Policy for Procurement Preference | Micro, Small & Medium Enterprises

POLICY FOR PROCUREMENT PREFERENCE UNDER SECTION 11 OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006.

1. Introduction

The Micro, Small and Medium Enterprises Development Act, 2006 under Chapter IV provides measures for promotion, development and enhancement of competitiveness of Micro, Small and Medium Enterprises which among others includes a provision on Procurement Preference Policy for facilitating procurement of goods and services produced and provided by micro and small enterprises by the Ministries and departments of Central and State Governments, its aided institutions & Public Sector Enterprises. Accordingly, the under-mentioned policy framework has been drawn to give effect to the provisions of Section 11 under Chapter IV of Micro, Small and Medium Enterprises Development Act, 2006.

2.Objective

The policy provides general principles for achieving the following objectives:-

    i. Increased participation by micro & small enterprises in Government Stores Purchase Programme.

   ii. Encourage linkages between micro & small enterprises and large enterprises.

  iii. Increased share of supplies of micro & small enterprises to Central Government or State Governments’ Ministries or Departments or its aided institutions and Public Sector Enterprises.

  iv. Increased participation of disadvantaged section of the society in Government procurements.

3. Legal Framework

The legal framework of the policy is based on the provisions of Section 11 under Chapter IV of Micro, Small and Medium Enterprises Development Act, 2006 which inter-alia mentions ‘For facilitating and development of micro and small enterprises, the Central Government or the State Government may, by order notify from time to time, preference policies in respect of procurement of goods and services, produced and provided by micro and small enterprises,by its Ministries or departments, as the case may be,or its aided institutions and public sector enterprises’

4. Salient Features of Procurement Preference Policy for MSEs

The salient features of the policy are as given below :

  I. The Central Government Ministries, its departments, its aided Institutions and Public Sector Enterprises etc. shall procure “at least 20%” of the value of their total annual purchases from Micro and Small Enterprises for the products or services produced and provided by such enterprises/suppliers.
II. The Government addresses the needs of disadvantaged sections of the society by providing more opportunities      under its Procurement Preference Policy by extending the following benefits: -
    a) At least 20% of (I) above shall be procured by Central Government Ministries or Departments or its Aided Institutions and Public Sector Enterprises from MSEs owned/managed by Scheduled Castes and Scheduled Tribes.
    b) At least 10% of (I) above shall be procured by Central Government Ministries or Departments or its Aided Institutions and Public Sector Enterprises, from such Micro and Small Enterprises which are owned by Women Entrepreneurs.
    c) It is mentioned that in case of institutes /cooperatives this benefits would be extended to only those institutes /cooperatives, which are managed by i.e. where critical office bearers like Chairman, President/ Secretary etc are from SC/ST category.
  III. As per present policy the benefit under Govt. Stores Purchase Programme are extended to those units, which are registered with NSIC under its Single Point Registration Programme(SPRS). This provision makes it difficult to reach out to the large number of MSEs scattered in rural and backward areas of the country. It is felt that work of registration needs to be decentralized in such a way that every State/UT gets at least one more authority for such registration in addition to NSIC. Accordingly it is proposed that all the Directors of Industries in the state governments/UTs might be entrusted the responsibility to register units as per the procedure followed by  NSIC. The units so registered will be treated at par with the units registered with NSIC under its SPRS and shall be eligible for similar benefits.To ensure that uniform criteria and procedures are followed for such registration, the NSIC may formulate detailed guidelines to such registration. The Micro & Small Enterprises so registered shall be entitled to the following benefits/facilities: -
     a. Issue of tender sets free of cost,
     b. Exemption from payment of earnest money,
     c. Waiver of Security Deposit upto the Monetary Limit for which unit is registered.
    d. MSEs quoting price(s) upto 15% over the lowest eligible price bid of larger enterprises, shall be given preference for procuring at least 50% of the required quantity in case such enterprises agree in writing to supply stores at the lowest eligible price.
   IV The existing reservation of 358 items for exclusive purchases from micro and small enterprises shall continue till 31.3.2010.

5. Applicability and Compliance

     i) Applicability:
    a) The procurement preference policy for MSEs shall be statutory under the section 11 of MSMED Act, 2006 and mandatory for the all the Central Government Ministries/Departments,its aided institutions and Public Sector Undertakings etc. To safeguard the interests of MSEs, the State Governments be advised to adopt the Procurement Preference Policy with/ without amendment(s) which they feel necessary.

    II) Compliance
   a) All the Central Government Ministries / Departments, its aided institutions and PSUs etc. shall mention in their Annual Reports the purchases  made by them from Micro and Small enterprises indicating %age share of purchases from MSEs out of their total purchases.
   b) All the Central Government Ministries / Departments, its aided institutions and PSUs etc. shall prepare Annual Procurement Plan for purchases from MSEs and upload the same on their official website so that MSEs may get advance information about the requirement of procurement agencies.

6. No mandatory with regard to minimum turn over of the manufacturer.

Many industries associations have been complaining that due to mandatory condition of minimum turnover put in the tender documents,it becomes difficult for large number of MSEs who do not fulfill this condition to participate in the tender process. To provide a label playing field to MSEs and also to ensure that no MSE is debarred from participating in tender process, all the Central Government Ministries/Departments, its aided institutions and PSUs etc. shall not impose the minimum turnover as one of the eligibility criteria for MSEs.