CPSEs’ purchases from MSEs rising steadily

The Central Public Sector Enterprises (CPSEs)’ procurement from Micro and Small Enterprises (MSEs) has risen steadily in recent years, a trend that enabled them to cushion the adverse impact of the pandemic and geo-political conflicts on their businesses.

As much as 35.6% of CPSEs’ purchases of goods and services were from MSMEs in FY23 compared with 32.48% in FY22 and 29.21% in FY21, all well above the mandatory 25% annual procurement requirement from these small units.

To provide marketing support to MSEs, the government modified the Public Procurement Policy in 2018, making it mandatory for public sector companies to procure 25%, instead of 20% of their total purchases, from MSEs including a special provision of 3% procurement for women entrepreneurs.

Also read: SCO members adopt India’s proposal for digital public infra

As a result, CPSEs procurement from MSEs’ rose from Rs 26,357 crore (23.1% of the total) in FY18 to `53,423 crore in FY22 and `61,033 crore in FY23.

However, despite the government nudging CPSEs to procure 100% through the Government e-Marketplace (GEM) portal, 38% of their procurement was outside of the GeM in FY23.

Of the CPSEs’ total procurement which stood at Rs 1.71 trillion in FY23, Rs 1.06 trillion was through GeM in FY23.

The CEO or heads of the CPSEs have been asked to certify to the secretaries of the administrative ministry concerned that only those goods and services have been procured outside GeM which are not available on GeM. Finance minister Nirmala Sitharaman has been nudging the CPSEs to avoid purchases outside of the GeM.

Besides Vivad se Vishwas, Sitharaman pledged a raft of steps in the Budget for FY24, including a revamped credit guarantee scheme and presumptive taxation benefits, in a bid to lift the fortune of the country’s 63.4 million MSMEs that account for a bulk of the jobs.

Also read: Cooling of CPI very satisfying: Shaktikanta Das

The renewed focus on MSMEs stems from the recognition of the fact that such units require a protracted period of succour to leave the pandemic scars behind and cope better with the risks of depleting export order flows. MSMEs account for about 40% of the country’s exports, 6% of the manufacturing GDP and almost 25% of the services GDP.

According to the Vivad se Vishwas, MSMEs can claim refunds of performance security or bid security and liquidated damages forfeited during the Covid-19 pandemic for failure to execute contracts by June 30.