By Anurag Kotoky
NEW DELHI Aug 13 Indian negotiators set a
higher base price for the purchase of helicopters from
AgustaWestland and frequently changed the bidding rules, the
federal auditor said on Tuesday, making it harder for the
government to complete the 560 million euro ($744.43 million)
The ruling Congress is battling allegations of widespread
corruption in government and the latest report into the deal to
buy 12 helicopters for top politicians offers further ammunition
to its opponents in the run-up to general elections next year.
The Comptroller and Auditor General said the defence
ministry did not comply with rules from the very beginning of
the tender process to the conclusion of the contract with
AgustaWestland, a division of Italy's Finmeccanica
Italy and India are separately investigating charges that
AgustaWestland paid bribes to win the 2010 deal for the AW101
helicopters. India froze payments to the company in February as
the scandal unfolded.
It had taken delivery of three helicopters before the deal
The auditor said the defence ministry had initially set a
condition that the helicopters should be able to fly to an
altitude of 6,000 metres, which meant that AgustaWestland could
not compete since the AW101 was certified to fly only to 4,572
Later the minimum altitude requirement was lowered to 4,500
metres, even though the helicopters were expected to be used in
the mountainous north and northeast parts of the country where
the altitudes are higher, it said.
Field trials of AgustaWestland's bid were conducted on
representative helicopters Merlin MK-3A and Civ-01 and on a
mock-up of the passenger cabin, and not on the actual
helicopter, the CAG said.
In contrast, the actual S-92 helicopters offered by rival
bidder Sikorsky Aircraft, a unit of United Technologies Corp
, were evaluated, the report said.
Bruno Spagnolini, former CEO of AgustaWestland, and Giuseppe
Orsi, former chairman of Finmeccanica, are being tried in Italy
on the accusations in the Indian deal. Both deny wrongdoing.
The Italian arrest warrant for Orsi and Spagnolini, seen by
Reuters, said the Indian tender was changed to deliberately
favour the Italian firm.
"The benchmarked cost adopted by the contract negotiating
committee was unreasonably high compared to the offer cost," the
"Hence it provided no realistic basis for obtaining an
assurance about the reasonableness of the cost of procurement of
AW101 helicopters," it added.
There was no immediate comment from the defence ministry to
the auditor's report and military analysts in India and abroad
said that New Delhi was likely to wait for the results of a
federal police investigation before making a decision on the
"CAG's assessments on the chopper deal will most probably be
factored into the current investigation, but to conclude that
either AugustaWestland will be blacklisted or the VVIP chopper
tender will be cancelled seems a little premature at the
moment," said Deba Mohanty, chairman of Indicia Research &
Advisory, a New Delhi-based think tank.
AgustaWestland has denied any bribery and asked India to pay
the sums due under the contract, sources said earlier this year.
A source familiar with the company's position said
AgustaWestland told the India's finance ministry in a letter
that its initial contract with the Indian government was still
valid and India was liable to pay the remaining amount because
the allegations had not been proved.
"The most prudent thing for India to do is to complete all
relevant investigations - including the CBI inquiry - and to
make a decision based on these findings," said Jon Grevatt,
Asia Pacific Defence Industry Analyst at IHS Jane's.