Coming down heavily on the Defence Ministry for violations in the offset clause that is aimed at promoting the domestic military manufacturing industry, the CAG has listed out several deals amounting to Rs 3,410 crore where waivers were given to foreign firms against the rules.
The offset policy mandates that foreign firms winning major defence contracts should pump back at least 30 per cent of the contract value to the Indian defence manufacturing sector, but the CAG has picked up several cases were equipment that had no value addition by Indian firms has been passed off as meeting offset obligations.
The CAG has listed out several contracts including major ones with Boeing for the supply of C 17 aircraft, Lockheed Martin for the C 130 J aircraft and Russia for upgrade of the MiG 29 fighters in which waivers have been granted against the policy.
“Despite India being one of the largest importers of defence hardware, the benefits of offsets could not be reaped to the extent envisaged due to lack of uniformity in interpretation of extant offset provisions,” the report days.
According to the report, out of the 16 offset contracts that were concluded between 2007-2011 that had a total worth of Rs 18,444 crore, equipment to the value of Rs 3,410 crore were already built equipment without value addition through the Indian offset partners.
The CAG also pulled up MoD for allowing the selection of ineligible offsets partners for the offset contracts in cases in which the purported Indian Offsets Partner (IOP) was actually a 100 per cent owned subsidiary of the foreign vendor. Among the examples cited were violations in the offset contracts for the $4.1 billion deal for 10 C-17 aircraft, eight P-8I anti-submarine warfare aircraft and Mi 17 helicopters and MiG 29 fighters from Rosoboronexport.
“In two contracts, penalty charges of Rs 3.06 crore viable on vendors on account of unfulfilled offset obligation had not been recovered from defaulting vendors including American Lockheed Martin (Rs 1.02 crore) and Israeli IAI for Harop systems (Rs 2.04 crore),” the report says.