NEW DELHI — India on Friday said it had started the process of canceling a $748-million deal for 12 Italian helicopters amid allegations that the contract was won through kickbacks.
The ministry of defense said in a statement it had “initiated action for (the) cancellation” of the contract for 12 helicopters from AgustaWestland intended for use by VIPs such as the prime minister.
Also Friday, the chief executive of Italian aerospace group Finmeccanica, the parent company of AgustaWestland, formally resigned.
Giuseppe Orsi, who was arrested Tuesday in a bribery scandal over the helicopter sale, also stepped down as chairman and presented his resignation letter to Judge Luca Labianca, who heard his testimony behind bars.
His lawyer said the resignation was aimed at “calming the climate created by the probe” into Orsi and the former head of AgustaWestland, Bruno Spagnolini, who is also due to be interrogated.
“I never knew anything about illicit operations,” Orsi said, according to his lawyer, adding that he had never met members of the “Tyagi family” — the alleged recipients of the bribes, according to leaks in Italian media.
India’s decision to cancel the order is a severe blow to Finmeccanica.
India, which has already put payments to the company on hold, also asked the Italian firm to “reply within seven days” if any terms of the contract and an “integrity pact” it signed in 2010 had been violated.
The purchase came under scrutiny from Italian investigators probing allegations the group had broken the law by paying bribes to foreign officials, leading to Orsi’s arrest. Italian prosecutors suspect that kickbacks worth around 10 percent of the deal, or 50 million euros ($68 million), were paid to Indian officials to ensure AgustaWestland won the contract, press reports say.
The latest move by the defense ministry is seen as an attempt by the government to contain the fall-out from the corruption scandal ahead of elections in the first half of next year. Defense Minister A.K. Antony ordered an Indian police investigation on Tuesday.
The chopper deal was cleared by Indian Prime Minister Manmohan Singh, whose government has been buffeted by a series of corruption scandals that analysts say could affect the party’s electoral chances in 2014 polls.
The cancellation will also overshadow a visit to India next week by British Prime Minister David Cameron. AgustaWestland, a wholly owned Anglo-Italian unit of Finmeccanica, was manufacturing the helicopters at its plant in southwest Britain.