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The Public Procurement (Preference to Make in India) Order, 2017 was issued by the Department of Industrial Policy and Promotion (DIPP) on 15 June. DIPP issued the order under the newly introduced Rule 153 (iii) of the General Financial Rules, 2017 (GFR 2017). The order empowers the government to provide for mandatory procurement of any goods or services or for price preference for the purpose of promoting locally manufactured goods or locally provided services. And the order applies to all procuring entities, which includes all ministries, departments, attached and subordinate offices, autonomous bodies and government companies as defined in the Companies Act, 2013.
Purchase and Price Preference
Under the new policy, only local suppliers will be eligible to bid if the value of procurement is between Rs 5 lakh and Rs 50 lakh, provided sufficient local capacity exists to generate competition. To qualify as a local supplier, the company will have to have ensure that the product or service it is offering has a minimum of 50 per cent local content. Local content implies the value added in India. This will be calculated by subtracting the value of imported content (including customs duty) from the total value of the good/service (excluding net domestic indirect taxes).
While local suppliers can self-certify the extent of the local content in their product or service, a certificate of the statutory auditor/cost accountant will have to be submitted to support the claim of local content where the value of procurement exceeds Rs 10 crore. The Order also provides for random independent verification of self-certification by committees of internal or external experts. False declaration could, of course, result in debarment.
The field will be open to both local and non-local suppliers in respect of procurement programmes exceeding Rs 50 lakh. If, however, a non-local bidder turns out to be the lowest (L1) in any such case, the lowest among the local bidders whose price bid is within 20 per cent margin of the lowest non-local bidder, will get an opportunity to match the L1 price and, subject to this condition being met, will get the contract for 50 per cent of the total order quantity, if the quantity is divisible. If the local L1 does not agree to match the overall L1 price quoted by the non-local supplier, the next higher bidders will get the opportunity to match the overall L1 price, one after the other.
If the quantity is not divisible and the lowest offer happens to be that of a non-local bidder, the lowest among the local bidders, whose bid is within 20 per cent of the overall L1 price, will get an opportunity to get the contract for the entire quantity subject to his matching the overall L1 price. In the event of the lowest local bidder not agreeing to it, the opportunity will pass on to the next higher bidders one by one, provided the price quoted by them is within 20 percent of the overall L1 bid.
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