‘India told us to keep deal secret’

Israel Aerospace Industries (IAI), the defence firm that was awarded a controversial Rs10,000 crore contract for the joint development of medium-range surface-to-air missiles (MRSAMs), confirmed on Thursday that it had indeed signed the deal. But it made a surprising disclosure: the deal was kept under wraps at the insistence of the government of India.

The contract was signed on February 27, just days before the Lok Sabha elections were announced. IAI was told that premature disclosure could lead to problems, and even termination of the contract. The deal includes suspicious clauses, including one for the payment of 6% “business charges”, which many observers believe could be a camouflage for commissions. The payment of commissions and middlemen are banned in Indian defence deals.

Following the DNA expose over the last three days, IAI had no option but to come out into the open. IAI told an Israeli daily that India had asked it to keep mum.

DNA reports exposing controversial arms deal worth Rs10,000 crore have forced the Israel Aerospace Industries (IAI) to come  out with the facts.

According to a report in Globes, an Israeli financial daily, “IAI stated that it delayed announcing the contract until now because the customer (i.e., the Indian government) informed the company that early disclosure was liable to cause material difficulties in execution of the contract, and even result in its cancellation.”

The report did not say why a formally negotiated deal between India and IAI, approved by the cabinet committee on security, should be cancelled just because it was made public. The IAI statement also raises questions about the conduct of the Indian ministry of defence over the entire deal.

The opposition parties, and especially the Left parties, are making hay over the DNA reports. It has become an election issue in Kerala, where defence minister AK Antony will have a tough time defending it. The Left is also using the report to display its opposition to Israel, presumably to score points with the Muslim electorate in Kerala and West Bengal, where it faces tough challenges from the Congress.

The ministry of defence has not officially made any reference to the deal. The Congress, however, protested its innocence. Said senior Congress leader and minister of state for external affairs Anand Sharma: “We absolutely reject any suggestion of wrongdoing. How can anyone even suggest any such thing could happen under a person of such integrity as defence minister AK Antony or in a government led by Manmohan Singh?”

Adding further weight to suspicions that the deal may not have been entirely above board, IAI also said that “it felt that this risk (of the contract being cancelled) would be substantially reduced once the advance payment was received,” Globes reported.

In reports published between March 25-27, DNA exposed the dubious basis on which the contract was entered into despite specific defence ministry guidelines about dealing with IAI. The
Israeli company is being probed by the Central Bureau of Investigation in connection with the Barak missile deal in which bribes of Rs 400 crore were allegedly paid. The missiles to be developed by IAI under the MRSAM contract are part of the same family.

IAI said the new deal was worth $1.4 billion (Rs7,000 crore), which is its share of the Rs 10,000 crore contract. The Defence Research & Development Organisation gets the balance Rs3,000 crore.  

IAI said a part of the payment for the systems would be made during the development period, and the balance during the 66-month delivery period, Globes reported. According to the report, deliveries of the MRSAM would begin “90 months from the date the advance payment is received.” The report also said that no advance payment had yet been received.