CPSE procurement from MSEs declines 43% to Rs 773.39 crore in FY24

One of the main reasons is that public procurement decreased due to delays caused by elections. The Budget could only be presented in July, resulting in a loss of six months, said Anil Bhardwaj

Procurement by central public-sector enterprises (CPSEs) from micro and small enterprises (MSEs) has declined by a sharp 43 per cent in 2023-24 (FY24), totalling Rs 773.39 crore, from 188 CPSEs, down from Rs 1,369.45 crore during FY23, according to the latest edition of the Public Enterprises Survey, released by the Ministry of Finance.

 

Anil Bhardwaj, secretary general, Federation of Indian Micro and Small & Medium Enterprises (FISME), stated: “One of the main reasons is that public procurement decreased due to delays caused by elections. The Budget could only be presented in July, resulting in a loss of six months. That’s the main reason.”

 

Procurement in FY24 was Rs 53,0151.48 crore, of which that from MSEs owned by entrepreneurs belonging to Scheduled Castes (SC) and Scheduled Tribes (ST) amounted to Rs 1,689.59 crore, an increase from Rs 1,616.01 crore in FY23.

 

Additionally, annual procurement in FY24 from MSEs owned by women was Rs 3,252.66 crore, up from Rs 2,403.46 crore in FY23.

 

The government notified the Public Procurement Policy for MSEs in 2012, and it is administered by the Ministry of Micro, Small & Medium Enterprises, effective from April 1, 2012. The policy aims to promote and develop MSEs by supporting them in marketing their products and services. 

 

  The government amended the policy to increase minimum annual procurement from MSEs from 20 per cent to 25 per cent and mandated that a minimum of 3 per cent of this 25 per cent must be procured from MSEs owned by women, in addition to 4 per cent from MSEs owned by SC/ST entrepreneurs.

 

To reduce the transaction cost of doing business, MSEs are supported by providing tender sets free of cost and exempting them from paying earnest money. These amendments came into effect on April 1, 2019.

 

“The government’s push for CPSE procurement from MSEs has yielded great results, but continuing procurement needs a mindset shift among CPSE management from a carrot-and-stick approach to a true realization of MSEs’ role in nation-building,” said Vinod Kumar, president of the India SME Forum.

 

However, if MSEs belonging to SC/ST entrepreneurs fail to participate in the tender process or meet tender requirements and L1 prices (lowest-quoted selling price), the 4 per cent sub-target can be met from other MSEs.

 

From 2015-16, the procurement goal of a minimum of 20 per cent became mandatory. Non-conforming departments were required to provide reasons for this to the review committee established under the policy.

 

The survey also noted procurement through GeM, a portal, by CPSEs in FY24 amounted to more than Rs 2.16 trillion in a total of Rs 5.30 trillion.

 

The GeM, hosted by the Directorate General of Supplies and Disposals (DGS&D), is a paperless, cashless, and system-driven e-marketplace that enables procurement of common-use goods and services with minimal human interface.

 

It is used for procurement by various ministries and departments, CPSEs, and autonomous bodies of the central government.