Guns and Butter in Billion-dollar Arms Deal
In December, the Indian Army will test assault rifles from five foreign firms in a Rs.2,500-crore contract to buy a new rifle. The contract is crucial because it will decide the weapon that nearly 1.2 million infantrymen in the world’s second largest army will carry for the next two decades. When the Army announced the tender in November 2011, it electrified the global arms industry. Besides the initial order of 65,678 Multi Caliber Assault Rifles (MCAR), the tender also calls for licence production of over 100,000 rifles in Indian ordnance factories, taking the deal to over $1 billion (Rs.5,500 crore). It is, officially, the world’s largest small arms procurement in recent times.
An arms agent with a flashy lifestyle, Abhishek Verma lived in a plush rented farm house in South Delhi dubbed ‘Verma Estate’. He reportedly advertised his parties through tweets, BBM messages and email. Verma worked for SIG Sauer since 2009, but his business was carried out by his partner, Anca Neacsu. He has been arrested thrice by CBI since June 2012.
Gun manufacturers in Russia, US, Europe and Israel took notice. In Delhi, arms agents began calculating the commissions from the deal-between Rs.100 crore and Rs.250 crore-nothing compared to other scams, but a substantial sum nevertheless.
Two players were already working for the mcar contract: Abhishek Verma and Bhupinder Singh. Abhishek Verma, 43, who is currently in jail for his involvement in the 2006 war-room leak case, worked for SIG Sauer Inc since 2009 but his business was carried out by his partner, Anca Neacsu. She was SIG India’s managing director.
The other player in the fray, Bhupinder, 64, is quieter and flies below the radar. Known as ‘Tusky’ in arms circles, he lives in South Delhi’s Vasant Vihar. For years, Bhupinder remained a fringe player in the home ministry, mainly servicing the police and paramilitary forces with small equipment contracts. Both the Ministry of Home Affairs (MHA) and Ministry of Defence (MoD) prohibit the use of agents in defence deals. In theory, all negotiations are conducted directly with the original equipment manufacturers. But these guidelines are not always followed.
“Abhishek is brash, loud and in–your-face and that was his undoing,” says a Delhi-based arms agent. “Single malt flowed like water at his parties and guests were plied with European escorts.” Tusky, however, is a smarter businessman, he says. “The parties at his Vasant Vihar home are discreet.”
India’s small arms imports were tiny and a monopoly of the state-owned Indian Ordnance Factories based in Kolkata. The November 26, 2008, attack on Mumbai and the war against Left-wing extremism came as a windfall for global arms manufacturers. The budget for the mha zoomed-the home ministry has a modernisation plan ofRs.38,000 crore to upgrade weapons and communications of state police and paramilitary forces over the next five years. Of this, Rs.13,000 crore will be spent on the seven paramilitary forces, and the rest on state police forces. Largescale imports of Bulgarian AK-47s, Israeli Tavors and German MP-5 sub-machine guns began.
Around 2009, Bhupinder took over as Italian weapon-maker Beretta’s representative in India. “We have been working with Beretta officially for three years,” he told INDIA TODAY. “There can be no hanky-panky when we deal with the home and defence ministries.” His son Udai Singh, however, says they have applied for, but are yet to get, rbi permission to set up an office in India.
Known as ‘Tusky’ in arms circles for his buck teeth, the nickname is a legacy of his days at Lawrence School Sanawar.A burly 6’3″ clean-shaven Sikh, he lives in an opulent bungalow in South Delhi’s Vasant Vihar. The son-in-law of a retired Army general, he represents Italian gunmaker Beretta.A keen golfer, he can be seen teeing off at the Delhi Golf Club and Army Golf Club.
Tusky and Udai Singh were the only arms agents present on all four days of the Border Security Force (BSF)’s weapon trials held between May 17 and 20 at their facility in Bhondsi, Uttar Pradesh. Officials present at the trials remember Bhupinder plying BSF officials with beer and soft drinks during the trials. On February 14, 2011, Delhi’s defence circles sat up and took notice of him. Beretta signed the mha contract worth overRs.200 crore for 34,377 carbines. Tusky was now in the big league of arms dealers such as Suresh Nanda, named by CBI as an agent in the Barak missile deal, and Mohinder Singh Sahni, also named by CBI as the agent in the Krasnopol guided munitions case.
The contract surprised everyone for the speed of its execution. It had taken less than three years from contract to delivery, unusual for India’s lethargic bureaucracy. The National Security Guard (NSG), for instance, is yet to get helmets or bulletproof jackets it has tendered for after the Mumbai attack. The contract saw multiple controversies and complaints from rivals, saying they had been unfairly ejected from the trials. The bsf went ahead with the order despite detecting defects in 2,374 carbines of the entire order in February this year.
INDIA TODAY sent Beretta a detailed questionnaire about its relationship with Bhupinder and Udai and the defects that emerged in thetender. A spokesperson responded: “Beretta is bound by the ‘confidentiality clause’ with Indian authorities. We bagged the Indian Government’s contract after participating in a tender process in which we figured on top.”
