March 20, 2001


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'There are no defence deals without middlemen'
'There are no defence deals without middlemen' Sitting in his huge, wood-panelled office at Ballard Pier in Mumbai, former Rajya Sabha MP Jayant K Malhoutra feels vindicated. An independent member, he spent his last two years in Parliament initiating discussions and raising questions about defence procurements and, in particular, the role of middlemen in defence deals. He even went so far as to name these middlemen in the House.

Today, he describes himself as 'angry, disappointed' and 'frightened.' 'Angry' because, despite constantly raising these issues, no action has been taken on them. 'Disappointed' because, though has created some kind of awareness, he does not believe the system will be cleansed. And 'frightened' because he believes national security is being put to serious risk.

He spoke at length on these issues with Associate Editor Savera R Someshwar. Excerpts:

Are you surprised by the Tehelka expose?

Not really! These are issues I have already raised in Parliament. But I am surprised at the ease with which the reporters could go in and out of all these places. Tomorrow, it could be ISI agents. Which leads me to wonder: How secure is our nation?

Can you imagine the president of a party grabbing money? Or even Jaya Jaitly talking money in the defence minister's house?

What were the issues you had raised?

As a Rajya Sabha member -- I retired in April last year -- I had initiated a debate in Parliament on the defence ministry's procurement procedures. The issues concerned the involvement of middlemen, agents and brokers. The ministry's decision-making process is influenced by middlemen and how much they can gain. This impacts the country's security. Besides, the involvement of agents can lead to leakage of secrets to international agencies.

Then Rear Admiral Suhas V Purohit -- who's involved in naval arms and arms-related purchases -- filed an affidavit in the Delhi high court giving details of a number of wrong procurements made at exorbitant prices by the Indian Navy.

I told then defence minister George Fernandes that, in the interests of the nation and the armed forces, an enquiry be ordered into the procedures as the defence ministry could no longer be considered a sacred cow. An enquiry was ordered, but nothing seems to have happened.

So I wrote to Central Vigilance Commissioner N Vittal who was in charge of the investigation requesting him to straighten out years of wrongdoing in this particular ministry.

I raised these issues with the President, vice-president, prime minister and home minister. Around a year ago, I circulated copies of my correspondence to every member of Parliament. My only regret is that this was not followed up. If it had been, the correction process would have been on and this Tehelka exposé would not have happened.

What were the specific areas of your concern?

I was a member of Parliament's Public Accounts Committee and the Defence Consultative Committee. As part of these committees, we visited defence establishments like Mazagon Docks in Bombay, the Vizag ship-repairing centre and submarine base, the Avadi tank factory. And I saw that these companies, where hundreds and thousands of crores have been invested, were not getting orders.

For instance, Mazagon Docks is equipped to manufacture submarines, but repairs are undertaken in Russia. The Avadi factory has been producing tanks for the last 20 years -- the Arjun tank was developed there -- and they have produced prototypes that meet most of the army's requirements. Yet, till recently, they had not received any orders.

It is my experience that unless you go into manufacture, it becomes expensive to upgrade and improve quality. It's like cars. The Koreans started making cars in 1964; today they are world-beaters!

Instead, we imported the T-72 and, now, we are talking of importing the T-90 just because Pakistan has the T-80s, which our intelligence reports have already described as junk. It seems that Pakistan itself is unhappy with the T-80s. Besides, once we import the T-90, there is no question of going ahead with the Arjun despite the Rs 500 crore invested in it.

I am not happy with the Arjun because 60 per cent of it is imported. Middlemen were involved in the supply of engines, each worth about Rs 1.5 crore.

I showed these papers to Fernandes along with documents from Admiral Purohit's case, where he gave proof that the defence establishment was buying things that were not needed.

At Vizag, spares worth crores had not been examined during their 18-month warranty period. When checked after the warranty, they were all found defective. Unusable! When questioned, the seniormost officer there said they did not have the material specifications or drawings of these spares. Asked how they could place an order without any kind of specifications, they had no answer. This is recorded in the Public Accounts Committee.

My assessment, and I have said this in Parliament, is that over Rs 30,000-40,000 crore of spares all over the country are junk. Many senior armed forces personnel I've met say this may be a conservative estimate.

