Summary:
Deeptech startups are seeking easier access to government orders through changes in procurement rules. Proposed reforms could create a pilot-to-scale pathway for companies developing AI, drones, semiconductors and advanced engineering technologies, helping them validate products before pursuing larger government contracts.
The India Deeptech Alliance (IDTA), a coalition of Indian and global venture capital investors, is pushing for changes in government procurement rules to make it easier for deeptech startups to win public-sector contracts. The alliance plans to submit a white paper to the government this year, although the timeline has not yet been finalized.
For deeptech companies, government procurement can be more than just another sales channel. A government order can provide early revenue, allow a startup to test its technology in real-world conditions and give potential customers confidence in the product. This becomes particularly relevant for businesses working in areas such as artificial intelligence, drones, semiconductors, defence and advanced engineering.
Deeptech Government Procurement: Key Facts
- Who is seeking changes? India Deeptech Alliance (IDTA)
- What is being proposed? Easier access to government procurement for deeptech startups
- Proposed pilot order: Up to ₹2 crore
- Potential subsequent order: Around ₹50 crore
- Key sectors: AI, drones, semiconductors, defence and advanced engineering
- Existing platform: Government e Marketplace (GeM)
- Broader objective: Help startups move from technology development and pilots to commercial-scale government orders
Why startups still struggle to win tenders
Startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT) already receive relaxations on prior experience and turnover requirements. However, they still have to meet technical, quality, statutory and execution requirements specified in tenders.
The bigger hurdle comes when government departments, agencies and public-sector undertakings ask for previous orders, existing customers, large-scale deployments or proof that a company can manufacture at scale. Such conditions can naturally favour established companies over young deeptech firms.
The alliance argues that this creates a gap between government support for developing technology and the ability of startups to actually sell that technology to government customers. The proposed reforms are aimed at addressing that gap.
A possible pilot-to-scale procurement model
One proposal gaining attention is a defined pilot stage. Under the suggested approach, a startup could receive a direct procurement order of up to ₹2 crore, subject to clearly defined performance criteria. If the technology meets those requirements, the company could then move towards a larger order of around ₹50 crore and subsequently scale further without repeating the entire procurement process.
Such a system could give startups greater visibility while allowing government agencies to validate a product before committing to a much larger purchase.
The alliance also wants startups to be engaged earlier, rather than only after a product has become fully developed. Government platforms such as the Government e Marketplace already facilitate procurement, but the proposed approach would allow government buyers to interact with startups at an earlier stage of product development.
Defence procurement is already moving in this direction
The Draft Defence Acquisition Procedure 2026, released for stakeholder consultation in February, places greater emphasis on indigenous design and technology readiness in certain defence procurements instead of relying solely on price. The industry sees this as a possible model that other government departments could adapt for sectors such as railways, healthcare and education.
This is happening alongside the government's ₹1 trillion Research, Development and Innovation Scheme, which is intended to support high-risk and high-impact innovation, including deeptech.
Why government orders matter for deeptech
Deeptech businesses generally require significant capital, specialised expertise and longer development periods. Public procurement can therefore act as an early customer mechanism, helping companies bridge the gap between laboratory development and commercial scale. NITI Aayog has also identified public procurement and government-as-first-buyer models as important ways to strengthen India's deeptech ecosystem.
