion of a territorial claim in Antarctica by India and china would not be a cost-effective method to protect their interests on the continent. The historical inaction in this area has created, if not by some theory of equitable estoppel then by passage of time, a situation in which India and china have put themselves in a zero sum game. They cannot therefore in the present scenario assert a territorial claim without jeopardizing overall national interests
With regard to the second option of converting the present Antarctic governance system to either a nature park or into a UN trust administered territory, these were the claims of India and to an extent China before they became consultative members of the ATS. Such a move would be very useful as it would provide an equitable representation to all the states of the world, however if there are pressures on world resources be they food or mineral, such a nature park becomes unrealistic. Also the relative control that India or China exercised in the ATS would be drastically reduced as other non-members states demand and exercise their own powers. Though representational problems would be solved, negotiations would be so much more problematic. There are however benefits of such a conversion, as it would destroy all territorial claims of all parties and ensure a more equitable distribution of resources and attendant benefits. Consequently such a move would never be supported by any of the original seven claimant nations.
We thus see that continuation of the Antarctic Treaty regime, with appropriate modifications, is the best option that India and china have to protect their extensive interests in Antarctica now and in the future. Though it is true that the overall problem of mineral resource exploitation exits, looking at how the treaty has dealt with other issues like environmental and living resources, proves the usefulness of staying with a proven governance structure. The "good faith" administration by the Antarctic Treaty regime has to be acknowledged; and its present success cannot be denied. The consultative parties have vested interests in the maintenance of the Treaty regime, but political reality dictates that these interests will not be exercised exclusively for the benefit of Treaty members. The Antarctic Treaty system has been described as:
"a pragmatic formulation deprived of ideological connotations of any sort which enables it to sustain a continued process of compromise and adaption to the changing realities relevant to the Antarctic."
This lack of an ideological bias and focus on avoiding conflicts between the super-power members has managed the show till the present. So long as the will to co-operate and negotiate exists among the members, non-claimant states like India and china should not find it impossible to get around their claim related disadvantage to secure a reasonable share of Antarctic resources. This essay would have concluded differently if the nations were some other third world nations, but looking at the growth of India and china in the recent past their value to the ATS is only growing to increase and their interests cannot be ignored. Conversely unless India and china build a sustained campaign and create wide support base, they cannot individually with their present strengths build an alternative to the ATS.
The ATS is therefore one of the only practical organizations for these Asian nations in the present times.
The previous paper dealt with the defence procurement procedure 2008 vintage of India. This was a paper written early this year, primarily because i was bored. Will be putting up another article which talks about the little known and seldom discussed topic of India's engagement with the land of Penguins, also known as 'The Antarctic'.
The Acquisition Process for Buy and Buy and Make 10
The Acquisition process for procurement under Make11
Procedure for implementing offsets provisions12
Standard Clauses13
List of Abbreviations:
AAP- Annual Acquisition Plan
AON- Acceptance of Necessity
CNC- Contract Negotiation Committee
CFA- Competent Financial Authority
DPSU- Defence Public Sector Unit
DPP- Defence Procurement Procedure
DRDO Defence Research and Development Organisation
DOFA- Defence Offset Facilitation Agency
DIPP- Department of Industrial Policy and Promotion
DAC- Defence Acquisition Council
FET- Field Evaluation Trials
IDS- Integrated Defence Staff
IPMT- Independent Project Management Team
LTIPP- Long term Integrated Perspective Plan
MMRCA- Medium Multi-Role Combat Aircraft
MSME- Micro, SmallandMediumEnterprises
OEM- Original Equipment Manufacturer
OFB- Ordnance Factory Board
QR- Qualitative Requirements
RFP- Request for Proposal
RuR- Raksha Udyog Ratnas
SCAP- Service Capital Acquisition Plan
SQR- Service Qualitative Requirements
SHQ- the Service Head Quarter
TEC- Technical Evaluation Committee
TOC- Technical Oversight Committee
Introduction to Indian Defence Industry
India is currently the darling of the global defence industry. India is the 10th largest defence spender and the country whose defence spending is rising the fastest in the world. A conservative estimate pegs India’s defence spending by 2022 to be around 100 billion dollars[1]. The string of high value deals concluded or announced in the recent years including the Scorpene submarines, the T-90 tank program, advanced frigates, Air-Craft carriers, plethora of small arm deals and the 10 billion dollars’ worth 126 aircraft MMRCA trials currently underway to an extent underscore the Indian arrival on the global arms arena.
