Government Procurement – An emerging tool of global integration and good governance in India

About the project

Currently, India holds an observer status in the WTO Plurilateral Agreement on Government Procurement. It is included in the recently-signed India-Japan free trade agreement. This issue is being discussed as part of negotiations on EU-India free trade agreement. However, there is little understanding about issues and challenges in regard to multilateral/bilateral obligations with respect to transparency, efficiency and market access aspects of government procurement that India will have to adhere to – this is particularly in case of stakeholders such as ministries/departments, industry associations, CSOs and so on.

The project will integrate the stakeholders into the activity design which is expected to generate critical momentum for continuing efforts in support of accession process to the Agreement on Government Procurement on the project completion. Further, the importance and relevance of the subject has increased with a greater focus today on global good governance post financial crisis. Therefore, it is expected that the project outputs will continue to draw interest from all concerned stakeholders.

Implementing Organisation:

CUTS International
D–217, Bhaskar Marg, Bani Park,
Jaipur 302 016, India
Ph: +91.141.2282821,
Fx: +91.141.2282485
Email: cuts@cuts.org
Web: http://www.cuts-international.org/

Supported under Prosperity Fund India Programme by

British High Commission, New Delhi, India

The Government of India uses preferential treatment in government procurement as a tool of its industrial and social policies. It is a part of India’s strategy for economic development, social responsibility and to protect small and vulnerable sections of the society.

Since the establishment of the World Trade Organisation in 1995 (India as a founding member) there is considerable pressure on India to accede to the WTO Plurilateral Agreement on Government Procurement. Following the launch of the Doha Development Round of negotiations by the WTO Members in 2001, there is considerable momentum to this pressure.

The Doha Agenda on government procurement was limited to transparency in government procurement (while the WTO Plurilateral Agreement on Government Procurement covers transparency as well as market access). Following the abandonment of negotiations on transparency in government procurement (after the Cancun Ministerial Conference of the WTO Members in 2003), there was a renewed demand to get India acceded to the WTO Plurilateral Agreement on Government Procurement.

While there is a clear demand on the part of India’s major trading partners (all are either member or in the process of accession to the WTO Plurilateral Agreement on Government Procurement) as its market for government procurement (only at the central government level) is estimated to be Rs. 250 billion (more than 3.5 billion British Pounds), there is an internal demand too – mainly to address transparency aspects of government procurement.

This demand received a further boost when it was pointed out that the average size of India’s government procurement bids subjected to compulsory open bidding (including overseas bidders) is much more than the minimum threshold that India would have to adhere to if it becomes a member of the WTO Plurilateral Agreement on Government Procurement. Furthermore, given the increase in size and change in structure of the Indian economy, it is in a position to comply with many other obligations of that agreement.

Another important development is many Indian firms are bidding for foreign contracts (on their own as well as through joint venture) and many are facing considerable challenges in accessing foreign markets for government procurement on account of India not being a member of the WTO Plurilateral Agreement on Government Procurement – for instance, the 2009 Buy America Act of the US stipulates an additional 2 percent tax on foreign bidders except from those countries which are members of this agreement.

Keeping in mind India’s opportunities and challenges in transparency and market access in government procurement, in 2010, it took the first step to become a member of the WTO Plurilateral Agreement on Government Procurement – that is to get an observer status to this agreement (India can observe negotiations and other proceedings but cannot take part in them with official submissions; non-papers can be submitted and there can be informal bilateral/plurilateral meetings with other members of that agreement).

India’s intention to become an active player in the government procurement market became clear when it agreed to negotiate this subject as part of EU-India free trade agreement and India-Japan free trade agreement (in latter case, it is a part of the signed agreement).

Along with these positive developments, one confronts with lack of data and literature on Indian government procurement market. And, there is little systematic attempt to make the process of acceding to the WTO Plurilateral Agreement on Government scientific (knowledge-based) as well as inclusive.

By 2013, Government of India adopts necessary policy changes towards a more transparent and open government procurement system supporting its possible accession to the WTO Plurilateral Agreement on Government Procurement

National Consultation
WTO Plurilateral Agreement on Government Procurement
Market Access Opportunities & Challenges for India
January 31, 2013, New Delhi

National Meeting
Government Procurement
An emerging tool of global integration and good governance in India
March 06, 2012, New Delhi

Project Launch Meeting
Government Procurement
An emerging tool of global integration and good governance in India
August 31, 2011, New Delhi

A Project Advisory Committee representing various stakeholder groups and consisting of experts on government procurement will be established to steer the process of this project and advice and evaluate the documents to be produced.

