The Indian Government’s E-Marketplace (GeM)

Government e-Marketplace (GeM) is a marquee initiative launched by the Government of India to usher an era of e-governance in the nation. India's public procurement spend stands at ~ 340 bn GBP (~15-20% of its annual GDP) and faces several inefficiencies owing to a complex policy landscape, manual inconsistent processes across Central and State buying organizations and long lead times. Addressing these issues can unlock significant value and help channelize resources for various development schemes and projects.

GeM is an online, end-to-end marketplace reform that provides an open, efficient & transparent solution. The platform was launched on 9th August, 2016 and is managed by GeM Special Purpose Vehicle, a 100% Government Owned, Section 8 Company under the Department of Commerce. Since inception, GeM has been able to achieve significant scale in operations and has taken many strides towards optimizing the operations on the platform. It has already achieved a cumulative GMV of close to 4 bn GBP, and is expected to grow 10X over the next 2 years. In the long run, over next 5-7 years it is expected to achieve its potential GMV of ~ 90 bn GBP equivalent to 4-5% of India’s GDP. 

A private consortium comprising of an e-commerce player, a systems integrator and an IT infrastructure provider, which operates under the stewardship of the GeM Special Purpose Vehicle, is accountable for maintaining and developing the technology platform. The platform is presumed to have led to overall savings of up to 25 percent in government expenditure while enhancing transparency and efficiency in public procurement. At full scale of operations, the savings from the platform will have a significant impact on lowering the fiscal deficit of the country.

The challenge

Government organizations and agencies around the world procure a wide range of goods and services from the private sector in order to run their country.

Given the scale and geographic spread of public procurement in India across Central and State Ministries, Departments and their affiliates, before GeM, India’s public procurement landscape was marred by many inefficiencies, a few of which are listed below:

  1. Limitations & inefficiencies in procurement system
    1. Geographic coverage of standardized procurement limited to localized vendor base
    2. Non-availability of granular data/ MIS on public procurement 
    3. Limited range of product categories under standardized rate contracts
    4. Lack of price reasonability (either individually selected vendors OR prices locked for 1 year under rate contracts)
    5. Limited demand aggregation/ benchmarking across organizations to optimize for bulk purchases
  2. Time consuming, heavily manual processes
    1. Admin overhead for buying organizations in terms of manpower & effort required
    2. Time consuming, cumbersome registration & verification processes for sellers
    3. Manual process inefficiencies such as offline payments processes
    4. Manual rate negotiations resulting in opacity and possible cartel formation
  3. Complex policy landscape with potential for conflicts – Many purchase preference policies exist in India today at both Central & State level resulting in complicated decision making for buyers. 

While a private buyer can choose his purchasing strategy flexibly, the public sector had limited options to respond dynamically to anti-competitive behaviour due to strict regulatory and legislative framework as well as detailed administrative procedures on multiple levels of government.

The initiative

In order to improve transparency of decision-making in the public procurement process and to reduce malpractices, India’s government, i.e. the Ministry of Commerce and Industries and the Department of Commerce, decided to set up an online marketplace for public procurement, a Government-to-Business platform (G2B). An online marketplace (or e-commerce marketplace) is a type of e-commerce site where products or services are offered by a number of sellers and all the buyers (i.e. the government agencies and departments) can select the products and services offered by any of the sellers, based on their own criteria. This enables a competitive pricing structure and implies the government procures more cost-efficiently. 

The Indian government introduced the Government E-Marketplace ‘GeM’ in August 2016 as an end-to-end online marketplace to facilitate online procurement of common use goods and services required by central and state government ministries, departments, public sector undertakings, autonomous institutions, organizations, and local bodies at the right price, right quality and right quantity in a transparent and efficient manner. [1] Within less than three years since its implementation, about 290,000 sellers & service providers have signed up to the platform. They sell more than 1,400,000 products to more than 39,000 buyer organization across Central and State Government Ministries, Departments and their affiliates [2].

In parallel, the Indian government amended the GFR (General Financial Rules) and brought about a change in procurement directives that mandated all organizations and departments under the Central Government to procure from GeM.

GeM aims to enhance transparency, efficiency and speed in public procurement. It provides the tools of e-bidding, reverse e-auction and demand aggregation to help governments achieve the best value for their money and hence, use taxpayers’ money efficiently. GeM also provides the buyers with an option to select only MSMEs and choose a seller from amongst them. This has helped buyers in significantly increasing share of MSME purchases in their overall procurement of goods and services.

