More small companies to benefit under public procurement policy

Presently, an enterprise with a turnover above ₹50 crore is categorised as a medium enterprise, making it ineligible under the procurement policy.

Under the policy, 25% of the government’s annual procurement, including Central Public Sector Enterprises (CPSES), central ministries, and departments, needs to be made from micro and small enterprises (MSEs).

“A large segment of MSMEs- typically small enterprises – are suppliers in government tenders because 25% of procurement by central government and Central Public Sector Undertakings (CPSUs) is reserved for MSEs. This move will benefit enterprises that have a turnover between the ₹50 crore to ₹100 crore category,” said Anil Bhardwaj, secretary general, Federation of Indian Micro and Small & Medium Enterprises (FISME). “Enterprises having a turnover exceeding ₹50 crore couldn’t get benefits of MSEs under public procurement policy such as exemption from submitting earnest money for the tender,” said an official who didn’t want to be named.

The reclassification, which is likely to come into force from the start of FY26, also shows the government’s shifting focus from turnover to investment in plant and machinery. “We will implement the definition by April 1 this year, and the focus of this change has been to increase investments in plant and machinery rather than just turnover,” said the official. The present definition maintains a 1:5 ratio between investment and turnover which has been brought down to 1:4.

“Investments in plant and machinery have significant importance, nudging the MSMEs to invest more in technology and machinery,” said the official.