Telecommunication Accounts and Finance -3

 

Chapter-7  DOT Cell Functions

 

Controller of Communication Accounts

Bharat Sanchar Nigam Limited () has been formed w.e.f. 1.10.2000 by converting the erstwhile Department of Telecom. Services (DTS) and Department of Telecom. Operations (DTO). A need was therefore felt for formation of a separate cell in DOT to deal with the residual items of work relating to DOT and DTS. Accordingly, a DOT Cell Unit has been formed at each Telecom Circle Accounting unit. These units have been subsequently, renamed as offices of CCA (Controller of communication Accounts) from 27.06.2002 as per DOT letter NO.3-4/31/2000-SEA dated 27.06.2002. The constitution in general of a CCA office will be as follows:

Controller of Communication Accounts	- in the grade of SAG from     Accounts & Finance Service
Joint CCA	- in the grade of JAG from Accounts & Finance service.
Deputy CCA	- in the grade of STS from Accounts & finance service.
Communication Accounts Officer	-in the grade Group B from Accounts & Finance service.
Junior Communication Accounts Officer	- in the grade of Group B from  Accounts & Finance services.

The office establishment comprises of Senior Accountants, Junior Accountants and Lower Division Clerks etc. It is necessary that closing balances as on 30.09.2000 in respect of various transactions like loans and advances, GPF etc. are identified and balances agreed with the books of accounts are transferred to the DOT. In addition to the above, the recoveries made after 1.10.2000 in respect of the above transactions relating to DOT period are transferred to CCA regularly on month to month basis so as to enable the CCA to maintain necessary broad sheets for the same.

 Item 1 (A)

 The responsibilities of the SSAs in  and the CCA unit in respect of items of work relating to erstwhile DOT/DTS employees who are on deemed deputation to  and also for those who are absorbed in  are summarized below:

 

SL	Item of Work	Responsibility of  field unit	Responsibility of the CCA unit
1	Settlement of pension & retirement benefits	Will process the pension cases and other retirement cases and submit them direct to the circle CCA	Will issue PPOs. Authorize DCRG, Commuted value of pension, family pension, insurance payment, GPF final payment.
2	Pension and leave salary contribution	Assess correctly and remit regularly the amount of contribution to the CCA	Will undertake collection and employee wise scrutiny.
3	General Provident Fund accounting	Details of amount collected and amounts paid will be intimated to the CCA unit.	Will maintain employee wise GPF broad sheet.
4	Recovery and accounting of HBA and other long term advances	Recovery particulars in respect of such loans & advances already taken by the employees prior to corporatisation will be intimated by the	Will maintain the official wise broad sheets and watch for complete recovery.
	Settlement of outstanding balances under remittance and suspense heads before transfer of firm figures to the balance sheet of the corporation	Will co-ordinate with CCA unit for early reconciliation.	Settlement will be done by the CCA in collaboration with the
6	Settlement of USO subsidy claims	To submit the claim for subsidy every quarter	To settle the claim after exercising necessary checks

Important

All claims of the govt. against the  and those of the  will be settled in Cash. Further, there should be no netting of ’s claims against the GPF contribution or pension contribution or leave salary contribution etc. A soft copy (floppy) and hard Copy (print out) of the schedules is to be given. Item 1 (B)

The other functions of CCA office are as below:

1. Collection of license fees in the form of revenue sharing from various organizations on behalf of Govt.

2. Collection of service tax from the telecom service providers.(This has since been dispensed with and SSAs are now to remit the service tax amount directly to service tax authorities)

3. Will handle the budget, finance and accounting functions of the Wireless Monitoring Organization.

4. Handling realization and accounting of revenue in the form of license fee and royalty for use of spectrum.

5. Handle the budgeting, accounting and DDO functions of CCA unit.

 It may be seen from the list given at item 1(A) above, that it shall be the responsibility of the SSA units in  to ensure that the monthly recoveries of GPF,CGEIS, Leave salary & Pension Contribution, Loans & advances etc. are made regularly and are transferred duly agreed in time every month to the CCA office. This work is required to be completed before 15th of the month following the month of account. The amount due should be remitted in the form of DD. It is important to note that the correctness of maintenance of accounts would depend upon the correctness and promptness with which the returns are submitted by the .

 

Levy of penalty for delayed payments to CCA:

Of late undue delay has been observed in transferring the recoveries to the CCA unit. It has been therefore been decided by the Govt. that the corporation will be liable to pay penal interest on delayed pension contribution.

The following are the details of rates of penal interest decided for levy provisionally by the DOT pending final approval by Ministry of Finance:

(i)  Delay in remittance of LSC/PC: As per SR 307(1)

(ii) Delay in remittance of GPF/L&A:

 

      2.5% above the applicable rate of interest. Interest will be charged from 1st of the month    

     following the recovery, if payment is not made by the specified date.

(iii) In case of CGEIS/CGEIS

 

2.5% of the ruling rate of interest on CGEIS per annum (Compounded quarterly). Interest will be charged from 1st of the month following the recovery, if payment is not made by the specified date.

Claims if any, by  on the CCAs/DOT may be preferred separately by 7th of following month and CCA will settle the same within 7 days from the date of receipt of the claim.. No netting is allowed to be made from the recoveries or any other amount due and payable to CCAs/DOT.

Actions suggested by the CCA for timely payment of pension to  staff :

So as to obviate the possible delays in settlement and to ensure that the pension and other retirement benefits are settled in time, the following schedule of action has been prescribed.

 

(A) Supply of six monthly list of the officials due to retire with in the next 24 to 30 months:

This should be supplied to the CCA office not later than 31 st of January or 31st of July as the case may be. In the case of officials retiring for reasons other than superannuation, the office of CCA is to be informed as soon as the employee seeks retirement.

 

Preparation of Pension Papers:

• Immediate action should be taken to verify the qualifying service of all employees retiring within 2 years.

• Ensure 24 months before retirements that the Service Book contains the certificates of verification for the entire period of service. Wanting certificates if any should be called for and recorded in the SB.

• If service verification relating to a different unit is not forth coming, the official concerned may be asked to file a written statement certifying the service rendered producing supporting evidence.

• All Govt. dues to be ascertained in advance and kept ready.

• In case of death/voluntary retirement, the head of the office should start verifying qualifying service, dues, pending disciplinary cases if any, and try to obtain the pension papers to avoid delay in settlement of the case.

• The TA branch of the SSA should complete calculation of average emoluments 10 months before retirement of retiring officials.

• Pension papers in triplicate to be forwarded to the individual with in 8 months of the retirement.

• The pension case should be forwarded to the office of CCA by the TA wing of  the SSA not later than 6 months before the date of retirement, duly ensuring that -

(i)   The Joint photo is duly attested and pasted in the application.

(ii)  All columns in the data sheet are completed

(iii) The calculations are correct.

(iv) The bank account no. is clearly noted in the application if  the govt. servant wishes to draw   

       pension through the bank.

(v)  The place where the retiring Govt. Servant wishes to stay after retirement

       and whether the place covered under the CGHS or otherwise.

 

Documents that should accompany the pension claims sent to the office of CCA:

 

1. Data sheet                                         Two copies.

2. Pension application                           Two Copies

3. Photograph/Joint photograph             Two copies

4. Specimen signature slip-claimant                  Two copies

5. Specimen signature slip-spouse                      Two copies

6. Details of family members                 One Copy

7. Nomination for DCRG/GPF/CGEIS One copy

8. Statement showing non-qualifying service      One copy

9. Report of vfn. of 25 yrs. Service                    One copy

10. Commutation application                 One copy

11. Vig/disciplinary clearance                One copy

12. Identification marks of the individual One copy

13. Identification marks of the spouse.   One copy

14. Detailed calculation sheet                One copy

15. No dues certificate                          One copy

16. Succession certificate.                                 One copy

(in case of no nomination)

17. LPC (Provisional/Final)                   One copy

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Chapter – 8  DDOs Role - Tax Laws, Direct & Indirect Taxes, VAT and CENVAT

 

Income Tax

1.1 Income tax is a composite tax on all incomes received by, or accruing or arising to, a taxpayer during a year.

1.2 In the language of the Income Tax Act, the year during which the income is received or is otherwise earned is called the “Previous year” and that income is assessed to tax in the year commencing on 1st April next following the close of previous year. This latter year is termed “Assessment year”.

1.3 Though income Tax is a single Tax on the aggregate of incomes from various sources the taxable income is first computed under different heads of income.

1.4 If there are two or more sources of income falling under a head of income the income is computed separately for each source of income. These are then aggregated. From the aggregated amount, certain deductions are made before the taxable income is reached. The various heads of income are:-

i)   Salaries

ii)  Income from House Property

iii) Profits and Gains of Business or Profession

iv) Capital Gains; and

v) Income from Other Sources

 

2. Income that is exempt from tax (only items related to salary)

2.1 Leave Travel concession in India (Only two journeys in a block of 4 years is exempt) [(Sec.10 (5)]

2.2 Gratuity [Sec.10 (10]

Government Employee: - Fully exempt

Non Government Employee (Covered by Payment of Gratuities Act)

The least of the following is exempt

 

15 days salary Last drawn (includes DA) X  length of Service	Less than 6 months service ignored. 6 months & above service is treated as full year
Rs.3,50,000
Actually Received

 

Non Government Employee ( Not covered by Payment of Gratuities Act)

The least of the following is exempt

 

Half months’ average salary(includes DA) (average of 10 months preceding the month of retirement) X Completed years of Service	Fraction of a year is ignored Average of 10 months preceding the month of retirement
Rs.3,50,000
Actually Received

 

However, the assessee can claim relief under Sec.89

2.3 Commuted Value of Pension [Sec.17(1)(iii)]

 

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Planning and Capital Works Management

Telecom Strategic Business Planning

1. Strategic Planning

Strategic Planning can be thought of as having three 's' constituent parts:

 

i) Strategic Analysis

ii) Strategic Direction and

iii) Strategic Implementation

 

While planning such, the changes / developments in seven key areas (as at present and in future) will be kept in view. 'TEMPLES' is the numeric for these areas as follows:

 

T - (Technology)

E - (Economy)

M - (Market forces competitions)

P - (Political Decisions)

L - (Law & Regulatory Systems) viz. TRAI etc.)

E - (Environment & Human Resources); and

S - (Social obligation (viz.) USO)

 

The Corporate Office of , will consider all the above before framing its "long term" and "short term" planning proposals along with varied techno-economic choices keeping in view technological developments that are taking place and that would take place in long term.

 

2. Business Plans: Main Areas

The main areas that influence any Business planning generally are mainly:

Market, Technology and Finance: Business plans of Telecom are being formulated with judicious admixture of these three elements. The factors that influence in business plans of Telecom are

 

a) Short and long term forecasting of market demand in respect of basic as well as Value Added Services

b) Assessment of needed "Technology' and identification of suitable vendors for supplies / products.

 

Basics for Formulation of Business Plan

Telecom Corporate Office communicates targets thus fixed against each territorial circle with suggested technological options, giving certain flexibilities to Heads of Circle.  Accordingly Business plan documents in Telecom wings will depend mainly, on Targets, Objectives, Social obligations as well as Capital Funds as follows:

 

(i)    Targets as fixed by  for the planning period for (a) Basic Services (b) Rural & VPTs under Universal Service Obligation.

(ii)  Meeting bandwidth requirements as targeted.

(iii) Choice/Availability of appropriate technology keeping view future market demands and availability of suitable vendors/ production units.

(iv)  To meet 'On demand' Accessibility and to maintain Reliability of services

(v)  And, availability of Resources / Capital funds

 

3. Planning Guidelines for New Telephone Exchange:

During 98-99, two major policy changes in respect of rural telecom has taken place. These are, Declaration of SDCA as multi exchange area w.e.f. 15.8.1998 and announcement of New Telecom Policy 1999 in March 1999. Objective of Universal service has been included in the New Telecom Policy. This objective is to be achieved by providing village public telephones in the remaining villages and telephones on demand.

 

In view of the above changes, planning guidelines for new telephone  exchanges in rural areas have been reviewed. New guidelines as stated hereunder are given for planning new telephone exchanges in the rural areas.

 

Pre Corporatisation Period

 

To accommodate the changes inspired by declaration of the SDCAs as multi exchange local areas and to meet universal service obligation as stated in NTP1999, the planning guidelines for new telephone exchanges in rural areas have been revised as under:

(i) The switching network should be planned for the whole area covered by the SDCA in such a way that the telephone can be provided on demand anywhere within the SDCA and the balance uncovered villages within the SDCA are provided with VPTs.

(ii) The local area of each of the multi exchanges should be defined and demarcated in such a way that entire area of the SDCA is covered by the existing exchange(s) within the SDCA.

(iii) A telephone from an exchange within its local area shall be treated as local telephone irrespective of its distance from the exchange. However, if a telephone is provided form an exchange at a place outside its local area (in the local area of another exchange) on the request of an applicant, the same shall be treated as a long distance telephone.

(iv) The fresh demand for telephones at a place or in an area should be met either from an existing telephone exchange by underground cables / overhead lines or by opening of a new telephone exchange or by using TDMA/PMP equipment depending on techno-economic considerations. A new telephone exchange should be planned and opened only if its is techno-economically not feasible to meet the demand for telephone from an existing telephone

exchange within the SDCA.

(v) When a new telephone exchange is opened in a SDCA, its local area and that of the already existing adjoining exchanges should be re-demarcated and notified.

(vi) Provision of reliable transmission media to all telephone exchanges by the year 2002 is another objectives stated in the NTP 1999. Accordingly all new exchanges should be planned along with reliable transmission media.

 

Post Corporatisation Scenario:

After the Corporatisation of DTS / DTO on 1.10.2000 careful strategy is being adopted for opening of new exchanges in the rural areas. This is to ensure the economic viability of . SDCA has been declared as multi exchange area w.e.f. 15.8.1998 and New Telecom Policy 1999 announced in March 1999. Objective of Universal Service is to be achieved by providing village public telephones in the remaining villages and telephone on demand by year 2003.

In view of the above changes, planning guidelines for new telephone exchanges in rural areas have been reviewed. The norms for planning of Small Exchanges in the rural areas have been revised. New guidelines stated hereunder (Para 4) be followed while planning new telephone exchanges in the rural areas.

 

4. Planning of Small Exchanges in Rural Areas

With effect from 27.9.2002, norms for planning of small exchanges are as follows:

i) The planning of rural area should first be with WLL solution.

ii) If WLL solution is not workable due to technical reasons, a new exchange would be planned with minimum registration of 75 within the local area of exchange.

iii) New exchange would be commissioned on optical fiber media. However, radio / satellite media could be used wherever optical fiber media is not techno-economically feasible.

