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Strategic Defence

Blacklisting Foreign Vendors
By Major General Mrinal Suman, July 2011 [[email protected]]

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First published  December 2008
India  has a penchant for blacklisting foreign arms producers without considering  negative effects it has on India’s military preparedness. This is the reasons why  recent reports of irregularities in the procurement of seven Barak anti-missile  defense systems and 200 missiles from Israel Aircraft Industries Ltd (IAI) have  caused serious concern to the Indian armed forces. They fear that the Government  may get forced to blacklist IAI as per the provisions of defence procurement  procedure. Should that happen, India’s defence modernisation plan would suffer  irretrievable damage. Having seen the adverse effects of banning Bofors, HDW  and Denel, they dread a similar fate for a large number of ambitious plans  under implementation. 

IAI is deeply involved in most of the  major modernisation plans of the three services. In addition to the upgradation  of fighter aircraft (Jaguar, MIG-21, MIG-29 and Mirage-2000), transport  aircraft (AN-32) and all helicopters of MI series, it is supplying three  Airborne Early Warning and Control System (AWACS) systems to India. It is also a  prime supplier of unmanned aerial vehicles to the three services. Most  importantly, IAI is involved in a number of developmental projects. India  simply cannot afford to cut off all dealings with it. The saga of banning  Bofors, HDW and Denel cannot be repeated.

Bofors
After carrying out trials of various  guns on offer, India opted for Bofors 155 mm FH-77B towed artillery system. A  contract for 410 systems was signed with the Swedish firm in 1986 for Rs1437.72  crore. The contract included transfer of technology for subsequent manufacture  of guns in India. India had planned to produce 1,840 pieces within the country  to equip 92 artillery regiments. However, with the exposure of kickbacks, the  Government banned Bofors for all future dealings. It had the following effect:-

• Although  India had paid for transfer of technology, it failed to utilise it. India lost  an opportunity to create a base for further development of artillery weapon  systems. As a result, indigenous competence to manufacture and maintain guns  remained stunted.

•As  spares could not be procured from Bofors, middlemen thrived making huge  profits. In the absence of adequate spares, the Army had to cannibalize parts  from some guns to keep other guns functional. Essential maintenance also suffered.

•Without  help from Bofors, India is struggling to carry out overhauling of guns in the  stipulated time frame. It is feared that delay in overhaul will adversely  affect extension of useful life of the gun systems. Indigenous capacity  installed with a Base Repair Workshop is far too less and it will take  unacceptably long to overhaul the complete inventory.  

•The  Navy was already using Bofors guns on some ships and they faced difficulties in  ensuring regular supply of spares.

•Indian  inventory of 84 mm Carl Gustav Rocket Launchers suffered as Carl Gustav  subsequently became a subsidiary of Bofors and thus, came under the ban.

Denel
Discussions were  in final stages with Denel of South Africa for 155 mm howitzers (both towed and  self-propelled) when it emerged that Denel had employed unacceptable means to  grab contract for the supply of NTW-20 Anti-Material Rifle. It was alleged that  Denel had engaged middlemen to offer bribes to obtain sensitive information  about the internal proceedings of the Commercial Negotiation Committee. The  Government decided to blacklist Denel in 2005 and cancel all orders placed on  it.

The development was highly unfortunate. Bhim  project was almost concluded with Denel’s T-6 155mm turret from the G-6  being mounted on Arjun hull. An initial order had also been placed on a public  sector undertaking. With the blacklisting of Denel, Indian Army’s Field Artillery Rationalization  Plan suffered a crippling blow. The total  requirement envisaged by 2025 is 3600 artillery guns of 155mm/52 calibre. The  current inventory is of 410 Bofors guns only. Therefore, India desperately wants  to procure 400 additional gun systems (220 wheeled and 180 tracked) on priority  to meet inescapable minimum requirement.  

Field  trials in respect of wheeled systems were carried out in 2003 to ascertain  compliance of Services Qualitative Requirements. Three competitors participated  – Denel, Soltam Atmos 2000 and FH77 of SWS Defence. All the three systems failed to  meet specified standards. Retrials of duly improved versions were held in 2004.  With the blacklisting of Denel, the choice got limited to Soltam and FH77. As  per the press reports, FH77 emerged far superior to Soltam and was the choice  of the Army. However, due to politically sensitive reasons, the Government  incorrectly termed the case as a single vendor situation and decided to float  fresh tender enquiries with reformulated Qualitative Requirements. Tender for  wheeled guns was floated in March 2007 and the second tender for tracked guns  followed soon thereafter. It is learnt that 12 producers of guns have been  invited.

Nearly  20 years have passed since the induction of Bofor guns; no new gun system has  been procured. Due to ban on Bofors and Denel, India has shut doors on two  major producers of guns and thereby limited its choice. Continued shortage of  suitable 155mm/52 caliber gun systems implies major gaps in India’s defence  preparedness. Additionally, India’s quest for indigenous production of 155 mm  ammunition also suffered a major blow. Work on a new ordnance factory in  Nalanda to manufacture 155mm ammunition for Bofors guns has got stalled, as  Denel was to provide technical know-how. Hundreds of crores of rupees have also  gone down the drain.  

HDW
The case of HDW makes instructive reading.  A contract was signed with the German firm in December 1981. India was to get  two HDW 209 class fully built submarines and sub-assemblies and components for  assembling two other submarines in India. HDW was also to provide required  training to Indian personnel.

HDW delivered two submarines in 1987 and  two more were assembled in India in due course. As allegations of bribery and  kickbacks became public, the Government decided to blacklist the company.  It was also decided not to build any more  submarines of the same class. Marlog, a company jointly owned by HDW and  Ferrostal, took over the responsibility to fulfill all contractual obligations.

There are just a handful of competent  submarine manufacturers in the world. By blacklisting HDW, India antagonized  one of the leading producers and thereby deprived itself of the benefits of  latest technological advancements. HDW is the world leader with the most  advanced air-independent propulsion system. Continued collaboration would have  given a boost to indigenous submarine building competence. Additionally, India  would have acquired wherewithal as regards maintenance, overhaul and repair  support.

As India had not received the complete  drawings and NATO identification numbers for all spare parts of the submarines,  it faced immense problems in procuring them from other sources. Middlemen made  huge profits. The Navy wanted to increase the offensive punch of the submarines  by mounting Exocet missiles on it. As HDW could not be engaged, others laid  unacceptably harsh conditions. Indian plans for the upgradation of the  submarine entailed an increase in their length and that could be done only by  HDW. To sum up, by blacklisting HDW India deprived itself of maintenance  support, upgradation opportunities and development of indigenous skills.   

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