1

Objectives:
1. Materials management – role and
importance.
2. To familiarize about stores activities.
3. Classification & Codification of stores.
4. Demand forecast of stock items.
5. Non-stock items.
6. Inventory control.
7. Public Vs Private procurement.
8. Types of contracts.
9. Tender systems.
10. Contract administration.
11. Any other issues – feel free to ask.
12. Examination – 50 marks – 30 mins.
 Role of MM
• Industry- Need resources
• 5 Ms –
• Men,
• Machines,
• Materials,
• Money &
• Management
3
 MM a Profit Center
Profit margin = Profit/Cost
= Sale Price - cost
Cost
•Sale Price is restricted by competition.
•Cost depends on
• Manpower,
• Materials,
• Other fixed costs.

5
»Planning – ascertaining needs, realistic estimates,
quantities & time, make/buy decisions.
»Procurement – uninterrupted supply, vendor
development, public policy, import substitution,
ancillarisation.
»Warehousing – receipt/inspection, storage,
preservation.
»Inventory Control – Optimum investment in
inventories ensuring full availability.
»Scrap Disposal- most economical channel to dispose
surplus/ obsolete materials, waste management.
»Distribution – fastest, most efficient, cost effective
supply and transport, insurance.
»Cost control & Reduction – Material research, variety
reduction, value analysis, transportation models, JIT,
MRP. 6
Cradle-to-grave management
MM in IR: Salient Features
◼Zonal Railways: 17
◼Production Units: 8
◼Stock Items: 1,30,000 (Approx.)
◼Stocking Depots: 262
◼Non-Stock Items: Equally Large

Source: IR year book 2019-20

 Expenditure on Purchases
(Excluding Ballast and Contractor Supply for Civil Construction)

Year Total Purchase (Rs. Crs)

1950-51 81.60
1960-61 177.90
1970-71 363.70
1980-81 1,377.10
1990-91 5,189.30
2000-01 10,835.00
2009-10 27,876.80
2010-11 29,099.00
2011-12 31,359.00
2014-15 42,764.00
2015-16 43,131.00
2016-17 43,347.00
2017-18 49,484.00
2018-19 62,134.00
2019-20 63,844.00
2020-21 78,000 (Prov)
Source: IR Year Book 2019-20
Broad classification of procurement:
Value in
1. Nature of purchase
Crores Rs.
18,497
Stores for operation, repairs and maintenance
2,210
Stores for construction
14,050
Fuel
Stores for manufacture of Rolling Stock and 29,086
purchase of Complete units
63,844
Total

9
2. Purchase from Small Scale Sector and KVIC =
Rs. 6,503 crores.
3. Procurement fro Public Sector Undertakings =
20%;
Other industries = 80%.
4. Value of Indigenous stores = 63,052 crores (99%).
10
 Scrap Sale Value (in Crores)
5000
4575
4408
4500 4192 4333
4002
4000
3525 35003495
3500 3248 3143
3000 2736 2801 2718
2500
2000 1833
1364
Value (in crores)

1500
1032
1000
500
0

Source: IR Year Book 2019-20

Year
 CLASSIFICATION OF STORES
Stock Non-stock
➢Uniform Demand/ ➢One time demand, not
Consumption & recouped required repeatedly.
regularly. ➢Stores Department does
➢ Planning, procurement, procurement only.
stocking, distribution, ➢Not-stocked in depot.
inventory control & disposal ➢Received directly by the
is Stores Department’s consignee’s or users
responsibility. ➢Allocated to respective
➢Purchased for a contract head of account.
period ➢Examples: Computer,
➢Stocked in Depots Printer, UPS, Furniture,
➢Examples: Wheel, Axle, Cartridge, TV, Laptop……….
Fan, Tubelight, A4 paper,
Registers, Uniforms, Paints,
Towels, etc.
CLASSIFICATION contd…

Further Classification:
 Ordinary Stores: Regular consumption.
 Emergency Stores: Items do not ordinarily wear & tear but need
immediate replacement on breakage, these are long lead items.
 Special Stores: Required for Works, excluding ordinary Stores.
 Custody Stores: Purchased for Special works & charged to the
works, left in the custody of stores depot, numerical records
important. Items for construction of Rolling Stock.
 Imprest Stores: Maintenance Units like running sheds, C&W
sheds needs a number of items, including consumables like
oils/greases, for repeated use. Items are normally charged off to
final head of account. Sanction of imprest normally 2/3 months’
requirement. Recoup every month.

15
Nomenclature

16
Items should be given
nomenclature for easy
communication among
Indentor, Purchaser,
Supplier and Inspector.
 Nomenclature contd..
1. Description: Understandable by User, Purchaser, Supplier and
inspector.
(i) Basic Commodity Method.
Basic Commodity, Variance in kind, Use, Size/shape
Ordinary toilet soap - Soap, toilet, ordinary
(ii) End Use: items like lubricating oils which have
different grades.
2. Specifications and drawing.
3. Unit: Same unit for all transactions of a particular item,
to avoid error in conversion, to facilitate expediency.
Hence standard units;
•Number: 01, Pair: 02, Set: 03, Kg: 13, MT: 15, Lt: 51.
4 . Material code – PL No.
18
Codification – Price List No.
Types of codification:
–Non Significant
–Fully Significant
–Semi Significant
IR uses semi-significant PL No.
19
 Codification: Stock Items
PL Number: 90 35 058 3
** ** *** *
A B C D
A-Main Group: Type of Equipment: 00-09 Steam Locos,
10-19 Diesel Locos, 20-29 Electric Locos, 30-39 C&W
items. (Total 76 Groups)
B-Sub Group: Basically major assemblies, form sub
groups. Brake fittings, Power Pack, Bogie items etc.

C-Serial number: Serial of item in the assembly. This

number by itself does not give clear idea of the item.

D-Check Digit: Important to check the correctness of the20

PL No./ (Modulus 11, Ex: 38 981580, 3085111?).
 Demand Forecast:Stock Items
•BASIS (Regular consumption Items)
•Past 3 years consumption, stock-outs considered

•Trend of past consumption

•Additional information on Current / future activity level;
phasing out of certain type of RS or other M&P.

•EAC = Estimated Annual Consumption.

•EMC = Estimated Monthly consumption.
•AAC = Average (actual) Annual
Consumption.
21
 Demand Forecast: Stock Contd..
•Weigted AAC based on past three
years’ consumption =
[(Y3x1) + (Y2x2) + (Y1x3) + (Y0x3)]
[6 + No. of Month in Y0 x (3/12)]

Wt. AMC= Wtd. AAC/12

22
 Recoupment of Stock Items
1. Annual Indent/Estimate System:
•A fixed interval review system
•CP(12/24 months), IP

•Calculation of Order Qty.

Net Quantity for Procurement = (IP + CP) X AMC –
(Stock + Dues) + Buffer Stock
Example: If Stock = 50, P.O. = 100
B.S. = 1 month, AMC = 10
NPQ = (12 + 12) X 10 – (50 +100) + 10

23
 Recoupment of Stock Items
2. MAXIMA-MINIMA System: Shop
Mfd. Items:
MaxL.= (Review period + LT + BP) X AMC
Reorder level (ROL) = (LT + BP) X AMC
EOQ = Max. – (Present stock + Pipeline dues)
–Lead Time Important
–Low Inventories, constant attention
required
•EOQ MAXMIN 24
1. Non-Stock Requisition(NSR)
• Basis of procurement of NS items.
• Procedure of procurement.
2. Service contract Vs Supply contract.
3. Public procurement Vs private
procurement.
4. Types of contracts in IR.
5. Tendering System.
6. Contract administration.
 Non-Stock Indent
Planning, demand generation, follow-up,
receipt, acceptance, bill passing and
consumption within reasonable period is user’s
responsibility.
Stores Department does only procurement.
BASIS:
•Estimates for works
•Programs for repair & maintenance.
If more than 2 drawls per year & value
exceeds Rs 50,000/-, propose stocking of the
26
item.
 Non-Stock Indent contd..

PROCEDURE
•Indent as per format S-1302 in duplicate.

•Detailed description, ISS/BS/IRS/own

specification, Drawing
•Head of allocation
•LPR/ BQ for estimate - Realistic assessment
•Indicate likely suppliers in case of 1st
purchase

27
 Non-Stock Indent contd..

•Funds availability
•Finance vetting if value > Rs. 2.5 lakh
(Rs. 10 lakhs for Safety items)
•Preferable delivery period be indicated
•Some railways arrange NS items also in
a planned manner
•Ensure to use the NS item within
reasonable time
28
Service Vs. Supply Industry
• Physical Goods – Tangible, Services -intangible.
• Inventory Levels in services Perishable. Production & consumption
happens at the same time.
• Customer Demands - do not produce a service unless a customer
requires it. Only design and develop the scope and content of
services.
• QA objective and measurable in goods; subjective in Services.
• Labour Requirements - specific knowledge and skills. Delivery is
labour intensive and cannot be easily automated.
• Physical Location - physical production site not required.
Manufacturers - physical location for production/stock holding.
• Goods can be patented, services can not. Services can be copied.
Goods = Materials + Works + Services.
Services = Services + Materials + Works
Works = Works + Materials + Services.
How Services increase with better income

Source: http://www.epwrf.res.in/includefiles/c10942.htm
Source: Wikipedia
Public procurement Vs Private procurement
 Public procurement Vs Private procurement
Private Public
Budget - Flexibility and agility within - Limitation in flexibility &
budgeting. methods of funding.
- Easier to procure based - Delegated preemptively
upon price and tougher to alter their
/competitiveness. course of distribution.

Motivation - For Profit (FP) - Not-for-Profit (NFP).