Providing Telecom Services in Rural Areas: General Instructions

i) The opening / shifting of telephone exchanges in rural areas should only be in exceptional circumstances. No new site (departmental or rented building) be acquired for opening new telephone exchange or shifting an existing telephone exchange of up to 500 lines capacity in

rural areas. Any unusual proposal of opening new telephone exchange in rural area

should be personally approved by the Head of the Circle with the concurrence of the IFA.

ii) Guidelines have already been issued for providing telephone connection on copper cable up to a radial distance of 3 Kms. from the exchange and any demand beyond is to be met by providing connections on WLL. The area to be covered for providing new telephone connections on copper cable is reduced from 3 Kms to 2.5 Kms radial to further cut down the cost of cable required for providing a landline connection.

iii) As telephone exchange capacity up to 496 lines (2 AN racks) can be achieved in the existing C2 exchanges, we may not open any RSU of 500 line capacity. The next stage of increasing the capacity by installing 1K RSU should be resorted to in cases where the revenue per line is reasonably high (about Rs.400/- per line per month and above) and the area is important because of the location of industries, agriculture products and agro based industries and customers like NRIs etc. All proposals of installing 1K RSU should be profitable proposals and for this cost saving may have to be resorted to by having buildings of the reasonable size and cutting down the cost of infrastructure wherever possible.

iv) Where the revenue per line is relatively low (less than Rs.300 per month), it is not expected that a capacity of more than 2 numbers of AN racks will be required. Additional demand in such cases may be met by providing connections on WLL. Only in cases where the demand rises to about 600 to 700, the proposal of increasing the exchange capacity to 1K may be initiated ensuring that it is not a loss

making proposal.

 

v) The choice of new telephone connection on wire-line or WLL should be based on techno-economic considerations and not on the option of the customer.

vi) External Plant of the existing telephone exchanges in rural area should be developed to provide more connections as per demand and existing infrastructure be utilized to the maximum extent.

vii) While providing new telephone connections to meet the targets, priority should be given to exchanges of 1000 line capacity or more as this will ensure a minimum rental of rs.110/- per month per connection.

 

Opening of New Rural Exchanges: Revised Policy

Management Committee of  while considering the item related to revision of policy for opening of new rural exchanges in circles having large waiting list has decided as follows:

The earlier decision on the subject for opening of new rural exchanges for A&N, Assam, Bihar, Chhattisgarh, J&K, Jharkhand, NE-I, NE-II, Orissa, UP (East) and Rajasthan Circles conveyed vide this office letter no.2-1/98-RDTF, dated 14-06-04 will remain in force with the modification that new rural exchange may be opened in above circles having net waiting list of more than 50000, with 5 Kms radius instead of 3.5 Kms if a minimum demand of 150 subscribers exist. CGM has to ensure the manning of such exchanges prior to approval of proposal for opening such exchange. As regards other remaining circles all such proposal shall continue to be sent to Corporate Office for prior approval.

The exchange should be opened on reliable media. The proposal for new exchange be studied and approval case by CGMs in concurrence with IFA.

 

5. Telecom Strategic Business Planning: Concepts

The overall objective of SBP is to give business direction to the entire Telecom Corporate sector. Te process starts with a 5 year vision of the planning wing prepared for the Planning Commission and then it takes a slice out of the 5 year plan for a 3 year outlook. This three year slice will be called SBP and then out of the 3 year outlook, a one year slice is taken, which is other wise called as AOP. It will have general strategic direction from the top at the Corporate Headquarters with detailed

planning work at the bottom at Secondary Switching Area (SSA) level. In the process of SBP, rather than planning in bits and pieces based on small projects, the Strategic Business Plan looks at the entire network at the SSA level in terms of a number of parameters like profitability, future growth, man power development, budget, financial constraints and ultimately, combining all these together at Circle level and then at the Corporate level.

 

 

Shelf of Projects

The concept of Strategic Business Planning and Annual Operating Plan is greater importance in determining the plans for consecutive years at a time, on Roll on basis. In this process, initially, Shelf of projects will be prepared by the concerned SSAs. For inclusion in Shelf of Projects, various project sheets will be prepared as SSA level in the prescribed forms. These project sheets are simplified and rationalized version of the existing project estimate formats. After having the project sheets got approved by the concerned financial wing of the SSAs, the same will be kept in Data Base called "Shelf of Projects" as proposed by the SSA.

The Shelf of Projects indicates the relative national remunerativeness of local Switching projects. Telex, Telegraph and Public Telephones only. The project sheets are normally be maintained by SSA for all the projects. For schemes beyond the powers of SSA, copies of PEs be sent up to level of office where authority to sanction the PEs lies.

A detailed examination of the project sheets will be done by the competent

authority concerned before AOP is finalized.

For example, individual project costing more than five crore but less than fifteen crores shall be examined in detail by CGMs before finalizing the AOP. The individual projects costing more than fifteen crores, will be examined by Corporate Office before approval of AOP. This Strategic Business Plan is meant to be a group of on-going projects and new projects in the time span of 3 years and Annual Operating is essential for the first year's programme of SBP.

Notes:

1. Categorization of Projects for SBP Purpose:

 

a. Projects costing "Less than five crores" (Category B)

b. Projects costing "More than 5 crores and less than 25 crores" (Category A-II)

c. Projects costing "More than 25 crores" (Category A-1)

 

2. Budgeting of works:

Works costing below 5 crores will be treated as 'B' works & to be shown in lump sum Budget provision. For projects costing Rs.5 Crores and above, details are to be sent project wise in Statement 'A' as usual.

 

Accordingly the categories of projects will be as follows:

 

Category           Financial Limit

A                     Rs.5 crores and above

B                       Less than 5 crores

 

Instructions on Capital Works: Budget Estimates

 

a. Fund should be demanded under the services as per the modified Head of Accounts effective from 1.4.2003

b. Funds should not be asked for under components, which have not been included in the Project Estimate. Funds demanded under such components will not be allotted.

c. The proposals should be framed indicating the requirement separately for General Area, Rural Area in respect of Revised Estimates and Budget Estimates in accordance with the “FORMAT” specification of which has already been furnished bide  letter No. 9-1/2003-CB Dated 28.8.2004

d.  Funds required for the payment of equated quarterly installments under Deferred payment system during the year are also be demanded against the respective projects and consolidated statements should be submitted separately.

 

Conditions in Allotment of Funds

Allotment thus made at the commencement of Financial Year subject to following conditions.

a. That no appropriation of funds is made by any circle or Division against any unsanctioned detailed estimates.

b. That no appropriation of funds is made beyond 10% of the sanctioned cost of detailed estimate.

c. That no appropriation of funds is made which has the effect of exceeding the sanctioned cost of the project beyond 10%.

 

Allotment of Funds – Utilization instructions

Instructions issued by Corporate Office,  in allotment of funds under Capital vide Lr. No. 8-1/200-EB dated 24.5.2002 are as follows.

 

The detailed allotments will be made under each component, e.g. Land, Building, A&P etc. against sanctioned project costing Rs. 5 Crores and above under Statement-

 

A. Expenditure is to be incurred against the projects for which allotments of funds is made under B.E. Funds allotted for a particular project should not be diverted to any other project for which no allotment in B.E is made. So far as New works costing Rs.5 crores and more are concerned allotment is made in respect of work for which copies of sanctions are available with the Capital Budget Section. Allotment of funds shall be considered for the rest of the New works after particulars of sanctioned estimates etc. are received. Issue of sanctions for such projects does not automatically carry with it the authority to incur expenditure without prior allotment of funds. The Circles are advised to send a statement giving full details of the New works sanctioned (with sanction particulars etc. ) along with the copies of sanctions to  Corporate Office, immediately to facilitate issue of authorization for incurring expenditure.

 

Lumpsum allotment is made in respect of works costing less than Rs. 5 Crores separately under Statement-B. It includes provision for New Works costing below Rs. 5 crores. Project-wise allotment in respect of these works is to be made by the circle concerned.

 

No expenditure is to be incurred by the circles or its Divisions against unsanctioned projects. No allotment of funds should be made beyond the sanctioned cost of the project. In case funds are required for such continuing projects costing Rs. 5 crores and above revised sanction may please be sent for consideration.

 

Overhead and escalation charges are also to be met from within the allotment given. No separate allotment will be conveyed for meeting these charges and no reserve is held centrally to cover the adjustment of these charges separately. It is proposed to modify the practice of allocating overheads to capital in keeping with Accounting Standard-10 and separate instructions are being issued regarding this.

 

ATDs received during the current year should not be held up till the closing part of the year. Available funds should be utilized for the adjustment on month to month basis.

 

Heads of Circles/IFAs are to closely monitor the expenditure monthly and ensure that the actual expenditure is within the scheme wise/area wise allotment. Diversion of funds from one scheme to another should not be resort. They are also requested to closely monitor the expenditure

 

Instructions by Corporate Office in respect of Capital Works on Closure of Accounts

 

Fixed Assets:

a. Lease hold and free hold land: Bifurcation of Land into leasehold and freehold must be done and reflected in the Asset Register and financial statements separately. Lease value of leasehold must be amortized over the lease period. Lease rent if any, in respect of leasehold land must be charged to P&L A/C.

b. Updation of Fixed Asset Register : Fixed Asset Register must depict the full details along with quantity and situation/location of the assets and the same is duly tallied with component-wise booked figure as reflected in the Audited Trial Balance. Addition/deletion of assets shall be posted in the Fixed Assets

register as and when the same are taking place.

c. Physical Verification of Fixed Assets at the close of financial year : The physical verification of fixed assets must be carried out at the close of financial year and authenticated records of physical verification are submitted to the Audit. The difference between the book value of the assets and value of the assets as physically available must be reconciled and neutralized before finalization of annual accounts..

d. Impairment of Assets : As per decision of  Board all the analogue exchanges like MILT-64, ESAX-200, ILT-512, ILT-2048 and NEAX-61S etc. (as per Circular 19) should be discarded/declared obsolete and disposed off. If any such assets are still reflecting in the accounts of  under Fixed Asset Schedule, the details of the said shall be furnished. If no such assets is available a certificate should be furnished “Certified that no asses as detailed in Circular No.19 are working and reflected in the Fixed Asset Schedule and in the Trial Balance under Schedule 105,106,108 and 109.

 

Assets decommissioned and declared obsolete by the competent authority

• Depreciation in respect of such assets is charged up to the date of decommission/ declaring the same as obsolete.

• The gross block & accumulated depreciation of such assets are neutralized.

• Net depreciated value of such assets of Basic Service is transferred to decommissioned asset accode 1171500.

• Provision is made for difference in value between the NRV and net depreciated value of obsolete asset, provided the NRV is less than the net depreciated value.

• Such obsolete asset is disposed off promptly as per rules. The provisions made earlier for such assets either by concerned Circle or by Corporate Office are to be utilized and excess provision is to be written back.

 

Addition of assets during the financial year

• Depreciation is charged strictly from the date of commission / put to use.

• Correct information about assets acquired during the financial year and put to use for a period of (i) less than 180 days, and (ii) 180 days and above, shall be furnished at the time of Tax Audit. This will help to calculate the depreciation under Section 32 of IT Act

 

Capital-Work-In-Progress

Huge pendency, abnormal delay in capitalization of CWIP & numerous audit qualifications are the main concern of  Management.

 

Capitalization of CWIP

• All the Circles must ensure that:

o CWIP is capitalized from the date of its commissioning / put to use.

o Necessary accounting entries are passed in the books of accounts, and Fixed Assets Register is updated immediately on commissioning of assets.

o In case of non-receipt of claim bills from the contractors/suppliers in respect of completed CWIP, necessary liability/provision is created and CWIP is capitalized.

o Head of Circles must ensure that the executing authority of the project issues commissioning certificate without delay so that no delay occurs in capitalization of CWIP.

o Project Circles / NETF Guwahati must ensure prompt issuance of ATD supported by complete documents of completed work and ATDs so raised, are accounted immediately in Trial Balance.

o It is to be ensured that capitalization is done within 1st half of the financial year so that 100% depreciation can be availed.

• Pendency at the close of financial year under head CWIP must not be more than the average expenditure of 3 to 4 months in respect of CWIP.

• The status of all the CWIP particularly more than one year old shall be reviewed by the Heads of Circles and action taken for prompt completion.

• Targets for capitalization during the current financial year as fixed by the Management of  and communicated through letter no: 600-19/2005-06/CA-1/ dated 02.03.2007 are to be achieved. The circles must ensure the same.

Charging of Overheads

• Overhead will be charged strictly on actual basis.

• Pay & allowance of the staffs who are actually engaged and have contributed for the execution of works, will be charged to CWIP.

• Administration and other general expenses, which are actually related and specifically attributable to the construction of a project/capital works or to the acquisition of a fixed asset, are allocated to that project/asset.

• Depreciation of fixed assets like departmental vehicle & testing instruments, which are actually utilized in project works, shall be charged to CWIP.

• Circles particularly Project & NETF Circles must ensure that no excess overhead is charged.

 

Writing back of unutilized inventory remaining at site

• At the close of each financial year physical verification shall be carried out to identify the stores remained unutilized at work site.

• The value of such un-utilized stores shall be transferred to inventory schedule by passing necessary JV.

Physical verification of Capital - Work - In - Progress

• At the end of each financial year physical verification of CWIP shall be carried out.

• The difference between booked figure of CWIP (as reflected in trial balance) & value of CWIP physically available shall be reconciled and neutralized.

• The physical verification report of CWIP shall be submitted to the Auditor.

 

Adjustment of provision made in previous financial years for old CWIP

• As per Branch auditor's report provisions were made for certain old CWIP in previous financial years.

• If such old CWIP is abandoned as per sanction of the competent authority, the corresponding provision shall be utilized and excess provision written back.

• If old CWIP, for which provision had already made, is not abandoned but revived and either work is going in respect of such CWIP or such CWIP is completed & put to use, concerned provision shall be written back.

Inventory

Valuation of Inventory

• Inventory to be valued taking into account the

o Purchase price including taxes & duties (except Cenvat credit) and freight inwards.

o Other expenditure directly attributable to the purchase.

o Administrative expenses that don't contribute to bring the inventories to their present location shall not be included.

o No under/excess valuation is done

Weighted average rate

• Inventory to be issued to capital & revenue works at weighted average rate.

• Weighted average rate shall be calculated on receipt of each new shipment.

Maintenance of Bin Cards & Priced Store Ledger

• Bin cards & priced store ledger must be maintained by each Depot/Store Dump.

• All details including quantity, unit of code, total value, and weighted average rate must reflect in Stores ledger.

Accounting of receipt of Inventory

• Immediately on receipt of inventory the consignee must account for the same in the Trial balance through its accounting unit.

• In case of receipt of inventory from supplier/contractor if the accounting unit of the consignee is the paying authority the credit shall be given to accodes for 'Sundry Creditors' and payment made for the inventory be adjusted against sundry creditors; otherwise the credit shall be given to 19903xx / 19904xx and corresponding ATD received subsequently, shall be adjusted accordingly.

• For receipt of inventory from the other Circles/units of  the credit shall be given to 19903xx / 19904xx and corresponding ATD received subsequently, shall be adjusted accordingly.

Accounting of issue of Inventory

• Issue of inventory from Stock to project & maintenance works shall be accounted in Trial balance as and when the inventory is issued.

• Store Depots, which are functioning as a separate accounting unit, must send the ATD immediately on issue of stores to the accounting unit of concerned consignee and account for the ATD in its Trial Balance.

• Transfer/diversion of stock from one accounting unit to another accounting unit shall be settled by ATD and issuing accounting unit must raise ATD and account for the same in Trial Balance immediately on transfer / diversion of stock.

