PSUs to prefer small enterprises

State-run departments and public sector undertakings (PSUs) will have to give preference to micro and small enterprises (MSEs) for procurement of goods and services, as per the public procurement policy for MSEs that the government approved on Tuesday.

The policy, which the Union Cabinet cleared, has set an annual target of 20 per cent procurement for the central government departments and PSUs from MSEs.

Further, within the minimum limit of 20 per cent, four per cent of the orders should be placed to entrepreneurs from the Scheduled Castes and Scheduled Tribes. However, the minimum procurement limit would become mandatory only after three years. Until then, it would be voluntary upon the government departments and PSUs to procure from the MSEs.

Micro, Small and Medium Enterprises Minister Virbhadra Singh 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. The industry fraternity has also welcomed the new policy.

PHD Chamber of Commerce and Industry said it fulfilled the sector’s long-standing demand. “It would go a long way in enhancing their competitiveness and promoting inclusive growth,” said its president Salil Bhandari.

The MSMEs, which account for 45 per cent of the country’s manufacturing output and 40 per cent of exports, have also been hit by the rising input costs and interest rates. The Confederation of Indian Industry said the new policy would help transform authorities’ mindset that goods manufactured by MSMEs were good enough for the PSUs and the government.

“India’s MSME sector plays a crucial role in the socio-economic development of the country,” it said in a release here. The sector employs about 60 million people in 26 million units that produce over 6,000 products. MSMEs contribute to about 8 per cent of the country’s gross domestic product.

A preferential procurement policy for MSMEs exists in countries like Australia, China, the European Union and the USA. PHDCCI’s Bhandari said the implementation of the policy should be in the spirit of the announcement.

“This would ensure that the public sector, which at present procures a mere four-five per cent from the segment, can enhance its purchases from this sector,” he noted. “It would thereby create a new chapter in the public-private partnership.”