Quick answer: Under the general PPP-MII framework, a Class-I local supplier has at least 50% local content and a Class-II supplier at least 20%. Purchase preference is generally available to Class-I suppliers, subject to the tender and product-specific orders.
Make in India compliance is not a logo or a declaration copied from an old bid. It is a numerical claim about domestic value addition, supported by records and made under a specific procurement order. A wrong classification can cause rejection, recovery, debarment or reputational damage.
The general framework sets minimum local-content bands, a margin of purchase preference and eligibility rules, while nodal ministries may prescribe higher thresholds or product-specific conditions. Always read the tender’s cited order and amendment date.
Class I, Class II and non-local supplier
Under the general revised order:
| Classification | General minimum local content | General treatment |
|---|---|---|
| Class-I local supplier | 50% | Eligible and may receive purchase preference where applicable |
| Class-II local supplier | 20% | Eligible in many procurements but normally no purchase preference |
| Non-local supplier | Below 20% | Eligibility restricted except where the procurement permits, such as applicable global tender cases |
The standard margin of purchase preference is 20%. Small purchases below ₹5 lakh are generally exempt from the order, with a higher targeted exemption for specified scientific procurement. Requirements must not be split to obtain an exemption.
How local content is calculated
The basic concept is the proportion of value added in India: total value of the item or service, excluding net domestic indirect taxes, minus the value of imported content, divided by the total value and expressed as a percentage. The tender may define treatment of imported components, customs duties, freight, services, royalty, software and subcontracting.
Create a bill-of-material or cost build-up showing each component’s source, value and supporting invoice or supplier declaration. Reconcile that calculation with the quoted price. A certificate that states a percentage without an auditable basis is vulnerable during verification.
How purchase preference can affect award
In divisible procurement, eligible Class-I suppliers within the margin may receive an opportunity for part of the quantity under the order’s allocation mechanism. In non-divisible procurement, the eligible Class-I bidder may be invited to match L1 where the stated conditions are met. The exact operation depends on the current order, tender design and whether the item is reserved for Class-I suppliers.
Do not assume that Class-I status guarantees award. The bidder must first be responsive and technically qualified, fall within the price margin and comply with matching or allocation conditions. Where L1 is already Class I, the preference mechanism may not need to be invoked.
Common certification and supply-chain errors
Frequent problems include using the company’s overall Indian turnover instead of item-specific local content, counting imported components as local merely because they were purchased from an Indian distributor, ignoring foreign software or royalty value, and relying on outdated supplier declarations. Another error is changing the supply source after award so that actual local content falls below the declared level.
Procurement, finance and production teams should approve the calculation jointly. Lock critical sources for the contract, obtain change-control approval and retain records through the audit period. Where the tender requires a statutory auditor, cost auditor or other prescribed certification, use the exact format and authority.
Practical checklist
- Identify the exact PPP-MII order and product-specific instruction cited.
- Calculate local content for the offered item or service—not the company overall.
- Trace imported value through every supply-chain tier that the tender requires.
- Reconcile the calculation with the financial bid.
- Use the prescribed certificate and competent certifier.
- Control source changes after award.
- Retain invoices, declarations and cost records for verification.
Frequently asked questions
Does buying an imported item from an Indian dealer make it local?
No. The place of purchase is not the same as domestic value addition. Imported content must be identified under the applicable calculation.
Can a Class-II supplier receive purchase preference?
Under the general framework, Class-II suppliers do not receive the Class-I purchase preference, though they may remain eligible where the tender permits.
Can a nodal ministry require more than 50% local content?
Yes. Product-specific orders can prescribe higher local-content thresholds or additional conditions. The tender’s cited instruction must be checked.
Final takeaway
Treat local-content classification like a financial statement: item-specific, reconcilable and auditable. A defensible calculation can create access and preference; an unsupported declaration creates material bid and contract risk.
Related reading
- MSME Public Procurement Policy: 25% Target, Benefits and Compliance
- Indian Government Procurement in 2026: A Complete Guide for Bidders
- GFR 2017 Updated to January 2026: Key Procurement Rules and Thresholds
Official references
- DPIIT: Public Procurement (Preference to Make in India) Order
- DPIIT: Revised exemption limit for scientific and research institutions
- General Financial Rules, 2017 — updated to 31 January 2026
Editorial note: This article is educational, not legal or bid-specific advice. Tender conditions, portal workflows, thresholds and government instructions can change. Always read the latest tender document, corrigenda, applicable office memoranda and portal guidance before acting.