Public Procurement (Preference to Make in India) Order 2017

Navdisha Sehgal

15 Oct, 2022

Public procurement is a process whereby the Government and state-owned enterprises purchase goods and services from the private sector. A substantial part of taxpayers’ money is utilized, and the government is required to follow a strict procedure to ensure fairness and transparency and to safeguard the public interest.

Purpose of Public Procurement

Public procurement aims to support the government. This will also allow public service operations to enter into cost-effective contracts with the service providers, contractors, and suppliers to provide services, goods and work, in accordance with the principles and the process laid in the public procurement.

Make in India

Make in India is a program initiated by India’s government to facilitate innovation, investment, enhance skill development, manufacturing, and to protect intellectual property in India. It recognizes ease of doing business, which in turn results in good entrepreneurship.

Make in India’s triumph relies on the startups.

It aims to fulfill the following objectives:

1. Promote investment
2. Procure an impetus for innovation
3. Enhance the development of skills
4. Protect the intellectual property
5. Provide employment opportunities
6. Build the best in class manufacturing infrastructure
7. Make India digital
8. Create healthy relationships with various countries.

Make in India focuses on mainly 25 sectors, which includeautomobiles, automobile components, aviation, biotechnology, chemicals, construction, defense manufacturing, electrical machinery, electronic systems, food processing, IT & BPM, leather, media and entertainment, mining, oil and gas, pharmaceuticals, ports and shipping, railways, renewable energy, roads and highways, space, textile and garments, thermal power, tourism and hospitality.

What is public procurement (preference to make in India) Order, 2017?

Indian government issued the Public Procurement (Preference to Make in India) Order, 2017^[1] to encourage manufacturing and production of goods and services, which increases employment and income. As per the Order, a supplier must fulfill specific criteria to be eligible to bid in public procurement.

There are 3 classes of Suppliers:

1. Class – I Local Supplier: It means a supplier or service provider has more than 50% of the local content in his services or goods.
2. Class – II Local Supplier: It means a supplier or service provider has 20% to 50% of the local content in his services or goods.
3. Class – III or Non – Local Supplier: It means a supplier or service provider has 20% or less local content in his services or goods.

The Public Procurement (Preference in Make in India) Order, 2017 states that only Class I & Class II of local suppliers can participate in the bid, as they provide more than 50% & 20% to 50% of the local content in the services or goods respectively.

Amendment in Public Procurement Order, 2017 

The Government of India on 16^th September 2020 amended the Public Procurement (Preference to Make in India) Order, 2017, wherein it enables the nodal Ministries/Departments to notify the higher minimum local content requirement for Class I & Class II local supplier, which was earlier 50% and 20% in that Order.

The entities of countries that don’t allow Indian companies to participate in the procurement for any item will not be allowed to take part in the Government procurement for all the items related to that Nodal Ministry or Department, except for the list of items published by the Ministry/ Department permitting their participation.

Along with this, if the procurement surpasses Rs. 1000 Crores per annum; the administrative departments must notify their procurement estimate for the next 5 years on their respective website.

Listing foreign certifications, brands or models or technical specifications in the bid is restricted, and the discriminatory practices are restricted against the local suppliers. Foreign certification can be obtained with the prior approval of the Department concerned (if required).

Vocal of local

The Government of India issued the Public Procurement (Preference to Make in India) Order, 2017, as amended in 2020. The Order aims to promote Make in India and the production and manufacturing of goods and services in India to enhance employment and income.

The said Order applies to all the Ministries and the Departments or autonomous bodies that come under the purview of the Government of India. It also included Government companies as defined under the Companies Act.

Only Class I suppliers and Class II suppliers are eligible to bid. ‘Class I’ suppliers’ offers items with more than 50% local content. The Class II suppliers’ offers items with 20% to 50% local content. Thus, only these classes are allowed to bid in the procurement.

According to the Notification of Order of 2017, the Telecommunication Ministry notified the local manufacturers of the items by making it mandatory to give preference to the local manufacturers in the procurement process. Similarly, the Ministry of Railways recently revised the use of wagon items, track items, and coaches. Except for a few products, all the components’ procurement is restricted to local suppliers having more than 50% local content.

Conclusion

The Public Procurement (Preference to Make in India) Order, 2017 was issued by the Government of India, to encourage ‘Make in India’ and to promote the goods and services manufactured or produced by the local suppliers. The Order specifies that only Class – I Local Suppliers and Class – II Local Suppliers are eligible to participate in the bid.

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