PURCHASE PREFERENCE (LINKED WITH LOCAL CONTENT) 2017 (PP-LC)

The Purchase Preference linked with Local Content (PP-LC) is in tune with Make in India campaign of
Govt. of India in Oil and Gas Sector to incentivize the growth in local content in goods and services. The
complete policy is as below:

In line with the policy along with amendments from time to time, the evaluation modality in case of
procurement of goods, services and EPC contracts, as the case may be, in International Competitive
Bidding shall be as under:
1. Definitions
1.1 Local Content: Local Content hereinafter abbreviated to LC shall be the value of local components in
goods, service and EPC contracts, indicated in percentage.
1.2 Purchase preference: Where the quoted price is within 10% of the lowest price, other things being
equal, purchase preference may be granted to the bidder concerned, at the lowest valid price bid.
1.3 Other definitions as detailed in the policy: http://www.petroleum.nic.in/sites/default/files/pplc.pdf

2. Scope
2.1 This policy benefit shall exclude goods/services falling under Micro, Small and Medium Enterprises
(MSME) (PPP-2012) or Domestically Manufactured Electronic Products (DMEP), as those
products/services are already covered under specific policy. The bidder shall declare their preference for
seeking benefit under PP-LC or MSME or DMEP.
2.2 In case a bidder opts for purchase preference based on PP-LC, the bidder shall not be entitled to
claim purchase preference benefit available to MSE Bidders as applicable for MSE bidders under PPP-
2012.
However, the exemptions from furnishing Bidding Document fee and Bid security shall continue to be
available to MSE Bidders.
a. While evaluating a particular bid, o avail any one out of two applicable purchase
preference policies, i.e., PP-LC-2017 or PPP-2012) will be considered, for price matching opportunities
and distribution of quantities among bidders, the precedence shall be in the following order:-
(a) PPP-2012
(b) PP-LC

For example,
Non divisible item
L1 bidder is non MSE, non PP-LC bidder
L2 bidder is PP-LC (within 10%)
L3 bidder is MSE bidder (within 15%)
MSE bidder shall be given preference to match the L1 price. If bidder matches the L1 price, order shall
be placed on him, otherwise, option for matching the L1 price shall be given to L2 bidder (PP-LC).

Divisible item
L1 bidder is non MSE, non PP-LC bidder
L2 bidder is PP-LC (within 10%)
L3 bidder is MSE bidder (within 15%)
MSE bidder shall be given preference to match the L1 price. If bidder matches the L1 price, order shall
be placed on the MSE bidder for 20% of tendered quantity. For the balance quantity (i.e. 50% of
tendered quantity/value) option for matching the L1 price shall be given to L2 bidder (PP-LC). Balance
quantity shall be awarded to original L1 bidder.
For further clarification, in case an item has quantity 4 nos. then 1 no. shall be given to MSE bidder, 2 to
PP-LC bidder and left out 01 no. to original L1 bidder.
b. In case L1 bidder is a MSE bidder, the entire work shall be awarded to him without resorting to PP-LC
bidders.
c. In case L1 bidder is a PP-LC bidder, purchase preference shall be resorted to MSE bidder as per PPP
2012 only.

3. Purchase Preference Linked with Local Content (LC)

3.1 Wherever the goods/services are procured under this policy, eligible (techno-commercially qualified)
LC manufacturers / LC service providers shall be granted a purchase preference of 10% i.e. where the
quoted price is within 10% of the lowest price, other things being equal, purchase preference shall be
granted to the eligible (techno-commercially qualified) LC manufacturers / service providers concerned,
at the lowest valid price bid.
3.2 Goods: 50% of the procured quantity would be awarded to the lowest techno-commercially qualified
LC manufacturer/supplier, subject to matching with L1, if such bidders are available. The remaining will
be awarded to L1 (i.e. Non Local Content (NLC) manufacturer/supplier not meeting prescribed LC
criteria).
However, if L1 bidder happens to be a LC manufacturer, the entire procurement value shall be awarded
to such bidder
3.3 Services/EPC Contracts: The entire contract would be awarded to the lowest techno-commercially
qualified LC service provider, subject to matching with L1, if such bidders are within 10% of the L1 bid
and L1 bidder is not a LC service provider.
4. Determination of LC -
4.1 LC of goods
4.1.1 LC of goods shall be computed on the basis of the cost of domestic components in goods,
compared to the whole cost of product. The whole cost of product shall be constituted of the cost spent
for the production of goods, covering: direct component (material) cost direct manpower cost, factory
overhead cost and shall exclude profit, company overhead cost and taxes for the delivery of goods.
4.1.2 The criteria for determination of the local content cost in the goods shall be as follows:
a) In the case of direct component (materiel), based on country of origin;
b) In the case of manpower, based on INR component; and
c) In the case of working facility, based on the country of origin.

