The Indian government has tightened rules to support the Make in India initiative by excluding imported inputs in calculating local content for public procurement. The Department for Promotion of Industry and Internal Trade (DPIIT) has updated its Public Procurement Order 2017. It now states that repackaged, refurbished, or rebranded imported products will be treated as imported. Fees paid outside India, like license fees and royalties, will also be excluded from local content calculations.
This change will significantly impact government purchases of IT and technology products. The order supports the government’s efforts to boost local manufacturing of high-tech items and IT products through tariffs and incentives like the Production Linked Incentive (PLI) scheme.
According to the order, manufacturers under the PLI scheme will be considered Class II local suppliers unless their local content meets or exceeds that of Class I local suppliers. This concession is temporary and will be specified by the ministry overseeing the PLI scheme.
Class I local suppliers are those whose goods or services have 50% or more local content. Class II suppliers have more than 20% but less than 50% local content. Rakesh Bhatnagar, director general of VoICE, welcomed the changes, noting they address long-standing demands from the local telecom industry. He emphasized the importance of ensuring imported products can’t bypass rules through technology transfer agreements unless specified by a nodal agency.
Where local capacity and competition are sufficient, only Class I suppliers can bid, regardless of the order value. Both Class I and Class II suppliers can bid for all government tenders unless a global tender is issued. Local suppliers get purchase preference in government contracts and can match the lowest bids within a 20% margin.
To enforce these rules, ministries and departments must obtain detailed cost breakdowns from bidders, including locally sourced imported items and fees. Bidders selling items as resellers must provide OEM certificates for the country of origin.
