Wednesday, 21 November 2007

From Russia with… a bill

by Ajai Shukla
Business Standard, 20th Nov 2007

With collective eyes glued on the warming relationship with the USA, and the talked-up contest with China, most watchers have brushed off the icicles forming on the India-Russia partnership. But the foreign ministry rhetoric of “historical ties” and “strategic partnership that has stood the test of time” cannot paper over the widening cracks as a resurgent India and a resurrected Russia find themselves growing in different directions. The embers in the relationship have turned to ashes and things could get worse.

The politics are no longer right. New Delhi’s dance with Washington is timed in sync with Moscow’s adoption of a hard line towards the west. The trilateral Russia-China-India talk shop is an ineffectual band-aid over a deep sword cut, because Moscow has few expectations from either India or China. Russia’s Ministry of Foreign Affairs complains that both Asian giants pay lip service to multi-polarity, and the primacy of the UN, while actually aligning their foreign policies to the US in order to gain short-term objectives like the lifting of sanctions, preferential trade relations, and an easier visa regime.

Prominent foreign policy analysts in Moscow complain about “the inertial foreign policy thinking of Russia’s potential allies… including China and India.” Russian realists, who now make policy, know that Russia, even with its new hydrocarbon wealth, cannot match the US in dealing with China and India. Moscow, conclude these analysts, would do better to concentrate on its own back yard --- the Central Asian Republics and the Caucasian Republics of the former Soviet Union.

If this changing political dynamic is the invisible cause, its most visible symptom is the crumbling of the arms relationship. With Russia no longer shipping in subsidized weaponry, South Block has not yet fully accepted the purely commercial nature of Moscow’s arms sales to India. The acrimony over Russia’s insistence on renegotiating the price of the Gorshkov aircraft carrier, and the Sukhoi-30 fighters, symbolises the new relationship.

New Delhi’s irritation partly rests on its perception that Indian arms purchases have bankrolled Russia’s defence industry for the fifteen years after the Soviet Union melted down into a bankrupt Russia. When three quarters of Russia’s famous military design bureaus ran dry from lack of funding, putting a million defence scientists on the streets, India bankrolled Moscow’s defence production estate, placing orders for warships, fighters, missiles and avionic upgrades that kept Russian factories rolling. That Russia now wants to renegotiate the prices that were agreed upon then is seen in New Delhi as not just breach of contract but also breach of faith.

But India’s importance for Russia’s defence industry has diminished and that is due not just to the petrodollars flowing into Moscow’s treasury, enabling Russia to place large orders of weaponry for its own military. In addition, a new group of customers who are signing up for Russian weaponry have made Russia less dependent on sales to India. First China supplanted India as Moscow’s top buyer; in 2006 and 2007 a host of smaller countries have knocked China off the pedestal. Amongst the $14 billion worth of arms deals signed by Russia in 2006-07, the biggest customer was Algeria, with a $7.5 billion order for a range of defence systems. Venezuela placed a $3 billion order, while Malaysia, Indonesia and Vietnam ordered more than a billion dollars worth of Russian arms. Russian strategists exult at having broken out of “the China-India arms sales ghetto”.

But India remains dependent on Russian arms, for several reasons. With 70% of India’s military carrying Russian weaponry, switching to another supplier entails a cost in terms of inter-workability. Another reason is that Moscow remains either the only vendor willing to give India sensitive systems like nuclear powered submarines and strategic bombers, or to jointly develop futuristic equipment with India. Finally, in India’s fractured polity, Russia remains a politically acceptable supplier. New best friend, America, has signalled its willingness to sell India one of its front-line nuclear-powered aircraft carriers, the Kitty Hawk. But one has only to recall the furore from the Left when the Kitty Hawk came to the Bay of Bengal for exercises in September to realise that, like the US-India nuclear deal, India’s communists would vehemently oppose a Kitty Hawk purchase.

