'The CVC report and the law ministry's reply on the issue is awaited,' said a senior defence ministry official, requesting anonymity.

The immediate casualty of the blacklisting is the Rs.12 billion ($240 million) deal between IMI and the Ordnance Factory Board (OFB) March 25 to revive a munitions factory at Nalanda in Bihar along the lines of IMI's ordnance factory in the Tel Aviv suburb of Ramat Hasharon, a project that had taken off after 10 long years.

Originally conceived in the late 1990s when George Fernandes was the defence minister, the Nalanda factory project went into limbo when South African defence major Denel, which was to collaborate in its construction, was blacklisted on corruption charges. The factory was to manufacture the propellant for the ammunition of the Bofors 155 mm howitzers and also Zitara carbines in collaboration with another Indian ordnance factory.

Besides IMI, the blacklisting of Singapore Technology is likely to derail the artillery modernisation programme of the Indian Army that has been hanging fire for over two decades and has been mired in controversy.

Singapore Technology's Pegasus ultra-light howitzer was a leading contender for the Indian Army's order for 140 guns worth Rs.29 billion.