The BL Interview. ‘We are looking to cut defence imports by 35-40%’

No sooner had he taken charge as Defence Minister in November 2014, Manohar Parrikar was faced with the issue of One Rank One Pension (OROP). Having dealt with that issue, Parrikar had little breathing time as the government came out with the policy for opening defence sector for foreign investment.

Tackling corruption in defence procurement was another major challenge for Parrikar. While he did come out with a revised Defence Procurement Procedure, he is yet to clarify on strategic partnership issue.

BusiessLine spoke to Parrikar on how he proposes to meet his target of reducing imports dependence in defence by 35-40 per cent and promote indigenous manufacturing. Excerpts:

How will you ensure defence scams do not take place under you?

A scam can be stopped by a transparent procedure and clean intentions.

How will the new Defence Procurement Procedure (DPP) be different from the previous ones?

In defence we have been too dependant on imports. ‘Buy Global’ has been a mantra. The current DPP is a game changer in the sense that it makes IDDM (Indigenous Design, Development and Manufacturing) as the first choice. There is a clear line of decision-making. If there is a product which is designed indigenously, that will be given first preference.

This will be followed by a Buy Indian policy where 40 per cent has to be indigenous. Then the next option is to buy and make in India, where some quantities can be bought from abroad but the balance has to be made in India.

To stop corruption you need to have transparent procedures and our revised DPP ensures that. You do not need more stringent procedures.

On the AgustaWestland scam, it seems all procurement that links with Finmeccanica is getting stalled, adversely impacting the modernisation plans?

Finmeccanica proposals have been put on hold. The blacklisting process is on now. We are not buying anything from them. But if there is already a product with some component of Finmeccanica in it or a product of theirs already in the forces, then we deal with them for spare parts, technical support, overhauling, repair and maintenance for the operation of the products. That’s the inventory I am carrying.

So Finmeccanica has not been blacklisted yet?

The process has now started because the Italian court has clearly declared that there is a crime and a bribe has been given. So there is enough documentary evidence with us and we have sent the file for legal vetting. Because, any action we take has legal repercussions. The company can go to court and ask for damages on certain issues. So I have to double check and I am not an expert on law. The government cannot be arbitrary and has to ensure natural justice.

So will it end up being another Bofors?

How can I predict what the investigation agencies will find? It is up to the agencies to track the money. But sometimes it is very difficult to track the money flow because many countries do not give information and the Indian courts don’t punish a person just on suspicion. I can prove intentions existed, I can prove that you intended to overpay. If money has gone into a country where no document is available it is not so easy to track that. The government will take all efforts to track the guilty.

How much of a reduction in imports are you planning under the new DPP?

Acquisitions made earlier cannot be changed today. I cannot even change acquisitions that are in the pipeline now. The value of this is ₹5 lakh crore, which will slowly taper off. So every year my target is to increase indigenous content by 5-10 per cent. Our final target will be 35-40 per cent, which can be done quickly. After that it will slow down.

How do you plan to achieve the export target of $2 billion by 2018 from the current $340 million?

Unless you fix an ambitious target you cannot reach it. We have allowed defence PSUs and Ordnance Factory Boards to export 10 per cent of their production capacity. If they manage to export it and the Army requires that capacity then we will increase the capacity which can be exported by 10 per cent next year. This will be only in products where they say the capacity less like missiles and Tejas. For others they are free to export any amount. Right now they export about 4-5 per cent of their production.

But how will you identify the buyers given the strategic issues involved?

There is no difficulty in identifying the friendly countries. But you have to be sure about its friendliness.

When will you finalise the chapter on strategic partners in the DPP?

This has three-four platforms only. Certain decisions can’t be made in in six months or one year. Even after the decision is made, additional time may be required to finalise the technology. Till then the old process continues. This is just a new addition.

On foreign direct investment, although 100 per cent is allowed in some cases, foreign OEMs say there is no clarity?

For 100 per cent FDI they have to apply. If there is clarity and every rule is given then 100 per cent becomes automatic. I do not want a foreign company to come and set up a unit here because I am also manufacturing that product here. But if a new product is coming up then I can think about it. I will consider it only if it benefits the country in technology terms.

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