Srinagar, Jan 26: The Federation of Chambers of Industries Kashmir (FCIK) has urged an immediate overhaul of Jammu and Kashmir’s public procurement policy, warning that massive government capital expenditure has largely failed to benefit local manufacturing and employment.

As the government reviews its Industrial Policy, FCIK highlighted that despite unprecedented public spending, local Micro, Small and Medium Enterprises (MSMEs) continue to face a severe shortage of supply orders, pushing many manufacturing units towards closure.
Between 2020–21 and 2024–25, the government spent over ₹1.58 lakh crore on capital expenditure, with an additional ₹32,607 crore allocated for the current financial year. Substantial spending also flows through Central Public Sector Undertakings, defence establishments, and paramilitary forces operating in the Union Territory.
“While this level of investment could significantly expand industrial capacity, generate employment, and foster new manufacturing units, the benefits are largely flowing outside the region due to procurement practices that marginalize local manufacturers,” FCIK said in a statement.
The chamber stressed that the crisis is not due to inadequate spending but to procurement decisions that fail to consider the local industrial ecosystem. At least half of the capital expenditure involves industrial goods manufactured before construction begins—exactly the segment for which nearly a quarter of J&K’s manufacturing units were set up. FCIK said that sourcing just 25% of these goods locally could have prevented widespread closures and job losses.
The chamber also noted that, until 2017, successive governments supported local industries through procurement incentives, cost equalisation, tax remissions, and toll exemptions. The current shift toward GeM-based procurement, national-level electronic tenders, and large turnkey contracts, coupled with the withdrawal of cost equalisation measures, has disadvantaged local MSMEs. Reliance on turnkey and composite contracts further undermines reservation benefits, as contractors independently source industrial goods, sidelining local producers.
Citing the ₹12,000-crore Revamped Distribution Sector Scheme, FCIK noted that procurement is routed entirely through turnkey mechanisms despite the presence of nearly 200 local MSMEs manufacturing electrical goods.
As part of its Industrial Policy recommendations, FCIK proposed a three-tier public procurement framework. Key measures 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 the segregation of industrial goods from civil contracts. The chamber also suggested replacing price preference with purchase preference to guarantee local orders without increasing government expenditure.
Appealing to the Omar Abdullah-led government, FCIK stressed that capital expenditure must be leveraged not only to create physical assets but also to build sustainable local industrial capacity. The chamber warned that bypassing local manufacturers would lead to job losses, idle factories, and long-term weakening of the industrial ecosystem.
“A well-structured public procurement policy can ensure that government investment generates sustainable employment, strengthens local industry, and delivers lasting economic benefits for the people of Jammu and Kashmir,” the statement concluded.