India today has the wherewithal, economic power and diplomatic reach to have access to state of the art strategic military technologies that a decade ago would have been unimaginable[2]. However no nation can create a viable deterrent and a strategic power projection when it is dependent on imports. More importantly depending on foreign suppliers ensures the non-availability of next generation technology. This makes sense as no army will sell us its crown jewels.
India currently imports 70% of its capital requirements and 30 % is domestically procured.[3] It is the stated aim of the Government of India (GOI) to reverse this ration from 70-30 in favour of imports to 30-70 in favour of domestic manufacture.
One of the methods that is devised by the Ministry of Defence (MOD) is the use of offsets. Under current rules (which will be elaborated later) 30% of every contract above 300 crores will have to be co-produced with or purchased from Indian manufacturers .If we take the above quoted figure of 100 billion dollars’ to be a reasonable figure then domestic manufacturers will get orders worth 21 billion dollars[4] or 90,300 crores.[5]
The idea that the GOI is pursuing is to build a domestic defence industry (DI) such that India produces 70% of its military requirement effectively reversing the present trend.
If we look overseas the global arms industry can be categorised into 4 types of DI complex:
China- a strong state control and monopoly is the main aspect of the chinese arms industry. However with the industrial revolution that the country has undergone private defence industry has been allowed into the realm of defence manufacturing even if to only use economics of scale. However the private industry under tight government control will play a crucial role in future years.
EU-Russian federation- here we have regions that have a very developed and mature defence industrial setup, courtesy the cold war arms race and the world wars. However with the end of cold war and the rise of America and the re-entry of the traditional Asian giants the arms industry in EU-Russia went through a phase of consolidation. EADS[6] in EU and the United Aircraft Corporation (UAC) of Russia are examples. This was done to reduce the duplication of efforts and resources, and eliminate competition for orders. These nations however retain an independent and robust private sector in the defence industry at every level.
US-Japan- the home of capitalism has fittingly spawned a large private defence complex which is involved in the creation of new products right from inception to delivery. Boeing and Lockheed Martin are one of the more common names. The Japanese defence industry also has heavy involvement of the private industry with a lion’s share of the defence contracts going to large consortiums like Mitsubishi and others.
Israel-Korea- due to their close involvement with USA they depended on foreign vendors. However in the interest of national security these countries setup programs to identify niches where domestic capability could be built up. Thus though Israel remains dependent on USA for weapon technology, it has created several industries in the private-public domain that dominate their respective fields in the international market. Small arms, Tanks, anti-missile systems, avionics are some areas that India has sourced from Israel recently. South Korea has also followed a similar program.
The proposed Indian defence industry might fall somewhere between china and Israel-Korea.
To establish a vibrant private-public defence industry we require technology, logistics and the creation of a manufacturing base dedicated for defence production. The huge modernisation program is one of our greatest assets in our endeavour.
The things working against us are the hold of Defence PSU (DPSUs) on production, a secretive north block and an under developed private participation especially in the small and medium enterprises.
