Government launches Vivad se Vishwas scheme for relief to MSMEs for COVID-19 period, as announced in the Union Budget 2023-24

The Department of Expenditure, Ministry of Finance, has launched the scheme, “Vivad se Vishwas I – Relief to MSMEs” for providing relief to Micro, Small and Medium Enterprises (MSMEs) for COVID-19 period. The scheme was announced in the Union Budget 2023-24 by Union Finance Minister Smt. Nirmala Sitharaman.  In Para 66 of the Union Budget speech, Smt. Sitharaman had announced:-

“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 Government and Government undertakings. This will provide relief to MSMEs”.

The Department of Expenditure, Ministry of Finance, had issued an order on 06.02.2023 indicating the broad structure of the scheme. Final instruction in this regard, extending the relief to cover more cases and relaxing the limits of refunds was issued on 11.04.2023. The scheme was commenced from 17.04.2023 and the last date for submission of claims is 30.06.2023.

COVID-19 pandemic, one of the biggest crises in the human history, had a devastating impact on economy, especially MSMEs. The relief provided under this scheme is in continuation to the efforts of the government in promoting and sustaining the MSME sector.

Under the scheme, Ministries have been asked to refund performance security, bid security and liquidated damages forfeited/ deducted during the COVID-19 pandemic. Certain relief has also been provided to MSMEs debarred for default in execution of contracts during the COVID-19 period.

The Ministry of Finance, through this scheme, decided to give following additional benefits to eligible MSMEs, affected during the COVID-19 period:

1. 95% of the performance security forfeited shall be refunded.
2. 95% of the Bid security shall be refunded.
3. 95% of the Liquidated Damages (LD) deducted shall be refunded.
4. 95% of the Risk Purchase amount realized shall be refunded.
5. 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.

6. No interest shall be paid on such refunded amount.

As per the Office Memorandum issued by the Department of Expenditure to Secretaries of all the Ministries/ Departments of Government of India and Chief Secretaries/ Administrators of Union Territories, relief will be provided in all contracts for procurement of Goods and Services, entered into by any Ministry/ Department/ attached or subordinate office/ autonomous body/ Central Public Sector Enterprise (CPSE)/ Central Public Sector Banks/ Financial Institution etc. with MSMEs, which meet the following criteria:

1. Registered as a Medium, Small or Micro Enterprise as per relevant scheme of Ministry of MSME on the date of claim by supplier/ contractor. MSME could be registered for any category of Goods and Services.
2. The original delivery period/ completion period stipulated in contract was between 19.02.2020 and 31.03.2022 (both dates are inclusive).

Government e-Marketplace (GeM) has developed a dedicated web-page for implementation of this scheme. Eligible claims shall be processed only through GeM.