Cabinet approves new procurement policy for MSEs

The cabinet today approved the Public Procurement Policy for goods produced and services rendered by micro and small enterprises (MSEs) under which all central ministries, departments as also public sector units will have to mandatorily procure 20 per cent of their annual purchases of goods and services from MSEs.

The policy will be notified under section 11 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

Ministries and PSUs, however, can spread their purchases over a three-year period beginning the current year for achieving an average 20 per cent minimum procurement goal per year.

Out of 20 per cent target of annual procurement from MSEs, a sub-target of 4 per cent (ie, 20 per cent of the 20 per cent) will be earmarked for procurement from MSEs owned by SC/ST entrepreneurs. However, in the event of failure of such MSEs to participate in the tender process or meet the tender requirements and the L1 price, the 4 per cent sub-target for procurement earmarked for MSEs owned by SC/ST entrepreneurs will be met from other MSEs.

Ministries and departments not confirming with the minimum procurement goal of 20 per cent at the end of three years, would have to provide reasons for the same to the review committee set up under the policy.

The participating MSEs in a tender quoting price within the band of L1 + 15 per cent may also be allowed to supply a portion of the requirement by bringing down their prices to the L1 price, in a situation where L1 price is from someone other than an MSE. Such MSEs may be allowed to supply up to 20 per cent of the total tendered value. In case of more than one such MSE, the supply will be shared equally.

Every central ministry and PSU will report the goals set with respect to procurement to be met from MSEs and the achievement made thereto in their respective annual reports.

The policy also lists 358 items reserved for exclusive procurement from MSEs.

For enhancing the participating of SCs/STs in government procurement, the central ministries/PSUs have to take necessary steps, including organising special vendor development programmes, buyer-seller meets etc, according to the draft policy.

The 20 per cent mandatory procurement goal will not, however, apply to defence armament imports. In addition, defence equipment like weapon systems, missiles etc will also remain out of purview of such policy of reservation.