Procurement policy msme

A Presentation
On
Public Procurement Policy

Presented By:
Narendra Kr. Bajpai
Human Development & Research Society
Rohan Saxena

Learning Objectives

Definition of Procurement.
Significance of Public Procurement Policy.
Problems faced by MSEs in India.
Role of MSME in Public Procurement Policy.
When Public Procurement Policy will effected?
Why Public Procurement Policy?
Key features of Public Procurement Policy.
Summary.


PROCUREMENT

Procurement is the acquisition of goods or
services. It is favorable that the goods/services
are appropriate and that they are procured at
the best possible cost to meet the needs of the
purchaser in terms of quality and quantity,
time, and location


India’s MSME sector plays a crucial role in the socio-
economic development of the country. It contributes
about 8% to country’s GDP. It accounts for 45% of
the country’s manufacturing output and 40% of
exports. The sector employs 60 million people in 26
million units producing over 6,000 products.

MSEs constitute an overwhelming majority of this
sector, contributing significantly to the gross
domestic product, manufacturing output, exports and
employment generation. Among registered MSEs,
10.73% are owned by SC/ ST entrepreneurs, 38.7%
by OBCs and 13% by Women entrepreneurs (as per
IVth Census of MSMEs).


MSEs are highly ignored to volatile market
conditions. To address this inherent problem, many
countries in the advanced world have put in place
public procurement policies to support MSEs and to
ensure a fair share of market to such entities.


Problems faced by MSEs in India
Although Indian MSMEs are a diverse and
heterogeneous group, they face some common
problems, which are briefly indicated below:
• Lack of availability of adequate and timely credit;
• High cost of credit;
• Collateral requirements;
• Limited access to equity capital;
• Problems in supply to Government Departments and
Agencies;


• Procurement of raw materials at a competitive cost;
• Problems of storage, designing, packaging and
product display;
• Lack of access to global markets;
• Inadequate infrastructure facilities, including power,
water, roads, etc.;
• Low technology levels and lack of access to modern
technology;
• Lack of skilled manpower for manufacturing,
services, marketing, etc.;



• Multiplicity of labour laws and complicated
procedures associated with compliance of such laws;
• Absence of a suitable mechanism which enables the
quick revival of viable sick enterprises and allows
unviable entities to close down speedily; and
• Issues relating to taxation, both direct and indirect,
and procedures thereof.


Role of MSME in Public Procurement
Policy.

A Review Committee has been constituted under the
Chairmanship of Secretary (MSME) for monitoring
and review of the Public Procurement Policy for
MSEs. In addition, a ‘Grievance Cell’ would be set
up in the Ministry of MSME for redressing the
grievances of MSEs in Government procurement.


Role of MSME in Public Procurement
Policy.
In India, the Government guidelines provide for
support in marketing of MSE products through a
variety of measures such as price preference,
reservation of products for exclusive purchase from
MSEs, issue of tender sets free of cost, exemption
from payment of earnest money, etc. In practice,
however, these guidelines are not being followed
many Government Departments/ CPSUs, etc in true
spirit.


Given the present global situation of an impending or
even continuing economic slowdown, creating
demand within our own vast market for products
produced by our own industries, would be a good
buffer to ward off the negative impact. With assured
public procurement, the MSE sector has only itself as
a competitor among its vast variety of products. It
will not only encourage better marketing strategies
but also an incentive for new designs and
technologies so that their produce can compete even
in international markets. This will also have a
stabilizing effect on market fluctuations of demand
and supply and liquidity crisis.



With MICRO & SMALL ENTERPRISES (MSEs)
great employment generation potential, the new
procurement policy will be a boost to keep generating
new products with mostly locally available resources
both in material and manpower. Thus with a
substantial section of national economy in good
spirits, government will have its hands strengthened
to chalked out policies to deal with the impact of
global economic crisis.


The Salient features of the Public
Procurement Policy w.e.f April
01,2012 are as under-
Every Central Ministry/Department/PSU shall set
procurement goal of minimum 20% of the total
annual purchases of the products or services produced
or rendered by MICRO & SMALL ENTERPRISES
(MSEs).
Out of 20% target of annual procurement from MSEs,
a sub-target of 4% (i.e., 20% out of 20%) will be
earmarked for procurement from MSEs owned by
SC/ST entrepreneurs.


