April 9th, 2018

The Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India has recently issued guidelines for implementation of Public Procurement Order No. 17 (PPO) in an aim to mandate procuring entities to make local suppliers as their priority purchase preference for medical devices, as well as other goods and services related to the Pharmaceutical Sector.

In order to facilitate the implementation, DIPP has appointed the Department of Pharmaceuticals (DoP) as the Nodal Department for implementing the provisions of the said Order. The PPO 17 authorizes the Nodal Ministry to prescribe percentage and the method of calculation of minimum local content with respect to any particular item related to the Pharmaceutical sector.

Guidelines for the implementation of Provisions of PPO 2017 with respect to Procurement of Medical Devices are summarized as follows:

1.     Percentage of Minimum Local Content

As for the Medical Device Industry, having a wide variety of medical devices, the DoP finds that it is not practical to prescribe the local content and percentage of preference in domestic procurement for each medical device.

Currently, the DoP is in the process of collecting reliable data regarding various categories of medical devices in India, including the other factors that should determine the percent minimum local content to be prescribed for each category.

For the time being, however, the following percentages were made, based on the present level of the understanding of medical devices in India.

Category of Medical Devices	% of Local Content
Medical disposables and consumables	50%
Medical electronics, hospital equipment, surgical instruments	25%
Implants	40%
Diagnostic Reagents/IVDs	25%

$1  2.    Manner of Calculation   

The percentage local content of Medical Devices are computed as a ratio between the cost of domestic components in the device and the total cost of the device.

The local content cost of direct component (or material) is based on the country of origin. In case of manpower, the local content cost shall be based on domestic manpower.

The local content of combination of several kinds of goods will be based on the sum of the Local content of each goods times the acquisition price of each goods, divided by the acquisition price of the combination of goods:

LC (g) = local content of each goods

AP (g) = acquisition price of each goods

AP (all) = acquisition price of the combination of goods

LC(all) = (LC1_(g)*AP1_(g)) + (LC2_(g)*AP2_(g)) … (LCn_(g)*APn_(g))  + /AP_(all)

$1 3.    Requirement of Purchase Preference    

Purchase Preference shall be given to local suppliers by procuring entities as stated in paragraph 3(a) of PPO 2017. This clause shall only be applicable if there are at least 2 local suppliers for any tender amounting to Rs 50 Lakhs, and if they can supply the purchased medical devices in the required quantities

$14.    Verification of Local Content    

a)  The local supplier is required to declare the local content. The format of self-certification can be found in Enclosure II of F.No.31026/36/ 2016-MD.

b)  For each tender, the procuring entity is required to mention the details of its competent authority.

c)  In cases where complaints regarding domestic value addition is received by the procuring entity, the latter shall be given the right to inspect and examine all related documents and shall make a decision. Shall further clarifications be necessary, the procuring entity may refer channel all matters to DoP.

d)  Any complaint received by the procuring entity shall be submitted, along with all the necessary documents in support of the complaint regarding domestic value addition. The complaint shall be disposed of within 4 weeks by the procuring entity.

e)  The grievance redressal committee shall receive/dispose of all complaints directed to DoP by any bidder or procuring entity.

f)   In cases where the any issues are referred to DoP, the Grievance Redressal Committee is also held responsible of receiving all documents from the bidder, and disposing the complaint within 4 weeks after taking such matters into consideration. If no information is provided by the bidder, the grievance redressal committee may take the necessary action, and consult with the procuring entity to establish the validity of the claim

g)  In cases where any complaint directed to DoP is made by the concerned bidder, a fee of Rs. 2 Lakh or 1% of the value of medical devices procured (whichever is higher) shall be paid by way of a Demand Draft to be deposited by the procuring entity, along with the complaints to be filed. If the complaint is found to be incorrect, the complaint fee shall be forfeited. In cases where the complaint is upheld and is found to be substantially correct, the deposited fee of the complainant shall be refunded without any interest.

$15.    All other provisions of PPO, 2017 shall be applicable as such and shall be adhered to by all procuring agencies for procurement of any medical device.

Reference:

Guidelines for Implementation of Public Procurement Order No. 17