Domestic firms can only enter into technology transfer agreements
The government has allowed domestic companies to partner with Chinese firms by way of technology transfer agreements to bid for public projects. The development is a major climbdown in the government’s stand with regard to Chinese firms since it barred them in every possible manner to do business in the country in the aftermath of escalated border tensions between the two nations last year.
In July 2020, as a fallout of the border tensions, the government had amended its general financial rules (GFRs), stating that bidders from any country sharing a land border with India need to first register with a “competent authority” to be eligible for government contracts. However, it had made an exception for bidders from countries where India had extended a line of credit or was engaged in development projects. This way countries like Nepal, Bhutan and Bangladesh were automatically exempted and it was clear that the order was aimed at firms belonging to China, as those based in Pakistan don’t participate in government contracts.
However, an office memorandum issued by the procurement policy division of the department of expenditure, ministry of finance, earlier this month, has stated, “there is no bar for the bidders to have ToT (transfer of technology) arrangement with the entities from a country sharing land border with India. Hence, such bidders are not required to be registered with the competent authority”.
Official sources said that the relaxation was required as lot of Indian firms bidding for government and public sector projects had some technology sharing pacts with Chinese firms, especially in the infrastructure sectors. As a result, the concerned administrative ministries had sought clarification from the finance ministry whether such bidders need to be allowed to participate in tenders or disqualified.
Sources said that since technology transfer is done on payment of fee by the Indian companies to their Chinese counterparts and the executing firms are Indian, such concessions can be made.
Industry sources said that the relaxation now provides some scope to the Chinese firms to do business in India. Since beginning last year, the government had otherwise taken a stringent approach towards Chinese firms by banning all Chinese apps and disallowing telecom gear manufacturers like Huawei and ZTE to build networks for either state-owned BSNL or even private sector telecom operators.
In fact, the government had adopted such a hard stance that last year it had even withheld import consignments, which mainly comprised industrial components, from China at ports apprehending malware. It was only after the domestic industry urged the government to clear their consignments as it was hurting their production that the custom authorities started clearing the consignments.