The long awaited policy for blacklisting of companies involved in any wrong doing during defence procurement is likely to be announced shortly by the Ministry of Defence (MoD), top sources have told BharatShakti.in. The policy was supposed to be released as part of the Defence Procurement Procedure 2016 that was made public during the DefExpo 2016 at Goa. However, along with the policy for nomination of Strategic Partners, the aspect of blacklisting was not addressed in DPP 2016, and only a truncated document was released.
The Indian Defence procurement has been plagued by delays for a decade, with large number of companies being blacklisted by the MoD on account of some or the other wrong doing. The role of middlemen, often serving without scruples, has supposedly been the main cause.
The Raksha Mantri in his first interview to BharatShakti.in in November 2015 had on being questioned on this aspect responded, “Agents are authorized representatives only and not middlemen. We are going to define what agents mean. Currently, this definition does not exist. A person who provides technological expertise, management support for a fee which is reasonable and which does not depend on the value of the contract or outcome – positive or negative – of the contract will be allowed as agent.”
The issue of blacklisting is again in the news on account of reports emanating about the Ministry of Defence deal for three Embraer jets from Brazil at a cost of USD $208 million. Under an agreement reached with both US and Brazilian authorities, Embraer has agreed to pay the justice department $107 million as penalty for one count of conspiracy to violate the Foreign Corrupt Practices Act’s anti-bribery and records provisions.
However in a major change from the earlier practice, the ban on companies for such misdemeanors will be product and company specific. Therefore, for example, the cascading effects of a ban on account of the Embraer deal will be limited to Augusta Westland – a subsidiary of the Finmeccanica that is suspected to have bribed officials and middlemen when India bought the AW-101 helicopters. It will not influence the MoD’s dealings with other companies of the Finmeccanica group.
The Indian Navy sources guns for its surface ships, heavy torpedoes for the submarines from companies that form a part of the Finmeccanica Group. The blanket ban had put the brakes on Navy’s planned acquisitions. Under the new blacklisting policy however, other group companies of Finmeccanica will be able to participate in different contracts. With most major military equipment being manufactured globally by only a few companies, blanket bans had reduced the number of competitors bidding for high value Indian defence contracts.
The new policy is also likely to allow middlemen; however, companies will have to provide necessary details to the MoD.
The RM in his interview to BharatShakti.in had stated that a committee will be formed that will investigate complaints received. His approach to the issue, in his own words: “Basically, what we are trying to do is to have a system that hands out graded punishment commensurate with the magnitude of the wrong-doing.”
The defence industry is hopeful the new policy will help fill up a rather big void in India’s current procurement procedures and also ease conduct of business with the MoD. The three services will surely welcome a policy that lays stress on integrity, without jeopardising timelines for procurement. Cases such as the procurement of 155mm Howitzers, when almost all known manufacturers of the gun system globally were blacklisted leading to enormous delays in procurement of guns for the Indian artillery, would hopefully be obviated in future.