India puts controversial $ 750 m Italian helicopter deal on hold

Published — Saturday 16 February 2013

Last update 15 February 2013 10:24 pm

| نسخة PDF Print News | A A

NEW DELHI: India’s Defense Ministry said yesterday that it has put a $ 750 million contract to purchase helicopters from Italian company Finmeccanica on hold amid allegations that bribes were paid to obtain it.
The ministry said a formal notice has been sent to Finmeccanica’s AgustaWestland helicopter division seeking cancellation of the contract. The company has a week to respond to the notice.
“With today’s show cause notice, the operation of the contract has been put on hold. The company has been asked to reply to the notice in seven days,” the ministry said in a statement.
India signed the contract with AgustaWestland for the purchase of 12 helicopters in February 2010. Three of the helicopters were delivered in December.
India has launched its own investigation into the 560 million euro ($ 750 million) deal after the Italian defense and aerospace giant’s chief executive was arrested in Milan on Tuesday on charges he paid bribes to obtain the contract.
Giuseppe Orsi, CEO of Finmeccanica, and Bruno Spagnolini, chief of AgustaWestland, are being investigated on corruption charges involving business done in India.
Orsi yesterday formally submitted his resignation as CEO of the company. In his letter to the Finmeccanica board, Orsi denied wrongdoing, saying he always worked “for the exclusive interest of Finmeccanica and its subsidiaries.”
The Finmeccanica board named its chief operating and financial officer, Alessandro Pansa, as interim CEO until a board meeting can be held in April. It also named a new vice chairman.
Indian Defense Ministry officials have said the contract includes an integrity clause against bribery or the use of undue influence. Under the terms of the clause, if any person or the company is found to have bribed officials or made any kind of payoff, the agreement can be scrapped and the firm blacklisted.
The Defense Ministry had already put on hold the delivery of the remaining nine helicopters.
India is expected to spend $ 80 billion over the next 10 years to upgrade its antiquated military.
The country has become the world’s top arms and defense equipment buyer in recent years as it tries to keep up with China’s growing power in the region and with longtime rival and neighbor Pakistan.
India accounted for 9 percent of all international arms imports from 2006 to 2010, and is expected to keep the top spot for the foreseeable future as it upgrades its air force, army and navy.
This is not the first time that a defense deal in India has been mired in allegations that a company paid millions of dollars in kickbacks to Indian officials.
In the 1980s, then-Prime Minister Rajiv Gandhi’s government collapsed over charges that the Swedish gun manufacturer Bofors AB paid bribes to supply Howitzer field guns to the Indian army.
Following the Bofors scandal, India banned middlemen in all defense deals.
From 2007 to 2011, Finmeccanica won an average of 250 million euros ($ 334 million) per year in orders from the Indian government, and aimed to double that by 2015. Analysts say that ambition could be jeopardized if the current allegations prove to be true.
Orsi took over the post of CEO in May 2011 from Pier Francesco Guarguaglini, who in December of that year also ceded the chairmanship to Orsi under government pressure due to allegations of a slush fund. That investigation has since been closed without charges.
Orsi, who was jailed on Tuesday, was being questioned by prosecutors north of Milan. The CEO of AgustaWestland is under house arrest.

What's happening around Saudi Arabia

JEDDAH: An African expat woman is being investigated for torturing her baby to death by pouring boiling water on her. The motive behind the vicious attack is unknown.The Board of Investigation and Prosecution in Jeddah has charged the woman with semi...
RIYADH: Over five million Overseas Filipinos Workers (OFWs), including more than one million in Saudi Arabia, observed “zero remittance day” on Friday, in protest against the random checking of boxes sent by them to their families back home by the Cu...
JEDDAH: Security authorities have arrested 45 people from different parts of the Kingdom for Daesh links in the past 10 days. Forty of the suspects, accused of terrorism, are Saudis. Others are 2 Yemenis, an Egyptian, a Palestinian, and a national of...
RIYADH: The Ministry of Health announced on Friday that two more people were infected with the Middle East Respiratory Syndrome (MERS) coronavirus. While no deaths were announced, the virus has already killed 26 people in just two weeks, from Aug. 16...
RIYADH: The government and courts have issued 35,010 penalties against citizens and expatriates for violating the country’s residency laws including fines and jail terms.Citizens and expatriates across the Kingdom were penalized for transporting, har...
JEDDAH: As international schools in the city gear up for the new academic session, some parents have requested that schools improve the quality of their classes in Islamic studies. Although the Ministry of Education has decreed that all international...

Stay Connected