DEFENCE SCANDALS IN INDIA HAVE LET THE COUNTRY DOWN
Delhi, 17 March 2001
nation has been shocked to the gills by the visual exposure of Defence
payoffs by the dotcom company tehelka.com. We congratulate tehelka and
surmise that some of the conversations appear to have been doctored with
the video pictures, but also recognise that it was high time the blatant
way Defence business is done was exposed. A laudable objective has
been achieved and so what if it is by deceit.
the first time there can be no denials in the eyes of the people. RM
George Fernandes may not have taken money like Rajiv Gandhi may not have
in the Bofors case, but then in both cases friends and others did the
collections. In this case the close advisers failed to keep the PM
apprised, as he seemed paralysed for two days.
banning legal Agents, sleazy facilitators have entered the Defence Biz.
IDC has all along written extensively on this and recommended that Legal
Agents be brought back and competitive transparency be restored.
no Agent business is a ruse that Rajiv Gandhi pushed down and even George
Fernandes defends. To illustrate: General Electric supplies LM 2500
turbines to the oil industry and 2½ % commission goes to the Agents, but
when it supplies the same turbines to Defence i.e. HAL for the Navy, there
is supposed to be no commission. This is absurd –– as all Defence
Companies have large allowances for commissions and payment of commissions
is a part and parcel of how world business is conducted and India cannot
buck the trend. It will only tempt more surreptitious deals.
the tehelka films it is now clear money has changed hands rapidly and
blatantly, which has been video taped for the first time. The persons
involved are allegedly all those very close to RM George Fernandes, the
Samata party bigwigs, some MOD officials and Military brass (Maj Gen
Chaudhry, DG WE has admitted on TV that he was tempted and took Rs 1 lakh
and now regrets it) and the top BJP functionary and some touts have all
dipped into the till, and to say that the money was given to them for the
party voluntarily is to "tell it to the marines", as Navy would
of Jaya Jetley, Jain, Nanda and Gupta who have nothing legal to do with
Defence figure and it was common knowledge these names have influence over
defence deals so lets now see how Government handles the crisis .
and his close friend of many years Jaya have resigned and we learn her
daughter was to marry a cricketer (next month), who also made the news
earlier for money lying around. Hence IDC will keep up the analysis in the
had also reported that at the IFR the Navy displayed the Rafael BARAK
missiles fitted on the INS Viraat as strap-ons, but the acquisition and
control radars from IAI were still to be fitted and Viraat was still to
embark the air squadrons. So it seems that
some fast acquistions definitely took place and hence payments; and
we do not know what the PM meant when he said "Dal me kuch kala lagta
hai" (There’s a fly in the ointment), because now it comes out that
seven systems have been bought, maybe two for the Bhramhaputra class.
For researchers and for those who enjoy following the Defence and Economic scenes, we append below three connected pieces. One is on corruption in Defence deals, another on Jaya Jetley from a book on Vishnu Bhagwat and the third is Dr Montek Alhuwalia's note of 1991. So enjoy the coming defence and economic situation as it is unfolding and make your own prognosis.
From ‘Indians Why We Are What We Are’ by Ranjit Rai (Manas))
Subramaniam in her book India is for Sale said this "One fine day
Western Governments got an idea. They decided to infiltrate the NGO
movement in India. The government of India hit on a better idea. It itself
became an NGO, donned a wig, a moustache and let itself loose on the world
stage. The GONCO -- government-non government organization -- was
India like most developing countries is known for people with power pushing vested interests and indulging in corruption at the cost of national interest. Most Asians have a streak of corruption in their veins. In South East Asia, especially in Indonesia, Thailand and Malaysia the system is accepted and has been legitimised. In these countries cost of international deals and projects are over projected within acceptable limits, to pay off people normally to the tune of five to ten percent of the total. A fee is charged for a better than normal service in these countries. The person who tops the cream, the bribe, the fee or commission or whatever you wish to call it, delivers. He is reasonable in his demand and refunds the fee if he fails to deliver. He seldom squeals. It is done with great suave. South East Asian leaders especially Mahathir of Malaysia and Suharto of Indonesia refined this art. Marcos over did it. They lasted a long time in their offices, and the projects they initiated are stories of national success. In South Korea Presidents have had to face death penalties for corruption and nepotism.
