Seven shocking truths about how India buys arms

India’s federal auditor, the Comptroller and Auditor General of India (CAG), gave the Modi government a comfortable headline — the final cost of Rafale jets as negotiated by the incumbent government was cheaper than the deal struck by the previous Congress government.

While the report deftly evaded the questions of alleged corruption, it has certainly exposed a set of serious problems in the way India buys its arms and ammunition, no matter which political party is in power.

The issues highlighted by Rajiv Mehrishi, the CAG, not only indicate the room for and possibilities of corruption and kickbacks, it may also compel people to question if the country’s unsuspecting forces are wielding substandard equipment.

Here are some of the shocking truths:

1. Requirements are changed to include or exclude specific vendors

The rules mandate that the Indian Air Force must clearly state its needs in verifiable and measurable terms before inviting bids from suppliers. People do that even before buying phones-- have a clear picture of what features they need and a price range-- before going to a shop or a website to buy a phone. Here, we are speaking about defence equipment.

But, the CAG report noted, the requirements of the Air Force are changed several times. The Air Force diluted its needs in the purchase of Attack Helicopter and the Doppler Weather Radar as no vendor could meet its requirement.

What is worse? The audit noted that in case of acquisition of Apache Attack Helicopters and Chinook Heavy Lift Helicopters, “the Air Staff Qualitiative Requirements (ASQR) were aligned to products of a particular vendor.”

India approved the purchase of Chinook Heavy Lift Helicopters and Apache Attack Helicopters from Boeing in 2015 for $2.5 billion under the Modi government.

Boeing’s Chinook was up against Russian MI-26, which offered nearly double the capacity to transport weapons, supplies and soldiers. Suppose, forces have to be transported to a conflict zone, Chinook would take twice as many trips as the MI-26 would have.

But the Air Force reduced its requirement which allowed for Boeing's bid to be accepted. Essentially, the needs of the Air Force were tweaked to match Boeing’s offering.

2. The decision to pick a certain aircraft, weapon or a vendor over another is often ad hoc

In an ideal situation, the government would have a benchmark price set for a particular purchase, and the bids can be evaluated in relation to the benchmark.

However, in many cases, the government changed the benchmark prices after opening the bids and ended up favouring one vendor over the others.

In some cases like the procurement of Doppler Weather Radars and Apache Attack Helicopters, technical bids were rejected when the vendors failed to meet the parameters. But in other cases that included MMRCA, Heavy Lift Helicopters and C130 J30 aircraft, bids were technically qualified even when they did not meet critical ASQRs based on the assurance given by the respective vendors.

3. A vendor is allowed to make changes even after placing a bid

In the case of the Basic Trainer Aircraft supplied by Pilatus, the Swiss company was allowed to change its offer after the bids were received from all potential vendors. The two other vendors had offered a better price by including certain hardware within their bid that Pilatus hadn’t.

However, instead of accepting one of the other bids, the government decided to seek a clarification from Pilatus and allowed it to make its bid competitive again. The contract was approved by the Cabinet Committee on Security, under the United Progressive Alliance (UPA) government led by the Congress, in May 2012.

4. Vendors can get away giving assurances

What’s more unfair than allowing vendors to change bids after submission? At times when the vendor does not meet the requirements still, the government has taken the supplier’s word for future improvements, while either undermining the needs of the forces, or putting lives at risk.

Both MI-26 and Chinook were cleared based on the presentation/assurance of the vendor to rectify the ASQR non-compliance before delivery.

The government does not even maintain proper records of the field trials of the equipments that were considered, making future reviews of such decisions difficult.

5. India could have bought weapons for cheaper prices but...

Indians buying cars, or even two wheelers, are notorious for being penny wise. They not only consider the mileage but also the cost of maintenance before making their choice.

Similarly, for defence equipment, mid-life upgrades for sustainment of the capabilities, if not for enhancement, should ideally be considered. However, the Indian government is a lot more lax, or selective in enforcing prudence.

Out of eight cases, the government did not consider the costs that may be incurred during the life of the product purchased.

For example, in 2017, the government decided that it cannot continue using Pilatus’ trainer aircraft because the maintenance cost was raised too high. If this had been considered at the time of purchase, some other vendor may beat the Swiss manufacturer.

6. Endless delays

The delay in decisions, signing of the contracts,and eventual procurement by the Indian government can be termed ‘proverbial’. “Against three years envisaged in Defence Procurement Process, four cases took more than three years and seven cases took more than five years to reach the contract conclusion stage. Delays in acquisition was essentially due to a complex and multi-level approval process, where objections could be raised at any stage,” the CAG report said.

And delays cost money.

The contract for Doppler Weather Radar was signed in 2012 and the actual delivery was in 2016.

7. Unforced errors leading to higher cost

India’s bureaucracy has also acted lazy at times. For instance, for all procurements from Russia or CIS countries, India allows for a 5% annual increase in cost, and for European suppliers the cost is allowed to increase by 3.5% every year of delay. The actual increase, going by market rates, would have been less than half.

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