The Ministry of Railways recently implored the Department for Promotion of Industry and Internal Trade (DPIIT) to exempt the procurement of essential medical items, particularly those involved in the treatment of Covid-19 and cancer, that are not produced domestically. This department is a key subordinate of the Ministry of Commerce and Industry.
The Background
In August 2020, Northern Railway communicated its difficulty in acquiring drugs and surgical items under the current Make in India policy to the Railway Board. As one of the country’s largest employers, with over 12 lakh employees, Indian Railways has extensive healthcare infrastructure, including super-specialty hospitals in all Zonal HeadQuarters. The problem lies in the procurement of certain drugs used in cancer treatment and supplies of antiviral medicines and vaccines for Covid-19 which are manufactured overseas but available domestically through dealers or agents. These agents may not fall under the Class-I or Class-II categories stipulated by the Make in India guidelines.
Understanding the Policy Revision
The revised Public Procurement (Preference to Make in India) Order 2017 introduced a categorization of suppliers based on their local content percentage. In June 2020, the government adjusted procurement norms to favor companies with goods and services containing 50% or more local content. Aiming to promote the Make in India initiative and foster national self-reliance, the policy does not, however, permit procurement from suppliers who do not meet the Local Content Criteria required for Class-I and Class-II Local Supplier category.
The Predicament
Under the current policy, there is no provision to procure items from suppliers who don’t meet the local content criteria required for Class-I and Class-II local supplier categories. With only these two supplier categories eligible to bid in procurement, it has been proposed to seek an exemption for procuring such medicines and medical items from ‘non-local suppliers’ or suppliers with less than 20% local content.
Incurring Direct Policy Violation
Despite the proposal, DPIIT indicated that procuring imported items through Indian agents and traders is indirectly violating the General Finance Rules, 2017. As a result, it discouraged this approach and advised seeking specific relaxation in procuring such medicines and medical equipment.
Restrictions on Global Tender Enquiry
In May 2020, Rule 161 (iv) of GFR 2017 was revised by the Department of Expenditure to limit global tender enquiry for contracts exceeding Rs. 200 crores. This amendment was intended to encourage local tenders by government procuring entities to benefit local organisations.
Indigenisation vs Relaxation
The purpose of seeking relaxation was to promote indigenisation of items not currently manufactured domestically. However, granting this relaxation would defeat the objective. In response, DPIIT has delegated the issue to the Department of Pharmaceuticals and Ministry of Health and Family Welfare, the nodal agencies for Pharmaceuticals, Medical Devices, and Equipment.
Powers under Make in India Policy Guidelines
DPIIT has recommended the Ministry of Railways to exercise its power conferred under Para 14 of the Make in India policy guidelines to seek relaxation in any particular procurement with ministerial approval. Para 14 authorises Ministries and Departments to grant exemptions and reduce minimum local content requirements if necessary.