3rd national vendor development programme for micro ... · preparing bids and common mistakes made...

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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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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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


Electronics and Energy Sector

Mr Hemant Kumar Dubey Senior Technical Manager Central Electronics Limited


Shipping Sector

Mr Sony Clement

Senior Manager-Purchase

Cochin Shipyard Ltd


Electronics Sector

Mr Yuvaraj A R

AGM (CMS)

Bharat Electronics Limited


Heavy Industry Sector

Mr P K Jain

General Manager-Corporate Operations

Management

BHEL


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

3rd national vendor development programme for micro ... · preparing bids and common mistakes made...

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