With the political logic and the arms relationship now entering a new trajectory, Russia and India cannot look towards trade and commerce to prop up their relationship. Bilateral trade is actually falling; from an insipid $5.2 billion in 1991, it has halved to $2.5 billion today. Without the proposed north-south corridor, through Iran, which is touted as the magic bullet for boosting Russia-India trade, the Prime Minister’s target of $10 billion by 2010 is thoroughly unrealistic.

Like in every relationship that changes over time, New Delhi must be nimble rather than nostalgic in reaching a new equation with Moscow. The energy relationship must be evaluated in a hard-nosed manner. Russia has already made it clear that future sales of nuclear reactors will take place only after India obtains exemptions from the NSG. And while India would like to be allocated oil exploration blocs in Russia as a favoured partner, Moscow would rather allocate them to western buyers, creating dependencies that could be leveraged later.

As India transforms into a regional, and then a global power, managing changing relationships will be a key challenge. Forging a mutually beneficial and more equal relationship with Russia is a high priority.

Saturday, 17 November 2007

MoD violates norms for its cash cow, BEL

by Ajai Shukla
Business Standard: 16th November 2007

Bharat Electronics Limited (BEL), the Ministry of Defence’s (MoD’s) most lucrative cash cow, continues to demonstrate how India’s eight Defence Public Sector Undertakings (DPSUs) can rake in the profits even while their prime customers, the military, complain bitterly.

Last week, BEL handed the MoD a dividend cheque of Rs 109.24 crores, on its highest net profit of Rs 718.16 crores for 2006-07. But going by the Indian Air Force (IAF) Deputy Chief, Air Marshall NAK Browne’s written complaint to BEL and the MoD (reported yesterday in the Business Standard), BEL’s highest ever turnover of Rs 3953 crores came less from producing quality products and more from using influence within the MoD to arm-twist the military into buying its radars, sonars, wireless equipment and electronics. 

Sources within the army, navy and air force cite several examples of how BEL’s influence works. A growing scandal is the unexplained violation of the MoD’s own norms in the procurement of some 30,000 night vision devices (NVDs) for an army that must scan the borders around the clock for militants sneaking in under cover of darkness. Instead of publishing a global tender for a contract that involves cutting-edge technology, the MoD gifted the contract to BEL, astonishingly asking the company to float the tenders for the contract. Instead of being one of the runners in an international race, BEL has been awarded the winners prize. 

All BEL must to do to set its cash registers ringing is to buy the high-tech image intensifier technology and select another company for the lower-end manufacture (outer casings etc) in India. This grossly violates Defence Procurement Procedure – 2006 (DPP-2006) but the MoD has turned a blind eye. This contract, worth over Rs 300 crores, will make BEL’s bottom line look even better next year, courtesy captive military customers who are not given the choice to buy cheaper elsewhere.

The MoD takes cover behind the principle of indigenisation, even though the critical technology has been purchased abroad and will, in BEL’s hands, become quickly outdated. This is exactly what has happened before. In the late 1990s, BEL went through the same process, buying NVD technology from Dutch firm, Delft, and making handsome profits by supplying the products to the army. A few years later, that earlier technology has evidently not been absorbed by BEL; the next generation of night vision technology is being bought afresh, and BEL is making profits all over again.

There is clear conflict of interest here. BEL’s board of directors features senior officials from the MoD, who take key decisions on awarding these contracts. An even more brazen conflict of interest occurs in the way senior military officers, who are in a position to block DPSU or DRDO contracts are hired, post-retirement, as consultants by these organisations. 

A case in point is the Artillery Command Control Communication Systems (ACCCS), which is a high-tech computerised system for bringing down quick and accurate fire onto a target from artillery weapons like the Bofors gun. As is now standard practice, a partnership between BEL and DRDO was given the contract, without any tendering. A senior officer, Lt Gen S Pattabhiraman, was closely associated with the project, first as Director General Information Systems, then as the Western Army Commander, and finally as Vice Chief of the Army Staff. As soon as Lt Gen Pattabhiraman retired, he was appointed a consultant with the DRDO, with the full knowledge of the MoD.

