India

The Army and Air Force (Disposal of Private Property) Act 1950 sets out measures and oversight of asset disposals, however there is little publicly available detail on these. The Institute of Chartered Accountants of India provides accounting standards for asset disposals which are provided on the website of the Ministry of Corporate Affairs, but it is not clear if these are used by the Ministry of Defence. There is an online platform asking for tenders for procurement and disposal of property on the Indian army’s website, which appears to be geared more towards procurement, however.

Corruption in selling service weapons through illegal markets has been alleged, which is indicative of the strength of controls. In one case reported in 2009, 41 army officers in Rajasthan bought prohibited arms from ordnance factories at cheap prices and sold them in the grey market with the help of arms dealers. In another, four high-profile generals face an official investigation into charges that they gave the go-ahead for a builder to acquire a 70-acre (30-hectare) plot of army land at a throwaway price in the Himalayan resort of Darjeeling. Further, a PIL filed lawyer in 2013 highlighted the arms racket carried out by Army personnel. The Supreme Court questioned the Army over light punishments given to its officers for illegally selling service weapons and ammunition to arms dealers and private persons.In another case reported in 2014, 72 officers and 1 Junior Commissioned Officer (JCO) were found guilty of selling Non-Service Pattern (NSP) weapons to arms dealers.

The Government of India Press Bureau reports that after the last case &quoute;A revised Standard Operating Procedure (SOP) on sale / disposal of Non Standard Pattern (NSP) weapons&quoute; was issued to prevent recurrences to corruption.

A detailed list of proceeds of asset disposals could not be found nor do financial statements and annual reports provide such information. Reports by the Comptroller and Auditor General do provide some aggregated information on asset disposals, however.

Response to Peer Reviewer 1: Specific examples of corruption cases related to asset disposals have been added. Score lowered from 3 to 2.

(Relevant information from Peer Reviewer 2 has been added to the main answer)

The Comptroller and Auditor General (CAG) undertakes audits of asset disposals with financial regularity and performance audits. This is an independent entity as a Constitutional body and its reports are made available online. As mentioned in the comments for the previous question, aggregated information is made available on asset disposals in CAG reports.

Response to Peer Reviewer 1: The previous question relates to the procedures of assets disposals, controls over it and the public disclosure of related information. Here, given audits of asset disposals are conducted regularly and made public, score 4 is justified and maintained.

The percentage of defence and security expenditure in the budget year dedicated to spending on secret items relating to national security and the intelligence services is not publicly available.

There is no specific information on the level of information regarding &quoute;secret&quoute; expenditure which is subject to legislative oversight.

The legislature is provided with information for the budget year, which is is sent to the Lok Sabha defence committee, which looks at the requests for grants from the Ministry of Defence. The two main heads in the budget documents are Capital and Revenue, with some details about equipment bought. Information related to items relating to national security and military intelligence are likely to be concealed in budget heads for different sectors. For instance in 2011, a full Rs 71,547 crore of direct defence expenditure has been reflected under other heads. This includes atomic energy, Border Roads Development, central police and paramilitary forces, allocations to the Department of Space &quoute;despite frequent international allegations of technology leakage into the Defence Research and Development Organsiation’s military missile programme&quoute;.

As discussed in Question 19, information related to the budgets of intelligence agencies does not appear to be subject to parliamentary oversight and these details are not included in the information sent to the legislature. Additionally, Secret Service Funds (SSF), which should be included in the scope of this question, are reportedly not subject to parliamentary oversight either.

Response to Peer Reviewer 2: Accepted. Additional information added and score lowered from 3 to 1.

The Comptroller and Auditor General (CAG) has audit jurisdiction for all government departments and ministries, and therefore it bears responsibility for receiving audit reports for some of the accounts of the security sector. As discussed in the previous question, information related to items relating to national security and military intelligence are likely to be concealed in budget heads for different sectors. However, debate in the legislature about their contents is restricted for security reasons. The excerpts of these reports are attached to the Ministry of Defence’s Annual Report, as an Annex, and this is publicly available online.

A Directorate General of Accounts (DAC) is reponsible for the oversight of the accounts of intelligence agencies. Although the accounts are drawn up as per the general procedures followed in other government departments, it receives allocations in the form of lump sums from two to three different budgetary sources, to conceal information in the interest of national security. Powers of audit are vested with the DAC instead of the CAG for greater secrecy and it produces reports, including an annual audit report which is reportedly not subject to oversight beyond the Secretary of the Research & Analysis Wing (RAW). Secret Service Funds (SSF) are outside the scope of audit and only a certifcate of use is to be submitted. According to IDSA (2012), &quoute;the SSF portion has been steadily increasing and its unutilised
component never gets surrendered, whereas other funds lapse if the project for which they are sanctioned remains unimplemented&quoute;.

Response to Peer Reviewer 1: Clarifications have been made.

Requests by the military can reportedly supplement the budget and there is evidence of extra-budgetary sources of military spending. Examples include the defence pension bill, budget for atomic energy, Border Roads Development (shown under the Ministry of Road Transport and Highways), central police and paramilitary forces for border security and counter-insurgency operations (shown under Ministry of Home Affairs), day-to day policing and allocation to the Department of Space, despite frequent international allegations of technology leakage into the Defence Research and Development Organisation’s military missile programme.

Moreover, as per Gilboy and Heginbotham, India displays a certain degree of non-transparency in defence spending and reporting, with off-budget items constituting a significant amount, which if added would bring total Indian defence spending to 1.3 times the official budget in 2005 and 1.4 times in 2010 (not including nuclear weapons, space and intelligence programs). The largest spending categories not included in the official budget are military pensions, paramilitary forces, defence related R&D.

Response to Peer Reviewers: Relevant information added to the main answer and score decreased from 3 to 2.

There is evidence of off-budget expenditure including the defence pension bill, budget for atomic energy, Border Roads Development (shown under the Ministry of Road Transport and Highways), central police and paramilitary forces for border security and counter-insurgency operations (shown under Ministry of Home Affairs), day-to day policing and allocation to the Department of Space, despite frequent international allegations of technology leakage into the Defence Research and Development Organsiation’s military missile programme.

According to Gilboy and Heginbotham (2012), India displays a certain degree of non-transparency in defence spending and reporting, with off-budget items constituting a significant amount, which if added would bring total Indian defence spending to 1.3 times the official budget in 2005 and 1.4 times in 2010 (not including nuclear weapons, space and intelligence programs). The largest spending categories not included in the official budget are military pensions, paramilitary forces, defence related R&D.

However, they estimate that the discrepancies between official and actual spending have more to do with bureaucratic budgetary divisions than with a concerted effort to hide. For instance paramilitary spending is listed in officially published budgets but not in consolidated defence budget due to different agencies involved. Further Indian spending is non-transparent in nuclear weapons program, intelligence programs, the full extent of defence related R&D, state assistance to defence industrial base, and to a lesser extent arms import costs.

It is difficult to analyse the limits of these budgets. In the past, budgets have been spent on military land for golf courses, misappropriation in government stores and suspected fraud in reimbursing customs duty to suppliers.

The Right to Information Act, 2005, regulates the classification of information by law. Under Section 8(I)(a), if information affects certain issues then its disclosure to citizens is not obligated. These issues include: the sovereignty and integrity of India, security strategic, scientific or economic interests of the State, relations with foreign states or the incitement of an offence. Information received in confidence from foreign governments is protected under Section 8(I)(f), and information that would endanger the physical safety or life of someone is protected under Section 8(I)(g). The Central Information Commission was created by the Act under Chapter III s.12. The Official Secrets Act, 1923, (OSA) is a law that came from the colonial period that outlines how national security issues should be dealt with, and it is considered to have weakened the Right to Information Act. The purpose of the OSA is to outline the criminal offences against espionage and to specify which documents are essential for national integrity. It can also extend to private organisations handling strategic matters in association with the government, according to legal experts. Some evidence can be found for the OSA’s misuse and limiting effect on the RTI Act.

Well known cases where the use of the OSA has been allegedly misused are those involving Santanu Saikia (who was arrested in the 1990s and recently again in 2015) and Iftikhar Gilani (2002). Gilani, in reference to Saikia’s recent arrest said, “The biggest problem is that people at the clerical level decide what document comes under this Act. This arbitrary power should be withdrawn and if there is anything which undermines the security of the country, it should be properly codified&quoute;.

In October 2014, the government's national security advisor, Ajit Doval, wrote to the cabinet secretary, Ajit Seth, raising concerns about an instance of classified information relating to warship INS Arihant finding its way into a television report.

Further, a senior official from a regulatory organisation said “All decisions must be transparent and must be disseminated to all. However, the decision making process itself should be confidential.”

The important thing to note here is that there does not seem to be evidence for &quoute;effective scrutiny&quoute; over the provisions made for classification of information relating to national security. In the event that a case reaches a court of law, it depends on the judiciary to interpret and in such regard, the law provides the framework. However, there does not seem to be an active legal regulation of the process of such classification, and in that sense it may well be within the decision-making of agencies and/or individuals.