Singapore Mr. Lee Kuan Yew, the ex PM whose tenure lasted 25 years,
ensured high salaries to the bureaucrats and set personal standard to keep
most corruption out. His wife earned for the family by running a
prosperous Law firm. Singapore enlists into the Peoples Action Party
educated leaders who realise they can make legal money by enriching the
nation whilst big brother Mr Lee known as Harry, watches over the Nation.
Their Armed forces sing the song "You can count on me". It is
said that in Singapore the Policeman goes for his duty without any money
in his wallet so that he can never be accused of being in possession of
money that came to him by any wrong doing.
the Philippines corruption is common like in India, but the people are
emotive and forgiving. The Marcoses plundered the treasury and now Mrs
Marcos is willing to return some of the assets for a deal. In Thailand
corruption exists but the Buddhist way of life ensures that by and large
no individual living being is hurt or robbed in the process. The
leadership, mainly military, has dedicated itself to economic progress,
whilst pursuing personal business. Prime Ministers and leaders resign when
the game is up. If things get too hot they live abroad for a while. In
Japan, Prime Minister Tanaka resigned and went to jail for accepting a
bribe in what was the Lockheed scandal, giving credence to a premise that
corruption is a world wide disease. It
is however more commonplace in developing countries, which calls for some
control and Military deals are especially tempting, for the secrecy that
surrounds them. Governments use the proceeds for political aims and salve
deals world over have a tinge of corruption. In the Arms bazaar big money
and big power play is at stake. It
is well known. And many countries use this source to fund the political
party or regime in power.
the UK, the media has openly insinuated that Mark Thatcher, son of ex
Prime Minister Baroness Margaret Thatcher, received kickbacks involving
millions of pounds from the Saudis. It also involved Mr
Aitken, once Minister for Defence Procurement. Since it was the
Ahmara Project and earned for UK some 1.5 Billion Pounds the Parliament
feebly inquired into the deal but let the Auditor General's enquiry die an
ignoble death. In the recipient nation eyebrows are raised higher, and
India has always been a buyer nation. Unfortunately, arms scandals are
seldom solved. It is rumoured India's Defence Minister late Shri Jagjivan
Ram accepted stones (diamonds) in bags from arms suppliers for deals made
in the late 60s and the early 70s. His collection was known as the 'Rams
Collection' in Holland. The modus operandi that arms suppliers use to
legitimise diamond purchase entries in their account books is by entering
them "as diamonds for tool cutting''. These diamonds are then handed
over to their customer and written off the ledgers.
In such cases Swiss banks and Panamanian go betweens are avoided
and Indian customs never checked a Minister, never one who brought in
stones anyway. Diamonds can be conveniently used for payoffs.
Diamonds are forever!
India, as in many countries in the East there have been tinges of
corruption in all government deals, especially in the oil sector. This
area was the largest spender in the 70's, mainly for import of equipment
and rigs for oil exploration. A cozy relationship between the oil agency
ONGC, the Government officials, the foreign suppliers and their agents
grew as India's oil finds increased. Some years later, in the early
eighties, an arms purchase called the HDW German Submarine deal erupted
into a scandal. Late Sanjay
Gandhi's name along with the Swaraj Paul group of UK and Hindujas and some
other names of bureaucrats and service officers were bandied about but the
matter still breathes in court.
Bofors scandal has waylaid India from 1987 to date. The moral of the story
is that Indian Defence has sadly, not contributed to nation building.
