New Purchase Policy to support MSME sector in the offing

30 Jul '09

3 min read

A new Purchase Policy of the government for providing market support to the Micro, Small and Medium Enterprises (MSMEs) is in the offing. The government has studied the purchase policy prevalent in the US and will come out with a MSME procurement policy that is likely to fix a certain percentage that government departments and ministries would have to buy from MSMEs based on the total amount of purchases made by them annually.

“We are trying to work out a new purchase policy for procurement of MSME products by the government and trying to convince major buyers like the defence and the railways of the need to adhere to such a step,” Mr. Dinesh Rai, Secretary, Ministry of MSMEs said here at the 'Global SMEs Summit', organised by FICCI in collaboration with the Ministry of MSMEs and the Confederation of Indian Small and Medium Enterprises.

Mr. Rai said that the Limited Liability Partnership Act would give more comfort to the MSME players and attract more capital into the MSME sector.

He said, the government had asked banks to set up care centres in banks to attend to the credit needs of the MSMEs. All unresolved issues, he said, could be taken up with his ministry for early resolution.

Mr. Rai said that the government was also setting up an MSME info call centre for giving hands-on service to entrepreneurs.

He said that in order to equip the MSMEs to face the competition from cheap imports, the government had launched the National Manufacturing Competitiveness Programme (NNMCP). The programme envisages investment of Rs 1000 crore during the 11th Plan period for enhancing the entire value chain of the MSME sector. Six of the 10 components of the NMCP were already operational – Quality Management Systems, Quality Technology Tools, Building Awareness on IPRs, Support for Entrepreneurial and Managerial Development, Marketing support/assistance to MSMEs Setting New Mini Tool Rooms and Lean Manufacturing Competiveness Scheme.

Mr. Rai said that the remaining four components – Energy Efficiency, Marketing Assistance, Promotion of ICT and Design Clinic Scheme were under various stages of approval. “The programme would be implemented through the PPP mode with close physical and financial participation of the MSME sector,” Mr. Rai said, and urged the MSME players to actively participate in the various NMCP schemes as these have the potential to take Indian MSMEs into a higher trajectory.

Dr. Amit Mitra, Secretary General, FICCI pointed out that timely availability of finance remained a major limiting factor for the growth of the SME sector. To enable SMEs to access capital at lower rates, he suggested that efforts should be made to for earmarking priority sector lending for SMEs, enhancement of cash-credit limits and overdraft facilities, enhancement of working capital support from the banks and high working capital ratios with reduced margins.

He said it was also imperative to build synergies between SMEs and large enterprises. The former could act as ancillaries, sub-contractors, suppliers of parts and sub-assemblies while the latter could act as suppliers of raw materials, technology, technical and marketing support.

Mr. Saurabh Srivastava, Chairman, Indian Venture Capital Association, stated that entrepreneurs required an easier policy framework, access to infrastructure, fewer taxes and access to finance, both equity and debt. He called for encouragement to venture funds for investment in SMEs.

Federation of Indian Chambers of Commerce and Industry

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