DE­FENCE DEALS: CUT­TING LOSSES

India Today - - UPFRONT - —San­deep Un­nithan

De­fence min­is­ter Arun Jait­ley has pulled the plug on four long-de­layed de­fence pur­chases worth over Rs 20,000 crore. Last month, a Rs 10,900 crore con­tract for sur­face-to-air missiles for the army was scrapped in favour of an indige­nous mis­sile sys­tem. Now Jait­ley has rec­om­mended the can­cel­la­tion of con­tracts for ar­moured re­cov­ery ve­hi­cles (ARVs), naval multi-role he­li­copters (MRHs) and tor­pe­does, worth about Rs 10,000 crore, which were co­matose with the MoD for years.

In 2011, the MoD had placed a Rs 1,770 crore con­tract with Bharat Earth Movers for 204 ARVs— used to tow tanks—made by Poland’s Bu­mar. De­lays re­sulted in a 20 per cent in­crease in cost thanks to the ap­pre­ci­a­tion of the dol­lar. An­other con­tract, worth Rs 1,800 crore, for the pur­chase of 98 Black­shark tor­pe­does man­u­fac­tured by a sub­sidiary of Fin­mec­ca­nica (now Leonardo) came un­der a cloud af­ter the firm was ac­cused of pay­ing bribes. The fourth—for the pur­chase of 18 naval MRHs—hit an im­passe in 2014, when com­mer­cial bids by Siko­rsky for S-70B chop­pers were found to be way above the Rs 6,000 crore the MoD had set aside.

Jait­ley’s de­ci­sion could be a mixed bless­ing for the armed forces. Once th­ese con­tracts are scrapped, it is likely they will be re­floated as Make in In­dia projects and govern­ment-to-govern­ment deals. MoD watch­ers tie the can­cel­la­tions to the govern­ment’s pol­icy on strate­gic part­ners—he­li­copter man­u­fac­ture is one of four ar­eas where the govern­ment sees pri­vate sec­tor firms ty­ing up with for­eign part­ners—and US firms are strong con­tenders in this re­gard. Though the hard­ware is still years away from in­duc­tion and will likely see sig­nif­i­cant cost es­ca­la­tions, the armed forces can take heart from the fact that the wheels of de­ci­sion-mak­ing have started mov­ing again.

Jait­ley has rec­om­mended the can­cel­la­tion of de­fence con­tracts worth about Rs 20,000 crore

PA­TIENCE WORN THIN De­fence min­is­ter Arun Jait­ley

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