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'Foreign-owned vs Indian-owned': MSMEs demand new rule to elbow out Chinese firms

MSME body has written to the government pointing out many Chinese companies have set up their units in India and they call themselves Indian companies

Nirbhay Kumar | July 27, 2020 | Updated 15:59 IST
'Foreign-owned vs Indian-owned': MSMEs demand new rule to elbow out Chinese firms
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Key Highlights

  • FISME has demanded to differentiate between 'Indian-owned Indian companies' and 'foreign-owned Indian companies' to further tighten the screw on Chinese firms
  • Finance Ministry last week amended the General Financial Rules 2017 to impose restrictions on bidders in public procurement from countries which share a land border with India on grounds of national security.
  • Earlier, the government had banned 59 mobile apps, mainly with origin in China, such as TikTok, UC Browser, Shareit.
  • Amid concerns over Chinese takeover of Indian companies, Modi government had in April this year changed FDI rules to put Chinese investments under heightened scrutiny.

Days after the government raised the Great Wall against China to keep their companies out from public procurement, micro, small and medium enterprises (MSMEs) have demanded a rule to differentiate between 'Indian-owned Indian companies' and 'foreign-owned Indian companies' to further tighten the screw.

Besides elbowing out Chinese companies, the demand is also aimed at eliminating competition from other foreign companies thus providing MSMEs more business opportunities.

Anil Bhardwaj, Secretary General at Federation of Indian Micro and Small & Medium Enterprises (FISME) said that the industry body has written to the government in this regard noting that many Chinese companies have set up their units in India and they call themselves Indian companies.

"In China, Chinese-owned Chinese companies and foreign-owned Chinese companies are distinguished in public procurement and allow only the former. One of FISME members had tied up with a Taiwanese company which had a factory in China but they were not allowed in public procurement. Given this we have requested the government to add similar provision in public procurements in India," Bhardwaj said.

In a late night development on Thursday, Finance Ministry amended the General Financial Rules 2017 to impose restrictions on bidders from countries which share a land border with India on grounds of national security.

The Department of Expenditure has issued a detailed order on public procurement to "strengthen the defence of India and national security."

While the amended procurement rule covers all public sector banks and financial institutions, autonomous bodies, Central Public Sector Enterprises (CPSEs) and Public Private Partnership (PPP) projects receiving financial support from the government or its entities, the Centre has written to the Chief Secretaries of the state governments invoking the provisions of Article 257(1) of the Constitution of India for the implementation of the order.

As per the order, any bidder from countries sharing a land border with India will be eligible to bid in any procurement whether of goods, services (including consultancy services and non-consultancy services) or works (including turnkey projects) only if the bidder is registered with the Competent Authority.

The latest government order is touted to be yet another economic attack on China in the wake of tensions at the Line of Actual Control (LAC) in Ladakh. Earlier, the government had banned 59 mobile apps, mainly with origin in China, such as Tik Tok, UC Browser, Shareit.

Amid concerns over Chinese takeover of Indian companies, Modi government had in April this year changed FDI rules to put Chinese investments under heightened scrutiny.

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