Security checks for FDI in race for govt tenders
National Security Exception Act won’t be limited to FDI coming in via M&As
By Rajat Guha, TNN |
NEW DELHI: The National Security Exception Act (NSEA) will not be limited to FDI coming in through M&As. Even government tenders would have to get mandatory security clerance before they are awarded to qualified foreign bidders if the Act comes into force.
A similar security system would apply for project management services too. At present, tenders floated by government departments, PSUs and state governments don’t pass through security-related scrutiny.
According to highly-placed sources in the government, the NSEA proposed by the National Security Council (NSC) would be extended beyond FDI to run security checks on government tenders. Every year, tenders worth thousands of crores are floated by ministries like urban development, ports, shipping, roads, coal, steel and defence.
The proposed NSEA, modelled on the lines of the Exxon-Florio Act of the US, has been sent to various departments for comments before giving the policy a concrete shape. As far as security aspects regarding mergers and acquistions are concerned, the department of industrial policy & promotion’s (Dipp) view would be taken into account.
The other government departments and PSUs are studying the nitty-gritties of the NSC’s proposal and would soon give their comments. “Tenders are our day-to-day business. The implications have to be looked into before we put a similar clause into the tendering system.
We don’t intend to make the process cumbersome. All ministries would have to reach a concensus,” a senior government official in the urban development ministry said. According to the proposal, a special committee would be set up under the home ministry to look into security aspects of the tendering process.
As far as project management services and foreign technology transfers are concerned, RBI grants automatic approval in cases where the lumpsum payment does not exceed $2 million and payment of royalty does not exceed 5% on domestic sale. After the proposed law is implemented, RBI’s mechanism would be altered slightly.
A similar security system would apply for project management services too. At present, tenders floated by government departments, PSUs and state governments don’t pass through security-related scrutiny.
According to highly-placed sources in the government, the NSEA proposed by the National Security Council (NSC) would be extended beyond FDI to run security checks on government tenders. Every year, tenders worth thousands of crores are floated by ministries like urban development, ports, shipping, roads, coal, steel and defence.
The proposed NSEA, modelled on the lines of the Exxon-Florio Act of the US, has been sent to various departments for comments before giving the policy a concrete shape. As far as security aspects regarding mergers and acquistions are concerned, the department of industrial policy & promotion’s (Dipp) view would be taken into account.
The other government departments and PSUs are studying the nitty-gritties of the NSC’s proposal and would soon give their comments. “Tenders are our day-to-day business. The implications have to be looked into before we put a similar clause into the tendering system.
We don’t intend to make the process cumbersome. All ministries would have to reach a concensus,” a senior government official in the urban development ministry said. According to the proposal, a special committee would be set up under the home ministry to look into security aspects of the tendering process.
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As far as project management services and foreign technology transfers are concerned, RBI grants automatic approval in cases where the lumpsum payment does not exceed $2 million and payment of royalty does not exceed 5% on domestic sale. After the proposed law is implemented, RBI’s mechanism would be altered slightly.
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