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Thursday, 14 February 2013

From Today's Papers - 14 Feb 2013
VVIP copter deal put on hold
Italian prosecutors name IAF ex-Chief Tyagi, his cousins in kickback case
Tribune News Service

New Delhi, February 13
Defence Minister AK Antony today said the government would blacklist and take legal action against any recipient of bribe in the Rs 3,600-crore VVIP helicopter deal. In Italy, prosecutors submitted a warrant in a court alleging that former IAF Chief SP Tyagi and his three cousins were in cahoots to tweak the deal to suit Italian aerospace major Finmeccanica.

The former IAF Chief, however, today categorically rebutted allegations of having changed any air staff qualitative requirements (ASQRs) during his tenure (2004 to 2007) to suit the Italian firm. The legal papers in the Italian court (translated copy with The Tribune) run contrary to this claim and show that Tyagi met agents of the Italian company at the offices of his three cousins and also during social events like weddings.

Even as Antony let his mind be known, the Ministry of Defence has decided to put on hold the receipt of the remaining nine of the 12 helicopters. Three helicopters were received in December 2012. India will invoke the penalty clause mandated under the integrity pact. "We will not lose a single pie. We can get back the entire amount paid to the vendor (Finmeccanica)," Antony said in the morning.

"We are not bothered about who the companies are, how strong they are. Everything depends on the CBI inquiry. The moment we get a report from the CBI, whoever is found guilty, Indian or foreigner, we will take the strongest action against them. They have to pay the price for the lapses. Nobody will be spared," he said.

When asked about the integrity pact, he said, "Our integrity pact is foolproof. Any vendor signing an integrity pact cannot get away. They are legally bound."

Chief Executive Officer (CEO) of Finmeccanica Giuseppe Orsi was arrested in Italy on Monday for allegedly handing out bribe to secure contract for his company. Italian prosecutors said Orsi hired US-born Guido Ralph Haschke to lead dealings in India to secure the contract.

Haschke and his partner Carlo Gerosa, prosecutors said, had close ties with the Tyagi brothers. Around 400,000 euros (Rs 3.2 crore) were given as consultancy fee to Haschke and Gerosa. "Of this, 100,000 euros (Rs 72 lakh) in cash were given to the Tyagi brothers," prosecutors said in the 62-page warrant. "The money went to the brothers to pressure Indian officials and help doctor the tender terms to favour the specification of AgustaWestland's helicopters," they added.

The report of the persecutors submitted in the office of the judge for preliminary investigations narrates how the Russian Mi-17, Eurocopter and US Sikorsky were edged out of the VVIP helicopter deal. Around Rs 350 crore (51 million euros) were allegedly "spent" on the deal.

What Italian court papers say

● Michel Christian, a consultant to AgustaWestland, corresponded with cousins of former IAF Chief SP Tyagi

● The agreement was with the Tyagi family, but the money was handed over only to his cousin Juli Tyagi

● Witness identified as ADR says: "Towards the end of 2006, I again met Tyagi (Air) Marshal at the office of his cousins in Delhi

● After Tyagi retired (March 2007), we met at the home/office of Tyagi brothers and during a wedding in India, ADR adds

● Tender was changed to accommodate AgustaWestland by lowering the required altitude limit at which the helicopters could operate

● Terms and conditions of the tender were changed to introduce an engine failure flying test

● This favoured AgustaWestland as its helicopters were the only ones with three engines
Charges totally false, claims Tyagi
Tribune News Service

Gurgaon, February 13
Former IAF chief Air Chief Marshal (retd) SP Tyagi has pleaded innocence in the AgustaWestland VVIP chopper kickback case, demanding a fair inquiry into the matter.

Addressing mediapersons here today, Tyagi rubbished allegations of accepting bribe to "alter" the Rs 3,600-crore deal, which involved procuring 12 helicopters from Italian firm Finmeccanica.

The former IAF Chief said: "I am shocked that my name has been dragged into this. These allegations are totally false. I retired in 2007 but the deal was signed in 2010. So how do I come in the picture?