- Centralized focus on - Focus on social
driving revenue. responsibility.
- Effort to increase - Issues beyond simple
shareholder returns. value for money or basic
- Financially driven mindset; supply.
increasing margins, driving - Larger focus on adding
profitability and enhancing social value to a supply
competitiveness. chain.
 Public procurement Vs Private procurement
Private Public
Regulations - Lesser presence of - Biggest boundaries for agility within
regulatory public procurement.
reporting. - Defined and constrained in some
- Self-regulatory. sense by legislation.
- Building more - Create less room for creative
sustainable and procurement methods.
responsible brand
associations.
Transparency - Can cover up their - Required to be conducted in more
spend in many transparent contexts.
instances. - Report back to the government (and
the people) with how money is being
spent.
Approach - Flexible, open to - Risk averse, rule based, formal
innovation, Profit & processes, arm’s length
people driven. negotiations.
- Frame work of Constitution of India & various Public Acts like
❑Indian Contract Act, 1872
❑Sale of Goods Act, 1930
❑Arbitration & Conciliation Act, 1996
❑Relevant Tax Acts – GST, Customs…
- Laws for monitoring equality and bribery.

Public procurement authorities in IR are required to follow:

❖ Public procurement policy.
❖ GFR
❖ GCC
❖ IRS conditions of contracts.
❖ Codes and manuals.
 Types of Contracts
• In Railways, we enter into:
– Supply Contracts
– Works Contracts
– Service Contracts (Earning/ Expenditure).
• Types of Supply Contracts;
– Rate Contracts: Quantity/consignee not
fixed. DGS&D (Now replaced by GeM).
Order by DDO.
– Running Contracts – Qty, fixed.
– Fixed Quantity/Delivery Contracts
 Tender System
• Purchase requires contracts with
suppliers
• For purchase of materials at competitive
prices we follow tendering systems:
– Open Tender: Used for estimated
tender value>Rs. 25 Lakhs,
• Wide publicity, no control on choice
of suppliers.
• Most competitive prices.
• Causes longer lead time.
 Tender System
• Limited Tender System;
– Value <25 Lakhs.
– Limited sources, on approved panel.
– Demand is urgent.
– Different types of LTs are;
• Ordinary LT.
• SLT; safety items, urgent
demands.
 Tender System
▪ Weekly Bulletins;
• few hundred items at a time,
• issued to the registered suppliers
who subscribe to the bulletin.
▪ Single Tender
– PAC item.
– Item extremely urgent.
– Very small value, not economical
for competitive tendering.
 PAC Format:
• Maker’s Name & Address, & Name of Local Agent
• I approve the above purchase & I certify that-
(a) No other make/brand will be suitable
(b) This is the only firm who is manufacturing/
stocking this item
(c) A similar article is not manufacture/ sold by any
other firms which could be used in lieu of.
• NB: If (c) is deleted Purchase Power gets restricted
to Rs. 15 lacs/- only, else GM’s approval)
Signing of PAC

1. JS – up to Rs. 75,000/-
2. SS – Up to Rs. 2L.
3. JAG/SG – Up to Rs. 15L.
4. SAG – Up to Rs. 25L.
5. PHOD/CHOD – Above Rs. 25L.
 Tender Invitation
• Purchase proposal is approved by CA and
tender document is prepared
• For OT, first advertised in the e-
procurement portal – IREPS. Then
Published in newspapers. No newspaper
advertisement for GeM tenders.
• Tender is floated in IREPS/GeM.
• ST, LT & SLT enquiries are mailed directly.
• All tenders have due date & time for
submission.
 Tender Opening
• OT & SLT are visible to participating
firms, tabulation opened & signed by
a Gazetted Stores Officer & a
supervisor.
• Limited tenders are opened by
Supervisor and officer of Stores.
Firms can not see the offers.
• Case given to the Competent TAA
after printing and signing of
tabulation.
 Tender Finalization
• Finalization;
– Accept/Reject an offer
• If value is less than Rs. 50 lacs, direct decision by
the Purchase Officer, if more, the case to be dealt
by a TC, consisting of three officers
• Officers from stores, user and finance dept.
• TC is a recommending body, its
recommendations are to be considered by an
accepting authority.
 Guidelines for Tender Committee
• Committee to be duly constituted (SOP)
• Lowest tender value is the criteria for level of
TC; a TC may have to transfer the case to a
higher level TC
• Dropping of purchase is also to be considered by
the TC
• Stores Member is the convener of TC, who puts
up the case to competent authority
• TC member can not be the TAA also.
• Concept of dissenting note.
 Tender Finalization
• Certain important points;
– Offer to be technically suitable
– Rates of lowest technically suitable offer to be
examined for rate reasonability
– Check if the delivery condition offered suits our
requirement
– Above being OK, see if the firm is reliable & their
past performance is satisfactory
– Check various terms & conditions offered by firm are
acceptable
– IRS Conditions of Contract: whether any deviation
– Tenders to be finalized within the offer validity
 Placement of PO
– Acceptance recorded by PO or the TAA
– Case passed on to the Purchase Section for
making PO
– PO is signed & sent to Accounts Dept. for
vetting if value exceeds 8 lakhs (Rs. 15 lakhs
for safety items)
– Value of PO is posted in the Liability Register
– PO is numbered & sent to the supplier by post
 Contract Administration
• Placement of PO is not the end.
• We have to get the materials, administer the
contract.
• PO Modifications:
– Suppliers may make requests for certain
amendment in the PO, dispose it appropriately.
– Take finance concurrence if the requested
modification involves financial repercussions.
 Contract Administration
• Delay in supply:
– DP expires, Contract expires, further
extension in DD with mutual consent
– Right to recover LD for any loss or
inconvenience suffered by Railway due
to delay in supply (IRS Terms).
– Liquidated damages: @0.5% per week,
maximum 10%.
• Failure of Supply: Risk Purchase/
Forfeiture of SD.
QUESTIONS?
M:9601285943
Thank You
51
International Standard Serial Number (ISSN): The purpose of a check digit is to
guard against errors caused by the incorrect transcription

The procedure for calculating the check digit, which may be carried out automatically in a
computer, is as follows:
Take the first seven digits (the check digit is the eighth and last digit).
Take the weighting factors associated with each digit : 8 7 6 5 4 3 2.
Multiply each digit in turn by its weighting factor.
Add these numbers together.
Divide this sum by the modulus 11.
Subtract the remainder from 11: 11-10 = 1
Add the remainder, which is the check digit, to the extreme right (low order) position of
the base number
9 0 3 5 0 5 8 3
8 7 6 5 4 3 2
72 + 0+ 18 + 25 + 0+ 15 + 16 = 146

11) 146 (13

143 Back
3
52
Wage bill increased from 35% in 2007-08
to 70% in 2016-17 of revenue

Back

53
 Inventory Management
• Definition:
– An idle resource which has an economic
value
• Inventory Types:
– Raw Materials & Parts: For production
program
– Consumables & Spares: For day-to-day
operations, repairs/maintenance
– In-process (Work in progress): At various
stages of production
– Finished Products: Not yet sold/used 54
 Inventory Management contd..
• Why Inventory?
– Railway specific items, not available off the
shelf, longer lead time
– Items readily available but frequent, piecemeal
purchases not economical
– Due to variations in consumption & lead time,
forecast of demand is not accurate, stock-outs
may occur.
Basic Problem
– Idle resource with economic value, blocking
capital, on the other hand it is imperative to
keep inventory.
55
Inventory Management contd..
Factors:
–When to initiate purchase - Lead Time
–Quantity to be purchased at a time
◆ Ordering Cost (Depends on mode of
tender also)
◆ Inventory Carrying Costs: Assessed at 20-
25% for IR,
• Interest/capital/opportunity cost:15-20%
• Obsolescence/Depreciation cost:2-5%
• Storage/Handling/Verification cost:3-5%
• Insurance/Security cost:1-2%.
–Stock levels for various items : Depends upon
Value, Use. 56
 Inventory Management contd..
Efficiency Indices of Inventory Management:
1.Service Level:
- %age of compliance of demands decided by top
management
- Cost of 100% level, prohibitive, 90-98% depending
upon criticality
- 100% target for Vital Safety items
2.Inventory TOR: Measure of average inventory held in
stock at a time.
TOR = Total Value of all items held in stock on a date
Total Value of issues made during the year

57
 Inventory Management contd..
3. Overstock/Inactive Items:
Inactive Stores: No issues for last 12
months
Surplus/Dead Surplus Stores: No issue for
Past 24 Months
•Dead suplus – Not expected to be issued for
next 24 months.
•Moveable surplus – Expected to be issued in
next 24 months.
•Maximum 5% inactive/surplus allowed.
58
 Inventory Management contd..
Inventory Control Techniques
1. Selective Control: Categorization on the
basis of Consumption Value, Criticality etc,
- ABC/VED are two such classifications.
2. Management by Exception:
Overstock/Surplus/Inactive items lists.
3. Suitable Recoupment Policies:
To keep optimum stocks

59
Inventory Management contd..
4.Variety Reduction:
To reduce OC & ICC
5.Value Analysis:
Achieving the same function with
minimum cost with alternative
design/materials
6.IT Applications:
– MIS for Management decisions based on
real time, statistical analysis.
– MMIS on IR
60
 Inventory Control
• ABC Analysis
– Pareto Principle: Majority of
activities (70-80%) governed by few
attributes (10-20%).
– Annual Consumption Value: In
Railways,
• 70% value represented by A Cat.
Items
• 20% value by B Cat. Items
• 10% value by the rest, C Cat.
Items. 61
 Inventory Control
• VED Classification: Service Level Important
– ABC does not give cognizance to importance or
criticality of the item
– Vital, Essential & Desirable items
– Vital items are critical for operation & do not
permit any corrective time, need immediate
replacement
– Essential items are also critical for operation but
operation does not come to stand still at once,
some corrective time is available
– Remaining items are known as desirable items.
62
 Inventory Control
• ABC/VED Matrix:

V E D
A AV AE AD
Strategic Discourage
items Procurement

B BV BE BD

C CV CE CD
Critical items General items

63
1
Objectives:
1. Materials management – role and
importance.
2. To familiarize about stores activities.
3. Classification & Codification of stores.
4. Demand forecast of stock items.
5. Non-stock items.
6. Inventory control.
7. Public Vs Private procurement.
8. Types of contracts.
9. Tender systems.
10. Contract administration.
11. Any other issues – feel free to ask.
12. Examination – 50 marks – 30 mins.
 Role of MM
• Industry- Need resources
• 5 Ms –
• Men,
• Machines,
• Materials,
• Money &
• Management
3
 MM a Profit Center
Profit margin = Profit/Cost
= Sale Price - cost
Cost
•Sale Price is restricted by competition.
•Cost depends on
• Manpower,
• Materials,
• Other fixed costs.

