Local industries have first right over public procurement according to an internal note issued by the Cabinet Secretariat to all government agencies, which will now have to show documentary evidence of attempts at local sourcing, before floating global tenders, two government officials said on condition of anonymity.
The Cabinet Secretariat last week directed all ministries, departments and state-owned companies not to approach it for permission to float a global tender without inviting bids from domestic companies and making efforts through industry bodies to first procure locally in accordance with the Aatmanirbhar Bharat Abhiyan (Self-Reliant India Initiative), the officials added.
“All government agencies have been directed first to approach the Department for Promotion of Industry and Internal Trade (DPIIT) to identify domestic manufacturers and service providers who can meet their requirements,” one of the officials cited above said.
In order to build domestic capabilities, all ministries and their agencies have also been asked to make public their medium-term (three-to-five year) requirement related to the procurement of goods and services through their websites, the second official added.
“The decision is guided by Prime Minister Narendra Modi’s May 12 address to the nation where he propounded ‘Aatmanirbhar Bharat Abhiyan’ while announcing the ₹20 lakh crore economic revival package,” the official said.
On May 15, the finance ministry disallowed global firms from participating in government tenders worth up to ₹200 crore. “Now, no Global Tender Enquiry (GTE) shall be invited for tenders up to ₹200 crore, unless prior approval is obtained from the Cabinet Secretariat,” its May 15 statement said.
The ministry added at the time that the move was aimed to benefit domestic, micro, small and medium enterprises (MSMEs).
The latest decision means that this will now apply to all global tenders.
Abhishek A Rastogi, partner at law firm Khaitan & Co said that this will certainly give a big opportunity to local industry, particularly MSMEs. “However, the moot point remains whether the buyers will be able to indigenously procure the same quality of the products and within the desired timelines.”
Amar Shankar, partner, Government and Public Sector Consulting at EY India said that the move would give “opportunity and advantage” to Indian industry to participate in the public procurement system which is estimated to be 18-20% of gross domestic product.
The move will encourage domestic industry to become competitive by adopting better methods, the latest technology, and also move towards import substitution, he said.
“In the short term, this may delay some on-going projects but in the end will play a positive role in realising the vision of ‘Aatmanirbhar Bharat’. Advise for 3/5 year procurement plans is significant as not only will it encourage government departments to operationally plan better but will also provide visibility to industry to be able to build capacity and cater to the demand in the future,” Shankar explained.