Tuesday, 19 February 2013

VVIP lessons: build arms, don’t buy them



This indigenous ARDE carbine could prevent another round of scams

By Ajai Shukla
Business Standard, 19th Feb 13

India leads the world in corruption in arms imports and the gap is widening as we import more and more weaponry. But in taking action against the guilty we content ourselves with political bluster and self-defeating bans. Defence Minister AK Antony’s “strong action” against Italian defence giant Finmeccanica, and its Anglo-Italian helicopter subsidiary AgustaWestland, is aimed at making him sound like a man of steel but is, in fact, a short-sighted reaction that is meant to --- but will fail to --- defuse the opposition’s equally motivated criticism.

Mr Antony has unilaterally “initiated action for cancellation of contract for procurement of 12 AW101 helicopters for the use of VVIPs”, by sending AgustaWestland a show cause notice asking why New Delhi should not cancel the Rs 4,000 crore contract signed in 2010. Just three of the twelve helicopters ordered have been delivered so far while India has already paid at least 40 per cent of the contract amount, according to knowledgeable persons, including former IAF boss, Air Chief Marshal Fali Major.

There is no proof yet of any wrongdoing. New Delhi has acted on the basis of an investigation report, filed by Italian prosecutors in Milan. The report alleges payment of Euro 51 million (Rs 350 crore) by Finmeccanica to secure the Indian contract. The case has not yet come to trial, though the evidence has persuaded an Italian magistrate to allow the arrest of Finmeccanica head, Giuseppe Orsi. The Italian judiciary has refused to release the investigation report; we know of the case only from media leaks, which the Italian authorities have not denied.

Until there is a conviction by the Italian judiciary, or until the Central Bureau of Investigation (CBI) determines prima facie wrongdoing (Antony referred the case to the CBI only last week) any move towards terminating the contract with AgustaWestland would be legally untenable. On Saturday, the company flatly denied wrongdoing and said that would reply accordingly to the show cause statement. On what legal basis then would Antony be proceeding?

Might the CBI succeed in actually obtaining proof of malfeasance, if it occurred? Going by its record in such cases, that seems unlikely. The CBI has little expertise on defence procurement, and the agency has repeatedly proved unable to obtain responses to letters rogatory, investigate money trails and hawala networks, or direct investigations towards the influential political figures that are often the recipients of defence payoffs.

So what might AgustaWestland do if Antony unilaterally cancelled the contract? If this were the United States --- where the Department of Defense has the financial clout to ensure that companies like BAE Systems have paid $400 million fines for apparent bribery --- AgustaWestland and its parent company, Finmeccanica, might have quietly fallen in line in the interests of future business. But India’s defence ministry does not have the weight to unilaterally cancel such a large contract, even though Finmeccanica subsidiaries like Selex, Wass, Oto Melara and MBDA do substantial business with our import-loving military. In 2009, Selex Sistemi Integrati (a Finmeccanica subsidiary) dragged the MoD to court in 2009, charging that the Tata group had been favoured over Sistemi in a Rs 1,000 crore contract for modernization of air field infrastructure (MAFI) in 30 IAF bases.

With the AW101 contract four times as large as the MAFI one, AgustaWestland would almost certainly challenge any cancellation by dragging it into arbitration. Since the Indian payment for the AW101 is currently ahead of helicopter delivery, New Delhi would end up a major financial loser by freezing the status quo. And the IAF would not want to be left with the unenviable task of operating two types of VVIP helicopters; and sourcing lifetime spares and overhaul for three AW101s from AgustaWestland.

Such embarrassments would continue for as long as India remains a major buyer of defence equipment. The only way out of the MoD’s downward spiral of purchases, scams, cancellations and blacklistings is the systematic and relentless indigenization of defence equipment. But a militarily and strategically illiterate MoD has, in the absence of any counter-narrative, bought into the military’s fiction that if “modernization” were not pursued (i.e. quick buys from overseas), national security interests would be severely threatened. In fact, the most serious challenge to our military preparedness is not any external threat, but the regrettable absence of home built defence systems and our crippling reliance on rapacious overseas suppliers.

It is time to end all but the most pressing overseas procurements. The defence ministry needs to form purpose-structured consortiums of companies --- chosen from both public and private sectors --- and task them to develop specific defence systems. For example, the elusive chimera of importing artillery guns must be buried forever. Instead, the government should task the DRDO’s Armament R&D Establishment (ARDE), Bharat Forge, Tata Power and L&T to produce a working gun by 2017. The army must be goaded into working with this coalition, and told its only option is an indigenous gun.

The Make category of the Defence Procurement Policy permits such consortiums. Only two defence systems are currently being developed under the Make procedure – a tactical communication system (TCS) and a future infantry combat vehicle (FICV). There should be at least a hundred.

