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India lifts military procurement ban on Rolls Royce, Finmeccanica

India will allow its military to buy from defense contractors that were previously banned because of graft allegations.

“Some purchases from six foreign companies, including Rolls-Royce Holdings Plc (RR/) and two local businesses that earlier faced curbs are now permitted, according to the Vice Chief of the Indian Air Force R. K. Sharma,” Bloomberg reported Tuesday.

The other five foreign companies are Finmeccanica SpA (FNC), Singapore Technologies Kinetics Ltd., Israel Military Industries Ltd., The Corporation Zashchita, and Rheinmetall Air Defence AG.

The Indian companies are T.S. Kisan & Co. Pvt. Ltd. and R.K. Machine Tools (Ludhiana) Pvt. Ltd.

The India defense ministry barred most of the companies in 2012 from doing business with the Ordnance Factory Board for 10 years.

In 2010, the Central Bureau of Investigation had registered a case involving “illegal gratification” from suppliers to ordnance factories, according to a government statement, Bloomberg said.

India is the world’s largest military equipment importer. It’s in a constant arms race with China and Pakistan.

Prime Minister Narendra Modi has made building up the armed forces a national priority.

Sharma told Bloomberg that procurement decisions involving the previously banned suppliers would still be made on a case by case basis. He said the severity of the allegations would be among the issues considered.

The Stockholm International Peace Research Institute said India increased its arms imports by 111 percent in the past five years compared with 2004–08, and it now accounts for 14 percent of the world’s arms imports.

China and Pakistan are the second and third largest buyers.

The India government banned UK-based Rolls Royce because of allegations in March that the company paid $3.1 million to officials for a deal to supply spare parts for helicopter engines.

In February last year, the head of Italian defense firm Finmeccanica was arrested by Italian police on allegations that he bribed Indian officials to win a $750 million deal to sell helicopters. India conducted a separate 15-month investigation.

Both Rolls Royce and Finmeccanica have traditionally held multiple contracts to supply hardware and services to the India air force and other branches.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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