‘Blanket blacklisting’ to go in defence deals

Ajay Banerjee

Tribune News Service

New Delhi, October 26

The Ministry of Defence (MoD) has decided to do away with having a system of “blanket blacklisting” and put in place a new “blacklisting” policy that will remove the dichotomy between tackling corruption in defence deals and having a method to deal with foreign companies which pay bribes.

The new “blacklisting” policy has been okayed, it will be formally approved in the forthcoming Defence Acquisition council (DAC) meeting planned after Diwali. Defence Minister Manohar Parrikar heads the DAC, which is the apex decision-making body of the MoD.

The new policy will have a pointed product specific ban, aimed at punishing the corrupt among the foreign suppliers and not hold to ransom the country’s military and defence needs. The new policy envisages that a person of a foreign company, if found to be indulging in corruption, will not be allowed to deal in another case of the company’s subsidiary. During the tenure of the Congress-led UPA (May 2004 to May 2014), a “blanket blacklisting” was followed and several new procurements were held up.

The MoD has decided to do away with “blanket blacklisting” of foreign companies, which were found guilty of offering bribes, a top official in the MoD said. Blacklisting a firm may not be a good option as it just forecloses options for India. There are no more than four to five equipment makers that are largely integrators of specialised parts produced by niche companies.

A sub-committee formed by the MoD will issue guidelines on the extent of blacklisting, its tenure and the procedure.

The challenge is from corrupt elements on the one side and cutting down on the delays in equipping the forces with the best equipment, weapons and aircraft on the other.

In 2015, a committee headed by former Union Home Secretary Dhirendra Singh submitted a report on defence procurement procedure (DPP) and suggested that misdeeds of an entity or its employees should not be visited on the equipment or system.

In other words, it has been suggested that there is no need to block the supply of equipment in case some bribery charge emerges.

The question before the MoD was how to deal with foreign companies which — despite being the best in their class — offer bribes or are forced to offer bribe to bag contracts in India.

In August 2014, just months after the Narendra Modi Government took over the MoD informally decided that “blanket bans” will not help, now this has been firmed up in way of a policy.

The MoD banned the Bofors artillery gun in the late 1980s. Since then, there has been no artillery gun purchase. In 2013, the purchase of AgustaWestland helicopters was stopped midway. In both cases, suspected bribery charges emerged.

After the new policy is implemented, the MoD will not buy helicopters or have any business relationship with AugustaWestland – a subsidiary of the Finmeccanica – but will be free to negotiate with the other company within the conglomerate.

To give an example, a source said Finmeccanica, headquartered in Italy, is the source of critical equipment like main guns for warships and heavy torpedoes. The Navy has been affected as companies owned by Finmeccanica are needed. The Navy hasn’t been able to procure torpedoes for the Scorpene submarine, which is slated to be commissioned in January 2017.