If operational preparedness suffers in the short or even medium term, that price must be paid. This strategic decision must be backed by cross-party political consensus, obtained with an agreement that the network of industrial structures that will arise from serious indigenization will be shared across ruling party and opposition constituencies. Ending this spiral of shameful scandals through indigenization is essential for national pride; strategic autonomy; and for building the defence capability that must backstop any bid for great power.

26 comments:

kulari94 said...

Excellent article.

Anonymous said...

Bludgeon... Air Marshal... Generals... into submission...

Anonymous said...

Oh yah...Salaman Khurship type arguments... you are inching nearer.

"Motivated opposition" you say. They invented stories or you are inventing many...

Anonymous said...

It's a great idea, except that people who are supposed to build them don't involve the users, nor accept suggestions (let alone seek user requirement). The R&D Org needs to be more open to ideas, and not be offended with differing views. As they say, 'Where all think alike, none think very much'.
Satish Vaidya

Anonymous said...

Why is the concept of "Build not Buy", so difficult for our wise leaders to fathom?

Why is it okay for Italian companies to manufacture arms for us, but Indian companies are a security threat?

Why is it difficult for the armed forces to understand that nations fight wars, not just armies?

Anonymous said...

watch the graph... http://dawn.com/2013/02/17/time-for-shias-to-leave-pakistan/... especially 2010... directly proportional... disturbing 2014...

Anonymous said...

This reminds me of Bofors and fallout from that scandal. The CBI,the tv journalist and other went across to Argentina to get the Italian middleman ,Ottavio Quottaroch, extradited to India and the Judge through the case out because of poor handling from the Indians,which I’m not surprised by it because if there’s one thing the Indians are good at is cocking things up in a bigway!! Look at the Bofors’ history and I would suspect the same for this.
Mind-set of most Indians is to look after number one! As Silvio Berlusconi said it’s not illegal to pay bribe to people of another country as that’s how they conduct their business. The payer should not be vilified as they, as in any walks of life, looking after the bottom line of their company. The prime consideration should be that the weapons or anything else is fit for purpose and not a white elephant. How many people pay bribe to get things done on a daily basis and jump the queue etc..? The people who are involved in this are opportunistic and given a chance to any bleeding heart who come on TV or print media would think about it too. Not many would turn it down. Even if you want to I’m sure they would be threatened to as to not to spoil the party. So get off the high horse and find the guilty and hang them!!!
One thing India can do and should be in the contract is, if a bribe is paid and after an investigation it’s found to be true and long as the equipment is fit for purpose, then India should withhold/demand the amount paid out in bribe. This will affect the bottom line of the company and this should not have impact on the Indian Arm forces or other users.
I bet the Pakistanis and Chinese are having chuckles when it comes to scuttling any big ticket contract with foreign companies that soon enough there would be scandal to keep India busy

Abhishek said...

What you have to say on Army replacing INSAS rifle . Is army trying to kill INSAS gun in favor of foreign gun ? wouldn't it be more appropriate if INSAS is improved just like in case of M4 to HK416?

Abhishek said...

"This indigenous ARDE carbine could prevent another round of scams" do you think army will use it , as army itself is trying to kill INSAS rifle.

Anonymous said...

Very good post.

Though I have a complaint that you still have not given us a high resolution pic of the poster on the right side corner of the picture (right side from reader point of view)

Jayant M said...

Col.Shukla,
Thank you for the article. We have the talent and the resources but not the political will or vision to put it in practice.

Sachin Khandelwal said...

Frankly the key message in this article is an oft repeated mantra of MoD, strategic brain tanks and even journos (IE published an editorial yesterday on similar lines). Why? Cause it a no brainer. Any sane decision making person/group will do it. Why its not done? the answer is equally straight forward: cause this is NOT the top priority of our key decision makers, it gets superseded by political ambitions, quick money, abroad trips, family favours.

Rahul said...

You just asked Gandhi Topis to foot their own belly..........

Besides, indigenous option for such such VVIP helicopters would be IMRH.

This reminds me of TP Unni Krishnans's presentation at AI-13 where we came to know about conflict in ASR and NSR resulting in design requirment with difference of almost 2 tones.

Requesting BROADSWORD to share with its followers the status of this proposed program.

Mr. RA said...

The existing graph in such matters is so poor that even if we extrapolate it to any good extent, it never lands in to any comfortable zone. The Bofors ghost becomes alive and jumps up at every timescale.

Anonymous said...

China may have the great wall but India's problem is its knack of sitting on it!Remember the Yes Minister motto "our policy is NOT to have a policy"?Indecision has cost India it's strategic alliance with its neighbours, weak infrastructure, underdeveloped military technology.Talent and population is available but is there a will power and decisive leadership?I saw an late 80s movie which had this dialogue "Don't screw with your brain, don't think with your dick".How true and pertinent to India!

sents said...

