The ghost of Bofors pay-off scandal is still haunting international defence majors wanting to do business with India. At a just-concluded defence equipment show here, representatives of several arms companies said that the Indian government's decision not to deal with agents was adding to their marketing costs.
India had banned agents in defence deals, preferring to negotiate directly with foreign companies after the Bofors field gun scandal involving pay-offs of Rs 66 crore came to light in late 1980s.
Some of the participants at the India International Civil and Defence Equipment Show said that agents served a useful purpose in that they maintained regular liaison with procurement agencies in the ministry of defence kept their principals informed about progress on possible purchases and help with the enormous amount of paperwork which was characteristic to India.
Now, however, foreign companies have to have their own people here which was proving to be a lot more expensive than retaining a local agent.
Even though the Indian government does not object to liaison offices for the purposes of concluding deals, it wants to work directly with the selling company.
According to W M Kelly of Oerlikon-Contraves AG, a Swiss defence equipment major, they had to close a local company set up with an Indian partner, after the new guidelines concerning agents.
Instead, liaison is maintained directly with the Indian government and with public sector companies like Bharat Electronics with whom the Swiss company is participating in a fire control system for ships.
Drew Sala, regional manager of the US handgun major Smith and Wesson, a first time visitor to India, says the Indian system of procurement will have to be followed and it was fine if his company has to deal directly with the government.
Our possible customers in India are the defence and law enforcement agencies and we will work with them to convey the advantage of our systems.
Sellers from Russia and East Europe seem to have an advantage in dealing with India as they have state-owned arms selling agencies like Rosvroozenhie of Russia which deal directly with the government.
Also, their strong historical links with India have made it easy for them to understand the Indian system. Their relative low cost of marketing enables them to maintain several liaison personnel.
In spite of the difficulty of a ban on dealing with agents, foreign defence majors view India as a better market to do business with than China, the largest arms procurer in the Asia-Pacific region.
There is a certain transparency in the Indian system which makes follow-up action easy. On the contrary, China is completely closed on this issue and one does not know why a contract is won or lost, said an official working with a foreign defence equipment company.
