The Hindu : Opinion / Editorials : Denel and defence procurements

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Monday, Apr 25, 2005

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Denel and defence procurements

News that a South African armaments manufacturer paid commissions to help clinch a contract to sell anti-materiel rifles (or bunker busters) to the Indian Army has refocussed attention on a problem that refuses to go away — the role of middlemen in illegally influencing defence procurements. Two South African newspapers have alleged that in 2003 Denel paid Varas Associates, a shadowy company registered in the Isle of Man, a `commission' of 12.75 per cent (approximating Rs.20 crore), for helping to secure the deal for the first batch of 200 anti-materiel rifles. This information, which has emerged at a time when Denel's operations are under the scanner of South Africa's anti-corruption unit (nicknamed the Scorpions), raises grave questions. The Centre has done the right thing by referring the alleged payoffs to the Criminal Bureau of Investigation for appropriate action. Was there a violation of Defence Ministry's rules on arms agents, which were notified in 2001? Secondly, is there any truth in the allegation that Varas Associates illegally procured secret Defence Ministry documents to advance Denel's chances of bagging the contract? Learning lessons from an unhappy past, the Government must ensure, as Prime Minister Manmohan Singh has emphasised, that l'affaire Denel does not slow down or derail the process of defence procurements. There can be little doubt that the controversy has stalled the Army's plans to acquire 1,200 anti-materiel rifles and put "on hold" other ongoing deals with Denel. Big-ticket purchases, especially of 155 mm guns (self-propelled, towed, and tracked) needed by the Army, cannot be delayed beyond a point. While it is vital that the CBI conducts its probe professionally, fairly, and swiftly, should prima facie evidence be found against Denel, it must be ruled out of contention.

Controversies such as this will continue to dog India's defence acquisitions until a larger issue — the role of middlemen or recipients of `commissions' and other types of secret payment that cannot really be distinguished from bribes — is resolved. This issue, which came on political centre-stage with Bofors, has been spotlighted by the Tehelka sting operation and, more recently, by the allegation that a shadowy Panamanian company was contracted to assist in securing the sale of Mirage 2000 aircraft to India. The 2001 registration system for arms agents, which replaced the "no agents clause" that supposedly became operational in 1989 following the Bofors expose, was intended to serve the cause of transparency. With hardly anyone coming forward to register, the claimed reform has been a non-starter. Led from the front by a Prime Minister who has an enviable reputation for personal integrity, the Government must reflect deeply on the issues at stake, clean up the stables, and get the defence acquisitions system absolutely right. Getting swiftly to the bottom of the Denel affair is vital for the health of defence procurements and for clean, corruption-free governance.

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