Para 1.10.3 — CONSULT_MANUAL

“Notwithstanding anything contained in these Rules, Department of Expenditure may, by order in writing, impose restrictions, including prior registration and/ or screening, on procurement from bidders from, or bidders having commercial arrangements with an entity from, a country or countries, or a class of countries, on grounds of defence of India, or matters directly or indirectly related thereto including national security; no procurement shall be made in violation of such restrictions.”

2. Detailed provisions in this regard have been notified by the Department of Expenditure's OM No. F.7/10/2021-PPD (1) dated 23.02.2023(Public Procurement Order No. 4 – hereinafter referred to in this section as the ‘Order’), are as follows.

a) Any bidder from a country which shares a land border with India will be eligible to bid in any procurement, whether of goods, services (including consultancy services and non-consultancy services) or works (including turnkey projects) only if the bidder is registered with the Competent Authority. The information on Competent Authority is given in sub-para 10 below. b) Any bidder (including an Indian bidder) who has a Specified Transfer of Technology (ToT) arrangement with an entity from a country which shares a land border with India will be eligible to bid in any procurement, whether of goods, services (including consultancy services and non-consultancy services) or works (including turnkey projects) only if the bidder is registered with the Competent Authority, specified in para 10 below. c) The requirement of registration for cases covered by sub-para a) above has been applicable since 23.07.2020. The requirement of registration for bidders covered by sub-para b) above will be applicable for all procurements where tenders are issued/ published after 01.04.2023. d) In tenders issued after 23.07.2020 or 01.04.2023, as the case may be, the provisions of requirement of registration of bidders and of other relevant provisions of this Order shall be incorporated in the tender conditions.

1.10.3 Restrictions/ Prior Registration on Entities from a Class of Countries (Rule 144 (xi), GFR 2017) 1. Requirement of registration: Rule 144 of GFR, 2017, has been amended to include a new sub-para

(xi) as follows:

3. Applicability a) Apart from Ministries/Departments, attached and subordinate bodies, notwithstanding anything contained in Rule 1 of the GFR 2017, the Order shall also be applicable to: i) all Autonomous Bodies; ii) all public sector banks and public sector financial institutions; iii) all Central Public Sector Enterprises; iv) all procurement in Public Private Partnership projects receiving financial support from the Government or public sector enterprises/ undertakings; and v) all Union Territories, National Capital Territory of Delhi, and all agencies/ undertakings thereof. b) The Order will not be applicable to: i) projects which receive international funding with the approval of the Department of Economic Affairs (DEA), Ministry of Finance, the procurement guidelines applicable to the project shall normally be followed, notwithstanding anything contained in this order and without reference to the Competent Authority. Exceptions to this shall be decided in consultation with DEA. ii) procurement made by Indian missions and by offices of government agencies/ undertakings located outside India. iii) bidders (or entities) from those countries (even if sharing a land border with India) to which the Government of India has extended lines of credit or in which the Government of India is engaged in development projects. Updated lists of countries to which lines of credit have been extended or in which development projects are undertaken are given on the website of the Ministry of External Affairs17. iv) procurement of spare parts and other essential service support like Annual Maintenance Contract (AMC)/ Comprehensive Maintenance Contract (CMC), including consumables for closed systems, from Original Equipment Manufacturers (OEMs) or their authorized agents.

