Cover Story: Comment

Defence Deals: Scam-Scarred and Not Really Battleworthy

Maroof Raza is consulting editor, strategic affairs, at Times Now and an author
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More murky defence deals mean another long lull in the purchase of crucial equipment for the armed forces

SINCE INDEPENDENCE, almost every major defence deal initiated by India has run into a controversy. The Jeep deal of 1948 and the HDW submarine and Bofors gun deals of the 1980s are some that are often cited. By 2002, a Defence Acquisition Council had been created, and soon after, the Defence Procurement Procedure (DPP), which has been revised many times over. It has clauses to keep out middlemen and to ensure the integrity of the weapons supplier (the Original Equipment Manufacturer or OEM in official parlance). But despite that, we now have the AgustaWestland scandal—which is about VVIP choppers, with the Indian Air Force and Special Protection Group involved in their purchase—which is making headlines with allegations of bribes being taken by some people in India to facilitate the deal. The question that is being asked, apart from who took the bribes, is how this rot can be stemmed. To do this, one must understand where the rot lies.

India offers one of the largest markets for arms sellers, primarily because our own defence manufacturing capabilities are yet to meet the expectations of our armed forces, the hype about ‘Make in India’ notwithstanding. The reasons are many. For one, India’s public sector undertakings—DRDO, HAL, etcetera— have been content assembling military equipment that is designed and made abroad, since a combination of R&D underfunding and the constant shifting of goalposts by the armed forces takes indigenous projects back to the drawing board again and again, which delays production till the point these appear outdated. Also, with every service chief wanting a set of ‘crucial’ items immediately, there is no time for them to design, test and finally induct weapons of domestic origin, a process that usually takes 10 to 15 years.

The services regard these PSUs as white elephants, while the PSUs find the design demands of the services absurd. Meanwhile, the countries that make state-of-the-art weapon systems—the US, Russia and some European nations—are unwilling to transfer technology for the same since this would eat into the profits of their own military industrial complex. Thus, India’s armed forces have no choice but to seek weapons and equipment from abroad.

Independent India’s defence forces have had to battle attempts by Pakistan to occupy Kashmir in 1947, 1965 and 1999, as also the Chinese invasion of 1962. And then there have also been Indian interventions in Bangladesh in 1971 and Sri Lanka in 1987-89, apart from some maritime missions. Plus, over the past quarter century, there have been repeated attacks by Pakistan-sponsored terrorists to ‘bleed India by a thousand cuts’. Add to all this the need to quell internal insurgencies and meet other challenges that call for military operations—earthquake and flood relief, for example—and you have a weapons wish list that requires foreign purchases to fulfill.

India offers one of the largest markets for arms sellers because our own defence manufacturing capabilities are yet to meet the expectations of our armed forces

In addition to threat perceptions, India’s need for advanced equipment is heightened by the country’s strategic ambitions, and, for that matter, the role the US and some others expect the country to play in the region.

India, thus, is one of the world’s largest importers of weapon systems, even though the purchase process is long and unpredictable, as the AgustaWestland scandal has shown. There are various figures that do the rounds of India’s planned defence spending, ranging from $150 billion to $400 billion over the next decade. Analysts say there is no way India can meet its defence needs in an annual budget of less than 4 per cent of GDP (roughly the same ratio as the US). If India wants a first-class military force, it would perhaps need to up the figure to 6 per cent of GDP. However, while India’s neighbours have steadily increased their defence spending—China has upped it by 441 per cent in the last decade, Pakistan by 107 per cent, Bangladesh by 202 per cent, and Sri Lanka by 197 per cent— the country’s defence budget has fallen below 1.8 per cent of GDP, despite a Parliamentary panel recommendation of 3 per cent.

Critics of Indian defence spending argue that as India has no stated military or territorial ambitions—unlike Pakistan that remains obsessed with the accession of Kashmir—New Delhi must exercise restraint in arming itself. This is an argument that has found takers since the days of Jawaharlal Nehru, who was initially of the view that India’s defence spending should be kept to a minimum even though the armed forces kept asking for more funds and better equipment in the 1950s. But adversaries do not wait for you to be prepared for war, as China demonstrated in 1962 with an invasion that put an end to Nehru’s idealism.

It is nobody’s case that India must arm itself to its teeth. But much of India’s military equipment is outdated, and even if the country were to trim its purchase list—by opting for 36 Rafale fighter jets, for instance, instead of the 126 being demanded by the Air Force—the scale of the orders would be large enough to attract every arms merchant worth its name. In December 2015, India’s Ministry of Defence pegged the total value of cleared projects at Rs 1.5 lakh crore, with projects worth Rs 55,800 crore okayed under the ‘Make in India’ scheme. These are large sums, and since the competition to secure orders is fierce, so is the tendency of suppliers to deploy bribery as a tool to get them.

