Cover Story DEFENCE

Tatra truck deal has blown the lid off a shadowy world of arms dealers who SHOOTING IN THE DARK operate with impunity

By Sandeep Unnithan & Shantanu Guha Ray

n August 2009, a most unusual whistleblower flew into New Delhi. H. Hanumanthappa, 79, a former Congress MP from Karnataka, carried a letter which alleged deviations in the Iway the defence ministry was buying Czech-made Tatra trucks. He was armed with a confidential report prepared by an em- ployee of Bharat Earth Movers Ltd (BEML). The report alleged the Bangalore-based defence PSU had violated defence procurement rules by buying the trucks not from the original equip- ment manufacturer but from a UK-based agent, Ravinder Kumar Rishi. The price of the trucks was also being inflated, he said. The trucks were being imported at between Rs 40 and Rs 80 lakh each but sold by BEML to the Ministry of Defence (MoD) for twice the amount, a mark-up of over 100 per cent. This was not the first alarm on the deal. Red flags had been raised on grounds that MoD was dealing with a trading company instead of an original equipment manufacturer. Since 2006, MOD’s Defence Procurement Procedure makes it mandatory to deal with original equipment manufacturers. In 2005, Brigadier I.M. Singh in the office of the Master General of Ordnance (MGO), responsible for procuring ammunition and vehicles in the army, alleged irregularities in the purchase of Tatra trucks. He was posted out of the MGO. In 2005, a television channel reported on the deal, won- dering how a psu could deal directly with a subsidiary. In 2006, two private sector de- fence firms, Larsen and Toubro and Tata (LEFT) A TATRA TRUCK Power, collaborating on a DRDO project, were CARRYING THE PRITHVI asked by BEML to pay Rs 40 lakh extra per MISSILE; A.K. ANTONY

Photographs by REUTERS Cover Story DEFENCE

truck over the initial Rs 80 lakh—the Lt-Gen Tejinder Singh was offering a two companies needed 28 Tatra trucks bribe. CBI has registered a preliminary The incorruptible defence minister has ensured that plum to mount indigenously developed inquiry into the allegation. ANTONY SECURES HOME FRONT defence projects land up in his native state, Pinaka rockets they had been nomi- The Tatra deal is only the tip of the nated to produce. Both companies re- iceberg. Ambitious arms agents co- n order to protect his squeaky clean A unit under Bharat Electronics Ltd to sup- fused. In March 2010, the MOD bought exist with corrupt officials and easy-to- an additional 788 trucks from Global co-opt politicians. Officially, arms image,A.K.Antony has always tried port outsourcing products for navy and air Ito steer clear of allegations of Vectra, owned by Rishi, at rates that agents have ceased to exist at least force and to provide waterfront support to were inflated by over 40 per cent. Over since August 2006. All defence compa- favouritism. But since becoming Union Southern Naval Command. It was inaugu- 7,000 Tatra trucks have been bought nies have had to sign an integrity pact defence minister in 2006,Antony has rated by Antony in February 2011. been liberal in directing investment over the past 25 years for over Rs 5,000 where they promise not to hire agents back home, even though for much of 5 Indian Coast Guard Academy, crore. Yet it was only on March 30 that or pay bribes. Manufacturers risk his tenure, the Left Democratic Front Kannur Kannur was chosen for the acad- CBI filed a First Information Report being blacklisted if they use agents. Yet emy overlooking Pune’s claims. It was in- (LDF) was in power. In the past five naming Rishi as the main accused in a middlemen continue to thrive. ‘Success years,Antony has granted as many as augurated in 2009 and the foundation case to defraud the nation. fees’ of up to 10 per cent for a defence six Ministry of Defence projects to stone laid in May 2011. The academy is Defence Minister A.K. Antony acted deal are routinely handed out to agents Kerala with a combined capital outlay coming up on 164 acres of land provided only after he came under pressure and key decision-makers. The kick- by the previous LDF government near the of more than Rs 1,000 crore. In spite of U D N from outgoing army chief General backs are disguised as legal fees to I

H Indian Naval Academy at Ezhimala. With their bitter political differences, Elama- E H

