Alarm bells have gone off in the Indian Air Force with the Ministry of Defence putting on hold all deals with leading engine manufacturer Rolls Royce, days after ordering a CBI probe into the allegations of bribery and corruption against the company.
The future operations of at least six types of aircraft in service with the Air Force and Navy — including Jaguar fighters, Embraer VVIP jets and Sea Harriers — are likely to be impacted with the annual contracts for repair and overhaul of engines being put on hold for the time being.
The decision to temporarily suspend all contracts with the engine manufacturer comes after the defence ministry expressed concern over the ongoing anti-corruption investigation into the company by the UK Serious Frauds Office (SFO) as well as red flags raised by Hindustan Aeronautics Limited (HAL) that conducted an internal probe after receiving several complaints.
MoD officials said the CBI had been asked to probe allegations of corruption against the company and look into all deals signed between Rolls Royce and HAL for discrepancies. These include deals for Hawk trainers as well as civilian contracts.
While maintenance contracts have been put on hold, IAF officials said the current contract was valid till the end of this month and that they had spares and other resources to maintain the fleet for now. Several military aircraft, including Avro, Hawk, Kirans, Sea Kings and C-130J, use these engines. The ministry is also seeking advice from the law ministry to ink any future contract, including the annual maintenance contracts, with the company.
The probe comes even as MoD officials said Rolls Royce admitted to hiring a private firm as a ‘commercial advisor’ for deals in India and that it was paid a certain percentage of the contract value. The ‘advisor’ has been identified as the Aashmore Private Limited company that is led by Singapore-based Ashok Patni.
Officials said Rolls Royce admitted in a communication to HAL in November 2013 that the advisor was hired to provide sales and logistic support as well as ‘strategic advice’ for the Indian market. However, sources said, the Rolls Royce’s view was that the company was hired only for advice and consultation for its civilian operations in India and not contracts for the defence forces.
As things stand, all defence contracts that Rolls Royce has inked with India between 2007 and 2011 have come under scrutiny. In addition, the defence ministry also asked for information from the UK where the SFO probe is under way. Arms agent Sudhir Choudhrie was arrested by the SFO last month as part of its investigation into Rolls Royce deals in Asia.
Sources said this was the first time Rolls Royce had made the disclosure that it hired a consultant in India, even though it was mandatory to make such disclosure. According to MoD officials, as part of a contract signed with HAL, Rolls Royce was sent a standard clause in November that asked for disclosure of any contract with individuals or companies for its dealings in India.
In December, said the officials, the company responded with details of its contracts with Aashmore, raising concern within HAL. This prompted the PSU to raise the matter with the MoD and a CBI probe was ordered.
“We will cooperate fully with the regulatory authorities and have repeatedly made clear that we will not tolerate misconduct of any sort,” Rolls Royce has said in a single-line statement on the matter.
BJP for court-monitored probe
The BJP Monday demanded a court-monitored CBI probe into the charges of bribery in the purchase of aircraft engine from Rolls Royce. BJP spokesperson Prakash Javadekar said: “UK Serious Fraud Office arrested arms dealer Sudhir Chaudhary and his son Bhanu, initiating investigation into allegations that the father-son duo acted as intermediaries of Rolls Royce. After this development, the Congress-led UPA government was forced to institute a CBI inquiry…” He added: “An investigation makes progress only if it is monitored by the courts, otherwise it becomes a cover-up operation. We demand a court-monitored probe into this.” Congress spokesperson Abhishek Singhvi, however, said: “It is important to clarify that the Congress has been uncompromising on allegations of corruption. An audit report of the HAL has simply led to a file noting after which the defence minister has already ordered an inquiry. This shows the commitment of the UPA government that whenever there is some prime facie allegation of wrongdoing, it is to be inquired into.” ENS