Defence spending and Defence luxuries like the Sri Lanka foray during
Rajiv's time were enunciated by a "policy on the run". It became
a cosy arrangement between South Block mandarins, Service Chiefs, R&D
menagerie headed by Dr VS Arunachalam from 1982 and supply industry
(foreign and indigenous) where the tax payer ended up by being taken to
the cleaners and being fooled beyond belief. The system of procurement
needed Agents to dole out moneys freely to all and sundry in the hope of
achieving influence to make a killing.
illustrates how decisions on vital Defence purchases were dictated by
vested interests and taken arbitrarily at high levels, even though
professionals lead our Armed Forces. This present story throws light on a
new and very powerful belief, which is the subject of gossip.
commissions have been loaded in India on virtually all big foreign
contracts –– not just the Defence ones. A part has gone into the
coffers of the party in power but most has gone into individual pockets.
It has been anarchy, corruption and vested interests aggravated and
abetted during the present regime. Today money taking has become blatant
and yet no scandal or kickback deal in India ever gets solved. Only
scapegoats are found and this time some people in the Armed Forces will be
the 60s a Jayant Dharma Teja took loans to build up the Jayanti Shipping
Company under Nehru's patronage. He fled to Costa Rica for a few years and
was caught much later. In 1971 an ex Army Captain by name RS Nagarwala
imitated Mrs Gandhi's voice on telephone and collected Rs 6 million in
cash from Mr VP Malhotra the chief cashier of the State Bank. He was
nabbed but on 02 Mar 72 he died mysteriously.
another case a Rajendra Sethia defrauded Indian banks of 7.64 Million
Pounds in London. The story
can go on. BOFORS is the biggest of the many unsolved cases, but in hushed
tones names of Agents are well known and IDC reported we saw some at Aero
India social functions.
corruption levels in India have risen to such heights is a moot question.
W S Naipaul, author of 'India, a Million Mutiness', is the one writer who
has depicted India with a perspective and a sense of honesty, which is not
easy to digest. He writes with stark reality that in the Gandhian spirit
Indian people soon after Independence, in both high and low places, felt
proud of being poor. This attitude was evident throughout the fifties and
sixties and may have served us well, but we never changed with the times.
The gargantuan Income Tax structure did not allow for the creation of
legal wealth and the evil of black money in most matters especially property became endemic. By
the seventies the moral fibre of the people was weakened and many became
rich through corrupt practices. The road to riches via hard work and
enterprise gave way to avalanches of corruption.
WOMEN AND WIVES –– MRS NILOUFER BHAGWAT AND MRS JAYA JAITLEY
From ‘Admiral Vishnu Bhagwat -- Sacked Or Sunk’. As Reported In
Outlook, the book was banned by MOD)
every successful man there is a woman' is an often repeated cliché. The
key word is behind him, and when she precedes him there is bound to befall
some trouble. In defence forces wives play a prominent role especially as
an officer progresses in his service career.
case of Admiral Vishnu Bhagwat his wife Niloufer was a firebrand advocate
who was baptized as a young lawyer as a junior to Mr. Rajni Patel in
Mumbai. He was a renowned criminal lawyer and his reputation as a
politician also, is still well remembered. Mrs. Bhagwat therefore always
stood up for causes, stormed the lower and high courts of Bombay and had
built up a reputation as a lawyer with tenacity. The judges knew her This
could have been her asset. But when she saw her husband being sidelined
for the Fleet Commander's post, which she believed Vishnu deserved, she
chose the high legal turf to fight the battle and trap the senior officers
of the Indian Navy. The result was the 400 page writ petition which came
as a bombshell and some thing novel for the Indian Navy. A service that
thrived on professionalism, technology, camaraderie and dedication was now
dealing with 400 pages of allegations, some so dangerous and slanderous
that the CNS Nadkarni called for a 'courts martial' of the petitioner, and
this has been highlighted in a full chapter with verse and quote.
