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India starts process of scrapping chopper deal

Government issues show-cause notice to AgustaWestland seeking to cancel the $750 mn deal
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First Published: Fri, Feb 15 2013. 05 23 PM IST
AgustaWestland is a wholly owned subsidiary of Finmeccanica. Photo: AFP
AgustaWestland is a wholly owned subsidiary of Finmeccanica. Photo: AFP
Updated: Sat, Feb 16 2013. 05 41 PM IST
New Delhi: India said on Friday that it had kicked off the process that would lead up to the scrapping of a Rs.3,600 crore helicopter deal and issued notice to manufacturer AgustaWestland over alleged kickbacks after opposition parties launched a fresh attack on the Congress-led government and threatened to press it for answers in the budget session starting shortly.
The main opposition Bharatiya Janata Party (BJP) asked the government to name “the family” that, according to the report of Italian investigators, had been paid a bribe of Rs.200 crore.
“The ministry of defence (MoD) has initiated action for cancellation of contract for procurement of 12 AW101 helicopters for the use of VVIPs. MoD has issued a formal show-cause notice to AgustaWestland of UK seeking cancellation of the contract and taking other actions as per the terms of the contract and the integrity pact,” the ministry said in a statement.
“MoD had already put on hold further payments to the company on Wednesday. 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,” it added.
Separately, comptroller and auditor general of India Vinod Rai said in Mumbai that his office was auditing the helicopter deal and will come out with a report “soon”.
India signed a deal with the UK-based AgustaWestland, a subsidiary of Italian defence giant Finmeccanica SpA, in 2010 to purchase 12 helicopters to ferry important government functionaries. The deal, however, came under a cloud after Italian investigators arrested the chief executive officers of Finmeccanica and AgustaWestland on 12 February.
The report filed by the investigators before an Italian court details the role of middlemen and former Indian Air Force chief S.P. Tyagi and his three cousins. The report alleged that Tyagi, who has claimed innocence and has himself sought an inquiry, briefed the middlemen over changes in tender conditions and kickbacks were paid to his relatives in the guise of engineering contracts. The report also named some serving Indian armed forces officials, who were either identified by their first names or ranks.
Had the tender conditions not been changed, AgustaWestland would have failed to qualify for the bid. The changed requirements left the company and one of its rivals in the race.
According to the Italian investigators’ report, a copy of which has been reviewed by Mint, AgustaWestland paid nearly €51 million (around Rs.370 crore today) in kickbacks to three alleged middlemen—Micheal Christian, Guido Ralph Hashcke and Carlo Gerosa—to secure the helicopter deal from India. The middlemen paid their Indian contacts after money was routed to India through shell companies, now the subject of investigation by India’s Central Bureau of Investigation (CBI) and the Enforcement Directorate.
In the past, Hashcke has served as an independent non-executive director on the board of realty company Emaar MGF and Christian has allegedly been involved in various defence deals in India. Emaar MGF said Haschke had never attended any board meetings and the company had no association with his other businesses and firms.
Indian rules don’t permit agents or consultants to be part of defence deals in any form.
Defence ministry officials said it may soon take a call on whether to blacklist Finmeccanica and its subsidiaries from doing business in India. Such a move would prevent its participation in defence projects to the tune of Rs.40,000 crore coming up in the near future.
CBI investigators again met defence ministry officials on Friday as part of their inquiries into the deal and the procurement process. While the federal agency is still collecting information from officials involved in the acquisition process, India asked Italy for evidence and information collected by its agencies.
“The ministry of defence made the request through the Indian mission (in Rome),” said a government official, requesting anonymity. Italy has rejected a similar request in the past saying that the matter was under investigation.
A CBI team will visit Italy next week in a bid to collect more details pertaining to the case.
The government had sought similar information from the UK authorities about AgustaWestland.
“In the recent past, we have formally checked with the UK side, and as of now they have given us an interim response, so we are waiting to further check with them whether they have any information. The interim response very specifically is that they want to wait for the investigation in Italy to be completed and for them to know more details of the investigation in Italy before they can respond to anything that we have asked them,” said Jaimini Bhagwati, India’s high commissioner to Britain.
The BJP demanded that the investigation be monitored by the courts as with the 2G scam.
It also demanded the details of the defence ministry’s internal inquiry and “how the government arrived at the conclusion that there was no foul play. MoD, instead of accepting its fault, is trying to deflect the issue by bringing in unnecessarily the technical specifications and dragging the name of NDA into the matter)”, BJP spokesperson Prakash Javadekar said.
The NDA, or the National Democratic Alliance, led by the BJP ran the government in 1998-2004.
“The issue is not technical specification, but the real issue is the corruption and the kickbacks, and government’s failure to order a timely probe and find out the Indian beneficiaries. The BJP wants to know who received the kickbacks. In two places, the Italian charge-sheet talks about payment of €28 million to ‘The Family’. The nation wants to know who ‘The Family’ is,” Javadekar said.
Parliamentary affairs minister Kamal Nath, while speaking to television news channel NDTV, said the government was ready for all sorts of probes, including by a joint parliamentary committee as demanded by the various opposition parties.
“There is nothing to hide and we must get to the bottom of this (controversy),” he said. “We are ready for any investigation. There should be consensus in Parliament on what further steps need to be taken.”
Aveek Datta in Mumbai and PTI contributed to this story.
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First Published: Fri, Feb 15 2013. 05 23 PM IST