Official pointed to offset violations in 2010

As early as February 2010, a senior ministry of defence (MoD) official had pointed out violations in the granting of offset contracts in the AgustaWestland VVIP helicopter case, which has now snow-balled into a major political issue between the ruling BJP and the main Opposition Congress.

The seven offset contracts — proceeds that had to be ploughed back to the buying country so as to incentivise domestic investment and production — in the AgustaWestland case were valued at Rs 1,120 crore.

In a note accessed by this newspaper, the official had pointed out that offset contracts in the Rs 3,600-crore VVIP chopper deal could only be given to Tata Group and Hindustan Aeronautics Limited (HAL) which had the valid industrial license to execute such work. But the offset contracts were given to eight companies other than Tata and HAL.

“As per the list available with the DPP (defence procurement procedure), (the companies) were not holding the valid licenses and yet these companies had been granted offset contracts contrary to the clear instructions available on the subject and the consistent view of the DOFA (defence offset facilitation agency),” the MoD note reads.

According to DPP-2006, offsets prescribing a minimum of 30 per cent of the indicative cost of acquisition were mandatory in all contracts above Rs 300 crore.

Offset obligations are discharged through the transfer of technology, buying components and systems manufactured by Indian industries, and also by investing in manufacturing facilities including meeting training and skill development needs.

Interestingly, one of the companies granted the AgustaWestland offset contracts is IDS Infotech — a firm accused of allegedly facilitating the payment of bribes to middlemen and Indian entities, including Air Force officials.

There were also a lot of ambiguity in the offset contract regarding the type of services and export orders to be executed by IDS Infotech.

The note points out that in spite of repeated requests, the relevant documents were not made available to the DOFA.