esamskriti
"A platform to share knowledge and insights to help Indians reconnect
with their heritage and build a glorious future together"

Strategic Defence

CAG Flays Government For The US Warship Deal
By Major General Mrinal Suman, July 2011 [[email protected]]

Chapter :

First published June 2008

The Comptroller and Auditor General of  India (CAG) in its report tabled in Parliament on 14 March 2008, has not only  questioned the wisdom of buying the 37 years old aging ship USS Trenton, but  more damagingly, has deprecated acceptance of restrictive clauses by India. Under  the restraining stipulations, India cannot employ the ship (which is basically  a troops-carrier) for offensive operations and has to permit the US to conduct  periodic inspections under the End-Use Monitoring (EUM) clause of the  agreement. The ship, since named INS Jalashva (water horse), was purchased by  India in September 2004 for Rs 200 crores under the US Excess Defense Article  programme. It was a government to government deal.

The report has shocked most observers. Critics  have been quick to express their indignation by dubbing the deal as another  scam. They wonder why India bought a ship nearing the end of its useful life  and agreed not to have unbridled control over its usage. More importantly, the  CAG report has thrown up three vital issues which need to be addressed in the  interest of national security. They are:- 
•Is  it prudent to purchase used defence equipment decommissioned by a foreign  country? 
•Should  India accept restrictive clauses with regard to the use of equipment duly paid  for? 
•What  exactly is the role of CAG in auditing defence deals?

Purchasing  Used Defence Hardware
Every country carries out a periodic  review of dynamic geo-political environment, national security policy  imperatives and likely operational commitments. Issuance of defence planning  guidelines with well defined objectives flows from the said review. Thereafter,  a defence capability plan defining capabilities required to be achieved by the  armed forces to achieve the laid down objectives is formulated. To attain the  capability in the specified time horizon, a long term perspective plan is  drawn. It entails identification of voids and surpluses as regards defence  systems and equipment. Whereas voids are filled with new acquisitions,  surpluses are disposed off in a manner most beneficial to the country.

Defence equipment may be declared  surplus for one or more of the following reasons:- 
•A  revision of strategic planning and operational doctrine may render its use  redundant.  
•The  quantity/number held may exceed forecast requirement. 
•Equipment  may be nearing obsolescence and is planned to be substituted by technologically  advanced replacements.  
•Cost  of upgradation or extension of service life may not be considered a  cost-effective option for envisaged usage.

Equipment declared surplus does not mean  that it is totally worthless and fit to be converted into scrap. Duly  refurbished and upgraded, most equipment can be put to effective use by other countries  for their envisioned operational requirements. Such an approach makes immense  political, economic and military sense for the following reasons:- 
•It is a highly cost effective option  for a country which is struggling to graduate to bigger roles. Old equipment is  generally available at a highly depreciated value which may be a fraction of  the cost of equivalent new equipment. 
•It exposes the buyer country to the  hitherto unfamiliar and inaccessible equipment, its design, functioning, maintenance  and a host of related technologies. Additionally, considerable spin-off  benefits accrue to the indigenous defence R&D. 
•The buyer country gets the benefit of  learning employment doctrines, operational exploitation and deployment  procedure. In the case of USS Trenton, Indian and the US naval personnel spent  nearly six months together at sea and in port to enable Indians to learn all  aspects of its functioning and operations.  
•It provides hands on training to the  buyer country and prepares its manpower to be ready for more advanced  equipment. Moreover, such equipment invariably comes with detailed training  literature and aids. Experience gained by the seller country gets passed on to  the buyer country.

Therefore,  it is unfair to criticize the Government for the US warship deal just because  the warship is 36 years old. The US has not discarded all ships of the same  class and continues to have six of them in its navy at present. It is seriously  contemplating their refurbishment to prolong their service life. INS Jalashva  will serve India for a few decades and provide invaluable training to the  Indian Navy in operating and employing a large ship of this class. It will also give a stratospheric  jump to India’s knowledge as regards conduct of amphibious and expeditionary  operations.

Acceptance of Restrictive Clauses
The  US has always been apprehensive of its exported defence equipment being  employed in a manner inimical to its interests.  Such concerns have forced the US Government to put in place a tight regulatory  framework under  the Arms Export Control Act (AECA) and the Foreign  Assistance Act (FAA). The US Government has been tasked to ensure that exported  defence articles/services are used by the recipient nations strictly as per the  initially stated intent. Additionally and more importantly, Section 40A of the  AECA mandates that end-use of defence articles and services which are sold,  leased or exported must be monitored by US security agencies.

The US exports military equipment and  services through two main routes - Direct Commercial Sales (DCS) and Foreign  Military Sales (FMS). Though subjected to the same licensing regime, both have  their distinct monitoring provisions. All DCS cases are subjected to “Blue Lantern” programme which was initiated in September  1990 by the Department of State. It entails pre-licence scrutiny and  post-shipment checks to ensure compliance of contract provisions. Special  attention is paid to the export of certain sensitive technologies like  night vision devices, cruise missiles, remotely piloted vehicles and  electronics.

Under FMS sales (USS Trenton has been  purchased through this route), the buyer nation forwards a Letter of Request to  the US Government. If the request is cleared, a Letter of Offer containing all  terms and conditions as dictated by the US laws for acceptance by the buyer, is  sent to the requesting Government. It is a non-negotiable document. The buying  Government is required to submit a Letter of Acceptance. All FMS agreements are  overseen by “Golden Sentry” EUM programme which covers the complete spectrum of  activities from initial delivery to final disposal. It is generally called  ‘cradle-to-grave’ monitoring.

