EADS Loses India Deal

The Indian Army scrapped the deal with EADS subsidiary, Eurocopter -- the largest manufacturer of civil and military helicopters in the world -- amid newspaper reports about irregularities in the bidding process and the illegal use of middlemen.

"We will issue a fresh request for proposals in the next two or three months," said Sitanshu Kar, a defence ministry spokesman.

Kar said the ministry was not commenting on why the deal collapsed; although he went on to say that newspaper reports about the bidding process were "more or less correct."

Setback for EADS

The news comes as a painful surprise to EADS, not just because of the loss of the huge military deal, but also because of the hopes the European defence and aerospace group had pinned on India's fast-growing civil aviation market for future sales of its Airbus commercial jets.

Only on Wednesday this week, EADS had expressed hope that its deal with India would be wrapped up soon. The group had planned to renew India's ageing Soviet-era fleet with 37 light helicopters manufactured in Europe, as well as oversee the production of an additional 160 choppers in India.

Earlier this week, an unnamed Indian official from the country's Defence Acquisition Committee told news agency AFP that there was some justification for the accusations against EADS.

"There are elements of truth in the complaints, especially the one involving an officer who was part of the evaluation committee while his brother headed the company that is Eurocopter's sole distributor in India," the official said.

EADS representatives in India have so far refused to comment on the Indian government's decision. The company has said it complies with all French and European regulations concerning the bidding and evaluating process and the use of middlemen.

Insiders suspect US influence

India put out the tender for 197 military helicopters in 2001, and in February of this year, named Eurocopter as the winner of the contract, choosing the company's AS 550 C3 Fennec over US-based Bell Helicopter's Bell 407.

Speculation is rife among diplomats and industry insiders that Washington put pressure on the Indian government in order to win the contract back for Bell Helicopter.

The German business daily Handelsblatt said that Washington is exerting its growing influence in New Delhi at a critical time, given India's plans to buy 126 fighter jets next year in a deal worth some $10 billion. EADS is in the running with the Eurofighter, but the US is represented with Lockheed's F-16 and Boeing's F-18.

According to Handelsblatt, the cancellation of the helicopter deal highlights the political hurdles faced by European weapon manufacturers trying to do business on the lucrative Indian market.