a) “Bidder" for the purpose of the Order (including the term ‘bidder’, ‘consultant’ ‘vendor’ or ‘service provider’ in certain contexts) means any person or firm or company, including any member of a consortium or joint venture (that is an association of several persons, or firms or companies), every artificial juridical person not falling in any of the descriptions of bidders stated hereinbefore, including any agency, branch or office controlled by such person, participating in a procurement process. b) “Tender” for the purpose of the Order will include other forms of procurement, except where the context requires otherwise. c) “Transfer of Technology” means dissemination and transfer of all forms of commercially usable knowledge such as transfer of know-how, skills, technical expertise, designs, processes and procedures, trade secrets, which enables the acquirer of such technology to perform activities using the transferred technology independently. (Matters of interpretation of this term shall be referred to the Registration Committee constituted by the Department for Promotion of Industry and Internal Trade, and the interpretation of the Committee shall be final.) d) “Specified Transfer of Technology” means a transfer of technology in the sectors and/ or technologies, specified in sub-para 5 below, occurring on or after 23.07.2020. e) “Bidder (or entity) from a country which shares a land border with India” for the purpose of the Order means: i) An entity incorporated, established, or registered in such a country; or ii) A subsidiary of an entity incorporated, established, or registered in such a country; or iii) An entity substantially controlled through entities incorporated, established, or registered in such a country; or iv) An entity whose beneficial owner is situated in such a country; or v) An Indian (or other) agent of such an entity; or vi) A natural person who is a citizen of such a country; or vii) A consortium or joint venture where any member of the consortium or joint venture falls under any of the above f) “Agent” for the purpose of the Order is a person employed to do any act for another, or to represent another in dealings with third persons.

1. A person who procures and supplies finished goods from an entity from a country which shares a land border with India will, regardless of the nature of his legal or commercial relationship with the producer of the goods, be deemed to be an Agent for the purpose of this Order. 2. However, a bidder who only procures raw material, components etc. from an entity from a country which shares a land border with India and then manufactures or converts them into other goods will not be treated as an Agent.

g) Beneficial owner for the purposes of point e

(iv) will be as under: i) In case of a company or Limited Liability Partnership, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person(s), has a controlling ownership interest or who exercises control through other means.

1) “Controlling ownership interest” means ownership of, or entitlement to, more than twenty-five per cent of shares or capital or profits of the company; 2) “Control” shall include the right to appoint the majority of the directors or to control the management or policy decisions, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements;

ii) In case of a partnership firm, the beneficial owner is the natural person

(s) who, whether acting alone or together, or through one or more juridical person, has ownership of entitlement to more than fifteen percent of capital or profits of the partnership;

iii) In case of an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of or entitlement to more than fifteen percent of the property or capital or profits of such association or body of individuals;

List of Category-I Sensitive sectors (Schedule-I)

List of Category-II Sensitive sectors (Schedule-II)

S. No Sectors 1 Atomic Energy 2 Broadcasting/ Print and Digital Media 3 Defence 4 Space 5 Telecommunications

S. No Sectors 1 Power and Energy (including exploration/ generation/ transmission/ distribution/ pipeline) 2 Banking and Finance including Insurance 3 Civil Aviation 4 Construction of ports and dams & river valley projects 5 Electronics and Microelectronics 6 Meteorology and Ocean Observation 7 Mining and extraction (including deep sea projects)

iv) Where no natural person is identified under sub-para g

(i) or g

(ii) or g

(iii) above, the beneficial owner is the relevant natural person who holds the position of senior managing official; v) In case of a trust, the identification of beneficial owner

(s) shall include identification of the author of the trust, the trustee, the beneficiaries with fifteen percent or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership. vi) For determining nationality while assessing the beneficial ownership of the bidder, the nationality as mentioned in the Passport of the beneficiary owner should be considered. In case of the possibility of dual citizenship, nationality on all the passports should be considered, through a suitable declaration. If, nationality in any of the passports of the person, whose beneficial ownership is being assessed, is recorded to be from a country sharing land border with India, the provisions contained under this Order shall apply. Hong Kong and Macau are to be considered as part of China for the purpose of this Order.

5. Sensitive Sectors/ Technologies (relevant only for the provisions on ToT arrangements; please refer to sub-para 2-b) above):

a) Certain sectors and technologies have been identified as sensitive from the national security point of view. The sectors listed in Schedule I to the Order are considered Category-I sensitive sectors. The sectors listed in Schedule II to the Order are considered Category-ll sensitive sectors. The technologies listed in Schedule III are considered sensitive technologies.