Under  “Golden Sentry”, all exported items are categorized and tracked by their serial  number on a country by country basis. The programme is designed to  provide assurance that the recipient is complying with the US Government  regulations. Regular monitoring prevents  diversion or misuse of sensitive technologies.   It also ensures that the host nation does not acquire technology through  reverse engineering and other means.

The US Government is within its rights  and fully justified in ensuring that its technologically-advanced equipment is  not used in a manner detrimental to the perceived US interests. Therefore, all  export contracts, irrespective of recipient nations, contain these stipulations  as standards terms of sale. There is no small print. It is for the buyer nation  to accept the equipment with restrictive clauses or to decline the deal.  

In the case of USS Trenton deal, many  observers have also objected to the restriction on the warship’s use in  offensive operations. It is a highly blown up and extraneous concern. AECA and  FAA require that defence articles and services can only be transferred to  countries and international organisations for purposes of internal security,  legitimate self defence and regional security arrangements. It is a very wide  spectrum with unlimited possibilities and multiple interpretations. During his  visit to India in March this year, US Secretary of Navy Donald C Winter tried  to allay Indian apprehensions and said, "There are no limits on the use of  the warship by a sovereign nation in support of its national defence objectives."  Even offensive operations are required to be carried out in support of  legitimate national defence objectives. Hence, India can employ the ship in all  justifiable roles. In any case, India does not covet other’s territories and will  never launch operations against another country unless duly invited by a  legally constituted government for assistance, as happened in Maldives in  November 1988. As India and the US are unlikely to be adversaries in the  foreseeable future, one cannot imagine a scenario in which India may employ INS  Jalashava in a manner inimical to the US interests.   

Performance  Audit by CAG
CAG carries out performance audit as per Chapter 7  of Regulations on Audit and Accounts – 2007. Performance Audit has been  described as an independent  assessment or examination of the extent to which an organisation, programme or  scheme operates economically, efficiently and effectively. It assesses economy  (acquiring equal-quality resources at least cost), efficiency (maximizing  output for a given set of resource inputs) and effectiveness (extent to which  objectives are achieved by a scheme, programme or organisation). In other  words, the role of CAG is limited to ascertaining financial propriety, fiscal  discipline and adherence to procedures.

CAG has done India proud by highlighting  inadequacies of the procedure and imposing caution on the functionaries. But in  the case of the procurement of the US warship, CAG has unjustifiably stepped  into the domain which is outside its charter and competence. It is quite  inappropriate and out of place for CAG to comment on need to procure a  particular defence asset. It is for the Cabinet Committee on Security to  consider national security imperatives to determine such issues. Moreover,  major defence procurements are invariably influenced by a large number of  inter-related factors including foreign policy considerations. Just because INS  Jalashava is 36 years old, it does not make it a bad buy. No objections were  raised when India bought HMS Hermes of 1953 vintage (since named INS Viraat)  from the UK in 1986. If that logic is accepted, purchase of fire ravaged  aircraft carrier Gorshkov from Russia may be termed as a bigger blunder. As  regards restrictive clauses, these pertain to operational exploitation of the  ship and fall totally outside the purview of audit. Moreover, understanding  reached between the US and India with respect to the application of these clauses  is not known in public domain and hence cannot be commented upon.

Conclusion
There is no reason for India to be  unduly worried as imposition of these clauses is universal in its application. EUM  programme is neither antagonistic in its objective nor is it India-specific. It  contains empowering provisions which can be invoked, if the situation so necessitates.  The US Government does not apply all stipulations across the board in all  cases. It is aware that EUM visits handled with insensitivity can invoke  negative sentiments and affect relations adversely. It has, therefore, been  making extensive efforts to dispel all apprehensions of the buyer nations and  make these visits least intrusive. Most of the nations appreciate U S concerns  and are ready to cooperate.

India has been fully aware of the US  laws and has accepted EUM oversight as a legitimate US instrument to safeguard its  interests. It may come as a surprise to many, including CAG, to learn that purchase  of Weapon Locating Radars in 2002 and the recent contract for six Hercules  aircraft also come under EUM regime. Moreover, in case India decides to opt for  the US fighter aircraft (F16/F18) or the Bell helicopter, EUM provisions will  remain applicable. In case India is disinclined to accept these restrictive clauses,  it will have to do without US defence equipment.   

Of late, there has been a proclivity for  smelling a rat in all defence deals. It is unfair to look at every defence deal  with suspicion and find non-existent faults. It is not for CAG to question the  wisdom of buying a used warship or accepting restrictive clauses. These are the  issues which are best judged by the policy makers. CAG will do well to restrict  itself to ensuring financial prudence and adherence to the laid down  procedures. Moreover, it ought to be more careful and exercise due caution  while commenting on defence deals. Even casual, ill-advised and injudicious remarks  provide a handle to the critics to assail the Government. Worst, such inappropriate  and irrelevant observations demoralize government functionaries, dent  credibility of the system and cause immense damage to the national psyche. The  end result is slow decision making, surrender of defence funds and tardy  modernization of the armed forces.

About  Author – Major Gen Mrinal Suman is India’s foremost expert in defence  procurement and procedures and offsets. He heads Defense Technical Assessment  and Advisory Services Group of CII.

Chapter :

Post A Comment

'The purpose of this feature is to provide a platform for exchange of views.
Please Register with site to post a comment and avoid abuse and getting into personal arguments.


Add Your Comment