Ministries flout local procurement rules in govt contracts, says DPIIT

Dept says tender terms favourable to foreign firms

The Centre has pulled up several ministries and their procurement agencies after repeated instances of them flouting domestic procurement norms in government tenders. 

Conditions placed in these tenders were found to be against local suppliers, with many prerequisites essentially eliminating them from the bidding process at the start, Business Standard has learnt.

The Department for Promotion of Industry and Internal Trade (DPIIT), following consultations with the government e-marketplace (GeM) and finance ministry, flagged these violations of the public procurement order of 2017 in an advisory issued to all ministries last month.  

The order, which was issued to prioritise Make in India, mandates the requirement of local supplies or local value addition in government procurement.

The government has been taking a series of steps towards the prime minister’s vision of self-reliant India. India’s share of manufacturing, as a share of gross domestic product (GDP), has also been stagnant over the past few years and is expected to fall further to 13 per cent of GDP in FY23.

Some of the discriminatory tender conditions include mandatory foreign certification, without equivalent Indian certification as an alternative in procurement of medical devices, the order said.

Procuring agencies, in the past, have put pre-qualifying criteria in their tenders requiring turnover and past experience not equivalent to the financial capacity required to execute the project. Moreover, local suppliers are also required to produce additional bank guarantees.

All these conditions, the DPIIT said in its indicative list, are examples of “restrictive and discriminatory conditions” against local suppliers.

The development comes in the backdrop of DPIIT getting complaints that the public procurement order was being flouted often. “A government panel headed by DPIIT secretary has been looking into the complaints regarding the violation of the order. When any violation of the order or a complaint comes into notice, the committee calls upon the ministry concerned to look into the matter,” a government official said.

The advisory mentions technical conditions in tenders that specify foreign companies as part of the contract. Some of these include CISCO, Siemens, Dell, HP, Lenovo, Mitsubishi, Schindler, Honeywell, and D-Link, among others.

“There have been cases where ministries came up with the tender, keeping in mind the mandate for local value addition norms. Despite that they would end up violating the 2017 public procurement order. To address this issue, the DPIIT, in consultation with the finance ministry and GeM, has prepared a list of discriminatory conditions against local suppliers,” the official cited above said.

The department, in the advisory, also clarified that ministries can no longer exempt contracts from domestic procurement norms citing lack of a contract-specific notification from the nodal ministry, as the order applies to all contracts exceeding Rs 5 lakh in value.

Another senior government official who handles infrastructure execution said that while the push for domestic procurement is much needed, there have been issues of suppliers delivering substandard goods after getting preference under Make in India, which could compromise the quality of the project. 

DPIIT had issued a public procurement order over five years ago to provide purchase preference to local suppliers. The larger idea was to encourage ‘Make in India’, promote domestic manufacturing and also increase employment opportunities in India.

According to the order, the minimum local content of 50 per cent is a requirement. However, it also gave the flexibility to the concerned or nodal ministry to prescribe a higher or lower percentage with respect to any particular item as well as the method of computing the share of local content.

A look at the complaints

Foreign brands being asked for in finished products/ supply

• Telecom products: Cisco, NEC, Alcatel, Siemens
• IT products: HP, Dell, Lenovo
• Lifts: OTIS, Mitsubishi, Schindler, Kone, Johnson
• Electrical equipment: Siemens, Schneider, GE Power

 
Pre-approved foreign brands in works/turnkey projects*

• Cameras: Honeywell, Bosch, Pelco
• Network switches: D-Link, Cisco, Brocade
• Axial Fan: Kruger, Nicotra, Greenhench

 
*Note: Indian brands not included in pre-approved list Source: DPIIT Advisory Order