3rd national vendor development programme for micro ... · preparing bids and common mistakes made...
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3rd National Vendor Development Programme
for Micro & Small Enterprises
Enhancing Market Linkages of MSEs through Strong Supplier Networks
20 December 2016: 0900-1800 hrs: India Habitat Centre, New Delhi
Retrospect
Confederation of Indian Industry
Plot No. 249 F, Sector 18, Udyog Vihar Phase IV
Gurgaon – 122 015 (Haryana, India)
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© Confederation of Indian Industry
Overview
The MSME sector is of paramount significance for the economic growth and job creation in
India. Low labour to capital ratio in the MSME sector compared to large industries and the
wide and diverse geographic distribution of these enterprises make them crucial for inclusive
and equitable growth across India. These enterprises are a source of healthy competition in
the economy. Through the promotion of economic dynamism and innovation, they stimulate
entrepreneurial spirit and the diffusion of skills in rural as well as urban areas.
In spite of their importance for the economy, these enterprises are bogged down by
considerable constraints that dwarf their growth potential. Lack of access to key resources
such as finance, skilled manpower, infrastructure, market access, etc. pose significant
challenges for MSMEs to attain global competitiveness. In such a scenario, robust supply
relationships with Central and State Public Sector Undertakings (PSUs) as well as large
enterprises present a significant opportunity for MSMEs by addressing their issue of
inadequate market access and linkages. These supplier relationships result in larger and more
consistent orders for MSMEs and the stricter requirements of a larger firm of a PSU in terms
of quality, on-time delivery, cost reduction and customer service provide incentives for the
MSMEs to improve their operations. Working with smaller, local suppliers presents an
excellent opportunity for larger companies too by reducing lead times, inventories and logistics
costs. As far as the country is concerned, the replacement of imported inputs with locally
produced inputs increases the national value-added, provides a push to the local communities
and promotes indigenization.
In general, greater and better industrial integration plays a major role in making the country
more efficient and competitive. However, if these relationships are not managed carefully, they
can quickly deteriorate, ruining the development opportunity for the MSMEs and discouraging
the larger firms from expanding their network of small, local suppliers. Buying-selling
relationships typically break down or fail to attain a sustainable status due to issues such as
poor understanding of the customers’ requirements, lack of knowhow on suppliers’ part to
understand and abide by the tender documentation process, low quality perception for
MSMEs’ products, etc. A methodical approach is required to build, sustain and nurture strong
supplier relationships between large enterprises or PSUs and MSMEs which can result in long
lasting benefits for all the stakeholders involved as well as for the economy as a whole.
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The Public Procurement Policy for MSEs, 2012
With the objective of promoting the growth and development of Indian MSMEs by improving
their market access and linkages, the Ministry of MSMEs notified the implementation of the
Public Procurement Policy for Micro and Small Enterprises from 1 April 2012. The Policy is
mandatory as notified under the MSMED Act 2006. The Policy calls for achieving an overall
procurement of minimum 20% of total annual purchases of products produced/services
rendered by MSEs within a period of 3 years by the central ministry, government departments
and PSUs. The policy has also earmarked a sub target of 4% procurement of goods and
services, out of the 20% from MSEs owned by SC/ST entrepreneurs.
Challenges Encountered in Developing Stable SME Supplier Networks
MSEs are small in size and are constrained in managerial capacity facing the problems of
information asymmetry, complex vendor registration process, disproportionate qualification
criteria and certification requirements while accessing the public procurement market. On the
other hand, CPSEs and other public procurement authorities are also faced with the challenge
of identifying and engaging with suppliers in the MSE sector. The key issues and challenges
affecting the policy implementation are detailed out below from the perspective of 3 main
stakeholders’ category:
I. Regulatory Authority
The Ministry of MSME is the lead ministry and plays the role of a regulator cum enabler for
the implementation of the Public Procurement Policy for MSEs. Though Ministry has initiated
various steps for effective policy roll out, it still faces challenges in effective implementation of
the policy arising from following main constraints:
• Difficulty in monitoring and evaluation due to non-availability of information from CPSEs
• Weak institutional structure for policy implementation
• Limited manpower and field level presence to cater to the needs of MSEs
• Lack of adequate ICT support systems for data capturing and tracking
Regulatory Authority
(Ministry of MSME)
Demand Side
(Procuring Agencies)Supply Side (MSEs)
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II. Demand Side (Procuring Agencies)
CPSEs and other public procurement authorities report a number of constraints that prevent
them from meeting their procurement targets as per the Public Procurement Policy, 2012. The
most significant constraints faced by PSUs and other procuring agencies are listed below:
• Difficulty in the identification of MSE vendors due to factors such as lack of a
comprehensive database of registered MSEs
• Difficulty in the determination of SC/ST Status
• Lack of willingness amongst MSEs to get registered
• Lack of adequate information on the quality, capability and eligibility of MSE vendors
III. Supply Side (MSEs)
In spite of the critical importance of the Public Procurement Policy for assisting the MSME
sector, these enterprises face a host of challenges that limit their ability to benefit from the
Policy. The most significant challenges are as follows:
• Poor understanding of the Vendor Registration Process by various PSUs
• Independent and decentralized vendor registration processes by various PSUs
• Lack an understanding of e-procurement procedures.
