Make in India class 1 vs class 2: purchase preference

The short answer: you’re Class-I if at least 50% of the value you supply is Indian, Class-II if you’re between 20% and 50%, and treated as non-local below that. Class-I is the one that matters — it carries the right to match the lowest price and take the order.

A supplier I know lost a tender on price by a hair, then watched the contract go to a firm that had quoted higher. He thought it was a mistake. It wasn’t. The winner was a Class-I local supplier, the tender carried a Make in India purchase preference, and that firm was offered the chance to match the lowest price and take the order. He’d never read the MII clause closely — and it cost him the bid.

That’s the policy I want to unpack here. It decides outcomes far more often than most suppliers realise, and which side of it you’re on is something you can usually work out in a few minutes.

What the Make in India purchase preference does

Formally, this is the Public Procurement (Preference to Make in India) Order, issued and amended by DPIIT. The intent is plain: government buyers should prefer suppliers whose goods and services carry genuine Indian local content over those who simply import and resell. It doesn’t ban anyone from bidding. It changes who gets preference when the prices are close.

The mechanism rests on one number: local content — the share of the value of what you supply that’s actually Indian. Material, labour, and overheads that originate in India count. The imported portion doesn’t. Where you land on that number sorts you into one of two categories, and the categories are the whole game.

I touched on this briefly when I wrote about EMD, ePBG, MII and MSE. Here I want to go properly into the Class-I and Class-II split, because that’s where suppliers either gain an edge or lose one without understanding why.

Class-I vs Class-II: the local content split

The split is based entirely on local content. The thresholds commonly specified in the policy and in tenders:

	Class-I	Class-II
Local content	At least 50%	20% to below 50%
At award	Strongest preference, can match L1 within the margin	Limited — ahead of non-local only
Where it helps	Close tenders where margins are tight	Better than nothing, not a winning edge

Below 20% local content, you’re treated as a non-local supplier and sit at the bottom of the preference order.

One caution. I’ve stated 50% and 20% because those are the figures most commonly written into the policy and into tender documents, but they aren’t universal. Individual nodal ministries can issue their own orders setting a different threshold for a specific product category, sometimes higher. So don’t memorise these two numbers and bid on faith. The number that governs your bid is the one printed in the tender in front of you — read it every time, the same way you’d read the rest of the tender document.

Nobody hands you a certificate — you self-certify

Here’s the part that trips suppliers up. There’s no Class-I certificate issued by anyone. When you bid, you declare your local content percentage and the category you’re claiming, and you certify it yourself, usually with the percentage and the location where value was added.

That self-certification is exactly why the policy carries teeth on the back end. The declaration is auditable. A buyer, or a complaint from a competitor, can trigger verification of what you claimed. For higher-value contracts the rules typically expect more than a bare declaration — often a certificate from a statutory or cost auditor backing the figure.

False claims aren’t treated lightly. They can lead to debarment from future tenders, which is a far heavier price than losing a single bid to disqualification.

So the discipline is simple. Claim the category you can actually defend with documents, not the one you wish you were in. A Class-I claim you can’t support is worse than an honest Class-II claim, because the downside is being shut out of the market, not just this one order.

At award, Class-I gets a second move

This is the mechanic that decided the bid I opened with, and it’s worth being precise about.

When bids are opened and the lowest price (L1) comes from a supplier who isn’t a Class-I local supplier, the rules allow a Class-I supplier whose bid sits within a defined margin of L1 to be given the chance to match the L1 price. If they agree to match, a share of the order — often the bulk of it — goes to them at the L1 price.

Read that twice if you import. It means a Class-I local supplier doesn’t have to be the cheapest to win. They have to be close enough, inside the margin the tender specifies, and willing to match. The genuinely local manufacturer gets a second move that the importer never sees.

For non-divisible contracts the logic adapts, but the direction is the same: real local content buys you a preference at the decisive moment, and the absence of it leaves you exposed to exactly that preference working against you.

What tightened in 2025: imports get squeezed

Over 2025 the rules moved in one clear direction, and the direction matters more than any clause number. The government tightened what’s allowed to count as local content, specifically to close the gaps suppliers were using to dress up imports as Indian.

Qualitatively, the changes pushed on three fronts:

• Resold imports were squeezed out. Buying a finished foreign product and reselling it doesn’t generate local content, however the invoice is structured.
• Refurbished or rebranded imported goods came under sharper scrutiny. Taking an imported item, relabelling it, and claiming it as locally made is exactly what the tightening is aimed at.
• Origin certification at the OEM level got firmer. The expectation increasingly runs back to the original equipment manufacturer to establish where value was genuinely added, rather than stopping at the trader who sold it last.

I’m describing the direction rather than quoting exact clause text, because the orders are issued and amended ministry by ministry and the specifics shift. But the trend is unambiguous. The space for treating an import as local content is narrower than it was, and it will keep narrowing. If your Class-I claim leans on a generous reading of where your product really comes from, treat that as a risk, not a strength.

Working out which side you’re on

Be honest with yourself before the buyer’s auditor is honest for you. Roughly:

• You manufacture or substantially assemble in India, and your Indian value addition clears the threshold the tender states (commonly 50%)? You’re likely Class-I, and the purchase preference is one of the best advantages you have. Claim it, and keep the documents to back it.
• You do real Indian value addition but land between the thresholds (commonly 20% to 50%)? You’re Class-II. Useful, but not a winning edge on its own.
• You import and resell with little Indian value added? You’re effectively non-local, and on any tender carrying this preference you should assume the clause can be used against you.

This sits alongside your other eligibility levers, not separate from them. If you’re also a micro or small enterprise, the MSE benefits stack with MII — worth re-reading the revised MSME classification to make sure you’re claiming everything you’re entitled to in the same bid.

The MII clause isn’t boilerplate to skim past. On a close tender it’s often the single line that decides who supplies. Read it on every bid, know your local content number cold, and claim the category you can defend.

And knowing which side of MII you’re on only helps if you reach the right tenders early enough to prepare a clean, properly certified bid. That’s the part we handle at TrackTender: relevant tenders for your state and category reach you on day one, with time to get your local content declaration and supporting documents in order — instead of scrambling on day thirteen.