Thursday, May 5, 2016

Manohor Parrikar in Rajya Sabha: Waxes Eloquence on Agustawestland VVIP chopper deal (May 4, 2016)

Part 1 

(Speech of the Defence Minister Manohor Parrikar)

Sir, let me first make it very clear that whatever I am now putting before the House, if 
you require, I will authenticate it, I will certify it. It comes from the Ministry 
files. I will not take any names so that you don't get a reason for disturbing. I expected Mr. Singhvi to be present here.

 He must have lost lakhs of rupees in arguing a free case today. ...(Interruptions)... 
 I am, actually, praising him. You don't want him to be praised. ...(Interruptions)... 
 He is a very good lawyer and he puts up the case very strongly. So strongly that for quite some time, even I was getting convinced by the argument. Probably, I now understand how convincing he is. But, Sir, many times it so happens that if the...(Interruptions)... 
 He is a very good lawyer and he puts up the case very strongly. So strongly that for quite some time, even I was getting convinced by the argument. Probably, I now understand how convincing he is.

Sober but Raksha Mantri put across his point
                                  
But if the brief is very weak, even the best advocate can't win the case. 

While I was listening to him, I remembered a story which I had read in my childhood of Badshah Akbar and Birbal. One day it happened that a golden spoon was stolen from Badshah's mahal. He didn't want it to be given for criminal investigation at that time because that would put him in a very embarrassing situation. So he called Birbal and told him that someone has stolen a golden spoon from his cutlery. 

What do I do? 

Birbal told him, 'I will find out the solution. Get all the servants.' He called all the servants and gave them one feet long piece of bamboo and told them that it was a magic bamboo. He told them to take it home,  He told them that it was a magical bamboo piece. Everyone believed Birbal and they went home. 

The one who had stolen the golden spoon, was a worried man. He could not sleep up to 2 o' clock. Then he suddenly got an idea. He got up at 2 o'clock, brought a knife and cut his bamboo by four inches, .......(interruptions ....)

Next day morning, of course, he got caught. What I find in their argument is that they have cut all their bamboos by four inches. ...(Interruptions)... Sir, I am placing herein the statement of facts of the case in detail. .... A litany of omissions and commissions at various stages of the decision-making process indicates mala fide and corrupt actions, driven by the goal to favour a particular vendor. 

This has been recognised by the Italian court in their judgement. At the outset, it may be useful to highlight to hon. Members, some of the salient issues. ... 
                                                                                                                  

Creation of a single vendor scenario. At various stages from March, 2005 onwards, and despite specific direction to the contrary, ORs (Operational Requirements) and SQRs were set, amended and processes influenced to make AWIL, the "only alternative". Violation of accepted norms of procurement processes. Unusually, a 
large number of deviations approved, counter-party to the supply agreements and exceptional dilution of FET standards.

......for the then Indian authority to ask the CBI to investigate. ...(Interruptions)... 

Cancellation of deal spurred by actions of supplier. The Deal was cancelled by the Government of India under advice from the A.S.G., not as a suo motu action, but in response to the vendor, seeking the appointment of an arbitrator. ...(Interruptions)... 

Delay in action against the supplier Group. From the first media report, in February, 2012, the approval to cancel all dealings with the Group was given more than two 
years later on the eve of change in Government. ...(Interruptions)... In fact, 
the final order was given by the present Government. ........ 

It is also significant to note that the judgement of the Italian court which spurred action from the Government of India was... ...(Interruptions)... 

spurred action from Government of India 
was based inter alia on the CAG Report from India. 

...(Interruptions)... 

Conduct of trials in India is 
extremely critical, especially, for helicopters meant to carry VVIPs because the terrain, climate and topographic conditions greatly vary with those of 
USA and UK. This crucial aspect has been given a go-by by permitting trials 
in foreign lands. The serious nature of deviations from standard FET 
conditions for the AW-101 in terms of trials being held outside India and not 
on the actual helicopter was exacerbated by the fact that even at the time of 
FET, the Augusta Westland helicopter was in developmental stage. 
............ 

