GeM & Public Procurement Policy: How MSEs Can Sell to Government

1. The 25% Target and the SC/ST and Women Sub-Targets

The policy came into effect on 1 April 2012 and became mandatory from 1 April 2015. As amended by Gazette Notification S.O. 5670(E) dated 8 November 2018, every central ministry, department and CPSU must procure at least 25% of its total annual procurement from MSEs. Within that 25% there are two sub-targets: • 4% of annual procurement from MSEs owned by Scheduled Caste or Scheduled Tribe entrepreneurs • 3% of annual procurement from MSEs owned by women entrepreneurs These are annual targets for the buying organisation as a whole, not quotas within each tender. If SC/ST-owned or women-owned MSEs don't take part, or don't meet the tender requirements and L1 price, the sub-targets can be met from other MSEs. There is also a list of 358 items reserved for exclusive purchase from MSEs, and a Review Committee reviews that list on a continuing basis.

• The policy applies to central government ministries, departments and CPSUs. It does not apply to state government departments or state PSUs, although the Ministry has asked states to frame similar policies.
• Buying organisations report their procurement from MSEs on the MSME Sambandh portal, which the Ministry monitors.
• Sub-contracts given to MSEs count towards the buyer's MSE procurement.

2. Who Is Eligible, and Who Is Not

Eligibility is narrower than many businesses assume. According to the Ministry's FAQs:

• The benefits are for micro and small enterprises registered on the Udyam Registration portal. Medium enterprises are not MSEs, so the policy's benefits don't apply to them.
• The policy covers goods produced and services rendered by MSEs. Traders, distributors, sole agents and works contracts are excluded.
• Retail and wholesale traders can hold a Udyam registration, but only for priority sector lending. They cannot claim benefits under this policy.
• Joint ventures and consortiums cannot claim the benefits, because Udyam has no provision to register them.
• To count towards the SC/ST or women sub-targets, the ownership must be disclosed in the Udyam registration. For a partnership or private limited company, SC/ST partners or promoters must hold at least 51%.

3. What an Eligible MSE Gets in a Tender

The policy is meant to lower the cost of taking part in government tenders and to give MSEs a fair chance on price. Under the official FAQs, eligible MSEs are facilitated through:

• Tender sets free of cost.
• Exemption from paying Earnest Money Deposit (EMD), also called bid security.
• Price matching (the L1+15% rule): if the lowest (L1) bid is from a non-MSE, an MSE that quoted within L1+15% may bring its price down to L1 and supply up to 25% of the total tender value. If several MSEs qualify, the share is split in proportion. If the item cannot be split, the MSE matching L1 may be awarded the full supply.
• Buyers may relax prior-turnover and prior-experience conditions for MSEs, subject to quality and technical specifications. In sensitive procurements such as public safety, health or security, the buyer may still insist on prior experience.

4. What the Policy Does Not Give You

Knowing the limits avoids costly surprises after you win an order. • No exemption from performance security. The Ministry's FAQs state that the policy gives no exemption from Security Deposit or Performance Bank Guarantee, so plan for it in your working capital or bank limits. • No guaranteed orders. The 25% target is for the buyer's annual procurement. It does not reserve any particular tender for you, and you still have to meet the tender's quality, technical and price conditions. • No automatic penalty on a non-compliant buyer. If a buyer refuses policy benefits, the Ministry of MSME's grievance mechanism (the CHAMPIONS portal) is the route, along with raising the matter with the buyer itself. Always read the specific bid document. Each tender or GeM bid states how it applies the MSE benefits and what documents it needs to verify your status.

5. How to Register and Sell on GeM

The Ministry of MSME has asked CPSUs to buy goods and services from MSEs through the GeM portal, so GeM is where most of these opportunities appear. GeM's own FAQs say there is no charge or fee for registering as a seller. The turnover-based caution money deposit that sellers once had to keep was discontinued in 2025. Transaction charges may apply on orders under GeM's current policy, so check the latest schedule on the portal.

• Step 1, Udyam first: get or update your Udyam Registration on udyamregistration.gov.in (free). The Udyam form also has an option to link your enterprise with GeM.
• Step 2, sign up on gem.gov.in as a seller. Verify the authorised person with Aadhaar and the Aadhaar-linked mobile, or with personal PAN (GeM says Aadhaar is no longer mandatory for seller registration). You also need an active email.
• Step 3, business details: enterprise PAN, CIN (companies only), bank account and IFSC, and income tax returns of the last three years, as listed in GeM's seller FAQs.
• Step 4, declare MSE status: in your company profile, choose to register as an MSME and verify your Udyam number with its linked mobile. This is how buyers and bids recognise you as an MSE.
• Step 5, complete your profile, then list products or services. Brand or OEM approval (and vendor assessment for some categories) may be needed, depending on what you sell.
• Step 6, bid: watch for bids that match your catalogue, check the MSE and EMD terms in each bid, and quote.

6. Practical Tips Before Your First Bid

Winning a government order is only half the job. Delivering and getting paid on time needs planning.

• Make sure the NIC codes and activities in your Udyam registration match what you supply.
• Budget for performance security, raw material and the payment cycle. A cash credit or bank guarantee limit arranged in advance can make the difference.
• Keep your Udyam details updated every year with ITR and GST data. A suspended or outdated registration can cost you MSE benefits in a bid.
• If you are a micro or small supplier and a buyer delays payment beyond the MSMED Act limits, the MSME ODR portal is available for claims.