Defence ministry proposes 10-year ban for firms that pay kickbacks

  • Shishir Gupta and Rahul Singh, Hindustan Times, New Delhi
  • Updated: Aug 19, 2016 01:13 IST
Defence minister Manohar Parrikar interacts with journalists in Jabalpur. (HT File Photo)

The defence ministry has finalised its blacklisting policy for arms contractors, with new penalties debarring firms from conducting business with the government for a period ranging from one to 10 years. South Block sources said on Thursday that these provisions would be invoked in case criminality is proved or there’s evidence of kickbacks being paid.

The new policy has been sent to attorney general, the country’s senior-most law officer, to legally vet the policy aimed at removing corruption in the defence sector.

In case a defence firm is found to be guilty of paying bribes to bag an order, the duration of the investigation against it will be taken into account while prescribing the ban, sources said. The provisions of the policy will apply to UK-based AgustaWestland, embroiled in Rs 3,727-crore VVIP chopper scam.

However, if no criminality is found, the punishment meted out will be less harsh. Firms guilty of procedural lapses, oversight or omission will be allowed to conduct business with the government if they agree to pay hefty fines.

After the NDA government came to power in May 2014, it has remained focused on bringing out a blacklisting policy that strikes a balance between the need to punish defence contractors who may have violated the law and to keep the military battle-ready.

Reflecting that approach, the government decided in August 2014 it would not allow Italian defence giant Finmeccanica, the parent firm of AgustaWestland, to take part in future military tenders till further notice. But ongoing contracts with the defence major would continue.

The defence ministry’s decision not to blacklist Finmeccanica followed the AG’s advice that a complete ban on the group could affect the military’s combat readiness.

India also froze all contracts with British engineering giant Rolls-Royce (RR) following a bribery scandal but orders for supply of spare parts for aircraft engines were approved on a case-by-case basis after assessing urgency.

The previous UPA regime had blacklisted six defence companies, including four foreign firms, for 10 years following allegations of corruption.

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