Explained International

India’s Carefully Crafted Strike Against China’s Interests Without Naming Them

restrictions on public procurement

If you follow the public discourse post the Galwan clash with China, you can see many angry voices on social media demanding a complete ban of sorts on China made products. While the emotions are fairly understandable, there are many governing international rules and also the intricacies of trade that prevents the Indian government from taking extreme steps. Nevertheless, its recent move to restrict the bidders of countries that share land borders with India in public procurement demonstrates a carefully crafted move to hurt the adversary.

Amending the Rule

A new press statement from the Ministry of Finance says, “The Government of India today amended the General Financial Rules 2017 to enable imposition of restrictions on bidders from countries which share a land border with India on grounds of defence of India, or matters directly or indirectly related thereto including national security. The Department of Expenditure has, under the said Rules, issued a detailed Order on public procurement to strengthen the defence of India and national security.”

So, one may ask, since India shares land boundary with countries other than China and Pakistan, how exactly is this move hurting the adversary? As they say, devil lies in details.

The countries which are receiving a line of credit from India are exempted from this rule, even if they share land boundary with India. This essentially leaves two countries to come under the new rule- China and Pakistan.

The Ambit of this Order

The Order takes into its ambit public sector banks and financial institutions, Autonomous Bodies, Central Public Sector Enterprises (CPSEs)and Public Private Partnership projects receiving financial support from the Government or its undertakings.

The Centre has also written to the States to implement this rule. For procurements by State governments, the Competent Authority will be constituted by the states; however, political and security clearance from the Centre will remain necessary.

Relaxation has been provided in certain limited cases, including for procurement of medical supplies for containment of COVID-19 global pandemic till December 31, 2020.

The Rulebook

It can be argued that the recent move provides an example of how to deal with an adversary without violating the rulebook. Now, firms from an adversary country are restrained by the rulebook, as it lays norms in each phase like in the case of already accepted tenders, E-procurement etc.

It directs, “The new provisions will apply to all new tenders. In respect of tenders already invited, if the first stage of evaluation of qualifications has not been completed, bidders who are not registered under the new Order will be treated as not qualified. If this stage has been crossed, ordinarily the tenders will be cancelled and the process started de novo. The Order will also apply to other forms of public procurement.”

Earlier also, India explored all the avenues to contain the undue economic advantages possessed by the adversary. Many projects in which Chinese companies were involved have been put on hold, 59 Chinese apps were banned on the ground of privacy concerns, and traders’ bodies were encouraged to shun the Chinese goods. On top of it, this recent move further provides a shield of the rulebook to counter the adversary. You may read our earlier article India’s Economic Punches Against China – An Account.