NEW DELHI: Chinese manufacturers that have invested in India to set up manufacturing facilities via the foreign direct investment route will need a fresh security check to be eligible for government contracts, a move that will impact phone and computer-makers as well drug and other equipment manufacturers.
This is a fallout of the revised guidelines issued by the finance ministry late Thursday evening, requiring bidders from any country sharing a land border with India to register with a “competent authority” to be eligible for government contracts. With an exception made for bidders from countries where India has extended a line of credit or is engaged in development projects, Nepal, Bhutan and Bangladesh would be exempted, officials told TOI.
As a result, the order is largely targeting firms from China since those based in Pakistan hardly participate in Indian contracts. Going forward, smartphone-makers such as Xiaomi and Oppo will need to go through a fresh clearance as part of the registration process through a committee comprising officials from ministries of home and external affairs, as well as the department for promotion of industry and internal trade, to be eligible to sell on the Government e-Marketplace (GeM), the online public procurement platform.
Besides, the fate of firms such as telecom equipment suppliers Huawei and ZTE as well as power gear players Dongfang and China Light and Power is also uncertain. There is, however, lack of clarity on Lenovo, as Legend Holdings, the company that owns the brand, started out in China but subsequently registered in Hong Kong.
“This will hit their business. They first need a clearance for additional investments in India and then seek fresh registration to participate in government contracts,” explained an official.
In April, the government had put a stop to automatic FDI approvals for Chinese firms and those from countries that share a border with India. Estimates suggest government’s public procurement spend varies between 20% and 30% of GDP, with certain agencies spending nearly half their budget on this.
While issuing the new order, the Centre has also invoked powers under Article 257(1) to get state governments to fall in line.