3rd National Vendor Development Programme for Micro & Small Enterprises

Transcription

1 3rd National Vendor Development Programme for Micro & Small Enterprises Enhancing Market Linkages of MSEs through Strong Supplier Networks 20 December 2016: hrs: India Habitat Centre, New Delhi Retrospect Confederation of Indian Industry Plot No. 249 F, Sector 18, Udyog Vihar Phase IV Gurgaon (Haryana, India)

2 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. Page 1

3 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 The Policy is mandatory as notified under the MSMED Act 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: Regulatory Authority (Ministry of MSME) Demand Side (Procuring Agencies) Supply Side (MSEs) 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 Page 2

4 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, 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. Page 3

5 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 3 rd 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 Page 4

6 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. Page 5

7 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 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 Page 6

8 Programme Schedule 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 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 1150 hrs Presentation by PSE from Electronics and Energy Sector 1200 hrs Presentation by PSE from Shipping Sector 1210 hrs Presentation by PSE from Electronics Sector 1220 hrs Presentation by PSE from Heavy Industry Sector 1230 hrs Presentation by PSE from Petroleum Sector 1240 hrs Discussions (Q&A) Mr P L Kashikedar Chief Manager (Supplier Relation & Registration) Mazagon Dock Ltd Mr Hemant Kumar Dubey Senior Technical Manager Central Electronics Limited Mr Sony Clement Senior Manager-Purchase Cochin Shipyard Ltd Mr Yuvaraj A R AGM (CMS) Bharat Electronics Limited Mr P K Jain General Manager-Corporate Operations Management BHEL Ms Maya Manohar Naik Senior Manager-Vendor Management (CPO) Hindustan Petroleum Corporation Limited 1255 hrs Concluding Remarks Dr Alka Kaul Chair, Sub-Group on Women Empowerment CII National MSME Council hrs: Lunch hrs: B2B Meetings between PSUs and MSEs Page 7

9 Snapshots from the 3rd National Vendor Development Programme Page 8