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FinMin asks govt dept and PSEs to refund 95% of the performance or bid security forfeited from MSMEs during the pandemic

Credit and Finance for MSMEs: The Finance Ministry’s Expenditure Department issued an office memorandum stating that all MSME vendors registered with the MSME Ministry would be eligible to claim a refund of the forfeited amount for contracts which had an original delivery or completion period between February 19, 2020, and March 31, 2022.

Credit and Finance for MSMEs: In a relief to MSMEs, the Finance Ministry on Monday asked all government departments and public sector enterprises to refund 95 per cent of the performance or bid security and liquidated damages that were deducted from SMEs for government tenders during the  two years of the pandemic, reported PTI. 

The Finance Ministry’s Expenditure Department on Monday issued an office memorandum stating that all contractors or suppliers registered as MSMEs with the Ministry of MSME as on March 31, 2022 would be eligible to claim a refund of the forfeited amount for contracts which had an original delivery or completion period between February 19, 2020, and March 31, 2022. 

“The Ministry of Finance today provided a major relief to MSMEs for COVID-19 period. In an order issued by the Department of Expenditure, Ministries have been asked to refund performance security/ bid security and liquidated damages forfeited/ deducted during the Covid-19 pandemic,” an official statement released by the Finance Ministry on Monday noted. 

Finance Minister Nirmala Sitharaman had announced a new scheme  ‘Vivad se Vishwas-I’ in the Budget 2023 underlining that in the case 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 the government and government undertakings. 

Importantly, Finance Secretary T V Somanathan earlier had said that the Vivad se Vishwas-I scheme announced in the Budget gave relief to small and medium businesses that could not fulfil their contractual obligations during the Covid period, reported PTI.

“We are assuming … we are giving them the benefit of doubt and saying that this (inability to supply during the Covid period) must have been due to circumstances beyond your control. We are not even getting into the actual reasons. We are giving a relief. 95 per cent of the forfeited amount will be returned to them regardless of the reasons for their failure. So it is a simple non-discretionary relief which is given to them,” Somanathan said. 

MSMEs can avail the relief for 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)/ Public Sector Financial Institution etc.

It is important to note that the government’s public procurement portal Government e-Marketplace (GeM) will be responsible for monitoring the refund to the MSME vendors who will be able to register on the portal and enter details of the applicable contracts.

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Further, these claims will be verified by the nodal officers of each procuring entity who will then give the approval for the refund of the due amount. The GeM portal will also provide reports to track pendency with each procuring entity. 

Notably, the date for the start of the application process for relief through GeM will be notified separately, the Finance Ministry noted in the release.