GeM is a dynamic, self-sustaining and user-friendly portal that is open to sellers of all sizes. It encourages MSME sellers through special filters on the portal. GeM aims to help all the government officials in purchasing goods and services that are of common use like air conditioning and heating equipment, writing instruments, water, projectors, desk and computer supplies and services like security, human resources, housekeeping, among others. [3]

Purchases up to Rs 25,000 (around 280 GBP) can be made from any of the available suppliers on the GeM directly by any ministry or department, meeting the requisite quality, specification and delivery period. For anything that costs beyond Rs 25,000, purchases have to be made through price comparison, bidding or reverse auction, where the criterion of the lowest price among available suppliers on the GeM has to be followed to ensure price efficiency. [3]

The public impact

A transparent public procurement system not only improves the government functioning but also helps boosting innovation within the private sector. A fair and transparent public procurement system in India has encouraged greater participation from firms in the bidding process as well as ensuring a competitive bidding process between various firms. [4]

So far, 23 states & 6 union territories (out of 29 states and 7 union territories), like Andhra Pradesh, Assam and Gujarat who have signed MoUs with the central government for getting on board the GeM, and many dealers and small businesses across the state reveal a growing interest in becoming a part of the portal. For them, the portal provides an opportunity to scale up their business and increase sales. [5] Procurement for all World Bank funded projects in the country has now also been enabled on GeM. 

On a state level, the government’s e-marketplace has significantly improved transparency of government purchases because almost all common use items like computers, printers, photocopiers, paper and stationary, as well as other office items like furniture, and bottled water for example are being purchased through GeM. Since its opening, this Business to Government (B2G) platform, has eliminated multiple levels of manual, sequential verification and decision-making, leading to dramatic reductions in lead-time in government procurement. For suppliers, too, this has opened attractive new options by eliminating intermediaries and guaranteeing prompt release of payment.[0]

This is especially remarkable for small Indian states. According to Srikanth Douripalli, regional manager for GeM in Goa, in its less than two years of existence there are around 5,000 products available for online purchase in Goa (one of the smallest Indian states) with 37,000 government organizations and Public Sector Undertakings (PSUs) registered and 250,000 sellers and service providers. The portal supported 2.1 mn  orders worth 3.5 bn GBP as of August 2018, with an average overall savings for the buyers (mainly the government agencies) of 25 percent. [6] The Bihar government has bought various items valued at Rs 423 crore via the GeM portal and saved between Rs 70,000 to Rs 1 lakh for every vehicle purchased for the police department, as on July 2019.[24]

The Union Government on January 14, 2019 launched the ‘Womaniya on Government e Marketplace (GeM)’, an initiative to enable women entrepreneurs and Women Self-Help Groups (WSHGs) to sell handicrafts, handloom, accessories, and other products directly to Government departments and institutions. Nearly 80% women-owned establishments in India are self-financed and more than 60% of 8 mn units are owned and led by women entrepreneurs from socially-challenged sections. Womaniya on GeM will spur hyper-local economic opportunities for women entrepreneurs and achieve gender-inclusive economic growth.[25]

The Ex-CEO of GeM, Radha Chauhan, states that the goal of engaging more sellers from small and medium sized enterprises as well as from isolated regions to advertise their products on the platform, has been successful so far: “Since its inception in 2016, GeM has today over 15% of its sellers as micro, medium and small enterprises who contribute more than 45% of sales by value on the platform, creating opportunities for small manufacturers in remote hinterlands of the country to sell and to interface with the government, directly”, she says. 

Exact numbers on the quantitative savings impact of GeM however vary between sources and are thus not fully conclusive.

Written by Julia Schnatz

What did and didn't work

All cases in our Public Impact Observatory have been evaluated for performance against the elements of our Public Impact Fundamentals.

