Arms and the middleman

India keeps learning the wrong lessons from defence scams. It must first stop being the world’s largest importer of arms and take a strategic turn towards indigenous procurement

Updated - May 03, 2016 02:12 am IST

Published - May 03, 2016 01:58 am IST

Under fire: “The Bofors scandal demolished Prime Minister Rajiv Gandhi’s dream run.” File photo of the Bofors gun in the South Madras constituency.

Under fire: “The Bofors scandal demolished Prime Minister Rajiv Gandhi’s dream run.” File photo of the Bofors gun in the South Madras constituency.

Allegations of wrongdoings in military procurements are as old as independent India. Within months of the country becoming free, there were insinuations that India’s first High Commissioner to London, V.K. Krishna Menon, had not adhered to procurement norms while ordering 200 jeeps for the Indian Army. Some 150 jeeps that finally landed in Madras port were refurbished second-hand ones, probably used in the recently concluded World War II. The allegations could do nothing to the maverick leader, who had become a cult figure of sorts in pre-Independence London with his oratory at Speakers’ Corner in Hyde Park. Menon’s blazing political career ended only in the wake of India’s humiliation at the hands of China in 1962, when he contributed to the disastrous conduct of the war as the Defence Minister.

Bofors scandal

There was a long break before India plunged into yet another defence scandal, this time with details emerging of kickbacks in the deal to purchase artillery guns from Sweden’s Bofors in the 1980s. The scandal that broke in 1987 shook up Indian politics, demolished young Prime Minister Rajiv Gandhi’s dream run, brought in coalition politics to the centre stage, and corruption became a key public agenda. However, no one really got punished.

Around the same time, German submarine maker HDW’s officials told the Indian ambassador that they paid 7 per cent commission to middlemen in a deal to supply submarines to the Indian Navy. The investigations wound up some time in the early 2000s, with the Central Bureau of Investigation (CBI) closing the case saying it had not been able to find any clinching evidence.

The 1990s was a wasted decade for military procurement thanks largely due to the disruption of the Soviet Union, India’s biggest military supplier. However, the Kargil conflict of 1999 and the military modernisation it kick-started were accompanied by machinations. After Tehelka’s ‘Operation West End’ exposed the murky modus operandi of defence deals, the CBI filed several FIRs pertaining to procurements.

Over the tenure of the United Progressive Alliance government from 2004 to 2014, there was a distinct change in the pattern of defence corruption and manipulations. The size of defence procurements had exponentially grown — the Scorpene submarine deal was estimated at Rs.18,000 crore, missiles were bought from Israel and helicopters and aircraft from the U.S., Russia, Israel and Europe for thousands of crores of rupees.

In the period, India also drew up a comprehensive Defence Procurement Procedure (DPP), and made “integrity clause” a must for all deals, but it did not end corruption. As India grew in its status as a moneyed shopper in the international arms bazaar, middlemen and shady operators all began to crowd into New Delhi.

Punishing no one

There is one unifying theme behind the seven decades of defence scandals in India: that we have drawn all the wrong conclusions from them. Thanks to this, India continues to perpetuate the very same scams on the military and honest taxpayer. It is a naïve merry-go-round. Nobody gets punished, or so it seems. That was the case in the jeep scandal, and that was the case in Bofors, HDW scandals and after the Tehelka exposé.

One of the least discussed aspects of military scams in recent years is how most of the allegations against major middlemen and companies that emerged in Operation West End have all disappeared. What the CBI in 2006 claimed was an elaborate manipulation of the procurement process to push through Soltam guns has now been buried in courts, with the investigation agency itself saying that the alleged kickbacks were money meant for selling kitchenware! In the Bofors scandal, after spending over Rs.200 crore on investigations, the CBI was not able to send any high-profile individual to jail. In the HDW scandal, over 15 years after it raided former Navy chief Admiral S.M. Nanda accusing him of being a middleman for the German company, the CBI closed the case saying there was no evidence to nail the accused. The outrage that accompanies initial claims is absent and there is no public scrutiny when CBI and other agencies finally give up.

All defence scandals have an international dimension to them. Though the money paid originates from the government exchequer, it is paid abroad, and commissions are distributed across secretive tax havens. Despite the complexity of the cases, none of our investigation agencies have cared to develop any significant skills in tracking global financial transactions, especially where it involves tax havens, shell companies and proxy directors.

The political stakes

However, there is more to this than meets the eye. Black money, including that from arms deals, has a powerful role in Indian politics. Political parties, except for a couple of exceptions, suck in massive amounts of black money to sustain their operations and their lavish election-time spending. Arms deals continue to be a key source of such illegal funding, although the bouquet in recent years also includes money from real estate, land deals, mining, etc.

For India to come out of this cycle of scams, of which Choppergate is only the latest, some important aspects need to be addressed. It must stop being the world’s largest importer of arms and take a strategic turn towards indigenous procurement. To create a robust military-industrial complex in India, a restructuring of its engineering curriculum, its procurement procedures, military research systems, etc. are required.

‘Make in India’ is a good first step, but for now it is a mere slogan. Painful decisions, including abandoning some ongoing expensive procurements from abroad, are important to help push Indian private sector into the procurement cycle. India will end up spending at least Rs.5,00,000 crore in the international arms bazaar in a decade, which means that at least Rs.50,000 crore, by bazaar estimates, could be the commission available to middlemen to grease palms.

There is no willpower visible as yet to dramatically reverse India’s appetite for foreign acquisitions, only the promise that this absurd theatre will return in the not-too-distant future.

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