MoD Panel Trains Guns on Cor­rupt Prac­tices by Strate­gic Part­ners

Rec­om­mends un­lim­ited penal­ties, black­list­ing; some cos against move

The Economic Times - - Front Page - Manu.Pubby@ times­group.com

New Delhi: A de­fence min­istry panel has rec­om­mended vir­tu­ally un­lim­ited penal­ties and min­i­mum five-year black­list­ing of pri­vate firms to be se­lected as strate­gic part­ners for ma­jor mil­i­tary con­tracts if they in­dulge in cor­rupt prac­tices or hire com­mis­sion agents. The task force for se­lec­tion of strate­gic part­ners (SP) — set up to iden­tify ma­jor In­dian com­pa­nies like Tata, L&T and Mahin­dra for man­u­fac­tur­ing projects of over .₹ 10,000 crore — has said any at­tempt to in­flu­ence mil­i­tary con­tracts should be met with stiff pun­ish­ment.

Leav­ing the penal­ties to be im­posed vir­tu­ally un­lim­ited, the min­istry of de­fence (MoD) re­port says that in case the min­istry dis­cov­ers that the SP has at­tempted to in­flu­ence any­one for a con­tract, it shall in­vite “li­a­bil­ity or penalty as the MoD may deem proper, in­clud­ing but not limited to ter­mi­na­tion of this agree­ment, im­po­si­tion of pe­nal dam­ages and re­fund of the amounts paid by the MoD’.

Cor­rupt prac­tices have been de­scribed as an of­fer or prom­ise to “give, di­rectly or in­di­rectly any gift, con­sid­er­a­tion, re­ward, com­mis­sion, fees bro­ker­age or in­duce­ment to any per­son in ser­vice of the MoD, di­rectly or in­di­rectly” to in­flu­ence the con­tract. On hir­ing of com­mis­sion agents by SP — at least four com­pa­nies could be cho­sen in the first stage based on their tech­ni­cal and fi­nan­cial strength — the com­mit­tee has been equally harsh, say­ing the MoD would have the right to can­cel the con­tract and re­cover all amounts paid. In ad­di­tion, the SP would be “de­barred from en­ter­ing into any ac­qui­si­tion con­tract with the GoI for a min­i­mum pe­riod of 5 years” if found guilty of hir­ing agents. An agent has been de­scribed as “any per­son, whether In­dian or for­eign what­so­ever, to in­ter­cede, fa­cil­i­tate or in any way to rec­om­mend to the GoI or any of its func­tionar­ies, whether of­fi­cially or un­of­fi­cially, to award it the sta­tus of a strate­gic part­ner”.

“It is a good move, any In­dian com­pany se­ri­ous about the sec­tor would not in­dulge in any such prac­tice as we have to work and live here,” JD Patil, head-de­fence and aero­space, L&T, told ET.

How­ever, a top ex­ec­u­tive of an­other ma­jor de­fence player, who did not wish to be named, warned that the rec­om­men­da­tion is vague and leaves an un­lim­ited li­a­bil­ity on com­pany books that could make them re­con­sider par­tic­i­pa­tion. “This makes the MoD an au­thor­ity to de­cide penalty and wrong­do­ing with­out le­gal process. Any fine or penalty for a per­ceived vi­o­la­tion can be detri­men­tal to busi­ness,” he said. “There are a num­ber of re­stric­tions sug­gested, in­clud­ing takeover rights in case of non-per­for­mance that would make com- pa­nies think twice be­fore even ap­ply­ing for SP sta­tus,” an­other se­nior de­fence ex­ec­u­tive who did not wish to be named said. De­fence agents and cor­rup­tion in mil­i­tary deals have been politi- cally hot is­sues over the years with the UPA govern­ment fac­ing sev­eral al­le­ga­tions of graft, in­clud­ing charges of of­fi­cials re­ceiv­ing money from mid­dle­men. Once se­lected, the SP would need to give an un­der­tak­ing that it has nei­ther en­gaged nor will it hire any per­son or body to in­flu­ence con­tracts.

“Strate­gic part­ner shall in such an event be li­able to re­fund all pay­ments made by the MoD in terms of the re­spec­tive ac­qui­si­tion con­tract along with in­ter­est at the rate of 2% per an­num above base rate of State Bank of In­dia,” it says.

The min­istry of de­fence is separately work­ing on a black­list­ing pol­icy that is to be re­leased this month, ac­cord­ing to De­fence Min­is­ter Manohar Par­rikar. Un­der the new pol­icy, an ap­pel­late board is likely to be formed within the min­istry to con­sider past and fu­ture cases ear­marked for black­list­ing and de­bar­ment of com­pa­nies would be con­sid­ered as the last re­sort.

De­fence agents and cor­rup­tion in mil­i­tary deals have been po­lit­i­cally hot is­sues over the years

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