Startups in India often face significant hurdles when attempting to participate in government tenders, as restrictive eligibility criteria and financial requirements frequently exclude them from competing on an equal footing with larger, more established firms.
To align more closely with the PM Narendra Modi’s vision of “Startup India,” a re-evaluation of procurement policies is essential. This should entail revisiting eligibility criteria, financial requirements, and other restrictions that prohibit the participation of startups in government tenders, said former IAS CK Mishra, who served as Secretary, Ministry of Health and Family Welfare and Ministry of Environment, Forest & Climate Change before retirement.
Facilitating Participation through GeM
Mishra said that while Government e-Marketplace (GeM) is a promising initiative, a lot more is need to be done. The GeM plans to onboard 1 lakh startups, allowing new business entrants to participate in public procurement bids without the usual norms related to turnover and minimum years of experience. As of June 2023, over 140,000 startups had been recognized by the Department for Promotion of Industry and Internal Trade (DPIIT), showed government data. By offering relaxation to startup entrants on terms related to past performance and financial stability, GeM not only broadens the pool of bidders but also introduces more innovative solutions to public procurement.
“Since its inception in 2016, GeM has facilitated public procurements worth over Rs 10 lakh crores, making it the world’s second-largest government procurement platform, just behind South Korea’s KONEPS. The platform has implemented significant changes to enable easier access for startups, including slashing transaction charges. Now, there are no transaction fees for orders valued up to ?10 lakhs, alleviating financial burdens for many Startups and MSMEs,” said the former IAS.
The increase in government bids earmarked with ‘Make in India’ preference highlights the initiative’s impact. In the financial year 2020-21, nearly 39% of bids floated by central government entities on the GeM portal were marked with this preference. By FY 2024-25, this percentage rose to 81%, indicating an enhanced commitment to integrating domestic production into government procurement processes. Mishra further shared that steps like improving eligibility criteria, pilot projects and other similar initiatives can help the sector.
Revised Eligibility Criteria: Shift focus from historical performance to innovative potential. Allow startups to demonstrate capability through recent projects or prototypes rather than a long past of contracts.
Pilot Project Funding: Implement programs to support pilot projects that allow startups to showcase their innovations in a practical context, thus facilitating a more comfortable entry into government contracts.
Supportive Financial Policies: Extend financial assistance programs to startups that enable them to meet the necessary financial criteria for bidding, reducing the barriers that often exclude them.
Tailored Support Mechanisms: Establish clear guidelines for governmental bodies to provide feedback to startups on their bids, helping them to refine future submissions.
Highlighting Successful Innovations: Promote success stories of startups that have won government tenders, showing the tangible benefits of innovation to both public services and economic growth.
“For India to truly leverage its startup ecosystem, government procurement must evolve to be more inclusive. Startups bring fresh perspectives and agility, which can significantly enhance public service efficiency and sustainability,” he said.
Through the reformation of procurement policies and an emphasis on supporting startups, India can create a robust ecosystem that not only enables young companies to thrive but also drives sustainable growth across various sectors. Reducing entry barriers will allow startups to contribute meaningfully to India’s economic and technological advancement.
