New Delhi’s decision to cancel its contract for the purchase of AgustaWestland AW101 helicopters has sent out a much-needed message to companies seeking a share of India’s growing defence market: bribing their way past the door does not pay. The AW101 deal involves some of the most serious allegations of corruption since the Bofors scandal, with allegations being levelled against former Air Chief Marshal S.P. Tyagi and his relatives. In a First Information Report filed last year, the Central Bureau of Investigation had alleged that middleman Guido Haschke used a Tunisian front company to route kickbacks to Air Chief Marshal Tyagi’s relatives to help tweak technical specifications that allowed the AW101 into the race. Mr. Tyagi denied wrongdoing, saying he had no role in the decision-making process. The CBI, however, wants to move forward on filing charges after a Ministry of Defence team now in Italy questions Mr. Haschke. New Delhi has agreed to arbitration demands by AgustaWestland, which may be a protracted and unpredictable process. It is probable, though, that the Central government felt the need to send out a strong message ahead of the general elections later this year. The fact that AgustaWestland’s parent firm, Finmeccanica, is Italian was certain to have been used by the Opposition to embarrass Congress president Sonia Gandhi.
Though the government’s commitment to eradicating corruption in defence purchases is welcome, the AgustaWestland case raises difficult questions on how best to address a problem that has dogged the country for decades. India has now blacklisted at least 15 firms on corruption-related charges, in the process delaying critical acquisitions. From artillery to electronics, contract after contract has come under suspicion, making officials wary of expeditiously processing even legitimate projects. In this case, the technical qualities of the AW101 are not in doubt: the helicopter won the approval of not just the Air Force, but also the Special Protection Group. The equipment now being used by the Prime Minister is obsolescent. In 2012, the Naresh Chandra Committee on defence reforms had suggested alternative measures to punish firms indicted for corruption, including harsh financial penalties. The government, though, has not shown much interest in institutionalising these alternatives. Nor has it moved to streamline the defence procurement procedure, which would allow for alternatives to be rapidly selected when one vendor is hit by scandal. Having taken a demonstrative stand against corruption, it is imperative that the government also makes sure legitimate defence needs are met.