Chinese Bidders To Be Restricted From Public Procurement Projects In India

With an eye on the Chinese investments in India, the government has amended the General Financial Rules 2017 to impose restrictions on bidders from countries sharing a land border with India. The curbs have been imposed on procurement of public projects on the grounds of matters directly or indirectly related to “national security”.

India shares a land border with seven countries, including China, Pakistan, Bhutan, Myanmar, Afghanistan, Nepal and Bangladesh.

The government has, however, relaxed norms in “certain limited cases”, including for the procurement of medical supplies for containment of COVID-19 global pandemic till December 31, for nations that receive “lines of credit or development assistance” from India as they will not require prior registration. So, in essence, the move bars investments in government projects from China and Pakistan.

As per the order, issued by the Department of Expenditure, any bidder from such countries sharing a land border with India will be eligible to bid in any procurement whether of goods, services (including consultancy services and non-consultancy services) or works (including turnkey projects) only if they are registered with the Competent Authority, which will be the Registration Committee constituted by the Department for Promotion of Industry and Internal Trade (DPIIT).

“Political and security clearance from the Ministries of External and Home Affairs respectively will be mandatory,” the Finance Ministry statement said.

All public sector banks and financial institutions, autonomous bodies, central public sector enterprises (CPSEs)and public-private partnership projects receiving financial support from the government or its undertakings will have to comply with the order. However, there will be no impact on investments in private projects in India.

Besides, the Centre has written to the chief secretaries of states, invoking the provisions of Article 257(1) of the Constitution of India, to implement the order by states and PSUs, saying they too play a vital role in the country’s national security and defence.

For state procurement, the ministry has said the competent authority will be constituted by states but “political and security clearance” will remain necessary.

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,” the ministry statement said.

The government has been putting Chinese investments and imports under strict scrutiny amid the border tension along the Line of Actual Control. The anti-China sentiment is growing stronger than ever in the country and there are calls for boycotting Chinese goods and investments after the skirmish in Galwan Valley of Ladakh left 20 Indian soldiers dead.

As part of Prime Minister Narendra Modi’s ‘Atma Nirbhar Bharat’ call, the government is also cutting dependence on China to encourage manufacturing in the country.

The decision is believed to be another major blow to the Chinese investors after the Centre mandated its approval in all foreign direct investments (FDI) from countries sharing land borders with India back in April.