Namrata Kath Hazarika | 26 Jun, 2009
The government should introduce public procurement mechanism in India particularly for the growth of MSMEs, said the Federation of Micro, Small, Medium Enterprises (FISME).

FISME has proposed to the government to make 20 to 25% of its public procurement -  i.e. the purchases of goods, services and public works by governments and public utilities - from Micro Small and Medium Enterprises (MSMEs).

Anil Bhardwaj, Secretary General of FISME told SME Times, "All countries including US, EU and Japan have set-aside programmes for procurement from MSMEs. In US, the quota of public procurement from small businesses go as high as up to 30 percent."

He said, "In India there is no such quota as yet. There are guidelines which recommend that a price preference may be given to MSMEs in government procurement. However, no government department adheres to these guidelines."

"Today when the economy is reeling under slowdown and some of the sectors have been badly hit, it is imperative that a set policy with 20 to 25% public procurement quota is notified for MSMEs."

"The government procurement mechanism acts as stepping stone for growth of MSMEs," he added.

Further Bhardwaj said that one of the major aims of government buying is to expand the supplier base of MSMEs which also gives an opportunity to new players to enter into the market.

Secondly, the payment in government buying is assured upon supply of goods and services.

Thirdly, MSMEs get advances easily against confirmed government orders.

Fourthly, with orders in hand, MSMEs take the risk of expanding their capacities and invest more in their companies.

He also mentioned that the public procurement mechanism has the potential of generating a huge demand of goods and services produced by MSMEs. However, to realize the potential it is essential that steps are taken in the following areas:

a. Need for simultaneously pressing for e-procurement system to induce transparency and greater disclosures of the procurement processes.

b. Need for ensuring prohibition of bundling of orders and putting unrealistic entry barriers to crowd out MSMEs.
 
c. Need to develop a mechanism in association with Ministry of MSME so that the following principles of Competition Policy be ensured. (e.g. filing of cases against anti-competitive procurement practices with support of Ministry of MSME).

"If the government takes initiative and implement steps, the public procurement mechanism will have a benign impact on large number of MSMEs. It will provide them support in the midst of adverse economic conditions," Bhardwaj added.