As recent as May 2001 the Industrial Policy Resolution, 1948 restricted entry of the private sector. The new policy opened the gates for private participation and allowed 26% FDI in Indian domestic private manufacturers[7]. As mentioned above Indian manufacturers (Pvt + Public) manufacture 30% of the Indian requirement. Out of this only 9% is directly attributable to the Private sector. Out of the DPSUs share around 25% is outsourced to other manufacturers. Out of this only 25% is claimed by the crucial MSMEs.[8]
The Defence Procurement Procedure:
Initiated in 2002 this was a process at consolidating the procurement procedure of the forces and to bring in transparency. Outlines the process employed by the armed forces for procurement right from issue of Qualitative Requirements (QRs), Request for Proposals (RFPs) to method of discharge of Offset obligations and standard contract clauses used.
The current procedure is the Defence Procurement Procedure 2008 as updated in 2009.
The defence procurement procedure was initiated in 2002-03 in the aftermath of the Kargil conflict. It built up on the 2001 opening of the defence sector to the private industry. The basic idea was to formalise the procedure utilised by the MOD for procurement. The Defence Procurement Procedure (DPP) was revised in 2006 where the concept of offsets was introduced for the first time. It was also mentioned that efforts would be made to treat the DPSUs and private companies on par for government contracts and funding. It was also decided that the DPP would be revised every two years. Accordingly a new DPP was introduced in 2008, with wide ranging modifications. Offset obligations were more clearly enunciated. Percentages were increased and waived in specific categories. For example: it was specified that if indigenous content was to exceed 50% then offset obligations would be waived. Also on a per case basis and depending on the domestic industries capacity offset obligations could be increased beyond the 30% mark. Further amendments were brought in 2009 which benefitted the Indian manufacturers.
Defence offsets:
Defence offsets are one of the core methods instituted by GOI to achieve its goals in defence manufacturing. Offsets are a commonly used mechanism worldwide. The stated aim is to remedy the imbalances in any domestic sector or region within the implementing country. Can be used to set of trade imbalances, or rejuvenate an industry or provide protection for a sector or region.
It was first used by the European nations when they were being armed by the United States in preparation for the cold war.
Offsets are industrial compensation practices that a foreign vendor has to enter into as a condition of purchase in either government-to-government or commercial sales of defence articles and/or defence services[9]. In defence trade, such industrial compensation can include mandatory co-production, licensed production, subcontractor production, technology transfer, and foreign investment.[10]
Offsets can be of two types- Direct and Indirect:
Direct offsets require the supplier to purchase goods or make investments which are related to the sector for the primary transaction, encouraging the growth of domestic industry in that specific sector.[11]
Indirect offsets oblige the supplier to purchase goods or make investments from the purchasing country which may be in specified sectors or at the discretion of the vendor[12]. The purpose here is to stimulate economic growth in the vendor country more generally.
In India current thresholds for offsets is set at INR 3 billion and generally the offset obligation is at 30% of the contract value.
There are 6 methods of procurement according to the present model.
1.Buy procedure:
Buy procedure means an outright purchase of equipment. Based on the source of procurement the category would be classified as ‘Buy Indian’ and ‘Buy Global’. Buy Indian would mean Indian vendors only and must have minimum 30% domestic content if systems are being integrated by an Indian vendor. ‘Buy Global’ would mean foreign and Indian vendors.
2.Buy and Make Procedure:
This is divided into Buy and Make Global and the newly introduced Buy and Make Indian.
Buy and Make Global means acquisition –purchases from a foreign vendor followed by licensed production-indigenous manufacture in the country.
Buy and Make Indian- means purchase from an Indian vendor including an Indian company forming a joint venture establishing a production arrangement with an Original Equipment Manufacturer (OEM) followed by licensed production-indigenous manufacture in India. This process should have a minimum 50% indigenous content on cost basis. If this is adhered to then offset conditions are waived. An important feature is that the RFP will be issued to the Indian manufacturer and not to the foreign OEM.
3.Make Procedure: is for the indigenous creation of cutting edge technology through domestic public-private participation.
4.Fast Track Procedure: to deal with a crisis or emergency.
