The total offset commitment by foreign defence companies to be fulfilled in India for various defence deals during the last 15 years, was $6.83 billion till August 01, 2022 of which they fulfilled offset claims worth 82.13% or about $5.61 billion, the Defence Ministry informed Parliament.
Expressing concern over the shortfall, MP Kunwar Danish Ali who raised this question said this “huge money could revive MSME (Micro, Small and Medium Enterprises) sector and create a lot of jobs.”
“Total 15 companies have missed the first deadline set for implementation of their defence offset commitment. Further details being strategic and sensitive in nature, cannot be disclosed,” Minister of State for Defence Ajay Bhatt said in a written reply in the Lok Sabha, on Friday. “For unfulfilled offset obligations, penalty as applicable has been imposed on the defaulting vendors as per the governing Defence Offset Guidelines.”
Further, in genuine cases, re-phasing of offset obligations has been allowed to enable vendors to discharge the pending offset obligations, Mr. Bhatt stated, detailing the steps taken by the Defence Ministry to prevent default or delay in implementation of offset commitments by vendors.
Defence offset policy was promulgated under Defence Procurement Procedure (DPP) 2005 with the objective that it would bring in high-end technology into the country and build the domestic defence industry. Under offset clause, a foreign company which wins a defence deal is supposed to invest back a part of the contract value in the country thus developing skills and bringing in technology while also generating employment.
As per DPP 2006, offset value has been fixed at 30% of defence deals above ₹300 crore which was revised to ₹2000 crore in DPP 2016 for full import deals. The first offset contract was signed in 2007.