Besides, the Indian government deals with traders and not with the manufacturers. I had mentioned in the Rajya Sabha -- and I have proof -- that the government was buying spares for the Bofors gun from a company called Mipro and not from Bofors because they had blacklisted it. This, despite the fact that Bofors has now been bought by another company called Celsius and is run by the Swedish government. HDW's agent is Admiral (retired) Nanda. You prefer to deal with him because you get part of the cake, but you will not deal directly because there the cake is very small.

All this is on record. And this has become a pattern -- blacklist a company and use these middlemen because the kickbacks are much, much more. But if you have an agent or buy directly from the manufacturer, your commission may be three or four per cent. As a result of the pressure that I put, there is no longer a ban on Bofors. They can now buy directly from the company. I wanted the ban removed on every one of these companies.

Despite the defence minister telling me that Avadi would be given an order for 124 tanks in April 1998, the order was only placed more than a year later. I'm not Avadi's agent. I just want as many things as possible to be manufactured in India. Why should we buy spares from the Russians?

Then there was this vice-admiral who applied for leave saying he was planning to vacation in Eastern Europe and London with his wife and son for somewhere between four to six weeks. He said he'd be staying in small hotels and his total cost would be Rs 20,000. I defy anyone to stay in Delhi for that duration for Rs 20,000. For weeks, he'll be travelling, paying his costs and you accept this application for Rs 20,000!

He stayed with two of the biggest arms dealers in these countries. One of them had a Russian wife and should have been considered a security risk. Yet, when this senior officer returned, he was promoted to deputy chief of naval staff. He still is. And this is the same officer against whom Admiral Bhagwat had some complaints.

This officer met me afterwards and told me he did not know the people he was staying with were defence contractors and suppliers. This is the man who is second-in-command in the navy. How does anyone react when such people who sensibly, in my opinion, should have been sacked, get promoted?

I raised this issue in Parliament. I even went to the extent of saying I am not just alleging the presence of middlemen but stating that there are no defence deals without the presence of middlemen, agents, traders and middle companies. Later, I wrote to Fernandes about the position taken by the Secretary, Defence Production, Prabir Sengupta, when he appeared before the Public Accounts committee. He had explained that some east European countries would manufacture defence products only as per orders placed with them by traders, whom we call middlemen. He clarified that this was why the government had to deal with the traders and not directly with the manufacturers. Then how could Fernandes say there were no middlemen?

How would you rate Mr Fernandes as a defence minister? Has he been any different?

I've known him for a long time , but not on a one-to-one basis. He's quite articulate and has been in this game for a long time. I don't think he is innocent of lack of knowledge. He's one of the very bright people we have in politics in India. What surprises me is he has allowed all this to continue in his ministry.

I told Fernandes I was not charging him with corruption, but I was charging him with not correcting the system.

And yet, after all this, BJP spokesman Mahajan says he is most honest. But is he competent? Does he deserve that chair? You have to go by results. How would you feel if someone you trusted bought for Rs 30,000 what you can get outside for Rs 4? This is public money being wasted. And one of your own admirals has gone to the high court listing all these wrong and excessive procurements which you will never need.

Fernandes says that every contract has a clause that, if agents are involved, the deal can be cancelled. But I cannot believe that I know who the agents are and the ministry does not.

Fernandes was defence minister for three years, yet no action was taken. I feel that things are not all right in that ministry. I don't want to go beyond because it is not in my nature to make charges that may or may not be true. If there is a maybe in my mind, I won't make a charge.

Is there a maybe in your mind right now?

Wouldn't there be in yours? I have one of the biggest bungalows in Delhi, where two rooms are full of various defence documents and the feedback I was getting. The quality of information that was available to me was the reason I could raise these issues. They could not answer me. Now, I am told the CVC's interim report is with the government and that it confirms everything I have said.

Do you believe the CVC's report will achieve any kind of result?

I have become a cynic. I don't believe anything is going to happen. It should have been circulated and debated in Parliament because it is a very serious subject. But no one knows what has happened to that report. You should ask the CVC that. (In his interview with the CVC said his department had submitted the preliminary reports on August 7, 2000.)

But the CVC says the final report will prepared only after they investigate the accusations.

Why should you wait for Tehelka? Tomorrow, something else will come out. Do you move from scandal to scandal or must there be some work done?

Do you think the PMO was involved?

Design: Dominic Xavier

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