The department of expenditure has issued a directive to all ministries that all startups — “micro, small or otherwise” — may now be allowed relaxation from certain eligibility criteria in the tendering process.
The move will provide a level playing field to startups in the manufacturing sector vis-a-vis the established companies and enable startups to participate in such tenders with relaxed eligibility conditions.
In March this year, after Prime Minister Narendra Modi launched the Startup India initiative, the Micro Small and Medium Enterprises 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.
However, the order only mentions small and micro enterprises covered by the Public Procurement Policy for MSE order 2012.
“The latest order has now put to rest earlier confusion over which startups are eligible for such benefits,” a senior official said.
No definition for startups has been given in the directive. A medium enterprise as defined in the 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. Under the start-up action plan, a startup is defined as one having a turnover of more than Rs 25 crore and can’t be older than 5 years from incorporation date.
“Many initiatives are not being implemented at the ground level. We have been unable to access funds through the credit guarantee scheme for instance…There needs to be greater clarity of definition and implementation of these schemes,” said Gaurav Kachru, founder of 5ideas Startup Superfuel, a seed fund that invests in start-ups.
Under the public procurement policy, the 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.
As per the MSME Ministry’s order, start-ups eligible should have the 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.
Source: The Economic Times