PART III / CHAPTER -2
PAYMENT TERMS
2.1 Payment: - The normal mode of payment,
i). 100 per cent after receipt and acceptance of stores at the consignee's end.
ii). 95 percent supported by proof of despatch and inspection certificate issued by the nominated inspection agency as specified in the contract and balance by 5 per cent on receipt and acceptance of stores.
Note: - Proof of dispatch: - Proof of dispatch should be termed to mean the Railway Receipt in original. Motor Lorry receipt should not be accepted as proof of dispatch for making advance payment.
Authority: Board's letter No.76/RS (G)/164/48 of 17th March 1978 – (Annexure III/2-02)
Advance Payment on the basis of qualified Railway Receipts should be discouraged as far
as possible; but under extenuated circumstances; the Railways can agree to advance payment against such Railway Receipts after adopting adequate safeguards in consultation with Financial and Legal Advisors.
Authority: Board's letter No.72/RS (G)/779/64 of 18.06.1974 forwarded under cover of Board's letter of even No dated 28.05.1987 – (Annexure III/2-07)
2.1.1 The advance payments should be made only against the original copy of the Inspection Certificate marked "copy for payment". The supply order should also mention clearly that the payment should be claimed on the basis the "Copy for the payment " foil only.
Authority: Board's letter No. 87/RS (G) /379 / 13 of 03.08.1987- (Annexure III/2-09)
2.2 Controller of Stores is empowered to authorize 100 per cent Payment on proof of inspection and dispatch in respect of Public Sector Undertakings within his Powers of purchase.
2.3 Controller of Stores is also empowered to authorize100 % payment on proof of inspection and dispatch up to a limit of Rs.50,000/- in respect of plant and machinery, special tools and proprietary articles obtained from Government or non-government agencies.
2.3.1 (a) COS/CMM is empowered to accept proposals for Single Tender from Stock Yards/Buffer Imports of main producers in respect of Steel items for Import/indigenous steel up to a value Of Rs.50 lakhs, powers of purchase without going into formalities of Tender Committee Examination. They can also allow 100% advance Payment in case of Purchase of steel on Single tender basis within the powers of purchase.
Authority: Board's letter 64/RS (G) 385/1 of 19.02.1981 (Annexure II/1-19)
64/RS(G)385/1 of 18.03.1981 (Annexure II/1-20) 64/RS(G)385/1 of 26.11.1985 (Annexure II/1-24)
87/RS(G)753/2 of 31.12.1987 (Annexure II/1-26 )
100% payment will also be applicable to M/s Rashtriya Ispat Nigam Ltd. Vizag
Authority: 87/RS(G)753/2 of 20.11.91(Annexure III/2-13)
With the decontrol of steel prices , the local purchase of stockyard items from SAIL ,TISCO, IISCO & RINL should be done as peer the following procedure;
(i) after obtaining quotations price lists from all the local stockyards.
(ii) At the lowest possible reasonable price subject to availability of items,
(iii) Non availability of items from the most economical stockyard on the day of purchase should be recorded in writing by the COSs/CMMs if purchase is effected from the higher offer.
Authority: Bd’s letter No. 87/RS(G)753/2 of 15/19.10.1992 (Annexure II/1-43)
The provision of purchase of stockyard item as mentioned above is valid upto 14.10.1998.
Authority: Bd’s letter No. 87/RS(G)753/2 of 26.10.1993 (Annexure II/1-48),
No. 87/RS(G)753/2 of 12.10.1995 (Annexure II/1-52),
No. 87/RS(G)753/2 of 04.03.1997(Annexure III/2-15) &
No. 87/RS(G)753/2 of 03.12.1997 (Annexure III/2-17)
COS/CMM are empowered to purchase with finance concurrence on single tender basis up to Rs.5 lakhs in each case with 100% advance payment without going into the formalities of Tender Committee Examination Oil/Lubricant from Public Sector Undertakings such as IOC/BPC/HPC/Balmer Lawrie & Co., the prices of which are administered or controlled.
Authority: Board's letter No.86/RS (G) 779/46 of 08.08.1988 – (Annexure III/2-12)
2.4 Where such payments referred to above in Para 2.2 and 2.3 are authorised without inspection, Bank Guarantees should be obtained.
Authority: Board's letter No.77/RS (G)/779/29 dt 29th December; 1977 – (Annexure III/2-01)
2.4.1 Under unavoidable circumstances, Railway can make the payment of advance to the Public Sector Undertakings through demand draft but no expenditure should be incurred on account of commission, being Government Drafts.
