Govt scraps blanket ban on arms firms in blacklisting policy

Tags: Policy

The government is also in favour of allowing agents, but only if the companies have the agents on their rolls

The Narendra Modi-led government has put in place a new blacklisting policy to deal with arms companies, which will do away with the blanket ban on the firms without jeopardising strict action against corrupt practices.

Dismantling the blanket blacklisting policy adopted by the previous UPA government, the Ministry of Defence has moved to speed up acquisitions.

The fine print of the new policy, which has been approved by the Defence Acquisition Council (DAC), will be put up on the Ministry of

Defence website in the coming days.

A three-hour-long meeting of DAC, chaired by defence minister Manohar Parrikar, also cleared several critical military purchases worth about Rs 82,117 crore. As reported earlier, the government plans to levy penalties — graded from stiff to soft — on business entities and individuals found violating rules of the defence procurement procedure as well as product specific bans keeping national security considerations in mind.

The approved purchases — called acceptance of necessity (AON) — is the first step in the acquisition process, which will be followed by “request for information” and “request for proposal.”

The approvals include purchases of 83 Tejas Mark 1A Light Combat Aircraft (LCA) along with simulators and ancillary equipment for the Indian Air Force (IAF) at a cost of Rs 50,025 crore, 15 helicopters for the IAF and the Indian Army at a cost of Rs 2,911 crore, 598 mini-UAVs for the Army at a cost of Rs 1,100 crore, and 464 T-90 Russian tanks at a cost of Rs 13,448 crore.

With these latest acquisitions, while the Tejas LCA numbers will go up to more than 120, India’s T-90 tank fleet would cross the 1,300 mark.

“The DAC also cleared the way for issuance of requests for proposal for six additional regiments of Pinaka missiles at a cost of Rs 14,633 crore”, the ministry source said.

Although “discussed and considered”, no decision was taken on buying 12 Japanese US21 amphibious aircraft, the source added. There was anticipation that the deal would get approval especially in view of prime minister Narendra Modi’s Japan visit on November 11-12. The new blacklist policy will focus on selective punishment instead of a sweeping ban.

The government is also in favour of allowing agents, but only if the companies have them on their rolls. The agents will be allowed to take part in negotiations and the companies can pay them fees for their contributions.

The practice of banning the entire group of companies had proved to be counter productive as it slowed down the acquisition process. It was observed that the companies often offer a range of products. In many cases, banning led to single vendor situation resulting in halting purchases.

Despite the ban on engaging agents, several defence deals have come under the scanner with allegations that the middlemen were paid hefty commissions to swing the contracts.

A committee constituted in 2015 had also recommended that wrongdoing by a company should not be allowed to have an impact on the system.

Apart from the blacklisting policy, the DAC also cleared deals worth Rs 75,000 crore, including the purchase of 83 light combat aircraft (LCA) for the Air Force. These purchases will be made for the Mark 1A version of the aircraft, which is still under development, said sources. The aircraft are being produced by Hindustan Aeronautics (HAL). The IAF has started raising the first LCA squadron.

The council also discussed the purchase of Japanese ShinMaywa US-2 amphibious aircraft, but no decision has been taken on the acquisition yet. Japan has been pushing for the sale of the aircraft and it was expected that the deal might be finalised during prime minister Narendra Modi’s upcoming visit to Tokyo. India and Japan are strategic partners and the latter is keen to sell these aircraft for the Indian navy.

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