The department for the promotion of industry and internal trade (DPIIT) has put on hold the relaxations recently granted by the finance ministry, which had effectively allowed domestic companies having technology transfer arrangements with Chinese firms to bid for public projects.
Citing representations from industry bodies that have expressed concern over the department of expenditure’s (DoE’s) decision last month, the DPIIT has resisted the “blanket exemption” to firms having transfer of technology (ToT) pacts with Chinese entities from mandatory registration with it and sought a review of the decision.
In a communication to the DoE last week, the DPIIT has argued that any such move will “provide an indirect route to the bidders having beneficial ownership in land border sharing countries to participate in public procurement in violation of the guidelines stipulated in the DoE order dated July 23, 2020”.
In the wake of the Galwan clash, the DoE had in July 2020 amended the general financial rules (GFRs), restricting bidders from countries with which India shares land border from participating in government procurement tenders without approval from competent authorities. However, the government made an exception for bidders from countries to which India had extended a line of credit or was engaged in development projects. This effectively limited the curbs to only China and Pakistan.
Consequently, in August last year, the DPIIT notified a format for companies from these bordering countries (China and Pakistan) to register themselves with the department to be able to bid for public projects. However, on June 8, the DoE said the amended GFRs won’t apply to bidders having transfer of technology pacts with an entity from the bordering countries.
Responding to this, the DPIIT wrote to the DoE: “The subject matter has also been examined in this department. It is considered that entities having beneficial ownership from concerned countries can have ToT agreement for installation/maintenance/after sales service/similar such services with an Indian company to push its products in public procurement, although not permitted unless mandatorily registered….”
It further said the scope and mandate of ToT agreements proposed to be exempted from the purview of July 2020 order needs to be defined. “Blanket exemption from registration to bidders having ToT arrangement will provide an indirect route to the bidders having beneficial ownership in land border sharing countries to participate in public procurement in violation of guidelines stipulated in DoE order dated July 23, 2020,” DPIIT said.
Also, other related issues raised by industry associations like national data security, particularly for the projects in sensitive areas too need to be appropriately addressed, the DPIIT added. The department, therefore, has requested the DoE to examine the issues and review the relaxation granted. Till the time the issue is resolved, the relaxation has to be put on hold, the DPIIT said.
The department said stakeholders, including CII, Ficci, Assocham, Telecom Equipment Manufacturers Association and Cellular Operators Association of India, have written to it against the relaxation of rules.