Modi government tenders find it hard to comply with its own 'Make in India' rules: Report

In the last three years, around 40 per cent of over 3,500 high-value tenders, amounting to Rs 64,000 crore, floated by various government departments were flagged as 'non-compliant' with the 'Make in India' rules by the nodal agency for this push -- the Department for Promotion of Industry and Internal Trade (DPIIT).

The Narendra Modi government introduced the 'Make in India' order in government procurement in 2017. However, enforcing it has been easier said than done.

The rules in the Public Procurement (Preference to Make in India) Order prohibit tenders that restrict or show discrimination against domestic suppliers. This might be by specifying foreign brands or setting conditions for eligibility around the turnover or production capacity. This may put domestic firms at a disadvantage.

In the last three years, however, around 40 per cent of over 3,500 high-value tenders, amounting to Rs 64,000 crore, floated by various government departments were flagged as 'non-compliant' with the 'Make in India' rules by the nodal agency for this push -- the Department for Promotion of Industry and Internal Trade (DPIIT).

The Indian Express viewed records that showed that for items from lifts to CCTV cameras, medical supplies to desktops, departments turned to foreign brands arguing that they made more sense economically and quality wise, than domestic alternatives.

Departments also highlighted that some foreign brands specified in the tenders have manufacturing operations here.

The DPIIT, in February 2023, found that of the 1,750 high-value tenders, floated by the Modi government's procuring entities since Oct 2021, 936 tenders -- valued at Rs 53,355 crore were not compliant with the 2017 rules.

DPIIT analysis further showed that corrective action was taken in 180 such tenders, while there was 'no response' in 706 such cases, as per The Indian Express.

The 2017 order was then made more stringent in 2020 when a new method of classification was introduced. It said that departments, as a norm, should only source from local suppliers with local content over 50 per cent if there is sufficient local capacity and competition. If there isn't, then they can source from suppliers with local content between 20 and 50 per cent. Suppliers whose local content is below 20 per cent, were classified as 'non local' and allowed only in exceptional cases, like global tenders.

By November 2024, soon after the 10th anniversary of the 'Make in India' initiative, the number of high-value tenders that failed to comply with the 2017 order went up to 1502, out of 3,590 tenders which the publication scrutinised. This accounted for 42 per cent of the total tenders seen and amounted to Rs 63,911 crore.

Of these, 982 tenders did not incorporate provisions of the 2017 order, 450 specified foreign brands, and 152 had restrictive turnover requirements.

The publication also accessed records showing that in 2019, the Principal Secretary to the Prime Minister and the DPIIT Secretary had instructed top bureaucrats across ministries to 'advise their procuring agencies to desist from such practices.'

In November 2024, the DPIIT further noted that the departments of Military Affairs and Atomic Energy had not yet updated the procurement policies to match the 2017 order. As of April 1, 2024, the Department of Telecommunications, ministries of Electronics and Information Technology, Civil Aviation, Petroleum and Natural Gas, Textiles, and Steel, did not update their procurement rules to add the 2020 amendments to the 2017 order, IE reported.

DPIIT, in 2022 itself, had compiled common tendering practices across ministries which it deemed to be restrictive and discriminatory to local suppliers.

For example, in tenders for telecom products, foreign brands like Alcatel, Siemens were specified, while companies like HP and Lenovo were specified for IT products.

Likewise, tenders for lift supplies specified brands like Otis and Schindler. While these companies have manufacturing ops in India, as some of these tenders specified, the mention of brand names itself violates the 2017 order.

"The main thing is, there has to be a supply response from the domestic suppliers...A mandate doesn’t create a supply response. It just raises costs and undermines the quality and functionality of things in some situations," a former senior official told the publication.

In a Feb 2023 meeting, the Housing and Urban Affairs Secretary said that the Central Public Works Department (CPWD) was having issues in procuring quality made-in-India lifts for its projects.

The Finance Secretary, meanwhile, noted that violations like requirement of excessive turnover or mentioning a specific brand didn't just violate the 2017 order, but also the General Financial Rules of the government, which oversee use of public finances.

Ministries were subsequently directed to “fix responsibility in case of violation” of the order and “take stringent action against officers responsible for such violations”, IE reported.

An 'inordinate delay' in reporting action that procurement entities took on grievances they got was also flagged, after it was seen that cases increased four times from 556 in October 2019 to 2,190 in Feb 2023.

Until November 2024, a total of 18 ministries and departments did not provide any action taken reports.