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EMD, tender fees and MSE exemptions in Indian tenders

What the earnest money deposit (EMD), bid security declarations, tender fees and performance security mean in Indian public tenders, which forms of security buyers accept, the exemptions and preferences for micro and small enterprises (MSEs) and startups, and the Make in India and other conditions that decide who may bid.

By the TenderGrid team. Updated 23 Oct 2026.

Before you can bid in most Indian public tenders, two amounts appear on the notice: a tender fee and an earnest money deposit (EMD). If you win, a third follows: the performance security. Micro and small enterprises and startups don't pay some of these at all. This guide explains what each one is, the forms they can take and the exemptions under the central government's rules. States and public sector companies have their own rules, which mostly follow the same lines.

This guide explains the rules in plain language. It is general information, not legal advice: the rules change often, and the tender document always prevails. Amounts are in rupees: ₹1 lakh is ₹100,000 and ₹1 crore is ₹10 million.

Earnest money deposit (EMD)

EMD, also called bid security, protects the buyer against bidders who withdraw or change their bid while it is still valid, or who win and then don't sign the contract or provide the performance security. In those cases the buyer can keep the deposit. Each tender states the amount, usually as a fixed sum that is a small share of the estimated value, and how you can pay it.

The accepted forms are listed in the tender. Under the central rules they include online payment, a demand draft, a fixed deposit receipt and a bank guarantee. Since 2022 insurance surety bonds are accepted as well, and electronic bank guarantees count the same as paper ones.

Bid security declaration

Instead of EMD, a buyer can ask you to sign a bid security declaration: if you withdraw or change your bid during its validity, or win and don't sign the contract or provide the performance security, you are barred from that buyer's tenders for the period the tender states. From November 2020 until the end of 2021, central government tenders used declarations instead of EMD across the board, as relief for companies. Today each tender says which of the two it wants.

Getting it back

Unsuccessful bidders get their EMD back after the contract is awarded, and since 2022 the central rules ask buyers to return it in stages, for example to bidders who fail the technical evaluation, instead of holding every deposit until the end. The winner's EMD is usually returned once its performance security is in place.

Tender fees

Many Indian tenders also charge a tender fee, sometimes called the cost of the tender document, which you don't get back. The notice says how much it is, whom to pay and whether an exemption is allowed. Registered micro and small enterprises get the tender documents free of charge (see below).

Performance security

The winning bidder provides performance security when the contract is signed, as a guarantee that it will deliver as promised. For central government contracts for goods and services, the Department of Expenditure lowered the maximum from 10% to 5% of the contract value in January 2024. Works contracts follow their own rules, and many public sector companies set their own percentages. The security stays in place until the supplier has met all its obligations, including the warranty where the contract has one, and is then returned.

Benefits for micro and small enterprises

The Public Procurement Policy for Micro and Small Enterprises Order 2012 gives micro and small enterprises (MSEs) these benefits in the tenders of central ministries, departments and public sector enterprises:

No EMD and free tender documents. Registered MSEs don't pay earnest money and get the tender documents free of cost.
Price preference. When the lowest price (L1) comes from a company that is not an MSE, MSEs that quoted within 15% of it can match L1 and supply at least 25% of the tendered value; several such MSEs share that part in proportion. If the item can't be split, an MSE that matches L1 can be given the whole order.
Purchase targets and reserved items. Central ministries, departments and public sector enterprises have to buy at least 25% of their annual purchases from MSEs, including 4% from MSEs owned by SC/ST entrepreneurs and 3% from MSEs owned by women. 358 items are reserved for purchase from MSEs only.

To claim these benefits, an enterprise registers on the government's Udyam Registration portal and gives its Udyam number with the bid. The benefits are for micro and small enterprises only, not medium ones, and tenders usually ask that the registration covers the goods or services being bought. Many states have MSE policies of their own with similar benefits for local enterprises.

Startups

Startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT) can be exempted from the prior experience and prior turnover criteria in central government procurement (General Financial Rules, Rule 173(i)), and from EMD (Rule 170(i)). They still have to meet the quality and technical requirements of the tender. Since February 2026 an entity with a turnover of up to ₹200 crore can be recognised as a startup, if it meets the other conditions.

Other conditions that decide who may bid

Make in India. Under the Public Procurement (Preference to Make in India) Order 2017, a Class-I local supplier offers goods, services or works with at least 50% local content and a Class-II local supplier at least 20%; ministries can set higher minimums for their sectors. Class-I suppliers get purchase preference, and below ₹200 crore buyers may not invite global tenders unless the government allows it (General Financial Rules, Rule 161(iv)). Bidders declare their local content themselves, and in larger tenders they may have to back it with a certificate from an auditor or cost accountant.
Power sector items. The Ministry of Power sets minimum local content for many power-sector goods and works under the same order, and has its own rules for testing imported equipment for the power system. The tender says which of them apply.
Bidders from neighbouring countries. Since July 2020 a bidder from a country that shares a land border with India may bid in public procurement only if it is registered with the Competent Authority (a registration committee set up by DPIIT), which needs political and security clearance. The rule covers goods, services and works, including turnkey projects, and the purchases of central public sector enterprises and public sector banks; states apply it through authorities of their own. It does not cover purchases by private companies.
Solar modules and cells. For government, government-assisted and scheme projects, and for net-metering and open-access projects, solar PV modules must be on the Ministry of New and Renewable Energy's ALMM List-I and, since 1 June 2026, their cells on List-II. Net-metering and open-access projects can be commissioned without List-II cells until 31 December 2026, a date that has been moved before, so check the ministry's latest notice.

A checklist before you bid

Check the EMD amount, the forms the tender accepts and how long the security must stay valid, and whether a bid security declaration is allowed instead.
If you are an MSE or a DPIIT-recognised startup, have your Udyam or recognition certificate ready to upload, and check that it covers the item.
Pay the tender fee, or attach the proof of your exemption.
For a paper instrument, send the original to the tender inviting authority in time, and make sure the scanned copy in your bid is identical.
Check the local content and country-of-origin conditions before you ask for supplier quotes.
Count the cost of the performance security in your price, in case you win.

For the portals themselves, see our guides to CPPP and the state e-procurement portals and to GeM bids for electrical and energy products.