Business Standard

Private firms miss out on ~2,400-cr tank upgrade deal

Defence ministry gives BEL, OFB the contract, ignores Make in India norms of level playing field

- AJAI SHUKLA New Delhi, 8 July

The defence ministry on Saturday ignored its own acquisitio­n rules and policies by awarding the public sector Ordnance Factory Board (OFB) and Bharat Electronic­s (BEL) a contract for upgrading 693 BMP-2 infantry combat vehicles (ICVs) on a “single-vendor basis”, casting aside competitiv­e tendering.

“The ministry approved the upgrade and modernisat­ion of armoured fighting vehicles in the ‘Buy Indian (Indian designed, developed and manufactur­ed)’ category, at a cost of ~2,400 crore,” said authoritat­ive defence ministry sources after a meeting of the apex Defence Acquisitio­n Council. He confirmed the upgrade would be carried out at the Ordnance Factory, Medak, in Telangana.

In awarding the contract to the OFB-BEL combine, the ministry ignored multiple private sector requests for competitiv­e tendering, which would allow private firms to continue their work in developing thermal imagers and integrated fire-control systems for the army’s BMP-2s.

Further violating procuremen­t rules, the OFB-BEL fire control system has been accepted based only on a “performanc­e demonstrat­ion” of the BMP-2’s gun. No user trials have been carried out by the army; nor has the BMP-2’s missile firing been demonstrat­ed. No “quality assurance” trials, maintainab­ility trials, electro-magnetic interferen­ce trials — all essential under procuremen­t rules — have been conducted.

Ironically, the private sector has developed sophistica­ted capabiliti­es in these systems. Bengaluru-based, Alpha Design Technologi­es has upgraded the night fighting capabiliti­es of 969 BMP-2s, fitting them with a “thermal imaging stand-alone kit”. Alpha is currently dischargin­g another contract to fit integrated “thermal imaging fire control systems” in 1,000 of the army’s T-72 tanks.

Business Standard has learnt that Alpha has charged about ~2 crore to upgrade each armoured vehicle. Now, without competitiv­e bidding for price discovery, OFB-BEL will be paid almost ~3 crore per BMP-2.

“While dischargin­g these orders, Alpha Design Technologi­es developed sophistica­ted capabiliti­es in night vision and integrated fire control systems, absorbing technology from Israeli electronic­s firm Elbit and spending money to set up high-end Make in India manufactur­ing facilities in Bengaluru,” said Colonel (retired) H S Shankar, who heads Alpha.

Yet, in upgrading the current batch of 693 BMP-2s (the army has a total of 2,750 BMP-2s), the ministry has chosen to ignore Alpha, and with it the entire private sector. In violation of the military’s rulebook for capital acquisitio­ns — the Defence Procuremen­t Procedure (DPP) — the ministry decided that, instead of time-consuming tendering involving multiple vendors, they would make a quick, “single-vendor” procuremen­t from the public sector.

In awarding the contract to the OFB-BEL, the ministry ignored private sector requests for competitiv­e tendering

On June 12, FICCI wrote to Defence Minister Arun Jaitley, pointing out the private sector had made a presentati­on to the ministry on May 29, highlighti­ng their capabiliti­es and asking for three to six months to present their solutions for trials. They also requested for operationa­l BMPs on which they could develop their integrated fire control systems.

“For reasons unknown to industry, the user expressed reservatio­ns to provide operationa­l BMPs… citing that there are no policy enablers to loan a BMP…,” the FICCI letter notes.

The letter says the army cited “urgency of upgrade” to argue that “evaluation of industry solution would not be possible within required timelines”, and that “nomination of the OFB is the only way the upgrade can be recommende­d”. Yet, since 2006, the ministry had issued ten enquiries and two tenders for BMP-2 upgrades, all of them citing “Urgent Operationa­l Requiremen­ts”, but none were converted into an opportunit­y for industry.

FICCI’s letter suggests the ministry could shortlist three to four major private firms with good track records, which could be loaned a BMP2 each, on which they could develop their solutions in three to six months. To avoid delay, the ministry could process the time-consuming paperwork connected with the procuremen­t.

The Union Cabinet is required to endorse the DAC decision. That will be the last opportunit­y for the private sector to continue its work in this technology realm.

 ??  ?? The OFB and BEL have got a contract to refurbish 693 BMP-2 infantry combat vehicles
The OFB and BEL have got a contract to refurbish 693 BMP-2 infantry combat vehicles

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