New Delhi: The government is considering making it mandatory for all power projects funded by state-run banks to procure local equipment. A public procurement mechanism with purchase preference to domestic equipment manufacturers for future electricity generation, transmission and distribution projects is in the works, a senior government official said.

The mechanism will apply to any procurement order funded by government lenders. In line with the Department of Industrial Policy and Promotion’s public procurement order 2017, the mechanism proposes that tenders worth below Rs 50 lakh should be given only to local suppliers.

“Competitive orders of higher value shall give preference to Indian companies. The proposal aims at promoting ‘Make in India’ as well as protect the domestic industry from Chinese and Korean firms,” the official said. As per the proposal, if a local firm emerges as the lowest bidder, the tender will be awarded to that company.
 

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But if a foreign firm emerges as the lowest bidder, it will get only 50% of the tender. An Indian manufacturer, whose quoted price for the tender will be within 20% of the lowest price bid, would be eligible for purchase preference, provided it matches the lowest price, the official said.

 

The purchase preference is proposed to be extended to all contracts funded by Power Finance Corp, Rural Electrification Corp and other state-run banks. “We are trying to include all equipment contracts for transmission, generation and distribution equipment into the ambit of the proposal. The proposal will be within the WTO framework,” the official quoted above said.

Another senior government official, however, said it remains to be seen if the DIPP order can be extended to commercial procurement contracts since the June 15, 2017 order is applicable to internal procurement by departments and PSUs.

The Union Cabinet had in April last year approved the domestic purchase preference policy for PSU oil companies.

The power ministry had earlier explored a reciprocity clause in the power transmission equipment market. The proposal explored disallowing investments from countries where Indian firms are banned. The domestic electrical equipment industry has been raising concerns on contracts awarded to Chinese companies for installation of supervisory control and data acquisition systems (SCADA) for power distribution that can lead to foreign control over a sector critical to the country’s growth.

Domestic power equipment manufacturers have said it could also be a threat to national security as electricity distribution systems carry power to pipelines, water systems, telecommunications and other critical infrastructure, while also serving key government and military facilities.