Foreign arms vendors contest MoD’s unexplained blacklists - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Sunday 25 March 2012

Foreign arms vendors contest MoD’s unexplained blacklists

Sudipta Ghosh, whose arrest by the CBI soon after he retired as the Ordnance Factory Board chief, led to the unexplained blacklisting of multiple arms vendors

By Ajai Shukla
Business Standard, 26th Mar 12

For years, eagerness to enter India’s massive arms bazaar has led the world’s biggest and most influential arms companies to meekly accept diktats from New Delhi that no other buyer imposes. Overseas vendors spend fortunes on developing India-specific weaponry and on “no cost, no commitment trials” in the hope of a lucrative order. But the defence ministry (MoD) now faces a rebellion after blacklisting four international arms companies early this month, apparently on the mere suspicion of wrongdoing.

In a sharply worded statement on Friday, Swiss arms giant Rheinmetall Air Defence (or RAD) says it “objects to the decision of the Indian Ministry of Defence announced on 5 March 2012 to exclude it from doing business with India’s Ordnance Factory Board (OFB). This decision was based on allegations against RAD which the company categorically rejects as false and as entirely without merit.”

Criticising MoD high-handedness, the company notes, “The Indian authorities have yet to inform RAD of the details of these allegations. Transparency with regard to investigations would enable RAD to put forward conclusive evidence that will refute all claims made against it.”

Another vendor, Singapore Technologies Kinetics (ST Kinetics), has already dragged the MoD to court. In three petitions, filed in the Delhi High Court last March, the company protested “the arbitrary suspension of ST Kinetic’s defence business activities.”

Now the Swiss company could go to court too. RAD has told Business Standard that, “Rheinmetall Air Defence is contemplating all options, including legal, to defend its reputation and prove these allegations false.”

The ongoing controversy over blacklisting stems from the arrest, on 19th May 09, of the former Ordnance Factory Board (OFB) chief, Sudipta Ghosh, who was being watched by the Central Bureau of Intelligence (CBI) on suspicion of accepting bribes from potential vendors. After the CBI arrested Ghosh, Defence Minister AK Antony announced through the media that seven arms vendors were blacklisted until further notice. These were ST Kinetics; Israel Military Industries Ltd (IMI); Media Architects Pvt Ltd, Singapore; BVT, Poland; and three medium-sized Indian companies. Rheinmetall was not on that list.

To date none of the companies that Antony publicly named have been told the charges against them, nor has any CBI charge sheet been filed. On 28th July 2010 Antony told parliament that charge sheets have been filed against Sudipta Ghosh; and against two Indian companies, TS Kisan & Co; and RK Machine Tools Ltd.

The foreign vendors emphasise that they have cooperated closely with the CBI in attempting to clear their names. According to STK, “we had even offered on several occasions to open our account books for inspection by the Indian authorities, but these offers were never taken up by them.” Similarly, RAD tells Business Standard that it has provided “comprehensive documentation in exchanges with Indian authorities.”

With only silence from the MoD, and Antony’s ban blocking them from the Indian market, ST Kinetics approached the Delhi High Court last year, seeking clarification on why they had been blacklisted. Court records indicate that, despite repeated opportunities given by the court, the MoD failed to provide an explanation. A public statement from ST Kinetics says, “the MoD repeatedly (told the court) that ST Kinetics is not blacklisted and that the ‘putting on hold’ of ST Kinetics’ defence business activities is but an interim arrangement only.”

With the court set to deliver final orders on 21st Mar, the MoD hurriedly announced a blacklist on 5th Mar. This debarred six firms --- ST Kinetics; IMI; RAD; Corporation Defence, Russia (CDR); and two Indian companies, TS Kisan & Co; and RK Machine Tools Ltd --- from doing business dealings with the OFB for ten years.

According to the MoD: “The firms were recommended for blacklisting by the CBI on the basis of evidence collected against them…. The decision to debar was taken today after taking into consideration their replies (to the MoD’s show cause notices).”

It remains unclear why this blacklist differs from the one Antony announced to the press after Ghosh’s arrest in May 09. The blacklist is also significantly different from the one Antony gave parliament on 28th Jul 10, naming seven foreign companies that the CBI had recommended for blacklisting. Besides ST Kinetics, IMI, RAD and CDR, that list included South African company, Denel; Israeli company, Soltam; and Varas Associates, from the Isle of Man.

ST Kinetics seems likely to file a fresh case against the MoD. While disposing of ST Kinetics’ earlier petitions, which the MoD had scuttled by announcing a blacklist, the Delhi High Court had directed that ST Kinetics had the liberty to file a fresh petition. The company has stated that, “ST Kinetics intends to vigorously take appropriate actions (sic) to clear its name and defend its reputation.”