A report focusing on Indian government procurement market at the central government level in three sectors, viz. health (pharmaceuticals as well as medical equipments), information technology and IT-enabled services and railways will be ready. It will look at the status of current regulations, market size, analyses of potential foreign competition, potential economic impact (impact on employment and government revenue, technology transfer, etc) and potential administrative costs.

A report on negotiating options for India – focusing on opportunities and challenges of India’s accession to the WTO Plurilateral Agreement on Government Procurement will be ready. Among others, it will look at the trade effect of increased market opportunities abroad and regulatory changes in India to comply with the WTO GPA rules. India’s offensive and defensive interests in selected countries and sectors will be studied in terms of business opportunities and specific regulations vis-a-vis modes of supply in those markets and sectors.

Awareness raised of concerned ministries (Department of Commerce, Ministry of Finance, the relevant line ministries including public sector undertakings) and to other relevant stakeholders (Indian and foreign players interested in Indian government procurement market) by organising national meetings and advocacy meetings.

Major Highlights towards the project accomplishment

Report of Consultation Meetings

Briefing Paper>
Should India Join the WTO GPA?
Vinitha Johnson*

WTO Plurilateral Agreement on Government Procurement
Market Access Opportunities & Challenges for India

Government Procurement in India
Domestic Regulations & Trade Prospects

In Media

Bill to regulate govt purchases introduced
Livemint, May 14, 2012

SMEs get public procurement boost
Business Line, May 04, 2012

Centre approves public procurement Bill
Business Standard, April 13, 2012

India looks to leverage its market clout
Livemint, April 06, 2012

Procurement policy will pay
The Hindu, March 11, 2012

Articles

India and the WTO procurement deal
The Hindu Business Line, February 21, 2013

Press Releases

Balance good governance with commercial interests in public procurement: CUTS
January 31, 2013, New Delhi

Public Procurement Bill needs stakeholders’ support: CUTS
March 07, 2012, Jaipur

Take a systemic approach for a balanced government procurement regime: CUTS
September 01, 2011, Jaipur

Project inception meeting will be organised involving Indian and foreign stakeholders to discuss the objective, scope and methodology of doing research and advocacy activities.
PAC (Project Advisory Committee) will be constituted and regular meetings will be held with the PAC to discuss the project’s progress and the quality of its outputs.
Desk research will be carried out to prepare the first research study – an overview of the Indian government procurement market.
Field research will be carried out in India and a few other relevant countries to prepare the first research study – to meet some key stakeholders (including government officials) to collect data and other information on the size, issues and challenges of the Indian government procurement market and to understand the views and concerns of expected (what it ought to be as against what it is) market access opportunities of foreign stakeholders in the Indian government procurement market.
Desk research will be conducted to prepare the second research study – negotiating options for India for its possible accession to the WTO GPA.
Field research will be administered in New Delhi and in Geneva to prepare the second research study – on negotiation issues and challenges of India’s possible accession to the WTO GPA.
National meetings with government officials from the Department of Commerce, Ministry of Finance, respective line ministries/departments (including public sector undertakings), industry associations, private sector players and other interested stakeholders for wider dissemination of project outputs (reports).
Advocacy meetings with officials of the Department of Commerce, Ministry of Finance, other line ministries/departments (including public sector undertakings), industry associations, private sector players and other interested stakeholders to discuss specific inputs on India’s expected negotiations to accede to the WTO Plurilateral Agreement on Government Procurement, and also making a case for an inter-ministerial expert committee (including having members from among non-state actors) to assist in the process of negotiation.

Following are the major beneficiaries of the project:

Indian government officials (including public sector undertaking)

Indian Industry Associations

Foreign Stakeholders interested in the Indian government procurement market

Project Advisory Committee

Andrew Jackson, Counsellor (Knowledge Economy), British High Commission

Anil Bhardwaj, Secretary General, Federation of Indian Micro and Small & Medium Enterprises (FISME)

Bernard Hoekman, Director, International Trade Department, The World Bank

D G Shah, CEO, Vision Consulting Group

K.P. Varma, President, Public Procurment Group and former Additional Member/Railway Board, Ministry of Railways, Government of India

Manab Majumdar, Assistant Secretary General, Federation of Indian Chambers of Commerce and Industry (FICCI)