Start-ups are unlikely to get the benefit of the relaxation clause for the prior experience and turnover criteria with respect to procurement of goods that have implications on public safety and health.

“For such procurements, wherever adequate justification exists, the procuring entities may not relax the criteria of prior experience/turnover for the start-ups,” sources said.

India has the third-largest number of startups globally. In January, Prime Minister Narendra Modi had unveiled a slew of incentives for them including a tax holiday, an inspector raj-free regime, capital gains tax exemptions, a Rs 10,000 crore corpus to provide funds, and relaxation in procurement norms.

In its October monetary policy review, the Reserve Bank stated that startups can raise external commercial borrowings (ECBs) of up to 3 million in a financial year, with a view to boosting innovation and promoting job creation.

Earlier, the government had said that all Central Ministries and Departments “may relax” the condition of prior turnover and prior experience in public procurement to all startups, if they meet quality and technical specifications.

However, doubts had arisen on whether it was optional for central ministries and departments to relax the experience and turnover condition, said an office memorandum of the Expenditure Department.

“However, there may be circumstances (like procurement of items related to public safety, health, critical security operations and equipment) where procuring entities may prefer their vendors to have prior experience, rather than giving orders to new entities,” the communication said.

Source: The New Indian Express