MoD, in key shift, will now penalise firms, not blacklist

The defence ministry will unveil a new blacklisting policy at the next Defence Acquisition Council meeting to be held in November, that will seek to levy penalties — graded from stiff to soft — on entities and individuals that are found violating Defence Procurement Procedure rules, sources told this newspaper.

The new policy, while promoting transparency and rationalisation of standards, will ensure that the armed forces are not crippled by lack of key defence products and equipment. Action against violators will comprise a mixture of heavy fines, graded blacklisting and other penalties.

On Tuesday, defence minister Manohar Parrikar gave an indication of what the new policy would be like. “The basic concept is anyone doing criminal activity in the nature of kickbacks normally should be punished with a ban. But in doing that, the extent of the ban is will be decided on the requirements of national security. Giving exemptions will also be based on national security considerations,” said Mr Parrikar.

“If I have a platform where the company has been banned, I can’t stop operating that platform as the company which supplied me the platform is now blacklisted. So whose loss is it You have to see national security considerations and not resort to knee-jerk reactions,” he said, adding the issues had already been discussed, and DAC members were fine-tuning the policy ahead of the next DAC meet.

India’s tough blacklisting norms, that prescribed a blanket ban on procurement of all products of a blacklisted firm, had severely handicapped defence procurement, impacting the government’s drive to modernise the armed forces.

The MoD has already permitted foreign defence firms to appoint “agents” to market their products to the armed forces, but with strict government oversight, that includes opening up of the company’s books to scrutiny and not allowing any success bonus or penalty fees, among other measures.

Earlier too, Mr Parrikar had voiced concerns over the indiscriminate blacklisting of firms supplying defence products over “small issues”. However, he had insisted that “serious crimes” should not go unpunished.