Prime Minister Manmohan Singh said on Monday the government had nothing to hide in a $750 million deal for AgustaWestland helicopters that has been suspended by the Defence Ministry over allegations of kickbacks.
The ministry has asked AgustaWestland, owned by Italy's Finmeccanica, to show by Friday that no bribes were paid in the deal and says it is ready to cancel the purchase outright. The helicopter company says it will comply with the request.
India has already received three of the 12 luxury aircraft it bought to transport political leaders, including the prime minister.
In his first comments on the affair since Italian police arrested Finmeccanica head Giuseppe Orsi last week, Singh said the government wanted to debate the issue in parliament, which begins a new session on Wednesday.
"Parliament is the appropriate forum to discuss all issues raised by the opposition. We are ready for any discussion," Singh told reporters. "We have nothing to hide."
The furore over the helicopter deal follows a string of graft cases that have buffeted Singh's government, which is nearing the end of a second five-year term and faces elections due in early 2014. The opposition is expected to raise the issue once parliament opens.
A Defence Ministry official said the decision to send a show cause notice to Finmeccanica, the first step toward scrapping the deal, was taken partly to fend off expected political pressure in parliament.
Finmeccanica could be blacklisted for several years in India if the government scraps the deal. Defence analysts IHS Jane's say this would put at risk some $12 billion in defence contracts being chased by Italy's second biggest employer.
Search for evidence
The Central Bureau of Investigation (CBI), which began an investigation of the deal after Orsi's arrest, is due to send an investigator and a judicial officer to Rome this week along with Arun Kumar Bal, a senior official overlooking acquisitions at the Defence Ministry. The team is due to meet Italian prosecutors, the CBI said.
The team's goal is "to gather as much evidence as possible relating to the allegations of corruption", said ministry spokesman Sitanshu Kar.
Italian police allege Orsi employed three middlemen who channelled millions of dollars in bribes to Indian officials, including to former air force chief S.P. Tyagi, in order to manipulate the tender in a way that favoured the Italian helicopters. Orsi says the allegations are untrue.
Officials from the prime minister's office during this government and a previous administration took part in a decision to change the maximum altitude the helicopters could fly, a change that helped AgustaWestland enter the contest. Officials involved have defended the change and deny corruption.
Tyagi has denied all wrongdoing, as has his cousin, Sanjeev Tyagi, who Italian police say set up meetings between the company and the air chief.
Sanjeev Tyagi says the accusations, made to police by a former business associate, Guido Haschke, are untrue.
Haschke was arrested in October but later released. Information from his interrogation, along with conversations recorded using phone taps and bugs form a large part of the police case against Orsi, who resigned as chief executive of Finmeccanica on Friday.
Police found a cache of documents pertaining to the investigation under a bed in the house of Haschke's mother after overhearing a conversation in which he said he had hidden some papers in the house.