Government's New Defence Rules: Less Blacklisting, More Penalties

In sweeping changes in rules to boost India's arsenal, foreign defence manufacturers will be allowed to hire "agents" but will need to pay a heavy penalty if rules are violated, top government officials have told NDTV.

The blacklisting of firms, which was a norm for the previous UPA government, will be reserved for the rarest of rare cases. The UPA had blacklisted as many as 12 firms, severely restricting the options of the forces to sources equipment.

The companies will be responsible for the agent's acts and will have to declare their "relation with the agent" every year till the contract is closed. If they don't, they could end up paying the government the contract amount and also face prosecution.

"The agent's fees or consultancy will have to be declared in advance. Also, the companies must inform the defence ministry within 15 days if they hire an agent or change consultants midway into negotiations," an official said.

"A graded system of penalty depending on the enormity of the violation is being finalized. The idea is to make violations prohibitively expensive so that there is no inducement to violate the conditions," he added.

These conditions will be in the contract.

The policy changes suggest newfound pragmatism in the government after the action taken against companies by the previous government severely hit defence preparedness.

For example, when the UPA "blacklisted" Tatra Sipox - the company that supplies specialized vehicles on which nuclear and other missiles are mounted and carried - about 10 per cent of the vehicles had to be grounded because of lack of spares, as investigations dragged on.

"We were facing a situation - much of the fleet carrying nuclear and conventional missiles were grounded with no spares coming," said an official.

Defence Minister Manohar Parikkar finally allowed the forces to negotiate with another independent Tatra-Sipox entity that wasn't involved in the alleged wrongdoing.

The blacklisting of gun manufacturers like Bofors and Denel meant that the Indian Army could not upgrade its artillery guns, officials say. India last acquired field guns in the 1980s.