India says seeks to cancel Finmeccanica helicopter deal

India has frozen payments for the AgustaWestland helicopters pending an inquiry after Italian police earlier this week arrested the head of Finmeccanica, Giuseppe Orsi, in connection with the case.

India has already taken delivery of three of the helicopters.

In recent years, India has emerged as the world's largest weapons importer, but procurements are periodically held up by allegations of corruption. Finmeccanica could be blacklisted in India for at least five years if investigators prove bribery.

IHS Jane's says Finmeccanica has been pursuing opportunities in India valued at more than US$12 billion in 2013.

Orsi, who has denied any wrongdoing, resigned on Friday.

“(The Ministry of Defence) today issued a formal show cause notice to AgustaWestland of the UK seeking cancellation of contract,” ministry spokesman Sitanshu Kar said.

“The operation of the contract has been put on hold. The company has been asked to reply to the notice in seven days,” Kar said in a statement.

Graft is likely to be a major issue in elections due by 2014 and a senior defense ministry official said the government was seeking to scrap the deal to fend off pressure in parliament.

The Italian investigation has been going on for months and India launched its own police inquiry this week after Orsi's arrest. Indian investigators said on Friday they will travel to Italy next week to find out details of the case against Orsi.

Indian officials have complained that the Italian investigators were not sharing any details of the case.

The opposition Bharatiya Janata Party and the media have said the government should have acted sooner on signs that something was amiss, after an internal defence ministry investigation found nothing wrong with the deal.

The issue is expected to dominate the first few days of the budget session in India's parliament when it opens next week.

The image of the Congress party-led government has been tarnished in the last four years by corruption scandals in the sale of mobile phone spectrum, coal fields and contracts for the 2010 Commonwealth Games in Delhi.

British Visit

India on Friday said it was pressing Britain for information about the case. AgustaWestland is a wholly owned subsidiary of Finmeccanica, but is based in Britain.

British Prime Minister David Cameron arrives in India for a three-day state visit on Monday.

“We've had recent talks with the UK government on this; they've told us they are looking at Italy to first complete their investigations,” Syed Akbaruddin, a spokesman for India's foreign ministry, told reporters in New Delhi.

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