Govt approves quota policy for small units

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SME Times News Bureau | 01 Nov, 2011
The Cabinet today approved the Public Procurement Policy for goods produced and services rendered by Micro and Small Enterprises (MSEs) by the Central Ministries/Departments/PSUs to be notified under Section 11 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

The policy cleared by the Cabinet, ahead of assembly elections in five states including Uttar Pradesh, sets an annual target of 20 percent procurement for the Central Government departments and PSUs from MSEs.

Within this limit, four percent of the orders should be placed to the SC/ST entrepreneurs and 16 percent for others.

Briefing reporters after the Cabinet meeting, Information and Broadcasting Minister Ambika Soni described the decision as "path-breaking". It was also in line with the "Congress manifesto", she said.

Elaborating, Micro, Small and Medium Enterprises (MSME) Minister Virbhadra Singh said with announcement of the new policy, PSUs are expected to buy goods worth Rs 35,000 crore from the MSEs, of which a business of Rs 7,000 crore would go to the SCs/STs.

However, the procurement policy would be voluntary in nature for three years.

It would be made mandatory after three years, he said.

The MSEs, including the khadi, village and coir industries, constitute an overwhelming majority of this sector, contributing significantly to the gross domestic product, manufacturing output and exports. In the overall production/value chains however, MSEs are highly susceptible to volatile market conditions.

The salient features of the Public Procurement Policy are:

i. Every Central Ministries/PSU shall set an annual goal for procurement from the MSE sector at the beginning of the year, with the objective of achieving an overall procurement goal of minimum 20 per cent of the total annual purchases of the products or services produced or rendered by MSEs from the latter in a period of three years.

ii. Out of 20% target of annual procurement from MSEs, a sub-target of 4% (i.e. 20% out of 20%) will be earmarked for procurement from MSEs owned by SC/ST entrepreneurs. However, in the event of failure of such MSEs to participate in the tender process or meet the tender requirements and the L1 price, the 4% sub-target for procurement earmarked for MSEs owned by SC/ST entrepreneurs will be met from other MSEs.

iii. At the end of three years, the overall procurement goal of minimum 20% will be make mandatory. Non conforming Departments will be required to provide reasons for the same to the Review Committee set up under the Policy.

iv. The participating MSEs in a tender quoting price within the band of L1 + 15% may also be allowed to supply a portion of the requirement by bringing down their prices to the L1 price, in a situation where L1 price is from someone other than an MSE. Such MSEs may be allowed to supply up to 20% of the total tendered value. In case of more than one such MSE, the supply will be shared equally.

v. Every Central Ministries/PSU will report the goals set with respect to procurement to be met from MSEs and the achievement made thereto in their respective Annual Reports.

vi. The Central Ministries/PSU will continue to procure 358 items from MSEs, which have been reserved for exclusive purchase from them.

vii. For enhancing the participating of SCs/STs in the Government procurement, the Central Ministries/PSU will take necessary steps including organizing special Vendor Development Programmes, Buyer-Seller Meets etc.

viii. Given their unique nature, defence armament imports will not be included in computing the 20% goal for Ministry of Defence. In addition, Defence Equipment like weapon systems, missiles etc. will remain out of purview of such policy of reservation.

ix. A Committee has been constituted under the chairmanship of Secretary (MSME), to review the list of 358 items reserved for exclusive purchase from MSEs on a continuous basis and for monitoring and review of the Public Procurement Policy for MSEs. In addition, a âGrievance Cellâ would be set up in the Ministry of MSME for redressing the grievances of MSEs in Government procurement.

The Policy will help to promote MSEs by improving their market access and competitiveness through increased participation by MSEs in Government purchases and encouraging linkages between MSEs and large enterprises.