CAG’s report on “defense offset management” said Wednesday that French company Dassault Aviation and European missile maker MBDA have not transferred technology to DRDO that they had initially proposed in the 59,000 crore deal for 36 Rafale jets.
Dassault Aviation is the manufacturer of the Rafale aircraft and MBDA provided Meteor, MICA and SCALP missiles for the fighter jet.
CAG in its report presented to Parliament said that in many cases, foreign suppliers were found to have made various compensation commitments to qualify for the main supply contract, but were later not serious about meeting these commitments.
“For example, in the offsetting contract for 36 medium multi-role combat aircraft (MMRCA), vendors M / s Dassault Aviation and M / s MBDA initially proposed (September 2015) to fulfill 30% of their offset obligation by offering high-tech to DRDO, “the CAG report said. It said DRDO wanted technical assistance for the indigenous development of the engine (Kaveri) for the light combat aircraft.” To date, the supplier has not confirmed the transfer of this technology “the report said.
India and France signed an intergovernmental agreement (IGA) in 2016 that has a 50% compensation clause to be executed by French partners. However, a controversy arose when Dassault Aviation chose Reliance Defense, owned by Anil Ambani, as its clearing partner, who had no experience in the defense sector.
In 2005, India adopted the compensation policy for defense capital purchases. This meant that for all capital purchases over Rs 300 million made through imports, the foreign supplier had to invest at least 30 per cent of the purchase value in India. This investment would be made in the aerospace and defense sector in India.
The supplier had at its disposal several avenues to fulfill these compensation obligations. This included foreign direct investment, offer of free technology transfer to Indian companies, and purchase of eligible products manufactured by Indian companies (exports), among others. For the settlement of these compensations, the foreign supplier had to select an Indian company as partner (Indian Offsets Partner or IOP).
The CAG report said that from 2005 to March 2018, 46 compensation contracts were signed with foreign suppliers, valued at Rs 66,427 crore. Under these contracts, by December 2018, vendors should have settled Rs 19,223 crore. “However, the offsets that they claimed to have been downloaded by them were only Rs. 11,396 crore, which was only 59 percent of the commitment, ”he said.
Furthermore, the Ministry accepted only 48 percent (Rs 5,457 crore) of these compensation claims submitted by suppliers. The rest were largely rejected for not complying with the contractual conditions and the Defense Contracting Procedure.
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