Make in India Preference in Tenders: Class-I and II

By Khanal Group · Tenders and bids · Updated 25 October 2026 · Not legal or tax advice

The Order and where it applies

The Public Procurement (Preference to Make in India) Order, 2017 (PPP-MII Order) was issued by the Department for Promotion of Industry and Internal Trade (DPIIT) under General Financial Rules (GFR) 2017 Rule 153(iii). It has been revised several times; the Department of Expenditure's Manual for Procurement of Works (Second Edition, 2025) reproduces it as revised by DPIIT's order No. P-45021/2/2017-PP (BE-II)-Part(4)Vol.II of 19 July 2024, and the GeM General Terms and Conditions refer to the same version.

The Order applies to procurement of goods, services and works by central ministries and departments, their attached and subordinate offices, autonomous bodies they control, and government companies. For this purpose, works include EPC contracts and services include system integrator contracts. State government buyers usually follow their own procurement policies; on GeM, the GTC lets them say so in the ATC.

Local content and the three classes

Local content is the value added in India: the total value of the item (excluding net domestic indirect taxes) minus the value of imported content (including customs duties), as a percentage of the total value, unless the nodal ministry prescribes otherwise. Imported items bought from local resellers, royalties and technical fees paid abroad, and repackaged, refurbished or rebranded imports are excluded. For multiple items, a weighted average is taken.

Class	Minimum local content	May bid in domestic tenders	Purchase preference
Class-I local supplier	50% (or higher if the nodal ministry notifies)	Yes	Yes, within L1 + 20%
Class-II local supplier	20%, but below the Class-I figure	Yes, unless the item is notified for sufficient local capacity	No
Non-local supplier	Below 20%	Only in a global tender enquiry	No

Nodal ministries may only raise these thresholds, not lower them. Local content is not about nationality: a foreign-owned firm with enough value addition in India can be a Class-I or Class-II supplier. Manufacturers under a Production Linked Incentive (PLI) scheme that have received the incentive are treated as deemed Class-II for that item, for the period the PLI ministry notifies, unless their local content already reaches the Class-I figure.

Who may bid

Where the nodal ministry has notified that there is sufficient local capacity and competition for an item, only Class-I local suppliers may bid, whatever the value. In SI, EPC, turnkey and service contracts, such notified items must be sourced from Class-I suppliers unless a relaxation is approved.
Otherwise, Class-I and Class-II suppliers may bid, and non-local suppliers only in a global tender enquiry. Under GFR Rule 161(iv), a global tender for estimated value below ₹200 crore needs approval of the authority designated by the Department of Expenditure.

How purchase preference works

The margin of purchase preference is 20%: the maximum by which a Class-I supplier's price may be above L1 for it to be offered the chance to match. Preference applies where the bid is evaluated on price alone; the Works Manual notes it does not apply where evaluation includes non-price criteria such as QCBS.

Divisible quantity

If L1 is a Class-I local supplier, it gets the full quantity.
If not, L1 gets 50% of the quantity. The lowest Class-I bidder within L1 + 20% is invited to match L1 for the other 50%. If it declines, the next Class-I bidder within the margin is invited, and so on.
Any part of the 50% left uncovered may also be ordered on L1.

Indivisible quantity, and services on price alone

If L1 is Class-I, it gets the contract.
If not, the lowest Class-I bidder within L1 + 20% is invited to match L1 for the whole contract, then the next, and so on. If none matches, the contract may go to L1.

If the buyer negotiates with a non-Class-I L1, the 20% margin is measured on the original L1 price, and Class-I bidders are asked to match the negotiated price. Tenders awarding to multiple bidders have their own rule aimed at at least 50% of the quantity going to Class-I suppliers.

Worked example

Illustrative: a divisible order for 200 units. Bids: P (non-local, global tender) ₹10,000 per unit; Q (Class-II) ₹10,500; R (Class-I) ₹11,500; S (Class-I) ₹12,300.