5.The Procedure for Naval ships and building is different than the above procedures. This is due to the complexity of naval construction wherein it is possible that all the above procedures in various forms would have to be used. A separate structure is therefore devised to deal with naval capital acquisition.
6.Procurement of medical supplies and technology is also separately dealt. Medical supply contracts do not have offset requirements.
We will be only dealing with the first three procedures i.e. ‘Buy, Buy and Make and Make’.
Offset obligations how discharged:
1.Direct purchase:
Direct purchase of products/services provided by the Indian Defence Industries which includes procurement from DPSUs, Ordnance Factory Boards OFBs, and Private defence industry.
2.Direct FDI:
Direct FDI in Indian Defence industry for industrial infrastructure for services, co-development, Joint Ventures and co-production of defence products and components. Another method is through direct FDI in Indian organisations involved in Research and Development as certified by the Defence Offsets Facilitation Agency (DOFA).
3.Offset Credits:
This is a newly introduced concept. It is essentially credit based on creation of offset programmes created in anticipation of a future contract within two financial years before the issue of RFPs.
Offset banking procedure was first introduced in DPP 2008. It essentially allows vendors to bank offset credits for offset transaction that are not related to any on-going obligation.
To avail of this scheme a proposal has to be submitted in the appropriate format to the Joint Secretary MOD for approval. The discharge obligations provided in DPP 2008 have to be adhered to in the proposal. On the proposal being approved by the MOD a unique Project Identification Number will be issued to the vendor, under which the credits can be banked. This is like an account number in a bank. The banked credits will have validity of two years after the conclusion of the project where they were initially generated.
The MOD has identified broad categories including spares for offset programmes. It has also recognised critical areas including spares and technology, however no ranking is available.
4.Transfer of Technology:
TOT is under the Buy and Make category i.e. item purchased from outside followed by licensed production in India. There is a differentiation between new transfer TOT and TOT for spares and maintenance.
Whenever TOT is required the MOD specifies in the RFP itself the agencies to whom the technology is to be transferred. Previously only DPSUs were eligible for receiving TOT. However with the introduction of Raksha Udyog Ratnas RuRs approved private manufacturers can also compete for receiving TOT. The RuR recognition process was not completed by the release date of DPP 2008 and hence the reign of DPSUs continues.
In case of spares foreign vendor has to identify and transfer technology for repairs and spares to an Indian entity. The vendor may choose from DPSUs, OFBs, RuRs or any other entity for passing the TOT.
Significantly TOT is currently excluded from offset fulfilment calculations.
Procedure to become an Indian Defence Industry
The defence sector reforms were kick-started by a combined CII+MOD task force which came up with various proposals.The first step was taken by the GOI when the defence sector was opened up in 2001 to the private sector. This was done through Press Note 4 of 2001. Detailed guidelines were issued under Press Note 2 of 2002 for licensed production of arms and ammunition. The Kelkar committee of 2005 came up with some suggestions which were incorporated in future DPPs primary among which was the introduction of Raksha Udyog Ratnas RuRs. Accordingly the Prabir Sengupta committee was entrusted the work of identifying industries that could be given the status of RuRs. The benefit of being a RuR was the equal treatment that would be given to RuR on par with DPSUs and OFBs in bidding for and receiving contracts. Further research conducted by RuRs would be subsidised by the MOD upto 80% of the value. They would also be allowed beneficial import norms. However RuRs have been not notified till date.
The private defence industry can be divided into two categories. One being the licensed private defence player which can be any person so interested; and RuRs who have to be recognised by the government and fulfil such other conditions that the government may notify from time to time. Thus the Indian private defence industry is the overarching category and RuR is a specialised part of the same.
Manufacturers wishing to be recognised as an Indian private defence industry have to obtain license under the Industrial (Development and Regulation) Act, 1951. Schedule I entry 37 deals with the Defence Industry. Industries applying for such a licence will have to approach the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce in consultation with the MOD. Licenses are required for any business involved in the production of arms and ammunition.