The ACCCS project cannot even claim to be going well, having already overshot its budget by Rs 300 crores. Running years behind schedule, and under pressure to deliver, BEL-DRDO threw indigenisation overboard and bought 900 tactical computers (the centre-piece of the ACCCS) from Israeli company, ELBIT, for Rs 110 crores. These computers are based on the outdated Pentium-3 processor. This is a design so outdated that it is no longer available in the market, but it will underpin one of the army’s key systems for the next 25 years.

DPP-2006, with all its emphasis on global competitive bidding, has failed to dent BEL’s clout. The MoD has awarded, without competitive bidding, a Rs 40 crore contract to BEL-DRDO for developing a crucial air defence system (ADC&R), the components of which are freely available off-the-shelf. BEL’s bottom line looks set to grow further.

Air Force slams BEL for unfair trade practices

by Ajai Shukla
Business Standard: 15th November 2007

Last week, Defence Minister AK Antony presented before the parliament’s Standing Committee on Defence a glowing report on the performance of India’s Defence Public Sector Undertakings (DPSUs). In 2006-07, the eight DPSUs earned Rs 17,855 crores, comfortably exceeding their target of Rs 15,625 crores. Profit after tax was Rs 2445 crores, two and a half times the target of Rs 1,034 crores.

Mr Antony, however, omitted to tell the standing committee about the growing chorus of complaints from the military about being railroaded into buying from the DPSUs, equipment that was actually developed and manufactured by foreign Original Equipment Manufacturers (OEMs). The DPSUs’ role, allege the services, is restricted to importing the equipment from the OEM, adding a hefty percentage to the price, and then selling it to the military, boosting their own profits.

Now the Indian Air Force (IAF) has decided that enough is enough. On the 31st of August, the Deputy Chief of Air Staff, Air Marshall NAK Browne, fired off a letter to the Chairman of Bharat Electronics Ltd (BEL), with a copy to the MoD, complaining that BEL is misusing its status as a DPSU to arm-twist the IAF into buying equipment that is sub-standard, or equipment that has actually been developed by foreign vendors, with BEL incorrectly claiming ownership.

In that letter number Air HQ/S 96135/12/2/ASR(TY BM-IV), which has been reviewed by Business Standard, Air Marshall Browne complains that:

• When BEL equipment fails to meet the IAF’s requirements during field evaluation, the company tries to overturn the rejection by sending representations to the MoD. The letter points out, “In all the cases, these representations have been found to be devoid of merit.”

• In the purchase of a critical electronic intelligence system (called the Ground Based Mobile Elint System), “BEL was importing sizable and critical sub-systems from sub-vendors abroad”. Apparently, BEL was not developing the system, but merely purchasing components, slapping them together, and selling them to the IAF.

• This became evident when the IAF was evaluating the sub-systems, where air force officers were surprised to find that “most of these sub-systems were demonstrated by OEM representatives and not by BEL.”

• That BEL was merely a front for foreign companies like M/s Elisra, Israel, and Ms Indra, Spain was clear from the fact that, “BEL representatives were mere observers and could not participate in the demonstration in any manner.”

• Despite knowing nothing about the equipment, complains the IAF Deputy Chief, “letters are being repeatedly sent by BEL to IAF and MoD extolling BEL’s capability to manufacture and support them.”

• The IAF Deputy Chief’s letter expresses outrage that when the (foreign origin) equipment was found inadequate during testing, it was BEL that represented. 

The letter reminds BEL that the Defence Procurement Procedure 2006 (DPP-2006) treats all vendors equally, implying that BEL should stop expecting favoured treatment. 

Finally, the IAF Deputy Chief points to the sub-standard quality of BEL equipment, suggesting that it “refrain from adopting these types of measures and instead focus more on improving the technical specifications (of equipment).” 

Commenting on the letter, the MoD has not denied that BEL does buy equipment off-the-shelf from abroad. Mr KP Singh, Secretary Defence Production, says that “there is little point in re-inventing the wheel”.