4.1.3 The calculation of LC of the combination of several kinds of goods shall be based on the ratio of
the sum of the multiplication of LC of each of the goods with the acquisition price of each goods to the
acquisition price of the combination of goods.
4.2 LC of service
4.2.1 LC of Service shall be calculated on the basis of the ratio of service cost of domestic
component in service to the total cost of service.
4.2.2 The total cost of service shall be constituted of the cost spent for rendering of service, covering:
a) Cost of component (materials) which is used.
b) Manpower and consultant cost; cost of working equipment/facility; and
c) General Service cost, excluding profit, company overhead cost, taxes and duties.

4.2.3 The criteria for determination of cost of local content in the service shall be as follows:
In the case of material being used to help the provision of service, based on country of origin;
b) In the case of manpower and consultant based on INR component of the services contract;
c) In the case of working equipment/facility, based on country of origin; and
d) In the case of general service cost, based on the criteria as mentioned in clauses a, b and c above.
4.3 LC of the EPC Contracts:
4.3.1 LC of EPC contracts shall be the ratio of the whole cost of domestic components in the
combination of goods and services to the whole combined cost of goods and services.
4.3.2 The whole combined cost of goods and services shall be the cost spent to produce the
combination of goods and services, which is incurred on work site. LC of the combination of goods and
services shall be counted in every activity of the combination work of goods and services

4.4 Target of Local Content

Items 2017-18 2018-20 2020-22
Service Contracts 20% 22% 25%
Supply Contracts 20% 22% 25%
EPC Contracts (Others) 30% 35% 40%
The prescribed local content shall be applicable on the date of Notice Inviting tender.

5. Certification and Verification

Manufactures of goods and/or providers of services, seeking Purchase Preference under the policy,
shall be obliged to verify the LC of goods/ service / EPC contracts with the provision as follows.

5.1 At Bidding Stage (All Documents in requirement to compliance of eligibility under this Policy
to be submitted in Unpriced Bid Only. No such documents are to be submitted in Priced Bid ):

The bidder claiming the PP-

confirming their meeting the Local Content and this undertaking shall be certified as under:

Where the total quoted value is less than INR 10 Crore (100 million)-The LC content shall be self-
assessed and certified by the authorized signatory of the bidder, signing the bid
Where the total quoted value is INR 10 Crore (100 million) or above.

i. The Proprietor and an independent Chartered Accountant, not being an employee of the firm, in case
of a proprietorship firm.

ii. Any one of the partners and an independent Chartered Accountant, not being an employee of the firm,
in case of a partnership firm.

iii. Statutory auditors in case of a company. Details in (b) below.

The onus of submission of appropriately certified documents lies with the bidder and the purchaser shall
not have any liability to verify the contents and will not be responsible for the same.
However, in case the procuring company has any reason to doubt the authenticity of the Local Content,
it reserves the right to obtain the complete back up calculations before award of work failing which the
bid shall be rejected.

The bidder shall provide only percentage of the local content in bids.
Bidder must have LC in excess of the requirement specified under clause 4.4

a) Undertaking by the bidder:

The bidder shall submit an undertaking from the authorised signatory of bidder having the Power
of Attorney along with the bid stating the bidder meets the mandatory minimum LC requirement
and such undertaking shall become part of the contract.

b) Certificate:
In cases of procurement for a value in excess of Rs. 10 Crores, the Undertaking submitted by the
bidder shall be supported by a certificate from the statutory auditor or cost auditor of the
company ( in case of companies ) or from a practising cost accountant or practising chartered
accountant ( in respect of other than companies) giving the percentage of local content.

