India Outrage Over Military "Coffin-gate" Scandal

by Rahul Bedi

Last week, demands grew for the resignation of Defense Minister George Fernandes over the extravagant importation of coffins and body bags for soldiers who died during the 1999 undeclared war with Pakistan on the disputed border in Kashmir.

Opposition leaders forced the adjournment of the Lok Sabha (lawmaking lower house of Parliament) for the second day in reaction to a report, tabled on Dec. 11 by the Comptroller and Auditor General (CAG), showing that coffins imported from the United States at around $2,500 apiece were substandard.

Many blame a series of embarrassing defense purchase scams on the failure to monitor shadowy arms dealers, who were banned in India following a political scandal over the purchase of Swedish Bofors howitzers.

These agents, who continue to operate clandestinely with official connivance, have resisted attempts to streamline defense purchases and conform to guidelines for their registration issued in November by the Ministry of Defense.

"No agents have officially registered themselves as yet," an official spokesman of the defense said.

India banned such dealers in 1987 following a $15 million kickback scandal surrounding the purchase of 410 FH-77B towed howitzers from AB Bofors of Sweden for $1.4 billion -- a case that is still under investigation.

"For years, (arms dealers) have operated in relative anonymity. But the moment they declare themselves they will become targets for corrupt politicians and officials demanding money to push their products," said a New Delhi representative of several East European and Israeli arms companies.

He added that the defense ministry, as per its guidelines, will "police" commissions paid by the principals to their Indian representatives.

Besides enhancing official interference, this practice, he added, would encourage agents to accept additional money overseas that would remain undeclared. This will defeat the official aim of preventing "leakage of foreign exchange and tax evasion on agency commissions," he said.

The ambiguous and contradictory guidelines for registering arms dealers require them to list their contractual, banking and financial details with the Ministry of Defense.

"The nature of services to be rendered by an authorized representative/agent and the commission payable to him shall unambiguously be reflected in the contract," the rules declare. But at the same time, "the scale of commissions payable will be determined by the defense ministry," the rules state.

An official report investigating a bribery scandal that led to the resignation in March of Fernandes -- who was reinstated in October -- recommended the legalization of arms dealers to root out corruption and ease bureaucratic delays in desperately-needed hardware.

Several senior politicians along with defense officials and a clutch of army officers also resigned after they were filmed accepting bribes and favors in a "sting operation" launched by two news website journalists.

Three army officers, including a brigadier and a major general, are facing court martial proceedings for accepting bribes from the journalists posing as fictitious arms dealers hawking a non-existent thermal imaging camera.

Fernandes' controversial reinstatement, even as investigations continue, is now once again being questioned by opposition politicians who hold him responsible for the coffin purchases and other serious irregularities cited by the CAG in its report.

The bribery scandal led to all defense procurements being "frozen" as military and defense ministry became apprehensive of finalizing even genuine contracts for fear of being investigated.

"I feel astounded by the (coffin) scam, that they can do this to martyrs. This is totally unacceptable," said Sonia Gandhi, leader of the Congress party, which leads the opposition in Parliament.

The Congress party, which led India to independence in 1947 and ruled with an iron grip, lost its preeminence in 1989 as a direct consequence of the Bofors scam, to which Gandhi's late husband and former prime minister Rajiv Gandhi was linked.

Fernandes said earlier that less than a quarter of the capital outlay of the $12.91 billion defense budget for the current financial year ending Mar. 31, 2002 remained unspent. This had adversely affected operational preparedness, officials said.

But his declarations that defense purchasing would be made transparent seem to ring hollow in the wake of the coffin scandal.

Meanwhile, India's monopolistic state-owned defense industry has been opened up to private participation through licensing with a foreign direct investment limit of 26 percent to reduce increasing dependency on imports, facilitate technology transfers and to meet challenges posed by changes in military technology.

But officials said details of privatizing India's vast and inefficient defense sector are still being worked out. Licenses for it would be issued by the defense ministry to companies with a minimum capitalization of $21.7 million.

"We buy everything from ships to artillery pieces from overseas private companies, but so far we have not allowed our indigenous private sector to make military equipment nor have we reposed faith in them," Parliamentary Affairs minister Pramod Mahajan said.

Private manufacturers, he added, would now also be allowed to import technical know-how in making defense equipment as part of India's shift toward dismantling its enormous, loss-making public sector and moving toward a market economy.