Oil and Natural Gas Corporation (ONGC) has asked the Petroleum and Natural Gas Ministry for complete exemption from following the National Offset Policy, as a special case, as following such a policy would have a direct impact on its operations and performance.
The policy, aimed at consolidating all big-ticket import spends and leverage them through mandatory offsets, has already met with stiff resistance from various ministries and the Planning Commission. The Union Cabinet had given an in-principle nod for a National Offset Policy in 2006, with an aim to boost India’s access to critical technologies and resources. The Cabinet Secretariat was asked to coordinate the matter, which has been drafted by the Commerce Ministry, and is being deliberated by a Committee of Secretaries.
In its communication to the Petroleum Ministry, ONGC has stated that the goods and services required for its operations are highly specialised in nature, for which sources are very limited in the global market. Insisting for additional obligations from the seller (in the form of offset policy) could lead to non-participation by many of the prospective bidders, thereby reducing fair competition in tenders, it added.
It also said additional obligations of the seller could lead to higher costs, since the participating bidders would pad up their bids on account of such conditions. “ONGC is constrained by government policies such as bearing subsidy burden to compensate the loss of oil marketing companies and price/purchase preference, which puts ONGC in a disadvantageous situation in comparison to its competitors,” it said.
Further, it said ONGC had to complete projects within the stipulated time-frame for the blocks awarded under the New Exploration Licensing Policy (NELP). Moreover, ONGC followed open bidding system in all high value cases and hence contracts were to be awarded within a limited validity period on the basis of published techno-commercial bid evaluation criteria. Therefore, the exercises as envisaged in the said policy on ‘offsets’ might delay the tender finalisation within the stipulated period, besides delays in project completion. “In view of the given circumstances, a special dispensation may be accorded to ONGC,” the communication concludes.