EMD in government tenders — what it is, and when you don't pay it
EMD — earnest money deposit, also called bid security — is money you put up with your bid so the department knows you are serious. If you win and then walk away, they keep it. If you lose, you get it back.
It is the first cost of bidding, and the first place small contractors lose money by not reading the notice properly.
How much
Most notices ask for 2% to 5% of the estimated cost of the work. On a ₹40 lakh road contract that is ₹80,000 to ₹2 lakh, blocked from the day you bid until the department releases it.
The tender notice states the exact figure. Never calculate it yourself — many departments set a flat EMD for a range of work values, and some cap it.
How it is paid
It depends on the department, and the notice says which they accept:
- Online payment through the portal's payment gateway (net banking, NEFT/RTGS) — now the most common on state e-procurement portals.
- Demand draft or banker's cheque in favour of the named officer, physically delivered before bid opening.
- Bank guarantee, usually only for larger works.
- Fixed deposit receipt pledged to the department.
Where a physical instrument is required, the deadline for delivering it is often earlier than the online bid deadline. Miss that and your bid is rejected however good your price is.
When you get it back
- If you lose: after the contract is awarded, normally within 30 days of the award or of the bid validity expiring. In practice you usually have to chase it.
- If you win: it is either returned once you furnish the performance security (usually 5–10% of contract value), or adjusted against that security. The notice says which.
When you lose it
EMD is forfeited if you:
- withdraw or change your bid during the validity period;
- refuse the work after being declared lowest bidder;
- fail to sign the agreement or furnish performance security in time;
- are found to have submitted false documents.
That last one matters more than people expect. A borrowed experience certificate or an overstated turnover figure can cost the EMD and get you barred from bidding.
The big change: many central tenders no longer take EMD
On 12 November 2020 the Department of Expenditure issued OM F.9/4/2020-PPD directing that bid security provisions should not be kept in bid documents, and GFR Rules 170 and 171 were amended accordingly. In place of money, bidders sign a Bid Security Declaration — a written undertaking that if you withdraw or fail to execute, you can be suspended from bidding for a stated period.
What this means in practice:
- Central ministries, departments and many central PSUs: often no EMD at all, just the declaration in the bid form.
- State PWDs, municipal bodies, state corporations: most still ask for EMD in cash or DD. State finance rules are their own, and the central OM does not bind them.
So do not assume either way. Read the notice.
If you are an MSE, you may be exempt
Under the Public Procurement Policy for Micro and Small Enterprises Order 2012, enterprises registered as micro or small get:
- tender documents free of cost, and
- exemption from EMD.
To claim it you need valid proof attached to your bid — Udyam registration, or NSIC single-point registration covering the actual goods or services in that tender. An Udyam certificate for a trade unrelated to the tendered work is routinely rejected.
The same policy sets a 25% annual procurement target from MSEs for central ministries, departments and PSUs, with 4% earmarked for SC/ST-owned and 3% for women-owned enterprises, and lets an MSE quoting within L1 + 15% match the lowest price for a share of the work. Those are central rules; states run their own MSE schemes with different terms.
DPIIT-recognised startups are exempt from EMD in central tenders on similar terms.
Before you bid, check these five lines in the notice
- EMD amount, and whether a Bid Security Declaration is accepted instead.
- Mode of payment, and the deadline for any physical instrument.
- In whose favour a DD or BG must be drawn, and where it must reach.
- Validity period demanded of a bank guarantee — usually bid validity plus 45 days.
- Whether your MSE or startup exemption is admitted, and what proof they want.
A caution
Rules change, and departments word them differently. Everything above describes the common pattern and the central rules as they stand in September 2026. The tender document for the work you are bidding on overrides all of it. Where the two disagree, the notice wins — and if the notice is unclear, raise it at the pre-bid meeting in writing.