Ecommerce marketplaces Flipkart and Amazon have entered the race of acquiring the procurement rights for goods and services on the central government’s e-marketplace GeM, as a managed service provider (MSP).
The Central Government is planning to roll out its e-marketplace GeM, the national public procurement portal soon and is inviting bids from the companies to manage it.
The government recently issued a request for proposal (RFP) and, reportedly, executives from these firms attended the pre-bid meetings, organised before the submission deadlines of June 1, 2017. The government is set to make the use of GeM mandatory for all its departments, as per reports surfaced in February 2017.
According to an earlier issued ET report, it will become part of the amendment to the General Financial Rules (GFR) being worked out by the Ministry of Commerce and Industry. By then, it has been estimated that the portal could contribute about INR 20,000 Cr in savings.
Recently, in April 2017, the Union Cabinet passed orders to wind up the government procurement department and replace it with GeM. It will be registered as a Section 8 company.
As stated by PM Narendra Modi on the official government portal,
GeM: A Brief Overview
The government e-marketplace was launched in August 2016 to facilitate the online purchase of goods and services for the employees of Central Government ministries and departments. The portal has been developed by the Directorate General of Supplies and Disposals (DGS&D) with technical support of NeGD (MeitY).
The aim is “to transform the way in which procurement of goods and services is done by the Government Ministries/Departments, PSUs, autonomous bodies etc.,” according to an official statement released by the government in January 2017.
Also, it aims to increase the adoption of Make In India goods. On GeM, the filters have put in place for selecting goods which are Preferential Market Access (PMA)- compliant and those manufactured by Small Scale Industries(SSI), to enable Government buyers to procure Make in India and SSI goods.
As stated by ET sources in a February 2017 report, ”GeM will block the purchase of, say, computers that do not comply with Preference for Domestically Manufactured Electronic Goods (PMA) norms. The rules prescribe PCs, laptops, tablets and other electronic products should have up to 45% domestic value addition over a five-year period.”
Later, the government also organised a training program for the central government officials to make them efficient with the usage of the marketplace. The initial cap for directly purchasing goods from the website has been kept at INR 50,000. Purchases beyond that need to be made through price comparison, bidding or reverse auction.
As claimed by the government, the average prices on GeM are lower by at least 15-20%, and in some cases even up to 56%. GeM is also doing demand aggregation for items that are to be procured by various Central/State Government Departments, which is estimated to result in annual savings to the tune of INR 40,000 Cr per annum.
“If pursued to its logical conclusion, GeM would eventually emerge as the National Public Procurement Portal (NPPP), keeping in tune with the global best practices. Most of the OECD (Organisation for Economic Co-operation and Development) member countries, like the US, South Korea, UK, Singapore etc., have a single NPPP and as a result annual savings of billions of dollars are made in public procurement, besides giving a fillip to the domestic industry,” was stated in an official statement.
Not only this, subsequent measures have been taken to make the portal safe and secure. All the documents on GeM are e-signed at various stages by the buyers and sellers. The antecedents of the suppliers have verified online automatically through MCA21, Aadhar, and PAN databases. In addition, SEBI-empanelled credit rating agencies are also being used for conducting a third-party assessment of suppliers. Also, for high-value bids/RA (risk assessment) on GeM, an e-bank guarantee is also being introduced.
What’s In It For The Bidders
Procurement by the central and state governments has been estimated to be worth around INR 5 Lakh Cr-INR 7 Lakh Cr each year.
As mentioned on the official government GeM portal – 3282 buyers, 7982 sellers and 942 service providers – have already been associated with GeM. It currently offers products in over 268 categories including automobiles, agricultural machinery, bathroom accessories, computers and accessories, pest control devices, personal communication devices and more. On the services front, 17 sectors have been added such as laundry, pest control, child care, security, transport, florist, third party inspection and more.
Also, a detailed list has been maintained on the website, showcasing product and service order list with the name of the company fulfilling them.
The company winning the bid for pursuing the contract will have a chance to get around 0.5% of the total transaction value on the portal as commission.
Both Flipkart and Amazon will be competing with the likes of tech giants Tata Consultancy Services, Wipro, and Accenture for the contract, as per media reports.
As stated by a person close to the development to ET, “Flipkart is a logistics provider, they know the game. Amazon is also hovering. However, these companies will have to partner with technology vendors since they can’t offer their own platforms to the government.”
Flipkart is already a leading player in the ecommerce game, with Microsoft as an investor, who recently participated in its $1.4 Bn funding round along with eBay and Tencent. Also, in February 2017, reports surfaced that Flipkart signed a cloud partnership with Microsoft Azure. With the added benefit of having introduced Indians to ecommerce, these factors certainly give the homegrown company an edge over other bidders, with the majority being tech companies with no prior experience in the field.
On the other hand, Amazon has infra capabilities with AWS (Amazon Web Services) and fulfilment centres in most states, but being a foreign company could be a hurdle when it takes on local players.
An email sent to Flipkart and Amazon for queries did not elicit any response at the time of publication.
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