3 ministries oppose PMO-backed purchase plan from SMEs | business | Hindustan Times
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3 ministries oppose PMO-backed purchase plan from SMEs

business Updated: May 27, 2010 23:17 IST

At least three ministries have raised apprehensions over a PMO-backed plan for compulsory government procurement from small and medium firms, a top level source has said.

The micro, small and medium enterprises (MSME) ministry would be calling an inter-ministerial meeting in the next 10 days to "sort out the apprehensions," the source said here on Thursday, adding the ministries of home, petroleum and commerce, and the PSUs under them are opposed to the idea, as they doubt the quality of products from MSME units.

The MSME ministry had recently circulated a Cabinet note proposing that at least 20 per cent of the government and purchases of the public sector units be sourced from SMEs.

A task-force chaired by Prime Minister's principal secretary TKA Nair had called for a compulsory procurement policy for SMEs which should also get easy bank credit. The task-force had submitted its report to Prime Minister Manmohan Singh in January.

"The home ministry has raised concerns whether SMEs can match the quality benchmarks of its purchases," the source said. The source further pointed out that while the ministries of commerce and petroleum and the PSUs under their control meet bulk of their requirements from imports, the ministries of defence and railways have assured the MSME ministry that they will support the policy at least for the non-strategic purchases.

There are 2.6 crore MSME units in the country out of which 1.86 crore are in the services space. The MSME sector, which was hit-hard due to the recent global financial meltdown, contributes 8 per cent to GDP, 45 per cent of the manufactured output and 40 per cent of exports.