VIEW­POINT : FA­CIL­I­TAT­ING DE­FENCE PRO­CURE­MENT

The move to re­struc­ture the ex­ist­ing reg­u­la­tions so as to per­mit mid­dle­men in the pro­cess­ing of ten­ders for the pro­cure­ment of de­fence equip­ment for the In­dian armed forces is in­deed a pos­i­tive step that would be wel­come by the global aero­space and defenc

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The process of pro­cure­ment of mil­i­tary hard­ware by the Min­istry of De­fence (MoD) di­rectly from the global orig­i­nal equip­ment man­u­fac­tur­ers (OEMs) op­er­at­ing in the open mar­ket has of­ten been plagued by se­ri­ous al­le­ga­tions of mis­de­meanour. This malaise has been at­trib­uted rightly or wrongly in large part to the in­volve­ment of “mid­dle­men” or agents em­ployed by the OEMs to fa­cil­i­tate deals and earn their com­mis­sion. The gen­eral view is that not only hefty com­mis­sions are paid to the mid­dle­men, th­ese in turn re­sort to pay­ment of huge sums as kick­backs to those who are in a po­si­tion to in­flu­ence the fi­nal­i­sa­tion of con­tracts in favour of the company en­gag­ing the mid­dle­men. All such pay­ments re­garded as off the record are sub­stan­tial and ul­ti­mately in­flate the cost of the deal.

Mid­dle­men have been as­so­ci­ated in de­fence pro­cure­ment deals since in­de­pen­dence and so have been scams be­gin­ning with the jeep scan­dal of 1948 to the in­fa­mous deal for Bo­fors guns for the In­dian Army in the mid-1980s that be­came the “defin­ing scan­dal in the his­tory of de­fence pro­cure­ment”. A fall­out of the Bo­fors scam was that the Con­gressled coali­tion gov­ern­ment of the day de­cided to pro­hibit em­ploy­ment of mid­dle­men in con­tracts for de­fence equip­ment. An ‘in­tegrity clause’ was in­tro­duced that was manda­tory for all con­tracts for de­fence equip­ment to ob­vi­ate al­le­ga­tions of cor­rup­tion and in­tro­duce trans­parency. The in­tegrity clause made it in­cum­bent upon the sup­plier to guar­an­tee that no in­di­vid­ual or firm was em­ployed to fa­cil­i­tate the deal. There was also a pro­vi­sion to can­cel the con­tract if at any stage it were dis­cov­ered that the dec­la­ra­tion was flawed.

How­ever, de­spite the change in the reg­u­la­tions gov­ern­ing the pro­cure­ment of mil­i­tary hard­ware, in­volve­ment of mid­dle­men con­tin­ued un­abated though in a sur­rep­ti­tious man­ner. Con­tenders who failed in their ef­fort to se­cure a con­tract in­vari­ably re­sorted to sub­vert the process by fil­ing for­mal or anony­mous com­plaints about vi­o­la­tion of the reg­u­la­tions on em­ploy­ment of mid­dle­men. This emerged as a ma­jor im­ped­i­ment for de­fence pro­cure­ment as A.K. Antony, the long­est serv­ing Min­is­ter of De­fence un­der the UPA Gov­ern­ment who be­ing keen to safe­guard his un­blem­ished rep­u­ta­tion for hon­esty and in­tegrity, in­vari­ably took cog­nizance of the com­plaints and or­dered in­ves­ti­ga­tions in re­sponse to the faintest al­le­ga­tions of wrong­do­ing. Based on such a course of ac­tion, a num­ber of ten­ders were can­celled be­fore the award of con­tract, some even in the last minute. Also, even ma­jor aero­space and de­fence com­pa­nies of global re­pute were black­listed and de­barred from par­tic­i­pat­ing in fu­ture de­fence con­tracts in In­dia.

Un­der the shadow of the Bo­fors scam, ef­fort by the In­dian Army to ac­quire new-gen­er­a­tion ar­tillery just could not ma­te­ri­alise as for one rea­son or another, the re­lated ten­der was can­celled five times. The ur­gently needed 197 light util­ity he­li­copters to re­place the ob­so­les­cent Chee­tah and Chetak he­li­copters in­ducted in the 1970s was can­celled twice and even­tu­ally scrapped. But the most frus­trat­ing ex­pe­ri­ence the In­dian Air Force (IAF) has gone through in the re­cent past was with the con­tract for 12 Agus­taWest­land AW-101 he­li­copters for VVIP travel. This con­tract was can­celled half­way through ex­e­cu­tion and as a re­sult, the IAF was lit­er­ally “left hold­ing the baby” with three ma­chines al­ready de­liv­ered. Be­sides, sub­stan­tial sums had been paid in ad­vance to the ven­dor and Fin­mec­ca­nica, the par­ent company, was in dis­re­pute un­der the shadow of a scam. The party worst af­fected by the re­tal­ia­tory ac­tion by the gov­ern­ment was the In­dian armed forces as their plans for mod­erni­sa­tion re­mained bogged down the quag­mire of al­le­ga­tions, in­ves­ti­ga­tions, black­list­ing of firms and can­cel­la­tion of con­tracts. In an ef­fort to deal with the al­le­ga­tions of wrong­do­ing in the pro­cess­ing of ten­ders or in the ex­e­cu­tion of con­tracts, the MoD ac­tu­ally ended up “shoot­ing it­self in the foot”.

Wis­dom seems to have fi­nally dawned as the new gov­ern­ment has fi­nally un­der­stood the ground re­al­i­ties of the sti­fling en­vi­ron­ment as­so­ci­ated with do­ing business with the gov­ern­ment in In­dia and the com­pul­sions of global firms to em­ploy mid­dle­men in their pur­suit of con­tracts. The move to re­struc­ture the ex­ist­ing reg­u­la­tions so as to per­mit mid­dle­men in the pro­cess­ing of ten­ders for the pro­cure­ment of de­fence equip­ment for the In­dian armed forces is in­deed a pos­i­tive step that would be wel­come by the global aero­space and de­fence in­dus­try.

AIR MAR­SHAL B.K. PANDEY (RETD)

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