The Rediff Investigation/ Rajesh Ramachandran
Seven years, Rs 500 million later, Army yet to receive defence material
Here is the latest skeleton to tumble out of the P V Narasimha Rao government's cupboard: more than Rs 500 million spent for nothing, that too despite a Cabinet minister's disapproval.
If in the urea scam, it was material worth more than Rs 10 billion that did not materialise even after payment, here it is defence equipment that did not reach Indian shores even after an advance payment of $ 10.63 million (Rs 276.3 million).
Curiously, after waiting in vain for a couple of years for the equipment to land, the Army subsequently did a volte-face, saying that the equipment it had
wanted all along was outdated.
The deal is seven years old. And it all began with Army Headquarters asking the defence ministry to procure 150 fire control systems, or FCSs, for its T-55 battle tanks in April 1990, from the Federal Directorate of Supply and Procurement, Yugoslavia.
The army's request came in the wake of an upgradation programme set up in the early 1980s, when it decided to source the much-needed FCSs from erstwhile Yugoslavia.
The upgradation programme meant that a newer, at least partially computerised, fire control system would be used for the T-55 tanks. A similar programme, called Project Rhino, for the modernisation of T-72 was initiated in the early eighties.
Project Rhino too got bogged down in the bureaucratic maze. Though the Army usually does its exhaustive equipment trials within a span of two or three summers, it takes much longer to get the ministry's green signal. And by then the equipment and its technology would have become obsolete.
The FCS is the most important electronic component of a tank, and decides its firepower. It controls the whole gamut of firing operations, like target selection, range estimation and determining the angle of projection of the gun.
The T-55 tanks, which saw action in the 1971 war, were inducted into the Army in the late 1960s and have no fire control system at all.
"Everything is left to the commanders' judgement and his experience. What we had was a graticule system, wherein we would have to aim with a telescope that has different marks for various ranges. The upgradation was essential to avoid the inaccuracy inherent in manual firing. We needed at least a partial resolution fire control system," a highly decorated armoured corps officer told Rediff On The NeT.
Though the tanks were procured from the former Soviet Union, it was not unusual to source components from Yugoslavia, since former Eastern Bloc countries had been producing various defence components for the Soviet Union.
The FDSP was chosen since India could do business on its own terms: deferred payment, credit facilities and sometimes even rupee payment.
But the defence ministry and the Army, while deciding on the source, did not gauge the political mood in that country. In fact, when the proposal came up before the then defence minister, Sharad Pawar, in June 1991, he disagreed with the idea of risking a deal with the politically unstable East European country.
Yet, the ministry bypassed his dissenting note and approved the Army's proposal in July 1991.
It is learned that the defence ministry sought advice from the external affairs ministry, the Yugoslavian government and the Indian mission there, and made out a better case in favour of the arms deal with Yugoslavia.
Pawar was then convinced of this point of view, and the contract was concluded in July itself for the supply of 150 FCSs at a cost of US $ 35.4 million. According to the contract, 30 per cent of the total amount was to be paid in advance, but only after obtaining a bank guarantee from the Yugoslavian national bank.
Yugoslavia was supposed to ship the first consignment of 20 FCSs within six months of getting the advance payment.
The advance, $ 10.63 million (Rs 276.3 million), was promptly paid in October 1991 against the bank guarantee, which was valid up to April 30, 1993.
As promised, the equipment was ready within six months. Yugoslavia asked the defence ministry in February 1992 to send a team to inspect the 20 FCSs before they were despatched to India.
Meanwhile, the situation in Yugoslavia worsened and the ministry could not send a team to inspect the consignments till June 1992. And in June, the United Nations clamped a trade embargo with Yugoslavia and nothing further could be done about the deal.
Back home Army HQ and the ministry did not encash the bank guarantee within the stipulated time frame.
The defence finance department, which was set up essentially to avoid the usual delays in dealing with the finance ministry, should have monitored the payment, in this case the encashment of the bank guarantee. But the department did not obviously find out why neither the money nor the equipment landed in India.
Officers who seek anonymity point out that a lapse definitely occurred, "by default or by design. If it is by default it shows that the system is not working; either way the concerned officers are answerable to the huge loss of money."
