Wednesday, 13 February 2013

NEW DELHI: India has suspended payments to Italian defense group Finmeccanica SpA for a $750 million helicopter deal and won't take delivery of more aircraft until the completion of a federal police investigation into bribery allegations, a defense ministry source told Reuters.

India will cancel a $750 million deal to buy helicopters from Finmeccanica SpA and blacklist the Italian defense group if bribery allegations are proven, defense minister AK Antony said, as political opponents tried to capitalize on the scandal.

Italian police arrested Finmeccanica's chief executive Giuseppe Orsi on Tuesday for alleged bribes paid to secure the sale of 12 AgustaWestland executive helicopters to the Indian Air Force, when he was head of the Finmeccanica helicopter unit. Orsi's lawyer denied the allegations.

The former head of India's Air Force, SP "Shashi" Tyagi, and three of his cousins are among the Indians named in the arrest warrant for Orsi. All say they are innocent.

AK Antony said he had ordered Central Bureau of Investigation (CBI) to investigate the purchase of the luxury helicopters destined for use by India's political leadership. He said that if the allegations are proven to be true, the company would be blacklisted and those involved punished.

"If any individual or foreigner, any firm are involved in this malpractice, nobody will be spared. We will take action against them, whatever may be the consequences," he told reporters on Wednesday. Three helicopters have already been delivered.

Coming at a time of cuts in defense procurement spending, the latest scandal could lead to additional scrutiny and delays for defense deals in the works.

"I am sure that there will be initial setback, but we will overcome that. That is not the main thing. The main thing is that we cannot allow corruption in defense deals," Antony said when asked about the impact on weapons modernization.

India, the world's largest weapons importer, has a long history of corruption in defense deals. A multi-million dollar scandal in the 1980s over the purchase of Swedish Bofors artillery guns contributed to an electoral defeat for then-Prime Minister Rajiv Gandhi, of the Congress party.



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