Finance Minister Nirmala Sitharaman on May 13 announced that the government will henceforth not buy goods or services valued less than Rs 200 crore from foreign suppliers. For this purpose, the general financial rules (GFR) will be amended to disallow global tender enquiries.
The move is aimed at protecting MSMEs adversely affected due to the novel coronavirus-led lockdown and to ensure assured demand for their products and services.
While the details of the notification are yet to be revealed, the MSME industry remains wary of the move as local subsidiaries of global companies incorporated in India could also be included, which could defeat the purpose of the move.
"Most MNCs operate in India through their subsidiaries. While the notification for global tenders is not out yet, if there is no specification for compulsory procurement through MSMEs, then it will not benefit small businesses. Without a specific order, local subsidiaries of global companies could continue to be treated the same way," says Anil Bhardwaj, Secretary General, Federation of Indian Micro, Small and Medium Enterprises (FISME).
The General Financial Rules comprises rules and procedures for government procurement. This includes specific rules on procurement of goods and services and contract management.
Under the existing guidelines for purchase, amended in May 2017, government agencies were required to procure goods and services worth less than Rs 50 lakh from local suppliers.
At present, the policy covers only public procurement by central government and public sector undertakings (PSUs).
The Union government also runs a portal called Government e-Marketplace (GeM), which allows MSMEs to sell their products. This enables government departments to meet the mandatory procurement goal of 25 percent from MSMEs and a sub-target of 4 percent procurement of goods and services from MSME entrepreneurs from SC/ST communities.
According to the GeM website, nearly 319,000 sellers have registered on it. Orders worth Rs 38,905 crore in gross merchandise value have been facilitated via GeM. Of this, around 68,286 are MSME sellers and they carried out transactions worth Rs 20,263 crore
Through amendments to the GFR, the government can increase the percentage of compulsory procurement from MSMEs which would enable them to tide over the current crises that has led to payments and working capital issues.