Guidelines for RuR selection:
It has been reported in recent news bulletins that MOD has officially scrapped the RuR process. If so then the following process and classification becomes irrelevant.[13]
On application to the Department of Defence (MOD) a committee for selection will be set up by the Department of Defence Production with approval of the Raksha Mantri. This committee will consist of: a technical expert, one financial expert, an independent management expert and a representative from the Integrated Defence Staff (IDS).
The applications have to be decided in a time bound manner, such that applications received by 30th September of this year will have to be decided latest by 31st March of the next. The recommendations of the committee will then be sent to Defence Acquisition Council (DAC) for approval.
Criteria for a RuR industry:
Public limited Indian company registered for 10 years with Foreign Direct Investment (FDI) not exceeding 26%.
Company with capital assets in India not less than 100 crores and turnover not less than 1000 crores for each year going back three years. Group companies will be considered as one entity for this purpose.
Minimum credit rating of CRISIL-A.
Profits for three of the last five years.
Should have a track record in engineering- software engineering is also included within this definition. A trading concern is not included.
Company should have a Research and Development base or should be willing to invest in one.
Company should meet quality and control system standards as laid down.
Company should have either a licence or a letter of intent for production of defence items under the Industrial (Development and Regulation) Act, 1951, notified by the government vide notification of 3rd January 2002 or obtain the same within 6 months.
These are to be reviewed every 3 years.
Administrative structure of Defence Procurement:
Ministry of Defence:
The ministry of defence can be divided into 4 areas.
Department of Defence: Is the most important sector for us as the DOD along with the Integrated Defence Staff (IDS) is responsible for preparation of both the short term and long term perspective planning documents for the requirement of the armed forces among other functions. It is also responsible for the Defence Budget, establishment matters, defence policy, matters relating to Parliament, defence co-operation with foreign countries and co-ordination of all defence related activities.[14]
Department of Defence Production: It is responsible for the control and management of OFBs and DPSUs.[15]
Department of Defence Research and Development: Responsible for DRDO and deals with the technology and scientific aspects of military technology.[16]
Department of Ex-Servicemen Welfare: Responsible for ex-servicemen, pensions, and resettlement and administrative work relating to the three services.[17]
Defence Acquisition Council was constituted in August, 2001. DAC is the highest body headed by the Raksha Mantri (Defence Minister) which oversees the entire acquisition process for the Armed Forces. It approves the long-term perspective plans and accords the acceptance of necessity in each case of capital acquisition. This process of according the Acceptance of Necessity (AON) involves categorization of items into “Buy”, “Buy & Make” and “Make”. This process of approving the categorization is the starting point of the acquisition process. Decisions that follow from here are implemented under the overall supervision of DAC by the Defence Procurement Board, Defence Production Board and the Defence R&D Board.
This the body which oversees all activities related to procurement on capital account in the Department of Defence flowing out of the “Buy” and “Buy & Make” decisions of the DAC. It functions mainly as a coordinating, supervising and monitoring body for the procurement process undertaken by the Acquisition Wing of the Department of Defence for the “Buy” and “Buy & Make” categories. In this process, it has the responsibility of approving the Annual Acquisitions Plans for the three Services. It essentially accords approvals to all major projects which are beyond the powers of the Raksha Mantri and require the approval of CCS or the Minister of Defence and Minister of Finance. The Defence Secretary is the Chairman of this Board. Its Members include representatives from the various Departments in the Ministry of Defence, the three Wings of the Armed Forces, Chief of Integrated Defence Staff and the Member Secretary is the Financial Advisor in the Acquisition Wing of the Department of Defence.
This a body, which is tasked to oversee indigenous manufacture and it derives its powers from the direction given by the DAC in respect of the categories of “Make” and “Buy & Make”. It is expected to closely monitor the “make” projects, advice the DAC on policy issues regarding licensed production, ToT and new development projects. Its membership is very similar to the Defence Procurement Board with the exception that the Chairman OFB and some CMDs of the DPSUs are also included. The Member Secretary of the Defence Production Board is the Director, Planning & Coordination, in the Department of Defence Production.
