PPP was introduced in 1992 in the wake of liberalisation measures to protect domestic manufacturers from getting beaten out of the market by foreign suppliers. This underlying logic of PPP does not hold any more as one of the largest beneficiaries of this price policy which is the Bharat Heavy Electricals Limited has close relationships with multinational companies for both steam and gas turbines, say ministry of power officials.

Critics of PPP say the policy allows MNCs, which have formed agreements with PSUs, to wear the mask of an Indian company and render international competition ineffective. MNCs, which are pitched against Indian suppliers, do not have to counter only the 10 per cent disadvantage. With the foreign supplier loading import duties on his quotation the advantage for the Indian manufacturer comes close to 20 per cent, officials say.

The PPP will not be beneficial for the economy as the domestic supplier along with its family of MNCs will not introduce the latest technology in the market as the PPP will not allow any competitor to survive, sources said. The PPP promotes the cause of a monopoly supplier which is not in the interest of the industry, officials said.

When there is a monopoly the PSU will get burdened with orders which would result in sub-contracting of orders to vendors resulting in deterioration of quality, sources pointed out. It is on these counts that the ministry of power and the ministry of finance are opposing the extension of the PPP, officials said.

NTPC has also written to the ministry of power that the PPP creates ambivalence in its tender appraisal norms. As NTPC receives large funds from bilateral agencies like the World Bank and the Asian Development Bank it is not easy for this utility to go with price preference directions.

The PPP was initially for a period of three years till 1995. It was further extended till March 1997. Thereafter it was extended to March 2000. The ministry of heavy industry has moved a cabinet note asking for extension of the policy till March 2002.