'Govt monitoring effectiveness of MSME procurement policy'

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Namrata Kath Hazarika | 15 Mar, 2013
The Ministry of Micro, Small and Medium Enterprises (MSMEs) is currently reviewing how much successful the public procurement policy has been during the first one year after its implementation, said MSME secretary Madhav Lal on Thursday in New Delhi.

"In the public procurement policy, it has been said that 20 percent would be procured from MSEs at the end of three years. Right now, we are at the end of first year. So, we are now beginning to review with the various PSUs as to how much they have been able to procure," said the Madhav Lal on the sidelines of the 2nd MSME Summit organised by Auto Component Manufacturers Association (ACMA) and Ministry of MSME.

In November 2011, the government approved the procurement policy mandating all state-run companies, ministries and departments to procure 20 percent of their products and service needs from Small and Medium Enterprises (SMEs).

Of the 20 percent target, there is a sub-target of four percent that is earmarked for procurement from the SMEs owned by entrepreneurs from the Scheduled Castes and Scheduled Tribes (SC/ST) communities.

The MSME Ministry is looking into the issue and making sure that the level of 20 percent procurement is achieved, Lal said.

" We need to see what needs to be done on either side. That is on the side of the PSUs as well as on the side of MSMEs to reach the level of 20 percent," he told SME Times.

According to the Deutsche Gesellschaft fÃ¼r Internationale Zusammenarbeit (GIZ), which focuses on private sector development work currently estimated that only about Rs. 3000-4000 crore procurements have been made from MSEs by PSUs.

The government has estimated that PSUs are expected to buy goods worth Rs.35,000 crore from the MSEs, of which a business of Rs.7,000 crore would go to the SCs/STs.

So far, only 50 PSUs have reported about their procurement made from MSEs, said the MSME Secretary.

When asked whether the policy is befitting SMEs, he added, "This is the process and it will simply go on. The policy is working for the entire MSME sector. But a lot of work needs to be done."

The sector plays a crucial role in the socio-economic development of the country. There are 26 million MSMEs in India that employ about 60 million people, contribute about 8% to its GDP, 45% to its industrial output and 40% to its exports.