20 pc penalty for vendors failing offset rule: Def Min

New Delhi: The Defence Ministry today said that 20 per cent penalty will be imposed on vendors failing to fulfill offsets obligation within the prescribed time frame as part of the Defence Procurement Procedure. The decision on `Revised Offset Guidelines` was taken last month during the meeting of Defence Acquisition Council (DAC) and it shall be applicable from August, Defence Ministry said in a release today.

"The overall cap on penalty will be 20 per cent of the total offset obligations during the period of the main procurement contract," it said. "There will be no cap on penalty for failure to implement offset obligations during the period beyond the main procurement contract, which can extend to a maximum period of two years."

Under the policy, vendors bagging deals worth over Rs 300 crore have to re-invest at least 30 per cent of the worth of the contract back into Indian defence, civil aerospace and homeland security sector. With plans to spend over USD 100 billion in next five years, India is expected to sign offset contracts worth over at least USD 30 billion.

Several other decisions were also taken during the meeting on transfer of technology (ToT), technology acquisition, period of implementing the offset, role of defence public sector undertakings (DPSUs) and co-production and co-development of technology.

Besides recognising ToT eligible for discharge of offset obligations, the meeting also made it clear that it should be provided without licence fee and there should be no restriction on domestic production, sale or export.