V.K. Singh, who was fed up of the sleaze lawyers, consultancies for retired army T ram Kareem, industries minister in the an estimated cost of Rs 720 crore, it is that has crept into the armed forces. In officials and payments to event man- THE BEML DEFENCE AND RAIL PRODUCTS DIVISION IN PALAKKAD previous LDF government, and Antony expected to provide training to 400 a March 26 newspaper interview, agement companies. As defence ana- worked out a cordial relationship to set ment of Rs 150 crore. The firm has 450 for Light Combat Aircraft, advanced Coast Guard personnel at a time. General Singh alleged he was offered a lyst C. Uday Bhaskar puts it, “Our up new projects.The alliance came to employees and manufactures compo- light helicopters and Sukhois. It is yet 6 National Institute for Research and Rs 14-crore bribe to clear ‘600 substan- highly bureaucratic and secretive pro- be dubbed as the EK-AK formula. nents for BrahMos missiles. to be inaugurated. dard vehicles’ in this deal. The cedures for procuring defence hard- Development in Defence Shipbuilding 3 BEML Defence and Rail Products September 2010 bribe offer, the chief ware add to the corruption.” 1 BrahMos Aerospace 2 Strategic Electronics Manufacturing (NIRDESH) at It is under the Division, Palakkad The manufacturing alleged, came from retired Lt-General It’s big business. is the world’s Thiruvananthapuram Ltd. It is a Facility in Kasargode district It is the department of defence production in facility of BEML Ltd commenced opera- Tejinder Singh. In his formal complaint largest arms importer. Between 2007 wholly owned subsidiary of BrahMos electronics arm of Hindustan the Ministry of Defence. The foundation tions in 2010 with an investment of to the CBI in April, General Singh named and 2011, the country imported arms Aersospace Ltd, New Delhi, an Aeronautics Limited, Bangalore. It stone was laid by Antony in January Rs 260 crore.The firm has 500 employ- Rishi as the person on whose behalf worth over $12 billion (Rs 60,000 Indo-Russian project under the was started with an investment of 2011. NIRDESH is the first of its kind in the Ministry of Defence. It commenced Rs 200 crore. The firm manufactures ees and manufactures Tatra trucks, country and is wholly funded by the de- A.K.ANTONYACTED ONLYAFTER HE CAME UNDER operations in 2008 by taking over the radars, navigation systems, mission pontoon bridge systems and rail coaches. fence ministry and all defence shipyards PRESSURE FROM OUTGOING ARMY CHIEF GENERAL facilities of a state PSU with an invest- computers and early warning systems 4 BEL Product Support Centre, Kochi in the country. by M.G. Radhakrishnan V.K.SINGH,WHO WAS FED UP OFTHE SLEAZE.

MAIL TODAY crore). Over the next decade, India will tor of Ordnance Factory Board Sudipta import arms worth over $100 billion Ghosh. The Ordnance Factory Board is Ahead in the arms race All roads lead to India (Rs 5 lakh crore). Among the deals in the apex authority that controls the 40 India ranks first among world’s top Five countries are the main suppliers of the pipeline are Rs 90,000 crore to buy factories under MOD. Ghosh allegedly five arms importers in 2007-2011 India’s defence requirements * 126 Rafale combat jets, Rs 50,000 received bribes from two Indian and crore for six submarines and an esti- four foreign defence firms, which $13.7 bn $4.7 bn Russia n mated Rs 20,000 crore to buy 2,700 Antony subsequently blacklisted on b

6

. UK howitzers. Suppliers include the mili- March 5. Antony said the ban followed

2 $1.9 bn n 1 b

$ CBI tary industrial complexes of the US, advice from , which had collected

n Israel 3 b .

7 n 9 $2.4 bn France, Russia, Israel and the UK. evidence against these companies (see $ .

b USA

6 3 $

. A series of scandals has finally cast box: Blocked from Business). 6

n France

$ $9.5 bn b

a shadow over Antony, who presides The ban may not stop the hectic lob- 1 .

