Improvement Suggestions for Public Procurement

Tenders must insist on domestic specifications and standards. Line ministries should ensure compliance. Frivolous specifications or functional requirements to circumvent the system should be plugged.

By Rajesh Tuli & Rakesh Kumar Bhatnagar

Aatma Nirbharta in the Indian Telecom sector requires an agile design and manufacturing ecosystem in the country. This in turn needs entrepreneurs and start-ups to succeed and be profitable - which requires a market pull for their products.

While Public Procurement (Make in India) Policy, (PPP MII) is an excellent policy the overarching policy framework needs to be strengthened to help start-ups in the initial deployment of their products. Such domestic grooming would be a precursor for global aspirations and largescale commercialization.

Government e-Marketplace (GeM) is an excellent market initiative that can be leveraged for PPP MII. The geM can be leveraged for demand forecasting and consolidation. The government has taken a laudable initiative to encourage procurement of domestic products in public procurement but considering the far-reaching impact and importance of this policy, ground-level implementation needs to be improved.

Public Procurement (Make in India) Policy, (PPP MII) is an excellent policy that has the single handed potential to resurrect the domestic manufacturing industry.

Improvements

Here are some suggestions from the industry for improvement:

1. Issue paper on Frequently Asked Questions (FAQ) for smooth implementation & interpretation of the policy in the desired spirit. FAQ has been suggested by the industry and reviewed at DOT. It is pending to be published on the website. The FAQ should be based on decisions, viewpoints, and judgments taken in grievance redressal committee meetings at DOT / DPIIT such that it acts as a compendium of various judgments. It should act as a guiding spirit for any future deviation from the policy consequently minimizing disputes. This paper must bring clarity on the following

• Applicability of policy on Turnkey projects (big Govt buy) that includes a large amount of civil work: It must be insisted upon by System Integrators & EPC contractors that at least items, where the nodal ministry has confirmed that capacity and competence exist in the country, must be purchased from domestic manufacturers.
• It needs to be clarified that Imported hardware with peripheral services of software configuration design and layout work cannot be shown as domestic value addition to circumvent the policy. Similarly, Profit, AMC, and Installation can not be part of domestic value addition.
• Policy circumvention in the name of up-gradation or additional licensees for old systems (even for 10–15-year-old equipment) must be addressed considering the spirit of the policy.
• Circumvention of policy in the garb of Interoperability with old proprietary products.

2. Grievance re-addressed meetings need to be held by each nodal ministry as an extended arm of the standing committee of DPIIT empowered to decide on Policy related grievances. This would facilitate the nodal ministry to encourage manufacturers of products covered by the nodal ministry and would also sensitize stakeholders to ensure corrective actions that prevent domestic manufacturers to sell products to large Government buyers.
3. As in the 2017 policy of DOT, Insist on compliance to TEC specifications in all tenders for Telecom products. Similarly, all products should be covered through domestic specifications. Tenders must insist on domestic specifications and standards. Line ministries should ensure compliance. This is important because frivolous specifications or functional requirements are generally inserted to circumvent the system. Customers may get domestic specifications framed or revised after a public consultation which provides time to the industry to adapt & update. Such a proactive mechanism will safeguard against Indian industry being put in “chasing mode” for every tender.
4. Enhance the list of items to include all items manufactured locally. There is a list of 94 items in Telecom that were submitted by VoICE (See LIST) and proposed for inclusion in the next update of DoT’s Public Procurement Notification. These lists should be made by each ministry and insisted upon for procurement from Indian manufacturers in public procurement.
5. The myth that 60% domestic VA is not possible must be broken since the balance sheets of most big companies will show raw material consumption in the manufacturing process is less than 50% of the sale value. They operate at more than 50% Gross contribution otherwise they wouldn’t even meet their expenses. If the total raw material for them is 50%, then active components and I cannot be more than 25% of the sale price so the myth that domestic VA cannot be 60% till semiconductor fabs are set up needs to be busted in the mind of decision-makers.
6. Domestic Value Addition (VA) should be enhanced from the VA percentage specified in the 2017 policy of DOT. Sufficient manufacturers were meeting that criterion & competing for the tenders. As a community, we cannot make retrograde claims on VA percentage. Telecom products are security-sensitive, unlike consumer electronics. Design and IPR components must be given higher weightage. Design is the basis to ensure the absorption of technology in the country and downstream ecosystems.
7. Portals like GEM should be diligent on VA percentage declarations. GEM can help consolidate demand and facilitate procurements from one central platform. Scrutiny of documents and submissions of each manufacturer can be validated at a central location rather than each department of the Government repeating the same activity which duplicates national resources. Common anomalies observed in the GeM portal are as follows:

• They allow imported products showing 21% VA without proper verification. Profits or installation or AMC could be shown as Domestic value addition. Many of the imported products are declared as Class I by the bidders.
• Tenders insist on all products from one OEM. Indian SMEs may not have all the subsystems required for a project hence are left out.
• None of the procuring agencies follow a protocol to get a waiver from the Standing committee or Secretary Coordination as per DPIIT guidelines to get the Make in India policy exemption. Many of the PAC RFP/tenders are there on GEM wherein foreign Make and models have been sought even if equivalent domestic products are available. GEM should not allow publishing of such a product even if overall Value Addition is met.

8. Enlarge the scope of the policy to Include

• State Governments purchases.
• Purchases by Telecom operators.
• World bank-funded projects at least for 3a products
• Indian projects are undertaken in other countries against LOC or Grant in Aid.

9. Implementation agencies responsible for ensuring policy compliance should be given more teeth to ensure punitive action against defaulters — both buyers and sellers — making wrong declarations. Situations exist where buyers ignored the directions of the standing committee meeting responsible for the implementation of the PPP MII order.
10. Enforcement and surveillance of Govt Initiatives like MTCTE and Trusted Sources at ground level

• MTCTE phase 1 and phase 2 have been implemented for more than a year. Now phase 3 and phase 4 have been announced. Still, many products for which MTCTE is not available or kept in abeyance are being imported, and implemented by TSP/ISP or traders. There are companies who have spent lot of effort, time, and money to get their equipment certified. MTCTE surveillance at ground level should be enforced.
• Trusted Source is a good initiative by Govt of India to ensure only secure products are being implemented by Indian networks as soon as the agency starts giving clearances for the source/products, enforcement is critical.

Tuli is MD, Coral Telecom Ltd

Bhatnagar is Director General, VoICE & Retired Advisor (Technology), DoT

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