Government buyers are required to buy 25% of their annual requirementfrom micro and small enterprises. Yet many MSEs don't know this exists, don't know how to claim it, or assume it's just a paper rule. It's not — ministries track compliance, and GeM enforces it through its platform design.
The Numbers
- Central government annual procurement: ₹5+ lakh crore
- 25% MSE target: ₹1.25 lakh crore+ annually
- 4% SC/ST sub-target: ₹20,000 crore+
- 3% women MSE sub-target: ₹15,000 crore+
- 358 items exclusively reserved for MSE procurement
Step-by-Step: Claiming the 25% Quota
- Step 1: Udyam registration — register at udyamregistration.gov.in using Aadhaar + PAN. It's free and instant.
- Step 2: List on GeM — create a seller account and list your products/services with the Udyam number linked.
- Step 3: EMD exemption — upload your Udyam certificate while bidding. EMD is automatically waived on GeM.
- Step 4: Purchase preference — if L1 bidder is not an MSE and your quote is within 15% of L1, you get the opportunity to match L1 and win.
- Step 5: For reserved items — bid confidently. Only MSEs are eligible. Non-MSE bids will be rejected.
Purchase Preference: The 15% Rule
If the lowest bidder (L1) is not an MSE, and an MSE has bid within 15% of L1 price, the MSE gets the option to match L1. If the MSE agrees to supply at L1 rate, the order goes to the MSE. This applies to up to 25% of the total quantity being procured.
Common Mistakes
- Not mentioning Udyam number in the bid — the purchase preference won't apply if you don't declare MSE status
- Expired Udyam registration — Udyam doesn't expire, but ensure your category (micro/small) is accurate based on current turnover
- Assuming it applies to state tenders — the 25% mandate is for central government. Some states have adopted similar policies, but check state-specific rules.
- Ignoring the reserved items list — many MSEs bid on open tenders while missing reserved items where they have exclusive access