India to investigate suspected Rolls-Royce kickbacks

Mon Mar 3, 2014 8:46am EST
 
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NEW DELHI (Reuters) - India's defense ministry said on Monday it had ordered an investigation into state-run Hindustan Aeronautics Ltd's (HAL) orders from Britain's Rolls-Royce Holdings (RR.L: Quote) worth at least $1.2 billion.

The Central Bureau of Investigation, the country's top crime-fighting agency, will look into more than 5 billion rupees ($80 million) in alleged kickbacks in a deal that was signed in 2011, a ministry official told Reuters.

Defense Minister AK Antony referred the case to investigators after being informed by HAL that Rolls-Royce had disclosed its use of outside consultants receiving a percentage commission, the official added.

Such arrangements could violate India's procurement rules, as they might be used to channel corrupt payments to secure lucrative government contracts.

Suspicions of corruption in India's state procurement programme have for years delayed the modernization of the armed forces of the world's most populous nation that continue to rely on outdated Soviet-designed equipment.

The air force has been dogged by a series of crashes of its Russian-built MiG fighter jets, while an accident aboard a Soviet-made submarine that killed two officers last week led the navy's chief of staff to resign.

India's Congress party-led government is keen to be seen as tough on graft before parliamentary elections due by May. The party, lagging in the polls, has faced rising public anger over a string of corruption scandals in its current term.

The probe into the HAL deal follows the arrest in Britain last month of Indian-born businessman Sudhir Choudhrie and his son in a bribery investigation by the Serious Fraud Office into Rolls-Royce's dealings in China and Indonesia.

Both men denied any wrongdoing and have been released on bail, their spokesman said last month.   Continued...