Standing Conference of Public Enterprises (SCOPE) chairman Uddesh Kohli has urged the government to continue the policy of purchase preference (PPP) for at least a couple of years more.
Currently, the decision on the extension of the PPP that lapsed on March 31, is pending with the finance ministry and is most likely to be referred to the Cabinet.
SCOPE chairman said there were many public enterprises who supply their goods and services to the government and other Public Sector Enterprises(PSEs). In order to stabilise their business in the competitive market, there is no need to continue the policy. Further, there are many PSEs, which were created to meet the needs of the government or the public sector. Providing purchase preference to these companies is justified, said Kohli.
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The Supreme Court in its recent judgment in Indian Drugs and Pharmaceuticals Ltd and others versus Punjab Drug Manufacturers Association and others has ruled that purchase by the government from public enterprises is neither unconstitutional nor discriminatory to the private sector and it does not create a monopolistic situation for public enterprises.
SCOPE chairman said the purchase preference and the very presence of PSEs is a countervailing factor that restrains private corporates from quoting high prices. It also helps in benchmarking prices in the market.
In the post liberalisation period there is still not enough competition and some vacuum exists in the market in supply of goods and services. Purchase preference to PSEs will act as a controlling factor, he added. Kohli clarified that purchase preference is applicable only in cases where differences between the lowest price and the PSE offer is not more than 10 per cent and it operates only when price is equated with the lowest. An enterprise, therefore, gets the opportunity to adjust its prices but there is no price preference or extra cost to the buyer.