Article Posted on : - Nov 21, 2014

NEW DELHI (PTI): The Defence Ministry has scrapped the Rs 2,700-crore deal for acquiring two minesweeper vehicles from a South Korean firm after it was found that there were violations of tender conditions as agents were in the play.

The Ministry has terminated the tender for the Mine Countermeasure Vessels (MCMVs) and has written a letter to South Korean firm Kangnam Shipyard.

Official sources said Defence Minister Manohar Parrikar signed the recommendation for terminating the tender prior to his departure to Goa on Wednesday.

The recommendation had been made during the tenure of Arun Jaitley who was in charge of Defence portfolio till early this month.

The deal had been stuck for long because of allegations of involvement of middlemen and the new government had sought an opinion from Attorney General Mukul Rohatgi.

The Attorney General in his opinion last month said tender conditions have been violated, the sources said.

India's defence procurement procedure does not allow agents in deals and the government has already encashed Rs 3 crore bank guarantee furnished by Kangnam.

Vendors have to sign a pre-contract integrity pact stating that there will be no middlemen involved.

As per the deal, the South Korean firm was to build two ships while the remaining six were to be manufactured by Goa Shipyard Limited (GSL) under the transfer of technology pact.

The deal with Kangnam was for about Rs 2700 crore while the entire project would have cost over Rs 7,000 crore.

Sources said the Defence Acquisition Council, which will meet on Saturday, will decide the next course of action.