 

Identification of obsolete / unserviceable / non-moving inventory

• Technical survey shall be carried out from time to time to identify obsolete/unserviceable / non-moving inventory as per existing procedure.

• If obsolete / unserviceable inventory is found, the same shall be declared as obsolete/ unserviceable as per existing rules & orders.

• The book value of obsolete / unserviceable inventory shall be transferred from the respective inventory accode to obsolete inventory accode 1171700 / 4171700 by passing JV.

• Provision shall be made for difference between NRV & book value of inventory, provided the NRV is less than book value.

• Obsolete / unserviceable inventory shall be disposed off promptly as per existing order and corresponding provision utilized / adjusted accordingly.

• Provision for obsolete / unserviceable inventory made up to 2005-06 must be utilized / adjusted / written back in the current financial year.

Physical verification of Inventory

• Physical verification of inventory must be carried out at the close of the financial year

• Records for physical verification shall be kept in the following format:

 

 

Name of invent tory	Weighted Average rate as on 31.3.2007	Quantity as per Stock Ledger as on 31st March 2007	Value of Stock as per Stock Ledger as on 31.3.07	Value of stock as reflected in the Trial Balance as on 31.3.2007	Quantity as per physical verification as on 31.3.2007	Value of stock physically available as per Weighted average rate as 31.3.2007	Difference between the quantity as per books and as per physical verification (3-6)	Difference between the value as per books and as per physical verification (4-7)	Action taken to reconcile the difference detected during physical verification
1	2	3	4	5	6	7	8	9	10

 

• Reconciliation between the quantity as per physical verification and as per priced stock ledger shall be done.

• Reconciliation between the value as per priced stock ledger and as per Trial balance shall be done.

• Proper action shall be taken for the difference (shortage/excess) between the stock as per books of accounts and stock physically available.

• In case of shortage of inventory, provision shall be made for the full book value of inventory found short, necessary investigation shall be done and ultimately provision shall be utilized / adjusted under the orders of the competent authority having power to write off loss.

• Records of physical verification shall be submitted to Auditor.

 

Project Analysis and Implementation

Projects & Estimates:

1. Plan Schemes:

The Department of Telecom letter No.5-8/90-EB, dated 20-06-1991, the New Schemes and New Services have been defined as under:

“New Service” is that for which expenditure arising out of new form of investment and/or new policy decision.

“New Schemes” signifies the projects which may be new for sanctioning authority but not for the department (Organization), and as such not new form of investment. In the case of a major project, consisting of several component parts, a statement showing the probable cost of each component part of the project, should be prepared in the office of the authority next below the authority competent to sanction the project.This statement is the basis on which the sanction of the competent authority is

accorded. The amount of each component estimate as it is sanctioned should then be entered against each item in the statement so as to keep a watch over the progressive cost of the project. This procedure will also apply to projects requiring the sanction of the Corporate Office.

 

2. Projection of Demand:

While preparing project estimates, it is to be ensured that the scheme is justified on the basis of the growth in demand. For working out justification,the projection of demand as projected by “Economic Study Cell” in its report for various places is generally considered. The projected demand on proposed date of commissioning of the exchange should be 94% of existing capacity + 90% of the already planned capacity of the station or the zone in which the exchange falls. The projection would, generally, be worked out on the basis of the past average growth of 8 years, where the demand has not been projected by Economic Study Cell. To this average rate of growth so arrived, 10% will be added for working out further projection. In multi exchange areas, where more than one zone is existing, the scheme should be justified considering the projection of demands of entire zone in which the exchange falls. Under the concept of Strategic Business Plan (SBP), the recommended equipments under Techno economic choices (with more or less mandatory) mainly depend on the demand on the date of commissioning or demand within 6 months of commissioning.

If the demand projected on higher side by over-ambitious forecasting, the same will lead to ‘under utilization’ of the system for a long period which will affect the Rate of return of the SSA. Likewise, if the demand forecasted is on a very restricted line, there would be possibility of immediate replacement of existing equipment higher capacity one. This will lead to avoidable capital expenditure and idle stock for long periods. As such, judicious forecasting of demand is essential at the initial stages of planning itself.

3. Project Estimates - General:

a. Once a project has been sanctioned by the competent authority (AOP approved)_, the powers as given in the Schedule of Financial Powers apply to the sanction of component estimates, including the ordinary

powers of officers to sanction excesses not exceeding 10% and to sanction revised and supplementary estimates. The powers are, however, limited in the case of estimates forming component parts of projects by the fact that net effect of sanction of component estimates to excesses thereon and to revised and supplementary estimates thereto must not cause the total cost of the whole project as sanctioned to be exceeded by more than 10%.  In order to keep a watch over the progressive expenditure on the project,

a register of project estimates is to be maintained, opening separate sheet for each project. The respective detailed estimates sanctioned against each component will be noted down therein to watch 10% excess as

indicated above.

b. No application for funds to execute a specific project will be considered unless it is accompanied by a properly completed project estimate giving full details of all the works comprising the project, the anticipated annual recurring expenditure, with the countervailing receipts and savings expected and the resulting profit or loss.

c. No project should be put forward without having the idea of its financial implications and in order that this point shall not be lost sight off it is laid down that no Head of Circle or SSA Head shall accord his sanction for execution for any work (even if the funds are available from his lump allotment) unless a project estimate has been prepared. This applies even if the project includes only one work.  However, such project estimate may not be necessary for projects relating to contribution of works or for schemes relating to ‘supply of assets’ for which rental is calculated on a fixed formula basis (Para – 157 of P&T Manual Vol.X).

 

Estimates in  system: Unlike the single account head for capital works as prevailed in DoT system (appendix V), two separate distinct account heads are being operated i.e., ‘fixed assets’ and ‘works in progress’ in . As and when any work is taken up, the works expenditure is to be booked under works in progress Schedules 114, 115 & 116). After the work is completed and completion certificate

(say Management certificate) is issued by the GM/TDM, where required, the expenditure till then booked as ‘works in progress’, will be transferred to fixed assets of relevant accounting schedule.

 

4. Justification of Projects:

Previously, project estimates were being prepared in Proforma Engg.110, to which justification and specification sheets are invariably got attached.With the introduction of Project sheets (in form SSA-PE) in place of Project estimates, the justification and specifications could not be presented in detail though salient points regarding existing status, short fall of capacity, etc., are provided for in the new prescribed forms. In order to ensure that the general/specific requirements are fulfilled in formulating projects and also to decide the relative priority in Shelf of Projects, existing guidelines on justification as detailed in Rule – 159 (a) of P&T Manual Volume – X are reproduced below with specific attention that these may be kept in view along with specific additional instructions issued by the Corporate Office,  from time to time.

a. Full reasons for the necessity of the project should be detailed in the justification attaching separate sheet to the project sheet.

b. In the case of new projects, a brief description of the area to be developed, the populations according to the latest census, particulars of staple trades etc., and the financial potentialities of the project are to be

given.

c. In the case of telephone projects, while giving details of pending and potential demand for the service the exact particulars of waiting list are given. Particulars of the volume of telegraph traffic in ward and outward for the previous two years should be recorded in cases where telephone facilities do not exist already.

d. In the case of new telephone exchanges, particulars should always be given for the number of connections which are anticipated to be taken immediately and also for the number of trunk calls in the outward direction only will be taken into account and they will be calculated for 300 working days in a year, at a rate equal to twice the rate for a call from the new exchange to the nearest important point on the general network.

e. An opinion should be expressed as to the latent traffic which might be expected to offer, where a more speedy telephone service available, and full particulars should be given of any complaints which have been received from the big commercial firms and chambers of commerce in regard to the inadequacy of the trunk service (may be regarded as “STD routes”).

f. In calculating the revenue receipts from STD/trunk calls anticipated, the proportion of full rate/ concessional rate etc., should be adopted on the basis of review conducted from time to time.

g. It should be observed that anticipated receipts should represent the increase over existing receipts and if the project includes as a component any work involving the removal of an existing revenue earning asset,

care should be taken to see that the revenue anticipated from any asset erected to replace the old asset based on an estimate of the increased revenue which the new asset will earn.

 

5. Profitability of Projects:

Profitability will be determined with reference to “Annual recurring expenditure” and“Annual recurring savings” of a project. As enumerated in Para – 157 of P&T Manual Volume – X, the ARE with the countervailing receipts and savings expected is worked out for each project for knowing the resulting profit or loss. This was done for each project falling under three spheres viz., transmission, trunk exchange installation and local exchange installation under the concept of SBP.

 

Remunerativeness – Concept under SBP

Under the concept of SBP or AoP, all proposed projects will be included in “Shelf of Projects” and this will indicate relative “Notional Remunerativeness of Local switching projects, telex, telegraph and Public telephone” only. For all other schemes viz., network transmission, net work switching, computer aided

system etc., no remunerativeness need be indicated since most of these other schemes will be in form of support to the above mentioned projects or as a measure of plan objectives (and the existing revenue per DEL is adopted for as ARS of the proposed project).

 

Note:

Per Del Revenue: Revenue is to be calculated as per the guidelines given in instructions against item 14 (ARS for SSA-SOP-01, Vol. I of Business Plan document). A good check is to be exercised to have the per DEL revenue projections over the past couple of years for the concerned area and keep a track of the trend. However, in case of major deviation is foreseen, the basis for the deviation should be discussed with IFA and also clearly enumerated.

 

PROFITABILITY (ARS – ARE):

a. Annual recurring savings or Annual revenue profit / Loss amount

b. Annual recurring expenditure (ARE) as per Para – 157 of P&T Manual Vol.X.

c. Profit/loss expressed as a percentage of investment (estimated cost of PE)

 

NOTE: In accordance with DoT Lr.No.6-11/97-EB, dated 29-09-1997, CGMs can sanction new schemes in Rural areas on loss basis not exceeding 15% in respect of estimates for exchanges less than 1000 lines.

Assessment of loss making projects: No project, as a rule, should be considered beyond 15%. While preparing AOP for the year, shelf of proposed projects is prepared. While doing so, the loss making projects, if any proposed, can be segregated separately and segmented as under and forwarded to the next higher authority.

 

a. Loss making projects other than Rural & hilly areas.

b. Loss making projects for Rural areas (less than 1000 lines)

c. Loss making projects for hilly areas.

 

Necessary budget allotment separately for such projects, which are approved after prioritizing among the proposed, will be obtained before proceeding with execution of those loss making projects.

 

6. Annual Recurring Expenditure:

Project estimate in Form Eng.110 provides for detailed calculation of ARE, adopting different percentages on various components, with hypothetical calculations relating to interest, technical maintenance and depreciation etc. (Note to Para 157 of P&T Manual Vol.X)

 

With setting up of Bharat Sanchar Nigam Limited, the following items are being considered for calculation of ARE for major projects.

a. Interest on total estimate of capital outlay.

b. i. Cost of operative establishment.

ii. Cost of maintenance and supervisory establishment

c. Technical maintenance at prescribed percentage

d. Depreciation at prescribed percentage

e. Rent of land and buildings, if any.

f. Control over item 2 (a&b) above @ 18%

g. Provision for tax.

 

7. Submission of Project Estimates:

The guidelines, as given below, have been issued by the Department of Telecom previously vide Lr.No.36306/90-TPS (XP), dated 17-06-1992 for sanction of project estimate. These guidelines are applicable in  for submission to Corporate Office.

a. All project estimates should be sent to Telecom Directorate through CGM of respective circle as per DoT Lr.No.1-16/82-TE1(Vol.II), dated 17-10-1989.

b. The specifications are to be explained component wise.

c. Justification should be based on latest ERU projection.

d. Detailed justification for provision of Engine Alternator may be furnished in the PE if the new  

    exchange is housed in the existing multistory building where some exchanges are already installed,   

    details of existing Engine Alternators and proposed new Engine Alternator may be given along with

    load calculation etc., for justifying provision of new Engine Alternator.

e. The cost provision of Building/EA and AC plant should be made in PE as per approved Schedule of  

    accommodation and taking into account the latest norms issued by BT cell of DOT. Enclosure of    

    approved SOA and PE is essential. In case of old building, utilization of building should be indicated.

f. The norms per line are being revised periodically almost every year. The latest norms of per-line cost may be taken in the PE.

g. ARE and ARS are required to be calculated as per latest rates and year to be indicated.

h. Where PCM equipments are provided, the details showing the justification of the number of PCM systems, racks, etc., must be furnished. The actual project estimate may, however, be prepared depending upon the local requirements.

Allocation of Expenditure:

The Expenditure is booked in the books of account on accrual basis and is classified as “Capital or Revenue” for proper accounting of transactions. The expenditure incurred on acquisition of fixed assets i.e. assets not held for sale in the ordinary course or business but meant for carrying on or conduct of business by producing/providing goods or services, is treated as Capital Expenditure The Expenditure which is incurred for carrying on the day-to-day activities of the enterprise and does not result in the acquisition/creation of an asset or a benefit of an enduring nature is treated as “Revenue Expenditure”.

 

Capitalization Policy of :

Allocation of Expenditure between capital and working expenses (Revenue Expenditure) detailed in Chapter III of FHB Vol. III Part-I is redefined in Accounting policy of  as follows.

(a) Land: Land is capitalized as and when possession of the land is taken and the final payment is made. In case title deeds are not finalized the effect of the same is indicated. The nature of the land such as freehold or leasehold is also indicated. Value of lease hold land is amortized over the period of lease.

(b) Buildings: A building is said to have been completed as and when it is ready for use. In other words it is capitalized to the extent it is ready for use. In case of building which are purchased, they are capitalized as and when the possession is handed over.

(c ) Apparatus & Plants : Apparatus and Plants principally consisting of Telephone Exchanges. Transmission Equipments., Air Conditioning Plants and Subscribers Instruments etc. is capitalized on commissioning of exchange/route/link. Remaining subscribers installations, A&P can be capitalized as and when the exchanges are commissioned to its full capacity utilization and are put to use either in full or part during the accounting period. The remaining part which are commissioned in the subsequent in the year should be capitalized in the period in which the exchange has been commissioned. (d) Lines and Wires: Expenditure on Lines & Wires are capitalized as and when there are erected or lines laid and a completion certificates is issued thereof to the extent of completion.

(e) Cables: Capitalized as and when the cables are laid and jointed and ready for connection to the main system.

 

Note: For the above items from (b) to (e) a Management Certificate (MC) is to be obtained and a copy provided to Auditors. In case of Land item (a) title deed copy may be provided to auditors.

(f) Vehicles: Expenditure on purchase of vehicles is capitalized as and when these are purchased.

(g) Other Assets: Expenditure on other assets is capitalized as and when these are purchased.

(h) Tools: These are to be charged to the P&L Account. The Expenditure involved may be for the activities of Installation, Maintenance or for Operation. The expenditure may be charged according to its nature. Full depreciation is to be charged on Capital Expenditure upto Rs. 5,000/-

(i) Partition: Partitions are a common expenditure which either occur due to new construction or replacement or repair. All expenditure which is in the nature of replacement or repair is to be charged to P&L A/C. New construction of partition should be debited to Furniture and Fixture. However, partitions

valued upto Rs. 2 lakhs should be charged to the P&L Account and a separate register for such asset is to be maintained. (The expenditure should be debited to respective revenue head.)

