India has scrapped a $600 million deal with Eurocopter at the last minute following allegations of irregularities in the selection process, seven years after beginning the process to choose 197 helicopters for its army.

A fresh request for proposals (RFP) will be issued soon, says the defence ministry, confirming a Flight International report last week that the ministry had suspended talks with Eurocopter and was on the verge of cancelling the deal. Industry sources expect the new tender to be issued in the second quarter of 2008, a process that could take several years to complete.

While Eurocopter may feel aggrieved, the Indian army is the biggest loser. The service urgently needs the helicopters to replace its Cheetak and Cheetah fleets, many of which were inducted over 30 years ago. "It could take another six years for a new helicopter is delivered and that's just too long. The army is paying the price for official incompetence," says a New Delhi-based defence observer.

Three main issues have plagued Eurocopter, which offered the AS550 Fennec, since India began price negotiations in February after disqualifying the Bell 407 on technical grounds. The first was that it used the AS350 B3 Ecureil, the civilian variant of the AS550, for the trials. The second was that, in a possible conflict of interest, a member of its agency in India is a close relative of a senior member of the selection committee. Thirdly, Bell charges that it was disqualified on flimsy grounds despite its attempts to co-operate with the selection committee.

The tender was referred to India's Central Vigilance Commission which agreed that there were irregularities. The ministry then directed that a fresh tender be called. Eurocopter, which appears to have been surprised by Thursday's move, declined to comment. A day earlier, insisting that it expects to sign a contract shortly, it reacted to what it called a "malicious" campaign by the Indian media.

Evaluations, it said, were done with "utmost transparency and professionalism" and the AS500 is "exactly the same" as the AS350 "in terms of airframe, systems, main gear box, rotor head, blades, engine and performances". On middlemen, it adds: "EADS and Eurocopter are keen on insisting that both companies fully comply with the very strict French and European regulations. Eurocopter has duly abided by and signed the pre-integrity pact that was requested by the Indian Ministry of Defence."

India could also begin investigations into the issue, given past controversies relating to military procurements and defence minister A K Antony's comments in recent months that transparency is essential in all deals. The ministry, adds the observer, must say why it took so long and spent so much before deciding to issue a fresh tender.

Bell will wait for the new RFP before deciding if it will offer the 407 again. Italy's AgustaWestland and Russia's Kamov and Kazan were in the fray before being excluded from the shortlist. Eurocopter, which staked a lot on this competition, would not confirm if it would enter once again.

 India's Eurocopter deal, including AS550 Fennecs, has been cancelled