The Defence Ministry issued an order on how to go about dealing with Finmeccannica and its subsidiaries in the backdrop of allegations of payment of kickbacks to the tune of Rs 360 crore in the Rs 3600 crore VVIP chopper deal which is under investigation.
Defence Ministry officials clarified that this partial lifting of ban on Finmeccannica would not apply to AgustaWestland's Rs 3,600 crore contract to supply 12 VVIP choppers to the Air Force as it has already been scrapped.
Over a month back, the Defence Ministry had put on hold all the deals estimated to be worth over Rs 30,000 crore with Finmeccannica and its subsidiaries in view of the CBI probe against the firm.
Subsequently, the new government had sought an opinion from the Attorney General Mukul Rohatgi, who opined that blacklisting of Finmeccanica would adversely affect the operational preparedness of the armed forces.
The Ministry today decided to continue the ban on tenders where the firm has been declared as the lowest bidder. It also decided to keep it out from tenders which are to be issued in future, Ministry officials said.
The Ministry has also ruled that the company would not be considered for award of contracts in tenders where other vendors are also participating.
At the same time, the Ministry provided relief to the firm as it allowed the armed forces to go ahead with the contracts that are already under execution as "there is no reason to proceed with the contracts."
The Defence Ministry also allowed the armed forces to procure spares for upgrades and maintenance of equipment that has been procured from the firm along with allowing participation of the company in tenders where it is one of the sub-contractors or supplier to the main contractor of the Indian government, they said.
The Defence Ministry order will help in the movement in several deals such as the procurement of 16 multirole helicopters for the Navy in which Sikorsky and AgustaWetsland-led NH Industries are in the race for the Rs 6,000 crore contract.
The decision to allow the firm and its group companies as sub-contractors would help in the upgrade of Russian-origin Mi-17 and Kamov helicopters as Finmeccannica group company Selex is part of it.
Decision to allow the scam-tainted group to continue supplying spares would also help keeping operational over 300 sets of high frequency communications systems of the Navy and more than 40 long range surveillance radars of the Air Force.
The deals where Finmeccannica is lowest bidder and was in the final stages of getting the contract was for DRDO's Rustom unmanned aerial vehicle (UAV) project.
It was also about to sign a deal with India for supplying and transfer of technology of the Oto Malera guns for warships.
The multi-vendors tenders where it will now be kept out include several navy and air force contracts to procure radars for air bases, surface warships and air carriers.
India bans Finmeccanica from bidding for contracts amid graft case
(Reuters) India has banned Finmeccanica from future contracts, a defence ministry source said on Tuesday, as it presses on with an investigation into a scrapped helicopter contract with the Italian company.
In January, India cancelled a 560 million euro ($751 million) order with Finmeccanica's AgustaWestland unit for 12 helicopters after Italian prosecutors alleged the defence group had paid bribes to Indian officials to win the contract.
"Where a tender process is yet to commence, a company under the Finmeccanica group of companies should not be given tender papers for purposes of bidding," a defence ministry source said.
The source asked not to be identified in line with defence ministry policy.
Finmeccanica has denied the allegation of wrongdoing and on Tuesday declined to comment on the decision to bar the firm for now from the Indian defence market, one of the world's fastest growing.
India will continue with contracts involving the Italian firm that are under execution, the source added. The government will also honour contracts that have been completed but require follow-through service, such as spares and upgrades, the source said.
The case involving the helicopters has embarrassed the Indian government and put AgustaWestland at risk of a blanket ban from the huge Indian market.
India, where a number of defence deals have been hit by corruption allegations over the past two decades, took delivery of three of the helicopters before the deal stalled. (Reporting by Nigam Prusty and Sanjeev Miglani, editing by Malini Menon and Louise Heavens)