DPE moots fresh lease of life for purchase preference policy

In a note to the group of ministers set up to decide on the policy, the DPE has pitched for extending the preference policy on the grounds that this would be in keeping with the government’s national common minimum programme (NCMP) objectives. ‘‘A purchase preference will significantly improve the viability of sick and loss making PSUs, many of which depend on orders from customers in the public sector,’’ the note says.

Issues presently being deliberated by the GoM relate to whether the extension should cover PSUs alone or their joint ventures also; whether sectoral exemptions should be given or the policy extended universally; the level of purchase preference and whether the extension should be conditional and if so the nature of these conditions.

Although both the petroleum and commerce ministries have opposed extending the policy beyond March 2005, they have suggested certain modifications if it becomes absolutely essential to continue with the preference policy.

As per the commerce ministry, the degree of purchase preference may be reduced from 10 per cent to 5 per cent and the policy extended only to tenders of Rs 10 crore and above instead of Rs 5 crore, as is applicable now. On its part, the petroleum ministry has sought sectoral exemption and has proposed that the oil sector in general, and the exploration and production sector in particular, be exempted from the policy stipulations.

‘‘However, in case it is decided to extend the policy to the oil sector, the preference should be available to only those companies whose revival plans depend upon the orders from oil sector companies in the public sector. Profit-making PSUs should not be permitted purchase preference at the cost of oil sector PSUs and in any case, purchase preferences should apply for orders not exceeding Rs 10 crore,’’ the petroleum ministry has said in its remarks to the DPE note.

Justifying the extension of the policy, the DPE’s note to the GoM says, ‘‘Revival packages of sick/loss making companies are being prepared for consideration of the Board for Re-construction of Public Sector Enterprises (BRPSE). Such revival packages in many of the PSEs depend upon the orders from customers in public sector.’’