Economic nationalism colours battle for ONGC contract

Vol 12, PW 21 (26 Mar 09) People & Policy

Hard economic times bring job losses, fewer contracts and inevitable nationalist calls to keep wealth at home, not send it abroad.

Take Mumbai-based engineering conglomerate Larsen & Toubro – most recently recognised for its work in building critical parts of the Indian moon mission. L&T has tried but failed to leverage its strong domestic pedigree in a battle against the older and equally well-established India-based AFCONS group for a multi-million dollar EPC contract from ONGC to set up the offshore Mumbai ICP-R process platform.

According to L&T, AFCONS committed the cardinal sin of joining up with PT Gunanusa of Malaysia to win the contract. Some industry observers accuse L&T of hypocrisy.

L&T, they say, is no different to AFCONS in forging alliances with overseas foreign partners and that the company’s call to economic nationalism rings hollow. But L&T feels threatened, as its order book dwindles and competitors like AFCONS came on the scene.

No surprise then to hear that last month L&T dispatched a 37-page presentation, seen by this report, to ONGC questioning the ability of AFCONS and PT Gunanusa to execute the ICP-R project. L&T accuses AFCONS of violating ONGC’s Bid Evaluation Criteria and lists reasons why L&T should be selected, even though the AFCONS alliance bid lowest by a wide margin.

As a domestic-owned company, says L&T, any contract from ONGC would keep work in India and add maximum value to the economy. L&T points to its stature as a bourse-listed blue chip with major government-owned insurers and banks as stakeholders.

If L&T won the job, says the company, engineering and manufacturing work would directly and indirectly create 5000 jobs. According to L&T, if AFCONS and PT Gunanusa were selected some 90% of the material would be imported, and most of the work done outside India.

Sadly for L&T, but good for foreign contractors, L&T lost the argument.