The government intervention for promoting Make in India in public procurement has resulted in garnering over Rs 50 billion benefits to Indian companies. The changed procurement conditions helped domestic companies to get business from the Railways, GAIL India and Oil and Natural Gas Corporation, among others.
One of the beneficiaries is Jindal Steel & Power Ltd (JSPL) that had earlier been kept out of procurement for rails but now is likely to get 20 per cent of the tendered volume under the new policy. The total size of the tender is expected to be around Rs 30 billion of which JSPL may get Rs 6 billion worth of order because of the new procurement policy.
In June 2017, the department of industrial policy and promotion came out with an order Public Procurement (Preference to Make in India) after the Cabinet cleared a policy to promote domestic content in government and PSU purchases. “Not less than Rs 5,000 crore benefit has come in less than one year,” Aruna Sharma, secretary, ministry of steel told Business Standard.
Sharma said the reservation for Indian companies is complaint with the norms of World Trade Organisation. “It makes a lot of sense since it is cheaper to buy from Indian companies. Long rails are imported but if the domestic producers are able to make long rails then it is a preferred item. India is not protecting them in terms of rate, it is not giving them any subsidy, not protecting them against the quality. The buyer has full freedom on quality check and can do price discovery.”
The Indian Railways had a qualifying criterion for placing rail orders that the company should have supplied a minimum quantity of rails. In October 2017, JSPL dispatched the last instalment of 150,000 tonne of rail to Iranian railways thereby meeting the threshold. Besides, a team from Research Design and Standard Organisation of the Indian Railways conducted tests for three weeks on JSPL manufactured rails. Under RDSO specification, steel used in the rails should have less than 1.6 particulate per million (PPM) of hydrogen content.
The Indian Railways required 1.4 million tonne of rails for 2017-2018. The government-owned Steel Authority of India which till now was the sole supplier of rails had committed to supply 950,000 rails during 2017-2018. To meet the shortfall of supply from SAIL, the Railways had invited a global tender but it was halted following the new rules under which JSPL would be offered 20 per cent of the tendered volume. The company would have to match the lowest bid price. “We are never against imports, if Indian manufacturer’s rates and quality are internationally competitive they will have an edge,” said Sharma.
A standing committee with DIPP secretary and secretary steel as members review the implementation of local content requirement in public procurement. The June order was required in order to amend the General Financial Rules of procurement that make purchase from lowest bidder mandatory.
A GAIL tender had been stalled last year after the new policy came. Chinese supplier North China, which had emerged as the lowest bidder for GAIL’s Rs 12 billion-contract for Bokaro-Dhamra section of the Jagdishpur-Haldia pipeline project, moved the Delhi High Court in July 2017 against the state-owned gas transporter’s decision to cancel the tender.
In December 2017, IL&FS Engineering and Construction Company bagged from GAIL a Rs 2.16-billion contract for 157.8 km long pipeline for Dobhi-Durgapur-Haldia section along with 13.28 km long spurline under Jagdishpur and Haldia Bokaro-Dhamra Natural Gas Pipeline project in Jharkhand and West Bengal.