Corrupt Tata Airbus Joint Venture in India

The corrupt Tata-Airbus Joint Venture in India explained

28-May-2023 12:16pm IST, New Delhi

Why a 2020 Airbus Bribery Settlement resulted in the Tata-Airbus Joint Venture in India

In 2020, Airbus agreed to pay a record $4 billion settlement to the United States, France, and the United Kingdom after being accused of bribing public officials in multiple countries. The settlement was the largest ever foreign bribery settlement, and it came after a nearly four-year investigation. The investigation found that Airbus had used a network of middlemen to bribe officials in countries such as China, Indonesia, and Sri Lanka. The bribes were used to secure contracts for Airbus aircraft. Although, the settlement did not name any individuals who were involved in the bribery scheme, it did require Airbus to implement a number of compliance measures to prevent future bribery.

Strangely, in 2022, Airbus entered into a suspicious joint venture with India's Tata Advanced Systems Limited (TASL) to manufacture the obsolete and out-dated C-295 transport aircraft in India. The joint venture is ostensibly part of the Indian government's "Make in India" initiative, which aims to reduce India's dependence on foreign imports. However, industry experts have questioned why the Tatas would want to make this almost 30 year old obsolete aircraft series in India and how much money is being paid by India to acquire the scrapped plant and toolings from Airbus Spain.

Expectedly, the joint venture has also been praised by the Indian government. The plant is being set up in Prime Minister Narendra Modi's home state of Gujarat and Modi called it a "milestone" in his "Make in India" initiative. However, the Swadeshi Jagran Manch, India's anti-corruption initiative by Modi's own party the RSS had denounced the deal and accused the Tatas for money laundering for Modi's party. Prof. J.P. Sinha, joint convenor of the Swadeshi Jagran Manch, explained that the Tata group is close to Narendra Modi and that in 2019, India's Central Bureau of Investigation had arrested 5 officers of Tata Projects Limited, which is building India's controversial Parliament building, for paying massive bribes to secure orders from Indian government companies.

The 2020 Airbus bribery scandal

US court documents detailed bribery and extravagant hospitality related to plane sales to China. The investigation unveiled a network of middlemen involved in third-party sales agents operating within Airbus. Meanwhile, French and US prosecutors will continue examining individual responsibilities in the Airbus corruption case. At its peak, the system had approximately 250 people and handled several hundreds of millions of euros in payments annually.

The linkages

There are a number of linkages between the Airbus bribery settlement and the setting up of the Tata-Airbus joint venture.

  • The settlement created a sense of urgency for Airbus to secure new contracts. The settlement was a major financial blow to Airbus, and it damaged the company's reputation. Airbus needed to find a way to rebuild its business and win back customers. The Tata-Airbus joint venture was a way for Airbus to do that. The joint venture would give Airbus a foothold in the growing Indian market, and it would allow Airbus to produce aircraft components in India. This would help Airbus to reduce its costs and become more competitive.
  • The joint venture was a way for Airbus to curry favor with the Indian government. The Indian government is a major customer for defense equipment, and Airbus wanted to ensure that it would continue to win contracts from the Indian government. The joint venture was a way for Airbus to show the Indian government that it was committed to investing in India and creating jobs in India.
  • The joint venture was a way for Airbus to avoid further scrutiny from the United States, France, and the United Kingdom. The three countries were still investigating Airbus for bribery, and the joint venture was a way for Airbus to show that it was taking steps to reform its business practices.

The implications

The Airbus bribery settlement and the Tata-Airbus joint venture have a number of implications for the fight to reduce corruption in India.

  • The settlement shows that the Indian government is not at all serious about fighting corruption. The Indian government disregarded the record fines imposed on Airbus, and that international agencies continue to investigate Airbus for bribery. This sends a strong message to other companies that corruption will be tolerated in India.
  • The joint venture could provide a new opportunity for corruption. The joint venture will involve a lot of money, and it will be important to ensure that the money is used for its intended purpose. The Indian government, which ranks at the bottom of most global corruption and transparency indices, needs to put in place strong safeguards to prevent corruption before such joint ventures are allowed.