"All changes in requirements and specifications are made by the Defence Ministry, which approves it. The tender was issued in my tenure. No specification was changed. Everything is on record. I agree that one of the alleged middlemen, Capt Tyagi, is a cousin but that's it. I have always kept my personal and professional life separate so please don't make me a scapegoat," he said.

I am shocked that my name has been dragged into this. These allegations are totally false. I retired in 2007 but the deal was signed in 2010. So how do I come in the picture?
N. Korea does it again
Pak connection needs to be probed

THEe third nuclear test conducted by North Korea, in defiance of international opinion, is believed to be more alarming than its previous two tests --- in 2006 and 2009. The latest test gave a better yield, indicating that the poverty-stricken communist country is not far from acquiring the nuclear weapon capability. The earlier tests gave indications that North Korea had crude plutonium devices, capable of giving a very low yield. The world, however, needs to find out the exact position of Pyongyang's controversial nuclear programme. The way the latest test was conducted, after informing some world capitals, shows that the North Korean leadership is not bothered about the international sanctions imposed on it.

Now it may be more difficult to revive the six-nation dialogue to force North Korea to abandon the nuclear path. Or it may demand a far greater price to cap its nuclear programme. Condemnation of the nuclear test is not enough. There is need to reach a consensus to launch a fresh UN-led drive to stop the emergence of another nuclear-weapon nation. The failure to do so will encourage Iran and other aspirants of nuclear power to defy world opinion and continue to have their controversial programme. The countries involved in the six-nation initiative should learn to speak in one voice. China and Russia, which have not been as harsh in condemning North Korea as the US, India and some other countries, should realise that their attitude will only encourage Pyongyang to keep its dangerous plan intact.

What is, however, more worrying is the suspected Pakistani role in the North Korean nuclear ambitions. It is believed that the latest device was made with enriched uranium supplied from Pakistan. This needs to be established by the international community so that action is also taken against Pakistan for promoting nuclear proliferation. Gen Pervez Musharraf had admitted the role played by the father of Pakistan's nuclear programme, AQ Khan, in helping North Korea, Iran and Libya (no longer in the race for nuclear power) to acquire nuclear weapon capability. Nuclear proliferation is the most serious threat to peace and stability. It must be handled with the seriousness it deserves.
Defence minister says India to punish those guilty of taking bribes in Italian helicopter deal
NEW DELHI — India will punish any official found guilty of taking bribes from Finmeccanica to steer a multimillion-dollar helicopter contract to the Italian defence firm, the defence minister said Wednesday.

A.K. Antony told reporters the government would blacklist and take legal action against any company found to have paid a bribe in the (euro)560 million ($670 million) deal for 12 helicopters intended for ferrying Indian officials around the country.

"Nobody will be spared. If a company violates the conditions, they are liable for criminal action," Antony said. "The company is liable to be blacklisted."

India's defence ministry has ordered a separate investigation into the defence agreement with Finmeccanica after the Italian company's chief executive was arrested in Milan on Tuesday on charges he had paid bribes to snag the Indian contract.

Antony said he ordered the Central Bureau of Investigation, India's equivalent of the FBI, to examine all aspects of the helicopter deal.

Meanwhile, former Indian air force chief Shashi Tyagi on Wednesday denied media reports that members of his family had received payments from the Italian group to facilitate the helicopter deal.

"I deny these allegations. Such a big contract is not determined by one person alone. Everything will become clear once the CBI probe is complete," Tyagi told NDTV.

India signed the contract for the purchase of 12 helicopters in February 2010.

Giuseppe Orsi, the CEO of the Italian defence and aerospace giant Finmeccanica, was arrested by Italian investigators on Tuesday. Orsi and Bruno Spagnolini, the chief of Finmeccanica's AgustaWestland helicopter division, are being investigated on charges that they paid bribes in India.

India's defence ministry said the helicopter contract with AgustaWestland included an integrity clause against bribery or the use of undue influence.

The defence ministry has put on hold the delivery of nine helicopters from the company.

India is expected to spend $80 billion over the next 10 years to upgrade its military.

The country has become the world's top arms and defence equipment buyer in recent years due to its concerns about China's growing power in the region and its traditional rivalry with neighbour Pakistan.

