NEW DELHI: India will remain among the world's largest arms importers for the foreseeable future. With DRDO, defence PSUs and ordnance factories flopping to get their act together, the CAG has now punched holes even in the implementation of the much-touted defence offsets policy.
The audit watchdog also slammed DRDO, often in the dock for huge time and cost overruns in crucial defence projects, for lacking "transparency and objectivity'', undertaking "unfruitful investments'' and committing "irregularities'' in getting sanctions for new programmes.
It was in July 2005 that the defence ministry came out with the new offsets policy to develop the indigenous defence industrial base (DIB). Under it, any foreign armament company bagging an arms deal over Rs 300 crore had to plough back at least 30% of the contract value back into India as offsets.
With India inking a flurry of defence deals, it has already attracted over $4.27 billion through defence "offsets'' since 2007. The figure will zoom upwards with several mega defence deals in the pipeline. The around $20 billion MMRCA (medium multi-role combat aircraft) project to acquire 126 fighters, for instance, specifies a 50% offset obligation on the foreign vendor.
But the latest CAG report tabled in Parliament on Thursday, after examining 16 offset contracts worth Rs 18,445 crore, said the policy was floundering to strengthen self-reliance in defence preparedness.
For one, the policy is ambiguous, with the audit watchdog also questioning waivers given to foreign arms companies from fulfilling their offset obligations. For another, the overall monitoring mechanism for directing offset activity towards desired objectives remains "ineffective'' and "only a paper exercise''.
"MoD needs to ensure clarity in the offset provisions so as to leave little room for ambiguity in their interpretation. The monitoring mechanism also needs to be reviewed to ensure effective implementation,'' the CAG report said.
India still imports 70% of its military requirements. After several complaints last year that India's fledgling DIB was incapable of absorbing the huge offsets, MoD was forced to liberalize the offsets policy to include investments in the country's civil aerospace, homeland security and training sectors as well.
MoD, however, has dragged its feet in implementing recommendations, first submitted by the Rama Rao Committee in 2008, to overhaul DRDO and its network of over 50 labs to ensure that cutting-edge weapon systems can be delivered in time to armed forces.
The CAG report also pointed out that DRDO was splitting sanctions for its projects to avoid seeking approvals from the requisite financial authorities. "The audit findings underscore that efforts of MoD to bring in transparency and objectivity in the functioning of its departments remain unachieved as of now,'' CAG said.
CAG punches holes in MoD’s offsets policy
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CAG punches holes in MoD’s offsets policy
