Our Correspondent
In a bid to counter China following border clash between the India and China, New Delhi has amended the General Financial Rules 2017 saying bidders from bordering countries eyeing government contracts would need prior registration and security clearances.
The Indian government’s statement said the decision was taken to “strengthen the defence of India and national security”. India shares borders with China, Pakistan, Bangladesh, Myanmar, Nepal and Bhutan, but the government statement did not name any specific country.
“Any bidder from such countries sharing a land border with India will be eligible to bid in any procurement whether of goods, services … only if the bidder is registered with the competent Authority,” the government statement said.
“Political and security clearance from the Ministries of External and Home Affairs respectively will be mandatory.”
The announcement comes after India in April issued a similar directive on screening incoming foreign investment from neighbouring countries with which it shares a land border.
India did not name China in that order, but the move irked Chinese businesses which have major interests in India. Beijing called the policy discriminatory.
Chinese firms have faced hostility since a border clash that killed 20 Indian soldiers in June. India has also banned 59 apps of Chinese origin.
In a late night order on July 23, the Indian government said the restrictions would apply to tenders issued by several entities including public sector banks, financial institutions and government enterprises.
“This was expected because public procurement is the strongest lever that Indian government can use to send a strong signal to China,” said Santosh Pai, a partner at Indian law firm Link Legal that advises several Chinese companies.
Procurement of medical supplies for containment of COVID-19 global pandemic until Dec. 31, 2020, will be exempted from the new rules, the government said.
The Government of India has written to the Chief Secretaries of the State Governments invoking the provisions of Article 257(1) of the Constitution of India for the implementation of this Order in procurement by State Governments and state undertakings etc. For State Government procurement, the Competent Authority will be constituted by the states but political and security clearance will remain necessary.
Relaxation has been provided in certain limited cases, including for procurement of medical supplies for containment of COVID-19 global pandemic till 31st December 2020. By a separate Order, countries to which Government of India extends lines of credit or provides development assistance have been exempted from the requirement of prior registration.
The new provisions will apply to all new tenders. In respect of tenders already invited, if the first stage of evaluation of qualifications has not been completed, bidders who are not registered under the new Order will be treated as not qualified. If this stage has been crossed, ordinarily the tenders will be cancelled and the process started de novo. The Order will also apply to other forms of public procurement. It does not apply to procurement by the private sector.
