Chopper scam: Government warns of blacklisting Italian firm
With the VVIP choppers deal facing charges of kickbacks, government today formally asked Italian firm Finmeccanica to state whether any money was illegally paid to any Indian entity or individual amidst its warning of legal action including blacklisting of the firm.
The Ministry of Defence, which is under attack on the issue, came out with a fact-sheet detailing the sequence of the Rs 3,600 (rpt) Rs 3,600 crore deal for 12 helicopters clinched in 2010 by a Finmeccanica subsidiary AgustaWestland.
It notes that the mandatory technical requirements of the chopper were changed in the tender during the Vajpayee government in 2003, with the then National Security Adviser Brajesh Mishra playing a key role.
The CEO of AgustaWestland has been asked to "categorically state the clear position in view of the current developments indicating specifically if any financial transaction has taken place with any Indian individual/entity which would be violative of the Integrity Pact or any other terms and conditions of the contract", it said.
Noting that the contract with AgustaWestland carried an integrity pact that bars paying of bribes or involvement of middlemen, the Ministry warned of "strict action including cancellation of contract, recovery of payment, blacklisting and penal action can be taken against the vendors."
It said the Government is "determined to take all possible legal and administrative action against the guilty parties and accordingly has ordered a thorough probe by CBI."
Giving details, the fact-sheet said that the first Request for Proposal was issued in March 2002 mandating requirement of 6,000 metre (18,000 feet) flying altitude for selection of the chopper.
This requirement made it clear that AgustaWestland could not participate in the deal. However, a meeting was taken by Principal Secretary to PM on this subject on November 19, 2003 where he "observed that his main concern was that the framing of the mandatory requirements has led us effectively into a single vendor situation".
The Defence Ministry fact-sheet states that in a meeting taken by the former NSA, it was also noted that the President and the Prime Minister have rarely made visits to places involving flying at an altitude beyond 4500 metres and it was also decided to make the mandatory requirement for operational altitude 4500 meters.
"The higher flying ceiling of 6000 meters, and a cabinet height of 1.8 meters could be made desirable operational requirements," it said.
He suggested that the then IAF Chief ACM S Krishnaswamy and Defence Secretary may jointly review the matter to draw up realistic mandatory requirements satisfying operational, security and convenience requirements of VVIPs and also set in motion a fast track process for selection and acquisition of the replacement helicopters.
"In pursuance of the above directive, the Operational Requirements (ORs) were deliberated at length between IAF, NSA, SPG/PMO and Defence Ministry between March, 2005 to September, 2006 and the above indicated changes were incorporated," the Ministry fact-sheet stated.
In these deliberations, the stakeholders took a decision to increase the number of choppers for VVIP duties from eight to 12.
After freezing the requirements, the Ministry issued the RFP on September 27, 2006 after which three vendors, namely Sikorsky, AgustaWestland, AW-101 helicopter and Russian Rosoboronexport responded to it. The Russian firm's bid was rejected as it did not deposit the earnest money and integrity pact.
After comprehensive field evaluation trials, in which the Special Protection Group was also represented, Sikorsky was declared to be non-compliant for not meeting four staff requirements.
The Ministry said during the contract negotiations, the Air Headquarters recommended inclusion of more systems on-board the chopper including Traffic Collusion Avoidance System (TCAS-II) and Enhanced Ground Proximity Warning System (EGPWS) for all 12 helicopters and SPG/PMO recommended inclusion of Medevac System for 8 VVIP helicopters.
After agreeing to induct these systems on board the choppers, the Contract Negotiations Committee (CNC) thereafter, recommended conclusion of the contract at a negotiated price of EURO 556.262 million (around Rs 3,600 crore).
"On completion of CNC the proposal was submitted for approval of the Cabinet Committee on Security (CCS), which considered the proposal in its meeting held on 18 January 2010 and approved the proposal and a contract was signed on February 8, 2010," the Ministry said.
The Defence Ministry said the contract signed with AgustaWestland includes "specific contractual provisions against bribery and the use of undue influence. Article 22 of the contract deals with penalty for use of undue influence.
This clause entitles the Buyer to cancel the contract with the Seller and recover from him the amount of any loss arising from such cancellation."
"Article 23 of the contract entitles the Buyer to consider cancellation of the contract without any entitlement or compensation to the Seller who shall be liable to refund all payments made by the Buyer in terms of the contract along with interest," it said.
The Ministry said any breach of the provisions of the Integrity Pact entitles the Buyer to take actions against the Seller which includes 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.
It also debars the bidder from entering into any bid from the Government for a minimum period of five years which may be extended.