IAF Rafale in Ambala Air Base
PC : Indian Air Force

NEW DELHI:  The Comptroller and Auditor General (CAG) on Wednesday questioned India’s offset policy and came down heavily on foreign vendors for not fulfilling their offset commitments. In its report titled ‘CAG’s Performance Audit Report on Management of Defence Offset’, the national auditor pointed out that French aerospace major Dassault Aviation and European missile maker MBDA, which supplied armaments for the Rafale jets, have not yet discharged their 30% offset obligation.

India received the delivery of the first batch of five Rafale fighter jets from the French manufacturer on July 29. They were formally inducted to Indian Air Force on September 10. The total worth of Rafale deal is Rs 59,000 crore. Opposition parties had alleged irregularities in the fighter jet deal. “In many cases, it was found that the foreign vendors made various offset commitments to qualify for the main supply contract but later, were not earnest about fulfilling these commitments,” the financial watchdog said in its report.

Giving example of the Dassault Aviation, the CAG said, “In the offset 4 contract relating to 36 Medium Multi Role Combat Aircraft, the vendors Dassault Aviation and MBDA initially proposed (September 2015) to discharge 30% of their offset obligation by offering high technology to DRDO.” But they have not confirmed the technology transfer till date, it observed. DRDO wanted to obtain technical assistance for the indigenous development of engine (Kaveri) for the Light Combat Aircraft Tejas.

Till date, the vendor has not confirmed the transfer of this technology, it said. As per the deal, the company has to invest 50% of the worth of the deal back in India as offset obligations. The investment amounted to around Rs 30,000 crore for which a numbers of Indian firms, including Anil Ambani’s Reliance Defence, were chosen.

This became a major controversy since the company was totally new in this sector. India adopted the offset policy for defence capital purchases in 2005, according to which all capital purchases above Rs 300 crore through imports will have the foreign vendor invest at least 30% of the value of the purchase in India.

Policy review call
In view of the fact that the offset policy has not yielded the desired results, the CAG suggested the government review the policy