In a major setback to coast guard's plan to upgrade its capacity post-Mumbai attacks, the defence ministry has cancelled a tender for hiring eight helicopters for transport and evacuation operations after going through the year-long selection process.

"Yes, we have cancelled the tenders for hiring of eight medium lift helicopters," a top defence ministry official told PTI here today.

The defence ministry had floated the tender for leasing the eight helicopters from global manufacturers in the middle of 2009, a deal that would have been worth several crores of rupees.

Four major helicopter manufacturers -- French Eurocopter, British-Italian Agusta Westland, Russian Kaman and American Sikorsky -- were provided the tender documents.

But only Sikorsky and Agusta responded to the tender towards the end of 2009.

However, after about eight months of scrutinising the tender papers and opening of commercial bids, the defence ministry decided to cancel the tenders and go in for a re-tendering process, the official said.

While Sikorsky had offered its S-76C++ platform, Agusta offered its AW109G platform to meet the coast guard's needs, the official said.

The coast guard plan was to place two helicopters in four different coastal cities so that its personnel could respond to emergency situation in no time.

Chennai, Kochi, Daman and Port Blair were selected as the bases and each of these cities would have two helicopters at its disposal.

The tender envisaged leasing of the eight helicopters for a period of two years, extendable to two more years, the official said.

While the selected supplier would be responsible for maintenance and operation of the helicopters, the coast guard would be a full time lessee, using the platform on the basis of its needs and paying for the service to the supplier.

The defence ministry official said though one of the companies was selected for awarding the lease contract, the price negotiations failed.

"We had problems with the costing of the lease. The costs proposed by the company was too high," the official said.

Meanwhile, defence ministry sources said the coast guard and the defence ministry had calculated the cost of the lease on the basis of one-time hiring of a helicopter.

However, the bidders for the tender pointed out that the costs did not work that way when coast guard was the only user and a full time lessee.

The supplier pointed out that it would have to include the cost of deploying the eight helicopters at four different locations at all times, serviceability of the helicopter (availability to fly) whenever it was needed by the coast guard, and 24-hour availability of pilots and maintenance staff.

The companies told the coast guard and the defence ministry that they would have to bear these costs if the lease was to be profitable to the company.

Consequently, the price negotiations failed, forcing the defence ministry and the coast guard to do a rethink on its costing procedures for the tender.

"This resulted in the tender being cancelled and hence we will go in for a fresh tender for hiring the eight helicopters," the official said.

After the Mumbai terror attacks in November 2008, the government had decided to fast track acquisitions for the coast guard and the Navy to build its capabilities to both prevent and handle emergencies arising out of terror attacks on coastal cities.

The plan to hire medium lift helicopters for transporting personnel, equipment and for evacuation operations was part of the fast track acquisition.