AgustaWestland deal took off after ex-Italian president Ciampi's visit
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The 2005 visit of then Italian president Carlo Azeglio Ciampi served as a watershed for the VVIP chopper deal, because while he met Prime Minister Manmohan Singh and Congress president Sonia Gandhi, the event was used for an under-the-radar meeting between then IAF chief S P Tyagi and Finmeccanica officials, that was organised by the middleman named in the Italian probe into the contract.
Less than a month after the meeting — in which the chopper deal as well as the need for a change in technical specifications was allegedly discussed — the deal got a vital push, with the government starting the process of firming up the technical requirements, as has been detailed in a defence ministry statement on the contract.
In his confession before the Italian court, middleman Guido Haschke has said that he was part of the official Italian delegation that came in February 2005 and arranged a meeting between Tyagi and Finmeccanica officials by using his contact with Julie Tyagi, a close relative of the former Air Chief.
He said that the tender for the choppers, which was yet to be issued, was discussed at the meeting and, till that point, the technical requirements had not been changed to reduce the service ceiling to 15,000 feet from the earlier 18,000 feet, a specification that had disallowed AgustaWestland from taking part in the competition.
"The meeting happened at the Air HQ and went very well, this is what Zappa (Finmeccanica executive) told me. Also Julie gave a positive feedback about the meeting. With this I mean that from both sides I understood that the condition for which AgustaWestland could participate in the yet-to-be-issued tender had been discussed. I specify that the operational ceiling was not lowered on that occasion but later," Haschke said in his statement.
As per the Defence Ministry's official statement, the formal process of firming up the technical specifications for the contract started in March 2005, barely a month after this meeting. The statement said that the operational requirements for the contract "were deliberated at length between IAF, NSA, SPG/ PMO and MoD between March, 2005 to September, 2006".
This clearly reveals that till March 2005, the technical requirements for the contract had not been revised to lower the service ceiling requirements and the move to revise these only took place after Tyagi's meeting with Finmeccanica officials. In its defence, the government has said that a policy decision to change the requirements had been taken in 2003, when the NDA was in power. But the fact remains that on record, the requirements were changed only after March 2005.
In fact, the middleman used the fixing of the February 2005 meeting between Finmeccanica officials and Tyagi as a proof of his high contacts in India, and later got in touch with Finmeccanica CEO Giuseppe Orsi and worked out a commission deal with him for a value of Euro 20 million.
Two other key factors that are mentioned in the Italian report have also been corroborated with the sequence of events that took place in India while the deal was being firmed up.
Price escalation at last minute generated extra kickbacks: The Italian investigation points to a sudden increase in the price of the VVIP chopper deal while it was in the last stages of being finalised. This increase, it was alleged, was used to generate extra kickbacks from the contract.
In its explanation note, the Defence Ministry has admitted that an escalation of price took place at the last minute after the Air HQ and SPG recommended the inclusion of extra systems to the VVIP choppers that were not part of the original tender.
"While the CNC was progressing its discussions, Air HQ, recommended inclusion of Traffic Collusion Avoidance System (TCAS-II) and Enhanced Ground Proximity Warning System (EGPWS) for all 12 helicopters and SPG/PMO recommended inclusion of Medevac System for 8 VVIP helicopters," said the government statement.
SPG preference for three engines favoured AgustaWestland: It has now come to light that the Special Protection Group (SPG) had made its preference for a three-engined chopper very clear before the Defence Acquisition Committee (DAC) that was to take the final decision on the selection of the winner of the contract. Sources said that after a visit to the AgustaWestland facilities, the SPG made the point to the DAC that a three- engined chopper would be safer and more reliable for VVIP travel.
The fact of the case is that the only other competitor to AgustaWestland in the deal was an American firm that had a twin-engined helicopter. The Italian report mentions that "the mediators managed to modify the original tender in a favourable way to AgustaWestland, in particular by reducing the limit of altitude so that AgustaWestland helicopters could participate, and to introduce, as a preference criterion, the capability to fly with a non-operational engine, which only Agusta helicopters had".