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Govt eyes policy Photo Credit: Mukul Mudgal/VCCircle

Govt eyes policy changes to bring more startups in medium industry

13 June, 2016

The government is planning to make changes in the policy pertaining to the Startup India initiative, to broaden the move by including a number of startups under the ‘medium industry’ category that would be eligible for public procurement incentive and preferential benefits.

As per the public procurement policy, the government departments, ministries and public sector undertakings (PSUs) need to procure at least 20% of their purchases from micro and small enterprises beginning April 2015.

“The governing policy includes only small and micro enterprises and does not mention the medium industry. We are trying to figure ways to make it part of the policy without breaking the legal framework,” The Economic Times reported citing an unnamed senior government official as saying.

Department of industrial policy and promotion (DIPP) is holding discussions with the department of expenditure and micro small and medium enterprises (MSME) ministry officials to find a solution so that the benefits announced in the Startup India action plan can be extended to the medium industry as well.

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. It means that most startups will miss this cut-off.

In March this year, after Prime Minister Narendra Modi launched the Startup India initiative, the MSME ministry issued an order to 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 the small and micro enterprises covered by the Public Procurement Policy for MSE order 2012.

“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.

The idea behind this benefit was to provide an equal platform to startups in the manufacturing sector vis-a-vis the established companies and enable startups to participate in such tenders with relaxed eligibility conditions. 

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Govt eyes policy changes to bring more startups in medium industry

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