M A I N   N E W S

Govt scraps Agusta copter deal
Tribune News Service

New Delhi, January 1
The Ministry of Defence today scrapped the Rs 3,600-crore deal with Anglo-Italian firm AgustaWestland to supply 12 copters to fly top politicians. The 2010 deal was mired in controversy and there were allegations of payoffs. “The Government of India has terminated with immediate effect the agreement on grounds of breach of the pre-contract integrity pact (PCIP),” the Defence Ministry said in a brief statement.

The cancellation came after a meeting between Defence Minister AK Antony with Prime Minister Manmohan Singh here earlier in the day, said ministry sources. The ministry had sought the Attorney General’s advice on how to proceed in the case.

“The Attorney General said that “integrity-related issues were not subject to arbitration,” the statement said. However, to safeguard its interest against Agusta’s move to press for arbitration, the MoD has appointed an arbitrator from its side. “The MoD has nominated Justice BP Jeevan Reddy as its arbitrator,” said the statement.

Already, prosecutors in Italy have discovered that Rs 360 crore were paid as bribes by the company to win the contract in 2010. In February 2013, India had frozen the contract after the arrest of top officials of the company. However, the firm had till then delivered three copters.

Since then, the CBI has registered a case against former Indian Air Force Chief Air Marshal SP Tyagi (retd) and claimed that Rs 360 crore had been paid to 13 middlemen, including Tyagi, his three cousins - Julie, Docsa and Sandeep Tyagi - European middlemen Carlo Gerosa, Christian Michel and Guido Haschke, besides some Indian companies.

India signed the deal in 2010 after Agusta beat its US competitor. The Russians had opted out of the race. After India froze the contract and asked why it should not be cancelled, AgustaWestland, in November last year, sought arbitration in the matter.

Italian prosecutors suspect kickbacks worth around 10% of the deal --- $ 67.6 million (50 million euros or around Rs 360 crore at then prevailing euro-rupee exchange rates ) --- were paid to Indian officials to swing the deal in favour of Agusta. The documents have been shared with CBI. The CBI in its FIR alleged that cash was handed to Tyagi's cousin, with more money funnelled via a web of middlemen and companies in London, Switzerland, Tunisia, Mauritius and Chandigarh. In August last year, the Comptroller and Auditor General had pointed out that the tender was tweaked to suit Agusta. It has apportioned blame for the period when Tyagi was the IAF Chief. It said former IAF chief Fali Homi Major allowed trials of helicopters that were not even the ones that India was supposed to buy. It narrated how the crucial flying ceiling was lowered from 6,000m to 4,500m allegedly after orders from the Prime Minister’s Office in November 2003. In the revised request for proposal issued in 2006, the mandatory “service qualitative requirement” (SQR) was reduced.

Rs 3,600-cr contract

The government had entered into a Rs 3,600-crore deal with AgustaWestland, a division of Italian defence group Finmeccanica, for purchase of 12 helicopters to fly top politicians in 2010.

Payoff allegations

• The deal went awry in February last year after the then chief executive of Finmeccanica was arrested for allegedly paying bribes to secure the deal, prompting India to freeze payments to the company
• Under India's defence procurement rules, the integrity pact prohibits paying or accepting bribes

The timeline

• Aug 1999: Replacement of Russian Mi-8 VIP copters proposed.
• March 2002: Global tender issued. Agusta doesn’t meet the specified requirement; only Eurocopter found suitable
• Nov 2003: To avoid single-vendor situation, change in requirements mooted
• Sept 2006: Tender re-issued
• Sept 2008: Agusta recommends price of ~3,600 cr
• Feb 2010: MoD signs deal
• Feb 2012: Finmeccanica CEO arrested, MoD orders CBI probe
• Feb 2013: MoD serves first show-cause notice to Agusta
• March 2013: CBI books SP Tyagi and 13 others
• Aug 2013: CAG finds that tender was tweaked, blames Tyagi
• Jan 1, 2014: MoD cancels contract