Very true. If corrupt officers in India are punished immediately, that could also bring down corruption.

Anonymous said...

As a former serviceman myself I feel totaly depressed at the pathetic state of defence preparedness and the rudderless nature of our political decision making on defence matters. India does not become great by placing the 'mother of all arms orders' on other countries and making them rich. India will become great only when we have the capability to produce weapons of quality in the country.Can we think of anything more shameful than placing a pilot training aircraft order on a foreign country. There should be a blanket ban on arms imports. If a country like India cannot make arms to defend itself then we deserve to be kicked in the butt by agressors as has been done in the past.

Anonymous said...

The road to hell is paved with good intentions, this article and the good Col.'s views being a great example of the same:

1. Building arms cannot be left to DRDO/PSUs. This requires whole sale changes in the defence industry structuring

2. Foreign companies will still play an important part as they have critical technologies

3. Desi firms will indulge in the same corrupt practices if agents/middlemen are not legalized and regulated

4. Corrupt netas, officers and babus will still ask for bribes if they are not sent to jail expeditiously.

5. India's defence paying a price in the short-term or medium-term is a lofty statement, good only till a war breaks out as Kargil showed when Bofors was back in business for a short time.

Silver-bullet solutions are good for killing werewolfs that exist in myth. Not in the real world

Anonymous said...

Good food for thought. You must take this thought process to the wider medias channels.....Here are some possibilities-

1. Place big bang orders on LCA-I and II, LCH, Arjun-II etc....and give the DRDO / HAL establishment comfort to invest more in these projects, and fast track them. As ti is thats their biggest gripe - the forces do not support them. But we must bring in the private sector as given in your article. At least we will have better surveillance and control over them as compared to when working with foreign vendors (this itself will hopefully be a deterrent to corruption)

2. Simultaneously pare down our foreign arms orders to the barest minimum / most essential. For example- we should never have gone for this VVIP chopper deal - it has very limited military value. But now that we have committed and 3 choppers are in.....I guess it wil be counter productive to cancel it completely.

We must stick with Rafale, but only to the 126 planes in the RFP (so that we don't get into price wangles from them). We must completely resist the push from them to execute additional options. We must tell IAF their fighter numbers will now only be made up by the LCA mark-I and II!!

We must continue to invest in T-50 since it is a very futuristic system. But let's make it very clear that the AMCA is to be experimental project which can be reviewed depending on the situation in coming years.

We must invest in a cheaper and stealthier one engine LCA mark III. That would really amortize the LCA costs over larger numbers. In any case the LCA is a small plane... and would be more effective only in 1) larger numbers 2) With AWACS / large Refuelers / Buddy Refueling capabilities / Network centric systems..and so on. So we must continue to invest in AWACS programs, since this is a difficult technology. Not so critical with Refuellers.

We must also invest in UCAV / USAV (or whatever you call it) since that is the future of aerial warfare...Neurons/Taranis/AURA and so on.

Anonymous said...

"This indigenous ARDE carbine could prevent another round of scams"

Haha, you gonna carry that and browbeat the decision makers into buying locally sourced weapons?

Deshdaaz said...

"But a militarily and strategically illiterate MoD"....ROFLMAO!! You said it!!

Hey Mr. Man of Steel, do these words puncture your hollow shell?

Anonymous said...

Harry Says...

Another poorly researched article. I ask you, why has the Insas failed?

Reliability problems, jamming, cracking of polymer magazines... all reported by Nepal, your only foreign customer.

Anonymous said...

IAF and IA strategy... won't drink milk till... get choclate (foreign deals)... inbetween war happens... IAF & IA... has jawans & air warriors... as connon fodder...

Anonymous said...

Want to re-assess your stance on the F-35?? Been more than a year since you argued for India buying it.

Interesting read in TIME -

http://www.time.com/time/magazine/article/0,9171,2136312-1,00.html

DrunkenDuck said...

First of first this is not a defense deal, 3500 crore is a too much price for 12 copters to fly pigs(VVIP)around India,there is no threat perception that demands such copters.CBI is just a tool in hands of home ministry, so expecting anything from CBI is useless.Italian court ordered arrest based on evidences which proves prima facie charges of corruption do exists, Author wants to convey CBI will reach a different conclusion and we all know what it would be.Ajay is batting for UPA.Indian tax payers don't want to spend 3500 crore of hard earned money on just 12 copters. We fly pilots in FLying coffins and our VVIP needs BMWs in Air? Ha ha

Anonymous said...

Shukla bahut chutti leta hai....bandook banane gaye ho kaa