Make in India Purchase Preference: Class-I and Class-II Local Suppliers Explained

Purchase preference under the Make in India policy turns on where the value in what you supply was created, not on how large your firm is. It can beat a lower price, which makes it one of the few levers in public procurement that rewards something other than the quote.

Class-I and Class-II

The Public Procurement (Preference to Make in India) Order classifies suppliers by the local content in what they offer:

• A Class-I local supplier meets or exceeds the higher local content threshold set by the order or by the relevant ministry
• A Class-II local supplier meets the lower threshold
• A supplier below the lower threshold is a non-local supplier

Local content is the value of the goods or services minus the value of imported content, expressed as a percentage. Which threshold applies to your product category can be varied by the administering ministry, so the tender's own clause governs.

What the preference does

Where a tender is subject to the order, Class-I local suppliers receive purchase preference. In broad terms, where a Class-I supplier's quote is within a margin of the lowest evaluated bid, that supplier may be given the opportunity to match the lowest price and receive the order.

Some procurements are restricted to Class-I suppliers entirely, particularly where the ministry has determined there is sufficient local capacity.

The practical effect is that a Class-I supplier can win at a price above L1, which is not true of any other lever in a standard tender.

The certification burden sits on you

This is the part that catches suppliers out. Local content is self-certified, and the certification carries consequences.

Typically a bidder must declare the percentage of local content and the location where value is added. For higher-value procurements, the order contemplates certification by a statutory auditor or cost accountant rather than a bare self-declaration, and the tender will say which applies.

A false declaration on local content is treated as a false declaration, with consequences that can reach debarment. See affidavits and undertakings in tenders for what you are signing.

Computing local content honestly

The calculation is value of the offering minus value of imported content, over value of the offering. What makes it non-trivial:

• Imported components bought from a domestic trader are still imported content. The purchase being domestic does not make the content local.
• Value added domestically includes local manufacturing, assembly and services that genuinely add value, not repackaging.
• The boundary is the offering, not the firm. A firm with high local content overall may be offering a product with low local content.

Where you are close to a threshold, document the working. That is what a query is answered with.

Where it shows up most

Purchase preference features heavily on GeM, where the platform captures local content declarations as part of the bid, and on goods procurement generally. It appears less often in a decisive way on pure works contracts, where the local content question is usually less contested.

How to participate in a GeM bid covers where the declaration sits in a GeM bid.

It stacks with, but differs from, MSE preference

Two separate preference regimes, from two separate instruments:

• MSE preference under the Public Procurement Policy for Micro and Small Enterprises 2012 turns on enterprise size
• Local supplier preference under the Make in India order turns on local content

A firm can qualify under both, and they are claimed separately with separate documents. Neither substitutes for the other. See what Udyam registration is worth and the 25 percent MSE procurement target.

The practical position

If you manufacture or add substantial value in India, work out your local content percentage for each product line once, document the working, and keep it current as your supply chain changes. It is a number you will be asked for repeatedly, and having it computed rather than estimated is what makes it usable.

If you are essentially importing and reselling, the honest answer is that this preference is not available to you, and declaring otherwise is a risk out of all proportion to a single order.

Avsar records your local content declarations alongside the rest of your company profile so the same computed figure is used consistently across bids. See the eligibility engine.