The Defence R&D Board has been constituted essentially to monitor and report on indigenous R&D proposals flowing out of the “Buy & make” and “Make” decisions of the DAC. It is a body that is expected to work closely with the Defence Production Board and to ensure that the transfer of technology from the laboratory to the factory is done in the most effective manner. The Chairman of this Board is the Scientific Advisor to RM and Secretary, R&D. Its Members are similar to the other two Boards with the exception that certain distinguished scientists have been included. The Member Secretary of this Board is the Chief Coordinator, R&D, in the DRDO Headquarters.
The MOD has an acquisition wing which is its secretariat providing necessary information to the Defence Procurement Board. This wing is headed by an officer of the rank of Special Secretary or Addl. Secretary and is assisted by Financial Adviser (Acquisition) in the rank of Addl. Secretary and three Acquisition Managers, three Technical Managers and three Financial Managers, dealing with Land systems, Air and Maritime & Systems respectively, all in the rank of Joint Secretary.
The present procurement procedure employed by the GOI can be divided into two practices: One which deals with procurement through ‘Buy and Buy and Make’ procedures and the second which deals with procurement through ‘Make Procedure’. The acquisition wing deals with procurement through ‘Buy and Buy and Make’.
Linkage to Acquisition Plans:
The Long term Integrated Perspective Plan (LTIPP) gives an idea about the armed force requirements for a period of 15 years and is based on Defence Planning guidelines which are drafted by the Head Quarters Integrated Defence Staff (HQ IDS) along with inputs from the respective service HQs.
The LTIPP is further broken down into the ‘Service Capital Acquisition Plan’ (SCAP) and the ‘Annual Acquisition Plan’ (AAP).
The SCAP has duration of 5 years and is formulated by the IDS. The planning process is under the overall guidance of the Defence Acquisition Council (DAC). Its decisions are approved by the Raksha Mantri and flows from the defence Procurement Board.
The AAP is a subset of SCAP. LTIPP and SCAP are approved by DAC but AAPs are approved by the Defence Procurement Board.
The Acquisition Process for Buy and Buy and Make
1.Drafting of Service Qualitative Requirements (SQRs):
All capital acquisition plans to be based on SQRs. These are drafted by the user directorate of the appropriate service arm.
Draft SQR goes to IDS, DRDO, Research and Development Board, Staff Equipment Policy Committee (a common committee for approving SQRs).
Request for Information can be issued to vendors. This is used as a tool to inform the industry so that they can plan ahead.
Sometimes two or more services might require the same product or service. In such a situation a common SQR is released by all the services which have a need of the product-service. This is called a Joint Service Quality Requirements (JSQR).
2.Acceptance of Necessity (AON):
AON is in the nature of a go forward given by the MOD and appropriate authority for starting the procurement procedure.
In order to seek AON the Service Head Quarter (SHQ) would prepare a statement of case and forward to Department of Defence Production, DRDO, MOD (Finance) and the administrative branch of MOD.
Quantity vetting is done by the administrative and finance branch of MOD.
Statement of case along with comments are to be forwarded to HQ IDS and then placed before the categorisation committee which will if amount is within delegated powers allow immediately and if above 100 crores forward to DAC for final approval[22]. If TOT is involved, the production agency has to be approved by DAC.
3.Solicitation of Offers: involves a single stage two bid system, wherein the technical and commercial offers are submitted together but in two separate sealed envelopes. This is to prevent a vendor from increasing his commercial offer if a single vendor situation arises. This is the stage at which Request for Proposals are sent out. RFPs are self-contained documents; a standardised RFP has been provided under DPP 2008. It can broadly be divided into 4 parts.
a.Elaborates general requirement of the equipment.
b.Incorporates the SQRs describing the technical parameters.
c.Commercial aspects of procurement.
d.Defines criteria for evaluation and acceptance of technical and commercial contents.
