Defence Ministry’s move to have ‘life cycle cost’ clause in tenders for military hardware, including in one for the 126 Multi-Role Medium Combat Aircraft (MMRCA), has come in for questioning from BJP which fears this could be misused for corruption.
BJP leader and former Finance Minister Yashwant Sinha has written to Defence Minister A K Antony, raising a number of questions over the “conceptual shift” in the defence procurement policy.
Sinha has expressed apprehensions about misuse of the new clause close on the heels of a major scam that unfolded in the Defence Ministry’s VVIP helicopter deal with Anglo-Italian company AgustaWestland.
Sinha has questioned the logic behind having such a clause and wondered what would be the contractual obligations for the life of an equipment.
He has underlined that in the absence of an enforceable obligation, the ‘life cycle cost’ (LCC) could be rendered a “dead letter”.
The former External Affairs Minister has suggested that the apprehensions about the clause being misused can be addressed by binding the vendors by “enforceable contract” to ensure its contractual obligations.
Referring to the MMRCA, he has said that two of the seven “elements” laid down in defence procurement policy in June 2007 were omitted in its case.
Sinha said doubt arises that if the model approved in 2007 is flexible, then would it not be changed from time to time, from acquisition to acquisition to favour a particular vendor.
The two elements dropped were ‘cost of total technical based reserves’ and ‘cost of transfer of technology’.
The government has argued that these elements were mentioned in the Request for Proposal for the 126 MMRCA contract under a separate head as these fighters would have to be spread across 5-6 different locations and these have multiple systems which require large inventory of such reserves.
Sinha has questioned whether the Defence Ministry has consulted the Finance Ministry on this “conceptual shift” and whether the latter has agreed to it.
He has also wondered whether it would not be advisable to consult the CAG in advance and have the concept examined in view of the “momentous nature” of this change to avoid any problems in future.
Sinha has also questioned how it will impact upon the defence offset policy and the interest of the domestic industry.