Govt buying from MSEs declines for second consecutive year even as share in overall procurement jumps

Government departments and CPSEs have continued to fail dismally in meeting targets for procuring from SC/ST and women-owned MSEs.

Covid impact on MSMEs: Procurement of goods and services by central ministries, departments, and public sector units (PSUs) from micro and small enterprises (MSEs) has witnessed a marginal decline during the Covid year 2020-21. The fall in procurement value has been for the second consecutive year to Rs 39,538 crore from Rs 39,632 crore in FY20 and Rs 40,399 in FY19, according to the available government data on public procurement. The government had earmarked a 25 per cent yearly procurement target by MSEs for CPSEs from April 1, 2015, onwards up from 20 per cent earlier. A sub-target of 4 per cent from SC/ST-owned MSEs and 3 per cent from women-owned MSEs were earmarked out of the 25 per cent target. Since FY16 (procurement worth Rs 18,246 crore), the government buying from MSEs has recorded 116 per cent growth.

Source: MSME Sambandh, Ministry of MSME

Comments from the office of Additional Development Commissioner – Ministry of MSMEs weren’t immediately available for this story.

However, the share of procurement from MSEs in overall government buying has been on an upward trajectory from as low as 12 per cent in FY15 to 23 per cent in FY18. Moreover, since the past three financial years (FY19-21), central ministries, departments, and PSUs have been able to surpass the 25 per cent annual procurement target that stood at 26 per cent for FY19, 30 per cent for FY20, and 32 per cent for FY21. Financial Express Online had reported this last month. Also, the number of MSEs benefitted through the annual procurement has jumped from nearly 90,000 in FY18 to 1.28 lakh in FY19, 1.57 lakh in FY20, and 1.62 lakh in FY21.

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“Covid had a significant impact on businesses of MSMEs over the past year. As per estimates, one-third of MSMEs in India has taken a hit due to the pandemic that is reflected in the procurement growth rate as well,” Sanjiv Layek, Executive Secretary, World Association For Small And Medium Enterprises (WASME) had told Financial Express Online.

The amount of goods procurement SC/ST entrepreneur-led MSEs grew to Rs 753 crore in FY21 after declining to Rs 693 crore in FY20 from Rs 825 crore in FY19. However, government departments and CPSEs continued to fail dismally in meeting the 4 per cent target. In fact, 0.6 per cent procurement from SC/ST entrepreneurs in FY21 was the all-time high since FY15. Likewise, procurement from women-owned MSEs was highest in FY21 at 0.58 per cent worth Rs 725 crore.

Importantly, even as the public procurement from MSEs has increased over the years, the government hasn’t been aware of large companies setting up wholly-owned MSE subsidiaries to acquire public procurement tenders in the country, according to MSME Minister Nitin Gadkari. “No, sir,” Gadkari had replied to a question in the Rajya Sabha on whether the government is aware that some large corporates are setting up wholly-owned MSEs subsidiaries to grab public procurement tender.