New Delhi, Nov. 11: Two banned companies — a Singaporean firm vying for a billion-dollar order for artillery guns and an Israeli arms supplier — are hoping for a reprieve after the government today said it has amended the rules under which they were blacklisted in June.

The defence ministry has amended the rules that may allow the companies to participate in trials and tests but not to conclude contracts before the CBI completes its investigation.

The two firms are on a list of seven with whom the defence ministry froze all business after a preliminary CBI investigation suspected they had bribed the former chief of the Ordnance Factories’ Board, Sudipta Ghosh, who was arrested in Calcutta in May.

Defence ministry sources said the rules were being announced after they were vetted by the Central Vigilance Commission and the law ministry.

“It is not our intention to favour this or that company. We are just saying this is how the companies will be dealt with because we have had business with them,” an officer said.

Singapore Technologies had to fly back two ultra-light howitzers, named Pegasus, after they landed in Mumbai in a specially chartered aircraft on June 5, the day A.K. Antony’s defence ministry announced the list of companies it was banning just after Ghosh’s arrest.

The decision froze the trials for the artillery guns for which ST flew in the howitzers. The freezing of business with the companies hit the armed forces hard.

The Indian Army, for example, has not acquired a single piece of heavy artillery in 22 years and a Rs 1,200 crore project to make ammunition for its Bofors guns in collaboration with Israeli Military Industries (IMI) is delayed by more than six years.

Israeli Military Industries was contracted in March this year — a month before Ghosh retired in April — to partner the Ordnance Factory in Nalanda for a Rs 1,200-crore project to make bi-modular propellant charges — ammunition for the army’s Bofors guns. It is also in a joint venture with the Ordnance Factory in Khamaria in Madhya Pradesh to make “cargo ammunition”, cluster bombs designed to maim.

Singapore Technologies, and a subsidiary, ST Kinetics, apart from participating in the competition for ultra-light howitzers with its Pegasus gun, is also involved with ordnance factories in producing combat vehicles.

After the services’ headquarters were prompted by the ministry to hasten acquisitions, they sought directions on how to deal with the blacklisted companies. Antony referred the issue to the Central Vigilance Commission and the law ministry before amending the rules.

The new rules will govern business with companies in accordance with the “Integrity Pact” (no-bribery clause) where contracts have been signed.

Terms laid down in a tender will govern companies vying for an order if the process of trials and testing has started. The armed forces should not deal with any of the companies named in the FIR by the CBI if they are not in the middle of a tender process, the new rules lay down.

The five other companies, apart from ST and IMI, named in the CBI FIR on Ghosh are: BVT of Poland, Media Architects Pte Ltd of Singapore, T.S. Kishan and Company Pvt Ltd, R.K. Machine Tools, and HYT Engineering, the last three being Indian firms.

In the past, Denel of South Africa was blacklisted after allegations that it had paid bribes to win a contract from the Indian armed forces to supply anti-materiel rifles. Bofors and HDW of Germany were also blacklisted.

Blacklisting can often prove counterproductive for the armed forces because it slows down modernisation programmes.