cag report on kargil purchases

 sickle_s.gif (30476 bytes) People’s Democracy

(Weekly Organ of the Communist Party of
India (Marxist)


No. 51

December 23,2001


Another Nail In
The Coffin


revelations by the Comptroller and Auditor General (CAG) of gross irregularities in
defence procurement related to the Kargil conflict have raised a storm both inside and
outside parliament. After the Tehelka exposé, the BJP-led government flatly denied any
wrong-doing, hounded and harassed the Tehelka team of journalists and even investors in
the website, appointed a toothless Commission of Inquiry and publicly demonstrated its
disdain for it by reinstating George Fernandes as Raksha Mantri even while the Inquiry was
still on-going.

The CAG report
now brings fresh and incontrovertible evidence of the system of defence procurement being
rotten to the core. As in the Tehelka episode, so too now with the CAG report, myriad
spokesmen of the BJP-led government are rushing to the print and electronic media in
defence of the Raksha Mantri, denigrating the CAG report and attacking their critics by
invoking the “exigencies of war” and the “blood of our martyrs.”

It is precisely
the sacrifices of our armed forces that the BJP and its allies in the NDA government are
mocking by their shameless defence of the indefensible. In money terms the coffin
contract, which has understandably grabbed the headlines, is only a small piece in the tip
of the iceberg. Numerous other contracts were examined by the CAG and its Report once
again exposes the extent of the rot in the MoD. This article discusses the details of the
various purchases relating to Operation Vijay, scrutinized in the CAG Report, in
order that the full facts are properly brought out and the current media onslaught of
half-truths and outright lies by the BJP-led government and its various spokesmen, are
well and truly nailed.


First some brief
background to the CAG Review. An armed conflict in the Kargil sector had been unexpectedly
thrust on India in May 1999, and the defence forces, the Army in particular, found itself
caught on the wrong foot in respect of adequate equipment and supplies which were then to
be procured urgently – these lapses in intelligence and defence preparedness are another
story altogether.

Due to these
exigencies, the established procedures were slightly modified by an MoD order in June
1999, relaxing certain aspects which could delay payment and receipt of supplies. However,
the main principles underlying the procedures remained, namely,

  • procurement against technical
  • optimum value through competitive
    procurement (subsequently permitting single-vendor deals to allow for specialised
  • check on import dependence, and
  • transparency in public

However, as the
CAG Report (CAGR) details, government and the MoD apparatus, as well as their apologists,
seem to have interpreted the June 1999 order to mean a carte blanche in procurement
which was certainly not the case. In any case, the CAG was asked to examine all these
purchases, which is fairly routine, and not such a virtue as ruling-alliance spokesmen are
making out. The CAGR covers 123 contracts aggregating Rs.2163.09 crore, related to Army
procurement for Kargil operations.

Let us now look
at some details.


The CAGR points
out that stores valued at a maximum of Rs 17.50 crore, i.e., less than 1 percent of the
total, were received before operations were over in July 1999. Nobody of course could know
when hostilities would end, a point made much of by various BJP-NDA apologists, but let us
look more closely. Around 75 per cent of the contracts, worth Rs 1606.26 crore, were
signed only after August 1999, of which 33 contracts worth Rs.621.70 crore were concluded
after December 1999.

Was Operation
still on-going at this point? One can understand defence preparedness even
during this period, making up for past lapses, but was continued fast-tracking justified?
If so, why was a Resolution of the Cabinet or Cabinet Committee on Security (CCS) not
obtained? Almost 90 percent of contracts called for delivery after 90 days, and as many as
36 contracts worth Rs 1491.53 crore had lead times of over 180 days, surely not showing
any great urgency. And none of the contracts appeared to have any penalty clauses for
delayed delivery, despite the very purpose of the fast-track procedures, nor did the MoD
appear concerned about delays, payments being released without demur.

An order was
placed for urgent requirement of 20 additional Short-Range Surveillance Radars from ELTA,
Israel, an earlier supplier with an order already under implementation, deliveries to
commence in October 1999. The new contract was finalised in February 2000, with a short
6-8 week delivery schedule at extra cost, but only three of the items were received only
in August 2000, and 17 items in January 2001.

