Advances to Contractors

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.  

III -   Advances For Accelerating Progress Of The Work During Course Of Execution Of Contract -

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).

****