(j) Temporary Sheds: Expenditure incurred for the construction of Temporary Sheds is purely wasteful asset. Therefore, such assets may be depreciated at 100%

(k) Soft Ware: (i) Where the Software come as part and parcel of Hardware, it will be charged to the same head of account as that of Hardware. (ii) Where Soft Ware is purchased separately – if it is used for office and maintenance purposes the entire amount will be charged to Revenue , if it is purchased separately for use for exchanges and other revenue purposes, it will be charged to capital under relevant schedules against Fixed Assets.

Note: If Software purchased separately for Telephone Revenue, IMPCS etc. can be capitalized as the same is utilized for “other revenue purposes”. This is to be amplified/clarified by , as the cost of Software involves heavy expenditure and costly in some cases.

 

Works –in-Progress: Treatment as Fixed Assets:

There is imperative need to ensure that the Works-in-Progress are completed well in time and converted into Fixed Assets. Only when the Works-in-Progress is converted to Asset, the claim for benefit of “depreciation” can be obtained for Income Tax purpose. While the works-in-progress should be completed at the earliest in any case, it should also be ensured that more than one year old item is not allowed to remain in works-in-progress without valid reason. For capitalizing and taking into account as

Fixed Asset “Management Certificate” is to be issued by the Management.

 

Asset Accounting & Formation:

Components of cost of fixed asset:

The cost of an item of fixed asset comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of brining the asset to its working condition for its intended use directly examples of directly attributable costs are:

(i) Site preparation

(ii) Initial delivery and handling costs

(iii) Installation cost, such as special foundation for plant and

(iv) Professional fees (for ex. Fees of architects and engineers)

 

Asset formation:

An Asset is deemed to have formed from the date of its commissioning. A unit is considered to have been commissioned from the date it is certified by the management that it has been commissioned in accordance with specifications and is ready for offering service for commercial use In case where a major scheme consists of one main project and some auxiliary systems and the functioning of the main project depends on the functioning of auxiliary units, the main plant cannot be considered for capitalization unless the auxiliary systems are commissioned. In case an auxiliary system is commissioned and put to use such unit concerned shall be capitalized. However, where the functioning of the auxiliary unit depends on the commissioning of the main unit, the auxiliary unit is capitalized along with main plant.

 

Asset Accounting:

To have clear accounting and correct picture of fixed assets, as and when an estimate is prepared allocation of expenditure can be made initially under Account Head “Works-in-Progress” Account Head Schedules (Schedule No. 14, 15 and 16)

 

Scrapping of Assets and Inventories

Scrapping & Replacements:

These replacements involve in two ways:

1. Replacing existing electromechanical exchange where the replaced exchange is recommended for scrapping, in accordance with instruction in DOT Lr., dated 01-04-1996.

2. Replacing existing exchanges like 256 RAXs, 512 SBMs, E10B RLUs etc., by higher capacity exchanges systems to meet the demand growth. In such of those cases, the existing exchange will generally be diverted to some place where needed in both cases; proper accounting of adjustments is to be ensured. In respect of exchange dismantled as in (i) above the disposal of recovered materials would be as follows:

(a) The scrapping committee would segregate and indicate separately items that are found to be unserviceable or obsolete for disposal by auction.

(b) The items/parts that can be recovered on cannibalization for reusing in some other installation or for maintenance purpose. The items under (a) above are to be brought in the "Register of unserviceable and

obsolete Register" (Form ACE 73A) for further disposal after obtaining sanction on ACE 9 from competent authority.

The items/parts found to be serviceable should be brought on ACE 8 (Numerical account) in accordance with instructions in PARA 338 of P&T Manual Vol.X.

 

Scrapping of exchange equipment: exercising powers

(i) Switching Systems: As per revised guidelines, Heads of Circles are now empowered to scrap Electro Mechanical Exchanges, even though they have not outlived their lives. In such cases, the Scrapping Committees are to be formed and the said Committee consisting of IFA has to review economic criterion and other aspects and forward its report to the Head of the Circle along with proper calculations of economic criterion for his decision. In respect of those Exchange systems which had outlived their prescribed lives, Scrapping Committee is not required and CGMs/GM of SSAs can dispose them off within their delegated financial powers obtaining the report from a Committee of experts who will examine the possibilities of utilizing whether any portion of the exchange can be reutilized.

 

Scrapping of Transmission Equipments: Procedure:

When the equipment is proposed to be replaced by expensive type of equipment, the replacement cost of the new system with its advantages over the old system may also be intimated through a statement to the competent authority along with the recommendations of standing Scrapping Committee so that the latter may also take into account the financial implications involved therein while taking a decision to

scrap the existing equipment which have not yet outlived the prescribed life. The financial powers of scrapping the equipment will be the same as prescribed for disposal of unserviceable and obsolete stores in the Schedule of Financial powers of the Department. The cases which fall under category (which have not outlived their life but not giving satisfactory services will be sent to the Directorate for approval. As regards cases falling under category equipment not completed their prescribed life but components have become obsolete and are not available will be scrapped by Heads of Circles if within their powers, provided that the Directorate have confirmed that the components have become obsolete and spares cannot be made available. The Standing Scrapping Committee report should be counter signed by the Head of the

Circle/Maintenance region before the same is submitted to the Directorate for approval. ( Lr.No.28-122/98-ML(PTI), dated 06-02-2001)

 

Scrapping of Computers:

The Computers required for higher level of processing (such as TR billing & accounting, customer services, fault repair services and directory enquiry etc.) may be scrapped after five years of its effective life.

Computers and peripherals used for application which can tolerate lower level of processing capability may be scrapped after seven years. These are mainly used in administrative offices for office automation purpose.

In both the above cases, the residual value of the PC & its peripherals may be taken at 5% of the original Cost. ( Lr.No.6-15/2000-Computerisation, dated 11-01- 2001).

 

Disposal of old Unserviceable and Obsolete Stores:-

Identification of unserviceable and obsolete stores:

During physical verification of stores in stock depots, some material may be found old and unserviceable. Such stores is mainly the stores returned from the field units after recovery from dismantled or replaced assets, or being surplus after completion of work. Instructions regarding disposal of old and recovered stores are available in P&T Manual X. Materials remaining surplus or recovered from a work should not be returned to store depots in an unserviceable stores and should be scrapped and disposed off locally. Detailed instructions regarding identification and disposal of all types of unserviceable, obsolete and surplus stores of store depots are available in P&T FHB-III Part-II. Both the instructions are similar and discussed below:

The stores are designated unserviceable when they are not useful for the department being beyond economic repairs or already declared as non-standard.

Obsolete stores are that stores going to be declared as non-standard shortly, generally new orders are not being placed for receipt and no indents are being received or pending. Stores are called surplus when they are in excess of requirement for a specific period, normally two years.

 

Stores Scrapping: Unserviceable, obsolete and surplus stores recovered from works or identified in store depots are noted in a register of unserviceable and obsolete stores in Form ACE-73, through which their disposal is watched. Before any stores is finally declared unserviceable and sanction of the competent authority is obtained, they are examined by a committee called Stores Scrapping Committee. The committee consists of Dy.G.M. as chairman, DE in charge, representative of Finance, DE from some other organisation (like T&D, Maintenance Region) as members and AE/SDE concerned as secretary. The committee will examine the materials and decide whether the materials should be declared as unserviceable or obsolete. The cost of repairs, the actual period in use or stock, possibility of utilising the items as substitute or for maintenance will be taken into account in arriving at the decision. The committee will meet once in two months or whenever there is substantial quantity of accumulated stores awaiting examination. The secretary shall keep a record of proceedings of meetings and submit a copy of the same to the authority competent for sanctioning the disposable of unserviceable stores in form ACE-9. A copy should also be sent to the IFA of the competent authority for verification.

Disposal of Scrapped Stores:

After obtaining sanction of competent authority, action should be taken for disposal of these unserviceable stores under the rules prescribed in P&T Manual Vol.X FHB-III Part-II and the orders issued from time to time. Generally the scrapped stores is disposed of by local auction or through tender cum auction. When it is proposed to hold an auction sale, a list of the stores to be sold will be prepared in quadruplicate in Form ACE-74 from the list of unserviceable stores (ACE-9) and verified from the register of unserviceable stores. The auction list should be prepared separately for stores becoming unserviceable though lying in stock and for stores returned from works etc. All the four copies of the auction list will be sent by the head of the circle/ Telephone District to the respective IFA for verification and signature. The particulars of monthly accounts in which the amount of stores has been written off from the stock should be indicated in the auction list. One copy of the list will be retained by the stores accounts department. Of the remaining three copies, one copy will be returned to the Head of the Circle/District and two copies to the store depot for arranging the auction.

On receipt of the list of duly verified, the depot or officer in charge of the stores will arrange for the sale by public auction, which will be conducted in the presence of the head of the depot or a gazetted officer subordinate to him who will personally record the final bids. The officer who supervised the auction should invariably be present at the time of release of the stores and supervise the removal to ensure that only the quantity of stores which were paid for or released. Whenever the material to be auctioned is of substantial value, Tendering cum Auctioning procedure may be adopted. A reserve/base price may be fixed by a committee and normal tendering procedure should be followed and bids invited. On the day of opening tender, auctioning may also be arranged in which tenderers also can participate. The highest bid received by tender or through auction, whichever is higher may be accepted.

Auctioneers may also be engaged to conduct the auction in a professional way to get the maximum price and the commission up to 1% may be paid to the auctioneers. However gross sale proceeds should be accounted for as receipt and the auctioneer’s commission- claimed in a separate bill- should be debited to expense head.

Accounting Adjustments of Sale Proceeds of Unserviceable or Obsolete Stores

Stores disposed of as unserviceable or obsolete stores are two types. Stores lying in the stock depots as inventories and declared as unserviceable or obsolete and disposed off by auction or tender. In such cases when sale proceeds are received, the value of stores as per stores ledgers registers of unserviceable stores and list of unserviceable stores (ACE-9) is to be compared with the sale proceeds and the difference between sale proceeds and book value of stores should be treated as loss on sale of assets (under concerned office & administration head) or profit under other income (schedule 41).

If the sale proceeds relate to the unserviceable stores of dismantled and replaced works, then sale proceeds have to compared with the net value of the Asset (Asset value less accumulated depreciation) and the difference will be treated as profit or loss on sale of assets.

 

The accounting entries in both the cases are suggested below:

 

(a) When Inventories are disposed off:

(i) Suppose the book value of the Inventories is Rs 1,000 and the sale proceeds received are Rs 900.

Rs 900 will be credited to Inventories (Sch. 17) head in collection cash book/ bank book and as journal slip will be issued for Rs 100, crediting inventories head (Sch. 17) and debiting loss on sale of asset under

concerned office and administration (Schedule 71 onwards).

(ii) Suppose Book Value is Rs 1,000 and sale proceed received are 1,200. Rs 1,000 will be credited to Inventories (Sch. 17) and Rs. 200 will be credited to profit on sale of asset (under Sch. 41 or 42) in the collection Cash book/Bank book.

 

(b) When unserviceable stores of fixed assets are disposed off:

Fixed assets are subjected to depreciation and every year accumulated depreciation is created against each asset in every year. In case of disposal, depreciation up to the date of effective life or dismantlement/scrapping should be provided for in the accounts of the year.

At the time of disposal of the assets, a journal slip has to be passed debiting depreciation account (under schedule 89/90/91) and crediting accumulate depreciation (Sch. 8/9/10).

The sale proceeds are accounted for as follows:

(i) Depreciated value of asset is Rs 20,000 and sale proceeds are Rs 18,000, the sale proceeds will be credited to the concerned asset head and for Rs 2,000 journal slip will be passed debiting loss on sale of asset (Sch. 71 onwards) and crediting concerned asset head.

(ii) Depreciated value of the asset is Rs 20,000, but sale proceeds received are 25,000, in this case, Rs. 20,000 will be credited to the concerned asset head and Rs 5,000 credited to profit on sale of asset (Sch. 41/42) in the collection account.

 

Materials for Works: Accounting

Materials for Telecom Operations are being obtained

 

a. From Circle Store Depot out of Stores/Stock available at its end.

b. Directly by the consignee at site, as indicated in the purchase order placed by Corporate Office/Circle/SSA

 

(i) If certain material is procured by  and kept at circle store depot (as ultimate consignee) for further distribution at the time of installation by field unit, the same is booked initially under “INVENTORY”

(ii) If the material is received by the consignee at site as per purchase order, the same will also be booked under “W-i-P of relevant Head of a/c, if put into use immediately. If not, “INVENTORY” head.

 

Treatment of Materials/Stores

Materials issued to works as on 31st March

The materials issued to the various installation (Works-in-Progress) but not consumed yet as on 31st March of the accounting year shall be listed out and value ascertained and debited to inventory under various heads and credited to respective works-in-progress as the case may be. The entry will be reversed in the accounts of the subsequent year.

Stores after completion of works: Treatment In case of installation works which have been completed as per accounting policy the store lying at site and which are no longer required for the works will be listed out and value ascertained and debited to the Inventory under respective head of accounts under Assets or under W-I-P as the case may be.

 Procedures & Precautions in Tendering, Evaluation, Negotiation and Arbitration

 

A Contract means...

The promises, agreements, transactions between two parties based on which commercial activities are carried out are called contracts. Section 2 (h) of the Indian Contract Act, 1872 defines the term Contract as “An agreement enforceable by law”. An agreement means a set of promises forming the consideration for each other. There must be two parties to a contract. In practice, if some one wants some work to be executed, he approaches a person for the said purpose. The other person on receiving the proposal quotes his price or charges, which are a consideration and other terms and conditions, are finalized. An agreement in relation to it comes into force. If this agreement is liable to be enforced by law, it is called a CONTRACT.

 

The principles of Govt. Contract are...

 

1. The terms of a contract must be precise and definite and there must be no room for ambiguity.

2. Standard forms of contracts should be adopted wherever possible.

3. In cases where standard from of contracts are not used, legal and financial advice should be taken in drafting the contracts before they are finally entered into.

4. No relaxation of specifications agreed upon in a contract or relaxation of the terms of an agreement entered into by Government should be made without proper examination of the financial effect involved in such relaxation.

5. Save in exceptional circumstances, no work of any kind should be commenced without prior execution of contract documents.

6. Provision must be made in contracts for safeguarding Government property entrusted to a contractor and for recovery of hire charges, if any, there for.

7. All contracts should have provisions for recovery of liquidated damages for defaults on the part of the contractor, unless any special instructions are issued by the competent authority.

8. 'Cost Plus' contracts should be avoided except where they are inevitable.

9. The term of contract for the purchase of perishable stores should invariably include a (separate) warranty clause.

10. 'Lump sum' contracts should not be entered into except in case of absolute necessity.

11. A schedule of quantities with their issue rates of such materials, which are supplied departmentally, and used in the contract work, should form an essential part of the contract.

12. The question whether any sales tax, service tax, octroi and terminal taxes and other local taxes and duties are to be paid and is so, by which party, should be settled and cleared up before entering into any contract.

