New Delhi: Amidst fears that India may lose money if it cancels the Euro 556 million deal with AgustaWestland for 12 VVIP helicopters, Defence Ministry is exuding confidence that the bank guarantees provided by the Italian company and the choppers it delivered in December last are enough to make up for any loss.
Sources told BDK that it had a total of Euro 210 million as bank and performance guarantee from AgustaWestland in India that could be encashed by the government if the deal is cancelled over allegations of bribery in the VVIP helicopters deal signed in January 2010.
The bribery charges had come to light during an Italian probe against AgustaWestland's parent firm Finmeccanica, which Italian prosecutors have alleged adopted corruption as a policy to win overseas contracts.
The prosecutors had also told a court in Milan that documents seized by them indicated AgustaWestland paid bribes to the tune of Euro 51 million to middlemen and the bribes reached certain Indians too.
The Defence Ministry has already handed over the details that it has obtained from Italy to the Central Bureau of Investigation (CBI) for carrying out a probe into the allegations.
"The Defence Ministry is sitting over a Euro 182 million bank guarantee and Euro 27 million performance guarantees from AgustaWestland in the VVIP helicopter deal," the sources said.
|Defence Minister A.K. Antony
"Taking into account the cost of the three AW-101 helicopters delivered to India by AgustaWestland in December 2012 worth Euro 128 million, the total amount with the Indian government is around Euro 338 million," the officials said.
However, India has already paid AgustaWestland close to Euro 318 million as per the payment schedule mentioned in the contract. Therefore, if the deal is cancelled, India will recover the money paid so far from the bank and performance guarantees it has from the company. Also it has 3 helicopters as asset with it worth Euro 183 million.
According to sources, India is only waiting for the CBI probe report or the report that the Italian judiciary had promised India when it was approached for details in February this year after the judicial process in the case against former Finmeccanica chief Guiseppe Orsi was completed in three months.
"Once either of these two reports is received, a decision on the cancellation of the VVIP chopper deal will be taken they said.
Sources pointed out that the contract signed with AgustaWestland included specific contractual provisions against bribery and the use of undue influence.
The Article 22 of the contract dealt with penalty for use of undue influence and this clause entitled the Indian government to cancel the contract and to recover the amount of any loss arising from such cancellation.
The Article 23 dealt with agents and agency commission required the selling firm to confirm and declare the engagement of any individual of firm as an agent or agency respectively, be they Indian or otherwise.
This clause also deals with agents or agency interceding or facilitating or in any way to recommend to the Indian government or its functionaries, whether officially or unofficially, to award the contract to the firm they represent.
AgustaWestland, under this clause, has assured that it had not engaged any agent or agency and that it has not paid or promised to pay or intended to pay any such person or firm for any intercession, facilitation or recommendation they carried out.
This clause further entitled the Indian government to consider cancellation of the contract without any entitlement or compensation to the Italian company, which will be liable, though, to refund all payments made by the Indian Defence Ministry under the contractual agreement, along with interest.
In addition, AgustaWestland had also signed an integrity pact with the Indian government, which extended for five years from the date of signing of the contract, which would mean it was valid till January 2015, or till the complete execution of the contract, whichever is later.
Under the integrity pact, the firm committed to take all measures necessary to prevent corrupt practices, unfair means and illegal activities during any stage of the tender or during any pre-contract or post-contract stage.
Any breach of the provisions of the integrity pact entitled the Indian government to take actions against the Italian company, which included forfeiture of the earnest money, performance bond, cancellation of the contract without giving any compensation, to recover all the sums already paid with interest, to cancel any other contracts with the company and to debar it from participating in any tender of the government for a minimum of five years, which may be extended.
Meanwhile, sources also noted that they are on the verge of cancelling the $3-billion worth tender for 197 Light Utility Helicopters, but are waiting for a formal probe by the CBI into allegations that serving Indian Army officer Brigadier V S Saini, who was part of the selection team for the helicopters, had sought $5 million as bribe to favour AgustaWestland in the tender that was issued in 2007.
Though AgustaWestland had been eliminated at the scrutiny stage of the tender, the allegations emerged from documents seized by the Italian prosecutors while investigating the Finmeccanica affairs, though Saini has denied the allegations.
However, during the Defence Acquisition Council (DAC) meet on April 2 this year chaired by Defence Minister A K Antony, Indian Army chief General Bikram Singh sought a thorough probe into the allegations before a decision on the fate of the tender was taken. At present, European firm single-engine Eurocopter's AS550 C3 Fennec and the twin-engine Russian Federation-built Kamov-226 Sergei are the two competitors left in the fray for this tender.
Accepting the recommendation from Singh, the Defence Ministry has now handed over the probe into the allegations against Saini to the CBI.
Sources also pointed out that in view of the allegations against Finmeccanica, the Defence Ministry may be forced to ask the Indian Navy to restart the tendering process of buying 16 Multi-Role Helicopters.
Finmeccanica's NH Industries is competing in the $1 billion tender for 16 Multi-Role Helicopters (MRH) that is at an advanced stage of finalisation. NHI has fielded its NH90 against American Sikorsky's S-70B.
In August 2012, India has issued a fresh tender worth $4 billion for 56 more MRH in which NHI may again participate.
With regard to the $22-billion Medium Multi Role Combat Aircraft (MMRCA) tender, the Defence Ministry has already strongly conveyed to French Dassault Avaition that there will be only one contract that it will sign with it for the 126 Rafale planes.
This has been conveyed following Dassault raising issues with regard to the role of Defence public sector Hindustan Aeronautics Limited (HAL) that is to licence-manufacture 108 of the planes here in India, after 18 planes are delivered off-the-shelf by Dassault.
The French firm had raised doubts over HAL's capability to handle production of the 108 planes and sought from the Defence Ministry exemption from responsibility on the delivery of these planes too, which is a clause in the tender that was issued in August 2007.
Dassault had been chosen over European consortium Cassidian’s Eurofighter Typhoon in January 2012 and since then, contract negotiation committee is holding parleys with the French firm on the contours of the deal.
“We hope to conclude the contract in another few months. The contract negotiation is progressing well. Dassault has been communicated that the tender provisions cannot be amended or relaxed at this stage,” sources said.