Saturday, 13 December 2014

Defence Minister Parrikar gives window into his thinking --- likely to allow arms agents, impose steep fines for wrongdoing



By Ajai Shukla
Business Standard, 13th Dec 14

Publicly enunciating his impending policy initiatives, Defence Minister Manohar Parrikar indicated today he could soon allow defence companies to have representatives in India; impose financial penalties on errant vendors rather than blacklisting them; and focus procurement on giving soldiers essential combat kit such as boots.

On the emotive issue of One Rank One Pension (OROP), a key demand of ex-servicemen who are demanding equal pension for retirees of equal rank who served for equal time, Parrikar promised it would come through in four to eight weeks, but retirees would get somewhat less than they hoped for.

On terrorist infiltration from Pakistan, Parrikar promised a policy within six months that would "end or at least reduce these blatant attacks." Significantly, Parrikar echoed the military’s line that India had military options short of full-scale war.

The defence minister spoke at a “conclave” in New Delhi on Friday, organised by the Aaj Tak television channel.

The ministry of defence (MoD) had banned “arms agents”, or representatives of foreign defence suppliers, after the Bofors kickbacks scandal in the late 1980s. The Bharatiya Janata Party (BJP) government has proposed removing this ban and legalising registered representatives.

Parrikar said, “Whether you call them middlemen or agents or lobbyists or representatives, they should be formalised and legalised."

Endorsing the policy revision initiated by his predecessor, Arun Jaitley, Parrikar pointed out that company representatives served useful purposes, e.g. as a convenient channel of communication between the MoD and the company.

Parrikar warned that doubts about “defence agents” were aroused when their fee structure included a success fee, or a percentage of the contract value.

Instead the ministry would demand that the company submits full information about its representative’s fee structure and method of payment. “We would require a clear agreement, deposited with the MoD in advance with heavy financial penalties if you violate (the agreement).”

Parrikar rejected the blacklisting of companies that violated procurement norms, recommending punitive monetary penalties instead. Citing the example of Italian corporation, Finmeccanica, which faces severe restrictions after the MoD blamed its subsidiary, Agusta Westland, for corruption in the sale of AW-101 VVIP helicopters to India, Parrikar pointed out that Finmeccanica had 39 subsidiaries, some of which were involved in crucial contracts with India.

“Should we rule ourselves out of dealing with all of those 39 subsidiaries? There has to be a clear policy on that,” said the defence minister.

The Finmeccanica companies involved in important MoD acquisitions include marine specialist, WASS (torpedoes); Selex Electronics Systems (radar and communications); Alenia Aeromacchi (aircraft); and Otomelara (naval guns).

Instead of blacklisting, Parrikar suggested that “How much you (the company} violated, pay the Indian government 4-5 times that, only then will you be permitted to participate in defence tenders.”

Parrikar clarified that this was just “loud thinking” and that the actual policy on representatives and blacklisting would be announced in January 2015.

On OROP, Parrikar said the MoD was identifying the financial cost. Estimating that ex-servicemen would get about 80 per cent of their demand, Parrikar said, “100 per cent satisfaction to everyone is never given in real life.”

Parrikar expressed confidence in his own decision-making, declaring that he had the competence to understand complicated matters, isolate key issues and arrive at the right decision.

Implying that his predecessor, AK Antony, did not go into details adequately, Parrikar claimed “I get up early in the morning; I spend half an hour, or an hour reading a complicated file. Once you have good intentions, there can be no questions about the quality of the judgment”, said Parrikar.

However, Parrikar declined to praise Antony for his probity, saying, “Honesty is not a solution”. Instead, what was needed was “decision making ability”.

Parrikar promised he would also bring wrongdoers to book. “You have to get into the muck to clear the muck… I am not scared of going into a room full of dirt. When I come out, I will go into a shower and clean it off,” he declared.

Based on his interaction with soldiers in high-altitude posts, Parrikar says he will give top priority to providing combat essentials like boots to soldiers, even those who were not entitled to the high-quality clothing issued at Siachen Glacier.

“If I can give good boots and equipment in Siachen, why not to these soldiers?” said Parrikar.

