Para 1.10.2 - Local Content | KartavyaDesk

Original Rule Text

b) ‘Local Content’ means the amount of value added in India which shall, unless otherwise prescribed by the Nodal Ministry, be the total value of the item procured (excluding net domestic indirect taxes) minus the value of imported content in the item (including all customs duties) as a proportion of the total value, in percent. Explanatory notes for calculation of local content given above i) Imported items sourced locally from resellers/ distributors shall be excluded from calculation of local content. ii) The license fees/ royalties paid/ technical charges paid out of India shall be excluded from local content calculation iii) Procurement/ Supply of repackaged/ refurbished/ rebranded imported products as understood commonly shall be treated as reselling of imported products and shall be excluded from calculation of local content. The definition of repackaged/ refurbished/ rebranded imported products is as follows: 1)‘Refurbishing’ means repair or reconditioning of an imported product does not amount to manufacture because no new goods come into existence. 2)‘Repackaging’ means repacking of imported goods from bulk pack to smaller packs would not ordinarily amount to manufacture of a new item. 3)‘Rebranding’ means relabelling or renaming or change in symbol or logo/ makes or corporate image of a company/ organization/ firm for an imported product would amount to rebranding. iv) To ensure that imported items sourced locally from resellers/ distributors are excluded from calculation of local content, procuring entities to obtain from bidders, the cost of such locally-sourced imported items (inclusive of taxes) along with break-up on license/ royalties paid/ technical expertise cost etc. sourced from outside India/ for items sold by bidder as reseller, OEM certificate for country of origin to be submitted. v) For contracts involving supply of multiple items, weighted average of all items to be taken while calculating the local content c) 'Class-I local supplier' means a supplier or service provider, whose goods, services or works offered for procurement, meets the minimum local content as prescribed for 'Class-I local supplier' under this Order. d) 'Class-II local supplier' means a supplier or service provider, whose goods, services or works offered for procurement, meets the minimum local content as prescribed for 'Class-II local supplier' but less than that prescribed for 'Class-I local supplier' under this Order. e) 'Non - Local supplier' means a supplier or service provider, whose goods, services or works offered for procurement, has local content less than that prescribed for 'ClassII local supplier' under this Order. f) ‘Margin of purchase preference’ means the maximum extent to which the price quoted by a “Class-I local supplier” may be above the L1 for the purpose of purchase preference. It has been fixed as 20 (twenty) percent. g) ‘Nodal Ministry’ means the Ministry or Department identified pursuant to this order in respect of a particular item of goods or services or works. h) ‘Procuring entity’ means a Ministry or department or attached or subordinate office of, or autonomous body controlled by, the Government of India and includes Government companies as defined in the Companies Act.

What This Means

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

• •Local Content is the value added in India, calculated as the total value minus imported content (including duties), expressed as a percentage.
• •Certain costs like imported items from resellers, license fees/royalties paid outside India, and repackaged/refurbished/rebranded imported products are excluded from local content calculation.
• •Suppliers are classified as Class-I, Class-II, or Non-Local based on their local content percentage, affecting their eligibility for purchase preference.
• •Class-I local suppliers can have a 'Margin of Purchase Preference' (currently 20%) over the lowest bid.
• •The 'Nodal Ministry' sets specific local content requirements for different sectors.

Practical Example

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.