Legitimacy

Public Confidence Good

The platform was developed in a span of five months and the Special Purpose Vehicle is now responsible for ensuring adequate publicity, including periodic advertisements in newspapers of the GeM and the items to be procured through GeM, for prospective suppliers. [10] This has eliminated all any human interface for vendor registration, order placement or payment processing and has removed entry barriers for suppliers who weren’t able to conduct business with the Indian government. Indian businesses and the MSME sector in particular perceived this to be the greatest benefit of GeM besides increasing transparency and reducing corruption in the procurement process. In general, the business community seems to be in favour of this new procurement system. [20]

GeM set up a twitter account for their operation where they inform the general public regularly (~ once every two days) about the most recent developments and news related to the marketplace. The next goal is to localise the markets by scaling GeM up to incorporate at least 13 other languages apart from English to make the market more accessible throughout India. [17] To further simplify the platform & make it more user-friendly, the platform has launched a chat-bot – GeMmy – to assist the users and quickly resolve their queries to expedite the process. In addition to this, GeM also launched a Learning Management System (LMS) on its website, which serves as a training tool and facilitates intermediate processes like registration training, live training using webinar, certification, feedback, FAQs and other user specific journeys.[2]

Recently, Startup-Lobby groups in India as well as the think-tank IndiaTech have requested the government and regulators to allow them to list their “home-grown” products and services on GeM. IndiaTech CEO Rameesh Kailasam told Indian News Outlet Times of India that this would allow startups to access new market opportunities while at the same time, government departments could benefit from the pricing advantages that many start-ups offer. This could include services like cabs as well as flight and hotel bookings. [15

In early 2019, GeM has launched an initiative to enable female entrepreneurs and self-help groups across India to advertise their products on the platform. This is part of an effort of GeM to enable more inclusive growth and make the procurement platform accessible to vendors of all backgrounds and regions, especially women, start-ups and young businesses. [18]

The Minister of State for Commerce and Industry also released a movie on GeM, , and expressed hope that its national launch would further seek to promote inclusiveness by catapulting various categories of sellers and service providers, take proactive steps to facilitate the training and registrations of such specific category of manufacturers and sellers, develop women entrepreneurship and encourage participation of MSME sector and Start-ups in public procurement.[19]

Stakeholder Engagement Good

Relevant internal stakeholders were mainly the different government organizations and departments on central, state, and local level. GeM was created by the Directorate General Supply and Disposal (DGS&D) for online purchase of commonly used goods and services by various central government ministries and departments.[7] The DGS&D was managed under the Commerce Ministry, which was at the core of developing the different features of the platform. The Ministry of Commerce and Industry suggested later during the development phase of the portal that the GeM also provides tools for online bidding and online reverse auction which can be used by the purchaser.[7] Eventually DGS&D, a department that had its origins in the India Stores Department, which was established in 1860 in London by the British for centralised purchase of goods for India, was shut down on 31st October 2017, and was entirely replaced by GeM. [22]  

External stakeholders included mainly vendors who want to sell their products on GeM. In order to include them better into the design of the marketplace, study groups were formed in different Indian states to enhance local vendors’ participation and get their input on the proposed creation of the e-marketplace. Special initiatives such as ‘Womaniya’ to enable women entrepreneurs and women-led self help groups to showcase and sell their products on GeM have been undertaken by GeM in the last year. GeM has also undertaken similar initiatives to promote MSMEs and Startups on the platform. [10] [21]

In addition to this, “Startup Runway” – a unique concept initiated by GeM to promote entrepreneurship through innovation was launched on 19th February 2019. This program is an opportunity for agile and lean Startups to reach out to the universe of Government Buyers by offering products and services that are unique in concept, design, process and functionality through StartUp Runway corner. DPIIT (Department for Promotion of Industry and Internal Trade) certified Startups are invited to offer their products/services for procurement on Government e Marketplace (GeM). The objective of the program is to enable startups and spur hyper-local job-creation, wealth generation to achieve inclusive growth. More than 1500 startups have registered on GeM, offering over 12,000 products; more than 5000 orders have been given to startups on the GeM platform. Some of the unique and innovative products offered by these startups include Motorbike Fire Engine, Health kiosk, rescue water craft etc.[2]

Firms offering their products on GeM also showed confidence when they evaluated the policy on state level: “Most of the firms and suppliers offering their products on GeM are happy with the service, according to the feedback received from them in Goa”, says Douripalli. The entire process of joining the marketplace and registering products is very smooth, transparent and very productive to all the buyers. The whole registration process for sellers takes just 10 minutes. A typical concern of local sellers prior to the creation of GeM was of payment getting delayed or not having enough inventory to process the order. Under the GeM framework, sellers receive the payment within 10 days of the buyer accepts the goods. The goods have to be supplied within 15 days of getting the order; this further increases efficiency and transparency. [6

