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Government imposes restrictions on public procurement from countries sharing land border with India

The order will apply to all forms of public procurement but not to procurement by the private sector.

Jul 24, 2020 12:06 IST
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The Union Government on July 23, 2020 amended the General Financial Rules 2017 to impose restrictions on public procurement from countries that share a land border with India on national security grounds.

The Department of Expenditure issued a detailed order on public procurement to strengthen India’s defence and national security.

Under the order, any bidder from countries sharing a land border with India will be eligible to bid for the procurement of any goods or services if the bidder is registered with the Competent Authority.

Who is the Competent Authority?

The Competent Authority for registration will include the Registration Committee, which was set up by the Department for Promotion of Industry and Internal Trade (DPIIT). Besides this, the bidders will require mandatory political and security clearance from the Ministry of External Affairs and the Ministry of Home Affairs. 

Key Highlights 

The centre has written to the Chief Secretaries of all states invoking the provisions of Article 257(1) of the Constitution of India to implement this order in procurement by State Governments and state undertakings. 

The states can constitute their own Competent Authority but political and security clearance will remain necessary.

The order provides relaxation in certain cases such as for the procurement of medical supplies for containment of COVID-19 pandemic till December 31, 2020.

The government through a separate order has also exempted the countries that provide development assistance or take line of credit from India from the requirement of registration.

The order will apply to all forms of public procurement but not to procurement done by the private sector. It will apply to all new tenders. 

What happens in the case of tenders already invited?

In the case of tenders already invited, if the first stage of evaluation has not been completed, the bidders who do not have prior registration will be treated as disqualified. 

However, if the first stage has been completed then, the tenders will be cancelled and de novo process will be initiated. 

Background

The new order takes into its ambit the Central Public Sector Enterprises (CPSEs), autonomous bodies, public sector banks and financial institutions and the public-private partnership projects that receive financial support from the centre or its undertakings.

The government had earlier allowed any non-resident entity to invest in India under the FDI policy except in sectors that are prohibited. However, the order had stated that if the entity belongs to a nation sharing land border with India then they can only invest under the government route. 

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