13. No work should be done under and agreement/ contract beyond the date of expiry of its tenure. Wherever it is considered that the work  has to be continued beyond the date of expiry of the tenure timely action should be taken for renewing the contract/agreement for the further  period required, after a suitable review of the provisions of the old agreements/ contract to see whether any modifications therein are required.

14. While awarding contracts or entering into any agreement full consideration should be given by the competent authority to the element of foreign exchange involved therein and subject to other conditions being equal, the offer involving the least expenditure on foreign exchange should be preferred. (Vide para 419.1 P & T Man Vol. II and GID (i) below Rule 12 of GFR)

 

The Contracts in  are...

 

Major Contracts	Procurement tender		Centralised items by  HQ
			Circle purchase of de-centralised item
			Local purchase of de-centralised items
	Works contracts	Engineering works	L & W
			Cable laying
			A & P
			DP & SI works
			Tower constructions
		Civil works	Building
			Electrical
			Anciliary

 

MINOR CONTRACTS	Maintenance Contract	Engineering Mtce.	Cable
			Internal Plant
			External Plant
			Equipment or Instrument repair
		Bldg. Mtce.	Civil
			Electrical
			Horticultural
		Annual Mtce.	Computers
			Office equipment
			Software Mtce.
	Service Contracts	Labour	Security
			Housekeeping
			Date entry and
			business processing
			delivery of bills
		OTHER contracts	Advertisement and
			Publicity
			Marketing of
			services
			Printing &
			publications
			Catering services
	Misc. Contracts		Stationery
			Consumable
			material
			Spares
			Machinery

Open vs. Limited...

The purchase contracts can be classified broadly into two categories i.e., Limited tenders and open tenders.  The term 'limited' means that the purchase is limited by value or by source or by area. The Open tenders means the purchases made by making wide publicity which will be open to registered or recognized suppliers, indigenous suppliers or to global suppliers.

 

The terminology...

Some of the terms frequently used with reference to tenders and contracts are...

 

1. Bidder: A Person, firm, company (or any other legal person) who has submitted an offer in response to a notice inviting tender.

2. Contractor: The bidder whose tender (offer) has been accepted, and who has entered into an valid agreement.

3. Supplier means the individual or firm supplying the goods on contract.

4. Goods means all the equipment, machinery or other material which the supplier is required to supply under the contract.

5. Advance purchaser Order means the intention of purchaser to place the purchase order on the bidder.

6. Purchase Order means the order placed by the purchaser on the supplier signed by the purchaser including all attachments and appendices thereto and all documents incorporated by reference therein. The purchase order shall be deemed to be a 'Contract'.

7. Work Order means the order issued to the contractor by the officer in charge of the works.

8. Contract Price means the price payable to the supplier under the purchase order for the full and proper performance of its contractual obligations.

 

9. Bid documents/ Tender documents means all the documents consisting of

a) Specifications of the materials or work

b) Terms and conditions of the contract and

c) Plans and detailed diagrams, if any, and other related documents forming part of contract.

 

10. Notice Inviting Tender (NIT) means any publication or notice issued to the public through press or otherwise expressing the intention of the corporation toget the supplies or work done and requesting the bidder to make offers.

 

11. Earnest Money Deposit (EMD)/ Bid Security means an amount required to be deposited by the bidder/ tenderer along with his offer as a security against his default of entering into contract.

 

12. Security Deposit/ Performance Guarantee means an amount fixed as security for ensuring the performance of the contract and compliance to the other conditions of contract by the contractor.

 

What is the management of a 'contract'?

Level playing: In the changed economic environment of today, it is necessary to see that the costs that burden the Public Sector transactions as well as other decision making costs are reduced to the minimum and the Public Sector organization is placed on a level playing field with the private sector so that they can compete effectively and operate profitably.

 

Objective: Objectives of the management must be basically be to provide good quality and cost. And the most fundamental of objective of audit is to assure that this actually happens. Therefore, there must not be any conflict between the objectives of the Audit and the Management. Both try to see that the Government gets good value for the money spent.

 

Procurement Policy: A good procurement policy is one that is clearly understood by all. There must be economy, speed, simplicity and transparency in all procurement related functions. Accountability is a basic attribute of a good procurement policy. In the fast changing scenario in the Telecom sector, it appears impossible to conceive that the organization, based on Government set of rules, would be able to compete inthe market with the players who have adopted latest technologies not only in the workplace but also in their decision making mechanism. If the pressure of cut-throat competition puts in making the wrong decisions, it would be treated as management failure and invites questions from all quarters like audit and media and MPs. In these circumstances  has to play a vital role with the constraints on the working of Public Sector and change is required in procurement methods. In order to achieve the goal, the challenges are to be identified.

Purchases: General Guidelines

The following general guidelines can be kept in view in procurement and call of tenders therefore.

a. Procurement should be done following transparent tendering procedure in consistence with the overall procurement policy of the Dept. /Organization.

b. While procuring, the existing inventory and inventory in the pipeline should also be accounted for. Utmost care should be taken to ensure that pilling up the inventory is avoided. Care is also to be exercised in assessing the requirement of items where no norms are prescribed.

c. Procurement will be as per technical specifications applicable at the time ofcalling of the tenders. The applicable specifications with Amendment No. ofany should be indicated in the tender.

 

Demands of Public Accountability:

• Constitutional Provisions

• Government / Audit Instructions

• Compliance to Procedures

• Supervision of Parliament, CVC.

Demands of Commercial Organization:

• New Technologies and business areas

• Necessity of speed and alertness in taking quick decisions

• Role of competitors

• Compliance to various tax and regulatory laws

• Lack of knowledge and training

ATTENTION may be given on the following issues:

• Need of flexibility in decision making process

• De-centralization of administrative & financial powers

• Correct assessment of requirements

• Market survey and vendor identification & rating

• Introduction of new management techniques in supply chain management, inventory control and cost analysis etc.

• Imparting training in tax, commercial and regulatory laws

• Improving communication channels and liasoning with contractors

• Effective supervision of contractors in implementation of contract and adherence of time schedules through progress reports, PERT technique etc.

• Quality consciousness and evaluation of loss on account of sub-standard work or material to relate with procurement costs.

Guidelines of Central Vigilance Commission on Procurement of Materials -

 

Improvement In Procurement System

 

The cardinal principle of any public buying is to procure the materials/services of the‘specified’ quality, at the most competitive prices and, if a fair, just and transparent manner. To achieve this end, it is essential to have uniform and well documented policy guidelines in the organization so that this vital activity is executed in a well coordinated manner with least time and cost overruns.

 

Provisioning: It has been noticed that in certain cases excessive, fraudulent and infructuous purchases were made without taking into consideration the important aspects like available stocks, outstanding dues/supplies , past consumption pattern and average like of equipment /items etc. This excessive/infructuous purchases were at times made in collusion with the firms. This resulted in not only the material lying unutilized for years together with no residual like but also a lot of extra expenditure was incurred on the inventory carrying cost. The provisioning of the stores needs to be done with utmost care taking into account the available stock, outstanding due/supplies, the past consumption pattern, average life of the equipment / spares. The requirements also need to be properly clubbed so as to get the most competitive and best prices. The requirements should not be intentionally bifurcated /split so as to avoid approval from higher authorities.

 

Estimated Rates: It was observed that the estimated rates are being worked out in anun-professional and perfunctory manner, at times by extrapolating the price of the lowest capacity equipment or by applying a uniform yearly compounded escalation over the prices of similar equipment purchased few years ago. Consequently, the inflated estimated rates prepared by the organizations resulted in acceptance and payment of higher prices to the firms. As the estimated rate is a vital element in establishing the reasonableness of prices, itis important that the same is worked out in a realistic and objective manner on the basis of prevailing market areas, lat purchase prices, economic indices for the raw material/ labour other input costs, wherever applicable and assessment based on intrinsic value etc.

 

Notice Inviting Tender : Against the most preferred and transparent mode of Global tender enquiry/ Advertised tender enquiry, some of the Organizations are generally issuing limited tender inquiry to select vendors, irrespective of the value of purchase. Further, the credentials of the firms and the criteria adopted for selection of such vendors, in most of the cases, are not put on record. This is not result in lack of competition bust also favoritism to the select vendors. It has been noticed that even incases where advertised/global tender inquiries were issued, the same were published in the local dailies and not in any National Newspaper and particularly in Indian Trade Journal, Calcutta is a Government publication and is regarded as the standard medium for advertising tender notices in India. The main purpose of issuing advertised/global tender is to give wide publicity. It has been noticed that the organizations do not forward the copies of the tender notices to registered/past / likely suppliers and while in case of imported stores, the copies of the tender notices are not being forwarded to Indian Missions/Embassies of major trading countries. In order to give wide publicity, generate enough competition and to avoid favoritism, as far as possible, issue of advertised/global tender inquiries should be resorted to published in ITJ and select National Newspapers. The copies of the tender notices should be sent to all the registered/past/likely suppliers by UPC and also the Indian Missions/Embassies of major trading countries in case of imported.

 

With a view to have wider, fair and adequate competition, it is important the sufficient time of say 4 – 6 weeks in case of advertised/global tender and 3 – 4 weeks in case of limited tenders is allowed, except, in cases of recorded emergencies, wherein also , a reasonable time should be permitted and tenders

 

Tender/Bid document: The terms and conditions being stipulated in the bid documents by some of the Organizations are quite insufficient and sketchy. Sometimes, the bid document contains obsolete, unwanted matter and conflicting and vague provisions , resulting in wrong interpretation, dispute and time & cost overruns. Even the date/time for receipt and opening of tenders is not being incorporated in the documents. The important clause relating to Earnest Money, Delivery Schedule ,Payment terms, performance/warranty Bank Guarantee, Liquidated Damages, Arbitration etc. are not being incorporated in the bid documents. All these clauses are important for safeguarding the interest of the purchaser and also have indirect financial implications in the evaluation of offers and execution of the contracts. All the important clauses as brought out above need to be incorporated in the bidding documents so as to fully safeguard the interest of the Govt. and for evaluation of bidson equitable and fair basis and in transparent manner.

 

Receipt of Tenders: Some of the organizations do not have proper arrangement for receipt of tenders. There is no Tender Box for receipt at scheduled date and time fixed for tender opening. Instead of trade representations leave the tenders with the receptionist or the concerned Purchase officer(s). This procedure is highly objectionable as the possibility of tampering and interpolation of offers cannot be ruled out. A proper arrangement for receipt of tenders at scheduled date and time through tinderbox needs to be adopted.

 

Opening of Tenders: Some of the organizations are not opening the tenders in publicize. in presence of the trade representatives. The system of not opening the tenders in public is against the sanctity of tender system, and is a non-transparent method of handling tenders. There could be a possibility of tampering and interpolation of offers in such cases. The rates at times are not quoted in figures and words, cuttings/overwriting are not attested by bidders. Some of the organizations justify such opaqueness in tendering system by making a reference to their manuals. This is not acceptable. The opening of tenders in presence of trade representatives needs to be scrupulously followed. While, opening the tenders by the tender opening officer/committee, each tender should be numbered serially, initialed and dated on the first page. Each page of the tender should also be initialed with date and particularly, the prices, important terms and conditions etc. should be encircled and initialed in red ink by the tender opening officer/committee. Alterations in tenders, if any, made by the firms, should be initialed by legibly to make it perfectly clear that such alterations were present on the tenders at the time of opening. Wherever any arising or cutting is observed, the substituted words should be encircled and initialed and the fact that such erasing/cutting of the original entry was present on the tender at the time of the opening be also recorded. The tender opening officer/committee should also prepare on the spot statement giving details of the quotations received and other particulars like the prices, taxed, duties and EMD etc. as read out during the opening the tenders.

 

Reasonableness of Prices: It has been noticed that the purchases are being made by some of the organizations in an adhoc and arbitrary manner without satisfying the prime requirement of establishing the reasonableness of rates in relation to the estimate rates, last purchase prices or the prevailing market rates.

Advance payment : As per CVC guidelines it has been brought out that payment of mobilization advance should be made only in cases of select works and that the advance should be interest bearing so that the contractor does not draw undue benefit. However, it has been noticed that some the organizations are quite liberal in allowing the advance payments. Even to the extent of 30-40% and that too, totally interest free. In some organizations the payment of advance is being stipulated in the bid document itself. The payment of interest free advance is in contravention of the guidelines issued by CVC.

 

The advance payment need to be generally discouraged except in specific cases, wherever payment of advance is considered unavoidable, the same should be interest-bearing and be allowed after getting an acceptable Bank Guarantee for an equivalent amount with sufficient validity so as to fully protect the Govt. interest. Performance Bank Guarantee: Most of the organizations are not stipulating the requirements of Performance Bank Guarantee while others are stipulating different amount of Security deposit/performance bond. It has been noted that the amount of PBG is too low in comparison to the contract value. The validity of Bank Guarantee is also not being scrupulously monitored and the extension in the Bank Guarantees commensurate with the delivery period extensions is not being sought resulting in loss to the Govt. in the event of non performance of the contract. In order to safeguard the Govt. Interest, it would be appropriate to take reasonable amount of Performance Bank Guarantee valid up to warranty period for due performance of the contract. The validity of the Bank Guarantees needs to be carefully monitored and whenever extension in the delivery period is granted, the validity of Bank Guarantee should also be appropriately extended so as to protect the Govt. interest. The genuineness of the BGs should be checked form the issuing bank.

 

Stipulation of delivery period in the contract : Delivery period is the essence of any contract. It has been observed that in some of the cases, specific delivery period with reference to the terms of delivery is not being incorporated It is noticed that in some cases only the date of offering the equipment for pre-dispatch inspection is stipulated as the delivery period, thought the terms of delivery are on CIF basis/FOR destination basis. In some cases the date of completion of supply of the equipment is stipulated as the delivery period even though the installation and commissioning of the equipment is also to be carried out by the supplier. For installation and commissioning no specific date is mentioned. In absence of any contractual binding in this regard, the suppliers claim the full payment for supplies of equipments and then tend to behave in an irresponsible manner and do not bother to take up timely installation/commissioning resulting in equipment remaining uninstalled for months/years together. The specific delivery period for supply as per the terms of delivery such as FOR station of dispatch/destination and for completion of installation with the necessary provision for Liquidated damages/penalty clause in the event of delay in supplies /installation needs to be incorporated in the contract.

 

Tenders

What are the stages in processing a tender...

There are different stages in processing a tender.

 

1. Preparation of Tender Documents: Tender documents are to be prepared very carefully to avoid disputes with the contractors during the time of execution ofthe contract. As far as possible, standard forms of documents should be prepared for various types of contracts. Wherever required, legal opinion or assistance of consultants should be obtained in drafting tender documents. Tender documents of previous 'successful' contracts of similar nature may be adopted by making suitable amendments / modifications. The tender documents of DGS& D, CGM- TS and the procurement manual of  may be taken as model documents for purchase contracts. Similarly standard documents of CPWD and other construction wings of Government bodies may be consulted for drafting contract documents of works

 

 

1. Notice Inviting Tender

2. Opening of tenders

3. Tender Evaluation and Acceptance

4. Letter of Intent/Advance Purchase orders

5. Agreements, Work orders/ Supply orders

6. Payment of Contractors or Final Bills

 

Tendering Systems:

1. Competitive Bidding

The bidding would be either International Competitive Bidding or Domestic Competitive Bidding.

