Department of Expenditure, Ministry of Finance issues restrictions on public procurement from border sharing countries

The Department of Expenditure, Ministry of Finance vide (i) an Office Memorandum dated July 23, 2020 (“OM”); and (ii) an order dated July 23, 2020 (“Order”), has amended the General Financial Rules, 2017 (“GFR”) to enable restrictions on neighbouring countries which share the land border with India, citing the reasons of national security and defence. Restrictions Imposed Under the OM, Rule 144 of the GFR is amended to insert sub-rule (ix) which empowers the government to put restriction on the procurement from bidders from certain country(ies) or a class of countries. Such restriction can be in the form of requiring registration and/or screening. Accordingly, bidders from countries sharing land border with India must register with a competent authority to bid for procurement of goods or services. The competent authority for this purpose shall be the Registration Committee constituted by the Department for Promotion of Industry and Internal Trade (DPIIT). As per the press release dated July 23, 2020 bearing release ID 1640778 by the Press Information Bureau (PIB), the central government has written to the chief secretaries of the state governments for implementation of the OM and the Order for procurements by the state government and the state undertakings. Exclusion from the Restriction As per the Order, the restriction imposed shall not apply to bidders from those countries to whom the Government of India has extended the line of credit or is engaged in the development of projects. Updated list of countries in this regard has been updated on the website of Ministry of External Affairs (MEA). The restriction of registration shall also not apply in limited cases including for procuring medical supplies for containment of global pandemic COVID19 till December 31, 2020. Applicability The new provision applies to all public procurements but not to the private sector. The Order and OM shall not apply in cases where orders have been issued or a contract has been concluded or a letter of award has been issued prior to the date of the Order. If a tender is yet to be opened or if the technical bid is yet to be evaluated or if the first exclusionary qualificatory stage is yet to be completed, tenders from bidders from countries sharing a land border with India shall be treated as if they are non-compliant. In other words, such tenders shall be ignored. If a tendering process has crossed the first exclusionary qualificatory stage and one or more bidders from countries sharing a land border with India have qualified, the entire process shall be scrapped and initiated afresh. This update has been contributed by Pratish Panjabi (Partner) and Shivani Agarwal (Associate).