By Adv. Gaurav Kumar, Founder, Bid Nexa · Advocate, High Court of Jharkhand · General information, not legal advice for a specific case.
Under the Public Procurement (Preference to Make in India) Order 2017, as revised on 4 June 2020, a Class-I local supplier has local content of 50% or more, a Class-II local supplier more than 20% but less than 50%, and a non-local supplier 20% or less. The margin of purchase preference is 20%.
Why it matters
Many central tenders give preference to local suppliers and some restrict bidding to them. Your class decides whether you can bid and whether you get preference, so getting the declaration right is as important as the price.
The three classes
| Class | Local content |
|---|---|
| Class-I local supplier | 50% or more |
| Class-II local supplier | More than 20% but less than 50% |
| Non-local supplier | 20% or less |
Source: DPIIT order as revised on 4 June 2020. Margin of purchase preference: 20%. Ministries can notify higher local content for specific items.
How to work out local content
- List the cost of every input, part and service in the item.
- Separate domestic value added from imported content as the order defines it.
- Calculate the share of local content.
- Keep the working and supporting invoices on file.
- Get the declaration certified where the tender asks for an auditor's or cost accountant's certificate.
Risks of a wrong declaration
A false local content declaration can lead to rejection, forfeiture of security and debarment. Treat it as a legal statement, not a form field. If a product's local content is close to a threshold, take advice before you declare.
Check the tender
Tenders specify which classes can bid, the local content needed for that item and the certificate format. Item-specific notifications can raise the thresholds. Confirm in the tender document / NIT.
Frequently asked questions
Can a non-local supplier bid in Indian government tenders?
It depends on the tender. Some tenders are open only to Class-I and Class-II local suppliers, while others allow non-local suppliers. The tender states who can bid. Confirm in the tender document / NIT.
What is the margin of purchase preference under Make in India?
Under the revised order of 4 June 2020, the margin of purchase preference is 20%.
Who certifies local content?
Many tenders require a self-declaration, and above certain values a certificate from a statutory auditor or cost auditor. The tender specifies the requirement.
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