Tendering in “Domestic competitive Bidding” with reference to procurements will be made

a. Through Advertisement (Open Tender)

b. By Direct invitation to a Limited no. of firms. (Limited Tender)

c. Through Expression of Interest

d. By invitation to only one firm (Single Tender-Proprietary Item)

Tendering Methodology for Procurement

 

a. Through Open Tenders: Open Tenders are to be called for where the total estimated value is more than Rs. 2 lakhs.

b. Limited Tender: The Limited Tender System will ordinarily be adopted in case of all orders, the estimated value of which is less than Rs. 2 lakhs.

c. The Single Tender System may be adopted in case of articles which are specifically certified as of proprietary nature by the indenting Department (and approved by Head of the Dept.) or when it is to the knowledge of the procuring agency than only a particular firm is the manufactures of the stores in demand. An item of stores which is of specialized nature and is being manufactured or stocked by only a particular firm, it is termed as Proprietary item.

d. Through Expression of Interest : In situations where Dept./Organization proposes to induct new technology/equipment/new service and the specifications for such new technology/equipment/new service are not firmed up, the Department may invite Expression of Interest (EOI) from the available vendors of that technology/equipment/new service. Based on the offers received from the bidders who choose to participate in the EOI, the bidders satisfying the terms of EOI will be short-listed.

 

e. By Educational/Development orders: In case where there is a large demand ofa particular type of equipment , but where the supply base is meager and required to be augmented, Educational/Developmental Tendering system is being adopted by some organizations such as  to ensure better competition and to increase the potential base for supply.

 

f. Through Call of Quotations : Small purchases can be made without call of quotations up to certain powers by unit officers. Similarly purchases can also be made with proper quotations up to delegated powers. For this “Notice Inviting Quotations” (NIQ) are to be called for and register of quotations to be maintained for the purpose.

 

Purchase Contracts / Tenders

1. Introduction

The important aspect of purchase by Govt. Organizations is the public accountability in the sense that those who spend public money must be accountable to the public representatives. Therefore, in the case of Govt. purchases, system and procedure have been adopted which try to ensure that all purchases on contract basis are made without any favour and from the most competitive bidders. The very nature of purchase activities places the officials concerned in contact with the suppliers and call for judgment and decision which are very important not only from the point of view of purchasing but also from the fact that the officials concerned have to display the highest sense of fair play.

 

2. Types of Purchase Contracts / Tenders:

 

Fixed Quantity Contract:- This type of contract is generally entered into where firm are called upon to offer for supplying a definite quantity by a specified date.

 

Rate Contract:- These are contracts for the supply of stores at specified rates during the period covered by contract. No fixed quantities are mentioned in the contract and the contractor is bound to accept any order from the purchaser or other parties specified in the contract which may be placed on him at the rates specified within the contract period. The purchaser, however, agrees to place order for a minimum quantity.

 

Running Contract:- These are contracts for the supply of an approximate quantity of stores at a specified price during certain period of time. The approximate requirement of number of parties for the period in question are combined and provision is made in the contract that during its currency such parties may demand their requirements at any time or at specified periods either direct from the contractor or through the purchasing organization which has entered into the contract. In such cases, provisions is generally made to the effect that the purchaser shall have the right to like a certain percentage more or less than the approximate quantity mentioned.

 

Price Agreement:- Price agreement is entered into with a firm for making supplies of certain stores during a given period at agreed rate specifying the monthly rates of supply as a standing offer to the purchaser or meeting any requirements of that store on an ad-hoc basis during that period.

 

Firm Price and Variable Price Contract:- In some cases contracts are also entered into on firm price as well as on variable price basis. Contracts providing for increase on account of increase in the price of raw materials and wages are called variable price contracts.

Lump Sum Contract:- This form, as its name indicates is used for works in which contractors are required to quote a lump sum figures for completing works in accordance with the given specifications, designs, drawings etc. Lump sum contract should be entered into in exceptional cases.

 

Cost Plus Contract:- A “Cost Plus” contract means a contract where in the price payable for supplies or services under the contract is determined on the basis of the actual cost of production of the suppliers or services concerned plus profit either at affixed rate per unit or at a fixed percentage on the actual cost or production.

 

3. Notice Inviting Tenders:

The NIT is not an an offer or proposal. It is in fact an invitation to offer or proposal. It is not addressed to any one in particular an is generally open. It gives the details of the thing for which tenders are invited.

Tenders should be invited in order to obtain adequate competition and to ensure economical purchase.

Being a government undertaking, in order to ensure FAIR PLAY IN ACTION as per  

the constitutional provision a tender notice –

(a) should be given wide publicity so as to enable all eligible persons to submit tenders(b) should give sufficient time to enable the tenderer to submit tenders. Tenders, should be invited in the most open and public manner possible. The Indian Trade Journal published by the Director General of Commercial Intelligence and Statistics, Calcutta which is a Govt. Publication should be regarded as the standard medium of public advertisement in India. Where necessary advertisements may also be inserted in one or more principal newspapers in India (both English and Hindi). Global tenders, wherever practicable and advantageous, should be invited in the case of purchase of plant and machinery and equipment from foreign countries. All the tenders floated by the  units should also be posted on the web-site.When it is decided to call for limited tenders the N.I.T. may be issued only to hoseparties who have proved experience in manufacture and supply of such equipment and who have prototype approval and production clearance. For such a limited tender it is a pre-requisite that the reasons for limiting the tenders to certain suppliers need to be brought out in the N.I.T. itself, so that such action would stand justified later. In respect of purchases of small value not exceeding Rs. 2 lakhs limited tenders are called for in .

 

Contents of N.I.T.:- The N.I.T. in all cases state –

(a) The estimated cost of the work or the quantity of items to be purchased.

 

(b) The place where and the time when the contract documents can be seen, and the blank forms of tender obtained, also the amount , if any, to be paid for such forms of tender.

(c) The place where, the date on which and the time when tenders are to be submitted and are to be opened (in the case of large contracts, this should be at least one month after date of first advertisement or notice).

(d) The amount of earnest money deposit to accompany the tender, and the amount and the nature of security deposit required in the case of the accepted tender.

(e) With whom, or on what authority, the acceptance of the tender will rest.

 

4. Tender Documents:

The tender documents generally specify the following points:

Definition of terms (e.g.) purchaser, supplier, contract, purchase order.

 

Cost of Tender Documents:

The cost of tender document will generally depend on the input cost for preparation  and printing of documents, drawings etc. The sale price of Tender document has been fixed depending estimated cost of tender.

(a) Estimated cost upto Rs. 1 lakh Rs. 150

(b) Estimated cost between Rs. 1 lakh and upto 50 lakhs Rs. 500

(c ) Estimated cost more than Rs. 50 lakhs and upto 2 Cr. Rs. 1000

(d) Estimated cost above Rs. 2 Cr. Rs. 1500

 

Note: Sale price of document is exclusive of Sales Tax. The Sales Tax is to be charged @ 12.25% (present rate) extra and accounted for separately.  The payment of tender document will be accepted in the form of Crossed Demand Draft in any Scheduled Bank. The fee for tender documents may also be paid in Cash.

 

Eligibility for bidding

Nature of work/specification of stores to be supplied with quantity, specification/ schedule of works to be enclosed with the tender documents. Tender submission and date and time of opening.

a.  Mode - depositing in Tender box, Registered post etc.

b. Double cover with inner cover with tender particulars and outer cover containing name and address.

c. Sealing

In respect of procurement of material the Bidders shall submit the following documents in the bid as proof of their eligibility.

 

(a) Proof of successful execution of Education/Commercial orders of DoT ND/CGMTS-CA/CMDs of MTNL/CGMS of Telecom Circles. For this purpose of Inspection .Certificate issued by Q.A is to be enclosed.

(b) Valid and Current Type Approval Certificate/Technical Specification Evaluation Certificate for the tendered item as per Technical Specification mentioned in the Tender Document.

(c ) Bid Security in the form of Bank Guarantee/NSIC registration as applicable.

 

1. Date and Time of opening

• Tenders received after due date and time will not be considered.

• If the date of opening mentioned in the tender happens to be holiday the tender will be opened on the next working day.

 

2. The venue of opening:

At the time of opening of tenders, the tenderers or their authorised representatives will be allowed to attend. Particulars of Documents required to be submitted.

 

The tenderer should accompany the following essential documents

a. Past supply record (Experience certificate)

b. Type approval certificate.

c. Sales tax clearence certificate.

d. Income tax clearence certificate.

e. Trade licence.

f. DG S&D registration certificate and copy of latest approved contract to justify not only registration but also getting regular contract.

g. Registration certificate with SSI, NSSIC, etc.

h. For EMD, Cash receipt or demand draft drawn in favour of Accounts

Officer etc.

 

The tenders received without EMD may not be considered.

EMD:

• Mode of payment

• Submission of documentary evidence

• Rejection of tender if EMD not paid or documentary evidence not submitted.

 

Specifications of Signatory:

• Sole proprietor

• Partnership firm

• Company

Pricing:

The tenderer should quote their rates specifically in case of supply of stores etc. on the

following.

(i) Unit Price/Total Price – Basic rates of stores/equipment

• Taxes ..... Excise duty/sales tax etc.

• Freight/Transportation if any

• Delivery including packing & forwarding changes if any.

(ii) Installation & Training etc.

• Warranty period

• Annual Maintenance contract after expiry of warranty.

    (iii) Instruction regarding writing figure in words.

• Attestation for corrections or over writing

• Instruction regarding discount

• Informatio on statutory Levy.

Validity of offer

• Delivery

• Essence of Contract

• Delivery Period

• Delivery schedule

Payment Terms

• Documents for payment

• Address of the office of payment

• Mode of payment

• On proof of despatch

• Advance payment

• Balance payment

Inspection

• Right of inspection of raw material

• Right of inspection during process

• Right of inspection of finished goods

• Particulars of authority to inspect

• Submission of prototype materials

• Disposal of rejected materials

Packing instructions

The contractor shall ensure that the stores are strongly and adequately packed to ensure safe arrival at destination.

Warranty Clause

Warranty as to quality: The contractor shall warranty that all stores to be supplied shall be new and free from all defects and faults in materials. Workmanship and manufacture shall be of the highest grade. The contractor shall be responsible for any defects that may develop under the conditions (i.e. time period etc.) provided by him and under proper use arising from faulty materials, design or workmanship. Normally the warranty period is 12 months after the stores have been taken by consignee. Replacement under warranty clause shall be made by the supplier free of all charges at site including freight, insurance and other incidental charges. Normally the warranty period is 12 months after the stores have been taken by consignee. Replacement under warranty clause shall be made by the supplier free of all charges at site including freight, insurance and other incidental charges.

 

 

Risk Purchase / General Damage

The department is at liberty to recovery any loss sustained for the lapse on the part of a contractor from his bills due to payment on any contract/supply bill.

Liquidated Damages:

Should the supplier fails to deliver the stores or any consignment thereof within theperiod prescribed and agreed for delivery, the purchaser without prejudice to otherremedies available to the purchaser shall be entitled to recover as agreed to the LD perbreach of contract, a sum equivalent to 0.5% of the value of the delayed supply and/orundelivered material supply for each week of delay or part thereof for a period upto10(Ten) weeks and thereafter at the rate of 0.7% of the value of the delayed supplyand/or undelivered material supply for each week of delay or parte thereof for another10(Ten) weeks of delay. The total value of the LD as per this shall be limited to amaximum of 12% (Twelve percent) i.e. L.D shall be levied upto 20 weeks only.The DP extension beyond 20 weeks would not generally allow. In special cases theextension is given beyond 20 weeks subject to following conditions.

(a) 90% of firm prices (approved final prices) will be given as provisional price during extension period.

(b) If any tender is finalized during this period the price finalized as per new tender will be applicable for the extension period of delivery schedule.

(c) The benefit of reduction in taxes during the extended delivery schedule shall be to purchaser account and any increase in taxes will be suppliers account.

 

Arbitration Clause

The disputes arises out of contract with the  and the contractor the case will be referred to arbitrator appointed by the .

 

Force Majure

If at any time, during continuance of the contract, the work/supply is prevented or delayed by reason of any war, or hostility, acts of public enemy civil commotion, Sabotage, fire, flood explosions, epidemics, quarantine restrictions, strikes, lock-outs, or act of GOD are informed by either party within a period fixed up under tender, no damage can be claimed for non performance or for delay in performance.

 

Security Deposit/Performance Security

• Mode

• Percentage or fixed amount

• Forefeiture condition to be indicated

Miscellaneous Conditions/Right Reserved

• Right to increase or decrease the quantity

• Right to reject any or all the tenders without assigning any reason

• Right to accept full or part quantity

• Right for repeal order

• Binding on Contractor to accept all conditions specified in the tender.

• The purchaser reserves the right to disqualify such bidders who have a record of no meeting the contractual obligations against earlier contracts entered into with the purchaser.

 

5. Earnest Money Deposit

Earnest money has to accompany every tender in order to prevent the tenderer backing out from his offer before the validity period of the tender and once the tender is accepted the tenderer furnishes required security and commence the work without any delay.

 

The amount of earnest money to be deposited should be sufficiently large to be security against loss, in case of the contractor failing to furnish the required security within the appointed time after the acceptance of his tender, or until the sums due tohim form a sufficient guarantee, as the case may be.

 

No earnest money is required to be deposited by –

• Firms which are registered with DG S&D for supply of stores.

• Public Sector Undertakings, which are registered with the department or DG S&D.,

• Small Scale Industries units which are registered with National Small

Scale Industries Corporation and in effect are treated automatically registered with DG S&D under the revised scheme of single point registration.

 

It may also be ensured that the S.S.I. Units are registered with the N.S.I.C. for those particular items for which they have submitted the tenders and the registration is current. If necessary the currency of registration may be got verified directly from N.S.I.C. for procurement of stores the earnest money should ordinarily be 2% of the estimated value of the tender and may not exceed 5%. The exact amount of earnest money may be indicated in the tender. (For tenders of the value of Rs One lakh or less, no earnest money need be insisted upon.)

 

The Earnest Money will be liable to be forfeited, if the tenderer withdraws or amends, impairs or derogates from the tender in any respect within the period of validity of his tender.

 

The Earnest Money of the successful tenderer shall be refunded after the security deposit as required, is furnished. The Earnest Money can be adjusted against the S.D. required to be furnished by the successful tenderer. If the successful tenderer fails to furnish the security deposit as required, then Earnest Money shall be liable to be forfeited by the tenderer.

 

The Earnest Money of all the unsuccessful tenderers will be returned as early as possible after the expiration of the period of the bid-validity but not later than 30 days of the award of contract. The competent authority shall ensure that the Earnest Money is refunded within the stipulated period to avoid any litigation by the unsuccessful tenderers. The tenderers may be advised to send a pre-receipted Chillan along with their bid so that the refund of Earnest Money after the bids have been rejected, is made within the stipulated period.

