http://asiasentinel.com/index.php?option=com_content&task=view&id=1934&Itemid=164
Asia Sentinel, 15 Jun 2009, Siddharth
Srivastava
Another scandal mars
Indian defense
India's corruption-ridden military procurement system has again
been hit by a major scandal that has resulted in the arrest of the
chairman of the state-controlled Ordinance Factory Board and the
banning of seven major domestic and international companies
including ones from Singapore, Poland and Israel.
The current scandal is
reminiscent of one – also involving Singapore – that brought down
the government of the late Prime Minister Rajiv
Gandhi, who, along with several others, was accused
of receiving kickbacks from the Swedish arms maker Bofors AB and
led to the defeat of the ruling Indian National Congress in
November 1989 general elections.
Similarly, Defense Minister George Fernandes was forced to step
down in 2001 after an Indian website released a secretly filmed
video implicating senior officials in corrupt arms deals,
energizing opposition parties to call for the entire government to
quit.
The latest controversy doesn't appear to be likely to bring down
the government. In a strongly worded statement, Defense Minister A
K Antony declared: "I will take strong action if any wrongdoing is
detected. No one found guilty will be spared.
The first victim is Gen. Sudipto Ghosh, the Ordinance Factory Board
chairman, who has been arrested along with several others for
taking bribes in exchange for defense contracts. Although seven companies have been named by
the Central Bureau of Investigation, India's version of the FBI,
Israeli Military Industries (IMI) and Singapore Technologies are
among the biggest, currently estimated to be negotiating contracts
over Rs 60 billion (US$1.27 billion).
Despite their size, Israel and
Singapore rank among the world's biggest arms
dealers. The Associated Press reported in 2007 that
Israel ranked as the world's fourth-biggest arms dealer after the
United States, Russia and France, selling US$4.3 billion in arms
exports, primarily to the United States and India. .
Singapore has been repeatedly
identified as a channel for illicit arms
sales. In
1995, Michael Heseltine, the former British Deputy Prime Minister,
asked for an investigation into Royal Ordnance, formerly a
state-owned arms maker, which allegedly was channeling arms
through Singapore
to both Iran and Iraq.
In the 1980s, the Swedish
government announced that all arms exports to Singapore had been
frozen in an effort to stop the island nation from being
used as a possible channel for the unauthorized export of Swedish
weapons. Between 1980 and 1984, according to the Swedes,
Unicorn International, an
associate company of Chartered Industries of Singapore, which in
turn was a subsidiary of an arm of Singapore's ministry of defense,
bought 304 missiles and 27 field sighting units from Bofors that
were traced to the Middle East.
According to Mark Pythian in his book "Arming Iraq: How the US and
Britain Secretly Built Saddam's War Machine," "Nobel Kemi and Bofors, subsidiaries of Nobel
Industries Sweden and member companies of EASSP, arranged for arms shipments for Iran
to be transferred through conduit countries, most notably
Singapore. Singapore was the second-largest largest
importer of Swedish arms and accounted for 14.4 percent of all
Swedish arms exports. Bofors sold Singapore artillery shells, 155mm
guns, 40mm naval guns, and 70 laser-guided anti-aircraft missiles
that were later shipped to
Iran."
IMI, the manufacturer of the Uzi, arguably the world's most popular
submachine gun, supplies most of the Indian military's small arms.
Singapore Technologies manufactures the towed 155-milimeter
howitzer among a variety of other weapons.
"Ending (ST's) contract means that a major upgrade to the artillery
equipment will have to end," said the website Bnet. "A whole new
contract proposal and award process would have to be completed,
seriously delaying the reequipping of the military with more modern
and advanced artillery. This means that India may have to
reconsider ending the contracts as they require the capability
being provided."
Two other Israeli companies possibly related to the inquiry, Israel
Aerospace Industries and Rafael, were not blacklisted, the website
said, as their contracts are considered so important to the
modernization of India's military.
