Why the Indian Artillery lacks the indigenous Bi Modular Charge System (BMCS)?

The foundation stone of the fortieth Ordnance Factory for manufacture of Bi Modular Charge System(BMCS) for the Indian army’s artillery was laid at Rajgir in Nalanda on April 14, 1999 by the then Prime Minister of India[i]. The factory was expected to be completed by November 2005. Since the sanction of the project, a lot of otherwise grueling positives have happened, which include acquisition of approximately 2,650 acres of land, rehabilitation of 1,191 families[ii] that were displaced, conclusion of contracts for Transfer of Technology (ToT) and construction of manufacturing plants with some of the biggest firms in the world like Denel of South Africa, Israel Military Industries (IMI), Biazzi of Switzerland and Bowas of Austria; after several rounds of tendering[iii].  As on January 01, 2012 the Ordnance Factory Nalanda had on its roll 142 employees[iv] and till May 31, 2014 over Rupees 910 crores have been expended on the project. Despite pressing user demand, commitment of the country’s executive, colossal investment of public money and all the activity, the factory isn’t producing as yet. What makes matters worse is the fact that in response to a recent parliament question, the Government has informed that no time line has been fixed for completion of construction of Ordnance Factory at Nalanda in view of the uncertainties in procurement/fabrication of the BMCS plant[v].

Many have referred to the project as jinxed but on the other hand the story of factory at Nalanda tells all about the pitfalls involved in building indigenous defence capability through the public sector route. Apart from failings in project planning and procedural inadequacies; reaction to corruption, fear of corruption and corruption contribute the most towards system’s failing. An analysis of the activities and decisions taken regarding the factory in past 15 years throws up some very good deductions with respect to our capability accretion process.

The Ordnance Factory Nalanda needs three plants to operationalize. The foremost being the BMCS main plant which constitutes of five sub plants. These include the Combustible Cartridge Case Plant, Single Base Propellant Plant, Triple Base Propellant Plant, Nitro-cellulose/Nitro-glycerin paste Plant and Propellant Charge Assembly Plant. The two secondary plants are those which manufacture primary ingredients - Nitro-glycerin and Nitro-cellulose. Interestingly, these three plants were tendered separately. The project of setting up of the factory was thus effectively converted into three independent and uncoordinated procurement decisions. The current reality is that while the feeder plants are raring to go, the main BMCS plant is nowhere in sight. The feeder plants may even waste out even before the factory sees some real action! Sound Project planning is pivotal to any infrastructure creation.  Things may have been entirely different if the three plants were tendered as a package deal.

The reaction to corruption is next area of concern which needs to be analysed pragmatically. The Army after extensive trials recommended procurement of BMCS from Somchem, a division of Denel, South Africa, in 1998-99. The company was the only known manufacturer of BMCS at that time. A contract was concluded with Denel for procuring 4 lakh BMCS modules in April 2002 along with TOT for indigenous production. The contract envisaged delivery of TOT documents which comprised of product specifications including detailed dimensional drawings and designs, quality and inspection procedures, process descriptions and production methods in respect of raw materials, intermediate products and final products. The total cost of the TOT package was of US $ 13.99 million. Tender Enquiry for construction of the BMCS plant was issued for the first time on March 29, 2004. The technical bids were opened on July 12, 2004 and price bids on October 26, 2004. IMI Israel emerged as the L-1 firm at a cost of Rupees 571.71 crore. However, the Ministry of Defence in June 2005 decided to cancel all contracts with Denel due to allegations of corruptions in some other case. The Nalanda project was also kept in abeyance from June 2005 to July 2006, even though Denel had supplied the necessary ToT documents and payment for it had been made. The decision to hold the project in abeyance as also subsequent delay in finalizing contracts led to considerable cost and time overrun. The estimated cost as per revised sanction increased to Rupees 2,160.51 crore in February 2009 from Rupees 941 crore originally sanctioned. The reaction to corruption in the instant case had no effect on Denel but the army suffered immensely.

After the project was restarted in July 2006, IMI asked for price increase from the originally quoted price of Rupees 571.71 crore to Rupees 654.79 crore. OFB did not accept the increased price and issued fresh global tender enquiry on February 26, 2007 with a view to generate more competition. Out of the five companies to whom tenders were issued, only three responded. Later, only two companies remained in consideration since the third refused to sign the integrity pact. The price bid was opened on 28 January 2008. The offer of IMI Israel was the lowest at Rupees 1,090.83 crore and the next higher quote was at Rupees 1,885 crore. During the earlier negotiations, the escalation demanded by the IMI was 15 per cent over a period of two years from July 2004 to August 2006. Against the fresh tender, the escalation was 67 per cent over a period of one year. Refusal to accept the asking price of Rupees 654.79 crore proved very costly. One actually wonders what prompted retendering, when it was known that firms capable and willing to supply BMCS plant are very few. Playing too safe in almost all cases adds to costs.

The contract for the BMCS plant with IMI Israel was finally concluded in March 2009 at the total cost of Rupees 1,175 crore. Advance amounting to Rupees 174 crore was also paid to IMI, which remained idle as all the transactions with IMI were put on hold in June 2009 by the Ministry of Defence. Finally, corruption took its toll and the contract was cancelled post investigation of allegations relating to illegal gratification. IMI was debarred from doing any further business dealing with Ministry of Defence for a period of ten years.

Having failed to procure the plant it was decided to fabricate the BMCS plant indigenously. Despite claims of competence by DRDO and the OFB the required plants haven’t materialized till date.  Interestingly, DRDO had claimed to have addressed the requirement way back in 2006. To quote from the December 2006 issue of Technology Focus, a bulletin of the DRDO, “DRDO has developed BMCS for 39 caliber 155 mm guns, which can also be used for 45/52 caliber 155 mm guns. … … … Dynamic trials have established that indigenous BMCS are equivalent to imported BMCS in all respects like muzzle velocity and range[vi].”  Currently, a Project Monitoring Board at the level of the Ministry of Defence and a steering committee at the level of the OFB, are in place to monitor the project. Both are unable to indicate a timeline for completion of the project, as on 15 July 2014.

It is very apparent from the case that the public sector entities which form the Indian defence supply chain have failed to procure from foreign manufacturers/indigenously fabricate the BMCS plant. This is despite the fact that the country has purchased the requisite technology to include product specifications, detailed dimensional drawings and designs, quality and inspection procedures, process descriptions and production methods in respect of raw materials, intermediate products and final products. In the last fifteen years we have made repeated attempts to address failings in operationalization of Ordnance Factory at Nalanda by repeating steps of the procedure for capital procurement. It is time for decision makers to stop reinforcing failures. It is time to redefine the Indian army’s supply chain for BMCS. If we fail to exploit the domestic private sector defence industry to execute the project, our state will not change. It is time to privatise or at least corporatise. 

Views expressed are personal.