NEW DELHI -- The government on Thursday approved a new policy to give preference to local goods and services in public procurement with a view to generate employment and promote 'Make in India' initiative.
The policy, approved by the Cabinet headed by Prime Minister Narendra Modi, is also aimed at stimulating flow of capital and technology.
"Under the policy, preference in government procurement will be given to local suppliers," an official statement said.
Local suppliers are those whose goods or services meet prescribed minimum thresholds (ordinarily 50 per cent) for local content, which is essentially domestic value addition.
The local content, it said, can be increased through partnerships, cooperation with local companies, establishing production units in India or joint ventures with Indian suppliers, increasing the participation of local employees in services and by training them.
Briefing about the meeting, Finance Minister Arun Jaitley said that for procurement of goods up to ₹50 lakh, and where the nodal ministry determines there is sufficient local capacity and competition, only local suppliers will be eligible.
However, for procurements valued above ₹50 lakh, if the lowest bid is not from a non-local supplier, the lowest-cost local supplier who is within a margin of 20 per cent of the lowest bid, will be given an opportunity to match the lowest bid.
If the procurement is of a type that the order can be divided and given to more than one supplier, the non-local supplier who is the lowest bidder, will get half of the order if it agrees to match the price of the lowest bid.
Further, if the procurement cannot be divided, then the lowest cost local supplier will be given the order if it agrees to match the lowest bid.
Small purchases of less than ₹5 lakh would be exempted, he said adding the policy would cover autonomous bodies, government companies/entities under the government's control.
As per the policy, there will be a procedure for verification of local content relying primarily on self- certification.
"There will be penal consequences for false declarations. In some cases, verification by statutory /cost auditors will be required," he added.
A standing committee of the Department of Industrial Policy and Promotion (DIPP) will oversee the implementation of this order and other issues and make recommendations to nodal ministries and procuring entities.
"The policy has been developed keeping in view the core principles of procurement including competitiveness and adhering to sound procurement practices and execution of orders," the statement said.
It would continue to maintain the balance between promoting 'Make in India' and ensuring timely, value-for-money products for the procuring entities.
Procurement by the government is substantial in amount and can contribute towards this policy objective to enhance income and create employment.
The government purchases runs into thousands of crore.
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