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Wednesday, February 20, 2013

The Military Corruption Complex

The  Military Corruption Complex

I have been quietly amused by the pother over the Westland helicopter scam, as though bribes were paid because the Government exercised its choice in favour of that company and someone ‘tweaked’  the requirements to limit the choice. Typically, this shows a complete lack of analytical understanding of corruption in Defence and this case like all other cases before it, will follow a predictable wild goose chase, investigators will earn junkets to Rome, some honest reputations will suffer permanent damage, much dirty linen will be washed, all major procurements will come to a halt, procedures will be made even more tortuous and centralized and like water , ‘rent seeking’ will seek out newer outlets.

Pity, how we squander each opportunity for systemic reforms by opting for the short term excitement of hunting for the corrupt and providing the hunters more and more game for their pleasure. We so easily overlook two cardinal factors. First that in Defence procurements in India most bribes are paid not for choosing X over Y but for simply proceeding with the procurement process and crossing the million hurdles placed on the track. The choice of the vendor is generally made on reasonably strong professional grounds and merit is almost never sacrificed, because it is well established that whoever is selected will pay.  

Second ,in a system where responsibility for a decision is  so widely dispersed and diffused any attempt to nab and nail the corrupt becomes a fishing expedition, in which the big fish invariably escape and small fish are caught for all the wrong reasons. The CBI revels in such fishing exercises as it provides them multiple opportunities for extracting their own part of the ‘rent’.

In the Westland case, going by a superficial scanning of media reports and analyses there appear to me two red herrings. One, that money was paid for ‘tweaking’ the requirements ( lowering the maximum altitude in which the helicopter was expected to operate and specifying a higher door/dome height) and much is being made of who ‘tweaked’ the requirements and when.  This does not sound right. Money is normally paid for restricting competition and tailoring specifications to favour a particular product/brand not for expanding it and allowing more vendors to be in the reckoning. While being given a chance to compete may command a price, it in no way ensures eventual success in the competition, particularly when in terms of capacity to  pay bribes, the competitors to Westland may have had a distinct edge. Naturally, Air Marshall Tyagi is at his wits end to figure why he should be under attack for simply having endorsed a decision to expand competition?

The second red herring is to draw attention to the role played by Air Marshall Tyagi and some of his relatives. Quite apart from the fairly convincing denial offered by ‘Julie’ Tyagi and the former Air Chief, the fact is that this was not an Air Force related procurement in which the Air Chief could have had a prominent role. This was a civilian requirement of the SPG and the Air Force at best played the role of technical advisers to facilitate the SPG in being able to meet its requirements. In any procurement process the determining role either in laying down specifications( GSQRs) or in tailoring processes to favour favourites, is that of the buyer not of those giving technical advice.. Why any payments should be made to someone whose role was so peripheral does not stand to reason .

I had written last year about the ‘why’ ‘where and ‘how’ of corruption in Defence procurements and drawn attention to three separate tracks of corruption.The first being the track of demand estimation, demand vetting, demand projection and inter se priority determination;  the second being the technical one - from framing the GSQRs, to preparing the engineering specifications, technical trials, user trials, and techno commercial evaluations before the procurement process commences. Both these tracks are the jealously guarded turf of the Services and brook no interference from anyone outside.  Neither the processes nor the practices are ever audited or subjected to independent professional scrutiny. However, this being an SPG requirement both these tracks are not  very relevant in this case.

The  focus should be on the third track which  is that of  the actual procurement one, where the onus shifts to the Ministry.In all procurement transactions there is a well established hierarchy of rent collectors along the approval chain. The approval cycle itself is so complicated and so lengthy that the opportunity for each functionary or facilitator to collect his share of the booty along the ‘nuisance value’ chain is maximised . At no stage does anyone really need to circumvent or short circuit the procedure because following the procedure itself provides the opportunity. Upto a certain stage all that is needed is to keep the process moving forward and as each stage of the transaction is crossed ,  the rent gets automatically paid. However, these payments are relatively small as these are meant to keep the ball in play and not for scoring a goal. The beneficiaries are generally the junior and middle rung Government officials, the network of personal staff attached to officers dealing with procurements, sometimes the officers themselves, Service representatives at the middle level who participate in the PNC (Price Negotiation Committee) meetings etc. At this stage the  main commodity on sale is information.

Things start getting hotter as the negotiations show signs of moving towards a conclusion. This is the stage where the main political level decision maker needs to get closer to insider information through his trusted man/woman. He needs to know in advance which way the wind is blowing. He does not need to influence the choice, he only needs to know who is the most likely winner. This is the time to summon the probable winner or his agent, the chief deal broker (normally one of three or four big time deal fixers), the main political level fixer (the contemporary Quattrocchi like figure), legal and financial facilitators and work out the final details of the payoffs, the sharing arrangements and the routings. There is a flurry of  official briefing meetings so that  the political level decision maker(s) can keep ahead  of the vendors in the information game; secret huddles in private farmhouses, closed room meetings in the Executive Clubs of five star hotels and a constant humming of mobile phones. At this stage all the vendors have  to open something like a Letter of Credit so that whenever the final decision is taken the payments get automatically credited to the designated accounts. Occasionally, last minute theatrics take place because of a falling out among the  multiplicity of agents and the principal deal brokers and the political fixers. There is considerable flexing of muscles and if one of the major deal brokers is antagonised, he can ensure through selective leaks to the media, or through a sudden review of priorities that the deal is either scuttled or pushed back sufficiently to enable him to regain control over it. However, such instances are rare and normally it is in everyone’s interest to cross the final hurdle. The deed done, the Dom Perignons  and the Blue Labels are brought out and the magnificent  fortified palaces in Chattarpur or Mehrauli or Sainik Farms  come alive to play host to many thanksgiving parties with a liberal sprinkling of beautiful ladies from Uzbekistan or Georgia or Ukraine.

The point of the long narration is this. Corruption is  deeply embedded in the architecture of Defence transactions and anything short of a complete transformation of structures, systems, processes will not make an iota of difference. There is no deal in which middlemen do not play a role and in which very hefty commissions are not paid. . Investigators, needlessly focus on why a particular vendor was chosen. It does not matter.  They also focus on procedural infirmities in the hope of catching the wrongdoer. Corrupt deals will always be procedure perfect and in fact if there are procedural flaws it is likely to be a  rare, clean transaction. The focus should shift to looking at the money trails, who paid whom and when, the  specific role of the big time deal fixers (whose existence everyone knows about and who can be found at every important social gathering in Delhi and on whom the Intelligence Bureau maintains huge files and yet they never seem to be in the least  bit inhibited in their movements or their activities) and the political connections of these fixers. Is it any wonder that in all the major investigations so far the role of these big deal brokers never been properly investigated or exposed?

Eventually, however, the focus on nailing the corrupt and teaching them a lesson achieves little in terms of curbing or preventing  future corruption. It only paralyses the honest and ensures that the corrupt, on the other hand, find more ingenious ways of making money. Only a complete system reform can change things. But that has few takers. Who would like to shut off such an important source of revenue for our system to survive?