CAG criticises Defence Ministry’s offsets policy
30 Nov 2012 7:41 AM IST
A Defence Ministry policy to promote military industry in the country has come in for criticism by the CAG, which also questioned the waivers given to foreign defence firms for fulfilling their offset requirements.
Under the offsets policy, foreign vendors bagging deals worth over Rs 300 crore have to invest at least 30 per cent of the worth of the deal back in Indian defence, homeland security or the civilian aerospace sectors.
In its report tabled in the Parliament today, the CAG pointed out that monitoring mechanism of the Defence Ministry for offsets was ‘ineffective as it was created without a clear definition of its objectives and role. It has remained only a paper exercise.’
The Government auditor also pulled up the Defence Ministry for allowing the selection of ‘ineligible offsets partners’ for the offset contracts where in some cases the Indian Offsets Partner (IOP) was a 100 per cent owned subsidiary of the foreign vendor.
The report said Ministry allowed fulfilment of offset obligations through Foreign Direct Investment (FDI) by foreign vendors in specified Indian industry but ‘there was lack of clarity and type of foreign investment which would be eligible and interpretation of provisions of the clause.’
The report said a Boeing proposal to set up a test facility at DRDO was an investment in kind, ‘even as it was not an eligible offset...the decision was taken without mandatory certification by theDOFA.’
Under the offsets policy, foreign vendors bagging deals worth over Rs 300 crore have to invest at least 30 per cent of the worth of the deal back in Indian defence, homeland security or the civilian aerospace sectors.
In its report tabled in the Parliament today, the CAG pointed out that monitoring mechanism of the Defence Ministry for offsets was ‘ineffective as it was created without a clear definition of its objectives and role. It has remained only a paper exercise.’
The Government auditor also pulled up the Defence Ministry for allowing the selection of ‘ineligible offsets partners’ for the offset contracts where in some cases the Indian Offsets Partner (IOP) was a 100 per cent owned subsidiary of the foreign vendor.
The report said Ministry allowed fulfilment of offset obligations through Foreign Direct Investment (FDI) by foreign vendors in specified Indian industry but ‘there was lack of clarity and type of foreign investment which would be eligible and interpretation of provisions of the clause.’
The report said a Boeing proposal to set up a test facility at DRDO was an investment in kind, ‘even as it was not an eligible offset...the decision was taken without mandatory certification by theDOFA.’
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