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FinMin classifies COVID-19 crisis as 'natural calamity'

FinMin classifies COVID-19 crisis as natural calamity

New Delhi: As the supply chains for some of the essential services took a hit on the first day of the 21-day countrywide lockdown, the Ministry of Finance has clarified that in cases where supply chains have been disrupted due to the ongoing Coronavirus crisis and the subsequent lockdown, both suppliers and purchasers would be allowed to invoke the Force Majeure Clause of the Manual for Procurement of Goods, 2017, issued by the Department of Expenditure.

A "Force Majeure" is an "extraordinary event or circumstance beyond human control", due to which if the supplier's or purchaser's operations are suspended, both parties would have to bear no contractual or obligatory liabilities by invoking the Force Majeure Clause. With a lot of supply chains already hit globally due to the Coronavirus crisis, the clarification would mean that more supply chains could be hit as the country finds its way through the next 20 days.

The Ministry has categorised the COVID-19 crisis as a "natural calamity", as per the clarification.

In Delhi itself, many grocery stores were facing a lack of supplies and even complained of their wholesalers running out of stock. One grocery store owner in South Delhi said that his wholesaler had suspended delivery services. "We are a family run business. Now, I have to send my son to pick up the supplies," he said. Across the country as well, truckers were glued to their rest stops amid fears of a police crackdown, choking a lot of the supply chain in the perishable foods market.

After the clarification from the Department of Expenditure, it is likely that more supply chains might be hit in India as suppliers and purchasers will now be able to invoke the Force Majeure Clause to protect their businesses. However, the Ministry also pointed out that according to the clause, it cannot be invoked ex-post-facto, which means that the party suffering from non-performance must notify the other as soon as such a situation arises.

Meanwhile, many cities in India saw employees of essential services being harassed or unnecessarily stopped by police in their enthusiasm to enforce the COVID-19 lockdown. There have been reports of food delivery executives being stopped by police, who then impound their vehicles. There have also been reports of several services hit due to a fear of police crackdown.

Several Pharmacies unions have also said that supply chains of crucial medicines are getting affected due to indiscriminate police crackdown and that if such a situation continues, they might start running out of medicines soon.

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