However, in case of foreign bidder, certificate from the statutory auditor or cost auditor of their
own office or subsidiary in India giving the percentage of local content is also acceptable. In case
office or subsidiary does not exist or Indian office/subsidiary is not required to appoint statutory
auditor or cost auditor, certificate from practising cost accountant or practicing chartered
accountant giving the percentage of local content is also acceptable.
5.2 After Contract Award

a) In the case of procurement of goods and/or services and/or EPC Contracts ( others ) with the order
value less than Rs. 10 Crore, the LC Content may be calculated ( self-assessment) by the supplier of
goods and/or the provider of services and signed by authorised signatory of bidder having the Power of
Attorney.

b) The verification of the procurement of goods, services or EPC Contracts in cases of procurement for a
value in excess of Rs. 10 Crores, the Undertaking submitted by the supplier/contractor shall be
supported by a certificate from the statutory auditor or cost auditor of the company ( in the case of
companies ) or from a practicing cost accountant or practicing chartered accountant ( in respect of other
than companies ) giving the percentage of local content.

However, in case of foreign bidder, certificate from the statutory auditor or cost auditor of their own office
or subsidiary in India giving the percentage of local content is also acceptable. In case office or
subsidiary does not exist or Indian office/subsidiary is not required to appoint statutory auditor or cost
auditor, certificate from practising cost accountant or practicing chartered accountant giving the
percentage of local content is also acceptable.

5.3 However, procuring company shall also have the authority to audit as well as witness production
processes to certify the achievement of the requisite local content and/or to obtain the complete back up
calculation before award of work failing which the bid shall be rejected and appropriate action may be
initiated against the bidder.
5.4 The Local Content certificate shall be submitted along with each invoice raised. However, the % of
local content may vary with each invoice while maintaining the overall % of local content for the total
work/purchase of the pro-rata local content requirement. In case, it is not satisfied cumulatively in the
invoices raised up to that stage, the supplier shall indicate how the local content requirement would be
met in the subsequent stages.
5.5 As regards cases where currency quoted by the bidder is other than Indian Rupee, exchange rate
prevailing on the date of notice inviting tender (NIT) shall be considered for the calculation of Local
Content.
6 Sanctions
6.1 The Procuring companies shall impose sanction on manufacturers/service providers not fulfilling LC
of goods/services in accordance with the value mentioned in certificate of LC.
During execution, it shall be the responsibility of the supplier/contractor to ensure fulfillment of the
minimum local content specified in the bidding document failing which following actions shall be taken by
the procuring agency:
a. Pre-determined penalty @10% of total contract value for non-adherence to minimum local content.
b. Banning business with the supplier/contractor for a period of one year.

6.3 In case seller/contractor desires to change the origin of sourcing of material/services, the same may
be allowed with the understanding that in case this results in non-compliance to minimum local content,
the penal action as above shall be applicable.
6.4 The financial penalty shall be over and above the PBG value prescribed in the contract and shall not
be more than an amount equal to 10% of the Contract Price.
 Declaration Form for availing Purchase Preference

Sr. Parameter Declaration Remarks

no.
1 We confirm that our offer is achieving the Yes / No
minimum local content target as per clause
no. 4.4 of PP-LC Policy (enclosed
yes
elsewhere in the bidding document) and the
requisite Undertaking along with supporting
certificate (if required) is submitted in
Unpriced Bid
2 Whether bidder is an MSE bidder? Yes/ No If yes- Necessary documents to
be attached along with unpriced
part of the bid.
3 Whether bidder wants to avail purchase Yes/ No ---
preference under Public Procurement
Policy-2012? (PPP-2012)
4 Whether bidder wants to avail Purchase Yes/ No If yes-
Preference Linked with Local Content- i) In case a bidder opts for
2017? (PP-LC 2017) Purchase preference based on
PP-LC, the bidder shall not be
entitled to claim purchase
benefit available to MSE Bidders
as applicable to MSE bidder
under PPP-2012.
ii) Bidder shall comply the
requirement of PP-LC Policy

Note:
a) While evaluating the bids, for price matching opportunities and distribution of quantities among
bidders, the order of precedence shall be as under: 1. MSE bidder (PPP-2012) 2. PP-LC complied
bidder (PP-LC)

b) The bidder claiming the PP-

letterhead confirming his meeting the Local Content and this undertaking shall be certified as under:

The LC content shall be self-assessed and certified by the authorized signatory of the bidder, signing
the bid along with 5.1 of the said Policy in
this Tender Document.