MSE and startup benefits in government tenders

6 min read · Last reviewed 14 August 2026

Under the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012, micro and small enterprises registered on Udyam receive exemption from tender fee and Earnest Money Deposit, and a purchase preference at evaluation; separately, DPIIT-recognised startups may be exempted from prior turnover and prior experience conditions in public procurement.

These are the two relaxations most likely to change whether a smaller firm can bid at all — and the two most often left unclaimed, because a bidder reads a turnover threshold, concludes they are short, and never reaches the clause that would have exempted them.

Micro and small enterprises

The Public Procurement Policy for MSEs Order, 2012 sets an annual procurement target for central ministries, departments and public sector undertakings: a minimum share of their annual procurement of goods and services must be sourced from micro and small enterprises, with sub-targets reserved for MSEs owned by Scheduled Caste and Scheduled Tribe entrepreneurs and for women-owned MSEs. The target creates sustained buy-side demand for MSE suppliers rather than a one-off concession.

For an individual bid, three things follow:

• Tender fee exemption — you do not pay to participate.
• EMD exemption — no bid security is deposited, which removes the working capital constraint that limits how many tenders a small firm can hold open at once.
• Purchase preference — an MSE that quotes within a defined band above the lowest bid may be given the opportunity to match the lowest price and supply a share of the tendered quantity.

DPIIT-recognised startups

The relaxation available to startups is different in kind: rather than a price preference, it removes gates. A DPIIT-recognised startup may be exempted from the prior turnover and prior experience conditions that would otherwise disqualify a young company outright — subject, importantly, to meeting the quality and technical specifications. It is an exemption from having a track record, not from being capable of the work.

This is what makes public procurement approachable for a company two years old with no comparable completed contracts: the conditions that make prior experience a precondition for getting prior experience can be lifted.

Claiming a benefit so it actually applies

Both preferences are self-asserted and evidence-backed. The evaluator does not look you up — they read what is in the bid. So:

1. State the claim explicitly in the bid, in the form the tender asks for.
2. Attach the certificate: Udyam registration for MSE claims, DPIIT recognition for startup claims.
3. Check the certificate is current and the entity name matches the bidder exactly.
4. Where the tender provides a declaration format for the claim, use that format rather than your own wording.

Read relaxations before thresholds

The practical habit worth forming: when you open a tender, check which preferences you qualify for before you test yourself against the turnover and experience conditions. Done in that order, a threshold you cannot meet may simply not apply to you. Done in the other order, you walk away from tenders you were entitled to win.

Key takeaways

• MSE benefits require a current Udyam registration in the micro or small category.
• EMD and tender fee exemption remove the main cash constraint on bidding volume.
• Purchase preference lets a close MSE bid match the lowest price for a share of the quantity.
• DPIIT startups can be exempted from turnover and prior experience — not from specifications.
• Nothing is applied automatically: claim it, evidence it, match the entity name.

Frequently asked questions

What benefits do MSMEs get in government tenders in India?

Micro and small enterprises registered on Udyam get exemption from tender fee and Earnest Money Deposit, and a purchase preference at evaluation, under the Public Procurement Policy for MSEs Order, 2012. The policy also sets an annual target requiring central ministries, departments and PSUs to source a minimum share of their procurement from MSEs, with sub-targets for SC/ST-owned and women-owned enterprises.

Do startups get exemption from tender eligibility criteria?

DPIIT-recognised startups may be exempted from prior turnover and prior experience requirements in public procurement, subject to meeting the tender's quality and technical specifications. The exemption must be claimed in the bid and evidenced with the DPIIT recognition certificate.

Is Udyam registration required to claim MSE benefits in a tender?

Yes. MSE benefits in public procurement rest on a current Udyam registration in the micro or small category, and the certificate must be attached to the bid. Medium enterprises do not receive these particular exemptions.

What is purchase preference for MSEs?

Purchase preference allows a micro or small enterprise whose bid falls within a defined band above the lowest quoted price to match that lowest price and supply a share of the tendered quantity. It applies at evaluation, after technical qualification, and must be claimed with supporting Udyam registration.

References

• Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012
• DPIIT startup recognition — relaxation of prior turnover and prior experience in public procurement