The Indian government on Thursday night made an important amendment in its public finance rule to scrutinize procurement of goods and services from bidders of countries that share a land border with India on the grounds of defence concerns and national security. Aimed largely at adversarial neighbours, India's punitive trade action exempt countries to which India extends lines of credit or provides development assistance.
Here are a few things about the notification you should know:
Which countries are at the receiving end?
India shares land border with seven countries, namely China, Nepal, Bhutan, Pakistan, Bangladesh and Myanmar. According to the Ministry of External Affairs website, India has extended credit to Bangladesh, Nepal and Myanmar. India is engaged in developmental works in Bhutan and has disbursed over ₹424 crore in loans and grants in FY21. These countries are exempted from the new order.
What the notification mandates
Companies from China will now have to register with a committee set up by the Department for Promotion and Industry and Internal Trade (DPIIT) before they can become eligible to bid for a government tender.
“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.
Political and security clearance from the Ministries of External and Home Affairs will be mandatory to get the registration certificate.
Applicable to all states, all govt bodies
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.
The notification mandates that 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.
Against WTO guidelines?
Legal experts deny that India's policy is against the WTO guidelines."India has not acceded to the Plurilateral Agreement on Government Procurement ('GPA') and is only an observer. As such, the amendment in their General Financial Rules 2017 is not falling afoul of their WTO commitments especially considering that such changes have been made for reasons of national security," says Dinesh Agrawal, Executive Director of law firm Khaitan & Co.
Exceptions for the order
Exceptions have made in four cases -- including procurement of medical supplies for containment of COVID-19 global pandemic till 31 December, 2020.
Exemptions have also been given to projects which receive international funding with the approval of Department of Economic Affairs and Ministry of Finance.
Possible reasons behind the order
The underlining trigger for the order is the clashes between Indian and Chinese troops in Galwan Valley on June 15. The scuffle between the two nuclear-armed nations led to the deaths of 20 Indian soldiers.
Indian govt has launched an offensive against the Chinese apps and investments by firstly banning 59 Chinese applications stating security concerns, then making it mandatory for sellers on the Government e-Marketplace (GeM) portal to clarify the country of origin of goods when registering new products.
India has cancelled railway and road tenders secured by Chinese companies, and PM Modi has asked agencies to end its dependence on import of solar panels, which are mostly imported from China.