South African arms maker Denel has little chance of winning more Indian contracts while government investigators look into allegations that the firm bribed officials to win a 2003 contract for anti-materiel rifles, Defence Ministry sources say.
Denel may even lose a multimillion dollar sole-source contract to provide about 180 155mm/52-caliber self-propelled howitzers to the Army, ministry officials said.
In a recent report, India’s Parliamentary Standing Committee on Defence expressed surprise that no field trials were conducted before the ministry approved the purchase, which is awaiting final approval by the Union Cabinet, a Defence Ministry official said.
“Denel was short-listed as the single vendor for the supply of 180 SP wheeled guns by the former National Democratic Alliance government based on a single-vendor selection,” the official said.
The parliament tabled the 80-page report, “Ministry of Defence Demand of Grants 2005-2006: Second Report,” on April 25.
The committee’s remarks, combined with the bribe allegation, almost ensures that Denel will not win the wheeled guns order.
In 2001, the ministry issued requests for proposals to 11 vendors for the program. Four of the five who responded were rejected after a technical evaluation of their proposals, leaving only Denel. Thus, no field trials were held to decide the suitability of the Denel gun, as is the ministry’s standard practice, the official said.
Denel is also competing against Sweden’s SWS Defense and Israel’s Soltamone for the Army’s upcoming purchase of 100 towed guns. Field trials were held in 2002 and 2003, with more to come.
“The Indian government will have no choice but to go in for a retendering for the purchase of the 180 wheeled guns and also for the towed guns,” a second Defence Ministry official said.
India will buy around 1,600 155mm guns for its artillery regiments in the next 15 years as it phases out older weapons.
Defense sources here in March predicted the gun deals would be rebid because officials with the ministry and the artillery directorate objected to the acquisition process used by the previous government. Artillery officials had complained that the use of a single vendor, Denel, elevated the price to about $5.5 million per gun, sources said. They noted that Russia’s Rosoboronex-port in 2000 offered to sell India 155mm MSTA 52-caliber guns for about $2.2 million per piece.
The Indian government on April 21 asked its Central Bureau of Investigation to look into the accusations leveled against Denel regarding the 2003 award of the contract for 200 anti-materiel rifles and 100,000 rounds of ammunition, and to establish the role of possible middlemen in the deal.
The allegation that Denel paid about $4.54 million to British firm Varas Associates to influence the tender in Denel’s favor first appeared in an April 17 story in the South African newspaper Cape Argus.
A Denel executive based here denied charges that the company ever paid money to influence an arms deal.
The Defence Ministry has asked the South African government and Denel to respond formally to its inquiries about the allegations, the first ministry official confirmed.
Defense analyst Sament Harish, a retired Indian Army captain, said this latest scandal could bring overseas acquisitions to a grinding halt if, in the wake of the controversy surrounding Denel, bureaucrats here become overly cautious about defense purchases. That could endanger New Delhi’s $2 billion Scorpene submarine deal with France and the purchase of much needed maritime surveillance aircraft for the Navy.
George Fernandes, who was India’s defense minister when the rifles deal was awarded, has said the charges are part of the United Progressive Alliance government’s “personal vendetta” against him for his opposition to the Congress Party, which leads the governing coalition. The Congress Party defeated Fernandes’ National Democratic Alliance government in May 2004 elections.
Denel also is linking up with the Indian Ordnance Factories Board to set up India’s 40th state-owned arms factory in the Nalanda district of Bihar state.