‘Mechanism exists to prevent corruption in defence deals’ (Lead)

April 22nd, 2008 - 2:01 am ICT by admin  

New Delhi, April 21 (IANS) India has a mechanism in place to prevent corruption in defence deals and to keep middlemen out of the picture, parliament was informed Monday. The Defence Procurement Procedure (DPP) enunciated in 2006 “incorporates provisions for penalties being imposed if any seller engages any individual or firm, whether Indian or foreign, to intercede, facilitate or in any way recommend” to the government the award of a contract to a particular firm, Defence Minister A.K. Antony said in a written reply in the Rajya Sabha.

The statement comes even as the defence ministry is preparing to release by mid-May a revised DPP to bring it in line with the best international practices, an official said.

“The DPP is currently being fine-tuned and should be announced by the second week of May,” the official told IANS, speaking on condition of anonymity.

Antony, in his reply, noted that the DPP provides for direct dealings with original equipment manufacturers (OEMs), or authorised vendors or government-sponsored export agencies for purchasing military hardware from foreign manufacturers.

This apart, the government had issued instructions in 1989 and 2001 to regulate Indian representatives or agents of foreign suppliers, the minister stated.

“The instructions provide for the regulation of representational arrangements through a system of regulation, categorical and open declaration by the foreign suppliers of the services to be rendered by their representatives and the remuneration payable to them by way of fees, commissions or any other method,” Antony pointed out.

“So far no authorised Indian representative/agent has been registered by the ministry of defence in terms of these instructions,” he added.

In reply to another question, Antony detailed the other steps that had been taken to prevent corruption and ensure transparency in defence deals:

* An Integrity pact between the government and the bidder in all contracts above Rs.3 billion,

* Major decisions in the acquisition process to be taken in a collegiate manner,

* Enhanced transparency in the conduct of field trials, and

* Pre-bid meetings with vendors.

The DPP had, for the first time, laid down in detail the measures to be followed in future for purchasing military hardware. It contains three critical elements: an offsets clause, no single-vendor purchases, and compulsory transfer of technology (ToT) in all big-ticket deals.

Of these, the offsets clause under which 30 percent of all defence deals worth over Rs.3 billion has to be reinvested in India’s defence industry has become a matter of major concern.

Responding to this, Antony has said: “We have received a number of suggestions. We are seriously applying our minds to this and fine tuning the procedures.”

According to Antony, the offsets policy was “at a nascent stage and is still evolving”.

“Discussions are going on with regard to few important issues like banking of credits, transfer of technology, licensing requirements for the software industry and the like,” the minister said in February.

“I am sure that the discharge of offsets will give the necessary fillip to the participation of the private sector in a big way,” he added.

A number of foreign defence manufacturers say the offsets clause is restrictive as it narrows down their options. They say they would like the scope widened to enable them to invest in other sectors as well.

They also point out that the clause is subjective, as in the case of an Indian Air Force (IAF) tender for 126 combat jets floated last September, the offsets provision has been arbitrarily raised to 50 percent.

The defence ministry estimates that Indian industry would have to absorb Rs.500 billion ($12 billion) worth of offsets in the next five years as the armed forces aggressively pursue their modernisation drive.

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