HMT LIMITED

PURCHASE MANUAL

HMT Bhavan, # 59, Bellary Road, Bangalore-560032

 HMT LIMITED
HMT Bhavan, # 59, Bellary Road, Bangalore-560032

PURCHASE MANUAL

(Released vide CMD’s Office Order No. 4/10 dated April 12,2010)
 Purchase Manual

Table of Contents

Para No Particulars Page No.

Introduction 1
1&2 Scope & Objectives 1
3 Purchase Function 1
4 Classification of Materials 2
5 Material Purchase Request 2
6 Vendor Listing 3
7 Modes of Purchase 5
8 Opening of Tenders 12
9 Comparative Statement 12
10 Re-tendering 15
11 Terms of Payment 15
12 Purchase Proposals 17
13 Financial Concurrence 18
14 Sanctions for Procurement 19
15 Placement of Orders 19
16 Procurement of Capital Items 20
17 Outsourcing 21
18 General Terms & Conditions 22
19 Other procedures related to purchase function 24
20 Other activities related to purchase function 26
List of Annexures 27
 Purchase Manual

INTRODUCTION:
In the present day scenario of increased competition, reduced time‐to‐market and globalize
outsourcing, Material Management has evolved as one of the major factors for the success
of any organization. The purchase function, a key component of material management has
now to function with more agility and is shouldered with more responsibilities than before.
In HMT Limited and its subsidiary companies, the purchase function is carried out by the
Purchase Department of the respective unit / division and is responsible for procurement of
the unit / divisions’ requirement. The Heads of the Materials Department and Purchase
Department are directly accountable for effective discharge of purchase functions within the
framework of the purchase policy of the company.
The Purchase Manual released vide Office Order No: 70/02 dated 15.03.2003 was prepared
taking into account various purchase functions in HMT Limited and its subsidiary companies
/ units / Divisions as well as CVC guidelines at that time.
Subsequent to the above, CVC / administrative ministry, has issued additional guidelines /
amendments over time which has necessitated review and update of the guidelines,
weeding out of redundant procedures, and improvement in the effectiveness of purchase
activities. Transparency and commitment of highest order of integrity are to be evident in all
Purchase activities.
The committee constituted vide Office Order No. 18/05 dated 26.10.2005 has examined the
existing Purchase Manual, guidelines / procedures and has updated it incorporating the
various guidelines issued by CVC as well instructions issued by the Administrative Ministry.
Relevant suggestions received from the various units of HMT Limited and its subsidiary
companies have also been taken into account in updating the Purchase Manual.

1. SCOPE
This document lays down the directions and guidelines to be followed by HMT LIMITED and
its Subsidiaries, on matters relating to procurement of materials, capital items and
subcontract and hiring of services.
2. OBJECTIVES :
(i) Timely procurement and supply of required materials with prescribed
specifications and quality at the most competitive price and terms.
(ii) Fair, consistent and transparent purchase practices.
(iii) Continuous search for alternate sources of supply and to develop reliable sources
of supply.
3. PURCHASE FUNCTION:
3.1 Definition of Terms used in Purchase Function
A quick reference list of the terms generally used in the purchase activity and their
definition is as per Annexure‐1.
3.2 Major responsibilities in respect of Purchase Function
The major responsibilities of Purchase and Finance Departments in respect of the
Purchase function are listed in Annexure‐2.

Page 1
 Purchase Manual

3.3 Purchase Committee

Every Unit / Division should have a broad based Purchase Committee through which
all purchase proposals should be routed. The constitution of the Purchase Committee
shall be as per Annexure‐3.
3.4 Purchase Coordination Committee
Further, a Purchase coordination committee shall be constituted to sort out all
outstanding issues connected with procurement, with a view to minimize inter‐
departmental correspondence and ensure adherence to guidelines and increase
transparency in purchase functions. The constitution shall be as per Annexure‐3.
Members of Purchase Co‐ordination Committee should give an undertaking that none
of them has any personal connection/interest in the Company/Agent(s) participating in
the tender process. Any Member having interest in any company/Agent should refrain
from participation in the tender purchase committee.
4. CLASSIFICATION OF MATERIALS:
All purchases should be broadly categorized into Revenue and Capital. Under Revenue,
further categorization shall be into Production and Non‐Production items. The production
items shall be categorized “A”, “B” and “C” Class as per classification adopted by the Units /
Divisions.