"It may be noticed that in spite of the disturbed situation in country A, it was possible to encash the bank guarantee before April 30, 1993, but no such action was taken or even contemplated," reveals the Comptroller and Auditor General's report which was tabled in both Houses of Parliament on June 9.
In February 1995, after the bank guarantee period elapsed, Army HQ informed the defencce ministry that it did not need the FCSs any longer as the technology involved in the equipment was outdated, and instead it needed the Thermal Imager Stand Alone Sight for the same amount earlier paid for the FCS.
Even the country's frontline tank, the T-72, does not have a full resolution fire control system or TISAS till date. The only tank that is supposed to have the TISAS is the MBT Arjun, but then the indigenous tank for the next century is mired in controversy for other reasons.
The latest generation fire control systems would have a laser range finder, instead of a manual operation, and would also calculate wind, temperature, pressure and humidity variations to deal with the situation electronically.
The Army's turnaround arouses suspicion, because no man or machine, not even a Shaktiman truck, is inducted into the army without General Staff Clearance -- the only exception being the Main Battle Tank Arjun.
Obviously the army gave the clearance for the Yugoslavian fire control system after the prescribed trials and test-runs.
"The fault is with the initial selection. Technology cannot change in three years, but your opinion can," says a retired armoured corps officer. What he leaves unsaid is that the reason could be extraneous considerations.
Officers involved in the Army's modernisation programmes allege that hefty kickbacks often play a key role while deciding what equipment should be bought from where.
The price could have also overridden quality considerations, as the Army always checks out with three or more vendors for whatever equipment it requires.
In this case, the Army was going in for upgrading an old fleet spending millions of rupees for fire control systems on a tank that would have cost less than a million apiece.
"It could also be because the FCS was the best available system then. I wouldn't say that it was a lapse on the part of the army. The technology getting outdated and the break-up of Yugoslavia, are all responsible for this freak incident where
everything was beyond anyone's control," is the other side of the story given by an officer who till recently headed one of the projects similar to Operation Rhino.
"By now the partial resolution fire control system is outdated. So when we gave a choice in 1995, we can only ask for the best. It is not a question of technology changing in three years. From the early eighties to 1995, the fire control system technology has had such a drastic change that we need a fire control system with a thermal imager," says the officer.
Thermal imager is the third generation system used to have a better view during night firing. The T-55s inducted in the sixties have an infra-red sight.
In the seventies, the image intensifier technology was introduced, and in the eighties the Western world had a breakthrough in thermal imaging technology, which identifies objects by calculating the heat reflected from the objects on view.
Thereafter, the attempt was to obtain TISAS from Yugoslavia against the advance payment of Rs 276.3 million. The UN trade embargo was lifted in March 1996, but yet there was no sign of the money or the equipment.
When the heat was turned on the ministry to come clean on the FCS deal early last year, the ministry came out with an excuse that it has got offers for the supply of various defence equipment from FDSP, and that it is processing the offers in consultation with the Army HQ.
But the CAG has called the deal "questionable". Apparently, the CAG was not offered any reason for the irresponsible handling of the matter that allowed the bank guarantee to lapse. The defence ministry spokesman had no comments to offer either, when contacted by Rediff On The NeT.
But the Yugoslavians still feel the deal could be redeemed. "They are not interested. Ask the Indian people why they don't want the equipment now. We are planning our president's visit to India this year and want to solve all these problems before that. Both sides have bona fide reasons. Believe me, there is nothing dirty in the deal. All this happened because of the trade embargo," says a highly placed source at the Yugoslavian embassy, who spoke on condition of anonymity.
Though the initial payment was Rs 276.3 million, CAG has come to the conclusion that "even if supplies take place for the entire amount now, the loss of interest for over seven years would be more than the principal."
And as long as there is no chance for the recovery of the advance amount paid, the total loss would be over Rs 500 million -- or, double the amount paid initially.
More than the money lost, the bigger embarrassment for the country is that if the T-55 tanks were pressed into service today, the men riding the machines would have to manage the firing manually.
The commander would spot the target, make a mental calculation, estimate the range, shout the range to the gunner who would repeat it and fire at the enemy -- who, in all probability, would be armed with the latest weaponry.
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