End Of A Sordid Chapter, While A New Positive Chapter Begins

On January 25, 2019, when India and South Africa on formally agreed on a three-year programme to boost their two-decade-old strategic partnership in key areas such as trade, defence, maritime security and information technology (the “strategic programme of cooperation” was announced by Indian Prime Minister Narendra Modi and visiting South African President Cyril Ramaphosa after delegation-level talks at Hyderabad House in Delhi), it was indicative of formally ending a sordid and highly embarrassing fiasco, for which India’s UPA-1 government is the sole party to be blamed. Due credit for achieving such a success must also be given to the relentless and inexhaustible behind-the-scenes efforts of Ms. Ruchira Kamboj, High Commissioner for India to South Africa & Lesotho.

The needless fiasco was the creation of rival, offshore-based weapons import/export lobbies that was entirely successful for derailing for the next 13 years the growing India-South Africa cooperation in the arenas of military-technical and military-industrial cooperation that formally began in late 1995 when South Africa’s DENEL Group began cooperating with the Indian MoD-owned Combat Vehicles R & D Establishment for co-developing the ‘Bhim’ 155mm/52-cal tracked self-propelled howitzer (for which the CVRDE supplied the hull of the Arjun Mk.1 MBT while DENEL supplied and integrated the T-6 howitzer turret for/with the hull).

Fast-forward to June 1999, when against a requirement projected by the IA, the MoD concluded a contract with the NASCHEM subsidiary of DENEL in January 2000 for 7,300 rounds of 155mm illuminating rounds at a total cost of $11.98 million (Rs.52.47 crore). Subsequent audit scrutiny by the CAG revealed that:

(A) At the time of the induction of the 155mm/39-cal Bofors FH-77B towed howitzers in 1986, illuminating ammunition of only 18km range had been procured from Bofors. The requirement was changed in 1997 to 24km-range, which was then available only with NASCHEM, making it a single vendor situation.

(B) As against the rate of $1,440 per round inclusive of transfer of technology (ToT) for licenced-assembly by the MoD-owned Ordnance Factory Board (OFB), which had been contracted for by the MoD with the NASCHEM subsidiary of DENEL in 1997, the MoD contracted a rate of $1,641 in January 2000 (without ToT). The escalation of 14% over two years in US$ terms with no ToT rights appeared high and partly attributable to the weak negotiating position because of a single vendor situation.

(C) In the follow-up to the ToT contracted for in 1997, the OFB had taken steps to create industrial facilities for licenced-manufacture of the 24km-range illuminating rounds and reported in August 2000 that it could start production by December 2000. However, no orders were placed.

(D) Although the requirement was projected in June 1999, the contract was concluded only in January 2000, with the deliveries commencing only in May 2000.

Against a requirement projected by the IA mid-June 1999 for OP Vijay, a contract was concluded with Electronics Corporation of India Ltd (ECIL) in October 1999 for 67,000 electronic fuzes for 155mm artillery rounds and 400 fuze-setters at a total cost of Rs.81.59 crore. The fuzes were to be imported/assembled from components imported from the REUTECH subsidiary of DENEL. Approval of the Defence Secretary was obtained based on the technical offer of ECIL, which indicated that the fuzes would not be of a vintage earlier than 1994. As per the contract, the delivery was to begin in October 1999. After failing to adhere to this time schedule, ECIL made a request in November 1999 for the supply of one category of fuzes (M-8513) of 1989 to 1992 vintage being held by the South African Army as against the 1994 vintage indicated in the technical offer. The approval was communicated by ECIL to REUTECH in May 2000. Subsequent audit scrutiny revealed the following:

(A) The technical offer from the ECIL/REUTECH team had indicated that the M-8513 fuzes would have a minimum shelf-life of 10 years without deterioration when stored under controlled “arsenal magazine storage condition” i.e. 21 +/- 2 degree Celsius and relative humidity not greater than 60% and six months when stored in open terrain. However, based on the submissions made by ECIL during negotiations, the contract indicated a shelf life of 15 years. Therefore, in terms of the technical offer, the 6,118 fuzes of 1989 and 1990 vintage proposed in November 1999 to be supplied had completed their shelf-life and the balance 8,882 fuzes would be completing their shelf-life within the next two years.