5
»Planning – ascertaining needs, realistic estimates,
quantities & time, make/buy decisions.
»Procurement – uninterrupted supply, vendor
development, public policy, import substitution,
ancillarisation.
»Warehousing – receipt/inspection, storage,
preservation.
»Inventory Control – Optimum investment in
inventories ensuring full availability.
»Scrap Disposal- most economical channel to dispose
surplus/ obsolete materials, waste management.
»Distribution – fastest, most efficient, cost effective
supply and transport, insurance.
»Cost control & Reduction – Material research, variety
reduction, value analysis, transportation models, JIT,
MRP. 6
Cradle-to-grave management
MM in IR: Salient Features
◼Zonal Railways: 17
◼Production Units: 8
◼Stock Items: 1,30,000 (Approx.)
◼Stocking Depots: 262
◼Non-Stock Items: Equally Large

Source: IR year book 2019-20

 Expenditure on Purchases
(Excluding Ballast and Contractor Supply for Civil Construction)

Year Total Purchase (Rs. Crs)

1950-51 81.60
1960-61 177.90
1970-71 363.70
1980-81 1,377.10
1990-91 5,189.30
2000-01 10,835.00
2009-10 27,876.80
2010-11 29,099.00
2011-12 31,359.00
2014-15 42,764.00
2015-16 43,131.00
2016-17 43,347.00
2017-18 49,484.00
2018-19 62,134.00
2019-20 63,844.00
2020-21 78,000 (Prov)
Source: IR Year Book 2019-20
Broad classification of procurement:
Value in
1. Nature of purchase
Crores Rs.
Stores for operation, repairs and 18,497
maintenance
2,210
Stores for construction
14,050
Fuel
Stores for manufacture of Rolling Stock 29,086
and purchase of Complete units
63,844
Total

9
2. Purchase from Small Scale Sector and KVIC =
Rs. 6,503 crores.
3. Procurement fro Public Sector Undertakings =
20%;
Other industries = 80%.
4. Value of Indigenous stores = 63,052 crores (99%).
10
 Scrap Sale Value (in Crores)
5000
4575
4408
4500 4192 4333
4002
4000
3525 35003495
3500 3248 3143
3000 2736 2801 2718
2500
2000 1833
1364
Value (in crores)

1500
1032
1000
500
0

Source: IR Year Book 2019-20

Year
 CLASSIFICATION OF STORES
Stock Non-stock
➢Uniform Demand/ ➢One time demand, not
Consumption & recouped required repeatedly.
regularly. ➢Stores Department does
➢ Planning, procurement, procurement only.
stocking, distribution, ➢Not-stocked in depot.
inventory control & disposal ➢Received directly by the
is Stores Department’s consignee’s or users
responsibility. ➢Allocated to respective
➢Purchased for a contract head of account.
period ➢Examples: Computer,
➢Stocked in Depots Printer, UPS, Furniture,
➢Examples: Wheel, Axle, Cartridge, TV, Laptop……….
Fan, Tubelight, A4 paper,
Registers, Uniforms, Paints,
Towels, etc.
CLASSIFICATION contd…

Further Classification:
 Ordinary Stores: Regular consumption.
 Emergency Stores: Items do not ordinarily wear & tear but
need immediate replacement on breakage, these are long
lead items.
 Special Stores: Required for Works, excluding ordinary
Stores.
 Custody Stores: Purchased for Special works & charged to
the works, left in the custody of stores depot, numerical
records important. Items for construction of Rolling Stock.
 Imprest Stores: Maintenance Units like running sheds, C&W
sheds needs a number of items, including consumables like
oils/greases, for repeated use. Items are normally charged
off to final head of account. Sanction of imprest normally
2/3 months’ requirement. Recoup every month.

15
Nomenclature

16
Items should be given
nomenclature for easy
communication among
Indentor, Purchaser,
Supplier and Inspector.
 Nomenclature contd..
1. Description: Understandable by User, Purchaser, Supplier and
inspector.
(i) Basic Commodity Method.
Basic Commodity, Variance in kind, Use, Size/shape
Ordinary toilet soap - Soap, toilet, ordinary
(ii) End Use: items like lubricating oils which have
different grades.
2. Specifications and drawing.
3. Unit: Same unit for all transactions of a particular item,
to avoid error in conversion, to facilitate expediency.
Hence standard units;
•Number: 01, Pair: 02, Set: 03, Kg: 13, MT: 15, Lt: 51.
4 . Material code – PL No.
18
Codification – Price List No.
Types of codification:
–Non Significant
–Fully Significant
–Semi Significant
IR uses semi-significant PL No.
19
 Codification: Stock Items
PL Number: 90 35 058 3
** ** *** *
A B C D
A-Main Group: Type of Equipment: 00-09 Steam Locos,
10-19 Diesel Locos, 20-29 Electric Locos, 30-39 C&W
items. (Total 76 Groups)
B-Sub Group: Basically major assemblies, form sub
groups. Brake fittings, Power Pack, Bogie items etc.

C-Serial number: Serial of item in the assembly. This

number by itself does not give clear idea of the item.

D-Check Digit: Important to check the correctness of the20

PL No./ (Modulus 11, Ex: 38 981580, 3085111?).
 Demand Forecast:Stock Items
•BASIS (Regular consumption Items)
•Past 3 years consumption, stock-outs considered

•Trend of past consumption

•Additional information on Current / future activity level;
phasing out of certain type of RS or other M&P.

•EAC = Estimated Annual Consumption.

•EMC = Estimated Monthly consumption.
•AAC = Average (actual) Annual
Consumption.
21
 Demand Forecast: Stock Contd..
•Weigted AAC based on past three
years’ consumption =
[(Y3x1) + (Y2x2) + (Y1x3) + (Y0x3)]
[6 + No. of Month in Y0 x (3/12)]

Wt. AMC= Wtd. AAC/12

22
 Recoupment of Stock Items
1. Annual Indent/Estimate System:
•A fixed interval review system
•CP(12/24 months), IP

•Calculation of Order Qty.

Net Quantity for Procurement = (IP + CP) X AMC –
(Stock + Dues) + Buffer Stock
Example: If Stock = 50, P.O. = 100
B.S. = 1 month, AMC = 10
NPQ = (12 + 12) X 10 – (50 +100) + 10

23
 Recoupment of Stock Items
2. MAXIMA-MINIMA System: Shop
Mfd. Items:
MaxL.= (Review period + LT + BP) X AMC
Reorder level (ROL) = (LT + BP) X AMC
EOQ = Max. – (Present stock + Pipeline dues)
–Lead Time Important
–Low Inventories, constant attention
required
•EOQ MAXMIN 24
1. Non-Stock Requisition(NSR)
• Basis of procurement of NS items.
• Procedure of procurement.
2. Service contract Vs Supply contract.
3. Public procurement Vs private
procurement.
4. Types of contracts in IR.
5. Tendering System.
6. Contract administration.
 Non-Stock Indent
Planning, demand generation, follow-up,
receipt, acceptance, bill passing and
consumption within reasonable period is user’s
responsibility.
Stores Department does only procurement.
BASIS:
•Estimates for works
•Programs for repair & maintenance.
If more than 2 drawls per year & value
exceeds Rs 50,000/-, propose stocking of the
26
item.
 Non-Stock Indent contd..

PROCEDURE
•Indent as per format S-1302 in duplicate.

•Detailed description, ISS/BS/IRS/own

specification, Drawing
•Head of allocation
•LPR/ BQ for estimate - Realistic assessment
•Indicate likely suppliers in case of 1st
purchase

27
 Non-Stock Indent contd..

•Funds availability
•Finance vetting if value > Rs. 2.5 lakh
(Rs. 10 lakhs for Safety items)
•Preferable delivery period be indicated
•Some railways arrange NS items also in
a planned manner
•Ensure to use the NS item within
reasonable time
28
Service Vs. Supply Industry
• Physical Goods – Tangible, Services -intangible.
• Inventory Levels in services Perishable. Production & consumption
happens at the same time.
• Customer Demands - do not produce a service unless a customer
requires it. Only design and develop the scope and content of
services.
• QA objective and measurable in goods; subjective in Services.
• Labour Requirements - specific knowledge and skills. Delivery is
labour intensive and cannot be easily automated.
• Physical Location - physical production site not required.
Manufacturers - physical location for production/stock holding.
• Goods can be patented, services can not. Services can be copied.
Goods = Materials + Works + Services.
Services = Services + Materials + Works
Works = Works + Materials + Services.
How Services increase with better income

Source: http://www.epwrf.res.in/includefiles/c10942.htm
Source: Wikipedia
Public procurement Vs Private procurement
 Public procurement Vs Private procurement
Private Public
Budget - Flexibility and agility within - Limitation in flexibility &
budgeting. methods of funding.
- Easier to procure based - Delegated preemptively
upon price and tougher to alter their
/competitiveness. course of distribution.

Motivation - For Profit (FP) - Not-for-Profit (NFP).