5. MATERIAL PURCHASE REQUEST (MPR):

5.1 Material Purchase Requests (MPR) duly verified & signed by the Material Chief /
Materials Engineering Chief shall be the basis for initiating procurement action by
the Purchase Department. The quantity and delivery schedule should be linked
suitably to the production programme, taking into account the lead time for
procurement.
HMT‐MTL, MPR's shall not be issued without clear Purchase Order/Letter of Intent
from the customer. In exceptional cases, MPR may be issued with clearance from
Unit Chief and Subsidiary Chief, keeping in view the inventory level.
5.2 MPR should be raised matching with maximum requirement of Quarterly / Half
yearly production / despatch schedule as well as delivery schedule of item keeping in
view the Operational Plan requirement at a time and the same should be reviewed
once in a month by the Purchase Committee and amendments, if required, based on
the change in production plan, may be issued. It is suggested that the optimum
quantity only shall be planned/purchased at a time taking into consideration the
quantity required and procurement lead time keeping 5.1 under consideration.
For C Class items MPRs may be raised based on firm production program for six
months depending on the MOQ and financial position subject to approval of the Unit
Chief.
5.3 The MPR shall be raised with requisite copies duly approved by the Material Chief

Page 2
 Purchase Manual

(Engineering Chief for capital items). The MPRs shall be serially numbered and
distributed to the Purchase and other connected Departments
5.4 On receipt of the MPRs, the Purchase Department will enter the MPR No. and the
date of receipt in the MPR Control Register and distribute to the concerned group‐in‐
charge / Purchase Officer. In case the MPR is incomplete, the same should be
informed to indentor and purchase action should start only after clarification is
obtained.
5.5 For proprietary items MPRs must accompany proprietary article certificate with
source of supply issued by the concerned Material chief and Design Chief / Indentor.
6. VENDOR LIST:
6.1 Enrolment of Vendors
(i) Each unit will have a register of approved vendors with separate registration
numbers for various categories of items. A party who has been enrolled as a
vendor in any of the Units of HMT may be considered for enrolment in other Units
as an approved vendor for similar items. The vendor list may be circulated among
Units of HMT and Units of Subsidiaries on 1st April of every year (with particulars
of items and rates wherever required). Periodic Vendor rating should be carried
out based on certain criteria viz., past track records of suppliers, guidelines issued
by ISO etc. A typical vendor Registration format (to be sought for rating) is
enclosed as Annexure‐4 for reference.
(ii) Units should endeavor to identify new vendors continuously from various trade
exhibitions, trade directories, trade journals, various web sites, yellow pages,
trade associations or reference from any known sources / other HMT Units and if
necessary, through Press advertisement. There should be a wide publicity through
website as well as other traditional channels at regular intervals for registration of
contractors / suppliers. Format for registration containing list of required data,
pre‐qualification criteria, infrastructure and other details should be made available
on the website and it should be possible to download the same and apply.
(iii) Any new vendor wishing to get enrolled with the Unit will have to submit all
relevant information supported with documentary evidence. If felt necessary, the
works / business premises of the new vendor may be inspected by the Vendor
Development committee, consisting of representatives from Quality Control,
Purchase and Finance, on a selective basis, commensurate with the value /
complexity of the items to be procured. The team shall submit a report covering,
inter alia, the following points in particular:
(a) Technical capability and production capacity
(b) Financial soundness / stability, Credit worthiness, copy of Annual report.
(c) Technically acceptable specification, Quality level of product / Components

