The Ministry of Petroleum and Natural Gas proposes to introduce several changes in the existing tendering process to provide incentives and boost local content in goods and services used in the petroleum sector.

The draft policy has been put up on the Ministry’s website for further comments before a final decision is taken after three weeks.

The primary feature of the proposed incentives is that whenever a public sector company issues a procurement tender, eligible domestic manufacturers and service providers will be given a purchase preference of 10 per cent.

“Wherever the local manufacturer or service provider’s quoted price is within 10 per cent of the lowest price, other things being equal, the local player will be given a preference to match the lowest valid bid price,” said Dharmendra Pradhan, Minister of State (Independent Charge) for Petroleum and Natural Gas.

“The central government has taken several steps to promote ‘Make in India’. The oil industry (public sector companies) spends ₹80-90,000 crore annually on procurement of goods and services. Therefore, to promote local manufacturing, a focussed incentive scheme is being proposed,” he said.

The policy proposes that each tender will specify the percentage of procurement where a local manufacturer will be given preference. For example, tenders for procuring various kinds of pipes, will have 50 per cent reserved for local manufacturers who are within 10 per cent of the lowest bid price.

Such local content targets have been set for different kinds of equipment as well as services both for the upstream and downstream sectors. In cases where the lowest bidder is a local manufacturer, the entire procurement will be awarded to them.

“In all cases, the local manufacturer will need to meet the lowest price. There is no preference given on the basis of price,” said Pradhan.

Till 2008, domestic manufacturers were given a preference on the basis of price where in those who were within 10 per cent of the lowest bid were termed winners without having to match the lowest price.

Determination of the local content of goods shall be computed on the basis of the cost of domestic components in the goods compared to the whole cost of the product, the draft policy states.

Local content cost determination for goods will be on three criteria – the country of origin of the material used, domestic manpower and the country of origin of the working equipment and facility. Verification of whether a manufacturer qualifies to be a local content manufacturer will be done at the bidding stage.

“We feel that the policy takes a balanced approach of combining price competitiveness with the local eco-system. We want the public sector units’ capital expenditure to get more local content,” Pradhan added.

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