India bans six defence firms for 10 years

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SME Times News Bureau | 06 Mar, 2012
Six defence firms, including four from abroad, were Monday banned from doing business with ordnance factories in India for the next 10 years for their alleged links to a graft case involving a former Ordnance Factory Board (OFB) chief.

Singapore Technologies Kinetics (STK), Israeli Military Industries (IMI), Germany's Rheinmetall Air Defence and Corporation Defence Russia, as also two Indian firms, were debarred from dealing with the OFB (rpt OFB) of the department of defence production under the defence ministry.

The Indian firms facing the action are New Delhi-based T.S. Kishan and Company Private Limited and Ludhiana-based R.K. Machine Tools Limited.

This would mean these firms can deal with other wings of the defence ministry.

When asked to clarify, officials said it was only "common sense" that other wings of the ministry may desist from dealing with these firms.

This is an interesting twist to the "debar" tale, because the IMI is the supplier of Travor rifles for Indian special forces and this procurement is not necessarily done through the OFB.

"The defence ministry today (Monday) decided to debar six firms from further business dealings with the OFB, Department of Defence Production, MoD, for a period of 10 years," defence ministry spokesperson Sitanshu Kar said in an official statement here.

This is only officialese to specify which wing of the ministry OFB belongs to.

The debarring of these six firms stems from the Central Bureau of Investigation (CBI) chargesheet against former OFB director general Sudipto Ghosh, and the probe agency's recommendation for blacklisting the six firms. The CBI had filed the chargesheet against Ghosh and several others involved in the graft case in June 2010.

"The firms were recommended for blacklisting by the CBI on the basis of evidence collected against them," Kar said.

"These firms were issued notice to show cause as to why action against them should not be taken consequent to the filing of the chargesheet in the case related to illegal gratification against Ghosh and others.

"The decision to debar them was taken today after taking into consideration their replies," Kar added.

The government had in June 2009 decided to put on hold all defence dealings with these companies that were named by the CBI in the graft case against Ghosh and recommended to the defence ministry that they be blacklisted.

However, some of the firms appealed against the decision and the Delhi High Court quashed the defence ministry order, noting that principles of natural justice were not followed by providing the companies an opportunity to be heard.

The government then issued show cause notices to the firms. After perusing their replies, the decision to ban them was taken.

As Bofors and Denel, two producers of artillery guns, were already banned in India, there were apprehensions in 2009 that halting defence business dealings with some of the firms, particularly STK and IMI, would impact the Indian Army's artillery modernisation programme.

At that time, the STK was ahead for the army's over $1 billion order for 155mm ultra- light howitzers for mountainous terrain. Since then, India has put in place processes to buy 145 of the M777 guns from BAE Systems stable through the government-to-government route from the US.

The IMI had, in April 2009, won a $300 million contract for building a chain of ordnance factories in Nalanda, Bihar, to manufacture ammunition for Bofors 155mm guns. The decision to debar IMI has resulted in the project being adversely affected.

T.S. Kishan and Company manufactures explosive shells for the 155mm Bofors guns through a tie-up with OFB.

R.K. Machine Tools is a supplier of components to the OFB such as 120mm shells and 155mm ammunition and flares for the artillery guns.