Procurement Policy
The overall target of 20% is proposed to be made
mandatory at the end of 3 years.
For enhancing the participation of SCs/STs in the
Government procurement, the Central Government
Ministry/Department/PSUs will organise special Vendor
Development Programmes, Buyer-Seller Meets etc.
Every Central Government Ministry/Department/PSU
will report the goals set with respect to procurement to be
met from MSEs and the achievement made thereto in
their Annual Reports.


Procurement Policy
The MICRO & SMALL ENTERPRISES (MSEs)
participating in a tender quoting price within the band
of L1+15% may also be allowed to supply at L1 price
where L1 price is from someone other than an MSE.
Such MSEs may be allowed to supply up to 20% of
the total tendered value. In case of more than one
such MSEs, the supply will be shared equally.


Procurement Policy
The Central Ministry/Department/Public Sector
Undertaking will continue to procure 358 items from
MSEs, which have been reserved for exclusive
purchase from them.
Given their unique nature, defence armament imports
will not be included in computing the 20% goal for
M/o Defence. In addition, Defence Equipments like
weapon systems, missiles, etc. will remain out of
purview of such policy of reservation.


Procurement Policy
The policy will help to promote MSEs by improving
their market access and competitiveness through
increased participation by MSEs in Government
purchases and encouraging linkages between MSEs
and large enterprises.


List of Items Reserved for Purchase
from Micro and Small Enterprises
1. AAC/& ACSR Conductor upto 19 strands 28. Bowls
2. Agricultural Implements 29. Boxes Leather
a. Hand Operated tools & implements 30. Boxes made of metal
b. Animal driven implements 31. Braces
3. Air/Room Coolers 32. Brackets other than those used in Railways
4. Aluminum builder's hardware 33. Brass Wire
5. Ambulance stretcher 34. Brief Cases (other than moulded luggage)
6. Ammeters/ohm meter/Volt meter (Electro magnetic upto Class I 35. Brooms
accuracy) 36. Brushes of all types
7. Anklets Web Khaki 37. Buckets of all types
8. Augur (Carpenters) 38. Button of all types
9. Automobile Head lights Assembly 39. Candle Wax Carriage
10. Badges cloth embroidered and metals 40. Cane Valves/stock valves (for water fittings only)
11. Bags of all types i.e. made of leather, cotton, canvas & jute etc. 41. Cans metallic (for milk & measuring)
including kit bags, mail bags, sleeping bags & water-proof bag 42. Canvas Products :
12. Bandage cloth a. Water Proof Deliver, Bags to spec. No. IS - 1422/70
13. Barbed Wire b. Bonnet Covers & Radiators Muff. to spec. Drg. Lv
14. Basket cane (Procurement can also be made from State Forest 7/NSN/IA/130295
Corpn. 43. Capes Cotton & Woollen
and State Handicrafts Corporation) 44. Capes Waterproof
15. Bath tubs 45. Castor Oil
16. Battery Charger 46. Ceiling roses upto 15 amps
17. Battery Eliminator 47. Centrifugal steel plate blowers
18. Beam Scales (upto 1.5 tons) 48. Centrifugal Pumps suction & delivery 150 mm. x 150 mm
19. Belt leather & straps 49. Chaff Cutter Blade
20. Bench Vices 50. Chains lashing
21. Bituminous Paints 51. Chappals and sandals
22. Blotting Paper 52. Chamois Leather
23. Bolts & Nuts 53. Chokes for light fitting
24. Bolts Sliding 54. Chrome Tanned leather (Semi-finished Buffalo & Cow)
25. Bone Meal
26. Boot Polish
27. Boots & Shoes of all types including canvas shoes


