Friday, November 4, 2011

New National Procurement Policy

The federal government has approved a procurement policy under which state-run departments and Public Sector Undertakings (PSUs) will give preference to micro and small entrepreneurs (MSEs), including those belonging to the Scheduled SC/ST category. The policy has set an annual target of 20 per cent procurement for the federal government departments and public sector units from MSMEs.
Within this limit, four per cent of the orders should be placed with “Scheduled Castes (SC) and Scheduled Tribes (ST)” entrepreneurs and 16 per cent for others.
The PSUs are expected to buy goods worth Rs 35,000 crore from the MSMEs, of which a business of Rs 7,000 crore would go to units belonging to “scheduled castes and tribes.”
However, the procurement policy would be voluntary in nature for three years and made mandatory after that. After it becomes mandatory, non-conforming departments will be required to provide reasons for not meeting the targets to a review committee.
Formation of Grievance Cell
Micro, small and medium enterprises, which account for 45 per cent of the country’s manufacturing output and 40 per cent of exports, have also been hit by rising input costs and interest rates. The sector employs 60 million people in 26 million units producing over 6,000 products.
The federal ministries and public sector units will continue to procure 358 items from MSMEs, which have been reserved for exclusive purchase from them on a continuous basis and for monitoring and review of the Public Procurement Policy for MSEs. In addition, a ‘Grievance Cell' would be set up in the Ministry of MSME for redressing the grievances of MSEs in government procurement.
For enhancing participation by enterprises belonging to “scheduled castes and tribes” in government procurement, the central ministries/public sector units will take necessary steps including organizing special vendor development programmes and buyer-seller meets.
Avenue for Increased Consumption of MSME Products
The clearance of the public procurement policy will offer a much needed and less optimally used avenue for increased consumption of MSME products by government departments and PSUs.
More importantly, it will signal a message of confidence and faith in the potential and capabilities of the MSME sector, according to the apex industry chamber.
According to a Confederation of Indian Industry (CII) study on worldwide procurement policies, many countries around the world have formulated such policies which have enabled small and medium enterprises to compete even in adverse economic conditions.In India, public sector units procuring a percentage of their goods from MSMEs was not mandatory, but this policy would help transform the authorities’ mindset that goods manufactured by micro, small and medium enterprises are good enough for public sector undertakings and the government.

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