Defence deals are all prone to manipulation, and banning firms only reduces our choices. India needs to use offsets to develop its local supply base

Deba R Mohanty

Yet another high-profile defence scandal, involving a prominent Italian company, Finmeccanica, as parent supplier and the Indian government as recipient, has surfaced. The deal in question is related to the supply of 12 AgustaWestland AW 101 helicopters for Indian VVIP use, worth R3,546 crore, to be under the control of the Indian Air Force communication squadron and operational participation from Special Protection Group responsible for VVIP security. The genesis of the helicopter in question is traced to 1999-2000 and the vendor was awarded the contract in 2010. A portion of the contract has already been delivered?3 helicopters have been handed over, while the Indian MoD has already paid roughly 30% of the total amount. Within three days of the breaking of the scandal, shock waves have swept Italian national politics and threatened to do the same in India. Both countries are in different stages of electoral transition with a common thread called the ?Finmeccanica Scam?.

While the scandal is spreading like wild fire in both countries, for our purpose it becomes all the more important to not only fathom the degree of murkiness in the defence business?as we are likely to become notorious for being a weapons merchant?s paradise thanks to our inabilities to meet the expectations of our armed forces?but also try to offer solutions to lessen the degree of murkiness. Murkiness in the defence business has been so rampant in most parts of the world that even strong states have been unable to put in place mechanisms to remove all ills despite having robust national regulatory mechanisms, checks & balances and politico-executive/public scrutiny.

Famous private arms agents like Basil Zaharoff flourished before and during World War I. Even after the League of Nations vehemently came down on the role of arms companies in national and international politics in the early 1920s, the ubiquity of the arms-middlemen-state nexus was never broken although there were attempts to nationalise the arms industry by many countries. After lying low for a brief period, arms industries and middlemen raised their ugly heads again after World War II to such an extent that the then US President Dwight Eisenhower had to warn the public about the evil influence of arms companies on state polity in his farewell address. The ?Iron Triangle??involving the executive, Congress and arms companies?and its role in US national security policies is well known. High-profile arms scandals have been periodically unsettling political climates in many countries, including India. Evidences from the last 110 years of recorded history suggest that politics and economics have overshadowed every thing else in military procurement matters, while an unfathomable web of stakeholders and participants in the arms trade has not been streamlined or made accountable despite state efforts.

Defence deals are prone to manipulation and corruption for a variety of factors, which are often intertwined and complex in nature and character. The current scandal provides an opportunity to understand the reasons of corrupt practices in the defence business and offer practical solutions to the vexing problem. I cite six factors as to why the defence business continues to be a problem in India: The treatment of national security as an exclusive domain (thought of, deliberated, planned and executed by state agencies), complex bureaucratic/administrative mechanisms (often overlapping and spanning more than a dozen departments from multiple ministries), structural complexities (decision-making and implementing mechanisms being both vertical and horizontal with cosmetic interactions?ask DRDO, armed forces, civil MoD, industry and you will receive different answers to the same query), exclusion of key stakeholders (vendors? interaction with the government confined only to restricted presentations and defence exhibitions), complex procedural mechanisms (too many multi-disciplinary committees, etc) and politico-strategic decision-making (calculations of diplomatic dividends, etc).

How does one deal with such a vexing problem? I offer four practical solutions. First, India has to put its house in order before it acts on others in the defence business. Details of need, quality requirement, evaluations and final approval need to be put in the public domain. Second, India needs to make some person/institution accountable for the decision made, which means that there is a need to put a particular person or institution who will examine a particular stage in acquisition. We have more than half a dozen inter-disciplinary committees overseeing the stages of acquisitions with nobody responsible for any lapse! Third, a three-directional interaction is missing in our case! Government and state-owned defence industries are a part of decision making choices. Where is the foreign or Indian OEM? It is high time that the department of defence production re-defines its role and accommodates aspirations of both Indian and foreign OEMs. And last, but not least, India has no choice but to send a strong signal to both international as well as domestic constituencies. Banning Finmeccanica will actually reduce our choices in on-going and future arms acquisitions. Past evidences in banning companies in land armament business have reduced our choices (read the OFB scam). Heavy fines with punitive restrictions can always act as formidable deterrents.

While politics of scandals will take its own course amid rumours, allegations and counter-allegations, ultimately scandals impact more negatively military modernisation and preparedness. All stakeholders play out their ugly games. Ultimately, the biggest stakeholder?the armed forces as end-users?is the biggest loser.

The author is a New Delhi-based defence analyst and heads a defence research firm