India accounted for 9 per cent of all international arms imports from 2006 to 2010, and is expected to keep the top spot for the foreseeable future as it upgrades its air force, army and navy.

However, arms deals in India have often been mired in controversy with allegations that companies have paid millions of dollars in kickbacks to Indian officials to procure lucrative contracts.

In the 1980s, then-Prime Minister Rajiv Gandhi's government collapsed over charges that the Swedish gun manufacturer Bofors AB paid bribes to supply Howitzer guns to the Indian army.

Following the Bofors scandal, India banned middlemen in all defence deals.
How 14,000 Crore Budget Cuts Will Affect India's Armed Forces
New Delhi: The slow growth of the Indian economy in recent years has had a cascading effect on the country's military. According to government estimates, the defence budget for the current year, 2012-2013, has been cut by a whopping Rs. 14,000 crore and acquisitions of new weapon systems have been either put on hold or delayed. Defence ministry officials have told NDTV that the budget cut is the biggest in several years.

Talking to reporters at the recently concluded Aero India show in Bengaluru, Union Defence Minister AK Antony said, "India is not an island. The world economy is going through a tough time, we will have to cut down."

Mr Antony said that the government is drastically cutting down on expenditure across the board and "budget cuts fall on our department too." He said that there will be no cuts in "priority areas" and the "operational preparedness" of the military will not be affected.

Senior officials have told NDTV that out of the overall estimated cut, Rs. 10,000 crore comes from the capital budget, which means the defence ministry would have much less to spend on buying new systems to upgrade old and aging weapons. The rest, Rs. 4,000 crore, is expected to be slashed from the revenue budget, which is used for paying salaries and meeting other running costs of the armed forces.
The armed forces had sought an outlay of Rs. 2,39,123 crore this fiscal, which amounts to 2.35 per cent of the projected GDP for 2012-13. It was, however, given a little over Rs.1,93,000 crore, from which the Rs. 14,000 crore cuts have been made. About Rs. 67,000 crore of the allocation was for capital expenditure; the revenue budget was pegged at a little over Rs. 1,13,000 crore.

As a result of the cuts, almost all critical purchases of new weapons systems have been affected. India's single biggest defence deal ever, a contract with France for around 200 new-generation fighter jets – pegged at between $15-17 billion – has been deferred to the next financial year. Although negotiations with France are complete, India wants to stagger the acquisition because of the lack of funds.

Similarly, the purchase of Ultra-Light Howitzers from the US for deployment in the mountainous border areas to counter China has been delayed.

Sources have told NDTV that the Indian Navy's plans to rapidly replace its aging fleet of conventional submarines with six new submarines have been affected. Each new submarine is estimated to cost anything between Rs. 7000-8000 crore.

The proposal to equip every infantry battalion of the Indian Army deployed in the plains with Anti-Tank Guided Missiles (ATGMS) has also taken a hit. The Navy's proposal to acquire multi-role helicopters to replace the old Sea King helicopter fleet has been put in cold storage.

Last week, Union Finance Minister P Chidambaram, when asked about the cuts in the defence budget, said, "You must have the money to provide the money." He also said that this year's cut could be made good next year only if India recorded faster growth translating into more tax collections.

Modernisation of the Indian military was put on hold during the 1990s and the 2000s as India grappled with its new economic realities, and needs, post liberalisation. Most of the equipment that the armed forces currently use was developed either in the 1970s or 1980s. It was only in the latter part of the last decade that the focus shifted back on rapidly modernising the military so that it is capable of addressing the altered strategic realities in India's neighbourhood.
Defence cuts may hit national security
Feb 11, 2013

Recently defence minister A K Anthony dropped a bombshell when he announced that there would be huge cuts in the defence budget. The cuts are reportedly as high as Rs 14,000 crore. The minister attributed the spending cut to global recession, stating that India is not an island and that fluctuations in the global economy do affect our nation as well. While nobody would dispute the economic truism in that statement, one is forced to review the current status of our armed forces in terms of our defence preparedness and to observe how such substantial cuts in the defence budget would affect our national security.

