February 21, 2020
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A Price-Tag On The Nation

The sheer number of irregularities reinforces the growing fear that kickbacks continue to be the rule in defence deals.

A Price-Tag On The Nation
illustration by Saurabh Singh Prime Minister Vajpayee was so moved by Mrs Sonia Gandhi's concern for his safety that he declared that the republic and Indian democracy were safe. I only wish safety could be so cheaply purchased. For, at the same time when he was saying this he was adjourning Parliament prematurely, not to give the police a chance to beef up security but to prevent a resumption of the debate on coffins for the Kargil dead, which the terrorists had so inconsiderately interrupted. If there is one ministry, and for one cabinet minister, for whom the December 13 attack came as a blessing in disguise, the ministry is defence, and the minister George Fernandes. For two days before the attack, the Comptroller and Auditor General had opened a proverbial can of worms in the defence department.

In 1999, citing the operational emergency created by the Kargil war, the ministry of defence had relaxed procurement norms on 123 contracts worth Rs 2,175 crore. These included virtually everything, from ammunition to thermal imagers to gloves and parkas to coffins for the dead soldiers. So far so good. But how did the ministry of defence use the latitude it had secured? The CAG's audit showed that there had been serious irregularities in 24 contracts covering 64 per cent of the total purchases. These included deliberately selecting more expensive equipment, deliberately accepting substandard equipment, and deliberately placing orders abroad for equipment that was being manufactured within the country.

These mistakes would not have mattered if the equipment had reached in time to be used in the war. Since no one could predict how long the war was going to last, or indeed how far it would escalate, they would have been excusable if the contracts had been placed while the war was still going on. But the CAG report shows that in most of these cases the contracts were placed, or confirmed despite revealed shortcomings in the equipment, only after the Kargil war was over. And that casts an altogether different light on the patriotic hurry to strike these deals.

Two examples will suffice to show this. The ministry placed an order for 208 hand-held thermal imagers for Rs 41.95 crore with a French firm, rejecting a bid from an Israeli firm with which BHEL already had a collaboration to produce these in India. To do so, it gerrymandered the contents of the two offers to make the French bid look 7 per cent cheaper when in fact it was 23 per cent dearer than the Israeli one. This decision also saddled the army with the need to hold two sets of spares instead of one. To cap it all, the contract was placed abroad on the grounds that BHEL was still setting up the manufacturing facilities and could not therefore supply them in time. But it was signed on February 1, 2000, seven months after the Kargil war ended and after disregarding the fact that BHEL had informed the MoD that its production facilities were up and running and it could start supplying the HHTIS in March. The French firm had committed itself only to a delivery date of May and actually supplied the HHTIS only in November 2000.

An even less defensible purchase was that of aluminium coffins for the Kargil dead. The MoD placed an order abroad for 500 aluminium caskets at $2,500 (Rs 1.09 lakh a casket). This order was placed, without any tender or search for alternative suppliers, with an American firm that had supplied aluminium caskets to the Indian commander of UN forces in Somalia in 1993 at $172 per casket. Since the Opposition chose to make this the centrepiece of its attack on the government and Fernandes, the ministry of defence has been trying to justify the purchase on grounds that have become progressively more flimsy. It first said that the demand from the army had been for reusable caskets, which were far more expensive. But the Eastern command General it cited as having made the request has vigorously denied making it, and said that all he had asked for was caskets that would prevent the bodies of his slain jawans from decomposing during the long transit to their families.

The MoD then said that it had had to order the caskets from abroad because aviation-grade aluminium was not available in the country. This turned out to be a palpable lie as Hindustan Aeronautics had been manufacturing disposable extra fuel tanks for its fighter aircraft for years. The price charged for each casket also turned out to be indefensible. Based upon its enquiries from the manufacturer about the structure of costs, the CAG concluded that the firm had charged Rs 4.5 million per tonne of aluminium sheets, when the London Metal Exchange price for identical sheets was Rs 63,360. The markup was therefore of 80 times, ie 8,000 per cent! To top it off, the caskets arrived long after the Kargil dead had been cremated or buried. They had been safely transported to their homes in foil-lined wooden caskets that had cost the army Rs 1,200 each!

Nearly all of the other irregularities cited by the CAG follow the same pattern. Its findings therefore suggest that in each case, suppliers were pre-selected on the basis of the kickback they were prepared to give to the concerned officials. In the CAG's sample, the value of each individual contract was fairly small—the coffin deal for instance was for only Rs 6.5 crore, and the largest contract was for Rs 151 crore. But their sheer number reinforces the widespread and growing fear that kickbacks have now become the rule in defence deals.

Any government to whom the lives of its soldiers and the preparedness of its armed forces mattered would have made this report the basis of a widespread inquiry with the aim of eliminating corruption and ensuring that the armed forces have what they need when they need it. Instead, the Vajpayee government has preferred to bury the issue by cutting short the life of Parliament itself. All is definitely not well with Indian democracy.
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