Army chief slams BEML on Tatra, awards it Rs 1,500-cr deal

[Kunal Biswas]

by Ajai Shukla
Business Standard, 31st May 12

The outgoing army chief, General V K Singh, claims he scuttled a Bharat Earth Movers Limited (BEML) bid to sell overpriced Tatra vehicles to the Indian Army. But, in February 2012, the army quietly signed a contract with BEML for an even larger and more controversial purchase: a $275-million (about Rs 1,500 crore) contract for 204 armoured recovery vehicles (ARVs).

Last week, the army chief declared in a television interview that he knew the WZT-3 ARV contract was a scam and BEML should be investigated in detail. He called the Tatra deal "a wake-up call for us to start examining other areas where things could have gone wrong".

But in February, BEML was nominated, without bidding, for the lucrative order for additional WZT-3 ARVs. Disregarded entirely was the fact that in three previous contracts for a total of 352 WZT-3 ARVs (44 in 1999; 80 in 2002; and 228 in 2005), BEML had disregarded the contractual stipulation to indigenise the ARV. Instead, the Indian defence public sector undertaking (DPSU) imported fully built ARVs from a Polish company, Bumar, fitted cosmetic Indian components and supplied these to the army.

The WZT-3 ARVs are essentially T-72 tanks kitted for repair and recovery, rather than for fighting. Instead of a gun and turret, the T-72 is fitted with a heavy-duty crane, winch and repair equipment. This allows the ARV to travel cross-country with tank columns, repairing tanks that break down.

The purchase of these essential vehicles has been fraught with controversy. In 2003, Brigadier Inder Mohan Singh was a Deputy Director General in the Master General of Ordnance (MGO) Branch, which handles the procurement of "in-service equipment," as the WZT-3 was since 1999. He has told Business Standard the tendering process was manipulated to ensure BEML emerged the lone bidder. The tender was sent out to only two PSUs, Bharat Heavy Electricals Ltd (BHEL) and BEML; only BEML bid. When Larsen & Toubro threw its hat in the ring, the defence ministry's acquisitions chief ruled it out as an "unsolicited bid". That left BEML, the single vendor, at liberty to dictate terms.


Top L&T officials verify this happened, though the company has declined to comment officially, since it had not been invited to bid.


Brig I M Singh says Ukraine then wrote in, offering their T-72 based ARV for trials. This was an attractive offer, since Ukraine was willing to use the T-72 chassis and running gear that India was already building near Chennai, while importing only the recovery gear. This, saysby Singh, would have made their ARV 30-40 per cent cheaper than the WZT-3. He put up an official proposal that the Ukrainian ARV be invited for trials, since this was a Rs 1,000-crore contract that should not go to a single bidder.

That idea was quickly shot down by the MGO himself, Lt General V K Jetley, whose brother, Colonel Virendar Jetley, had been employed by Bumar India, a joint venture between Bumar Poland and the New Delhi-based Chemon Group, headed by prominent Delhi cigar baron, Chetan Seth. "Within days, I was removed from the ARV cost negotiation committee," says Brig Singh.Chetan Seth, interviewed by Business Standard, confirms Col Virendar Jetley was his employee. However, he denies any influence was exercised.

Arms dealers have long sought a link with the MGO's office, which controls a large chunk of the defence budget.

The owner of Vectra, Ravi Rishi, now under the CBI scanner in the Tatra case, employed two successive MGOs soon after they retired: Lt Gen R I S Kahlon, from the time he retired till his death last year; and Lt Gen S J S Saighal, who hit the limelight when Eurocopter, which employed his brother, Lt Gen H S Saighal, won a massive Indian contract for 197 light helicopters. The defence ministry overturned that decision after rivals protested.

With the contract for 228 WZT-3 signed in 2005, Bumar Poland began sending shiploads of ARVs to Mumbai. While BEML was supposed to indigenise these quickly, Brig I M Singh says BEML did absolutely no work on the ARVs.

"The Bumar ARVs did not even go to the BEML plant. When the ship from Poland reached Mumbai, we would send drivers to unload the ARVs. They would load the ARVs onto a train to Ordnance Depot, Kirkee, from where the frontline units would collect them," says Brig Singh.

Chetan Seth admits the ARVs never went to BEML but claims some Indian parts would be fitted onto the ARVs in Ordnance Depot, Kirkee. "It took some time, but we indigenised drivers' periscope sights; drivers' adjustable seats; periscopes; and radios. We had a team of five Polish engineers in Kirkee," avers Seth.

Approached for comments, BEML chief, V R S Natarajan, said he would respond in a press conference once the army chief retired. When pressed for answers, he asked for an emailed list of questions, to which he has not responded.

Meanwhile, another Chetan Seth company, Optic Electronics, was providing an illustration of how "indigenisation" worked in the WZT-3.

