In a move that will mainly affect entities from China, the government has amended the General Financial Rules, 2017, imposing restrictions on public procurement from bidders of countries that share a land border with India, citing grounds of defence and national security.
Bidders from these countries will be eligible only if they are registered with the Registration Committee constituted by the Department for Promotion of Industry and Internal Trade (DPIIT). They will also be required to take mandatory political and security clearance from the ministries of External Affairs and Home, the Finance Ministry said in an order issued late Thursday.
The central government has also directed state governments to implement this order for all public procurement.
Listing out the exceptions, the Finance Ministry said that relaxation will be provided for procurement of Covid medical supplies till December 31. Also, the order for prior registration will not apply for countries to which the government extends lines of credit or provides development assistance, even if they share a land border with India.
India shares its border with China, Nepal, Bhutan, Pakistan, Bangladesh and Myanmar. As per official data, out of these, the government has extended lines of credit to Bangladesh, Nepal, Myanmar, exempting them from the new order. India has extended lines of credit totalling $30.59 billion to 64 countries, including 41 from Africa.
“As per the Order any bidder from such countries sharing a land border with India will be eligible to bid in any procurement whether of goods, services (including consultancy services and non-consultancy services) or works (including turnkey projects) only if the bidder is registered with the competent authority,” the order said.
“The competent authority for registration will be the Registration Committee constituted by the Department for Promotion of Industry and Internal Trade (DPIIT). Political and security clearance from the Ministries of External and Home Affairs, respectively, will be mandatory,” it said.
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“For national security reasons, the competent authority shall not be required to give reasons for rejection/cancellation of registration of a bidder,” it said.
More filters in place
The latest move mandating registration and security clearance for bidders of countries sharing land borders with India, in public procurement tenders, will effectively put in place more filters for entities from China. The restrictions follow a series of steps taken in recent months to prevent the influx of Chinese products and investments into India.
These measures follow a series of steps that have been taken in recent months to prevent influx of Chinese products and investments into India.
On June 23, the government made it mandatory for sellers on the Government e-Marketplace (GeM) portal to clarify the country of origin of goods when registering new products. The GeM portal now allows buyers to reserve a bid for Class I local suppliers, or suppliers of those goods with more than 50 per cent local content. For bids below Rs 200 crore, only Class I and Class II (those with more than 20 per cent local content) are eligible.
The decision came in the backdrop of the government’s push for Atmanirbhar Bharat, and following the clashes between Indian and Chinese troops in Galwan Valley on June 15, which prompted several government departments to launch an offensive against imports from China.
At $70.32 billion in 2018-19 and $62.38 billion between April 2019 and February 2020, China accounts for the highest proportion of goods imported into India — around 14 per cent in 2019-2020 so far.
In April, the government amended FDI rules mandating prior approval for investment by entities in countries that share land borders with India. “…an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route,” the DPIIT had said.
The move came days after China’s central bank, People’s Bank of China (PBoC), raised its shareholding in Housing Development Finance Corporation (HDFC) to over one per cent.
The government stated that prior approval was compulsory for foreign investments from all countries sharing borders with India to prevent “opportunistic takeovers” of domestic firms following the pandemic.
Apart from attached ministries and departments, and subordinate bodies, this new order will be applicable to all autonomous bodies, public sector banks and financial institutions, central public sector enterprises, public private partnerships receiving financial support from the government or public sector undertakings, union territories and National Capital Territory (NCT) of Delhi.
This move will not apply to cases where orders have been placed or contract has been concluded or letter of acceptance has been issued — but new tenders will be covered. Also, if the first stage of evaluation of qualifications has not been completed in the tenders already invited, bidders not registered under the new order will be treated as not qualified.
“If this stage has been crossed, ordinarily the tenders will be cancelled and the process started de novo. The order will also apply to other forms of public procurement. It does not apply to procurement by the private sector,” the ministry said.
In works contracts, including turnkey contracts, contractors will not be allowed to sub-contract work to any contractor from a country that shares a land border with India unless registration is provided by the contractor.
The Registration Committee under DPIIT shall be headed by an officer not below the rank of joint secretary and will have officials from MHA, MEA and other concerned departments as members.
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