Page 3
 Purchase Manual

(d) After sales service

(e) Details of major customers served. (Customer reference list)
(f) Status of ISO certification.
(g) Samples test acceptable reports approved by the Heads of Design,
Production & Engineering Dept.
(h) Details whether the vendor has been put on holiday list / banned / black‐
listed by any Government agency
Based on the recommendation of the Committee, the Purchase Chief shall
provisionally register the party as a vendor and allot a vendor code. A trial order
is then placed on the vendor to assess his capability and after successful
execution of the trial order, the name of the vendor shall be included in the
approved vendor’s list with a permanent vendor code.
6.2 Removal of Vendor's Name :
A Vendors' name may be removed from the approved Vendor’s list for the
reasons such as:
(i) Failing or neglecting to respond to invitation to tenderers for 3 successive
enquires sent by RPAD for items dealt by such vendors.
(ii) Unsatisfactory performances‐ quality, delivery schedule etc.,
(iii) Failing to honour agreed terms and conditions.
(iv) Failing to obtain minimum rating during three continuous vendor ratings.
(v) If it has been blacklisted or put on holiday list.
(vi) If defaulted beyond reasonable limits in honouring commitments in any Unit
of HMT and its subsidiaries.
In case the Purchase Committee decides that action against a firm is called for
due to any of the above reasons, it may recommend issue of a notice to the firm
asking it show cause why it should not be banned for a specific period /
blacklisted in view of the allegations against it. Details of the allegations/charges
should be appended to the show‐cause notice and the firm should be asked
submit within 21 days a written statement of defence. All the correspondence
with the firm to be made by registered post with acknowledgement due.
On receipt of the reply / no reply received, the Purchase Committee shall analyse
the position and recommend exoneration / removal of the vendor’s name from
the approved list for a specific period / blacklisting indefinitely, and after
obtaining the approval of the competent authority (Unit Chief) and shall inform
the vendor. The period of ban should be a minimum of one year and should be
decided based on the gravity of the offence and the quantum of loss suffered by
the Company.
The vendor has to apply for fresh registration after the specified period from the
date of deletion of his name.

Page 4
 Purchase Manual

6.3 Blacklisting of Vendors:

Enrolled vendors shall be blacklisted on the following grounds:
(i) Government order / instructions.
(ii) If the proprietor / any one of the partner’s representatives is found guilty
of malpractice such as bribery, corruption, fraud, interpolation /
substitution of tenders, misuse of HMT’s design/drawing.
(iii) If the proprietor/any one of the partners is convicted by law for an act
detrimental to the interest of HMT’s Business.
The Purchase committee may consider blacklisting of vendor for a definite
period or black listing the vendor indefinitely depending upon the seriousness of
the irregularity / fraud committed by him, following proper procedure such as
issue of show‐cause notice etc.
Orders for blacklisting a firm shall be approved by the Subsidiary / Business
Group Chief based on the recommendation of the Purchase Committee. Once a
firm is blacklisted, firm name will be removed from the vendor list and it should
be informed to all the Units so that none of the Units shall have any dealings
with it.

7. MODES OF PURCHASE:
7.1 Tender System:
The tender system is adopted to procure materials at competitive rates and different
types of tenders are in vogue viz., Open Tender, Limited Tender, Single Tender and
local purchases through spot offers (Spot Tender). Where it is warranted, Global
tender may be resorted to. Procurement process can also be through electronic mode
(E‐Procurement – e‐tendering, receipt of offer through secured mails) within the
provisions of the Purchase Manual & relevant acts, where ultimately bidding,
contracting and payments, etc., are accomplished electronically, reducing the process
time and thus improving efficiency. It should be ensured that the process is conducted
in a fair and transparent manner
The mode of tendering will be decided based on the following guidelines:
7.1.1 Open Tender:
Open Tender refers to calling of quotations by advertising tender enquiry in website of
the company and at least in one reputed local / national newspaper. All tender notices
are to be approved by the competent authority (Unit Chief / Purchase Chief). Open
Tenders have to be resorted to for an item where the estimated tender value of
purchase exceeds Rs.25 lakh;
The procedure for the same would be as follows:
The advertisement with full details should be published on the website of the company
/ the Government of India website for tenders. A dedicated website for Government
tenders hosted by NIC is available vide www.tenders.gov.in to which HMT and its
subsidiaries have been provided access to upload tenders. The complete bid

