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DPP

Indian industry has given a mixed response to the new guidelines approved by the Defence Acquisition Council (DAC) as part of the Defence Procurement Procedure (DPP) 2016. While some in the industry welcomed the greater role for the private sector and the focus on Micro, Small and Medium Enterprises (MSME), some major industry players seemed disappointed with the guidelines.

The DAC, headed by Defence Minister Manohar Parrikar, on Monday approved some key changesto the Defence Procurement Procedure while deferring decisions on other issues such as strategic partnerships and procedures for blacklisting companies.

“Overall, the sense one gets from the announcement is that the government intended to push forward ‘Make in India’. However, one has to see the fine print. We will have to wait for the DPP to come out,” said Amit Cowshish, former Financial Advisor (Acquisition) in the Defence Ministry and Distinguished Fellow at the Institute for Defence Studies and Analysis.

Anurag Garg, director of PwC’s strategy and defence vertical, said that the new DPP was significantly better off than the last DPP, given the positive shifts meant to ensure movement at a good pace by putting timelines of 24 months between the prototype developed and the Request For Proposal (RFP) stage.

‘Protracted processes’

However, the CEO of one of the largest private industrial groups of the country launched a scathing attack on the policy, stating that the DPP seemed to be the product of “babus and some retired babus,” and there was very little reflection of the problems faced by the industry. A senior executive of another Indian company concurred with it, stating, “The problem is not of new procedures. It is about processes. They are too protracted.”

On the other hand, there was a positive response to the proposed new category of Indigenous Design Development Manufacturing (IDDM) and government funding for design and development. “We welcome the IDDM category in the DPP as it will back companies like us who have proven competencies in indigenous design, development and manufacturing,” said Puneet Kaura, MD and CEO, Samtel Avionics.

The new guidelines have put a major focus on the MSME sector to stimulate domestic innovation. The DPP talks about creating a new category for MSMEs as well as funding of up to Rs.10 crore for design and development.

G.Raj Narayan, Founder and MD, Radel Group, said the funding mechanism proposed for the MSMEs and the ranking system were excellent moves.

MUDRA YOJANA

This refers to ‘Of Rs 71,000 crore in Mudra loans, government credit Rs 2,000 crore’ (The Indian Express, January 12, http://iexp.in /Qqt218688). The report by Sunny Verma tried to paint Mudra as being only a “rebranding” exercise and portrayed the government’s contribution as just Rs 2,000 crore out of the Rs 71,000 crore that has been lent under the programme. Mudra is a redesign of policy in order to re-target the audience, restructure processes and, most importantly, rejuvenate the mission of lending to the small, poor budding entrepreneur.

In order to understand the objection to the report, we need to answer three basic questions on the Mudra Yojana. First, why was Mudra launched? The programme was launched to give access to cheap credit to poor and small fledgling businesspersons. Even after 67 years of independence, a large section of the unorganised sector had no access to formal credit and used to have to rely on money lenders, who charge exorbitant rates of interest.

Yes, schemes for this class did exist before as well — but poor design and a lack of awareness ensured that the target audience did not receive the intended benefits. There was no nationwide initiative, and lending was left to the discretion of individual banks. Even loans of less than Rs 10 lakh were not readily available or forthcoming. Second, what did Mudra do? For starters, the government has made sure that the poor are not subjected to the requirements of collateral and guarantor to get credit. This has made the entire process for getting a loan easier, so that the poor don’t have to face as many roadblocks.

The government has classified loans into three groups — Shishu, Tarun and Kishor — to cater to the different needs of different sections of entrepreneurs. There have been other qualitative improvements as well: Mudra debit cards are issued to borrowers. Using these, they can withdraw the loan from any ATM in India, as and when they need the money. Debtors can also now repay the loan at any time and at any ATM in India. Provisions have been made to make possible daily withdrawals or repayments.

The interest on Mudra loans is calculated on a daily basis. When all this is taken into account, it becomes clear that the programme is a boon for small businesspersons. Third, and last, how has Mudra made a difference? The massive awareness and huge demand for Mudra loans is a result of the government’s efforts. While certain similar schemes have been announced before, there was no awareness around them.

- See more at: http://indianexpress.com/article/opinion/columns/mudra-yojana-a-boon-for-small-players/#sthash.5grqzvZA.dpuf