Procurement Policy Support for MSMEs in India – A Detailed Guide

Introduction

Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in India's economy, contributing significantly to GDP, employment, and industrial output. Recognizing their importance, the Government of India has implemented Procurement Policy Support to provide MSMEs with fair opportunities in government purchases, ensuring their growth, competitiveness, and sustainability.

Under this policy, the government mandates Public Sector Undertakings (PSUs), Central Ministries, and Departments to procure a specific percentage of their purchases from MSMEs. This initiative boosts MSME participation, promotes indigenous manufacturing, and supports the Atmanirbhar Bharat (Self-Reliant India) initiative.

Objectives of Procurement Policy for MSMEs

The Procurement Policy for MSMEs aims to:

✅ Enhance Market Access – Increase MSME participation in government contracts.
✅ Ensure Fair Competition – Provide MSMEs equal opportunities against large corporations.
✅ Encourage Indigenous Manufacturing – Promote locally made products under Make in India.
✅ Support Small Businesses – Improve financial stability for MSMEs by guaranteeing market demand.
✅ Promote Inclusivity – Reserve a portion of government procurement for SC/ST and women-led MSMEs.
✅ Reduce Entry Barriers – Remove the requirement of Earnest Money Deposit (EMD) for MSMEs in government tenders.

Key Features of Procurement Policy for MSMEs

1️⃣ 25% Mandatory Procurement from MSMEs

• Every Central Ministry, PSU, and Government Department must source at least 25% of their annual procurement from MSMEs.

2️⃣ 4% Reservation for SC/ST Entrepreneurs

• Out of the 25% MSME procurement, 4% is reserved for SC/ST-owned MSMEs.

3️⃣ 3% Procurement from Women Entrepreneurs

• A minimum of 3% of annual purchases must be made from women-owned MSMEs.

4️⃣ Exemption from Earnest Money Deposit (EMD)

• MSMEs registered under the Udyam Registration Portal are exempted from paying EMD and tender fees, making it easier for them to participate in tenders.

5️⃣ Preference in Tendering

• In the case of a price tie-up between an MSME and a large enterprise, preference is given to the MSME if the bid is within L1 + 15%.

6️⃣ Single Order Splitting to MSMEs

• If an MSME's bid is within 15% of the lowest bid (L1), they can receive a portion (up to 25%) of the total order if they match the L1 price.

7️⃣ GeM Portal (Government e-Marketplace) Integration

• MSMEs can sell their products and services directly to government buyers via GeM Portal, making procurement transparent and accessible.

8️⃣ Delayed Payment Resolution

• The MSME Samadhaan Portal helps MSMEs recover delayed payments from government buyers and large enterprises.

Eligibility Criteria for MSMEs to Avail Procurement Benefits

To benefit from the Procurement Policy, an MSME must:

✅ Be registered under Udyam Registration Portal (earlier Udyog Aadhaar).
✅ Have a valid GSTIN and PAN number.
✅ List products/services on the Government e-Marketplace (GeM) for direct procurement.
✅ Meet quality and technical specifications outlined in government tenders.
✅ Be owned by SC/ST or women (for specific reserved procurement quotas).

How to Register for Government Procurement as an MSME?

MSMEs can register for government procurement in a few simple steps:

Step 1: Get Udyam Registration

• Register on the Udyam Registration Portal.
• Provide business details like Aadhaar, PAN, and GSTIN.
• Receive a unique MSME registration number.

Step 2: Register on Government e-Marketplace (GeM)

• Visit GeM Portal and create an account.
• Upload product/service details, business certificates, and compliance documents.
• Start bidding for government tenders and direct orders.

Step 3: Register on MSME Sambandh Portal

• MSME Sambandh (https://sambandh.msme.gov.in/) tracks MSME procurement compliance.
• MSMEs can monitor government departments' procurement performance.

Step 4: Participate in E-Tenders

• Visit Central Public Procurement Portal (CPPP).
• Search for relevant tenders under MSME category.
• Submit technical & financial bids online.

Step 5: Track Payments on MSME Samadhaan

• If payments are delayed beyond 45 days, MSMEs can file a complaint on MSME Samadhaan (https://samadhaan.msme.gov.in/).

Benefits of Procurement Policy Support for MSMEs

1️⃣ Assured Market & Increased Revenue

• 25% mandatory government procurement ensures steady demand.
• MSMEs get direct access to large buyers, improving sales.

2️⃣ Financial Relief for Small Businesses

• EMD and tender fee exemptions reduce financial burden.
• Timely payment policies prevent cash flow issues.

3️⃣ Encourages Women & SC/ST Entrepreneurs

• 3% procurement reserved for women-led MSMEs.
• 4% reserved for SC/ST enterprises ensures inclusivity.

4️⃣ Easier Access to Government Contracts

• MSMEs get preference in tendering even if their bid is slightly higher.
• Government splits large orders to include MSMEs.

5️⃣ Strengthens 'Make in India' & 'Atmanirbhar Bharat'

• Encourages MSMEs to manufacture locally.
• Reduces dependency on imports.

Challenges Faced by MSMEs in Government Procurement

🚧 Lack of Awareness – Many MSMEs don’t know about procurement benefits.
🚧 Bureaucratic Hurdles – Lengthy tendering processes discourage small businesses.
🚧 Delayed Payments – Despite MSME Samadhaan, many payments get delayed.
🚧 Lack of Digital Skills – Some MSMEs struggle to navigate GeM & e-tendering platforms.

Comparison of Procurement Policy with Other MSME Support Schemes

Conclusion

The Procurement Policy Support for MSMEs is a game-changer that guarantees a stable market, financial benefits, and growth opportunities for small businesses. By registering under Udyam, GeM, and CPPP, MSMEs can participate in government tenders, secure large orders, and expand their business.

This policy aligns with Atmanirbhar Bharat, Make in India, and Digital India, ensuring MSMEs become self-reliant and globally competitive.

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