WHAT?

Public procurement referes to how government ministries, departments, PSUs and other public bodies buy goods, services and works from private or public suppliers. A Public Procurement Policy sets rules, preferences, and procedures for such purchases to ensure transparency, competition, value for money, and support to priority sectors (like MSMEs or domestic manufacturing). In India it is shaped by a mix of policy documents, orders, and acts rather than one single “Procurement Law”.

Main Policy Instruments in India

1. Public Procurement Policy for Micro & Small Enterprises (MSEs) Order, 2012 (amended later)

• At least 25% of annual procurement by Central Ministries / CPSEs must come from MSEs.
• Out of this, 4% must be from SC/ST entrepreneurs and 3% from women entrepreneurs (targets added later).
• Price preference: MSEs can supply at L1 price even if they quote up to 15% higher than L1 bidder.

2. Make in India – Domestic Preference Rules (2017, amended 2020) gives preference to “local suppliers” based on local content in goods/services.

Categories:

• Class I local supplier: ≥50% local content (highest preference)
• Class II local supplier: 20–50% local content
• Government e-Marketplace (GeM) portal integrates these rules.

3. GeM (Government e-Marketplace) : Online platform to bring transparency, efficiency, competition. Mandatory for most central purchases (goods & services above small thresholds).

4. Procurement Preference to Public Sector & Strategic Sectors : For certain strategic items (e.g., defence, railways, nuclear), domestic producers / PSUs get preference.

5. Transparency Rules : Manual for Procurement of Goods & Services (2022) by Ministry of Finance. E-tendering mandatory above set limits. Bid security / performance guarantee norms.

Key Objectives

1. Value for money (best cost-quality balance).
2. Transparency & fair competition (avoid corruption).
3. Support domestic industry / self-reliance (MSMEs, Make in India).
4. Efficient use of taxpayers’ money.
5. Social equity (SC/ST, women entrepreneur quotas).

Recent Developments

1. Digital push: GeM 5.0 with AI tools, analytics.
2. Green procurement: guidelines to prefer eco-friendly products.
3. Faster payments to MSMEs: 45-day payment mandate under MSME Act.
4. Defence Offset Policy & Strategic Partnership Model also influence procurement.