NEW DELHI: Fearing unmanageable defence scandals on the eve of general elections, the Union government has issued comprehensive guidelines to deal with two tainted Israeli firms that are dominant players in the Indian arms market. The guidelines put curbs on new deals with them, citing the ongoing CBI inquiry into the Barak scandal, in which the two firms, Israel Aerospace Industries (IAI) Ltd and Rafael, are involved.

It was only in August that the MoD (ministry of defence) got fresh vigilance clearance to go ahead with India's largest joint development project for missiles, with the same Israeli companies. This is a $2.5billion project to develop a new generation medium range surface-to-air missiles. And only a few weeks ago, the government approved purchase of Spyder quick reaction missiles for the Indian Air Force from the same firms. It remains to be seen if the Spyder will now be bought.

Besides, India has several other significant contracts or joint developments with the two firms.

The guidelines issued last week include a decision not to order any more Barak missiles though the Navy has been pressing for replenishing its stock of the ship-borne weapon system. The guidelines say the repeat order for missiles should not be issued because of the CBI probe into the original 1999-2000 deal, according to sources.

The CBI has reportedly found evidence that arms dealer Suresh Nanda, son of former navy chief Admiral SM Nanda, was paid commission by IAI and Rafael for the deal, and he, in turn, paid it to politicians and others.

The Barak scandal broke after Tehelka videotaped Samata Party leader RK Jain claiming that his party was paid money by Nanda to ensure the government bought the Barak system, which is jointly produced and supplied by IAI and Rafael. The CBI FIR had mentioned then defence minister George Fernandes, his companion Jaya Jaitley, then navy chief Admiral Sushil Kumar, Jain and Nanda among the accused. The investigations are under way.

The government guidelines say no tenders (request for proposals) should be issued to IAI and Rafael in single vendor situations until the cabinet committee on security takes a final decision. Recent years have seen a growing trend of Israeli companies, mostly IAI and Rafael, becoming single vendors for significant contracts. A host of such contracts have gone to them, most prominent of them being the controversial Barak deal.

In cases of multi-vendor deals, the MoD has said the RFPs could be issued to both IAI and Rafael but will have to be withdrawn if the CBI files a chargesheet showing "incriminating evidence" against the companies in the Barak case. Besides, even if one of the two firms is selected, the ministry will have to obtain a fresh vigilance approval.
Where the RFPs have already been issued or where schemes are at various stages of procurement involving the two Israeli companies, the process will continue. But the vigilance status of all such cases has to be "reviewed", the government has said.

The government move comes at a time when the joint development of a new generation Barak missile for the Indian Navy is under way. Several DRDO scientists are in Israel working on the project.

The Israeli firms had received unusually kind treatment from the government despite the CBI finding preliminary evidence of corruption in the Barak deal. In the past, as soon as allegations surfaced the government has prohibited all dealings with the firm concerned- Germanys submarine maker HDW, Swedens Bofors, and South African firm Denel have been dealt with in such strict fashion.

Source : DNA