Bhagwat also vitiated the atmosphere and hurled charges and accusations
against the Akali Dal, George Fernandes and one of them was against
Shrimati Jaya Jaitley, the then Secretary of the Samata party and now its
President. Mrs. Jetley ex Jaya Chettur from Kerala had her college
education in Miranda College in New Delhi in the early sixties. She is the
wife of a senior IAS officer and friends who knew her in college rate her
academically above average and a talented personality. On TV she comes off
as a very articulate person. She came into prominence as being close to
George Fernandes of the Samata party and now we know how close. In an
exchange of letters in the Hindustan Times Jaya Jaitley pulled up the
editor for quoting the remarks made about her by Niloufer Bhagwat. One
would have thought that the matter died a natural death as Mrs. Bhagwat
was not seen or heard of in the media once Vishnu began defending his
case. It was not to be. Jaya Jaitley came out with a piece on Niloufer
Bhagwat in the Pioneer titled "Wife, Lawyer, Politician or
came the arms dealers angle. Now what would Mrs. Bhagwat a lawyer, whose
brief it is to deal with a case against a client on a matter of
promotions, be doing flinging mud on the entire Navy. It became a battle
between the two women. In an interview to the Hindustan Times on January
10, 1999 when asked to substantiate her allegation that the Defence
Minister was planting stories in newspapers, Ms. Bhagwat called him
"temperamentally low" because he was one of those associated
with "the very people (she presumably means Lok Nayak Jayaprakash
Narayan) in asking the armed forces to revolt" and because he
supposedly "went around attempting to blow up institutions:" Mr.
George Fernandes led the underground battle against Indira Gandhi's
dictatorship and declared that any means were legitimate to fight an
illegitimate Government. Jayaprakash Narayan has recently been awarded the
Bharat Ratna and Mr. Fernandes has held prominent positions in all
non-Congress governments. Now the whole Ministry is being dubbed as
corrupt. Jaya Jaitley also got upset when the Congress party took up
Bhagwat's case to ask for a Joint Parliamentary Committee and spewed her
venom on the Congress party leader Mrs. Sonia Gandhi. She listed charges
against Bhagwat and questioned the integrity of Lieutenant General P.N.
Hoon who had filed a PIL in Mumbai. He has threatened to sue Mrs. Jaya
Jaitley for her article in the Pioneer on April 7, 1999.
we have some wheeling dealing at the Defence Miniter's residence by Jaya
on celluloid, though it is reported in the media that she has three other
residences at Sujjan Singh Park (in her mother's name), in Khirki Malviya
Nagar and in Kaushalya Park off Haus Khas. The whole scene is interesting.
IDC spoke to a Maj Gen who is a very competent journalist and who was a
very pro George Fernandes writer and his reaction was George will be back
sooner than you think. We leave you to make sense of all this.
A Piece On The Economy
the last few days IDC has received responses and few have questioned our
optimistic analysis of the Indian Economy, which was done before the
tehelka tapes were made public. IDC also attended the Konrad Adenauer
Trust Conference on "Impact of Globalisation in South Asia". We
were convinced Globalisation is about transparency, technology and open
competitiveness and efficiency. We learnt Sri Lanka has made strides and
despite LTTE insurgency, maintains 6% growth and highest per capita income
of 840 USD in the region. India comes next and has FFE of 43 bill USD and
comfortable debt payment schedules and deficit is down to 5.1 %.
wishes to highlight the note written in Oct 1991 by Dr Montek Ahluwalia,
(then Finance Secretary) for the then Finance Minister Dr. Man Mohan
Singh, for submission to the then PM Shri Narasimha Rao. India had only 1
bill USD FFE and deficit was mounting to beyond 6.5 % of GDP with danger
hindsight the note makes great economic reading for researchers and for
IDC to see that in 1991 India was worrying about 600 mill USD loan
adjustment. Hence IDC congratulates FM Yashwant Sinha and his team which
includes economists Dr Montek Alhuwalia and Dr Rakesh Mohan for the second
round of liberalization. In defence deals we also look to transparency and
hope the economy and liberalisation is not derailed because of tehelka as
the world economy is slowing down and if India dithers you and I will
ON ANNUAL IMF MEETINGS
By Dr M S Alhuwalia
Annual Meeting of the Board of Governors of World Bank - IMF took Place in
Bangkok on 15th – 17th October 1991. Finance Minister participated in
these meetings as Governor for India on both these institutions. The
meetings provided a useful opportunity for bilateral discussions with
Finance Ministers of most our major aid donors, and also with the top
management of the IMF and the World Bank. The meetings also discussed
several critical issues in the area of international finance, including
the prospects for mobilizing support for the reforms in the Soviet Union.