• Complicated Tender Documentation / Bidding Processes
• Information asymmetries about the quality and technological standards by PSUs
• Low quality perception for the products of MSEs
• Lack of awareness about the tendering processes, subcontracting, raw materials control,
marketing and other promotional activities, etc. in order to build the capacity of MSE
vendors.
• Lack of appropriate feedback and grievance redressal mechanisms
Vendor Development Programmes
Limited information, low skill sets, cumbersome registration /bidding/contracting procedures,
payment delays are the major access barriers to public procurement market by MSE.
Therefore, in addition to the procurement goal, the policy also advises procuring organizations
to take actions (vendor development programme, buyer-seller meets, and outreach activities)
which enhance MSE’s ability to participate in public procurement. This is being undertaken by
most of the organizations in different formats and with varying degree of impact.
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There is a need for adoption of more systemic approach as mentioned below:
• Enhance coordination between procurement and vendor division
• Well prepared detailed content with experienced resource
• Content should include
� Procurement Potential and annual Procurement Plan
� Understanding Vendor Registration Processes
� E-procurement and Digital Signature
� Preparing Bids and Common mistakes made by MSEs
� Grievance Redressal Mechanism
3rd National Vendor Development Programme
CII organized the 3rd National Vendor Development Programme for Micro and Small
Enterprises (MSEs) on 20 December 2016 at the India Habitat Centre in New Delhi with the
objective of enhancing the market linkages of MSEs through strong supplier networks. The
Programme provided a platform for bringing together leading Indian PSUs from across sectors
and MSMEs and promoting long term supply relationships between them.
Key Highlights of the National Vendor Development Programme
• Participation of 20+ leading Indian PSUs seeking long term supplier relationships with
MSME vendors
• Participation of around 100 SMEs from across sectors and geographical seeking to
enhance their participation in the supply chains of major PSUs
• Presentations by procurement officials participating PSUs on their product and service
requirements, procurement policies and procedures as well as their vender registration
processes, quality and technological specifications, delivery terms, tender
documentation, etc.
• B2B meetings between the procurement heads of the PSEs and the MSME vendors
• Awareness creation on the Public Procurement Policy for Micro and Small
Enterprisers, 2012 launched by the Ministry of MSME
• Address by Shri Surendra Nath Tripathi, Additional Secretary and development
Commissioner, Ministry of MSME, Government of India
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© Confederation of Indian Industry
Summary of Discussions at the Programme:
Speaking at the Programme, Shri Surendra Nath Tripathi stressed on the importance of
promoting an open and transparent procurement framework in the country by taking a stern
stand on practises such as preferential tender participation, registered vendors’ list, etc.
Stating that the registration with the Ministry should be universally accepted by various PSUs,
he instructed PSUs to assist in building the capabilities of MSEs through regular vendor
development programmes. According to him, Vendor Development Programmes are great
enablers to attain the objectives of the Public Procurement Policy which mandates PSUs to
procure 20% of their annual requirements of goods and services from MSES and reserves a
sub-target of 4% from SC / ST entrepreneurs. He added that the Policy also reserves 358
items for exclusive procurement from MSE vendors but clarified that PSUs should also procure
items not covered in this list from MSEs and also attempt to exceed the 20% mandatory
procurement target prescribed by the Policy. He further stated that procurement orders from
PSUs incentivize MSEs to upgrade their quality standards, promotes indigenization and also
assists the government with employment generation. Finally, he stated that Indian MSEs have
proved their capabilities to deliver high quality products to various supply chains and PSUs
must demonstrate greater trust in procuring from these enterprises as well as assist in creating
a robust public procurement framework through simpler and standardized tender
documentation processes, fair tender participation norms, vendor development programmes,
timely payments, etc.
