In a first, India opens up central govt procurement market to UAE

Experts say this may open a Pandora's box with demand for similar commitment

In a major shift in its trade policy stance, India has opened up its central government procurement market to the United Arab Emirates (UAE) under the free trade agreement (FTA) signed last month. This will give national treatment status to UAE companies, on a par with Indian companies, while bidding for central government tenders.

“The (two) parties recognise the importance of government procurement in trade relations and set as their objective the effective, reciprocal and gradual opening of their government procurement markets, in order to maximise, inter alia, competitive opportunities for the suppliers of the parties,” the text of the India-UAE Comprehensive Economic Partnership Agreement (CEPA), which was released on Sunday, shows.

Biswajit Dhar, economics professor at the Jawaharlal Nehru University, said there was a fundamental change in position on public procurement that India had taken so far. “This is a slippery slope. Once you show your hand that you are actually agreeable to committing government procurement to some trade partners, you have to give the same commitment to other trade partners in all upcoming FTAs such as with Australia, the UK, and the EU. There will also be pressure from the WTO (World Trade Organization) as well to join the plurilateral Agreement on Government Procurement, which we have been opposing all along,” he said.

Opening up public procurement to the UAE will make Japan an unintentional beneficiary. “There is a clause in the India-Japan CEPA that if India opens up its public procurement market to any of its trading partners, then it has to extend the same to Japan as well,” Dhar added.

Both India and the UAE are now bound not to introduce any technical provision to protect domestic suppliers, or discriminate against suppliers of the other country. However, both countries are not bound to disclose any information which it considers necessary for the protection of its essential security interests relating to the procurement of arms, ammunition or war materials, or to procurement indispensable for national security or for national defence purposes.

A procuring entity in one country may use limited tendering for domestic suppliers only if in response to a prior notice, no tenders are submitted that conform to the essential requirements in the tender documentation -- or no suppliers satisfied the conditions for participation.

Each country reserves the right to apply a preferential procurement policy for its MSMEs in accordance with its laws and regulations. “lf a party maintains a measure that provides preferential treatment for its MSMEs, the party shall ensure that the measure, including the criteria for eligibility, is transparent,” the text of the trade deal said.

The trade deal also specifies what will and will not be opened up. Public procurement of goods and services, including construction services above Rs 200 crore (SDR 20 million) by 34 designated central government ministries, including the Ministry of New and Renewable Energy and the Ministry of Power, will be opened up.

However, procurements by all central public sector enterprises, autonomous bodies, and regulators are not covered under the deal. Procurements conducted under the Public Procurement (Preference to Make In India) Order 2017, procurements related to construction projects or any infrastructure projects, procurements relating to the health care sector, procurements of agricultural products for food aid programmes are also not covered under the deal.

Dhar said even though at present, foreign companies get the opportunity to bid in government tenders above the Rs 200 crore threshold, there is no legal requirement. “The commitment under the India-UAE trade deal makes their participation binding as now they have to be given equal opportunity because of the national treatment clause to bid for any project that the government is putting out. It’s now a matter of right for them,” he added.