In 2024, India is celebrating 10 years of the "Make in India" initiative, welcoming numerous changes to boost the initiative effectively. Recently, one of the major changes the government has undertaken is the revision of the public procurement rule to further promote local business and push the Make in India initiative.
Public procurement procedure defines how governments and state-owned companies acquire goods and services, directly impacting the local economies and industries. The revision in public procurement rules is likely to positively impact the acquisition of goods and services by governments across the country.
IAS officers, stakeholders, and business owners are appreciating this bold move of the government.
Historical Context of Public Procurement Rule
Public procurement rules in India showcase a significant evolution aimed at enhancing transparency and supporting local industries. Initially, public procurement was governed by the General Financial Rules (GFR) and the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012. However, these frameworks lacked explicit mechanisms for tender preferences based on local content, limiting their effectiveness in promoting domestic manufacturing.
As a strategic move to boost the Make in India initiative, Public Procurement (Preference to Make in India) [PPP-MII] Order 2017 was introduced. This order established a structured approach by categorizing suppliers into Class-I (minimum 50% local content) and Class-II (20% to 50% local content) suppliers. It also introduced a 20% margin of purchase preference for local suppliers, enabling them to compete more effectively against non-local bidders.
Although public procurement traditionally fell under the Ministry of Finance, it shifted to DPIIT to better align with domestic manufacturing initiatives like "Make in India."
Former IAS officer, Ramesh Abhishek, (at that time, 2017, working as Secretary of the Department for Promotion of Industry and Internal Trade, DPIIT), led the initiative and played a pivotal role in conceiving and then establishing it.
The new public procurement revision 2024 is another step to further boost the Make in India initiative.
Critical Changes Made to the Public Procurement Rule to Enhance Make in India Initiative
Public procurement rules are very important rules for supporting the initiative of Make in India while ensuring the development of local manufacturing, ensuring the country's economic growth.
In the latest amendments to the PPP IIM Order 2017, led by former IAS officer Ramesh Abhishek many new significant changes have been brought into the picture that many IAS officers, stakeholders, economic critics, and notable individuals have welcomed.
- Exclusion of Imported Inputs:
One of the key changes, that is receiving buzz from the notable IAS officers, is that no imported inputs are considered when counting the local content in purchase orders. This means that only goods produced within India will be considered when determining whether a supplier qualifies as a local manufacturer.
- Classification of Imported Goods
Another significant change is that the new rules identify the repackaged, refurbished, and rebranded imported goods, as imported goods, avoiding the move of companies to repack the imported items in the name of country-made products. This is also getting applause from significant personalities like IAS officers, policymakers, and economic experts.
- Adjustment in Calculating Local Content
From the introduction of the rule, the license fees, royalties, and technical costs paid to foreign parties shall not be credited to local content. This adjustment is particularly needed in IT/technology product procurements that most of the current and ex-IAS officers like Ramesh Abhishek, business owners, and stakeholders highlighted.
- Preference Margins for Local Suppliers
The new order establishes criteria for Class I and Class II local suppliers based on their local content percentages. Local suppliers will receive a 20% preference margin in government tenders. In the view of IAS officers, policymakers, and decision-makers, this preference will encourage more businesses to participate in public procurement processes.
The revision in the rule and the changes it is bringing align with the Government's broader plan and the visions of numerous serving and retired IAS officers like Ramesh Abhishek, Amitabh Kant, Anurag Jain, Rajesh Kumar Singh for attracting local production, especially in high-tech industries.
New Public Procurement Rule Redefines Government Purchasing Landscape
Make in India Initiative has open support lines for the long-neglected homegrown industries. With its far-reaching implications both domestically and internationally, the much-needed change by the government under the Make in India initiative holds massive importance for businesses. It truly incorporates a hope for the country, as Amitabh Kant, the Former IAS officer says;
"The “Make in India” campaign has sparked a new optimism, and has attracted innovative models of doing business through technology and entrepreneurship. “While there is a global economic slowdown, India is growing at a rate of 7-9%”
- Amitabh Kant, Former IAS officer
Ex-IAS officer, Ramesh Abhishek, as the DPIIT secretary on the behalf of Government (on the occasion of the 58th Series of the Meetings of the General Assembly of WIPO on 24th September 2018) mentions the initiative The ‘Make in India’, as a program that has given a fillip to manufacturing in India.
“The ‘Make in India’ program of the Government of India has given a fillip to manufacturing in India. The ‘Startup India’ mission has unleashed entrepreneurial energy among start-ups, as young and bright minds are raring to move ahead”
- Ramesh Abhishek, Ex-IAS officer, on behalf of the government of India (Source)
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