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Thursday, 21 February 2013

From Today's Papers - 21 Feb 2013



Antony says imports should be last resort

Tribune News Service


New Delhi, February 20

In the backdrop of the VVIP copter scandal, Defence Minister AK Antony today asked the forces to start looking within and break free of the "import mindset". He said importing equipment should be the last option. He also announced to review defence production and procurement policies.


Chastising the services and the officialdom, he said: "There is a tendency, when we go abroad, we see so many modern equipment and (want to) immediately get it through the import route, that is landing us in trouble."


He was speaking at a function on army air defence this morning. The function was organised in collaboration with the CII.


He went on say that the easiest way to get modern equipment is to change this "import mindset" while adding "import is the last resort not the easiest resort that mindset we have to change."


He said the first attempt should be to find out if that equipment could be obtained from somewhere in the country itself. If that was not possible, only then the import route should be resorted to, he said at the function where Army Chief General Bikram Singh was also present. "We cannot waste a single penny of Indian taxpayers' money for greedy players," he said. Indigenisation was the ultimate answer, he said. "Made in India, will make us proud," he said.


Depending too much on imports would land us in trouble, Antony said. "I feel our armed forces, the government, the DRDO and the industry must work together so that India can reach to maximum level of indigenisation within a reasonable time," he said.


"We will have a second look at the defence production policy as well as the defence procurement policy so that we can speed up indigenisation," he added.


"We are living in the dangerous surroundings, so armed forces need the most modern equipment at the earliest. We must have a second look about our priority. Opt for import only as the last option,"  he suggested.


A situation of "zero imports is not possible, but maximum effort should be to go indigenous", he said.


Expressing anguish at the copter scandal, he said in spite of taking so many precautions, such things were happening again. "I got an email from abroad about some foul play in defence deals and corruption by one Abhishek Verma. Immediately, we sent that email to the CBI and the Enforcement Directorate. Now that man is in jail. But even after all this there are people who are not learning lessons. This means we have to further tighten our mechanism," he said.

Indian Army soldier commits suicide by hanging himself

An Indian Army soldier committed suicide here today after being fed up with his physical disability, a police official said.


Police said that Ajay Kumar (33), a resident of Anand district in Central Gujarat, was posted in Vadodara and had a slight physical disability in his legs.


His left leg, a police official said, was operated upon at the army hospital in Vadodara before being shifted to an army hospital in the Shahibaug Cantonment area.


Last night, he left hospital premises and hanged himself at a nearby construction site, the police said.


The body has been handed over to his family members, the police said, adding that they have registered a case of accidental death.

BAE Pulls Out of Joint Venture With India's Mahindra



NEW DELHI — In a setback to joint ventures in India's defense sector, the U.K.'s BAE Systems and domestic automobile company Mahindra & Mahindra ended their equity partnership, formed in 2009, called Mahindra Defence Systems.


BAE will forgo its share of 26 percent in Mahindra Defence Systems; no details are known on the purchase price of BAE's share.


While an executive of Mahindra Defence Systems said its acquisition of BAE's 26 percent stake will not end their relationship, sources in the Indian company said BAE is leaving the joint venture because it has decided the future defense market for its products was not as bright as it had earlier calculated.


In a joint statement, BAE Systems and Mahindra Defence Systems said, "This decision is a reflection of the shareholders' belief that they can best meet emerging customer requirements and address the opportunities in this dynamic market with a flexible, tailored approach that was not easily facilitated by the structure of the existing joint-venture entity."


BAE officials referred requests for further information to the statement.


The British company's 26 percent equity in Mahindra Defence Systems is the maximum under Indian law that a foreign company can invest in a joint venture in India's defense sector.


BAE invested $5.83 million of the $21.5 million invested in the joint venture.


Headquartered in New Delhi with manufacturing facilities in neighboring Faridabad, Mahindra Defence Systems manufactures specialized military vehicles and is also developing a mine-protected vehicle for use by the Indian Army.


The Army plans to buy more than 5,000 light strike military vehicles over the next five years. Requirements include four-wheel drive, high power-to-weight ratios, travel speeds of 80 kilometers per hour and ability to carry rocket launchers and GPS navigation systems.


Currently, the Army uses about 2,000 Russian BMP-1 and BMP-2 multipurpose armored vehicles.


Mahindra Defence Systems sources said the joint venture was banking on business from the homemade Future Infantry Combat Vehicle project and artillery projects, including 155mm/52-caliber guns, but refused to give details on their assessment on these futuristic projects.


No BAE executive would offer a reason for the pullout beyond what was in the joint statement.

Setback on JV With Israel


In April, Mahindra Defence Systems received a setback when its proposal to forge a joint venture with Israel's Rafael was denied by India's Foreign Investment Promotion Board. While no official reason was given, Indian Ministry of Defence (MoD) sources told Defense News the proposal was shot down for security considerations.


Mahindra Defence Systems and Rafael had proposed setting up development and production facilities to make anti-torpedo defense systems in India. Khutub Hai, retired Indian Army brigadier and current CEO of Mahindra Defence Systems, expressed frustration at the rejection of the joint venture.


"Both Mahindra and Rafael are surprised at the decision as both are reputable companies which have extensive engagement with the government of India on projects related to defense and homeland security," Hai said.


