In another major move to restrict China's participation in the Indian economy, the government changed the rules to enable curbs on bidders from countries that share a land border with India on the grounds of defence and national security. Though the order does not name any country, as in the case of the previous order subjecting FDI from the same set of neighbours, the move is clearly aimed at scrutinising and imposing curbs on Chinese investments and partnerships in Indian projects. The new rules seek to block supply of stationary, turbines and telecom equipment as well as award of road and power contracts to companies that have a link with China.
The move comes in the backdrop of the continued military stand-off in Ladakh where Chinese forces are dragging their feet over vacating intrusions after partly complying with mutual agreements to disengage. Indian military commanders and top diplomats have unambiguously conveyed to China that status quo must be restored and India will do all it can to safeguard its sovereignty.
The action signals increasing impatience with China over its failure to fully implement the "consensus" to disengage and de-escalate. Previously, the government had banned 59 Chinese controlled apps, a decision that is seen to have hurt China's booming internet firms. The order, which does not apply to private sector procurement, said, “The new provisions will apply to all new tenders. In respect of tenders already invited, if the first stage of evaluation of qualifications has not been completed, bidders who are not registered under the new Order will be treated as not qualified,” the government said.
If the first stage has been crossed, ordinarily the tenders will be cancelled and the process started de novo. The order will also apply to state government and other forms of public procurement but not to private sector. The government order amended the "General Financial Rules 2017" to allow the Centre to intervene in matters that directly or indirectly relate to defence and national security. As per the order any bidder from such countries sharing a land border with India will be eligible to bid only if registered authority to be set up by the department of promotion of industry and internal trade.
Procurement will include goods, services (including consultancy services and non-consultancy services) or works (including turnkey projects) only if the bidder is registered with the Competent Authority. A registration committee constituted by DPIIT will need to be provided political and security clearance from the ministries of external and home affairs which will be mandatory.