New Delhi: The government on Tuesday approved a procurement policy under which state-run departments and PSUs will give preference to micro and small entrepreneurs (MSEs), including those belonging to SCs/STs.
The "path-breaking" policy cleared by the Cabinet, ahead of assembly elections in five states including Uttar Pradesh next year, will set an annual target of 20 percent procurement for the Central Government departments and PSUs from MSEs.
Within this limit, four percent of the orders should be placed to the SC/ST entrepreneurs and 16 percent for others.
"But, given their unique nature, defence armament imports will not be included in computing the 20 percent goal for Ministry of Defence. In addition, defence equipment like weapon system remain out of purview of such policy for reservation," according to an official statement.
Briefing reporters after the Cabinet meeting, Information and Broadcasting Minister Ambika Soni described the decision as "path-breaking". It was also in line with the "Congress manifesto", she said.
However, the procurement policy would be voluntary in nature for three years. It would be made mandatory after three years.
After it becomes mandatory, non-conforming departments will be required to provide reasons for not meeting the targets to a Review Committee.
Elaborating, Micro, Small and Medium Enterprises (MSME) Minister Virbhadra Singh said with announcement of the new policy, PSUs are expected to buy goods worth Rs 35,000 crore from the MSEs, of which a business of Rs 7,000 crore would go to the SCs/STs.

Also, PSUs and government departments would be required to report the goals set with respect to procurement to be met from small units and the achievement made in their respective annual reports.
The MSMEs, which account for 45 percent of the country's manufacturing output and 40 percent of exports, have also been hit by the rising input cost and interest rates.
The sector employs 60 million people in 26 million units producing over 6,000 products.
Meanwhile, a release from the Ministry of Social Justice and Empowerment said that out of 20 percent target of annual procurement from MSEs, a sub-target of twenty per cent (i.e. 20 percent out of 20 percent) will be earmarked for procurement from MSEs owned by SC/ST entrepreneurs.    

Earlier, the reservation for SC/ST entrepreneurs was not included.
Minister of Social Justice and Empowerment Mukul Wasnik had written to the Ministry of MSME for the inclusion of reservation for SC/ST entrepreneurs in the public procurement policy of the Central Government and its departments and PSUs. His ministry had also taken up the issue at other higher levels in the government.
With the Cabinet taking a decision to reserve 20 percent of their total procurement to be reserved for MSE sector which would come to around Rs 35,000 crores, the share of the SC/ST entrepreneurs in the total procurement will be around Rs.7000 crore a year.
The ministry release said that in order to enhance the participation of SCs/STs in the Government procurement, the Central Ministries and PSUs will also take other necessary steps including organizing special vendor development programmes and buyer-seller meets.