The Telegraph
Since 1st March, 1999
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Public sector units turn to e-sourcing to cut costs

Calcutta, Oct. 27: After corporate majors like Reliance, Tata Steel, Dabur, Mahindra & Mahindra, it is the turn of the government and public sector units to turn to e-sourcing in a bid to save on costs.

E-sourcing is the strategic sourcing of purchases using internet technologies.

The Karnataka State Police Housing Corporation has adopted the electronic route to locate a service provider and has paid a mere Rs 7.8 lakh against a budget of Rs 35 lakh. The organisation expects to place Rs 100 crore worth of orders through online auctions next year.

Andhra Pradesh State Transport Corporation, AP Technology Services, AP Health and Medical Housing Infrastructure Development Corporation and Commissionerate of Tenders have adopted the online reverse auction process of e-procurement.

“The government and public sector units are waking up to the benefits of e-sourcing, though it is yet to reach a significant level,” FreeMarkets country manager Amit Bhatia said.

FreeMarkets has completed e-sourcing deals worth Rs 4000 crore and has identified savings of around Rs 600 crore for its customers.

The total e-sourcing market in the country is estimated at Rs 8200 crore in the last three years and is growing annually at 50 per cent. This year, the industry will account for Rs 5000 crore, of which FreeMarkets has a 60 per cent share of third party e-sourcing.

According to experts, the benefits of online reverse auction extend beyond cost savings. It ensures transparency which is critical in the procurement process.

According to estimates, PSUs spend nearly $25 billion on buying products and services. “If this purchase is made online, these organisations can save up to 15 per cent,” added Bhatia. “This translates into a whopping Rs 20,000 crore of savings.”

E-sourcing will help the government to maintain a level-playing field for suppliers as they are provided with identical information prior to the online auction. Even during the auction, each bidder receives identical and simultaneous market feedback regarding leading bids and their respective positions.

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