Local players in electronics industry see preference policy as a threat
Ironically, it is aimed at creating more demand for Make in India goods
Preferential treatment to the Indian electronics industry is becoming a threat of sorts for the domestic players who think priority inclusion in the public procurement policy would be counterproductive for Make in India.
The industry is already reeling under the onslaught of low- cost Chinese products and they fear inclusion in Public Procurement (Preference to Make in India) will be counterproductive.
Persons close to the development said major electronic products, including smart meters, which the Centre is currently procuring through bulk tenders, would now fall under the policy that the Centre put in place last year.
The Indian electronics industry thinks the policy has flaws. “We would be forced to match the lowest bid in order to get the tender. Reducing price below the cost of production is not possible for Indian companies. Even in the last two smart meter tenders, which did not have preferential sourcing, the price quoted by Chinese companies was way below the production cost,” said a senior executive in a company that participates in government tenders for various electronic items.
The policy, which has been revised twice — the most recent being May 2018 — enlists several sub-clauses that otherwise favour Indian companies. According to the policy, if the lowest bidder for any order above ~5 million is not an Indian, the winner will only get 50 per cent of the tendered amount. The balance 50 per cent would be offered to the Indian participants and whoever can match the lowest quoted price (in the range of 20 per cent of the price) will get it. In case the lowest bidder is an Indian company, they will get the full amount. Also, for orders below ~5 million, only Indian companies are allowed to participate.
“The policy as a whole is very encouraging for the electronics sector as it will boost government procurement of indigenous goods. However, the ~5-million cap, which includes only domestic companies, is too less for our industry. Most of the bulk orders for electronic products are larger than ~5 million,” said Sunil Mishra, director-general, Indian Electrical & Electronics Manufacturers’ Association. He added while the preference would be a welcome change, it’d be beneficial on a case-tocase basis and cannot be a blanket reform. “In some products, the price can be lowered to match competition and in some products such as smart meters and allied new technologies, it’d be near impossible. It could lead to a compromise in quality,” said a senior executive with an electronics firm.
The Public Procurement (Preference to Make in India) Order 2017, that came into effect back in June last year, stipulates that only local suppliers will be eligible for all government goods purchases less than an estimated ~5 million. Also, individual procurement policies of various ministries have not been subsumed by the national policy administered by the Department of Industrial Policy and Promotion. As a result, various ministries have brought out individual orders on specific goods.
While no further changes to the existing order are planned, the government will draw a list of 90 items which will be brought under the mandatory category in preferential procurement, the official mentioned earlier added. This includes leather items and certain industrial machinery, among others. Work on identifying the items has been slow as the interministerial committee tasked with administering the national policy has not been meeting regularly.
Despite measures to reduce the influx of inbound industrial as well as consumer electronics, imports have continued to shoot up. The data from the commerce and industry ministry shows the trade gap for electronics products has doubled in the last five years. The deficit stood at $38.94 billion for 2017-18, compared to $18.86 billion in 2013-14.