The other offending companies
named are Media Architects of Singapore and BVT
Poland. The Indian companies are HYT Engineering, R K Machine Tools
and T S Kishan Ltd.
The CBI in its first information report stated that Ghosh
vigorously pushed Israeli firms for defense-related purchases and
entered into "criminal conspiracy" with a "private person and other
accused" to demand and obtain "huge illegal gratification" for
supply orders. New Delhi has thus put on hold all procurements and
projects underway with the seven firms till CBI completes its probe
into the alleged huge commissions.
Sources say that the armed forces will now have to look for new
suppliers of the defense equipment, critical to keep their arms
updated. The contracts affected were between IMI and the Ordinance
Board in March, worth around Rs 12 billion (US$252 million), to set
up an ordnance complex at Nalanda in Bihar to manufacture
propellant charges for artillery ammunition meant for Bofors
howitzers.
Blacklisted firms have not been allowed back into Indian defense
contracts due to the political repercussions of such moves. The
Nalanda complex has been a particular victim. In 2004 a South
African firm, Denel, was blacklisted which then went into oblivion
from the Indian scene. Denel had been originally sought for the
construction of the Nalanda Ordinance factory, which also went into
limbo.
Similar has been the fate of the then-Swedish Bofors (now owned by
BAE Systems), which was caught in the controversy involving
commissions to middlemen that cost Gandhi his job. Despite India's
desperate need for howitzers, Bofors has been unable to break back
into the Indian scenario; the guns that were delivered have proved
their mettle during the Kargil war between India and Pakistan in
1999.
Officials say that given the latest moves to blacklist companies,
IMI will be particularly impacted. It will certainly affect future
Indo-Israeli defense ties, which now run into billions of dollars.
In addition to the Uzi and Tavor 21 submachine gun, variants of
which cater to the needs of the Indian forces, IMI supplies 125mm
tank shells and manufactures Zitara carbines and cargo ammunition
(a variant of cluster bombs).
The Indian Defense Research and Development Organization (DRDO) was
also to be assisted by IMI in the development of the long delayed
indigenous Arjun tank for the Army. The OFB and IMI were also
looking collaborate on the development of PB500 bombs capable of
penetrating two-meter-thick concrete.
Meanwhile, ST was to supply
Pegasus howitzers (140 air-mobile ultra-light ones) valued at
nearly Rs30 billion. The firm was also contending to win the Rs80
billion deal to sell 400 155mm/52-calibre towed artillery guns,
along with transfer of technology for indigenous manufacture of
1,100 howitzers. The Pegasus howitzer was due for
field testing in the western state of Rajasthan this summer. The
guns are needed to be deployed in rural areas as well as along the
India-Pakistan and India-China borders.
Among the Indian firms blacklisted, T S Kishan Co was to supply
spares and accessories for T-72 and T-90S main-battle tanks of the
Indian Army; Pune-based HYT Engineering components of missiles
produced within India and the Ludhiana-based R. K. Machine Tools
spares for vehicles and machinery produced by state unit Bharat
Earth Movers.
Observers say that the latest scandal and blacklistings will
certainly impact India's defense modernization efforts, one of the
largest globally, pegged at over US$50 billion between 2007 and
2012 aimed at building an immediate strike force against Pakistan
and longer term deterrence against China.
In a report last year, the Associated Chambers of Commerce and
Industry of India said the country over three years (2004-7), spent
US$10.5 billion on military imports, making it amongst the largest
arms importers in the developing world.
Last month the IAF inducted the first of the three Israeli Phalcon
AWACS, India's most potent force multiplier, capable of tracking
down incoming missiles and can keep an ``eye'' on neighboring
nations without infringing airspace. India is paying US$1.1 billion
for the three AWACS.
Another system India recently purchased from Israel for US$600
million are aerostat radars to also spot surreptitious guerilla
attacks such as the one in Mumbai wherein the attackers used dingy
boats to infiltrate the city. New Delhi has also signed a US$1.4
billion deal with Israel to purchase a 70 km shore-based and sea
borne anti-missile air defense system.
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