To further the Make in India push, imported items sourced locally from resellers, distributors, royalties, technical charges paid out of India, and supply of repackaged or refurbished goods will be excluded from the calculation of local content, according to an order issued by the Department for Promotion of Industry and Internal Trade (DPIIT).
The government has modified the definition of ‘local content’ through the revision. License fees, royalties, or technical charges paid outside India are excluded while calculating local content.
Refurbishing, now defined as repair or reconditioning of an imported product, will not be considered manufacturing. Similarly, repackaging or repacking imported products from bulk to smaller packs and rebranding or re-labeling or changing symbols/l and logos of an imported product, are excluded.
As per the revised Public Procurement (Preference to Make in India), Order 2017, the procuring entities will have to obtain from bidders, the cost of such locally-sourced imported items (inclusive of taxes) along with break-up on license/royalties paid/technical expertise cost sourced from outside India.
Class-I local supplier means a supplier or service provider, whose goods, services or works offered for procurement, has local content equal to or more than 50% while
Class-II suppliers have 20% local content.
PLI, purchase preference
As per the revised order, manufacturers making a product under the production
linked incentive (PLI) scheme will be deemed Class II local supplier of that item unless they have local content equal to or more than the Class I local supplier. This concession to PLI will be applicable for a limited period which will be specified by the ministry running a particular PLI scheme.
The order also gives purchase preference to the local suppliers in government contracts and given an opportunity to match the lowest bids if they miss out. The margin of purchase preference is 20%.
Besides making mandatory sourcing from Class 1 supplier in turnkey, EPC and services tenders, it has exempted procurement of spare parts, consumables and maintenance, service contracts with OEMs.
OEM certificates for country of origin have to be provided for the items sold by the bidder as reseller, as per the revised order issued Saturday.
For contract involving supply of multiple items, the weighted average of all items has to be taken while calculating the local content.
The order also said that a penalty upto 10% of the contract value may be imposed in case the contractor/ supplier does not meet the stipulated local content requirement and the category of the supplier changes from Class-I to Class-II/ Non-local or from Class-II to Non-local.
To ensure that the order is fully implemented, the ministries, departments and other government entities have been asked to obtain from bidders the cost of locally-sourced imported items along with the break-up of royalties and other fees. For the items sold by the bidders as reseller, OEM certificates for country of origin are to be submitted.