According to a senior Chetan Seth employee, Optic Electronics functioned from an SEZ in Noida, importing surplus parts from East Europe depots, touching these up, and then re-exporting them at a 500 per cent profit.

"Optic Electronics would import the day sights for each WZT-3 ARV for $5,500. These stained, often rusty, parts would be cleaned up and re-exported to Bumar Poland for around $25,000. These would then be fitted onto the WZT-3," says the Seth employee on condition of anonymity.

Chetan Seth says he built day sights in partnership with a Polish company called PCO. He admits providing day sights for the WZT-3, but denies they were surplus parts from junkyards.


Ironically, the "indigenisation" of the WZT-3, which never crossed even 20 per cent, was being done through low-tech routes like ploughs, driver sights, towing ropes and seats, even as India was running a full T-72 tank manufacturing line at Heavy Vehicles Factory, Avadi, and building T-72 engines at the Engine Factory, Avadi.

Business Standard learned during a visit to Avadi last November that the Ordnance Factory Board (OFB) had quoted a price of Rs 40-50 lakh per engine for the WZT-3, but BEML rejected this as too high. Consequently, Bumar continues to source the engine from East Europe. The OFB's quote has also been rejected for the latest order for 204 WZT-3 ARVs, which bodes ill for any prospect of indigenisation.

The ministry of defence has not responded to an emailed request for comments.

From:
Broadsword: Army chief slams BEML on Tatra, awards it Rs 1,500-cr deal

 

[Ray]

CRIMINAL CASE FILED AGAINST TRUCK SCAMSTER RISHI IN CZECH ONE YEAR BACK
GENERAL V K SINGH'S CRUSADE AGAINST CORRUPTION DESERVES NATIONAL RECOGNITION
REFER Czech Position | Information for free people
It should be clear, by now to every moron who went on defending the government in the tussle between the army chief and the Minister that it was the General who upright and honest. And that he was made to pay the price for his honesty in trying to clean up the system.
Fighting corruption in the army is not easy. It means war on three different fronts. The politician who is above you, corrupt colleagues who are with you and the moneybags of the arms mafia. Fighting your own is very different from fighting the enemy.
And here we had the most comical situation of a honest general working under a honest Minister. It is a rarity. However, the clash of two honest personalities can be very dangerous, more so if one is manipulated by the corrupt.
Relations had not soured between the two, when the General reported the bribing incident to his Minister. Yet all that the Minister did was beat his forehead (for lack of a better phrase). Both admit to the reaction.
The Minister counseled that such people should be kept out and the General did not want to pursue the matter further.
While the General's reaction in being reluctant to take on senior colleagues is understandable, the reaction of the Minister is not.
Defence purchase falls within his domain. In the age of internet it was not difficult for anyone to know that Vectra of UK was not the producer of Tatra trucks but was a middleman. It was also not difficult to know that Tatra was a Czech company, the original manufacturer. It was also not difficult to know the price at which the trucks were being sold by Czeck company Tatra and the price paid by India.
All this information was with the General and that is why he did not sign on the purchase order and wanted to purchase the trucks directly. He knew that India had been procuring the trucks at more than twice the price sold by the parent company.
The General had done his homework. It may be a conjecture but there is reason to believe that he informed the Minster and the reason for keeping out the supplier was over invoicing of over 100% which would have compromised their integrity. It was also the reason for the Minister beating his forehead!
The scam was not in the bribe offered to the General but in the purchase price of the equipment. Could he or his advisers not understand this simple truth.
If a product was being bought at twice the price for which it was available in the open market then it does not require a genius to divine that bribes had been paid! Not only bribes but large bribes have been paid to lots of people because each one knows the quantum of profit being made by the middleman.
However only a small percentage of the bribe (which is large in absolute terms- 14 crores in this case) was to be paid to the men in uniform, which the General refused.
The large chunk of bribe was to be paid to those who were not in uniform. And all these persons were within the jurisdiction of the Minister.
Hence the matter was squarely within the domain of the Minister and it was a major omission on his part not to order investigation on defence purchase worth thousands of crores which were procured for twice the market price.
The scam has been going on for a decade and hence the unity of the political parties demanding the resignation of the General Singh.
Contrast the ignorance of the Minister with the discovery made by the author (with no resources or staff) in two hours of net surfing. The following information which is a news report from Czech republic is most damning:
Ravinder Kumar Rishi, the chief scamster in the deal, was not only swindling the Indian government but also the Czech government.
A criminal case was filed against him in the country where Tatra trucks were manufactured almost a year back for the supplies made to India!
The article dated 27/4/11 on a Czeck website states:

