MNC medtech firms seek changes in local content norms for procurement

Multinational medtech firms have urged the Centre to revise local content calculations under PPOs, proposing inclusion of R&D and maintenance costs to widen eligibility in tenders

Indian affiliates of multinational medical device manufacturers have asked the Centre to consider changes in the way local content is calculated in devices meant to be entered for government procurement under public procurement orders (PPOs).

 

PPOs are a set of guidelines for the procurement of medical devices and goods in India, which favour domestic manufacturers to promote Make in India.

 

According to industry sources, several MNC medtech firms have shared submissions to the Department for Promotion of Industry and Internal Trade (DPIIT) and the Department of Pharmaceuticals (DoP), which include a new formula to calculate local content to be eligible for PPO tenders.

   

“The companies have recommended that costs borne towards research and development (R&D) and maintenance may also be included in the calculation of local content in devices,” a medtech executive told Business Standard.

 

Currently, this calculation only includes the amount of local content used in each device, which shall be the total value of the item procured (excluding net domestic indirect taxes) minus the value of imported content in the item (including all customs duties) as a proportion of the total value, in percentage.

 

The executive quoted above added that companies also had stakeholder consultations with the DPIIT some weeks ago for the same. “The calculation formula was circulated among the industry and most foreign companies have agreed to this,” he said.

 

Sources in the government confirmed this development, with an official in the know adding that a submission has been received by the department, but it is currently under the purview of the Ministry of Electronics and IT and DPIIT.

 

The move comes at a time when the industry is divided over the issue, with current regulations favouring devices with local content of up to 50 per cent for procurement.

 

According to PPO guidelines, two classes of local suppliers are formed — Class I and Class II. Class I includes a supplier or service provider whose goods, services, or works offered for procurement have local content that is more than or equal to 50 per cent, whereas Class II suppliers have local content of more than 25 per cent but less than 50 per cent.

 

These suppliers are then given preference in all types of public procurements where the nodal procurement agency thinks that enough capability is available in India. It is only in global tender enquiries (GTEs) that non-local suppliers, or those with local content less than or equal to 25 per cent, are allowed to participate.

 

“With the new formula, many of the MNCs which were earlier out of the procurement race will be able to register and be classified as local suppliers,” an industry expert added.