Public sector undertakings are a method in which defence and security entities own significant commercial businesses. The detail on their operations and finances are published and available publicly. The Comptroller Auditor General (CAG) has highlighted companies using defence land for their operations, which is very opaque, although no evidence exists that the defence institutions own parts of the companies.

Public sector undertakings (PSU) are companies of which the government owns a majority stake (51 per cent or above). The PSUs of the Indian Government are administered through the Ministry of Defence and its Department of Defence Production. These commercial interests are substantial and beneficial, and they include: Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), Bharat Earth Movers Limited (BEML), Mazagon Dock Limited (MDL), Garden Reach Shipbuilders & Engineers Limited (GRSE), Goa Sihipyard Limited (GSL), Bharat Dynamics Limited (BDL), Mishra Dhatu Nigam Limited (MIDHANI), Hindustan Shipyard Limited, and Ordnance Factory Board. The details of ownership and finances are publicly declared and published on companies’ websites, for example, the BEML website.

The MoD is India's largest landowner. Instances of exploiting defence land commercially and allowing commercial businesses to function on such government land have been reported in earlier Audit Reports of the Comptroller and Auditor General of India. In Agra, Lucknow, Pune and Secunderabad 122.58 acres of Defence land had been leased out to various clubs at nominal rates for unauthorised commercial purposes like marriages, parties, and exhibitions. There is, however, no evidence of these businesses being directly owned by defence institutions.

The Army Zone Golf is a private registered entity, which was set up to run golf courses whilst employing personnel from the services. Since golf is not recognised as an official military activity, this is not an authorised practice. The golf courses were &quoute;prohibited&quoute;, and many of them were on land designated for training - so not publicly declared as to what they were used for. A Public Accounts Committee report called on the Indian defence ministry to hold an inquiry into how military land had been turned into private golf clubs which sold memberships to civilians and foreign diplomats. According to the committee, club houses had been hired out to civilians as wedding and party venues but the funds generated had not been declared or passed to the government.

While the Comptroller and the Auditor General’s (CAG) publishes a report of military estates management, audit of military owned businesses and those on defence land is not available within it and public information on the same is often not detailed. Some evidence has been presented to show that Air Force officials in Bangalore have used defence land for activities such as shopping complexes, private engineering colleges, cinema hall and banks, all of which are unauthorised, although details have not been provided for audit.

The Army Zone Golf is a private registered entity, which was set up to run golf courses whilst employing personnel from the services. Since golf is not recognised as an official military activity, this is not an authorised practice. In March 2011 there were 97 courses under the Army 8,076.94 acres. Information on a further 18 golf courses was not given to the CAG.

From &quoute;gross misuse&quoute; of golf courses to &quoute;monumental failure at all levels of governance'', the parliamentary Public Accounts Committee (PAC) in December 2013 &quoute;slammed&quoute; the Union defence ministry, Maharashtra government and armed forces for abject mismanagement of defence land. The Committee noted that the CAG has repeatedly objected to the use of defence lands for unauthorised commercial purposes such as golf courses, but no action has been taken. In addition, revenue generated from such activities has not been credited to government accounts.

The PAC state the entire policy on the golf courses should be &quoute;revisited comprehensively&quoute; with &quoute;appropriate remedial action&quoute; being taken to ensure &quoute;recreational facilities needed for the armed forces are not misused/abused in any manner&quoute;. It also asked the MoD to submit &quoute;a status paper'' on the golf courses and environmental parks used by the military and the nature of their membership as well as the annual revenues generated through them and the accounts where they are credited.

The Central Service Rules (1965) which applies to civilian positions in defence prohibits public servants engaging in trade, business, or other employment. Specific regulations on whether military personnel are permitted to be have private business interests could not be found. However, it is unlikely that they are. A colonel serving in the Indian Army stated in an interview that serving personnel were not authorised to engage in activities for private enterprise.

Two instances of unauthorised private enterprise by various factions within the military were discovered by the Comptroller and Auditor General (CAG) in March 2011. Allegedly, ‘huge amounts of revenues’ were earned by the army by using government land to illegally run 97 golf courses and sports clubs. The Army Zone was responsible for running the golf clubs, and this was a private registered entity that employed service staff. Using military land for golf courses is not authorised because it is not a military activity.

In December 2013, the parliamentary Public Accounts Committee (PAC) in December 2013 &quoute;slammed&quoute; the Union defence ministry, Maharashtra government and armed forces for abject mismanagement of defence land, citing &quoute;gross misuse&quoute; and &quoute;monumental failure at all levels of governance''. The Committee noted that the CAG has repeatedly objected to the use of defence lands for unauthorised commercial purposes, but no action has been taken. In addition, revenue generated from such activities has not been credited to government accounts.

The PAC said the entire policy on the golf courses should be &quoute;revisited comprehensively&quoute; with &quoute;appropriate remedial action&quoute; being taken to ensure &quoute;recreational facilities needed for the armed forces are not misused/abused in any manner&quoute;. It also asked MoD to submit &quoute;a status paper'' on the golf courses and environmental parks used by the military and the nature of their membership as well as the annual revenues generated through them and the accounts where they are credited.

Additionally, there are cases of illict activities related to asset disposals further discussed in the comments for Question 22.

One of the major causes of the current government’s electoral victory was corruption in the previous government, and predictably, this government and the Defence Minister have been vocal about anti-corruption. Parrikar has on several occasions stated his commitment to anti-corruption and is publicly perceived as a ‘clean’ person and was selected for his administrative abilities and clean image, despite some allegations to the contrary.

He has cited his ability to make speedy and clean decisions as his specialty, also stating that he would be &quoute;clean and transparent as Defence Minister.” He is himself “looking into” a recent case of allegations of corruption involving a senior Army officer looking after promotions, transfers and postings within the force . He has “repeatedly voiced his intention to formalise defence agents and adopt a different approach towards the blacklisting policy”. In this regard, in order to prevent corruption in smaller defence deals, the Defence Ministry has brought contracts of the value of Rs. 20 crore (from the previous Rs. 100 crore) under the ‘integrity pact” - a binding document that enables heavy penalties for bribing. This is in line with his belief that companies that violate procurement norms should face heavy financial penalties not blacklisting.

The previous Defence Minister AK Antony in March 2014 had also made statements related to anti-corruption and integrity, for example, his speech about the cancellation of a deal with AgustaWestland for helicopters. He stated his track record in tightening up the loopholes in defence deals during his time in the Ministry. He had also made statements in the past in front of the Army and Air Force Commanders about these issues.

Corruption was highlighted by former Army Chief General VK Singh at the beginning of his tenure as an issue that he would work to combat, labeling it a ‘hydra-headed monster’ in 2011. He has been involved in a dispute surrounding his age, which has been negatively perceived in the light of this anti-corruption mission.

Under Section 53 (Extortion and Corruption) of the 1950 Army Act of India, ‘Any person subject to this Act who commits any of the following offences, that is to say, (a) commits extortion; or (b) without proper authority exacts from any person money, provisions or service; shall, on conviction by court-martial, be liable to suffer imprisonment for a term which may extend to ten years or such less punishment as is in this Act mentioned2. The legal framework is further set out in the Air Force Act and the Navy Act.

However, these legal provisions are not applied rigorously. Retired Major General Nilendra Kumar stated in 2011 that: ‘Relative lenient punishment awarded to those found guilty for economic offences induces others also to deviate from the laid down moral code... Army Headquarter’s [shows] hesitation in taking suitable action against culprits... Disciplinary cases are dealt without showing any concern for prompt completion... No worthwhile directives to institute greater financial norms were issued by the Army after the Tehelka, Adarsh or Sukna scams. Rather than sweeping the financial scams under the carpet of secrecy, these episodes should be subjected to clinical scrutiny to devise lessons learnt...’

In the 2013 'Choppergate' scam, several politicians and defence officers - including a former Air Force chief - were accused of having accepted bribes from AugustaWestland to clear a contract to supply 12 AgustaWestland AW101 helicopters to India. It was the first time a chief of the Indian Air Force was named in a corruption or criminal case by the CBI - but it is yet to be seen how the case will be dealt with. While an Italian court found him not guilty, the investigation by the CBI is still ongoing.

A sting operation by the magazine Tehelka alleged that civil awards by the Assam Rifles were awarded corruptly and that senior officials, including the Director General, the Additional Director General and the Chief Engineer of the force were involved. An inquiry was begun in September 2014, undertaken by the vigilance department, of which the head is the accused Director General. The Delhi High Court issued notices when a former personnel filed a peititon for an independent investigation.

In another case reported in June 2015, four serving personnel reported corruption in the Ex-servicemen Contributory Health Scheme (ECHS). While two were removed from service, the other two resigned. Reports indicate that the Army did not order an inquiry into the case as it involved senior personnel. However, the Defence Minister has since reportedly asked for a report on the case.

