India eases public tender rules to help Covid-hit firms

3 March 2021

The Indian government has amended procurement rules to allow a wider range of eligible suppliers to bid for public contracts.

Following the financial strain caused by the pandemic, the Indian government has removed the rule that suppliers must be profitable to qualify for public tenders “with immediate effect” to support medium and small firms.

India’s Manual for procurement of goods 2017, a public procurement guidebook, previously stipulated that companies would not qualify if they had made losses.

The clause said: “Bidder Firm (manufacturer or principal of authorised representative) should not have suffered any financial loss for more than one year during the last three years.”

However, the rule that suppliers must have positive net worth still stands, which could be problematic as profit losses from Covid could have  impacted net worth.

Sanjay Aggarwal, president of the PHD Chamber of Commerce and Industry, said: “The change made in the prequalification criteria in respect of profitability of bidders to government tenders is a welcome initiative and it will also benefit MSMEs, which would have been adversely affected due to the impact of Covid-19 and suffered financial losses,” according to the Hindustan Times.

He added that the criteria around requirements for positive net worth should be reviewed, and the rule that net worth “should not have been eroded by more than 30% in the last three years” be removed as long as firms are financially strong.

In 2020 the government amended procurement rules to give local suppliers a better chance of winning tenders, making it harder to launch tenders to international bidders, and favouring locally produced goods post-Covid.

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