National

Despite ban, middlemen abound in defence deals

A.M. Jigeesh Richa Mishra New Delhi | Updated on February 26, 2019

Dominated by four or five big players, mainly from high profile families, who call themselves consultants, these agents/consultants enjoy a monopoly in facilitating defence deals for foreign or domestic entities.

All attempts of the Defence Ministry to rein in middlemen in defence deals have met with little success. This lobby is just too powerful as has become evident once again in the recent VVIP chopper deal.

Though use of agents is banned in this sector, revelations in this deal tell a different story.

Dominated by four or five big players, mainly from high profile families, who call themselves consultants, these agents/consultants enjoy a monopoly in facilitating defence deals for foreign or domestic entities.

According to industry sources, these handful of players play an important role in deals where the stakes are high. The players include some flamboyant members of Parliament as well as retired defence officials.

India, which has already invested about $50 billion in defence purchases in the last decade, is supposed to spend more than $100 billion in this decade.

Industry circles confirm that the commission given by companies to agents ranges from four per cent to 15 per cent.

But agents or consultants are officially recognised in the energy sector, unlike in the defence sector.

On the legalisation of agents for the defence sector, a section of defence industrialists claims that as in the petroleum sector, where agents are legalised, this can be done for defence sector as well. But the Defence Ministry, points out a source, is not open to this idea.

An informal attempt by the Defence Ministry in the past to officially recognise agents had met with stiff opposition from the players themselves. No one came forward to declare themselves as agents, the source added.

There were also fears that if the ban is lifted, it may lead to political opposition as most of the agents have political linkages. An industry source claimed there is “inherent contradiction” in the Defence Ministry’s stand on the issue.

He said on the one hand, in the Defence Procurement Procedure, the Government lays down a condition that the vendor is required to give full details of any agents or technical consultants that may have been appointed by them for marketing of their equipment in India.

On the other hand, the procedure adds that a seller will be debarred from entering into any supply contract if found engaging an agent to market its products.

> jigeesh.am@thehindu.co.in

> richa.mishra@thehindu.co.in

Published on February 15, 2013

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