India bans Finmeccanica from future contracts

India today barred scam-tainted Italian defence firm Finmeccannica from participating in future tenders while deciding to carry out ongoing contracts with the group and its subsidiary AgustaWestland, more than a month after putting all deals on hold.

The Defence Ministry issued an order on how to go about dealing with Finmeccannica and its subsidiaries in the backdrop of allegations of payment of kickbacks to the tune of Rs 360 crore in the Rs 3600 crore VVIP chopper deal which is under investigation.

Defence Ministry officials clarified that this partial lifting of ban on Finmeccannica would not apply to AgustaWestland's Rs 3,600 crore contract to supply 12 VVIP choppers to the Air Force as it has already been scrapped.

Over a month back, the Defence Ministry had put on hold all the deals estimated to be worth over Rs 30,000 crore with Finmeccannica and its subsidiaries in view of the CBI probe against the firm

Subsequently, the new government had sought an opinion from the Attorney General Mukul Rohatgi, who opined that blacklisting of Finmeccanica would adversely affect the operational preparedness of the armed forces.

The Ministry today decided to continue the ban on tenders where the firm has been declared as the lowest bidder. It also decided to keep it out from tenders which are to be issued in future, Ministry officials said.

The Ministry has also ruled that the company would not be considered for award of contracts in tenders where other vendors are also participating.

At the same time, the Ministry provided relief to the firm as it allowed the armed forces to go ahead with the contracts that are already under execution as "there is no reason to proceed with the contracts." The Defence Ministry also allowed the armed forces to procure spares for upgrades and maintenance of equipment that has been procured from the firm along with allowing participation of the company in tenders where it is one of the sub-contractors or supplier to the main contractor of the Indian government, they said.

The Defence Ministry order will help in the movement in several deals such as the procurement of 16 multirole helicopters for the Navy in which Sikorsky and AgustaWetsland-led NH Industries are in the race for the Rs 6,000 crore contract.

The decision to allow the firm and its group companies as sub-contractors would help in the upgrade of Russian-origin Mi-17 and Kamov helicopters as Finmeccannica group company Selex is part of it.

Decision to allow the scam-tainted group to continue supplying spares would also help keeping operational over 300 sets of high frequency communications systems of the Navy and more than 40 long range surveillance radars of the Air Force.

The deals where Finmeccannica is lowest bidder and was in the final stages of getting the contract was for DRDO's Rustom unmanned aerial vehicle (UAV) project.

It was also about to sign a deal with India for supplying and transfer of technology of the Oto Malera guns for warships. The multi-vendors tenders where it will now be kept out include several navy and air force contracts to procure radars for air bases, surface warships and air carriers.