 

The Bidders (Small Scale Unit) who are registered with National Small Scale Industries Corporation under Single Point Registration Scheme are exempted from payment of Bid Security up to the amount equal to their monetary limit or Rs.50 lakhs whichever is lower.

 

6. Security Deposit

 Security Deposit should in all cases be taken for the due fulfillment of a contract, in advance, from a private person or firm contracting with the Govt. organization.Security to the purchaser for an amount equal to 5% of the value of the purchase order within 14 days from the date of issue of Advance Purchase Order by the purchaser. The following are the exemptions: Firms which are registered with the Director General of Supplies and Disposals for supply of stores, subject to the following conditions: The competent authority, before taking a decision to exempt a firm from furnishing security deposit, should satisfy himself that the firm is registered with the D.G. S&Dfor the supply of the particular stores proposed to be purchased. That the value of stores to be supplied in each individual contract does not exceed the monetary limit, if any, fixed in their cases at the time of registration with D.G. S&D for the particular stores. 

 

That it is not merely registered with the D.G. S&D, but continues to receive and execute contracts from the D.G. S&D. Small scale industries units which are registered with the National Small Scale Industries Corporation and in effect are treated as automatically registered with D.G. S&D under the revised scheme of single point registration.

 

"All suppliers (including Small Scale Units who are registered with National Small-scale Industries Corporation under Single Point registration Scheme) shall furnish Performance Security to the purchaser for an amount equal to 5% of the value of the purchase order within 14 days from the date of issue Advance Purchase Order by the purchaser.

 

Public Sector Undertakings which are registered with the department or D.G. S&D.In support of the above, the competent authority should require the firm to submit to him documentary evidence to prove that it is registered and that it has handled and continues to handle contracts from the Directorate General for the stores for which itis registered. The competent authority shall, also in addition, take into account the performance of the firms against his own contracts, if any, awarded to them and may, if he considers necessary, insist on the security deposit notwithstanding the fact that they are registered with the D.G. S&D.

 

The actual amount of the Security Deposit may be decided by the Heads of

Department according to the circumstances of the case, subject to a minimum of 5%

and maximum of 10% of the amount of contract.

 

The Security taken from a contractor shall be in one of the forms given in Rule- 274

of GFR 1963.

(i) Cash

(ii) P.O. Cash certificates/NSC, etc. transferred to the President.

(iii) P.O. S.B. Pass Books.

(iv) Bonds/Deposit receipts of Scheduled Banks.

(v) Fidelity Bonds of Insurance Companies etc.

 

But in DOT/, the Security Deposit also called Performance Guarantee is in the form of Demand Draft in favour of the DOT/ or Bank Fixed Deposits mortgaged or Bank Guarantees for the entire contract period. Part of Security Deposit may also be in the form of recoveries from Running Account Bills. The Security Deposit will be refunded only after due fulfillment of the contract as per the agreement and all the dues against the contractors are recovered.

 

 

7. Tender Opening:

The bids have to be opened at the prescribed place and time in the presence of those bidders who chose to witness the bid opening. Normally from department side there will be 3 members preferably one from the finance side. The bids received should be signed by all the departmental officers witnessing. Any corrections in the quotations have to be attested and all details of the bids received and rates quotedetc. has to be entered in a tender register and signed by all the members of the opening committee. The rates quoted by the various bidders may be readout to the bidders for their information. However, no queries can be entertained. Comparative statement will be prepared and signed by all the members. The comparative statement and bid documents have to be handed over to the tender evaluation committee.

 

Duties of the officer on opening a tender

 

1. Dated initial of the officer is must on each corrections, conditions and additions in schedule of quantities, schedule of materials to be issued and specification and other essential parts of the contract document and also date and initial on pages of the tendered documents irrespective of fact that they contain or do not contain any corrections or overwriting’s etc.

2. Each of these corrections, additions etc. should be allotted independent numbers serially. The rates should be written a fresh in the hand of the officer opening the tender with proper attestation with date.

3. The total number of such correction, omissions, and overwriting must be already mentioned at the end of each page of schedule attached to the tender paper and properly attested with the date.

4. Any ambiguities in rates quoted by tenders, in words or figures, must be clearly indicated on each page of the schedule with proper dated attestation.

5. In case where the contractor has quoted rates in rupees and no paise is mentioned the word ‘only’ should invariably be added after the words rupees with dated initial.

6. Where the contractors have omitted to quote the rates in figures or in words, the omissions should be recorded by officer opening the tender on each page of the schedule.

7. The Divisional Officer should see that the contractors quote entire rates in words including paise to avoid chances of tempering in rates and if the contractor fails to do so, the tender opening officer should himself write the rates in words and if necessary, initiate action against the contractor.

8. A tender opening register has to be maintained in which name of Tender, Tender Opening date & time, Name of officers and contractors present, number of tenders received with the names of the bidders and amounts quoted have to be entered and signed by the tender opening officer and the witnesses.

 

8. Tender Evaluation and Tender Acceptance

After opening the tenders in presence of the representatives of the bidders it

isnecessary to concentrate on the evaluation of the various offers received from the

bidders.

 

Evaluation of offers are sub-divided into two categories:-

1. Preliminary Evaluation:

Tender Concitions-(i) Fulfilment of eligibility criteria by the bidder & (ii) Fulfilment

of the Bid Security clause.

 

The offer of a firm can be declared INVALID if any of the above two basic conditions are not fulfilled.

The scrutiny of the enclosed documents is also carried out in respect of the Type Approval Certificate produced by the bidder, the NSIC Registration Certificate, the Income-Tax Clearence Certificate, Power of Attorney in favour of the authorised signatory in the Tender and cerfified copy of the Partnership Deed/Memorandum of Association in case of Private Limited or Public Limited Companies.

The above points are scrutinised basically by a team comprising of one SDE, one DE,

one AO or one CAO. After the scrutiny of the documents, the formal permission for

the Internal Financial Advisor, Deputy General Manager or General Manager

Incharge of procurement & finally Chief General Manager is obtained for putting up

the same for consideration by the Tender Evaluation Committee or Stores Purchase

Committee. The set-up of the Tender Evaluation Committee and the purpose is

discussed below.

The constitution of Stores Committees will be as follows:

a. Telecom Circle:

1. Area Manager or Dy. G.M. of the Telecom Circle/District

2. TDE with Headquarters at the same place

3. One TDE belonging to the same Telecom Circle but not under the same

Area Manager

4. IFA/CAO

b. SSA under GM:

1. Dy. General Manager dealing with the Material Management

2. One Director of Telecom Mtce. or Project Circle or their representative

3. AGM who looks after the Material Management

4. Chief Accounts Officer & IFA/DFA of the SSA

 

, India For Internal Circulation Only 31

c. SSA under JAG:

1. Telecom District Manager

2. TDE looking after the Material Management work

3. One more TDE belonging to other SSA

4. Chief Accounts Officer of the SSA

Area Manager or Deputy General Manager or TDM as the case may be, will be the

Chairman whereas in the case of Telecom Circles, these committees may be more

than one depending upon the number of Area Managers in the respect Telecom

Circles/Districts.

If the above conditions are fulfilled, evaluation in detail is carried on for Rates,

Discount, quantum of Excise Duty, Sales Tax (Central/State), Total price payable,

delivery schedule and quantity offered by the firm.

The Evaluation of all bids are done as under:-

1. Preliminary Evaluation

2. Evaluation in detail already discussed in foregoing paras

3. The Technical Evaluation & preparation of comparative statement is to be

carried out by Technical branch representatives of the TEC.

4. The Commercial Evaluation including the check of eligibility criteria is to be

carried out by the Commercial/Financial branch and

5. The vetting of the comparative statement of the bids and commercial

evaluation statement is to be done by the Finance representative of the TEC.

 

Recommendation of TEC:

• The TEC should clearly spell out its recommendation in its report about

techbnically acceptable bids, listed in order starting from lowest technically

acceptable bids (L-1) upwards.

• The report should contain complete technical, commercial and financial

appraisal, the logic leading to the recommendations themselves and reasons

for rejecting bids lower than the lowest technically acceptable bids.

• The tender shall be evaluated for the quantities indicated in the schedule of

requirements. In normal purchase procedure, the orders will go in favour of

the lowest acceptable bidder for the full quantity. Apportioning the quantity

may arise due tto certain limitations or considerations. As most of the items

procured by the DOT are specialised products it become sometime necessary

tto sustain multiple vendors suppliers through distribution of quantities.

• All the pages and enclosures of the TEC report should be numbered

consecutively and signed by all the TEC members.

In some of the major contracts where the material and equipment has to meet the

required specifications, the bid evaluation is done in two stages. First and the

preliminary evaluation include the technical evaluation in addition to eligibility of the

bidders. the second stage is financial evaluation. In such cases the technical bids and

financial bids are called for in separate sealed covers and financial bids are opened

only after technical evaluation and short listing of contractors.

2. Tender Acceptance:

The broad guidelines in connection with acceptance of tenders are as

follows :

1. The tender should not be arbitrarily accepted or rejected.

 

2. The approach of the authority while considering tenders should not be

irrational and every one should be judged by the same standards.

3. No irrelevent consideration should be enter into consideration.

4. A time schedule for scrunity & disposal of tender has to be prescribed so

as to ensure speedy disposal of the tenders. In case of rare circumstances

where the tenders could not be accepted with in the maximum period of

150 days, action should be taken to get the tender validity period

extended from the tenderers.

5. In case of tender where validity period has already expired, decision to

accept the same should be taken only after validity period is got

extended. Also conditional tenders cannot be accepted ignoring the

conditions.

6. Usually the lowest tender should be accepted unless there is some

objection

• to the capacity of the tenderer,

• to the security offered by the tenderer,

• to his execution of some former works.

7. While deciding the lowest tender the following points may be kept inview :-Some contractors are in the habit of stipulating number of conditionswhile submitting their tenders. Generally the conditions stipulated bythe tenderers have financial effect which have to be evaluated in anappropriate manner. The financial effect of all such conditions whichhave financial bearings has to be added to the tendered amount whiledeciding on the question as who the lowest tenderer is. At that time thelowest tenderer would be the one whose tendered amount afteradding/substracting the financial effect of all mandatory conditionswhich have financial effect (whether such conditions may or may not beacceptable), is the lowest.

8. When a single tender is received, Rule 441-C of P&T Manual Vol II stipulates that the heads of Circles and Divisional Officer are required to obtain prior approval of the next higher authority for acceptance of asingle tender. The rule further says that it shold however be left to the discretion of the competent authority to whom local conditions are known, to call for tenders for second time, in case of receipt of a single tender.

9. Negotiations:- Rule 426.1 of P&T Manual Vol II prohibits negotiation #with a particular tenderer to modify the terms of his tender in order toreduce them to the level or below that of any other competitor.However, there may arise some occasions on which negotiations maybe found necessary. Such negotiations, should however, be restrictedto the lowest tenderer only and with a view to bring down the prices inrespect of only such items for which he quotes unduly high ratescompared to other tenderers. For such negotiations, it is necessary that aprovision should be invariably be made in the tender inquiry from to theeffect that acceptance of all items or any of items mentioned in thetender would be optional.Tenders can be accepted by the various authorities who are vested with the powersunder the Schedule of Financial Powers. When it is proposed to accept a bid otherthan the lowest, the concerned authority has to submit the roposal to his next higherauthority for acceptance. However, when in the case of CGMs, if the orders arepassed by them personally, they may accept a tender other than the lowest,. However,they may have to send a report of the same to the Directorate.When a single responsive bid is received, the concerned authority may use hisdescreation and see whether to call fresh bids if there is a reasonable prospect ofsecuring better response otherwise the proposal for acceptance of a single tender hasto be submitted to the next higher authority with his recommendations.The guidelines issued by Central Vigilance Commission of Tendering Process-Negotiations with L-1 are furnished below.(a) As post tender negotiations could often be a source of corruption, it is directed

 

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C&AG Statutory Audit

The Comptroller and Auditor General's (Duties, Powers and Conditions of Service)Act which came into effect in 1971 and regulates his duties and functions also laysdown (Section 19(1) that is relation to audit to accounts of Government Companies,his duties and powers will be in accordance with the provisions in Companies Act.

 

Auditing of Annual Accounts

As enjoined in Section 227 (2) to 227 (4) of Companies Act, the audit of AnnualFinancial Accounts (P&L Account and Balance Sheet etc) will be conducted by theStatutory Auditor duly appointed by the C.A.G. A person, who is a CharteredAccountant within the meaning of Chartered Accountants Act 1949, is only qualifiedfor such appointment as an Auditor of Statutory Auditing.The Statutory Auditor confines himself to examine mostly whether the Company hascompiled with "technical requirements" of Company Law (Viz., AccountingStandards, Provisions, Fixed Assets, Depreciation etc) and guidelines issued byInstitute of Chartered Accountants. Thus the Statutory Auditing is legally fulfilledonce the company has made adequate "Disclosures" in the "Notes" to the Accounts".Thereby the Statutory Auditor has got some limitations to comment on the proprietyof managerial decision.

 

Auditing of Govt. Company: Action by CAG

The CAG will review the Financial Report of Statutory Auditor and comment uponsuch Audited Accounts under Section 619 (4) of Companies Act.The said Review of Accounts made by CAG will be forwarded to the Corporate Office for publishing as an "Annexure to the Director's Report."The acceptance or otherwise of these comments by the Management will also bepublished by the  in its Report, along with the comments of C&AG.In addition to the above, the C.A.G. can arrange through Director of Audit andAccounts to test check or conducting separate supplementary audit of the Company

 

Accounts. Accordingly, DAA will conduct his Regulatory Audit in normalcourse for SSAs/Circles. During the course of this regulatory audit, DAA canissue Audit memos and frame Audit Paras on important irregularities for inclusion inAudit Report - (Commercial) of C.A.G.

Statutory Auditing

Annual Accounts

As prescribed in Section 210 of Companies ACT, at every Annual general meeting of the company, the Board of the Company has to lay before the company the ‘Balance Sheet’ as at the end of the period and ‘ Profit and Accounts’ for the period.(Various Activities for finalization of ‘Annual Account’s are detailed in Annexure I)

 

Annual Accounts  Circle offices

The Profit and Loss Account and Balance Sheet will be prepared at Circle level based on the Trial balances being received from SSAs/PAU under its control. Similarly all the P & L Accounts and Balance Sheets of versions circles will be consolidated and single Profit and Loss Account and Balance Sheet for the  as a whole will be prepared at Corporate office level ( for No.500-31/2000-TAI dt 31.8.2001).

 Instructions

a. Trial balances will be prepared by SSA/PAUs from Account Records and will be formatted along with relevant schedules to circle office. The correctness of Trial Balance and schedules are subjected for internal Auditing.

b. In the Circle office, at the time of preparation of circle P & L Account and Balance Sheet, the balances appearing in the Trial balances of each SSA/PAUwill be adopted as it is without any accounting entry. At the time of finalization of circle P & L Account, the surplus or deficit will be shown against head of account 210101.

c. Similarly, in corporate office, at the time of preparation of Corporate Profit and Loss Account and Balance Sheet, the P & L accounts of all circles will be adopted as it is, without any accounting entry.

d. The year end balances of SSA/PAUs and circles got transferred notionally to the Circles/ Corporate office respectively as in above para (ii) & (iii) leaving nil at the year end balances in the schedules at SSA/PAU and circle level.

