New Delhi: In a startling find, the Comptroller and Auditor General (CAG) has found that in the six years till 2018, of the Rs 659.99 crore levied as penalty on foreign military vendors for failing to meet offset obligations, only Rs 2.97 crore or a mere 0.45 per cent has been recovered till May 2019.
In its recently-tabled report on ‘Management of Defence Offsets’, the CAG has stated that of the Rs 659.99 crore levied as a penalty, Rs 105.35 crore pertained to Army deals, Rs 478.35 crore to IAF deals and Rs 76.29 crore towards Navy deals.
An offset is a mechanism to partially compensate for a significant outflow of a buyer country’s resources in a large purchase of foreign goods or by transferring technology or by adding to the capacities and capabilities of the domestic industry.
While the defence ministry refuted CAG’s recovery figure of Rs 2.97 crore as fines from foreign vendors and claimed to have recovered Rs 57.68 per cent or 8.7 per cent as penalty, CAG stood by its numbers.
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Coming down heavily on the offset policy, the national auditor pointed out the key lacunae of not linking the main military contract with the offset contract. It said: “Due to non-inclusion of the offset clause in the main contract, obligation on the vendor to discharge offset has almost become optional.”
The CAG report added: “Vendors make offset commitments in order to get the main contract. But later they are not earnest about fulfilling these commitments and raised new issues which delayed the offset implementation.”
The penalty to be levied is determined by the Controller General of Defence Accounts (CGDA) after assessing the eligible quantum of offset discharge. But the MoD’s Director-General in charge of defence acquisitions has to okay the amount before it is imposed on the vendor.
The CAG also found that in most cases either the CGDA did not intimate the extent of leviable penalty or the Defence Offsets Management Wing (DOMW) did not submit the complete documents to CGDA.
