India's long-delayed effort to acquire 197 light reconnaissance and surveillance helicopters for its army and air force is spiraling toward what might be the program's second cancellation.

The billion-dollar deal, a fight between Eurocopter's AS550 C3 Fennec and the Kamov Ka-226T Sergei, has languished without decision since 2010, when field evaluation trials were completed. The helicopter sale has been further derailed by an army-recommended investigation into the role an Indian military officer played in a purported bribery attempt during the first stage of the competition.

Those allegations arose as part of an Italian investigation into the larger scandal involving Finmeccanica, which resulted in the ouster of CEO Giuseppi Orsi. Italian authorities discovered papers suggesting that an Indian military officer had offered to manipulate the specifications and trial process in the light helicopter program to favor AgustaWestland, which had been a contender at the time. The company's AW109 was eliminated from the competition on technical grounds shortly after the purported offer was made.

A senior Indian defense ministry source confirms that the Defense Acquisition Council, headed by Defense Minister A.K. Antony, will not move forward on the light helicopter program until inquiries into corruption charges by the officer are complete.

In March, Antony told the Indian parliament that “no formal inquiry has been instituted in the case of procurement of the 197 Light Utility Helicopters.” The statement was nuanced, though. Government agencies are investigating corruption charges against the Indian officer but not the helicopter deal itself.

The episode is the latest in a line of difficulties for the program. In 2007, the first time the competition was aborted, Eurocopter had won, but the program was scrapped in the final stage following allegations of non-compliance—a major blow to Eurocopter.

Now, the possibility of a second program kill has Eurocopter managers in India anxious to the extreme.

The “delay in the procurement program for reconnaissance and surveillance helicopters has become a serious cause of concern for Eurocopter,” wrote Rainer Farid, vice president for sales and customer relations in India and South Asia in an April 3 letter to India's director general of acquisitions. “Since issue of the current [request for proposals], till date four years has elapsed, and the validity of the commercial quotes has already been extended six times.”

Kamov declined requests for comment on the program, but an official at Russian Helicopters in New Delhi described a sense of confusion about how to proceed.

“It does not look good. The government hasn't answered questions sent by us. The signal appears to be, step back, this isn't happening,” the official said. “We are currently weighing our options under the Defense Procurement Procedure. There is a total absence of clarity on the way forward.”

Industry worries appear to be shared within the Indian government. Defense ministry officials remain grim about the program's future.

“It isn't formally over. But it seems unlikely it will come up for a decision any time soon,” says a senior defense ministry acquisitions officer. “The entire deal will have to be reexamined, perhaps from scratch.”

The possibility of ending the procurement a second time is a bitter blow for the army and air force, both of which have desperately sought new-build helicopters for operations from high-altitude bases since 2004.

Their fleets of light utility Cheetah/Alouette-IIs and Chetak/Alouette-IIIs are too old to be reliable. In February, the army concluded a $76 million deal for 20 Cheetals—up-engined versions of the Cheetah/Alouette-II that Hindustan Aeronautics Ltd. (HAL) builds under license—as a stopgap, anticipating delays in the light helicopter deal.

HAL's own light utility helicopter program is delayed but making progress. The program looks to meet a requirement of 185 helicopters for the army, air force and navy. After a protracted effort, the company has finally chosen the Turbomeca Ardiden 1U turboshaft engine. Urged to speed the program, HAL has committed to a first flight in 2015, and final operational clearance in 2017.

Separately, the navy will shortly release a request for proposals to service a requirement of 56 light naval utility helicopters. Fighting against a potential blacklist in the VVIP helicopter bribery scandal, AgustaWestland has pitched its AW109 and is likely to compete with the Sikorsky S-76D, Bell 429 and Eurocopter AS565 Panther.