Verma was furious because Beretta finally had a toehold in India. They were within sight of the ultimate arms contract, the Army’s assault rifle tender that Verma had coveted. SIG had already entered the home ministry in 2007 with a consignment of 500 SiG 551 assault rifles for NSG.
Between December 5 and 7, Verma hosted SIG owner Michael Lueke and ceo Ron Cohen in Delhi. He laid out the red carpet so his employers knew he had connections deep in Delhi’s political establishment. Over the next two days, he introduced them to politicians, bureaucrats and armed forces officials. Lueke and Cohen also met M.M. Pallam Raju, who has been minister of state for defence for nearly eight years. One particular entry in their two-day visit is interesting: ‘Mr Gandhi, Member of Parliament (scion of the Gandhi family) at his residence’. It is not clear who this mysterious ‘Mr Gandhi’ is. india today contacted both Mr Gandhis in Parliament-Rahul and Varun. A spokesperson for Rahul said that though he was in Delhi that day, no such appointment had been scheduled and no meeting took place. Varun also denied having met Lueke and Cohen.
Lueke and Cohen also met Major General R.K. Rana, inspector general of the Special Frontier Force (SFF), a covert paramilitary force that operates under India’s external intelligence agency, Research and Analysis Wing (RAW). “SFF is the most premier paramilitary organisation in India,” Verma said in an email to his US employers in December 2011. “Whatever they buy, the rest buy.”
Besides SIG and Beretta, three other global firms responded to the army contract: Colt Defense of US, Ceska Zbplojovka of Czech Republic and Israeli Weapon Industries (IWI), which reportedly has the backing of a formidable London-based arms dealer.
In January, soon after the SIG brass visited India, a barrage of anonymous complaints was sent to the home minister, defence minister and the home and defence secretaries. “9 mm carbines for bsf, another scam,” the complaint screamed in 36-point size type. “Beretta-Bhupinder Singh (Tusky)”, the complaint further read, noting how the home ministry allowed arms agents to represent and lobby arms manufacturers. Stamped on all seven pages of the complaint was a line: “After a successful attempt with MHA, Beretta’s ultimate target is mod.”
Verma was believed to be behind the fusillade of complaints. But by January-end, he faced troubles of his own. Miffed after a lucrative deal fell through, Verma’s former partner, New York-based lawyer C. Edmond Allen, wrote to CBI, MoD and MHA, of payoffs of $530,000 (Rs.3 crore) made by a Zurich-based Swiss arms firm, Rheinmetall Air Defence (RAD). He enclosed documents to show proof of the deals. RAD executives allegedly wanted Verma to remove a blacklist imposed on them in 2011 after they were found to be involved in the 2009 Ordnance Factory Board (OFB) bribery scam.
RAD, however, rejected allegations of being involved in corruption in India and said in a statement, “Such an allegation is false and without merit.” Verma and Neacsu were charged with corruption and arrested by CBI in June. But the agency did not file a chargesheet so Verma got bail. CBI re-arrested him for forgery but couldn’t file a chargesheet within the mandatory 60 days so Verma was freed again. He was finally arrested on August 30 under the Official Secrets Act for possessing classified MoD documents and procurement plans. Verma’s lawyer, Vijay Aggarwal, has rubbished the allegations. On July 29, he told Mail Today, “All I can say is that daily something new comes out, which is clearly an attempt to influence court proceedings. This is not the appropriate time to comment.”
The Army’s tender has already been dogged by allegations that it had been fixed to favour Beretta. Two of the world’s biggest rifle manufacturers, Belgium’s FN Herstal and Germany’s Heckler and Koch, did not participate in the contract bid in 2011 because they were not confident of winning.
The Army has switched its rifles only twice since Independence-after the 1962 China war, and around the 1999 Kargil war. The Army has been voicing its discontent with the existing indigenous 5.56 mm insas rifle. It also wants a rifle better than the 7.62 mm AK-47, which it uses to fight insurgency in J&K and the North-east. The new weapon has to have the ability to fire both 7.62mm and 5.56mm bullets. This would enable a soldier to change barrels to fire ammunition. This capability comes with a hefty price tag. Each rifle with a conversion kit would cost approximately 3,000 euros (Rs.200,000). An insas rifle manufactured by OFB costs Rs.35,000.
It is still unclear what research the Army did before the tender was floated. The service itself is divided over the contract. “No army in the world goes in for such an expensive and sophisticated weapon,” says a general. “It will add to a soldier’s burden and increase logistic nightmare. Multi-calibre weapons are usually supplied only to specialist units like commandos.”
SIG has dropped Verma and Neacsu from their India business and is competing in the Army contract, for which trials will be held soon. Verma’s removal from the scene means the competition for the world’s largest gun contract has shrunk to just one important player.