Source: LiveMint.com, Feb 28, 2017
New Delhi: To promote its flagship Make In India programme, the government is proposing its own version of the US’s Buy American policy through a national government procurement policy, according to a government official familiar with the plan.
The policy being considered involves purchases of Rs2 trillion a year but doesn’t include defence equipment.
Under the proposed policy, the central government will provide special preference to companies producing in India; this could be in the form of a relaxation in turnover and experience conditions as well as price preference in products and services it is buying for its own use.
The purchases could range from mobile phones and computers to stationery and medicines, and even steel or aluminium for government and railway projects.
When implemented, the scheme, which is compliant with the norms of the World Trade Organization (WTO), will incentivise companies to manufacture in India, given the scale of government purchases.
The central government estimates that the purchases could be around Rs2 trillion a year. That number will grow once state governments, municipal bodies and government educational institutions start doing the same.
A group of secretaries, headed by commerce secretary Rita Teaotia, made the recommendation earlier this month and Prime Minister Narendra Modi is believed to have signed off on it. The commerce ministry is now giving final touches to the policy, after which the expenditure department in the finance ministry will notify it.
“The recommendation to the prime minister was that the Make In India policy has to be government-wide and that one of the tools (for this) is government procurement. We have a powerful tool (for this) which is compliant with WTO rules,” added the government official who asked not to be identified.
Under WTO rules, if government is buying for itself and not for commercial purpose, then it may provide preference to domestic products. In the Jawaharlal Nehru National Solar Mission case which India lost to the US at the WTO, the country was planning to impose mandatory local content requirements on solar power developers who would sell power on commercial basis.
The US follows a similar policy under the Buy American Act, 1933, under which it prefers US-made products for government purchases.
The new e-market platform GEM (Government e-Market) which is used to procure goods and services for the government in a transparent manner will be used to roll out the new policy.
“We can emphasize preference for domestic products in government procurements and we can monitor its implementation across ministries through the GEM platform,” the official said.
Sunil Kant Munjal, chairman, Hero Corporate Service Pvt. Ltd, described the plan as “bold” and said it would help create “100 million jobs”. “ It is a big boost for Make in India,” he added.
Both Indian companies and multinationals which have been in India for some time and have significant manufacturing facilities in the country would benefit, said Venugopal Dhoot, chairman, Videocon Industries.
“In consumer durables, production is largely happening in Thailand and they get imported here at zero duty. With this move, they will be forced to manufacture them here in order to supply to the government. It seems like the Modi government is standing by its objective of promoting local industry,” he added.