Defence Procurement Policy 2016 shows a lot of promise for MSMEs

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Home-Splash_Govt-Policy_MSME_June-2016The policy places an emphasis on indigenisation and greater MSME participation in the defence sector

By EB Bureau

The Ministry of Defence unveiled the much awaited first draft of the Defence Procurement Policy (DPP) 2016 on March 28, 2016.
The DPP 2016 aims to promote indigenisation in the Indian defence sector by strengthening the domestic defence industry as well as providing a boost to the Make in India campaign. The new policy attempts to promote a higher participation of Indian SMEs in defence projects.
One of the most notable changes in the DPP is the introduction of a novel procurement category called ‘Buy Indian designed, developed and manufactured’ or ‘Buy IDDM’, which places a great deal of importance on the indigenisation of the defence industry and envisions a vibrant defence industrial base in the country. ‘Buy IDDM’ refers to procurement from Indian vendors of indigenously designed, developed and manufactured products with at least 40 per cent indigenous content. In the case of products not designed or developed in India, indigenous content has to be 60 per cent. It replaces the ‘Buy Indian’ category as the most preferred in the hierarchy of six procurement categories. Other changes include the splitting of Services Qualitative Requirements (SQRs) into two categories, i.e., essential and desirable, where contracts can be signed based on the vendor meeting the essential parameters while the desirable parameters can be developed after signing the contract.
The policy also introduces a maiden ‘Make’ category, which aims at developing long term indigenous defence capabilities in the country. This has two sub-categories: projects funded by the Ministry of Defence (MoD) and projects self-funded by the developers. Funding by the MoD for ‘Make’ projects has been raised to 90 per cent while self-funded projects can avail of a mobilisation advance of 20 per cent of the estimated cost of developing the projects. A reimbursement of the remaining 10 per cent under the government funded projects is also provided for, if the Ministry of Defence fails to procure after successful development. This is a pioneering step, which has the potential to give an unprecedented boost to the indigenous industry and further the participation of MSMEs in defence projects.
In addition, with the special focus on MSME participation, projects with an estimated development cost of up to ₹ 100 million and ₹ 30 million under the sub-categories 1 and 2, respectively, of the ‘Make’ projects have been earmarked exclusively for MSMEs. This clearly demonstrates the MoD’s plans to enhance the engagement of MSMEs in the defence sector.
Although the MoD is yet to add a few sections including annexures and appendices to the DPP 2016, in its current state the document shows a lot of promise for Indian MSMEs.
We will be happy to receive your feedback and comments on the newly released DPP 2016 and its impact on MSMEs.


Public Procurement Policy amended to include startups
Relaxing the revenue and experience related norms of the Public Procurement Policy for MSMEs will ensure more participation from startups

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By EB Bureau

The government of India has notified the Public Procurement Policy for Micro, Small and Medium Enterprises (MSMEs) Order 2012. This mandated a 20 per cent procurement from MSMEs, out of the total procurement by central ministries, departments and CPSUs, with effect from April 15, 2015.
Public procurement PolicyThis policy has been further amended on March 10, 2016, to include startups, which are normally micro, small and medium enterprises. The government has relaxed procurement norms related to experience and turnover for micro, small and medium startups with a view to enable these ventures to be part of the public procurement. It has been clarified that all central ministries, departments and central public sector undertakings may relax conditions regarding turnover and prior experience with respect to MSMEs in all public procurements, subject to meeting quality and technical specifications.
This amendment will create a space for startups in public procurement undertaken by various ministries and departments. For more information, Figure 1 shows a copy of Public Circular No. 1(2) (1)/2016-MA dated March 10, 2016.

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