In the wake of alleged chopper scam, India has put on hold all procurements from Italian defence group Finmeccannica and its affiliate companies, a move that will hit hard acquisitions for the armed forces as it is taking part in projects worth over $8 billion ( Rs. 48,000 crore).
In separate circulars, department of defence and department of defence production have said that "all procurements/acquisitions cases in pipeline with Finmeccannica group of companies including its subsidiaries and affiliates" should be put on hold.
The orders, accessed by PTI, say that there should be "strict compliance" by all the three services and public sector units, Ordnance Factory Board and other concerned departments under it with its orders in this regard.
Finmeccannicca is the parent firm of AgustaWestland, which was accused of paying kickbacks to the tune of over Rs. 360 crore in Rs. 3,737-crore deal for supplying 12 VVIP choppers to the air force and the deal has since been scrapped.
The ministry has also asked the departments under it to stop any kind of dealings with the firms named in the VVIP chopper scam FIR including AgustaWestland, IDS Tunisia, IDS Mauritius, IDS Infotech, Mohali and Aeromatrix Solution Limited, Chandigarh.
After the chopper scam broke out, government had decided to go slow on defence deals with the Finmeccannica group but this is the first time it has issued orders to put the deals with the group on hold.
The two circulars, issued within months after the Modi government took over, may also hit Navy's requirements for radars as Finmeccannica group company Selex is involved in programmes such as the Indigenous Aircraft Carrier with its radars.
Selex has already supplied 300 sets of high frequency communications systems to the Navy and is also supplying precision approach radars for enabling landing of military aircraft in bad weather.
It has also supplied more than 40 long range surveillance radars to the Air Force and the informal ban is likely to affect the spare supplies and air space management by the force.
Navy's requirement for Otomelara guns, produced locally by the public sector firm BHEL, is also likely to be impacted as the 127mm guns are the main weapon of the Indian navy warships.
The government has also deferred a Rs. 6,000-crore 16 helicopter deal for the Navy in which one of the two companies is linked to the Finmeccannica.
There are several deals such as the development of the indigenous Unmanned Aerial Vehicle Rustom for which Selex radars have been planned to be inducted.
The government is also taking a call on whether the ban would extend to companies in which Finmeccannica has stakes.
According to estimates, the Finmeccannica group companies are taking part in defence deals worth $8 billion (Rs 48,000 crore).