Rs 42K-crore defence offset obligations pending: Parliamentary panel

The offset policy was introduced in 2005 and mandates a contractual commitment where foreign military equipment suppliers are required to undertake sourcing from India, invest in local industry and also invest in local research and development.

The Public Accounts Committee in a report tabled in Parliament referred to 26 ongoing offset contracts and added these entail an offset obligation of $ 9.9 billion. Close to 45 per cent of these offset obligations ($4.48 billion) remains unfulfilled, said the panel.

The report said so far, offset obligation worth $5.46 billion (approximately 55 percent of total offsets) had been handled. The ministry further informed the committee that in all, 56 offset contracts worth $13.215 billion had been signed till date with scheduled completion by 2033.

The report said ‘loopholes and lacunae exist’ in the defence offset finalisation process. The report added that “it was of the considered view that the emergence of such deficiencies at the settlement stage reflected inadequacies in the planning and contract management processes of the ministry”.

The report said the committee recommended that the ministry ensures that all defence offset obligation, which were pending as on December 31, 2025, need to be cleared with immediate effect. Further, the committee recommended that a special audit be conducted in the matter to better ascertain the status of implementation of the Defence Offset Policy.

The committee also observed that the ministry neither seemed to possess any metric to calculate actual impact of the defence offset policy of Indian defence sector’s development nor had instructed any detailed study into this matter to ascertain how to better utilise the defence offsets.

The offset policy was used in major foreign defence procurements to achieve three key objectives: reduce the outflow of national resources, facilitate the transfer of advanced technology, and strengthen the domestic industrial base.