45% of defence offset obligations unfulfilled as of December 2025

The Public Accounts Committee examined the implementation of offset obligations in defence contracts to ensure foreign vendors compensate India through local investment or technology transfer, which impacts the growth of the domestic defence industry.

Who it concerns: Ministry of Defence, foreign defence vendors, and Indian defence manufacturers.

What the committee found

• Committee flagged non-discharge of offset obligations, incorrect claims, and slow verification, noting that 45% of obligations remained unfulfilled as of December 18, 2025.
• Committee recommended mandating timelines for compliance and engaging the Controller General of Defence Accounts or Defence Offset Management Wing early in contract preparation.
• Committee recommended restricting direct purchases to a threshold and mandating that at least 50% of offset obligations be met through Foreign Direct Investment (FDI) or technology transfer.
• Committee recommended extending the offset policy to all capital acquisitions and lowering the required investment percentage from 30%.
• Committee recommended ensuring offset partners are Indian entities or joint ventures with Indian entities.
• Committee recommended focusing offset investments on specific areas based on DRDO requirements, such as maintenance, repair, and overhaul of military aircraft and helicopters.
• Committee recommended rationalizing the list of technologies to include those actively sought by DRDO and excluding products that are commercially viable without support.
• Committee recommended introducing a multiplier of two for key areas and removing all other multipliers.
• Committee recommended including an indemnity clause in the policy to deter non-compliance and linking offset fulfilment with the performance of the main procurement contract.

Also in the document

• Approximately 45% of offset obligations remained unfulfilled as of December 18, 2025.
• Between 2007 and March 2018, 90% of the total value of offsets across audited contracts was scheduled to be discharged through direct purchases.
• The current offset policy applies only to acquisitions worth at least Rs 2,000 crore in the 'buy (global) category'.