Make in India Policy in Procurement

Make in India in procurement refers to the government's policy framework that gives purchase preference to goods manufactured in India over imported alternatives, with the degree of preference linked to the percentage of domestic value addition (local content) in the product. It is implemented through the Public Procurement (Preference to Make in India) Order issued by DPIIT and sector-specific orders from individual ministries.

What is Make in India Policy in government procurement?

The Make in India (MII) procurement policy creates a tiered preference system based on local content:

Class-I Local Supplier: Products with 50 percent or more domestic value addition qualify. These suppliers receive the highest purchase preference.

Class-II Local Supplier: Products with 20-50 percent domestic value addition. These suppliers receive a lower tier of preference, they can bid but are preferred over imports only when Class-I suppliers are insufficient to meet quantity requirements.

Non-local suppliers: Products with less than 20 percent local content or imported products. These are eligible only when domestic suppliers cannot meet the requirement.

For procurement up to Rs 200 crore: Only Class-I and Class-II local suppliers can bid if sufficient domestic competition exists. Imports are excluded unless the government determines that domestic supply is inadequate.

For procurement above Rs 200 crore: International competitive bidding is allowed, but domestic suppliers get purchase preference, if a domestic supplier quotes within a specified margin above the lowest foreign bid, the domestic supplier wins at the price matched to the foreign L1.

Local content is calculated as: (Cost of domestic inputs / Ex-factory price of goods) x 100. Self-certification is the primary mechanism, with the caveat that false certification results in a minimum three-year debarment from government procurement.

Sector-specific orders layer additional requirements on top of the general DPIIT order: electronics, solar panels, medical devices, defence equipment, and telecommunications each have their own MII thresholds and verification mechanisms.

Why it matters for bidders

For domestic manufacturers, MII preference is a significant competitive advantage. If your product qualifies as Class-I, you can win a government contract even if a foreign supplier quotes 5-10 percent lower, depending on the sector-specific order provisions.

Documentation matters: the local content certificate must be prepared accurately, with the calculation methodology and input sourcing documented. A self-certification that cannot withstand scrutiny, for example, claiming 55 percent local content while importing the primary component, creates debarment risk.

For companies considering setting up Indian manufacturing to access government procurement, the MII threshold provides the investment decision benchmark. A product with 45 percent local content can be pushed to 50 percent by substituting one imported sub-component with a domestic equivalent, upgrading from Class-II to Class-I preference.

Example

A solar panel manufacturer wants to supply 2 MW of solar panels to a state utility under a Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) tender. The tender is governed by the Ministry of New and Renewable Energy's MII order requiring Class-I local supplier status (50 percent+ local content). The manufacturer uses domestically produced solar cells (a key component) and locally assembled frames, achieving 58 percent local content on the self-certification calculation. They submit the local content certificate with their technical bid and qualify as a Class-I supplier, eligible to compete.

Key rules / thresholds

• Class-I: 50 percent or more domestic value addition, highest preference.
• Class-II: 20-50 percent domestic value addition, lower preference tier.
• Below 20 percent: eligible only if domestic supply is insufficient.
• Procurement up to Rs 200 crore: restricted to domestic suppliers if adequate competition exists.
• False local content declaration: minimum three-year debarment from government procurement.
• Sector-specific MII orders (defence, electronics, solar, medical devices) may have different thresholds.