Procurement from Chinese Companies through GeM Portal in India

GeM (Government e-Marketplace) is a national public procurement platform. This is an online platform designed specifically for the government departments and government companies for any kind of procurement. Government bodies, i.e., Central Government, State Government, Public Sector Undertakings (PSUs) and municipal bodies, are required to place through tender on GeM and all eligible suppliers are free to submit quotations for such tender.

Also, all kinds of overseas supplies are also routed through GeM. It was developed by the Directorate General of Supplies and Disposals (DGS&D) under the Ministry of Commerce and Industry. In July 2020, Government restricted bidders from countries sharing land border with India from submitting their quotations. Recently, government has made certain amendments related to procurement from Chinese companies.

This article contains a detailed insight of how amended provisions have affected Cheiense bidders on GeM portal:

1. Restriction on procurement from Countries sharing land border with India

From July, 2020 onwards, Government has restricted free overseas movement of goods and services from the countries sharing land borders with India through a amendment in General Financial Rules
Post such amendment, GeM portal has removed hundreds of Chinese companies and vendors from GeM platform. This move was taken post physical stand-off at LAC.
Companies having Chinese beneficiaries have also been removed from GeM Portal.
As per amended provisions, only those companies from land sharing border countries can participate on GeM portal only if they are registered with a competent authority.
Competent authority is a registration committee constituted by the Department of Promotion of Industry and Commerce (DPIIT).
Under the new guidelines registration requirements include political and security clearance from the Ministry of External Affairs and Ministry of Home Affairs.
The move has impacted electronic products including laptops, desktops, medical devices.
Under the new GeM rules all suppliers are required to obtain certification from vendors that they are compliant with the order.

2. Procurement from Chinese Companies from GeM portal

Post amendment of General Terms and Conditions of GeM portal, Chinese companies are having doubt whether there is any means available for chinese company to supply goods or services through GeM Portal.

With respect to same, one need to refer Clause 26 of General Terms and Conditions on GeM 4.0 (Version 1.12). Clause 26 specifies Restrictions on procurement from a bidder of a country which shares a land border with India.

As per Clause 26, following are the restrictions:

Any bidder from the country sharing land border with India shall be allowed to supply through GeM Portal only if the bidder is registered with Competent authority . Therefore, there is no blanket ban for chinese companies. However, they are first required to register with the Competent Authority.

Definition of bidder is very broad and it includes firm or company, consortium, Joint venture, every artificial juridical person including any agency branch participating in a procurement process.

Entities controlled directly or indirectly by the entities located in countries sharing land border with India will be covered under this clause and will get registered with competent authority first.

“Controlling ownership interest” means ownership of or entitlement to more than 25% of shares capital of the company;

“Control” shall include the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements;

An Indian (or other) agent of such an entity is also covered under this clause.

The registration shall be valid at the time of submission of bid and at the time of acceptance of bid. If the bidder was validly registered at the time of acceptance / placement of order, registration shall not be a relevant during contract execution.

Any bidder, including an Indian bidder, who has a Specified Transfer of Technology (ToT) arrangement with an entity from a country which shares a land border with India will also be covered under this clause and will be required to be registered with Competent Authority.

“Transfer of Technology” means dissemination and transfer of all forms of commercially usable knowledge such as transfer of know-how, skills, technical expertise, designs, processes and procedures, trade secrets, which enables the acquirer of such technology to perform activities using the transferred technology independently.