India’s State-run Energy Efficiency Services Ltd (EESL) has cancelled Rs 500 crore contracts placed on a China-backed PT Hexing as it failed to comply with the local content norms.
EESL is expected to conduct fresh bidding for about 30 lakh smart meters in which, Indonesia-based PT Hexing that is backed by a Chinese firm, and other foreign firms will have to seek approval from the Department for Promotion of Industry and Internal Trade (DPIIT), as per the latest public procurement norms to participate in the tenders.
The Managing Director of EESL Saurabh Kumar said the cancellation of the contract has “nothing to do with the origin of investment. They failed in the terms of contract for domestic manufacturing.”
EESL had not begun deployment of the initial batch of smart meters that arrived from PT Hexing.
The tender for procurement of two million smart meters was won by PT Hexing under global bidding about two years ago.
The Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry on June 4 modified public procurement norms to give preference to companies whose goods and services have more than 50% local content.
The revised order on public procurement classifies suppliers into class-I, II and non-local suppliers, based on which they will get preference in government purchases of goods and services.
India recently barred non-local suppliers in bidding for contracts for supply of about 110 goods and services to power plants.
The non-local suppliers are manufacturers with less than 20% local content.
These tenders, in respect of which there is sufficient local capacity, will be open to only “class–I local suppliers” or those vendors who have more than 50% local content.
The power ministry has issued public procurement order with separate lists of products with adequate manufacturing capacity in India and those being manufactured locally under technology license from foreign countries.
The ministry’s latest order dated July 28 mandates that tenders for these 110 equipment and works can be awarded only to local companies with high localisation.
The equipment includes transformers, switch gears, cables and insulators, which are imported in large numbers in India despite available local capacity.
The ministry’s order is based on the June 4 order of the Department for Promotion of Industry and Internal Trade (DPIIT) that provides for compulsory purchase preference to local suppliers.