5 * 2007-2011; Source: SIPRI over a procurement process that in- bying for a slice of the arms pie in India. $ cludes eight defence public sector un- A fortnight before the Indian Gover- Splurge offensive dertakings and 40 ordnance factories. nment inked a multi-billion dollar deal The army,navy and air force have lined up He is a traditional Congress leftist, a for 126 new generation fighter jets for big buys between 2012 and 2016 defender of the public sector, and the Indian Air Force (IAF) on January 31, has built a career on probity. But he Bernard Baiocco, a French arms con- appears to have allowed some ques- sultant, visited New Delhi to take part in tionable arms deals to continue negotiations with top defence officials. Air Force Navy Army India South Korea Pakistan China Singapore unchecked. In 2009, CBI arrested the London’s The Sunday Times, in a story Source: Stockholm International Peace Research Institute (SIPRI) $30 bn $15 bn $5.2 bn former chairman and managing direc- headlined ‘Inside a 18 billion dogfight’,

20 INDIA TODAY N APRIL 23, 2012 APRIL 23, 2012 N INDIA TODAY 21 Cover story DEFENCE

H C TIWARI D LONG ROAD TO ACQUISITION THE FIVE KLISTE BIG BUYS BLAC The defence procurement process is multi-layered and long drawn Army,Air Force and Navy have all out. It often leads to delays, even in the purchase of basic items. gone in for big-ticket acquisitions Blocked from ndia spends Rs 2 lakh crore every year tional secretary. It is assisted by a finan- DASSAULT RAFALE to maintain its military, the world’s cial adviser (acquisitions) of the rank of 126 Rafale Multi Role Medium Business Ithird largest. Its armed forces spend additional secretary and three acquisition Combat jets for the IAF by On March 5,A K Antony Rs 79,000 crore in importing warships, managers, three technical managers and 2016—Rs 90,000 crore. handed out a 10-year ban to tanks and fighter jets. The acquisition three financial managers dealing with six companies for offering process begins when one of the service land, air and naval systems. It invites com- bribes to the Ordnance chief directorates within an armed force lists mercial bids from leading manufacturers the parameters of a weapon system. who have been identified as suppliers of SINGAPORE TECHNOLOGIES This is called Service Qualitative military hardware.The hardware manu- KINETICS Requirement. These requirements are facturers have to bring in their equipment No charges have been brought against forwarded to the Director-General, for field trials, often lasting over a year, in it. The publicly held company, one of Weapons and Equipment, a Lt-General different climatic conditions.Trials are su- Asia’s largest defence and HDW SUBMARINES engineering groups, has filed petitions who works under the deputy chief of pervised by teams from the Weapons and VENDORS AND ARMYMEN ATA STALL Six submarines for navy under in the Delhi High Court to overturn the army staff. The DG reviews the case and Equipment Directorate.The directorate AT THE DEFEXPO IN DELHI IN MARCH allegedly earning commissions to facil- blacklisting decision. then forwards the file to the defence sec- carries out a general evaluation report itate supply of 1,200 anti-material Project 75 India to start building retary for clearance. based on the trial results. this apex body includes Union ministers by 2017—Rs 50,000 crore. ISRAEL MILITARY INDUSTRIES rifles from South Africa’s Denel (see DG-Acquisitions then enters the scene. A Price Negotiation Committee, set of defence, finance, home and external The state-owned main manufacturer box: At Arm’s Length). of defence platforms for Israeli Usually an IAS officer of the additional up and headed by joint secretary (acqui- affairs. A contract is signed with the ven- The following year (2006), Suresh Defence Force has been embroiled in secretary rank, the DG-Acquisitions heads sitions), picks the lowest bidder and be- dor. MOD estimates that the entire Nanda was chargesheeted for al- the Barak missiles controversy. It par- the Defence Procurement Board which gins commercial negotiations. After the process could take up to two-and-a-half legedly receiving kickbacks in the ticipated in Defexpo in Delhi and its has been designated as the Ministry of deliberations comes the final stage in years. In actual practice, it takes over six Barak anti-missile system deal be- last order from the Ordnance Factory Defence’s (MOD) procurement board for all which a proposal is forwarded to the years for the Government to purchase in March 2009 was worth Rs 45 crore. tween Israel Aircraft Industries (IAI) new acquisitions since 2001.This board is Cabinet Committee on Security for final even simple items like ballistic helmets and the Indian Army and then in RHEINMETALLAIR DEFENCE headed by a special secretary or an addi- clearance. Headed by the Prime Minister, to protect soldiers. the import of Armoured Recovery The publicly held Swiss company is Vehicles from Slovakia. Investigations CARBINES, one of the largest European suppliers by the country’s premier investigating of arms technology. It participated in ASSAULT Defexpo in Delhi and has asked Indian agency have been held up due to pend- RIFLES said Baiocco, a former employee of the 75 basic trainer aircraft for IAF. CCS “But despite that, MOD officials de- ing Letters Rogatory in Israel and UK. authorities to offer conclusive 4,60,638 carbines and evidence of the allegations, failing defence firm Thales that contributes sought clarifications from the defence cided to ignore all Defence Procur- The agency also chargesheeted arms assault rifles for the army which it will seek legal recourse. radar and electronic systems to Rafale, ministry after an official complaint from ement Procedures to favour Pilatus for agent Sudhir Choudhrie for allegedly by 2015—Rs 11,572 crore. was part of a team set up by the consor- the South Korean government to the reasons only known to them. I am in- earning commission in the 2000 deal CORPORATION ZASHCHITA, RUSSIA tium GIE Rafale, a group of 500 compa- Prime Minister’s Office (PMO) on the se- formed that MOD received a lot of tech- to install seven Barak missile systems nies involved in making the fighter jets. lection process, in which one of its de- nical and financial data from Pilatus on Indian naval warships. CBI recently SURFACE- The 19-year-old private company, TO-AIR which specialises in manufacturing Janata Party President Subra- fence companies, Korean Aerospace post opening of bids in order to com- closed the case against Choudhrie MISSILES special and armoured vehicles, has manian Swamy, whose meticulous in- Industries (KAI), also took part. plete their files. This is complete viola- after failing to prove whether global Four regiments not yet commented on the ban. vestigations into the 2G telecom scandal Switzerland’s aviation giant Pilatus tion of the laid down procedures of remittances into his accounts were of air defence shook the nation, suggests Baiocco’s Aircraft Ltd was the contender. MOD,” Reddy wrote in his letter. commissions, but the Enforcement T.S. KISAN AND CO, DELHI missiles for the role was influential. “He stayed in Delhi KAI, placed second in the pricing bid, For nearly a decade, CBI has Directorate will continue a similar The privately-owned company, which army by 2015— for nearly a week and met a number of alleged discrepancies in the commer- chargesheeted arms dealers, MOD and probe against the businessman. makes 155mm Bofors shells and is Rs 10,500 crore. owned by J.S. Thapar, has been key people. I was told that the Euro- cial bid of Pilatus, which won the bid. defence officials in as many as 18 cases The same year also saw the agency charged by CBI with giving a fighter (produced by an Italian, The Korean company alleged that the with little success. In 2005, London- chargesheeting arms agent Abhishek Rs 30 lakh bribe to then Ordnance Germany and UK consortium EADS) Swiss had not factored the costs of based middleman Vipin Khanna and Verma, who acted as a middleman and 155 mm HOWITZERS chief Sudipta Ghosh. had almost won the Rs 90,000-crore maintenance transfer of technology Delhi-based arms agent Mohinder earned hefty commissions from Thales 2,700 howitzers for the army by 2017—Rs 20,000 crore. R K MACHINE TOOLS, contract to supply 126 multi-role (TOT) into the bidding price, and were Singh Sahni were chargesheeted for of France to push the sale of the French LUDHIANA medium combat jets and then, sud- thus able to show a lower bid. “This The CBI chargesheet in 2010 named denly, everything changed and Dassault leaves us (IAF) with a much higher cost Sunil Handa, a manager of the private won the deal,” Swamy told INDIA TODAY. of ownership/life cycle of the aircraft,” ON JANUARY 30, A RS 1,850-CRORE DEAL FOR company, for paying a Rs 2.5 lakh bribe to Ghosh for receiving orders in That’s not all. On January 30, the wrote Anantha Venkatarami Reddy, an BUYING 75 BASIC TRAINER AIRCRAFTWAS STALLED Tamil Nadu and Maharashtra. Cabinet Committee on Security (CCS) de- MP from Andhra Pradesh, in a letter to layed a Rs 1,850-crore deal for buying the Prime Minister in December 2011. AFTER SOUTH KOREA CRIED FOUL.

