The CAG released its report on Wednesday.
The CAG also painted a grim picture of the effectiveness of India’s compensation policy, saying it did not find a single instance of foreign suppliers transferring high-tech to the industry.
- News18.com New Delhi
- Last update: September 23, 2020 11:17 PM IST
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Both Dassault, the maker of India’s generation 4.5 front-line Rafale fighters, and MBDA, the European arms manufacturer whose hardware has been installed in next-generation aircraft, “were not serious” about their compliance. Compensation commitments, a Comptroller and India Auditor General (CAG) report noted. India signed a Rs 59,000 crore deal with Dassault for 36 Rafale jets in 2016, the first batch of which arrived in India in July.
India has a 30% compensation policy, which means that any equity purchase above Rs 300 crore made from a foreign defense provider requires the provider to invest at least 30% of the purchase value in India in return. . This clause is intended to strengthen the aerospace and national defense sectors of India. Foreign suppliers can fulfill their compensation obligations through Foreign Direct Investment (FDI) offering free Technology Transfer (ToT) to Indian companies, purchasing products manufactured by Indian companies, etc.
“In many cases, it was found that foreign suppliers made various compensation commitments to qualify for the main supply contract, but later, they were not serious about meeting these commitments. For example, in the compensation contract related to 36 Medium Multi-Functional Combat Aircraft (MMRCA), vendors M / s Dassault Aviation and M / s MBDA initially proposed (September 2015) to fulfill 30% of their compensation obligation offering high technology to DRDO. DRDO wanted technical assistance for 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.
The CAG report – ‘Defense Compensation Management Performance Audit Report’ – noted that there was not a “single case where the foreign supplier transferred high technology to Indian industry.” State-of-the-art technology transfer is seen as vital to boost the Indian defense industry. It further states: “Similarly, the foreign supplier hardly supplied equipment ‘in kind’ to Indian industry. Therefore, the objectives of the compensation policy remain largely unfulfilled, even after more than a decade of its adoption. “
In scathing comments, the CAG suggested that the offsetting breach was occurring because the contract rules, and the various amendments to the Defense Procurement Procedure (DPP), had no provision to penalize foreign defense contracts if They were found that he was not meeting his compensation obligations.
“Even though the suppliers did not meet their compensation commitments, there were no effective means of penalizing them. Failure to comply with compensation obligations by the supplier, especially when the contract period of the main acquisition has ended, is a direct benefit for the supplier, ”the report reads.
Not only had the providers not met their offset obligations, which could be considered a direct loss to the country’s domestic markets, the CAG report further noted that, at current rates, providers must discharge their remaining offsets, which should be done over the next six years, it also seemed pretty unlikely.
“The rate at which foreign suppliers have been meeting their compensation commitments was approximately Rs 1.3 billion per year. Given this situation, meeting the commitment of 55 billion rupees by suppliers over the next six years remains a major challenge, ”the CAG noted.
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