Purchase policy to get extension

The purchase preference policy for PSUs is most likely to be extended by three years but in a highly truncated form on the basis of the comp...

The purchase preference policy for PSUs is most likely to be extended by three years but in a highly truncated form on the basis of the compromise arrived at in the meeting of the group of ministers (GoM) on Wednesday.

The GoM has agreed to recommend to the Cabinet extension of the purchase preference policy for another three years, sources said. “We have made our recommendations and now Cabinet will decide,” Finance Minister P. Chidambaram said after the meeting of the GoM on purchase preference.

The differences in the GoM on extending the scheme — which expired on March 31, 2005 after the last extension in October 2004 — ensured that the policy was changed beyond recognition.

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As the power ministry was opposing the extension of policy in its present form, the compromise reached at the meeting ensured that the 10 per cent price preference that PSUs got while supplying to other PSUs is done away with.

Earlier, if a PSU bid was within 10 per cent of the lowest quoted price to a tender, the contract went its way. Now instead of price preference, the PSUs bidding for government contracts would be given an opportunity to match the lowest bid, all other things being equal.

The policy covered all government contracts above Rs 5 crore but the GoM has decided to put a cap on the value of tenders where PSUs can avail purchase preference. “The cap will be Rs 100 crore,” sources said.

The policy has seen numerous extensions in the past. After it expired on March 31, 2004, the Cabinet decided to extend the scheme till March 31, 2005.

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While extending the policy for another year in October, the Cabinet decided that GoM will take a decision on its future extensions.

The policy grants preference to the central public sector enterprises (CPSEs) in government contracts at lowest valid price bid if the price quoted by it is within 10 per cent of the lowest price.