Page 5
 Purchase Manual

documents along with application form shall be published on the website. It should be
ensured that the parties making use of this facility of website are not asked to again
obtain some other related documents manually for participating in the tender process.
Any charges for tender / application form may be asked to be paid at the time of
submission of application form.
The advertisement in Print Media should mention the website address and availability
of details in the website. A single insertion would normally be sufficient. In order to
reduce the expenditure on advertisement, the tenders for several items may be
clubbed under one insertion. In case of non receipt of atleast 3 offers, then due date
can be extended for further period of 7 days and to be communicated to all the
tenders who have purchased the tenders and also notify in the website for the benefit
of others. A copy of the tender notification should also be circulated to all the Vendors
borne on the approved list of Vendors and to established foreign suppliers wherever
applicable, by post, e‐mail and fax. "Foreign Supplier" means the source and not the
"commission agent" or "intermediary". Under no circumstance the proposed
advertisement should be published under the category of "classified advertisements".
The time allowed for receiving quotations against Open Tender can be fixed at a
minimum of 21 days from the date of release of tender enquiry / notice. However in a
very special case wherein paucity of time would be affecting the performance of the
company for the corresponding period and for recorded reasons of Purchase
Committee, time allowed for receiving quotations may be limited to minimum 15 days
with sanction from Unit Chief. This should not be a repetitive occurrence.
In respect of all Open Tenders, two part bid system shall be followed. Technical
Tenders and Price Tenders should be obtained in separate sealed covers.
Tender Forms should be priced suitably to recover the cost of advertisement etc., to
the extent possible. Purchase Committee will decide the tender document fee and
mode of despatch of tender document with approval from Unit Chief. Tenderer
should furnish security deposit as per tender terms and conditions. Adequate time
should be allowed for collection of tender documents by the supplier.
As regards to participation against Global Tenders/Global enquiries for supply /services
pertaining to business activities of HMT (International) Limited wherein tender terms
requires mention of make or model(s) of items or manufacturers authorization letter
for acceptance of the bid or wherein the time available for submission of bid is limited
(less than one month) or wherein the products are not of standard nature having no
specified vendors, HMT(I) may resort to a limited tender enquiry or a single tender
enquiry with justification and recommendation of Purchase Committee and sanction
from the Subsidiary Chief on case to case basis. In case of retendering the period of
response should not be less than 10 days and reasons to be recorded by the Purchase
Committee.
7.1.2 Limited Tender:
Limited Tenders are those addressed to all parties in the approved list of Vendors for
the required item(s), as per the database maintained by the Purchase Department / a
hard copy signed by the purchase chief as per ISO system. For not addressing enquiry
to any approved Vendor(s), approval of unit chief shall be obtained with justification.

