New Delhi, Feb. 21: Defence minister A.K. Antony has ordered the reframing of defence purchase policies to create and boost local arms-makers in the wake of the VVIP chopper kickback scam.
Antony ordered the reframing of policy after he concluded that India’s armed forces are too heavily invested in Finmeccanica, the Italian firm that owns AgustaWestland which sold the 12 helicopters, and military modernisation would slow down if a ban was imposed on the conglomerate.
It could also impact the negotiations for the largest defence acquisition project, an estimated $15-billion deal to buy French-made Rafale multirole combat aircraft.
More than 70 per cent of the Indian military arsenal is made up of imports. Antony’s order is, at best, an ambitious plan spread over decades to reorient defence acquisitions through a system of joint ventures between Indian public and private sector companies with foreign arms-makers.
India’s domestic defence industrial companies do not have the technology, the R&D and the process to produce weapons that will satisfy its armed forces.
“It would be completely unrealistic to assume that the DRDO, ordnance factories and defence public sector companies have enough capacity even if they perform at their peak to cater to the full spread of our future military needs,” said V. Siddhartha, who has spent many years in India’s strategic sector, including the space department and the DRDO.
Finmeccanica is the eighth largest arms company in the world and has been in business in India for 40 years. Its current contracts in India total nearly $12 billion, according to a Jane’s defence analyst.
Reuters reported from Rome that senior management at Finmeccanica met Indian officials who are looking into the allegations of corruption in the chopper deal.
The meeting was “positive” and will be discussed by Finmeccanica’s board later in the day, the company’s new chief executive officer Alessandro Pansa said.
The Indian delegation is in Italy to collect evidence in the case, which centres on allegations that Finmeccanica paid bribes to win a Rs 3,550-crore contract for the sale of 12 helicopters to India.
Systems from the company or its subsidiaries are installed in Indian warships, aircraft and land-based weapons that are in use and that have been ordered.
Among this, is the yet-to-be-delivered Admiral Gorshkov aircraft carrier. The vessel itself is being imported from Russia but the Indian Navy wanted radar systems from a Finmeccanica company to be used on it.
Finmeccanica-associate Fincantieri delivered two fleet tankers — the INS Deepak and INS Shakti — to the Indian Navy last year. It is still contracted for training and spares. Fincantieri is also the design consultant for the navy’s IAC (Indigenous Aircraft Carrier) project. AgustaWestland supplied Seaking helicopters to the Indian Navy.
Finmeccanica’s exposure in the Indian armed forces is more than the six companies banned by Antony after the arrest of the former director-general of the Ordnance Factory Board in Calcutta in 2010.
In March last year, Antony put three foreign majors — Rheinmetall Air Defence, Singapore Technologies and Israel Military Industries — on a “blacklist” of six companies. Including Finmeccanica in that list will threaten current and future military modernisation projects, defence ministry officials believe.
Defence research analyst Siddhartha cautioned that India is not in a position to stop all imports of required weapons systems and other defence acquisitions.
India’s civilian industry would jeopardise its commercial cost-competitiveness even in the domestic market if it ordered only military-specifications dominated systems for production in military-only dedicated lines, even if the required investment is subsidised, Siddhartha said.
But, he said, India would need to work towards increasing self-reliance in defence acquisitions. Attempts to provide the armed services the capabilities they require over the next decade mainly through imports would place the services in what he calls a “triple trap”.
“What is developed abroad will not suit our requirements, what is suitable will be denied, and what is not denied will be unaffordable,” Siddhartha said.
AgustaWestland said in a statement this evening that “its conduct has been fully compliant with the rules which regulate the AW101 helicopters contract signed with India”.
The company said that it was responding to the notice sent by the Indian defence ministry on February 15 “in the spirit of full cooperation”.
Defence ministry spokesperson had said that it was a showcause notice and the beginning of the contract termination process. The company was asked to respond in a week.