The Union Cabinet would take up the new procurement policy for micro, small-and-medium enterprises (MSMEs) soon, a senior central government official said here today.
“It has been pending with the Cabinet for a while now, and I hope that the Cabinet will take it up any time soon,” MSMEs’ Secretary Dinesh Rai said on the sidelines of the Small Business Congress 2010, being organised by Franchise India, here today.
The MSME procurement policy, finalised by Prime Minister’s Taskforce on MSMEs, proposes to make it compulsory for government departments and public sector units to source 20 per cent of their procurement needs from small and micro units, though defence units may be exempted due to quality requirements.
Early this month, MSMEs Minister Dinsha Patel had said the ministry was finalising the proposed policy for sending it to the Cabinet.
“A proposal for a comprehensive public procurement policy to benefit micro and small enterprises is under finalisation in consultation with the ministries/departments concerned,” Patel told the Lok Sabha.
A task force chaired by the Prime Minister’s Principal Secretary, T K A Nair, had proposed a compulsory procurement policy for MSMEs to help them improve their bottom lines and broadly encourage small-and-medium businesses in the country.
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The task-force had submitted its report to Prime Minister Manmohan Singh in January.
Rai said there were 26 million SMEs in the country, of which 18.6 million were in the services’ space. The sector contributes to eight per cent of the nation’s gross domestic product, as much as 45 per cent of the manufacturing output and 40 per cent of exports, besides offering employment to nearly 45 per cent of the working population.
There existed the potential for their contribution to still rise further, he said. “Though we have a large number of small-and-medium units, their contribution to GDP in general and manufacturing in particular could go up a lot, as in Germany and China, their share to the manufacturing sector is a high 75-80 per cent,” he said.
Admitting that cheap Chinese imports were hurting the sector, he said the only way out was to improve competitiveness to catch up with the Chinese.
Pointing out that the Chinese enjoy a huge comparative advantage in terms of all factors of production such as land and finance availability, coupled with infrastructure and conducive labour policies, Rai said the only area where domestic units excel was in the field of managerial talent.