New Delhi, May 31 (KNN) On one hand the government is pushing for mandatory public procurements by MSMEs for PSUs, while on the other hand some of the big business-giving departments like Railways are still following the old rules for its tenders which were framed even before the procurement policy was announced.

One such case is with the ‘Work’ tenders of the Railways which, according to railways,  do not fall under services or under manufacturing, hence keeping the MSMEs out of the eligibility criteria for participating in the biddings.

The MSME units are not allowed preference  in tenders, as Railway considers it as Work Contract despite the fact that service tax is payable in reality on these contracts, whereas the Ministry of Finance is treating it as Consultancy work and will be extracting 15% as service Tax.

“We represented to various railway authorities for including provision of MSME Purchase Preferences Clause in their tender documents of various Services contract, and simultaneously submitted all cases as grievance to their grievance redressal cells, but as on date nothing concrete have come up,” said H S Chopra, MD, Data Technosys(Engineers) Pvt. Ltd.

Chopra has highlighted several others tenders floated by the Indian Railways in which the MSMEs were not allowed to participate despite being eligible for participating.

“We are losing time and thereby losing business in pursuing all concerned authorities of MSME Ministry as well as the tendering departments for our right of entitlement to concessions allowed to MSMEs like no tender cost and no EMD. This being the start of the financial year 2016-17 most of the eligible tenders have already been floated and now new tenders related to Service Contracts in railway after this will come only in next financial year,” he cried.

“Under these circumstances if we are not in a position to bid in these tenders even being a MSME unit because of our meagre financial resources as our only constraint and tendering Government department not allowing us to avail the concessions permissible to MSME like exemption /relaxation in cost of tender / EMD in that case we will lose sizeable amount of business in this financial year dragging us to verge of closure,” he added.

The MSME entrepreneur is leaving no stone unturned to approach all the concerned departments and Ministries urging for timely action regarding this stating “it is essentially required and need of hour”. 

Chopra pointed that in response to one of his grievances filed; an MSME official told him that the railway officials are of the view that the preference policy is not applicable on works contract.

He also mentioned that the official referred about a High Court Order which states that Works come neither under Services nor under Manufacturing.

“This appears to be an inter-ministry issue to be settled between two ministries’ (Ministry of MSME & Ministry of  Railways) and perhaps that is the reason still no concrete decision on inclusion of preference for MSME Unit  for these ‘Service Contract’ in Railways could be derived or any consensus reached till date,” Chopra said.

The MSME entrepreneurs who pay heavy service tax for these contracts have raised concerns saying that MSME units are not allowed under this preference policy in tenders (because Railway is treating it as Work Contract ignoring the fact that service tax is payable in reality on these contracts), whereas the Ministry of Finance is treating it as Consultancy work and will be extracting 15% as service Tax.

“Thus under these circumstances, a MSME Unit like us on one hand will be losing the privilege of less investment to gain work while  on the other hand will have to part with 15% of our Gross Bill amount as service Tax on these contracts. Therefore it is our suggestion / and we feel like this issue requires the intervention of finance ministry and PMO also if railway is adamant not to include this policy for consultancy (‘SERVICE SECTOR’) contracts,” the entrepreneur cried. 

The issue of classification of ‘Works’  as  ‘Services’ has been settled long back by WTO, exclaimed an expert on MSME policies at FISME, the national federation of MSME and there is no need to re-invent the wheel by the railways. As a signatory of WTO, Government of India is bound by the WTO guidelines and all Government department including Railways, should follow these. He suggested that the matter be taken up with PMO as another example of how Government functionaries are ‘torpedoing’ the ease of Doing Business mission. (KNN Bureau)