4.Technical Evaluation Committee (TEC): the TEC conducts trials on a no cost no commitment basis especially if a new technology is being procured.
The TEC is constituted by the SHQ for technical bids received under RFPs issued. If TOT involved TEC will include among others DRDO.
Field Evaluation Trials (FET) is conducted by the user service on the basis of trial methodology given in the RFP.
Vendors have to send units to India.
If the acquisition is in respect of ships, submarines, then no FET as prototypes are obviously not available.
FET has to be completed before cost negotiations can be initiated.
Based on FET SHQ will carry out staff evaluation which gives out the compliance of the demonstrated equipment vis-a-vis SQRs.
This evaluation will be approved by SHQ and sent to the Acquisition wing.
If product is not accepted then technical manager has to inform the vendor the reasons for rejection.
If JV involved along with TOT then the JV has to prove that it has absorbed the technology specified under the RFP.
In certain situations a Technical Oversight Committee (TOC) will be appointed to oversee the Technical Evaluation process. The Defence Secretary will constitute the TOC for select projects over 300 crores. The primary mandate of TOC is to ensure that technical evaluation trials are conducted properly. The report of TOC has to be submitted within 30 days. The TOC will consist of an officer from a DPSU which is not involved in the contract, a DRDO scientist and one service officer.
5.Contract Negotiation Committee (CNC): here starts the price negotiation and commercial aspects of the contract.
Process starts with preparation of compliance statement incorporating commercial offers in RFP.
CNC would form a comparative statement of tenders with a view to evaluate the technically acceptable offers and determine the lowest acceptable offer (L1 vendor).
6.Approval of Competent Financial Authority (CFA):
CNC will document the selection of vendors using a formal written recommendation report addressed to the select approval authority.
This report processed by the acquisition manager and sent to the Competent Financial Authority for approval.
Consequent to approval by the Competent Financial Authority contract is signed by concerned Acquisition Manager in the Acquisition Wing.
This process and all the procedures are modified or can be ignored when GOI enters into an Inter-Government Agreement, whereby procurement is at the government levels.
The Acquisition process for Procurement under Make:
The Make process falls under the following categories:
1.Strategic, complex and security sensitive systems- undertaken by DRDO and managed by Defence Research and Development Board.
2.Low Technology-Mature Systems- categorised as Buy Indian with 50% domestic content.
3.High technology complex systems- categorised as ‘Make’ undertaken by DPSUs, RuRs, OFBs, consortiums.
Upgrades are included within this process.
The process:
HQIDS will formulate the Defence Capability Plan with the LTIPP and order the feasibility of the project.
HQIDS is responsible for getting projects categorised as Make and get AON from DAC.
After DAC approval Acquisition wing will process the project. This includes an Independent Project Management Team (IPMT) which would issue a Project Definition Document and an Expression of Interest (EOI). The EOI is for shortlisting agencies and obtaining CFA approval.
Monitoring the development of project till prototype stage will be by the IPMT along with the Defence Production Board.
Trials and evaluation will be under the auspices of the respective services.
After a favourable evaluation report, commercial negotiations will commence with L1 vendor for limited series production.
Procedure for implementing Offsets Provisions
Offset provisions to apply for Buy Global and Buy and Make with TOT. Uniform offset of 30% of cost of acquisition in case of Buy Global contract and 30% of foreign exchange component in case of a Buy and Make with TOT contract.
Offering more offsets than is required under the contract will bestow no benefit on the foreign OEM.
Defence Offset Facilitation Agency (DOFA) plays an important part in offset procedures. DOFA is a single window agency for:
1.Facilitation and implementation of Defence Offsets.
2.Assisting vendors in interfacing with Indian Defence Industry.
3.Assisting in vetting Offset proposals.
