The Indian Defence Ministry has cancelled the $1.5bn deal to acquire six mid-air refuellers for the Indian Air Force from European consortium Airbus.
The cancellation comes after the Finance Ministry raised objections regrading the acquisition, since it does not abide by the L1 (lowest item in a contract) guideline.
The air force had placed the bid for the EADS Airbus A-330 multirole tanker transport (MRTT) aircraft, which would increase the duration and number of missions of the air force's fighter aircraft.
A military derivative of the Airbus A330-200 airliner, the A330 MRTT is designed as a dual-role air-to-air refuelling and transport aircraft.
The A330 MRTT has a maximum fuel capacity of 111,000kg (245,000lb) and is equipped with a Airbus Military aerial refuelling boom system (ARBS) for receptacle-equipped receiver aircraft.
Meanwhile, the air force has asked the Defence Ministry not to cancel the A-330 contract.