01 Jan 15. The Indian government is open to reviewing all cases of blacklisted defence firms on merit. It has also partially lifted a ban on Tatra trucks as it prepares a new policy that will allow foreign defence firms to legally hire agents, Defence Minister Manohar Parrikar said.
The new Defence Procurement Policy (DPP), which will focus on the development of a domestic defence industry and faster acquisition process, will be issued in about another month and a half.
Asked about the new government’s policy on blacklisted firms, Parrikar said, the “debarment principle” is also being worked out and pointed out the basic principle is in the interest of the armed forces.
“So if I have to deal with a firm which does have some earlier colour on it, it will based on merit,” Parrikar said in an interaction with journalists late Wednesday night in New Delhi. He added that based on merit and necessity, the government can “consider after proper verification, lifting the ban or restriction to a reasonable level”.
Explaining the process, he said the state-run BEML has been allowed to supply spare parts for the Tatra trucks as long as it does not deal with the British subsidiary of the company, which was banned by the UPA following a scandal.
“We have lifted the restricted ban for technical and purchases of spares from the original company provided they have nothing to do with the people who have been blacklisted,” he said.
Parrikar pointed out that one should not just go by the name
Tatra as there are 3-4 companies which make the trucks.
“The company which has been banned is Tatra UK and we have permitted BEML to deal with the original company which is owned by different people now,” he said, adding the condition is that they should not have relations with “questionable individuals.”
“A restricted Non Objection Certificate has been granted to BEML, because we do need Tatra vehicles for defence purposes. It has become critical for certain applications,” he said.
Heavy vehicle maker Tatra was banned in March 2012 after the then Army Chief General (Retd.) VK Singh’s allegations that he was offered bribe to clear “substandard trucks” supplied by the company to the Indian Army.
Parrikar said that a draft of the changed policy is ready and a final draft will be ready in another 8-10 days. It will then go through further procedures before going to the Union Cabinet.
“The process shall be completed in another one and a half months,” he said. Defence Ministry sources said a blanket ban on defence firms has proved to be detrimental to the interests of the armed forces as it cripples the procurement process.
“The thinking is that there cannot be a blanket ban on defence firms. “Measured steps can be taken and the policy will outline what steps would be taken for various offences, if committed,” the sources said.
Under UPA Defence Minister AK Antony, a number of companies were blacklisted due to alleged cases of corruption. The last major one was that of Italian defence giant Finmeccanica in a Rs 3,600 crore deal on VVIP helicopters.
However, the Modi government had in August this year allowed
Finmeccanica and its subsidiary Augusta Westland to do business with India but in a limited capacity. It has been banned from participating in future tenders but allowed to carry out ongoing contracts with the group.
Talking about the role of agents, Parrikar said he would prefer to call them representatives or technical consultants. “It exists in DPP but is not clarified. It should be explained clearly so that bonuses, success fees and commissions are debarred,” he said.
Any other activity like technical information, attending meetings and others can be permitted to registered representatives.
“Naturally, they can’t be who have been blacklisted or debarred from defence deals.” To repeated questions, the Minister said he will permit “agents” to be allowed with debarment on any payment which is related to business.
“That means you cannot get a bonus out of an order, you cannot get success fees out of order, you cannot get percentage out of this…You can definitely appoint a person for certain fees provided you disclose it to the department in advance,” he said. While agents have an option to register themselves with the Defence Ministry under the existing DPP, only a handful have done so.
Industry sources say that this is because there is not much clarity and also because one immediately comes under the scanner of all regulatory and security agencies in the country.
Talking about the government’s thrust on “Make in India Policy”,
Parrikar said they are considering financing 100 per cent of the cost with some conditions, up from the 80 per cent now. Explaining this, he said, “You identify a product which needs to be developed in India. You find out a company which is best suited for doing that exercise and then finance it.
“As of now it is mentioned at 80 per cent but we are considering financing up to 100 per cent provided there is at least 20 per cent component of small scale or medium scale industries in that development,” Parrikar said.
He said defence is probably one place where we look for foreign acquisition, lock, stock and barrel. Parrikar said the government wants to simplify the make procedure and deregulating certain aspects of export conditions.
“There are too many export bottlenecks,” he said, adding the government was working on allowing defence products to be exported as long as it is to the country which is not in negative list or product which is not sensitive.
Parrikar said he would also like to reduce the time from the date of identifying the product or requirement to the completion of process, which currently stands at about six years. He said that by March 2016, the production capacity of defence PSUs and ordinance factories would be raised by 30 to 40 per cent.
The Minister stressed that there will be zero tolerance to mishaps in the armed forces, saying strict action would be taken. He also promised to resolve issues relating to defence personnel saying, “Ultimately, whatever weapons you give, it is the hands, mind and heart behind that weapon which actually performs”.
(Source: MPI – Hawk Information/Press Trust of India)