55. Circlips 86. Cotton Wool (Non absorbent)
56. Claw Bars and Wires 87. Crates Wooden & plastic
57. Cleaning Powder 88. (a) Crucibles upto No. 200
58. Clinical Thermometers (b) Crucibles Graphite upto No. 500
59. Cloth Covers (c) Other Crucibles upto 30 kgs.
60. Cloth Jaconet 89. Cumblies & blankets
61. Cloth Sponge 90. Curtains mosquito
62. Coir fibre and Coir yarn 91. Cutters
63. Coir mattress cushions and matting 92. Dibutyl phthalate
64. Coir Rope hawserlaid 93. Diesel engines upto 15 H.P
65. Community Radio Receivers 94. Dimethyl Phthalate
66. Conduit pipes 95. Disinfectant Fluids
67. Copper nail 96. Distribution Board upto 15 amps
68. Copper Napthenate 97. Domestic Electric appliances as per BIS Specifications :-
69. Copper sulphate - Toaster Electric, Elect. Iron, Hot Plates, Elect. Mixer, Grinders
70. Cord Twine Maker Room heaters
71. Cordage Others & convectors and ovens
72. Corrugated Paper Board & Boxes 98. Domestic (House Wiring) P.V.C. Cables and Wires (Aluminum)
73. Cotton Absorbent Conforming to the prescribed BIS Specifications and upto 10.00 mm
74. Cotton Belts sq.
75. Cotton Carriers nominal cross section
76. Cotton Cases 99. Drawing & Mathematical Instruments
77. Cotton Cord Twine 100. Drums & Barrels
78. Cotton Hosiery 101. Dust Bins
79. Cotton Packs 102. Dust Shield leather
80. Cotton Pouches 103. Dusters Cotton all types except the items required in Khadi
81. Cotton Ropes 104. Dyes :
82. Cotton Singlets a. Azo Dyes (Direct & Acid)
83. Cotton Sling b. Basic Dyes
84. Cotton Straps 105. Electric Call bells/buzzers/door bells
85. Cotton tapes and laces 106. Electric Soldering Iron
107. Electric Transmission Line Hardware items like steel cross bars,
cross
arms clamps arching horn, brackets, etc


108. Electronic door bell 141. Hand Pump
109. Emergency Light (Rechargeable type) 142. Hand Tools of all types
110. Enamel Wares & Enamel Utensils 143. Handles wooden and bamboo (Procurement can also be made
111. Equipment camouflage Bamboo support from
112. Exhaust Muffler State Forest Corpn. and State Handicrafts Corporation)
113. Expanded Metal 144. Harness Leather
114. Eyelets 145. Hasps & Staples
115. Film Polythene - including wide width film 146. Haver Sacks
116. Film spools & cans 147. Helmet Non-Metallic
117. Fire Extinguishers (wall type) 148. Hide and country leather of all types
118. Foot Powder 149. Hinges
119. French polish 150. Hob nails
120. Funnels 151. Holdall
121. Fuse Cut outs 152. Honey
122. Fuse Unit 153. Horse and Mule Shoes
123. Garments (excluding supply from Indian Ordnance Factories) 154. Hydraulic Jacks below 30 ton capacity
124. Gas mantels 155. Insecticides Dust and Sprayers (Manual only)
125. Gauze cloth 156. Invalid wheeled chairs.
126. Gauze surgical all types 157. Invertor domestic type upto 5 kvA
127. Ghamellas (Tasllas) 158. Iron (dhobi)
128. Glass Ampules 159. Key board wooden
129. Glass & Pressed Wares 160. Kit Boxes
130. Glue 161. Kodali
131. Grease Nipples & Grease guns 162. Lace leather
132. Gun cases 163. Lamp holders
133. Gun Metal Bushes 164. Lamp signal
134. Gumtape 165. Lanterns Posts & bodies
135. Hand drawn carts of all types 166. Lanyard
136. Hand gloves of all types 167. Latex foam sponge
137. Hand Lamps Railways 168. Lathies
138. Hand numbering machine 169. Letter Boxes
139. Hand pounded Rice (polished and unpolished) 170. Lighting Arresters - upto 22 kv
140. Hand presses 171. Link Clip


