In a major relief to MSMEs, the Centre on Monday asked various ministries to refund performance security, bid security and liquidated damages forfeited or deducted during the COVID-19 pandemic. The move, ‘Vivad Se Vishwas I – Relief for MSMEs’, comes after Finance Minister Nirmala Sitharaman in the Budget Speech promised to refund the forfeited amount in cases of failure by MSMEs to execute contracts during the COVID-19 period.
In an order issued by the Department of Expenditure, it has been decided to give following additional benefits to MSMEs:
* 95 per cent of the performance security forfeited from MSMEs shall be refunded.
* 95 per cent of the bid security (Earnest Money Deposit), if any, forfeited from MSME firms in tenders opened between 19.02.2020 and 31.03.2022 shall be refunded.
* 95 per cent of the liquidated damages (LD) deducted from such firms shall also be refunded. LD so refunded shall not exceed 95% of the performance security stipulated in the contract.
* In case any firm has been debarred only due to default in execution of such contracts, such debarment shall 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 shall be entertained.
* No interest shall be paid on such refunded amount.
The order has been issued as a follow-up to the ‘Vivad se Vishwas-I’ scheme announced in the Budget Speech 2023-24 by the Union finance minister.
“The government has been getting many references from micro, small and medium enterprises (MSMEs) regarding difficulties being faced by them in the last two years due to COVID 19 pandemic. The government had provided certain benefits to the industry (including MSMEs) in government contracts in the past,” the finance ministry said in the order.
The COVID-19 pandemic, one of the biggest crises in the human history, had a devastating impact on the economy. It had a huge adverse impact on the MSMEs too. A number of MSMEs had highlighted the difficulties being faced by them in the last 2 years due to COVID-19 pandemic.
Sitharaman in the Budget Speech 2023 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 the government and government undertakings. This will provide relief to MSMEs.”
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