British company equipped Indian sea base

Rolls-Royce struck a £22m deal to supply the Indian Navy with military equipment as fears grew over a nuclear war over Kashmir.

Through a US subsidiary, the famous British firm sold an advanced shiplift 12 days ago. It was bound for India's new naval base being built at near Goa at Karwar on the Arabian Sea south of Pakistan. The base will be headquarters for India's Western fleet.

News of the deal will heighten growing anxiety over Britain's decision to continue talks over a major £1bn arms deal to sell 60 Hawk jets to the Indian Government.

It emerged yesterday that Jack Straw, the Foreign Secretary, reassured the Indian defence minister, George Fernandez last week that the deal could still go ahead.

Today's revelations will reopen the Cabinet dispute prompted by last week's Independent on Sunday report, which quoted authoritative sources at the Department of Trade and Industry who said that the Government had agreed to suspend arms sales to both countries.

Downing Street insisted that the current tension over Kashmir was no reason for a change in policy. But other senior ministers, including Robin Cook and Clare Short, have indicated support for a suspension. Labour MPs have already voiced serious concerns about the lack of scrutiny surrounding arms deals to unstable countries.

Richard Bingley, of the Campaign Against the Arms Trade lobby group, said: "It is farcical for the Foreign Secretary to go out to South Asia to promote peace, yet at the same time British companies are still arranging arms deals with Government backing. Quite how promoting the Hawk deal with help promote peace is beyond me."

A spokesman for Rolls Royce said the company had followed all British and US Government guidelines for applying for export licences when it agreed the contract. "We clearly went through all the current procedures, as we always do," he said.