The CBI has also been reportedly accused of mishandling cases, for example, in a corruption case involving the selling off of army diesel.

A senior policy advisor for Amnesty International recently stated that the military justice system in India &quoute;discounts legal training and qualifications, lacks independence from the military chain of command, and ignores conflicts of interest&quoute;.

Effective legislation and mechanisms applicable to military and official personnel exist to report corruption, and there is evidence that whistleblowing is taken seriously by the MoD. A new bill was introduced in the Lok Sabha in August 2010 called the Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, which was subsequently renamed the Whistle-Blowers’ Protection Bill, 2011. The Armed Forces and security institutions were put under the remit of the Bill in December 2011 by the Ministry of Defence after a parliamentary committee suggested this course of action. It also states that &quoute;No public information disclosure may be if it contains Information likely to prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the state, relations with foreign state, or lead to incitement of an offence&quoute;. The scope and limits of this are not clearly defined, leaving it ambiguous.The bill was passed by parliament in February 2013.

Whistleblowers are afforded further protection under the Central Vigilance Commission, which can punish those who reveal their identities. It should be noted that the Lokpal and Lokayuktas Act (2013) does not provide for protection of whistle-blowers.

Some activists have complained that the new bill is a ‘mere formality’ that affords little protection to whistleblowers and also stated concerns about its execution. One news article claims that the Bill does not provide for any penalty for harassing a public servant/any other person making a disclosure and does not provide for admission of anonymous complaints by the competent authority - in other words, protect the identity of the complainant. In fact, the Vigilance Commission can reveal the identity of the complainant to the head, if it is of the opinion that it is necessary to do so.

Recent cases highlight the lack of protection given to whistleblowers in defence institutions and that they do not take whistleblowing seriously. In one case reported in June 2015, four serving personnel reported corruption in the Ex-servicemen Contributory Health Scheme (ECHS). While two were removed from service, the other two resigned. Reports indicate that the Army did not order an inquiry into the case as it involved senior personnel. However, the Defence Minister has since reportedly asked for a report on the case. In another case, a senior scientist the Defence Research and Development Organization (DRDO) who reported cases of corruption on two different occassions was first reportedly removed from ongoing projects and transferred, and then at the time of the second case, served a show-cause notice.

There was a series of attacks on people who tried to uncover corruption with the Right to Information Act, 2005, and 8 campaigners died in civil action on corruption. Saurav Ray, a former Defence Estates Officer, exposed corruption in a land-grab scandal in Adarsh that implicated senior Armed Forces officers. He stated that because he opposed the no-objection certificate issued for the land, he received a very hostile response from officers.

On the basis of the information above, it is likely that there is little to no trust amonst defence officials that they would be afforded protection on reporting corruption.

(Relevant information from the TI Chapter Reviewer has been added to the main answer)

There is no evidence that special attention is paid to personnel in sensitive positions that demonstrates the recognition that certain positions may be vulnerable to corruption.

‘Little thought has been paid to the selection and training of the functionaries entrusted with the procurement of military equipment worth hundreds of crores of rupees. The quality of personnel continues to be the weakest link in the whole procurement system and this aspect needs immediate attention. The acquisition staff should be professional, well qualified and adequately trained... India , has failed to appreciate that procurement of defence equipment is a highly specialised activity needing extraordinary professional skills and unique attributes. It is an intricate and multifaceted process. It is not a routine governmental activity that can be performed by all with desired results.’ (Major General Mrinal Suman, 2005)

Certain methods could be used to reform the system according to Maj Gen Suman, such as:
●tdefining Acquisition Staff: ‘As a broad guideline, only those appointments, which influence decision making, should be termed as Acquisition Staff Appointments (ASA). These appointments are required to be notified and updated periodically.’
●tselecting suitable personnel for posting to ASA: ‘MoD and SHQ have to lay down essential and desirable criteria for each post under their respective domains. Criteria should include aspects like formal education, related experience, previous exposure in similar jobs, demonstrated competence and aptitude. Personal integrity has to be of unimpeachable standard. Selected officers should have an unblemished record and should be eligible for next promotion. It should preferably not be a last leg posting. In other words, to improve quality, it is essential to induct talent and inject professionalism.’
●testablishing a minimum tenure: ‘three years and extendable to five years. Their career interests should be protected. Initially, the selected officers should be kept on probation for a period of three months. Thereafter, their suitability could be determined for permanent posting. The officers should also have the option to seek reversion if they so desire.’
●tproviding mandatory orientation training: ‘Initial three weeks could be utilised for acquainting [ASA appointees] with the procurement structures, revised procedure and methodology, while the last three weeks should be for specialised training related to their specific jobs.’

Evidence from the Major General’s statements in 2009 show that little had changed since 2005: ‘In India, acquisition functionaries are posted in routine turn over. There is no selection based on educational qualifications, demonstrated flair or past experience. Unfortunately, the services are to blame the most in this respect. They have failed to grasp the importance of staff proficiency. A number of critical acquisition functions are being performed by officers posted to New Delhi on their last-leg posting prior to superannuation. Similarly, a bureaucrat from Animal Husbandry or Panchayati Raj Department can be posted to the Acquisition Wing to negotiate advanced weapon systems worth billions of dollars. The role of defence financial advisors is performed by Defence Finance functionaries without elementary knowledge of economics and military matters. Worse, no training is ever provided to acquisition functionaries to enable them to discharge their duties efficiently. Lack of integral legal advice has been another major weakness of the system. To sum up, it will not be incorrect to aver that defence acquisitions in India are being handled by amateurs who are ill-equipped to carry out highly specialised functions.’

The situation was also little changed in 2012. The Major General states that: 'Subsequently, even the Comptroller and Auditor General (CAG) noted the fact that system of acquisitions being handled by unspecialised personnel posted for three year tenures was simply not adequate. It emphasised that “defence acquisition is a cross-disciplinary activity requiring expertise in technology, military, finance, quality assurance, market research, contract management, project management, administration and policy making”. However, this aspect continues to remain totally neglected to date.'

The number of civilian and military personnel seems to be accurately known. The Ministry of Defence publishes information in this regard on its website. The annual IISS Military Balance and other sources also contain similar information. In 2012, the Indian Armed Forces were cited by the BBC as the world's 9th largest employer.

However, given the lack of transparency in the budget (further discussed in Questions 12 and 12B), it may be possible that this information is inaccurate. This is further confirmed by a recent case in 2012 whereby an internal audit found that the army was supplying rations to at least 2.5 lakh 'ghost' soldiers who either do not exist or draw the double benefit of free cooked meals plus the ration monthly allowance.

Response to Peer Reviewer 1: Agreed. Main comments edited accordingly with additional information and score decreased from 4 to 3.

Pay rates and allowances for all civilian and military personnel are openly published and are available for public view on the websites of the main branches of the Indian armed forces and within recruiting material. They are also published on external (non-defence) websites.

Overall, personnel receive correct pay on time. Sometimes basic pay will be adjusted and occasionally there are flaws in the simplicity and the transparency of the payment system.

The system for paying lower-ranking personnel, Pay Accounts of Personnel Below Officer Rank (PBOR) dates back to the 1940s, which is run on an individual ledger accounts system. The system in place for paying soldiers is often delayed because of the involvement of intermediate agencies. A new online system was set up in 2010 to provide these payments, which seems to have improved the method, however it appears that the system has not been fully employed.

The main issue of concern for servicemen in India is not the speed of pay but receiving equivalent amounts to their civilian counterparts. There was widespread anger in the armed forces in 2008-2009 when servicemen complained that successive pay panels had failed to address their long-pending pay and pension &quoute;anomalies&quoute;. Hundreds of ex-servicemen continue to protest by returning their medals over the failure of successive governments to implement the one-rank, one-pension principle despite it being promised by most parties in their manifestos. A special hearing on this issue will be included in the 7th Central Pay Commission. However, the government has not accepted the demand for military representation on the pay panel.

There has also been an issue concerning delays in payment to ex-servicemen.

There is a published system in place for the appointment of top service personnel, which is independently monitored. The Appointment Committee of Cabinet (ACC), with perhaps some input from Central Vigilance Commission (CVC), is responsible for the monitoring of appointments and promotions to the level of Joint Secretaries and above in government positions.

The system was put in place as a result of a report from the government (the Ajai Vikram Singh Commission Report) and it includes objective criteria and methods for appointing senior level staff. In practice, the process is publicly available, however there is suspicion and some evidence that appointments may not be carried out according to candidates’ merit only because there can be competition within different services regarding the promotion speed of individuals up the ranks.

In September 2015, the Defence Ministry red flagged the proposed promotion of a Major General following allegations of impropriety. The CBI in an earlier inquiry, did not find enough evidence against him for criminal prosecution, and the said officer received Discipline and Vigilance Clearance. However, following complaints during a meeting of the Special Promotions Board of the Army, Parrikar has decided to verify the authenticity of the complaints. However, the recommendations made by the Board have still not been accepted by the Ministry.

