Indian Defence Minister A.K. Antony is leaning toward barring Anglo-Italian helicopter firm AgustaWestland from doing business in the country because of a corruption scandal, but he could be outvoted by cabinet colleagues, several government sources said.
Some cabinet ministers and even officials within the defence ministry fear such a move could set back India's efforts to modernise its military, the sources told Reuters. India plans to spend $100 billion in the next decade on military hardware.
Publicly, Antony has said he is awaiting the results of a federal police investigation into the allegations of corruption, which AgustaWestland denies. But several defence officials said that based on evidence uncovered so far, the minister favoured barring the firm from bidding for Indian defence contracts.
AgustaWestland, a division of Italian defence group Finmeccanica, faces allegations in Italy and India that it paid bribes to win a $750 million deal to supply 12 VIP AW101 helicopters to transport Indian political leaders.
Any decision on barring AgustaWestland will initially be taken by Antony, but it will need approval of a cabinet committee that includes Prime Minister Manmohan Singh, Finance Minister P. Chidambaram and foreign minister Salman Khurshid.
Behind the scenes, some cabinet ministers and defence officials have expressed concern that any move to ban yet another major defence firm could deal a blow to India's stuttering efforts to modernise its military.
Antony is nicknamed St. Antony for his anti-corruption zeal and reputation for probity. Blacklisting the helicopter firm could contain damage to the ruling Congress party, which fears the corruption allegations could become an issue in upcoming state and national elections.
The extent of the opposition in the cabinet to such a move is unclear, but if those opposing blacklisting muster a majority then Antony may have to look at less punitive measures, such as imposing a heavy fine. Everything hinged on what the probe by the Central Bureau of Investigation (CBI) into the deal uncovers, defence ministry officials said.
A cabinet minister confirmed to Reuters there were "divergent views within the government" over the issue.
The mere fact there is debate within the cabinet and the defence ministry over blacklisting is notable. It shows growing disquiet over an anti-corruption measure that analysts say has cost India dearly, reducing the pool of arms firms it can buy from and hampering efforts to replace obsolete equipment.
India placed six defence companies on a blacklist last year after allegations that bribes were paid to win contracts. These included Rheinmetall Air Defence, part of Germany's Rheinmetall AG, Israel Military Industries and Singapore Technologies Kinetics, which have been barred from doing business in India for 10 years.