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 lets each tender fill in its own percentages. 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.

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. There is no single national percentage you can memorise once and apply to every bid. 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.

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 bottom line

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.