New Delhi, April 21, 2005, Sujan Dutta (The Telegraph)

The company that was blacklisted after allegedly paying kickbacks is set to emerge as the single contender for a multi-million dollar Indian contract after South African firm Denel was virtually knocked out today.

Defence minister Pranab Mukherjee said all transactions with Denel were being frozen for the time being “as a matter of routine”.

“We will see what form the inquiry will take. There have been demands (in the Lok Sabha) for calling in the Central Bureau of Investigation,” he added.

The moves against Denel come in the wake of a probe by South African investigators into charges that the company paid a British firm of agents to influence the Indian defence establishment to win a contract to supply anti-materiel guns (reported in The Telegraph on Wednesday) when George Fernandes was the minister.

But the light ordnance anti-materiel guns (bunker busters) were a small order of Rs 300 crore in comparison to what is at stake — deals estimated at Rs 9,000 to 12,000 crore to upgrade and re-equip Indian artillery.

Denel is one of the contenders, the notable others are Sweden’s erstwhile Bofors AB, which was once blacklisted after allegations of kickbacks in a 1987 deal during Rajiv Gandhi’s regime, and Israel’s Soltam.

In contention for the order are Soltam’s TIG 2002, Bofors FH 77 B05L52 and the Denel G-5/2000.

Sometime in the next two months the army is scheduled to conduct “summer trials” of the 155mm/52 calibre howitzers in the Rajasthan desert. At least two such trials in India’s artillery competition have already been held.

In the last trial in December 2004, Denel, Soltam and the Bofors howitzers were called.

Though the official word on the trials is held back, there is a question mark on Soltam and Denel making the grade.

After today’s decision, Denel is knocked out of the race anyway and with technical doubts already clouding Soltam’s chances, Indian artillery could be left with a single-vendor situation. That vendor is Bofors, now under SBS Defence Systems AB.

It does not mean Bofors will be awarded the contract as in a single-vendor situation, the practice is to re-tender.

India last bought 410 pieces of heavy artillery from Bofors. The army has projected that its entire artillery should comprise big guns of 155mm/52 calibre.

These guns would be towed (wheeled), self-propelled and tracked.

Denel had nearly bagged the order for the 155mm tracked version named “Bhim” that would have involved mounting the Denel-manufactured turret and barrel on the chassis of the Indian-manufactured Arjun tank.

But even that order is now jeopardised.