Response to Peer Reviewer 1: The report refers to corruption and nepotism &quoute;in the upper echelons&quoute;, but it does not specify this with regard to appointments.

Promotions are made on recommendations of a Special Promotions Board, which itself uses “inputs from Confidential Reports (CR), performance on training courses, honours and awards, value judgement and negative inputs such as poor disciplinary awards. Of these inputs, CRs normally constitute approximately 90 per cent of the total weightage. The operational performance of an officer against an external threat and in counter-insurgency operations provides an important input. However, the CR remains the most important.

The Defence Ministry has red flagged the proposed promotion of a Major General following allegations of impropriety. The CBI in an earlier inquiry, did not find enough evidence against him for criminal prosecution, and the said officer received Discipline and Vigilance Clearance. However, following complaints during a meeting of the Special Promotions Board of the Army, the Defence Minister Parrikar has decided to verify the authenticity of the complaints. However, the recommendations made by the Board have still not been accepted by the Ministry.

For the Indian Navy, there is a Promotion Committee that would consider the officers branchwise, batch by batch, for promotion to higher rank, once a year. However, in 2014, the Navy was accused of bending the promotion rules of officers to the rank of captain by approving a controversial 'one-time dispensation' that does away with the need for an officer to spend mandatory time at sea.

In the Air Force, there is a Promotion Board for promotion to the rank of Sergeant presided over by an officer of the rank of Wing Commander and for Warrant ranks presided over by an officer of the rank of Group Captain Air HQ ( Air Officer in charge Personnel/AoP’s Branch) formulates the Promotion Policy and Procedure, which is then approved by the Ministry of Defence.

However, occasionally the method of promotion seems not to be an objective matter. There is competition within the services institutions regarding the time taken to promote individuals and there are some cases where there is evidence of promotion occurring without rigorous checks to ensure that it is based on the candidate’s prowess.

The Appointment Committee of Cabinet (ACC) appears to have a role with the oversight of appointments in senior positions only. There is no other evidence of scrutiny of promotions processes by independent personnel.

Response to Peer Reviewer 1: Further evidence has been provided to the main answer.

India does not have compulsory conscription. However, there has recently been some debate as to whether the country should adopt such a system.

There are no known conscription schemes in India. Since the time of the British Raj, recruitment in India has been voluntary. As a 2009 article put it: ‘Compulsory military service could be an option in future’.

Formally, recruitment of armed personnel is conducted through an official method with criteria depending on the vacancy and the number of applicants for each role. There is little evidence of checks and balances within this system to ensure that bribes are not paid to soldiers for preferred postings. It is suspected that bribery is common, due to some incidences such as a recruitment drive in the Punjab where a message was broadcast to applicants, stating &quoute;Recruitment into the Army is a free service. Candidates are advised not to pay bribe to anyone for recruitment as it is purely based on merit and no one can help them at any stage. Selection process during recruitment at all stages is computerised and transparent&quoute;. There have been reports of soldiers receiving bribes to ensure that an applicant obtains a specific position as well.

An internal audit by the Defence Ministry's Controller General Defence Accounts has questioned the army for supplying ration to at least 2.5 lakh 'ghost' soldiers in 2010 - 2011 who either do not exist or draw the double benefit of free cooked meals plus the ration monthly allowance. Army authorities, however, refute the audit report, asserting that additional rations are procured to meet the operational requirements while it has to also stock supplies in Jammu and Kashmir and the northeast due to absence of vendors there.

However, this isolated report was the only indication of ghost soldiers in India. In general, the strength of payment systems and oversight by the CAG suggests that the phenomenon is unlikely to occur. The score has been selected given there is no evidence of follow-up on the case by the MoD or any related statements by the MoD.

Response to Peer Reviewer 1: Given there has been a case in the last five years and there is no evidence of steps taken to prevent such phenomenon in the future, the score is maintained.

The hierarchy of payment are separate to chains of command for the armed forces and the Ministry of Defence. Salaries are disbursed through Pay Account Offices and in 2010, an electronic monthly pay system was implemented.

The Indian Defence Ministry does not have a Code of Conduct as part of its anti-corruption measures however it does have an ‘Honour Code with a clause regarding integrity that all personnel are supposed to adhere to. This says that “A Cadet must be Loyal, Truthful, Trustworthy, Honest and Forthright under all circumstances. He will not Lie, Cheat or Steal. Nor will he Mislead or Deceive anyone. He will faithfully live up to this code and encourage his Comrades to do so”. The integrity clause states 'Every cadet is responsible for his action. He will be held accountable in your activities you will encounter the choice between the right and the wrong. The right thing to do so isn’t always the easy thing to do, but is Always the right thing to do. A cadet is expected to have the Honour and Courage to do the morally and ethically right thing regardless of its consequence'.

The Army Act (1950) provides conduct standards relating to &quoute;offences in respect of property&quoute;, &quoute;extortion and corruption&quoute;, &quoute;making away with equipment&quoute;, &quoute;injury to property&quoute;, &quoute;falsifying official documents and false declaration&quoute; and &quoute;signing in blank&quoute; - which all point toward existence of codes of conduct for armed forces personnel. The Air Force's Directorate of Personal Services also provides policy guidelines on corruption, bribery and accepting gifts. The Prevention of Corruption Act (1988) also prohibits the receipt of gifts and hospitality by government officials, which should cover any civilian employees not within the scope of military legislation.

There is reference to ethics and morality specifically within the Army Doctrine that forms part of the Military Code, under Part 3, Chapter 7, Section 21, paragraph 7.25. This highlights the importance of ethical standards in carrying out work to high standards and recommends that personnel are trained on the subject.

There is an alternative vision of the Code of Conduct that is to be found in the Chetwode Hall of the Indian Military Academy. This refers to the duty of personnel to serve the country and to put themselves behind other considerations.

It is believed that the military work with an unofficial code of conduct within the institution, which governs situations such as bouncing cheques and that this should be codified more substantially.

Sushil Kumar made this argument in reference to the Chetwode Code, arguing that despite its benefits and positive aspects, it would be far better to officially codify it into a set of rules governing behaviour, in a way that would be coherent with the philosophy of the military. An effective system of a moral code has also been called for by Retired Major General Nilendra Kumar, who has emphasised that the creation and implementation of a Code of Conduct cannot come soon enough to bring transparency and accountability into military institutions as part of an official measure.

Given there is a Joint Secretary for Co-ordination and Works (C&W) within tasked to look at corruption and acceptance of gifts, there are likely to be rules and guidance provided by it as well.

Response to Peer Reviewers: Agreed. Additional information has been added and the score has been raised from 0 to 2.

As discussed in the previous question, while there is no Code of Conduct in place, there are some conduct standards defined in various legislation.

There are indications that breaches of these standards are addressed. Some examples include that or retired Lieutenant General whose name appeared in the Adarsh Housing Scandal, being declared a person non grata; the CBI registering a case against an Army Vice Chief Lt General for allegedly conspiring with a builder over a select piece of Pune Cantonment defence land; and and Sukna land scandal, which led to court martial and dismissal of the former military secretary Lt Gen. Further, recently the promotion of a Major General has been red-flagged following allegations of impropriety, which fall under the ambit of disciplinary procedure guidelines.

It should be noted that there are issues with the consistency and effectiveness of measures taken against those breaching conduct standards, however. A senior policy advisor for Amnesty International recently stated that the military justice system in India &quoute;discounts legal training and qualifications, lacks independence from the military chain of command, and ignores conflicts of interest&quoute;.

Response to Peer Reviewers: Main comments edited and new information added. Score raised from 0 to 2.

The Indian Army Doctrine highlights the importance of training within the arena of anti-corruption and there are thought to be different methods of training for officers and non-officers.

According to Colonel Samarth Nagar (2009), ‘Training and ethics in morals forms one component of education received by all ranks in the armed forces. However, formal ethics education is evidently uneven between the commissioned officers and personnel below officer rank.’ Retired Maj-Gen Kumar also argues that: ‘The Army is yet to start any training course for the senior commanders - for that matter for the officer cadre - on ethics and morality... Regular and periodic seminars and conferences should be held to discuss areas of common pitfalls and “do and don’ts” as regards financial transactions.’

Therefore we can see that formal procedures for personnel anti-corruption training are being discussed and created, however they are implemented with limited effect at present and the training is rarely updated or scheduled regularly.

There is some evidence of training conducted, however. The Ministry of Defence Annual Report 2013 - 2014 states that training and &quoute;Viligance Awareness Weeks&quoute; were conducted for all defence Public Sector Undertakings (PSUs) and the Defence Research and Development Organization (DRDO). Additionally, the Navy was reported to have a centre which provides customised training on the core values of the Armed Forces, which includes &quoute;integrity&quoute; in 2012 - 2013.

(Relevant information from Peer Reviewer 2 has been added to the main answer)

There are examples of outcomes being made public, though no policy that they must be. There are some examples of effective prosecutions available in the public domain over recent years, though there is some public speculation and scepticism over whether other attempted prosecutions have been suppressed or inappropriately sanctioned.

