New Delhi: On New Year’s day, the defence ministry finally bit the bullet by scrapping the controversial Rs 3,546-crore contract with Italian-owned UK-based firm Agusta-Westland for the procurement of 12 AW-101 helicopters for VVIP use that was inked in February 2010.
The contract was “terminated” on the grounds that Agusta had violated the integrity pact and agreement. MoD sources said this is probably the first time ever that a major defence contract has been cancelled by India, adding that Antony had always taken a tough stand against corruption.
The deal became controversial in February 2012 after allegations surfaced in Italy tat kickbacks had been paid to clinch it. Agusta had denied the allegations. Defence minister A.K. Antony met Prime Minister Manmohan Singh on Wednesday to discuss the issue and possible implications. The decision of the MoD was formally announced by evening.
MoD may issue new tender
After scrapping the AgustaWestland copter deal the defence ministry may now either use customised variants of the new Russian Mi-17 V-5 helicopters in future to transport VVIPs, including the President and Prime Minister, or issue another global tender.
For the past few weeks, the MoD had appeared convinced that bribes were paid to clinch the deal after this was indicated by the ministry’s “internal mechanism”, sources said. This will now pave the way for eventual blacklisting of AgustaWestland by the MoD even though sources said no decision has been taken on this aspect yet. The MoD is also waiting for the CBI to submit its probe report.
Agusta will now forfeit the earnest money and performance bond and will receive no compensation for cancellation. India may also seek damages from Agusta, possibly of more than 500 million euros (about Rs 4,000 crore). Sources said the India will also be legally entitled to recover all the sums already paid with interest and to debar Agusta from entering into any bid from the government for a minimum period of five years which may be extended.
The Centre is believed to have already paid over Rs 1,000 crore to Agusta as part of initial payments in the contract.
In its reaction, Agusta said, “AgustaWestland has not received any communication from India’s MoD. The company is therefore unable to comment beyond reiterating the denial of allegations.”
