The central government is flooded with complaints from start-up firms stating that the Central public sector companies are not following the public procurement guidelines that exempt them from the requirement of “prior turnover and prior experience”.
On May 17, 2017, Ramesh Abhishek, secretary, Department of Industrial Policy and Promotion (DIPP), wrote to P K Sinha, Cabinet Secretary, wherein he raised this issue. “A number of representation(s) are being received from startups regarding non-compliance of DPE (Department of Public Enterprises) guidelines by CPSUs (Central Public Sector Units),” the letter said.
Explaining the background, Abhishek said: “As directed in the circular issued by the Department of Expenditure (on July 25, 2016 and September 20, 2016), Central ministries/departments have to relax condition of prior turnover and prior experience in public procurement to all startups (whether micro and small enterprises or otherwise) subject to meeting of quality and technical specifications. The DPE has further endorsed these orders to all CPSUs (on November 8, 2016).”
Abhishek wrote this letter to Sinha to give details about the implementation of Startup India programme, which was launched by the Prime Minister on January 16, 2016 to provide impetus to startups across the country. In his letter, he also informed Sinha that “states have been requested to issue a similar notification to encourage startups” through such public procurement.
Under Public Procurement Policy for Micro and Small Enterprise Order 2012, Centre made it mandatory for its ministries, departments and CPSUs to procure minimum 20 per cent of their products and services from micro and small enterprises from April 1, 2015. On March 10, 2016, the Ministry of Micro, Small and Medium Enterprises had stated: “The startups are normally micro and small enterprises which may not have a track record. These will have technical capability to deliver the goods and services as per prescribed technical and quality specifications, and may not be able to meet the qualification criterion relating to prior experience and prior turnover.”
Therefore, using the powers provided under Para 16 of Public Procurement Policy for Micro and Small Enterprises 2012, the ministry clarified that “all central ministries/ departments/ central public sector undertakings may relax condition of prior turnover and prior experience with respect to micro and small enterprises”. Later, the Department of Expenditure and the DPE then endorsed this policy with their own respective circulars, making it mandatory for CPSUs to relax conditions for startups.
On September 20, 2016, the Department of Expenditure issued a circular stating that “for all public procurement, the central ministries/departments have to ensure that criteria of prior turnover and prior experience for all startups is relaxed subject to their meeting of quality and technical specifications”.
On November 8, 2016, the DPE endorsed the aforementioned circular of Department of Expenditure, and advised all the ministries and departments of central government to “direct their CPSUs to follow the directions mentioned therein for implementation”. This circular of the DPE was also sent to the CMDs of all the CPSUs.