Friday, 15 February 2013

Westland defence scandal hits MoD (PO)

M D Nalapat

Friday, February 15, 2013 - Although China in 1949 was half the economic size of India, the situation got reversed by 1989,and in 2013,the economy of the other superpower is four times that of its southern neighbour. The change in fortune is a reflection not only of the success of China but the failure (of those in charge in) India to choose policy pathways which promote growth. The usual excuse for poor performance is that “the poor need attention”, and consequently the better-off have to be satisfied with less attention. In actual fact, while the better-off have widened their lead over the others, the poor have largely been ignored.

The highways of India are a telling example of such skewed priorities. There are no pedestrian walkways, and consequently those too poor to own a means of transport have to risk their lives each time they step on a road, or cross a street. Only a few overhead crossing points are provided, thereby making pedestrians gamble with death by crossing in the middle of traffic. The poor are remembered only in words, the only favored group in India being the holders of unaccounted cash. These are protected from the high tax rates in the country, and can buy their way out of most situations. Politicians and officials form the overwhelming proportion of the holders of unaccounted wealth in India, with many of them linked directly to businesses that thrive as a result of government patronage. Unaccounted wealth began to multiply rapidly after 1998,during the period when A B Vajpayee was Prime Minister. The main “fixer” was a prominent “son-in-law” who stayed at the official residence of his relative and became a multibillionaire in a short while, with scarcely any media attention given to his rising wealth. Interestingly, the gentleman in question was close to a prominent opposition family as well, so that once that family got elected to run the country, it has protected the lucky son-in-law from accountability for his dizzying wealth.

Among the ways in which money diverted to foreign bank accounts was made was by forcing petroleum exporters to levy a premium on their sales to India, the extra cash going to hidden accounts. This is the reason why the price of hydrocarbons supplied to India is usually much higher than the same feedstock supplied to (far richer) European countries. Machinery purchases are another way of illegal enrichment, with prices artificially boosted so as to generate illegal cash hoards abroad. In this manner, several crooked businesspersons get back their actual investment in a project almost immediately. Political pressure ensures that credit flows from nationalized banks, which often are forced to write down much of the money owed to them, because of malfeasance. While such shenanigans have been going on for decades in India, and indeed centuries, they have reached levels the past six years that have never been seen since the British left.

National defense is a lucrative source of illicit money flows. An example is the used aircraft carrier bought by India from Russia, which is costing the country nearly $4 billion after including maintenance and interest costs. This is more than a hundred times what China paid for a similar carrier, much of the difference apparently going to pad pockets in both Russia as well as India. Other examples are the huge outlays spent on refit of Mirage aircraft, as well as the $20 billion purchase of fighter aircraft from France that no other country except India has bought, and which proved of dubious value to Paris even against the miserably inferior air force of Colonel Kaddafy in Libya.

For that price, as General V K Singh ( former Chief of Army Staff) said, India could have bought the whole aircraft manufacturing company, rather than get placed in a situation where it will bleed each year from higher and higher demands for spare parts and maintenance. The best defense for a country, in fact a needed pre-condition for effective defense, is a strong economy. By its reckless purchases of high-priced defense items, the Manmohan Singh ministry has helped the Reserve Bank of India to reduce India’s rate of growth to half what it was six years ago. Of course, RBI Governor D Subbarao is a favourite of the PMO, and was given an extension two years ago despite his toxic policy of super-high interest rates designed to weaken domestic industries. Subbarao claims that it was “concern for the poor” that made him raise rates, even though even a college student of economics knows that in the Indian economy, high interest rates fuel rather than dampen inflation. Manmohan Singh seems determined to go down in history as a disaster, a wish that he is in the process of actualizing.

Given the fact that the highest levels in policymaking in India are implicated in Defense purchases, and that the rot extends not only to the ruling parties but also to the Opposition (who both join hands to ensure that officers with a record of facilatating deals get promoted), it is no surprise that only a few smaller fry get in trouble as a consequence of (rare) exposure of corruption in defense purchases. However, the action by the Italian authorities (who are obviously of a different cut than Silvio Berlusconi) in arresting the CEO of Finnmecanica has torn off the shroud which covered at least one deal, the $1 billion purchase of helicopters from Agusta Westand for the VIP Sqadron of the Air Force. A former Air Force chief has been mentioned in thois context. His defense is that he did not give any recommendation in favour of the helicopters. Of course, often money gets paid not to get a positive rcommendation but to prevent a negative one.

survey of the lifestyle of former Air Force chief Tyagi will show whether his home and his doings fit his pension. Indeed, there are cases of former high officials enjoying lifestyles that would burn up their annual pensions in a day. A former Army Chief who claims to be close to top politicians has extensive family conections with foreign business interests, and a lifestyle that is regal in its opulence. However, naturally, he has not only escaped censure but even official attention by the Income-tax and other agencies. A comprehensive audit of the lifestyles of retired officials (both civil and military) and that of their offspring is all that is needed to fix the needle of suspicion, but of course, this will never be allowed to happen. Many at the top are merrily ruining the future of the 1.2 billion people of India, and making sure that the money they make gets sent abroad so that they can safely leave when the country sinks into chaos. Such people are unlikely to be shamed into accountability just because an Italian CEO has been sent to jail in his country for bribery connected with a deal involving sale of helicopters to India.

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