While there has been criticism of prosecutions only applying to lower ranking personnel, there are also examples available of effective prosecutions in recent years, even of high-ranking officials. In 2013, a Wing Commander was convicted by court martial for allegedly accepting bribes from the representative of French aircraft manufacturer Dassault. In early 2011, two Lieutenant Generals in the army were court-martialled and one of them was given a three-year jail term.

There is little evidence of a policy that necessitates outcomes of defence service personnel prosecutions to be made public. There are some cases that have highlighted issues with the process, such as how long the prosecution takes, that have generated public scepticism about the measure. One example involved a delay of three years in a prosecution by General Court Martial of a commander who had made expensive illegal purchases.

There is also criticism that penalties are not applied to higher level officials and that only colonels and those of lower ranks are subject to harsh punishments. Some examples provided in this respect are those of two and three star generals involved in the &quoute;ketchup colonel&quoute; episode, where a lenient punishment was reportedly given. Commentators have stated that inaction in such cases has encouraged corrupt activities.

Facilitation payments are illegal (as per the Indian Penal Code 1860 and Prevention of Corruption Act 1988), but there is little indication that mechanisms are effectively used or capable of discouraging occasional facilitation payments. Recent reports that bribes were involved in the Indian Air Force's planned purchase of AgustaWestland AW101 helicopters and in state-run Hindustan Aeronautics Limited's purchase of Rolls-Royce engines between 2007 and 2011, have highlighted the fact that facilitation payments and scams may be more widespread than officially acknowledged.

One article explains the phenomenon thus: &quoute;So why has New Delhi failed to bring corrupt practices that hurt the country’s military development – and, indeed, its defence industry - under control? Such problems can be traced back to what may be termed as the ‘systemic complexities’ found within the administrative organs of the state, most notably the MoD. These ‘complexities’ have allowed the MoD and its Integrated Headquarters to function in a closed and relatively autonomous manner for generations. Indeed, such practices continue to this day despite the introduction of a series of reforms to the higher defence management sector over the past decade or so.&quoute;

There is no doctrine which addresses corruption as a strategic issue in the military’s operations. However, the Ministry of Defence do have a policy of transparency and various procedures in place to guarantee that the policy functions. There is an awareness within the defence establishment of corruption as an issue as is indicated by conduct standards specified in the Army Act (and others for the Air Force and Navy) relating to offences in respect of property&quoute;, &quoute;extortion and corruption&quoute;, &quoute;making away with equipment&quoute;, &quoute;injury to property&quoute;, &quoute;falsifying official documents and false declaration&quoute; and &quoute;signing in blank&quoute;.

A 2012 comment piece by a researcher in the Center for Strategic and International Studies noted: &quoute;India is still unsure of the type of power it wants to become. That uncertainty translates to the lack of an effective and coordinated defence strategy that guides defence procurement, force structure, military deployments, and developing relationships. Aside from its doctrine of ‘strategic autonomy’ that allows India the luxury of ‘omni-engagement’ while resisting excessively close partnerships or entangling alliances, India has yet to officially articulate its core interests through a publicly available national security strategy or defence strategy.&quoute;

Training for all officers takes place within the Indian Army, as stated on their website. This training is referred to as dealing with ‘moral’ issues, thought to include corruption.

However, in practice it is not certain that the doctrine is carried out effectively, and there are suspicions, based on increasing evidence, that officers often do not manage corruption effectively, either being involved in corrupt activities themselves or disregarding the corrupt actions of others. There have been a series of corruption scandals involving bribes, wrongful purchases and speculations, and furthermore there has also been a lack of effective investigation into these cases by the military according to the view of India’s Supreme Court.

There is no further public evidence of training that encompasses corruption issues in the field and evidence of its application in the field or, of corruption issues managed ineffectively in the field. According to a serving Major who was interviewed, however, who has been deployed on peacekeeping missions, there is training before being sent on peacekeeping missions. These are mostly a list of &quoute;Dos&quoute; and &quoute;Don'ts&quoute; with anti-corruption training a part of the &quoute;Don'ts&quoute;. These trainings range in time period depending upon the role of the person deployed, the duration of deployment. However, in this case, the person received a training of a month.

It is not known whether or not India deploys corruption monitors on operations or peacekeeping missions.

There is no public evidence of known guidelines, and staff training, on addressing corruption risks in contracting whilst on deployed operations or peacekeeping missions.

According to a serving Major who has been deployed on peacekeeping missions, there is training before being sent on peacekeeping missions. These are mostly a list of &quoute;Dos&quoute; and &quoute;Don'ts&quoute; with anti-corruption training a part of the &quoute;Don'ts&quoute;. These trainings range in time period depending upon the role of the person deployed, the duration of deployment. However, in this case, the person received a training of a month. It is not clear whether the training included guidance on corruption in contracting.

There was information related to a two-week training course on Defence Management and Contracting under the United States International Military Education and Training Programme, which allowed for the nomination of one civilian MoD official. It is unclear whether this will cover contracting in operations specifically and how often such training opportunities arise.

Response to Peer Reviewer 1: Additional information from a primary source has been added. Score raised from 0 to 1.

PMCs are not employed by the Indian armed forces to provide operational staff to military environments. The main involvement of the private sector in India's defence industry is in military procurement and producing advanced defence equipment. Prior to 2012, the private sector was consciously kept out of the defence equipment manufacturing sector due to security considerations.

There has been debate on whether PMCs can be used as a strategic imperatives for domestic Indian security, given the continuous involvement of the army in internal conflict zone which often ascribes to them the perception of an occupation force and is seen to harm the reputation of the army. However, this is speculative and there has been no evidence of PMCs actually being used.

The score has been selected given there is no evidence of the employment of PMCs but nor are there regulations forbidding their employment either.

Defence procurement in India is governed by policy, rather than legislation. Procurement is indirectly covered under the heading &quoute;Trade and Commerce&quoute; of the Central List, the State List and the Union State List in the Indian Constitution (which govern the legislative functions of the central, union and state governments). This enables states to pass legislation on the subject. While Parliament has yet to do so, several states have enacted relevant legislation (for example, the Tamil Nadu Public Procurement Act, the Karnataka Public Procurement Act, and the Rajasthan Transparency in Public Procurement Act) although they are not comprehensive.

Defence procurement, which is instead governed by the Defence Procurement Procedure (DPP) that was compiled in 2002. The DPP was updated six times between 2002 and 2013 and its aims are to improve transparency and accountability and to ensure that there is competition and impartiality in procurement within Indian military operations. Whereas the focus of DPP was previously on 'buying', it has now expanded to 'making' and 'buying' with a stronger focus on ensuring the 'Indian Content', which is seen as a crucial aspect of avoiding corruption. As the previous Defence Minister AK Antony had stated, indigenisation is the “ultimate solution to the scourge of corruption”.

The DPP cannot be applied to inter-government procurement, which include US Foreign Military Sales, or certain strategic procurement (DPP 2013, p.22). which India is known to undertake. The oversight mechanisms in place for these exemptions is unclear. This is also the case with Fast Track Procedures, which do have to be approved by the Defence Acquisition Council (DAC) and defence production agencies.

However, there is evidence that the DPP is often by-passed. As a recent news article put it: &quoute;India’s defence procurement sector continues to be rocked by instances of corruption and wrongdoing. At least three major scandals – two of them related to purchases by ordnance factories and one to the Indian Air Force (IAF) – have led to the blacklisting of nine companies in the past eight years. Currently, the Central Bureau of Investigation (CBI) is investigating more than twenty cases of corruption and undue influence. India’s Ministry of Defence (MoD) has also blacklisted four major international companies - Rheinmetall Air Defence (RAD), Singapore Technologies Kinetics Ltd. (STK), Israel Military Industries Ltd. (IMI) and Corporation Defence Russia (CDR) – and the former chief of the Ordnance Factory Board (OFB) was arrested and jailed in 2010 for wrongdoing. More recently, the MoD cancelled the purchase of 12 AW 101 helicopters worth $570 million as a result of the violation of an Integrity Pact by Finmeccanica subsidiary Augusta Westland International (UK) Limited. The violation resulted in investigations by the CBI into the activities of 11 individuals, including top executives of Augusta and Finmeccanica, the former Chief of the Indian Air Force, as well as four additional companies (two foreign and two domestic).&quoute;

Neither the DPP, nor the Defence Production Policy released in 2011, are strictly followed. &quoute;India’s foreign military purchases are accompanied by ‘offset’ obligations that require foreign sellers to purchase supplies and services from Indian sources worth at least 30 per cent of the sale price. The latest controversy casts a harsh light on the role of middlemen and consultants, and shows how offset contract arrangements can be misused to become vehicles to flow funds for kickbacks and other illegal purposes. Also exposed is the risk that corruption distorts India’s procurement process where it produces deviation from stated performance requirements as to favour one over other competitors&quoute; (Metzger). In 2011, whistleblowers in the Ministry of Defence reported ‘the ministry’s flagrant violation of rules in almost every recent offset contract’. Transparency International had already noted that there is considerable secrecy in the negotiation of offset contracts in India, which may allow bribes to be concealed within the offset.