S. No Sectors 8 Railways 9 Pharmaceuticals & Medical Devices 10 Agriculture 11 Health 12 Urban Transportation

S. No Sectors 1 Additive Manufacturing (e.g., 3D Printing) 2 Any equipment having electronic programmable components or autonomous systems (e.g., SCADA systems) 3 Any technology used for uploading and streaming of data including broadcasting, satellite communication etc. 4 Chemical Technologies 5 Biotechnologies including Genetic Engineering and Biological Technologies 6 Information and Communication Technologies 7 Software

b) For Category-I sensitive sectors, bidders with ToT arrangement in any technology with an entity from a country which shares a land border with India shall require registration. c) For Category-ll sensitive sectors, bidders with ToT arrangement in the sensitive technologies listed in Schedule III, with an entity from a country which shares a land border with India shall require registration. d) In Category-ll sensitive sectors, the Secretary (or an officer not below the rank of Joint Secretary to Government of India, so authorized by the Secretary) of the Ministry/ Department of the Government of India is empowered, after due consideration, to waive the requirement of registration for a particular item/ application or a class of items/ applications from the requirement of registration, even if included in Schedule III. The Ministry/ Department concerned shall intimate the Department for Promotion of Industry and Internal Trade (DPIIT) and National Security Council Secretariat (NSCS) of their decision to waive the requirement of registration. Ministries/ Departments of the Government of India are not required to consult the DPIIT/ NSCS before deciding and are only required to intimate the decision to DPIIT/ NSCS. If any point is raised by DPIIT/ NSCS, it should be considered in future procurements; ongoing procurement for which the waiver was granted need not be interrupted or altered. e) Based on security considerations, a Ministry/ Department in a Category II sensitive sector or other Ministries/ Departments may recommend to DPIIT inclusion of any other technology in the list of sensitive technologies, either generally or for their Ministry/ Department.

10. Competent Authority and Procedure for Registration a) The Competent Authority for the purpose of registration under this Order shall be the Registration Committee constituted by the Department for Promotion of Industry and Internal Trade (DPIIT) 18 [Notified vide OM No. F.6/18/2019-PPD issued by Department of Expenditure dated 23.07.2020]

Manual for Procurement of Consultancy Services, Second Edition, 2025 6. Sub-contracting in works contracts: In works contracts, including turnkey contracts, contractors shall not be allowed to sub-contract works to any contractor from a country which shares a land border with India unless such contractor is registered with the Competent Authority. The definition of “contractor from a country which shares a land border with India” shall be as in sub-para 4-e) above. This shall not apply to sub-contracts already awarded on or before the date of the Order (i.e., 23rd July 2020).

8. Validity of registration: In respect of tenders, registration should be valid at the time of submission of bids and at the time of acceptance of bids. In respect of supply otherwise than by tender, registration should be valid at the time of placement of order. If the bidder was validly registered at the time of acceptance / placement of order, registration shall not be a relevant consideration during contract execution.

9. Government e-Marketplace: GeM shall remove non-compliant entities from GeM unless/ until they are registered in accordance with this Order.

(i) In respect of application of the Order to procurement by/ under State Governments, all functions assigned to DPIIT shall be carried out by the State Government concerned through a specific department or authority designated by it. The composition of the Registration Committee shall be as decided by the State Government. However, the requirement of political and security clearance as per para 10

(d) shall remain and no registration shall be granted without such clearance.

(ii) Registration granted by State Governments shall be valid only for procurement by the State Government and its agencies/ public enterprises etc.

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(i) In respect of application of the Order to procurement by/ under State Governments, all functions assigned to DPIIT shall be carried out by the State Government concerned through a specific department or authority designated by it. The composition of the Registration Committee shall be as decided by the State Government. However, the requirement of political and security clearance as per para 10

(d) above shall remain and no registration shall be granted without such clearance.