- Centralized focus on - Focus on social
driving revenue. responsibility.
- Effort to increase - Issues beyond simple
shareholder returns. value for money or basic
- Financially driven mindset; supply.
increasing margins, driving - Larger focus on adding
profitability and enhancing social value to a supply
competitiveness. chain.
 Public procurement Vs Private procurement
Private Public
Regulations - Lesser presence of - Biggest boundaries for agility within
regulatory public procurement.
reporting. - Defined and constrained in some
- Self-regulatory. sense by legislation.
- Building more - Create less room for creative
sustainable and procurement methods.
responsible brand
associations.
Transparency - Can cover up their - Required to be conducted in more
spend in many transparent contexts.
instances. - Report back to the government (and
the people) with how money is being
spent.
Approach - Flexible, open to - Risk averse, rule based, formal
innovation, Profit & processes, arm’s length
people driven. negotiations.
- Frame work of Constitution of India & various Public Acts like
❑Indian Contract Act, 1872
❑Sale of Goods Act, 1930
❑Arbitration & Conciliation Act, 1996
❑Relevant Tax Acts – GST, Customs…
- Laws for monitoring equality and bribery.

Public procurement authorities in IR are required to follow:

❖ Public procurement policy.
❖ GFR
❖ GCC
❖ IRS conditions of contracts.
❖ Codes and manuals.
 Types of Contracts
• In Railways, we enter into:
– Supply Contracts
– Works Contracts
– Service Contracts (Earning/ Expenditure).
• Types of Supply Contracts;
– Rate Contracts: Quantity/consignee not
fixed. DGS&D (Now replaced by GeM).
Order by DDO.
– Running Contracts – Qty, fixed.
– Fixed Quantity/Delivery Contracts
 Tender System
• Purchase requires contracts with
suppliers
• For purchase of materials at competitive
prices we follow tendering systems:
– Open Tender: Used for estimated
tender value>Rs. 25 Lakhs,
• Wide publicity, no control on choice
of suppliers.
• Most competitive prices.
• Causes longer lead time.
 Tender System
• Limited Tender System;
– Value <25 Lakhs.
– Limited sources, on approved panel.
– Demand is urgent.
– Different types of LTs are;
• Ordinary LT.
• SLT; safety items, urgent
demands.
 Tender System
▪ Weekly Bulletins;
• few hundred items at a time,
• issued to the registered suppliers
who subscribe to the bulletin.
▪ Single Tender
– PAC item.
– Item extremely urgent.
– Very small value, not economical
for competitive tendering.
 PAC Format:
• Maker’s Name & Address, & Name of Local Agent
• I approve the above purchase & I certify that-
(a) No other make/brand will be suitable
(b) This is the only firm who is manufacturing/
stocking this item
(c) A similar article is not manufacture/ sold by any
other firms which could be used in lieu of.
• NB: If (c) is deleted Purchase Power gets restricted
to Rs. 15 lacs/- only, else GM’s approval)
Signing of PAC

1. JS – up to Rs. 75,000/-
2. SS – Up to Rs. 2L.
3. JAG/SG – Up to Rs. 15L.
4. SAG – Up to Rs. 25L.
5. PHOD/CHOD – Above Rs. 25L.
 Tender Invitation
• Purchase proposal is approved by CA and
tender document is prepared
• For OT, first advertised in the e-
procurement portal – IREPS. Then
Published in newspapers. No newspaper
advertisement for GeM tenders.
• Tender is floated in IREPS/GeM.
• ST, LT & SLT enquiries are mailed directly.
• All tenders have due date & time for
submission.
 Tender Opening
• OT & SLT are visible to participating
firms, tabulation opened & signed by
a Gazetted Stores Officer & a
supervisor.
• Limited tenders are opened by
Supervisor and officer of Stores.
Firms can not see the offers.
• Case given to the Competent TAA
after printing and signing of
tabulation.
 Tender Finalization
• Finalization;
– Accept/Reject an offer
• If value is less than Rs. 50 lacs, direct decision by
the Purchase Officer, if more, the case to be dealt
by a TC, consisting of three officers
• Officers from stores, user and finance dept.
• TC is a recommending body, its
recommendations are to be considered by an
accepting authority.
 Guidelines for Tender Committee
• Committee to be duly constituted (SOP)
• Lowest tender value is the criteria for level of
TC; a TC may have to transfer the case to a
higher level TC
• Dropping of purchase is also to be considered by
the TC
• Stores Member is the convener of TC, who puts
up the case to competent authority
• TC member can not be the TAA also.
• Concept of dissenting note.
 Tender Finalization
• Certain important points;
– Offer to be technically suitable
– Rates of lowest technically suitable offer to be
examined for rate reasonability
– Check if the delivery condition offered suits our
requirement
– Above being OK, see if the firm is reliable & their
past performance is satisfactory
– Check various terms & conditions offered by firm are
acceptable
– IRS Conditions of Contract: whether any deviation
– Tenders to be finalized within the offer validity
 Placement of PO
– Acceptance recorded by PO or the TAA
– Case passed on to the Purchase Section for
making PO
– PO is signed & sent to Accounts Dept. for
vetting if value exceeds 8 lakhs (Rs. 15 lakhs
for safety items)
– Value of PO is posted in the Liability Register
– PO is numbered & sent to the supplier by post
 Contract Administration
• Placement of PO is not the end.
• We have to get the materials, administer the
contract.
• PO Modifications:
– Suppliers may make requests for certain
amendment in the PO, dispose it appropriately.
– Take finance concurrence if the requested
modification involves financial repercussions.
 Contract Administration
• Delay in supply:
– DP expires, Contract expires, further
extension in DD with mutual consent
– Right to recover LD for any loss or
inconvenience suffered by Railway due
to delay in supply (IRS Terms).
– Liquidated damages: @0.5% per week,
maximum 10%.
• Failure of Supply: Risk Purchase/
Forfeiture of SD.
QUESTIONS?
M:9601285943
Thank You
51
International Standard Serial Number (ISSN): The purpose of a check digit is to
guard against errors caused by the incorrect transcription

The procedure for calculating the check digit, which may be carried out automatically in a
computer, is as follows:
Take the first seven digits (the check digit is the eighth and last digit).
Take the weighting factors associated with each digit : 8 7 6 5 4 3 2.
Multiply each digit in turn by its weighting factor.
Add these numbers together.
Divide this sum by the modulus 11.
Subtract the remainder from 11: 11-10 = 1
Add the remainder, which is the check digit, to the extreme right (low order) position of
the base number
9 0 3 5 0 5 8 3
8 7 6 5 4 3 2
72 + 0+ 18 + 25 + 0+ 15 + 16 = 146

11) 146 (13

143 Back
3
52
Wage bill increased from 35% in 2007-08
to 70% in 2016-17 of revenue

Back

53
 Inventory Management
• Definition:
– An idle resource which has an economic
value
• Inventory Types:
– Raw Materials & Parts: For production
program
– Consumables & Spares: For day-to-day
operations, repairs/maintenance
– In-process (Work in progress): At various
stages of production
– Finished Products: Not yet sold/used 54
 Inventory Management contd..
• Why Inventory?
– Railway specific items, not available off the
shelf, longer lead time
– Items readily available but frequent, piecemeal
purchases not economical
– Due to variations in consumption & lead time,
forecast of demand is not accurate, stock-outs
may occur.
Basic Problem
– Idle resource with economic value, blocking
capital, on the other hand it is imperative to
keep inventory.
55
Inventory Management contd..
Factors:
–When to initiate purchase - Lead Time
–Quantity to be purchased at a time
◆ Ordering Cost (Depends on mode of
tender also)
◆ Inventory Carrying Costs: Assessed at 20-
25% for IR,
• Interest/capital/opportunity cost:15-20%
• Obsolescence/Depreciation cost:2-5%
• Storage/Handling/Verification cost:3-5%
• Insurance/Security cost:1-2%.
–Stock levels for various items : Depends upon
Value, Use. 56
 Inventory Management contd..
Efficiency Indices of Inventory Management:
1.Service Level:
- %age of compliance of demands decided by top
management
- Cost of 100% level, prohibitive, 90-98% depending
upon criticality
- 100% target for Vital Safety items
2.Inventory TOR: Measure of average inventory held in
stock at a time.
TOR = Total Value of all items held in stock on a date
Total Value of issues made during the year

57
 Inventory Management contd..
3. Overstock/Inactive Items:
Inactive Stores: No issues for last 12
months
Surplus/Dead Surplus Stores: No issue for
Past 24 Months
•Dead suplus – Not expected to be issued for
next 24 months.
•Moveable surplus – Expected to be issued in
next 24 months.
•Maximum 5% inactive/surplus allowed.
58
 Inventory Management contd..
Inventory Control Techniques
1. Selective Control: Categorization on the
basis of Consumption Value, Criticality etc,
- ABC/VED are two such classifications.
2. Management by Exception:
Overstock/Surplus/Inactive items lists.
3. Suitable Recoupment Policies:
To keep optimum stocks

59
Inventory Management contd..
4.Variety Reduction:
To reduce OC & ICC
5.Value Analysis:
Achieving the same function with
minimum cost with alternative
design/materials
6.IT Applications:
– MIS for Management decisions based on
real time, statistical analysis.
– MMIS on IR
60
 Inventory Control
• ABC Analysis
– Pareto Principle: Majority of
activities (70-80%) governed by few
attributes (10-20%).
– Annual Consumption Value: In
Railways,
• 70% value represented by A Cat.
Items
• 20% value by B Cat. Items
• 10% value by the rest, C Cat.
Items. 61
 Inventory Control
• VED Classification: Service Level Important
– ABC does not give cognizance to importance or
criticality of the item
– Vital, Essential & Desirable items
– Vital items are critical for operation & do not
permit any corrective time, need immediate
replacement
– Essential items are also critical for operation but
operation does not come to stand still at once,
some corrective time is available
– Remaining items are known as desirable items.
62
 Inventory Control
• ABC/VED Matrix:

V E D
A AV AE AD
Strategic Discourage
items Procurement

B BV BE BD

C CV CE CD
Critical items General items

63
 Returned Stores

दिलीप गुप्ता
प्रोफेसर तादलका प्रबंधन

12/1/2021 AFP
 Returned Stores
All the materials no more required by the consuming
departments should be returned to the nominated stores
depots for taking disposal action. Why?

