MSME procurement worrisome: Govt buying from small businesses lag behind halfway through FY20

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Published: September 18, 2019 6:36:47 PM

Ease of Doing Business for MSMEs: The government had last year revised the annual public procurement target for MSEs by the central ministries, departments from 20 per cent to 25 per cent of the total annual purchases.

The procurement from SC/ST entrepreneurs led MSEs was Rs 240.57 crore for the current financial year.

Ease of Doing Business for MSMEs: Almost halfway through the current financial year, the procurement from micro and small enterprises (MSEs) by the central ministries, departments and central public sector enterprises (CPSE) stood at Rs 11,902 crore including procurement from MSEs owned by SC/ST entrepreneurs, as per the data available with MSME Ministry’s public procurement policy monitoring portal MSME Sambandh. The procurement from SC/ST entrepreneurs led MSEs was Rs 240.57 crore for the current financial year. “If these are five-month figure then it shows a huge drop from last year. Even if the procurement is increased in the second half, I doubt it would cross the last year figure,” Rajiv Chawla, Chairman at the MSME association — IamSMEofIndia told Financial Express Online.

The public procurement from MSEs for FY19 was Rs 40.3k crore including from SC/ST enterprises even as the latter’s share stood at Rs 824 crore. The drop in the figures this year reflects the current economic slowdown impacting multiple sectors including auto, textiles, gems and jewellery, real estate etc. The government had last year revised the annual public procurement target for MSEs by the central ministry, department from 20 per cent to 25 per cent of the total annual purchases. Out of the total target, 3 per cent has to be earmarked for procurement from women-owned MSEs and a sub-target of 4 per cent for procurement from MSEs owned by SC/ST entrepreneurs.

Also read: Over 6,000 MSMEs to go digital as CII, Dell announces new centre to support small businesses

“Every sector is facing a downturn and even if the government increases the infrastructure spending etc., as promised but not every PSU is going to do that or has the financial muscle to do that. PSUs normally run on a commercial basis and no one would unnecessarily buy extra inventory unless required. These figures are worrisome,” said Chawla adding that the amount would probably touch around Rs 30k crore going by the current ratio while we expected it to be enhanced to Rs 50k crore. This means it would be only 50 per cent of what was expected.

Importantly, the procurement from women-owned MSEs fared better for the current year so far with nearly Rs 167 crore worth buying while for FY19, the procurement was worth Rs 231 crore. “Procurement from women-MSEs is fine and should be appreciated but the overall picture is bad,” said Chawla. An official from the Development Commissioner, Ministry of MSME confirmed to Financial Express Online that the figures available on the website are updated.

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