Steel Mandates: Oil Giants Navigate Local Sourcing Exceptions

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Synopsis

Government-controlled oil companies in India must seek case-by-case exceptions to comply with the local sourcing mandate on steel products. The Ministry of Petroleum and Natural Gas's request for a general exception from the Domestically Manufactured Iron & Steel Products policy aims to expedite tenders for major public sector undertakings like Engineers India Ltd and Oil and Natural Gas Corporation, reports Economic Times.

Article

In a recent development, government-controlled oil companies in India are facing a unique challenge, securing individual exceptions to adhere to the local sourcing mandate on steel products. The Ministry of Petroleum and Natural Gas has sought a general exception from the Domestically Manufactured Iron & Steel Products (DMI&SP) policy, specifically designed to provide preference to domestically manufactured iron and steel in procurement tenders floated by public sector undertakings.

The relaxation in the policy is intended to facilitate the swift awarding of tenders, particularly for major entities such as Engineers India Ltd (EIL), Oil and Natural Gas Corporation (ONGC), Oil India Ltd (OIL), and Indian Oil Corporation Ltd (IOCL). However, officials emphasize that no general exception will be granted under DMI&SP to the companies without sufficient evidence proving the inability to domestically manufacture specific steel items.

Under the DMI&SP policy, the government grants preference to domestically manufactured iron and steel products, promoting procurement tenders with 15%-50% value addition. The policy is applicable to the supply of iron and steel products with an aggregated estimate value of $25 million or higher. While waivers are available for specific steel grades not manufactured domestically or quantities exceeding domestic capacity, blanket waivers are ruled out.

To further ensure compliance, bids by traders must now be accompanied by an authorization certificate issued by a domestic steel manufacturer. This precautionary measure aims to prevent the substitution of domestically sourced steel with imported commodities, aligning with the policy's mandate.

Despite opposition from procurers concerned about potential monopolization by steel manufacturers, the government stands firm on the decision. The position may be subject to review if complaints of monopolization surface in the future. In an additional effort to streamline tender processes, oil companies have been instructed to project import quantity requirements a year in advance and obtain necessary approvals.

India's total steelmaking capacity, standing at 161.30 million metric tons, produced 127.20 metric tons in the fiscal year 2022-23.

Conclusion

In conclusion, the recent shift in India's steel policy mandates that government-controlled oil companies seek exceptions for local steel sourcing. The Ministry of Petroleum and Natural Gas's request for a general exception aims to accelerate tender awards for major public entities. Despite concerns about potential monopolization, the government emphasizes the need for evidence in each case, reinforcing its commitment to promoting domestic iron and steel products. This move aligns with the broader goal of enhancing transparency and efficiency in procurement processes.

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