Foreign companies rush to register in India to meet new 'Atmanirbhar Bharat' rules

KEY HIGHLIGHTS

• Foreign companies have approached Indian CA firms to set up local units to meet new investment rules

• Advisories have been issued to industry to gear up their capacities/capabilities to meet projected public procurement demand in line with the objectives of Atmanirbhar Bharat

• In order to promote local manufacturing, DPIIT amended the public procurement rules to ensure that only items with minimum 20% local content can participate in government tenders

• The government had earlier announced that no global tender will be issued for procurement of items worth less than Rs 200 crore

The tweaked public procurement order disqualifying companies with less than 20% domestic content from most government tenders has prompted foreign firms to set up their shops in India. The chartered accountancy (CA) firms have seen growing requests from various foreign companies to incorporate their wholly-owned subsidiaries in India to meet the revised tender criteria.

"Due to the amendment in PPP-MII (Public Procurement-Preference to Make in India) Order 2017, to provide that items with minimum 20% domestic value addition/local content can participate in public procurement, we have received certain requests from foreign suppliers to set up their organisations in India and provide them business support," said Vivek Jalan, Partner, Tax Connect Advisory Services.

"Doing business in India was never easier and with its huge market, the foreign suppliers are also taking this as an opportunity to expand their business with a local presence," he added. In order to promote local manufacturing, Department for Promotion of Industry and Internal Trade (DPIIT) amended the public procurement rules to ensure that only items with minimum 20% local content can participate in tenders floated by the government or any of its entities.

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Also, items with more than 50% local content will get purchase preference over other items. Following the change in the tender rules, DPIIT Secretary Guruprasad Mohapatra wrote to other ministers to advice all procuring entities to comply with the guidelines. "It is also requested to direct all procuring entities to interact with industry associations regarding the proposed changes, share their procurement projection with industry, and advise industry to gear up their capacities/capabilities to meet projected public procurement demand in accordance with Hon'ble Prime Minister's vision of Atmanirbhar Bharat," Mohapatra wrote in a June 8 letter to his counterparts in other ministries.

The government has been pushing for local manufacturing, and numerous incentives have been announced to attract investment in sectors such as electronics and pharma. The push has particularly intensified following border tensions with China. "We were not expecting requests for setting up new companies during Covid time but we have been approached by an Australian firm to set up their unit in India. We don't know how big a factory they will set up, but they want direct presence here due to the change in procurement rules," said Rajat Mohan, senior partner at AMRG Associates.

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Rakesh Nangia, Chairman, Nangia Anderson India said, "We have received several enquiries for setting up Indian subsidiaries of foreign companies because to bid for contracts they would need an industrial company in India." The government had announced that no global tender will be issued for procurement of items worth less than Rs 200 crore. In a bid to support local manufacturing, the government has taken a slew of tariff and non-tariff measures especially to contain import of cheap items from China.

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