Kashmir’s industrial paradox: Massive spending, fewer orders for local MSMEs
Srinagar, Jan 26: The Federation of Chambers of Industries Kashmir (FCIK) has called for a reset of Jammu & Kashmir’s Public Procurement Policy, warning that the Union Territory’s unprecedented capital expenditure is flowing out of the region instead of strengthening local manufacturing and creating factory jobs.
As the Government of Jammu & Kashmir reviews its Industrial Policy, the Valley’s apex industrial body has highlighted a stark contradiction: while the government has spent over Rs 1.58 lakh crore on capital expenditure between 2020-21 and 2024-25, with an additional Rs 32,607 crore earmarked for the current year, local Micro, Small and Medium Enterprises (MSMEs) are facing an acute shortage of orders.
“A large number of manufacturing units are either closed or on the brink of closure for want of supply orders,” FCIK said in a statement, adding that substantial spending by Central Public Sector Undertakings, defence, and paramilitary forces further amplifies the scale of public investment in the region.
The chamber emphasised that this distress does not arise from lack of government spending, but from procurement choices that have systematically excluded local manufacturers.
According to FCIK, at least 50 percent of the capital expenditure consists of industrial goods manufactured in factories before construction activity begins—precisely the items that nearly 25 per cent of J&K’s manufacturing units were established to produce 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,” the statement noted.
FCIK recalled that until 2017, successive governments recognised the structural disadvantages faced by regional industries and provided marketing support, cost equalisation measures including tax remissions, toll exemptions, and related incentives.
However, the shift to GeM-based procurement, national-level e-tendering, and large turnkey contracts, coupled with the withdrawal of cost-equalization measures, has tilted the procurement ecosystem decisively against local MSMEs.
The chamber pointed to the increasing reliance on turnkey and composite contracts, which have effectively diluted MSME reservation benefits. “Under such contracts, contractors procure industrial goods independently, effectively excluding local manufacturers and MSME-reserved items,” FCIK stated.
The ongoing Rs 12,000-crore Revamped Distribution Sector Scheme (RDSS) serves as a stark example, where procurement has been routed entirely through turnkey mechanisms despite the presence of nearly 200 local MSMEs manufacturing electrical goods in J&K.
As part of the Industrial Policy review, FCIK has proposed a three-tier Public Procurement Policy. The proposals include reviving the State Industries Corporation (SICOP) as the nodal marketing and procurement agency for MSE-reserved and locally consumed items, reforming e-tendering and turnkey practices to ensure meaningful MSME participation, and mandating segregation of industrial goods from civil contracts.
The chamber has also advocated a major shift from ineffective price preference to purchase preference, which would ensure assured orders to local manufacturers without imposing additional financial burden on the government.
“Capital expenditure in J&K must be leveraged not only to create physical assets but also to build and strengthen local industrial capacity,” FCIK stated in its appeal to Chief Minister Omar Abdullah’s government.
The chamber warned that when public spending consistently bypasses local manufacturing, it leads to lost jobs, idle factories, and a weakened industrial ecosystem. A well-crafted Public Procurement Policy, FCIK emphasised, can ensure that government investment retains value within the Union Territory, generates sustainable employment, and delivers long-term economic benefits for the people of J&K.
