US shows the way in nurturing SSIs
The Small Industries Development Bill being finalised by the Union government, according to media reports, will aim at providing statutory backing to the present guidelines on granting price and purchase preference to products of the small scale industry (SSI) sector.
If that happens, it would mean quite a progressive step. At present, 350 items are reserved for exclusive purchase from the SSI sector (and about ten items from the handicraft sector) in the case of the Central government, its departments, agencies and undertakings. In the case of items open to purchase from both small and large units, a price preference of "up to" 15 per cent is given "on merits" to the SSI bidder. With the public sector space shrinking, preference for SSI supplies needs to be enforced more seriously in government departments.
When it comes to the issue of protecting and conferring privileges on small businesses (both manufacturing and service), the most prominent model is given by the United States of America (USA), whose Small Business Administration (SBA), under the direct control of the President of the US, administers and oversees implementation of many pieces of federal legislation for affirmative action in favour of the small sector.
In the US, all federal purchases worth more than $2,500 but not exceeding $100,000 are set aside exclusively for competitive bidding by small business concerns (SBCs, defined primarily in terms of employees in the case of most manufacturing sectors and turnover in the case of most services). Federal purchases over $100,000 are set aside for participation by SBCs, along with others. In the case of purchase contracts upwards of $500,000 (and $1,000.000 in the case of construction) awarded to large businesses, the prime contractor is obliged to submit a subcontracting plan wherever there is scope for supply by SBCs.
This type of purchase preference is most attractive since it assures a minimum percentage of orders for small businesses in federal procurement, including by major buyers like the Defence Department, Agriculture Department, National Aeronautics and Space Administration (NASA) and the Defence Department.
What is more, price preference of ten per cent (as distinct from purchase preference) in open competition is accorded to "socially and economically disadvantaged SBCs" like those run by women, ex-servicemen and minorities and SBCs in regions where the federal purchase scheme has been "historically underutilised". Special consideration is given to bids from "labour surplus areas".
The Office of Advocacy of the federal government is empowered to represent the views of small businesses before federal agencies and Congress. Under the Regulatory Flexibility Act, federal departments and agencies are obliged to assess the impact their rules and regulations are likely to have on SBCs.
The SBA (which also operates a loan programme) executes its administrative and watchdog responsibility through nearly 60 Small Business Development Centres (SBDCs) and 900 subcentres. All this shows how nurturing the competitiveness of small enterprises -- the largest provider of employment -- is looked at as a major feature of the "market economy" in the world's largest and most powerful economy.
In the European Union (EU), attempts are being made to ensure a fair share for SMEs (small and medium enterprises) in European-scale (as distinct from nationwise) government procurement. An official commission has recommended intensification of efforts to coordinate and publicise public procurement programmes and enable small business to seek orders through the Internet.
The EU is also set to revise its definition of SMEs (in terms of both employee strength and turnover) from next year.
India is a signatory to the Bologna Charter of 2000 on SME Policies, which recognised the role played by entrepreneurship and dynamic SMEs in restructuring economies and combating poverty. It will only be appropriate that India looks for a visionary and at the same time realistic legal framework in which micro, small and medium enterprises are able to realise their full potential.
(Published in The Hindu on Nov.21, 2004)
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