Boost for small units: 20% quota for MSMEs in PSU procurement

The year 2011 could bring cheers to micro- and small- industries, as a much-awaited public procurement policy (PPP) is expected to be in place by the end of January. Debobrat Ghose writes. Pick-me-up policy

The year 2011 could bring cheers to micro- and small- industries, as a much-awaited public procurement policy (PPP) is expected to be in place by the end of January.

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The ministry of micro, small and medium enterprises (MSMEs) is set to send a note to the Cabinet for final approval.

The new PPP makes it mandatory for all ministries and public sector undertakings (PSUs) to reserve 20% of their annual procurement from MSMEs.

"The cabinet note is almost ready and we're sending it to the cabinet secretary for the cabinet's consideration," secretary, Ministry of MSME, Uday Kumar Varma said. "This policy will be a big boost to the sector."

He said the 20% reservation would be introduced in a phased manner over three years.

According to sources, the government undertakings have so far procured only 4% to 5% of total purchase from MSMEs, which has disappointed the small entrepreneurs. "Initially, some of the ministries were apprehensive of quality and quantity, but that has now been settled," the source added.

The proposed revised order is the result of an MSME task force constituted by the Prime Minister last year.

The task force recommended a PPP, to mandate ministries and PSUs to procure 20% of their purchases from MSMEs. The present share of MSME in the annual procurement is estimated at R1.07 lakh crore.

The industry has welcomed the move. "It has been a long struggle for the sector," said Anil Bhardwaj, secretary general, Federation of MSMEs. "The new policy should be in place at the earliest."

"This policy will benefit small entrepreneurs from small centres, whose products are hardly purchased by the PSUs," said Shalabh Sharma, vice president, Federation of MP Chambers of Commerce & Industry.