The Department of Pharmaceuticals (“Department”) has, in an Order dated 1st January, 2019 announced that purchase preference must be provided by all Government Procuring Entities to local suppliers of Pharmaceutical Formulations in various dosage forms, as per the minimum local content prescribed.
This Order has been issued with the view to encourage the ‘Make in India’ initiative of the Government as per the revised Public Procurement (Preference to Make in India), Order 2017 and to promote manufacturing and production of goods and services in India with a view to enhance income and employment.
The Order has been effective since 1st January, 2019.
Key Highlights of the Order
For formulations which are manufactured in India, the minimum local content for all Pharmaceutical formulations in different dosage forms and strengths is specified a follows:
Year 2018-19- Minimum Local Content 75%
Year 2019-21- Minimum Local Content 80%
Year 2021-23- Minimum Local Content 85%
Year 2023-25- Minimum Local Content 90%
For formulations which are not manufactured in India, the minimum local content for all Pharmaceutical formulations in different dosage forms and strengthsshall be as follows:
Year 2018-19- Minimum Local Content 10%
Year 2019-21- Minimum Local Content 15%
Year 2021-23- Minimum Local Content 20%
Year 2023-25- Minimum Local Content 30%
Procedure for calculating local content for Pharmaceutical Formulations
Bill of Material sourced from domestic manufacturers (Dom-BOM) may be calculated based on one of the following depending on data available:
i) Sum of the costs of all inputs which go into the product (including duties and taxes levied on procurement of inputs except those for which credit/ set-off can be taken) and which have not been imported directly or through a domestic trader or an intermediary.
ii) Ex-Factory Price of product minus profit after tax minus sum of imported Bill of material used (directly or indirectly) as inputs in producing the product (including duties and taxes levied on procurement of inputs except those for which credit/ set-off can be availed).
iii) Market price minus post-production freight, insurance and other handling costs minus profit after tax minus warranty costs minus sum of Imported Bill of material used as inputs in producing the product (including duties and taxes levied on procurement of inputs except those for which credit / set-off can be taken) minus sales and marketing expenses.
Total bill of Material (Total-BOM) may be calculated based on one of the following depending on data available:
i) Sum of the costs of all inputs which go into the product (including duties and taxes levied on procurement of inputs except those for which credit / set-off can be availed).
ii) Ex-factory Price of product minus profit after tax.
iii) Market price minus post-production freight, insurance and other handling costs minus profit after tax, minus sales and marketing expenses.
The percentage of local content value-addition may be calculated as per the following formula:-
Percentage of local content= (Dom-BOM/Total-BOM) x100
Every procuring entity must constitute a Committee with internal and external experts for independent verification of self-declaration and auditors / accountants certificates on random basis and for the complaints that are received / referred.
In case a complaint is received by a procuring entity against the claim of a bidder regarding local content, the same should be referred to the committee of the procuring entity. The Committee should dispose of the complaint within 4 weeks, as far as possible, from the date of receipt of complaint along with all necessary documentation in support of local content claimed by the bidder.
There will be a complaint fee of Rs. 10,000/- per complaint to be deposited with the said procuring entity along with the complaint by the complainant. In case the complaint is found to be incorrect, the complaint fee shall be forfeited. In case, the complaint is upheld in part or full, deposited fee of the complaint will be refunded without any interest.
Source: Department of Pharmaceuticals
