The Government of India recently imposed restrictions on public procurement from bidders belonging to countries that share a land border with India. This significant move was initiated to fortify national defence and security. The new policy was implemented through the amendment of the General Financial Rules 2017. Furthermore, the government has made it mandatory for sellers on the Government e-Marketplace (GeM) portal to specify the country of origin of goods for new product registrations. Additionally, Foreign Direct Investment rules were also revised, necessitating prior approval for investments by entities from border-sharing countries.
Underlying Reasons for the New Order
The implementation of these restrictions decisively addresses India’s concerns about the increasing influx of Chinese goods and investments following the Galwan Valley clashes between Indian and Chinese troops. Experts suggest the decision is aligned with the nation’s agenda to promote and establish an “Atmanirbhar Bharat” or self-reliant India.
Eligibility requirements for Bidders from Border-Sharing Countries
Under the new order, bidders from these countries must be registered with the Registration Committee (Competent Authority) constituted by the Department for Promotion of Industry and Internal Trade (DPIIT). For reasons pertaining to national security, the Registration Committee is not obligated to provide reasons for rejection or cancellation of a bidder’s registration. Moreover, bidders must secure mandatory political and security clearance from the Ministries of External Affairs and Home.
Application of the New Order on Various Institutions
This order is applicable to public sector banks, financial institutions, autonomous bodies, Central Public Sector Enterprises (CPSEs), and Public-Private Partnership projects that receive financial support from the Government or its undertakings. However, this order is not enforceable on the private sector.
Mandatory Implementation by State Governments
The Central government has invoked the provisions of Article 257(1) of the Constitution, thereby directing state governments to enforce this order for all public procurement. For state government procurement, the Competent Authority will be constituted by the states but political and security clearance from Central government ministries will remain necessary.
Relaxations in the Order
The new order doesn’t apply for the procurement of COVID-19 related medical supplies until the end of December 2020. It also exempts countries that India grants lines of credit or provides developmental assistance such as Bangladesh, Nepal, and Myanmar. Despite sharing a land border with India, these countries are not subjected to prior registration. Additionally, India provides various forms of developmental assistance to Bhutan and Afghanistan.
About Article 257(1)
Article 257(1) states that every State’s executive power should be exercised in a way that it doesn’t impede or prejudice the exercise of executive power of the Union. The Union can give directions to a State which it finds necessary. If a state fails to adhere to the directives issued by the Centre under Article 257(1), the President may impose President’s rule under Article 356.
