FCIK calls for reset of public procurement policy in Jammu and Kashmir

Srinagar, Jan 26, KNT: The Federation of Chambers of Industries Kashmir (FCIK) has called for an immediate reset of the public procurement policy in Jammu and Kashmir, warning that massive government capital expenditure has failed to translate into growth for local manufacturing and employment.

As the government undertakes a review of its Industrial Policy, the apex industrial body said that despite unprecedented public spending, local Micro, Small and Medium Enterprises continue to face a severe shortage of supply orders, pushing many manufacturing units towards closure.

In a statement, FCIK said that between 2020–21 and 2024–25, the government spent over ₹1.58 lakh crore on capital expenditure, with an additional ₹32,607 crore earmarked for the current financial year. It said substantial spending is also carried out through Central Public Sector Undertakings, defence establishments and paramilitary forces operating in the Union Territory.

The chamber said this level of sustained investment has the potential to significantly expand industrial capacity, generate large-scale factory employment and enable the establishment of new manufacturing units. However, it said the benefits of public spending are largely flowing outside the region due to procurement practices that sideline local manufacturers.

FCIK said the crisis facing local industries does not stem from inadequate government spending, but from procurement decisions taken without evaluating their impact on the local industrial ecosystem. It pointed out that at least half of the capital expenditure consists of industrial goods manufactured well before construction begins, precisely the segment for which nearly one quarter of Jammu and Kashmir’s manufacturing units were set up.

The chamber said that even sourcing 25 percent of this industrial component from local manufacturers could have prevented widespread factory closures, job losses and underutilised capacity. It recalled that until 2017, successive governments addressed the region’s structural industrial disadvantages through procurement support, cost equalisation measures, tax remissions and toll exemptions.

According to FCIK, the shift towards GeM-based procurement, national-level electronic tenders and large turnkey contracts, along with the withdrawal of cost equalisation measures, has tilted the procurement ecosystem against local MSMEs. It said the increasing reliance on turnkey and composite contracts has further diluted reservation benefits meant for MSMEs, as contractors independently source industrial goods, effectively excluding local manufacturers.

Citing the ₹12,000-crore Revamped Distribution Sector Scheme, the chamber said procurement has been routed entirely through turnkey mechanisms despite the presence of nearly 200 local MSMEs manufacturing electrical goods in Jammu and Kashmir.

As part of the Industrial Policy review, FCIK has proposed a three-tier public procurement framework. The proposals include reviving SICOP as the nodal marketing and procurement agency for MSE-reserved and locally consumed items, reforming tendering and turnkey practices to ensure meaningful MSME participation, and mandating segregation of industrial goods from civil contracts.

The chamber has also proposed replacing price preference with purchase preference to ensure assured orders for local manufacturers without increasing the government’s financial burden.

Appealing to the Omar Abdullah-led government, FCIK said capital expenditure must be leveraged not only to create physical assets but also to build durable local industrial capacity. It warned that continued bypassing of local manufacturing would result in sustained job losses, idle factories and long-term weakening of the industrial ecosystem.

The chamber said a well-structured public procurement policy could ensure that government investment generates sustainable employment, strengthens local industry and delivers lasting economic benefits for the people of Jammu and Kashmir. [KNT]