(ii) Registration granted by State Governments shall be valid only for procurement by the State Government and its agencies/ public enterprises etc. and shall not be valid for procurement in other states or by the Government of India and their agencies/ public enterprises etc.

and shall not be valid for procurement in other states or by the Government of India and their agencies/ public enterprises etc.

b) The Registration Committee shall have the following members: i) An officer, not below the rank of Joint Secretary, designated for this purpose by DPIIT, who shall be the Chairperson; ii) Officers (ordinarily not below the rank of Joint Secretary) representing the Ministry of Home Affairs, Ministry of External Affairs, and of those Departments whose sectors are covered by applications under consideration; iii) Any other officer whose presence is deemed necessary by the Chairperson of the Committee. iv) With effect from 01.04.2023, an officer (ordinarily not below the rank of Joint Secretary) representing the National Security Council Secretariat.

c) DPIIT has laid down the method of application, format etc. for such bidders as covered by the Order. d) On receipt of an application seeking registration from a bidder covered by sub-para 2-a) and 2-b) above, the Competent Authority shall first seek political and security clearances from the Ministry of External Affairs and Ministry of Home Affairs, as per guidelines issued from time to time. registration shall not be given unless political and security clearance have both been received. e) The Ministry of External Affairs and Ministry of Home Affairs may issue guidelines for internal use regarding the procedure for scrutiny of such application by them. f) The decision of the Competent Authority, to register such bidder may be for all kinds of tenders or for a specified type

(s) of goods or services and may be for a specified or unspecified duration of time, as deemed fit. The decision of the Competent Authority shall be final. g) Registration granted by the Competent Authority of the Government of India shall be valid not only for procurement by the Central Government and its bodies specified in sub-para 3 above, but also for procurement by State Governments and their agencies/ public enterprises etc. No fresh registration at the State level shall be required. h) The Competent Authority is empowered to cancel the registration already granted if it determines that there is sufficient cause. Such cancellation by itself, however, will not affect the execution of contracts already awarded. Pending cancellation, it may also suspend the registration of a bidder, and the bidder shall not be eligible to bid in any further tenders during the period of suspension. i) For national security reasons, the Competent Authority shall not be required to give reasons for rejection/cancellation of registration of a bidder.

11. Clarifications regarding the applicability of the restrictions under Rule 144

(xi) of the GFR. a) The proprietary purchases are not excluded from the provisions of the Rule 144

(xi) of GFR, 2017. b) The rule is applicable on all the purchases irrespective of the order value. c) The provisions of Rule 144

(xi) are not applicable in the case of selling of raw materials by a Government agency (like a CPSE/ Autonomous Bodies, etc.). d) The provisions of Rule 144

(xi) are not applicable on the export to the countries sharing land border with India.

SN Scenario Applicability of Rule 144

(xi) a) The equipment/ goods have been purchased or will be purchased from company (manufacturer) from country which shares a land border with India The bidder has procured certain goods to offer the requisite services to a procuring entity. In such case, the bidder does not fall within the definition of the terms “bidder” as defined under sub-para 4-e) above. Hence, the provisions of the Rule 144

(xi) of GFR, 2017 do not apply to this case. b) By entering into a MOU/ lease agreement with the company (who owns the equipment/ goods) from country which shares a land border with India Here, the bidding vendor proposes to hire the services from a company that belongs to a country sharing land border with India. This, prima facie, becomes the case of indirect supply of services by a company that owns the equipment/ goods by introducing an intermediary. The intermediary merely acts as an agent to the company providing services of the equipment. In such a case registration of company owning the equipment and indirectly supplying the services shall require to be registered with the competent authority, thereby requiring the need to fulfil the provisions of Rule 144 (xi).

e) Sub-contracting is not permitted to any contractor from a country sharing land border with India, unless registered with the competent authority. However, it is to be noted that procurement of raw material, components, etc. does not constitute subcontracting. In case, a bidder has proposed to supply finished goods, procured directly/ indirectly from the vendors from the countries which shares land border with India, such vendor will be required to be registered with the Competent Authority as per the provisions of Rule 144

