Black­list­ing re­de­fined

SP's MAI - - MILITARY VIEWPOINT - LT GEN­ERAL P.C. KA­TOCH (RETD) The views ex­pressed herein are the per­sonal views of the au­thor.

Since De­cem­ber 2014, me­dia was re­port­ing that a new gov­ern­ment pol­icy le­gal­is­ing mid­dle­men in arms pur­chases, a source of mas­sive con­tro­ver­sies in the past, would be in place soon. De­fence Min­is­ter Manohar Parrikar had stated on De­cem­ber 31, 2014, “The mid­dle­men have to be de­clared and their com­mis­sion can­not be linked to the out­come of ne­go­ti­a­tions.” The gov­ern­ment had also been en­gaged in im­ple­ment­ing nu­anced black­list­ing norms to re­place the ear­lier in­dis­crim­i­nate ones. Mid­dle­men or de­fence agents were banned for years af­ter the mul­ti­mil­lion-dol­lar scan­dal in the 1980s in­volv­ing al­leged kick­backs paid to politi­cians and of­fi­cials in pur­chases. This move ob­vi­ously was be­cause of poor re­sponse to the reg­u­la­tory role on agents that the Min­istry of De­fence (MoD) had ac­quired for it­self in con­junc­tion strin­gent guide­lines is­sued in year 2001 that had proved coun­ter­pro­duc­tive.

As for black­list­ing, the Bo­fors ban had se­verely af­fected the ar­tillery with short­age of spares and as­sem­blies. In fact, dur­ing the Kargil con­flict just 100 Bo­fors guns could be can­ni­balised from the 400 Bo­fors guns that had been im­ported. The equip­ping of armed forces suf­fered very badly dur­ing the decade-long ten­ure of A.K. Antony as De­fence Min­is­ter be­cause he would black­list a firm at the drop of a hat — even based on an anony­mous let­ter. The action of lift­ing of such black­list­ing was not trans­par­ent enough. Re­cently, cor­rup­tion in the Agus­taWest­land he­li­copter scan­dal had hit the me­dia, the ori­gin of which ac­tu­ally was in 2013 when Ital­ian in­ves­ti­ga­tors ar­rested and in­car­cer­ated the com­pany’s Chair­man, Guiseppe Orsi, on charges of brib­ing In­dian of­fi­cials to fa­cil­i­tate the sale by group com­pany, Agus­taWest­land, of AW101 VVIP he­li­copters to In­dia. This had led to the blan­ket black­list­ing of the of Ital­ian multi­na­tional, Fin­mec­ca­nica.

The blan­ket black­list­ing also placed a ban on the Fin­mec­ca­nica af­fil­i­ated com­pa­nies of the Fin­mec­ca­nica Group, which dis­rupted: Purchase of 98 Black Shark heavy­weight tor­pe­does for In­dian Navy’s Scor­pene sub­marines from marine spe­cial­ist, White­head Ale­nia Sis­temi Subac­quel (WASS).

Ship­board radar be­ing fit­ted on the in­dige­nous air­craft car­rier, INS Vikrant, by Selex Elec­tron­ics Sys­tems (ES). Purchase of anti-air­craft guns for war­ships from Otome­lara. Fur­ther pro­cure­ment of Agus­taWest­land he­li­copters, two of which had al­ready been pro­cured be­fore the black­list­ing came into ef­fect.

In 2014, Arun Jait­ley, then De­fence Min­is­ter, had is­sued tough in­terim guide­lines for deal­ing with the Fin­mec­ca­nica Group com­pa­nies, which did lit­tle to help ease the prob­lems in procur­ing tor­pe­does, ship­board radars, anti-air­craft guns as men­tioned above. There was cry­ing need to cir­cum­vent blan­ket bans on global de­fence con­glom­er­ates that that not only re­stricts the gov­ern­ment’s op­tions in buy­ing weaponry but also in the event of sim­i­lar prod­uct not avail­able from other sources, ad­versely af­fects mod­erni­sa­tion of the mil­i­tary. Now gov­ern­ment has ap­proved a new ‘black­list­ing’ pol­icy dur­ing the meet­ing of the De­fence Ac­qui­si­tion Coun­cil (DAC) chaired by De­fence Min­is­ter Parrikar held on Novem­ber 7, 2016. This pol­icy is de­signed to tackle cor­rup­tion bet­ter and will be of­fi­cially an­nounced in the near fu­ture. It not only lists out the method to deal with for­eign firms but more sig­nif­i­cantly has done away with the sys­tem of ‘blan­ket black­list­ing’.

The new pol­icy will have a fo­cused prod­uct-spe­cific ban, aimed at pun­ish­ing the cor­rupt among the for­eign sup­pli­ers and not hold to ran­som the coun­try’s mil­i­tary and de­fence needs. This in­deed is a wel­come step es­pe­cially at a time when a boost is be­ing given to de­fence-in­dus­trial pro­duc­tion in the coun­try that would raise com­pe­ti­tion amongst com­pa­nies. The new pol­icy en­vis­ages that a per­son of a for­eign com­pany, if found to be in­dulging in cor­rup­tion, will not be al­lowed to deal in an­other case of the com­pany’s sub­sidiary. Ac­cord­ing to MoD sources, while the new pol­icy does away with blan­ket black­list­ing of en­tire con­glom­er­ates, com­pa­nies found guilty of vi­o­lat­ing norms, es­pe­cially an “in­tegrity pact” that forms a part of all de­fence con­tracts, can still be banned from do­ing busi­ness in In­dia.

Un­der the new pol­icy, Agus­taWest­land would be li­able for black­list­ing and fi­nan­cial penal­ties, while the group com­pa­nies would be eval­u­ated on merit. This pol­icy some­what mir­rors the US pol­icy of im­pos­ing tough fi­nan­cial penal­ties on com­pa­nies found guilty of wrong­do­ing, rather than ban­ning them from do­ing busi­ness al­to­gether. What will hap­pen in the event cor­rupt prac­tices are dis­cov­ered in sin­gle-ven­dor sit­u­a­tions is per­haps yet to be ex­am­ined. Nev­er­the­less, the new black­list­ing pol­icy is a wel­come step and needs to be pro­mul­gated straight­way.

AW101 VVIP he­li­copters

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