The oil ministry on Wednesday sought stakeholder comments on a proposal for giving preference to local content in goods and services worth Rs 90,000 crore sourced annually by state-run oil companies.
The policy is aimed at creating a domestic oilfield equipment and services industry and encouraging local manufacturing under the Prime Minister’s ‘Make in India’ initiative, oil minister Dharmendra Pradhan said.
“We will fix a certain percentage of goods and services that has to be sourced locally or from within India. These can be by way of purchase by the winning bidder, who can be an Indian company or a foreign company, from local units or by setting up manufacturing plants within the country,” he said.
The proposed purchase preference policy envisages a minimum proportion of local content, by way of domestic manufacturing or inputs, in contracts offered by all state-run oil firms. It is proposed that the threshold would be raised in phases spanning a decade or so.
Offers for goods and services that come with the stipulated degree of local content would get preference as an incentive for localisation and encourage overseas firms to set up manufacturing base in India.
It is proposed that if the price quoted by a company, whether foreign or domestic, is within 10% of the lowest bidder for a tender and meets the minimum domestic content norm, it would get purchase preference. The preference would not apply to other bidders if the lowest bidder itself has the necessary local content.
Pradhan said the consultation paper has outlined the proportion of domestic content that is possible immediately in areas and items. He was hopeful the ministry would be able to implement the policy in the 2016-17 fiscal after consultations were over by February 19.
The minister said the areas and items for local content have been chosen in a way that do not create an empty barrier or discourage foreign companies and reduce competition. “All tenders would be on competitive bidding basis,” he said, adding that local content in supply of pipes, for example, can go up to 50 per cent easily.
The scheme is a modified version of the Purchase Preference Policy (PPP) of state-run firms which was scrapped in 2008 to provide a level playing field to private players and enhance competition.
That policy was introduced in 1992 wherein if the price quoted by a public enterprise in public procurement was within 10% of the lowest bidder’s price, purchase preference was granted, provided it was willing to match the lowest price.
The Second phase of the National Solar Mission too has a tapering local content clause to promote domestic manufacturing of photovoltaic panels and other equipment, starting with 50% for 750-mw Batch 1, and ending at 10% for 2,000-mw Batch-3. The US had dragged India to the WTO, saying the clause was restrictive. India lost the case.
