Defence Ministry to relook at defence blacklist guidelines

November 23, 2016

The Union Defence Ministry is planning to relook at defence blacklist guidelines for dealing with global defence firms engaged in corruption in arms deals.
Thus, under recently released new policy called ‘Guidelines of the Ministry of Defence for penalties in business dealings with entities’ the Union Defence Ministry will “re-ascertain” the list of companies banned from doing business in India.
The blacklisting policy was approved by the Defence Acquisition Council (DAC) on November 7, 2016 and the policy was released by the Ministry on 21 November 2016.
Key Facts

The new policy has moved away from blanket banning of blacklisted firms which has adversely affected defence preparedness. Instead of ban, it imposes heavy penalties.
It has reduced the period of blanket ban to 5 years from 10 years. However the upper limit of the ban period has not been specified.
It allows doing business with a blacklisted firm for support of critical spares and maintenance in view of national security.
However, it will be through prior approval from the Defence Minister, i.e. the designated competent authority.

Why there is need to relook?
Many global defence firms have been banned from doing business in India because of allegations of corruption against them. However, blacklisting such firms has skewed the competition, with the Indian military not able to access many of the global products.

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