Wednesday, November 02, 2011

Govt to make 20 per cent of purchases from small and medium enterprises

Cabinet acts on one more poll promise from Congress manifesto

New Delhi: The Congress has pulled out another rabbit as it were from its 2009 manifesto in a bid to counter the image that it is leading a dysfunctional UPA government. Information and broadcasting minister Ambika Soni and minister for small and medium enterprises (SMEs) Virabhadra Singh announced the cabinet decision on Tuesday that all central public sector enterprises and central ministries will have to procure 20 per cent of their requirements and purchases from small and medium sized enterprises. Soni described it as a “path-breaking decision” and said it was “part of the Congress manifesto”.

Singh explained that the SMEs are a crucial and vibrant part of the Indian economy accounting for 45 per cent of the industrial sector and 40 per cent of exports, and that this 20 per cent sourcing from SME's will come to Rs 1,75,000 crore in the next two-and-half-years that remain for UPA in office. Right now, one per cent to 12 per cent of the purchases of public sector undretakings (PSUs) are made from SMEs. He has also said that an assured market will enable the banks and other institutions to enlarge credit facilities for the SMEs.

There are 2.7 crore SME units and it is the biggest employer in the manufacturing sector with a work force of 60 million people.
Of this new quota of 20 per cent, 20 per cent of the purchases are to be made from small and medium enterprises owned by scheduled castes (SCs) and scheduled tribes (STs). It has been calculated that the share of the SC and ST SMEs will come to around Rs 7,000 crore for the next three years.

When asked by DNA as to why the sector needed governmental intervention of this kind if it is vibrant and if it is of such crucial importance, Singh said even in the United States, “the citadel of capitalism” there is legislation that mandates 23 per cent of the purchases be from small businesses. He has also said that after three years it could be made mandatory in India as well. As of now, it is only a governmental directive.

The other important cabinet decision was to convert the existing copper wire-based connectivity to optical fibre as part of the broader goal of achieving convergence in implementing a National Mission for Education and the National Knowledge Network.

About 25000 colleges and 2000 polytechnics will now be connected through this and it will cost Rs 13.5 crore per year. Connectivity for 18,000 colleges has already been approved. The institutions of national importance have also been upped from 419 to 572. Soni has described this as last mile connectivity which provide high quality e-content. The National Informatics Centre (BIC) has been entrusted to make the feasibility study for the connectivity project.

When asked about Wipro chief Aziz Premji's statement that government is paralysed and no decisions are being taken, Soni struck a conciliatory and diplomatic note. She said that Premji was a respected figure and he formed this impression about the government because of misinformation. She said that the government will have to reach out to civil society and change this wrong perception. She denied that the government was not taking decisions.

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