India cancels Israel Military Industries boycott - report

IMI

US "Defense News" reports that the way is now open for IMI to win a battle tank development project.

Without fanfare, India has retracted its 2009 boycott of Israel Military Industries Ltd. (IMI). The measure will pave the way for negotiations between IMI and the Indian Ministry of Defense on potential joint projects, including development of a battle tank for the Indian army, according to a report from New Delhi by US periodical "Defense News."

The information is attributed to a source in the Indian Ministry of Defense. The ministry has not published an official announcement that the boycott was removed, but notified IMI management of its decision in September. Indian Ministry of Defense officials and diplomats in the Israeli embassy in New Delhi did not confirm the report. According to "Defense News," IMI management sources did not respond to the report.

The previous government in India, controlled by the United Progressive Alliance (UPA), imposed the embargo in 2009, following accusations that IMI had bribed officials in Indian government company Ordnance Factory Board (OFB) in order to win a tender for production of 155-mm artillery shells in cooperation with the Indian company's plant in the Nalanda district. Five other foreign companies, including companies from Russia and Singapore, were accused of corruption in the same year for the purpose of winning military tenders, and a boycott was imposed on all of them. The "Times of India" reported in 2012 that IMI would be barred from operating in India until 2022. In any case, the Indian uncover police never proved that IMI paid bribes, according to the Indian source who reported the removal of the boycott.

"Globes" wrote in 2012 that IMI's involvement in the bribery affair had excluded it from taking part in defense deals in India, while other Israeli defense companies were prospering in the country, where demand for weapons and systems has been constantly rising. "Globes" called 2009-2012 "lost years" for IMI. 2013 and 2014 were also obviously lost for the company in India.

According to "Defense News," now that the boycott has been removed, the Indian Ministry of Defense plans to consider new possible defense projects with IMI. One possible project is a partnership in the development of a battle tank for the Indian army and the establishment of a factory for joint production of various types of munitions, particularly 155-mm artillery shells. IMI was a leading contender in the competition for developing the tank before the boycott. In addition, due to the boycott, the Indian Ministry of Defense canceled IMI's win in a tender for the production of a system for loading 155-mm ammunition slated for production at an OFB facility.

What caused the removal of the boycott? According to "Defense News," the exclusion of the company from the Indian defense industry caused a shortage of 155-mm artillery ammunition. Former Indian army chief of staff Gen. (res.) VK Singh reported to then-Indian Minister of Defense AK Antony a "critical shortage" of various types of ammunition. OFB was incapable of supplying the Indian army's munitions needs, and India became dependent on Russia for its ammunition requirements.

IMI has always denied any involvement in bribery. Following the decision in 2012 to bar the company from doing business in India until 2022, company management stated that it had "acted legally, and would continue its actions with the authorities in India to settle the matter." IMI said it intended to appeal the decision to the authorized parties in India, because it had been "based on erroneous reports, and ignored documents and figures that IMI had given to the Indian Ministry of Defense."

A source involved in the matter told "Globes" reporter Yuval Azulai in 2012, "IMI fell victim to wider affair involving a number of defense companies operating in India. In its case, however, a competing company had motivation to implicate IMI in this dubious affair. It is not as if this is not something that never occurred before in giant tenders in various places around the world."

Published by Globes [online], Israel business news - www.globes-online.com - on November 18, 2014

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