SMPP's 10 Army contracts worth Rs 2,000 crore face scrutiny after CBI probe

New Delhi: All business dealings of tainted defence manufacturer SMPP - which has been named in a corruption probe involving a ₹500 crore deal - are now under the scanner, including ongoing contracts with the Army where deliveries are in the process of being executed.

Sources said that the company has close to 10 ongoing contracts with the army for a range of equipment, including ammunition, loitering munitions, intelligence gathering drones and protective gear. They added that the contracts are worth over ₹2,000 crore, with some of them inked this year.

As per the Central Bureau of Investigation (CBI), the top management of the company was allegedly involved in bribing an official of public sector entity Munitions India Limited to secure a ₹500 crore order.


SMPP, which started as a pulp packaging manufacturer, faces a suspension of all business dealings with the defence ministry as it has been named in a CBI First Information Report.

Sources said that as per the rules, the company will be taken off all ongoing procurement contracts with the armed forces. This includes contracts in which it has already been shortlisted after a competitive process. The company will not be issued any fresh tenders or request for information by the armed forces, excluding them from the procurement process.

They added that as per current provisions, even cases in which the contract has been signed but deliveries are yet to be made are under scrutiny and a decision would be taken on a case to case basis. A committee is likely to be set up within the ministry to decide on the fate of signed contracts where deliveries have not been completed.

For systems that have already been delivered - this includes jet powered kamikaze drones - the defence ministry can continue procuring spares and services to ensure that remain serviceable.

"In a procurement case where the contract has been signed, but, execution is yet to commence, the Secretary of the Department concerned may decide to execute or to discontinue that contract," the guidelines state. SMPP has not responded to requests for comments by ET.

It is no stranger to controversy and its first major contract for bullet proof jackets came under the scanner in 2019, when it was revealed that a bulk of the components used were sourced from China. The company had passed Army trials by using western origin components but replaced them with Chinese products when deliveries took place.