Guns, money and national interest: India's defence middlemen
Over the past six years, India has been the world’s number-one importer of arms and ammunition, ahead of China, South Korea and Pakistan, according to the Stockholm International Peace Research Institute (SIPRI), which tracks the global arms trade. India now buys 12 percent of all the weapons and military hardware sold on global markets
...The work of a middleman eludes precise definition—and the men accused of facilitating deals through bribery or other inducements would never accept the name. Some operate their own arms companies; others simply represent foreign manufacturers as agents or consultants. Many are retired officers in the services they now lobby, while others have family connections to senior defence personnel or powerful politicians. The middleman rarely figures in a deal for his technical or operational knowledge of the product being sold. What he brings to the table is his network of connections in the military, bureaucratic and political establishment: his ability to grease the right palms, charm the big players, and navigate the confounding labyrinth of India’s defence procurement process—which has of late become even more complex and rigorous in an effort, as yet unrealised, to put the middlemen out of business.
If the tightening of rules has done nothing to thin the agents’ ranks, attempts to punish them in connection to crooked deals have fared even worse. Adding an alleged middleman to the UCM list, or blacklisting firms, is a measure of last resort for the government—a tacit acknowledgement that while cases against these men have not yet succeeded in court (if they even reach the courts), something must be done to obstruct their continuing operations. Even when an investigation is opened, the nature of the business makes it difficult for Indian agencies to collect evidence and prove criminal activity. It is possible to show, for example, that proper procedures have not been followed, and that a particular company has benefited. But even when foreign investigators have found concrete evidence of bribes and commissions, the money trail can rarely be traced.
“The payments in this business—the kickbacks—are paid in such complex and convoluted and secretive ways, it’s almost impossible for anyone to track, even for the CBI to track,” said Josy Joseph, a senior editor at the Times of India who has reported extensively on defence corruption and arms agents. “That is why no Indian agency has ever successfully prosecuted a single case, including Bofors. No arms agent has been convicted for a defence deal.”...
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...The work of a middleman eludes precise definition—and the men accused of facilitating deals through bribery or other inducements would never accept the name. Some operate their own arms companies; others simply represent foreign manufacturers as agents or consultants. Many are retired officers in the services they now lobby, while others have family connections to senior defence personnel or powerful politicians. The middleman rarely figures in a deal for his technical or operational knowledge of the product being sold. What he brings to the table is his network of connections in the military, bureaucratic and political establishment: his ability to grease the right palms, charm the big players, and navigate the confounding labyrinth of India’s defence procurement process—which has of late become even more complex and rigorous in an effort, as yet unrealised, to put the middlemen out of business.
If the tightening of rules has done nothing to thin the agents’ ranks, attempts to punish them in connection to crooked deals have fared even worse. Adding an alleged middleman to the UCM list, or blacklisting firms, is a measure of last resort for the government—a tacit acknowledgement that while cases against these men have not yet succeeded in court (if they even reach the courts), something must be done to obstruct their continuing operations. Even when an investigation is opened, the nature of the business makes it difficult for Indian agencies to collect evidence and prove criminal activity. It is possible to show, for example, that proper procedures have not been followed, and that a particular company has benefited. But even when foreign investigators have found concrete evidence of bribes and commissions, the money trail can rarely be traced.
“The payments in this business—the kickbacks—are paid in such complex and convoluted and secretive ways, it’s almost impossible for anyone to track, even for the CBI to track,” said Josy Joseph, a senior editor at the Times of India who has reported extensively on defence corruption and arms agents. “That is why no Indian agency has ever successfully prosecuted a single case, including Bofors. No arms agent has been convicted for a defence deal.”...
In the wake of the Bofors scandal, defence procurement slowed markedly, and officials began talking about ways to keep middlemen on the sidelines. But at the end of the decade, a raft of new allegations emerged. In December 1999, a member of the Rajya Sabha, Jayant Kumar Malhoutra, used a discussion in the upper house to allege that up to 20 recent contracts had been tainted by the involvement of agents, middlemen and front companies, who continued to operate freely in spite of a ban on the use of their services. At around the same time, Rear Admiral SV Purohit, who had been the assistant chief of logistics at Naval Headquarters, filed a petition before the Delhi High Court to challenge his own stalled promotion, which included further sensational allegations about the outsized role of middlemen and agents in a series of big-ticket contracts.
As the accusations of corruption multiplied—in Parliament, the media, and court—the defence minister in the Bharatiya Janata Party-led coalition government, George Fernandes, came under relentless pressure to clean up the mess. In February 2000, he responded by ordering a sweeping investigation by the Central Vigilance Commission (CVC), which examined every defence contract larger than Rs 75 crore that had been signed since 1989, when the ban on middlemen was first put in place.
After examining nearly 500 files handed over by the defence ministry, the CVC concluded in its interim report that “the ban on agents in the procurement of weapons and weapons systems ... is, in effect, not a ban at all.” The rules prohibiting middlemen in weapons deals had made no impact. In its investigations into the specific allegations raised by Purohit, which pertained to naval procurement, the CVC found ample evidence that middlemen exerted considerable influence in the purchasing process, even for minor items and spare parts, pointing to unnecessary purchases, “exorbitant” prices, bidding cartels, and the frequent violation of tender rules requiring multiple competing bidders.
In March 2001, the CVC submitted its final report, though the BJP-led government refused to make it public, a decision that was regarded as an attempt to prevent further scrutiny into deals concluded under its watch in the run-up to the Kargil War. By that time, however, a much bigger scandal had taken over the headlines: a sting conducted by Tehelka, known as Operation West End, which secretly taped a series of military officials and politicians accepting bribes to facilitate the purchase of non-existent night-vision devices...
Read more: http://www.caravanmagazine.in/reportage/boomtown