Page 6
 Purchase Manual

Tender shall be posted Under Certificate of Posting or Speed Post / Courier / RPAD &
email to all sources of supply listed for that category of item(s). The time allowed for
receiving quotations against limited tenders shall be minimum 15 days from the date
of release of tender. However in a very special case wherein paucity of time would be
affecting the performance of the company for the corresponding period and for
recorded reasons of Purchase Committee, time allowed for receiving quotations may
be limited to minimum 10 days with sanction from Subsidiary Chief / Unit Chief. This
should not be a repetitive occurrence.
Foreign and Local suppliers where mode of communication available through email
and fax, and to meet the urgent delivery requirement, enquires may be sent by email /
Fax / Courier which works out to be faster and economical. The Companies official
email‐ID shall only be used for all such e‐mail enquires and adequate records of such
correspondence shall be maintained in hard copies for future reference. In a limited
tender the tender documents are sent to the approved Vendors parties free of cost
along‐with a copy of tender notice. The procurement shall be from approved vendors.
However, under exceptional circumstances procurement from unapproved vendors
shall be considered with the approval of Unit Chief / Subsidiary Chief in case of offers
advantageous to the company. Two part bid system shall be considered for
procurement as mentioned vide pre‐qualification criteria for bids.
7.1.3 Single Tender:
Single Tenders are those addressed to a single party and the reasons for the same are
to be clearly recorded in the proposal. This can be resorted to only under the following
condition(s) and with the prior approval of Purchase Co‐ordination Committee and
sanction from the Unit Chief:
(i) The Government has canalized the supply only through a single source.
(ii) Supplies are from Government and semi‐Government agencies and controlled
agencies who have a market monopoly for those products. (Eg Petrol, Diesel,
LPG, Iron ore etc) and based on the inevitability of the situation
(iii) Proprietary items: In line with clause 7.9 and only for MPR’s accompanied by
Proprietary Article Certificate, as per prescribed format (Refer Annexure‐5 )
(iv) Designer / Inhouse User’s department with justification / Customer’s stipulation
(v) Time limit for obtaining offers may be stipulated based on requirement.
(vi) Offers by email/fax can be accepted in case of single tender / proprietary item
enquiries.
(vii) Consultancy by nomination (as per GFR Rule 176) – Under some special
circumstances, it may become necessary to select a particular consultant where
adequate justification is available for such single source selection in the context
of the overall interest of the Department/ Unit/ Company. Full justification for
single source selection should be recorded in the file and approval of the
competent authority obtained before resorting to such a single source selection.
In this context it may be noted that as per clause 1.5.3 of the Manual on Policies
& Procedure of employment of consultants issued by the Ministry of Finance,

Page 7
 Purchase Manual

consultancy by nomination is normally restricted to a financial ceiling of Rs 10

Lakhs. The Manual may also be referred for detailed guidelines on appointment
of consultants. The manual is available in the website of Ministry of Finance.
7.1.4 Local Purchase through Spot Offers (Spot Tenders):
This is resorted to only for emergent requirements. A team of Officers comprising of
representatives from Purchase, Finance and User departments proceed to the market
and obtain spot offers from local vendors after physically verifying and inspecting the
goods and obtaining the assurance that the items are offered ex‐stock.
Offers may also be received from established suppliers / vendors by fax/email/courier
etc, Wherever possible the procurement should be made from authorized distributors.
If item is not readily available with the authorized distributors, the same may be
procured from the reputed vendors based on the cheapest of the quotations collected
by the team. In all such cases, written quotations should be obtained from minimum
three different vendors and the selection process recorded and countersigned by the
officials concerned. Such purchases should invariably be regularized, subsequently by
issue of confirmatory purchase order after obtaining Unit Chief’s sanction. The value of
such purchases should not exceed Rs.50000/‐ per order.
7.1.5 General:
(i) In all cases, enquires shall be circulated by post Under Certificate of Posting,
Courier / Speed Post through Central Mailing System (CMS). FAX / email /
electronic Data Transfer can also be used. Suppliers shall be asked to submit
properly sealed quotation super‐scribing the tender name and reference no. on
the cover. It should be specified in bold letters in the tender terms and conditions
that covers only stapled will not be accepted,
(ii) Regarding the number of vendors to be contacted, it is difficult to strike a balance
between commercial and technical consideration particularly when the items to
be procured are not standard products. Nevertheless, the endeavor should be to
keep enquires as much broad based as possible for obtaining competitive offers.
(iii) Bulk buying and bunching of materials required for several contracts / indent shall
be done to the maximum extent possible, to derive price advantage.
(iv) In the case of common items used by more than one Unit, whose total
consumption value for the year is more than Rs.75 lakhs for the Group, then
Subsidiary/ Business Group should consolidate the requirement and the tenders
should be issued and finalized at the Business group level to take advantage of the
prices and other benefits due to higher volume.
(v) If the procurement is to be distributed on more than one vendor, the tender
document should clearly specify the dividing pattern of the procurement and also
likely number of Vendors to be considered for procurement of entire quantity.
There should be consistency in loading pattern of both quantity and price of L1.
(vi) If it is proposed to buy a set of items as a package from a single vendor, then the
same condition is to be clearly indicated in the enquiry/tender. Otherwise the
procurement will have to be done from respective L1 for each item.

