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aw119Kx helicopter: Image courtesy Agusta
 
The Indian Government has not yet let Agusta Westland-Tata joint venture (JV) off the Defence/VVIP helicopters scam hook. This is in spite of the fact that the JV has categorically written to the Government on 31st January 2014 that it would only sell its choppers in the domestic civilian and overseas markets.
The JV named Indian Rotorcraft Limited (IRL) had first indicated that it would keep itself away from the defence sector in February 2013 when the Government put the chopper scam under the criminal investigation. 
Before taking a fresh call on JV’s plea for certain approvals, the Government wants to first decide whether the manufacture of helicopters for civilian market is delicensed. It also wants to decide whether foreign investment in this business should be allowed through the automatic route. 
The Government intends to take a policy decision on these two issues after consulting Ministry of Defence (MOD) and Department of Industrial Policy and Promotion (DIPP). 
IRL’s stance that it wants to keep away from the defence market is expected to become redundant if MOD decides to blacklist Anglo-Italian Agusta Westland group. MOD can do this to penalize the Group for allegedly paying kickbacks to influential entities to bag the Indian Air Force (IAF) contract for 12 helicopters. Of these choppers, eight were required for flying the so-called very very important persons (VVIPs). 
On 1st January 2014, MOD had terminated this contract and reluctantly agreed for arbitration as proposed by Agusta Westland. 
IRL ran into opposition from MOD and Ministry of Home Affairs (MHA) after it separately applied for two amendments to its foreign investment approval dated 21st September 2011.  The company has set up its 30 aircraft/year assembly line at Hyderabad Aerospace Park. It had stated that it would start assembly of choppers from April 2014.
On 30th and 31st January 2014, IRL applied for permission to produce two helicopters, AW 119Ke and AW119Kx for the export and domestic civilian markets. It currently holds approval to produce both the defence and the civilian versions of AW 199Ke helicopter.  
It also applied for change in the name of foreign investor from Agusta Westland NV of the Netherlands to Agusta Westlands S.p.A of Italy. This name change is required as the Dutch company was merged with Italian one on 1st January 2014 as a part of restructuring of Agusta Westland group.
On 19th August, 2013, IRL had applied for first amendment to the approval given by Foreign Investment Promotion Board (FIPB). The JV urged the Government to substitute AW119Ke with AW119kx model of helicopters for indigenous manufacture as mentioned in the approval letter. 
FIPB recommended approval of this requested change at its meeting held on 19th September 2013. Before the Government could issue the revised approval, MOD asked FIPB to not proceed further as the latter had not correctly recorded its views on the application.
MOD later stated that it did not want the Government to issue the approval to JV at this stage keeping in view ongoing probe into the chopper deal. 
MOD communicated to FIPB its reservations on IRL against the backdrop of investigations into chopper deal through its letters dated 14th November 2013, 28th February 2014 and 3rd March 2014. Its last communication led FIPB to defer decision on IRL’s two applications for amendment to FIPB approval at its meeting held on 6th March 2014.
Towards 2013-end, MHA had communicated to FIPB secretariat its decision to deny security clearance to the JV. Such clearance is mandatory for any company that manufactures any defence sector equipment. 
The Government can now bail out IRL out of this sticky situation only by declaring it as civilian aircraft venture as prima facie it has not found IRL’s involvement in chopper scam. 
In IRL, Augsta Wesland NV holds 26% stake with the balance majority stake of 74% held by Tata Sons Limited (TSL).  The MOU for JV was signed in February 2009. The MOU might have helped Agusta Westland, UK bag the MOD contract on 8th February 2010 for supply of 12 AW-101 helicopters at a total cost of Euro 556.262 Million.  Barely four days after signing of this contract, TSL and Augusta Westland signed the shareholders’ agreement to incorporate IRL. 
It remains to be seen whether CBI probe eventually finds any connection between chopper contract and IRL. On 15th February 2013, Tata group clarified that “IRL has no connections with the Indian Air Force purchase of AW101 helicopters. IRL does not envisage any impact on the proposed joint venture.”
 Following series of media reports about the dubious transactions by Agusta Westland's Italian Parent Finmeccania from February 2012 onwards, Indian Government started internal enquiries into irregularities which reportedly included alleged kickbacks in the MOD chopper contract. 
When more reports about steps taken by the concerned foreign investigative authorities including arrest of Mr. Giuseppe Orsi, CEO, Finmeccanica appeared in February 2013, MoD decided to put the chopper contract on hold.. It also stoppped further payments to Augusta Westland.
MOD also handed over the case to the Central Bureau of Investigation (CBI) for criminal investigation. In February 2013, CBI had registered a Preliminary Enquiry into irregularities in the chopper deal.
CBI is probing transactions/role of six companies in the terminated chopper deal. The firms are: Finmeccanica, Italy; Agusta Westland, U.K.; Infotech Design System (IDS) Mauritius; IDS Infotech Ltd, Chandigarh; IDS Tunisia and Aeromatrix Infotech Solution, India. 
CBI's ongoing probe also covers the involvement of then Chief of Air Staff and certain non-defence persons including three foreigners in the chopper scam. 
According to CBI release dated 25th February 2013, “It is alleged that in the procurement process of the helicopters, some middlemen have influenced the deal in favour of the U.K- based company. It is also alleged that the Italy-based company paid commission in terms of several millions of Euros to the middle men.”
The release adds: “The two middlemen from their share of commission allegedly paid huge sums of money to several Indian Nationals through Tunisia and Mauritius route in the garb of engineering contracts with two India-based companies. The two middle men are directors in one of India based private companies, in which one private person works as Chief Operating Officer and he allegedly has a role in channelizing money for illegal purposes.”
Apart from handing over the case to CBI, MOD had issued two show cause notices to Augusta Westland, UK on 15th February, 2013 and 21st October, 2013. Subsequently, MOD terminated the chopper deal on 1st January 2014. 
(posted at http://indianairtransport.wordpress.com/ on 3rd May 2014)
 
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