The Supreme Court Friday refused to entertain a petition challenging the Centre's offset policy provided in the Defence Procurement Procedure (DPP) saying "it is a policy matter".
The PIL has alleged that the offset policy of the government that was first provided in the DPP 2005, and revised subsequently in 2007, 2009, 2011, 2013 and 2016, is causing loss to public exchequer.
The top court dismissed the PIL, which termed the current offset policy of the government as arbitrary, unfair and irrational.
"We do not consider the present petition to be a fit case for being entertained under Article 32 of the Constitution. The same is, accordingly, dismissed," said a bench of Chief Justice Ranjan Gogoi and Justice Sanjiv Khana said.
While deciding the Rafale deal case the Supreme Court had on December 14 last year not found any fault with the DPP-2013.
Counsel appearing for petitioner Saurabh Jain said the policy favours nepotism and leads to favouritism.
The bench, after perusing the material said that it is a policy matter and refused to entertain the petition.
Jain in his plea said that 'Offset Clause' was added to DPP in 2005 with the objective to promote indigenisation of the technology within the country.
He said that foreign Original Equipment Makers (OEM) build in extra fee in their cost proposals to Ministry of Defence (MOD) for discharge of mandatory offset obligations.
"Thus, the 'cost' of 'offsets' is borne and paid by the MoD from the public exchequer as part of overall contract price. It can lead to up to 30 per cent increase in the contract price. This leads to favouritism and nepotism," the plea said.
The plea arrayed various companies as respondents including Tata Advance Systems Limited, Mahindra Defence Systems Ltd, Dassault Reliance Aerospace Limited, Boeing India Private Limited, Lockheed Martin India Private Limited, Dassault International, Rafael and Hindustan Aeronautics Limited.
It said that in the last ten years, about 21 major procurement contracts have been signed by the MoD under Foreign Military Sales (FMS)/ Government to Government (GTG)/ Inter Government Agreement (IGA) procurement and in each of these contracts there have been offset contracts worth over Rs 70,000 crore were given to private companies.
"It is reiterated that offsets come at a huge price to the public exchequer. Whereas in case of all other procurement categories which are competitive, offset costs can still expected to be reasonable and linked to actual due to presence of competition amongst bidders.
"However, in case of GTG/FMS or IGA, there is no competition and hence no price discovery through competitive process and thus the foreign suppliers are at liberty to charge a much higher price to counterbalance their offset obligations. This ultimately leads to higher price being paid by the Indian Government thus causing loss to Indian public exchequer," it said.
The plea said had there been no offset clause, the MoD would have paid a much lower purchase price for the weapon system.
"It is pertinent to note that from the current list of Indian Offset Partners (IOPs), it is evident that foreign OEMs have been passing on the benefits on account of offsets to Indian Private Sector companies of their choice, in spite of these companies lacking the basic infrastructure or experience.
"On the contrary, Public Sector companies like HAL, BEL, BDL, MDL, ECIL and other Public Sector companies have been deprived of the benefit, which comes at the cost of public money," the plea said.
The petitioner further sought direction to declare the offset policy as illegal and unconstitutional.
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