The curious case of govt-owned Bank Note Paper Mill's private status

A government-backed JV's legal limbo tests the boundaries of procurement norms

Can a joint venture (JV) company between two fully owned government subsidiaries call itself a private company? That question seems to have put the government in a dilemma.

Mysuru-based Bank Note Paper Mill (BNPM) India Private Ltd produces high-quality currency papers with security features supplied to the four currency printing presses located in Nashik (Maharashtra), Dewas (Madhya Pradesh), Mysuru (Karnataka), and Salboni (West Bengal).

BNPM is a 50:50 JV between Bharatiya Reserve Bank Note Mudran Private Ltd (BRBNMPL), a wholly owned subsidiary of the Reserve Bank of India, and Security Printing & Minting Corporation of India Ltd  (SPMCIL), a government enterprise under the Ministry of Finance.

In February and March of this year, BNPM invited three tenders for the supply of machine-glazed kraft sheets with varnish coats used for packaging currency notes to protect them from moisture and damage; angle boards to protect the products during transportation and storage; and polyethylene terephthalate strapping rolls for heavy load applications for a longer duration.

Indovative Products, a Delhi-based startup that manufactures currency packaging products, submitted bids but was rejected on the technical ground of lacking “past experience”.

Indovative raised the matter with the Department for Promotion of Industry and Internal Trade (DPIIT) in April, claiming that the Public Procurement (Preference to Make in India), or PPP-MII, order issued in 2017 exempts startups from prior experience as a qualifying factor in procurements by the central government and public sector enterprises.

DPIIT referred the matter to BNPM in April, and BNPM responded in May that it has been listed as a private limited company and, therefore, does not fall under the category of a procuring entity by the definition of the PPP-MII order.

The industry department found the reply “unsatisfactory” and directed the Department of Financial Services (DFS) in the Ministry of Finance to review the reply sent by BNPM. However, DFS responded to DPIIT, stating that the matter does not pertain to it and advised it to take it up with the Department of Economic Affairs (DEA) in the Ministry of Finance.

Minutes of the meeting available in the public domain showed that the matter was subsequently taken up with DEA via an office memorandum dated May 30, 2023, followed by a reminder dated June 13, 2023. “However, feedback from DEA is still awaited,” the document said. 

In the 15th meeting of the standing committee to review the implementation of the public procurement order held on July 21, DPIIT observed that the procuring entity (BNPM), being a subsidiary of the Government of India’s enterprises, falls under the definition of “procuring entities” in line with the PPP-MII order of 2017. “Hence, the reply by BNPM is inconsistent with the PPP-MII order, and the same must be complied with by BNPM in letter and spirit.”

DPIIT proposed that the standing committee may direct BNPM to review the “restrictive criteria” in line with the provisions of the PPP-MII order of 2017, as amended on September 16, 2020, to enable local suppliers to participate in the bidding process.

Varun Krishna, founder of Indovative Products, said, “It’s not like we didn’t have any experience at all. We have supplied the same material to the Hoshangabad-based Security Paper Mill (a unit of SPMCIL). However, the quantity was small compared to the requirements of BNPM. DPIIT has given its decision in our favour. Still, BNPM has not abided by the order. Can’t anything be settled in this country unless one moves court?” he asked.

An email query sent to the Ministry of Finance remained unanswered until the time of going to press.