Tighter purchase policy for PSUs

NEW DELHI: Acceding to industry demand, the government has made few changes in the purchase preference policy(PPP) for central PSUs. In the modified form, a 20% minimum value addition criterion by way of manufacturing and or services has been included as a prerequisite for PSUs to avail the purchase preference. Under the purchase policy, a central public sector enterprise is provided the option of matching the lowest bid in any tender with a higher bid upto 10% on a preferential basis.
The minimum value addition criterion has been one of the safeguards measures suggested by CII to prevent misuse of the PPP scheme. The private sector had been against the purchase preference arguing that the policy offers undue advantage to foreign companies as they submit their bids under the umbrella of the PSUs and even though the value added content of the latter was as low as 5-10% they scored over private sector bids.
The other change in the policy, stipulates that the provisions relating to PPP should be specified in the notice inviting tender(NIT) for Rs 5 cr and above and for any deviation including the exclusion of the PPP clause from NIT it will be obligatory for the concerned ministry/ department/ central PSU/ autonomous bodies to obtain prior exemption from the cabinet in consultation with the Department of Public Enterprises.
It has also been stated that joint venture companies where government holding directly or indirectly through a central PSU is 51% or more and joint ventures which are subsidiaries of central PSUs with the majority stake with the parent will also be eligible for purchase preference.
Due to the continual extension of PPP major private sector equipment manufacturers- ABB, Alstom, Siemens and L&T had earlier stayed away from the bids invited by the government-owned power utility NTPC. The current move seems to be an attempt to assuage the industry after the PPP was extended for two more years starting 1 April, 2002.
The issue of PPP has for long been a contentious one between the industry and the government. It was introduced for the first time in 1992 with a time period of 3 years. Subsequently it was extended for 2 years in 1995 and thereafter for another 3 years. In 2000 it was extended for the fourth time for 2 years, till 31 March, 2002.