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NEW DELHI: India is seeking to cancel a $750m order for a dozen helicopters from Italian defence group Finmeccanica, the defence ministry said yesterday, responding to growing pressure over kickback allegations.
India has frozen payments for the AgustaWestland helicopters pending an inquiry after Italian police earlier this week arrested the head of Finmeccanica, Giuseppe Orsi, in connection with the case.
India has already taken delivery of three of the helicopters.
Finmeccanica could be blacklisted in India for at least five years if investigators prove bribery.
IHS Jane’s says Finmeccanica has been pursuing opportunities in India valued at more than $12bn in 2013.
Orsi, who has denied any wrongdoing, resigned yesterday.
“(The Ministry of Defence) today issued a formal show cause notice to AgustaWestland of the UK seeking cancellation of contract,” ministry spokesman Sitanshu Kar said.
“The operation of the contract has been put on hold. The company has been asked to reply to the notice in seven days,” Kar said in a statement.
Graft is likely to be a major issue in elections due by 2014 and a senior defence ministry official said the government was seeking to scrap the deal to fend off pressure in parliament.
The Italian investigation has been going on for months and India launched its own police inquiry this week after Orsi’s arrest. The Central Bureau of Investigation (CBI), which has been entrusted to probe the bribery allegations, is likely to send a team to Italy within a week to probe the alleged around €51m kickbacks paid by Finmeccanica to clinch the deal.
Officials have complained that Italian investigators were not sharing any details of the case.
The government said yesterday it was pressing Britain for information about the case. AgustaWestland is a wholly owned subsidiary of Finmeccanica, but is based in Britain.
British Prime Minister David Cameron arrives in India for a three-day state visit on Monday.
“We’ve had recent talks with the UK government on this; they’ve told us they are looking at Italy to first complete their investigations,” Syed Akbaruddin, a spokesman for India’s foreign ministry, told reporters in New Delhi.
One of the people Italian prosecutors say is involved in the case is British citizen Christian Michel, named in an arrest warrant as receiving bribes on behalf of AgustaWestland.
Orsi, who was questioned by prosecutors yesterday, faces allegations of paying bribes to win the €560m ($750m) contract for AgustaWestland to supply the helicopters, for use by senior politicians.
Orsi’s arrest warrant is based largely on statements made by Guido Ralph Haschke, who says he channelled bribes from Finmeccanica through three brothers related to a former Indian Air Force chief, SP Tyagi, to change terms of the tender to favour the AgustaWestland aircraft. Tyagi and his kin have denied allegations of receiving kickbacks of around Rs7.2m from middlemen.
REUTERS & IANS