New Delhi: On the eve of the general election, the UPA government has quietly signed a massive, legally opaque, Rs10,000 crore defence deal with Israel Aerospace Industries (IAI), ignoring a continuing probe by the Central Bureau of Investigation (CBI) and initial vigilance concerns.
The contract, to supply medium-range surface-to-air missiles (MRSAM), has raised worrying questions of propriety, with key bureaucrats and former defence officers playing influential roles in creating and pushing the deal through.
The deal, which was signed into a contract this month, comes at a time when India already possesses a more powerful missile in the same class --- the advanced air defence (AAD) missile, part of India's anti-ballistic missile shield.
DNA investigated the deal by accessing documents, tapping innumerable sources, and interviewing key military officers. A key point that emerged was that legal opinion did not conclusively favour the deal.
The deal, which is being kept under wraps, could sound the death-knell of the indigenous surface-to-air Akash missile system, into which hundreds of crores have been invested over the years. More importantly, the deal ignores the success of the AAD missile, which could be deployed as a surface-to-air missile and used exactly like the Israeli MRSAM.
DNA's investigation suggests that some former officers of the Indian Air Force (IAF) played a key role in limiting the large-scale induction of Akash into the force, pushing instead for the Israeli MRSAM. At least one of them is suspected to be working for the Israelis from New Delhi, say several military sources.
Joint development of the MRSAM between IAI and India's Defence Research & Development Organisation (DRDO) was cleared in July 2007 by the cabinet committee on security (CCS). But defence minister AK Antony did not give it his final administrative clearance because of the CBI's continuing investigation into the Barak missile scam (see box p20). The CBI had by then filed an FIR on the purchase of the Barak missile system in 2000 from IAI and Rafael, naming former defence minister George Fernandes and then navy chief Sushil Kumar.
Despite CCS approval, a cautious Antony sought vigilance opinion on the file. The defence ministry's vigilance department cited the CBI investigation to suggest that the deal should not go through, two different sources told DNA. So, the defence minister asked the DRDO to keep the file pending.
But some time in the last week of March 2008, the DRDO was ordered to move the file again for CCS approval. This happened even though the CBI was still investigating IAI and had, in fact, found more evidence of Israeli firms engaging arms dealers for the 2000 deal with the Indian Navy.
Asked why the government did not blacklist the two firms despite the CBI's FIR, a senior official remarked: "What do we do when we are neck-deep with the Israelis?"
In the past, whenever allegations about the involvement of arms dealers have cropped up, the government has moved quickly to blacklist the firms involved. These include Bofors, HDW, and Denel. In all three cases, the blacklisting was done even before the CBI had filed FIRs.
A senior defence ministry official, who defended the government on the contract, said the MRSAM file was sent to the solicitor-general, who felt that the CBI's FIR was not a bar and the government could go ahead with the deal if it considered the missile essential. Similar, vague opinions favouring the deal were obtained by the ministry from other agencies. The Central Vigilance Commission said the deal could go through if it was in the national interest.
The defence ministry sought the opinion of the law ministry, which said much the same thing: if the equipment was essential to national security, the deal could go ahead.
After fishing for favourable legal opinion, the "IAF was asked to confirm that it was absolutely essential" for national security, the defence ministry official told DNA. The IAF gave this in writing.
It's worth noting that none of the legal opinions specifically cleared the deal. They essentially lobbed the ball back to the defence ministry, asking it to decide if the MRSAM was essential for national security. The DRDO used the grey area of national security to prepare a supplementary CCS note, which was approved in December 2008. The DRDO and IAI representatives signed the deal into a contract just days before the elections were announced.
The deal was done despite a defence ministry guideline that virtually bans dealings with IAI and Rafael. An order issued on October 3, 2008, "with the approval of the Hon'ble RM (Raksha Mantri)", laid down details about how to handle IAI and Rafael. In dealing with them, the defence ministry's order said, tenders in which the two firms were the only competitors should be withheld. Tenders in multi-vendor deals could be given to the two firms, but they would have to be withdrawn if the CBI filed any charge-sheet. In procurements already underway and involving the firms, vigilance clearance had to be sought afresh. It also said repeat orders for Barak should not be issued since the FIR had already been lodged on the original purchase.
These are precisely the guidelines the defence ministry has breached. IAI was the only competitor for the MRSAM deal. Ideally, the deal should not have been processed.
But, in 2008, despite the CBI investigation, vigilance guidelines, and lack of multiple vendors in contracts, the government and the air force pushed through several deals with IAI and Rafael. Besides MRSAM, it approved two others: a repeat order for Aerostat radars, and low-level quick-reaction missiles (LLQRM) to protect existing Aerostat radars. Both these purchases were cited as reasons for approving the MRSAM deal.
The fact is that there was no open tendering in any of these three contracts. IAI was the only participant from the beginning in the MRSAM contract, and no comparative pricing was done in the international market.
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