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PAC flags loopholes, seeks special audit as nearly 45% of offset obligations remain pending; former MoD acquisition finance adviser says actual default is far lower than headline figures suggest.
The Public Accounts Committee’s (PAC) observation that nearly Rs 42,000 crore worth of defence offset obligations remain pending has reignited debate over the effectiveness of India’s offset policy. While the Parliamentary Panel has flagged serious deficiencies in contract management and called for a special audit, a former senior Defence Ministry official argues that the figures do not necessarily point to a structural failure.
The PAC, in a report tabled in Parliament in the current Monsoon Session, said 26 ongoing offset contracts carry obligations worth $9.9 billion, of which about $4.48 billion, around 45 per cent, remained unfulfilled as of December 31, 2025. It recommended that all pending obligations be cleared immediately and sought a comprehensive audit of the policy’s implementation.
The committee also criticised the Ministry of Defence for lacking a mechanism to measure the actual impact of defence offsets on India’s indigenous defence industry. It said loopholes in the offset finalisation process reflected weaknesses in planning and contract management.
However, Amit Cowshish, former Financial Adviser (Acquisition) in the Ministry of Defence, said the figures require closer interpretation.
“The policy’s launch in 2005 is not the relevant benchmark because offset contracts were signed progressively from 2008 onwards, each with its own implementation schedule,” he said. Contracts signed years later naturally have obligations extending several years into the future.
According to Cowshish, the more meaningful indicator is the value of obligations that had actually fallen due by December 2025. Based on the PAC report itself, over 92 per cent of claims against due obligations had already been submitted.
“That does not indicate any major structural failure in the execution of offset contracts,” he said.
Cowshish also cautioned against attributing responsibility solely to foreign original equipment manufacturers (OEMs). Offset implementation follows plans approved in advance by the Defence Ministry, making delays a shared responsibility.
A vendor may fail to place orders on time, he said, but delays can also arise if an Indian Offset Partner (IOP) is unable to execute the work. Other implementation issues may also contribute to pending obligations.
On the PAC’s criticism of “loopholes and lacunae”, Cowshish argued that the offset policy itself became increasingly complicated over time.
“The policy was complex from the beginning and only became more complicated. There was excessive control by the Ministry in approving offset proposals, weak implementation oversight, and audits of offset claims started quite late,” he said.
The former acquisition finance adviser also questioned whether the policy was ever capable of delivering the strategic outcomes often associated with it.
He said vendors were allowed multiple avenues to discharge offset obligations and naturally opted for the simplest route, such as purchasing eligible defence products from Indian firms. Expecting significant technology transfer through this framework, he added, was unrealistic.
The PAC has argued that offsets should help reduce dependence on imports, facilitate advanced technology transfer and strengthen India’s domestic defence industry. It also noted that the Ministry has not conducted any detailed assessment of whether these objectives have actually been achieved.
Cowshish, however, believes expectations from the offset policy have often exceeded what the framework was designed to deliver.
“The expectations the PAC has from the offset policy and the suggestions it has made seem unworkable to me,” he said.
The report is likely to renew scrutiny of how India structures and monitors offset contracts, particularly as the country continues to sign high-value foreign defence deals while pursuing its broader goal of defence self-reliance.
Ravi Shankar
Dr Ravi Shankar has over two decades of experience in communications, print journalism, electronic media, documentary film making and new media.
He makes regular appearances on national television news channels as a commentator and analyst on current and political affairs. Apart from being an acknowledged Journalist, he has been a passionate newsroom manager bringing a wide range of journalistic experience from past associations with India’s leading media conglomerates (Times of India group and India Today group) and had led global news-gathering operations at world’s biggest multimedia news agency- ANI-Reuters. He has covered Parliament extensively over the past several years. Widely traveled, he has covered several summits as part of media delegation accompanying the Indian President, Vice President, Prime Minister, External Affairs Minister and Finance Minister across Asia, Africa and Europe.