Order for
Hand-Held Thermal Imagers (HHTIs) — remember these, the items the Tehelka team were
pretending to sell? — worth Rs.41.95 crore was placed on Thompson CSF of France in
February 2000 with a stipulated delivery time of 4 months, but supplies were received only
by November 2000. In June 1999 indent for 3250 tyres for Kolos Tatra vehicles was raised,
the Price Negotiating Committee meeting postponed to suit the convenience of the supplier
and held only in October after which contract was concluded in December and supplies began
only in March-April 2000. Army HQ had asked for 11,000 bullet-proof jackets by end-August
1999, but MoD ordered for 40,000 including 20,000 for Operation Vijay, all from
foreign suppliers despite indigenous availability, split among 3 vendors so that supply
could be expedited. Deliveries were received only between October 1999-June 2000 as
against the specified compressed delivery schedule of July-September 1999.

In all these
cases, no penalty clause.

Delays? – no


Poor quality?
Apparently no problem either.

In case after
case discussed in the CAGR, the standard of supplies seemed to be of little concern.

A case in point
involves artillery shells from Krasnopol, also referred to in the Tehelka tapes, which had
failed several performance tests especially under high-altitude conditions. CAGR notes
that again field trials had been stipulated and even though once again the shells had not
performed to requirements, the contract was cleared in February/March 2000, much after Operation
. While Army HQ had confirmed that only 25-30 percent of targets could be hit by
this ammunition in the Kargil operations, Raksha Mantri himself gave approval to the
Ministry recommendation. MoD had stated in August 2000 in response to the CAG that the
contract was based on “detailed analysis which confirmed employability of Krasnopol
ammunition in mountainous terrain, within the design limitations of the ammunition, to a
large extent”, a classic statement of obfuscation if any, prompting CAGR to note that
“it appears that Operation Vijay was but an excuse for pushing through a
procurement that otherwise may not have qualified.”

100 Anti
Material Rifles (AMR) with ammunition were contracted with Mechem-Denel of South Africa
for Rs.23.22 crore “even though it fell short of the range specified in the GSQR by
24 percent and there was no assurance regarding performance of the 20mm ammunition…
[beyond] 6500 ft”. The rifle also suffered from other defects such as no open sight,
night sight or carrying handle but the contract did not call for any modifications. Only 6
AMRs were delivered in December 1999, a further 35 in March-May 2000 and the balance after
that. Due to these defects, the Army in a June 2000 inspection did not even clear the
rifles for issue. Subsequently, Director General Quality Assurance (DGQA), a key post in
the procurement chain whose importance repeatedly comes up in the Tehelka tapes, cleared
the AMRs in November 2000.

MoD urgently
contracted KBP Tula, Russia, for 1200 flame throwers at Rs 18.22 crore. This weapon had
been field tested in 1995 and had performed very poorly, having a reach of only 350 metres
against the promised 1000 metres, and also missing the target at 200 metres, MoD then
recommending only a one-time purchase of 300 pieces. Still the order, again delivered

Perhaps the most
glaring case pertains to the import of time-expired ammunition from RVZ of Russia in
December 1999 through two contracts worth Rs 402.76 crore. As per terms agreed, the
ammunition was to be new and, if from current stock, have residual life of at least 3
years. Shockingly, the finalized contract itself ordered ammunition whose shelf-life had
expired, in some cases, as much as 7-12 years earlier! DGQA also managed to declare,
against its own guidelines of 7 years shelf-life, 30,000 rounds of 130mm shells
serviceable upto 2003 irrespective of the year of production ranging from 1976 to 1991.
The December 24, 2001 issue of India Today carried an article which tried its best
to portray the CAGR in poor light and give a clean chit to Raksha Mantri and the
government. It claimed that the MoD has promised (to India Today perhaps?) to look
into the matter and punish the guilty! Perhaps another Commission will be appointed and
those being inquired into would be first suspended and then reinstated even before any
findings had come in! Similarly, a contract worth Rs.81.59 crore for supply of fuses was
awarded to the public sector Electronics Corporation of India Limited (ECIL) assembling
kits imported from a South African firm. Even as per the technical offer, about 6000 fuses
would have completed their 10 years’ shelf-life and the remaining almost 9000 fuses
in the next 2 years. The firm then requested permission for late delivery of some fuses
held in stock by the South African Army, and even before MoD had communicated approval,
supplied 15,000 fuses of 1989-90 vintage. Even more astonishingly, MoD paid out 95% of the
contracted amount of Rs.17.27 crore! Again, no problem, even though this contract
“merely resulted in transfer of old fuses from the stock of South African Army to the
Indian Army.” Another amazing deal was for Multi-purpose Boots for which orders were
placed on first-time foreign suppliers in July-October 1999 for 52,775 pairs at a total
cost of Rs 30.37 crore for deliveries between July-November 1999. While product samples
had been inspected and approved in June 1999, a large proportion of the boots received
were found to be “too small for any adult use” or “of odd size.” The
Ministry’s response to this CAGR observation was too clever by half, that these
small-size shoes would be supplied to the Assam, Gorkha and Garhwal regiments! But CAGR
notes that the concerned Army department had “clearly stated that [the shoes] would
be too small to fit any soldier.”