Page 8
 Purchase Manual

(vii) Evaluation Criteria shall be included in the tender conditions.

(viii) All relevant data on tender issue, receipt and opening should be recorded and
maintained.
(ix) The terms & conditions of the tender enquiry should indicate that the
performance of the supplier against previous orders would invariably be reviewed
at the time of recommending fresh order on them and their offers are liable to be
rejected if their supplies are not satisfactory.
7.1.6 Pre‐qualification bids & criteria:
Pre‐qualification criteria is a yardstick to allow or disallow the firm / suppliers to
participate in a tender. Separate Pre‐qualification criteria under two bid system, shall
be requested to qualify bidders. Pre‐qualification criteria should be strictly followed in
all open tenders and limited tenders where approved list of vendors is not available for
the product. The criteria for pre‐qualification are to be clearly mentioned in the tender
enquiry. This also applies to sub contracting works as well as procurement contract.
However, for procurement of regular requirements of standard items like bearings,
fasteners v‐belts, etc., and off the shelf materials or where technical specifications are
clear and frozen, one part bid system covering qualification criteria and price bid may
be considered.
The following points must be kept in view while fixing eligibility criteria:
Pre‐qualification / in case of one part bid Post‐qualification, shall be based entirely
upon the capability and resources of prospective bidders to perform the particular
contract satisfactorily, taking into account their
i) experience and past performance on similar contracts for preceding two years
ii) capabilities with respect to the person, equipment and manufacturing facilities
iii) The quantity, delivery and value requirement shall be kept in view while fixing
the pre‐qualification criteria.
In open tender no bidder should be denied the participation in the pre‐qualification
bids without proper reasons / justification.
Evaluation criteria of pre‐qualification bids should be made explicit in the bid
document
In two part bid system the price bids of only those vendors who are considered
qualified based on the pre‐qualification criteria should be opened.
7.2 Supply through DGS & D Rate Contract:
The Director General of Supplies and Disposal (DGS&D) enters into a contract for
various items to cater to the requirements of different Government Organisations. List
of stores on rate contract is published by DGS&D from time to time for the use of
Direct Demanding Officers. This list should be obtained and kept with the Purchase
Department. Many of the “Rate Contract Holding Firms” normally offer DGS &D Rate
Contract Prices to HMT and the same shall be availed. Orders are to be released on
normal HMT Purchase Order forms at DGS&D rate contract prices and other
commercial terms as mutually agreed. When there is more than one DGS&D rate

Page 9
 Purchase Manual

contract for the same item, order shall be released to any one of them offering better
commercial terms. Where the firm is not ready to offer DGS&D rate contract prices to
HMT, these prices should be utilized for negotiation purpose while finalizing the
Purchase Order. Wherever applicable, quotation from other reputed suppliers /
vendors should also be taken for comparison of prices and negotiations. In case
DGS&D rates are higher than the prices offered by the reputed vendors, decision on
ordering on such vendors shall be considered with justification / recommendation,
financial concurrence and final approval from the Unit Chief.
7.3 Purchase from Collaborators:
Purchase from HMT’s collaborators covered by collaboration / price agreement does
not come under tender system. The other procedures like MPR, obtaining sanction for
the proposal and placement of Purchase Orders are to be followed. The import license,
if required, will be obtained by the Purchase Department. The requirements in
quantity and value in terms of foreign exchange have to be planned well in advance. It
is imperative that the items are ordered within a reasonable period so that shipment
could be effected within the validity period of the license.
7.4 Purchase from Foreign Suppliers:
7.4.1. All imports should have prior approval of competent authority as follows:
(Typical Format for approval is enclosed as Annexure‐6).
Import value (CIF) Competent authority
Upto Rs. 10 Lakh Unit Chief
Subsidiary Chief / Functional
Rs.10 Lakh & Above
Director of Holding Company.