 Consuming Department gets credit

 Space constraint with Indenter
 Revenue may be generated by scrap sale
 Material not required by one consignee may be useful
to some other consignee.
 Proper accountal of material
12/1/2021 AFP
 Returned Stores
• Three types of material constitute Returned
Store:
– Scrap Material

– New Material but no more required

– Material used but no more required i.e.

second hand

12/1/2021 AFP
 Scrap:
Chapter 24 of Stores Code

• Material no longer useful to Railways for

the purpose for which it was originally
obtained
• Also consist of arising of waste materials
from manufacturing & repairing
processes
• Items, other than waste materials, can be
declared Unserviceable by Branch officer

12/1/2021 AFP
 SOURCES OF ARISING of Scrap

• Scrap P. Way Material:

• Rails, Sleepers, Track Fittings, Points
Crossings etc.
• Condemned Rolling Stock:
• Wagon, Coach, Loco etc.
• Kept with SE (Loco), C&W, Train
Examiners or other nominated locations
or cutting up yards under stores depot
12/1/2021 AFP
 SOURCES OF ARISING of Scrap
Railway Workshops:
•ME, CE, EE, S&T etc
•Scrap building material:
•Off-cuts of bars/rounds, Structural, pipe &
pipe fittings, with SE(Works) in Divisions

•Inactive/surplus items:
•Declared as scrap by Survey Committee
•Obsolete T&P items
12/1/2021 AFP
 Scrap:Classification

•Schedule of Scrap:
•A detailed & unified schedule of
scrap items under Group 98
•PL numbers have been allotted
• Book rates to be revised
periodically (within six months)

12/1/2021 AFP
 Scrap
•Main categories of scrap
•98 03 Re-Roll able Scrap
•98 05 Melting Scrap
•98 08 Cast Iron
•98 11 CRS
•98 20 Bronze Scrap
•98 32 Scrap Machinery

12/1/2021 AFP
 Valuation of Returned Stores

• Depends whether the item is “Stock” item

or “Non-Stock”
• Also depends on condition of the item
• NS Item:
• Use by Railway, not certain
• No separate Book Average Rate (BAR)
• Credit afforded @ scrap rate for New &
2nd hand serviceable item
12/1/2021 AFP
 Valuation Of Returned Stores

•2nd hand Rails

•Usable on other work:
65% of present BAR for new rails

•Serviceable M&P
P = R- {N/Lx (R-S)}
R – Present rate, S - Scrap rate
N – Age, L - Life of the machine

12/1/2021 AFP
 Valuation of Returned Stores

•Stock Item:
•If not OVERSTOCK in depot:
•@ BAR for new item
•Half of BAR for 2nd hand serviceable
•If overstock in depot:
•PCMM to decide
•May be 1/4th of BAR for Ferrous, new & 2nd
hand serviceable and half of BAR for NF
12/1/2021 AFP
 Valuation of Returned Stores

•Repairable Stock Item:

•Can be useful for another term after
repair/reconditioning
•Credit afforded @ 1/3rd of BAR of new
item, for Ferrous items & @ half of BAR
for Non-ferrous items

12/1/2021 AFP
 Returned Stores:

• All stores previously issued for the

services of Railway, no longer required for
use, to be returned back to Nominated
Depot (S-1601)

• S 1539 (Advice Note of Returned

Stores)/DS-8, prepared in 6 copies

12/1/2021 AFP
 Distribution of S 1539

• Originator (1st )
• 3 foils to depot (2nd ,3rd , & 4th)
– 2 foils to Accounts Office (3rd & 4th)
• Accounts Office (5th)
• Divisional Officer (6th)
– Stores Depot (6th)
– Finally Back to Divisional Officer (6th)
• From Accounts (3rd + 5th) to Divisional
Officer, with monthly Credit Summary
– 3rd foil to Divisional Accounts
– 5th foil to Originator

12/1/2021 AFP
 Cont.
Hands over DS8
material along
Consignee with 2nd, 3rd and
4th copies Nominated
nd rd th
Takes 3 copies (2 , 3 & 4 ) along with DS8 material Stores Depot
Nominated
Stores Depot
keeps 2nd copy
after accountal
Divisional Accounts
Makes 6 copies Office
of S1539. Hands over 3rd
Keeps 1st copy and 4th copy
Sends in
as record after accountal
Advance 5th
copy for
information
Keeps 3rd copy Depot
and sends Associated
Sends 3rd copy Accounts
Monthly Credit
Summary
Depot
Sends 6th Associated
Copy to Send 5th Copy for matching Accounts
Divisional Office keeps
Office for Divisional Office 4th copy
information
12/1/2021 AFP
 Survey Committee

• No such sale can be effected before the scrap and other

obsolete items on sale are cleared by a Survey Committee.

• This committee consists of stores and technical officers

who will inspect every materials proposed to be scrapped
and sold barring a few exceptions like condemned rolling
stock, turnings and borings, etc.

• The Survey Committee thus ensures that no material

useful to Railway can be disposed off unless the same is
inspected and cleared by an expert body.
12/1/2021 AFP
 Survey of Scrap and other Materials

Survey Committee inspects critically the condition

of all Stores:
(a) That have deteriorated in value, for any reason,
(b) Broken or damaged in transit, or while in stock,
(c) Lying in the custody of the Stores Department
for a long time and considered by PCMM as
having become unserviceable owing to
obsolescence or other causes and
(d) Received as scrap from the line.
12/1/2021 AFP
 Preparation of survey sheets

• Survey sheets on the prescribed proforma are prepared in

which recommendations against each item are recorded
by the Committee
• Some items are exempted from surveying by survey
committee. These items are turnings and borings, waste
paper, firewood, saw dust etc.
• Survey is not required for condemned rolling stock, rails
and sleepers on line for which condemnation certificates
given by Chief Work Shop Manager and Chief Track
Engineer respectively.
• Lots of small value (Rs. 5000/- at present) are also not
required to be surveyed AFP
12/1/2021 for which depot officers have
been given powers to scrap such lots.
 Sale of Scrap Materials
(a) Sale through Public Auction

(b) Sale through Tenders- By inviting tenders for

the materials to be sold.

(c) Direct Sale- Some materials may be sold

directly at pre-determined rates to Railway
employees and other government organisations.

(d) Quoting for Sale- submit quotations/tenders to

other organisations if they have floated tenders for
12/1/2021 AFP
purchase of scrap.
 COLLECTION OF SCRAP

• Consignor generally sends scrap in two

categories, Ferrous and Non-Ferrous
• Sorting has to be done in the depot

Un-loading Area

BINS
12/1/2021 AFP
 Scrap Yard Layout
1. Central Sorting Yard:
• Receipt of mixed scrap
• Sorting in separate lots for disposal

2. Reclamation Section:
• Salvaging items for use with modification

3. Yards (Bins) (Preferable Twin Yards):

• Storage & Disposal
• For “LOT” formation,
• Separate for each item
12/1/2021 AFP
 ACCOUNTAL OF RETURNED
STORES
1. For ferrous scrap only staff of sender
and receiving department is involved

2. For Non-ferrous scrap accounts stock

verifier witnesses the receipt

3. Non-ferrous scarp is kept on godowns

under lock & key
12/1/2021 AFP
 Sale of Scrap Material
• Through E-Auction only. Website is ireps.gov.in,
http://www.ireps.gov.in/

• Any buyer in India can participate subject to

one time deposit of Rs 10,000/-, Class III digital
certificate and Affidavit

• The centralized registration shall permit the

bidder to participate in all E-Auction, over entire
Indian Railway, available on the site www.
Ireps.gov.in
12/1/2021 AFP
 Reserve Price

• Basis:
• Market Information,
• Past Rates
• Condition of lot

• All Ferrous & NF Items:

• By Depot Officer

• CRS:
• Tare weight, inspection
• Saleable weight (Excluded items)
12/1/2021 AFP
 STANDING EMD

 A valid user Registered with E-Auction Portal can bid

after depositing any amount in his “Purchase Account”
and can submit bids equivalent to or up to 10 times of
the amount as available in “Purchase Account” on real
time basis.

 This account shall be updated on real time after each

transaction.

 If a bidder is awarded a lot(s), appropriate EMD for

the same will be deducted from this amount deposited.
12/1/2021 AFP
 Bidding Limit

Total Bidding Limit is the maximum Bid amount for

which bidder can bid against any number of lots in
E–Auctions of various depots of Indian Railways.
Bidding Limit is 10 times the (Standing EMD + lien
marked). During live auction, the bidding limit will
dynamically change based on status of bid. If the
bidder is highest for any lot, appropriate EMD will be
blocked and his bidding limit will decrease; if the bid
is superseded by another bidder or rejected by
Auction conducting officer , his blocked EMD will
released and his Bidding Limit will be restored.

12/1/2021 AFP
 Sale of Scrap Material - MoEFCC
• Some items can be sold to suppliers approved
by MoEFCC (Environmental Issue):

• Hazardous Waste Management Rules -

http://cpcb.nic.in/hazardous-waste-rules/
– Lead Acid Batteries
– Waste oils

• E-waste Management Rules - http://cpcb.nic.in/e-

waste-rules/
– E-waste
12/1/2021 AFP
 AUCTION: Rail

•“As is where is basis”, no survey by SC

•By proxy, rails not brought to yard
•Clear marking (Red) on rails which are scrapped and to
be sold
•Delivery by SE concerned, SV & RPF
•Approach is important
•Delivery by measurement only
•For point and crossing by weight so proximity of weigh
bridge is necessary

12/1/2021 AFP
 AUCTION: Girders
•For Girders:
•By proxy, girders not brought to yard
•Delivery by SE concerned, SV & RPF
•“As is where is basis”, no survey by SC
•Approach is important
•Sold as a lot

12/1/2021 AFP
 AUCTION: CRS
•CRS:
•Condemned by Mechanical Dept.

