Guide 04 Procurement and tendering
How Udyam registration helps a defence supplier
Udyam registration, free and self-declared, is what makes a micro or small enterprise eligible for the Public Procurement Policy's benefits: earnest money exemption, price-matching rights against L1, reserved items and free tender sets. It replaced the older Udyog Aadhaar Memorandum, which stopped counting for these benefits after 31 March 2022.
- Topic
- Procurement and tendering
- Checked
- 23 September 2026
- Sources
- 3
- Questions
- 6
01
Udyam is free, and that matters
Udyam registration is free of cost, paperless and based on self-declaration. The Ministry of MSME states plainly that no fee is payable to anyone for it and that no website or app other than the official portal is recognised; a supplier or agent asking for money to complete Udyam registration is charging for a government service that costs nothing.
Registering costs nothing and unlocks benefits that otherwise cost real money on every bid, which is why it is worth doing before it is needed rather than scrambling once a specific tender is already open.
02
What Udyam registration unlocks in a tender
None of this touches performance bank guarantees or security deposits, which still apply to an Udyam-registered winner on the same terms as anyone else, and none of it applies to works contracts, which sit outside the Public Procurement Policy's purview altogether.
- Exemption from earnest money deposit, under the Public Procurement Policy for MSEs
- Free tender sets from central ministries, departments and CPSUs
- Price-matching rights: quoting within L1 plus 15 percent lets an MSE supply part of the order at the L1 price
- Eligibility for the 358 items reserved for exclusive purchase from micro and small enterprises
- Possible relaxation of prior turnover and experience conditions, subject to meeting quality and technical specifications
03
Udyam replaced Udyog Aadhaar for this purpose
Since 1 July 2020, Public Procurement Policy benefits have gone to enterprises registered under Udyam rather than the earlier Udyog Aadhaar Memorandum, and Udyog Aadhaar stopped being valid for this purpose after 31 March 2022. Enterprises registered with other Ministry of MSME bodies were also required to move onto Udyam. A firm still trading on an old Udyog Aadhaar number should re-register on Udyam before its next bid.
04
The 2025 classification limits
An enterprise has to satisfy both the investment and the turnover limit to fall into a given class; crossing either ceiling moves it up. Only micro and small enterprises get the Public Procurement Policy's benefits described above, so a medium enterprise, while still a genuine MSME for other purposes, does not get EMD exemption or price-matching rights on this route.
MSME classification from 1 April 2025 (notification S.O. 1364(E))
- Micro
- Investment up to Rs 2.5 crore, turnover up to Rs 10 crore
- Small
- Investment up to Rs 25 crore, turnover up to Rs 100 crore
- Medium
- Investment up to Rs 125 crore, turnover up to Rs 500 crore
05
If a buyer pays late
Once registered, Section 15 of the MSMED Act, 2006 caps the payment period a buyer can agree with a micro or small enterprise at 45 days from acceptance of the goods or services, or 15 days if no date was agreed in writing. Late payment carries compound interest, with monthly rests, at three times the Reserve Bank of India's notified bank rate. A supplier can file a claim through the MSME Samadhaan portal, which routes it to the state's Micro and Small Enterprise Facilitation Council for conciliation or arbitration.
Asked next
Questions people also ask
How Udyam registration helps a defence supplier
Is Udyam registration free?
Yes. Udyam registration is free of cost, paperless and based on self-declaration, and the Ministry of MSME states that no fee is to be paid to anyone and that no other website or app is official. Agents charging for Udyam registration are offering a service the government provides free.
Do I need Udyam registration to get MSME tender benefits?
Yes. Since 1 July 2020 the benefits of the Public Procurement Policy go to micro and small enterprises registered under Udyam. The older Udyog Aadhaar Memorandum remained valid for this purpose only until 31 March 2022. Enterprises registered with other Ministry of MSME bodies were required to register on Udyam as well.
What are the MSME investment and turnover limits in 2026?
From 1 April 2025, under notification S.O. 1364(E): micro enterprises have investment up to Rs 2.5 crore and turnover up to Rs 10 crore; small, up to Rs 25 crore and Rs 100 crore; medium, up to Rs 125 crore and Rs 500 crore. An enterprise must satisfy both limits to fall in a class.
Within how many days must a government buyer pay an MSME supplier?
Under Section 15 of the MSMED Act, 2006, a buyer must pay a micro or small enterprise supplier by the agreed date, which cannot exceed 45 days from acceptance of the goods or services. If no date is agreed in writing, payment is due within 15 days. This applies to government and private buyers alike.
What happened to the Udyog Aadhaar Memorandum?
It was the predecessor to Udyam registration. It stopped being valid for Public Procurement Policy benefits after 31 March 2022, once Udyam became the registration that mattered for those purposes from 1 July 2020. Firms still holding only an old Udyog Aadhaar number should re-register on Udyam before their next bid.
Where can an MSME complain if a buyer ignores the procurement policy?
The Ministry of MSME set up a grievance cell called the CHAMPIONS portal for complaints about non-compliance with the Public Procurement Policy. For delayed payments, the separate MSME Samadhaan portal applies. For disputes under a specific contract, follow the dispute clause in that contract as well.
Checked against
Sources
- 01Udyam Registration portal, Ministry of Micro, Small and Medium Enterprises
- 02MSMED Act, 2006, MSME Samadhaan, Ministry of MSME
- 03FAQs on the Public Procurement Policy for MSEs, Development Commissioner (MSME), Ministry of MSME
This guide explains how the system works in general, as the documents above describe it, and was last checked on 23 September 2026. Rules and thresholds change: the governing document is the authority, not this page.
On this site
Where this meets the work
- Vendor registration information for new suppliers
- Defence contract works
- The maintenance contract record
More in Procurement and tendering
- DAP 2020 procurement categories explained, and the DAP 2026 draft
- What changed in the Defence Procurement Manual 2025 (DPM 2025)
- How GeM works for defence suppliers
- Where Indian defence tenders are published, and how to bid
- EMD and performance bank guarantee rules in defence tenders
- MSME benefits in Indian public procurement, and what is excluded
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