Foreign firms could get access to govt contracts

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New Delhi: In a move that could herald the opening up of India’s multi-billion dollar market of government procurement to foreign companies, the commerce ministry has proposed a process for the country to join the agreement on government procurement (GPA), a plurilateral treaty under the World Trade Organisation (WTO).

The ministry has moved a Cabinet note, which suggested that India should acquire an “observer status” in the GPA to begin with, and consider formally acceding to the agreement as and when the climate is conducive. If the proposal is implemented, it would end the current policy bias for Indian companies, especially PSUs, and expose them to serious competition from abroad in getting large government-supply contracts, especially in areas like infrastructure, construction and energy.

Formal accession to GPA involves binding commitments on market access for public procurements above a threshold value. It implies equal treatment to Indian and foreign companies when it comes to the selection of bidders and award of contracts. Currently, there are 14 signatories to the GPA, including the US, European Union, Canada, Japan and Korea.

Simultaneously, the ministry is also doing risk-benefit analyses of India becoming a member of the GPA framework with respect to many countries, including the EU, Australia and Japan. The move marks a radical policy shift. India used to oppose even the relatively innocuous proposal to discuss transparency in government procurement as part of WTO’s Doha Round negotiations, let alone mull market access commitments in this area. At the fifth WTO ministerial conference held in Cancún in September 2003, then commerce minister Arun Jaitely was seen taking a firm stance against globalisation of government procurement norms and its inclusion in the Doha development agenda (DDA). Government procurement, one of the “Singapore Issues” is outside the ambit of the ongoing DDA negotiations but accession to the GPA is independent of that process.

The commerce ministry’s proposal could also have the beneficial effect of India’s government procurement mechanism becoming more transparent and auditable. Also, if the proposal is implemented, at least sections of Indian industry that have the ability to outbid their global peers on price and/or quality, would gain meaningful access to the highly competitive market for government contracts in the GPA signatory nations.

The government procurement market in these countries is valued at trillions of dollars at 10-15% of the GDP.