India on Wednesday scrapped a Rs 3,727-crore defence deal with Anglo-Italian company AgustaWestland for procuring 12 VVIP helicopters for the Indian Air Force (IAF) in the wake of bribery allegations.
Beginning the New Year on a strong anti-corruption note, Defence Minister A K Antony signed a termination letter on the grounds of a breach of pre-contract integrity pact, which seeks to ensure corruption-free defence deals. Antony had a meeting with Prime Minister Manmohan Singh before terminating the contract.
“Based on the opinion received earlier from the Attorney General of India, it has been the view of the government that integrity related issues are not subject to arbitration. The government has terminated with immediate effect the agreement that was signed with AgustaWestland on February 8, 2010,” said Defence Ministry spokesperson Sitanshu Kar.
The deal was frozen in February 2013, hours after the Italian police arrested top officials of Finmeccanica, Agusta’s parent company and the Defence Ministry ordered a probe by the Central Bureau of Investigation.
Former IAF chief S P Tyagi and his three brothers were among the suspects. It was during the tenure of Tyagi that key changes in operational requirements were made in the tender document between March 2005 and September 2006.
Tyagi’s tenure also witnessed an increase in the number of helicopters from eight to 12. The additional four choppers were supposed to have non-VIP configuration for the Special Protection Group, which provides security to VIPs.
India has already paid about 30 per cent of the contract and received three helicopters, two in the VIP configuration and one in the cargo configuration, which were stationed in the Pallam Air Force base. The IAF has been flying the helicopters at a minimum level to keep them operational.
The ministry was tight-lipped on the fate of the three choppers. Though retaining them may pose a problem in acquiring spare parts, former IAF chief N A K Browne said the Mi-8 helicopters, which were being used to ferry the VIPs, would be phased out in 2014.
AgustaWestland initiated an arbitration procedure against the Defence Ministry in October for unilaterally freezing the contract without providing any proof of wrongdoing by the company. The deadline for initiating arbitration will expire on January 4.