India builds a huge wall to stop Chinese firms from getting govt contracts

The Union finance ministry, in a late night development on Thursday, made an important amendment in its public finance rule that barred all government agencies from procuring goods and services from bordering countries such as China and Pakistan on the grounds of national security, two officials said requesting anonymity.

“The Government of India today amended the General Financial Rules (GFR) 2017 to enable imposition of restrictions on bidders from countries which share a land border with India on grounds of defence of India, or matters directly or indirectly related thereto including national security,” the finance ministry said in a statement. The GFR laws regulate all matters related to public finance.

The order takes into its ambit all public sector companies, autonomous bodies and public-private partnership (PPP) projects receiving financial support from the government, it said. State government and its undertakings have also been directed to follow suit.

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The Department of Expenditure, an arm of the finance ministry, issued two separate orders on late Thursday night.

While the first order barred public procurements from countries sharing land-borders with India, the second gave exemptions to certain neighbours whom India offers lines of credit. According to officials mentioned above, they could be neighbours such as Nepal and Bhutan.

But, the notifications did not mention names of any particular country or group of countries.

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Bidders from countries that are barred could bid in any procurement whether of goods, services, including consultancy services only if the bidder is registered with “the Competent Authority”, the statement said.

“The Competent Authority for registration 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,” it said.

Relaxation has been provided in certain limited cases, including for procurement of medical supplies for containment of Covid-19 global pandemic till December 31, 2020.

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By a separate Order, countries to which India extends lines of credit or provides development assistance have been exempted from the requirement of prior registration, the statement said.

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, it said.

“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,” it said.

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As state governments,too, play a vital role in national security and defence of India, the Union government has written to the Chief Secretaries of the states invoking the provisions of Article 257(1) of the Constitution of India for the implementation of this order in procurement by state governments and state undertakings, it said.

“For State Government procurement, the Competent Authority will be constituted by the states but political and security clearance will remain necessary,” it added.