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Focus: GS-III Indian Economy

Why in news?

New government procurement rules (apparently targeted at Chinese companies) is affecting multinationals using regional headquarters in Hong Kong to set up operations in India or do business in India.

How has the government changed the procurement rules?

  • The Government of India 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.
  • As per the Order any bidder from such countries sharing 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 Competent Authority for registration will be the Registration Committee constituted by the Department for Promotion of Industry and Internal Trade (DPIIT).
  • Political and security clearance from the Ministries of External and Home Affairs respectively will be mandatory.
  • 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.

Current Situation

  • The move was largely seen as targeted against China, coming in the wake of border tensions – and by extension – the rules apply to Hong Kong since China controls the territory.
  • India may relax curbs on imports of tyres by excluding top-end ones that are used in high-end luxury cars and bikes and are not produced in the country.
  • Industry has sought clarification on whether these provisions applied even to entities that have no investment from either Hong Kong or China, but merely have an office in the territory through which business or investment is routed to India.

-Source: Economic Times

December 2023