No blanket exception for PSU oil companies from local sourcing mandate on steel

Government-controlled oil companies will have to seek case-by-case exceptions when not complying with local sourcing mandate on steel products.

According to officials aware of the move, the ministry of petroleum and natural gas had requested a general exception from provisions of the Domestically Manufactured Iron & Steel Products (DMI&SP) policy.

The relaxation was to help speed up awarding of tenders floated by public sector undertakings such as Engineers India Ltd (EIL), Oil and Natural Gas Corporation (ONGC), Oil India Ltd (OIL) and Indian Oil Corporation Ltd (IOCL).

“More evidence is required to say that steel items could not be domestically manufactured. There will be no general exception under DMI&SP to the companies,” a senior government official told ET.

Under the DMI&SP policy, the Centre gives preference to domestically manufactured iron and steel products in procurement tenders floated by public sector undertakings. The policy mandates to provide preference to products with 15%-50% value addition in procurement orders. This policy is applicable to supply of iron and steel products having aggregated estimate value of ₹25 crore or higher. It also has provisions for waivers to all such procurements, where specific grades of steel are not manufactured in the country, or quantities as per demand of the project cannot be met through domestic sources.

In addition to no blanket waivers, it has also been decided that bids by traders need to be accompanied by an authorisation certificate issued by a domestic steel manufacturer. This development will prevent traders from supplying imported commodity instead of domestically sourced steel, which is mandated under the policy.

The move comes despite stiff opposition from procurers that fear monopolisation by steel manufacturers and defeats the purpose of open competition. “The position may be reviewed in future if complaints of monopolisation by manufacturers are received,” the official added.

To speed up finalisation of tenders, oil companies have also been asked to indicate further import quantity requirement for a year in advance and take approvals for the same. India’s total steelmaking capacity stands at 161.30 million tonnes (mt). The country produced 127.20 mt in 2022-23.