Estonia defence minister resigns over €70 million ammunition scandal involving Indian-owned firm

New Delhi: An Indian-owned ammunition supplier has become embroiled in a €70 million defence procurement controversy in Estonia, prompting the Baltic nation’s defence minister to resign and exposing serious weaknesses in a programme intended to supply artillery shells to Ukraine. The supplier disputes Estonia’s allegations of delayed, incomplete and substandard deliveries, turning the case into an international arbitration battle over money, performance and responsibility.

The controversy concerns Datasel SRL, an Italian-registered company owned by Nagpur-based Neco Defence Munitions, which was selected by the Estonian Centre for Defence Investments to supply large-calibre ammunition under contracts signed in 2024. The advance payments were financed at least partly through the European Peace Facility, which is an off-budget European Union mechanism used to provide military assistance to Ukraine.

The Estonian defence minister, Hanno Pevkur, announced his resignation on Wednesday, saying he was accepting political responsibility for failures within the defence establishment even though he had not personally negotiated the contracts. Pevkur had headed the ministry since 2022 and acknowledged that findings by Estonia’s national audit office concerning the country’s defence forces and the procurement agency were serious enough to undermine confidence in the sector. The country’s public broadcaster ERR reported that political parties across the spectrum had called for his departure.

Estonia’s procurement agency signed its first contract with Datasel in August 2024 and transferred an advance of €15 million, followed by another contract and a payment exceeding €10 million in October. Although the first ammunition consignment was expected to reach Ukraine in November 2024, reported production and delivery problems did not prevent the agency from concluding two further contracts before the end of that year, taking the overall advance payments to about €70 million.

According to ERR, Datasel and its Indian parent had no previous record of producing or selling the artillery shells covered by the agreements when the contracts were awarded. The procurement was nevertheless undertaken during an acute global shortage of 155mm ammunition, when European governments were searching beyond established western manufacturers to replenish Ukraine’s rapidly depleted stocks.

Datasel and Estonia present conflicting accounts

Estonian authorities maintain that the supplier failed to deliver the ammunition in accordance with the contractual timetable and that the material reaching an intermediary warehouse in Europe was incomplete and below the required quality standards. The government subsequently terminated the agreements, sought repayment of the advances and referred the dispute to international arbitration in Strasbourg. ERR’s account of the contracts said the first scheduled delivery had encountered delays within months of the initial payment.

Datasel has rejected allegations that it failed to fulfil its obligations, arguing that Estonia ended contracts that the company remained capable of completing. Its director, Siddharth Jaiswal, told Economic Times that the Estonian side cancelled the arrangements in 2025 because the funds had lapsed, which left the company with completed ammunition and work-in-progress inventory.

The company said it received approximately €59 million rather than the full €70 million cited by the Estonian authorities and submitted invoices for goods worth about €58 million. It has acknowledged delays but denied that the supplies were deficient, while filing a counterclaim seeking damages running into tens of millions of euros for what it describes as Estonia’s breach of contract.

Jaiswal also said several contracts concluded between late 2024 and 2025 had a combined value approaching €150 million, and maintained that Estonian representatives inspected the ammunition before further orders were placed. Ramesh Jayaswal of Jayaswal Neco Industries separately told Hindustan Times that the shells had passed quality checks conducted by Estonian officials and that subsequent contracts were stopped only after funding became unavailable.

There is also disagreement over the ammunition’s intended recipient, with Estonian and European accounts describing it as military aid for Ukraine. Sources representing Datasel have said the formal contracts named Estonia as the end user and made no reference to Ukraine, an assertion that could become important during arbitration but does not necessarily determine the wider purpose for which Tallinn arranged the procurement.

Audit failures deepen political fallout

The dispute surfaced as Estonia’s national audit office was examining broader weaknesses in defence-sector accounting, inventory controls and procurement oversight. Investigators are also examining whether requested documents were improperly withheld, although the existence of that inquiry does not by itself establish wrongdoing by Datasel or its Indian owners.

The procurement agency initially maintained that it had sent the four Datasel contracts to the audit office on June 5, but the documents were not received. The agency’s director general, Elmar Vaher, later accepted responsibility for failing to verify their delivery, saying officials had assumed that an email containing the confidential documents had gone through. The disclosure added to concerns over how a high-risk international ammunition transaction was supervised.

Pevkur said the ammunition received was not unusable but was incomplete and of insufficient quality, an assessment the supplier contests. He also argued that procuring shells rapidly for Ukraine required dealings with intermediaries and suppliers in Asia, Africa and the Balkans because some producers did not want their involvement publicly identified.

The European Commission has begun discussions with Estonia to determine whether Tallinn may have to return money drawn from the European Peace Facility. A commission spokesperson said established safeguards and recovery procedures were intended to ensure that EU funds were used properly, but no decision on repayment had been reached. ERR reported that Estonian taxpayers could ultimately face exposure if the expenditure were ruled ineligible.

Why the Indian link matters

Neco Defence Munitions belongs to the Nagpur-based Neco Group, whose businesses include steel, engineering, mining, power and defence manufacturing. The group’s defence arm advertises small-arms ammunition, large-calibre ammunition, mortar bombs and other military products, although Estonian media have questioned whether Datasel or its Indian owner possessed a demonstrated record of executing an artillery-shell order of this scale when the contracts were signed.

For India, the controversy arises as private manufacturers seek a larger share of the international weapons and ammunition market under New Delhi’s drive to expand defence exports. The allegations, even though contested and still subject to arbitration, underline how delivery schedules, quality certification, financial guarantees and transparent contracting can become decisive tests of credibility for Indian companies entering tightly regulated European supply chains.

The case should therefore be treated as a contractual and governance dispute whose facts remain under examination, rather than proof of misconduct by the Indian supplier. Its eventual resolution will determine not only who bears the financial loss but also whether weaknesses in Estonia’s emergency procurement system, failures by the contractor, or a combination of both caused an ambitious Ukraine ammunition deal to unravel.