“It’s time to understand that the gun is innocent”. That has to be the prize quotation to come out of Delhi’s Defexpo defence show last week. It was made by Anand Mahindra who runs Mahindra & Mahindra, a Mumbai-based tractors-to-software group that is diversifying into defence equipment and is now tendering in India to sell the latest version of a Bofors gun that triggered a major mid-1980s corruption scandal here.
That scandal has hampered the development and equipping of the country’s armed forces for over 20 years. So Mahindra was presumably trying to joke his way out of the political embarrassment of M&M having a joint venture with UK-based BAE Systems, which now makes Bofors guns following a series of takeovers.
In 1986, the Indian government headed by prime minister Rajiv Gandhi, placed a $1.4bn contract with Bofors of Sweden that led to allegations of Rs64 crore (then about $50m) bribes.
That’s a pitifully small amount compared with today’s massive corruption levels, but the case has reverberated ever since through Indian’s political system and the courts. It contributed to the defeat of Gandhi’s government in 1989 and embarrassed the Nehru-Gandhi dynasty for years after – even though, as Mahindra also said, it has served India well (left, in use during the 1999 Kargil war with Pakistan).
Defence ministers and bureaucrats have been scared to place large sensitive orders, fearing similar bribe scandals.
That fear has reached crisis proportions under the current defence minister, A.K.Antony, (right) a Congress politician who is so scared of losing his clean reputation (and damaging his Leftist image in his home state of Kerala) that he proverbially tilts at windmills every time there is a whiff of corruption, cancelling more big contracts than he has placed in the past six years and blacklisting potential suppliers.
Mahindra’s remark is specially relevant now because India urgently needs to shake off the Bofors legacy and modernise its armed forces, which are probably the worst equipped of any large country in the world.
Pallam Raju, the minister of state for defence, said at an army seminar last week that history shows there are hardly any examples internationally “wherein a higher technology military power has been overwhelmed by lower technology power in the long run.”
“Defences are obsolete”
Yet a background paper prepared by the Delhi-based PHD chamber of commerce for the army seminar said that “most of India’s ground based air defences are obsolete” and that upgrades of basic artillery equipment were “ten years behind schedule”. The generals attending the seminar didn’t metaphorically blink at such unpatriotic statements – they knew only too well they are true.
The chief of army staff said recently that 80% of India’s armoured tanks are night blind. “That means like the medieval times you fight morning to evening and take rest at night – Pakistan has 80% of tanks capable to fight at night,” says Rahul Bedi, a defence journalist. “Planning and strategic thinking of the Indian Army’s procurement program is in complete shambles. Bureaucrats and politicians are throttling the procurement
A more academic critique headlined “Arming without Aiming” will be coming soon from the America’s Brookings Institution. Co-authored by Stephen Cohen, a south Asia expert, it argues that India’s arms purchasing has “lacked political direction and has suffered from weak prospective planning, individual service-centred doctrines, and a disconnect between strategic objectives and the pursuit of new technology”.
And Ajai Shukla, a former army officer and now a defence journalist, writing in the Business Standard daily newspaper, this morning estimates that “Antony’s halo” is costing India 125% more than is necessary for half the equipment it buys because of price rises (during delayed contracts) and because tenders sometimes being abandoned in favour of more expensive negotiated deals.
70% bought abroad
India is the world’s largest buyer of defence equipment, with expenditure budgeted at least at $40bn over the next four years. Half of that is on capital expenditure and is likely to rise around 15% in the finance minister’s annual Budget speech on February 26 , even though not all of it is ever spent [[Feb 26 insert: the actual budget increase is only about 4%]].
At least 70% of purchases have been made abroad for decades, mainly because the generally inefficient and moribund public sector-dominated defence establishment cannot deliver even high technology night vision goggles and modern helmets, let alone fighter aircraft or guns. Until recently, the capable private sector was mostly kept out of doing more than supplying minor components because the defence establishment enjoyed the combined benefits of protected jobs, patronage, prestige, and foreign kickbacks – and because Antony instinctively supports public sector trade unions that do not want private sector competition.
As I wrote last October, the armed forces have been warning the Defence Ministry for years to accelerate orders for urgently needed new equipment that are mired in bureaucratic inertia, corruption, and the manipulations of competing suppliers who trip up each other’s potential orders. (The same applies to equipment needed for the Home Ministry’s internal security).
How Pakistan and China must enjoy watching the self-inflicted damage that India does to its own war readiness, relishing the thought that they themselves could not do more in a border war.
Some progress has been made in recent years on improving defence manufacturing, but this has been dismally slow since it was nominally opened up to the Indian private sector in 2002. With a few exceptions such as Tata and Larsen & Toubro obtaining rocket launcher contracts, and L&T building the hull of a nuclear submarine, there have been few major private sector orders.
This will gradually change following the introduction in the past year of a technology transfer-oriented “Buy and Make (Indian)” policy, and the (long drawn out and muddled) introduction of an offset programme, where foreign arms companies have to spend half the value of an order in India. This is pulling foreign defence companies into tie-ups with Indian business such as M&M’s with BAE, but offset contracts worth only Rs8,200 crore ($1.8m) have so far been signed, half with the Indian private sector.
Less progress has been made on speeding up urgently needed defence orders, often because potential losers lobby or bribe the government to change tack. Following intense US diplomatic pressure, a $550m a pending order with Europe’s Eurocopter for 197 modern light helicopters that are urgently needed by the Army was cancelled two years ago after America realised its Bell company was losing. Inexplicably, Bell failed to tender when the contract was offered again.
Last month, Germany’s ambassador to India, Thomas Matussek, complained publicly after a $1.5bn contract for Airbus A-330 multi-role refueling tanker aircraft, made by Europe’s EADS consortium and favoured by the Indian Air Force, was rejected because the finance ministry said the aircraft were too expensive. Matussek alleged ‘”political reasons”, and one does not have to be too much of a conspiracy theorist to sense America’s hand at work again though a Russian Ilyushin was the runner-up in the 2008 tender.
Matussek’s complaint had a wider significance at a time when the US, using clout provided by its nuclear supplies deal with India, is trying to supplant Russia as the country’s biggest arms supplier. India has begun negotiating some contracts through the US government instead of using tenders, partly to enable it to select specific equipment such as Boeing’s C-17 Globemaster heavy-lift aircraft where a $1.7bn order is being negotiated, and partly to avoid the risk of corruption scandals on competitive tendering. This sort of negotiated contract has happened for decades with Russia, but the use of America’s FMS (foreign military sales) procedure is new and is worrying European countries such as Germany, France, and the UK because they risk being squeezed out of key contracts.
So what does India need to begin to turn itself into a state of at least semi-war readiness to cope with potential border wars with China and Pakistan?
First, it needs a defence minister who can shake off the Bofors legacy and cope with kick-backs, whether or not he lines his own and his political party’s pockets. He also needs the political skills, standing and determination to push through quick decisions and play diplomatic games constructively with the US, Russia and Europe so that orders are placed, not cancelled.
Also needed are a prime minister and political leadership who can shake off some of the froth surrounding India’s peace-loving mantra and who are genuinely interested in building up the technological capability, and supporting the manpower, of the country’s fighting forces. Sadly the current dispensation, as it is called in India, does not meet that criteria.A slightly shorter version of this post, without the pics, is on the FT.com India page at http://www.ft.com/world/asiapacific/india
Earlier posts on Indian defence: