Para 1.11.3 — GOODS_MANUAL

GOODS_MANUAL

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.
1.11.3 Procurement Preference to Make in India (MII policy) (Rule 153
(iii) of GFR, 2017) 1. Purpose: To encourage ‘Make in India’ and promote manufacturing and production of goods and services in India with a view to enhancing income and employment, Department of Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, Government of India, issued Public Procurement (Preference to Make in India), Order 201729. The order is issued pursuant to Rule 153
(iii) of GFR, 2017. The Order is applicable to the procurement of Goods, Works, and Services30. For this Order: a) ‘L1’ means the lowest tender or lowest bid, or the lowest quotation received in a tender, tender process or other procurement solicitation as adjudged in the evaluation process as per the tender or other procurement solicitation. 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.
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) ‘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) per cent. d) ‘Nodal Ministry’ means the Ministry or Department identified pursuant to this order with respect to a particular item of goods or services or works. e) ‘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. f) ‘Works’ means all works as per Rule 130 of GFR- 2017 and will also include ‘turnkey works.
2. Eligibility of ‘Class-I local supplier’/ ‘Class-II local supplier’/ ‘Non-local suppliers’ for different types of procurement a) In procurement of all goods, services, or works in respect to which the Nodal Ministry/ Department has communicated that there is sufficient local capacity and local competition, only a ‘Class-I local supplier’ shall be eligible to bid, irrespective of purchase value. b) Only ‘Class-I local supplier’ and ‘Class-II local supplier’ shall be eligible to bid in procurements undertaken by procuring entities, except when a Global tender enquiry has been issued. In global tender enquiries, ‘Non-local suppliers’ shall also be eligible to bid along with ‘Class-I local suppliers’ and ‘Class-II local suppliers.’ In procurement of all goods, services or works not covered by sub-para 2-a) above, and with estimated value of purchases less than Rs. 200 Crore, in accordance with Rule 161
(iv) of GFR, 2017, Global tender enquiry shall not be issued except with the approval of competent authority as designated by Department of Expenditure. c) For the purpose of this Order, works include Engineering, Procurement and Construction (EPC) contracts, and services include System Integrator (SI) contracts.
2A. Mandatory sourcing of items, with sufficient local capacity and competition, from Class-I local suppliers in SI/ EPC/ Turnkey Contracts/ Service Tenders a) The items, notified as having sufficient local capacity and competition, shall mandatory be sourced from Class-I local suppliers in SI/ EPC/ Turnkey Contracts/ Services tenders. This provision will be applicable only for those items which have been notified by the Nodal Ministry as Class-I i.e. having sufficient local capacity and competition, with specific HSN codes.
1A. Special treatment for items covered under PLI Scheme The manufacturers manufacturing an item under PLI scheme shall be treated as deemed Class II local supplier for that item unless they have minimum local content equal to or higher than that notified for Class-I local supplier for that item, provided the manufacturer has received incentive from the concerned PLI Ministry for the item. The above shall be applicable for the specific time period only, as notified by concerned PLI Ministry.
b) Notwithstanding above, if in any project, it is considered that it is not practically feasible to source such items from Class I local suppliers, it may take relaxation from such stipulation with the approval of Secretary of the administrative Ministry/ Department concerned or with the approval of the Competent Authority specified by the Administrative Ministry/ Department, on case-specific basis.
c) Applicability in tenders where the contract is to be awarded to multiple bidders: In tenders where the contract is awarded to multiple bidders subject to matching of L1 rates or otherwise, the ‘Class-I local supplier’ shall get purchase preference over ‘Class-II local supplier’ as well as ‘Non-local supplier’, as per following procedure:
3. Purchase Preference: supplier’s quoted price falling within the margin of purchase preference(L1+20%), and the contract shall be awarded to such ‘Class-I local supplier’ subject to matching the L1 price. 3) In case the lowest eligible ‘Class-I local supplier’ fails to match the L1 price, the ‘Class-I local supplier’ with the next higher bid within the margin of purchase preference (L1+20%) shall be invited to match the L1 price, and so on, and the contract shall be awarded accordingly. In case none of the ‘Class-I local suppliers’ within the margin of purchase preference matches the L1 price, the contract may be awarded to the L1 bidder. 4) “Class-II local supplier” will not get a preference for any procurement undertaken by procuring entities.
i) In case there is sufficient local capacity and competition for the item to be procured, as notified by the nodal Ministry, only Class I local suppliers shall be eligible to bid. As such, the multiple suppliers who would be awarded the contract should be all and only ‘Class I Local suppliers.’ ii) In other cases, ‘Class II local suppliers’ and ‘Non-local suppliers’ may also participate in the tender process along with ‘Class I Local suppliers’ as per provisions of the Order. iii) If ‘Class I Local suppliers’ qualify for the award of contract for at least 50 (fifty) per cent of the tendered quantity in any tender, the contract may be awarded to all the qualified bidders as per award criteria stipulated in the tender documents. iv) However, in case ‘Class I Local suppliers’ do not qualify for the award of contract for at least 50 (fifty) per cent of the tendered quantity, purchase preference should be given to the ‘Class I local supplier’ over ‘Class II local suppliers’/ ‘Non-local suppliers’ provided that their quoted rate falls within 20 (twenty) per cent margin of purchase preference of the highest quoted bidder considered for award of contract so as to ensure that the ‘Class I Local suppliers’ taken in totality are considered for award of contract for at least 50 (fifty) per cent of the tendered quantity. v) Only those ‘Class-I local suppliers’ would be eligible for purchase preference whose quoted rates fall within 20 (twenty) per cent margin of purchase preference, subject to its meeting the prescribed criteria for award of contract as also the constraint of maximum quantity that can be sourced from any single supplier. First, purchase preference must be given to the lowest quoting eligible ‘Class-I local supplier.’ If the lowest quoting ‘Class-I local supplier’ does not qualify for purchase preference because of aforesaid constraints or does not accept the offered quantity, an opportunity may be given to the next higher eligible ‘Class-I local supplier,’ and so on. In case the quantity thus allocated to eligible ‘Class-I local suppliers’ is short of 50% of the tendered quantity, then this shortfall quantity may be distributed among all other qualified bidders as per award criteria stipulated in the tender documents. vi) To avoid any ambiguity during the bid evaluation process, the procuring entities may stipulate their own tender-specific criteria for the award of contracts amongst different bidders, including the procedure for purchase preference to ‘Class-I local supplier’ within the broad policy guidelines stipulated in the sub-paras above.
4. Exemption of small purchases: Notwithstanding anything contained in para 2 above, procurements where the estimated value to be procured is less than Rs. 5 lakhs shall be exempt from the Order. However, it shall be ensured by procuring entities that procurement is not split for the purpose of avoiding the provisions of this Order.
a) Exemption in sourcing of spares and consumables of closed systems: Procurement of spare parts, consumables for closed systems and Maintenance/ Service contracts with Original Equipment Manufacturer/ Original Equipment Supplier/ Original Part Manufacturer shall be exempted from this Order.
5. Minimum local content: The ‘local content’ requirement to categorize a supplier as a ‘Class-I local supplier’ is a minimum of 50 (fifty) per cent. For ‘Class-II local suppliers,’ the ‘local content’ requirement is a minimum of 20 (twenty) per cent. Nodal Ministry/ Department may prescribe only a higher percentage of the minimum local content requirement to categorize a supplier as a ‘Class-I local supplier’/ ‘Class-II local supplier.’ For the items for which the Nodal Ministry/ Department has not prescribed higher minimum local content notification under the Order, it shall be 50 (fifty) per cent and 20 (twenty) per cent for ‘Class-I local supplier’/ ‘Class-II local supplier’ respectively. It may be noted that local content is not related to the nationality of the firm – a foreign-owned firm may also become a Class-I or Class-II local supplier by adding local value addition.
6. Requirement for declaration in advance: The minimum local content, the margin of purchase preference and the procedure for preference to Make in India shall be declared in the notice inviting tenders or other forms of procurement solicitation and shall not be varied during a particular procurement transaction.
7. Government E-marketplace: In respect of procurement through the Government Emarketplace (GeM), shall, as far as possible, specifically mark the items that meet the minimum local content while registering the item for display and shall, wherever feasible, make provision for automated comparison with purchase preference and without purchase preference and for obtaining consent of the local supplier in those cases where purchase preference is to be exercised.
8. Verification of local content: a) The ‘Class-I local supplier’/ ‘Class-II local supplier’ at the time of tender, bidding or solicitation shall be required to indicate the percentage of local content and provide self-certification that the item offered meets the local content requirement for ‘Class-I local supplier’/ ‘Class-II local supplier,’ as the case may be. They shall also give details of the location
(s) at which the local value addition is made. b) In cases of procurement for a value more than Rs. 10 crores, the ‘Class-I local supplier’/ ‘Class-II local supplier’ shall be required to provide a certificate from the statutory auditor or cost auditor of the company (in the case of companies) or from a practising cost accountant or practising chartered accountant (in respect of suppliers other than companies) giving the percentage of local content. c) The bidder shall give self-certification for local content in the quoted item (goods/ works/ services) at the time of tendering. However, at the time of execution of the project, for all contracts above INR 10 Crore, the contractor/ supplier shall be required to give local content certification duly certified by cost/ chartered accountant in practice. For cases where it is not possible to provide certification by Cost/ Chartered Accountant at the time of execution of project, the supplier shall be permitted to provide the certificate for local content from Cost/ Chartered Accountant after completion of the contract, within the limit acceptable to the procuring entity. In case the contractor/ supplier does not meet the stipulated local content requirement and the category of the supplier changes from Class-I to Class-II/ Non-local or from Class-II to Non-local, a penalty upto 10% of the contract value may be imposed. However, contract once awarded shall not be terminated on this account. d) Decisions on complaints relating to the implementation of this Order shall be made by the competent authority that is empowered to investigate procurement-related complaints relating to the procuring entity. e) Nodal Ministries may constitute committees with internal and external experts for independent verification of self-declarations and auditor’s/ accountant’s certificates on a random basis and in the case of complaints. f) Nodal Ministries and procuring entities may prescribe fees for such complaints. g) False declarations will be in breach of the Code of Integrity under Rule 175(1)(i)
(h) of the General Financial Rules, for which a bidder or its successors can be debarred for up to two years as per Rule 151
(iii) of the General Financial Rules along with such other actions as may be permissible under law. The Department of Expenditure shall issue suitable instructions (please refer to para 3.7 of this manual) for the effective and smooth operation of this process so that: i) The fact and duration of debarment for violation of the Order by any procuring entity are promptly brought to the notice of the Member-Convenor of the Standing Committee and the Department of Expenditure through the concerned Ministry /Department or in some other manner; ii) On a periodical basis, such cases are consolidated, and a centralized list or decentralized list of such suppliers with the period of debarment is maintained and displayed on the website(s); iii) With respect to procuring entities other than the one that has carried out the debarment, the debarment takes effect prospectively from the date of uploading on the website
(s) in such a manner that ongoing procurements are not disrupted. iv) A supplier who has been debarred by any procuring entity for violation of the Order shall not be eligible for preference under the Order for procurement by any other procuring entity for the duration of the debarment. The debarment for such other procuring entities shall take effect prospectively from the date on which it comes to the notice of other procuring entities in the manner prescribed above.
9. Specifications in Tenders and other procurement solicitations: a) Every procuring entity shall ensure that the eligibility/ qualification conditions with respect to previous experience fixed in any tender or solicitation do not require proof of supply in other countries or proof of exports. b) Procuring entities shall endeavour to see that eligibility/ qualification conditions, including on matters like turnover, production capability, and financial strength, do not result in unreasonable exclusion of ‘Class-I local supplier’/ ‘Class-II local supplier’ who would otherwise be eligible beyond what is essential for ensuring quality or creditworthiness of the supplier. c) Procuring entities shall review all existing eligibility norms and conditions with reference to sub-paragraphs
(a) and
(b) above. d) Specifying foreign certifications/ unreasonable technical specifications/ brands/ models in the tender document is a restrictive and discriminatory practice against local suppliers. If foreign certification is required to be stipulated because of the nonavailability of Indian Standards and/or for any other reason, the same shall be done only after written approval of the Secretary of the Department concerned or any other Authority having been designated such power by the Secretary of the Department concerned.
11. Action for non-compliance of the Provisions of the Order: In case restrictive or discriminatory conditions against domestic suppliers are included in tender documents, an inquiry shall be conducted by the Administrative Department undertaking the procurement (including procurement by any entity under its administrative control) to fix responsibility for the same. Thereafter, appropriate action, administrative or otherwise, shall be taken against erring officials of procuring entities under relevant provisions. Intimation on all such actions shall be sent to the Standing Committee.
12. Assessment of supply base by Nodal Ministries: a) “All administrative Ministries/Departments whose procurement exceeds Rs. 1000 Crore per annum shall notify/ update their procurement projections every year, including those of the PSEs, for the next five years on their respective website.” b) The Nodal Ministry shall keep in view the domestic manufacturing / supply base and assess the available capacity and the extent of local competition while identifying items and prescribing the higher minimum local content or the manner of its calculation, with a view to avoiding cost increase from the operation of this Order. c) Increase in minimum local content: The Nodal Ministry may annually review the local content requirements with a view to increasing them, subject to the availability of sufficient local competition with adequate quality.
10. Reciprocity Clause: a) When a Nodal Ministry/Department identifies that Indian suppliers of an item are not allowed to participate and/ or compete in procurement by any foreign government due to restrictive tender conditions which have direct or indirect effect of barring Indian companies such as registration in the procuring country, execution of projects of specific value in the procuring country etc., it shall provide such details to all its procuring entities including CMDs/CEOs of PSEs, State Governments and other procurement agencies under their administrative control and GeM for appropriate reciprocal action. b) Entities of countries that the nodal Ministry/Department identifies as not allowing Indian companies to participate in their Government procurement for any item related to that nodal Ministry shall not be allowed to participate in Government procurement in India for all items related to that nodal Ministry/ Department, except for the list of items published by the Ministry/ Department permitting their participation. c) The stipulation in
(b) above shall be part of all tenders invited by the Central Government procuring entities stated in
(a) above. All purchases on GeM shall also necessarily have the above provisions for items identified by the nodal Ministry/ Department. d) State Governments should be encouraged to incorporate similar provisions in their respective tenders. e) The term 'entity' of a country shall have the same meaning as under the FDI (Foreign Direct Investment) Policy of DPIIT as amended from time to time.
13. Manufacture under license/ technology collaboration agreements with phased indigenization: a) While notifying the minimum local content, Nodal Ministries may make special provisions for exempting suppliers from meeting the stipulated local content if the product is being manufactured in India under a license from a foreign manufacturer who holds intellectual property rights and where there is a technology collaboration agreement / transfer of technology agreement for indigenous manufacture of a product developed abroad with clear phasing of increase in local content. b) In the procurement of all goods, services or works in respect of which there is a substantial quantity of public procurement and for which the nodal ministry has not notified that there is sufficient local capacity and local competition, the concerned nodal ministry shall notify an upper threshold value of procurement beyond which foreign companies shall enter into a joint venture with an Indian company to participate in the tender. Procuring entities, while procuring such items beyond the notified threshold value, shall prescribe in their respective tenders that foreign companies may enter into a joint venture with an Indian company to participate in the tender. The procuring ministries/departments shall also make special provisions to exempt such joint ventures from meeting the stipulated minimum local content requirement, which shall be increased in a phased manner.
14. Powers to grant exemption and to reduce minimum local content: a) The Administrative Department undertaking the procurement (including procurement by any entity under its administrative control), with the approval of their Minister-incharge, may, by written order, for reasons to be recorded in writing, i) reduce the minimum local content below the prescribed level or ii) reduce the margin of purchase preference below 20 (twenty) per cent or iii) exempt any item or supplying entities from the operation of this Order or any part of the Order. b) The Administrative Department, while seeking exemption under this para, shall certify that such an item
(s) has not been notified by Nodal Ministry/ Department concerned under para 3 above. c) A copy of every such order shall be provided to the Standing Committee and concerned Nodal Ministry / Department. The Nodal Ministry / Department concerned will continue to have the power to vary its notification on Minimum Local Content.
15. Directions to Government Companies: With respect to government companies and other procuring entities not governed by the General Financial Rules, the administrative Ministry or Department shall issue policy directions requiring compliance with this Order.
16. Standing Committee: a) A standing committee is hereby constituted with the following membership: i) Secretary, Department for Promotion of Industry, and Internal Trade-Chairman ii) Secretary, Commerce-Member iii) Secretary, Ministry of Electronics, and Information Technology-Member Joint iv) Secretary (Public Procurement), Department of Expenditure-Member Joint v) Secretary (DPIIT)-Member-Convenor b) The Secretary of the Department concerned with a particular item shall be a member in respect of issues relating to such item. The Chairman of the Committee may co-opt technical experts as relevant to any issue or class of issues under its consideration.
17. Functions of the Standing Committee: The Standing Committee shall meet as often as necessary, but not less than once every six months. The Committee a) shall oversee the implementation of this order and the issues arising from it and make recommendations to Nodal Ministries and procuring entities. b) Shall annually assess and periodically monitor compliance with this Order. c) Shall identify Nodal Ministries and the allocation of items among them for the issue of notifications on minimum local content. d) May require the furnishing of details or returns regarding compliance with this Order and related matters. e) May during the annual review or otherwise, it may assess issues, if any, where it is felt that the manner of implementation of the order results in any restrictive practices, cartelization, or increase in public expenditure and suggest remedial measures. f) May examine cases covered by sub-para 13 above relating to manufacture under license/ technology transfer agreements with a view to satisfying itself that adequate mechanisms exist for enforcement of such agreements and for attaining the underlying objective of progressive indigenization. g) May consider any other issue relating to this Order that may arise.
18. Removal of difficulties: Ministries /Departments and the Boards of Directors of Government companies may issue such clarifications and instructions as may be necessary for the removal of any difficulties arising in the implementation of the Order.
19. Ministries having existing policies: Where any Ministry or Department has its own policy for preference to local content approved by the Cabinet after 1st January 2015, such policies will prevail over the provisions of the Order. All other existing orders on preference to local content shall be reviewed by the Nodal Ministries and revised as needed.
20. Please refer to the FAQs related to the PPP-MII order issued by DPIIT, placed in Annexure 28.

GOODS_MANUAL

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.
1.11.3 Procurement Preference to Make in India (MII policy) (Rule 153
(iii) of GFR, 2017) 1. Purpose: To encourage ‘Make in India’ and promote manufacturing and production of goods and services in India with a view to enhancing income and employment, Department of Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, Government of India, issued Public Procurement (Preference to Make in India), Order 201729. The order is issued pursuant to Rule 153
(iii) of GFR, 2017. The Order is applicable to the procurement of Goods, Works, and Services30. For this Order: a) ‘L1’ means the lowest tender or lowest bid, or the lowest quotation received in a tender, tender process or other procurement solicitation as adjudged in the evaluation process as per the tender or other procurement solicitation. 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.
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) ‘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) per cent. d) ‘Nodal Ministry’ means the Ministry or Department identified pursuant to this order with respect to a particular item of goods or services or works. e) ‘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. f) ‘Works’ means all works as per Rule 130 of GFR- 2017 and will also include ‘turnkey works.
2. Eligibility of ‘Class-I local supplier’/ ‘Class-II local supplier’/ ‘Non-local suppliers’ for different types of procurement a) In procurement of all goods, services, or works in respect to which the Nodal Ministry/ Department has communicated that there is sufficient local capacity and local competition, only a ‘Class-I local supplier’ shall be eligible to bid, irrespective of purchase value. b) Only ‘Class-I local supplier’ and ‘Class-II local supplier’ shall be eligible to bid in procurements undertaken by procuring entities, except when a Global tender enquiry has been issued. In global tender enquiries, ‘Non-local suppliers’ shall also be eligible to bid along with ‘Class-I local suppliers’ and ‘Class-II local suppliers.’ In procurement of all goods, services or works not covered by sub-para 2-a) above, and with estimated value of purchases less than Rs. 200 Crore, in accordance with Rule 161
(iv) of GFR, 2017, Global tender enquiry shall not be issued except with the approval of competent authority as designated by Department of Expenditure. c) For the purpose of this Order, works include Engineering, Procurement and Construction (EPC) contracts, and services include System Integrator (SI) contracts.
2A. Mandatory sourcing of items, with sufficient local capacity and competition, from Class-I local suppliers in SI/ EPC/ Turnkey Contracts/ Service Tenders a) The items, notified as having sufficient local capacity and competition, shall mandatory be sourced from Class-I local suppliers in SI/ EPC/ Turnkey Contracts/ Services tenders. This provision will be applicable only for those items which have been notified by the Nodal Ministry as Class-I i.e. having sufficient local capacity and competition, with specific HSN codes.
1A. Special treatment for items covered under PLI Scheme The manufacturers manufacturing an item under PLI scheme shall be treated as deemed Class II local supplier for that item unless they have minimum local content equal to or higher than that notified for Class-I local supplier for that item, provided the manufacturer has received incentive from the concerned PLI Ministry for the item. The above shall be applicable for the specific time period only, as notified by concerned PLI Ministry.
b) Notwithstanding above, if in any project, it is considered that it is not practically feasible to source such items from Class I local suppliers, it may take relaxation from such stipulation with the approval of Secretary of the administrative Ministry/ Department concerned or with the approval of the Competent Authority specified by the Administrative Ministry/ Department, on case-specific basis.
c) Applicability in tenders where the contract is to be awarded to multiple bidders: In tenders where the contract is awarded to multiple bidders subject to matching of L1 rates or otherwise, the ‘Class-I local supplier’ shall get purchase preference over ‘Class-II local supplier’ as well as ‘Non-local supplier’, as per following procedure:
3. Purchase Preference: supplier’s quoted price falling within the margin of purchase preference(L1+20%), and the contract shall be awarded to such ‘Class-I local supplier’ subject to matching the L1 price. 3) In case the lowest eligible ‘Class-I local supplier’ fails to match the L1 price, the ‘Class-I local supplier’ with the next higher bid within the margin of purchase preference (L1+20%) shall be invited to match the L1 price, and so on, and the contract shall be awarded accordingly. In case none of the ‘Class-I local suppliers’ within the margin of purchase preference matches the L1 price, the contract may be awarded to the L1 bidder. 4) “Class-II local supplier” will not get a preference for any procurement undertaken by procuring entities.
i) In case there is sufficient local capacity and competition for the item to be procured, as notified by the nodal Ministry, only Class I local suppliers shall be eligible to bid. As such, the multiple suppliers who would be awarded the contract should be all and only ‘Class I Local suppliers.’ ii) In other cases, ‘Class II local suppliers’ and ‘Non-local suppliers’ may also participate in the tender process along with ‘Class I Local suppliers’ as per provisions of the Order. iii) If ‘Class I Local suppliers’ qualify for the award of contract for at least 50 (fifty) per cent of the tendered quantity in any tender, the contract may be awarded to all the qualified bidders as per award criteria stipulated in the tender documents. iv) However, in case ‘Class I Local suppliers’ do not qualify for the award of contract for at least 50 (fifty) per cent of the tendered quantity, purchase preference should be given to the ‘Class I local supplier’ over ‘Class II local suppliers’/ ‘Non-local suppliers’ provided that their quoted rate falls within 20 (twenty) per cent margin of purchase preference of the highest quoted bidder considered for award of contract so as to ensure that the ‘Class I Local suppliers’ taken in totality are considered for award of contract for at least 50 (fifty) per cent of the tendered quantity. v) Only those ‘Class-I local suppliers’ would be eligible for purchase preference whose quoted rates fall within 20 (twenty) per cent margin of purchase preference, subject to its meeting the prescribed criteria for award of contract as also the constraint of maximum quantity that can be sourced from any single supplier. First, purchase preference must be given to the lowest quoting eligible ‘Class-I local supplier.’ If the lowest quoting ‘Class-I local supplier’ does not qualify for purchase preference because of aforesaid constraints or does not accept the offered quantity, an opportunity may be given to the next higher eligible ‘Class-I local supplier,’ and so on. In case the quantity thus allocated to eligible ‘Class-I local suppliers’ is short of 50% of the tendered quantity, then this shortfall quantity may be distributed among all other qualified bidders as per award criteria stipulated in the tender documents. vi) To avoid any ambiguity during the bid evaluation process, the procuring entities may stipulate their own tender-specific criteria for the award of contracts amongst different bidders, including the procedure for purchase preference to ‘Class-I local supplier’ within the broad policy guidelines stipulated in the sub-paras above.
4. Exemption of small purchases: Notwithstanding anything contained in para 2 above, procurements where the estimated value to be procured is less than Rs. 5 lakhs shall be exempt from the Order. However, it shall be ensured by procuring entities that procurement is not split for the purpose of avoiding the provisions of this Order.
a) Exemption in sourcing of spares and consumables of closed systems: Procurement of spare parts, consumables for closed systems and Maintenance/ Service contracts with Original Equipment Manufacturer/ Original Equipment Supplier/ Original Part Manufacturer shall be exempted from this Order.
5. Minimum local content: The ‘local content’ requirement to categorize a supplier as a ‘Class-I local supplier’ is a minimum of 50 (fifty) per cent. For ‘Class-II local suppliers,’ the ‘local content’ requirement is a minimum of 20 (twenty) per cent. Nodal Ministry/ Department may prescribe only a higher percentage of the minimum local content requirement to categorize a supplier as a ‘Class-I local supplier’/ ‘Class-II local supplier.’ For the items for which the Nodal Ministry/ Department has not prescribed higher minimum local content notification under the Order, it shall be 50 (fifty) per cent and 20 (twenty) per cent for ‘Class-I local supplier’/ ‘Class-II local supplier’ respectively. It may be noted that local content is not related to the nationality of the firm – a foreign-owned firm may also become a Class-I or Class-II local supplier by adding local value addition.
6. Requirement for declaration in advance: The minimum local content, the margin of purchase preference and the procedure for preference to Make in India shall be declared in the notice inviting tenders or other forms of procurement solicitation and shall not be varied during a particular procurement transaction.
7. Government E-marketplace: In respect of procurement through the Government Emarketplace (GeM), shall, as far as possible, specifically mark the items that meet the minimum local content while registering the item for display and shall, wherever feasible, make provision for automated comparison with purchase preference and without purchase preference and for obtaining consent of the local supplier in those cases where purchase preference is to be exercised.
8. Verification of local content: a) The ‘Class-I local supplier’/ ‘Class-II local supplier’ at the time of tender, bidding or solicitation shall be required to indicate the percentage of local content and provide self-certification that the item offered meets the local content requirement for ‘Class-I local supplier’/ ‘Class-II local supplier,’ as the case may be. They shall also give details of the location
(s) at which the local value addition is made. b) In cases of procurement for a value more than Rs. 10 crores, the ‘Class-I local supplier’/ ‘Class-II local supplier’ shall be required to provide a certificate from the statutory auditor or cost auditor of the company (in the case of companies) or from a practising cost accountant or practising chartered accountant (in respect of suppliers other than companies) giving the percentage of local content. c) The bidder shall give self-certification for local content in the quoted item (goods/ works/ services) at the time of tendering. However, at the time of execution of the project, for all contracts above INR 10 Crore, the contractor/ supplier shall be required to give local content certification duly certified by cost/ chartered accountant in practice. For cases where it is not possible to provide certification by Cost/ Chartered Accountant at the time of execution of project, the supplier shall be permitted to provide the certificate for local content from Cost/ Chartered Accountant after completion of the contract, within the limit acceptable to the procuring entity. In case the contractor/ supplier does not meet the stipulated local content requirement and the category of the supplier changes from Class-I to Class-II/ Non-local or from Class-II to Non-local, a penalty upto 10% of the contract value may be imposed. However, contract once awarded shall not be terminated on this account. d) Decisions on complaints relating to the implementation of this Order shall be made by the competent authority that is empowered to investigate procurement-related complaints relating to the procuring entity. e) Nodal Ministries may constitute committees with internal and external experts for independent verification of self-declarations and auditor’s/ accountant’s certificates on a random basis and in the case of complaints. f) Nodal Ministries and procuring entities may prescribe fees for such complaints. g) False declarations will be in breach of the Code of Integrity under Rule 175(1)(i)
(h) of the General Financial Rules, for which a bidder or its successors can be debarred for up to two years as per Rule 151
(iii) of the General Financial Rules along with such other actions as may be permissible under law. The Department of Expenditure shall issue suitable instructions (please refer to para 3.7 of this manual) for the effective and smooth operation of this process so that: i) The fact and duration of debarment for violation of the Order by any procuring entity are promptly brought to the notice of the Member-Convenor of the Standing Committee and the Department of Expenditure through the concerned Ministry /Department or in some other manner; ii) On a periodical basis, such cases are consolidated, and a centralized list or decentralized list of such suppliers with the period of debarment is maintained and displayed on the website(s); iii) With respect to procuring entities other than the one that has carried out the debarment, the debarment takes effect prospectively from the date of uploading on the website
(s) in such a manner that ongoing procurements are not disrupted. iv) A supplier who has been debarred by any procuring entity for violation of the Order shall not be eligible for preference under the Order for procurement by any other procuring entity for the duration of the debarment. The debarment for such other procuring entities shall take effect prospectively from the date on which it comes to the notice of other procuring entities in the manner prescribed above.
9. Specifications in Tenders and other procurement solicitations: a) Every procuring entity shall ensure that the eligibility/ qualification conditions with respect to previous experience fixed in any tender or solicitation do not require proof of supply in other countries or proof of exports. b) Procuring entities shall endeavour to see that eligibility/ qualification conditions, including on matters like turnover, production capability, and financial strength, do not result in unreasonable exclusion of ‘Class-I local supplier’/ ‘Class-II local supplier’ who would otherwise be eligible beyond what is essential for ensuring quality or creditworthiness of the supplier. c) Procuring entities shall review all existing eligibility norms and conditions with reference to sub-paragraphs
(a) and
(b) above. d) Specifying foreign certifications/ unreasonable technical specifications/ brands/ models in the tender document is a restrictive and discriminatory practice against local suppliers. If foreign certification is required to be stipulated because of the nonavailability of Indian Standards and/or for any other reason, the same shall be done only after written approval of the Secretary of the Department concerned or any other Authority having been designated such power by the Secretary of the Department concerned.
11. Action for non-compliance of the Provisions of the Order: In case restrictive or discriminatory conditions against domestic suppliers are included in tender documents, an inquiry shall be conducted by the Administrative Department undertaking the procurement (including procurement by any entity under its administrative control) to fix responsibility for the same. Thereafter, appropriate action, administrative or otherwise, shall be taken against erring officials of procuring entities under relevant provisions. Intimation on all such actions shall be sent to the Standing Committee.
12. Assessment of supply base by Nodal Ministries: a) “All administrative Ministries/Departments whose procurement exceeds Rs. 1000 Crore per annum shall notify/ update their procurement projections every year, including those of the PSEs, for the next five years on their respective website.” b) The Nodal Ministry shall keep in view the domestic manufacturing / supply base and assess the available capacity and the extent of local competition while identifying items and prescribing the higher minimum local content or the manner of its calculation, with a view to avoiding cost increase from the operation of this Order. c) Increase in minimum local content: The Nodal Ministry may annually review the local content requirements with a view to increasing them, subject to the availability of sufficient local competition with adequate quality.
10. Reciprocity Clause: a) When a Nodal Ministry/Department identifies that Indian suppliers of an item are not allowed to participate and/ or compete in procurement by any foreign government due to restrictive tender conditions which have direct or indirect effect of barring Indian companies such as registration in the procuring country, execution of projects of specific value in the procuring country etc., it shall provide such details to all its procuring entities including CMDs/CEOs of PSEs, State Governments and other procurement agencies under their administrative control and GeM for appropriate reciprocal action. b) Entities of countries that the nodal Ministry/Department identifies as not allowing Indian companies to participate in their Government procurement for any item related to that nodal Ministry shall not be allowed to participate in Government procurement in India for all items related to that nodal Ministry/ Department, except for the list of items published by the Ministry/ Department permitting their participation. c) The stipulation in
(b) above shall be part of all tenders invited by the Central Government procuring entities stated in
(a) above. All purchases on GeM shall also necessarily have the above provisions for items identified by the nodal Ministry/ Department. d) State Governments should be encouraged to incorporate similar provisions in their respective tenders. e) The term 'entity' of a country shall have the same meaning as under the FDI (Foreign Direct Investment) Policy of DPIIT as amended from time to time.
