New Delhi: Two months after Cabinet Secretary exhorted government agencies to purchase more indigenous products to boost Prime Minister Narendra Modi's 'Make in India' initiative, state-run ONGC amended a project tender to restrict domestic buying to mere 20 per cent, allowing the rest to be bought abroad.
Rajiv Gauba in August wrote to central departments that "PPP-MII (Public Procurement - Preference to Make in India) Order is not being implemented in letter and spirit by some of the organisations".
The PPP-MII Order was issued to encourage production of goods, services, and works within the country to enhance income and employment.
Despite that, small and medium sized companies complain that they are kept out of large contracts where foreign vendors are given
priority.
On October 22, ONGC tweaked tender conditions for $500-million Pipeline Replacement Project-VII to advance the project award date to 20 January, 2022 from scheduled 3 February, 2022.
This was done, said sources, as the two-year freedom to ONGC in sourcing from abroad ends on 29 January 2022, five days before 3 February when the contract was to be awarded.
If ONGC had not advanced the award date, the project executor could have only purchased pipelines domestically as per the Domestically Manufactured Iron & Steel Products (DMI&SP) Policy of 29th May 2019.
To support Indian firms, the DMI&SP Policy lists iron and steel pipelines as products "to be exclusively domestically manufactured and cannot be imported without the approval of the Ministry of Steel".
However, ONGC sought an exemption from the policy for PRP-VII that involves replacing 317 kms of pipelines citing engineering necessity and interface hardship that delayed projects.
The Steel Ministry's Standing Committee on 29 January, 2020 granted the exemption – but only for seamless pipes — to ONGC for two years until 29 January, 2022 with a caveat that they test domestic producers by placing a development order within two months.
"If development order fails, then balance 20 per cent may be procured from foreign manufacturers. ONGC should place developmental order within two months i.e. by 31 March, 2020," it added.
It advised ONGC to delink development order from the tender and submit the test results for its review by June 2020.
Despite the Committee's instruction, ONGC did not place the development order.
Later, for fear of being chided by Steel Ministry for ignoring its directions, as well as the likelihood of falling into legal wrangles when the waiver ends on 29 January, 2022, ONGC amended the PRP-VII tender on October 22 to address both issues.
"ONGC has been granted waiver for all its offshore constructions and submarine pipelines (seamless line pipes for size 16" and below) projects for two years (i.e. 30 January, 2020 to 29 January, 2022) for 80 per cent of the net procurable quantity of Iron and Steel products and balance 20 per cent of the quantity of Iron and Steel products are to be exclusively procured by the contractor from domestic manufacturers/suppliers meeting/exceeding the domestic value addition targets as development order," says the ONGC amendment.
Evident from the amendment is that the development order was not placed by 31 March, 2020 as directed and that it is worded such that in case the test case development order fails, the contractor would be free to place purchase order abroad for balance 20 per cent of line pipes as well.
If that were to happen, Indian firms would be excluded from supplying nearly Rs 400 crore worth of line pipes, thereby berefting the nation of a significant boost to the economy and contradictory to PM's push for Make in India as there is sufficient capacity in the country to manufacture these pipes.
A better option would have been what Indian Oil Corp followed for Vadinar Pipeline Project: Buy pipes from domestic producers and free issue them to the project executor for laying them – as was done by ONGC in Hazira-Uran and ICP-Heera pipelines.
This would have achieved the government's objective of providing Purchase Preference to Local Content (PP-LC), DMI&SP Policy and encourage small and medium domestic enterprises.