Finmeccanica banned from defence deals

The Defence Ministry on Tuesday squeezed the military business space for Finmeccanica by banning the scam-tainted Italian defence major and its subsidiaries from participating in all future military acquisitions.

Only contracts under execution and deals involving supply of spares and updates would be allowed to go through, said Defence Ministry officials.

Some acquisitions that may be affected are 16 multi-role Navy helicopters at a cost of Rs 5,400 crore to replace the ageing Sea King-42A choppers and several Defence Research and Development Organisation projects. The Navy deal had moved beyond the L-1 stage, and even price negotiations had been concluded.

The ban also means if a Finmeccanica-group firm is a supplier of a particular component or system to Dassault Aviation, the future of the 126 fighter jets—India’s biggest defence deal—might be in jeopardy. The French company’s Rafale fighter jet was shortlisted as the preferred platform after extensive trials, but the commercial contract was under negotiation for the past two years.

The ban, however, may not affect the supply 3D L-Band air-surveillance radar (RAN-40L) for indigenous aircraft carrier Vikrant as Selex ES, for which a Finmeccanica-group firm has been contracted.

The Defence Ministry’s order follows an advice from the attorney general, who was approached by the Defence Ministry to decide on the future course of action after it put on hold several planned acquisitions involving the Finmeccanica group of companies.

The arms major came under the scanner after its subsidiary AgustaWestland was indicted in a scam involving the acquisition of 12 VVIP helicopters in a Rs 3,727-crore (€556-million) contract signed in 2010, which was scrapped this January.

Officials said if any Finmeccanica-group firm emerged as the lowest bidder, all such procurement cases would be put on hold till further orders.

In other acquisition deals, where the tender process is going on but no vendor has been selected, Finmeccanica-group companies might not be considered, provided the tendering is satisfactorily completed with other firms, said officials.

“Where the tender process is yet to commence, no Finmeccanica-group will be given tender papers,” said officials.