Mr. Deputy Chairman, Sir, this created some problems when the three 
helicopters were received and were being put on test trials. I will just read 
one para from a file of Air Force where the trials were taking place. I will 
read one para only. I quote, "At Srinagar, 5,400 feet above the sea level, effective payload of this helicopter is nil in OGL configuration at all ranges of temperature. Even in IGE configuration, a reduced payload is to be accepted. The common VVIP sorties to Nehru Helipad cannot be undertaken. Similar is the case of Gulmarg, Pahalgam where VVIP sorties have been flown in the past using Mi-17iv helicopter." This file luckily was saved from a devastating fire which took place on 3rd of June, 2014 which 
burnt down all the records in that particular office. But this file remained in 
the drawer of the officer. 

So, it survived. ...(Interruptions)... This could not 
be further verified because obviously the helicopter was stopped from 
testing after that. ...(Interruptions)... 

 Additional commercial quotes sought from both the vendors. Third, 
acceptance of the partial compliance of the two SQRs in respect of AW-101 
non-VIP version helicopter. Neither S-92 nor AW-101 fully complied with 
SQR in the FET. 

However, AW-101 was recommended for induction in spite 
of emerging as a single vendor by waiving off two parameters, while no such 
concession was granted to S-92. The warranty of 'three years/2000 hours 
whichever is earlier' on the airframe and 'three years/1200 hours whichever is 
earlier' on the engine offered by M/s Sikorsky and 'three years/900 hours 
whichever is earlier' offered on the whole helicopter by M/s AWIL was 
accepted instead of RFP stipulation of 'three years/900 hours whichever is later'. Acceptance of option clause for three years instead of five years. 

Inclusion of additional items such as Traffic Collision and Avoidance System, 
Enhanced Ground Proximity Warning System for all 12 helicopters and 
Medevac system for 8 VVIP helicopters at CNC stage. ...(Interruptions)... 
Deletion of Active Missile Approach Warning System, Incorporation of Rear 
Air Stairs in 04 non-VVIP helicopters. ...(Interruptions)... Completion of 
helicopter delivery in 39 months instead of 36 months. 

The accepted principle in procurement is that deviations must be approved only under exceptional circumstances, for robust rationale and exercising extreme caution. ...(Interruptions)... The numerous deviations approved appear to flout this norm, as has also been pointed out by the Comptroller and Auditor General in their report. 

That CAG Report has highlighted that the allowed offsets were not compliant with DPP and many Indian Offset Partners were not eligible. Augusta Westland gave a year-wise breakup of work from 2011 to 2014 to be executed by IDS Infotech under this 
offset programme even though the work has been completed well before the 
conclusion of the contract in 2010. 

Now, this is very important. Investigation in the matter so far revealed involvement of IDS Infotech as a conduit for transfer of bribe money. We have already got court orders on that too. I would explain what action we have taken on that. 
 The benchmark cost arrived by CNC was unreasonably high and had 
provided no realistic basis for price negotiations. The benchmark cost as 
worked out by CNC was Euro 727 million, approximately, Rs. 4,877.50 
cores, which is six times the estimated total project cost of Rs. 793 crores, 
in January, 2006, wherein the estimated unit cost of AW-101 – this is very 
important – was considered as Rs. 100 crore, approximately Euro 15 million, 
at the time of SOC. When the recommendation was given for acceptance of 
RFP, this was the price quoted by the Air Force – Rs. 100 crores, that is, 
Euro 15 million. The CAG Report has stated that the base price of US $ 27 
million for the year 2000 was adopted by CNC, while the base price of AW- 101 VIP helicopter was US $ 18.2 million in the year 2010, as seen from the Internet. 

                                               
                                                      (BJP MP created Swamy-phobia in Rajya Sabha)  

Even the Air Force has estimated it as 15  million dollars in 2006. It is there on the records....
I am reading from the CAG Report. I would provide whatever clarifications you may need later. ...(Interruptions)...  MoF, in their observation on CCS note, stated that they are unable to support the proposal. The Ministry of Finance also asked that a response to the letter of the MP, Nathubhai G. Patel to the CVC may be 
incorporated in the final CCS note along with MoD’s response thereon. 

