Fifty per cent is the number most bidders have heard, and it is the one they most often get wrong. Make in India purchase preference does not simply reward Indian firms: it sorts bidders by the local content in what they are offering, gives the higher class a right to match the lowest price rather than a discount, and sets floors rather than one fixed figure: under the national Order a Class-I local supplier needs at least 50% local content, a Class-II local supplier at least 20%, and the margin of purchase preference is 20%, with each notice stating the figures that apply to it. A supplier who is not lowest can take the work. A supplier who is lowest can lose half the order.

Local content, not nationality

The test is about the offering, not the company. A firm registered in India, run by Indians and paying Indian taxes can still fail the threshold if the value in what it is supplying was added elsewhere.

The Delhi High Court set the working definition out in Mageba Bridge Products Private Limited v RITES Limited, decided on 21 September 2023, quoting the tender’s own clause: a Class-I local supplier means a supplier or service provider whose goods, services or works offered for procurement has local content equal to or more than 50%, as defined under that clause.

On the other side of the line, the clause said a Class-II local supplier will not get purchase preference in any procurement undertaken by the procuring entity. Class-II can still clear eligibility. What it does not do is win a matching right.

In that case the bidder filed a chartered accountant’s certificate with its bid, declaring total local content above 50%, and on that basis claimed Class-I status on a bid of about ₹29.52 crore against a rival at about ₹31.93 crore.

What the Make in India Order sets for every tender

The clauses in that tender come from the Public Procurement (Preference to Make in India) Order, 2017, issued by the Department for Promotion of Industry and Internal Trade under Rule 153(iii) of the General Financial Rules. The text quoted below is the revision dated 19 July 2024, issued with immediate effect. The tender in the Mageba case was drafted under an earlier version, so where the two differ, a new notice follows the current Order.

Term What the Order says Para
Class-I local supplier Local content of at least 50% 5
Class-II local supplier Local content of at least 20%, but below the Class-I figure 2, 5
Non-local supplier Local content below the Class-II figure 2
Margin of purchase preference 20% 6
Higher thresholds A Nodal Ministry may prescribe only a higher minimum local content for its items, never a lower one 5
Who may bid Only Class-I and Class-II suppliers, unless a global tender enquiry is issued; below Rs 200 crore a global tender enquiry needs the approval of the competent authority designated by the Department of Expenditure 3(b)
Items with sufficient local capacity Only Class-I suppliers may bid, whatever the value 3(a)
Small purchases Procurement below Rs 5 lakh is exempt, and a purchase may not be split to get under that line 4

Local content has a defined calculation. It is the total value of the item procured, leaving out net domestic indirect taxes, minus the value of imported content including all customs duties, expressed as a percentage of the total value. Imported items bought from a local reseller or distributor are left out of local content, and so are licence fees, royalties and technical charges paid out of India. Where a contract supplies several items, the weighted average of all of them is taken.

The percentages are blanks the tender fills in

This is the finding that changes how you read any of it, and it is visible in the clause text itself.

The same tender recorded that the margin of purchase preference shall be 20%, and then, on the next line, that the minimum local content for this tender shall be 20%, followed by the drafting instruction still sitting in the document: fill the value of minimum local content.

That blank is the whole point. The Order fixes floors of 50% and 20%, but a Nodal Ministry can notify higher figures for its own items, and paragraph 7 of the Order requires the notice inviting tenders to state the minimum local content and the margin of purchase preference, which then cannot be varied during that procurement. The structure is standard, the thresholds are filled in per tender, and a figure you carry over from last year’s notice is a guess.

So the first job on any tender carrying this policy is to find three numbers in that specific document: the local content required to be Class-I, the minimum local content to bid at all, and the margin of purchase preference.

How Make in India purchase preference decides the award

The mechanism is a matching right, and it runs differently depending on whether the work can be split.

