:: Technical --- ID :: 16580
Oil marketing companies told to cancel Rs 5,000 crore tender for buying LPG cylinders
Oil marketing companies told to cancel Rs 5,000 crore tender for buying LPG cylinders

Oil marketing companies told to cancel Rs 5,000 crore tender for buying LPG cylinders

NEW DELHI: Th e government has ordered Indian Oil, BPCL and HPCL to cancel Rs 5,000-crore tender for purchase of cooking gas cylinders following detection of several discrepancies in the buying process, said people familiar with the matter .

The three state-run oil companies had recently floated a tender to buy 3.77 crore liquefied petroleum gas (LPG) cylinders to serve new customers, which have almost doubled in the past five years .

Many conditions prescribed in the tender, including the pricing and preference for vendors from eastern India, triggered several complaints to the Prime Minister's Office (PMO), which then sought a wider examination of the matter, a person familiar with the matter said.

" State oil companies were asked to explain several anomalies and discrepancies in the tender process but they failed to offer a satisfactory response," the person said. This resulted in the government directing the oil companies to cancel the tender and float a fresh one that's free of discrepancies.

Oil companies have been directed to bring more transparency in the purchase process, and also institute a strong technical evaluation mechanism so that the process is, and appears to be, fair to all, the person quoted above said. Companies have also been asked to consider recent orders by Delhi High Court and the Competition Commission of India on cylinder purchase while preparing the new tender .

IndianOil, BPCL and HPCL didn't respond to ET's emailed queries till the time of going to press.

One important issue highlighted by the government in the tender is that of higher rates for cylinders compared with the purchase price in 2017. The government also questioned the efficacy of the price band mechanism companies have followed in the tender.

In 2017, cylinders were purchased for about 1,350 a piece. At that rate, the current tender for 3.77 crore cylinders would have been worth Rs 5,089 crore .

Another contentious issue was that of zoning of vendors, which meant differential treatment of suppliers from the so-called zone 1 and zone 2. Zone 1 mainly comprises eastern regions such as Bihar, West Bengal, Odisha, eastern UP, eastern MP and North-East while the rest of India falls in Zone 2 .

Manufacturers in Zone 1 get preference under the tender conditions. A similar condition was followed in 2017 tender, which resulted in 40% of the orders going to just 20% of the bidders from zone 1. About 80% of the vendors, who belonged to zone 2, got only 60% orders. Fearing that this imbalance was likely to worsen this time round, many vendors raised complaints against the process, according to people familiar with the matter.

Most older vendors have manufacturing facilities located outside the eastern region and found it difficult to quickly set up production units in eastern India, leaving them at a disadvantage.

The government has also asked oil companies to make sure that cooking gas supply to customers is not affected due to tender cancellation and delayed purchase of new cylinders.

In India, about 14 crore new customers have been added in the past five years, raising cooking gas access to 96% of the households now, from 55% in 2014. The government has given new LPG connections to 8 crore poor families under its Ujjwala scheme, vastly expanding the disadvantaged section's access to cleaner cooking fuel.

The Economic Times 09-09-19