Whiff of scam in Rs 2,700 crore contract for South Korean warships

NEW DELHI: The Navy will have to wait longer to get its desperately-needed mine counter-measures vessels (MCMVs), which are used to detect, track and destroy mines laid by enemies. The long-pending Rs 2,700 crore deal to acquire two MCMVs and technology transfer from South Korean company Kangnam Corporation, which was to be followed by Goa Shipyard building another six such vessels for over Rs 6,000 crore, has run into trouble.

The defence ministry is now investigating whether Kangnam allegedly hired middlemen to help in the negotiations to clinch the contract, which would have been the first major deal to be signed with South Korea. "MoD is looking whether the negotiation process was vitiated because of the persons hired by the South Korean shipyard," said an official.

Middlemen are banned under the Indian defence procurement procedure, with the vendor signing a pre-contract integrity pact. Having "encashed" a Rs 3 crore advance bank guarantee provided by the South Korean shipyard, the MoD has forwarded the case to attorney general Mukul Rohatgi for legal opinion.

As reported by TOI earlier, the final price negotiations with Kangnam were concluded way back in October 2011, as also approved by the defence and finance ministries of the UPA-2 regime. Just as the contract was headed for Cabinet Committee on Security's final nod, it was put on hold after Italy's Intermarine, one of several contenders defeated in the global tender, and a BJP politician complained to the Central Vigilance Commission and others about irregularities in the selection process.

The deal has been on hold since then despite visiting South Korean President Park Geun-hye in January raising the pending export of Korean "minesweepers" to India with then PM Manmohan Singh.