Kickbacks in India’s defence purchases

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    Prime minister Narendra Modi of India boasts his government of being corruption- free. But, his claim has become questionable in the light of recent audit of Rafale purchase in France.

    India had ordered 36 of these fighter aircraft from France in September 2016. The 7.8 billion government-to-government deal for 36 fighter jets was signed in 2016. The Indian Air Force has already raised its first squadron of the Rafale jets at Ambala and is due to raise the second one at Hasimara in West Bengal.

    India expects to receive more than 50 percent of these fighters by April-end. The first batch of five Rafale jets had arrived in India on July 28 and was officially inducted on September 10 by the government.

    In a startling disclosure, the French Anti-Corruption Agency, Agence Française Anticorruption

    has announced that their inspectors have discovered an unexplained irregularity during their scheduled audit of Dassault. According to details, “the manufacturer of French combat jet Rafale agreed to pay one million euro to a middleman in India just after the signing of the Indo-French contract in 2016, an investigation by the French publication Mediapart has revealed. An amount of 508,925 euro was allegedly paid under “gifts to clients” head in the 2017 accounts of the Dassault group  ( Dassault paid 1 million euro as ‘gift’ to Indian middleman in Rafale deal: French report India Today Apr 5, 2021). Dassault tried to justify “the larger than usual gift” with a proforma invoice from an Indian company called Defsys Solutions. The invoice suggested that Defsys was paid 50 per cent of an order worth 1,017,850 for manufacturing of 50 dummy models of the Rafale jets. Each dummy, according to the AFA report, was quoted at a hefty price of 20,357. The Dassault group failed to provide any documentary evidence to audit about the existence of those models. Also, it could also not explain why the expenditure was listed as a “gift to clients” in their accounts.

    Shady background of Defsys

    Defsys is one of the subcontractors of Dassault in India. It has been linked with notorious businessman Sushen Gupta. Sushen Gupta. He was arrested and later granted bail for his role in another major defence scam in India, the AgustaWestland VVIP Chopper case.

    The Enforcement Directorate charged Sushen Gupta for allegedly devising a money-laundering scheme for the payouts during the purchase of the helicopters.

    Rampant corruption in India

    Corruption in defence deals is a norm rather than an exception in India. They did not spare even aluminum caskets used to bring back dead bodies from the Kargil heights (“coffin scam”). Investigations into shady deals linger on until the main characters or middleman is dead. Bofors is a case in point.

    Why investigation of defence deals since independence recommended

    India’s Tehelka Commission of Inquiry headed by Mr. Justice S N Phukan had suggested that a sitting Supreme Court Judge should examine all defence files since independence.

    Concerned about rampant corruption in defence purchases allegedly involving Army personnel, he desired that the proposed Supreme Court Judge should by assisted by the Central Vigilance Commission and the Central bureau of Investigation.

    He stressed that unless the existing system of defence procurement was made more transparent through corrective measures, defence deals would continue to be murky. He had submitted his report to then prime minister Atal Behari Vajpayee, but to no avail. The Commission had examined 15 defence deals including the AJT, Sukhoi, Barak missiles, T-90 tanks, tank navigation systems, simulators, hand-held thermal. imagers, Karl Gustav rocket and Kandla-Panipat pipeline. The irregularities in the scrutinised defence deals compelled the Commission to suggest de novo scrutiny of all defence purchases since independence.

    Tardy trial

    The courts have absolved Rajiv Gandhi of involvement in the BOFORS scam. However, a considerable section of Indian people still believes that ‘Mr. Clean’ was not really so clean. The BJP exploited Rajiv’s acquittal as an election issue. Kuldip Nayyar, in his article “The gun that misfired” (Dawn February 14, 2004) laments, “There was practically no discussion on Bofors-guns kickbacks in the 13th Lok Sabha which has been dissolved for early elections. Once Rajiv Gandhi died the main target – the non-Congress parties lost interest in the scam”.

    According to analysts, the mechanisms of public accountability in India have collapsed. Corruption has become a serious socio-political malady as politicians, bureaucracy and Armed Forces act in tandem to receive kickbacks. The anti-corruption cases, filed in courts, drag on for years without any results. To quote a few case: (a) There was no conviction in Bofors-gun case (Rs 64 crore), because of lethargic investigation (the case was filed on January 22, 1990 and charge sheet served on October 22, 1999. Among the accused were Rajiv Gandhi, S K Bhatnagar, W N Chaddha, Octavio, and Ardbo. The key players in the scam died before the court’s decision). (b) No recoveries could be made in the HDW submarine case (Rs 32.5 crore). The CBI later recommended closure of this case. (c) Corruption in recruitment of Armed Forces.

