Good news for foreign EPC bidders and drillers!
Narendra Modi promised a pro-business agenda when elected and he’s proving true to his word.
In a little reported development with huge implications for foreign investment in the oil sector the Modi government has abolished the protectionist ‘price preference’ regime that gives Indian bidders unfair advantage over foreign bidders in state-owned EPC and service contract tenders. Introduced in 1984, the ‘price preference’ policy, hated by foreign contractors, but a life-line for inefficient Indian companies, was consigned to the garbage can in a two-page circular issued to ONGC, GAIL and Oil India chairmen by oil ministry director Subhashish Panda on October 1.
“The (oil) ministry has taken a considered decision to do away with the ‘price preference’ policy with immediate effect,” writes Panda. “However, tenders which have already been floated or are being processed will be governed by the applicable (old) price preference policy (except if technical bids have yet to be opened).
” Panda writes that ONGC has been repeatedly asking for this policy to be scrapped. “ONGC’s experience,” adds Panda, “is that due to ‘price preference’ for domestic bidders foreign participation in ONGC tenders has reduced considerably, leading to restricted competition and higher costs for ONGC.
” Panda says in the 30 years since ‘price preference’ was introduced Indian companies have had enough time to compete with foreign companies without protection.