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Denel cases referred to CBI New Delhi, April 22 MoD sources said besides the Rs 55 crore contract signed with Denel in August 1999 to supply 9000 rounds of 155 mm “red phosphorous ammunition”, the CBI had also been asked to probe charges that middlemen were involved in the procurement of anti-material rifles when Mr George Fernandes was the minister. Mr Pranab Mukherjee told The Tribune that all deals transacted with Denel had been referred to the CBI. The investigating agency will specifically be looking into the role of middlemen in the deals and whether kickbacks were paid to influence the Indian defence establishment. Mr Mukherjee had stated yesterday that Denel was to supply a large number of anti-material rifles to the Indian Army as per the agreement finalised by the previous regime. It had already supplied about 300 of the rifles and the remaining consignment was to follow. In addition, the NDA Government had also been negotiating a far larger deal for the procurement of 155 mm self-propelled guns, estimated to cost around Rs 9000 crore, from the South African company. However, with the latest revelations of the alleged payment of commissions for the anti-material rifles, all deals with Denel have now been frozen. Rules in India do not allow the involvement of middlemen in any defence deal, Mr Mukehrjee stressed, adding that the CBI will probe whether these laws had been violated. Mr Mukehrjee also clarified that the deals with Denel had been “frozen’’ but not cancelled, adding that the final decision on these purchases will have to await the competition of the CBI probe. These rules were framed after the Bofors scandal erupted in the 80s when the Opposition had charged the Rajiv Gandhi regime for pushing through the deal with the Swedish firm following the payment of kickbacks. The clock has turned a full circle now. The same opposition parties are now facing similar charges from the Congress-led UPA Government. MOD sources revealed that the 155 mm howitzers, which were to be procured by the NDA Government from Denel, had failed the field trials once but the South African firm had been pushing hard for a fresh trial.It is learnt that Denel had approached a number of retired Indian Army officers who, in turn, were pressurising the Army to give Denel another chance. Besides Denel, other firms in contention are Israeli company Soltam and the Swedish firm Bofors. Though the Bofors gun had passed the earlier test, its competitors were banking on the Congress sensitivity to the Swedish company, to put them ahead in the race. The Army plans to purchase over 1,200 towed, wheeled and the tracked self-propelled 155mm/52 cal howitzers under its Field Artillery Rationalisation Plan in a programme valued at over Rs 9,000 crore over the next 10 years. Mr Mukherjee’s latest order has implications for another major project. Denel’s turret was successfully integrated with the chassis of the Arjuna tank to produce the Bhim self-propelled howitzer. However, price negotiations were put on hold as the Army felt that Denel’s price offer of turrets for Bhim was too high. Incidentally, concerns over the anti-material rifle deal with Denel were first raised in 2001 by the then Comptroller and Auditor General (CAG) V.K Shunglu in his preliminary audit review of the Army’s procurement for Operation Vijay. The CAG’s comments on the rifles, mentioned under the ‘Major Irregularities’ sub-head, imply that the deal was signed hastily, though there were five serious deficiencies in the rifles finally supplied to the Army.  |
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Cornering deals Denel style New Delhi, April 22 Reports emanating from South Africa say that besides being investigated for paying commission to the UK firm for securing the details of the PNC report, the South African authorities have also launched an inquiry against the firm for giving more than 100 million Rand worth of ‘commitment fee’ to a Saudi Arabian firm for a defence deal which eventually flowed back to the company officials in the form of “kickbacks”. All this was apparently being done to ensure that the company came out of the red. The same seems to have been the logic with the previous NDA regime, which in the garb of strengthening the newly reached “strategic partnership” with South Africa, agreed to help Denel avoid a possible close down. According to reports, Denel has constantly been facing losses. In the financial year 2003-04, the year it won the tender for supplying anti-material rifles, the company incurred losses worth about 377 million Rand which rose from 72 million Rand in the previous year. Incidentally, the company was facing financial problems even when the first contract was offered to Denel way back in 1999. But the NDA Government went ahead with the contract for the supply of 9000 rounds of 155 mm ‘‘red phophorous’’ ammunition for the Indian Army. That same year, it was the first time that South Africa had participated in a Defence Expo here. According to reports now, the South African authorities were investigating the firm for not only the Indian deal but also for misappropriation in the Saudi Arabia deal. Media reports from Johannesburg say that in the Saudi Arabia deal Denel paid the money in advance as a “commitment fee” for a deal that never happened. The company had hoped to sell weapons worth billions to Saudi Arabia. The 100 million Rand payment was later written off as “marketing costs”. Denel allegedly transferred the money in three installments between June 1996 and January 1997 to a Swiss account associated with the Saudi agent. It totalled $22,5-million (R100-million) at the time. The deal to sell South African artillery systems to the Saudis, touted to be worth about $1.4 billion was pursued by Denel for nearly 10 years, but it never materialised. The sale was conceived in 1992 in the aftermath of the first Gulf War when it became known that the Saudis were in the market for howitzers. In 1996, the Denel board was told the $22.5 million “commitment fee” would clinch the deal. They paid, but the Saudis never finalised the promised arms bonanza. As a result investigations into the pay off started in 2002 and now these have reached a stage where it is being felt that the same money may actually have ended up with the Denel officials and some politicians. The payout was especially controversial because it happened before any arms contract was signed and because it allegedly contravened Denel’s own rules. These generally provide for payment of commission only once the principal sum has been secured. The advance payment also appeared to be in addition to the agreed commission , already a whopping 26 per cent on the value of the deal. When the deal failed, the Denel board was forced to write off the $22.5 million as “marketing costs”. By then their own auditors, PricewaterhouseCoopers, had already alerted the Auditor General who, in turn, referred the matter for criminal investigation. The South African authorities while seeking details of the bank account, where the payment was transferred, from the Swiss authorities said the only remuneration to which the agent was entitled was an all-inclusive consultancy fee of 26 per cent of the contract value. |
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