DRAFT POLICY OF THE GOI FOR PROCUREMENT PREFERENCE UNDER SECTION 11 OF THE MSMED ACT, 2006

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DRAFT POLICY OF THE GOI FOR
PROCUREMENT PREFERENCE UNDER SECTION 11 OF THE
MSMED ACT, 2006
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• Present Policy
• Facilities extended to MSEs by GOI
  Ministries/Departments/CPSUs 
• (i) Issue of tender sets free of cost, exemption
  from payment of earnest money, waiver of
  Security Deposits up to the monetary limit
  for which unit is registered with NSIC
•  
• (ii) Price preference of up to 15 over the
  quotation of large scale units and
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• (iii) Reservation of 358 items for exclusive
  purchase from SSI sector.

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• Need For A New Policy
• The present policy is non-statutory in nature.
• Some of the Departments, CPSUs, .etc., do not
  adhere to the provisions of this policy
  wholeheartedly.
• The state governments follow different policies
  (and some do not indicate such preferences) for
  procurement preference for MSEs.
• The current policy does not indicate any
  preference for the services rendered by MSEs in
  government procurement, nor for disadvantaged
  MSEs.
• Price preference is seldom extended.
• Database of purchases from MSEs very weak

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• Legal Framework for New policy
• Section 11 of Micro, Small and Medium
  Enterprises Development (MSMED) Act-2006
• For facilitating promotion and development of
  micro and small enterprises, the Central
  Government or the State Government may, by order
  notify from time to time, preference policies in
  respect of procurement of goods and services,
  produced and provided by micro and small
  enterprises, by its Ministries or departments, as
  the case may be, or its aided institutions and
  public sector enterprises.

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• Draft Procurement Preference Policy
• 20 of annual value of purchases from MSEs
• The Central Government Ministries, its
  departments, its aided Institutions and Public
  Sector Enterprises to procure at least 20 of the
  annual purchases (of the products and services
  produced or provided by MSEs) from MSEs or other
  suppliers (as defined in Section 2 (n) of the
  MSMED Act, 2006).
• .

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• II. Reservation for Disadvantaged Sections
• (SC/ ST/ Women)
• At least 20 of the value of total annual
  procurement of goods and services from MSEs to be
  procured from MSEs owned and managed by Scheduled
  Castes/ Scheduled Tribes.
• At least 10 of the value of total annual
  procurement of goods and services from MSEs to be
  procured from MSEs owned and managed by women.

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• III. Preference to MSEs on Price Matching
• MSEs quoting price higher (up to 15) than
  the lowest eligible price bid, to be given
  preference for procuring at least 50 of the
  required quantity, in case such enterprise
  agrees to match the lowest eligible price.

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• IV . Single Point Registration Scheme
• Benefits
• Issue of tender sets free of cost,
• Exemption from payment of earnest money,
• Waiver of security deposit up to the monetary
  limit.
• The work of registration to be decentralised to
  allow capable state/UT industrial development
  organisations .etc. to register MSEs.

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• General Policies
• Central Government Ministries, its Departments,
  its aided institutions and Public Sector
  Enterprises, should confirm in their Annual
  Reports about the status of compliance of these
  provisions.
• Eligibility clause of minimum turnover limit
  not to be imposed by Government buying
  organisations in the tenders for the procurement
  of goods or services from MSEs.

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• Consultation with Stakeholders
• Draft discussed in a meeting of the Principal
  Secretaries / Secretaries to the State
  Governments on 18.10.2006.
• Consultation with the representatives of
  prominent MSE Associations on 15.03.2007.
• Consultation with the representatives of some
  Ministries / Departments/Purchase Agencies of GOI
  on 16.05.2007.
• Consultation with the National Board for MSMEs
  on 13.12.2007
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• Issues raised by Associations
• The 358 reserved items should be retained
• The price preference of 15 should be
  retained
• Effective monitoring support required
• Issues raised by Purchase Agencies
• Proposal not PracticableMinistries like
• Telecommunications, Civil Aviation,
  Defence, Railways
• .etc., might not be able to fulfill the
  obligatory purchase
• Concerns on quality and reliability of timely
  supply by MSEs

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• Other Issues
• Poor database.
• Fluctuating purchases through DGSD.
• Low registration with NSIC.
• States support needed.
• Price matching would need concurrence of
• CVC since guidelines prohibit negotiation
  with
• anyone except L1.
• Security deposit Exemption needs amendment
• in GFR 2005, for which DoE not agreeable.
• Definition of MSEs owned/managed by
• disadvantaged sections needs to be
  finalised.

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THANK YOU
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