Says procurement analyst Major General Mrinal Suman: “The flimsiness of the MoD’s case is evident. Instead of the vendors being charged and prosecuted in court, they are taking the MoD to court. How can the MoD impose bans without due process? They must explain to the accused the charges against them; there are hard-won corporate reputations at stake here. And each time a ban is imposed, one or more procurement programmes get derailed.”

ST Kinetics plans to participate in the MoD’s Rs 8,000 crore tender for 155 mm, 52 calibre towed artillery guns; and in another Rs 3,000 crore tender for 140 ultra-light 155 mm, 39 calibre howitzers for the Indian Army. The company is also a strong contender for supplying the Ministry of Home Affairs with 43,318 close quarter battle (CQB) carbines, with day and night sights, as well as even larger MoD tenders for modern carbines.


  1. That is absolutely wrong. In the Army promotions are not decided on DoB. In our time we had different boards for different ranks – Lt. Colonel to Colonel, Colonel to Brigadier, Brigadier to Major-General and so on. Your promotions are decided after you have been selected by the board and this is purely on merit. And then your seniority counts which is already fixed at the time you pass out of the Indian Military Academy. DoB comes in only when you are due to become a core commander and here what is important is that you have a residual service of three years. When you become an Army commander, you need to have a residual service of two years. So where was my advantage? By agreeing to 1950, I was actually putting myself at a disadvantage.

    In your face Colonel..can't believe that you presented facts in such a dramatic manner that it made general look idiot...selfish u r..can't call u colonel from no on..u shamed armed forces...ultimately journalist ne sipahi ko hara hi diya..duniyadari jeet hi gayi....

  2. Antony is probably one of the biggest dunces handed the Indian defence ministry ever. Under his watch, only his reputation has mattered, what happens to India is not of his concern. Whether it be the conspiracy against the IA chief, the disaster that is IA procurement continuing, no artillery but purchases of flawed T-90s continue or whether it be the one rank one pension many mistakes and no solutions from shri antony. What a worthless Govt we have headed by an equally incompetent individual MMS and corruption flourishes everywhere. The countrys economy is doing badly and all this Govt is engaged in is to somehow come to power again to loot the indian people more

  3. What is so scary about middlemen?
    Are we so incompetent as a bureaucracy that we are unable to devise a system that is efficient,effective and transparent.
    The real scandal is not merely kickbacks,but that of our foolish policies and blind propping up of DPSUs.

    Can there anything more atrocious than the fact that these DPSUs,touting a govt label merely act like commission agents themselves.
    What can be more scandalous then he fact that a BEML asks the Army to pay three times the price of a TATRA truck than that of the original manufacture itself.And this when all it does is assemble an imported kit.
    Its gets worse when we we have domestic guys like TATA who also manufacture trucks with equivalent capability.
    What is the use of an OFB vehicle factory that actually gets kits from a DOMESTIC manufacturer and merely labels it for supply to the forces. Obviously we pay double overheads ,including that of a bloated inefficient OFB.
    The same story is that of many other PSUs.
    Who says we are poor?
    We guys must be the only country that spends more than the amount we think are lost on alleged corrupt practices.
    After all we have made sure that for 60 crores kickbacks in the Bofors scam,our artillery program will have to spend at least 60,000 crores in today's prices to modernize the artillery(if it even happens).
    I am worried that tomorrow some one may complaint on the INSAS and our MOD will blacklist it and suggest the army to fight with Lathis(at least till the time another chaudhary allges bribes in lathi supply too!

  4. Nobody mentions that there are other major companies invastgated for miss-conduct but while being under invastigation, which has not been concluded yet in some of the cases, they are not blacklisted and are not limited in their activities in India. one should wonder why? Are MoD's consideration clean and pure?

  5. Anon @ 27 March 2012 00:58...
    atleast... the nation won't be sold... lock, stock and barrel... if it were... under people... from... any of the people like... Raja, Chiddu, Maran, Kanni, Kala Chashmish...

  6. ST Kinetics - singapore based firm? So we are buying arms from the Chinese to defend against the Chinese?

    We might as well buy directly any arms from China then...why have a middleman who will have a margin based on selling a product regardless of where the vendor is from.

    Perhaps MOD should also define criteria including how Indians are treated in their home country...i.e Singapore.

  7. I understand that paying and receiving a bribe is a crime. But blacklisting a vendor only addresses one side of the crime. If we can stop a vendor from selling us things because our own system is corrupt, then pretty soon we will run out of vendors as this does not address the issue of corrupt system. Fix our system and vendors issues will automatically be reduced. Just my two cents.


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