22 INDIA TODAY N APRIL 23, 2012 Cover Story DEFENCE

TAINT ON These businessmen have been linked to India’s I discovered ATARM’S LENGTH booming weapons bazaar TRUCKS ‘malpractices‘ in Tatra’s long journey before BEML’S purchase SUDHIR VIPIN KHANNA 76 M.S. SAHNI 76 the brakes were applied on it of Tatra vehi- CHOUDHRIE 64 Chairman, TSL Defence Chairman, Mokul Group cles in 2009. It President, Magnum Technologies of Companies & honorary 1986 MoD signs contract with was my duty to International and Eureka Patriarch of a politically counsel, Belize Omnipal, the authorised Czech government Sales Corporation

bring such powerful family, Khanna, Delhi-based Mohinder agency for defence exports. BEML also Choudhrie left India in 2006 shortly before an NRI businessman based in London, has Singh Sahni was caught on tape by a

lapses to the

signs Transfer of Technology deal with CBI filed an FIR against him in the Barak mis- figured in two CBI cases pertaining to the weekly magazine talking about approach- ‘ Omnipal under which the trucks would notice of the‘ sile case. Another case was registered by deal with Denel of South Africa for supply ing then BJP president Bangaru Laxman be manufactured in India. ministry. CBI against him in 2007 for alleged payoffs of 1,200 anti-material rifles. Khanna’s for an arms deal in 2006. CBI has also to him from Israeli gun manufacturer name first figured in the Justice R.S. established links between Sahni and H. Hanumanthappa 1997 Ravi Rishi’s Tatra Sipox (UK) Soltam. He returned to India in 2011 after Pathak panel probe into the Iraqi oil-for- the charge-sheeted former Ordnance Congress leader and former MP signs 10-year deal for Tatra trucks with BEML. CBI closed its cases for lack of evidence. food scam. The Enforcement Directorate is Factory head Sudipta Ghosh. Sahni has Known as Bunny to friends, he is a major probing sources of funds remitted to his been most active in Russia and former 2003 Rishi’s other company, Global donor to UK’s Liberal Democratic Party. and his family’s accounts in India. Soviet republics. Vectra, signs deal for supply of Tatra trucks Agents have to BEML, superseding the earlier contract ‘continued‘ to SURESH NANDA 71 ABHISHEK RAVI RISHI 58 signed in 1997.The motive behind it is not VERMA 44 known. CBI is investigating the case. thrive in Chairman, Claridges Hotels Chairman, Vectra Group India and and Resorts Group Chairman, Atlas Defence The promoter of the Vectra 2003 BEML MD VRS Natarajan tells MOD continued to A former Lt-Commander in Systems Ltd and Atlas Group left India over a he was compelled to deal with Tatra Sipox. manipulate the navy,Nanda was impli- Interactive India Pvt Ltd quarter-century ago. After After the breakup of Czechoslovakia,the cated in 2001 for receiving kickbacks in the Abhishek was named as a middleman in the fall of communism, Rishi’s Vectra

firm became a majority shareholder in the the General Barak anti-missile system deal and import the Rs 18,000 crore-plus Scorpene French Group acquired Tatra and expanded its op-

