Defence

Indian defence procurement and the questionable value of staggered purchases

The Chief of Defence Staff (CDS) Gen. Bipin Rawat has announced that India will employ a ‘staggered purchases’ approach to its defence procurement for the foreseeable future. Staggered purchasing is the procurement of small orders of defence equipment on an ‘as-and-when-required’ basis.

India has employed staggered purchases in the past. This experience shows that instead of being a solution, this method is emblematic of Indian defence procurement/production process’ larger systemic deficiencies.

These deficiencies include a low operational account, large capital account deficit, inefficient domestic manufacturing, and diverse inventory of weapons and weapon-systems. Ultimately, India’s employment of staggered purchases is problematic as it is based on the prioritisation of affordability over value-for-money.

India’s T-90 Experience

Indian Defence Public Sector Units (DPSU) have wrangled with the issues of inefficient and expensive domestic manufacturing for decades. Take for example the Indian army’s purchase of its T-90 Main Battle Tank (MBT) fleet; the first deal for which was for 124 fully-built units and 186 local assembly kits in 2001.

The second, in 2004, was for the licensed production of 1,000 units. In 2007, a further 347 had to be contracted directly from Russia. In 2019, licensed production for 464 additional tanks was negotiated at a cost of US$ 3.12 billion.

Even with relatively large orders, the Indian army has had to negotiate multiple contracts specifically due to the poor production standards in the Heavy Vehicles Factory (HVF) in Tamil Nadu. Weak indigenous production has resulted in additional costs; with barrels, targeting, and night-vision systems having to be replaced by foreign imports. In fact, even as of 2019, 45 per cent of the T-90 MBT (its transmission and engine) is still Russian-manufactured, necessitating units be shipped to Russia for major repairs.

The dearth in domestic logistics and parts production have raised the actual cost of the T-90 MBT to three-times the purchase price. The staggered purchase of parts, kits, and whole platforms have also encouraged Russian vendors to gouge prices on each transaction.

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