Finance Ministry asks CPSEs to refund 95% of performance/bid security forfeited from MSMEs till March 2022

The Finance Ministry on Monday asked all departments and public sector entities to refund 95 percent of the performance or bid security and liquidated damages forfeited/deducted from small and medium businesses in government tenders for over two years till March 31, 2022.

To give relief to MSMEs, Finance Minister Nirmala Sitharaman in 2023-24 Budget announced 'Vivad se Vishwas-I' scheme which provides that in cases of failure by MSMEs to execute contracts during the Covid period, 95 percent of the forfeited amount relating to bid or performance security will be returned to them by government and government undertakings.

The Finance Ministry's Expenditure Department on Monday issued an office memorandum stating that all contractors or suppliers registered as micro, small and medium enterprises (MSME) with the Ministry of MSME as on March 31, 2022, would be eligible to claim a refund of the forfeited amount for contracts which had an original delivery or completion period between February 19, 2020, and March 31, 2022.

"The Ministry of Finance today provided a major relief to MSMEs for COVID-19 period. In an order issued by the Department of Expenditure, Ministries have been asked to refund performance security/ bid security and liquidated damages forfeited/ deducted during the Covid-19 pandemic," an official statement said.

Speaking with PTI, Finance Secretary T V Somanathan had earlier said that the Vivad se Vishwas-I scheme announced in the Budget gave relief to small and medium businesses that could not fulfil their contractual obligations during the Covid period.

"We are assuming … we are giving them the benefit of doubt and saying that this (inability to supply during the Covid period) must have been due to circumstances beyond your control. We are not even getting into the actual reasons. We are giving a relief. 95 percent of the forfeited amount will be returned to them regardless of the reasons for their failure. So it is a simple non-discretionary relief which is given to them," Somanathan said.

This relief will be provided in all contracts for the procurement of goods and services, entered into by any Ministry/ Department/ attached or subordinate office/ autonomous body/ Central Public Sector Enterprise (CPSE)/ Public Sector Financial Institution, etc., with MSMEs.

The grant of relief will be monitored through Government e-Marketplace (GeM) and MSME vendors will be able to register on the GeM portal and enter details of the applicable contracts. The nodal officers of each procuring entity would verify the claim of the vendor and refund the due amount.

The portal will also provide reports to track the pendency with each procuring entity. The date of commencement of the process of applications for relief through GeM will be notified separately, the Finance Ministry added.