British companies are pursuing $ 38 billion contracts in India, but challenges are wary of challenges

A remarkable characteristic of the India-UK free trade agreement signed last month was the decision of the government of Narendra Modi to open the vast public procurement market to British suppliers.

This generally includes a range of things that the government buys – goods and services to contracts for public works such as roads.

Some 40,000 high -value tenders worth 38 billion sterling pounds of federal ministries will now be open to auction for British companies in strategic sectors such as transport, green energy and infrastructure – areas that have so far been strongly protected from foreign competition.

Access is unprecedented, according to sales experts.

It is “much greater” than what India had offered in its previous agreement with the United Arab Emirates and “establishes a new reference,” Ajay Srivastava said the World Trade Research Initiative (GTRI), the BBC told.

Under the agreement, British bidders for Indian government contracts in specified areas will be treated almost equally with Indian suppliers and will also have real -time access to information on public calls to come and supply opportunities.

In addition, goods from the United Kingdom made with only 20% of interior contributions can now be provided to the Indian government, allowing British companies the flexibility to source up to 80% of the parts or raw materials from other countries and qualify for the preference for purchases in India.

The minimum contractual value in which these companies can tender for government projects have also been greatly reduced due to the fact that “British companies can now teach on a wide range of low -value projects – such as rural roads, solar equipment for schools or computer systems for government offices – which were previously out of reach,” said Srivastava.

But for British companies, the realization of this opportunity in the field will be easier to say, said several experts at the BBC.

While British suppliers are eligible to participate as local class II suppliers, Indian companies will continue to obtain preferential treatment as a class I suppliers, explains Dr. Arpita Mukherjee, a commercial expert from the Indian Council for Research on International Economic Relations.

In addition, prices play a key role in the victory of contracts and “British companies tend to have higher prices” compared to Indian companies, which will be a major challenge for them, she adds.

A greater means of deterrence will be delayed payments and an application of difficult contracts, which are “major inherited problems with regard to public procurement in India”, explains Srijan Shukla of the reflection group on the observing research foundation.

He says that a study on the supply of companies in the central public sector from India from 2017 to 2020 revealed that payments pending to suppliers were often more than total average purchases in one year.

“This will have an impact on British players trying to penetrate the public procurement markets of India, in particular with regard to public contracts which have long -standing horizons and are subject to regulatory and political uncertainties,” Shukla told the BBC.

Pending contributions have also been a major irritant for small companies in India, which has led to short -term liquidity problems which “often form these supply markets and reaffect this business to major players”, according to Mr. Shukla.

Much of this is reflected in the mediocre classification of India – 163 out of 190 – on the application of contracts in the Doing Business report of the World Bank, the last cycle of which was in 2020.

Although things have improved since the publication of these rankings – with one -shop portals such as the government’s electronic market, the central public procurement portal or the recently launched online dispute settlement portal providing more transparency to the public tender process – the payment discipline by government entities continues to remain a challenge, said Mr. Shukla.

According to Ms. Mukherjee, the India-UK trade agreement emphasizes purchase transparency, but omits problems such as waiting contributions, the application of contracts and penalties.

She adds that the agreement excludes the complete provisions of the settlement of disputes from the economic and commercial agreement for four years after the APE has taken effect – these arrangements generally define how disputes are resolved.

“Doing business in India is a skills acquired. Over time, companies in the United Kingdom will have to learn how to work around complexity concerning the art of winning public tenders and navigating complex regulations,” said Shukla.

Despite the insignificant problems, allowing the entry of foreign players into the Indian public procurement market for a large -scale change in policy.

It shows the intentions of the Indian government to open a space that has long been reserved for small and medium-sized local businesses, and could reflect the concessions that Delhi is willing to give foreign players in future trade agreements like the one negotiated with the United States, according to GTRI.

India is late to include in -depth supply clauses of the government in commercial transactions, making its current efforts a catch -up game, said Shukla.

It is also a sign, he says, of the confidence of the Indian government that its own companies can compete with global companies outside and at home. ”

Hope is that more foreign players will more oblige responsibility for the Indian government and “help to standardize” its tender and public procurement process – marked by delays in payment and poor application of contracts – to global standards.

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