Public Procurement Policy for MSMEs

The policy aims to promote MSME's participation in public procurements and support them in marketing their products and services. The MSME sector is essential for the economic growth of the country.

To achieve this objective, the Government has notified specific rules and regulations, such as 25% of total procurement should happen from micro, small & medium industries. Per the rules, at least 4% of it should be procured from SC/ST entrepreneurs.

Government procure goods and services through various government portals and tenders such as GeM (Government e-Marketplace) or e-tender and procurement portals.

In this article, we will learn about various aspects and regulations of this policy in brief detail.

Public Procurement Policy for MSMEs

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The MSME public procurement policy applies to all government entities, including PSUs, irrespective of the nature or magnitude of their purchase. The exception is only made for the ministry of defence, where arms imports are excluded from the 20% procurement goal for the ministry of defence.

Request for Exemption

Government agencies or PSUs could appeal to the review committee for an exemption from mandatory purchases if they considered MSMEs irrelevant for their particular purchase items.

MSMEs have trouble getting into the public procurement market because they need more information. They need more skills. The registration, contracting, and bidding processes are complex, and they have to wait a long time to get paid.

In addition to the procurement goal, this policy also tells the organizations buying to do things like vendor development programmes, buyer-seller meetings, and outreach activities.

These things could make it easier for MSMEs to participate in public procurement.

• Mechanism for MSMEs
• Bids Grievance Redressal
• E-procurement and Digital Signature Preparation
• Procurement Capability, in addition to an Annual Procurement Plan
• Acquiring Knowledge of the Processes Involved in Vendor Registration

GeM (Government e-Marketplace) is the most significant contributor to government procurements from the micro, small and medium industries. It contributes almost 30% of the Government's total public procurement target of 25%.

How does GeM work?

Local suppliers can register themselves on the GeM portal and list their brands or products in the desired category. GeM works as a mediator for MSMEs and state-owned agencies. Once the vendor is listed and their services are online on the portal, they can participate in live tender as per their category.

The Government of India has issued General Financial Rules (GFRs) regulations. All Government Departments and designated Bodies must comply with these Orders and Rules as executive instructions.

There are specific GFR rules which dictate procurement through the GeM portal.

1. GFR rule 149: As per the guidelines of general financial rule (GFR-149), government agencies can procure from GeM in the following ways:
• Direct purchase: According to the GFR rule-149, government agencies can directly purchase from the GeM portal within the limit of INR 25,000.
• L1 purchase: L1 purchase stands for lowest purchase. It is initiated when the procurement order is Rs more than 25,000 but less than 5,00,000. Per the said guidelines, buyers must select at least 3 vendors and choose the one with the lowest offered price.
• Public procurement via tender: If the purchase order is more than 5,00,000. In such cases, procurement can only be done through public procurement/Tender via the government e-Marketplace.
2. GFR rule 155: It says that the Purchase Committee buys goods. If a product is not on the GeM portal, purchases of goods costing more than Rs. 25,000 and up to Rs.2,50,000/- on each occasion can be made based on the recommendations of an adequately formed committee.

These rules are required by all buyers when making purchases on the GeM portal.