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  3. PSUs to prefer MSEs for procurement of goods and services

PSUs to prefer MSEs for procurement of goods and services

02 Nov 2011 Evaluate

In a move to enhance competitiveness and promote micro and small enterprises’ (MSEs) growth, the government owned departments and public sector units (PSUs) will have to give first preference to MSEs, including those belonging to SC/ST entrepreneurs. The public procurement policy for MSEs, which the union cabinet approved on November 1, has set an annual target of 20% procurement for the central government departments and PSUs from MSEs.

Additionally, in the minimum limit of 20%, orders worth 4% must be placed to SC/ST entrepreneurs. However, the minimum procurement limit would become compulsory only after 3 years. Till that time, it would be voluntary upon the central government department and PSUs to procure from the MSEs.

Virbhadra Singh, Minister of Micro, Small and Medium Enterprises said the announcement of the new policy has triggered expectations that PSUs would buy goods worth Rs 35,000 crore from the MSEs. Of this, a business of Rs 7,000 crore would go to the SCs/STs. On the other hand, this would also ensure that the public sector, which at present procures a mere 4-5% from the segment, can enhance its purchases from this sector.

The preferential procurement policy for MSMEs also exists in countries such as Australia, China, the European Union and the USA. The industry had welcomed the move of the government, as this move of government will enhance the competitiveness and also promote inclusive growth. The sector has been affected badly from the increasing input cost and interest rates.

The MSMEs plays very important role in the Indian economy as it accounts for 45% of India’s manufacturing output and around 40% of country’s export. The sector also provides employment to 60 million people in 26 million units which produce more than 6,000 products. The MSMEs also contribute around 8% of the county’s Gross Domestic Products.

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