4.Interacting with IDS and SHQ.
5.Co-ordination with other areas requiring offsets and promoting exports of Indian defence industry.
At the AON stage the Services Capital Acquisition Plan Categorization Higher Committee (SCAPCHC) will consider and where cost of contract is above 300 crores 30% offset obligation will be applied. Further depending on the capacity of the Indian domestic industry the offset percentage can be increased. Offset obligations are to be part of RFP and these obligations are binding.
When a vendor is replying to a RFP offset proposals are to be in the form of an undertaking only. No details are to be provided. After initial technical and commercial offers have been submitted then details of how offset obligations fulfilled are to be provided.
The Technical evaluation of offset proposals will be by the technical manager of the Acquisition Wing with the approval of the Director General of the Acquisition. The vendor is free to select his Indian partner. The commercial offset offer will be opened by CNC along with the main bid. In this CNC will be assisted by DOFA.
Once the proposal has been accepted and contract awarded, quarterly reports are to be submitted detailing the fulfilment of offsets.
Standard Clauses:
Arbitration: It is provided in the standard clauses that any disputes will be settled by bilateral discussions. If any disputes are not settled amicable then within 60 days it has to be referred to the Arbitration Tribunal comprising of 3 members. The seat of arbitration will be New Delhi or any other city in India as decided by the parties. The applicable act will be Arbitration and Conciliation Act, 1996. Award of the arbitral tribunal will be enforceable in Indian courts. Decisions are to be by majority of the panel.
Force Majeure: the standard force majeure is provided with the period to be decided on a case to case basis.
Undue Influence: the seller has to give an undertaking that he has not provided any service, or bought or gifted anything to any person in service of buyer for procuring the contracts. Any breach of this undertaking as provided under Indian Penal Code (IPC) chapter IX or the Prevention of Corruption Act, 1947 or any other act will enable the buyer to cancel the contract and recover damages.
The decision of the buyer or nominee that a breach has occurred is final and binding on seller.
For schemes over 100 crores an Integrity Pact has to be signed by all the parties to the contract. Here the buyer promises that he will not take bribes while the seller promises that he will not give bribes.
Use of Agents-Agency and Commission: seller has to confirm that he is the OEM and has not used anyone to facilitate or influence GOI. In case the seller has used people to influence members of GOI, remedies include but are not limited to refund of amount, possibility of contract cancellation and being barred from future contracts for 5 years.
The buyer can access the books of account of seller for determining is seller has employed agents to influence GOI. Further a Pre-Contract integrity pact might also be entered into by the parties.
Demands for future reform in Offset procedures:
Use of multipliers: multipliers are a method through which a ranking of technology procured can be achieved. Procurement of a mature technology from a foreign OEM is not the same as acquiring a cutting edge technology. However theoretically offset obligations for both are the same and the value of each offset credit in both the situation is equal, though the cutting edge technology is of more importance for GOI than the mature technology. With the use of multipliers cutting edge technology offsets will have more value attached such that one offset of such a technology will be worth two of a mature technology import.
Offset Trading: a controversial proposal where vendors will be allowed to trade their offset credits for consideration to other vendors.
Creation of a National Offset Policy with a hierarchy of requirements and a clear roadmap laid out for the duration of LTIPP.
[1] http://www.livemint.com/2009/06/22214905/MiG23s-become-the-new-lab-rat.html. Last visited 0/02/2010.
[4] http://www.business-standard.com/india/news/india%60s-offset-advantage-high-tech-transfers/280636/. Last visited on 10/02/2010.
[5]70% is procured from foreign vendors. 70% of 100 billion is 70 billion. 30% of 70 billion is 21 billion. This is a preliminary calculation. There are a lot of factors which are not being included, which might lead to the figure being revised.
[6] European Aeronautic Defence and Space Company N.V.
[7] http://www.ciidefence.com/defenceindustry.asp?id=1. Last visited 09/02/2010.