•Auctioned from cutting up yard, no survey by SC

•Excluded fittings like NF, wheel sets
•For premature condemnation approval as per
guidelines required like for condemnation of loco for
which codal life not completed approval of Railway
Board is required
•Sold as a lot

12/1/2021 AFP
 Delivery of Scrap at Site
Free time allowed for payment of balance sale
value from the date of acceptance of bid:
10 days upto Rs 03 Lakh otherwise 15 days

Free time allowed for delivery reckoned

from the date of acceptance of bid : 50 days

In presence of following officials: Custodian

12/1/2021
(PWI, CRS etc.), RPF, AFP
SV, DMS
 Delivery of Scrap in Depot
Free time allowed for payment of balance sale
value from the date of acceptance of bid:
10 days upto Rs 03 Lakh otherwise 15 days

Free time allowed for delivery reckoned

from the date of acceptance of bid : 40 days

In presence of following officials: DMS, RPF,

12/1/2021 AFP
Stock Varifier
 Extension of time for balance payment

• Time for payment of BSV ( Balance Sale value) with

interest may be extended by Railway for P.Way scrap and
other line lots upto 40 days and for depots lots upto 35
days from the date of acceptance of bid in exceptional
circumstance on written request of the purchaser.
• The EMD shall be forfeited, if BSV is not deposited by
purchaser within the said period of 40/35 days.
• Interest Rate: The rate of Interest charged on delayed
payment shall be 7% (Seven percent) above the Base rate
of State Bank of India, as prevailing on the day of auction
or the day of the payment being made by the bidder,
whichever is higher.
12/1/2021 AFP
 Delivery of Scrap in Depot
• Delivery Order:
• By Depot Officer or Auctioneer after full
payment
• Sale Issue note:
• Prepared by ward, after loading & weighment,
signed by depot officer
• Gate Pass:
• After the Sale Issue Note is signed

12/1/2021 AFP
 धन्यवाद

12/1/2021 AFP
 DILIP GUPTA, PIM
दिलीप गुप्ता, प्रो.(तादलका प्रबंधन)
1
Expenditure on Purchases (Excluding Ballast
and Contractor Supply for Civil Construction)
Year Total Purchase (Rs. Crs)
1950-51 81.60
1960-61 177.90
1970-71 363.70
1980-81 1,377.10
1990-91 5,189.30
2000-01 10,835.00
2009-10 27,876.80
2010-11 29,099.00
2011-12 31,359.00
2012-13 36,027.00
2013-14 42,447.00
2014-15 42,764.00
2015-16 43,131.00
2016-17 43,347.00
2017-18 49,484.00 Source:
IR Year
2018-19 62,134.00 Book
2018-19
Inventory
 Definition:
 An idle resource which has an economic value
 Inventory refers to the items kept for future use/ Sale.
 Inventory Types:
 Raw Materials & Parts: For production program
 Consumables & Spares: For day-to-day operations,
repairs/maintenance
 In-process (Work in progress): At various stages of
production
 Finished Products: Not yet sold/used

3
Types of Inventory
 Why Inventory?
 Necessary evil.
 Railway specific items, not available
off the shelf, longer lead time
 Items readily available but frequent,
piecemeal purchases not economical
 Due to variations in consumption,
Supply & lead time
 Forecast of demand is not accurate
 To avoid stock-outs.

5
More or Less Inventory?
 Higher inventory is good to avoid stock
out and to absorb uncertainties, but is
bad in high cost of inventory.
 Lower inventory is good in saving
money, but is bad in increased risk of
stock out, customer dissatisfaction, and
process interruption.
Practical discussion
 Let us say you need 01 pen per month for your regular
work. Which option will you prefer?

1. Will buy 01 pen each month

2. Packet of 10 pens for 10 months

7
Advantages of option 1 or disadvantage of option 2

 No Inventory to maintain so no space required

 No fund blocking
 Inventory carrying cost will be nil
 No loss due to obsolescence or depreciation
 Better warranty obligation
 Latest technology avaialble
 No pilferage

8
Advantages of option 2 or disadvantage of option 1

Piecemeal purchase not economical

Uncertainty in failure of firm, transportation,
Labor etc..
No time to ensure quality of product.
Substandard product may be accepted.
Lost opportunity due to stock out.

9
10
Efficiency Indices of Inventory Management:
1. Service Level: Availability 100/98/95%
2. Inventory TOR: Measure of average inventory held in
stock at a time.
TOR = Total Value of all items held in stock on a date X 100
Total Value of issues made during the year
3.Inactive/ Surplus Items:
•Inactive: Not issued since 1 year.
•Surplus: Not issued since 2 years.
Moveable surplus : likely to be issued in next 2 years
Dead surplus: Not likely to be issued in next 2 years
• Maximum 5% inactive/surplus allowed.
4. Overstock items. 11
 Kitchen A Kitchen B

Total No. of Items 100 100

No. of items Available 90 95

Availability 90% 95%

Items Not available Almond, Cashew, Flour, oil, Salt,

baking Soda, Black Sugar, Gas.
Salt, resins,….

12
 s
1000 Rs 1500

1000
Profit : Rs 1000
RoR : 100%

1000 1500

Profit

Profit : Rs 1000
RoR : 50%
2000 3000 1000

Profit
Turn Over Ratio
 1 2

Inventory on 15th 20 Cr 30 Cr
March

Issue upto 15th March 100 Cr 90 Cr

TOR on 15th March 20% 33.33%

PCMM visit on 16th March

PCMM

Inventory on 31st 15 Cr 10 Cr
March
Issue upto 31st March 105 Cr 110 Cr
TOR on 31st March 14.2% 9.09 %
 Inventory Control
• ABC Analysis
– Pareto Principle: Majority of activities
(70-80%) governed by few attributes
(10-20%).
– Annual Consumption Value: In
Railways,
•70% value represented by 10% of Items
A Cat items
•20% value by 20% of items B Cat items
•10% value by the rest, C Cat items.
17
18
19
Depot
1000 items : 100 Cr Annual Consumption Value
100 items (10%)------70 Cr (70%) A Cat
10 Items :----49 Cr AA

200 items (20%)------20 Cr (20%) B Cat

700 items (70%)------10 Cr (10%) C Cat
490 Items ----1 Cr CC
TF : Rs 50,000 * 2 = 1L C
Bolt: Rs 10 *100000 = 10 L A
A 20
 Inventory Control
• VED Classification:
• Service Level Important
• ABC does not give cognizance to importance or
criticality of the item.
• Vital, Essential & Desirable items
• Vital items are critical for operation & do not
permit any corrective time, need immediate
replacement
• Essential items are also critical for operation but
operation does not come to stand still at once,
some corrective time is available
• Remaining items are known as desirable items. 21
 Inventory Control
• ABC/VED Matrix:

V E D
A AV AE AD
Critical Discourage
Scrutiny Procurement

B BV BE BD

C CV CE CD
Liberal Routine
Procurement Scrutiny
22
 Recoupment of Stock Items
1. Annual Indent/Estimate System:
•A fixed interval review system
•CP(12/24 months), IP

•Calculation of Order Qty.

Net Quantity for Procurement = (IP + CP)
X AMC – (Stock + Dues) + Buffer Stock

23
Recoupment of Stock Items
2. MAXIMA-MINIMA System:
–Lead Time Important
–Low Inventories, constant attention
required

24
 Maxima-Minima Method

EOQ

MAX

Re-Order Level
Qty

MIN
L T
0
TIME
BS
 ECONOMIC ORDER QUANTITY

•ICC: ORDERING COST:

•Physical Storage •Indent Scrutiny
•Interest loss •Check overstock
•Opportunity cost •Issue Inquiry &
Process Offers
•Obsolescence
•Place Orders
•Depreciation
•Watch Progress of
•Pilferage Supplies
•Verification cost •Receipt & Inspn.
AAC : 1200 Nos
Ordering Cost : Rs 1000/order
Avg Inventory carrying cost : Rs 20
Per Order No. of Ordering Avg Inventory Total Cost
Qnty Orders Cost Inventory Carrying
Cost

1200 1 1000 600 12000 13000

600 2 2000 300 6000 8000

400 3 3000 200 4000 7000

300 4 4000 150 3000 7000

200 6 6000 100 2000 8000

100 12 12000 50 1000 13000

27
ECONOMIC ORDER QUANTITY

•EOQ: TOTAL MINIMUM COST

Cost in Rs.

IC COST

ORDERING
COST

EOQ
Order Quantity in Nos.
Assumptions
• The cost of the ordering remains constant.
• The demand rate for the year is known and
evenly spread throughout the year.
• The lead time is not fluctuating
• No cash or settlement discounts are available,
and the purchase price is constant for every
item.
• The optimal plan is calculated for only one
product.
• There is no delay in the replenishment of the
stock, and the order is delivered in the quantity
that was demanded, i.e. in whole batch.
 Example
• Annual requirement quantity (D) = 10000
units
• Cost per order (K) = Rs. 40
• Cost per unit (P)= Rs. 100
• Yearly carrying cost per unit (h) = Rs. 5
• Economic order quantity =
• Q= (2 ∗ 10000 ∗ 40/5)
• = 400 units
• Number of orders per year = 25
QUESTIONS??