Mistakes made in
the exigencies of war? Sheer callousness? Or murky dealings?


A glance at how
procedures were bent may provide some answers. However urgent the situation, surely
prices, alternative suppliers, delivery schedules etc should have been carefully examined?
CAGR notes that, “in most cases, last purchase prices were neither available on file
nor taken into account by the Price Negotiations Committee (PNCs). Wherever Professional
Officers Valuation was adopted… they were at such variance from final prices that
these did not provide a basis for reasonableness of suppliers’ prices.” Take the
infamous Casket deal. Buitron and Baise, USA were contracted for 500 aluminium caskets at
US 2500 dollars each. Funnily enough, even for a simple item such as this, only one
supplier was identified, the name having come in 1994 from the Indian Commander of UN
forces in Somalia who said the caskets were available for US 172 dollars. No acceptance
test, evaluation or price assessment were carried out even for this first time. On
delivery, the entire lot was rejected for being overweight and being welded instead of
being die-pressed. Raksha Mantri George Fernandes and various senior ministers including
the Finance Minister Yashwant Sinha, who should know all about costs and prices, tried to
defend themselves by stressing that the apparently high cost was because the caskets
were made of top quality “aeronautical grade aluminium”. No one has explained
why such material used in aircraft and aero-engines was required for caskets which are to
be placed underground!
Further, as CAGR states, the price quoted with 75% towards
raw material would have translated to a rate of Rs 45.31 lakh per tonne “which is at
least 10 times more than the rate being paid presently by Hindustan Aeronautics Ltd. for
importing the highest grade aluminium” and numerous times more than the Rs 63,360 per
tonne quoted in the London Metal Exchange for high grade Aluminium! Absolute stupidity or
utter venality?

A contract was
concluded with Kintex SCH, Bulgaria, for 3600 Under Barrel Grenade Launchers (UBGL), 3600
AK-47 Rifles, grenades and sundry spares for Rs 19.68 crore. The UBGL offered were not
compatible with the AK-47 rifles in service which necessitated also buying the 3600
rifles, similar to ordering tyres and then having to buy new cars to go along with
them since they would not fit the existing cars!
An offer from Romtechnica,
Romania, was rejected on grounds of incompatibility of UBGLs with rifles in service even
though 100,000 rifles supplied by this company were already in use by the Army!
Incompatibility was rewarded, compatibility punished!

Raksha Mantri
approved in June 1999 import of 26,000 rounds at Rs 116.83 crore from Israeli Military
Industries Limited as a “one-time measure” for meeting the emergent requirements
of Operation Vijay. This ammunition was under production in the Ordnance Factory
and option was also available for 26,500 shells under an earlier contract with a regular
supplier, RVZ of Russia whose ammunition was already tried and put in service. Incredibly,
CAGR states that, RVZ’s offer was “rejected on the grounds that it was…
addressed to Director(O) rather than JS(O)”!

Amazing indeed
that even a wrong addressee was sufficient grounds for rejection whereas in other cases,
guns and ammunition not having the desired and stipulated range, not being able to hit
targets, offers with post-dated “clarifications” effectively lowering prices to
meet competing offers, were all acceptable!

Finally, look at
this example of what the CAGR calls “slipshod scrutiny… and poor
negotiations”. Celsius Weapons Systems AB of Sweden supplying various spares and
other items for the Bofors 155mm howitzer points out to MOD that it had not noted errors
on the higher side in rates quoted and proposes reduction in the contract sum by Rs.9.61
crore with MoD then revising the contract!

Clearly, George
Fernandes and the Ministry he heads are either totally incompetent, thoroughly corrupt or
utterly mismanaged. Raksha Mantri can take his pick… but he must go. And so must this
government which defends him to the hilt, sees nothing wrong in all this and tolerates or
even winks at this incompetence and venality. The nation and its brave armed forces have
had enough and deserve better.

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