Rs 1.9 Lakh Crore Spent, Local Industries Still Starved of Orders: FCIK | Kashmir Life

SRINAGAR: As the Government of Jammu and Kashmir undertakes a review of its Industrial Policy, the Federation of Chambers of Industries Kashmir has called for an immediate reset of the Public Procurement Policy, saying massive public spending has failed to translate into local manufacturing growth and employment generation.

The apex industrial body said that despite capital expenditure of over Rs 1.9 lakh crore during the last six years, local Micro, Small and Medium Enterprises continue to face an acute shortage of orders, pushing many units towards closure.

According to the chamber, the Government of Jammu and Kashmir spent more than Rs 1.58 lakh crore on capital expenditure between 2020 21 and 2024 25, while Rs 32,607 crore has been earmarked for the current financial year. Additional large-scale spending is also undertaken through Central Public Sector Undertakings, defence and paramilitary forces operating within the Union Territory.

FCIK said this sustained public investment had the potential to significantly expand industrial capacity, generate tens of thousands of factory jobs and facilitate the establishment of new manufacturing units across Jammu and Kashmir. However, it said local industries have remained largely excluded from procurement flows.

“Despite this massive public investment, local MSMEs are facing an acute shortage of orders, and a large number of manufacturing units are either closed or on the brink of closure for want of supply orders,” the chamber said in a statement.

The chamber said the distress was not due to lack of government spending but stemmed from procurement decisions taken without adequate assessment of their impact on the local industrial ecosystem.

FCIK pointed out that at least 50 percent of capital expenditure consists of industrial goods manufactured well before construction activity begins, adding that nearly 25 percent of manufacturing units in Jammu and Kashmir were established specifically to supply such goods for public procurement.

“Even if just 25 percent of this industrial component had been sourced from local manufacturers, the present crisis of idle factories, job losses and underutilised capacity could have been largely avoided,” it said.

The chamber recalled that until 2017, successive governments had acknowledged the structural disadvantages faced by local industries and addressed them through procurement support and cost equalisation measures such as tax remissions and toll exemptions.

It said the shift towards GeM-based procurement, national-level e-tendering and large turnkey contracts, coupled with the withdrawal of cost equalisation measures, had tilted the procurement ecosystem against local MSMEs.

FCIK further said the growing reliance on turnkey and composite contracts had diluted MSME reservation benefits, as contractors independently procure industrial goods, effectively excluding local manufacturers.

Citing the Rs 12,000 crore Revamped Distribution Sector Scheme, the chamber said procurement under the scheme had 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 Policy, including revival of SICOP as the nodal marketing and procurement agency for MSE-reserved and locally consumed items, reforms in e-tendering and turnkey practices to ensure MSME participation, and mandatory segregation of industrial goods from civil contracts.

The chamber has also called for a shift from price preference to purchase preference to ensure assured orders for local manufacturers without imposing additional financial burden on the government.

Appealing to the Omar Abdullah-led government, FCIK said capital expenditure in Jammu and Kashmir should be leveraged not only to create physical assets but also to strengthen local industrial capacity.

It said continued bypassing of local manufacturing in public spending leads to job losses, idle factories and a weakened industrial ecosystem, adding that a well-crafted Public Procurement Policy could help retain value within the Union Territory and generate sustainable long-term economic benefits.