Australia intends to pursue the $500 billion Indian public procurement market, following New Delhi’s decision to allow access to public bids in the free trade agreement with the United Arab Emirates.
With a large number of sensitive sectors, including dairy, wine, agriculture, digital trade, government procurement, and services on its demand list, the Australian government is prepared to toughen its stance in the negotiations for the full-fledged India-Australia Comprehensive Economic Cooperation Agreement, which are likely to formally begin next month.
For India, which has always been reluctant to open up this lucrative sector to foreign firms, the inclusion of public procurement in the UAE pact was a first. Australia, which is also in the process of negotiating a Comprehensive Economic Cooperation Agreement (CECA), will fight for the opportunity to compete against Indian businesses for contracts for goods and services issued by central government agencies and ministries.
An Australian High Commission official in response to an enquiry said, “Chief negotiators are discussing the scope of CECA, which will include further market access commitments for goods and services, as well as digital trade and government procurement. We will also explore new areas of cooperation”.
In the past, New Delhi has opposed the opening of the government procurement market in a trade deal, mostly to safeguard the interests of the medium- and small-scale industries that mainly rely on government contracts for business. The current government made a significant policy change by opening up public procurement for projects worth more than 2 billion in the UAE FTA.
According to Arpita Mukherjee, professor at Indian Council for Research on International Economic Relations (ICRIER), “Countries do have threshold limits and other requirements for government procurement.”
“Comprehensive trade agreements cover government procurement. However, a country can carve out certain sectors. In the case of India, many sectors are under state government or joint jurisdiction and there is no clear regulation on government procurement,” she added.
For instance, the India-UAE agreement forbids government purchases in the fields of construction, infrastructure, and healthcare, including pharmaceuticals and medical devices.
According to V.K. Agarwal, former president of the Federation of Indian Micro, Small, and Medium Enterprises (FISME) and current chairman of its policy committee, “Public procurement can be opened once MSMEs become stronger – we are still fragile.”
He said, “It is unfortunate that public procurement was opened up for the UAE which is one of the world’s most open markets. Products from any country can come into the UAE duty-free. India has not reached that stage.”
Vinod Kumar, the India SME Forum’s president, stated, “We have seen how FTAs in the past such as one with ASEAN have ruined MSMEs. LEDs, chipsets, LCDs came in from elsewhere ….everything came in through these countries, and we did not push our companies to develop it. Look at cooking oil. The ASEAN agreement prodded the entire ASEAN group to export to India and our own oil producers went down the dump”.
“We have been asking for a consultation specific to MSMEs because eventually whatever FTA we are doing, it is going to impact MSMEs,” he added.
The commerce ministry announced earlier on Wednesday that it would upgrade the platform’s current software in order to create a more active Government e-Market (GeM) portal for use in public procurement. The current software will be updated, according to Piyush Goyal, minister of commerce and industry, and the process might take more than a year to complete.
The project’s RFP has been released, according to GeM CEO P K Singh, and the winning bidder will be given the assignment. According to Singh, the work would begin in January of the next year and would take roughly 16 to 17 months to complete.
The portal was introduced in August 2016 to allow all central government ministries and departments to make purchases of products and services online. So far this fiscal year, procurement through GeM has crossed more than 1.1 trillion. Goyal expressed the hope that by the end of this fiscal year, the amount would reach 2 trillion.