Defence Ministry told companies to include integrity pact for agents even as they get freedom to conduct price negotiations directly. The ministry is also giving more autonomy to PSUs in presenting commercial offers and quotes to foreign customers

by Manu Pubby

NEW DELHI: In an interesting role reversal, the defence ministry — which has had to deal with controversies over defence agents operating in India — has warned its public sector units (PSUs) to be careful while hiring partners abroad, as focus shifts towards enhancing military exports.

A series of steps are being taken to put in a regulatory framework to simplify export of both lethal and non-lethal equipment, including measures to step up utilisation of lines of credit extended by India to friendly nations.

Given India’s target — Rs 35,000 crore exports annually by 2025 from the Rs 4,000 odd crore at present— the ministry is looking at safeguards to ensure unethical practices are not used abroad while promoting arms sales. In an advisory to all PSUs earlier this month, the ministry stressed on taking utmost care in appointing agents and channel partners overseas, emphasising adherence to guidelines of the Central Vigilance Commission.

In particular, PSUs have been asked to include integrity pacts — binding legal agreements that result in huge fines being levied on erring parties — while appointing agents. “Due diligence should be ensured while appointing channel partners/agents overseas and a fair transparent process observed. Suitable integrity pact and indemnity clauses should be incorporated in contracts,” the advisory read. Similar strict guidelines are already in place in the Indian defence procurement policy.

Government-owned companies will also need to submit quarterly reports certifying that all guidelines on integrity are being observed when it comes to exports. India already has an export booklet in place that lists the systems on offer to friendly nations. These range from small arms and communication systems to artillery, missiles and various types of ammunition.

The ministry is also giving more autonomy to PSUs in presenting commercial offers and quotes to foreign customers. While in the past, commercial offers were sent after getting official inputs by the ministry— a time consuming process that added another layer of bureaucracy — new guidelines authorise PSUs to deal directly with foreign customers. The only exception would be government-to-government requests that would still be processed by the South Block.