New Delhi: Solving a whip against the Foreign Armament Department for failure to fulfill their offset obligations in defense transactions, India has threatened to ban US companies and place 11 American, French, Russian and Israel companies on the watchlist for imposition of punishment.
The Ministry of Defense (MOD) has delivered hard messages to weapons companies, looking for repetitive time extensions to release their offset commitment, that it will not be a business as usual, say the top source.
“This is the first time MOD shows his teeth in such a way.
Warnings have been issued that if the company does not fulfill their offset obligations in a timely manner, the guarantee of their performance banks that exist in other contracts can be scorched or the deduction made from scheduled payments,” said the source .
“If this option is not available to the company, the show notification will be issued to explain why it should not be banned.
The US company in question, which previously issued five-six notices to give up the offset obligation, was to pay attention to the notification of the cause of the show to forbid it.
Mod, however , have a strong case, “he added.
Under the defense offsets policy was first promulgated in 2005, at least 30% of the total contract value in an agreement must be hijacked back to India as a re-investment.
Offset in several contracts, such as RS 59,000 Crore One for 36 French Rafale fighters in the Lakes in 2016, has been set at 50%.
Overall, India has signed around 55 defense offset contracts with a total value of around $ 12 billion (Rs 87,600 Crore) until now.
“But only around $ 5 billion has been thrown away so far, some of them are still under clarification or test.
The figure should be much higher at this time but the company dragged their feet in fulfilling contractual obligations,” said an official.
In the report submitted in parliament in September last year, Comptroller and Auditor General of India (CAG) called for a major overhaul of all offset policies, emphasizing that “almost did not meet the purpose” to appoint advanced technology, attract FDI and strengthen the domestic defense industry base .
Offset policies mandate original foreign equipment manufacturers (OEM) to release offsets through a combination of roads that are permitted if they adjust the capital procurement agreement more than Rs 2,000 Crore.
Previously, the threshold limit was repaired at RS 300 Crore.
The ADMIT ARMS company mod official “contains additional costs” into the contract, often increases the price of around 8-10% to fulfill their offset commitment.
Some reforms in the offset policy were included in the revised defense acquisition procedure (DAP) last year, with a new impulse to attracting investment and technology transfers for making defense by setting higher multipliers to them.
Offset in government agreements to the government and “Offer of AB Initio’s single vendor” is also abolished in the new DAP.