Further to this, GeM also offers ‘Business Cockpit’ – a value-add service for the OEMs, enables the businesses to get deeper insights by providing relevant statistics such as coverage analysis, buyer information, value & volume of business etc.[2]

Political Commitment Strong

Ever since its development, commitment to the efficient and wide-spanning use of the platform has been strong: With the Finance Minister Arun Jaitley announcing the proposal to reform government procurement in a budget speech in February 2016 [8], the idea was to aggregate demand from government offices and use the power of bulk buying to get better cost advantages from electronic goods suppliers. The proposal was also presented to Prime Minister Narendra Modi as one of the avenues to drive operational efficiencies. [9]“The government is committed to curbing corruption. One of the key aspects of this objective is to minimize Governments human transactional interface”, said Narenda Modi, the Indian Prime Minister in the course of GeM’s implementation. [10]

Shortly after the launch of GeM, the Finance Ministry amended the General Financial Rules and has made it mandatory for all the departments and ministries to source common goods and services from GeM. [2] To further accelerate the adoption and use of e-government services by major national ministries as well as their local counterparts across the states, a National Mission on GeM was launched in September 2018 by India’s Commerce and Industry Minister, Suresh Prabhu. [10]

Policy

Clear Objectives Good

Procurement through GeM has been authorized as per the General Financial Rules, 2017 Rule 149, where also the marketplace’s broad objectives were stated. The announcement was released shortly before the launch of the platform and defines the overall objectives of the GeM as follows: 

  • Transparency and efficiency in public procurement; corruption free governance
  • Remove entry barriers for bonafide sellers
  • Increase overall efficiency leading to significant cost savings on government expenditure in procurement
  • Maximizing the ease in availability of all types of products and services bought by government buyers
  • Promote inclusiveness by opening the platform to a vast array of sellers and buyers
  • Achieve cashless, contactless, and paperless transactions

Even though the objectives were stated clearly, they do not include more specific numerical goals as to the extent to which GeM should be used across government entities. The objectives of the procurement policy were also not changed over the time period and were not adjusted to more specific challenges that arose, especially regarding the engagement of local vendors. [10] Many of the products on offer on GeM are produced in urban regions with high economic activity, rather than in remote regions, weaker sections and medium small enterprises, or even more locally manufactured goods and services. [12]

Evidence Strong

While developing GeM, the Indian government used other countries’ similar platforms as examples and drew on the learnings from these global Government-To-Business (G2B) platforms, in particular Chile’s “Chile Compra”, South Koreas “KONEPS”  and Singapores “GeBiz”. The Indian government linked up with the procurement agencies of these three countries (and the World Bank) to obtain information on their pricing data for the platform. The defined five dimensions for which they defined best-practices from around the world: Buyer and Seller management, platform features, policy and management, revenue and operations model. Once they had identified the best practice in the global G2B arena, they defined its implications for GeM and strategized how to implement GeM in line with these best practices. 

The Indian government also rolled out an extensive pilot version to test the platform before it fully went online. After the Finance Ministry announced the development of the GeM, the pilot was rolled out in July 2016 with the Department of IT preparing the interface of the platform, before the main site went online in January 2017. The GeM was rolled out in two phases. In the first phase, only two, more general product categories that are used most widely by various Government Ministries, Departments, and Organizations: Computers and Vehicle management (e.g. Taxi) service were being offered. [7] During the pilot, it was free of charge for sellers to advertise their products on GeM. 

After the pilot period of six months, in January 2017 the software developers added more functionality of the website by including more product categories, allowing more sellers to advertise their products and they also created a mechanism that informs sellers about the reasons for losing a bid. It remains free of charge for sellers to advertise their products on GeM, only a small vendor registration fee is necessary.  