L1 is P. The margin is ₹10,000 × 1.20 = ₹12,000. R is within it; S is not; Q is Class-II and gets no preference.
P is awarded 100 units. R is invited to match ₹10,000 for the other 100 units. If R accepts, it supplies 100 units at ₹10,000. If R declines and no other Class-I bidder is within ₹12,000, those 100 units may also go to P.

With MSE preference and on GeM

When a tender also applies the MSE policy, follow the procedure it states for the two preferences together (see MSE purchase preference). Under GeM's Bid to RA rules, a seller eligible for Make in India preference whose price is within 20% of a non-MII L1 is allowed into the reverse auction even if it would otherwise be eliminated (see how GeM bids are evaluated).

Self-certification and verification

At bid stage, Class-I and Class-II bidders state their percentage of local content, self-certify that the item meets it, and give the location(s) where the value is added.
Above ₹10 crore, a certificate from the statutory or cost auditor (for companies), or a practising cost or chartered accountant (for others), giving the local content percentage is required.
At execution, for contracts above ₹10 crore, a local content certificate from a practising cost or chartered accountant is required; where that is not possible during execution, it may be given after completion within a time the buyer accepts.
Falling short: if the supplier's class changes from Class-I to Class-II or non-local, or from Class-II to non-local, a penalty of up to 10% of contract value may be imposed, but the contract is not terminated on that account.
False declarations breach the Code of Integrity under GFR Rule 175(1)(i)(h), and the bidder can be debarred for up to two years under Rule 151(iii).

The local content requirement, margin and procedure must be stated in the tender and cannot be changed during that procurement.

Exemptions and protections for local suppliers

Procurement below ₹5 lakh is exempt, if not split to avoid the Order.
Spares and consumables for closed systems, and maintenance or service contracts with the OEM, are exempt.
Tenders may not demand proof of supply abroad or of exports as experience.
Turnover, production capability and financial strength criteria should not unreasonably exclude Class-I or Class-II suppliers.

Checklist for a bidder

Work out local content item by item, with imported content (including duties) and excluded items, before you decide your class.
Check whether the nodal ministry has notified a higher threshold, or sufficient local capacity, for your item.
Keep a working sheet and the location of value addition to support the self-certificate.
Arrange the auditor or CA certificate early if the value exceeds ₹10 crore.
Track local content during execution; a class change can cost up to 10% of contract value.
Be ready to match L1 quickly if you are Class-I and within 20%.

K-Tender drafts declarations and letters from your company data in Word and PDF, and keeps each signed version in the document vault so the exact certificate used in a bid is frozen when you record the submission.

Common questions

What local content makes a Class-I local supplier?

At least 50%, unless the nodal ministry has notified a higher figure for the item. A Class-II local supplier needs at least 20% but less than the Class-I figure. Below 20% is a non-local supplier.

Does a Class-II local supplier get any price preference?

No. The Order gives purchase preference only to Class-I local suppliers. Class-II suppliers may bid, but they are not invited to match L1.

Can a non-local supplier bid in a domestic tender?

Generally no. Only Class-I and Class-II local suppliers are eligible except in a global tender enquiry. For goods, services and works below ₹200 crore not covered by a sufficient-local-capacity notification, a global tender needs approval of the authority designated by the Department of Expenditure.

When is a CA certificate of local content needed?

At bid stage, self-certification is enough below ₹10 crore. For procurement above ₹10 crore, a certificate from the statutory or cost auditor (for companies) or a practising cost or chartered accountant (for others) is required, and at execution of contracts above ₹10 crore a certified local content statement is required.

Is a foreign-owned company barred from being a local supplier?

No. Local content is not tied to nationality. A foreign-owned firm that adds enough value in India can be a Class-I or Class-II local supplier.

Does the Order apply to small purchases?

Procurement with an estimated value below ₹5 lakh is exempt, provided the requirement is not split to avoid the Order. Spares and consumables for closed systems and maintenance contracts with the OEM are also exempt.

Make in India preference in public procurement