Modus operandi of payoffs to the military

The Panama Papers leaked by a root source, apparently for altruistic reasons, has tarred a lot of public figures, including the baritone-voiced Amitabh Bachan, who had set himself up in recent years as spokesman for Gujrat Tourism garbed in the toga of national pride (and is now reduced to explaining, as if this has an iota of credence, that his name was perhaps misused by Panama-registered shipping companies, etc. since 1993! and, contrarily, that it revealed no illegality!).

The more interesting sidebar story ( related to the system of payoffs to the Indian military, in the Panamanian case, to officers in the IAF and Indian Navy, by the Italian firm, Elettronica SpA, peddling elint (electronic intelligence) equipment, radar warning receivers, laser warning receivers/missile warning systems, electronic support systems (for helos), and self-protection jammers. The commissions range mostly in double figures from 13% to 17% of the deal amount for basically spares supply and servicing contracts. Thus, a top-end 17% commission for just one 1996 deal totaled 112,399 Euros or approx Rs 85.5 lakhs (at today’s conversion rate) for distribution by the Indian agent to corrupt Indian militarymen. Any delays in delivery that draw penalties result in the penalty sums being deducted from the commissions disbursed. And if the supplier is ever caught in this nefarious payoffs scheme, it invariably responds by brazening it out with statements, to wit by Elettronica SpA, that it “rejects any wrong or illegal practice and can adhere to facts…”, etc.!

Indian arms agents operate on retainer plus basis and Elettronica SpA is a relatively small firm. There are as many as 300-odd foreign arms companies active in the New Delhi circles, the majors with more than a single company representative presence to further their interests. The bulk of these up-front commissions, according to informed persons, are for disbursal to officers in the procurement loops in the three armed services and to officials in MOD, with the registered or unregistered agents being paid off through separate channels.

While rules require arms agents to register with GOI, these are often flouted, so there’s only minimal accountability. Moreover, because the payoffs process is necessarily secretive, just about every minor and major arms vendor has Panamanian-kind of offshore instruments to channel payoffs that are impossibly difficult to trace and their activities just as difficult to track, and well nigh impossible to bring to book. It is a system tailor-made for uniformed and civilian staffers in the procurement process to help themselves with payment — their choice — in cash or kind. So the Panama Papers have uncovered only a small part of the corruption system — the proverbial tip of the iceberg.

This is precisely why I have been maintaining over the years that the armed services which do not admit to the taint of corruption, are about as soiled as the politicians and bureaucrats. Just visit the residences services chiefs build for themselves to get an idea. I know only of one retired service chief who survives on his pension income — Vishnu Bhagwat. He lives frugally in a two room apartment in Colaba. Recall, he was the naval chief dismissed by the socialist defence minister, George Fernandes, in Vajpayee’s govt in 1996, and who followed in the footsteps of ADM Ronnie Periera. The day after his retirement, Periera took to a bicycle coz’ he admitted he couldn’t afford a car. He finally upgraded his conveyance, I am told, to a scooter.

Corruption — the fundamental weakness and historic failing of South Asian societies is the principal cause of internal insecurity and why countries of the subcontinent will always remain vulnerable. It is also one of the main reasons why India will never become a great power, because there’ll always be people within the policy establishment and in the system who’ll do a foreign country’s or an adversary’s bidding for a price.

About Bharat Karnad

Senior Fellow in National Security Studies at the Centre for Policy Research, New Delhi, he was Member of the (1st) National Security Advisory Board and the Nuclear Doctrine-drafting Group, and author, among other books of, 'Nuclear Weapons and Indian Security: The Realist Foundations of Strategy', 'India's Nuclear Policy' and most recently, 'Why India is Not a Great Power (Yet)'. Educated at the University of California (undergrad and grad), he was Visiting Scholar at Princeton University, University of Pennsylvania, the Shanghai Institutes of International Studies, and Henry L. Stimson Center, Washington, DC.
This entry was posted in arms exports, Asian geopolitics, civil-military relations, corruption, Culture, domestic politics, Geopolitics, Great Power imperatives, Indian Air Force, Indian Navy, society, South Asia. Bookmark the permalink.

10 Responses to Modus operandi of payoffs to the military

  1. Raj says:

    Mr Karnad, you have been very harsh in your judgement. One odd case does not compare to the almost all in other segments so mentioned. pl dont try to malign the armed forces for vested interests

    • I may be harsh but not very wrong about corruption seeping into the military, eating away at its entrails. This is all the more shocking because the armed services, rightly or otherwise, are held to a higher standard. The corrupting of the ethos may be systemic effect. A corruption-ridden system is bound to induce uniformed persons to do wrong, etc. The trouble is these exposures/revelations of wrong-doing only trickle out long after the fact. So ACM Tyagi was implicated in the Augusta-Westland deal, and it was said that it was a one-off thing. Among earlier major transactions, Jaguar acquisition elicited names, Mirage 2000 had some tongues wagging and a chief’s name was bandied about, there was the Scorpene contract and a service chief was mentioned in the media, Rafale is another such deal where names are freely used. It doesn’t take long to hear the talk in military circles, as in civilian ones, of which officer is on the take, etc. One just has to keep one’s ears open.

    • Punjabi Sardar says:

      What you don’t understand is with a force of 10 lakh only 200 men will command 5000 men.

      It means that out of few dozen top tier officers some % are corrupt.

      Many soldiers will tell you same thing. Don’t think of average ranks & officers above brigadier as same.

  2. I think I understand what Dr. Karnad is saying. It is not about “most”, “many” or “majority” or whatever. It is that “some” are prepared to sell the country’s interest for pecuniary gain. Those “some” are enough to set things back or stymie processes. Same with academia, you can find so many giving an America, Russian or Chinese viewpoint but so few advocating an Indian viewpoint.

