This provision can be effectively and efficiently used by the procurement authorities to meet its MSE procurement goal in a situation where the nature of the procurement such as turnkey projects and special requirements, can be fulfilled by large companies only. To offer flexibility to the procuring agency, this policy has not prescribed any particular roadmaps or tools for the implementation and measurement of MSE procurement through the sub-contracting mode. Therefore, each agency has the freedom to devise their mechanism.

Public Procurement Policy clearly states that the annual goal of the procurement would also include subcontracts to the MSE units by large enterprises and the consortia of MSEs formed by the NSIC. The payments made on account of the sub-contract to the MSEs by the contractor for the execution of PSEs’ contract would be considered a part of the PSEs’ annual procurement expenditure on MSEs in the case of any such sub-contractual arrangement is made with the MSE. Subcontracting is a vital tool made available under this policy.

This policy is restricted to the procurement of the goods produced and the services rendered by MSEs alone without including trading activities. The 358 items currently reserved for the purchase from the MSE sector would continue to be reserved for the MSEs.

The MSME Public Procurement Policy is valid to all the Ministries, Departments and Central PSUs, regardless of their nature or volume of procurement. The Ministry of Defence is the only exception to this notification. Defence armament imports are excluded in the estimation of the 20% procurement goal for the Ministry of Defence. Furthermore, defence pieces of equipment such as weapon systems and missiles are also beyond the scope of this policy. The Ministry of Defence itself would do the monitoring of goals set under this policy in line with proper procedures that they have established.

Only Micro & Small Enterprises registered with any public agency are eligible under the Public Procurement Policy. A public agency could be any of the following.

District Industries Centres (DICs)
Khadi & Village Industries Commission (KVIC)
Khadi & Village Industries Board (KVIB)
Coir Board
National Small Industries Corporation
Directorate of Handicrafts and Handloom
Any other body specified by the Ministry of MSMEs.

Post-2015, the overall procurement goal of a minimum of 20% has been deemed mandatory. Of the 20% target of annual procurement from MSEs, a sub-target of 4% is allocated for procurement from MSEs owned by Scheduled Caste (SC) or Scheduled Tribe (ST) entrepreneurs. It is essential to note that this is 4% of total procurement and not 4% out of the 20% target. However, in case of failure of such MSEs to participate in the tender process or to meet tender requirements and L1 price, 4% sub-target for procurement allocated for MSEs owned by SC or ST entrepreneurs can be achieved from other MSEs.

Every Central Ministry/ Department/ PSE is required to set an annual objective for procurement from MSEs at the start of every fiscal year, with a view to procuring at least 20% of the overall total annual purchases of products produced or services rendered by MSEs for three years.

The MSME Public Procurement Policy rests on the core principles of competitiveness, adhering to sound procurement practices and the execution of orders for supply of goods and services under a system that is fair, equitable, competitive, transparent and cost-effective.

With the objective to promote the growth and the development of Indian MSMEs by upgrading their market access and linkages, the Indian Ministry of MSMEs notified the implementation of the MSME Public Procurement Policy from 1 April 2012. The Policy is deemed mandatory as stated under the MSMED Act of 2006. The policy aims to achieve an overall procurement of minimum 20% of the total annual purchases of products produced or services procured from MSMEs by the Central Ministry, Government Departments and PSUs. Deemed mandatory from the 1st of April 2015, the policy has also saved a sub-target of 4% procurement of goods and services, out of the 20% from the MSEs owned by SC or ST Entrepreneurs.

The MSME sector is essential for economic growth and to create work opportunities in India. Low labour to capital ratio in this sector when compared to large industries along with an extensive and diverse geographical distribution of such enterprises make them crucial for the inclusive and equitable growth across the nation. They stimulate entrepreneurial spirit and diffuse skills into rural and urban areas through the promotion of economic innovation and dynamism. However, these enterprises are burdened down by significant constraints that restrict their growth potential. To tackle these issues, the Ministry of MSMEs notified the implementation of the MSME Public Procurement Policy. This article talks about this policy and the various aspects of the same.