BEL is often praised for reducing reliance on foreign vendors in products like radars, sonars, wireless and electronic warfare systems. It claims to have indigenised 80% of its turnover, but the IAF’s letter places a question mark over that figure. The army, too, has often complained about BEL’s enormous clout in the MoD, which allows it to shape procurement decisions to suit its own interests rather than national security.

Army think tank in trouble

by Ajai Shukla
Business Standard: 13th November 2007

Proponents of a high-tech and strategically focused military have long complained that the Indian Army is so preoccupied with its commitments in J&K and on the China border that it fails to consider seriously the challenges of the future. If one were to go by the ongoing uncertainty in the army-affiliated brains trust ---- the Centre for Land Warfare Studies (CLAWS) --- the army would appear better at running tanks than think tanks.

CLAWS, inaugurated in 2004, was to be the army’s forum for contemplating the battlefield of the future. This, it has failed to do. Funded through a Rs 5 crores corpus from the defence budget, and headed by a retired three-star general, Lt Gen Vijay Oberoi, the seminars and studies that CLAWS conducted have never been translated into doctrine, strategy or plans. Now, in a terse letter, Lt Gen Oberoi has resigned “on account of irreconcilable differences with the establishment.” Tuesday was his last day in office. 

Senior army sources complain that the absence of quality research or tactical papers on subjects directly related to land warfare, CLAWS’ core mandate, was due to the think tank’s preoccupation with high-profile seminars. In November 2006, at a well-attended seminar, CLAWS presented proposals for salary hikes for the military by the 6th Pay Commission. In February 2007, it conducted an international seminar on “The Emerging World Order”. The most recent seminar on “Disaster Management” deviated even further from the study of land warfare.

For all this, CLAWS has utilised approximately Rs 40 lakhs each year, in addition to getting most of its infrastructure --- office space, office equipment, clerks, and posted officers --- from the army. In contrast, the air force and navy think tanks, the Centre for Air Power Studies (CAPS) and the National Maritime Foundation (NMF), have stuck to their mandate and played roles in evolving operational concepts for the air force and the navy. 

Lt Gen Oberoi’s departure comes in the wake of hard questions finally being asked by CLAWS’ oversight body, an Executive Council, headed by the army’s deputy chief. Senior army sources say that the long rope granted to Lt Gen Oberoi was due as much to his personal stature as to the fact that he had close regimental and personal linkages with the previous army chief, Gen JJ Singh, who was also the ex-officio Patron of CLAWS. Just 22 days after Gen JJ Singh retired, Lt Gen Oberoi submitted his resignation.

On Monday, the army interviewed a potential successor, Brigadier Gurmeet Kanwal, but it will take time and effort for CLAWS to reorient itself towards genuine land warfare concerns of the future, such as the Naxal threat, electronic command and control systems, or cyber attacks on military electronics. Its current research scholars are engaged in dissertations on subjects like human resource development, defence economics and disaster management. Its next seminar is on the political turmoil in Pakistan. Land warfare is still nowhere on the horizon.

Tuesday, 6 November 2007

The Shah of Pakistan

by Ajai Shukla
Business Standard, 6th Nov 07

Most commentators are being short sighted in viewing the drama being played out in Pakistan as a political struggle for power in Islamabad. In the immediate term the political deal making, Musharraf’s declaration of emergency, and the inevitable arrests and counter-agitation would make it seem that. But broadening one’s gaze to events across Afghanistan and Pakistan’s North West Frontier Province (NWFP), growing radicalization across the country, and a security and political establishment that is cracking under the stress, it is clear that battle has been joined not just for power in Islamabad but for the very soul of Pakistan.

The man at the centre of the spectacle, President General Pervez Musharraf, is one of the few who understand how completely the game has changed. The jehadi and tribal lashkars that he and his predecessors forged into convenient tools are now his most implacable enemies. The military that has shaped Pakistan’s political worldview, and which still remains the country’s political arbiter, is suddenly shaky and increasingly unpopular. The arch-enemy, India, seems almost irrelevant; in an ironic twist of symbolism, India and Pakistan are playing cricket as Pakistanis turn on Pakistanis.

