NEW DELHI: The oil ministry plans to give local companies a juicy share of the Rs 6-7 lakh crore investment planned in the next five years by helping local equipment makers compete successfully against foreign vendors, and setting up manufacturing clusters with attractive funding with the help of the Rs 10,000-crore collected as oil industry development cess every year.The ministry hopes to make significant contribution to the NDA government's Make-in-India programme in which Prime Minister Narendra Modi wants to make the country a manufacturing hub and create jobs. The oil ministry, as part of its initiatives for the programme, plans targeted fiscal measures such as long-term funding and interest subvention for manufacturing clusters. The ministry is likely to modify procurement norms for public sector entities by aggregating their requirements and has set a target of 50% indigenisation for investments in the upstream sector over the next three years.At a recent review meeting of the Make-in-India drive, the ministry has said in the medium term, it would aim to set up dedicated manufacturing zones and clusters focused on oilfield services such as building ships, offshore platforms and rigs. "The hydrocarbons industry is committed to investingRs 6-7 lakh crore over the next five years, so the ministry has set up a steering committee to identify equipment that can be manufactured locally," said an official aware of the development."Pooling the demand of firms like ONGC and IndianOil could help leverage indigenisation by introducing local content as a procurement criterion," the official said. Already, it has been decided that three of nine new LNG ships to be chartered by GAIL India in the next five years, would built in Indian shipyards.

Last year, the government had abolished its system of giving a 10% price preference to local companies as state-run firms said the policy had led to high costs for them. Industry bodies like Ficci had urged the government to review its ‘abrupt withdrawal' of the price preference policy for oil and gas equipment makers (in late 2014) and pointed out that India's capital goods sector was already shrinking sharply.

"We have got representations from industry to reintroduce some form of purchase preference as it is a tool used around the world to promote local manufacturing. Indian manufacturers already face cost disadvantages as imports of oil equipment are totally duty free," said an official from the heavy industries ministry. Apart from changes in the procurement norms, the oil ministry has also proposed a new vendor development program that will also aim at improving access to overseas technologies for local manufacturers.