Firms find going tough in Madhya Pradesh

The state government's decision to award tenders to large companies is hurting local firms.

With a combined turnover of roughly Rs 20 crore, small and medium scale supplying firms of schedule cast and schedule tribe categories are under tight squeeze in the state due to sloppy store purchase rules of the government entity Madhya Pradesh Laghu Udyog Nigam Limited (MPLUN).

Madhya Pradesh government procures and purchases medicines, drugs, furnitures, electric fittings, stationaries, office materials and other small items through MPLUN "" an arm of the Department of Industries.

As many as 1000 firms that supply these items which are used in various government and private offices are facing a tough time. Despite their often-repeated requests to various government officials and state chief minister to change the rules, business is going out of their hands.

The previous Congress government had framed rules in 2003 to ensure an allocation of 30 per cent quota to SC/ST category manufacturing or trading small-scale firms in government purchase and procurement.

The Bharatiya Janata Party government removed this 30 per cent mandatory provision in 2005 and allowed only big manufacturers to participate in supply tenders for various items including medicines and drugs to the state government, as a result the economically poor firms failed to survive.

The SC/ST category firms are allowed to form joint ventures and participate in MPLUN tenders only as a manufacturing firm and not as a supplier.

"We had been doing good business till 2003. The then industry minister, Kailash Chawla, changed the rules and allowed only manufacturing firms (owned by SC/ST community also) to participate in government procurement tenders floated by MPLUN. How can small firms compete with big manufacturers or set up their own manufacturing unit? Is it an easy job?" asks Prafull Solanki, president of MP Schedule Caste/Schedule Tribe Manufacturing and Trading Association.

The Association had been assured by the state chief minister Shivraj Singh Chouhan in a mega meet 'Laghu Udyog Panchayat' with SMEs earlier this year in the month of June that new store purchase rules will be announced before 31 August this year. But nothing has happened so far.

"The change in rules and regulations adversely affected our business which stood at Rs 200 crore of the total orders of Rs 700 crore during 2003 for all firms. Now even after a Rs 1200 crore budget for government purchase and procurement, the SC/ST category supply firms are not entitled to share even a single rupee of the order," says Chandrashekhar Druvakar, who owns a supply firm in Indore, adding, "The manufacturing firms of non-SC/ST category have created their own definition. They (manufacturing firms) have formed partnership manufacturing firms with their own employees of SC/ST category to supply medicines and other materials to state government."

"My business has gone down from Rs 4-5 lakh per annum to nil during the last three years," says Hari Rao Tapal of Indore-based J Amarnath & Co. His firm supplied furniture to state government offices through MPLUN.

MPLUN chairman Vipin Dixit, managing director SK Mishra were not available for comment.

A small supply firm creates at least 12-15 direct and indirect employments. With the dwindling orders and growing number of bigger firms, mainly pharmaceutical companies, as many as 15000 people are on the verge of losing their jobs. "My firm has employed only one person and I am looking for some other businesses," said Tapal.