Dassault Aviation, MBDA yet to fulfil offset obligations under Rafale deal: CAG

French aero major Dassault Aviation and European missile maker MBDA are yet to fulfil ir offset obligations of offering high techlogy to India as part of deal relating to procurement of 36 Rafale jets, Comptroller and Auditor General said in a report released on Wednesday.

Dassault Aviation is manufacturer of Rafale jets while MBDA supplied missile systems for aircraft.

In its report tabled in Parliament, CAG also painted a grim picture of efficacy of India's offset policy saying it did t find a single case of foreign vendors transferring high techlogy to Indian industry, ding defence sector ranked 62nd out of 63 sectors receiving FDI.

"In offset contract relating to 36 Medium Multi Role Combat Aircraft (MMRCA), vendors M/s Dassault Aviation and M/s MBDA initially proposed to discharge 30 per cent of ir offset obligation by offering high techlogy to DRDO," CAG said.

"DRDO wanted to obtain technical assistance for indigeus development of engine (Kaveri) for Light Combat Aircraft. ​Till date vendor has t confirmed transfer of this techlogy," according to a press release issued by CAG.

​ first batch of five Rafale jets arrived in India on July 29, nearly four years after India signed an inter-governmental agreement with France to procure 36 aircraft at a cost of Rs 59,000 crore.

Under India's offset policy, foreign defence entities are mandated to spend at least 30 per cent of total contract value in India through procurement of components or setting up of research and development facilities.

offset rms are applicable to all capital purchases above Rs 300 crore me through imports.

offset obligations can be me through Foreign Direct Investment, free transfer of techlogy to Indian firms and purchase of products manufactured by Indian firms.

auditor said though vendors failed to keep up ir offset commitments, re was effective means of penalise m.

"n fulfillment of offset obligations by vendor especially when contract period of main procurement is over, is a direct benefit to vendor," it said.

CAG said as offset policy has t yielded desired result, defence ministry needs to review policy and its implementation.

It needs to identify constraints faced by foreign suppliers as well as Indian industry in leveraging offsets, and find solutions to overcome se constraints," it said.

CAG said 48 offset contracts were signed with foreign vendors from 2005 to March 2018 with a total value of Rs 66,427 crore, and Rs 19,223 crore worth of offsets should have been discharged by vendors by December 2018.

But amount discharged by m was only Rs 11,396 crore, which was only 59 per cent of commitment.

"Furr, only 48 per cent (Rs.5,457 crore) of se offset claims submitted by vendors were accepted by Ministry. rest were largely rejected as y were t compliant to contractual conditions and Defence Procurement Procedure."

It said remaining offset commitments of about Rs 55,000 crore would be due to be completed by 2024.

" rate at which foreign vendors have been fulfilling ir offset commitments was about Rs 1,300 crore per year. Given this situation, fulfilling commitment of Rs 55,000 crore by vendors in next six years remains a major challenge," CAG said.

auditor found that of total value of offsets, only 3.5 per cent was contracted to be discharged through FDI with Indian Offsets Partners or IOPs, ding it did t find a single case where foreign vendor h transferred high techlogy to Indian industry.

" defence sector is ranked 62nd out of 63 sectors in India in terms of FDI. Similarly, re was hardly any equipment supplied 'in kind' to Indian industry by foreign vendor. Thus, objectives of offset policy remain largely unachieved," report said.

CAG said it undertook performance audit of offset policy after a dece of its roll out to assess extent to which its objectives were met.