32
धन्यवाद
33
 Imports Management

SPMM (Co)

12/1/2021 AFP 1
 Topics

• Import Policy
• Incoterms
• Mode of Payment
• Insurance
• Shipping clearance

12/1/2021 AFP 2
 Level of Imports
• Level of import done by Railways is
very less
• Less than 2% of total procurement
• Mainly wheels of LHB coach, Track
machines, spares of locos and
coaches

12/1/2021 AFP 3
 Imports
Contracts placed by –
• RLY BOARD – WHEELS, AXLES, TRACK
MACHINES.

• COFMOW – MACHINES for Workshops

• PUs and Zonal Railways – Crank shaft,

Engine Block, LHB items, Diesel Electric
Locomotive components, Loco & Coaching
Spares
 Value of Import – Rs. in crores
Year Import Total Purchase % Import

2012-13 2247 36027 6.24

2013-14 2189 42447 5.16
2014-15 1413 42764 3.30
2015-16 1330 43131 3.08
2016-17 1494 43347 3.45
2017-18 990 49845 1.99
2018-19 1056 62134 1.70
2019-20 792 63844 1.24
Data and PPTs\Statistical summary 19-20.pdf
 Import Policy
• The import and export of goods is
governed by -
– Foreign Trade (Development & Regulation)
Act, 1992 &
– Export Import (EXIM) Policy
• Directorate General of Foreign Trade
(DGFT) issues EXIM Policy

12/1/2021 AFP 6
 Import Policy
• Introduced w.e.f. 1st April 1992. (Latest : Foreign
Trade Policy for 2015-20)- Extended up to
31.03.2022

• Imports/Exports can be done freely except as

regulated by the Policy

• Modus Operandi: “Negative Lists”, issued as a

part of Exim Policy

12/1/2021 AFP 7
 Negative List
• https://www.dgft.gov.in/CP/?opt=itchs-
import-export defines Negative lists

– Prohibited items
– Restricted Items
– Canalized Items

Free Items

12/1/2021 AFP 8
 Import Policy
• Prohibited Items: Data and
PPTs\Prohibited12.06.19.pdf
– Prohibited goods shall not be imported

• Restricted Items: Data and PPTs\Restricted

12.06.19.pdf
– Can be imported only;
• against a license
• by actual user

12/1/2021 AFP 9
 Import Policy
• Imports of Canalized or STE
Items: Data and PPTs\STE items.pdf
– Through Agencies specified in the
Negative List

• Items not included in the

“Negative List”:
– Can be imported by any one whether
actual user or not
12/1/2021 AFP 10
 Import Authorisation

• A document issued by DGFT,

permitting;
– Entry of foreign goods into India
– Remittance of the foreign
currency to overseas supplier

12/1/2021 AFP 11
 Import Authorisation: Para 2.11
(a) Description, quantity and value of goods;
(b) Actual User condition;
(c) Export Obligation;
(d) Minimum Value addition to be achieved;
(e) Minimum export/import price;
(f) Bank guarantee/ Legal undertaking /
Bond with Customs Authority/RA
(g) Validity period of import/export as
specified in Handbook of Procedures.
12/1/2021 AFP 12
 Import Authorisation for Rly
Spares
• Normal maintenance spares of
Railways;
– No Import Authorisation required
– L/C can be opened directly,

• In case order is placed on “Indian

Agent” of foreign supplier, on FOR
terms:
– Import Authorisation is to be obtained by
the Agent, by paying due license fee

12/1/2021 AFP 13
 INCOTERMS
• International Chamber of Commerce
Established in 1919 by group of
Industrialist after First World War.
• Incoterms® rules have become an
essential part of the daily language of
trade.
• Incorporated in contracts for the sale of
goods worldwide
• ICC | International Chamber of Commerce (iccwbo.org)

12/1/2021 AFP 14
 Cont.
• Potential Dispute Points:
– Packing, Marking, Loading to Carrier at firm’s premises
– Export Clearances
– Inland Freight, Terminal and Vessel Loading Charges
– Ocean Freight/Air Freight
– Marine Insurance
– Unload, Destination, Terminal Charges
– Customs Clearance Charges
– Duty, Customs Fees, Taxes
– Delivery to Buyer destination
– Unloading at Buyer destination

12/1/2021 AFP 15
2020
Incoterms
2020
 Cont.
• The 11 Incoterms® 2020 rules are presented in two
distinct classes:
– RULES FOR ANY MODE OR MODES OF TRANSPORT

•EXW: EX WORKS
•FCA: FREE CARRIER
•CPT: CARRIAGE PAID TO
•CIP: CARRIAGE AND INSURANCE PAID TO
•DPU: DELIVERED AT PLACE UNLOADED ( DAT:
DELIVERED AT TERMINAL-2010)
•DAP: DELIVERED AT PLACE
•DDP: DELIVERED DUTY PAID
11/08/20 AFP 18
 Cont.
• The 11 Incoterms® 2020 rules are presented in two
distinct classes:
• RULES FOR SEA AND INLAND WATERWAY
TRANSPORT

– FAS: FREE ALONGSIDE SHIP

– FOB: FREE ON BOARD
– CFR: COST AND FREIGHT
– CIF: COST INSURANCE AND FREIGHT

Data and PPTs\incoterms_2020_chart.pdf

12/1/2021 AFP 19
Incoterms
2020
 Incoterms Chart

12/1/2021 AFP 21
 Types of Import Contracts
• FAS (Free Alongside Ship):
• Responsibility of supplier
– ceases once he delivers material
alongshore
• Importer to bear all charges of;
a) Loading into the ship
b) Freight
c) Insurance
d) Can choose Indian vessel for shipping
the goods
12/1/2021 AFP 22
 Cont.

• FOB (Free on Board):

– Supplier’s responsibility to get the goods
loaded into the ship
– Freight & Insurance to be borne by buyer
– Buyer can choose Indian Flag ship
• CIF (Cost Insurance Freight):
– Add the element of Freight & Insurance to
FOB Price
– Total price up to the port of destination
– Supplier’s choice of vessel

12/1/2021 AFP 23
 Cont.

• CFR Cost and Freight

– “Cost and Freight” means that the seller delivers
the goods on board the vessel
– The risk of loss of or damage to the goods
passes when the goods are on board the vessel.
– The seller must contract for and pay the costs
and freight necessary to bring the goods to the
named port of destination
– Preferred Clause as per Rly. Bd.

12/1/2021 AFP 24
Responsibility in FAS v/s FOB
Details FAS FOB
Export customs declaration Seller Seller
Carriage to the port of Seller Seller
shipment
Loading in vessel Buyer Seller
Carriage to port of Buyer Buyer
destination
Insurance Buyer Buyer
Unloading at the port of Buyer Buyer
destination
Import customs clearance Buyer Buyer
Carriage to the place of Buyer Buyer
destination
Responsibility in FOB v/s CFR
Details FOB CFR
Export customs declaration Seller Seller
Carriage to the port of Seller Seller
shipment
Loading in vessel Seller Seller
Carriage to port of Buyer Seller
destination
Insurance Buyer Buyer
Unloading at the port of Buyer Buyer
destination
Import customs clearance Buyer Buyer
Carriage to the place of Buyer Buyer
destination
Responsibility in FOB v/s CIF
Details FOB CIF
Export customs declaration Seller Seller
Carriage to the port of Seller Seller
shipment
Loading in vessel Seller Seller
Carriage to port of destination Buyer Seller
Insurance Buyer Seller
Unloading at the port of Buyer Buyer
destination
Import customs clearance Buyer Buyer
Carriage to the place of Buyer Buyer
destination
 Mode of Payment:
Considerations
• Supplier & Buyer have no intimate
knowledge about each other, not sure
of credit worthiness of each other

• Both the parties are governed by rules

of their respective countries, which are
different sets of rules

12/1/2021 AFP 28
 Mode of Payment: Risks

•Seller sends goods without

payment: Risk of non-payment,
late payment
•Buyer sends payment without
good: Risk of non-supply, late
supply
•Solution: Letter of Credit
12/1/2021 AFP 29
 Letter of Credit

An arrangement by means of which a

bank (issuing bank) acting at the
request of a customer (applicant),
undertakes to pay to a third party
(beneficiary) a pre-determined amount
by a given date according to agreed
stipulations and against presentation of
stipulated documents
 Cont.
• It is a documentary commitment
by a Bank
• To place an agreed amount of
money at Seller’s disposal,
• On behalf of the Buyer
• Under precisely defined
conditions

12/1/2021 AFP 31
 Letter of Credit:Flow Chart

• L/C Issuance:
2 - Application for opening L/C Buyer’s
Buyer
Bank

3 - L/C
1- Mailed
Contract
Concluded

Bank in
Seller’s
Seller 4 - L/C Notified Country
12/1/2021 AFP 32
 Letter of Credit:Flow Chart
• L/C Utilization:
4 - Debit A/C & Send Documents Issuing
Buyer
Bank

Negotiating
2 - Document Submitted
Seller Bank
Payment Released
12/1/2021 AFP 33
 Letter of Credit:IRLC

• Irrevocable L/C:
– Issuing Bank gives binding
undertaking for making payment
provided the seller complies with
prescribed conditions
– Can not be cancelled without the
consent of all the parties
concerned

12/1/2021 AFP 34
 Letter of Credit:RVLC

• Revolving L/C:
– When regular continuing shipment by
seller is involved
– Amount once utilized is available
again
– Fresh L/C is not required to be
obtained for each shipment
– May indicate max number of
revolutions or max amount to utilized

12/1/2021 AFP 35
 Cont.

Revolving LC
Example texts :
“Amount of credit Rs10 lacs revolving
five times to maximum Rs 60 lacs”..

