MSE procurement policy hits bump

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Bikky Khosla | 09 Feb, 2016
Most of the public sector units and government departments are not abiding by the MSE procurement norms. Under the Public Procurement Policy, it is mandatory for them to make at least 20 percent of their total purchases from micro and small enterprises, but a recent review by the MSME minister has found that the current procurement level is less than 10 percent. Of this, procurement from SC/ST owned enterprises is less than 0.2 percent against a mandatory 4 percent. This data is concerning -- what good are policies and guidelines when they are not followed?

When the Public Procurement Policy for Micro and Small Enterprises came into force in April 2012, it was eagerly expected that the move would facilitate the sector exclusive access to public procurement worth Rs.35,000 crore annually. For the first three years, the minimum 20 percent quota was not made mandatory, and as a result, the sector had to wait this long period without expecting much. Then the 'preparatory period' came to an end in March, 2015, raising some hopes again, on which the latest data now seems to throw cold water -- only 100 central PSUs, out of a total of 220 units, procured from MSEs till now this financial year, and procurement even by these units did not amount to 10 percent of their total purchases.

The procurement policy says that PSUs have to give valid reasons if the mandatory 20 percent quota is not met by them, but despite this clear directive they have continued to show a callous attitude towards the policy. In the past, complaints were raised against them many a time by industry associations. Time and again, stern warnings were also issued by the MSME ministry, but with little result. This forced the Prime Minister's Office to take a review meeting to deal with this problem, which was later followed by the aforesaid review by the MSME minister. Now, with the findings clearly showing deviations, it will be interesting to see how the Centre tightens the noose around the defaulters.

Meanwhile, the Union budget is to be presented this month and I think this could be taken as an opportunity to boost small business participation in public procurement. Without adequate trade financing, MSMEs find it extremely difficult to take part in the competitive bidding process. So, there is an urgent need for some innovative solutions to help them overcome this challenge. In addition, I think serious thoughts should be given to measures for making the bidding process transparent and corruption-free, helping MSMEs easily access information on bidding opportunities, training them to bid successfully for tenders, and encouraging supplier innovation.

I invite your opinions.