3 minute read 20 Sep 2022
PMA policy

Would preferential market access (PMA) policy aid Make in India?

By EY India

Multidisciplinary professional services organization

3 minute read 20 Sep 2022
Related topics Tax Tax planning

The policy encourages participation of local content in manufacturing.

In brief 

  • For becoming the manufacturing hub of the world, India needs to pave the way for foreign manufacturers to choose India as their base.
  • Strengthening the manufacturing sector and making it a viable place for local manufacturers may help attract foreign manufacturers to India.
  • Revamping the PMA policy to PMI policy is one such step taken by the government to build a robust manufacturing infrastructure.
  • The PMI policy gives first-hand preference to the lowest bidder to promote goods manufactured by the local supplier.

In 2012, the Government of India introduced the Preferential Market Access (PMA) policy to address concerns related to product quality and security and to create new employment opportunities in the manufacturing sector. PMA policy guidelines were passed as a production-linked localization barrier by way of providing the local content requirements, stipulating that the supplied products should encompass a certain percentage of local value addition.

To transform India into a global manufacturing hub, facilitate investment and build a robust manufacturing infrastructure, one of the measures was to revamp the PMA policy to preference to Make in India (PMI) policy, issued by Department for Promotion of Industry and Internal Trade (DPIIT). 

The PMI policy gives preference to bidders on the grounds of promoting locally manufactured goods or locally provided services by way of issuance of public procurement (preference to Make In India), Order 2017 on 15 June 2017, last amended vide DPIIT order dated 16 September 2020. 

In terms of the PMI policy, the relevant ministries / departments are required to communicate the goods, services or works, wherein, sufficient local capacity and local competition exists. 

The policy seeks to divide suppliers into three categories namely, Class-I local supplier (if minimum local content is 50%), Class II local supplier (if minimum local content is less than 50%) and Non-local supplier (if local content is below 20%). If the local supplier is eligible to bid for any procurement, he shall provide self-certification against the local content. The policy also gives power to the nodal ministries to prescribe a higher minimum local content to categorize a supplier as ‘Class–I local supplier’/ ‘Class–II local supplier’. 

Manner of distribution of contracts under PMI Policy

PMI policy provides for awarding the contract in such a manner that the lowest bidder gets the entire contract in case he is a local supplier. However, in case the lowest bidder is a non-local supplier, then in case of divisible contracts, for 50% of the contract, the policy invites the lowest local supplier to match the non-local supplier, subject to the condition that his bid falls within the margin of preference (being 20%). Further, with non-divisible contracts, the policy invites the lowest bidder among the local suppliers to match the bid of the lowest non-local supplier, subject to the margin of preference. The process continues until the policy awards the contract to the L1 bidder.

Mandatory conditions stipulated to meet the PMI Policy  

The local suppliers being the ‘Class-I local supplier’/Class-II local supplier’ at the time of tender bidding are required to indicate percentage of local content and provide self-certification that the item offered meets the local content requirement. 

For procurements of a value exceeding INR 10 crores, the ‘Class-I local supplier’/ ‘Class-II local supplier’ are also required to provide a certificate from the statutory auditor or cost auditor of the company (in the case of companies) or from a practicing cost accountant or practicing chartered accountant (in respect of suppliers other than companies) giving the percentage of local content.

Next steps

India, with its vast pool of skilled resources, competitive costing, and government-led initiatives such as production-linked incentives, is emerging as an attractive global manufacturing hub for leading global Original Equipment Manufacturers (OEMs). However, for most manufacturers, the decision to shift their manufacturing base to India would appear lucrative only if they are able to supply to government procurement agencies. Given the present geo-political situation, India has a strong opportunity to become a significant part of the global supply chain and emerge as a global manufacturing hub by removing further bottlenecks. 


For the PMI policy to serve as a catalyst to the manufacturing sector in India, the government should undertake policy implementation in a phased manner. This includes reflecting upon the country’s local ecosystem and adopting a pragmatic approach, which would balance the need for the hour with an eye on a sustainable future for manufacturing.

About this article

By EY India

Multidisciplinary professional services organization

Related topics Tax Tax planning