New Delhi, Nov 15 (KNN) The Federation of Indian Micro and Small & Medium Enterprises (FISME) has written to Union Minister of Finance Nirmala Sitharaman to introduce Surety Bonds to make public procurement more inclusive and help MSEs enhance business volumes with freed up collateral assets.

It is of the view that above all it will enhance competitiveness of MSMEs.

Introduction of Surety Bonds will place Indian business at par with what most developed economies in an important respect, read the letter. 

Recognising the reformist initiative announced in the Union budget 2022-23 to transforming the way most public procurement is conducted in India, FISME said it is of even greater significance for the MSME community that caters to Public Procurement for the following reasons.

Further it underlined how access to adequate bank facilities continues to be a challenge.

The margin money to be deposited for issue of a Bank Guarantee varies from 10% to 30% for MSMEs. 

Over and above this cash outgo, substantial fees of 2.4% pa must be paid, upfront even if the BG is required to be furnished for 5 years.

FISME raised the issue that many MSEs are incapacitated to fully utilize the generous 25% purchase preference reserved for them in Central/State Govt purchases.

Requirement of collaterals to the extent of the BG facility required, payment of margin money- 10 to 30% are stipulations which has caused some of the hurdles.

SBI Gen Ins, was the only entity out of all those registered with IRDA as potential sureties, that responded to FISME’s request to update on the progress made by them to take benefit of the opportunity that was offered to them by the government.  (KNN Bureau)