Domestic pipe makers restricted to 20% of $500 million ONGC project

NEW DELHI: Domestic pipe makers have been restricted to only 20% of a $500-million ONGC project after the state-run explorer advanced the date of awarding contract to five days before the mandatory domestic purchase policy for iron and steel products was to kick in for the project.

ONGC had floated the tender for a project, identified as PRP-VII, to replace 317 km inter-platform offshore pipeline on September 22 with February 3, 2022 as the project award date. But on October 22, the company advanced the award date to January 20, 2022.

Industry sources said the successful bidder could have sourced all the pipes domestically under the original schedule as the two-year exemption from the domestically manufactured iron & steel products ( DMISP ) policy granted to ONGC would have ended on January 29, 2022.

After the steel ministry announced the policy on May 29, 2019, ONGC had in 2020 sought an exemption for the PRP-VII project citing “engineering necessity and interface hardships delaying projects”. Under the DMISP policy, iron and steel pipelines have “to be exclusively domestically manufactured and cannot be imported without the approval of the steel ministry.”

The ministry on January 29, 2020, granted exemption until January 29, 2022 for 80% of the required pipes with the caveat that ONGC test domestic producers by placing a development order by March 31, 2020 for the remaining 20% of pipes. Import of this quantity was allowed if the development order failed. ONGC was also advised to delink the development order from the tender and submit the test results for the ministry’s review by June 2020.

ONGC, however, did not place the development order and amended the tender to advance the date of award with a view to avoiding falling foul of the steel ministry and possible legal challenge once the exemption ended on January 2022. Under the circumstance, 80% of the pipelines are likely to be imported.