Feasibility Strong

To make the introduction of the platform feasible, the central government organized the implementation in close cooperation with state and local departments. In 2018, trainings for key stakeholders such as government and Public Sector Undertaking (PSU) officers were organized across locations and covered at least 187 districts. This was accompanied by mentoring of buyers and sellers for their registration on the GeM portal. [10Each of these training sessions were attended by more than 60 procurement officers from about 20 Central government organizations based in Delhi; each such training programme took place in a series of similar pan-India training sessions for all the Central government procurement officers, said a government statement. [3]

Emphasising on the importance of the programme, GeM’s Ex-CEO Radha Chauhan said that the feedback that the officers provide and share will be used for further enhancement of the site. She added that more training sessions are planned for both government buyers as well as sellers in the coming months. [3]

Also, District and Sub-District road shows were organized to create grass-root level information and bring local buyers and vendors on board to GeM to increase its range of products.  

Action

Management Strong

The software for the e-market platform is mainly used by procurement officers in central and state government departments. These officers are extensively trained by the training team at GeM, the National Institute of Financial Management (NIFM) and National e-Governance Division (NeGD). 

The software for GeM is being upgraded constantly to make it glitch free. The portal is managed by a local team in each state as well as Union Territories (UT).  Many states now buy goods such as laptops, car rental services, and medicines on the GeM portal. [5

In April 2017, the Cabinet decided to set up a special purpose vehicle (SPV), a not-for profit company to operate GeM, making it an autonomous body. This decision followed a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi. The GeM is headed by CEO Talleen Kumar, who resumed his position in GeM in Aug 2019. Prior to this, GeM was led by Radha Chauhan, who started GeM with a small team of 15 people which was constantly expanded in the course of implementation. GeM has adopted an HR policy that enables it attract talent from the private sector, to come and work cohesively with the government officials to man and manage the marketplace. This facilitates in bringing best-in-class industry expertise into the organization. The management team at GeM also governs a large private sector consortium with specialist vendors that is responsible for developing and maintaining the platform 

GeM SPV also appointed a nodal officer in order to better address complaints and grievances in time while constantly improving the technological workings of the platform. For example, two years after launching of the platform, they introduced a price comparison function for up to three items as well as an improved search function for purchases made through GeM. [10]

A National Mission on the GeM was launched in September 2018, two years after its implementation, to further inform the approach.  This led to a significant rise in registrations of buyers and sellers as well as a positive trend in spread of transactions, both in volume and value, across buyer organizations. Three UTs signed MoUs with GeM during the mission and it brought more width and depth to the product offers on GeM by collecting and listing user requirements, thus enhancing adoption and use of GeM for procurement.[10

Measurement Fair

Measurement of the impact GeM has had so far are mainly measured in how much turnover the platform has seen and how many different stakeholders have actively engaged GeM in the procurement process. 

The economic effects of GeM have been substantial: The average prices on GeM are lowered by at least 15–20%, up to 56%. Demand aggregation for a lot of the goods and services results in an annual savings of up to Rs. 40,000 crore per annum for the Government. [20]

Alignment Good

Fighting corruption and increasing transparency of public procurement transaction is a mutually shared interest between the Indian government and civil society. To successfully run the e-marketplace platform and ensure its usage and user-friendliness, the government partnered with numerous actors across India: Academic Training institutions, Technology Development for Indian Languages (TDIL), a platform for citizen engagement (MyGOV), as well as local manufacturers, Indian businesses and government departments that procure their goods through GeM. [10]

The GeM is strongly tied to the “Make In India” initiative, aimed at fostering the idea of producing with local manufacturers within India. The Heavy Industries Ministry has now mandated that preference is to be given to domestically-manufactured vehicles with a minimum 65 per cent local content in public procurement of automobiles, “to promote manufacturing and production of goods and services locally, preference shall be provided by all government procuring entities to domestically manufactured automobile and automotive components", as stated in the government announcement. [16

In addition to this, GeM, through its offerings, has also emphasized on the Swacch Bharat Abhiyan, by discouraging the use of plastic and encouraging buyers to opt for environmental friendly products for a cleaner India. On the World Environment Day - 5th June 2019- GeM took the initiative to urge governments, industry, communities and individuals to come together and explore renewable energy, green technologies in order to improve air quality in cities and regions across the world. GeM contributes to this initiative by being cashless, contactless and paperless in its operations.[2]

The creation of GeM was also embedded into the “Digital India” initiative that seeks to put emphasis on e-governance and transform India into a digitally empowered society. It is to ensure that government services are available to citizens electronically. It aims to transform ease of doing business in the country as a whole, so these initiatives are interlocking in the sense that they mutually try to curb corruption within the government. [11]