For the average Pakistani, it’s suddenly become an unfamiliar world --- the spiralling violence, a breakdown in law and order, the widely resented use of soldiers, paramilitary forces and policemen against their own countrymen in the tribal NWFP, the replacement of Islamic brotherhood with a humiliating subservience to the US, and the abandonment of the Kashmir cause for no understandable reason.

For decades, the Pakistani worldview has been comfortingly simple: India was the big enemy, which undermined Pakistan around the globe; Kashmir had been snatched from Pakistan and must be recovered. Islam was being targeted by Western value systems and Pakistan must join hands with Islamic countries in fighting for their religion; the foot soldiers of jehad were being produced in Pakistan; that was all right as long as it worked for Pakistan and the jehadis didn’t make unreasonable demands for a major share of political power. Pakistani politicians were corrupt and venal and must be kept in check by the patriotic and valorous military.

But what discerning Pakistanis now see clearly --- and Musharraf, through harsh experience, has joined that group --- is that the multiple contradictions that form Pakistan’s psyche are now in open conflict with one another. Pakistan is at war with itself and every side is losing. There are no comforting “good guys” to back; the picture is uniformly grey.

Musharraf’s evolving thought processes can be seen in the NWFP. For decades, tribal lashkars have done Islamabad’s dirty work, invading Kashmir in 1947 and again in 1965 and backstopping the Afghanistan jehad against the Soviets in the 1980s. Unsurprisingly, Musharraf, like the rest of the Pakistan army found it convenient to leave them alone, pumping in Islamist fervour to add an edge to the tool. But after Taliban moved headquarters to the NWFP and Quetta, confronting and bloodying the Pakistan Army, Musharraf signed a virtual surrender pact with the militants, blaming their growing radicalisation on the presence of US troops in Afghanistan. Now, with suicide terrorism and targeted assassination streaming out of the NWFP, Musharraf has concluded that the Pakistan Army will have to clean up, regardless of the cost in soldiers’ lives. His recently retired number two, General Ehsan-ul-Haq, admitted on Saturday that, “we consider extremism and terrorism to be the highest-priority threat to the security and well-being of Pakistan.”

That’s where that contradiction runs into another. The growing Islamisation in Pakistani society, initiated by Gen Zia-ul-Haq, one of Musharraf’s predecessors, has critically hobbled Pakistan’s army. The evidence would be funny if it wasn’t so alarming. The “kidnapping” of almost 250 fully-armed Pakistani soldiers by militants in the NWFP and mass desertions by paramilitary forces and policemen seem to indicate that the Pakistani forces are far from ready to fight this battle. The generals understand there is no choice; but the soldiers are not convinced.

Musharraf’s understanding of what must be done has come desperately late, at a time when he has squandered the goodwill of the average Pakistani and his credibility lies in tatters. He has squandered political capital in image building exercises and in unnecessary battles with the judges. If Musharraf’s only remaining support base, the Pakistan Army, proves unwilling to fight what will be a virtual and bloody civil war against radicalisation and fundamentalism, another leader will replace him.

Whoever heads the government of Pakistan will have to confront these issues. While Benazir Bhutto has reached the same conclusion as Musharraf, she will have at her disposal the same unwilling implements that are failing the General. For these reasons, America has continued its somewhat diluted support to Musharraf and India has reacted with nothing more biting than the hope that things will get better soon.

Senator Joseph Biden, the Democratic chairman of the Senate Foreign Relations Committee has suggested that Musharraf could be “Pakistan’s Shah of Iran”, swept out of power in an Islamist revolution that will confront the US thereafter. But now America’s favourite nightmare --- nuclear weapons in the hands of Islamists --- may not even need a revolution. Nawaz Sharif is forging alliances with the Islamist parties, a Nawaz - Islamist right wing victory would see the realisation of the US’s worst fears.