BAE's decision to pull out of the Mahindra Defence Systems joint venture will create doubts about the Indian defense market, said Nitin Mehta, defense analyst.


An executive of the Federation of Indian Chambers of Commerce and Industry, the lobbying agency for Indian industries, said the pullout is bad news for the private-sector defense market, which is still in its infancy.

India Defense Scandal's Wider Impact

Helicopter bribe allegations could slow massive defense plans


India is no stranger to defense corruption scandals and it is in the middle of yet another multi-million dollar global defense scam, one that analysts say threatens its entire procurement program in its headlong effort to upgrade its creaking defense structure to meet challenges from Pakistan and China.


In the latest episode, Italian defense and aerospace company Finmeccanica's Chief Operating Officer Giuseppe Orsi is believed to have paid €51 million to secure a US$755-million contract for selling 12 VVIP helicopters to India. Orsi, who has been jailed in Milan, denies wrongdoing while New Delhi says it is will scrap the 2010 contract. The scandal threatens to slow India's defense upgrade.


"All these plans will now go into deep freeze," Avinash Garg, a Delhi-based defense analyst formerly with the ministry of external affairs, told Asia Sentinel. "The latest controversy will delay the ongoing acquisition of weapons in India as the government probes the allegations." The scandal, Garg adds, will also lead to a stormy upcoming parliamentary budget session, followed by stricter reviews of all defense deals and delays in the awarding of defense contracts.


The slowdown is certain to frustrate the armed forces, which have been urging the government to increase defense spending to modernize. Decelerating defense purchases will also have an impact on aerospace and defense companies worldwide who are betting on India's plans to spend tens of billions of dollars each year for new equipment.


India already slashed its defense budget for the fiscal year ending March 31 as economic growth has slowed. (GDP growth projections for 2013 have been recalibrated to 5.4 percent by the government after an earlier projection of around 6 percent.


Finmeccanica's bribes were allegedly paid to many Indian intermediaries, including retired Air Chief Marshal SP Tyagi, a former chief of the Indian Air Force, and his relatives, who swung the controversial deal for the choppers in favor of AugustaWestland, a wholly-owned subsidiary of Finmeccanica.


Alarmingly, despite the fact that allegations have swirled for years in India's scandal-prone defense procurement industry, this is the first time an Indian service chief has been directly named. According to a preliminary inquiry, the technical requirements for the helicopter were "tweaked" to allow the AugustaWestland to bid.


The defense ministry ratified the nearly US$1 billion contract in February 2010, and had consistently refused to order a probe into the deal despite more than a year of allegations of huge kickbacks. It is only now, after the report directly named Air Chief Marshal Tyagi, that the government ordered a Central Bureau of Investigation inquiry.


The scandal has provided grist for the opposition's mill in an election year. "I see the making of a second Bofors in this scam," said Ravi Shankar Prasad, a spokesman for the country's largest opposition party, Bharatiya Janata.


The Bofors scandal in the late 1980s implicated former prime minister, Rajiv Gandhi and several others who were accused of receiving kickbacks from Swedish defense company for winning a bid to supply field howitzers. The company paid US$11.65 million and the scandal led to the defeat of Gandhi's ruling Indian National Congress party in 1989 general elections.


India is also on the verge of finalizing a contract with Dassault Aviation of France to purchase 126 Rafale fighter jets in a deal estimated at over US$10 billion. The Rafale acquisition is part of a massive Air Force plan to buy 400 planes and helicopters through 2022.


Fearing a backlash from the Finmeccanica episode, French President Francois Hollande, who is currently on an India visit, assured New Delhi that no "middlemen" will be involved in the country's biggest defense deal.


Besides the Rafale deal, the Indian Army is also in the process of acquiring new tanks, artillery, missile batteries and machine guns while the Navy is upgrading its fleet with new frigates and submarines.


Sullying the atmosphere further was a revelation by India's former army chief General VK Singh last month that he was offered a hefty bribe by a lobbyist to approve a defense procurement deal. Singh's public announcement shocked many over the unhindered access that international arms middlemen enjoy to senior Indian military and defense personnel.


"Just imagine, one of these men had the gumption to walk up to me and tell me that if I cleared the tranche, he would give me [US$2.73 million]," Singh told reporters. "He was offering a bribe to me, to the Army Chief. He told me that people had taken money before me and they will take money after me. I was shocked. If somebody comes and tells you, you will get so much, what can you do?"


Singh's public disclosure sent the government scurrying to institute a high-level enquiry, which is probing whether a serving general was indeed offered a bribe to clear the purchase of substandard vehicles.


Analysts say the corruption scandals can be largely blamed on middlemen in the procurement process. "Wherever big bucks are involved, such dubious characters will exist," a Home Ministry Secretary said. "One has to evolve a system where they can operate legitimately within a system of checks and balances. Why has the defense ministry not been able to register them as official agents for companies?"


Analysts are also shocked that despite India being the world's largest arms importer, having spent well over US$50 billion over the last decade, the nation does not boast a single authorized agent of a foreign armament company on the defense ministry's rolls. What exists instead are shady "consultants" and middlemen.


"Defense deals normally amount to about 10 percent of the total contract value, with a lion's share going to politicians. Middlemen normally get around three percent with bureaucrats and officers from the Army, Navy and the IAF sharing the rest of the spoils," the secretary said privately.


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