  3. satyaki says:

    Bharat Sir,

    Have’nt there been other honest service chiefs in the recent past ? Like Gen. Padmanabhan, for instance ?

  4. N.D. Hari Dass says:

    revealing, but sad..

  5. ‘Am sure there are.

  6. ~!@#$%^&*()_+ says:

    @BK, I come to read you about strategic and military matters. And on most of your points, I tend to agree with you (invariably after having done reasonable reading of my own). But when it comes to matters regarding economics (of which corruption is a true subset) I find your ideas completely at a different tangent to my own.

    IMO, Corruption (as normally understood, that of unjustified monetary consideration), does not constitute as big a challenge as corruption (moral) does.

    Just to give you an idea of what I am talking about:

    1) Even losing suppliers would be paying graft. So graft alone cannot make the needle swing.

    2) Graft will invariably have both fixed payments and variable payments and as you rightly suggested deductions for penalty provisions getting invoked. So there is mutual competition open to all parties, even in the corrupted system.

    3) The whole of the defense budget is merely 2% of the annual national income of India (a lot of which is actually returned unspent). If the political authority was really concerned that their priorities were being subverted because of corrupt officials then they can easily make counter graft offers. Most political systems derive their own graft from the consolidated national income, at only a slightly lesser rates compared to the ones cited by you for military contracts. And why only counter graft offers. The political authority has well equipped intel agencies at their disposal and these dalals are not too difficult to spot for a reasonably well tuned intel set up. At the same time the intel set up, normally expected to bear loyalty to the nation itself may be host to graft-lovers and graft-giver. In fact in such a case who would you believe in and how would you believe in systems designed to weed out the corrupt.

    4) The ‘belief’ could actually be a bigger source of corruption then merely monetary considerations. Most of these dalals would already have convinced themselves, swearing to their respective gods, that India needs their ‘services’ else DRDO/DPSU/Political system will kill this country of illiterates.

    5) Oh and by the way even the DPSU system (notionally a national institution) would be offering consideration for the deals struck. Only that, instead of a lifafa there could be memberships to Boards where decision are made, advisory positions that allow circumvention of the overall national system. You have yourself alluded to green-cards and easy ‘scholarships’ in Ivy league.

    6) The issue is not merely weapons/supplies imports. Even technology may be imported for monetary or other considerations. So how do you plug that gap.

    7) The delays in agreed timelines itself is a hidden corruption. At times reasonable and unforeseen delays too can be dressed up like corruption. And paid dalals could be pushing stories around these delays.

    8) Then there would be management of the lines of succession in the armed forces. Something that can be done using in fact the judicial system with the really corrupt people shooting from the shoulders of some rightfully celebrated judge. A case that you cite as an upright officer, had precedents of these kinds too where judicial system was said to have been used for vengence. That too as some claimed in collaboration with some other officer whose progeny later got married to a Pakistani man. By saying this I am not denying that officers too can be victimized by the political leadership as much as the officers may be displaying un-officer like behaviour.

    9) Then not just the judicial system even the procedural system can be misused. You already have cases where Ex. Defence secretaries are doing nationally reported audits, of decision in which they were involved, after having been appointed to that position by disgraced political leaderships while they move out. No monetary corruption involved but still.

    10) Then there would be the complex web of think tanks, seminars and study tour circuits. How would you explain for example cases where some officer changes his views on something they were opposing (in national interest) after just one visit to some country. The very same officer having been accused of manipulating requirements for competing ideas while in service. The very same officer having held conciliatory views on nuclear issues that depart substantially with those of hawks like you. See no graft cited no corruption involved but still the net results are not any good either.

    See my point is simple-it is the janlokpal syndrome. You put a man incharge to do a job faithfully. You find he is not upto it. Then you put somebody else incharge to see that good faith is maintained in whatever the first man is doing. But what gives you confidence that the second man will do his job? And how far will you go with this logic?

    I have specific names in mind when I write some of the above points. I would say we are facing a multi-pronged challenge, corruption is just one of them. Sometime back you had advised need for punitive actions which I had disagreed to. That time it involved whole segments of the country. These infact are more appropriate cases that demand punitive actions. And if these punitive actions cannot be delivered by judicial means then you should still have ways and means available to you that would at least ensure that suspect cases are kept outside of the system.

    • There’s very little to disagree. The rot is too deep to uproot easily, and certainly not without a radical makeover of the whole system. Because this is too large a task, it will never be attempted and the situation will progressively worsen until the whole edifice collapses, the pillars of state buckling first.

  7. ~!@#$%^*()_+ says:

    Some time back on this a blog reader had commented something, believing that criticism of armed forces goes against national interest.

    Now if people remember how NDTV among others had prominently hosted Ex-ACM S. P. Tyagi when the Italian courts had ruled that no corruption was involved in the Agusta-Westland’s VVIP Chopper deal.

    Let us now see what NDTV says about the Italian Courts of Appeal now saying exactly the opposite when it says the following :

    Also notice the paper is not making any mention of other worthies involved like Sonia Gandhi, the then NSA MK Narayanan and the then Prime Minister Manmohan Singh.

    These people do get covered here, though:

    So basically to complete a picture you have to cover a lot of sources (each with its own agenda) and correlate the available information. It is only then that you begin to understand something of how India has lost 25000 men in uniform after 1947.

    All this is not going to get right even when some people have begun saying things today. If people keep quiet then even the gods will not make this stop, ever.

    This is not about criticism of Armed Forces.

    This is about, not criticizing a very small minority that has risen to the topmost echelons stepping on the sacrifice of so many of our people.

    If people do not get outraged, then it is unnatural.

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