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Govt releases new policy, mandates oil & gas PSUs to ensure 50-20% local content in procurement

The government has mandated oil and gas PSUs to ensure 50-20 percent local content (LC) in the procurements made by them

The government has mandated oil and gas PSUs to ensure 50-20 percent local content (LC) in the procurements made by them.
  • The Ministry of Petroleum and Natural Gas spelled out three categories of bidders on the basis of the percentage of local content

  • It has mandated oil and gas PSUs to give preference to the first category of bidders who meet the criteria of 50 percent LC

New Delhi: In line with its vision to give an impetus to Atmanirbhar Bharat, the government has mandated oil and gas PSUs to ensure 50-20 percent local content (LC) in the procurements made by them. In a detailed policy released on Thursday, the Ministry of Petroleum and Natural Gas spelled out three categories of bidders on the basis of the percentage of local content and mandated oil and gas PSUs to give preference to the first category of bidders who meet the criteria of 50 percent LC or more.

“The regulation shall be intended to support and boost the growth of domestic manufacturing sector so as to be able to support oil and natural gas business activities and contribute added value to economy, absorb manpower as well as have national, regional and international competitiveness,” said the order. The policy shall be effective for a period of one year, starting October 1 this year, the document added.

Public Procurement with Local Content: The categories of bidders

The policy defined a supplier of goods and/or provider of service as a business entity having capability of providing goods and/or service in accordance with the business line and qualification thereof. It classified such suppliers under three categories. Class-I local supplier means a supplier or service provider, whose goods, services or works offered for procurement, has local content equal to or more than 50 percent as defined under the policy. Class-II local supplier would have local content more than 20 percent but less than 50 percent and non-local supplier will have local content less than or equal to 20 percent.

How will bidding and award of contract take place?

In respect of all goods, services or works in respect of which the Nodal Ministry/Department under DPIIT’s Public Procurement (Preference to Make in India) Order, 2017 has communicated that there is sufficient local capacity and competition, only Class-I local supplier shall be eligible to bid, irrespective of the purchase value. 

Only in global tender enquiries, non-local suppliers shall be eligible to bid along with Class-I and Class-II local suppliers.

For all qualified bids, contracts will be awarded to Class-I supplier if it is the L1 bidder. In cases where L1 bidder is not a Class-I supplier, then 50 percent of the order quantity will be awarded to L1 and then the lowest Class-I bidder shall be invited to match the L1 price for the remaining 50 percent order quantity. However, the supplier’s quoted price must fall within the margin of purchase preference (20 percent).

The policy also empowers PSUs to impose sanctions on manufacturers/ service providers who do not fulfill the local content criteria of goods/ services in accordance with the value mentioned in certificate of LC or do not adhere to delivery timelines. The sanctions may be in the form of written warning, financial penalty and blacklisting. 

How will local content be determined?

The local content of goods shall be computed on the basis of the cost of domestic components in goods, compared to the whole cost of product. The local content of service shall be calculated on the basis of the ratio of service cost of domestic component in service to the total cost of service.

“The policy shall apply to all the public sector undertakings (PSUs) and their wholly-owned subsidiaries under the Ministry of Petroleum and Natural Gas; Joint Ventures that have 51 percent or more equity by one or more Public Sector Undertakings under the Ministry of Petroleum and Natural Gas; attached and subordinate offices of MoPNG,” the document said.

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A steering committee will be constituted by the ministry to provide effective guidance and to oversee the effective implementation of the policy, including review and amendments required. The Steering Committee may consider representations on target Local Content in goods, services and EPC and modify the policy accordingly. 

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