CAG on defence offsets: A case of the bureaucracy failing to bite the bullet?

September 30, 2020 6:45 AM

Repetition of the same mistakes as highlighted by the CAG twice is reflective not only of a general apathy to oversight, but also demonstrates to some extent our inability to grasp core policy principles that stakeholders—both internal and external—constantly draw our attention to, in order to inform proper policymaking in the first place

When mistakes can’t thus be distinguished from policy, there are no mistakes left to justify to anyone anymore!

By Sandeep Verma
The latest CAG report on the (non-) implementation of defence offsets has brought into sharp focus, once again, the broader subject of developing India’s domestic industrial base—one of the foremost policy announcements of her present political leadership. It also raises concerns of some bureaucratic incapacity when contrasted with an unambiguous political vision of turning India into a strong and vibrant powerhouse via Atmanirbhar Bharat.

The positioning of ‘Make in India’ has clearly not been lacking either in its clarity or its consistency; and the Prime Minister’s Office has repeatedly emphasised this grand vision on a number of occasions: for instance, while steering the Department for Promotion of Industry and Internal Trade’s well-crafted Public Procurement (Preference to Make In India) Orders right since 2017, and in nudging the Ministry of Electronics and Information Technology towards implementing cluster-oriented manufacturing of critical electronic components as part of the historic

National Policy on Electronics in 2019.
The 2020 CAG report on defence offsets is not the first one—a privilege that vests with an earlier CAG report in 2011 that outlined a number of similar problems with defence offset management in India. One need only to compare, inter se, the two CAG reports, or with reported findings of the latest CBI chargesheets in the Agusta case, to assess the number and range of mistakes made during offset contract management.

A serious situation such as this, twice repeated, drives one towards an obvious conclusion that the qualitative deterioration in defence offset guidelines around 2010-11—in contrast to the original guidelines that were issued in 2005-06 based on far-reaching recommendations of the committee on defence procurement and manufacturing chaired by the legendry Vijay Kelkar—is probably more a case of bureaucracies changing “the rules of the game” simply to hide their own inadequacies during defence offset contract lifecycles.

After all, it has been a clichéd but a well-understood strategy amongst “Yes-Minister”-esque bureaucracies across the world that if one has made too many mistakes, the best way to justify those mistakes is by incorporating all such digressions into government policy through dilution of the policy itself. When mistakes can’t thus be distinguished from policy, there are no mistakes left to justify to anyone anymore!

For perspective’s sake, it is important to note that Kelkar Committee recommendations that formed the very basis of India’s Defence Offset Guidelines issued almost a decade-and-a-half ago contained some core guiding principles that seem to have been diluted in 2011. The original offset guidelines of 2005-06 allowed direct offsets relating to manufacturing of defence products alone—a principle that the defence bureaucracy could not stick to very long in the face of well-coordinated push by foreign vendors.

A second core “Kelkar” principle was grant of offset credit only for value-addition in India—one that was neglected for almost a decade in offset management before it was able to make some re-entry into the Ministry of Defence’s procedures. A third principle was to keep offset contract duration short enough so as to be able to see their visible impacts, and to insist submission of properly crafted offset offers rather than signing of paper promises by foreign vendors: important issues that have all been highlighted by a number of researchers (including this author) forming part of the MoD’s own policy think tank—the Manohar Parrikar Institute for Defence Studies and Analyses.

Within this context, repetition of the same mistakes as highlighted by the CAG twice is reflective not only of a general apathy to oversight, but also demonstrates to some extent our inability to grasp core policy principles that stakeholders—both internal and external—constantly draw our attention to, in order to inform proper policymaking in the first place.

Some of this civil and military bureaucracy is the same which, when faced with the DPIIT’s strong (and happily irreversible) push against unbridled foreign imports finding their way into India’s public procurement marketplaces, took a few months to even come up with an amazingly short list of 15 items where India’s manufacturing has been assessed to be of sufficient capacity and to ensure adequate competition—all this when India’s naval sector has been one of the most aggressive in pursuing indigenisation efforts for decades altogether!

To be fair, the defence list is actually 24 items, but then 10 of these are rings of slightly different types; and such a “tiny” list makes one wonder if it has been issued only for demonstrating an “optical” compliance with the DPIIT’s mandate. The list issued by the Ministry of Railways purportedly in compliance with DPIIT orders is similarly limited to just 28 items; and it is unambiguously clear that such “baby-step” approaches by some departments may not result in making a serious dent as clearly intended by the DPIIT and the PMO—namely, making Bharat atmanirbhar.

To conclude, what we as bureaucracies need to undertake is really a reorientation of our own attitudes and upskilling of technical policymaking skills, and to get out of our comfort levels in remaining conservative and risk-averse. We have comforted ourselves for far too long that the small set of general administrative skills we pick up as collectors and as secretaries working within limited landscapes in states is all that India needs; when the truth is quite the opposite.

Navigating highly dynamic and unforgiving domestic and international developments, especially in the face of such clearly ambitious and aggressive policymaking that India’s leadership wishes us to execute, requires us to start adopting much more collaborative and strategic approaches, and even much more domain specialisation, than what we have hitherto achieved so far.

 

The author is an IAS officer and a member of MP-IDSA. Views are personal

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