Govt overachieves annual MSE procurement target for third straight year even as YoY growth rate falls

Purchases from SC/ST and women-led MSEs have continued to fall significantly short of meeting the annual targets.

Ease of Doing Business for MSMEs: Central ministries, departments, and central public sector enterprises (CPSEs) have overachieved their annual procurement target of 25 per cent from micro and small enterprises (MSEs) for the third consecutive year. Procurement from MSEs during FY21 stood at 31.25 per cent up from 30.17 per cent in FY20, and 26.32 per cent in FY19. FY18 purchases from MSEs were 23.11 per cent of the government’s overall annual procurement during the year. While the annual procurement continued to scale north, the year-on-year growth rate contracted in FY21 to 1.08 per cent from FY20 in comparison to 3.85 per cent growth rate for FY19-20 and 3.21 per cent for FY18-19, according to the data from MSME Sambandh.

Moreover, the value of goods procured from MSEs also declined to Rs 36,482 crore in FY21 from Rs 39,632 crore in FY20, and Rs 40,399 crore in FY19. The number of MSEs benefitting from annual procurement was also reduced to 1.48 lakh in FY21 from 1.57 lakh in FY20 even as it was higher than 1.28 lakh MSE benefitting from public procurement in FY19. “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) told Financial Express Online.

Email sent to Government eMarketplace (GeM) CEO Talleen Kumar didn’t elicit an immediate reply for this story. GeM is the government’s public procurement portal to enable ease of buying and selling between government buyers and MSME sellers.

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While procurement from MSEs by the central ministries, departments, and CPSEs remained above the threshold mark, the purchases from SC/ST and women-led MSEs have continued to fall significantly short of meeting the annual targets. The government had earmarked 25 per cent yearly procurement target by MSEs for CPSEs from April 1, 2015, onwards up from 20 per cent earlier, according to the MSME Ministry’s website. 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. FY21 procurement worth Rs 669.44 crore from 5,429 SC/ST MSEs stood at 0.57 per cent and Rs 639.15 crore procurement from 4,129 women MSEs was only 0.55 per cent.

“Women and SC/ST entrepreneurs’ participation has been very low in government schemes as they are not encouraged towards the same. Encouragement from the government end also has been lacking along with lack in promotional activities. This requires door-to-door reaching out to SC/ST and women MSEs to enhance their participation and boost procurement. Also, many of them are not aware of public procurement and other schemes,” added Layek.

Importantly, while the public procurement from MSEs has increased annually, the government is not 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.