NEW DELHI: The Centre is set to make it compulsory that 4% of its annual purchases be made from units run by dalits and tribals, in what will be its strongest bait for classes which hold the key to political battles at the Centre and states.

The 4% purchase quota proposal from ministry of micro, small and medium enterprises (MSME) is part of the policy that 20% of government procurement be done from MSMEs.

Preferential procurement has been an early poll promise of UPA and its delivery after seven years in power is set to be seen through the prism of Uttar Pradesh elections where Congress is vying with dalit czarina Mayawati to recapture some political space after decades in the wilderness.

Activists believe that mandatory purchases from dalit units would boost entrepreneurship among poor classes with assured state clientele and without the fear of competition from entrenched businessmen. The demand gained ground in the new economy where job quota was shown to have limitations of reach.

The quantum of business available for dalit entrepreneurs may be big. An OECD estimate had suggested that government purchases amounted to 30% of GDP, thereby making business of Rs 94,000 crore available for dalit units. But even by the lower estimate based on Centre's spending pattern, Rs 25,000 crore may be available to units set up and run by SCs and STs.

This year, the Centre budgeted to spend around Rs 12.5 lakh crore, of which defence spending and interest payments add up to Rs 5 lakh crore while subsidies are estimated at Rs 1.4 lakh crore. So, procurement by MSMEs would be around Rs 1.2 lakh crore.

It is not a small figure going by Centre's first tentative steps after years of reluctance in the face of strong lobbying. A sub-committee of the cabinet committee on dalit affairs in UPA-1 had recommended that 30% of government purchases be made from SCs/STs. The inspiration for purchase quota comes from Digvijay Singh regime in MP where it formed part of state policy after Bhopal declaration.

The move, at once part of affirmative action plan, is bound to attract attention of social justice observers. For Congress, it would be a way to blunt the criticism among SCs/STs after failing to extend the frontiers of job reservation to private sector as promised in UPA-1. Its proposal for 5% quota in private enterprises which availed government funding met with lukewarm response and has been put in deep freeze.

If enacted now, Congress could use it as a weapon to contrast its achievement with the work done by Mayawati regime for dalits, a segment Rahul Gandhi has been trying hard to woo from its first choice BSP. Congress needs big ticket decisions to back its chances in April polls in UP and is working hard on a clutch of measures including a new land acquisition bill.