Tatra faces tunneling and tax evasion allegations

Anonymous plaintiff accuses the major owner and management of Tatra truck maker of tunneling profits and tax evasion
The management and a major shareholder in the iconic Czech truck producer Tatra face a criminal complaint for allegedly failing to ensure proper oversight of assets. The anonymous plaintiff claims that the sale of truck parts at knock-down prices to India via an intermediary British company has damaged the company.
Václav Láska, a former high-ranking police investigator, lawyer and one-time head of the local branch of watchdog Transparency International, has lodged a criminal complaint against the management of Tatra trucks and one of the firm's major shareholders, Indian businessman Ravinder Kumar Rishi, on behalf of plaintiffs who wish to remain anonymous due to fears of "labor persecution," the daily Právo reported on Wednesday.
Vectra allegedly profits from Tatra's loss

Since 2005, Tatra has supplied so-called complete knock-down kits (CKD), containing all the components of haulage to the Indian state-owned firm Beml Limited, which then assembles the vehicles in India. The transactions have been conducted through British-registered intermediary firm Vectra Limited, which, according to the charges, has frequently purchased the CKD kits at below production cost, thus causing losses to the Czech company running into millions of crowns.
"The Tatra company sells kits to the British company Vectra Limited without a profit margin, and even at prices lower than the cost of manufacturing. All margins from this business, i.e. all profits from these transactions, go only to the accounts of the British company," Láska told Právo. "The fact that the representatives of Tatra allow these transactions clearly contradicts the principles of sound economic governance."
Láska claims that between 2005 and 2010 Tatra lost around Kč 270 million in potential profit. The calculation is based on a profit margin of 10 percent per kit, which he says the management intentionally forfeited in order to sell the goods to Vectra Limited at a knock-down price. Láska also says that through the transactions the company also avoided paying tens of millions of crowns in tax.
"By transferring the considerable profits to the British company, the Tatra company reduced its income tax payments by tens of millions of crowns," Láska said.
Alleged misuse of information

Ravinder Kumar Rishi, deputy chairman of Tatra's supervisory board, is also the owner of Vectra Limited and thus de facto represents both Tatra and Vectra in business negotiations - and the transactions in question. According to Láska, Ravinder Kumar Rishi may have misused information in these business relations.
In 2010, Tatra supplied 600 CKD kits to the Indian company Beml - which assembles the trucks and has large orders with the Indian army - and according to Láska, Tatra has committed to deliver a further 460 kits this year. "If the criminal complaint is deemed to be justified, steps could be taken which will curtail further losses and also stop additional tax evasion," Láska told Právo
The question to be answered is this:
If a criminal complaint was filed against the company and Ravinder Kumar Rishi by the Czech republic for merely causing a loss of 10% on profits foregone due to under invoicing a year back, then what action did the Defence Minister take against Vectra which as a middleman had supplied trucks at more than 100% the amount for which Tatra sold in the open market? This scam was going on for the past ten years.
Rishi cheated Czechs by 10% but the Indians by more than 100%!
I will bet top dollar that the anonymous plaintiff referred to in the article is an Indian source who had no faith in the Indian system to act and therefore chose to go through the head of Transparency International.
Could it be the good General or a source close to him? Your guess is as good as mine!
It is difficult to believe that the Czech authorities did not correspond with the Indian government within the past one year. They do have an embassy in India! Where are the records of the correspondences?
The General was made to pay the price for his anti corruption crusade in the Sukhna land scam and the Adarsh Society scam, including the court marshalling of Lt. Gen. Avdesh Prakash, who was Military Secretary under Gen. Deepak Kapoor.
It is time that Mr Anthony realizes his mistake. He is surrounded by corrupt people who are using his reputation as a shield.
What is at stake is the loss of faith of the people in honest ministers. Manmohan Singh and then Mr Anthony! What good is the virtue of honesty? Is there any hope of redemption left for the country?
The General will go in a blaze of glory but the Minister will not.
And for those who are aligned with the arms mafia and ask for the reason as to why the General did not take action on the Tatra scam? Against whom would he take action? Procurement of defence equipment is not under his charge. Did you expect him to take on the retired generals and ex Chiefs who were paid off for signing the document that he refused to sign? Would there be any proof? Where would that get him? Would you take on a ex Defence Minister or a corrupt Minister in the Cabinet? Was the issue of Bofors pursued by the Army Chief?
A General is not a General if he is not a good tactician. General VK Singh proved to be a master tactician in the manner in which he took on the entire system of corruption in the Army and in the Ministry.
This General showed that he had earned all his stars. The nation could give him one more.
General VK Singh a big salute to you.
Even if you could not win the war against corruption with Anthony as your Minister!
In the end the General proved to the nation that even the most honest politician of our times is not good enough to prevent the huge corruption that infests defence deals.

 

[Ray]

Recd on email

Posted without comment so that in case somehow has an insight on this issue, they can let us know the reality.

 

[Bhadra]

recd on email

posted without comment so that in case somehow has an insight on this issue, they can let us know the reality.

it happens only in india !!

 

[Bhadra]

by ajai shukla
business standard, 31st may 12






from:
broadsword: Army chief slams beml on tatra, awards it rs 1,500-cr deal

slanted journalism of a very low standard !