India has called on public procurement bodies to favour local suppliers as part of plans to become more self-reliant © Getty Images
India has called on public procurement bodies to favour local suppliers as part of plans to become more self-reliant © Getty Images

India must ‘rethink supply strategies’

5 August 2020

India must look to diversify its supply chains in order to plan for the post-Covid order, according to a government minister.

India’s union minister Hardeep Singh Puri told the Indo-Asean Oceanic Business Summit and Expo the country should “try and avoid excessive dependence on any one source or commodity”. 

Puri also called on the members of the Association of Southeast Asian Nations (ASEAN) to increase cooperation in the wake of the pandemic.

“(The) pandemic has made us rethink our supply- production strategies. It is time for the world community to regroup, diversify and integrate and the time for greater cooperation among our countries in innovations in health technologies, medicine, scientific research and development,” he said in a tweet.

Seperately, the government has told public procurement bodies that price should no longer be the deciding factor in awarding a tender and local suppliers should be favoured, as part of prime minister Narendra Modi’s “self-reliant India” strategy.

The Department for Promotion of Industry and Internal Trade said in an order that procurements should favour Class-I local suppliers who have a local content of “equal to or more than 50%”.

The order has also defined two other categories of supplier: class-II local suppliers who supply local content of “more than 20% but less than 50%”, and non-local suppliers who supply local content of “less than 20%.”

In procurement processes where there is sufficient local capacity and local competition, only “Class-I local suppliers” shall be eligible to bid, irrespective of purchase value, the order said.

The order comes as India has responded to growing frictions with China by restricting companies from countries with a shared border from participating in bids for government procurement without approval from competent authorities – a move widely regarded as being aimed at its huge neighbour.

Last week, it was reported that Indian Railways was considering increasing the participation of local vendors in its procurement process as part of plans to make the country self-reliant.

Piyush Goyal, minister of railways and commerce & industry, said it was vital to create a transparent purchasing environment within Indian Railways and make sure more local vendors get to participate in the procurement process.

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