Railway Accounts Department Examinations

Showing posts with label Advances to Contractors. Show all posts
Showing posts with label Advances to Contractors. Show all posts

Sunday, July 29, 2018

Advances to Contractors



v  1264 E -Para No.64 of 12th chapter of Indian Railways Engineering Code  - Click here

v  As far as possible abstain from giving advances to Contractors.  That means No payment is made except for work actually done. 

v  GMs may, however, sanction within their delegation of powers  - Those works which are capital intensive and specialized nature and also when estimated value of the tender exceeds Rs.25 Crores.

v  Such advances are of four types.


I-Mobilization Advance: 

v    Limited to 10% of the Contract value and payable in 2 stages. 

A.      Stage I - 5% of Contract value  - on signing of the Contract Agreement.

B.      Stage II - 5 % on mobilization of site establishment, setting up of offices, bringing in equipment & actual commencement of work.


     II- Advance against Machinery & Equipment:

v   Limited to a maximum of 10% of the Contract value.  Also Limited to 75% of the purchase price of such
          Equipment.

v   Against New Machinery & Equipment, involving substantial outlay, brought to side and essentially
           required for the work. (No advance -Against old equipment)

v  Hypotheticate to the President of India by a suitable Bond or alternatively covered by an irrevocable Bank Guarantee for full cost of the Plant & Equipment

v  The Plant & equipment shall be insured for the full value and for the entire period.

v  Such Plant & Equipment shall not be removed from the site of work without prior written permission of the Railway Engineer.  



v  Decided on the merits of each case .

v  By General Managers with recommendations of PCE in consultation with PFA. 

v  Total of such Advance is up to Rs.100 Crores or less or as decided by Railway Board in a year.

v  Restricted to 5% of Contract value or Rs.1 Crore whichever is less. 
IV - Advances in Exceptional Cases:

v  By General Managers with recommendations of PCE in consultation with PFA. 

v  Up to a maximum of Rs. 5 Lakhs.

v  Contracts of value of less than Rs. 50 Lakhs.

v  Exceptional cases only.

The Above Advances Are Subject To The Following Conditions -  ACS 54  Click here

ü  Interest rate  - decided by the Railway Board at the beginning of the financial year.   - applicable for the tenders opened in that financial year.

ü  Advances except those against machinery and equipment,   - Irrevocable guarantee (Bank Guarantee, FDRs, KVPs/NSCs) of at least 110% of the value of the sanctioned advance amount (covering principal plus interest). The Bank Guarantee shall be from a Nationalised Bank in India or State Bank of India in a form acceptable to the Railways;

ü  The recovery shall commence - When the value of contract executed reaches 15% of original contract value

ü  The recovery shall complete - When the value of work executed reaches 85% of the original contract value.

ü  The instalments on each "on account bill" will be on pro-rata basis;

ü  Grant of advance is primarily in Railway's own interest

ü   Not eligible - same Advance for same work from different officers.

ü  Accounts Office - responsible for payment & recovery of such advances.

Recovery of Interest:

v   Interest shall be recovered on the advance outstanding for the period commencing from the date of payment of advance till date of particular on-account bill

v  adjusted fully against on-account bill along with pro-rata principal recovery.

v  In the event of any short-fall, the same shall be carried forward to the next on-account bill and shall attract interest.

v  The Bank Guarantee for such advances shall clearly cover at least 110% of the value of the sanctioned advance amount (covering principal plus interest).
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