    Legal cover for middlemen

    Central Vigilance Commissioner P Shankar had alleged (October 2003): “The CVC had submitted its defence deals report on March 31, 2001. Yet a year later, the government has not conducted the mandatory departmental inquiry to fix responsibility”. Shankar explained that the CVC had examined 75 cases apart from specific allegations made by former MP Jayant Malhoutra and Rear Admiral Suhas V Purohit Vittal. Malhoutra’s allegations were about middlemen in defence deals. After his report, the ministry lifted the ban on agents in November 2001 to regularise the middlemen. Purohit, in his petition in the Delhi HC on a promotion case, had alleged unnecessary spare parts were bought from a cartel of suppliers instead of manufacturers, at outrageous prices and at times worth more than the original equipment.

    Past cases forgotten to continue business as usual

    There were ear-rending shrieks about the Taj-heritage corridor case, Purulia-arms-drop case and stamp-paper cases. Indian Express dated November 11, 2003 reported that the stamp-paper co-accused assistant Sub-Inspector of Police drew a salary of Rs 9,000, but his assets valued over Rs 100 crore. He built six plush hotels during his association for 6 years with the main accused Abdul Karim Telgi. The ASI was arrested on June 13 and charged under the Maharashtra Control of Organised Crime Act. Investigations by the Special Investigating Team (SIT) probing the stamp scam had found that the ASI Kamath accepted Rs 72 lakh from the scam kingpin, Abdul Karim Telgi, on behalf of IGP Sridhar Vagal.

    The problem is that the modus operandi of corruption ensures that it is invisible and unaccounted for. There are widespread complaints that the politicians exercise underhand influence on bureaucracy to mint money. For instance, the Chief Vigilance Commissioner complained to Indian Prime Minister (November 8, 2003) that at least “six cabinet ministers, handling key infrastructure ministries, are harassing chiefs of public sector undertakings for ‘personal favours’, and in some cases even for pay-offs”.

    For example, one PSU (Public Sector Udertaking) chief is said to have complained that he was asked to get Rs 20 crore delivered to his minister’s party office and when he refused, he was “denied” an extension. Indian Express dated February 19, 2004 reported, under reportage titled “Figuring India” that ‘Rajiv Pratap Rudy is only one in a long line of ministers who have misused the funds and facilities of Public Sector Undertakings”. The newspaper appended the following bird’s-eye view of the funds (available for corruption) at the PSUs command: Rs 3, 24,632 crore total investment in PSUs, Rs 36,432 crore profits, 12,714 crore profits of monopolies in petroleum, Rs 5,613 CRORE profits of monopolies in power Rs 7,612 crore, profits of monopolies in telecom Rs 10,388 crore, Rs 61,000 crore invested in PSUs in 1991-1998, Rs 19,000 crore returns during 1991-1998.”

    Corruption as proportion of gross Domestic Product

    Professor Bibek Debroy and Laveesh Bhandari claim in their book Corruption in India: The DNA and RNA that public officials in India may be cornering as much as ₹921 billion (US$13 billion), or 5 percent of the GDP through corruption.

    India 86th most corrupt (Transparency International corruption ranking Jan 29, 2021)

    India’s ranking on the Corruption Perception Index– 2020 is 86. The index released annually by Transparency International ranks 180 countries by their perceived levels of public sector corruption according to experts and business people. It uses a scale of zero to 100, where zero signifies the highest level of corruption and 100 is very clean.

    All-round corruption

    In India, anti-corruption focuses on big ticket graft. But it is petty corruption that hurts common people more. Both need to be weeded out. A former World Bank president Robert Zoellick once said, “Corruption is a cancer that steals from the poor, eats away at governance and moral fibre, and destroys trust.”

    According to Transparency International, CPI-2020 shows that corruption is more pervasive in countries least equipped to handle Covid-19 and other crises. “Covid-19 is not just a health and economic crisis. It is a corruption crisis. And one that we are currently failing to manage,” Delia Ferreira Rubio, chair of Transparency International said. “The past year has tested governments like no other in memory, and those with higher levels of corruption have been less able to meet the challenge. But even those at the top of the CPI must urgently address their role in perpetuating corruption,” she added.

    Concluding remarks

    Click Wikipedia to know that Narendra Modi’s “Net worth” is “₹ 2.85 Crore” (June 2020). This figure defies his humble financial background. He has a penchant for hobnobbing with “crony capitalism”. It appears he is worth a lot more.  Those who make illicit money have a knack to hide it.

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