Defence ministry flouts norms to milk BEL

BS SPECIAL - PART 2

Bharat Electronics Limited (BEL), the Ministry of Defence's (MoD) most lucrative money-spinner, continues to demonstrate how India's eight defence public sector undertakings (DPSUs) can rake in the profits even while their prime customers, the military, complain bitterly.

Last week, BEL handed MoD a dividend cheque of Rs 109.24 crore, courtesy its highest net profit ever of Rs 718.16 crore for 2006-07.

But going by Indian Air Force Deputy Chief Air Marshall NAK Browne's written complaint to the defence ministry, BEL's highest turnover of Rs 3,953 crore came less from producing quality products and more from using influence within the MoD to arm-twist the military into buying its radars, sonars, wireless equipment and electronics.

Sources in the army, navy and air force cite several instances of how BEL's influence works. A growing scandal is the unexplained violation of MoD's own norms in the procurement of some 30,000 night vision devices (NVD) for an army that scans the borders round-the-clock for militants sneaking in under the cover of darkness.

Instead of publishing a global tender for a contract which involves cutting-edge technology, MoD gifted the contract to BEL, astonishingly asking the company to float the tenders for the contract. Instead of being one of the runners in the race which should have involved foreign players, BEL was handed the award on a platter.

All BEL needs to do to set its cash registers ringing is to buy the high-tech image intensifier technology abroad and select another company for lower-end manufacture (outer casings etc) in India.

This grossly violates Defence Procurement Procedure - 2006 (DPP-2006), but MoD has turned a blind eye to such happenings.

This contract, worth over Rs 300 crore, will make BEL's bottom line look even better next year, thanks to captive military customers who are not given the choice to buy cheaper elsewhere.

Even though the critical technology has been purchased abroad, MoD takes cover behind the principle of indigenisation. It will, in BEL's hands, soon become outdated. This is exactly what has happened before.

In the late 1990s, BEL went through the same process, buying NVD technology from Dutch firm Delft and making handsome profits by supplying the products to the army. A few years later, however, the earlier technology was still not absorbed by BEL.

The next generation of night vision technology is being bought afresh, and BEL, as usual, is making profits all over again. BEL's board of directors features senior officials from the MoD who take key decisions on awarding these contracts.

An even more brazen conflict of interest occurs in the way senior military officers, who are in a position to block DPSU or DRDO contracts, are hired, post-retirement, as consultants by these organisations.

A case in point is the Artillery Command Control Communication Systems (ACCCS), which is a high-tech computerised system for bringing down quick and accurate fire onto a target from weapons like the Bofors gun.

As is now a standard practice, a BEL-DRDO consortium was given the contract, without a tender. A senior officer, Lt Gen S Pattabhiraman, was closely associated with the project, first as director general information systems, then as the western army commander, and finally as vice-chief of army staff.

As soon as Lt Gen Pattabhiraman retired, he was appointed a consultant with the DRDO, with the full knowledge of the MoD.

The ACCCS project cannot even claim to be going well, having already overshot its budget by Rs 300 crore. Running years behind schedule, and under pressure to deliver, BEL-DRDO threw the indigenisation idea overboard and bought 900 tactical computers (the centre-piece of the ACCCS) from Israeli company ELBIT for Rs 110 crore.

These computers are based on the outdated Pentium-III processor. This is a design so outdated that it is no longer available in the market, but it will underpin one of the army's key systems for the next 25 years.

The DPP-2006, with all its emphasis on global competitive bidding, has failed to dent BEL's clout. MoD has awarded, without competitive bidding, a Rs 40 crore contract to BEL-DRDO for developing a crucial air defence system, the components of which are freely available off-the-shelf. BEL's bottom line looks set to hit new highs.