India may legalize the use of agents by foreign defense companies and establish penalties other than blacklisting when overseas firms violate rules, said a Defence Ministry source.
Announcement of the new policy will come by late February, the source said, and follows threats by South Korea that it would no longer join India in defense programs after New Delhi put on hold a US $500 million mine countermeasures vessel (MCMVs) award, won by South Korea’s Kangnam Corp., after allegations that the company used defense agents. Indian Defense Minister Manohar Parrikar has since asked MoD officials to legalize use of agents for overseas defense companies operating in India, said the MoD source.
It was during the fifth India-Korea Joint Defense Committee Meeting in Seoul Nov. 17-18 that South Korean defense officials told their Indian counterparts they were angry over MoD’s decision on the MCMV deal. Parrikar, who took over Nov. 10 as defense minister, decided to resolve the issue, the source said.
The fate of the deal to supply eight minesweepers to the Indian Navy is still not known, said a diplomat of the South Korean Embassy.
Defense agents were banned in 1989 after allegations of kickbacks in a competition to acquire howitzer artillery guns from Bofors of Sweden. However, a senior MoD official said clear guidance has never been provided on who constitutes an agent. Parrikar’s decision to “sort out the issue of defense agents” is welcome and will ease hassles for overseas defense companies, the official said.
Parrikar has asked his bureaucrats to put in place a “clear cut” policy that will “formalize and legalize the working of defense agents in India,” the MoD source said.
“The defense minister has a strong opinion against blacklisting overseas companies. Instead, he prefers to use other punitive measures against defaulters,” the MoD official said.