Public Procurement Rules revised To Promote Local Manufacturing

To enhance the Make in India campaign, the government has made public procurement rules stricter by not including imported inputs in calculating local content for purchase orders.

The Department for Promotion of Industry and Internal Trade (DPIIT) clarified in the most recent update to the Public Procurement (preference to Make in India) Order 2017 that the purchase and distribution of repackaged, refurbished, rebranded imported goods will be considered as selling imported goods.

Licence fee, royalties, and technical fee paid outside of India will not be included in the calculation of local content. The government purchasing of IT and other technology products will be the most noticeable outcome of this order.

This directive will support the government's recent initiatives to promote domestic production of high-tech goods and IT products by offering tariff protection and incentives such as the production linked incentive (PLI) scheme. The procurement preference policy was initially introduced in 2017 to promote the manufacturing and production of goods and services within India.

According to the directive, manufacturers producing an item under the PLI scheme will be considered a Class II local supplier of that product if their local content is less than or equal to the Class I local supplier. The ministry running a specific PLI scheme will determine the duration of time that this concession will be valid for.

A Class I local supplier is defined as one that provides goods, services, or works for procurement with a local content of 50% or higher. A Class II local supplier has a local content of over 20% but less than 50%.