India has modified rules to give additional preference to local companies in govt procurement contracts. These changes bar companies with less than one-fifth Indian content from participating in most government tenders that are floated — for buying pens to constructing highways.
The latest norms come weeks after Prime Minister Narendra Modi called for boosting self-reliance in Indian industrial and services sectors through an “Aatma Nirbhar Bharat” campaign.
The Department For Promotion Of Industry and & Internal Trade has amended it’s Public Procurement (Preference to Make In India) Order of 2017 that gives priority to bidders of government contracts that use more local content.
As per the changes, suppliers of goods and services to the central Government have been divided into three categories. Suppliers with more than 50 percent of local content are categorized as Class 1, which is the highest rank in the pecking order of preference.
Suppliers with 20 to 50 percent local content are categorized as Class 2 while those with less than 20 percent local content has been designated as non-local suppliers.
As per earlier norms, government contracts below Rs 50 lakh were reserved exclusively for bidders which had more than 50 percent local content. Moreover, there was no classification of suppliers to government companies.
As per the new rules, only Class 1 suppliers will be allowed to bid for government contracts in sectors that have “sufficient local capacity and local competition”.
The nodal central government ministry or department will prepare a list of goods and sectors in which India has enough local capacity. These norms are also applicable for contracts related to engineering procurement and construction used extensively in the infrastructure sector as well as system integration, which relates to services like operation & management, surveys, and annual maintenance contracts.
Restrictions have been imposed on government departments to float global tenders. The new DPIIT notification mandates that for contracts below Rs 200 crore, prior permission will have to be taken before floating global tenders.
Moreover, non-local suppliers – or bidders for government contracts with less than one fifth Made In India content – will be allowed to participate only in global tenders.
The preference given to Class 1 suppliers will also be applicable to sectors that don’t have sufficient local capacity. In such cases, both Class 1 and Class 2 companies will be allowed to bid with greater preference being given to the former. Even in global tenders, if the lowest bidder of a divisible tender (or L1) is not a Class 1 Supplier, it will be assured of only 50% of the contract value. In such a case, the Class 1 supplier with the lowest bid will be allowed to match the L1 bid for the rest of the contract value with a margin of preference of 20 percent –that is bid price that is 20 percent less than the L1.