Bloomberg News

India Promotes Local Arms Makers After Finmeccanica Fraud Probe

February 20, 2013

India Defense Minister A.K. Antony said he’s doing more to strengthen local arms makers and reduce reliance on foreign suppliers following fraud allegations against Finmeccanica SpA over a helicopter deal.

“Imports should be the last resort,” Antony said at an arms seminar, according to a statement from the New Delhi-based defense ministry. Procurement processes and production policies will be reviewed to bolster the prospects for local companies, he said.

The Indian market is increasingly important for U.S. and European defense companies as they seek to offset reduced demand at home. Boeing Co (BA:US). has sold C-17 airlifters and P-8I maritime surveillance planes to India and is in talks to sell attack helicopters, European Aeronautic, Defence & Space Co. is in talks over the sale of Airbus A330-based refueling planes, and BAE Systems Plc has exported Hawk training jets.

Antony called on India’s private-sector defense companies and large state-owned enterprises to cooperate to quickly achieve the “maximum for indiginization,” the ministry said.

India has already changed terms for offset deals, agreements in which outside entities selling to India commit to sourcing part of the total contract in the country, to aid local suppliers. “I would urge the industry to come forward and take advantage of this policy,” Antony told domestic weapons makers.

The Indian government, which has barred several companies from bidding for contracts to stem corruption, is investigating whether Rome-based Finmeccanica’s AgustaWestland was involved in making illegal payments to secure a $753 million deal for 12 AW101 helicopters. The contract could be scrapped if wrongdoing is found.

The helicopter deal led to the arrest this month of Finmeccanica Chief Executive Officer and Chairman Giuseppe Orsi on corruption and tax fraud charges in Italy. Orsi was stripped of the CEO title and resigned as chairman. He led AgustaWestland at the time the deal was struck and denies wrongdoing.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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