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India has imposed $43 million penalty on foreign arms companies for delay in discharging offsets

Source : The Times of India

India has imposed $43 million penalty on foreign arms companies for delay in discharging offsets
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New Delhi: India has imposed penalties amounting to $43 million against foreign vendors in 16 arms contracts for delay in fulfilling their offsets commitments, the defence ministry told Parliament on Monday. 

“The total number of offset contracts in which the vendors have defaulted/non-performed offset obligations during the last five years is 21, with a non-performed amount of $2.24 billion till December 31, 2021,” junior defence minister Ajay Bhatt said in a written reply in Rajya Sabha. 

“Action is taken against the defaulting/non-performing vendors by imposing penalties after following the laid down procedures. The same has been completed in 16 contracts with levying of penalty amounting to $43.14 million till December 31, 2021. During the last five years, offset claims worth $2.64 billion have been submitted in 47 offset contracts,” he added. 

As was first reported by TOI in August last year, the MoD had put around a dozen US, French, Russian and Israeli firms on a watch-list and warned them for failure to fulfil their offsets obligations. 

Since then, some of these companies have paid the penalties to get out of the watch-list. Among them is missile-maker MBDA, which is the weapons package supplier for the Rafale jets manufactured by Dassault Aviation, in the Euro 7.8 billion contract inked with France in September 2016. 

India, apart from the inter-governmental agreement with France and supply protocols for the fighters and weapons, had also inked a major offsets contract with Dassault and a smaller one with its partner MBDA. Under the deal, 50% of the contract value (around Rs 30,000 crore) has to be ploughed back to India as offsets or re-investments. 

Overall, the MoD has inked around 60 offset contracts, with over $13 billion to be discharged from 2008 to 2027. But as per a parliamentary report, only $3.7 billion was discharged by the vendors till April 2021, of which $2.16 billion has been accepted in audit and the balance claims are under “clarification or examination”.

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