However, there is some scrutiny. A Comptroller and Auditor General compliance audit report (Defence Services - Army and Ordnance Factories) in 2012 showed that five offset contracts in the defence sector concluded between 2007 and 2011 were not in consonance with the provisions laid down in the Defence Procurement Procedure.

A draft Public Procurement Bill was introduced in May 2012, but has now lapsed. The new government is now trying to resuscitate the Bill. The Finance Ministry has invited comments on the draft of the existing Bill. The current Finance Minister's budget speech in 2015 highlighted the government’s commitment to formally legalise India’s public procurement system.

The score has been selected given that while there is no legislation in place, defence procurement is covered by the DPP.

Response to Peer Reviewer: Information regarding exemptions from the DPP has been added.

The Defence Procurement Procedure (DPP) is the process of procurement of the Indian Ministry of Defence that is publicly available and open. The Defence Procurement Manual is published by the MoD (with amendments) and outlines certain elements of the defence procurement cycle. Only summary details on the entire procurement process could be found, however. The DPP and DPM exclude, for example, procurement by the Defence Research and Development Organization (DRDO), ordnance factories, production agencies and other parts of the security sector which contribute to defence. Moreover, since not all defence expenditure is under the defence budget, such as that for atomic energy, it is difficult to assess all of defence procurement.

In terms of main contracts, those signed as inter-government agreements or through the 'fast track' procedure are exempt from the DPP. Given the MoD does not publish details of arms purchases, verifying whether a purchase was made through the DPP is difficult.

In terms of transparency of aspects of the defence procurement cycle process, as mentioned in the comments for Question 22, no detailed information on the proceeds of assets could be found although the Army Act 1950 sets out its framework and oversight. There are some flaws within the DPP, in particular when dealing with offset contracts. Defence contracts generally are subject to a large amount of secrecy and this means that effective monitoring of company activities during the contract period is said to be very difficult.

A case from 2011 regarding the supply of rations by the Canteen Stores Department highlights the lack of transparency. A 2012 report stated that Army jawans had been provided with food far past its expiration date (up to 28 months) which further points to the issues within the procurement cycle process.Additionally, in 2015, there were allegations of corruption in the procurement of meat and vegetables in the Navy.

Response to Peer Reviewer 1: Comments have been edited accordingly.

There are mechanisms for oversight within defence procurement in India. The first is a pact, which contains a promise from all sides in the agreement not to involve themselves in any sort of illegal bribe throughout. The pact applied to all bids above Rs 100 crores. However, the new Defence Minister brought contracts of the value of 20 crore under it as well in an effort to minimize corruption in smaller defence contracts in September 2015. The process is monitored independently with the Central Vigilance Commission, and violation of these terms results in legal action. Bidding contracts typically carry contact information relating to the independent monitor appointed for oversight.

The second method of procurement oversight is the Prevention of Corruption Act 1988. This punishes civil servants who are givers and receivers of bribes with imprisonment or fines.

There is evidence that these are active. In a written reply in the Rajya Sabha, the previous Defence Minister A.K. Antony said that, while there have been allegations of irregularities in certain defence procurements - like VVIP helicopters for the Air Force, reconnaissance and surveillance helicopters for the Army, Tatra trucks for the Army and award of contract by Ordnance Factory Board, Kolkata - whenever such allegations surface, they are examined and the case is referred to the appropriate agency for further investigation. But as yet, no ministry official has been found guilty of corruption.

Further oversight is exercised by the Comptroller and Auditor General compliance audit report (Defence Services - Army and Ordnance Factories) in 2012 showed that five offset contracts in the defence sector concluded between 2007 and 2011 were not in consonance with the provisions laid down in the Defence Procurement Procedure.

The Acquisition Wing is also mandated with an oversight role as per the DPP. The procedure itself depends on the size of the contract. For example, it would submit quaterly reports (which are not public) on contract implementation to the Defence Procurement Board (DPB) in complex projects including design, development and testing and a likelihood of technology transfers.

The role of the Standing Committee of Defence (further discussed in Question 2) should be noted here as well. In 2014, the Committee ordered the pre-audit of procurement by the CAG or the CBI to limit the potential of corruption.

It should also be noted that the DPP's Fast-Track procedure allows for Urgent Operational Requirements (UOR) through which UOR equipment can be purchased outright and is not required to be part of LTIPP /SCAP /AAP. Fast-track procurement still requires approval from the DAC,and defence production agencies, however. This has implications on the quality of oversight.

Response to Peer Reviewer 2: Accepted and comments edited in the main answer. However, it should be clarified that the Defence Minister has brought contracts of the value of Rs 20 crore under the ‘integrity pact’in order to reduce corruption in smaller defence deals.

The latest Long-term Integrated Procurement Plan (LTIPP) which was approved in 2012 provides an outline of long-term requirements of all three services. An Annual Acquisition Plan (AAP) is developed by each service, although these are not publicly available. A document entitled &quoute;Technology Perspective and Capability Roadmap&quoute; was also released in 2013 to help with the implementation of the LTIPP. Additionally in 2013, the MoD released a document titled to help implement the LTIPP.

Unclassified defence tenders associated with the Armed Forces, the DRDO, PSUs, et. are published openly on the government tender website, while the Army also publishes information on tenders and Requests for Information (RFI). Limited tenders, sole-sourced procurement and repeat orders are not included on the tender portals. Purchases that undergo the DPP's Fast-Track procedure, which allows for Urgent Operational Requirements (UOR) equipment to be purchased outright are also worth a mention here.

According to the DPP, the &quoute;operational parameters of equipment required by defence services&quoute; prevents cannot be made public due to national security concerns. Such Requests for Tenders are to be processed by Service Headquarters (SHQs) after due consultation with concerned agencies.

Response to Peer Reviewer 1: It has been established in later questions that defence procurement is reactionary and somewhat based on threat scenario rather than following a plan or national security strategy. Details of the changes in the DPP do not need to be detailed here as they do not neccessarily involve a change in the public availability of the defence purchases. Further, the main answer has been revised to focus on main contracts only given Questions 70 - 72 are focused on offsets.

(Relevant information from Peer Reviewer 2 has been incorporated in the main answer)

The Ministry of Defence and the bidders in all procurement bids must sign an agreement, the ‘Integrity Pact’, stating that neither will offer or accept bribes throughout the process. This pact was initially required for purchases above Rs. 100 crores but the current Defence Minister has brought contracts of the value of 20 crore under it as well in an effort to minimize corruption in smaller defence contracts in September 2015. There is no formal requirement for bidders to establish a compliance program or code, however they are advised to create and implement a code of conduct and a compliance program committing to the rejection of bribery and unethical behaviour.

The Defence Acquisition Council (DAC) has formal responsibility for a process of capital acquisition planning: an Annual Acquisition Plan (AAP), a Five Year Services Capital Acquisition Plan (SCAP) and a 15-year Long Term Integrated Perspective Plan (LTIPP). Each service develops an AAP (which is not public) listing urgent requirements and near term procurement needs. Approvals of plans are seen to be problematic.

There is no national security &quoute;doctrine&quoute; or policy document or a complex grand strategy, however it would not be correct to say that there is no strategy that guides national defence (this is discussed in detail in Question 3). Most of the procurement appears to be based on a coherent set of ideas that guide national defence, but since they are not explicitly written down on paper, they cannot be said to be based on a national security strategy and it would be difficult to verify that purchases are based on them through audits.

Various issues cause problems for the defence procurement process, according to independent analyst Chandra Shekar in 2004. Firstly, it is thought that there is no long-term view on technological requirements and little understanding of cost relationships. There is also limited attention paid to safeguarding current equipment within the defence procurement process.

It has been noted by analysts that there is no approval of or adherence to the Ministry of Defence’s five year plan, which involves all elements of the armed forces.

According to General V. P. Malik and Brigadier Gurmeet Kanwal (2005), &quoute;Defence planning in India is characterised by seesaw bouts of frenzied activity followed by long periods of relative inaction. Five-year defence plans have rarely been formally approved before commencement. The Tenth Defence Plan, now in its third year, is yet to be accorded formal government approval. Ad-hocism is the order of the day, leading to knee-jerk responses and haphazard planning, making India a reactive rather than pro-active nation in matters pertaining to national security. Whenever India’s major adversaries plan a big defence purchase, there is an outcry for similar acquisitions, resulting in piecemeal decisions regardless of long-term impact and overall requirements.&quoute;

Recent articles and reports also corroborate this information.

Response to Peer Reviewer 2: Agreed. Score lowered from 2 to 0 and updates made to main answer.

The Defence Acquisition Council (DAC) has formal responsibility for a process of capital acquisition planning: an Annual Acquisition Plan (AAP), a Five Year Services Capital Acquisition Plan (SCAP) and a 15-year Long Term Integrated Perspective Plan (LTIPP). There tend to be delays with the approval of AAP and SCAP, however.

