Micro and small scale units in Odisha dread job losses for 300,000 people over the replacement of prevailing rate contract system with Government e-Marketplace (GeM) by the state government.
Presently, the rate contract system is in vogue for 83 items sourced by the state government. But a switch to GeM will eventually phase out the prevailing procurement system, crippling the operations of micro and small enterprises. As many as 721 registered units are leaning on government purchases to stay afloat. Each year, government departments source goods to the tune of around Rs 1000 crore from these units.
The state finance department has already issued a circular, making it mandatory for all departments to make purchases through GeM route. Small and micro units feel that if the state government withdraws the rate contract system, many of them will be forced to shut shop, leading to retrenchment of around 300,000 people employed in these units. According to the state Economic Survey, Odisha's unemployment rate stood at 7.1 per cent in 2017-18, beating the pan-India average of 6.1 per cent.
“About 90 per cent of the micro and small enterprises in the state depend on government purchases since they lack alternative markets for their products. If GeM is implemented, traders will join the fray and this phenomena will jeopardize the interests of the local manufacturers. The GeM will benefit only a single player- the lowest bidder. By contrast, 15-2o players can profit from the rate contract system”, said Smarajit Mohanty, president, Orissa Small Scale Industries Association (OSSIA).
He said all bulk purchases are made as per the rate contract system and it works to the benefit of the government and all stakeholders as the rates are determined before.
The rate contract system has proven to be a time tested process of procurement of quality goods at reasonable price and within the stipulated time frame. The store items needed in bulk quantities are identified, tested and procured at the Directorate of Export Promotion & Marketing. The rates of goods sanctioned by the state government remain valid initially for a year and for even two years by default.
OSSIA's member units have been vehemently opposing the state government's decision to adopt GeM portal for procuring goods since traders are also allowed to participate in the process. While they are not opposed to GeM per se, they have suggested that bulk purchases by the state government needs to be done through the present procurement process by keeping items covered under rate contract out of the purview of the GeM portal