The note summarises some important development sin the meetings, which are
particularly relevant for us.
development reported in this note have to be evaluated in the Background
of our exceptional Balance of Payments difficulties and the consequent
loss of confidence in our economy on the international financial
had led to a freeze on new lending by commercial banks and a continuing
outflow of NRI deposits. The withdrawal of these normal flows meant that
we faced a substantial "unfilled gap" in our external payments
requirements, even on the assumption of substantial important restraint
unless drastic import restriction beyond the present levels which would
precipitate serious description of industrial production, severe shortages
of essential products such as diesel and kerosene and unavoidable pressure
on prices. The unfilled gap is estimated at round $3.8 billion in1991-92
and $ 2.8 billion in 1992-92, it has been our objective to meet this
unfilled gap by a standby credit from the IMF combined with special fast
disbursing loans from the World Bank and the ADB support of our structural
adjustment programme, An important positive development from our point o
view is that it is now widely known in Financial Circles that the proposal
for an IMF stand-by credit of $2 billion (over an 18months period) will
come before the IMF Board on 21st October. It is also known that we have
successfully concluded negotiation with the World Bank on a structural
adjustment loan of $500–600 million, which could go to the Banks' Board
in the third in the third week of November. The Bank's top management have
confirmed that they would be willing to provide further support for two
other elements in our announced policy viz the National Renewal Fund and
Financial Sector reform. International financial community sees these
developments as an objective endorsement by multilateral financial
institutions of the economic Policies of the government and they have
helped to create confidence among commercial banks.
meetings with the UK, France, Germany and Japan at FMs level we were
assured that the economic directions indicated by the government are
appreciated and we will have support in the World Bank and IMF.
of the support of major industrialized countries and also the top
management of the IMF and World Bank we are beginning to see a perceptible
change in the attitudes and assessments of the commercial banks. Several
commercial banks approached us with suggestions that once the IMF-World
Bank Programmes are in place by the end of November, India would plan to
approach the commercial markets say in January for new borrowing of about
these positive developments there are also several danger signals. A basic
problem we have to recognize is that although our policy initiatives are
widely appreciated, there are understandable doubts about whether we will
deliver on what we have promised. There are several reasons for this.
reason for skepticism is the view that India has in the past, announced
economic reforms but the initial initiatives have been allowed to peter
out. In the present situation, there are questions whether, in the absence
of a clear parliamentary majority, we will be able to deliver on
potentially controversial proposals, which could always run into motivated
opportunistic criticism. There is also tremendous suspicion that the
bureaucracy will simply not let liberalization and de-regulation proceed.
These doubts at present are only doubts, and do not diminish the genuine
applause for what the government has already done and announced to do in
future. But they will surface quickly if we do not persevere in what we
have said we will do.
these reasons our performance under the IMF standby and the World Bank SAL
will be watched carefully to see if we meet the milestones we have set for
ourselves. The most important of these is the target of containing the
fiscal deficit in 1991-92 to 6.5% o GDP Progress towards this objective is
monitored every few months and failure to meet this objective would
seriously jeopardize our credibility. It would lead to interruption, or
cumbersome renegotiation of the Fund Programme in a situation in which we
would have little goodwill to count on. It is also important to delivery
on the various elements of our structural adjustment programme including
especially the deregulation envisaged in the trade policy, the dis-investment
in public sector enterprises and the establishment of a National Renewal