The energy companies had set up a committee to brainstorm how Make-In-India can be implemented in supply contracts and to incentivize suppliers to locally produce goods.
The government is leaving no stone unturned to push its agenda of Make-In-India. In one of its latest efforts to boost the campaign, the government is known to have asked state-run oil exploration, refining and marketing companies to start giving preference to suppliers’ meeting a minimum local content criteria.
The energy companies had set up a committee to brainstorm how Make-In-India can be implemented in supply contracts and to incentivize suppliers to locally produce goods. The direct benefit of local production is that it will help create jobs and fuel economic growth.
The energy companies have now decided to institute a 'Purchase Preference' policy. As per the policy, the government will specify the minimum required threshold for local content in various product categories. So if a supplier meets the cut-off set for its product category, and is within 10% of the lowest bid, the supplier will be given a chance to match the bid and win the supply contract. In case the supplier is unable to match the lowest bid, the contract will be awarded to the lowest bidder and not the local supplier. This makes sense as the oil companies should not be made to suffer and pay higher supplier costs in the name of Make-In-India. But on the other hand, if the local-supplier can provide high quality products at lowest possible cost, then choosing a local supplier over others does no harm.
Though it might seem like a good move, the reality is that it will not do much when it comes to boosting local employment and growth. Suppliers of energy industry don’t have as big an impact on growth, as the energy companies themselves. It is well known that India imports more than 80% of its crude oil requirements. This is the biggest bottleneck for the country since decades. So if government really wants to ensure that its mission to boost economic growth is fueled by local players, then it will do much better if it focuses on boosting crude oil outputs by encouraging local explorers or by creating new local oil-exploration companies. If such steps are taken, only then will the true potential and benefits of making-in-India be realized.
The energy companies have now decided to institute a 'Purchase Preference' policy. As per the policy, the government will specify the minimum required threshold for local content in various product categories. So if a supplier meets the cut-off set for its product category, and is within 10% of the lowest bid, the supplier will be given a chance to match the bid and win the supply contract. In case the supplier is unable to match the lowest bid, the contract will be awarded to the lowest bidder and not the local supplier. This makes sense as the oil companies should not be made to suffer and pay higher supplier costs in the name of Make-In-India. But on the other hand, if the local-supplier can provide high quality products at lowest possible cost, then choosing a local supplier over others does no harm.
Though it might seem like a good move, the reality is that it will not do much when it comes to boosting local employment and growth. Suppliers of energy industry don’t have as big an impact on growth, as the energy companies themselves. It is well known that India imports more than 80% of its crude oil requirements. This is the biggest bottleneck for the country since decades. So if government really wants to ensure that its mission to boost economic growth is fueled by local players, then it will do much better if it focuses on boosting crude oil outputs by encouraging local explorers or by creating new local oil-exploration companies. If such steps are taken, only then will the true potential and benefits of making-in-India be realized.
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