New Delhi, 30 May: The Ministry of Defense has started cracking down on foreign companies that do not follow India’s Defense Offset Policy. Notices have been sent to foreign companies having major military contracts with the country, which have not invested at least 30% in the Indian defense and aerospace sector under the offset policy. A fine of $ 43.14 million has also been imposed against several such companies. Companies that have been pending for more than a decade have been put in the ‘black list’.
India’s defense offset policy made it mandatory for foreign companies to outsource at least 30% of the value of large contracts to Indian manufacturers.
The offset policy was projected to attract foreign investment of $11.2 billion in the period 2008-2024, but so far only more than 20% of these have been met. Many major foreign companies in Europe and America have not followed the defense offset policy.
According to the Defense Ministry, foreign companies have not paid offsets of more than $2.24 billion in the last five years, despite several extensions granted on specific requests.
The Comptroller and Auditor General (CAG) in its report tabled in Parliament on Defense Offset Policy during the last monsoon session of Parliament had estimated a loss of Rs 8000 crore to India in defense deals with foreign companies in the last 15 years.
In the report tabled in Parliament, the CAG said that in the defense agreements signed between 2005 and 2018, no foreign company has transferred its technology to India as per the offset policy.
The CAG has said that foreign companies have to fulfill offset claims of about 55 thousand crore rupees in the next six years. At present, only offset commitments of Rs 1,300 crore every year are being met. Therefore, the CAG has considered it a big challenge to meet the offset commitments of Rs 55,000 crore in six years.
The CAG in its report had said that between 2005 and 2018, India had signed 48 agreements with foreign defense companies totaling Rs 66,427 crore.
According to the Defense Offset Policy of the Ministry of Defense, till December 2018, India was to transfer an offset of 19,223 crores, but only 11,396 crores were transferred. Of these, only commitments worth Rs 5457 crore have been accepted. That is, only 59 percent offset policy has been followed. In this way, in the last 15 years, India is estimated to have lost Rs 8000 crore in defense deals with foreign companies.
Now the Ministry of Defense has started cracking down on foreign companies due to non-compliance of Defense Offset Policy.
However, notices have been sent to foreign companies having major military contracts with the country, which have not invested at least 30% in the Indian defense and aerospace sector under the offset policy.
Also, a fine of $ 43.14 million has also been imposed against several such companies. Companies that have been pending for more than a decade have been put in the ‘black list’.
Sources said if the default continues in the first phase, the penalty will be deducted from the prescribed payment for foreign equipment. Banking guarantees of companies that have been paid in full will be encashed and additional punitive measures will be imposed.
