The ministry of micro small and medium enterprises (MSME) has started a review of the public procurement policy both a national and state level.
According to official sources, the ministry proposes to suggest all states to come up with public procurement policy at the state government level to facilitate a demand pull growth in the segment.
Currently, every ministry except for defence is required to procure a minimum of 20% of annual value of goods and services from micro and small enterprises’. However many ministries are yet to come up worth a procurement plan.
The concern has arisen from the fact that the share of MSMEs’ in the GDP, manufacturing output and exports has been slowly declining. Due to the nature of the structure of the MSMEs, they have far less ability to counter demands of time and resources as efficiently as their larger counterpart. Therefore many of them prefer to operate in an informal and unregistered segment which is growing five times faster than the organised segment and these segment accounts for over 95% of all MSMEs, suggested an interdepartmental report.
The review will help to streamline the issues so that various central government ministries’can start adhering to the 20% procurement guidelines strictly, Not only that, in a high level meeting of the state governments to be held, the proposal for a state level procurement policy will be discussed to enlarge the market for MSEs, official sources said.
One of the major issues to be considered for the review is to counter the imports of electronic system and design management sector. To this effect, the Ministry has urged Department of Electronics and Information technology to take measures for blocking the entry of technically inferior products into the country. Directorate general of foreign trade has been requested to provide a product wise export potential in different destination countries.
Besides, various central government ministries have been asked to identify major imports of their respective areas whose manufacturing includes low to medium end technology. Thereby, these ministries could come up with product specific schemes to incentivize domestic manufacturing of those products under the product procurement policy. Department of Commerce in addition is in the process of indentifying non functional Special economic Zones (SEZ) where such industries could be located.
Meanwhile, the ministry of micro, small and medium sector has allowed use of all non tax benefits available to the MSMEs for a period of three years even if they graduate to their next higher level. These benefits will be available to entities falling under three categories, micro, small and medium units and come into effect from April 1, 2013. The major benefit of the government procurement policy is that all central ministries and public sector undertakings will fulfil 20% of their annual purchase from products produced and services rendered by the MSE sector within a period of three years starting 2012. Policy has also earmarked four% of the 20% procurement from MSMEs to be from units owned by proprietors belonging to scheduled caste and tribe categories.
