Scams and system paralysis

Col R Hariharan

The latest scandal in the purchase of a dozen August Westland helicopters, dubbed by TV talk show honchos as Bofors-2 the vexing question why there are so many scams in our defence purchases? The biggest reason is globally there is a lot of money in it. According to a 2009 estimate, the world spent annually $1.6 trillion - 2.6 percent of world GDP – on things military including arms, equipment and services. A third of this amount was probably spent on buying arms and munitions. And India is the biggest buyer of them all; according to SIPRI statistics for the years 2007-11, India with a ten percent share tops world’s top 20 importers. But that is no consolation to the tax payer who is expected to pay 40 percent of this year’s budgeted Rs 193,000 crores defence expenditure on imports.

At best it is a dubious distinction to be the top most importer India because it is an acknowledgement that we do not produce enough weapons to equip 1.3 million men at arms, in the third largest army of the world we boast of.  It is a shame that after nearly seven decades of independence, India has not been able to produce a modern rifle for its armed forces and paramilitary. This is an anachronism    in a country that launches multiple satellites, builds atomic submarines and designs ballistic missiles.

The “Bofors 2” is not going to be the last scandal in defence purchases because many more orders are in the pipeline. As each scam pops up it reminds us that we have not shown competency to organize a clean system to import weapons let alone create a world class arms manufacturing industry in the country to reduce imports.

It is not that the Defence Ministry did not think of such things.  But apparently it is in sync with the way we to do things in this country – complicate simple things so that middlemen thrive on simplifying the complicated. MoD has evolved a complicated 12-step system for defence purchases. From conception to delivery each step has built-in delay potential so that a little grease applied in right spots could get bureaucratic wheel moving a little more easily. The purchase cycle usually goes on too long; the minimum gestation period is probably four years and it can go up to 12 years like the proverbial Gaja Prasav (elephant’s pregnancy). The thumb rule seems to be the higher the cost, the longer it gestates; it can go up to 12 years! After all even the much maligned VIP helicopter deal had taken over seven years from thought to action.

At the first whiff of scandal, the risk of the whole deal getting aborted at any stage is real. The MoD file cabinets of must be full of tombstones of such deals. The defence minister AK Antony appears to be in that post more to prevent corruption in defence purchases than getting the armed forces to be battle ready. He has blacklisted over a dozen major arms manufacturers across the globe. They include some of the best names in the business with exclusive patents for state of the art weapons.

Somehow, no power broker – politician, the shadowy middleman who should not be there, bureaucrat or service officer who has the clout – appear to have been punished in many cases of corruption investigated by CBI. Many cases are in limbo because it does not have somebody to prod the reluctant CBI into action. Nor have they discouraged the flow of kickbacks; more corruption cases are popping up in keeping with geometrical increase in armed forces deficiencies. And the scams have grown bigger from Rs 62 crore kickbacks in Bofors deal to Rs 340 crores in Augusta Westland deal. Neither the list of aborted deals nor the black list of manufacturers is likely to stop growing if this scheme of things persists.

So what do the armed forces do? Run around in circles like a cat chasing its own tail or start all over the process! What other options they have? Write a letter to the Prime Minister? No, way; every general will remember how the whole parliament jumped on the poor General VK Singh for the sin of writing to the prime minister of his concern at procurement delays affecting the battle readiness of troops.

So the obvious but unmentionable truth is if we reduce our over dependence upon imported weapons opportunities for big kickbacks would evaporate. So to prevent corruption that we evolve complicated processes of arms purchase that have so many objectives - offsets for indigenisation, power play through system of sanctions, resuscitation of ailing public sector, political pressures, super power real politick, and but not the objective of equipping forces in time.   

Arms manufacture in India is mostly in the hands of public sector firms, many of which have a monopoly in import the arms and military equipment as well. Tatra truck scam is a very good example how they operate. For years the public sector importer purchased vehicles of outdated technology from the same agent at higher than manufacturer’s price and sold it at marked up price to the army without any value. Army got inferior vehicles of dubious quality at exorbitant prices while public sector importer went to the bank laughing. And of course, the agent who was not supposed to be one went on thriving in this happy arrangement for a dozen years.

Who got the kickbacks in the transaction? If we go by past experience, the truth may never come out because scams come in waves and wash away the old ones from public memory. Bofors scandal is a case in point. Someone in the chain made Rs 64 crores in kickbacks; according to one report the nation spent close to Rs 250 crores to investigate it and after 25 years the case is still open in a closed shelf of the CBI. In American slang calls such results ‘zilch.’ I cannot find a better term to describe them.   

These things never see the light because of the blanket secrecy that shrouds all matters defence. It suits the black sheep among politicians, businessmen, arms manufacturers, unscrupulous bureaucrats and army officers and shadowy broker who is not supposed to exist. Scrutiny is in-house and inbred. Dependence upon public sector to deliver has brought in time delay as part of the whole process. And the nation and the armed forces are paying for their sloth and inefficiency. They need not keep in touch with global trends because another big establishment – the Defence Research and Development Organization (DRDO) is supposed to do that.  If public sector manufacturers are holy cows, DRDO is a temple bull. Its research is good in parts though much of it never gets translated into commercial level production.

The systemic problems, the delays, corruption at different levels stymie progress even if weapons are manufactured in ordnance factories. Typical is the case of six firms blacklisted for ten years in the case related to illegal gratification against former Director General of Ordnance Factories Sudipto Ghosh. Rheinmetall Air Defence, Zurich was one of the blacklisted firms. But General VK Singh in his hollowness in war-waging capability list submitted to the defence minister points out how the project to replace the barrels of T72 tanks with new 125 mm smooth bore barrels for 1800 tanks has been stalled because the supplier Rheinmetall has been blacklisted for 10 years! It is surprising General VK Singh’s March 2012 ‘hollowness’ letter with a disturbing list of serious deficiencies has not been taken up in parliament for serious discussion.

When a scam hits the roof or TV talk show, the government freezes the transaction and orders a probe. After sometime media jumps to another juicy bit and everyone forgets about it. The poor soldier at the border carries on as before with out-dated weapons. Unless another Kargil happens and the soldier is called upon to perform herculean tasks like a veritable David fighting Goliath, the issue is forgotten. In parliament the defence minister has spoken about taking up indigenous production to eliminate import scams. These are brave words; indigenisation has been more in though than action. In the last eight years he served as defence minister vested interests in government have shown little enthusiasm to change the current order of things.  So it will be business as usual I presume, when all the heat and fire generated by Westland scam dies down.

Speed, scale and skill - Narendra Modi’s watch words for development very much apply to nurture an arms industry. Let us throw the defence manufacturing industry completely open to private sector as well.  Let them compete with public sector; we cannot afford to feed holy cows any longer. That may not clean up the system, but it would make the cows and bulls run. Prices can be more competitive, products state of the art and deliveries timely. And probably the government will make more in tax revenue. But who will do it in the land of holy cows?   
Courtesy: The Pioneer, Sunday, February 24, 2013 titled "Indefensible deals"  http://www.dailypioneer.com/images/PDF/today_epaper.pdf