The Defence Ministry is mulling a review of the ‘No Cost, No Commitment’ trial, through which the government dissociates from footing the bill for the expenses incurred on the military equipment acquisition process as well as the obligation of purchasing post-trial. The Ministry had sought industry response given that many in the defence sector had held a view that the cost of trials is high and a drag on medium and small-scale medium enterprises and start-ups.
Colonel Sumit Kapur, Director B in ADG Acquisition Tech (Army), wrote to the industry stating “a study is being undertaken by this office to analyse the suitability of ‘No Cost, No Commitment (NCNC)‘ trials in the present Defence Capital Acquisition process”. The stakeholders were supposed to give comments and recommendations for improvement of the existing system and, if possible, an alternative methodology by August 7. The Defence Acquisition Procedure 2020, the latest revised manual, continues to pitch for the NCNC trial for buying equipment.
Rationalisation of processes
The Defence Ministry’s move, government sources believe, is part of further rationalisation of the processes which would offer the twin benefit, including allowing a level playing field for indigenous defence companies, especially the start-ups which are not cash-rich, under the Atmanirbhar Bharat scheme.
The Society of Indian Defence Manufacturers (SIDM), a not-for-profit association formed by the CII to be the apex body of the Indian defence industry, has shared its viewpoint to the Ministry on the need for dilution of NCNC trails, said industry sources aware of the issue.
Sources in a foreign defence equipment supplier company said “what the government could do is to take care of expenses of the companies after they qualify for the technical bid because since from that stage onwards the only important aspect remains is that of opening the financial bid and declaring L1”. Many countries, he said, compensate for the trials in a bidding process.
A senior army officer on the condition of anonymity said when the NCNC trial was introduced decades ago, the acquisitions were done only through either defence public sector undertakings or from foreign suppliers. The private indigenous defence manufacturers did not exist then, and, in any case, the government would pick up losses or fund the DPSUs as it does even now, and no issue arose about sharing liability by the government, the officer pointed out. There is, however, a need to give relaxation in the NCNC trial that incentivises participation, the senior officer advocated.
A Defence Ministry officer pitched for a larger empowered platform, could be headed either by the Defence Minister or Defence Secretary, to allow threadbare discussion among stakeholders like representatives of Tri-Services, from thinktanks and industry, so that requirements and roadmaps for capacity enhancement can be arrived at periodically. The pre-Request For Proposal (RFP) serious engagements will also avoid chances of no bidding which would also save on the government costs, both of money and manpower, the officer pointed out.
Ahead of this step of having a consultative committee sort of thing, there is a need to invest much more in research and development than 25 per cent of the total defence budget announced in this year’s general budget, the officer suggested. That would help forces to make informed decisions beneficial in every sense to the defence requirement of the country, he pointed out.