Mar
8
2013

The AgustaWestland Helicopter Scam?

The Arms Acquisition Process in India has been slowed to a crawl due to a series of scams. The basic fact is that by 1990, the entire Indian arms inventory obtained from the former Soviet Union had become due for turnover. That is the time that the USSR collapsed and the Indian economy itself came close to collapse. As such, the armed forces were clearly told to wait till the Indian economy revived.The recapitalisation of the armed forces’ capital stocks was put off by over two decades. This severely constrained India’s response options to Pakistan’s Proxy War in Jammu and Kashmir and India was forced to fight reactively in its own territory. By the start of 21st century, the liberalised Indian Economy gained traction. However, the recapitalisation of the capital military stock remained confined to a crawl as the political leadership moved excruciatingly slowly on defence deals, ostensibly to obviate corruption. As a result, the Indian Air Force’s (IAF) squadron strength today is falling rapidly as the MiGs are well past their service life; and no Rafales or Light Combat Aircrafts (LCA) seem to be visible on the horizon. Our submarine strength is rapidly declining as the Kilos retire but the Scorpenes are not available. After the Bofors Scam in 1987, the Indian Army has been without its mainstay of firepower – Medium Guns. Its Air Defence (AD) Artillery is of the 1960s and 70s vintage. Its light helicopter fleet, is also from the same era and is about to fall out of the skies. Its tank fleet is night blind and sans ammunition. The previous Army Chief’s letter had raised an outcry by listing these voids last year but public memory is woefully short.

Cover-March-2013

The AgustaWestland scam could not have therefore come at a worse time. It is amazing that despite the Defence Minister’s strongly articulated antipathy to corruption in defence deals, these scams continue to surface after virtually every defence purchase. The resultant media outcry usually leads to the deal cancellations and blacklisting of the firms concerned. In the process the only ones to really suffer are the Armed Forces. The acquisition of badly needed weapon systems gets delayed by decades with huge attendant cost overruns to the national exchequer. The pity is, for all these setbacks to the defence of the country, no culprits have ever been caught so far and given exemplary punishment.

The ministry bureaucrats who negotiate the actual deal seem teflon coated, take no responsibility and go scot free. The Bofors was an excellent gun. 450 were purchased outright and a 1,000 were to be manufactured in the country before the scam surfaced. The real losers were the Indian Army. The AgustaWestland deal was worth € 560 million. Of this, € 51 million was paid as kickbacks. Of this some € 30 million were disbursed in India and € 10 million given to Italian politicians to secure Giuseppe Orsi’s promotion in Finmeccanica. This amounts to a kickback of virtually 10 per cent of the deal amount, which is huge. Generally international bribes / commissions amount to 2-3 per cent of the overall cost of the deal.

The initial media outcry was focused on the former Air Chief. It was alleged that he had tweaked the helicopters altitude requirements from 18,000 ft to 15,000 ft to accommodate Agusta. It later came to light that this decision had been taken some two years before the commencement of his tenure by the then NSA of the NDA government to rightly avoid a single vendor situation.

The best outcome of the whole sordid deal would be if we were finally pushed into creating a viable Defence Industrial Base in India that involves our vibrant Private sector in a major way. The FDI cap in Defence collaborations should be raised to 49 per cent to start with and India’s major multinationals must be involved in a big way

Deals should not routinely be cancelled. Emphasis should shift to following the money trail and punishing the bribe takers. We cannot afford a piquant situation where we blacklist half the defence firms of the world and needlessly delay the induction of quality and proven equipment

The Bofors was an excellent gun. 450 were purchased outrightand a 1,000 were to be manufactured in the country before the scam surfaced. The real losers were the Indian Army.

The trial evaluations were carried out after the said Air Chief retired and the contract was signed only in 2010. As such, logically it is difficult to establish a quid pro quo with the former Air Chief. The entire spin doctoring exercise in hindsight appeared to be probably aimed at diverting attention from the primary bribe takers amongst the politico-bureaucratic nexus, defaming the Indian Armed Forces and setting up a convenient fall guy. Those who know the mechanics of the Indian arms acquisition process are aware that the Service Chiefs and Headquarters play at best a limited role. They cannot by themselves change any GSQRs, once the RFP is issued. Subsequent media reports have mentioned the role of Abhishek Verma – who reportedly has close links with the ruling establishment and is one of the main commission agents for most arms deals in the capital.

However, the AgustaWestland deal, in particular, merits cancellation. The Finance Ministry has imposed a cut in the Defence Capital Acquisition process of Rs 10,000 crore. To avoid cutting funds for combat equipment, we could do away preferentially with this luxury copter deal for our VVIPs. Having failed to get the armed forces their basic weapon systems they can afford to fly cattle class for some time!

Generally, it would be a waste of time to look for any infirmities in the process of the deal. Usually there are none. In fact, this acquisition process is deliberately dragged out so that the authorised rent collectors can collect their commissions at each stage – simply for letting the process go through. These rent collectors seem to be very well known to the arms dealers in Delhi, have excellent political links and powerful patrons who save and shield them from all enquiries and harm. In the AgustaWestland case unfortunately, as per the fact sheet put out by the Ministry of Defence (MoD) itself, there are some startling infirmities in the process, namely:

Why were the trials not carried out in India under actual operating conditions? These trials were hurriedly completed in just two months in Italy and the USA, which is somewhat of a record. The normal practice is to get the equipment to India under a no cost-no commitment clause.

Why were additional systems like Traffic Avoidance System, Enhanced Ground Proximity System and Medical Evacuation system added at the Contract Negotiation State? As per the DPP this should have been in the RFP. Inserting them subsequently was illegal and enabled the vendor to make huge profits.

There is something about the speed with which this VVIP deal was concluded that raised suspicion. The involvement of the SPG added its share of ambiguity and the then SPG Chief himself went to Italy.

On the whole this is a disturbing state of affairs. This vitiated arms acquisition process has caused a huge setback to our defence preparedness and further slowed down the arms acquisition process. Huge windows of vulnerability have been created, which could now last beyond 2020. An ill-informed Indian public simply does not comprehend the great dangers that this political rent collection in our arms deals is posing to our National Security.

What then, should we do?

The best outcome of the whole sordid deal would be if we were finally pushed into creating a viable Defence Industrial Base in India that involves our vibrant Private sector in a major way. The FDI cap in Defence collaborations should be raised to 49 per cent to start with and India’s major multinationals must be involved
in a big way.

Deals should not routinely be cancelled. Emphasis should shift to following the money trail and punishing the bribe takers. We cannot afford a piquant situation where we blacklist half the defence firms of the world and needlessly delay the induction of quality and proven equipment.

However, the AgustaWestland deal, in particular, merits cancellation. The Finance Ministry has imposed a cut in the Defence Capital Acquisition process of Rs 10,000 crore. To avoid cutting funds for combat equipment, we could do away preferentially with this luxury copter deal for our VVIPs. Having failed to get the armed forces their basic weapon systems they can afford to fly cattle class for some time!

The Mi-17 fleet has stood us well in the past and could suffice for future VVIP duties. This will at least spare funds for combat equipment and send the right message to all vendors. India has to begin somewhere to cleanse this rotten system and a good place to start would be right here and now.

Team DSA

About the Author: Team DSA

Defence and Security Alert (DSA) magazine was launched by Ocean Media Private Limited, New Delhi, a company of a leading publishing group of India. DSA covers the entire spectrum of defence and security issues and developing scenarios impacting Indian and global strategic concerns.

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