How to buy a battle-ready military

The defence procurement system needs radical reform to address corruption

In the media frenzy generated by General V.K. Singh's not-so-startling revelations, our genius for muddling issues and focussing on their more salacious aspects has once again become evident. Knee-jerk reactions, like the reference of the Tatra procurements to the CBI, will ensure the flaws in the decision-making process remain unaddressed and the opportunity for serious and radical systemic reforms is again passed over.

There are several distinct sets of issues the current episode throws up , all of which deserve separate analyses.This essay confines itself to the issue of corruption in defence procurements. Why does it occur and what is special about corruption in defence? Where does it occur and relatedly, how does it occur?

The issue of "why" is complex. Many reasons make it different from corruption elsewhere. The market is what is called monopsonistic, that is, a monopoly on the demand side, rather than the supply side, and monopolies of both kinds can be pernicious. Paradoxically, however, given the uncertainties and the whimsies of the market, the number of suppliers is also limited. This necessarily leads to an unhealthy relationship between the buyer and the supplier, which veers between being cosy and crony-like to being tense and adversarial. The risks involved are considerable and therefore the need for intermediation often necessary. Security concerns necessitate a veil of secrecy on defence acquisitions, making it difficult to apply the rules of transparency applicable elsewhere. Perversely, the need for confidentiality also becomes an excuse for conducting business in devious and furtive ways.

The nature of the market, therefore, is one that provides fertile breeding ground for corrupt practices. What increases the complexity is the tortuous system of procurement designed by the Indian bureaucracy on the famous CYA principle, which ensures that multiple opportunities for charging rent arise, and that this rent has to be paid and is paid, irrespective of who one chooses to buy from and irrespective of there being honest jokers in the pack at different levels. Procedures intended to prevent foul play ironically achieve the opposite, with illicit payments being made simply for play to happen — foul or fair.

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