Significantly, Parrikar indicated boots etc would be prioritised over high-cost combat platforms. Pointing out that 90 per cent of the procurement budget was already committed towards earlier contracts, he said, “If there are resource (constraints), I will prefer to settle the smaller amounts.”

11 comments:

Nikhil Deodhar said...

Its good to see that the defence minister has made a statement for changing the procurement policy. The ideas that he proposes seem reasonable enough. Also good to see that he is talking about the more basic needs of Army like combat uniforms as well. But as an outsider to the armed forces, I would like to ask a question- The author of this blog has raised the issue of poor planning in procurement in his articles, but most of the times, the defence ministry is said to be culpable in them. Don't the respective armed forces have a say in the process as well? If so, aren't they as culpable as the ministry in the mistakes made in procurement? Just curious about it...

saffronbandit said...

Mr Parrikars "loud thinking" is on the right track. Question is how much of it will be translated into actual MOD policy.

I am glad that he is also focusing on the nitty gritty like good boots for the men. Mebbe he read your article your article dated 25th Nov)!!

Anonymous said...

THE NON IMPLEMENTATION OF OROP AS ENVISAGED AND DEMANDED BY THE EXSERVICE ORGANISATIONS WILL BE A BETRAYAL OF THE SOLDERS SAILORS , AIRMEN AND OFFICERS BY THE BJP GOVT AND WILL PROVE THE SLOGAN THAT IT IS A GOVT WHICH BACKTRACKED ON THE PROMISE IT MADE. FOR A EMERGING THREE TRILLION DOLLAR ECONOMY PAYING A FEW THOUSAND CRORES TO THE DISTRESSED OLD VETRANS WILL NOT COST THE NATION AS MUCH AS THE WICKED BABUS HAVE MADE THE BJP MINSTER BELIEVE .

Anonymous said...

Have mixed feelings about such a plan. It will lead to mushrooming of agent companies which may impede the primary policy of indigenous development. It also sounds like surrender and acceptance of an inability to control defence procurement corruption.

kulari94 said...

Wrong, Parrikar. Honesty is a good quality. And Antony did make a decision - to delay foreign acquistions to give indigenous defense a chance to develop. Were it not for Defense Minister Antony, neither Tejas nor Arjun would have made it.

Anonymous said...

HAVE STANDING AQUISATION BOARDS FOR THE THREE SERVICES WITH WIDE REPRESENTATION FROM SERVICE OFFICERS , CIVIL SERVICE , ACCOUNTS , CIVILAN BANKERS OF INTERNATIONAL REPUTE , BUSINESS LUMANARIES FROM PUBLIC PRIVATE LARGE ENTERPRISES , FOREIGN CONSULTANTS AND DRDO , SPACE AND ATOMIC ENERGY RETD SCIENTISTS ON CASE BY CASE BASIS FOR CUTTING EDGE TECHNOLGIES , DEVELOPMENT , AND TRANSFER

Anonymous said...

Finally we have a Raksha Mantri speaking about results. Fining a company makes sense rather than black listing them. However it is important the regular infantry kit is far improved

victor raj said...

Arms agents has never done anything good anywhere in the world. They unnecessarily raise the coat of project or flex things just to get their commission cut. A very bad decision. Never allow it. All the other changes he mentioned are good.

Sunil Kapila said...

Defence Innovation private funding may need to be tried out. IP of this great weaponry we import are what they are due to the intelligence which clocks in the silicon at fast speed.
We do not need to become assembly line runners alone !!!

Sunil Kapila said...

Well a beginning . This is articulation of the challenges faced by the defence community as a whole. Hope his techno background tempered by practical problem solving ability will create result. Defence Research and development focus with accountability . encouraging ivory tower PH d to partake in real, modest innovations will be great way forward . Mr manohar could help laying out the openness in creating such a Eco system.

Jean Luc Picard said...

So far so good with Def Min Parrikar.

One negative observation, he opened his mouth about the army trying to do something in the next 6 months to curb Fidayeen style attacks like in Uri.

He should not have revealed a timeline to the public.

Side Note -

Can we please have more articles ? One mid week and one on the weekend. :)