India imposes penalty for delay in offsets duty

NEW DELHI: The defence ministry has imposed a penalty of up to a million euros on European weapons maker MBDA for delay in meeting its offset obligations under the ₹59,000 crore Rafale deal with France for 36 fighter jets made by Dassault Aviation, media reports said on Wednesday. The defence ministry has collected the fine, from MBDA, linked to missile maker’s offset commitments during September 2019-2020, news agency PTI reported citing unnamed people , adding that the European firm lodged its protest while coughing up the penalty.

HT reached out to the defence ministry and MBDA but neither confirmed or commented on the matter.

India’s offset policy stipulates that in all capital purchases above ₹300 crore, the foreign vendor has to invest at least 30% of the value of the purchase in the country to boost indigenous capabilities. In the case of the 2016 Rafale deal, this was 50%. The MBDA weapons on the Indian Rafales are the Meteor beyond visual range air-to-air missiles, MICA multi-mission air-to-air missiles and Scalp deep-strike cruise missiles.

In a report tabled in Parliament in September 2020, the Comptroller and Auditor General (CAG) had made critical observations after a scrutiny of the status of a raft of offset contracts — including the September 2016 Rafale deal — signed between 2005 and 2018. The country’s top auditor said that Dassault Aviation and MBDA had not confirmed the transfer of technology (TOT) to the Defence Research and Development Organisation (DRDO), an integral part of the contract.

The induction of Rafale jets is expected to be completed by February, with 32 of the 36 ordered already delivered to the Indian Air Force.