A municipal worker drives a coronavirus-theme auto rickshaw in Chennai © ARUN SANKAR/AFP via Getty Images
A municipal worker drives a coronavirus-theme auto rickshaw in Chennai © ARUN SANKAR/AFP via Getty Images

India backs SMEs in new procurement rules

20 May 2020

The Indian government has altered its procurement rules to give the country’s SMEs a better chance of winning public sector contracts.

India’s Department of Expenditure said in an amendment note that it had changed the General Financial Rules (GFR) to make it harder for government departments to launch tenders for potential bidders outside India.

“No global tender enquiry, however, shall be invited for tenders up to Rs 200 crore or such limit as may be prescribed by the Department Of Expenditure from time to time,” said the note.

The change aims to benefit domestic SMEs as it will force government departments to keep tenders worth less than Rs 200 crore within the country, rather than opening them to international bidders.

Under the current rules a government department can launch a global tender inquiry if it believes it may not be able to obtain the goods or services in India at the required specification and price.

The notice said that the amendments had been carried out “in pursuance of the prime minister’s address to the nation”.

Prime minister Narendra Modi has called for policies aimed at a “Self Reliant India” in an address where he announced a much-needed second relief package of around $266bn.

This brought the government’s overall stimulus to around 10% of the country’s GDP.

The government has also announced that it will provide extra security to contractors and suppliers fulfilling public contracts to help their cash flow.

In another Department of Expenditure order the government said conditions governing performance security deposits would change.

Under current rules between 5% and 10% of the value of the contract has to be deposited with the government as performance security for 60 days after the contract completion date.

But under the changed regulations this deposit will be returned to the contractor or supplier if they invoke force majeure due to the coronavirus pandemic or if they make an application while not in default of contractual obligations.

However the order also said that the deposit would be returned in proportion to contract work which has been completed.

The department also said it would refrain from taking action against contractors whose contracts have been impacted by the nationwide lockdown.

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