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Wednesday, Nov 26, 2008
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Policy on arms purchases reversed

Sandeep Dikshit

Vigilance status of Israeli companies should be assessed
South African company Denel blacklisted earlier

NEW DELHI: With the approval of a procurement of three squadrons of low-level quick reaction missiles from two Israeli companies, the government has reversed its own policy of not dealing with arms companies involved in corruption cases.

Not only has the Cabinet Committee of Security (CCS) cleared this multi-million dollar purchase, it has specified that all other procurement cases of IAI and Rafael, both Israeli companies, could also be processed.

The only rider is that in each of the cases, the vigilance status of the two companies should be assessed while seeking CCS clearance. The clearance to dealing with Israeli companies, who figure in a Central Bureau of Investigation case for corruption, makes it possible for the companies to continue participation in several lucrative deals.

Highly placed sources said although the Ministry of Defence was reluctant to deal with the two companies, the writ of the higher authorities was invoked to make the bureaucracy fall in line.

Officials were told that progress would be made in the procurement cases — where either IAI or Rafael have emerged or are likely to emerge as the vendor with whom commercial negotiations are to be undertaken or are under way — and their vigilance status assessed and brought out in each case while seeking approval.

This contrasts sharply with the manner in which the government banned Denel, a company from one of its close political allies, South Africa. Even as the investigating agencies began probing the charges, the then Defence Minister Pranab Mukherjee promptly set up a committee which recommended the blacklisting of the company from each and every tender it was participating in.

Officials here argued that the reason Israeli companies have been allowed to continue is because they not only helped India during awkward moments during the Kargil War of 1999 with Pakistan but also assisted India actively in beefing up its counter-insurgency and defence-preparedness by providing “state-of-the-art equipment.”

The reluctance to blacklist Israeli companies was manifest two years ago when the scandal surfaced, allegedly involving the then

Defence Minister and Chief of the Naval Staff. Denel had by then been blacklisted one year back but officials were confident that such a case would not befall Israeli companies even though the case against Denel has made little progress.

Following the Bofors scandal, a mandatory clause in defence procurement agreements states that a company can be blacklisted and all contracts cancelled if it uses middlemen in deals. Companies now must also sign an integrity clause in which they promise not to use unfair means to obtain orders, otherwise they would be barred from participating in future tenders. Officials may be right in stating that the blacklisting of companies from Israel, whose large proportion of defence production now finds its way to India, could hurt defence purchases. But the same is true in the case of Denel.

A vitally required ordnance plant to be built with Denel’s help is stuck due to the corruption case.

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