By Adv. Gaurav Kumar, Founder, Bid Nexa · Advocate, High Court of Jharkhand · General information, not legal advice for a specific case.
Micro and small enterprises registered for the goods or services being bought are exempt from paying EMD under the Public Procurement Policy for MSEs, and receive tender sets free of cost. Performance security is not exempted. Many tenders now also accept a bid security declaration instead of EMD. Always attach proof in the format the tender asks for.
What the rules say
The MSME Ministry's FAQ on the Public Procurement Policy for MSEs states that MSEs are exempt from paying earnest money deposit and get tender sets free of cost. It also states that performance bank guarantee and security deposit are not exempted.
Separately, the Finance Ministry's Office Memorandum of 12 November 2020 notes that GFR 2017 Rule 170 exempts micro and small enterprises from bid security, and allows departments to ask for a signed Bid Security Declaration instead of bid security. A bidder who withdraws or changes a bid during its validity can then be suspended for the period the tender sets.
Who qualifies
- The business must be a micro or small enterprise, shown by a valid Udyam registration.
- The registration should cover the goods or services being procured. A trader may face extra conditions, so read the tender clause.
- Medium enterprises are not covered by the MSE exemption.
How to claim it
- Read the EMD clause in the NIT and note the exact proof it asks for.
- Download your Udyam certificate and check that the NIC codes match the item.
- Select the exemption option on the portal, if the portal offers one.
- Upload the certificate and any declaration in the tender's format.
- Keep the original handy in case the buyer asks for it during evaluation.
Where bidders go wrong
- Claiming exemption with a Udyam registration that does not cover the item
- Uploading an old Udyog Aadhaar instead of the Udyam certificate
- Assuming exemption also covers performance security
- Ignoring a tender that says EMD exemption is not allowed for that bid
A practical tip
Keep a one-page 'eligibility pack' with your Udyam certificate, NIC codes and a standard exemption letter. It saves time on every bid and reduces technical rejections. Confirm in the tender document / NIT.
Frequently asked questions
Do MSEs have to pay EMD on GeM?
Eligible MSEs can claim EMD exemption where the bid allows it, by meeting the conditions shown in the bid and providing the proof asked for. Some bids set specific conditions, so read the bid document. Confirm in the tender document / NIT.
Is performance security also exempt for MSEs?
No. According to the MSME Ministry's FAQ on the MSE procurement policy, performance bank guarantee and security deposit are not exempted for MSEs.
What is a bid security declaration?
It is a signed undertaking given instead of EMD. If you withdraw or modify your bid during its validity, you can be suspended from bidding for the period stated in the tender.
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