February 16, 2013


[Defense analysts said the dramatic revelations of bribery that are being splashed across Indian newspapers every day — and the probe they have prompted — may cast a shadow over India’s ambitious plans to replace its aging military arsenal. Those plans made the country the world’s largest arms importer last year. The bribes were allegedly offered to officials as high as the former air force chief.]

Adrian Dennis/AFP/Getty Images -  India said Friday it had started the process of 
cancelling a 748-million U.S. dollar deal for 12 Italian helicopters amid allegations 
that the contract was won through kickbacks. Here, an Agusta Westland helicopter 
participates in a flying display in Hampshire, England.
NEW DELHI — Allegations of corruption in the purchase of 12 Italian helicopters are threatening India’s desperately needed multibillion-dollar modernization of its defense forces.

The chief executive of the Italian defense and aerospace company Finmeccanica, Giuseppe Orsi, was arrested in Milan this week on charges of bribing Indian officials to secure a $750 million deal in 2010 to sell the AW-101 medium-lift helicopters.

In response, India ordered a federal probe into the charges and put payments on hold. The Defense Ministry also deferred discussions this week on another contract to buy 197 light utility helicopters, fueling fears that the controversy may paralyze the government’s already painfully slow decision-making process.

Defense Minister A.K. Antony told reporters Wednesday that if the probe reveals proof of graft, the Italian company and its Britain-based subsidiary “are liable for criminal actions; they are liable to be prosecuted; the company is liable to be blacklisted.”

“We are not bothered about who the companies are, how strong they are, how influential they are,” Antony said. “Nobody will be spared.”

In a statement Friday, the Defense Ministry said it has notified the Finmeccanica subsidiary, AgustaWestland, that it is seeking to cancel the contract. The company was asked to reply to the notice in seven days.

Defense analysts said the dramatic revelations of bribery that are being splashed across Indian newspapers every day — and the probe they have prompted — may cast a shadow over India’s ambitious plans to replace its aging military arsenal. Those plans made the country the world’s largest arms importer last year. The bribes were allegedly offered to officials as high as the former air force chief.

The case has reminded many Indians of another defense corruption scandal in the 1980s, which helped bring down a government and pushed back many key defense purchase decisions. A similar delay, they now warn, may threaten India’s security at a time when its lumbering military needs to urgently transform itself into a leaner and more lethal force to face potential threats from neighbors such as China and Pakistan.

“The unfortunate fallout of the current helicopter controversy is that decisions will get stalled, people will play safe and not take any decisions at all, and that will affect our defense modernization and preparedness adversely,” said Mrinal Suman, a retired army major general who instructs foreign defense manufacturers on Indian weapons procurement policies. “The modernization of our armed forces is already lagging behind by 15 years. About half of the weapons and equipment in India’s armed forces are obsolete.”

In 2011, V.K. Singh, then chief of the Indian army, said the army’s major combat weapons were in an “alarming” state, making India unfit for war.

India in recent years has embarked on plans to upgrade its Soviet-era arsenal with new fighter aircraft, antitank missiles, maritime patrol aircraft, infantry combat vehicles, helicopters, assault rifles and submarines — a shopping list worth about $100 billion over more than a decade.

U.S. companies hope to corner a predominant share of this market in the coming years. Defense trade between the United States and India has generated nearly $8 billion since 2005, coinciding with a new era of closer ties between the two nations.
But each defense purchase takes an average of eight to 10 years, frustrating many foreign vendors.

“Overcautious officers delay the process by looping in and marking defense acquisition files to every senior [official], just to avoid taking individual responsibility for their decisions,” said an industry observer familiar with the process.

The reason for such nervousness, analysts said, is the bruising aftermath of a defense corruption scandal in 1989, in which Indian officials were accused of receiving bribes from the Swedish company Bofors in return for a contract to buy howitzers. The scandal cost the then-ruling Congress party dearly in elections that year.
“It took at least 15 years for the government to recover from the shock of the Bofors scandal and pick up the courage to take decisions on buying weapons again,” said Suman.

