Big businesses and corporates are eyeing the small and medium subsidiaries to take advantage of the public procurement process. Experts believe a number of large corporates have been setting up micro and small enterprises (MSE) subsidiaries to eat into standalone MSEs share of public procurement tenders.
Chandrakant Salunkhe, Founder and President, SME Chamber of India, told Financial Express that there are about 5 to 5.5 lakh MSEs that are basically subsidiaries of some of the very well-known Indian corporates, and have a stronghold in the public procurement process. “Businesses operate them without lending their names to them. Since June, the number has increased.”
He said corporate-backed MSEs cannot be questioned as they are registered entities operating in the market. “We are observing the situation but we cannot stop them as anyone can do business, but the government should take necessary steps to help MSEs,” Salunkhe said. “The government should look into the MCA/ROC data to validate this scenario. Vishal Kumar, Co-founder and COO of MSMEx, believes the government should come up with the revised guidelines for public procurement and restrict wholly-owned MSE units of such large entities to stop participating in the public tendering process.
Subodh Jindal, President, All India Food Processors’ Association, and Founder, Excelsior Food & Chemical Industries, said there is a strong and deliberate effort made by the large sector and they are definitely doing this by their own offshoots and getting new entrepreneurs to join them and show the unit as MSE in that entrepreneur’s name whereas the profit goes to them. “Large enterprises were sought to support MSEs in their growth but they don’t have permission to kill them. I have seen in meeting with ministries how MNCs have always tried to reserve their products in spaces belonging to MSMEs and they have been successful in doing so as bureaucracy supported them.”
What comes as a surprise is that the government is not aware that large companies are setting up wholly-owned MSE subsidiaries to acquire public procurement tenders. Nitin Gadkari, former MSME Minister, had said “no” in the Rajya Sabha in March this year.