Bribery row: Is BEML filling its coffers at Army's expense?

The bribe offered to Army Chief General VK Singh due to his opposition to all-terrain Tatra vehicles that are used by the Indian army raises doubts over whether Bharat Earth Movers Limited (BEML)- the defence ministry undertaking- was supplying the vehicle to the Indian army at exorbitant prices just to maximise its own profits.

Though Tatra did not sell directly to the Army, it sold high-priced components to BEML which was given a licence to manufacture the trucks in 1968 and indigenise the Czechoslovakian vehicle. But over the years BEML has merely taken kits and put them together and passed them on to the army after marking their prices.

Shares of BEML today traded 4.6 percent lower at Rs 625.75 on the National Stock Exchange as the company is alleged to have supplied sub-standard equipment at inflated price to the Army.

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VK Singh believed that the Bangalore-based defence PSU, which assembles Tatra trucks under licence from Tatra Sipox UK Limited, has been selling the trucks to the army for Rs 1 crore a vehicle, when it can actually be bought for half the price in Eastern Europe. In fact Ural India Ltd, an Indo-Russia JV which has an assembly plant in Haldia, had offered to sell a category of all-terrain multi-wheeled vehicles to the army for Rs 40 lakh each, said various media reports. Indian companies like Ashok Leyland and Tata Motors also supply similar trucks for Rs 16-18 lakhs.

And when Gen Singh wanted to open up the bidding process to Ural and other such firms to get the vehicle at a cheaper cost, he was urged by the alleged briber to approve a file that would allow the purchase of 600 Tatra vehicles - a transaction involving at least Rs 600 crore. Since the alleged bribery attempt, V.K. Singh had ordered that not a single Tatra brand truck should be bought by the army. There are about 7,000 Tatras with the army, bought over nearly 25 years between 1986 and 2010.

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According to a report in the Business Standard, Singh had two other objections to the Tatra. “First, BEML had not indigenised production adequately. Almost 70 percent of the Tatra was sourced from abroad. Second, despite BEML’s so-called ‘manufacture’ of the Tatra for decades, it remained a left-hand-drive vehicle that was unsuitable for Indian conditions,” the article said.

But high pricing of components could have delayed almost all efforts to indigenise the product completely. Last year, BEML’s director VRS Natarajan said the Tatra was now 60 percent Indian-made - up from 21 percent in 2002. However, the truck should have been made wholly Indian by now, which further led to allegations that BEML is wilfully importing form Tatra at high cost.