Indian Military Helicopter Procurement Costs To Rise Following AgustaWestland Contract Termination

As the possibility of blacklisting by the Indian government looms over AgustaWestland following the termination of the VVIP helicopter deal, its participation in various other military tenders worth an estimated $3.5 billion also hang in the balance.

The decision also leaves India in a cagey position as helicopter-makers like Russia’s Mil Helicopters, Sikorsky and Eurocopter could stand to benefit from the VVIP helicopter bribery fallout as one less competitor could mean greater chances of success and higher prices.

In 2013, AgustaWestland submitted its bid for two military tenders to supply 56 helicopters to the Navy and 14 medium-lift helicopters to the Coast Guard.

In the naval utility helicopter tender worth $2.5 billion, AgustaWestland and Eurocopter were pitted against each other to replace its fleet of vintage Cheetah/Chetak helicopters which are operated from warships and air bases.

Sikorsky joined AW and Eurocopter in submitting its bid for the Coast Guard tender to buy 14 medium-lift choppers worth $200 million.  And Finmeccanica’s NH Industries in competing to win the Indian Navy’s $802 million tender for 16 Multi-Role Helicopters. Sikorsky’s S-70B is also in the running.

Last week India terminated the VVIP helicopter deal with AW and said that it would keep the three helicopters the company had delivered last year. Meanwhile, the MoD has begun the process to "encash" the bank guarantees provided by AgustaWestland in the deal.  According to a statement by AgustaWestland, it will continue to support the three helicopters already delivered to, and currently operated by, the Indian Air Force.

If India takes the steps as per its defence procurement procedure, it will have no choice but to blacklist AgustaWestland once the bribery charges are proved. However, so far no steps have been taken to bar the company.

"Since no decision to debar the said company (AgustaWestland) from participation in the procurement process has so far been taken, the bids are under process," Defense Minister AK Antony told Parliament last year.

A lot will depend upon which way the international arbitration, invoked by AW after the termination, will go. Indian MoD will have to prove that the bribery did take place more than AW having to prove that it did nothing wrong.