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Ban period for blacklisted defence companies reduced to five years
The new rules will apply to both Indian and foreign firms and agents or employees of companies found to be directly involved in the corrupt act will be barred for life from dealing with the ministry of defence.
NEW DELHI: In its new policy for penalties on defence companies for indulging in corrupt practices, the government had reduced the ban period for serious defaulters to five years from the existing 10 and has given the forces flexibility on dealing with barred entities in case the equipment required is of a critical nature.
The defence ministry quietly released its new policy titled ‘Guidelines of the Ministry of Defence for Penalties in Business Dealings with Entities’ on Monday that says its aim is to ensure probity and transparency into defence deals.
The new rules will apply to both Indian and foreign firms and agents or employees of companies found to be directly involved in the corrupt act will be barred for life from dealing with the ministry of defence.
“The procurement process needs to proceed without loss of credibility and therefore there is a need to put in place appropriate measures to deal with acts of impropriety,” the policy, which has been in the works for almost two years reads.
The policy will apply to companies accused of impropriety and could be extended to their allied firms as well, such as subsidiaries and partners with the approval of the defence minister.
Listing out six reasons for which companies can get banned, the policy says that violating the integrity pact, indulging in corrupt practices and endangering national security would be treated with most seriously while non-performance and any other grounds would invite a less harsh penalty.
Foreign companies will initially be suspended for six months if the defence ministry feels that allegations of corruption against them are serious. This ban will be reviewed every six months and would in most cases not extend beyond a total period of five years. This is a major change from the earlier policy when companies were debarred for a minimum period of 10 years for corrupt practices.
Such companies will not be allowed to participate in defence ministry orders and the ban can be extended to their partner companies as well by the defence ministry. For the lesser offence of nonperformance, the ban would not exceed three years.
Flexibility has, however, been given to the forces to deal with even banned entities if the need is critical. Banned companies, for example, may be allowed to sell a product if there is no alternative source of supply. Also, in cases where the company has already transferred technology, the product line will not be impacted. The defence ministry will from now on maintain an updated list of banned or suspended entities.
The new policy has been brought out after a crippling blow to the armed forces over the past five years due to a number of foreign companies been banned for corruption. In the resultant situation, the armed forces were left with limited choice to choose suppliers as several large companies were on the blacklist.