If there are changes to suit end-users, the cost can go up many times. AgustaWestland pushed the cost up from Rs 800 crore to Rs 3,600 crore

The Government has cleared the purchases of critical weapon systems like the M777 Howitzer guns for the Army’s artillery arm, as also contracts for six conventional submarines under Project 75i at a cost of about Rs 80,000 crore. Torpedoes for submarines and choppers for the Air Force and Army are also on their way. But with the Defence Minister having announced that all defence deals signed over the past decade will be re-examined, it can safely be assumed that the desperately needed modernisation of India’s armoury could face another bout of delays, given how long and cumbersome the acquisition process now is.

In the 1980s and a few instances more recently (such as with the US), many of the deals that were signed took the FMS or ‘government to government’ route. This works well when you opt for equipment that doesn’t have an equivalent elsewhere, and the foreign government gives a certificate of its operational efficacy. It also leaves no room for middlemen. It was because all we need cannot take this route that Indian officials put together a DPP in 2002, which was around the time that the VVIP helicopter deal was being re-negotiated.

The DPP works something like this. First, each military service makes a projection of its requirements based on operational needs and/or the lifespan of existing equipment (it was the need to replace Russian-made Mi-8 helicopters that led to the shortlisting of AgustaWestland’s AW101s). Next, a ballpark cost of the item is arrived at (in the case of the VVIP choppers in the eye of the storm, it was Rs 793 crore), along with broad specifications (GSQR) of the equipment desired. After the requirements are approved by the Ministry of Defence, the service sends out ‘requests for proposals’ to OEMs, and those keen on fulfilling the order must agree to provide models for trial on a ‘no- cost-no- commitment’ basis. However, before the trials begin, the OEMs are required to sign an ‘integrity pact’ that is essentially about ensuring there’ll be no kickbacks or bribes. (AgustaWestland had signed it and so did its rival Sikorsky, though the Russian OEM refused to do so.)

The central issue is that the armed forces are now in for another long lull in the purchase of crucial equipment that they require to remain battle-worthy

WHY DO KICKBACKS still take place? For an answer, one needs to understand how the Indian system operates. The process of equipment trials—across various terrains and weather conditions—is undertaken by the respective services, and can take several years. After this is done and a shortlist prepared, the politicians and bureaucrats of the Defence Acquisition Council begin price negotiations, with the vice-chief of the service, also a member of this team. The final approval for deals worth $100 million or more is given by the Defence Minister and Cabinet Committee on Security (the AgustaWestland deal was in excess of $600 million). If there are specification changes made to suit the whims of end-users in India, the cost of the equipment can go up many times (in the case under the scanner now, the PMO and SPG wanted a chopper that would let a six-footer walk around, equipped with multiple engines, an anti-missile system and medical evacuation facilities, all of which AgustaWestland’s AW101 apparently had, though it pushed the cost up from Rs 800 crore to Rs 3,600 crore).

A few things stand out as unusual in the AgustaWestland deal. First, the huge variation in the initial estimate and the final cost could have been questioned if this were widely known. Sadly, despite all the trumpeting of how good the DPP is, our system, like most other hierarchical ones, doesn’t have enough transparency. This must change. Secondly, our services are notorious for changing their specifications endlessly, often asking OEMs for the moon, and this prolongs negotiations, escalates bills and makes room for envelopes to be passed around in South Block. We therefore need a new dedicated team of professionals who can handle such purchases smoothly in a much tighter time frame. Most service officers are posted out before they’ve fully understood the game. Finally, while the bulk of the financial power rests with politicians, they neither have the domain expertise nor the experience in handling such complex deals, relying as they allegedly do on either the directions of their party’s top brass or their own resources to make decisions. It will save the country a lot of time and money if the details of all defence deals are made public before they are signed.

The secrecy that surrounds most things related to national security is a sorry legacy of the Nehruvian era. And though the level of public awareness is much higher than it was in the 1960s, when politico-military bungling was kept secret till a Himalayan blunder shook the nation, there exist deeply vested interests even now within ‘babudom’ to keep things as they are. Indian politicians have been happy to have guns fired off their shoulders, as long as they get a tidy sum of the loot.

The agents that represent arms lobbies are a reality of the arms bazaar. And though they have been banned by the DPP, they still operate in India. This being so, we need to find a better way to deal with them. Equally important is for India to have a national security doctrine to plan for the purchase or development of weapon systems. Only then can we have a long-term integrated perspective plan, as the DPP mandates. At present, each of India’s armed services has its own doctrine, as if preparing to go to war all by itself. The armed police forces are even worse off. They have none at all.

Thus it is that we continue to lurch from crisis to crisis. But, in all the cacophony of charges being traded, the central issue that gets little mention is that India’s armed forces are now in for another long lull in the purchase of crucial equipment that they require to remain battle- worthy, as those keen to avoid any controversy will ensure that no big ticket purchases take place in the years ahead. Such scandals only compound the abysmal state of affairs that lend credence to the cynic’s view that ‘India’s first rate military is saddled with outdated and obsolete equipment’.

With indigenous weapons still far off and with India’s previous defence minister having shown greater zest in cancelling contracts and blacklisting companies than equipping our forces with what they need, our consideration set of companies to buy arms from is already severely restricted. We cannot go on like this anymore.