The Hindu Business Line : Cabinet extends purchase preference policy for CPSEs

THE Cabinet on Thursday decided to extend the Purchase Preference Policy for Central public sector enterprises (CPSEs) for three years up to March 2008 after which it would be terminated.

The Purchase Preference Policy gives preference to CPSE in case of purchases made by the Government departments and other CPSEs. However, the Cabinet has limited the size of the contracts that does not exceed Rs 100 crore.

Each Ministry would be asked to make a list of PSEs that would require Purchase Preference Policy support. If there is no possibility of making a positive list, each Ministry may attempt a negative list of PSEs, which may not require Purchase Preference Policy support, according to an official release. Last year, the Purchase Preference Policy was extended by a year till March 2005 along with an announcement that a Group of Ministers (GoM) would take a final call on the issue. Now it has been decided that it will be terminated after 2008.

However, the Power Ministry has been granted an exemption from the Purchase Preference Policy policy subject to the condition that it will place certain orders with BHEL on a negotiated basis price benchmarked through competitively bid projects every year.

The Ministry of Power and the Ministry of Heavy Industries would work out at the beginning of each year, the number and value of the orders to be placed with BHEL, the release said.

The policy will apply only to PSUs and their subsidiaries in which they hold more than 51 per cent but not to a joint venture by a PSU and a joint venture partner. To qualify for support under the purchase preference, PSUs would be subject to same qualification as other bidders. However, in suitable cases, the purchasers and clients will relax the condition of net worth from the list of minimum qualifications.

The PSUs, which have the benefit of purchasing preference, would be subject to payment of damages or any other penalty included in the contract if they fail to abide by it, the statement said.

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