Why Indian Politicians Love Defense Corruption Scandals

This article first appeared on the Riding the Elephant site.

Defense corruption scandals in India never blow up and dominate media coverage and political intrigue for their own sake.

They do not develop because neither the defense ministry nor the armed forces (the customers) want to get a better deal or see the real lawbreakers caught. Nor do they develop because the bribes may affect the quality of the equipment, even though specifications might be fudged.

The real reason is always that a defense company wants to stir up trouble for a rival. Or, as in the case of the AgustaWestland helicopter scandal that is currently dominating Indian politics, because politically embarrassing information has become public and one party can use it against the other.

This usually happens when a scandal is being driven by events in another country. Rarely are inquiries initiated and followed through in India without being spurred on by foreign activity. In the helicopter case, this was recent court action in Italy involving Finmeccanica, AgustaWestland's parent company, and in the famous Swedish Bofors gun contract case during the 1980s, it was revelations in Sweden.

The political furor that has suddenly built up over the helicopter order illustrates many of the problems that have made India's defense forces grossly ill-equipped to fight wars because the country relies on foreign suppliers for up to 70 percent of its supplies and because most orders are endlessly delayed by bureaucratic inertia and blockages.

Most orders, it is also reasonable to say, are linked to bribes, so scandals can occur wherever the vested interests are involved. India's long-awaited Rafale jet fighter order with France is now, as the media like to put it, "under the scanner," which could lead to more delays.

Narendra Modi's Bharatiya Janata Party (BJP)-led government is trying, with a new defense procurement procedure, to speed up orders and increase the proportion of equipment made in India. It also plans to penalize foreign companies found guilty of paying bribes without barring them from future work, and to regulate the controversial role of defense agents.

India's premier political dynasty, the Gandhis, has been the focus of attention in both the Bofors and helicopter scandals. In the case of Bofors, among those named were friends of Rajiv Gandhi, then the prime minister, and of his wife Sonia, now the party's leader. It was widely perceived that the Gandhis or their friends and relations had benefited from the $1.4 billion contract, with some Rs 64 crore (then about $50 million) in bribes.

In the helicopter case, Indian names of possible recipients of bribes have been widely gossiped about for the past few years in private conversations and in the media. And all, of course, deny involvement. They range from Sonia Gandhi (named in the Italian court's papers) and her son and heir-apparent, Rahul; to Ahmed Patel, her influential political secretary; and to M.K. Narayanan, a former national security adviser.

Shashindra Pal Tyagi, who was the chief of air staff from 2004 to 2007, was also named in Italy as a recipient, partly because his cousins were allegedly intermediaries for the bribes, though it is extremely unlikely that he was operating without the connivance of top political figures.

Hinting heavily that the government wants to link the bribes and Tyagi to the Gandhis, Manohar Parrikar, the current defense minister, said two days ago that the government would go after the "big fishes" who got the helicopter specifications "tweaked" during the previous Congress Party-led administration. "There are definitely some small fish, but there will also be some big fish. We will try...to ensure we get to the money trail," Parrikar told the CNN-News18 TV channel.

Asked how he was convinced there were "big fish," Parrikar replied, "Obviously there were, as rules were tweaked to favor Agusta, which Antony otherwise would not have done unless someone was overseeing this." That was a reference to A.K. Antony, the Congress government's ineffectual defense minister, who protected his non-corrupt reputation so carefully that he rarely authorized contracts or tampered with tenders unless, as Parrikar said, "someone…was overseeing" him.

The AgustaWestland contract was relatively small and is one of the least significant of the numerous defense orders that have been hit with corruption allegations over the decades, beginning with an order for army jeeps soon after India's 1947 independence and then guns, submarines, aircraft and other types of orders.

The contract was for 12 VVIP helicopters, to replace aging Russian craft, that transport the prime minister and other top leaders. It was initiated in 1999 by the then Atal Bihari Vajpayee-led BJP government and was concluded by the Manmohan Singh-led and Sonia Gandhi-influenced Congress government in 2010. AgustaWestland's Italian headquarters won the $450 million order for its AW-101 aircraft produced in the British town of Yeovil. The alleged bribe was about $40 million.

The Italian courts have said that Tyagi lowered the Indian Air Force's height requirement for the helicopters to operate up to altitudes of 6,000 meters so that the AgustaWestland aircraft, which could not go so high, could be bought.

But, as Ajai Shukla, a leading defense analyst, has recently pointed out, the Ministry of Defense said (two years ago) that the order to lower the service ceiling was issued by Brajesh Mishra, Vajpayee's highly influential principal secretary and national security adviser before Tyagi became chief of air staff. (That has led to the theory that Tyagi's cousins knew the decision had been made and extracted bribes from AgustaWestland, claiming they would make sure it was implemented.)

The contract was terminated from January 2014 by the Singh-Gandhi government, by which time three helicopters had been delivered. Antony, burnishing his ultra-clean reputation, mothballed the three aircraft and banned Finmeccanica companies from Indian contracts after Italian investigators arrested Giuseppe Orsi, who headed the group, in February 2013 on charges of bribing Indian officials.

Antony did this to numerous foreign companies accused of bribery, thus outlawing leading suppliers and seriously slowing down the ordering and delivery of new defense equipment.

This was widely regarded as an untenable policy, and the current government started tentative moves soon after it was elected two years ago to levy financial penalties on companies accused of corruption instead of debarring them.

Shukla points out that Parrikar has even cited Finmeccanica as an example of the need for this change, saying that many of its 39 group companies were involved in crucial contracts with India. "Should we rule ourselves out of dealing with all of those 39 subsidiaries?" Parrikar asked 17 months ago.

In the current political frenzy, that looks like an unwise question, because Congress Party leaders have asked what persuaded the current government to soften the anti-bribery stance. They are also citing a theory (originating from one of the middlemen involved) that Modi offered to withdraw the cases against two Italian marines accused of murdering two Kerala fishermen in 2012 in return for AgustaWestland evidence against the Gandhi family.

That led the government to issue on April 29 an almost embarrassingly long (1,350 words) statement trying to explain and justify itself.

This row will gradually fade from the headlines when another issue emerges for politicians' and the media's attention, though it will trundle on with Indian authorities' investigations and could easily be ratcheted up again when political or other interests wish.

However, neither the government nor the Congress Party really wants to see the helicopter scandal reach any real conclusion because of what might be revealed and because of other allegations that either side might make.

There are always more defense deals to be explored. The next big contract is for 36 Rafale fighter jets that Modi personally ordered in a government-to-government deal (bypassing competitive tenders) for delivery, "in fly-away condition as quickly as possible," when he was in Paris on an official visit in April last year.

That quick deal was supposed to cut through the red tape that had virtually scuppered three years of negotiations, involving $18 billion to $20 billion, for 126 of the planes after a long international tendering process. But, 13 months later, negotiations for the 36 jets have not been concluded, partly because of India's demands for price cuts and for France's "fly-away condition" to include 50 percent of the price being offset by work done in India.

And now that too has become controversial, because the Indian government has ordered an inquiry into arms deals started under the Congress government. That includes the original 126 aircraft as well as others, including Swiss-made Pilatus helicopters.

All of which shows that India's politicians are more interested in scoring political points and embarrassing their opponents than they are in equipping the country's defense forces with the aircraft and other equipment they need.

John Elliott's book IMPLOSION: India's Tryst With Reality is published by HarperCollins, India.