Bidding
Make in India in tenders: Class-I and Class-II local suppliers explained
Make in India in tenders: Class-I (50%) and Class-II (20%) local content, who can bid, the 20% purchase preference, certificates and MII on GeM.
By GovtTenderHub editorial teamUpdated 9 min read
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In short
- The Public Procurement (Preference to Make in India) Order 2017, last revised on 19 July 2024, grades bidders by the local content of what they offer: Class-I local supplier at least 50%, Class-II local supplier at least 20% but below 50%, and non-local supplier below 20%.
- In central government tenders only Class-I and Class-II suppliers can bid, unless the buyer issues a global tender enquiry, which it can't do below ₹200 crore without special approval. Where the nodal ministry has notified enough local capacity, only Class-I can bid.
- Purchase preference is for Class-I only. If L1 isn't Class-I, the lowest Class-I bidder within 20% of L1 can match the L1 price and take half the order, or all of it if the order can't be split.
- You self-certify local content. Above ₹10 crore you also need an auditor's or practising accountant's certificate. A false declaration can mean debarment for up to two years.
- Purchases under ₹5 lakh are exempt, and the preference doesn't apply in QCBS. On GeM, each bid document says whether it applies.
Make in India decides two things in a central government tender: whether you can bid at all, and whether you can win without being the lowest. Both turn on the local content of what you offer. Paragraph numbers below refer to the order as revised on 19 July 2024.
What local content means
Para 2 defines local content as "the amount of value added in India": unless the nodal ministry prescribes otherwise, the value of the item (excluding net domestic indirect taxes) minus its imported content (including customs duties), as a percentage. The Manual for Procurement of Goods 2024 gives the formula:
Local content = (sale price − value of imported content) × 100 ÷ sale price
Say you sell a pump for ₹1,00,000 before GST, and its imported parts cost ₹35,000 including customs duty. Local content is 65%, so you're Class-I. With ₹60,000 of imports it would be 40% (Class-II); with ₹85,000, 15% (non-local).
Under the order's notes, imported items bought from Indian resellers still count as imported, licence fees and royalties paid abroad are excluded, and repackaged, refurbished or rebranded imports are treated as resold imports. For several items, take the weighted average.
Ownership doesn't matter: the Goods Manual notes that a foreign-owned firm can be Class-I or Class-II by adding value in India.
Class-I, Class-II and non-local suppliers
| Class | Local content (default) | Can bid in a domestic tender | Purchase preference |
|---|---|---|---|
| Class-I local supplier | 50% or more | Yes | Yes |
| Class-II local supplier | 20% or more, below 50% | Yes, unless the item is Class-I only | No |
| Non-local supplier | Below 20% | No, only in a global tender enquiry | No |
Exactly 50% makes you Class-I, and exactly 20% Class-II (Goods Manual FAQ).
Nodal ministries can set higher minimums for their items, never lower ones (para 5). The tender must state the minimum local content, the margin and the procedure, and can't change them mid-procurement (para 7). A manufacturer that has received PLI scheme incentives for an item is treated as Class-II for it unless it meets the Class-I minimum (para 2A).
Who can bid
- The default (para 3(b)): only Class-I and Class-II suppliers, except in a global tender enquiry (GTE), where non-local suppliers can bid too.
- GTEs are limited. Below ₹200 crore, a GTE needs approval from the authority the Department of Expenditure designates (para 3(b) and Rule 161(iv) of the General Financial Rules).
- Items with enough local capacity (para 3(a)): where the nodal ministry has said so, only Class-I suppliers can bid, whatever the value.
- Inside EPC, system integrator, turnkey and service contracts (para 3.1): items notified as having enough local capacity must be sourced from Class-I suppliers, unless relaxed for a project.
Buyers also can't demand proof of supply abroad or exports (para 10).
How the 20% purchase preference works
The margin of purchase preference is 20% (para 6), and only Class-I suppliers get it (para 3A).
Items that can be split (para 3A(b)):
- If L1 is Class-I, L1 gets the full quantity.
- If not, L1 gets 50%, and the lowest Class-I bidder within 20% of L1 is invited to match the L1 price for the other 50%.
- If it declines or takes less, the next Class-I bidder within the margin is asked, and so on. Anything left goes to L1.
Items that can't be split, and services evaluated on price alone (para 3A(c)): the lowest Class-I bidder within the margin is invited to match L1 and gets the whole contract. If none matches, L1 wins.