“Credit amount Rs10 lacs revolving every

month for the same amount, for the first
time in January 20 XX, for the last time in
May 20 XX, maximum amount payable
under this credit Rs 60 lacs.”
12/1/2021 AFP 36
 Letter of Credit: Application

• Made by nominated Accounts

Officer
• Addressed to issuing bank &
copied Importer
• It is a contract between the Bank
& Importer
• Stipulates conditions for
discharge of L/C
12/1/2021 AFP 37
 OPENING OF LCs: PRECAUTIONS

a. Particulars of Import License, if any

b. Full and correct address of the beneficiary
c. Precise / brief description of goods
d. Price of goods in words and figures
e. Origin of goods
f. Mode of transport – Sea / Air / Land / Rail
g. Last date of shipment of goods, presentation of
docs
h. Port of shipment / destination
12/1/2021 AFP 38
 Cont.

i. Whether part-shipment / trans-shipment permitted

j. Value of goods – CIF / CF / FOB and its currency
k. Payment terms
l. Expiry date of LC
m. Documents to be submitted under the LC and how
many copies are required: Draft, Invoice, B/L or
AWB or R/R or L/R, Packing List, Weigh List,
Certificate of Origin, Insurance Policy / Certificate,
Quality Certificate, Consumer Invoice / Certificate,
Inspection Certificate
12/1/2021 AFP 39
 Insurance Cover

• Cargo Insurance are covered under three

separate clauses known as INSTITUTE CARGO
CLAUSES A, B & C. The risks covered under
these clauses are as follows:

• ICC(C) Fire, Explosion, Stranding, sinking,

capsizing, overturning plus Derailment of land
conveyance, Collision, discharge of cargo at
port of distress, Jettison, etc
 Cont.
• ICC(B) Provides protection against all the
perils covered under ICC-C plus earthquake,
Lightning, washing over board, Entry of sea,
lake, river, water, package while loading, or
unloading, total loss of any package lost
over board or dropped whilst loading on or
unloading from vessel or craft

• ICC(A) All risks of loss or damage except

those which are willfully done, unworthiness
of vessel, war, strikes etc.

• NMU_Institute_Cargo_Clauses.pdf
 Cont.

• Insurance cover taken for:-

• ICC(B) - This is a basic cover for bulk

items such as steel, rails and sheet
angles, wheels, and axles etc.
• ICC(A) - This is an all risk cover for
items like loco spares, S&T equipment,
coaches, track machines etc.
 Marine Insurance
• Specific Voyage Policy

– One place to another

– Period not very specific
– Expires on completion of voyage

12/1/2021 AFP 43
 Cont.
• Open Policy
– To take care of frequent transit with
considerable turnover
– Sum insured normally representing
annual turnover – can be enhanced
from time to time to suit the
requirement
– Policy ceases on expiry date or on
exhaustion of the total sum insured
whichever shall first occur
– Basis for evaluation FOB/FAS + 10%
12/1/2021 AFP 44
 Cont.
• Open Cover
– To provide continuous, automatic and
guaranteed coverage to a regular importer or
exporter issued for a period of 12 months
with out specifying the sum insured
– Unstamped document – only an agreement in
writing
– Gives the insured an automatic insurance
even for shipment remaining
uninsured/uncovered through oversight
– Obligatory to declare on the part of insured
– Basis for evaluation FOB/FAS + 10%
12/1/2021 AFP 45
 Cont.
• Open Cover (Basic) i.e. ICC(B):
– Covers loss when vessel is stranded, sunk
or burnt, due to storm or act of God
– Steel & Bulk cargo covered under FPA (Free
of Particular Average) will result in ICC(C)
– Claim for total loss only entertained & not for
damage or short landing etc.
– “With average” policies provide broader
coverage. The coverage extends to partial
losses if the partial losses reach a certain
percentage of the policy’s insured value.
12/1/2021 AFP 46
 Cont.
• All Risk Open Cover or ICC(A):
– Covers all types of imported stores other than Steel & other
Bulk Cargo
– Covers risks of all sorts including loss/damage, theft, non-
delivery
– Warehouse to warehouse
• Period covered by these Policies:
– Time/place of commencement [WH to WH],
– Covers course of transit,
– Terminates on delivery at destination or on expiry of 60
days after discharge at the destination Port [if not moved
further]
– Data and PPTs\Marine inusrance contract 2018.pdf

12/1/2021 AFP 47
 Cont.
• Based on FOB value, closing particulars
are advised to the Insurance Company in
a standard declaration form under
covering letter as per insurance contract
entered into by Railway Board. The
insurance company issues policy
certificate which ensures that the
consignment is insured

12/1/2021 AFP 48
 Cont.
• Railway is required to deposit amount in
Compulsorily Deposit Amount [CDA] (quarterly
advance premium).

• This is based on estimated import for each

quarter.

• The CDA balance to be maintained by recouping

on regular interval and there should be no
negative balance.

12/1/2021 AFP 49
 Inspection of Imported Items

• Pre-dispatch inspection by Railway Adviser (RA)

attached to Embassy, Berlin
• Railway Adviser attached to Embassy, Tokyo

• RITES

12/1/2021 AFP 50
 Letter of Credit: Negotiating
Documents

• Bill of Lading: Evidence of

dispatch
• Marine Insurance Policies
• Signed Invoices
• Inspection Certificates, when
required

12/1/2021 AFP 51
 Procurement Procedures
• General:
– Procurement by Railway Board &
Zonal GMs
– GMs of PUs, have full powers [free
resources] to invite ST/LT/GT, for
procurement of components required
for their production program,
– Full Powers to import are available to
PCMMs;
– Restrictions under MII Policy for< Rs
12/1/2021 200 cr AFP 52
 Procurement Procedures: Pre-
Tendering
– For certain items, Two Bid tendering
may be resorted to
– FOB/CFR price with details of freight &
insurance
– Pre-dispatch inspection
– Packing details with approximate weight
of the consignment
– Relevant LD clause to be incorporated
– Data and PPTs\LHB Tender\TenderDocumentWTA-501.pdf

12/1/2021 AFP 53
 Procurement Procedures: Agent

• Additional information on
– Contact particulars of the Agent
– IT PAN No.
– Capability; service only on the
contract or general service
– Past Performance of the Agent

12/1/2021 AFP 54
 Tender Finalization
• Comparative statement, giving FOB,
CIF, CFR & FOR price,
• Note containing technical comments,
report on each offer
• Date of delivery
• Data and PPTs\LHB Tender\FIN-TAB-WTA-501-
44004903.pdf
• Data and PPTs\LHB
Tender\WTA_501_081018.pdf

12/1/2021 AFP 55
 Agency Commission
• Paid in non-convertible Indian Rupees
– At TT Buying Rate of exchange
• Ruling on the date of contract finalization
– It is a fixed amount
• Right to retain commission till the discharge
of warranty obligations
• Commission if on higher side can be
negotiated, consequently FOB reduced

12/1/2021 AFP 56
 Shipment
• If contract on FOB basis
than option of opting for
Indian Flag vessel
• Age < 15 years
• It facilitates payment of
freight in Indian Rupees

12/1/2021 AFP 57
 Air Freighting

• Electronic / Sophisticated
• Fragile
• Urgent requirement
• Air India
• FE release by GM/PCMM
with FA&CAO’s concurrence

12/1/2021 AFP 58
 Import Material - Railways
• Normally received in Mumbai for Rly Bd. Contract

• CR coordinates supply to individual consignees by

getting the material released from port and
transporting it to individual consignees

• CR enters into Clearance/Customs House Agent

Contract (once in 3 yrs) and Empanelment of
Transporters (Valid for 3 years with provisions for
extension)

12/1/2021 AFP 59
 CHA
• On arrival of consignment in port, CHA files Bill of Entry
(BE) and submits demands for advance payments to be
made to various agencies (Cargo handling, Terminal
handling charges, Ground rent charges (if any), Container
detention charges (if any), Delivery Order charges)
towards clearance of consignment.
• Demand for Customs Duty along with Bill of Entry against
which e-payment is made directly to Customs authorities
• Demand for Freight charges is received along with
Shipper’s bill against which e-payment is made directly to
Shipper.

12/1/2021 AFP 60
 PORT WISE ITEMS
 Mumbai Port – Heavy machines in loose condition
including those for Engineering Department like Rail
Grinding Machine

 JNPT – Containers including open top

 Air Port – Small consignments for hospitals, RDSO

and all types of spares required urgently by users
12/1/2021 AFP 62
 Procurement Procedures:
Tender Publicity
• While issuing Global Tenders,
especially against WB loans, tenders to
be published;
– In all member countries of WB
• {Including Switzerland}
– Send Tender Notice to local official
representatives of such countries
– News Papers of purchasing country
– For WB tenders publication in UN
Developmental Business (UNDB)
12/1/2021 AFP 63
 Tender Consideration:
WB Procedure: Currency
• Currency of Bidding:
– Price in the bid to be in currency of bidder
– Price can be in US $, any other currency?
• Currency of Payment:
– In which price was quoted in the
successful tender
– Purchaser reserves the right to pay in the
currency of the country of origin, if price
quoted in other currency

12/1/2021 AFP 64
 Tender Consideration:
WB Procedure: Bid Evaluation

– Bids are to be evaluated in terms of a

single currency, for the sake of
comparison
– Exchange rate ruling on the date of
tender opening to be taken as the
basis
– Convert total value to local currency,
taking CIF value

12/1/2021 AFP 65
 Tender Finalization:
Price Preference

• Price Preference to indigenous

suppliers:

– 15% Against GT under WB loans,

• Provided value added exceeds

30% of factory price

12/1/2021 AFP 66
 Tender Consideration:
WB Procedure: Bid Groups
• Bid Classification: WB Loans;
– Group A: Equipment with indigenous
input [value addition] => 30%
– Group B: Imported item, available in India,
on Rupee payment
– Group C: To be imported (Outside Group
A&B)
• If C is costly, cheaper of A&B can be
purchased
• If C is lowest, price of C to be loaded with
15% & compared with A
12/1/2021 AFP 67