The policy for purchase preference for local content in government purchases gives preference to local suppliers that meet the minimum thresholds for local content in their goods and services. The policy applies to all government procurements including ones by autonomous bodies, companies and entities under the government's control.
The policy differentiates implementation restrictions on the basis of the quantum of the contract, as below -
- For government procurement of INR 5 million (~USD 77,172*) or less in areas where it is determined by the concerned ministry that there is sufficient local capacity and competition, only local suppliers will be eligible to supply.
- For government procurement of INR 5 million and more or where sufficient local capacity and competition doesn't exist, if the lowest bid is from a non-local supplier and if there is a bid from a local supplier that is within a margin of 20% from the lowest the bid, then the local supplier will be given an opportunity to match the lowest bid. Further, in case the local supplier matches the lowest bid, it will get to supply a) 100% of the procurement if the procurement is non-divisible or b) 50% of the procurement if the procurement is divisible, where the contract of the rest 50% will be given to the non-local supplier.
- Government procurement of less than INR 0.5 million (USD 7,717) has been exempted from the order.
On 29 May 2019, through a Revision Order it was notified that in case the Nodal Ministry or Department communicates that there is sufficient local capacity and local competition in the sector, then only local suppliers shall be eligible to bid irrespective of the purchase value.
On 13 May 2020, the Indian Finance Minister had announced as part of a stimulus package that for all government procurements up to INR 200 crore (~ USD 26.51 million**), only local suppliers will be eligible.
On 4 June 2020, through a Revision Order the following amendments were made -
- Class-I and Class-II local suppliers were defined. A Class-I local supplier is a supplier that has a local content of at least 50% while a Class-II supplier is one that has local content of more than 20% and less than 50%. A Non-Local Supplier is a one with a local content of less than 20%.
- For procurements where the Nodal Ministry or Department has communicated that there is sufficient local supply and local competition, only Class-I local suppliers will be eligible.
- For all procurements where sufficient local supply or competition is not available and where the value of procurement is less than Rs. 200 crore (~ USD 26.51 million**), no Global tender will be issued unless a competent authority has approved the same. In such cases, only Class-I and Class-II local suppliers will be eligible.
- The Class-I local supplier will always get preference over the Class-II local supplier in all procurements.
*INR to USD as on 24 May 2017 - INR 64.79/USD
** INR to USD as on 4 June 2020 - INR 75.45/USD