172. Linseed Oil 203. Paper Tapes (Gummed)
173. Lint Plain 204. Pappads
174. Lockers 205. Pickles & Chutney
175. Lubricators 206. Piles fabric
176. L.T. Porcelain KITKAT & Fuse Grips 207. Pillows
177. Machine Screws 208. Plaster of Paris
178. Magnesium Sulphate 209. Plastic Blow Moulded Containers upto 20 litre excluding Poly
179. Mallet Wooden Ethylene
180. Manhole covers Terphthalate (PET) Containers
181. Measuring Tapes and Sticks 210. Plastic cane
182. Metal clad switches (upto 30 Amps) 211. Playing Cards
183. Metal Polish 212. Plugs & Sockets electric upto 15 Amp
184. Metallic containers and drums other than N.E.C. (Not elsewhere 213. Polythene bags
classified) 214. Polythene Pipes
185. Metric weights 215. Post Picket (Wooden)
186. Microscope for normal medical use 216. Postal Lead seals
187. Miniature bulbs (for torches only) 217. Potassium Nitrate
188. M.S. Tie Bars 218. Pouches
189. Nail Cutters 219. Pressure Die Casting upto 0.75 kg
190. Naphthalene Balls 220. Privy Pans
191. Newar 221. Pulley Wire
192. Nickel Sulphate 222. PVC footwears
193. Nylon Stocking 223. PVC pipes upto 110 mm
194. Nylon Tapes and Laces 224. PVC Insulated Aluminium Cables (upto 120 sq. mm) (ISS:694)
195. Oil Bound Distemper 225. Quilts, Razais
196. Oil Stoves (Wick stoves only) 226. Rags
197. Pad locks of all types 227. Railway Carriage light fittings
198. Paint remover 228. Rakes Ballast
199. Palma Rosa Oil 229. Razors
200. Palmgur 230. RCC Pipes upto 1200 mm. dia
201. Pans Lavatory Flush 231. RCC Poles Prestressed
202. Paper conversion products, paper bags, envelops, Ice-cream 232. Rivets of all types
cup, paper cup and saucers & paper Plates 233. Rolling Shutters


234. Roof light Fittings 265. Socket/pipes
235. Rubber Balloons 266. Sodium Nitrate
236. Rubber Cord 267. Sodium Silicate
237. Rubber Hoses (Unbranded) 268. Sole leather
238. Rubber Tubing (Excluding braided tubing) 269. Spectacle frames
239. Rubberised Garments Cap and Caps etc 270. Spiked boot
240. Rust/Scale Removing composition 271. Sports shoes made out of leather (for all Sports games)
241. Safe meat & milk 272. Squirrel Cage Induction Motors upto and including 100 KW440
242. Safety matches volts 3
243. Safety Pins (and other similar products like paper pins, staples phase
pins 273. Stapling machine
etc.) 274. Steel Almirah
244. Sanitary Plumbing fittings 275. Steel beds stead
245. Sanitary Towels 276. Steel Chair
246. Scientific Laboratory glasswares (Barring sophisticated items) 277. Steel desks
247. Scissors cutting (ordinary) 278. Steel racks/shelf
248. Screws of all types including High Tensile 279. Steel stools
249. Sheep skin all types 280. Steel trunks
250. Shellac 281. Steel wool
251. Shoe laces 282. Steel & aluminium windows and ventilators
252. Shovels 283. Stockinet
253. Sign Boards painted 284. Stone and stone quarry rollers
254. Silk ribbon 285. Stoneware jars
255. Silk Webbing 286. Stranded Wire
256. Skiboots & shoes 287. Street light fittings
257. Sluice Valves 288. Student Microscope
258. Snapfastner (Excluding 4 pcs. ones) 289. Studs (excluding high tensile)
259. Soap Carbolic 290. Surgical Gloves (Except Plastic)
260. Soap Curd 291. Table knives (Excluding Cutlery)
261. Soap Liquid 292. Tack Metallic
262. Soap Soft 293. Taps
263. Soap washing or laundary soap 294. Tarpaulins
264. Soap Yellow 295. Teak fabricated round blocks


