June 13, 2016: In order to broaden and energise one of PM Narendra Modi’s pet initiatives, Startup India, the government is considering policy changes to include a bigger number of startups under the ‘medium industry’ category that would be eligible for public procurement incentive and preferential benefits.
Under the public procurement policy, central government department and ministries and its central PSUs have to procure at least 20% of their purchases from micro and small enterprises beginning April 1, 2015. This means that slightly bigger startups may miss out on this benefit that could be their initial survival.
“The governing policy in the matter includes only small and micro enterprises and does not mention medium industry. We are trying to figure ways to make it part of the policy without breaking the legal framework,” a senior government official said.
A medium enterprise as defined in the Micro Small and Medium Enterprises (MSME) Act should have investment of not less than Rs 5 crore and not exceeding Rs 10 crore in equipment if it operates in manufacturing space. In services sector this limit ranges from Rs 2 crore to Rs 5 crore. This will mean most startups will miss this cut off.
Department of Industrial Policy and Promotion is talking to the department of expenditure and MSME ministry officials for a solution so that the benefits announced in the Startup India action plan can be extended to such medium industry as well.
As per the action plan, a startup is defined as one having a turnover of more than Rs 25 crore and not be older than five years from incorporation date. In March this year, after Prime Minister Narendra Modi launched the Startup India initiative, the MSME ministry issued an order to all ministries and central public sector units to relax conditions related to prior experience and turnover for startups in all public procurements.
“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-prior turnover,” the order stated.
