Public Procurement Order, 2017 amended

Published: September 19, 2020

The Government of India has recently amended the public procurement order 2017. The amendment has been made to curtail Chinese investment. According to the amendment the entities of countries that do not allow Indian companies to participate in their government procurement procedures shall not be allowed to participate in Indian government procurement procedures.

 Highlights

  • The amendment has been made to promote Make in India and to curtail investments from neighbouring countries especially China. The amendment now enables the departments and nodal Ministries to notify higher local content requirement for class 1 and class 2 local suppliers. Earlier the share of class 1 and class 2 local suppliers were fixed at 50 % and 20 % respectively (in June 2020).
  • Also, all the administrative departments and Ministries whose procurement is greater than 1000 crore rupees per annum will notify their procurement projections on their respective websites for the next five years.
  • The Government of India will notify an upper threshold value of procurement above which foreign companies can create joint ventures with Indian companies in order to participate in government tenders in near future. The amendment says that a threshold is to be fixed.

Class 1 local supplier

Class 1 local supplier means a supplier whose goods and services offered for procurement has local content greater than or equal to 50 %. Now with this amendment the ministry can notify local content requirement even greater than 50 %.

 What is local content?

The local content is the value added in India. This means the total value of the item procured – the value of imported content in the item. This is a proportion of the total value in percentage.

 What is public procurement?

The process by which the government and state-owned enterprises can purchase goods from private sector. The process uses a part of the tax payer money. Thus, strict guidelines and tracking are essential.

Public procurement policy of India

The public procurement policy intends to incentivize production that is linked to local content requirements. The Government of India has notified a public procurement policy for the micro and small enterprises as well. According to this policy, 25 % of annual procurement by the department, Central Ministries and public sector enterprises have to be made from micro and small enterprises.

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