Centre mulls boosting local manufacturing with procurement policy rejig: Report

The proposal, requiring cabinet approval, is anticipated to be considered by the next government, as noted by an official.

The government is weighing adjustments in its procurement policy to potentially raise the level of local content for certain group of suppliers.

A proposal put forth by the industry department suggests increasing the minimum local content requirement for Class-I and -II suppliers from 50 percent to 70 percent and from 20 percent to 50 percent, respectively.

According to a senior government official speaking to Business Standard on condition of anonymity, certain sectors, including defence production, electronics and information technology, telecommunications, mines, railways, power, ports, and shipping and waterways may be exempted from these enhanced limits.

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Inter-ministerial consultations are underway, with departments of ministries soliciting responses to the proposal from the Department for Promotion of Industry and Internal Trade (DPIIT). The proposal, requiring cabinet approval, is likely to be considered by the next government, as noted by an official to Business Standard.

Under the existing framework, firms meeting the criteria of producing goods, services, or works with at least 50 percent local content are categorised as Class-I local suppliers, enjoying the highest preference in public procurement. Class-II local suppliers, on the other hand, produce goods, services, or works with 20-50 percent local content.

Suppliers falling below the 20 percent local content threshold are grouped as non-local suppliers, typically receiving the lowest preference unless no Class-I or Class-II local suppliers are available for a specific requirement.

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Government e-Marketplace CEO PK Singh expressed positivity towards the proposed changes. "It is a positive move for India. We will implement it as and when notified," he said.