The Government e-Marketplace (GeM) is reshaping the landscape of government procurement in India with innovative policies aimed at inclusivity and economic growth of all sizes of business.
One of its standout features, the Micro and Small Enterprises (MSE) Purchase Preference plays a pivotal role in empowering small businesses. Similarly, the Make in India (MII) Purchase Preference underscores the platform’s commitment to promoting locally manufactured goods.
To gain a deeper understanding of MII Purchase Preference and how it complements MSE policies, check out our detailed post on the Make in India Purchase Preference on GeM. In this blog post, we have tried to shed some light on the MSE Purchase Preference, its objectives, and how it creates opportunities for small enterprises in government procurement.
What is MSE?#
MSEs, or Micro and Small Enterprises, refers to business units that fall under specific investment in plant and turnover thresholds. These thresholds are defined under the classification of Micro, Small, and Medium Enterprises (MSMEs), which was updated by the Indian government to align with global standards.
The classifications are as follows:
| Enterprise Category | Investment in Plant & Machinery or Equipment | Turnover |
|---|---|---|
| Micro Enterprises | Up to INR 1 crore | Up to INR 50 crores |
| Small Enterprises | Up to INR 10 crores | Up to INR 50 crores |
| Medium Enterprises | Up to INR 50 crores | Up to INR 250 crores |
This classification serves as a foundation for various policies like the MSE Purchase Preference, which are aimed at nurturing smaller businesses and helping them succeed in competitive markets.
Registering as an MSE#
To benefit from MSE-specific policies, entity must register as MSEs. Registration is an online process, which can be done through the Udyam Registration Portal. The process of Udyam registration is fully digitalised and paperless, businesses do not need to upload any documents or certificates. The process is free of cost and ensures easy convenience for eligible enterprises.
Key Benefits of Udyam Registration:
- Quick and hassle-free registration.
- Access to government incentives and subsidies.
- Qualification for the MSE Purchase Preference.
- Becomes eligible for priority sector lending from Banks
Public Procurement Policy for MSEs#
The Public Procurement Policy for Micro and Small Enterprises (MSEs), introduced under Section 11 of the MSMED Act, 2006, mandates preferential treatment for MSEs in procurement processes. The key goals of this policy include promoting inclusivity, boosting economic growth, and ensuring fair competition.
Key Features of the Policy
- Mandatory Procurement Quota:
- Central Government Ministries, Departments, and Public Sector Undertakings (PSUs) must source at least 25% of their annual procurement from MSEs.
- Within this 25%, 4% is reserved for MSEs owned by Scheduled Caste/Scheduled Tribe entrepreneurs and 3% for MSEs owned by women entrepreneurs.
- Exclusive Procurement:
- 358 items are reserved exclusively for procurement from MSEs.
- Relaxation in Procurement Norms:
- Exemption from payment of tender fees.
- Waiver of Earnest Money Deposit (EMD).
- Relaxation in prior turnover and experience requirements.
- Price Matching Advantage:
- MSEs quoting within 15% of the lowest bid (L-1) when the L1 is given by a non-MSE, are allowed to provide at least 25% of tendered value at L-1 subject to matching of the prices by MSME.
How MSE Purchase Preference Works on GeM#
The MSE Purchase Preference is seamlessly integrated into the GeM platform. When a buyer opts for this preference in their bid, MSEs gain a competitive edge through the following mechanisms:
- Eligibility Criteria:
- For goods, the seller must be a manufacturer or primary producer.
- For services, the seller must be a registered service provider.
- The seller must have a valid Udyam Registration Certificate or equivalent documentation.
- Price Matching Policy:
- If an MSE's bid is within 15% of the L-1 price, they are given a chance to match the price.
- ContractsThe top five MSE price offerings within L1+15% can match the L1 price are distributed among a maximum of five eligible MSEs, ensuring equitable opportunities.
- Contract Allocation:
- A minimum of 25% of the total contract quantity is awarded to eligible MSEs.
- Buyers may split contracts among multiple MSEs who accept the L-1 price match.
How to Leverage MSE Benefits on GeM#
For MSE sellers to maximize their benefits on GeM, they must:
- Update MSE Details: Ensure their GeM seller profile reflects accurate MSE credentials, such as Udyam Registration.
- Verify Bid Preferences: Review GeM bids to identify opportunities with MSE purchase preferences enabled.
- Participate Strategically: Submit competitive bids and utilize the price-matching feature when within the eligible margin.
Pro Tip: Sellers can check for MSE preferences by downloading the bid document and reviewing the “MSE Purchase Preference” section.
Conclusion#
The MSE Purchase Preference on GeM exemplifies the government’s commitment to building a resilient, inclusive economy that everyone can use as a platform irrespective of the size of their business.
By prioritizing Micro and Small Enterprises in procurement, the policy not only supports businesses eco system but also contributes to national economic growth.
For MSEs looking to thrive, understanding and leveraging these preferences on GeM is essential for the growth of their business.
