Within 6 days of presentation of Union Budget, Finance Ministry has issued order to implement “Vivad se Vishwas-I” scheme for micro, small and medium enterprises (MSMEs). The scheme envisages relief by returning the forfeited amount for not fulfilling contractual obligation during Covid.

“Ministries have been asked to refund performance security/ bid security and liquidated damages forfeited/ deducted during the Covid-19 pandemic,” an office memorandum (OM) issued by Expenditure Department said. In her budget speech, Finance Minister Nirmala Sitharaman had said: “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.”

As per the latest estimates, share of gross value added (GVA) of MSME sector in all India GDP during 2020-21 was 26.8 per cent while the share of MSME manufacturing output in all India manufacturing output during 2020-21 was around 36 per cent. MSME sector is accounted for in growth rate figures. The estimates of national accounts of the country are based on data of organised as well as unorganised sector.

The OM has prescribed criteria to avail relief. It says the contractor/ supplier should be registered as MSME with Ministry of MSME, as on March 31, 2022. The original delivery period/ completion period was between February 19, 2020 and March 31, 2022.

Performance security

Those fulfilling specified criteria will be refunded 95 per cent of the performance security forfeited from them. 95 per cent of the bid security (Earnest Money Deposit), if any, forfeited from MSME firms in tenders opened between February 19, 2020 and March 31, 2022 will be refunded. 95 per cent of the Liquidated Damages (LD) deducted from such firms will also be refunded.” LD so refunded shall not exceed 95 per cent of the performance security stipulated in the contract,” OM said.

Further, in case any firm has been debarred only due to default in execution of such contracts, such debarment will also be revoked by issuing an appropriate order by the procuring entity. However, in case a firm has been ignored for placement of any contract due to debarment in the interim period (i.e. date of debarment and the date of revocation under this order), no claim will be entertained. “No interest shall be paid on such refunded amount,” the OM clarified.

The grant of relief will be monitored through Government e-Marketplace (GeM). MSME vendors will be able to register on GeM portal and enter details of the applicable contracts. The list of the procuring entities will also be available on the portal. The portal will notify the nodal officers of each procuring entity to verify the claim of the MSME vendor. After due diligence, the nodal officer will refund the due amount and update the portal with the amount, date and transaction details of the payment. The portal will also provide reports to track pendency with each procuring entity. “The date of commencement of the process of applications for relief through GeM will be notified separately,” the OM said.

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