(MENAFN- AFP) India has cancelled a 556-million-euro ($753 million) contract with Anglo-Italian firm AgustaWestland to buy luxury helicopters for VIPs following a corruption scandal, the Press Trust of India reported Wednesday.
The deal was scrapped after Defence Minister A. K. Antony held a meeting with Prime Minister Manmohan Singh, the national news agency said, quoting what it described as official defence ministry sources.
India had suspended the deal in 2013 after Italian investigators began looking into allegations that AgustaWestland paid bribes to win the contract.
The Italian boss of AgustaWestland's parent company Finmeccanica was arrested last February over the case -- touching off a firestorm in India, where the Congress-led government has been battling a string of graft scandals before elections this year.
India signed the deal in 2010 for 12 helicopters from AgustaWestland after the company beat competition from American and Russian rivals.
In November last year the helicopter maker had sought arbitration to try to salvage the contract.
Italian prosecutors suspect kickbacks worth around 10 percent of the deal -- $67.6 million (50 million euros) -- were paid to Indian officials to swing the deal in favour of AgustaWestland, according to Italian media reports.
India has already received three of the helicopters, intended to be used by such dignitaries as the prime minister and the president, but Antony halted deliveries of the remaining nine.
India's auditor general said in a report last year that the defence ministry "deviated from procurement procedure and tender on several instances in the deal" including altitude requirements.
Indian detectives raided the home of former air force chief S.P. Tyagi as part of the probe into the allegations of bribery. Tyagi has denied any wrongdoing.
Cash was allegedly handed to Tyagi's cousin, with more money funnelled via a web of middlemen and companies in London, Switzerland, Tunisia and Mauritius.
The purchase also came under scrutiny from Italian investigators probing allegations the Italian group had broken the law by bribing foreign officials.
The company denies any wrongdoing.
A spokesman for the company in India was not immediately available to comment on the PTI report.
The cancellation is expected to be a big blow to AgustaWestland, which has a factory in southwest England.
The decision will also be a severe blow to Finmeccanica, whose chief executive Giuseppe Orsi resigned from behind prison bars in February last year.
Orsi denies any wrongdoing and his lawyer has called the allegations against him "inconsistent" and his arrest "unjustified".
The latest move by the Indian defence ministry is seen as a government attempt to contain the fallout from the corruption scandal before elections due in the first half of this year.
The helicopter deal was cleared by Singh, whose Congress-led government has been buffeted by a series of corruption scandals that analysts say could affect the party's electoral chances in 2014 polls.
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