ONGC wants exemption from National Offset Policy
The Oil and Natural Gas Corporation (ONGC) has asked the Petroleum and Natural Gas Ministry for complete exemption from following the National Offset Policy (NOP) saying such a policy would have a direct impact on company’s operations and performance.
What is the core of NOP? Why ONGC wants exemption?
What is the core of NOP?
The NOP is aimed at supporting domestic industries and manufacturers. It was given an in-principle nod in 2006 with an aim to boost India’s access to critical technologies and resources. As per the policy, indigenous industries will get a share of the contracts the global players secure from India, requiring them to compulsorily use the Indian supplies as a percentage of the deal. Offsets will require any foreign seller of products and services in India to buy part of the material at a pre-determined percentage of the sale value from the Indian manufacturers and suppliers. It is expected that this policy will help in upgrading technology, skill and competitiveness in various sectors of the economy and ensure that the foreign suppliers enter into deals with the Indian companies for sourcing part of their requirements.
Why ONGC wants exemption?
ONGC states that following NOP could affect its operations on the following grounds:
- Goods and services required for ONGCs operations are highly specialized in nature, for which sources are very limited in the global market. Insisting for additional obligations from seller (in form of Offset policy) could lead to non-participation by many of the prospective bidders thereby reducing fair competition in tenders.
- Additional obligations of the seller could elevate costs, since the bidders would increase their bids on account of such conditions.
- ONGC has to finish the projects within the stipulated time frame for the blocks awarded under New Exploration Licensing Policy (NELP). As ONGC follows open bidding system in all high value cases and hence awards contracts within a limited validity period on the basis of techno-commercial bid evaluation criteria. Therefore, the exercises as envisaged in the NOP may delay the tender finalization within the stipulated period.