EMD exemptions: who does not pay, and what a declaration commits you to

What bid security is, and how much a tender may ask for

This is general information; confirm with the tender document and your adviser.

Earnest money, bid security in the rules' own language, is the sum lodged with a bid so that a bidder cannot walk away from its own bid without cost. Rule 170(i) of the General Financial Rules 2017 sets its size: the “Amount of bid security should ordinarily range between two percent to five percent of the estimated value of the goods to be procured”. The Works Manual repeats the same band on the works side: “The amount of bid security should ordinarily range between two (2) to five (5) per cent of the estimated value of the works to be procured”.

“Ordinarily” is the operative word. The band is a norm the buyer works within; the figure that binds you is the one printed in the tender.

It need not be cash. The Works Manual lists the accepted forms as “insurance surety bonds, account payee demand draft, banker's cheque, or bank guarantee (including e-bank guarantee)”. So an insurance surety bond and an electronic bank guarantee sit beside the instruments a contractor already knows. When each sum in a bid comes back is mapped on money in a bid.

The exemptions the rules name

Two categories are exempt by the rule itself, not by a buyer's grace. The Department of Expenditure states the position in one sentence: “As per Rule 170 of General Financial Rules (GFRs) 2017, Micro and Small Enterprises (MSEs) and the firms registered with concerned Ministries/ Departments are exempted from submission of Bid Security.”Department of Expenditure, Ministry of Finance (Procurement Policy Division)Rule 170 also carries the exemption a DPIIT-recognised start-up claims.

The second of those is the one bidders overlook. Registration with the concerned ministry or department is not enrolment on a portal and not a GST registration; it is a buyer's own list, and a firm on it is exempt on that buyer's tenders. Whether you are on one is a question for the department, not for the portal. What registrations and approvals a bidder needs in place before any of this matters is on before you can bid.

The catch: “MSEs” in the rule, and the order's own scope

The rule exempts MSEs. The order that defines what a micro or small enterprise gets does not reach every bidder holding that registration: traders, distributors, sole agents and works contracts sit outside its purview. What the order gives, and what it withholds, is set out on what the MSE policy gives a small bidder.

So on a works tender the two documents point in different directions: the rule names MSEs among the exempt, and the policy that gives that word its content excludes works contracts. Departments resolve the gap differently, and a tender's own clause is what decides it. The practical consequence is narrow and worth stating plainly: on a works tender, do not assume the exemption. Read the clause, and if it is silent, ask before the pre-bid date rather than at submission.

The bid-securing declaration, and what signing it commits you to

Rule 170(iii) allows a buyer to take a signed undertaking instead of money. In place of a bid security, buyers “may require Bidders to sign a Bid securing declaration accepting that if they withdraw or modify their Bids during the period of validity, or if they are awarded the contract and they fail to sign the contract, or to submit a performance security before the deadline defined in the request for bids document, they will be suspended for the period of time specified in the request for bids document from being eligible to submit Bids for contracts with the entity that invited the Bids”.

Read as three promises, a bid-securing declaration says: I will not withdraw or change my bid while it is valid; if I win, I will sign; and if I sign, I will furnish the performance security on time. Break any one of them and the penalty is not a forfeited deposit (there is no deposit) but a period out of that buyer's tenders.

The Works Manual states the works-side consequence in harder words: a breach “shall be considered as a violation of Code on Integrity and they shall be debarred for the time period specified in the BSD from being eligible to submit Bids/ Proposals for contracts with the procuring entity”.

Debarment is not a private matter between one bidder and one buyer. Rule 151, as amended on 8 May 2026, lets a procuring entity debar a bidder that “has breached the code of integrity”, requires every such case to be reported, and provides for a consolidated list of debarred firms. The periods that rule sets, and the grounds added to it in 2026, are on GFR Rule 151 amended.

One more thing about the declaration: the standard template makes it look compulsory. The Model Tender Document tells bidders that “As per current Government orders, in lieu of bid security, bidders must furnish Bid Securing Declaration (BSD)” as its Form 7. That sentence reflects the direction described next, not today's Rule 170(iii), which leaves the choice with the buyer. Read the notice for what this buyer asks; the line-by-line reading is on how to read a Notice Inviting Tender.

“EMD has been abolished” is the wrong sentence

It is repeated often enough to cost people bids, and it comes from a real instruction that has lapsed. On 12 November 2020 the Department of Expenditure directed that “no provisions regarding Bid Security should be kept in the Bid Documents in future and only provision for Bid Security Declaration should be kept in the Bid Documents”. It reached everything: the instructions were issued for “all kinds of procurements viz. Goods, Consultancy, Works, non-consulting Services etc”.

It was also time-bound. The same office memorandum says the instructions apply to “all the tenders issued till” 31 December 2021. Since then Rule 170 has governed again, which is why a tender that asks for earnest money is not out of date and a tender that accepts a declaration is not doing anyone a favour. Both are the rule working normally.

Claiming the exemption on the portal

An exemption is a claim made inside a bid, in the form the tender names, with the document behind it. Two portal facts decide how that plays out on the night.

Money moves before the bid does. On a NIC portal the tender fee and the earnest money are paid online, and “Only upon successful receipt of online payment, bidder can able to freeze / finally submit their bid to the procuring entity and get bid acknowledgment regarding successful bid submission.”National Informatics Centre (NIC), Central Public Procurement PortalA bidder who is exempt still has to make the exemption visible in the bid rather than simply skipping the payment.

Portals differ on the instrument. Andhra Pradesh's contractors' FAQ says a bank guarantee or demand draft taken for EMD is “scanned and should be attached to the technical bid during submission”, with the originals handed over “to the department during the technical bid opening”. The submission-night sequence is on submitting on a NIC portal.

What the exemption does not touch

An exemption from bid security stops at the bid. It says nothing about the performance security or the security deposit that a winner furnishes and a buyer holds afterwards: the MSE policy's own answer on that point is on what the MSE policy gives a small bidder, and the sums, the instruments and the timings are on after you win.

Nor does it survive a rejection. A bid without the security a tender asked for, or with a claimed exemption it cannot document, fails at the technical stage, one of the standard grounds on why bids are rejected at technical evaluation.

Whether this firm is exempt in this tender is a question about one clause, one registration and one buyer, and it is answered before the bid is frozen rather than after. This is general information; confirm with the tender document and your adviser.