Defence procurement in India has always been riddled with nightmares. In many ways it has been perennially jinxed. It takes ages for the process to be completed and it is very often afflicted by allegations of corruption. The armed forces have taken serious measures to tackle corruption, especially the army while under Gen V K Singh intiated court martial proceedings against very high ranking officers including  three star generals. While there has been some headway in fighting corruption, policy making and procurement projects have been seriously affected as officials are scared to take risks in the fear that they would be hounded with allegations. Anthony orders a probe on every complaint he receives, causing delays in nearly every project. Even anonymous complaints are being probed. Any foreign power that wishes to weaken us could take advantage of this (the lurking fear is that they already may have).

Increasing worry

There is an increasing worry that many proposed projects may not see the light of day. The Navy has been requesting advanced submarines under a proposal dubbed as  Project 75-I. This new line of six submarines would possess AIP (Air Independent Propulsion) capability. AIP increases the mission life of a submarine by around three times. The capability enables a submarine to generate air onboard without the need to surface for breathing to recharge its batteries. At present, none of the Indian submarines have this capability, and most of them can only be under water for only three days. The irony is that this proposal has been around for years and the ministry of defence (MOD) is yet to initiate the formal process by announcing the global tender or RPF (request for proposal)!
The Airforce has not fared any better. The 20 billion $ MMRCA (medium multi-role combat aircraft) project to acquire 126 French Rafale fighters has been delayed for ages. The RFP for this project was issued way back in August 2007 after years of delay, but it is yet to be finally inked. The joint Army- Airforce proposal for nearly 200 light utility helicopters has been stalled. The leading contenders were the Russian Kamov Ka-226T and the Eurocopter AS 550 C3 Fennec. The uncertainty over this project is appaling especially when the armed forces are desperately trying to replace the existing Cheetah and Chetak fleets.

We live in an environment which is very prone to conflict. We face serious challenges from a rather unstable Pakistan on the Western front and an increasingly belligerent China on the Eastern front. How prepared are we to faced either one of them? How prepared are we to fight a two front war if both of them declare war on us? These are very uncomfortable questions and our discomfort increases when we know that our armed forces are not getting the equipment they desperately seek.

The recent border clashes with Pakistan that resulted in the beheading of two Indian soldiers urge us to remain cautious. The Pakistani army chief Gen Kayani has always stated that its military operations will remain 'India Centric'. China has a close military relationship with Pakistan (evinced recently in the help they rendered to Pakistan in constructing the strategically located Gwadar Port near the Straits of Hormuz). China has always been taunting us with numerous border incursions. The Chinese are constantly testing our resolve on the Eastern Front. Will the 37 divisions of the Indian Army be enough to deal with the combined might of both Pakistan and China? What are we doing to counter the rapid modernization of the Chinese armed forces, especially their Navy which is virtually a blue water Navy now? When was the last time we conducted serious war games on the eastern front?

While it is true that we do not face any immediate threat of war, we should never take this situation for granted. Our suave diplomacy may be able to achieve an everlasting peace with our unpredictable neighbours , this should not influence our armed forces as they have to always prepare for the likelihood of a two front war. How they will deal with that situation in the face of ever increasing defence cuts is anybody's guess.
India's defence ambitions hinge on 'over-extended' firm

India wants to throw off the tag of world's biggest arms importer and produce its own top-class weaponry, but its ambitions hinge on a state-run group renowned for its inefficiencies.

HAL, or Hindustan Aeronautics Ltd, has a near-monopoly in the country's aerospace industry and its presence was unmissable at this year's India air show, which wrapped up in Bangalore on Sunday.

Its huge stand and ubiquitous branding underlined the scale of a company that already produces under licence the British-supplied Hawk trainer aircraft, Russia's SU-30 multi-role fighter jets, and European helicopters among others.

It is also the crucial player in the world's biggest arms deal for 126 Rafale fighter planes, the first of which will be made in France by Dassault Aviation with the remaining 108 to be assembled by HAL in India until 2018.

The government is forcing foreign arms suppliers to share their technology with HAL in the hope that it can one day manufacture its own products of the same calibre.

But an Indian industrialist, speaking to AFP on condition of anonymity, was scathing in describing the management culture of the heavily unionised public sector giant and its 35,000 employees.