The DPP's Fast-Track procedure allows for Urgent Operational Requirements (UOR) through which UOR equipment can be purchased outright and is not required to be part of LTIPP /SCAP /AAP. Fast-track procurement still requires approval from the DAC,and defence production agencies, however. Several major military platforms have been reportedly fast-tracked (see sources below) in recent years, which has undermined the LTIPP/SCAP/AAP process and highlights its inability to ensure timely procurement.

There has been some indication that not all military purchases are based on clear criteria, although most are. There is evidence of purchases that were not pre-organised, and analysts argue that there should be greater transparency and efficiency in defence spending and a revised method for managing acquisitions. A 2005 paper by General V. P. Malik, former Chief of Army Staff, and Brigadier Gurmeet Kanwal, Senior Fellow at the ORF Institute of Security Studies, concludes: &quoute;Defence planning has been neglected for long in India. This has led to ad-hocism in decision-making and adversely affected the modernisation plans of the Services. The key issues needing immediate attention include the need for formal prior approval for five-year defence Plans, better management of the defence revenue and capital acquisition budgets, streamlining of the defence procurement process and better human resources management&quoute;. Recent reports by IDSA, Defence Industry Daily, Sobolev and Jovovic (2014) also confirm this.

(Relevant information from Peer Reviewer 2 has been incorporated in the main answer)

Despite formal processes for open competition being in place (through the Competition Act 2002, for example), there is evidence of single-sourced deals with no competition in the defence procurement process.

There is no evidence on the proportion of single vendor contracts in total procurement. However, there are several instances of CAG reports finding high percentage of single vendor contracts. For instance, the AW101 deal was single vendor. Further, a CAG report of 2007 found that &quoute;60 per cent of cases of army purchases, only a single vendor was pre-qualified&quoute;.

However, there is also evidence that the MoD is not favourable to single vendor contracts. For instance, a recent CAG report found &quoute;that while ammunition must be available at any given point in time to sustain 40 days of intense two-front war, the available stock of what is known as the war wastage reserve (WWR) was nowhere near this target at the end of the year 2012-13&quoute;. The reasons given for this are &quoute;delay in finalisation of specifications, complexities involved in the transfer of technology, or because the process threw up only a single vendor as the possible supplier. Thus, because of the ministry’s misplaced sensitivity about single-vendor situations, ammunition could not be obtained even when it was there for the asking&quoute;.

Furthermore, the system appears to adhere to procedures rather than principles, which suggest single vendors are not preferred. For example, Lowest Bidder (L1) status is prioritised over competitors with better quality of product and many unique products are single vendors. Another 2014 report by Defence Industry Daily Staff states that &quoute;India’s defence procurement establishment has shown an extreme risk-averse behavior and defence India observes external link that when a competition devolves to a single-vendor solution, the practice is often to re-tender&quoute;. However, there are reports that also state that domestic defence procurement tends to be sourced through Defence Public Sector Undertakings (DPSUs) and OFs with monopoly which has led to inefficiency. There does however seem to be a change with the new government which appears to be more committed to competition.

The press have identified flaws in offset contracts and the Ministry’s methods of using them that suggest that foreign suppliers are in a preferential position. They have also drawn attention to the Ministry’s Acquisition Wing due to a lack of adherence to principles regarding procurement and single-sourcing rules.

Response to Peer Reviewer 2: Agreed. However, it should be mentioned that although there is competition in principle, this is often difficult to materialize. The Avro replacement program and the Light Utility Helicopter program (to replace the dated Chetak and Cheetah fleets and which has now been cancelled twice) are two examples which illustrate this. Score raised from 2 to 3.

There is evidence of audit and regulation of tender boards. The Ministry of Defence details methods of procurement that describe these measures.

While there exists an independent audit function for tender board decisions, its results are not always considered independent, nor are they always automatically publicly available. It appears audits are conducted regularly. Further, the CVC has monthly review meetings, conducts regular and surprise inspections and has quarterly meetings with Secretary of Ministry and CBI.

The Defence Production Board has responsibility for oversight of projects with production items made by India. This board also runs a Project Monitoring Team that oversees the implementation and monitoring of each project.

The relevant legislation here is the Competition Act, which establishes the Competition Commission of India (CCI) to investigate and adjudicate related matters.

There has been a prominent collusion scandal regarding Bofors, the Swedish arms merchant, which has continued for a substantial period of time. This scandal highlights the lack of credibility in the processes for punishing such companies and suggests that there will be little enforcement. No other cases related to defence could be found, although there are examples of collusion in other sectors.

Procedures are in place for contract management and post-contract management which depend on the project scale. The Ministry of Defence has a three Joint Secretary and Acquisition Manager for Air, Land, and Maritime Systems, which transfer cases for contract management to respective Service HQs. As per the DPP, the Service HQ carries out administration and management while post-contract management is undertaken by the Acquisition Wing, again with procedures dependent on the complexity of the programme. Single Vendor projects are reviewed by the Acquisition Manager (or the equivalent service officer in the Service HQ) while Complex Project are reviewed by a steering committee headed by the Director General (Acquisition) in the MoD or the Principal Staff Officer at SHQ. It includes with members from MoD, MoD (Fin), Defence Research and Development Organization (DRDO), Department of Defence Production (DDP) and the Service HQ. The Acquisition Wing also submits quarterly Contract Implementation Reports (CIR) to the Defence Production Board (DPB). Each service has an Integrated Financial Advisers (IFA) manual which lists rules and regulations for contract management.

The systems in place, however, appear to be weak. The staff from the Ministry of Defence who are responsible for monitoring of the procurement process are not necessarily trained in these issues and are rotated around different functions. Particularly with regard to technical offers and evaluation in the field, there is a perceived lack of expertise. These flaws in the training of staff within the procurement and the acquisition processes and the lack of training for oversight of contractors’ delivery have been highlighted by independent evaluations.

(Relevant information from Peer Reviewer 2 has been added to the main answer)

Tenderers who wants to bring to attention flaws in tendering procedure can approach the specified authority or the independent external monitor appointed under the Integrity Pact. The contracting authority's decision is final although it can be challenged before a court of law and then judicial review lies with the high court of the state. However, it must be noted that the DPP rules have changed their focus in this regard in 2013 and there are may be further changes in the upcoming DPP.

Despite this, some companies see the procedure of complaining as detrimental to their business rather than a positive action, and therefore will refrain from using these mechanisms. According to Malhotra (2012), there is the absence of a transparent grievance reprisal mechanism: &quoute;In case of a grievance against an award of a contract, complaint can be lodged with the procuring agency. However, it leaves very little scope for transparency. In case where the procuring officials have participated in the manipulation of the outcome, chances are very low that the aggrieved bidder will get a fair hearing. If not satisfied with the decision of the procuring body, the aggrieved bidder can appeal in the court. Given the high number of pending cases in the Indian Courts, any legal remedy could only be found after a long delay which is costly for small firms since long delays may make remedy insignificant with respect to the tender concerned&quoute;.

(Relevant information from Peer Reviewer 1 and the TI Chapter Reviewer has been added to the main answer)

Offending companies are punishable by the Prevention of Corruption Act (1988). In cases of violation of the Integrity Pact, there is a range of sanctions that can be applied. However, reports indicate the upcoming Defence Procurement Procedure (DPP) may remove blacklisting and instead impose heavy fines of companies found to participate in corruption or ease the terms of blacklisting. The new Defence Minister has stated that the new DPP will address issues with current norms of blacklisting companies such that they are not 'indiscriminate' and do not impact India's defence modernisation.

Historically, there were limited sanctions that are applied within the procurement system by the executive, as shown by the scandal in the 1980s surrounding the Bofors case and individuals involved. The reason for this limitation is that the courts have an overload of cases, potentially decades old, and do not have adequate resources to get through them efficiently. The Central Bureau of Investigation (CBI) is the national government’s authority for criminal investigations, yet cannot act on these cases since the responsibility lies primarily with the local police authorities. The CBI also has a substantial amount of cases backlogged, meaning that it is also lacking the resources to deal with procurement scandals.

However, most recently, sanctions have been applied more regularly. Other recent cases include the AgustaWestland helicopter deal which was terminated in early 2014 and the blacklisting of Israeli firms by India in 2012 due to corruption allegations.

(Relevant information from the TI Chapter Reviewer has been added to the main answer)

There are procedures in place in offset contract negotiations to oversee due diligence of contractors. These particularly apply to procurement proposals with a value of more than 300 crores, schemes which are classified as ‘Buy Global’ (purchases from foreign/Indian vendors) and ‘Buy and Make with Transfer of Technology’ (purchased from a foreign vendor and then licensed production). After the monitoring process, audits are carried out on the offset contract company and its completion of the agreement. While ensuring integrity and compliance may be a part of this, it is not a primary or prominent concern. Corruption risk does not appear to be referred to, either.

