Speaking to the mediapersons after the inauguration of DefExpo here on Thursday, the Indian Defence Minister AK Antony said “we have spent 92% of our Capital Budget by January 31, 2014. A number of new procurements are in the pipeline which would take place in the next financial year which begins from April, 2014.”

As polls are ahead in the country and a new government is likely to be in place by May, the incumbant Government can only afford to table a 4-month “vote-on-account” Budget in the current session of Parliament. It is interesting to see how much allocation would be made for capital expenditure of Defence Ministry in the “vote-on-account” Budget and how much allocation the new Government will make for capital expenditure of Defence Ministry when it comes to power in May. Thus, Antony has thrown a challenge for the future.

Defending the programme of modernisation of Armed Forces in his tenure, the Indian Defence Minister said “the process is on its path” despite certain delays.

“Our action against malpractices might have created some delays in procurement, but has helped to streamline the process and given signal to the industry in India and abroad that everyone will get an opportunity if their products are good and prices are low,” he said.

He claimed that this situation encouraged the procress of indigenisation in production and procurement. At present the ratio defence product indigenisation and imports is 30:70. As the trend has set in substantial indigenisation within the next 10 years and the country would be able to export defence products, he said.

Saying that there was “no slacking” in modernisation programme, Antony said “we will not compromise on transpareny’.

He claimed : “our system has cleaned up to large extent. In defence procurement no political decision is taken. It is on merit. Whenever there is a complain we are acting.”

However, Antony admitted diversion of Rs 7,900 crore from capital expenditure to revenue expenditure to meet salary expenses. But he denied that that there was a cut in the overall Defence Budget. Every year the allocation to Defence Budget has seen an increase. The problem was due to “unforeseen increase in revenue expenditure.”

He said that there was no delay in purchase of medium multi role combat aircraft (MMRCA). Negotiations are on for calculating the “life cycle cost” of MMRCA. Thereafter the matter will be place before the Cabinet Committee on Security (CCS) for clearance. French firm Dassault Aviation bagged in 2012 the $10 billion deal for purchase of 126 Rafale medium multi-role combat aircraft (MMRCA).

On the controversial AgustaWestland chopper deal, the Minister refused to comment. “I cannot comment unless the inquiry by the CBI take a final shape,” he said and added that hearing in an Italian court is taking place regularly on this issue.

Antony admitted that Artillery modernisation has “not yet been fulfilled.” But compared to past 10 years the Armed Forces are better off.

He said that considering the increasing role of the Armed Forces, there should be more allocations in the Budget for more platforms, training and welfare measures. “The prioritisation of needs should come from military leadership,” he said.

He claimed that over the years the assests of Indian navy have increased substantially. Indian Navy is one of the modern navies of the world.
On the number of accidents in the Indian Navy over the past few months, the Minister said : “for every accident we set up a probe panel and intend to take corrective action.”

He said that the Government also cares for the welfare of ex-servicemen. “Over 20 years ago the Supreme Court had directed setting up of a tribunal. We took the decision after consulting the Armed Forces in the interests of ex-servicemen.

Speaking in a seminar at DefExpo, the Secretary, Defence Production, GC Pati said that in 2001 the doors were opened for private sector participation. In 2011 the government formulated Defence Production Policy and in 20133 it came out with Defence Procurement Procedure and offset policy. As per contracts signed so far Rs 20,000 crore worth offset obligation will materialise in next five years.

“Indigenisation methodology is being reviewed,” he said.

Former Secretary, Defence Production and Chairman, Task Force on Defence Modernisation, Ravindra Gupta said that 30% growth rate in Defence industry was required to increase the trend of indigenisation and create half a million job in the next decade. India should be a party to Warsaner Agreement and should have a comprehensive list of defence products and items of dual use. He said that there should be no licencing system for defence industry. The Department of Defence Production should be renamed as Department of Defence Production and Trade. India should export defence products and Defence Export Council should be set up. Defence industry should be accorded infrastructure status. All suppliers should be accorded deemed export status and the small and medium enterprises (SMEs) should be leveraged.

Joint Secretary, DIP in the Ministry of Defence, Sanjay Garg said that the licencing system or the government’s policy on foreign direct investment (FDI) should not come in the way of indigenisation. There should be perfect coordination and cooperation among the Defence Ministry, industry and R&D institutions.

Whether FDI or not capital requirement is not a problem. No foreign investor will be prepared to transfer state-of-the-art tecnologies. They will only transfer second generation technology which may not serve the purpose, he said and called for a clarity in export policies.

Principal Director in the Directorate of Indigenisation, Cmde Aseem Anand suggested that offset policy should be applicable to technical institutions like IITs for grooming youths and mission mode project support should be extended to the defence SMEs.

He said that indigenisation process began in the Indian Navy as early as in 1960s. There are 45 major warship under construction in Indian shipyards today. In the float system of Indian Navy 90% indigenisation has taken place, while 50% indigenisation has taken place in the move system and 20% indigenisation has occurred in fight system.