Updated: January 13, 2010 16:19 IST

India Inc seeks greater role in defence supplies

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A file photo of Defence Minister A.K. Antony. Photo: P.V. Sivakumar.
The HIndu
A file photo of Defence Minister A.K. Antony. Photo: P.V. Sivakumar.

The government on Wednesday released a report that says industry wanted India’s defence order book to be more visible, and that more tenders be issued for domestic companies to bid for military equipment supply.

“Feedback from industry reveals that it is seeking clearer definition and enhanced visibility to be given to the government’s order book,” said the report released by Defence Minister A.K. Antony.

Titled “Opportunities in the Indian Defence Sector —— An Overview”, it said the move would help domestic companies to align business planning with the country’s defence needs, and provide the government “the benefit of greater security of supply”.

India, dependent on imports for 70 percent of its defence equipment requirements, is the world’s 10th largest spender in this area, with its payout growing at 9.3 percent annually.

“Companies believe there should be greater participation by industry during the formulation of the RFPs (Request for Proposals),” said the report prepared by the Confederation of Indian Industry (CII) and consultancy KPMG.

“There is common consent that the RFI (Request for Information) process is not being used to provide sufficient rationalisation of requirements.”

The report also said that in “single vendor situations”, the government should act with discretion and avoid competition.

“Industry also felt that on certain occasions, avoidable expenses are incurred through the use of competition where a particular product or technology was clearly preferred,” it said.

“There should be procurement procedures which allow for and dictate the circumstances wherein a single source procurement can be made.”

India has doubled its direct capital acquisition budget from Rs. 62 billions in 1999-2004 to Rs.137 billions in 2004—2009.

However, industry believes that to avoid underspending of the defence budget, rolling budgets should be introduced.

“A second major source of concern for industry over the procurement process, once commenced, is the lack of predictability and flexibility. A consequence of this is the annual defence underspends.”

In this connection, the report noted that the surrendered amount is relocated to the finance ministry and may not be available for the defence sector the following year.

“Hence, there has been a demand from industry to introduce the concept of rolling budgets, allotting the ‘underspends’ from prior years to the following year’s annual budget in order to ensure that ongoing procurements are not stopped for lack of funds.”

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