An editorial Thursday in the Indian Express newspaper warned against “the system’s tendency to lapse into inertia and indecision when faced with demands for greater accountability.”

As in the aftermath of the Bofors scandal, “procurement may again be slowed, suspended or banned, apprehending scandal,” the editorial said. “Asked to prove its innocence, the system could again choose to retreat to the comforts of inaction and prevarication.”

@ The Washington Post


LONDON: British Prime Minister David Cameron will arrive in India on Monday to try to win new trade and investment in the face of fierce global competition, hoping New Delhi may change its mind and choose the Eurofighter over France's rival Rafale jet.

Making his second visit to India as prime minister, Cameron's trip comes days after a similar trade promotion mission by French President Francois Hollande, underlining how Europe's debt-stricken states are competing with one another to tap into one of the world's fastest-growing economies.

The timing of Cameron's trip is not ideal. India said on Friday it wanted to cancel a $750 million deal for a dozen helicopters made by AgustaWestland, the Anglo-Italian subsidiary of Italy's Finmeccanica, over bribery claims.

That will not make Cameron's job of persuading India to buy more civil and military hardware any easier.
But at a time when Britain's government is struggling to get its own economy growing, officials see India, which is projected to become the world's third largest economy by 2050, as a strategic partner whose success could help the British economy grow in the decades ahead.

Cameron will remind the Indian government that the Eurofighter jet - which is partly built in Britain - remains an attractive option if New Delhi decides to review its multi-billion dollar deal to buy 126 French-made Rafale fighters.

A British government source said on Friday that London had noted that Hollande had not finalised the Rafale fighter jet deal during his own trip.

"Hollande was in India this week and a deal has not been signed so we will want to find out from the Indians how their talks are progressing with the French," the source said.

An official from Cameron's office suggested the Eurofighter offer remained on the negotiating table.

"We respect the fact that the Indians have chosen their preferred bidder and are currently negotiating with the French. (But) of course, we will continue to promote Eurofighter as a great fast jet not just in India but around the world."


Cameron's visit to India, a country that won independence from Britain in 1947 and whose colonial history remains a sensitive subject for many Indians, will last from February 18 to February 20 and take in New Delhi and Mumbai.

Cameron says the two countries enjoy a "special relationship", a term usually reserved for Britain's ties with the United States, but it is a relationship undergoing profound change. For now, Britain's economy is the sixth largest in the world and India's the 10th. But India is forecast to overtake its old colonial master.

TATA group, an Indian company that owns car maker Jaguar Land Rover, is now Britain's biggest employer in the manufacturing sector and, in a nod to how the relationship is evolving, London will stop giving India foreign aid after 2015.

Cameron will be accompanied by a large business delegation, which one of its participants told Reuters was the biggest trade mission of its kind since the 1970s. Another big trade mission in 2010 failed to yield the gains Cameron had hoped for.

He is expected to lobby India to open up its economy to foreign investment to allow retailers, such as Britain's Tesco, to open outlets there amid frustration that many of the sectors where British business excels remain partly or fully closed to foreign investors.

India is forecast to spend $1 trillion in the next five years on infrastructure and Britain is hoping its firms may win some of those contracts. Britain is also keen to persuade more Indians to study in the UK.

Some of its companies have also run into problems. Mobile phone operator Vodafone has repeatedly clashed with the Indian authorities over taxes, oil company Royal Dutch/Shell (RDSa.L) has asked the British government to raise a tax dispute it has with India during Cameron's visit, and energy giant Cairn has faced problems too.

Cameron's aim is to double trade between the two nations from 11.5 billion pounds in 2010, when he last visited, to 23 billion pounds in 2015. Officials say that goal remains on track and that bilateral trade rose by around 23 percent in 2010 and 2011.

Cameron is expected to meet Manmohan Singh, his Indian counterpart, and may also have talks with President Pranab Mukherjee as well as with Sonia Gandhi, chairperson of the ruling Indian National Congress party.

@ The Himalayan Times