The Union Cabinet on Tuesday approved a new public procurement policy for the various arms of the central ministries, departments and public sector undertakings, requiring them to source at least 20% of their respective annual purchases from micro, small and medium enterprises (MSMEs) within a period of three years. Also, a fifth of this 20% (or 4% of the total) must be sourced from MSMEs owned by entrepreneurs from scheduled castes or scheduled tribes.
Around 95% of industrial units in the country are small and medium enterprises (SMEs) and 40% of the value addition in the manufacturing sector takes place in this segment. They are the largest job creators in the country and account for the bulk of India?s exports. However, many of them have poor access to credit since commercial banks insist on collateral.
?The new policy will facilitate greater access to credit for the sector and help in employment generation,? information and broadcasting minister Ambika Soni said, briefing reporters on the Cabinet decision. The government recently announced a new manufacturing policy, which included a slew of fiscal incentives for SMEs.
?There will be no compromise on the quality and price of the goods and services rendered by SMEs, which have to compete with the best enterprises in the world,? she said, adding that helping this segment of the economy was a promise made by the ruling UPA coalition.
MSME minister Virbhadra Singh said this sector which did not have the infrastructure support that larger companies have, do need government support. ?In the US, 23% of government procurement is from small businesses, for which provisions have been legislated,? he said.
Departments which cannot conform with this rule will be required to provide reasons for the same to a review committee set up under the policy. The central ministries/public sector enterprises will continue to procure 358 items from MSMEs, which have been reserved for exclusive purchase from them.
The policy will help promote MSMEs by improving their market access and competitiveness through increased participation in government purchases and encouraging linkages between them and large enterprises. The Cabinet decision will be notified under Section 11 of the MSME Development Act, 2006.
The Cabinet also approved the enactment of the Prasar Bharati Amendment Bill, 2010 which is pending in Rajya Sabha. The Bill amends the existing Section 11 of the Prasar Bharati Act, 1990, regarding ?Transfer of service of existing employees to the Corporation?, which deals with the transfer of services of employees to Prasar Bharati upon its incorporation in 1997.
This decision will make the status of the employees recruited at Prasar Bharati (Doordarshan and All India Radio) between November 1997 and October 2007 absolutely clear and unambiguous.
It will impact aid 2,000 Prasar Bharati employees, who were on deemed deputation till now. Overall, Prasar Bharati has over 34,000 employees.