For example, in a tender for 100 chairs, L1 is a Class-II supplier at ₹5,000 a chair, so the margin runs up to ₹6,000. Class-I bidder B quoted ₹5,700. L1 gets 50 chairs, and B is asked to supply the other 50 at ₹5,000. If B declines, the next Class-I bidder at or below ₹6,000 is asked. Had the tender been for one machine, B would be offered all of it at L1's price.
Not in QCBS. The Department of Expenditure's manuals say the preference "would not be applicable where evaluation is based inter-alia on non-price criteria, e.g., QCBS". The L1 guide explains QCBS.
When the order doesn't apply
- Purchases under ₹5 lakh (para 4). Buyers must not split a purchase to get under it.
- Spares and consumables for closed systems, and maintenance contracts with the original equipment maker (para 4A).
- Case-by-case orders by the buying department, with its Minister's approval, lowering the minimum local content or the margin, or exempting an item (para 14).
- Tenders issued before 19 July 2024 (para 20).
- State tenders. The order binds central ministries, departments, their offices, autonomous bodies and government companies. On GeM, state buyers can follow their state's own policy by saying so in the bid's terms.
Proving your local content
Para 9 sets out the checks:
- At bidding, you self-certify the local content percentage and give the locations where value is added.
- Above ₹10 crore, you also need a certificate from your statutory or cost auditor (companies), or a practising cost accountant or chartered accountant (others).
- During contracts above ₹10 crore, a practising cost or chartered accountant certifies the local content. If you turn out to be in a lower class, the buyer can impose a penalty of up to 10% of the contract value, though the contract isn't terminated.
There's no government-issued "Make in India certificate": the declaration is yours, and it must reflect the item as it is now, not future plans (Goods Manual FAQ).
Make in India and the MSE preference together
A Class-I supplier may or may not be an MSE. The Department of Expenditure's guidelines of 18 May 2023 settle whose turn comes first:
- L1 is an MSE and Class-I: L1 gets the order.
- Item can be split: if L1 is Class-I but not an MSE, only the MSE preference applies; if L1 is an MSE but not Class-I, only the Make in India preference. If L1 is neither, MSEs within 15% get their share first (up to 25%), then Class-I suppliers within 20% get half of the remaining quantity, and L1 gets the rest.
- Item can't be split: an MSE that is also Class-I, within 15%, gets the first chance. Failing that, L1 keeps it if it is an MSE or Class-I; if it is neither, an MSE gets the next chance, then a Class-I supplier.
The Department's own example: of 50 desktop computers, an MSE within 15% gets 13, a Class-I supplier gets 19 (half of the remaining 37, rounded up), and L1 gets 18.
The same guidelines say non-local suppliers, MSEs included, can bid only in a global tender enquiry. Some GeM bid documents word this differently, so read the bid's own clause. For the MSE side, see MSME benefits in government tenders.
Make in India on GeM
GeM's general terms apply the 2024 order's certification rules and penalties. In practice:
- Your catalogue. You declare a product's local content ("MII content") when you upload it, once you pick India as the country of origin. GeM's seller FAQ says that if it's below what a bid requires, you can't take part in that bid.
- The bid document. Product bids show "MII Purchase Preference" (Yes or No), the price band ("L1+X%", normally 20) and the "Maximum Percentage of Bid quantity for MII purchase preference". Service bids often show "MII Compliance" instead. Many bids also ask for the OEM's certificate of local content, without which no preference is given. See how to read a GeM bid document.
- Reverse auctions. A Make in India seller within 20% of a non-MII L1 is let into the auction even if the elimination rule would drop it (GeM reverse auction guide).
- Complaints about local content in a bid go to the buyer, not to GeM.
Of the 11,009 live GeM bid documents GovtTenderHub had read on 29 September 2026, 66.4% have the Make in India line ("MII Purchase Preference", or "MII Compliance" in service bids) set to Yes.
Common questions
What is a Class 1 local supplier?
A supplier whose goods, services or works offered in the tender have at least 50% local content, or the higher minimum a nodal ministry has set for that item. Only Class-I suppliers get purchase preference.
What is the difference between Class 1 and Class 2 local supplier?
Class-I needs at least 50% local content, Class-II at least 20% but below 50%. Both can bid in domestic tenders unless the item is Class-I only, but only Class-I gets the 20% preference.
Is a local content certificate required?
Up to ₹10 crore, your self-certification is enough under the order. Above ₹10 crore you also need an auditor's or practising accountant's certificate. The tender may ask for more, such as an OEM's certificate on GeM.
Does Make in India apply to GeM bids?
Yes, for central government buyers; the bid document shows whether MII purchase preference is on. State buyers on GeM can follow their state's own policy instead.