A Defence deal that put Modi on spot

The Modi government, which had, until recently, looked unassailable, largely on account of its corruption-free image, in contrast with that of the previous UPA government, is suddenly looking vulnerable, following rumours about the Rafale deal.

There have, no doubt, been allegations for some time that the government is favouring certain sections of the corporate sector, but those sections enjoyed similar dispensations from the previous governments too. Despite the worrisome condition of the economy, Modi has commanded a high degree acceptance as the common man still believes he has lived by his original claim – “na khaoonga, na khaane doonga”.

The Rafale deal, however, appears to be altering this impression. The BJP is not yet able to give clear answer to the question why HAL, a public sector company, was in 2015, replaced by a private company as the Indian partner of the French Dassault Aviation in the Rafale deal. As the Indian firm has neither expertise nor experience in Defence materials, the Opposition parties have made grave charges.

The common man, used to Opposition parties making allegations about the ruling party, had not really found any motives to the BJP so far. But, this week, an investigative French journalist set off fireworks by quoting Hollande, the former President of France, that the Indian agent’s name was suggested by the government of India while not specifying the person representing the government.

At this stage, it is difficult to say much more about this controversial matter. It may take decades for the truth to come out, if at all it happens. The Bofors mystery, which rocked the country in the 80s, still remains unresolved. Still, this appears to be a good time to look at why deals relating to Defence procurement prove to be deadly booby traps in many countries.

It is common to dig holes and camouflage them with artificial covers in order to lure unsuspecting animals into walking over them. Defence deals also appear to belong to the category of transactions that create misleading outward impressions.

For all appearances, everything looks normal when heads of the countries concerned sign the agreements. It is only later that it transpires that middlemen were involved for greasing the palms of political leaders of the buying nation. And trouble begins.

Rajiv Gandhi convincingly won the Parliamentary elections in 1985, following the death of his mother Indira Gandhi. Apart from the wave of sympathy created by the assassination of Mrs Gandhi, the image of being ‘Mr Clean’ who reluctantly entered politics because of unforeseen circumstances, went a long way in facilitating that victory.

As Prime Minister, Rajiv ushered in a new era of economic reforms and brought technology close to the common man. He became the icon of the youth and modern thinking. Just when he appeared unstoppable, Bofors happened changing the whole picture. Blaming the Congress party, all the Opposition MPs resigned (a strategy being contemplated by the Congress now) Rajiv lost the subsequent election and V P Singh, who promised to expose Bofors culprits, became the Prime Minister. However, 25 years down the lane nothing is known about the allegations surrounding the Bofors episode and they remain unproved. It is said that no tangible evidence is available.

The phenomenon of Defence deals claiming the careers of political leaders is not confined to India. Instances of corruption in high places do come to light in many sectors but are more common in the Defence area, largely on account of the secrecy in which transactions in that field are shrouded. National security is cited as the reason for not allowing a public debate.

Even criticism of wasteful expenditure in Defence is painted as unpatriotic. An important weapon at the disposal of the Ministry of Defence for concealing facts is the system of “classification” whereby access to records is restricted – officers at different levels are allowed access to different grades of information. The Ministry enjoys the unenviable distinction of being among the top three corruption-prone sectors in the country along with oil, construction and engineering. According to reliable studies, nearly 50% of all graft money emanates from the Defence sector.

For each complex equipment, there are usually just a handful of manufacturers and only a couple of buyers at a point of time. Therefore, price discovery is a big challenge. The contracts involve huge sums and expert lobbying takes place at the highest levels. Supplying nations enjoy immense economic benefits including employment and therefore pursue opportunities vigourously both at the manufacturer as well as the government levels.

Another special feature is the ‘offsets’, which are additional investments made by the suppliers over and above their sales. Economists see them as highly problematic and inefficient for various reasons including the fact that assessing their fair value is never easy.

Still, it cannot be denied that the arrangement sometimes can stand in the way of attempts to unravel some unsavoury practices. Another factor that makes effective scrutiny of these deals difficult is the highly technical nature of the specifications of the equipment involved.

Political leaders defend their decisions, saying that they went by the recommendations of professionals in the Armed Forces, while the senior most military professionals are prevented by their service rules from revealing the details leading to the decisions in public.

As a result of all this practice, many of the decisions within the Defence system end up being somewhat like Winston Churchill’s description of Russia as “a riddle, wrapped in a mystery inside an enigma…”. And when a person like A K Antony, known as the synonym for integrity, cancelled some controversial deals, he was accused of protecting his own image at the cost of the interests of the Armed Forces and the country’s defence!
Having said all this, it must also be noted that it is not as if many of our Defence deals are bad. Our armed forces are among the best in the world and their procedures and practices have stood the test of time.

The occasional slipup, mistake, or even succumbing to temptation cannot take away from the stupendously complicated and colossal responsibility shouldered by them and the exemplary manner in which they handle the task entrusted to them.

And, in many cases, there are diplomatic nuances to Defence deals. If, for instance, weapons of the same type, quality and quantity are available at the same price from two countries, one of them may be preferred on account of foreign policy imperatives. And it may not always be possible to explain such circumstances without compromising the interests of the country.

What is more, the very nature of the decisions involved in some issues may require them to be taken at the highest level, as a result of which even Ministers and civil servants at the highest ranks of the bureaucracy may not be fully aware of the circumstances.

Therefore, the Opposition parties can hardly be expected to know what is going on. Since major Defence procurements are rarely purely commercial decisions, they are undertaken by the Cabinet Committee on Security and its equivalents in other countries.

To clear improve transparency and accountability defence purchases, experts have suggested many methods including promoting competition among potential suppliers by designing technical specifications intelligently.

Demanding and securing disclosure of costs and expenditures, stricter parliamentary supervision to promote greater transparency Insisting on disclosure of the identities of agents and also the payments and terms of the contracts.

Offsets should be subjected to rigourous standards and supervision and fully disclosed to enhance transparency and facilitate monitoring. Given the sensitive and complicated nature of the entire issue, and the national security implications, one must think twice before entering into the blame game about sensitive and delicate issues involving the external interests and the internal security of the nation. (The writer is former Chief Secretary, Government of Andhra Pradesh)