Avoid defence purchases through agents: Anil Ambani

Reliance Group chairman Anil Ambani on Tuesday said the current practice of defence purchases through agents must be an exception, and sought more clarity for the private sector in deals emerging out of agreements between countries or their armed forces.

"It is nobody's case that everything in the defence industry is amenable to competitive bidding. But the practice of making purchases by nomination should be an exception," Ambani said at the Global Investors Summit organised by Assocham at DefExpo 2016 here.

"Where nomination is unavoidable, there need to be some clear guidelines in place so that private players have better visibility regarding future opportunities," he said, adding that a credible defence policy cannot be built without the involvement of the private sector.

The Reliance Group chairman, whose company acquired Pipavav Defence two months ago as part of a major foray in the military hardware and related space, said the government must also spell out where the private players stood in inter-governmental agreements and foreign military sales.

"There's a general lack of clarity among industry players about the role of the private sector in case of contracts under IGA/FMS. Will participation in such cases be restricted to DPSUs alone or is there a scope for private players to participateIJ" he wondered.

Ambani, who spoke a day after the government unveiled a new defence procurement policy here, also said there must be no restrictions between air, land and sea in procurement of defence material in the programmes that have been identified by for strategic partnerships.

"An open, calibrated policy will shake the status quo, end the monopoly of existing players and benefit the nation by encouraging the entry of new players and increased competition," he said, but lamented that new contracts for new players were few and far between.

"In the last 22 months, the Defence Acquisition Council has met a record number of times and cleared proposals in excess of Rs.200,000 crore. This is hugely impressive by any standards, highly commendable," he said.

"A large number of contracts however are either repeat orders due to urgent force requirements or have been decided on a nomination basis, while others fall under the category of foreign military sales or inter-governmental agreements," he said.

"More opportunities for the private sector would be welcome."

He cited the example of public sector shipyards and said while they had order book in excess of Rs.150,000 crore, the total production in the past two years was hardly Rs.6,000 crore annually. "At this rate, it will take more than 20 years to deliver on the current order book," he said.

"This when the Indian Navy has an acquisition pipeline of Rs.300,000 crore over 15 years."

Ambani said the existing mindset in the defence sector, which holds past experience as the most important criteria for awarding work, needs to change, and allow the private sector to take up its rightful role in enhancing national security.

At the same time, he lauded two new concepts in the new defence procurement policy -- the thrust on a indigenous design development and manufacturing, and moving away from the age-old practice of awarding contracts based on lowest cost.

He said the first will promote sharing of knowledge, facilitate greater interaction od private players with armed forces and lead to better adaptation. The second, he added, will encourage vendors to offer quality rather than opt for minimally compliant solutions.