Public Procurement (Preference to Make in India) Order, 2017

by | Nov 3, 2020 | Insight

Government of India has been loud and clear of its intent to promote ‘Make in India’ initiative to boost domestic manufacturing of goods and rendition of services. In this regard, Government came up with Public Procurement (Preference to Make in India) Order, 2017 (‘PP Order 2017’) mandating all Government Bodies to give purchase preference to local suppliers in India. PP Order 2017 has been recently updated on September 16, 2020.

Being one of the major customers in India, Government bodies’ mandatory preference to local suppliers is a big step in the direction of building local manufacturing base. Through this update, we wish to apprise you regarding following key features of the updated PP Order 2017: 

  • Procuring Entity: Procuring Entity are entities bound to procure in the manner provided under this Order. This includes every Ministry or Department or attached or subordinate Office or autonomous Body controlled by the Government of India and includes Government Companies defined under the Companies Act, 2013.
  • Categories of suppliers: The Order categorizes supplier of goods and services as follows:

S. No.

Category

Requirements

1

Class I local supplier

Supplier whose minimum local content in manufactured goods / services is 50 percent

2

Class II local supplier

Supplier whose minimum local content in manufactured goods / services is 20 percent

3

Non-local supplier

Supplier whose minimum local content in manufactured goods / services is less than 20 percent

  • Local content (percentage of value addition in India): Local content is equivalent to total value of item procured by Procuring Entity (excluding net indirect taxes) less value of imported content in item (including custom duties). It is pertinent to note that Department of Promotion of Industry and Internal Trade (DPIIT) has identified and approved certain product categories and their associated Ministry / Department (Nodal Ministry) who can prescribe higher percentage of minimum local content. Some Nodal Ministries include Ministry of Electronics & IT, Department of Telecommunications, Department of Heavy Industries, Department of Pharmaceuticals, Ministry of Petroleum and Natural Gas etc.
  • Eligibility of Supplier: If sufficient local supplier base and local competition exists, only Class I local supplier shall be eligible to bid. In other cases, both Class I and Class II local supplier shall be eligible to bid. Non-local supplier can bid only when global tenders are issued. In all bids, Class I local supplier shall get purchase preference over Class II local suppliers and non-local suppliers. Similarly, Class II local supplier shall get purchase preference over non-local suppliers.
  • Exemption: Procurements below INR 5 Lakhs shall be exempted from this Order. In addition, the Administrative Department undertaking procurement (on approval from their Minister in charge) can also exempt any particular item or supplier from the coverage of this Order.

NITYA Comments: PP Order 2017 intends to open floodgates of opportunities for domestic manufacturing and provision of services, wherever possible. This will have significant impact on importers who majorly supply to Government. The high local content requirement laid down under PP Order 2017 restricts traders of imported goods in dealing with Government. Every supplier must assess its eligibility and quantum of local content in goods and services to be supplied to Government.

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