"What could be done in 10 minutes may take 10 months. Nobody takes responsibility," he said.

James Hardy, an analyst at the defence consultancy IHS Jane's, says that HAL is "overextended", expressing an opinion largely shared by observers at home and abroad.

The group posted sales of 142 billion rupees (HK$20.4 billion) last year but is aiming to almost quadruple this to US$10 billion (HK$77.6) in the next seven years, chief executive RK Tyagi told reporters at Aero India.

Tyagi, who took up the job in March last year, detailed new plans for the company to expand into airport infrastructure, as well as plane and drone maintenance.

But Dipankar Banerjeee, a retired army general who founded the New Delhi-based Institute of Peace and Conflict Studies (IPCS), says HAL's "deliveries are too slow and indigenous development has been less than satisfactory.

"The Indian public and Indian armed forces are not very happy with HAL," he says.

India's reliance on foreign weapons is due to the inadequacy of its own sector, which comprises HAL, the state-run Defence Research and Development Organisation (DRDO), its affiliates and a few smaller private players.

One notoriously late and over-budget project was for home-grown light combat aircraft called Tejas, which have taken more than 25 years to develop and are still several years away from being inducted by the airforce.

HAL's helicopters are also seen as inferior to foreign products, leading India to negotiate with European, American and Russian manufacturers for hundreds of new choppers.

But the group represents the doorway into the huge Indian market and foreign groups queuing for business for New Delhi know they must embrace it.

"It's a client and a partner which cannot be ignored, with very significant volumes," said Eric Lenseigne, the head of Indian operations for French group Thales which has been in India for the past 60 years.

Eurocopter, which sold its helicopter licences to HAL in the 1960s, praised the group. "If you have a happy marriage, why would you divorce?" said chief executive Lutz Bertling.

The heads of the Indian armed forces are known for their more frank assessments.

"Unfortunately there is no other big aircraft company," said IPCS's Banerjee, who hopes that private companies will play a bigger part in future.

"The armed forces are very keen that the private sector takes a bigger role in research, development and production in collabouration with foreign firms," he said.

The chief executive of Dassault Aviation, Eric Trappier, has signed a partnership with one of India's biggest private companies, Reliance, which despite having no prior experience will be brought into the Rafale deal.

Its role is set to be defined in the ongoing negotiations for the sale, which Dassault is striving to sign this year after several delays since the company was chosen as preferred bidder in early last year.

The purchase and amount of technology that will be transferred to India in the deal are issues set to be taken up by French President Francois Hollande during a trip to India on Thursday and Friday.
AgustaWestland chopper scam may hit deal for 197 copters for IAF, Army

Read more at:
As the name of a retired chief of Indian Air Force (IAF) has figured as one of the beneficiaries in the AgustaWestland chopper scam, it might have an impact on the procurement of 197 light helicopters for the armed forces, sources said on Wednesday.

Headlines Today has learnt that the Central Bureau of Investigation (CBI) probe, ordered by Defence Minister A.K. Antony on Tuesday, and fresh revelations in the VIP chopper scam would effectively destroy the other deal that has been in the pipeline for about five years. HT exposed it first: Tyagi's alleged involvement in VIP Chopper deal

The ministry of defence (MoD) has been in the process of procuring 197 helicopters for the IAF and the Indian Army. According to sources, the MoD has now decided to delay the process as a result of deviations in the deal, coupled with the heat now on the government over the kickback allegations in the deal for 12 VIP choppers.

The process to acquire these high altitude reconnaissance and surveillance helicopters worth $600 million was in the final stage.

According to sources, the MoD would decide later this week on how to kill the deal, which has been in work since July 2008 and delayed because of the bureaucratic process.

French company Eurocopter's Fennec and Russian Kamov Ka-226T might lose out if the MoD decides against the deal. Italian company AgustaWestland was also a contender originally, but was eliminated on technical grounds.

An investigation by the Italian police has revealed that AgustaWestland might have tried to influence trials when it was still a contender. The CEO of AgustaWestland's parent company Finmeccanica was arrested by the Italian police on Tuesday on charge of bribing Indian authorities to secure the order for 12 copters. That forced Antony to order a CBI probe into the matter.

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