296. Tent Poles 325. Waxed paper
297. Tentage Civil/Military & Salitah Jute for Tentage 326. Weighing Scale
298. Textiles manufacturers other than N.E.C. (not elsewhere 327. Welded Wiremash
classified) 328. Wheel barrows
299. Tiles 329. Whistle
300. Tin Boxes for postage stamp 330. Wicks cotton
301. Tin can unprinted upto 4 gallons capacity (other than can 331. Wing Shield Wipers (Arms & Blades only)
O.T.S.) 332. Wire brushes and Fibre Brushes
302. Tin Mess 333. Wire Fencing & Fittings
303. Tip Boots 334. Wire nails and Horse shoe nails
304. Toggle Switches 335. Wire nettings of gauze thicker than 100 mesh size
305. Toilet Rolls 336. Wood Wool
306. Transformer type welding sets conforming to IS:1291/75 (upto 337. Wooden ammunition boxes
600
amps) 338. Wooden Boards
307. Transistor Radio upto 3 band 339. Wooden Box for Stamps
308. Transistorised Insulation - Testers 340. Wooden Boxes and Cases N.E.C. (Not elsewhere classified)
309. Trays 341. Wooden Chairs
310. Trays for postal use 342. Wooden Flush Door Shutters
343. Wooden packing cases all sizes
311. Trolley
312. Trollies - drinking water 344. Wooden pins
313. Tubular Poles 345. Wooden plugs
314. Tyres & Tubes (Cycles) 346. Wooden shelves
347. Wooden veneers
315. Umbrellas
316. Utensils all types 348. Woollen hosiery
317. Valves Metallic 349. Zinc Sulphate
318. Varnish Black Japan 350. Zip Fasteners
319. Voltage Stablisers including C.V.T's
320. Washers all types
321. Water Proof Covers
322. Water Proof paper
323. Water tanks upto 15,000 litres capacity
324. Wax sealing


HANDICRAFT ITEMS
Sl.No. Item Description
351 Cane furniture
352. Bamboo file tray, Baskets,
Pencil stand, side racks etc.
353. Artistic Wooden Furniture
354. Wooden paper weight,
racks etc.
355. Glass covers made of
wood and grass jute.
356. Jute furniture
357. Jute bags, file cover
358. Woollen & silk carpets.


SUMMARY
The Union Cabinet approved a procurement policy asking the
government departments and public sector undertakings
(PSUs) to give preference to micro and small entrepreneurs
(MSEs), including those belonging to SC/ST entrepreneurs,
while making purchases.

As per the Public Procurement Policy for goods produced and
services rendered by MSEs by the Central
ministries/departments/PSUs to be notified under Sec. 11 of
the Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006, all Central ministries and PSUs will
have to ensure that a minimum 20% of all their total annual
purchases of products or services are from MSEs. And within
this limit, 4% of the orders should be placed to the SC/ST
entrepreneurs.


SUMMARY
“But, given their unique nature, defence armament imports
will not be included in computing the 20% goal for the
Ministry of Defence. In addition, defence equipment such as
weapon system remains out of the purview of such policy for
reservation.”

However, the procurement policy would be voluntary in nature
for three years and made mandatory after that i.e. After it
becomes mandatory, non-conforming departments will be
required to provide reasons for not meeting the targets to a
review committee.


SUMMARY
The Central ministries/PSU will continue to procure 358 items
from MSEs, which have been reserved for exclusive purchase
from them. A committee has been constituted under the
chairmanship of Secretary (MSME), to review the list of 358
items reserved for exclusive purchase from MSEs on a
continuous basis and for monitoring and review of the Public
Procurement Policy for MSEs. In addition, a ‘Grievance Cell'
would be set up in the Ministry of MSME for redressing the
grievances of MSEs in government procurement.


SUMMARY
According to Micro, Small and Medium Enterprises
(MSME) Ministry “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.
The policy will help to promote MSEs by improving
their market access and competitiveness through
increased participation by MSEs in government
purchases and encouraging linkages between MSEs
and large enterprises.”


Avenue for Increased Consumption of
MSME Products
The clearance of the public procurement policy will offer a much needed and
less optimally used avenue for increased consumption of MSME products by
government departments and PSUs. More importantly, it will signal a message
of confidence and faith in the potential and capabilities of the MSME sector. In
India, public sector units procuring a percentage of their goods from MSMEs
was not mandatory, but this policy would help transform the authorities’ mindset
that goods manufactured by micro, small and medium enterprises are good
enough for public sector undertakings and the government.
India Engineering Sourcing Show 2012 – Your First Step to benefit of New
Procurement Policy
To provide Indian MSEs a live platform to offer their products & services to
PSUs, Ministry of Commerce & Industry, Govt. of India with EEPC India as lead
agency, is organizing India’s largest Engineering Sourcing Show (IESS) at
Mumbai during 22-24 March 2012.
So, be proactive and have your share in 20% of procurement requirements of
state departments & PSUs. IESS 2012 provides you the opportunity to meet
face to face with these PSUs and list yourself in their vendors list or increase
your total sales to them.


Thank You


Procurement policy msme

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