Offsets must even for single vendor deals: Defence ministry

India today said it would not go ahead with a single vendor for its defence products if the offset clause was not agreed to and would look for a new source to acquire the equipment in such a scenario.

It also said it was seriously considering “stringent” penalties against vendors who renege on meeting their offsets obligations, which mandate that the seller plough back 30-50 per cent in defence deals that are worth over Rs 300 crore. “In a single vendor situation, if he does not agree to offsets, we will look for another vendor,” Defence Production Secretary R K Singh said at a Ficci seminar on defence offsets here.

“We feel the penalties are not stringent enough to dissuade vendors from reneging on contracts,” he said, referring to the defence procurement procedure that India had brought out making it mandatory for foreign vendors to sign an offsets clause in defence deals.

Singh said India had already done deals that would bring in over Rs 1,200 crore in offsets back into India “as enabler of capability” to domestic industries. Another Rs 49,000 crore worth of offsets were in the offing under deals that would come through in the next few years, he added.

With regard to demands from industries to expand the scope of offsets to civilian areas, too, under defence contracts, the secretary said the offsets obligations would remain in the defence sector only.