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#2910, 17 July 2009
Indian Defence Deals: Cleaning the Augean Stables
Radhakrishna Rao
Freelancer, Bangalore
email: rkrao1950@gmail.com

Over the years, some big ticket Indian defence deals hogged the limelight with their involvement with middlemen in murky backgrounds, pay-offs and bribes, procedural improprieties and a lack of transparency in acquisition processes. However, India’s no-nonsense Defence Minister, AK Antony, known for his impeccable personal integrity, has hinted at strong and ruthless action against any corruption, irregularities and wrong doing in defence deals. Antony delivered a stern warning  to defence vendors and  arms suppliers against resorting to “bribes and payoffs” to bag Indian defence contracts while inaugurating the  exposition “Defcom India 2009” in New Delhi on 27 May.

In fact, Antony was forthright in saying that if any corruption or irregularities are noticed at any stage of the defence acquisition process, it would lead to the immediate termination of the contract. A stickler for rules, Antony gave a piece of his mind with the statement,”They (defence vendors) should not lure Indian defence officials with money. If they try, they will face the consequence as also the officials and manufacturers who are in touch with them.”

Matching his words with action, Antony had ordered the cancellation of two major contracts at the last minute during his previous stint as Defence Minister. The first deal related to the supply of 197 light utility helicopters for the Indian defence forces. The European helicopter major, Eurocopter, was close to bagging this order, but the deal was called off after certain discrepancies and procedural lapses were noticed. Similarly, the Defence Ministry cancelled the 155mm artillery gun tender after Bofors emerged as the frontrunner, since it was embroiled in a corruption case in the 1980s, and for many years featured in the media discussion and public debate. “At times we found certain manipulations and malpractices. We cannot ignore that so we ruthlessly cancelled big ticket items. In [the] future also, I cannot say if there is a malpractice [that] we will take a lenient view” observed Antony. He drove home the point that middlemen will not be allowed in Indian defence deals. According to the new defence procurement policy unveiled in August 2008, “armament companies will have to sign integrity pacts to ensure that no unethical means will be employed to bag the order.” Further, the new policy lays stress on transparency in technical trials as part of the acquisition process.

Taking a cue from Antony’s tough stance, the Ministry of Defence cracked the whip by suspending all transactions with arms outfits, from within the country and outside, after evidence was gathered about “hush money” being transferred to the account of Sudipto Ghosh, the former Director General of the Ordnance Factory Board. Subsequently, all the seven arms enterprises—Israel Military Industries (IMI), Singapore Technology, HYT Engineering, TS Kisan and Co Pvt. Ltd, RK Machine Tools, BVT of Poland, and Media Architects of Singapore-- were blacklisted. Antony pointed out that this action should act as a deterrence to the practice of “bribery and payoff” to win contracts.

Blacklisting these firms, however, will contribute greatly to delaying some vital projects for the Indian army. In particular, the Indian army’s artillery acquisition program, which  had been affected after the Bofors’ scandal and  blacklisting of the South African state owned   enterprise, Denel,  on bribery charges in 2005, is likely to be further delayed. Similarly, the Indian army’s quest for self reliance in the critical area of artillery ammunition has been adversely affected by cancellation of the US$250 million deal that India’s Ministry of Defence (MOD) had entered into with IMI for establishing an ammunition factory in Nalanda. This factory was meant to produce ammunition for the 155mm Bofors gun already with the Indian army.

The Rs100 billion deal that New Delhi had  entered into with Israel in February this year for joint development of a Medium Range Surface to Air Missile (MRSAM), with Israel Aerospace Industries (IAI) and  India’s state owned Defence Research and Development Organization (DRDO) as partners, has also come under a cloud due to the alleged payment of “hefty business charges.”  Critics of the deal say that these payments are only a camouflage for “pay offs.”  The attempt to keep this deal under wraps has added to the controversy. Incidentally, IAI is already under investigation by the CBI for its alleged role in paying “hush money” for pushing the sale of Barak missiles to the Indian Navy. Antony had a tough time answering some queries on this controversial deal. But he reiterated his stand that the Government of India would not hesitate to cancel this deal if any irregularities were proven. The IAI-DRDO   joint venture to develop MRSAM has been under the active consideration of the Government since 2007.

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