Defence Minister Parrikar gives window into his thinking --- likely to allow arms agents, impose steep fines for wrongdoing

By Ajai Shukla

Business Standard, 13th Dec 14

Publicly enunciating his impending policy initiatives, Defence Minister Manohar Parrikar indicated today he could soon allow defence companies to have representatives in India; impose financial penalties on errant vendors rather than blacklisting them; and focus procurement on giving soldiers essential combat kit such as boots.

On the emotive issue of One Rank One Pension (OROP), a key demand of ex-servicemen who are demanding equal pension for retirees of equal rank who served for equal time, Parrikar promised it would come through in four to eight weeks, but retirees would get somewhat less than they hoped for.

On terrorist infiltration from Pakistan, Parrikar promised a policy within six months that would "end or at least reduce these blatant attacks." Significantly, Parrikar echoed the military’s line that India had military options short of full-scale war.

The defence minister spoke at a “conclave” in New Delhi on Friday, organised by the Aaj Tak television channel.

The ministry of defence (MoD) had banned “arms agents”, or representatives of foreign defence suppliers, after the Bofors kickbacks scandal in the late 1980s. The Bharatiya Janata Party (BJP) government has proposed removing this ban and legalising registered representatives.

Parrikar said, “Whether you call them middlemen or agents or lobbyists or representatives, they should be formalised and legalised."

Endorsing the policy revision initiated by his predecessor, Arun Jaitley, Parrikar pointed out that company representatives served useful purposes, e.g. as a convenient channel of communication between the MoD and the company.

Parrikar warned that doubts about “defence agents” were aroused when their fee structure included a success fee, or a percentage of the contract value.

Instead the ministry would demand that the company submits full information about its representative’s fee structure and method of payment. “We would require a clear agreement, deposited with the MoD in advance with heavy financial penalties if you violate (the agreement).”

Parrikar rejected the blacklisting of companies that violated procurement norms, recommending punitive monetary penalties instead. Citing the example of Italian corporation, Finmeccanica, which faces severe restrictions after the MoD blamed its subsidiary, Agusta Westland, for corruption in the sale of AW-101 VVIP helicopters to India, Parrikar pointed out that Finmeccanica had 39 subsidiaries, some of which were involved in crucial contracts with India.

“Should we rule ourselves out of dealing with all of those 39 subsidiaries? There has to be a clear policy on that,” said the defence minister.

The Finmeccanica companies involved in important MoD acquisitions include marine specialist, WASS (torpedoes); Selex Electronics Systems (radar and communications); Alenia Aeromacchi (aircraft); and Otomelara (naval guns).

Instead of blacklisting, Parrikar suggested that “How much you (the company} violated, pay the Indian government 4-5 times that, only then will you be permitted to participate in defence tenders.”

Parrikar clarified that this was just “loud thinking” and that the actual policy on representatives and blacklisting would be announced in January 2015.

On OROP, Parrikar said the MoD was identifying the financial cost. Estimating that ex-servicemen would get about 80 per cent of their demand, Parrikar said, “100 per cent satisfaction to everyone is never given in real life.”

Parrikar expressed confidence in his own decision-making, declaring that he had the competence to understand complicated matters, isolate key issues and arrive at the right decision.

Implying that his predecessor, AK Antony, did not go into details adequately, Parrikar claimed “I get up early in the morning; I spend half an hour, or an hour reading a complicated file. Once you have good intentions, there can be no questions about the quality of the judgment”, said Parrikar.

However, Parrikar declined to praise Antony for his probity, saying, “Honesty is not a solution”. Instead, what was needed was “decision making ability”.

Parrikar promised he would also bring wrongdoers to book. “You have to get into the muck to clear the muck… I am not scared of going into a room full of dirt. When I come out, I will go into a shower and clean it off,” he declared.

Based on his interaction with soldiers in high-altitude posts, Parrikar says he will give top priority to providing combat essentials like boots to soldiers, even those who were not entitled to the high-quality clothing issued at Siachen Glacier.

“If I can give good boots and equipment in Siachen, why not to these soldiers?” said Parrikar.

Significantly, Parrikar indicated boots etc would be prioritised over high-cost combat platforms. Pointing out that 90 per cent of the procurement budget was already committed towards earlier contracts, he said, “If there are resource (constraints), I will prefer to settle the smaller amounts.”