Legalising representatives of arms companies
The media had reported in early October this year that the Ministry of Defence (MoD) is soon going to encourage registration of legalised agents with the new policy starting in December this year and that the Modi Government was working already to overhaul the policy on hiring of defence agents by foreign armament companies after implementing nuanced blacklisting norms to replace the earlier indiscriminate ones. The October report mentioned that MoD had already held one round of top-level discussions on the policy for “authorised Indian representatives or agents” and the role they can play in facilitating and smoothening arms deals in legitimate manner.
This move is obviously because of poor response to the regulatory role on agents that MoD had acquired for itself in conjunction with stringent guidelines issued in year 2001 – that had proved counterproductive. Interestingly, the government in 2001 had lifted the blanket ban on agents, which had been in force since 1987 after the infamous Bofors guns and HDW submarine scandals. But this bid to inject some transparency did not really work since the stringent norms laid down for agents were considered unrealistic, with the government even declaring it would determine the scale of commission to be paid to them. Consequently, almost no one came forward to be registered as an agent.
Defence Minister Manohar Parrikar through his recent statement has now confirmed that the government is planning to legalise representatives of various foreign arms companies in the country, for speedy purchase of military hardware. He said, “We will allow company representatives. They will be middlemen. When I say middlemen it doesn’t mean commission agents or dalals. He will be a company representative in India. The company representative can work on a fee basis. He will be the information provider. Several times we require feedback and also someone who can get us information. There are some foreign companies which want to come to India... they can’t go on sending their people here.”
He however added that the concept of legalising middlemen has not been given a final thought, adding, “I am throwing this idea open, it is not a decision. This is loud thinking. Reactions and feedback are invited from public.” The Minister said middlemen can be permitted to charge expenses from parent companies for representing them in the country. The Minister opined that the government should be in a position to have a very clear-cut policy by January next on representatives and on blacklisting including a raft of measures to ensure transparency and at the same time speeding up such purchases to modernise the armed forces. This is not a new idea and has come up time and again, with many experts recommending its institutionalisation. The fact is that the absence of this led to high levels of corruption in arms purchases including in the MoD since agents still approached officials anyway. A dispassionate analysis would perhaps bring out that not one single arms deal has taken place without involvement of an agent directly or indirectly. In fact, hordes of shady middlemen including in garb of consultants lurked in the corridors of power to grease the official machinery and swing deals with hefty kickbacks to politicians, bureaucrats and military officers despite all the antigraft provisions and integrity pacts in place – some shady agreements made in environment of five-star hotels.
For example take, the recent case of a retired Lt General offering a serving Army Chief a bribe of some ` 17 crore in latter’s office. Take the mention of bribes given to politicians and bureaucrats in Haschke’s diary in connection with the Westland VVIP helicopter deal. Take the case of hefty bribes given to Indians in the Eurocopter deal, details of which are known to the Intelligence Bureau (IB). But then these are a drop in the ocean and the tentacles of the arms mafia has managed to put the lid on. As to corruption in the Defence Research and Development Organisation (DRDO) related to defence deals, including JVs with foreign companies, you just need to see last five years CAG reports. The bottom line is that our military procurements have been dogged by long delays and allegations of graft, some even through anonymous letters.
India is the world’s largest arms importer, having spent ` 83,458 crore in just the last three years in acquiring weapons from the US, Russia, France, Israel and others. Overall, India has inked arms deals worth well over $60 billion since the 1999 Kargil conflict. But there are just a handful of legalised defence agents on the rolls of MoD. The move to legalise agent of arms companies is not only timely but imperative because: massive voids in military’s defence needs must be filled up speedily; with call of Make in India and relaxations in FDI, many foreign companies are looking at India and JVs must have authorised agents to deal with the official machinery; defence deals don’t originate only on government-to-government basis especially where private industry—therefore agents are essential; legalised agents can assist foreign armament companies in replying to arms tenders, trial evaluation of systems, price negotiations, enhancing the quality of after-sales service and in resolving performance and warranty issues, and; legalised agents will cut down on corruption in defence procurements. Registration of a greater number of legalised agents under a new policy is certainly required.
The armament companies should be free to choose anyone they want to act as their agents provided they are not blacklisted. It should also be left to the company to decide how much commission it wants to pay the agent. As to blacklisting, the government may go for any amount of stringent measures but from the military point of view it is essential that an alternative source of similar defence equipment should be available, least the voids grow exponentially. This was one of the blind spots with former Defence Minister A.K. Antony who blacklisted firms at the drop of a hat, even on anonymous complaints, without alternative source of procurement, leading to mounting criticalities in the armed forces.
The armament companies should be free to choose anyone they want to act as their agents provided they are not blacklisted.