Govt clarifies norms for goods procured from China, Pakistan
- The clarification aims to provide ease of business to contractors and bidders in executing public sector projects by explicitly allowing them to sourcing cheaper raw materials and components from neighbours such as China.
Government vendors can procure raw materials and components from neighbours sharing land borders with India such as China and Pakistan, but no project can be awarded to contractors from these countries without prior registration and security clearance, the finance ministry has clarified.
The clarification issued on Monday aims to provide ease of business to contractors and bidders in executing public sector projects by explicitly allowing them to sourcing cheaper raw materials and components from neighbours such as China, two persons with direct knowledge of the matter said on condition of anonymity.
It came after the government received several representations seeking to know whether bidders were permitted to procure raw material, components and finished goods from vendors belonging to countries sharing land borders with India, the two persons said.
“However, the government continues to strictly enforce its public procurement policy announced on July 23, 2020 that bars award of any project to contractors from countries sharing land borders with India without prior registration with a competent authority and security clearance from MEA [ministry of external affairs] and MHA [ministry of home affairs],” one person said.
An office memorandum issued by the finance ministry on Monday said that in case of works contracts, including turnkey contracts, contractors shall not be allowed to sub-contract works to any contractor from a country which shares a land border with India unless such a contractor is registered with the competent authority.
“However, no such restriction is stipulated in the Order [dated July 23, 2020] regarding other procurements i.e. procurement of Goods, Services, etc,” the note said. The Competent Authority is defined as a registration committee in DPIIT. All such foreign entities are also required to get political and security clearance from MEA and MHA.
According to the memorandum, a bidder is permitted to procure raw material, components and sub-assemblies from the vendors of countries that share a land border with India. “Such vendors will not be required to be registered with the Competent Authority, as it is not regarded as ‘sub-contracting’,” it said.
“However, in case a bidder has proposed to supply finished goods procured directly/indirectly from the vendors from the countries sharing land border with India, such vendors will be required to be registered with the Competent Authority,” it added.
After the Chinese aggression on the Line of Actual Control in-mid June last year, the government on July 23, 2020 made an important amendment to its public finance rule that virtually barred all government agencies from procuring goods and services from bordering countries such as China and Pakistan, citing national security as the grounds. “It is to be noted that in spite of the border tensions, trade relationships are still continuing. Though India’s imports from China have dipped approximately by 20%, its still high in terms of absolute numbers and trade deficit additionally is in favour of China,” said Divakar Vijayasarathy, founder and managing partner of consulting firm DVS Advisors LLP said. “ Further there are many raw materials for which the Indian industry is entirely dependent on China for supply with no alternative. Hence a complete ban or reduction is not possible.”