New Delhi, June 13 (KNN) While MSMEs seem sanguine about the Strategic Partner concept proposed by Defence Minister Manohar Parrikar, they have doubts that business will flow down to them without a set-aside.

The apex industry body for MSMEs, FISME, has submitted its representation to the Defence Ministry, in which highlighting the “bias” against the MSMEs in the system, it has recommended for 20% procurement from the sector by the Strategic Partner (SP).

It has also suggested that the SP should handhold the small vendors at the initial ‘Technical Gate’ and there should be an expert on MSME vendor eco-system in the ‘Evaluation Team’ for SP.

In May, the Defence Ministry had set up five committees for making specific recommendations on manufacturing defence equipment under Strategic Partnership model. Further, five sub-groups were also constituted to initiate focussed discussions on specific platforms.

Each sub group had industry representatives from CII, FICCI, ASSOCHAM, PHDCCI and FISME with the chairman ­ from an industry association ­making the final presentation to Parrikar on the discussions and recommendations.

In its representation, Federation of Indian Micro and Small & Medium Enterprises (FISME) highlighted that if there would be one SP for one platform, the natural corollary is that it would be a monopoly who would be allowed cost plus pricing and assured business.

“When an entity is not be subjected to competition, disregard for costs gets deep into their systems and processes,” said FISME.

Further, because of lack of pressure of cost and productivity, such entities tend to produce each and every thing in house no matter at what cost. Because of vertical integration, such enterprises become fortress of technology and knowhow.

The technology and knowhow acquired/ developed through public money remains confined within four walls of such enterprises because there is no pressure for outsourcing and transfer of technology, FISME said adding that this would lead to Higher costs; Limited tech spinoffs, few tech transfers and tech diffusion in country especially to MSMEs; and Higher risks because of technological concentration in one organization.

The industry body also said that the “bias” against MSMEs runs deep in the system and getting them into game would require upfront affirmative policy interventions

For this, FISME suggested that Strategic Partner must procure 60% from Indian vendors and 20% of total order value from MSMEs.

The industry body for the MSMEs also said that the applicant strategic partner should be asked to demonstrate capabilities in developing vendor eco-system and capacity building / handholding of small vendors, at the initial ‘Technical Gate’ itself.

During Evaluation, there must be explicit marks for the plans of the Strategic partner for capacity building of and outsourcing to MSMEs, FISME recommended.

To evaluate competency of the strategic partner applicants in this regard, an expert on MSME vendor eco-system should be included in the ‘Evaluation Team’.