August 19, 2014

India Lifts Ban on Denel

India has removed South Africa’s Denel from a blacklist, allowing the company to again do business here after nine years of investigations failed to prove corruption charges related to a rifle purchase.

The Indian Ministry of Defence sent a letter Aug. 12 to Denel lifting the ban, said a source in the MoD.

An executive of Denel, who requested not to be named, said they received a communication from MoD saying the ban had been lifted, but gave no details of the contents of the MoD letter.

“The decision to de-blacklist Denel and allow it to do business in India will send a positive signal to overseas defense companies to do business in India,” said an executive of an overseas defense major based in New Delhi.

Denel was banned by the outgoing United Progressive Alliance (UPA) government after allegations that it paid kickbacks to secure a deal with the Indian Army in 2002 to sell 1,000 NTW-20 anti-material rifles along with 398,000 rounds of ammunition.

Under the deal, 700 rifles were to have been purchased directly and the remaining 300 licensed-produced in one of the factories of India’s state-owned Ordnance Factory Board. Only 400 rifles had been inducted into the Indian Army and the remainder put on hold after the 2005 blacklisting and investigation by the anti-fraud agency, the Central Bureau of Investigation (CBI).

Charges were filed by the CBI against Denel and the UK-based consulting firm Varas Associates, which allegedly rerouted part of the commission to unnamed officials of Denel and the MoD in India. Varas was not banned along with Denel. None of the charges have been proved by CBI, the MoD said.

The purchase of the anti-material rifles was made during the tenure of the National Democratic Alliance (NDA) government, which was in power from 1999-2004, and returned to power in May. The blacklisting was done under the outgoing UPA government within a year of it coming into power in 2004.

The blacklisting of Denel stalled several Indian Army projects, including the purchase of 155mm/52 caliber artillery guns as Denel was the front runner in that program, which was then canceled.

The blacklisting also delayed the homegrown effort, “Bhim Artillery Project,” under which Denel had proposed to install its 155mm artillery gun on an Indian-made Arjun tank chassis.

“Denel will now emerge as a keen competitor in India’s $4 billion variety of 155mm/52 caliber artillery gun projects,” said defense analyst Nitin Mehta, adding that the South African company may forge tie ups with domestic defense companies to compete in these programs.

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