The Ministry of Finance has established a new scheme called “Vivad se Vishwas I – Relief to MSMEs” under the Department of Expenditure. The goal of this programme is to help Micro, Small, and Medium Enterprises (MSMEs) affected by the COVID-19 pandemic. The initiative was launched as part of the Union Budget 2023-24 by Union Finance Minister Smt. Nirmala Sitharaman. Smt. Sitharaman announced the plan in Para 66 of her budget address.
“In cases of failure by MSMEs to execute contracts during the COVID period, 95 per cent of the forfeited amount relating to bid or performance security will be returned to them by Government and Government undertakings. This will provide relief to MSMEs”.
On February 6, 2023, the Ministry of Finance’s Department of Expenditure published an order defining the scheme’s general framework. On April 11, 2023, a final set of instructions was issued, broadening the scope of the relief to include further cases and reducing return limitations. The plan went live on April 17, 2023, and claims can be lodged until June 30, 2023.
The COVID-19 pandemic has been one of the most catastrophic catastrophes in human history, with severe economic consequences, particularly for MSMEs. This scheme is part of the government’s ongoing efforts to support and promote the MSME sector.
The plan calls for Ministries to reimburse performance security, bid security, and liquidated damages that were forfeited or deducted during the COVID-19 epidemic. Furthermore, some relief has been provided to MSMEs that were barred due to contract execution failures during the pandemic.
Vivad se Vishwas Scheme Relief For MSMEs – Eligibility Criteria
The Secretaries of all Ministries/Departments of the Government of India, as well as the Chief Secretaries/Administrators of Union Territories, have received an Office Memorandum from the Department of Expenditure.
According to the memorandum, all contracts for the procurement of goods and services entered into by any Ministry/Department/attached or subordinate office/autonomous body/Central Public Sector Enterprise (CPSE)/Central Public Sector Banks/Financial Institution, etc., with MSMEs that meet the following conditions will be granted relief:
- The supplier or contractor must be registered as a Medium, Small, or Micro Enterprise under the Ministry of MSME’s applicable plan on the date of their claim to be eligible for this relief scheme. MSMEs can be registered for any type of product or service.
- The contract’s original delivery or completion date must fall between 19.02.2020 and 31.03.2022 (inclusive).
- To implement this concept, the Government e-Marketplace (GeM) has built a dedicated webpage. Only claims that match the eligibility criteria will be processed by GeM.
Vivad se Vishwas Scheme Relief For MSMEs – Benefits
This scheme from the Ministry of Finance provides additional benefits to eligible MSMEs that were affected during the COVID-19 period. The following benefits will be provided:
- 95% of the performance security that was forfeited will be refunded.
- 95% of the bid security will be refunded.
- 95% of the liquidated damages (LD) that were deducted will be refunded.
- 95% of the risk purchase amount that was realized will be refunded.
- If a firm was debarred only due to a default in executing these contracts, the debarment will be revoked by issuing an appropriate order from the procuring entity.
- However, if a firm was ignored for a contract placement due to debarment during the interim period (between the debarment date and the revocation date under this order), no claim will be entertained.
- No interest will be paid on the refunded amount.
What Is MSME And Its Purpose?
In 2006, the Micro, Small and Medium Enterprises Development (MSMED) Act was introduced to address policy concerns affecting MSMEs, as well as the coverage and investment threshold of the sector. The objective of the act is to support the development of these enterprises and enhance their competitiveness. It establishes the first-ever legal framework for recognizing the concept of an “enterprise,” which includes both manufacturing and service entities.
For the first time, it defines medium enterprises and aims to integrate the three tiers of these enterprises, namely, micro, small, and medium. The act also provides for a statutory consultative mechanism at the national level with balanced representation of all stakeholders, particularly the three classes of enterprises, and with a wide range of advisory functions.
The Act has specific funds for the promotion, development, and improvement of these enterprises. It also promotes progressive credit policies, preference in Government procurements for products and services of micro and small enterprises, more effective mechanisms for mitigating the problems of delayed payments, and assurance of a scheme for easing the closure of business by these enterprises.
On May 9, 2007, after an amendment of the Government of India (Allocation of Business) Rules, 1961, the erstwhile Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries merged to form the Ministry of Micro, Small, and Medium Enterprises (M/o MSME). This Ministry designs policies and promotes/ facilitates programs, projects, and schemes and monitors their implementation with a view to assisting MSMEs and help them to scale up.
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