Purchase preference to local content in oil, gas contracts announced

The government on Wednesday announced a 10 percent purchase preference for local products in all petroleum sector contracts towards boosting the share of domestic manufacture in projects awarded by state-run oil and gas companies.

"Based on discussions within an internal steering committee on the matter, companies and other stakeholders, we have decided there should be 10 percent purchase preference in tenders," Petroleum Minister Dharmendra Pradhan told reporters here.

"Our ministry has estimated oil companies' annual capital expenditure of around Rs. 90,000 crore. The award of these contracts should increase local manufacturing," the minister said.

He said the award of these contracts would not require separate approval from the union cabinet.

Pradhan also said the ministry will soon publish a concept paper on the proposal calling for stakeholder comments.

"These consultations are expected to be over by 19 February. Rolling out the new proposal would go into the next financial year," he said.

The policy does not differentiate between domestic and foreign companies as long as they meet the minimum cutoff of locally manufactured content in a tender.

Under the changed guidelines, contracts for equipment and services can attract mandatory local content share of between 10 percent to 50 percent.

"Based on our estimate, upto 20 percent local content can come in service and supply related contracts while 30 percent locally manufactured content can come in EPC (engineering, procurement and construction) contracts," Pradhan said.