In order to boost the flagship Make in India program, the Union Cabinet on Wednesday (24 May) approved a policy that will encourage consumers to ‘Buy in India’. The policy will show a preference for domestically produced goods by the government and state-owned firms.
This policy was planned by the Modi government a few months ago in February wherein a person close to the planning revealed details about the upcoming policy. This policy is to be an Indian version of the US Buy American policy. The special preferences to companies producing in India could be in the form of price preferences in products and services that the government is buying for its own use, or a relaxation in turnover.
Talking about the same, Finance minister Arun Jaitley stated,
To promote Make in India, there was a proposal that the government will prefer purchase of domestically produced goods
This new policy aims to substantially boost domestic manufacturing and service provisions and in this way, create more jobs. Additionally, it will encourage capital and technology to be put into domestic manufacturing as well as other services.
According to a statement made by the cabinet, the “Government procurement preference to Make In India order, 2017”
will also stimulate the flow of capital and technology into domestic manufacturing and services… (and) provide a further thrust towards manufacture of parts, components, sub-components etc. of these items, in line with the vision of ‘Make in India.’
This policy involves buying goods and services worth at least Rs. 2 trillion a year and covers autonomous bodies, government companies, as well as companies that are under the State’s control.
Purchases of less that five lakh are exempted from the policy whereas acquiring services worth fifty lakh or less can only be made from local suppliers, if the nodal ministry decides there is sufficient local capacity as well as local competition.
In the case that there is insufficient local capacity or competition, local suppliers will be given a 20% margin of purchase preference and will be given the opportunity to match the lowest bid within a margin of 20% of the same.
The cabinet statement said,
If the procurement is of a type that the order can be divided and given to more than one supplier, the non-local supplier who is the lowest bidder will get half of the order and the local supplier will get the other half if it agrees to match the price of the lowest bid. If the procurement cannot be divided, then the lowest cost local supplier will be given the order if it agrees to match the lowest bid
The policy mandates that specifications in tenders should not be restrictive for local suppliers and the procedure for verification of local content will primarily rely on self certification. Jaitley added,
There will be penal consequences for false declarations. In some cases, verification by statutory /cost auditors will be required
The implementation of this order along with other issues and recommendations to nodal ministries will be overseen by a committee in the Department of Industry Policy and Promotion (DIPP). The policy aims to continue the balance between promoting ‘Make in India’ and guaranteeing timely, value-for-money products for the concerned entities.
