Stop blacklisting arms companies

Updated on: Dec 25, 2016
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A blanket ban on some firms will restrict our security options

Indian and foreign firms supplying armaments to the armed forces are now in a quandary. They do not know whether to hail the new ‘Guidelines of Ministry of Defence (MoD) for Penalties in Business Dealings with Entities’ (or more popularly the blacklisting policy), or feel agitated over the policy not being implemented retrospectively.

Despite requests from industry veterans and defence industry lobbies over the years not to apply a ban retrospectively, the Government is silent on the fate of firms that have already been blacklisted. The new policy should ideally ensure that from now on, multi-billion dollar projects do not necessarily get stuck due to an earlier ban on companies; the disqualifications should instead be treated as project-specific. Blanket blacklisting by the MoD in the past reduced competition and created a single vendor situation for procuring critical weaponry. Projects worth around ₹50,000 crore are stuck due to a blanket ban on certain firms by the MoD. The armed forces suffer in the process. What is also not generally understood is that if a firm has been banned from a specific deal with the MoD , that should not preclude it from doing business with another Indian client.

Recently, the Rajasthan government came under attack for ordering helicopters made by AgustaWestland for Chief Minister Vasundhara Raje. Although AgustaWestland has come under the scanner for its deal with the defence ministry, the common perception is that it can do business with any other entity. By disallowing Westland, Sikorsky stands to benefit because it’s the only alternative. Global defence conglomerates are inter-linked and arms trade is being carried on by a handful of firms. Banning one creates a domino effect on other projects. However, a glimmer of hope now is that the Minister of Defence Manohar Parrikar has directed his ministry to chalk out a plan to review and analyse all old cases. This may revive stalled projects in the near future.

Senior Assistant Editor

Published on January 16, 2018

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