NEW DELHI: India will sign a $1.8-billion submarine deal with France on Thursday amid a controversy that a company involved in the deal had a `slush funds account'. The French Ambassador Dominique Girard dismissed the allegation as "unfair."

A delegation of the chief executive officers of the companies involved in the contract has arrived here for the signing ceremony with the Defence Ministry. The six submarines to be built at the Mazgaon Docks in Mumbai will augment the Navy's fleet, which will start retiring by the time the first Scorpene submarine is inducted. The deal will also activate the submarine-building facility at Mazgaon that has been largely lying idle for a decade.

The Government decided the deal on a single tender basis. Two other contenders were not looked upon favourably — the German submarine-maker HDW was not reconsidered while desultory discussions were held for the Russian Amur class conventional submarines.

India has 16 submarines, of which two are on the verge of retirement. Phased decommissioning of the other 14 will begin from 2010. The delay in deciding on submarines led to the Navy signing an agreement with the U.S. for rescue systems.

The National Democratic Alliance Government cleared the decks for the contract but approval was held up due to the elections. The United Progressive Alliance Government decided to renegotiate after discovering some problems in the contract, including a clause that required India to pay a penalty of about Rs. 2,000 crores.

"Best non-nuclear submarine"

Speaking to The Hindu , Mr. Girard said reports against the deal started appearing in the media around April when the contract started solidifying. "But we were generally very cool because it is the best non-nuclear submarine available. Besides, it was a total transfer of technology operation, and the submarine would be fitted with the best available missiles."

"We were always confident that the deal was just a matter of time. My interaction with the Indian Navy had indicated that delaying it would have been detrimental to the interests of the end users. These allegations would not have helped India," he added.

Mr. Girard said the recent article in a French newspaper about the slush funds was on the basis of a testimony by a dismissed employee of a French company.

France had tighter anti-bribery laws than the framework suggested by the Organisation for Economic Cooperation and Development. "Therefore, for the newspaper to suggest that the company had a centralised slush fund account was stretching imagination. Bribery is a criminal offence in France and is not seen lightly by the people," he said.

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