It should be noted that offset policies are still fledgling and changes tend to be implemented annually. Therefore it is not certain that the monitoring and audit processes are effective in the oversight of offset contracts. The flaws in the mechanism include problems that occur from the beginning, with lack of transparency around the contract, and loopholes within it. Therefore, it is ‘impossible for the public to monitor whether the companies actually carry out the investments they promise over the course of the contract’, according to an analyst.

A recent CAG report (audit scope – October 2011 to February 2012) tabled in Parliament in November 2012 indicated certain shortcomings in the offset contracts signed till mid-2012. The report highlighted that most of the offset contracts have not adhered completely to the DPP guidelines. The report also questioned the waivers given by the Ministry to foreign vendors in fulfilling their offset obligations.

There have been recent steps taken to address these issues.

The establishment of a Defence Offset Monitoring Wing (DOMW) to replace the existing Defence Offset Facilitation Agency (DOFA) has strengthened the monitoring and supervision of offset programmes. Not only has the DOMV been afforded more powers, each new organisation is required to annually report to the DAC on progress. The DOMW is also tasked to &quoute;formulate offset guidelines; participate in technical and commercial offset negotiations; monitor/audit offset programmes; administer offset penalties in case of default by vendors; implement offset banking; and assist vendor in all offset-related matters&quoute; (IDSA 2012). Most importantly, it is a repository of signed offset contracts (in contrast to the DOFA).

It should also be noted that previously, an offset work package needed to be approved by multiple agencies, ending with approval by the Defence Acquisition Committee (DAC). The final authority has now been changes to the Secretary for Defence Production.

Also of relevance here is the government's recent inclusion of contracts of the value of 20 crore under Integrity Pacts to minimise corruption in lower-value contracts.

Response to Peer Reviewer 1: The limit for Foreign Direct Investment (FDI) in offset contracts has now been raised to 49 per cent.

(Relevant information from Peer Reviewer 2 has been added to the main answer)

In August 2015, the government made retrospective changes to the its offset policy to increase flexibility for foreign companies to choose partners and allocate work shares. These were made in recognition of India’s previously stringent conditions which reportedly led to the blocking up of over three quarters of the investment since 2009. One of the noted issues, according to experts was the requirement to provide detailed work packages during the time of submission of the initial bids. Foreign companies were previously required to provide details of partners and contracts up to three years in advance.

Foreign firms are now exempt from having to declare the names of Indian offset partners, the amount of FDI and the value of equipment years in advance and this information can now be provided at the time of execution of the contract. There will now also be an option to switch from offset obligations to ‘Buy and Make’, under which the value of the FDI by the Original Equipment Manufacturer (OEM) and eligible products are be counted off as offset obligations.Additionally, changes in an offset work package will now be decided by Secretary Defence Production rather than a long process approved by the Defence Acquisition Committee (also retrospective).

A recent CAG report (audit scope – October 2011 to February 2012) tabled in Parliament in November 2012 indicated certain shortcomings in the offset contracts signed till mid-2012. The report highlighted that most of the offset contracts have not adhered completely to the DPP guidelines. The report also questioned the waivers given by the Ministry to foreign vendors in fulfilling their offset obligations. The CAG provides periodic reports on the management of defence offsets - for example., CAG Report No. 17 of 2012-13 (Air Force and Navy).

(Relevant information from Peer Reviewer 1 has been added to the main answer)

There are procedures for competition both with offset contracts and the main contract, however some evidence indicates that with recent changes, the level of competition in relation to offset contracts is likely to be enforced less stringently.

Major changes were brought in to India’s offset policy in August 2015, with retrospective effect. These were made in recognition of India’s previously stringent conditions which reportedly led to the blocking up of over three quarters of the investment since 2009. One of the noted issues, according to experts was the requirement to provide detailed work packages during the time of submission of the initial bids. Foreign companies were previously required to provide details of partners and contracts a few years in advance.

The changes bring in increased flexibility for foreign companies to choose partners and allocate work shares. Foreign firms are now exempt from having to declare the names of Indian offset partners, the amount of FDI and the value of equipment much in advance. This information can now be provided at the execution stage.

Previously, the work package needed to be approved by multiple agencies, ending with approval by the Defence Acquisition Committee (DAC). The final authority has now been changed to the Secretary for Defence Production.

Response to Peer Reviewer 1: Agreed. Relevant information has been added and the score is lowered from 3 to 2.

All defence procurement projects in India are governed by the Defence Procurement Manual (DPM) and the Defence Procurement Procedure (DPP) issued by the Indian Ministry of Defence. Historically, defence procurement in India has been coloured by suspicions of corruption and bribery. More often than not, 'agents' of foreign defence suppliers have been involved. While 'market experts' or 'consultants' offer advantages to foreign defence companies operating in India, they often operate without a thorough understanding of the intricacies of the market. This has been seen to become an issue when the consultancy services go beyond providing market information and start playing an active role in the procurement process. The line that divides what is allowed and what is not is relatively easy for unwary suppliers and agents to cross. In a market where enforcement agencies are at a state of heightened alert to prevent corrupt activities or undue influence over government procurement projects, there have been an increasing number of prosecutions on such matters in India. Enforcement of the Foreign Corrupt Practices Act by the US authorities has resulted in a number of investigations into activities in India initiated from the United States. There is also wide ranging cooperation and information sharing between agencies in various jurisdictions across the world with their counterparts in India.

The DPP allows for the appointment of agents, although they are subject to the terms and conditions of the Integrity Pact which needs to be signed by prospective bidders. It provides for significant scrutiny, disclosure requirements and limitations on activities, thereby discouraging the use of agents. This information must also be disclosed when the equipment has been supplied or contracted with any organisation within India. Reports indicate that few agents have been registered through these processes. However, it is also reported that the number of middlemen involved in defence procurement contracts is increasing.

There are measures to regulate the role of agents so that they are subject to some degree of scrutiny. Analysts argue that there are flaws in the monitoring and oversight of agents although not a large amount. These problems are predominantly related to bureaucracy within the procurement process and other reports indicate that the procedures in place for regulation are convoluted and complex.

The current Defence Minister has stated that the role of agents will be legalised in defence deals in the upcoming DPP. The proposed changes include not permitting commissions or percentages of profits associated with contracts as remuneration for their services, which will instead be declared by the bidding company. This has not been factored into the scoring as the changes have yet to take place.

The government makes publicly available a certain level of detail of financing packages, including key elements such as the sums involved and payment deadlines. However, information on aspects such as interest rates and rules and regulations surrounding default penalties are likely to be limited and is inconsistently available.

The government formally requires the main contractor to ensure that its subsidiaries and sub-contractors adopt anti-corruption programmes. Legislation requires that the main contractor of the Ministry of Defence and its subsidiaries and sub-contractors adhere to anti-corruption mechanisms, under the Indian Penal Code, 1860, Chapter IX and the Prevention of Corruption Act, 1988.

There is, however, evidence that there are shortcomings in enforcement. These are detailed in the annual audit by the Comptroller and Auditor General (CAG) of the Ministry of Defence. One recent example includes the eight-year long corruption probe into South African arms manufacturer Denel following allegations that it paid kickbacks to Vara Associates, a company based in the Isle of Man, to help secure five deals between July 1999 and April 2005, to supply the Indian Army with anti-material rifles and rounds of ammunition.

In another example, fresh contracts with Finmeccanica were banned under regulations on the basis of the well-known corruption case involving its subsidiary AugustaWestland in relation to the procurement of VVIP helicopters. However, this blanket ban was lifted by the government to allow ongoing contracts to progress. The newly proposed Defence Procurement Procedure (DPP) will reportedly address issues with current norms of blacklisting companies such that they are not 'indiscriminate' and do not impact India's defence modernisation.

As established in the comments for Question 63, there is evidence of a formal process to identify technical specifications for procurement, which indicates that military need is taken into consideration. There is, also, however, evidence that indicates that arms purchases are based on political influence from supplier nations, rather than always on the basis of necessity, as the Indian government often claims. The erstwhile Soviet Union and Russia hold treaties with India which have particular influence, and Russian arms and equipment account for over half of India’s arms imports. Combined with arms sales from Britain, this accounts for the vast majority of India's arms imports.The government of India has indicated its intention to diversify and find alternative arms import sources, although this seems to have met with conflicts of interest and problems. For example, there were corruption allegations in relation to the Barak missile deal with Israel.

Response to Peer Reviewer 1: The current Defence Procurement Procedure (DPP) does not fit the 'Make in India' idea in the sense of what the government is advocating, although preference is given to Indian products over foreign ones. The new, upcoming DPP proposes clear guidelines to push for ‘Make in India’ in defence manufacturing. Additionally, USA had overtaken Russia in 2014 as India's largest arms supplier in the previous three years, although it remains the most significant exported in terms of overall numbers. As of August 2014 and on the basis of the three preceding years, the largest arms suppliers in order of the value of their contracts to India were: USA, Russia, France and Israel.