On Monday, the defence ministry finally approved guidelines meant to punish companies that have engaged in corruption in the course of selling weaponry to India. While full details are yet to be made available, the policy appears to seek a middle course between the blacklisting of companies that have apparently engaged in bribery in India and allowing them to get away with it. The government is right to view blacklisting with some scepticism. While there should certainly be consequences for engaging in illegal activity, it is also the case that blacklisting was a very blunt instrument indeed, especially as many arms companies are large conglomerates. The consequence of wholesale blacklisting tended to be that many procurements already in process, and to which no suspicion was attached, would be held up or cancelled. Over the course of time, as more and more companies came to be blacklisted, the options available to India for the purchase of arms also narrowed. Cumulatively, the consequences for military preparedness and national security were severe.
It is important to note that the blacklisting mechanism could also be seen as being unfairly arbitrary. For example, the furore over the case in Italy involving the sale of AgustaWestland AW-101 helicopters to India led to the blacklisting of AgustaWestland’s parent company, Finmeccanica. The logic for blacklisting the parent company is not entirely clear, but the consequences were very clear indeed. Various other major purchases fell into limbo, including the radar being fitted on India’s aircraft carrier, INS Vikrant, and the torpedoes being bought for the Scorpene submarines. No doubt, the special stringency of the action in this case was partly because the Italian connection of the companies in question meant that the case had acquired a particular political salience. This stringent action is not matched in other cases that could be viewed as being similar. For example, the BBC and The Guardian have reported that about eight years ago companies controlled by the arms-dealing Choudhrie family received almost 100 million euros from several Russian defence firms. These payments included some from JSC Rosoboronexport, the sole intermediary authorised by the Russian government for the export of defence equipment of strategic importance. There is no proof of illegality here yet. If the logic used for the Finmeccanica ban were extended to this deal, it would require all weapons-related imports from the Russian Federation to be cut off. Clearly, that would be a step too far. Yet in the Finmeccanica case, the defence ministry was willing to allow India’s submarines to go without torpedoes, purely for reasons of politics.
While the government’s acceptance that blacklisting has gone too far is an important step forward, the time has come for a more rational approach to arms purchases. Worldwide, this is a business that uses agents. There is nothing inherently corrupt about the use of agents who are paid commissions; only when undue influence of one kind or another is applied to government servants does the national interest suffer. It is important that the arms industry be encouraged to come above ground. Only through such transparency and regulation can more predictability be provided to procurement, and corruption be checked.
