India auditor says wrongdoing in Italy chopper deal, piles pressure on govt

NEW DELHI, (Reuters) – Indian negotiators set a higher base price for the purchase of helicopters from AgustaWestland and frequently changed the bidding rules, the federal auditor said yesterday, making it harder for the government to complete the 560 million euro ($744.43 million) deal.

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 defence group.
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 was stalled.

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 metres.

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 auditor said.

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