Authority: Board's letter No.76/RS (G)/753/2 dt 13.06.1983 – (Annexure III/2-05).
2.5 Procurement of Non-ferrous Metal through Centralised Canalising agency.
The General Managers are authorised to sanction an advance payment up to a maximum Rs.2 crores for purchase of non-ferrous metals from MMTC other Public Sector undertakings for procurement through the Centralized canalizing Agency. These powers may also be delegated to C.O.S. up to a limit of Rs.25 lakhs.
Authority: Board's letter No. 76/RS (G)/753/2 dated 7th August 1984 – (Annexure III/2-06)
87/RS (G)/753/2 of 15/19.10.1992 (Annexure II/1-43)
2.6 100% advance payment to suppliers on delivery by road ex-godown and against proforma invoice.
2.6.1 In general, 100 % advance payment against proof of lorry receipt of Road Transport/ ex-godown should not be accepted and where it is unavoidable, necessary safeguards like Bank guarantee may be taken in consultation with F.A. & C.A.O. for shortage, non-conformity to contract specifications etc.
2.6.2 Where it is not possible to insist upon the firms to accept Standard terms of payment, 100 per cent payment on proforma invoices may be accepted only in the case of firms of repute, for specified period, say One year , evolving suitable conditions in consultation with F.A. & C.A.O. and with the sanction of General Manager.
Authority: Board's letter No.79/RS (G)/753/1 dated 08.04.1981 – (Annexure III/2-04)
2.7 DRM's are empowered to accept 100% payment up to a limit of Rs5000/- in each case for the purchase of spares of machinery and plant items or Proprietary in nature, after ensuring sufficient Safe guards like Bank Guarantee etc.
Authority: Board's letter No.87/RS (G)/753/1 of' 29.02.1988 – (Annexure III/2-11)
2.8 Acceptance of conditions for payment of advance along with orders: In Stores contracts the Railways can agree to condition for payment of advances along with the orders up to a limit of Rs.3 lakhs or 30% of the value of the orders whichever is less.
Authority: Board's letter No.87/RS(G)779/21 dt. 13.01.1988 – (Annexure III/2-10)
2.9 The advance payment to extent of 25% of the ordered value can be made to M/S I.T.I., Banglore without any ceiling limit for purchase of non-competitive products for which I.T.I. are sole supplliers.
2.9.1 GM's are authorised to sanction advance payment upto 50 % of the value of the order within his overall purchase powers to M/S Hindustan Cables for the supply of telecommunication equipment's including cables.
Authority: Board's letter No.76/RS (G)/753/2 dated 18.6.80 – AnnexureIII/2-03)
2.10 In the case of procurement of Plant & Machinery, Board had circulated guidelines for payment terms to be adopted vide their letter No.85/RS (G)/379/21 Dated 02.06.1987 – (Annexure III/2-08).
2.10.1 In order to minimize delay in supply, installation and commissioning of M&P, an Expert Committee was appointed by the Board to study the purchase conditions and objectively examine these with a view to identify, analyse and suggest measures which contribute to delay in supply, installation and commissioning of sanctioned machinery and plant. The findings and recommendations of the committee are circulated by the Board for guidance and compliance in all procurement cases of Machinery and Plant.
2.11 The summary of the Committees Recommendations are as below:
(a). The transport of M&P from the supplier’s premises to the consignee at site will be arranged by the supplier. The contract should be placed with the condition " free delivery "at site. Mode of transport should be left to the contractor. 90% payment should be made to the contractor after receipt of the material in good condition by the consignee.
(b) A penalty of ¼% of the cost of the machine per week subject to maximum 2% will be levied against the supplier for delay supply of the foundation drawings.
(c) A penalty of 2 % of the contract value per month will be levied against the supplier subject to a maximum of 8 % for delay in commissioning of the machine after the permitted free period. After the penal period of 4 months, the machine will be commissioned by Railways making alternative arrangements. PG bond will also be encashed alongwith the withholding of 10% of the balance payment. This money could be utilised for financing the commissioning of the machine by the Railways. the bad performance of the firm should be kept in view at the time of considering future orders.
(d) The WG bond will only be released after satisfactory performance of the machine for a period of 12 months from the date of commissioning of the machine, issue of PTC will be the basis for the release of 10% balance payment.
