Indian MoD urged to review offset implementation

India’s Comptroller and Auditor General (CAG) has criticised the Indian Ministry of Defence’s (MoD’s) management of defence offsets and called for a review of the policy’s execution.

In a report submitted to the Indian parliament on 23 September the CAG said that the objectives of the offset policy – to leverage defence procurement to support defence industrial development – “remain largely unachieved” and that the MoD “needs to review the policy and its implementation”. The MoD has not responded to the criticism.

According to the CAG, one of the biggest problems with the policy is that foreign contractors are not discharging offset obligations in line with their commitments. More effective monitoring and penalties need to be introduced by the MoD, it said.

According to India’s Comptroller and Auditor General, India has signed defence-offset contracts with foreign companies - including Dassault for its supply of Rafale fighters (pictured) – worth about USD9 billion. (IAF)

Since 2005, when the offset policy was launched, until March 2018 a total of 46 offset contracts – worth INR664.27 billion (USD9 billion) – had been signed by the MoD and foreign suppliers, said the CAG report.

It added that, according to these offset contracts, INR192.23 billion worth of offsets should have been discharged by contractors by December 2018. “However,” the CAG said, “the offsets claimed to have been discharged by [contractors] was only INR113.96 billion, which was only 59% of the commitment [up until the end of 2018]”.

The CAG added, “Further, only 48% (INR54.57 billion) of these offset claims submitted by vendors were accepted by the [MoD]. The rest were largely rejected as they were not compliant with the contractual conditions and the [MoD’s] defence procurement procedure.”