India’s Defense Procurement Bungles
Image Credit: REUTERS/Ajay Verma

India’s Defense Procurement Bungles


In February I wrote a piece for The Diplomat noting that India was, to use that old bromide, “at a crossroads” on its road to armed forces modernization.

I argued that, despite mind-numbing bureaucracy and a misfiring indigenous defense industry, India was buying its way towards establishing a well-supplied fighting force at land, air and sea.

Events since then have conspired to challenge that rosy assessment of military procurement on the subcontinent. A combination of corruption allegations and Ministry of Defence mismanagement are conspiring to foul up what should be relatively straightforward deals.

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First up in this list of shame is the MoD’s failure to sign off on a deal to buy 145 M777 lightweight howitzers from BAE Systems. The contract, which was routed through Washington’s government-to-government Foreign Military Sales (FMS) program, should have been signed off years ago. Instead, the Indian MoD missed a October 15 deadline that BAE had imposed because the company could not afford to keep the gun’s U.K. production line open while it waited for Delhi to sign on the dotted line.

The delays means that if the Indian Army wants the M777 – which by all accounts it does – then it’ll have to pay at least an extra $50 million to reopen the line.

Next up is the omnishambles over the 12 AgustaWestland AW101 VVIP helicopters that India was supposed to be getting this year. Three had been delivered when a corruption scandal exploded around the contract, with two company executives arrested in Italy and a former Indian air chief marshal accused of taking bribes by Indian investigators. While all involved deny any wrongdoing, the MoD suspended payments with nine helicopters still to be delivered.

The case developed further this month when AgustaWestland filed for arbitration in an attempt to force the MoD to unblock its payments and get the contract back on track. This may have backfired, however, with MoD officials apparently incandescent at the company for filing the arbitration claim when the defense minister was in hospital and only days after the ministry’s top air procurement official had died.

The fallout from the AgustaWestland case can also be seen in the services’ procurement plans. In April the MoD delayed the army’s plans to spend 150 billion rupee ($2.3 billion) on Rafael Spike non-line-of-sight anti-tank missiles because of sensitivities at sole-sourcing such a big contract.

It is also impeding recent attempts by the U.S. to kick start the military-industrial relationship with Delhi. The Pentagon – in the form of outgoing Deputy Defense Secretary Ashton Carter – has promised to co-develop at least two systems with India: a successor to the Javelin anti-tank guided missile and the next-generation EMALS catapult for launching aircraft off carriers.

The chances of either of these joint developments getting off the ground are severely compromised by India’s inability to sort out its basic procurement relationships with foreign vendors, as the U.S.-India Business Council (USIBC) noted in a September letter to the Pentagon that was provided to IHS Jane’s.

The USIBC letter complained that India was imposing "unfeasible delays" on signing defense contracts and that foreign defense companies had little post-delivery liability protection. It pointed to the M777 deal as a key example of the problems being faced.

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