13. Manufacture under license/ technology collaboration agreements with phased indigenization: a) While notifying the minimum local content, Nodal Ministries may make special provisions for exempting suppliers from meeting the stipulated local content if the product is being manufactured in India under a license from a foreign manufacturer who holds intellectual property rights and where there is a technology collaboration agreement / transfer of technology agreement for indigenous manufacture of a product developed abroad with clear phasing of increase in local content. b) In the procurement of all goods, services or works in respect of which there is a substantial quantity of public procurement and for which the nodal ministry has not notified that there is sufficient local capacity and local competition, the concerned nodal ministry shall notify an upper threshold value of procurement beyond which foreign companies shall enter into a joint venture with an Indian company to participate in the tender. Procuring entities, while procuring such items beyond the notified threshold value, shall prescribe in their respective tenders that foreign companies may enter into a joint venture with an Indian company to participate in the tender. The procuring ministries/departments shall also make special provisions to exempt such joint ventures from meeting the stipulated minimum local content requirement, which shall be increased in a phased manner.
14. Powers to grant exemption and to reduce minimum local content: a) The Administrative Department undertaking the procurement (including procurement by any entity under its administrative control), with the approval of their Minister-incharge, may, by written order, for reasons to be recorded in writing, i) reduce the minimum local content below the prescribed level or ii) reduce the margin of purchase preference below 20 (twenty) per cent or iii) exempt any item or supplying entities from the operation of this Order or any part of the Order. b) The Administrative Department, while seeking exemption under this para, shall certify that such an item
(s) has not been notified by Nodal Ministry/ Department concerned under para 3 above. c) A copy of every such order shall be provided to the Standing Committee and concerned Nodal Ministry / Department. The Nodal Ministry / Department concerned will continue to have the power to vary its notification on Minimum Local Content.
15. Directions to Government Companies: With respect to government companies and other procuring entities not governed by the General Financial Rules, the administrative Ministry or Department shall issue policy directions requiring compliance with this Order.
16. Standing Committee: a) A standing committee is hereby constituted with the following membership: i) Secretary, Department for Promotion of Industry, and Internal Trade-Chairman ii) Secretary, Commerce-Member iii) Secretary, Ministry of Electronics, and Information Technology-Member Joint iv) Secretary (Public Procurement), Department of Expenditure-Member Joint v) Secretary (DPIIT)-Member-Convenor b) The Secretary of the Department concerned with a particular item shall be a member in respect of issues relating to such item. The Chairman of the Committee may co-opt technical experts as relevant to any issue or class of issues under its consideration.
17. Functions of the Standing Committee: The Standing Committee shall meet as often as necessary, but not less than once every six months. The Committee a) shall oversee the implementation of this order and the issues arising from it and make recommendations to Nodal Ministries and procuring entities. b) Shall annually assess and periodically monitor compliance with this Order. c) Shall identify Nodal Ministries and the allocation of items among them for the issue of notifications on minimum local content. d) May require the furnishing of details or returns regarding compliance with this Order and related matters. e) May during the annual review or otherwise, it may assess issues, if any, where it is felt that the manner of implementation of the order results in any restrictive practices, cartelization, or increase in public expenditure and suggest remedial measures. f) May examine cases covered by sub-para 13 above relating to manufacture under license/ technology transfer agreements with a view to satisfying itself that adequate mechanisms exist for enforcement of such agreements and for attaining the underlying objective of progressive indigenization. g) May consider any other issue relating to this Order that may arise.
18. Removal of difficulties: Ministries /Departments and the Boards of Directors of Government companies may issue such clarifications and instructions as may be necessary for the removal of any difficulties arising in the implementation of the Order.
19. Ministries having existing policies: Where any Ministry or Department has its own policy for preference to local content approved by the Cabinet after 1st January 2015, such policies will prevail over the provisions of the Order. All other existing orders on preference to local content shall be reviewed by the Nodal Ministries and revised as needed.
20. Please refer to the FAQs related to the PPP-MII order issued by DPIIT, placed in Annexure 28.

Para 1.11.3 — GOODS_MANUAL

Original Rule Text

Para 1.11.3 — GOODS_MANUAL

Original Rule Text