India opens govt procurement sector for UK firms under FTA

New Delhi: After the UAE, India has opened its central government procurement for British companies under the free trade agreement (FTA) announced on Tuesday, an official said on Wednesday.

The official said British firms would be allowed to participate in the procurement of goods and services of the non-sensitive central-level entities only.

However, access to state and local government-level entities will be excluded.

"Eligible UK suppliers would be allowed to bid for domestic tenders as deemed Class II local suppliers only," the official said, adding carve out is also provided for 'Make in India' policy as well as medium and small enterprises.

Earlier, India opened the government procurement segment in the comprehensive trade pact with the UAE. Under that pact, UAE firms are allowed to participate in procurement tenders worth over Rs 200 crore.

In 2020, the government modified public procurement norms to give maximum preference to companies whose goods and services have 50 per cent or more local content to promote 'Make in India'.

The revised Public Procurement (Preference to Make in India), Order 2017, has introduced a concept of Class-I, II and non-local suppliers, based on which they will get preference in government purchases of goods and services.

Class-I local suppliers will get the most preference in all government purchases because their domestic value addition is 50 per cent or more. They will be followed by Class-II suppliers, whose value addition range is more than 20 per cent but less than 50 per cent.

Commenting on the pact, economic think tank GTRI said that allowing UK firms to compete on near-equal terms could crowd out Indian MSMEs, which depend heavily on protected access to government contracts.

"It also dilutes one of India's last remaining industrial policy tools - government procurement preferences - used to promote domestic manufacturing, innovation, and jobs," GTRI Founder Ajay Srivastava said.

India's government procurement (GP) market is one of the largest in the world and it is estimated at nearly USD 600 billion annually, or approximately 15 per cent of the country's GDP.

This expenditure fuels development across infrastructure, healthcare, power, education, transport, and defence.

However, GP is more than a budgeting tool as it is a critical industrial policy instrument, used to promote local manufacturing, build MSME capacity, and advance national programs like Make in India and Atmanirbhar Bharat.

On the inclusion of environment and labour chapters in the FTA, the official said to safeguard India’s interests, these chapters will not attract application of dispute settlement of the pact.

"Environment chapter takes into account the differences in the Parties’ respective levels of development, priorities and circumstances based on CBDR-RC (Common but differentiated responsibilities and respective capabilities) and takes into account different development status and national priorities," the official said.

On the other hand, the labour chapter only provides for cooperation provisions and institutional mechanism for discussing issues related to skill development, capacity building, information sharing on skill gaps.