Situation What the clause does
L1 is a Class-I local supplier The contract is awarded to L1 for the full quantity
L1 is not Class-I, work is divisible 50% of the order quantity goes to L1; the lowest Class-I supplier whose price falls within the margin is invited to match the L1 price for the remaining 50%; if it fails, the next higher Class-I within the margin is invited, and so on; any quantity still uncovered may also go to L1
L1 is not Class-I, work is not divisible The lowest Class-I supplier, if within the margin, is invited to match the L1 price and takes the contract on matching

Two consequences follow for how you bid. If you are Class-I, you do not need to be lowest, but you do need to be close enough to be inside the margin, because the matching right never opens to a bidder outside it. If you are not Class-I, being L1 may secure you half an order rather than all of it, and half an order still carries your full mobilisation.

Price the job on the quantity you might actually receive. Owners who cost a divisible contract on the whole tonnage and win 50% of it discover the overhead does not halve with the work.

The Order also limits what a tender can ask of local bidders. Paragraph 10 bars eligibility conditions that require proof of supply in other countries or proof of exports, and asks procuring entities to make sure conditions on turnover, production capability and financial strength do not shut out Class-I or Class-II suppliers beyond what quality or creditworthiness needs. If a notice’s work experience criteria or average annual turnover requirement looks built to keep local firms out, that paragraph is the one to cite in your pre-bid query.

Proving the number

At the bidding stage the clause required the supplier to indicate the percentage of local content and provide self-certification that the item offered meets the requirement for its class, along with details of the locations at which the local value addition is made.

Above a value of ₹10 crore it went further: a certificate from the statutory auditor or cost auditor of the company, or from a practising cost accountant or practising chartered accountant for suppliers that are not companies, giving the percentage of local content.

That distinction is worth planning around. Below the threshold you are certifying yourself, which is faster and entirely your risk. Above it you need a professional to put their name to a computation, and that computation takes preparation your bid timetable rarely allows for.

The exposure that outlives the award

Most bidders treat the declaration as a bid formality. The clause treats it as a continuing obligation.

It provided that in case of a false declaration or submission of a false certificate, banning of business dealings shall be done with the defaulter under the tender’s guidelines, and it closed with a note that verification of local content shall be done during execution of work.

Read those together. The percentage you certify to win is testable on site afterwards, and the penalty is not a price adjustment but exclusion from future business, which is the same commercial death as blacklisting. Certify a number you can still stand behind when someone counts what actually arrived at the site.

The current Order makes the same point in national terms. At execution, every contract above Rs 10 crore needs a local content certificate from a practising cost or chartered accountant, which may follow completion of the contract within a time the buyer accepts. If the supplier turns out not to meet its class, dropping from Class-I to Class-II or non-local, a penalty of up to 10% of the contract value may be imposed, though the contract is not terminated on that account. A false declaration is a breach of the Code of Integrity under Rule 175(1)(i)(h) of the General Financial Rules and can bring debarment for up to two years under Rule 151(iii), and a supplier debarred for violating the Order loses its preference with every other procuring entity for that period.

Does Make in India preference help your bid?

Treat Make in India purchase preference as a pricing question rather than a patriotism question. Your class decides whether you get a matching right; the margin decides whether you are close enough to use it; the tender decides both numbers.

Before the next bid, work out your genuine local content with your accountant and keep the computation on file, because assembling it under a submission deadline is how wrong percentages get certified. Then read the specific clause in the specific notice rather than the version you remember. If you are building a pipeline of government work, keep a shortlist running from the live tenders and contract opportunities, check your Government e-Marketplace registration and Udyam status are current, and match any new machine on equipment finance to work you have actually been awarded.

Rates, schemes, specifications and prices change — confirm current terms with the OEM, dealer, bank or insurer before deciding. The clauses summarised here are from one tender as recorded in a judgment; the notice you are bidding on sets its own thresholds and governs. The national figures are from the Order as revised on 19 July 2024.