The Big Picture - Defence Blacklisting Policy: Will Procurement Improve?

The Big Picture- RSTV

Defence Blacklisting Policy: Will Procurement Improve?

Recollect

Jeep scandal- 1948– First major corruption case of independent India where a Rs. 80 lakh contract for the purchase of 200 army jeeps was signed with Britain and only 155 jeeps arrived.

Bofors scandal- 1980s– Swedish arms manufacturer Bofors and Government of India were accused of involvement in corrupt practices in procurement of howitzer guns.

Kargil coffin scam- 1999– Allegations of corruption on Government of India for incurring losses in purchase of coffins from US based company.

Background

Defence procurement for decades have been involved in controversies and scandals in India. Hardly any major defence procurement has escaped controversies. The defence contractors, including large foreign companies have come under cloud with shady dealings or atleast allegations of shady dealings. This has resulted in many of contractors getting blacklisted over several years. Some feel that blacklisting of companies have resulted in slowing down of defence procurement and is also affecting the defence preparedness of the Indian military. On the other hand, the need to punish the corrupt defence contractors and the political significant cannot be undermined. In the light of all this, the government has finalised the draft of the new defence blacklisting policy. This policy was promised in January 2015 and it is still expected to take 6 months more. But, a defence blacklisting policy is now long overdue which needs to set right many of the inadequacies in defence acquisition like modernisation and issues like blacklisting of companies. However, still these decisions are caught in yes minister, meaning the bureaucracy and the various rules and regulations.

The defence corruption scandals and allegations induced ‘Bofors syndromme’. Here, no decision making was done because there was a fear that criminality might be attached to the decision. Thus, a balance which was required between having moral high ground and ensuring that defence preparedness is in place was never attained. A former defence minister who was an honest politician, failed to perform as defence minister because his moral high ground position gave knee-jerk reactions and affected defence purchases. The defence forces were hit hard by existing blacklisting norms where many critical firms were blacklisted under a blanket policy.

The present defence minister has charted out three stages in blacklisting of defence contractors to ensure nothing is knee-jerk. The new norms will be a mixture of heavy fines, graded blacklisting and other penalties if there is a violation of integrity pact, if there is criminality, there are undisclosed agents who have been brought in, bribes have been paid or any document have been stolen (recent Scorpene leak).

The nuanced approach the defence minister has talked about- unless there is clear evidence of corruption or criminality, no blacklisting will be done.

Defence requirements or probity-what is important?

If any weapon system has been tested on field and it has been found to be appropriate for use by the defence forces then it is a separate issue from question of allegations of taking bribe or existence of any other maleficence. The purchase of the weapons should not be stopped if they are found most apt for use after field trials. Actions can be taken separately against officials who have been alleged of corruption.

If the organisation which is blacklisted comes up with an advanced technology, India will be the primary loser and will be starved of latest and inevitable defence technology.

Bernard Gray (former British defence adviser) gave solution when the Britain ran into trouble balancing probity with operation readiness. He gave measures such as penalties, blacklisting for short period, naming and shaming the companies etc. According to him, operational readiness should not be compromised on probity means.

The current defence blacklisting policy has lot of clauses from Bernard Gray recommendations. India has to get a system that will favour the procurement of equipment and not let that stagnate simply because one has to stand on moral high ground.

The new guidelines drafted can enable safety of officers but they should not stop procurement of equipment. The country should not be penalised because of few corrupt people. The defence minister said that there will be no blacklisting in an impulsive manner. Even if the CBI is examining allegations against the corrupt defence contractors, India will continue to engage with these companies till investigation is over.

When does the controversy start?

The operational requirements are laid down by the special branches of the operation of the three services. They are passed on to post-structure development branch, which does rest of the process in terms of induction including field trials. The cost is not by and large addressed by them. After that it goes to Ministry of Defence through various layers of decision making and ultimately to the Defence Acquisition Council. So far, not one case is heard that there is a problem at defence services HQ where bribes have been exchanged or an inferior equipment has been bought. Problem arises when everything goes to the Ministry of Defence.

Role of media

In AugustaWestland case, it took about a year for the government to act. When there was an extreme allegation in media on AugustaWestland indulged in corruption, soon there was an announcement of no dealing with AugustaWestland. This shows the sensitivity of politicians to media reports which makes them act impulsively, without verification. The allegations of corruption prevented India from buying best VVIP helicopters. The Scorpene data leak matter has to be handled with more care and efficiency in order to not affect India’s comprehensive critical capability.

Allegation is not reality

In 2001, India was buying equipment for the navy. It was found that all the companies that had bid for it had inquiries pending against them. The matter was taken to CVC who said that defence preparation and preparedness comes first and India should continue with the process of purchasing the equipment. The necessary procedures were followed with respect to purchases and later it was found that inquires had been baseless. So, till the inquiry is complete, the process should go on because defence purchases involve huge money and political as well as non-political interests. If there is opposition for being involved in talks with companies having allegations against them, the government can answer in parliament that inquiry is going on and simultaneously procurement can be conducted. This balances the need for defence requirements as well as waiting for right time for strict decisions.

However, if the inquiry finds that there has been corruption, government should look into the matter further and take action against corrupt officials. However, till then if no damage has been done to operational capability of the defence purchases, there shouldn’t be any instant reactions which stop the purchases.

Conclusion

In India, the Ministry of Defence is the single buyer. But it could not create an ecosystem where the incentive for criminality and corruption is reduced. The manufacturers have a nightmare while dealing with conditions and procedures. Also, over last 40 years, the electoral cycle has been connected with major defence acquisition. There is a situation where highest defence decision making is culpable in allowing a system which gives such little niches for criminality or corruption. Till date, after Bofors case, there is no artillery gun for the Indian army, there is a problem of rifle for infantry, there is a requirement of replacement of air defence guns and ultra light howitzers. Thus, new defence blacklisting policy is expected to overturn the blanket bans and expedite the process of defence procurement.

The Defence Ministry has cleared the new blacklisting policy, which is now being vetted by the Attorney General.

Connecting the dots: