India will consider hiring arms agents and doing business even with blacklisted defence firms in a limited capacity to reinforce the military’s arsenal that was hemmed in by the previous UPA government’s ban on some major suppliers caught in corruption allegations.
“Based on merit and necessity, we can consider lifting the ban (on tainted firms) to a reasonable level,” defence minister Manohar Parrikar said on Tuesday night.
The move to change the rules of arms trade is in line with the NDA government’s plan to strike a balance between the need to punish errant defence contractors and to keep the forces operation ready, as reported first by HT on July 23.
Parrikar said the government would release guidelines by February on hiring “representatives” to facilitate arms trade, factoring in the military’s interests at a time the defence procurement policy is being overhauled to obliterate the UPA administration’s rigid approach.
Being the world’s biggest arms importer, with Russia as its prime supplier from 2009 to 2013, the country could ill-afford to continue with its blanket bans on defence firms and persist with a depleted armoury of knocked down equipment, an expert said.
The main beneficiary of the NDA government’s flexible approach is the state-owned Bharat Earth Movers Limited (BEML), which has been allowed to source spares for Tatra military trucks as long as it does not deal with the British subsidiary of the firm banned by the UPA administration.
Heavy vehicle maker Tatra was banned in March 2012 after then army chief General VK Singh’s allegations that he was offered bribe to clear “sub-standard trucks” supplied by the company to the army.
“The banned company is Tatra UK and we have permitted BEML to deal with the original company which is owned by different people now,” Parrikar said. Other than Tatra, Rolls-Royce and Finmeccanica would also benefit from the revised policy.
The NDA government has allowed the IAF and the navy to procure spare parts for aircraft engines from Rolls-Royce despite the British engineering giant coming under the scrutiny for a bribery scandal in March.
Italian defence giant Finmeccanica, which had a Rs 3,600 crore deal with India for VVIP helicopters, was among a number of companies blacklisted during UPA defence minister AK Antony’s term. The Narendra Modi government in August allowed Finmeccanica and its subsidiary Agusta Westland to carry out existing contracts, though the bar on participating in future tenders remained.
“Finmeccanica has 39 subsidiaries. Should we stop dealing with all 39? I don’t agree. The military needs equipment,” Parrikar said.
The minister stressed the need to let foreign vendors approach a possible deal through agents, whom he preferred to call representatives or technical consultants perhaps to allay fears in a country which looks at such negotiators with suspect because of a rash of bribery scandals — the most infamous being Italian businessman Ottavio Quattrocchi in the Bofors scam.
Parrikar said the expenses incurred by the “representatives” could be reimbursed but there was no question of paying them success fee or commission. “That means you cannot get a bonus out of an order, you cannot get success fees out of order, you cannot get percentage out of this ... You can definitely appoint a person for certain fees provided you disclose it to the defence department in advance.”