Corruption is... India

Why India’s Defense Sector Is A Hotbed For Corruption


Botched cases of defence procurement have been all over the news lately, and they may yet result in major political repercussions. Unfortunately, this has been the case since the very beginning in independent India. As defence deals have grown bigger and more convoluted, they have been harder to complete in an effective manner. Here are 5 defence procurement deals that left a sour taste in the mouth.

 1. 1948 Jeep Scam

The jeep scam of 1948 was the first major case of corruption in independent India. Then Indian high commissioner to Britain, V.K. Krishna Menon, skipped formal procedure when  signing a Rs. 80 lakhs deal with a foreign company for the purchase of army jeeps. The Indian Army rejected the jeeps stating the vehicles were sub-standard. However, the army had to settle for the poor quality jeeps as most of the payment had been done upfront. To add insult to injury, the number of jeeps delivered was also lower than the originally agreed number.

An inquiry committee was set up to investigate the deal, but then the Government ignored the recommendations of the committee and announced that the case would not be subjected to a judicial inquiry. Menon was never held to account for his role in the deal, and later became Defence Minister in 1957.

 2. 1987 Bofors Scandal

This scandal came to light when a Swedish radio broadcast in 1987 claimed that the Swedish arms manufacturer AB Bofors had bribed key Indian policy makers and top defence officials to secure an arms deal with India. The deal in question was the 1986 purchase of 410 155-mm howitzer guns by India at a cost of Rs. 1450 crore. An investigation by journalist Chitra Subramaniam for ‘The Hindu’ newspaper uncovered a money-trail of illegal payments to persons close to the Nehru-Gandhi family, including the notorious Italian businessman, Ottavio Quattrocchi.

This story became major issue in the 1989 Lok Sabaha elections, and was thought to have been decisive in the defeat of PM Rajiv Gandhi, even though he had never been personally implicated in the scandal. A special investigative team set up by the CBI filed formal charges against several accused in the case, including Rajiv Gandhi, Ottavio Quattrocchi, and defence secretary SK Bhatnagar, while the UK-based Hinduja brothers were also implicated. However, some of the suspects passed away during the long trial and the Delhi High Court later exonerated Rajiv Gandhi and the Hinduja brothers of any involvement. The case came to an ignominious end when all charges against Quattrocchi were dropped in 2011 for a lack of evidence.

Want to test your knowledge about the Bofors scam? Take a quiz.

 3. 2001 Barak Missile Scandal

In a 2001 sting operation named ‘Operation West End’, Indian news magazine ‘Tehelka’ had alleged that a number of defence deals done by Indian government had involved kickbacks, including the deal for Barak missile systems from Israel. The Barak missile deal was signed in 2000 and involved the purchase of seven Barak systems from Israel Aircraft Industries at a total cost $199.50 million and 200 missiles at a cost of $69.13 million for the Indian Navy. The CBI alleged that R.K. Jain and Jaya Jaitley, close aides of then Defence Minister George Fernandes took huge bribes from a middleman named Suresh Nanda in exchange for Fernandes’ approval of the deal.

The deal had been done over the objections of the Defense Research Department Organisation (DRDO), which was then headed by future President A.P.J. Abdul Kalam. The CBI alleged that Fernandes had overruled DRDO and Kalam at the behest of the middlemen. The case was finally closed by a Delhi Court in 20133 after the CBI reported that it did not find any substantial evidence to prove that bribes were paid in this case.

 4. AgustaWestland Helicopter Scam

In 2010, India signed a $530 million deal with a British firm AgustaWestland (which is owned by the Italian company Finmeccanica), for the purchase of 12 VVIP transport helicopters for the Indian Air Force. But the deal came under scanner in 2013, when Italian authorities imposed corruption charges on Finmeccanica. The subsequent investigation by the CBI led to FIRs against Air Chief Marshall S.P. Tyagi (former head of the Air Force) and 4 of his cousins, as well as the brother of former Union Minister Santosh Bagrodia. The entire deal was eventually cancelled in 2014.

In April 2016, an Italian Court convicted senior officials of AgustaWestland of bribing Indian Government officials to complete the deal. An Italian investigation had found a complex web of firms through which kickbacks had been channelled and the Enforcement Directorate (ED) is following the leads. The case is still alive in the Indian Courts and has not reached a resolution yet.

 5. Rafale Fighter Jet Deal

In order to fulfil the need to upgrade the Indian Air Force’s fleet, the defence ministry gave the $10.2 billion contract for the procurement of 126 Rafale fighter jets to the French company Dassault in 2012. The deal went sour following the differences between the two parties over pricing, while Dassault was also not in favour of India’s suggestion for domestic sourcing of parts and technology transfer to India for the production of the jets.

These differences led to protracted negotiations and at one point the deal appeared to have been cancelled altogether. However, the deal was revived during Prime Minister Narendra Modi’s state visit to France in 2015, albeit on a much-reduced order of only 36 aircraft. The new terms of the deal have still not reached a conclusion but Defence Minister Manohar Parrikar hopes to finalise the deal by June 2016.

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