original Czech manufacturer Sipox AS. Staff Quality of armoured recovery vehicles (ARV). The submarine deal, which allegedly involved erations in India and Eastern Europe. One ‘ Require- ‘ Barak probe is held up due to pending kickbacks of Rs 500 crore. He spent nearly of his subsidiaries, Global Vectra Helicorp, 2005 L&T,Tata consortium for Pinaka ments. Letters Rogatory (LR) in Israel and UK; CBI is two years in jail between 2006 and 2008. was also embroiled in a scandal leading rockets points out discrepancies in cost of scrutinising ARV case LRs. Nanda served a 53- Verma allegedly hosted parties for army to the cancellation of the multi-billion Tatra trucks. TV report reveals that MoD is Ambika Banerjee day jail term for fudging foreign accounts. and naval officers in return for favours. Eurocopter deal in 2007. dealing with an agent,not the original equip- Trinamool Congress MP ment manufacturer (OEM). BEML says Global Vectra is a subsidiary of OEM Tatra. submarine Scorpene to the Indian On March 30, CBI filed an FIR against The facility would employ over 500 per- says Diliep Singh, vice-president, com- pounded, could be arrested. Agencies PINAKA Navy. Verma is out on bail, but the case Rishi and started his interrogation for sons. As a former chief minister of munications, Vectra Group. “Tatra like the ED and DRI will look into the ROCKET continues. Much depends on the CBI’s selling overpriced Tatra trucks to the Kerala, Antony had a constituency to Sipox (UK) is a single window for sup- money trail of his multiple companies. ability to extradite Verma’s friend Ravi Indian Army. No one disputes the util- protect (see box: Antony secures home plying technical support, provides “Agents have continued to thrive in Sankaran, the key suspect in the naval ity of Tatra, named after a European front). Such a consideration didn’t transfer of technology to BEML and de- India and continued to manipulate the war room leak. mountain range. They are used to tow seem to affect the previous defence velops new products on behalf of both General Staff Quality Requirements In 2007, arms dealer Ravi Rishi’s tanks, howitzers and carry rockets, as minister, Pranab Mukherjee, who did factories (in Czech Republic and and tender requirements. From the company, Global Vectra Helicorp, was well as Agni and Prithvi missiles. Like not set up any defence PSUs in West Slovakia). It is clearly more than a smallest tender for shops near defence embroiled in a scandal leading to the the Bofors howitzers, quality is not the Bengal in his two-year tenure. ‘trading company’,” he said. establishments to big arms deals, August 2009 Karnataka cancellation of the multi-billion issue: A competitor grudgingly de- When it signed the March 2003 deal Rishi, who is being questioned by agents are everywhere,” says Trina- Congress leader H. Hanumanthappa writes Eurocopter deal for purchase of 197 scribes its “centipede-like ability” to with BEML, say CBI officials, Global CBI, is said to have made several reve- mool Congress MP Ambika Banerjee. to Sonia Gandhi alleging MoD is buying choppers for the Indian Army. Global glide over obstacles thanks to a multi- Vectra pretended to be an original lations that will expand the probe, sug- He recently blamed the Prime Minister Tatras from agent and not OEM. Letter Vectra Helicorp was headed by Lt-Gen wheeled drive. But quality is no reason equipment manufacturer. It was gesting a complex network of and the defence minister for ignoring a reaches Antony two months later. (retired) SJS Sehgal, also a director of for graft and inflated pricing. however an agent for the Czech bureaucrats and army officers he “in- number of letters he wrote on defence the Vectra Aviation, the sole distributor CBI has also registered a case Republic-based firm that made the vested” in. In particular, he has men- corruption—the last one written on Yet MoD buys 788 March 2010 of the Eurocopter choppers, a perfect against “unknown” BEML executives trucks. “There is no violation of the tioned a bureaucrat couple who are May 11, 2011— stretching from bribes Tatras from Global Vectra for Rs 632 crore. example of how retired army officers for criminal conspiracy to defraud the defence procurement rules as Tatra being investigated for amassing exces- in sanctioning military shops to hard- February 21, 2012 Antony are co-opted. Sehgal’s younger nation. It has questioned VRS Nata- Sipox (UK) is an authorised vendor and sive wealth. There are chances that ware acquisitions. sanctions prosecution of Ravi Rishi by CBI. brother, then serving Lt-General H.S. rajan, the chairman and managing di- sold to BEML and not directly to MOD,” Rishi, whose passport has been im- UPA had brought in Antony to clean Sehgal, was involved in the trials of the rector of the Bangalore-based defence up the defence ministry; after all, the March 26, 2012 V.K. Singh Bell and Eurocopter choppers to select PSU. BEML had violated rules by dealing Congress and the family that controls it alleges bribe offer from a former the bidder. The Rs 3,000-crore deal with Rishi’s firm Global Vectra. But NO ONE DISPUTES THE UTILITY OFTATRATO TOW had suffered grievously from a previous Lieutenant-General to clear shipment of was cancelled after Bell complained to Natarajan has been smart enough to arm deals. A clean defence ministry 600 substandard vehicles. TANKS, HOWITZERS AND CARRY ROCKETS. BUT QUALITY MOD, blaming the brothers for trying to invest in Antony’s backyard, setting up was to be the family legacy, not Bofors. IS NO REASON FOR GRAFTAND INFLATED PRICING. I March 30, 2012 CBI FIR names swing the deal in favour of Eurocopter. a Rs 260-crore factory in Palakkad. Now it may well be Tatra. Rishi,‘unknown’ BEML executives for conspiracy to defraud Government. APRIL 23, 2012 N INDIA TODAY 25