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India says "too early" to look for foul play in Rafale deal

By Manoj Kumar and Andrew Osborn

NEW DELHI (Reuters) - Indian Defense Minister A.K. Antony said on Tuesday it was "too early" to consider the possibility of foul play in a planned $10 billion deal with France's Dassault Aviation for Rafale war planes.

India has threatened to scrap a $750 million deal for a dozen AgustaWestland helicopters after Italian police arrested the former head of parent company Finmeccanica, Giuseppe Orsi, last week for allegedly paying bribes to Indian politicians to win the contract.

The Rafale purchase, one of the world's largest defense deals, has come under increased scrutiny in the Indian media because of the Finmeccanica case.

The allegations surrounding the AgustaWestland deal also hung over the visit by British Prime Minister David Cameron to India this week. After meeting his Indian counterpart, Manmohan Singh, Cameron promised to assist India's investigation into the sale of the helicopters, which are manufactured in Britain.

Antony was responding to a question from Reuters at a news conference on whether the government was looking into any possibility of corruption in the deal with Rafale to buy 126 fighter jets, which is in the final stages of negotiation between Dassault and India.

"It is too early," he said, adding that there were many levels of scrutiny in the deal.

"I can assure you one thing, as far as our government is concerned, regarding integrity, transparency, we will not compromise," he said.

"We will go to any extent to take action," he said, if there was any evidence of corruption.

French President Francois Hollande said on a visit to India last week that his government was committed to deals being done according to "commercial rules" and France remained vigilant in the fight against corruption.

"We are working with Indian authorities, we have nothing to do with Finmeccanica and even less with the problems that they're having now," Eric Trappier, chief executive of Dassault Aviation, told reporters during Hollande's visit.

"VERY SERIOUS CONCERNS"

The Finmeccanica case has sent shockwaves through the defense industry in India, the world's largest weapons importer. It follows a series of corruption scandals that have dogged the government, which faces a general election due by 2014.

The Defense Ministry is considering cancelling the helicopter deal, which would put in question some $12 billion in sales the Italian company is chasing.

India prohibits any middlemen in arms deals.

Several Indian newspapers have quoted a 2002 Paris court judgment that a British-based broker, Christian Michel, was employed by Dassault during a bid to sell India 10 Mirage 2000 jets. The court ruled that Dassault and Michel had parted ways by the time that deal was signed in 2000.

"Today there are only reports. We are very clear if for any deal, any foul play is found, we will take action," Antony said.

Michel is now accused by Italian prosecutors of funneling bribes to Indian officials to swing the AgustaWestland helicopter deal.

Cameron is in India hoping to tap one of the world's fastest-growing major economies for new trade and investment opportunities, including in the defense sector.

Britain was part of a consortium hoping to win the contract to sell Eurofighter jets worth about $10 billion to India. That consortium has lost out to Dassault but Cameron has sought to persuade the Indian government that Eurofighter remains an attractive option if India decides to review the Rafale deal.

The timing of Cameron's visit was not ideal, coming just after the AgustaWestland corruption allegations erupted.

"I also conveyed to the prime minister our very serious concerns regarding allegations about unethical means used in securing the 2010 contract of the AgustaWestland helicopters," Singh told reporters after their meeting.

"I have sought full assistance from the UK in this case. Prime Minister David Cameron has assured me of the cooperation of his government in the investigation."

Cameron, speaking after Singh, said his government would respond to any request for information about the deal.

"I'm glad the Italian authorities are looking into this issue in detail as Finmeccanica is an Italian company, the parent company of AgustaWestland," Cameron said.

(Additional reporting by Frank Jack Daniel, Annie Banerji and Nigam Prusty; Writing by Frank Jack Daniel and Matthias Williams; Editing by Raju Gopalakrishnan and Robert Birsel)

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