Abstain from Obstructing Modernisation

In some cases of procurement of military hardware, the so-called scams are created by false, baseless or motivated allegations by rival firms that could not win the contract

Issue: 10 / 2016By Air Marshal B.K. Pandey (Retd)

In September 2016, a deal for the purchase of three Embraer EMB 145 twin-engine regional jet aircraft for the Indian Air Force (IAF) came under the scanner of the US authorities over allegations of kickbacks paid by the original equipment manufacturer (OEM) to secure the contract. These three aircraft were to be modified by the Defence Research and Development Organisation (DRDO) as airborne early warning and control platforms for operational deployment by the IAF. The contract was signed in 2008 between Embraer and the DRDO. Embraer has been under investigation by the US Justice Department since 2010 when a contract with the Dominican Republic raised America’s suspicions. The probe being conducted by Brazilian and US authorities has been extended to the deal with DRDO. Unfortunately, there were insinuations of the involvement of a former Chief of the Air Staff (CAS) of the IAF who apparently had selected the platform.

The allegations of misdemeanour in the procurement of this high value military hardware comes soon after the episode related to the procurement of 12 AgustaWestland AW101 helicopters for the IAF for VVIP travel. Here too the needle of suspicion for wrongdoing pointed at a former CAS who was said to be responsible for the selection of the platform. The allegations in both these cases have been that the selection was made in a manner so as to favour a particular firm for monetary gain. The effort to procure 197 helicopters for the Indian Army and the IAF ran aground after the tender was cancelled a second time on account of allegations of misdemeanour in the process of selection. The menace of scams in the procurement of military hardware has not been exclusive to the IAF. The Indian Army has been rattled by a number of such episodes since independence, the most voluble of these being the procurement of artillery guns from Bofors. The effort by the Indian Navy to procure eight mine countermeasure vessels from South Korea for Rs. 2,300 crore had run aground in 2014 on account of irregularities observed by the Ministry of Defence (MoD).

In many of the so-called scams in the procurement of military hardware, the problem is created by false, baseless or motivated allegations by rival firms that could not win the contract. Sometimes, political or business rivalry in the country of the OEM finally has an adverse impact on the execution of the contract. There is also a possibility that political rivalry in the country importing the equipment could have the potential to vitiate the whole process. In the bargain, apart from the unwarranted damage to the OEM, the reputation of senior functionaries, both military and civil, is often tarnished or demolished.

While it is gratifying to note that the investigating agencies have not been able to find any proof to substantiate the allegations of kickbacks, these episodes have left a debilitating impact on the process of decision making by the political, civil and military leadership. This will certainly impinge on the confidence with which future contracts for high value military hardware will be handled by service headquarters. If the process of procurement of military hardware remains easily vulnerable to allegations of wrongdoing, it will ultimately impede the acquisition process. The unfortunate consequence for a country like India that depends heavily of foreign sources for the procurement of defence equipment would be that the operational capability of its armed forces will progressively erode and they will no longer be in a state of preparedness to fight a war especially on two fronts simultaneously, a possibility that is beginning to appear to be real.

Another bane of defence procurement has been the phenomenon of ‘blacklisting’ companies based on mere allegations of wrongdoing, without even the charges being actually proved. As per the list drawn up by the MoD, in 2006, there were a total of 118 firms were banned from doing any business in India on the basis of allegations of impropriety. The list included foreign OEMs and Indian vendors. In 2012, the MoD blacklisted six companies including Singapore Technologies, Israeli Military Industry and Rheinmetall Air Defence of Germany for ten years for their alleged role in ordnance factory scam. This practice was a major impediment in the modernisation plan of the Indian armed forces and thus was akin to ‘shooting oneself in the foot’. Fortunately, there is a move to review this self-defeating practice and introduce policy changes.

Unless the government carries out a comprehensive review of the existing policies related to defence procurement and makes it less vulnerable to the self-defeating practices of cancellation of contracts and blacklisting of companies, modernisation plans of the Indian armed forces may continue to remain a distant dream!