Make defence procurement process transparent
There is an element of déjà vu over the spate of allegations that bribes have been paid by an Italian company in India’s Rs 3,700-crore purchase of 12 VVIP helicopters from Anglo-Italian company AgustaWestland. While these allegations remain unsubstantiated, both in Italy and in India, and the defence ministry has referred the matter to the Central Bureau of Investigation (CBI), it is notable that a service chief has for the first time been personally accused of accepting illegal gratification, a charge that he has denied. Regardless of such allegations’ eventual legal validity, that they can be made at all suggests that the procurement procedures continue to remain opaque and subject to manipulation, whether by people accepting illegal gratification or by parties who can credibly accuse officials of doing so. That the ghost of Bofors can keep popping up like this suggests that the measures introduced by New Delhi – which really amount to little more than banning agents and middlemen and mandating an “integrity clause” in all arms contracts – have failed to make a dent in the way business is done in the murky world of arms deals.
Also evident in the current set of allegations is the way domestic politics feeds off weapons procurement programmes. The Italian investigation into Finmeccanica, the parent company of AgustaWestland, is actually based on the suspicion that money was diverted from illegal arms payments to an Italian political party, Liga Nord, to buy its support to form a government. With Italian elections due this month, there is a strong political component to the Italian investigations. Similarly, with elections on everyone’s political horizon in India, there is a strong political component in the Opposition’s allegations today that the United Progressive Alliance government has dragged its feet in referring the matter to the CBI. The Bharatiya Janata Party, which is leading the shouting brigade, seems to have completely overlooked the fact that it was Atal Bihari Vajpayee’s office, and specifically his principal secretary, Brajesh Mishra, who ordered that the specifications of the helicopter be changed to bring in more alternatives. This entirely valid decision makes the pre-2004 National Democratic Alliance government an equal party in the decision-making process that led to the procurement of the AgustaWestland AW-101 helicopter.
Today, the levelling of allegations threatens the remaining part of the AW-101 contract (so far only three of the 12 helicopters contracted have been delivered). Defence Minister A K Antony has already indicated that the “integrity clause” might be invoked, which could mean not just the levying of financial penalties but also the cancellation of the balance of the contract. It would be recalled that, in the purchase of Bofors guns in the 1980s, the government reacted to allegations of wrongdoing by blacklisting Bofors, which meant that India bought 310 guns off the shelf, but denied itself the golden opportunity to build a thousand in India with technology transfer. It is also time the procurement process was made more transparent, by ensuring necessary disclosure about all defence deals so that those who take decisions remain accountable.
Operating margins down 230 basis points q-o-q on higher employee costs and other expenses
Analysts expect volume pressure to continue; profit growth likely to be intact