How trucks drove the Army bribe row

March 27, 2012
http://www.thehindu.com/news/national/article3251869.ece

In 1999, millions of Indians watched as batteries of Indian multi-barrel rocket launchers unleashed fearsome barrages against Pakistani positions on the Kargil heights — clearing the way for soldiers who had come under withering fire as they sought to claw their way up the mountains.

In an explosive interview to The Hindu published on Monday, Chief of the Army Staff General V.K. Singh said the Tatra trucks that carried those rockets were substandard and sold at exorbitant prices. He added that there was no proper facility where they could be serviced.

Had audiences watched the trucks carefully, they would have noticed that the driver sat on the left — an extraordinary testament to how much a vehicle that began to be produced in India in 1986 still relies on imported equipment.

Lieutenant-General (retd.) Tejinder Singh, a former intelligence officer who is alleged to have offered the Army chief a Rs. 14 crore bribe, is claimed to have been trying to make sure they kept being bought.

The politics of trucks

Tatra's fortunes in India have been tied to Ravi Rishi, a graduate of the Indian Institute of Technology in New Delhi who went on to own the London-headquartered consortium Vectra — a multinational conglomerate with interests in everything from private aviation to luxury apartments. Mr. Rishi's crown jewel, though, is his controlling interest in Tatra — a Czech firm he picked up cheap, amid the collapse of eastern Europe's arms industry after the cold war.

Founded in 1850, Tatra supplies trucks to at least 23 militaries, among them the United States, Israel, and Saudi Arabia. In 1973, Israel was so impressed by the Tatra trucks captured from its Arab adversaries that it began importing them, using Rumanian president Nicolai Ceausescu's cash-starved regime as a conduit.

In 1986, when India began a great wave of military modernisation, Mr. Rishi steered Prime Minister Rajiv Gandhi's government towards picking Tatra. Public sector giant BEML was given a licence to manufacture the trucks. In the years since, almost 7,000 have been built.

Mr. Rishi declined to be interviewed for this article. The Ministry of Defence, however, said on Monday it had not received a single complaint about the truck, a very different account to that given by Gen. Singh.

The sceptical General

Weeks after taking office, Gen. V.K. Singh stalled an order for 788 new Tatra trucks approved by his predecessor, arguing the vehicle was overpriced and underperformed. Earlier, as General Officer Commanding-in-Chief of the Eastern Army Command, General Singh had considered the competing claims of Ural, a Russian-Indian joint venture, and had been impressed.

In 2009, highly placed military sources said Gen. Singh had informally used two Ural trucks to ferry supplies to Sikkim. His staff reported the trucks were better-powered than their Tatra competitors.

Led by Kolkata-based businessman J.K. Saraf, Ural is a joint venture between Russian firm Uralaz and Mr. Saraf's Motijug industries, which manufactures heavy vehicles at Haldia, in West Bengal. Ural did not respond to e-mail seeking its comments.

Gen. Singh, as Chief of the Army Staff, wanted to give Ural and other firms a chance to bid for the Army's truck contracts. His decision to open up bidding is what, the General's aides claim, led to the effort to bribe him. Even though Tatra did not sell directly to the Army, they argue, it still sold high-priced components to BEML — and thus had an interest in ensuring the sales continued.

Hard questions

There's little doubt Tatra components seem overpriced: a jack, for example, costs Rs. 30,000. There are claims that Indian-made four-wheel drive platforms cost Rs. 18 lakh or less, to the Tatra's Rs. 80 lakh — and that the BEML-made Tatra sells for substantially more than it is available off the shelf abroad.

Like so much to do with military procurement, though, it is unclear if the high prices have to do with corruption — or India's complex defence procurement policies.

For one, indigenisation of the vehicle has gone slowly. Last year, BEML's director V.R.S. Natarajan said the Tatra was now 60 per cent Indian-made — up from 21 per cent in 2002. BEML finally began making its own Tatra engines in-house. The truck ought, however, to have been wholly Indian-made by now, leading to allegations that BEML is wilfully importing form Tatra at high cost.

“It's easy,” said a military engineer linked with BEML, disagreeing, “to point fingers, but these are complex financial questions. BEML, for example, imports left-hand drive axles, because setting up new ones for right-hand drive would cost hundreds of crores. There's no guarantee the Army will order enough trucks for that to make sense.”

High pricing has dogged almost all Indian efforts to indigenise complex foreign-made products, because of the enormous costs of setting up production lines to manufacture low volumes.

The Ministry of Defence has long argued these investments are worthwhile despite their costs, since they help India build up long-term industrial capacities with civilian technology spin-offs.

India's next order for Army trucks — some 1,500, to be tested rigorously and purchased through a competitive process — will establish whether it is possible to get better trucks for less money. It is unlikely, though, to address the larger problems that dog the acquisition process.