Dear friends and colleagues,
Please find below a journal article by TWN’s New Delhi based researcher Ranja Sengupta, entitled ‘Government Procurement in the EU-India FTA: Dangers for India’, published recently by the influential Economic & Political Weekly.
Sengupta considers the challenges facing the government in New Delhi as it faces pressure from the European Union, via the proposed EU-India free trade agreement, to open up its lucrative government procurement (GP) sector (estimated at around US$156 billion, or around 12-14% of the nation’s gross domestic product), even while it studies the benefits and prospects for Indian companies to access public procurement in Europe.
The stakes are indeed high for India, Sengupta points out, as sectors as diverse as railways, energy and telecommunications to construction and health, hitherto reserved for domestic constituencies and used to address economic and social inequalities and to promote domestic growth and development, are slated to be up for grabs by EU (and India’s other trade partners') firms.
In addition to provisions such as prescribing minimum local content, price preference and other preferential measures, preferential treatment had also previously been given to Indian micro, small and medium enterprises (MSMEs) and khadi and village enterprises (KVEs) such as the waiving of tender fees, awarding contracts to other than the lowest bidder, and 5-15% price preference for small-scale industries (SSIs). Reservations had also been given to MSMEs and KVEs, public sector undertakings, women’s groups, scheduled castes, scheduled tribes and other minority groups.
But while India is being asked to give market access to the EU, the latter’s own procurement, though technically open, is in effect inaccessible to most other countries, Sengupta finds. Only a very small proportion of the EU GP market can effectively be accessed by non-EU suppliers. According to one study, even if the EU markets were open to India, India’s likely gain would be around only US$10-12 million.
Recent developments in India have seen many MSMEs becoming ineligible for procurement bids, and a proposed public procurement bill is aimed at ensuring transparency, accountability, probity, fair and equitable treatment and to promote competition, efficiency, economy, integrity and public confidence in the public procurement process.
But aside from the conflict between the provisions of the future law and the likely provisions of the FTA in the pipeline between EU and India, the dangers are stark given the latter will lock in India’s commitments on GP and severely compromise policy space.
Notwithstanding the current lack of transparency in the Indian system, corruption and “big gaps in the implementation of a development-friendly GP policy,” Sengupta concludes, these issues can be addressed domestically. After all, she says, India can always invite international bids when it needs, as it does currently, without shackling itself to binding agreements to do so.
With best wishes,
Third World Network