Defence sector to be opened soon for lobbyists, agents

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New Delhi | March 3, 2015 2:36 AM

For greater transparency in defence deals, the government will soon open up the sector for lobbyists/agents, with the rider that companies will...

For greater transparency in defence deals, the government will soon open up the sector for lobbyists/agents, with the rider that companies will be heavily penalised if they violate stringent conditions, including disclosure of consultancy fee paid to their agents.

Inter-ministerial consultations are on to finalise a revamped defence procurement policy by April, and the norms on defence lobbyists/agents /middlemen are expected to be part of this policy, official sources told FE.

However, the government has decided that blacklisting of firms will be reserved only for the rarest of rare cases. This was because the UPA government had blacklisted as many as 12 firms, severely restricting the options of defence forces to source equipment and spare parts.

Currently, many defence companies covertly use agents to strike deals, but they wash their hands off the agents’ activities in case of wrongdoing.

According to defence ministry sources, the new norms will make it mandatory for companies to disclose the names of agents and the agency fees paid every year till the end of the contract.

The norms will also specify that the nature of the relationship between the company and its agent will have to be included in the contract signed with the government. This is to ensure that companies can be held responsible for the acts of agents including bribery and other illegal acts.

Firms failing to make such disclosures will have to pay a huge penalty in addition to the contract amount. Such companies and their officials would also face criminal charges. “The agent’s fee or consultancy will have to be declared in advance. Also, companies must inform the defence ministry within 15 days if they hire an agent or change consultants midway into negotiations,” said an official.

“What is expected to be finalised at the meeting is a graded system of penalty depending on the enormity of the violation. The idea is to make violations prohibitively expensive so that there is no inducement to violate the conditions,” he added.

The proposed changes in policy follow the new found pragmatism in the government as the action taken against companies by the previous government severely hit defence preparedness.

Citing an example — of “blacklisted”  Tatra Sipox, the company that supplies specialised vehicles on which nuclear and other missiles are mounted and carried — about 10 % vehicles had to be grounded because of lack of spares, as investigations dragged on. Defence minister Manohar Parikkar finally allowed the forces to negotiate with another independent Tatra-Sipox entity that was not involved in the alleged wrongdoing.

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