(e) For special purpose, machines being procured for the first time and for developmental/trail orders, 80%payment should be made to the firm on completion of the performance trial at the firm’s premises and receipt of the machine at consignee’s end in good condition. 10% on successful commissioning at Railwy’s premises and balance 10% on successful completion of the warranty period . further stringent conditions may be laid down by COFMOW based on the individual cases, if considered necessary. The repeat order for similar type of M&P should only be considered on the firm after successful completion of trials to the satisfaction of consignee and COFMOW.
Other observations arising out of the committee recommendations are as below :
(i) During the discussion, the committee also found that the present practice of ordering spares for the machines after six months is counter productive. This system should be discontinued and spares as required ordered alongwith the machine to avoid delays and the losses of small packages in transit.
(ii) the suppliers should be permitted to work in more that one shift for commissioning the machine, if he makes such a rquest. This will reduce commissioning time of the machine by the supplier.
(iii) The material should be unloaded at the place nearest to the site where the machine is to be commissioned so that minimum shifting of the heavy machine is involved at the time of commissioning.
(iv) If more that one machine required to be commissioned by the same supplier, COFMOW should ensure before placing the purchase order that the supplier has capacity and capability of mustering more than one team of service engineers for commissioning and attending to warraanty complaints arising from different locations.
Authority: Bd’s letter No. 93/M(M&P)/1063/36 of 25.06.1996 ( Annexure III/2-14)
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ANNEXURE III /2-01
Copy of letter No. 77/RS(G)/779129 dated 29th December 1977 from Joint Director, Railway Stores (P), Railway Board, New Delhi, addressed to General Managers, All Zonal Railways
Sub: Simplification of purchase procedure and delegation of powers in respect thereof
The question of decentralisation of powers of the General Managers has been under the consideration of Decentralisation Committee and after careful examination of the Report of the Committee, the Board have decided as under-
(i) Non-enforcement of certain standard conditions of Contract: - As per para 439-S, the General Managers are competent to vary I. R. S. conditions of Contract in exceptional cases within their powers of purchase. It has now been decided that the General Managers may also waive operation of clauses relating to ' liquidated damages', ' Risk purchases' and ' arbitration ' appearing in the I. R. S. conditions of Contract as a standing measure on the Railways/Production Units in respect of Contract valued upto Rs. Ten thousand, at the post contract stage, in order to avoid disproportionate administrative expenditure in small recoveries.
(ii) Recovery of liquidated damages and loss due to risk purchase: --While the non-recovery of such amounts are now being dealt with on the Railways under the powers of write off on case to case basis, it has now been decided that the General Managers may also waive such recoveries where they amount to Rs. 2,000/- or less in each case subject to the condition that suitable penal action is taken against the firm, including de-listing the firm, if necessary, from the list of approved suppliers. These powers are to be used in cases recoveries could be made only by resort to arbitration or legal action. These powers may also be exercised by Controllers of Stores / Addl. Controllers of Stores.
(iii) Payment terms: -(a) In order to he in line with D. G. S. & D., conditions of contract it has now been decided to enhance the limit of 90 percent payment on proof of despatch as appearing in I. R. S. Conditions of Contracts as a general measure to 95 per cent in contracts other than running contracts and 98 per cent in case of Running Contracts; the balance payment will be 5 per cent or 2 per cent as the case may be instead of 10 per cent at present. Separate amendments will issue.
(b) It has also been decided that the Controllers of Stores may authorise 100 per cent payment on proof of inspection and despatch in respect of Public Sector Undertakings within their powers of Purchase. In respect of spares for Plant and Machinery, proprietary items and special tools obtained from Government or Non-Government agencies, Controllers of Stores may authorise 100 per cent payment in respect of Contracts upto Rs. 50,000/- on proof of inspection and despatch. Where such payments are authorised without inspection, Bank Guarantees should be obtained.
2. This issues with the concurrence of Finance Directorate of the Ministry of Railways.
Please acknowledge the receipt.
ANNEXURE III /2-02
Copy of letter No. 76/RS (G)/ 164/48-dated 16th / 17th March 1978 from Joint Director, Railway Stores (P), Railway Board, New Delhi, addressed to General Manager(s) All Indian Railways and Production Units.
Sub: Advance payment on the basis of receipt issued by Road Transport Agency-
Procedure regarding
In continuation of their letter of even number dated 16th March 1977 on the above noted subject, the Ministry of Railways desire that motor lorry receipts should not be accepted as proof of despatch of materials for making advance payments for supply of stores.
This issues with the concurrence of Finance Directorate of the Ministry of Railways.