(xi) of GFR, 2017. f) There is no bar on the contractor from procuring raw material from a firm that has been acquired by another firm belonging to a country that shares a land border with India. g) Contract Manufacturing outside India: If the bidder is getting the subject product manufactured outside India, this is treated as contract manufacturing, and beneficial ownership of the actual manufacturing entity must be verified. If the actual manufacturer meets the beneficial ownership criteria (para 4-g above) – then the bidder must submit DPIIT registration of such manufacturer to participate in the procurement. h) Hiring of Services: Suppose, a Bidder (Indian/Foreign), who is not from a country sharing land border with India, offers services to a procuring entity by arranging equipment from another company then the following scenarios may appear:

12. Illustrative examples on the applicability of the Restrictions under Rule 144

(xi) of GFR 2017 a) A vendor, say, ‘Party A’ from India, is procuring an item from their sister company, say, ‘Party B,’ which is registered in a country not sharing a land border with India. Both the parties, Party A and B, are owned by an entity that does not belong to a country sharing a land border with India. Party B has its production facility in a country sharing land border with India. The manufactured item will be procured by Party A from its sister concern, i.e., Party B from the above-mentioned production facility. The production unit is wholly owned by Party B. The Party A now claims that the provisions of Rule 144

(xi) of GFR 2017 do not apply on it because: both the Party A and B are not:

i) Both Party A and B are not an entity incorporated, established, or registered in such a country, since Party A is registered in India and Party B is registered in a country not sharing land border with India; ii) Both Party A and B are 100% owned subsidiary of an entity, which is incorporated, registered, and established in a country not sharing land border with India; iii) The beneficial owner of Party A and B is not situated in a country sharing land border with India since they are owned by an entity belonging to country not sharing land border with India; iv) Both Party A and B are not an Indian (or other) agent of such an entity; v) Both A and B are not a natural person who is a citizen of such a country; vi) Both A and B are not a consortium or joint venture where any member of the consortium or joint venture falls under any of the above. Though, Party B has a wholly owned subsidiary in a country that shares a land border with India but is not a JV or consortium (a subsidiary does not qualify as a JV or consortium) vii) In addition to the above, Party A claims that they are not procuring finished goods directly/ indirectly from the vendors from the countries sharing a land border with India as the item is being manufactured in their own production units. viii) In light of the above facts and the claims put forth by Party A, it is important to clarify to the procurers that Party A acts as an agent for Party B, which manufactures goods in a country sharing a land border with India. Party B supplies goods manufactured at premises established in a country that shares a land border with India. In such a case, registration is required for Party B (and not necessarily for Party A, who is only an agent and not from a country sharing a land border with India).

i) Upto a period of ten years from the date of incorporation/ registration, if it is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India, and ii) Turnover of the entity for any of the financial years since incorporation/ registration has not exceeded one hundred crore rupees, and iii) The entity works towards innovation, development or improvement of products or processes or services or a scalable business model with a high potential for employment generation or wealth creation. b)

Provided that an entity formed by splitting up or reconstructing an existing business shall not be considered a ‘Start-up’. c) Provided further that in order to obtain benefits a Startup so identified under the above definition shall be required to be recognized as Startup by DPIIT.

a) Exemption from submission of Bid Security: Such Start-ups shall be exempted from payment of Earnest Money. b) 19Relaxation in Prior Turnover and Experience: The Procuring Entity reserves its right to relax the condition of prior turnover and prior experience for start-up enterprises recognized by the Department for Industry & Internal Trade (DPIIT), subject to meeting quality & technical specifications. Startups may be MSEs or otherwise. Such relaxation can be provided in the case of procurement of works as well. It is further clarified that such relaxation is not optional but normally has to be ensured, except in case of procurement of items related to public safety, health, critical security operations and equipment, etc) where adequate justification exists for the

2. Support to Start-ups The Government of India has ordered the following support to Start-ups (as defined by the Department for Promotion of Industrial and Internal Trade - DPIIT).