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India Puts Finmeccanica Deals On Hold

Aug. 6, 2014 - 03:45AM   |  
By VIVEK RAGHUVANSHI   |   Comments
India canceled the purchase of 12 AgustaWestland VVIP helicopters and has put other deals with parent company Finmeccanica on hold.
India canceled the purchase of 12 AgustaWestland VVIP helicopters and has put other deals with parent company Finmeccanica on hold. (AgustaWestland)
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NEW DELHI — India’s new government has halted defense deals with Finmeccanica while the federal anti-fraud agency looks into alleged corruption in the Navy’s 2010 purchase of 12 VVIP AgustaWestland helicopters.

Sources in the Ministry of Defence (MoD) said an internal circular issued by the Department of Defence Production had instructions to put a hold on purchases from the Italian company and its subsidiaries.

Among the subsidiaries that may be affected are Selex, which is supplying the Air Surveillance Radar for India’s under-development aircraft carrier, and Whitehead Alenia Sistemi Subacquel (WASS), which is supplying the Navy with 98 Black Shark heavyweight torpedoes and upgrading A244 lightweight torpedoes.

Neither Finmeccanica nor the MoD would comment on the circular.

The move is somewhat unexpected. When the new government of Prime Minister Narendra Modi came to power in May, it signaled that such holds would be rare.

“A new government has come with a fresh mind and as a fresh chapter for India’s policy,” Minister of State for Defence Rao Inderjit Singh said earlier this year. “If a person or a company has been found guilty, they should be punished as strongly as possible. But before guilt is established, if a contract is canceled, it is unfair. A review is needed.”

And in early June, when the three chiefs of the Indian defense forces had their first meeting with Modi and Defence Minister Arun Jaitley, they said such holds had harmed India’s defense readiness.

“The putting-on-hold of defense projects of Finmeccanica and its subsidiaries is a complete change of face of the new government, which had promised before the elections to push India’s defense preparedness,” Indian defense analyst Nitin Mehta said. “So far, the new government has not announced any substantive measures which will hasten stalled defense projects. In fact, the defense budget for 2014-15 proposed by the new government is too meager to meet the long-term defense needs of the defense forces,” Mehta said.

The Black Shark torpedoes are to arm the six French-designed Scorpene submarines being built at India’s Mazagon Docks in Mumbai.

“They were hoping that the new government under Prime Minister Narendra Modi would clear the purchase of Black Shark heavyweight torpedoes for the Scorpene submarines,” an Indian Navy official said.

The subs are due for delivery in 2016, nearly four years behind schedule. The subs will operate without torpedoes if the project is put on hold, the official said.

The upgrades to the A244 torpedoes are part of a series that include getting a new, longer-range fire control system, increasing their speed, and improving their target detection and acoustic counter-countermeasures.

Between 2005 and 2009, the United Progressive Alliance government barred Singapore Technologies Kinetics, Israel Military Industries, Zurich-based Rheinmetall Air Defense, Russia-based Corporation Defense, and Denel of South Africa from doing business in India for ten years.

This caused shortages of ammunition and slowed the purchase of howitzers. The blacklist halted a $300 million contract, signed with IMI in 2009, to build ordnance factories in the state of Bihar to manufacture ammunition for Bofors 155mm guns.

The tender for wheeled 155mm/52-caliber artillery was canceled by the blacklisting of Rheinmetall, which was vying with Konstrukta of Slovakia for the job.

The 2005 blacklisting of Denel for alleged bribery and kickbacks led to the cancellation of the tender for the purchase of 155mm/52-caliber towed guns, which Denel was expected to win. ■

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