New policy for defence suppliers accused of graft soon

The Narendra Modi government may soon come out with a new policy on the blacklisting of defence suppliers accused of corruption, as such blanket prohibitions are hurting India’s military interests.

The policy, being readied under the tutelage of Defence Minister Manohar Parrikar and his predecessor Arun Jaitley, is likely to be released before the next budget.

The graded ban on Italian arms major Finmeccanica in August was the first indication of the overhauling of the practice of blanket ban.

Almost simultaneously, South African major Denel was taken out of the blacklist in August after nine years as a government probe failed to prove allegations of corruption against it over a rifle purchase deal.  Denel is almost sure to be a key bidder for the Rs 15,750-crore deal to supply 814 artillery guns, approved by the Defence Acquisition Council last Saturday.

“The new policy will decide how and whether a firm should be blacklisted in military deals. It would also determine the role of middlemen and commercial agents,”  said an official. The role of middlemen and agents, often employed by the arms companies, remains a political hot potato.

The defence procurement procedures formulated under India’s longest serving defence minister A K Antony prohibited any role of middlemen.

The Congress's Mr Clean, Antony had blacklisted several arms majors, like Rheinmetall Air Defence, Finmeccanica, Corporation Defence of Russia, Singapore Technologies Kinetics and Israel Military Industries. The Modi government, however, has taken a different view. While Parrikar cancelled a deal with South Korean company Kanganam for taking the help of a middleman in selling eight minesweeper vessels to the Navy, the company was not blacklisted because it claimed that the agent was appointed to overcome the language barrier.

“The consensus within the ministry is to allow Goa Shipyard Ltd (GSL) to build all eight vessels in India. The GSL is free to take technology from any company, including the Korean one, which has not been blacklisted,” said Parrikar in an interaction with journalists on Sunday.

Soon after taking over as defence minister, Jaitley had stated that blacklisting had impacted India’s military preparedness.

“The issue has been discussed at length at the Defence Ministry. A large number of firms have been blacklisted. Now that upholds consideration of probity but narrows our buying options, which can affect our security-preparedness,” Jaitley had said in August.

Since the Modi government relies a lot on the “Make in India” campaign in the defence sector to boost manufacturing growth, there is a need to take many big foreign players out of the blacklist so that they can join hands with Indian companies for business.