Similar concerns were raised by the MP before the CVC, stating that 
the case is in violation of CVC norms. The CCS approved the proposal for procurement of 12 VVIP and VIP helicopters from Messrs Augusta Westland, UK, in the meeting held on 18th January, 2010, for the following reasons:

(i) Augusta Westland helicopters have been selected after multivendor competition bid, for which RFPs have been issued to six vendors, out of which only two vendors responded. (ii) Augusta Westland helicopter was the only helicopter that met the SQRs framed for the VVIP version and the operational requirements of the IAF. The other helicopters participating in the trial did not meet the SQR. (iii) The present fleet of VVIP helicopters will complete their total technical life in the year 2010.


Even the deliveries of three helicopters 
were accepted in December, 2012. ...(Interruptions)... Only on 
receiving the reports of arrests of M/s. Finmeccanica Chief, Mr. Orsi, 
the Ministry of Defence, on 12th February, 2013, asked the CBI to 
conduct an inquiry into the matter. ...(Interruptions)... 
  
The operation of the agreement was put 
on hold and payments stopped with issuance of the first Show Cause 
Notice (SCN) to M/s. AWIL, UK, on 15.02.2013. ...(Interruptions)... 
  
The Italian authorities commenced criminal proceedings from 19th June, 2013, at the Court of Busto Arsizio, Milan, in this case. The documents obtained through these proceedings have been shared with the CBI and the ED. ...(Interruptions)... Some of the documents so received were used in taking action for cancellation of contract. ...(Interruptions)... These documents included a classified document titled 'Revised Operational Requirements for VVIP helicopters'. ...(Interruptions)... 

After consultation with ASG, a Second SCN was issued to M/s AWIL, UK on 
21.10.2013. M/s AWIL, UK raised the issue of going for arbitration in the letter dated 4.10.2013, and, again in the response dated 25.11.2013 to the 

A global RPF was issued to eleven vendors on 20th March, 2002. The technical evaluation ...(Interruptions)... The Technical Evaluation Committee shortlisted three vendors viz., MI- 172, EC-225, and EH-101. The flight evaluation of EH-101 could not be done as the helicopter was not certified for an altitude of 6,000 meters. There was a mention that this did not participate. They did participate, but it was not certified for an altitude of 6,000 meters, as a mandatory operational requirement. 

The EH-101 helicopter was later renamed as AW101 of AgustaWestland. After flight evaluation, only EC-225 was found suitable for acquisition, as it had met all mandatory operational requirements. The PMO, in December, 2003 – I am confirming that – observed that the framing of mandatory ORs has effectively led to acquisition into a singlevendor situation. It was inter alia considered to make the operational altitude of 4,500 meters as mandatory and a higher flying ceiling of 6,000 meters and a cabin height of 1.8 meter as desirable operational requirement, 'desirable'. 


                                     

From 2005 onwards, a series of measures were taken by the then Government which resulted in eventual acquisition of AW helicopter. These steps constituted a subject matter of stringent criticism by the Comptroller and Auditor General of India. And, tragically, the motives behind these decisions are today being doubted by the entire nation. As I said in my opening remarks, the fact that there was corruption in the matter is brought out in extensive details – Mr. Antony himself said that there was corruption – in recent judgements of Milan High Court. 

It dominates our public discourse. Sadly, it has also dented the country's image and standing in the world. The country wants to know as to who instigated, who supported and who benefited from the corruption. We cannot let this pass. On 1st March, 2005, a meeting was chaired by the National Security Advisor. As I said, this was during UPA-I. The PMO wherein it was inter alia agreed that the ORs should broadly confirm to the parameters of MI-8 helicopters. It was also agreed that the Defence Secretary would take a meeting with participation of the Air Force, the SPG and the Secretary (Security) to draw up the operational specifications and the single-vendor situation should be avoided. 

The ORs were accordingly finalized in a meeting chaired by the Defence Secretary on 9th May, 2005. (Contd. by 4k _ PK) -USY/PK-GS/6.40/4K SHRI MANOHAR PARRIKAR (CONTD.): The cabin height of 1.8 metres was made mandatory in the revised Service Quality Requirements. ...(Interruptions).. The acceptance of necessity for the procurement of 12 helicopters at Rs.793 crores was accorded by the Defence Acquisition Council on 3rd January, 2006, under 'Buy' category with 30 per cent offsets. The Request for Proposals was subsequently issued to six vendors -- -- including M/s AgustaWestland, Italy, on 27th September, 2006. 

(to be continued.......in part 2)


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