Government Tenders for MSMEs: EMD Exemption, Purchase Preference and Selling on GeM

Central government ministries, departments and public sector undertakings buy goods and services worth enormous sums every year, and micro and small enterprises (MSEs) are given specific advantages in that buying. Udyam registration is the key to claiming them. This guide explains the main benefits and how to use them, including on the Government e-Marketplace (GeM).

The Public Procurement Policy

Under the Public Procurement Policy for Micro and Small Enterprises, central ministries, departments and public sector undertakings are expected to buy at least 25% of their annual procurement of goods and services from MSEs. Within that, there are sub-targets for MSEs owned by entrepreneurs from scheduled castes and scheduled tribes, and by women. This creates a steady demand for MSE suppliers.

The Benefits for MSEs

Free tender documents

Registered MSEs can get tender documents free of cost.

EMD exemption

MSEs are generally exempt from paying earnest money deposits (EMD), which otherwise lock up working capital for every bid. Some tenders replace the EMD with a bid security declaration.

Purchase preference

Where an MSE quotes within a set margin of the lowest price (L1) and the L1 bidder isn't an MSE, the MSE may be allowed to supply a portion of the requirement by matching the L1 price.

Reserved items

A list of items is reserved for procurement only from MSEs.

Relaxations

Many departments relax prior-experience and prior-turnover criteria for MSEs and startups, though quality and technical requirements still apply.

Who Qualifies

• Micro and small enterprises with a valid Udyam registration for the goods or services in the tender.
• The benefits are for manufacturers and service providers. Traders generally don't get public procurement benefits, even if registered on Udyam.
• Medium enterprises don't get the MSE benefits.

Make sure the products or services in your Udyam registration match what you're bidding for, since departments check this.

Selling on GeM

The Government e-Marketplace (GeM) is the online platform through which many government buyers purchase common goods and services. To sell on GeM:

1. Register as a seller using your PAN, Aadhaar of the authorised person, and business details.
2. Link your Udyam registration so you're identified as an MSE and can claim the benefits.
3. Complete your profile, including bank details and documents.
4. List your products or services, with specifications and prices, and respond to bids and reverse auctions.

GeM shows buyers MSE sellers, and many purchases are made directly, through bids, or through reverse auctions on the platform.

State Government Tenders

Many states have their own procurement policies with similar preferences for local MSEs. Check the state's policy and its e-procurement portal, since benefits and conditions differ.

Practical Tips

• Keep Udyam, GST and income tax returns up to date, since tenders ask for them.
• Keep turnover certificates, financial statements and experience certificates ready.
• Read the tender's MSE clause carefully; conditions vary.
• Price realistically, since purchase preference only applies within the set margin of L1.

Getting Help

Think Filing gets MSEs tender-ready: Udyam registration matched to the products bid for, GeM seller onboarding, and the certificates tenders ask for.

Sources

• Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012, as amended.
• Government e-Marketplace seller guidance.