- Public procurement in India is about 30% of GDP and most vulnerable to corruption.
- It is characterized by cartelization, rigging, monopoly, corruption, poor quality of procured goods and services etc.
- Apart from reduction in corruption, ensuring access for government to best product and service at reasonable prices etc., public procurement policy can bring in the following financial benefits :
- Fiscal Savings (of about 0.6-1.2% of GDP) and hence added fiscal space
- Enhanced flexibility for government to channel expenditure into growth enhancing areas
- Shift towards rule-based institutional procurement
Government has approved a national procurement policy that gives preference to ‘Make In India’ in government procurements. The policy aims to maintain the balance between promoting ‘Make in India’ and ensuring timely, quality and value-for-money products for the procuring government entities.
Why was it needed?
- It will boost domestic manufacturing and service provision
- It will enhance income and employment.
- It will facilitate flow of capital and technology into domestic manufacturing and services.
- Preference will be given to local content in government procurements
- Local content essentially means domestic value addition
- Local suppliers are those whose goods or services meet minimum thresholds (50%) for local content.
- For the procurement of goods below Rs 50 lakhs, only local suppliers will be eligible if the Nodal Ministry determines that there is a availability of sufficient local capacity and local competition.
- For procurements valued above Rs 50 lakhs or in case of insufficient local capacity and if the lowest bid happens to be from a non local supplier, then the lowest-cost local supplier who is within a margin of 20% of the lowest bid, will be offered an opportunity to match the lowest bid.
- If the order can be split into more than one supplier, the order will be split between the non-local supplier and the local supplier.
- Small procurements valued below Rs 5 lakhs are exempted from the policy.
- The order also covers autonomous bodies and all the government entities under the control of the government.
- The policy primarily favours self certification for verification of local content. However, if the declarations were found to be false then the supplier will have to face penal consequences.
- A Standing Committee in Department of Industrial Policy and Promotion (DIPP) will oversee the implementation of this order. It will further make recommendations to Nodal Ministries and procuring entities.
Challenges in Implementation:
- Enhancing data management capabilities and standardisation which will ensure transparency in public procurements.
- Need clarity regarding multiple references to ‘rules’ in the Bill which have led to confusion and ambiguity.
- Need to upgrade infrastructure (For e.g. IT Infrastructure for e-procurement) and the skill sets of the officials involved in procurement exercise in-line with best practices.
- However, apart from these, certain other reforms like:
- Changes in the Procurement Bill like simplifying objectivity, including post-tendering steps within the ambit of procurement, designating a nodal agency for procurement etc.
- Strengthening CCI to check cartelization while procurement
- Adoption of Global best practices like OECD Guidelines In Public Procurement
- These all steps along will go a long way in reforming the procurement process in India