(B) In fact, even before the MoD had accorded the approval to the proposal, the ECIL/REUTECH team had supplied 15,000 fuzes of 1989-1990 vintage in December 1999 and 95% of the contracted amount for these fuzes (Rs.17.27 crore) was paid to the team. The MoD was only able to withhold the balance 5% and negotiate it as a discount.

(C) The interest of the MoD was sought to be protected by obtaining a corporate bank guarantee worded in very general terms stipulating that the ECIL/REUTECH team would undertake to perform its obligations under the contract. No signed corporate guarantee was, however, available in the records of the MoD furnished to the CAG for auditing in April 2001. In this context, is is pertinent to note that ECIL is a company wholly owned by the Government of India and the final obligation would ultimately vest with the Govt of India itself.

(D) While the original approval was accorded by the Defence Secretary, being the competent financial authority, the decision for accepting fuzes worth Rs.17.27 crore of such vintage was taken by the Joint Secretary himself. In any case, the first lot of fuzes of the old vintage came only towards the end of December 1999. But since OP Vijay was over by August 1999, this merely resulted in transfer of old fuzes from the stockpiles of the South African Army to the IA at a cost of Rs.17.27 crore to the Consolidated Fund of India.

The MoD concluded a contract in July 1999 with the Mechem subsidiary of DENEL Denel for the supply of 100 NTW-20 Anti Material Rifles (AMR) and 1 lakh rounds of ammunition (14.5mm and 20mm) at a total cost of US$5.4 million (Rs.23.22 crore). Even though the AMR fell short of the range specified in the GSQR by 24% and there was no assurance regarding performance of the 20mm ammunition (which had only been designed for altitudes up to 6,500 feet ASL), the AMR and its ammunition were selected in view of the then-prevailing operational urgency (due to OP Vijay). The AMRs also did not have a carrying handle, open telescopic day sight and a compatible night-sight, which were recommended for inclusion in the contract by Indian Army (IA) Headquarters. Subsequent audit scrutiny by India’s Comptroller & Auditor-General (CAG) revealed that acceptance of the equipment could not serve the operational requirements of OP Vijay as the delivery of the first six AMRs scheduled within 15 days of the signing of the contract actually came only in December 1999, several months. Another 35 AMRs with 1 lakh rounds of ammunitions came only in March/May 2000. The balance came later. Audit scrutiny further revealed that the modifications pertaining to night-sight and carrying handle were never made in the contract. Inspection of the AMRs in June 2000 revealed that they had been supplied without the telescopic open sight and that the conversion kit for the 14.5mm barrel lacked accuracy. The AMRs were, therefore, not cleared for issue. The MoD stated in August 2001 that IA HQ had informed it that the Directorate General for Quality Assurance (DGQA) had cleared the NTW-20s for service-induction in November 2000.

Against an urgent requirement projected by the IA on June 17, 1999) for 155mm red-phosphorous rounds to gain the advantage of incendiary effects in addition to smokescreen-laying during OP Vijay, a contract was concluded in August 1999 with NASCHEM for 9,000 rounds at a total cost of $12.69 million (Rs.55.1 crore). A technical delegation of the MoD and IA had visited South Africa in June/July 1999 and cleared NASCHEM as a single vendor. The contract also envisaged free ToT to be finalised with the OFB. Even though the ammunition was projected as required for OP Vijay, the contract concluded on August 20, 1999 stipulated the delivery of the first 1,200 rounds only four months after the export licence was obtained by Pretoria, and the balance from six to nine months. However, the first lot of 1,200 rounds were received at the Central Ammunition Depot at Pulgaon only in June 2000, 10 months after OP Vijay was over and the inspections had not been completed as of October 2000. The MoD intimated that the delay was caused primarily due to problems in getting chartered ships through the Ministry of Surface Transport for the consignments. CAG audit scrutiny revealed that this issue had been raised by NASCHEM during negotiations in July 1999 and steps could, therefore, have been taken by the MoD in advance to arrange emergency transportation of at least the first consignment. Alternatively, the problem in shipping should have been considered before deciding to source this ammunition, which was required urgently.

