India-UK Comprehensive Economic and Trade Agreement’s (CETA) Government Procurement (GP) Chapter marks India’s first successful negotiations of a comprehensive chapter with significant Market Access (MA) commitments.The chapter includes commitments that guarantee open and transparent procurement processes based on objective criteria. The GP chapter provides a legal guarantee for Indian suppliers to be treated on par with UK suppliers regarding social value considerations within procurement processes to ensure a level playing field for Indian businesses.
The chapter also allows Indian procuring entities to base the technical specifications for the procurement of goods and services on national technical regulations and set out deadlines for the submission of requests to participate in the procurement process in accordance with their domestic laws. The CETA provides Indian suppliers with a guaranteed recourse to the domestic review procedures under the GP chapter.
As per the Indian government, the UK has agreed to asymmetric thresholds (contract value above which the CETA GP chapter applies) for goods and services in favour of India for market access commitments. In this regard, UK’s thresholds for goods and services are SDR (Special Drawing Rights) 130,000 (approximately ₹1.6 crores) while India has a 3.5 times higher threshold of SDR 450,000 (approximately INR 5.5 crores). For procurement related to construction services, both sides have agreed to have a similar threshold of SDR 5 million (₹60 crores).In addition, the UK has, for the first time, accommodated India’s domestic policies relating to procurement. Under the Public Procurement (Preference to Make in India), Order (PPP-MII Order), while British suppliers are eligible to participate as “Class-ll local suppliers” (if at least 20% of their product or service is from the UK), Indian suppliers will continue to receive preferential treatment as “Class-1 local suppliers” (if their goods or service have more than 50% local content from India).Also Read: India-UK FTA: Why it’s a trade pact that goes beyond traditional tariff reductions
In contrast, Indian suppliers will receive non-discriminatory treatment in the UK procurement markets. Additionally, India has also preserved its policy space to provide preference to MSMEs under the Public Procurement Policy for Micro and Small Enterprises Order (MSE Order). India’s MA commitments are limited to the Central Government Ministries/ Departments, including their attached sub-ordinate entities. Additionally, central PSUs in competition with private entities are also outside the scope of India’s MA commitments made to the UK. It also specifically excludes sub-central (state/local government) level procuring entities.Indian suppliers will have guaranteed access to the UK procurements being conducted at the central level of government and some at the utilities level. As per the Indian government, in 2022, these opportunities were worth approximately GBP90 billion (or $120 billion) and included major central government entities procuring IT services, construction services, financial and insurance services, etc. Indian suppliers will be able to participate in procurements by major government departments such as the Cabinet Office, Department for Business and Trade, National Highways, NHS Foundation Trusts (Department of Health and Social Care), and Foreign, Commonwealth and Development Office, Department for Education, among others.In addition, Indian suppliers can participate in government procurement conducted by entities such as Belfast Metropolitan College, Northern Regional College, and North West Regional College, which are not offered to all trading partners.On 22nd May, government sources had told CNBC TV18 that Indian companies will get non-discriminatory treatment under the UK’s Social Value regime, which mandates government departments to factor in economic, social and environmental well-being for public service contracts.Sources added that the British government sees the FTA as providing unique and unprecedented access to British businesses in India’s public procurement market, which comprises around 40,000 tenders with a value of £38 billion per year. On the opening up of government procurement for British companies, sources had earlier said that British firms would be allowed to participate only in the procurement of goods and services of non-sensitive central-level entities in India. The FTA also provides a carve-out for the ‘Make in India’ policy as well as for medium and small enterprises.India’s government procurement market is estimated at nearly $600 billion annually, which is around 15% of the country’s GDP. UK is the 2nd country for which government procurement has been opened up in India, after it was opened up for the UAE under the FTA. Emirati firms are allowed participate in procurement tenders worth over ₹200 crores in India, which will now also apply to British companies.As per the revised Public Procurement (Preference to Make in India) Order 2017 which introduced distinctions of Class-I, Class-II and non-local suppliers for the purpose of preference in government procurement, Class-I local suppliers get the highest preference. Access to state and local government-level entities will continue to exclude British companies, while suppliers allowed to bid for domestic tenders will be deemed as Class II local suppliers. By definition, Class-I local suppliers have a domestic value addition (DVA) of over 50% while Class-II suppliers have DVA from 20% to 50%.Also Read: FTA gives 95% of Indian exports duty-free access, UK gets 24.5%: Commerce Ministry
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