Govt: Foreign defence suppliers haven't met 'offset obligations'

Tribune News Service

New Delhi, April 4

Foreign military equipment suppliers who get military contracts in India have defaulted on “offset obligation” to the tune of $2.24 billion (Rs 16,650 crore). This is the cumulative pendency in the last five years for 21 contracts, the Ministry of Defence informed the Rajya Sabha in a written reply on Monday.

21 contracts not honoured: Govt

• Offset obligations were not fulfilled in 21 defence contracts in last five years
• Under India’s offset policy, foreign defence entities are mandated to spend at least 30% of total contract value in India through procurement of components, transfer of technologies or setting up of research and development activities
• Action is taken against defaulting/non-performing vendors by imposing penalty after following the laid down procedure

Offsets are an obligation by foreign companies to boost India’s domestic defence industry if India is buying defence equipment from it. Since defence contracts are costly, the government wants part of that money either to benefit the Indian industry, or to allow the country to gain in terms of technology.

“Offset obligation during the last five years is 21 cases with non-performed amount of US $2.24 billion,” the MoD said.

Action is taken against the defaulting and non-performing suppliers by imposing penalty and in 16 cases the penalty amounted to $43.14 million till December 31, 202.

During the last five years, offset claims worth US $2.64 billion have been submitted in 47 contracts, the Defence Ministry said.

Meanwhile in September 2020, the Comptroller and Auditor General (CAG) in its report, “Management of Defence Offsets”, said it was found in many cases that foreign vendors made offset commitments to qualify for the main supply contract, but were later not earnest about fulfilling these commitments.

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