AND PURCHASE PREFERENCE POLICY
FOR MARKETING MSMEs PRODUCTS
Purchase Preference Policy
Price Preference Policy
Complete List of Reserved Items (including Handicrafts
Single Point Registration Scheme
The importance of the cottage and small scale industries to
the National Economy was recognised by the Government as early
as in 1948 under the Industrial Policy Resolution. In pursuance
of this Policy, a comprehensive programme for the development
of the Sector was drawn in early 50's. The marketing assistance
to the small scale units through preferential purchase by the
Central and State Purchase Organisations was emphasised. The emphasis
was reiterated in the Government Policy in 1991.
The small scale sector has grown significantly in the last
4-5 decades. The Sector has certain distinct advantages from the
point of view of Indian economy viz. low intensity capital investment,
high employment potential, low intensity of import in export production
Purchase Preference Policy
The policy of reservation of items for exclusive purchase has
been in vogue since late 60's as a measure of market support to
the MSMEs sector. The Stores Purchase Policy of the Government prior
to 1989 was in the form of categorisation of items in six major
groups as detailed below:-
Group-I: Items which are of
no interest to small scale units and can be solely procured only from large
scale units (128 items).
Group-II: Items which can be purchased solely from large scale
units but where it is possible for the large scale units to job
contract accessories and components to MSMEs units (159 items).
Group-III: Items which can
be purchased both from small scale and large scale industrial units.
Group-IV: Items which are
reserved for exclusive purchase from small scale units (409 items).
Group-V: Items which are to
be purchased from MSMEs to the extent of 75% of the requirement (13 items)
Group-VI: Items which are
to be procured exclusively from the MSMEs units to the extent of 50% of the
requirement (28 items).
However, with effect from
July 28, 1989, the Purchase Policy of the Government was changed in a major
way and the categorisation of the items was reduced to the following two
major groups, viz.
Items of stores reserved
for exclusive purchase from KVIC/Women's Development Corporations/Small
Scale Units and
Others not so reserved.
The first group comprised of 409 items earlier reserved for exclusive purchase
from the small scale sector.
To consider the question of inclusion of additional items in
the Group-IV (reserved exclusively for purchase from small scale
sector), a Committee was constituted in 1968 with Secretary (Department
of Supply) as its Chairman. The Committee was reconstituted on
August 6, 1979 and again on October 10, 1979 and December 4, 1979.
The Members of the Committee include representatives from various
organisations viz. Ministry of Defence, Railways, DC (Handloom),
KVIC, P&T, DC (Handicrafts) etc. and DC (MSMEs) as a Member
The list of 409 items reserved for purchase from the MSMEs sector
was reviewed recently and after deleting items having common nomenclature
and making the entries more generic as well as addition of new
items, a revised list of 358 Items was approved by the Committee
which also includes 8 handicrafts items reserved for purchase
from the Handicraft Sector.
Price Preference Policy
Assistance under Government Stores Purchase Programme in the
form of reservation of products for exclusive purchase from small
scale sector and price preference is one of the major instruments
for providing marketing support to the small scale industries.
The Director General of Supplies and Disposals, the Central Purchasing
Organisation of Government of India provides a number of facilities
to small scale industries under its Government Stores Purchase
These include reservation of certain products for exclusive
purchase from the small scale sector and price preference upto
15% in case of selected items which are produced in both large
scale as well as small scale units.
Point Registration Scheme of NSIC was launched as a Market
Support Measure for the MSMEs sector. Under this Scheme, the following
benefits are given to the MSMEs units which get themselves registered
with the NSIC:
Availability of Tender sets free of cost;
Exemption from payment of Earnest Money Deposit;
Exemption from payment of Security Deposit;
Price preference upto 15% over the lowest quotation of the large scale units (on merits).
The NSIC while registering a unit under this scheme is required
to undertake capacity assessment of the applicant through the
institutional set up of the MSMEs in the country. They are also
required to obtain confidential report from the bankers of the
manufacturers about the credit worthiness/financial standing of
the same. The units registered with NSIC under this scheme are
given a registration certificate indicating items for which registered
and monetary limit upto which registered.
It is clarified that policy of the Price Preference of 15%
is a critical benefit available to the MSMEs sector. The benefit
is available to compensate them on account of non-availability
of economies of scale, poor resource base, poor access to raw-
material etc. as compared to the large scale sector. The policy
of the Price Preference of 15% is an independent policy and is
in no way linked with the price preference of 10% to the PSUs
and other purchasers.