Incentives for MSMEs to participate in government procurement in Maharashtra state
Micro, Small and Medium Sized Enterprises (MSME) are a key pillar in an economy. All governments world-wide take efforts to encourage the growth of MSMEs. A key underlying fact is that the large enterprises of today were once a MSME. In this time and age, MSMEs find it all the more challenging to compete against the large, well-established enterprises. To enable the MSMEs to compete on par with the established enterprises, many governments develop policies to support the MSMEs. This article details the support extended by the Maharashtra Government to catalyze participation of MSMEs in government tenders. By definition provided by the Union Ministry of Government of India, effective 13th May 2020, Manufacturing and services unit with up to 10 Crores is termed as a Micro enterprise and the units with up to a turnover of INR 250 crores is termed as a Medium enterprise.
The Department of Industry, Energy and Labour published a manual of office procedures for procurement by the government departments. This manual was enacted on the 1st of December 2016. In serial number 15 of the manual, the government agencies are restricted to procure a set of 241 products only from MSMEs. This list of products is provided in Appendix-17, in the manual and it included products such as Asphalt Boiler, Ammeter, Grease nipples and glue.
Typically, bidders are required to pay a tender form fee and Earnest Money Deposit (EMD) to participate in government tenders. The tender fee in Maharashtra can vary in the range of 1000 - 10,000 Rs, which is non-refundable. Earnest Money Deposit (EMD) is usually computed as a percentage of the estimated value of the contract, estimated at 1 - 2% of the tender value. Though EMD is refundable, it is usually held by the government for at least a couple of months. In such a case, the cash flow of the business gets blocked.
As per the procurement manual, businesses registered under the Micro, Small and Medium Enterprises development act 2006 are exempted from paying EMD and tender fee while participating in tenders published by the government agencies in Maharashtra. Besides the above, the manual provides for 20% quantity reservation for items not included in the reserved product list. However, the MSMEs will be eligible to get this benefit provided they manufactured the product.
It is recommended that the MSMEs gain awareness and avail the incentives by participating in the tenders advertised by the government agencies in Maharashtra. The latest list of Maharashtra tenders is available in the Tendersniper portal.