The MSME Ministry has recommended policy draft for PSUs’ to procure 20% of their goods and services from MSMEs.The ministry is discussing the proposal with other ministries under whose ambit PSUs fall as they have raised concerns about the quality and quantity of procurement.

This recommendation is part of the report submitted by  MSME task force constituted by the Prime Minister last year.

The proposed policy will make it mandatory for ministries and PSUs to procure 20 per cent of their annual purchase volume from MSMEs and report the procurement made from MSMEs in their annual reports.

The Cabinet approval is expected some time next month for it be implemented. Defense, power and railways are likely to be key sectors in the government that will procure the most from MSMEs under this policy.

As of now around 4-5 per cent of the government’s total annual procurement is currently from MSMEs.  Raising it to 20 percent will be a big task in next 3 years as stipulated in the draft report.

In case this target is not met due to lack of procurement base, the ministries and PSUs can present their case to the committee, stating the reasons which impede uptake of the stipulated volume.

The policy of preferential procurement from MSMEs is prevalent in the US, UK and Europe to promote the cause of MSMEs. US has to source good and services from minority/ women owned enterprises under it 8(a) programs. (MBE/WBE)  In this program fortune 2000 companies are  given tax breaks to buy a minimum of five per cent of their total needs (products/ services) by value from these MBE/WBE claim tax benefits.