India imposes restrictions on public procurements from neigbouring countries, eye on China

With an aim to keep Chinese vendors out from public procurements, the Modi government on Thursday announced restrictions on bidders from countries 'which share a land border with India' on grounds of defence and national security. 

The government has amended the General Financial Rules 2017 and has issued an order requiring registration of bidders from such countries in order to be eligible to bid in public procurement of goods, services (including consultancy services and non-consultancy services) or works (including turnkey projects).

The Registration Committee constituted by the Department for Promotion of Industry and Internal Trade (DPIIT) will be the authority to clear such bidders. Political and security clearance from the Ministries of External and Home Affairs respectively will be mandatory.

In a statement, the Ministry of Finance said the order takes into its ambit public sector banks and financial institutions, Autonomous Bodies, Central Public Sector Enterprises (CPSEs)and Public-Private Partnership projects receiving financial support from the Government or its undertakings.

The Centre has written to the Chief Secretaries of the State Governments invoking the provisions of Article 257(1) of the Constitution of India for the implementation of this Order in procurement by State Governments and state undertakings etc. For State Government procurement, a Competent Authority will be constituted by the states but political and security clearance will remain necessary.

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Relaxation has been provided in certain limited cases, including for the procurement of medical supplies for containment of COVID-19 global pandemic till 31 December 2020.

By a separate Order, countries to which India extends lines of credit or provides development assistance have been exempted from the requirement of prior registration. To be clear, India provides 'development assistance' worth crores of rupees to most of its neighbours — Afghanistan, Nepal, Bhutan, Bangladesh, Sri Lanka and the Maldives. The only two countries where these new restrictions truly apply is China and Pakistan — both a security concern for New Delhi.

The new provisions will apply to all new tenders. In respect of tenders already invited, if the first stage of evaluation of qualifications has not been completed, bidders who are 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.

Tensions with China

Tensions with China escalated as the People's Liberation Army (PLA) and the Indian Army were involved in a violent standoff at the Galwan Valley in Ladakh. 20 Indian soldiers were martyred in the stand-off which triggered an anti-China sentiment across the country with traders and businesses appealing to boycott the neighbouring country. Following the escalation, the Indian government also 59 Chinese mobile apps citing security and privacy concerns. 

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