 

Some remarks often made in Auditor's Report

The following are some other points reported often in Auditors Reports inviting CAG comments:

• Balances in subscribers deposit accounts (of TR), interest accrued /due thereon and sundry debtors are not reconciled with respective subsidiary records.

• Inventories of huge quantities remaining unutilized on works, though received long back under various estimates

• Necessary provision not made in respect of liquidated damages

• Capital advances given

• Claims recoverable from other units/ DOT (Cell) and the claims have not been acknowledged by the concerned units.

• Claims receivable (viz Royalties from publishers of Telephone Directories etc.

• Claims payable towards Land acquisition etc.

• Non adjustment of charges booked under "Direction & Execution" to the relevant projects/works in he same financial year.

• Non assessing contingent liabilities as enjoined in part I of schedule VI of Companies Act and not discoursing the same separately under following heads.

(i) Taxes (ii) Excise Duty (iii) Sales Tax (iv) Custom Duty (v) Demurrage

(vi) Any other Misc claim

• Not obtaining lease deeds for the Buildings hired on lease.

• Non insuring the vehicles and other assets, including cash.

• No adequate provision made for advances in respect of which recoveries are long pending and doubtful. (viz. advances to contractors, PSUs like M/s HCL, ITI etc.)

• Non reconciliation of postings in deposit register with General ledger Balance in many cases

• Advances to suppliers/contractors in respect of capital works are not exhibited under capital works in progress.

Comptroller & Auditor General and Audit Reports

The Audit Report of the Comptroller & Auditor General of India (CAG) are the annual culminations of an elaborate audit exercises covering the activities of Govt. Departments, Govt. Enterprises, etc., These audit exercises are being conducted by the various sections of Indian Audit and Accounts Dept (IAAD) [(viz p & T Audit,Commercial Audit, Civil Audit etc.)], under CAG's General direction round the year.Thus IAAD's audit is incident on all the Govt. Depts and Govt. Companies and on certain other Autonomous Bodies and organizations as provided in the law. These IAAD offices make a very large number of reports / Audit paras to various levels of the Governments and Govt companies. However select few cases of these reports find their way to "C.A.G's Audit Reports", which is done after much further scrutiny and after due incorporation of the executive point of view, wherever made available to him. The Constitution of India requires CAG to make his reports to the President who causes them to be laid before each House of Parliament. These reports are made grouping functionally as Civil: Scientific: Posts and Telecommunications: Defence:Railways: Revenue Receipts and Commercial.

For Example :

 

Report no. of 1999	Type	Desc
No.1	Civil	1. Accounts of union Govt.
2		2. Transactional Audit observations
3		3. Performance Appraisals
4		4. Other Autonomous Bodies
5	Scientific Depts.	5. Scientific Depts.
6	Communications	6. Dept. of Post
		Dept. of Telecom
7	Defence services	7.Army & Ordinate factors
8		8. Air forces & Navy
10	Revenue Receipts	10. Indirect Taxes (customs)
11		11.Indirect Taxes (central Excise)
12		12.Direcvt Taxes

 

 

Govt. Companies

Annual Audit Reports of Commercial in respect of Govt. Companies will generally be categories:

Report 1 (Commercial) (Review of Accounts)

Giving an over all appreciation of the performance of the Govt. Companies and Corporations as disclosed in their Annual Accounts.

Report 2 (Commercial)(Comments on Accounts)

Containing extracts from the important comments of CAG's on the accounts of Govt. companies and Corporation with a resume of the reports submitted by the statutory Auditors on the Audit of the Companies in pursuance of the directions issued by CAG.

Report 3 (Commercial)

Transactional Audit (Observations)

Containing observations on individual transactions noticed in the course of Regulatory Audit conducted by IAAD parties during the course of their inspections and review Reports on selected aspects of their working Reports.

 

Reports 4, 5 ……… Audit Report of individual understanding

Performance Appraisals of selected Govt. Enterprises will be made and reviewed under individual Reports. These Audit Reports of Commercial will be finalized for CAG by the Audit Board after taking into the account the results of discussion held by them with the representatives of the Govt Company (e.g.  etc.) and concerned Ministry / Dept.(e.g. DOT etc.).These audit reports of Govt. Depts. and Govt. Companies etc. stands referred to the Public Accounts committee (PAC) for Govt. Depts. and to the Committee a Public Undertakings (COPU) for Govt Companies. These Committees take up examination by selection, of the matters brought in CAG's Audit Reports and call for oral evidence of Govt. officials / Depts. etc. Thereafter the above Committees make their own reports and recommendations to the Parliament.

 

Regulatory / Supplementary Audit By C&AG

Different Types

Apart from Comments upon Reports of Statutory Auditor under Section 619(4) of Companies Act, the C & AG can conduct a separate test / supplementary Audit of Companies Accounts as enjoined in Section 619(3) (b) of companies Act. In respect of , being Govt Company under Dept. of Telecom, DAAP & T will audit and report on all transactions of the  in a separate Report. The said audit and report covers: All transactions relating to expenditure (Vide sec 13 of CAG Manual)All receipts to satisfy the affective assessment of them and collection (Vide sec 17 of C.A.G. Manual)All accounts of Stores and Stock kept in an office.(Vide sec 17 of C.A.G. Manual)"While conducting the Audit of Expenditure as above the objective of Audit is tonsure whether the moneys shown in the accounts as having been disbursed are legally available for and applicable to the service or purpose to which they have been applied for are charged and whether the expenditure conforms to the authority which governs it”(Vide sec 13 of CAG's (DP & CS) Act)Another important objective of audit would be to examine how for the authority whose transactions are under audit has adequately discharged its financial responsibility in regard to various schemes / projects; purchases undertaken and “Value for Money" is obtained during the process.

 

Audit against Sanctions of Expenditure

This is to examine whether the expenditure incurred (e.g. Bills passed P.Os placed, Tenders accepted etc) is covered by the sanction of appropriate authority competent do so in virtue of powers vested in it by provisions of specific orders of Delegation or drawn by red legation.

Audit against Efficiency (Project Estimates / Performance)

This is to ascertain whether Project Estimates got prepared in times in accordance with guide line to meet the purpose of schemes / proposals and the operations are conducted economically and efficient without "Time & Cost Overrun".

ii. The aim of audit is also to ensure

a. how far the physical targets have been achieved within the estimated time;

b. how far any returns which were anticipated, had actually accrued and

c. how far the final purpose or objects of the expenditure have been achieved,

d. eg. In the case of Telecom projects it should be ascertained if the estimated revenue has actually been generated as a result of the completion of the projects to the extent anticipated. Similarly, in the case of a training facility, it would be seen by Audit on HRD whether the adequate number of persons are being trained every year and the objective of retooling of Human resources is achieved to the extent anticipated.

Audit of Accounts of Stores & Stock: Transactional Audit

Under Transactional Audit, the way in which the procurements are obtained and whether they are utilized as originally planned will be scrutinized by Audit.

Audit of Contracts

This is to examine whether the contractual clauses are strictly operated upon and whether necessary amounts are recovered from defaulting contractors (such as Liquidated damages etc.,) in time as per the provisions made therein.

Revenue Audit

The scope of Revenue audit is to ensure

• Prompt raising of demands and collections made.

• Difference of Rules, Tariffs & instructions in raising those demands.

• Existence of safe guards / mechanism to ensure that there are no omissions & commissions either in rising of demands or collections.

• That no amounts due to Dept are left outstanding on the books without  sufficient reasons and whether such claims are processed by the Dept with due diligence and are not abandoned.

Effective Audit Compliance Before, During and After Audit

 

Audit Inspection Reports:

 

Responsibility of Unit Officers:

All the officers of the  are to ensure that relevant files required for reference by Audit department are made available to them with promptitude and expeditiously.

 

Following instructions in this respect would be observed.

• The subordinate authority shall afford all reasonable facilities to the Audit Officer & Internal Auditor for the discharge of his functions and furnish fullest possible information as required by him for the preparation of any official or report.

• The subordinate authority shall not withhold any information books or other documents required by the Audit Officer/IA.

• If the information, books or other document or part there of are of secret nature, these should be sent by name to the Audit Office and he will deal with team in accordance with the standing instructions for handling and custody of

such documents.

Productions of documents to Audit

Files required by Audit Officers should be readily made available to them without any apprehension that objections may be taken by Audit merely based on contradictions and the views expressed in the note made by subordinate officials and higher authorities. If the contents of the file or any part of it are 'secret' or 'top secret' the file may be sent personally to the Head of the Audit office specifying this fact.

 

The draft inspection report will be discussed by the Inspecting officer with the Head of office and his IFA before submitting the same to the DAA to explain his viewpoint especially in the case of objections contained in Part II of the report. The Head of the office should avail of this opportunity and should record his remarks against each Para in specific and unambiguous terms, thereby either accepting or refusing the factual accuracy of the objections/points raised by the Audit. This would help the Audit to appreciate the Management's point of view and may eventually be Helpful in setting most of the objections in the initial stage itself. The remarks like" seen" " would be looked into" etc. should not be used as these defeat the very purpose of a discussion, leaving the pares as they stand. The Head of Office and IFA should take up the discussions relating to the items brought by the Inspecting officer from the very start of the inspection,. It is not available to postpone it to the fag-end of the inspection, because very little time is left for holding any constructive effective and useful discussions and achieving the desired results of setting the objections on the spot. The records required for production to Inspection Party in connection with the oldparas should be collected in advance and kept ready dully referred and flagged. This will save lot of time and initiation to the Audit party. During the inspection, if certain important financial irregularities are noticed which prime face would be considered by the Audit for being developed to the stage of Draft Para for inclusion in the Audit Report, the same would be taken up immediately byte Head of office and IFA for thorough examination. A chronological history of such cases should be recorded in a separate register and connected documents/report should be collected and kept in the personal custody of

the Head office and IFA, so that such important cases are not lost sight of and effective and prompt action is taken from time to time.

At the time of his transfer, the Head of Officer & IFA should mention the up-to-date position of all pending cases along with his charge report.

Audit Inspection Reports

Action frames & Disposal

The result of Local Audit by DAA is communicated through inspection report, which is drawn in parts as below.

Part -I includes

a. Introduction.

b. Outstanding objections from previous reports

In part, (b) all outstanding objections are reproduced in full, every alternate year along with up-to-date position. This is done to bring the outstanding paras pointedly to the notice of all concerned for facility of watch and expeditious disposal).

c. Schedule of persistent irregularities

The old outstanding objections are to be replied separately through the respective files of old inspection reports. An Audit Para will not be treated as closed by the Audit till the objections made in all sub paras are settled.

Part-II contains

Two sections: Section 'A' includes all important irregularities i.e. irregularities involving recoveries, cases of violation of principles, losses etc. Section 'B' contains irregularities though not major to bring to the notice of higher authorities.

Part-III

Is a Test Audit note containing minor irregularities to which a schedule is attached to show the items settled on the spot. The procedural irregularities in respect of which the Divisional Officer has given assurances for following the correct procedure in future are also noted in this Schedule. Although the Test Audit Note has been termed as Part III of the Inspection Report, the Test Audit Note objections are not included at present in the Inspection reports)

Prior action before Audit Inspections:

Inspection officer intimates the Head of the Unit to keep ready the replies in respect of old outstanding paras of the pending inspection Reports along with the relevant records for personal discussion for settlement of as many objections as possible. The old Inspection Reports should be discussed by responsible unit officer and IFA with the Inspecting Officer personally and results of such discussions should be recorded

 

Disposal of Audit Notes/Audit Reports

The Audit notes/Test Audit Notes are dealt with directly in the Divisional Office and should be returned to the Audit Office within a month from the date of their receipt.  Similar time limit should be observed for Audit Notes received from Audit

Functions of IFA: IFA of the Circle/Unit is responsible for a. Watching the settlement of Audit objections and Inspection Reports.

b. To coordinate the work relating to Draft Audit paras/PAC recommendations and connected works and to advise the

concerned officers to give proper attention thereto.

Draft Audit Paras:

Disposal and Action frame:

In course of audit of the financial transactions of PAUs the Audit points out omissions/irregularities primly in the shape of Audit objections as above. Based on serious unsettled objections and reviews of the various projects carried out by the Audit, the Branch Audit Officer issued Draft Audit paras to GMs/TDMs of the Telecom units for reply( with copy to CGM concerned )As soon as copy of draft audit para is received by the Head of Circle along with supporting documents the same will be endorsed to the concerned unit officer. The unit officer will communicate acceptance or otherwise of the facts and offer comments, within a period not exceeding two weeks. The GM/TDM will also take immediate steps to prepare a chronological history of the cae and collect the relevant records so as to make them instantly available to the higher authorities for perusal and verification where necessary.These are followed by further Draft audit paras (issued by the Principal Director of Audit to the CMD  in respect of cases not settled at Circle level. Finallythe cases in which Audit is not convinced with organizations explanation are includedin the Report of the Comptroller and Auditor General of India. Draft Audit Paras-Disposal

 

Procedure at the Circle level: Time frame

The important financial irregularities are in the first instance brought to the notice of Heads of Circle through Audit paras by the Branch Audit Officers concerned during its Transactional Audit. The Heads of Circles are required to give promotion attention to the draft audit paras proposed by the Branch Audit Offices. The verification of facts and figures are to be completed as expeditiously as possible. If any information is required from SSAs/PAUs this should be called or priority basis so that reply to Branch Audit para is issued within the stipulated period of three weeks. The Head of the Circle and IFA can have periodical meetings with the Head of the Branch Audit officers concerned for discussing the issued raised in the Draft Audit para proposed by the Branch Audit Officers and to get them dropped by offering satisfactory explanation to them. The Heads of Circles will simultaneously submit to the Corporate Office two copies of the draft audit paras together with two copies of replies furnished by them to audit along with a comprehensive report indicating the remedial or disciplinary action taken or proposed to be taken in the matter. The report to the Corporate office should be exhaustive and should contain a critical analysis of the various points rising out of the draft paras and no vital information should be kept back. There should not be any attempt at shielding any official responsible for the irregularity and all the relevant facts should be mentioned in their fullest details. Such reports would be very helpful

in the corporate office dealing with the draft audit Para when formally proposed by the Director of Audit (P&T) for formulating their final comments without any delay in obtaining information from the Circles.

Two copies of subsequent replies, if any, sent to the Branch Audit officer in this regard will also be endorsed to the corporate office along with copies of further communication received from Audit.As a result of explanation given by Heads of Circle, some of the Draft Audit parasproposed by the Branch Audit Officers may be dropped by the Principal Director ofAudit. However if the audit is not satisfied with the replies to the Branch Audit paras,Draft Audit paras will be proposed for inclusion in the C&AG's report.Role of IFA:At the Circle level the IFA is to coordinate the work of disposal of Branch Audit paras and references received from corporate office on Draft audit paras proposed by the Principal Director of Audit to ensure their speedy disposal. He has to constantly and continuously monitor the progress of each such case at all stages till they are final dropped or explained to the PAC and till final actions an ATN(Action Taken Note)when received.

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