File photo of Congress leader P Chidambaram.
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.
- News18.com New Delhi
- Last update: September 24, 2020 5:32 PM IST
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Congressional Leader P Chidambaram criticized the Center on Thursday after India’s Comptroller and Auditor General (CAG) called for a review of the Defense Ministry’s policy for offsets on the 59,000 rupee Rafale deal with the French firm Dassault Aviation in a report.
Both Dassault, the maker of the Rafale fighters, and MBDA, the European arms manufacturer whose hardware has been installed on the aircraft, “were not serious” in meeting their compensation commitments, the CAG report noted.
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.
“CAG finds that the suppliers of the Rafale aircraft have not confirmed the transfer of technology under the compensation contract,” Chidambaram said in a tweet.
He referred to the report as the “opening of a can of worms,” and said that offset obligations should have started on September 23, 2019 and the first annual commitment should have been completed on September 23, 2020, which was yesterday. “Will the government say if that obligation was met?” He asked in a tweet.
The offsetting obligations should have started on 9-23-2019 and the first annual commitment should have been completed on 9-23-2020, i.e. yesterday. Will the government say if that obligation was met?
Is the CAG report opening a can of worms?
– P. Chidambaram (@PChidambaram_IN) September 24, 2020
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.”
“Similarly, there was hardly any equipment supplied ‘in kind’ to Indian industry by the foreign supplier. Therefore, the objectives of the compensation policy remain largely unfulfilled, even after more than a decade of its adoption, ”the report adds.
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.
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