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, Kerala 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 Kozhikode It is under the Division, Palakkad The manufacturing alleged, came from retired Lt-General It’s big business. India 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.