New Delhi: French company Dassault Aviation, which produces fighter jets, and MBDA, the missile manufacturer of Europe, as part of a deal related to the purchase of 36 Rafale jets to India for high technology) has not yet met its offset obligations of the offering. This has been revealed in a report released on Wednesday by the Comptroller and Auditor General (CAG), Comptroller and Auditor General of India. Dassault Aviation is a manufacturer of Rafael Jet, while MBDA has supplied missile systems for the aircraft. The CAG report presented in the Parliament has presented a blurred picture of the impact of India’s offset policy.
The CAG stated that it has not found a single case of high technology transfer by foreign vendors to Indian industries. The report also said that the defense sector ranked 62nd out of 63 sectors receiving foreign direct investment (FDI). The CAG has stated, “Vendors in the offset contract relating to 36 Medium Multi-Role Combat Aircraft (MMRCA)” M / s Dassault Aviation and M / s MBDA initially proposed to discharge 30 percent of their offset liability by providing high technology to DRDO Was. ” According to a press release issued by the CAG, “DRDO intends to receive technical assistance in indigenous development of engines (Kaveri) for Light Combat Aircraft”.
Till now the vendors have not confirmed the transfer of this technology. ” The first batch of five Rafale jets reached India on 29 July. The supply was received almost four years after the signing of an inter-governmental agreement for the purchase of 36 aircraft for a deal of Rs 59,000 crore. Under India’s offset policy, companies making foreign defense products are required to spend at least 30 percent of the total purchase contract price in India. They can spend this in India by purchasing components or setting up research and development centers. The offset criteria apply to all capital import transactions exceeding Rs 300 crore. The seller company can fulfill this offset liability by foreign direct investment, transfer of free technology to the Indian company, or by purchasing products made in India. Offset means that a certain amount of the deal will be repaid or adjusted in India only.
The auditor stated that although sellers failed to meet their offset commitments, there is no effective way to punish them. The CAG stated, “If the offset obligations are not met by the seller, especially when the contract period of the main purchase is over, then there is a direct benefit to the seller.” The CAG stated that since the desired results of the offset policy have not been achieved, the Ministry of Defense needs to review the policy and its implementation. The ministry needs to identify barriers preventing foreign suppliers as well as the Indian industry from taking advantage of offsets and find solutions to overcome these barriers.
The CAG said that 48 offset contracts worth a total of Rs 66,427 crore were signed with foreign vendors from 2005 to March 2018. Out of these, the offset liabilities of Rs 19,223 crore should have been discharged by the vendors till December 2018, but the amount given by them is only Rs 11,396 crore, which is only 59 percent of the commitment. “Apart from this, only 48 percent (Rs. 5,457 crore) of these offset claims submitted by the vendors were accepted by the ministry,” the report said. The rest was largely rejected because they did not conform to the terms of the contract and the defense procurement process.
The CAG said the remaining offset commitments of about Rs 55,000 crore are to be completed by 2024. He said, “Foreign vendors have fulfilled offset commitments at the rate of about Rs 1,300 crore per year. In view of this situation, it is a big challenge to fulfill the commitment of 55 thousand crore rupees by the vendors in the next six years. ”
