NTPC suspends purchase preference policy

Policy lapsed on March 31,inter-ministerial wrangles delay decision on extension.

With the lapse of purchase preference policy of the government on March 31, 2005, National Thermal Power Corporation (NTPC), the country's largest generator of power, has decided to do away with the preference given to public sector units and to joint ventures with government-owned companies.

"The board took a decision to the effect and it has been implemented for all contracts which are to be awarded," said an NTPC executive.

NTPC has already altered its tender advertisements to specify that no preference will be given to public sector units or to joint ventures with PSUs.

The move is expected to affect other PSUs like Bharat Heavy Electricals Ltd, which are large equipment suppliers for power plants.

Bhel executives, however, refused to comment on the matter saying the decision had not been communicated to them officially.

Other PSUs in the power sector, however, have adopted a wait and watch policy.

"We will go by whatever policy is in place on the date when the tenders are opened," said a senior executive at PowerGrid Corporation of India Ltd, the central transmission utility.

The view was echoed by a senior executive at National Hydroelectric Power Corporation. "We will not be opening any new tenders in the next two weeks. However, we will follow whichever policy is in place at the time the tenders are opened. The government is yet to decide on extension of the policy," the executive said.

The purchase preference policy gives PSUs a 10 per cent price preference when bidding for contracts.

The last extension given to the policy expired at the end of 2004-05. However, inter-ministerial wrangles mean no decision has been taken on its extension.

The department of public enterprises is in favour of an extension, as it will assist sick PSUs. However, the commerce and petroleum ministries are reportedly against such a move.

The finance ministry had earlier said it wanted the price preference to be either scrapped completely, or the purchase preference reduced to 5 per cent. It had also indicated that Navratna PSUs might not be justified in using the purchase preference policy.

Policy shift

• NTPC has altered its tender ads to specify that no preference will be given to PSUs or to joint ventures with PSUs
• Other government-owned companies in the power sector are adopting a wait and watch policy
• Finance ministry wants the price preference to be either scrapped or the reduced to 5%