PSUs like BEML are Middlemen Milking the Military

Tatra deal: BEML was a middleman milking the system
by FP Staff Apr 3, 2012
The role of defence public sector undertakings like BEML that are working like middlemen in defence deals, often marking up final prices by 100 percent, is sharply in focus, after a whistleblower told CNN-IBN of the dubious role that BEML played in the Tatra truck deal.
And with one former Army chief claiming that the Army chiefs are kept in the dark about the financial aspects of defence deals, the role of officials in the Ministry of Defence and in defence PSUs may merit a wider investigation.
The tale narrated by the whistleblower is quite revealing.
In 2003, Brigadier (Retd) Inder Mohan Singh, who was then in the Equipment Brach, had raised questions about BEML’s deal with Tatras Sipox UK, the UK-based company owned by Ravi Rishi, for the supply of Tatra trucks to the Army. He had written to ask for details of the price of the trucks, and for copies of the transfer of technology agreement. The very next day, he had a surprise visitor waiting in his office.
“At 9 o clock, when my office had barely opened, a BEML officer was sitting in my office,” Brig IM Singh told CNN-IBN. “He said, ‘Sir, marwadiya sabko’ (You’ve killed everyone).” Asked what he meant, the visitor confided: ‘The letter you faxed yesterday will create a lot of trouble.”
If anything, it was Brig IM Singh who found himself in trouble. His letter, making enquiries about the deal, was cancelled, and he was transferred out of the Equipment Branch.
“The biggest middlemen and the biggest agents are the defence PSUs,” he says. “They do not manufacture anything on their own.”

Defence journalist Ajai Shukla too says that the “real story” in the Tatra case isn’t about the performance of the trucks or about the Czech company. “It is a story that plays out day after day how the defence PSUs – like BEML in this case – take the entire system for a ride as a result of their proximity to the Ministry of Defence.”
What BEML has done, says Shukla, is that it has bought the equipment in knocked down condition overseas, assembled it in India, added in a heavy mark-up in price, forgotten entirely about its promise of indigenisation and sold the trucks to the army at almost twice the price it bought it at.
“You have a Ministry of Defence official sitting on the board of BEML, and when BEML asks for a procurement to be done or a particular supply order to be given, it is almost always granted,” says Shukla.
“There are just two scandals in the Tatra case,” he adds. The first is BEML’s conduct. The other is how the Ministry of Defence allowed BEML to get away with this from the late 1980s until today. “It took a Gen VK Singh to disrupt this chain of scams that has been going on – and say we must consider an alternative.”
Former Chief Vigilance Commissioner Sudhir Kumar, who has dealt with similar cases in the past, too concurs that the Tatra case highlights the fact that PSUs function “almost like middlemen.” A large number of PSUs have converted themselves into agency operations, he adds.
Former Army chief, Gen Shankar Roychowdhury confided that the financial details of defence deals were not typically known to the Army Chief. Which is why when he served as Army chief, he had not objected to the Tatra truck deal: all he was concerned with was the vehicle’s performance, and he was well pleased with it.
Shukla says that the focus should now turn to the role of the BEML and officials in the Ministry of Defence.
Tatra deal: BEML was a middleman milking the system