He also engaged in candid discussions with the participants at the Programme and responded
to the queries by various queries raised by them. In response to the issue of delayed
payments, he stated that the Ministry has established MSE Facilitation Councils across
various states for resolving the issue of delayed payments and is also in the process of
launching an online portal for registering complains. In response to a query, he clarified that
MSE vendors engaged in trading imported goods are beyond the coverage of the Policy. In
response to the request by MSEs to relax the requirements of prior experience and turnover
for participation in tenders by PSUs, he shared that the Ministry of MSME, vide a Notification
dated 10 March 2016, instructed PSUs to relax the norms for prior experience and turnover
from start-ups and micro enterprises. Many PSUs raised the issue of difficulty in identification
of MSE vendors and requested the government to compile a list of MSE vendors supplying
various products, with a special emphasis on MSEs manufacturing and supplying the 358
items reserved for exclusive purchase from MSEs. He shared that the Ministry has launched
the Udyog Aadhaar portal for enhancing registrations by MSMEs.
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© Confederation of Indian Industry
Also speaking at the Programme, Mr Shreekant Somany, Chairman, CII National MSME
Council and Chairman and Managing Director, Somany Ceramics Limited stated that MSEs
are an integral part of various supply chains in India and the Public Procurement Policy is an
exemplary initiative to promote the market access of MSEs. Lamenting the limited impact of
the Policy, he stated that out of almost 300 PSUs in the country, only 133 submitted data on
procurement and only 43 PSUs met their target of 20% procurement from MSEs in 2014-15
and stressed on the importance of mandatory disclosure by PSUs about their procurement
from MSEs. According to him, robust supply relationships PSUs present a significant
opportunity for MSEs through larger and more consistent orders as well as incentives for
product and quality improvements owing to the stricter requirements of larger firms. Working
with MSEs presents an excellent opportunity for larger companies in reducing lead times,
inventories and logistics costs and promotes indigenization for the economy. Finally, he
shared that measures such as a strong institutional framework as well as initiatives by PSUs
to promote vendor development and simplify the vendor registration processes will go a long
way in creating a strong and sustainable network of MSE suppliers in the country and result
in substantial gains for the economy.
List of Participating PSUs:
1. Bharat Earth Movers Limited
2. Bharat Electronics Limited
3. Bharat Heavy Electricals Limited
4. Bharat Petroleum Corporation Limited
5. Central Electronics Limited
6. Cochin Shipyard Limited
7. Electronics Corporation of India Limited
8. Engineers India Limited
9. Garden Reach Shipbuilders and Engineers Limited
10. Gas Authority of India Limited
11. Goa Shipyard Limited
12. Hindustan Petroleum Corporation Limited
13. Mazagon Dock Limited
14. National Mineral Development Corporation Limited
15. National Thermal Power Corporation
16. Oil India Limited
17. Power Grid Corporation Limited
18. Project and Development India Limited
19. NLC India Limited
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Programme Schedule
1000 – 1100 hrs: Inaugural Session
1000 hrs Opening Remarks Mr Shreekant Somany Chairman CII National MSME Council
1020 hrs Inaugural Address
Mr S N Tripathi Additional Secretary & Development Commissioner Ministry of MSME Government of India
1035 hrs Open Discussions and Q & A
1050 hrs Closing Remarks Mr Ashok Saigal Chair, Sub Group on Ease of Doing Business CII National MSME Council
1130 – 1300 hrs: Plenary Session on Vendor Registration Processes of Major PSEs:
Presentations by Procurement Officials
1130 hrs Opening Remarks Mr Ashok Saigal
1140 hrs Presentation by PSE from
Shipping Sector
Mr P L Kashikedar
Chief Manager (Supplier Relation &
Registration)
Mazagon Dock Ltd
1150 hrs Presentation by PSE from
Electronics and Energy Sector
Mr Hemant Kumar Dubey Senior Technical Manager Central Electronics Limited
1200 hrs Presentation by PSE from
Shipping Sector
Mr Sony Clement
Senior Manager-Purchase
Cochin Shipyard Ltd
1210 hrs Presentation by PSE from
Electronics Sector
Mr Yuvaraj A R
AGM (CMS)
Bharat Electronics Limited
1220 hrs Presentation by PSE from
Heavy Industry Sector
Mr P K Jain
General Manager-Corporate Operations
Management
BHEL
1230 hrs Presentation by PSE from
Petroleum Sector
Ms Maya Manohar Naik
Senior Manager-Vendor Management (CPO)
Hindustan Petroleum Corporation Limited
1240 hrs Discussions (Q&A)
1255 hrs Concluding Remarks Dr Alka Kaul
Chair, Sub-Group on Women Empowerment
CII National MSME Council
1300 – 1400 hrs: Lunch
1400 – 1700 hrs: B2B Meetings between PSUs and MSEs
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Snapshots from the 3rd National Vendor Development Programme