Public Procurement (Preference to Make in India) Order

The Public Procurement (Preference to Make in India) Order is the executive order issued by the Department for Promotion of Industry and Internal Trade (DPIIT) that creates the operational framework for purchase preference to domestic manufacturers in all central government procurement. It is the legal instrument through which the Make in India initiative is applied to government buying.

What is the Public Procurement (Preference to Make in India) Order?

The Order, first issued in 2017 and revised in 2020, establishes the Class-I and Class-II local supplier classification system and prescribes how procurement authorities must apply purchase preference at each value threshold.

The Order applies to all central government ministries, departments, public sector undertakings, and bodies controlled by the central government. State governments are encouraged to adopt equivalent orders, and many have done so.

Key operational provisions:

Restricted competition: For procurement up to Rs 200 crore, if there is sufficient competition among domestic (Class-I and Class-II) suppliers, procurement is restricted to domestic suppliers only. "Sufficient competition" means at least three eligible domestic suppliers competing. Below that threshold, the government must document why sufficient domestic competition does not exist before allowing foreign suppliers.

Price preference mechanism: For procurement above Rs 200 crore where international competitive bidding is necessary, if a Class-I domestic supplier quotes within the specified margin above the foreign L1 price, the domestic supplier wins at the L1 price. For Class-II suppliers, the preference margin is lower.

Ministry-specific orders: Each ministry can issue sector-specific orders under the DPIIT umbrella order with higher local content thresholds, product-specific definitions of domestic value addition, and additional verification requirements. These ministry orders prevail in their sectors.

Verification: DPIIT designates third-party agencies for local content verification in specified sectors. Where third-party verification applies, self-certification alone is insufficient.

Effective date and review: The Order is reviewed periodically. Thresholds and preference margins can be changed by subsequent ministry orders.

Why it matters for bidders

The Order fundamentally changes the competitive landscape for government product procurement. Understanding whether your product qualifies as Class-I or Class-II, and the distinction between them, determines whether you compete in a field that includes foreign suppliers or a domestic-only field.

For companies that source components internationally, the Order creates an incentive to build domestic supply chains. Moving from Class-II to Class-I status by increasing local content from 45 to 55 percent may require a six-month development effort with domestic component suppliers, an investment that pays back through preference in every subsequent tender.

For sectors where ministry-specific orders apply (electronics, defence, solar, medical devices), the relevant ministry order's threshold and definition of local content may be more stringent than the general DPIIT order. Bidders must check both the general Order and the sector-specific order before self-certifying.

Example

A foreign manufacturer of industrial pumps intends to bid on a central government water supply project worth Rs 150 crore. Since the value is below Rs 200 crore, the Order restricts competition to domestic suppliers if three or more compete. The foreign supplier checks whether their Indian subsidiary with 52 percent local content qualifies as a Class-I local supplier. It does. They bid through the Indian subsidiary with the local content certificate, competing on equal terms with other domestic Class-I suppliers. The lowest-priced Class-I domestic supplier wins.

Key rules / thresholds

• Procurement up to Rs 200 crore: restricted to domestic suppliers if at least three domestic suppliers compete.
• Class-I (50 percent+ local content): eligible for all preference provisions.
• Class-II (20-50 percent local content): eligible for preference over non-domestic suppliers.
• False self-certification: minimum three-year debarment from government procurement, plus financial penalties.
• Sector-specific orders from individual ministries override or supplement the DPIIT Order in their areas.
• The Order does not apply to procurement through GeM for product categories not specifically listed under the Order's annexure.