On November 29, 2001 the SOMCHEM subsidiary of DENEL was contracted to supply the OFB with a complete ToT package worth Rs.2,160 crore for setting up an industrial facility by November 2005 at Nalanda in Bihar’s Rajgir district for licence-producing 800.000 bi-modular charges (BMCS) per annum. However, the MoD in April 2005 blacklisted the entire DENEL Group after unsubstantiated allegations that it had paid kickbacks to Vara Associates, a company based in the Isle of Man, to help secure five contracts from India between July 1999 and April 2005, to supply the IA with 1,000 NTW-20 AMRs and more than 300,000 rounds of ammunition. No irregularities were found during subsequent investigations in South Africa, the Isle of Man, Switzerland, India and the UK. By the time DENEL was blacklisted by the MoD for no discernable reason, SOMCHEM had already passed on the industrial know-how to OFB for producing the BMCS modules, while 400 NTW-20s had been delivered by MECHEM. The contracts with India involved the supply of 700 NTW-20s off-the-shelf, plus knock-down kits for another 300 NTW-20s (for licenced-assembly by the OFB’s Trichy-based factory) and 398,000 rounds of ammunition.

The OFB Trichy-assembled NTW-20s are now known as the Vidhwansak multi-calibre AMR and contrary to widespread rumours, they have not been indigenised. The same goes for the Mk.1 AGLs supplied by MILKOR of South Africa, which were licence-assembled by OFB Trichy, while their 40mm grenade rounds are still being supplied in kit-form to a dehra Dun-based private company for final assembly.

Meanwhile, in order to replace SOMCHEM, Israeli Military Industries (IMI) was contracted in March 2009 to partner with OFB Nalanda for a Rs.1,200-crore project for producing the BMCS modules. In addition, IMI was contracted to partner with the OFB’s It is also in a joint venture with the OFB’s factory at Khamaria in Madhya Pradesh to make 155mm cargo ammunition (howitzer-delivered cluster munitions designed to maim hostile infantry forces. However, IMI too got blacklisted by the MoD in 2011, following which the OFB’s Nalanda-based factory is now scheduled for commissioning only in March 2019, when series-production of the BMCS modules (whose industrial know-how from SOMCHEM has since been mastered by the DRDO’s HEMRL) will commence.

The MoD announced on September 6, 2018 that it had formally terminated the blacklisting of the DENEL Group after the MoD and the “South African side” signed a “final settlement agreement” on July 19, 2018 following a South African delegation’s visit to India between July 16 and 19 July of the BRICS Summit. In a statement the MoD said that its decision 13 years after it had blacklisted DENEL came after inking a ‘Settlement Agreement’ under which DENEL waived off nearly $100 million that it would have been entitled to after arbitration proceedings following DENEL’s blacklisting. So now, in the words of President Ramaphosa, DENEL is now looking at a “result-oriented” partnership with India. It may be recalled that the strategic partnership between India and South Africa was established in March 1997. DENEL is thus now well-positioned to bag the contract for military-industrial cooperation with the OFB’s Khamaria-based factory for producing 155mm cargo rounds. In contrast, Pakistan Ordnance Factories had in 2014 teamed up with France’s Nexter Systems for licence-producing such rounds, while NORINCO of China began producing such rounds earlier this decade. To date, the OFB has succeeded ion producing only the following types of 155mm rounds:

155 mm SHELL HE 107

155 mm SHELL HE M 77B

155 mm SHELL HEER

155 mm SHELL SMOKE ER 24KM

SHELL 155 mm ILLUMINATING MIRA

SHELL 155 mm HE

SHELL 155 MM ILLUMINATING ERFB

SHELL 155 MM SCREENING SMOKE BE M2A2

155 mm HE ERFB BB

155 mm HE ERFB BT

155 mm HE-ER BASE BLEED PROJECTILE

Yet another lesser-known fact is that the SaabTech-supplied AMLCD-based display processors, radar warning receivers, laser warning receivers and missile approach warning systems found on-board the Dhruv WSI/Rudra and the Light Combat helicopter are in fact originally developed and built in South Africa by AVITRONICS, which is now a subsidiary of Saab. These very sensors are also on board the Su-30MKMs of the Royal Malaysian Air Force, while the AVITRONICS-developed-and-built laser warning receiver is part of TATA Power SED’s offer to install them on the IA’s T-90S MBTs as parts of Saab’s LEDS-150 active protection suite.

In addition, the health-and-usage monitoring suite (HUMS) on board the Indian Air Force’s Su-30MKI H-MRCAs and Hawk Mk.132 AJTs too are sourced from South Africa. For further details about them, read this:

http://trishulgroup.blogspot.com/2009/05/hums-for-su-30mki.html