The Centre told the Supreme Court Monday that as per the Defence Offset Guidelines, the Original Equipment Manufacturer (OEM) is free to select its Indian Offset Partners (IOPs) for implementing the offset obligation in the deal.
Justifying its stand on the Rafale deal, the Centre said that to promote indigenisation, a robust offset clause has been included in the Defence Procurement Procedure (DPP) since 2005.
It said the aim was to leverage "our capital acquisitions to develop the Indian defence industry, improve defence research and encourage the development of synergistic sectors such as civil aerospace and internal security".
It further said: "The offsets are to ensure that for every dollar that went to a foreign arms supplier, 30-50 per cent get back into India for an investment or procurement. As per DPP-2013, the offset clause would be applicable for all procurement proposals where indicative cost is Rs 300 crore or more involving outright purchase from foreign/Indian vendors and purchases from foreign vendors followed by licensed production."