7.4.2. The regular tendering procedure has to be followed for procurement from
foreign suppliers also. However tender enquiries may be sent through fax
mode/email in order to save time.
7.4.3. Where customs duty is not payable on the imports because of the
Government exemption notification (or) availability of special import
license etc., the same must be indicated in the Purchase Order( for internal
use) so that customs duty is not paid on such items. Wherever customs
duty is payable, the correct chapter and classification code in conformity
with specification and description of the item should be indicated
invariably to ensure payment of appropriate duty and to avoid
excess/short payment of customs duty at time of clearance of the goods.
Invoices and other import documents produced to customs authorities at
the time of assessment of customs duty should also indicate the
specification and description as per the Purchase Orders. Purchase
Department shall ensure these at the time of issuing the Purchase Orders.
7.5 Purchase through Long Term Contract:
The object of entering into a long term contract is to ensure continuous supply at
competitive rates. In keeping with this objective, long term contract should generally

Page 10
 Purchase Manual

be entered into for a reasonable and justifiable period but not more than two years at
a time. The approval of such contract for procurement should be recommended by the
Purchase Committee by following regular Purchase Procedure and approved by the
Subsidiary/Business Group Chiefs with a written agreement with the firm. The
feasibility of combining the requirements of other Units may also be kept in view
before entering into such contract. While entering into long term contract with
suppliers, price variation clauses (PVC) as per the approved formula shall be permitted
in case need arises.
7.6 Cash Purchase:
Cash purchase should be resorted to only in respect of items of small value and
emergent requirements. Purchases of materials not exceeding Rs. 5000/‐ at a time will
come under this category. Purchase department may request inspection/ user
representative to accompany purchase representative. Purchases should be made
against cash bills by the Purchase Department. Payment should be made out of the
revolving imprest maintained by the Purchase Department. All such purchases should
be regularized periodically by obtaining sanctions from the Material Chief. These
purchases should be covered under the specific budget head.
7.7 Purchase with Specific Imprest:
For cash purchase of production items ( Aid or input to product ) , specific imprest not
exceeding Rs.10000/‐ at a time, can be drawn by the Purchase Department through a
written request to Finance Chief with prior approval of Unit Chief, which shall be
regularized by following usual purchase procedure.
7.8 Purchase of Proprietary Items:
An item will be considered “proprietary” only if the item or near equivalent to the item
is not available and/or all possible suppliers quote only the product of one
manufacturer. Materials with registered patents and not offered by any other sources
may also be treated as proprietary items. Materials required for production or
maintenance of plant and equipment which necessarily have to be of particular make
or manufacture shall also be referred as “proprietary” and also the source of supply. If
an item is manufactured as a development effort by any manufacturer based on the
design/drawings of HMT, such item will also be considered as “proprietary”. However,
in such cases, continuous efforts should be made to develop more number of alternate
suppliers to create competition. The price of proprietary items should be negotiated by
the Purchase committee. Generally brand name should not be cited as proprietary if
alternatives are available.
7.9 Repeat Orders
Proposals can be for procurement on Repeat Order basis without calling for fresh
tender, at the original order price in cases where there is no likelihood of prices
coming down for the items. Repeat Orders may be placed based on Purchase Orders of
other HMT Units also with the approval of the Unit Chief, in order to save time and
costs. For this a letter has to be obtained from the respective unit that their order was
placed after process of normal tendering and was approved/ concurred by the
competent authority as well as a specific confirmation from the supplier regarding

Page 11
 Purchase Manual

acceptance of the same terms & conditions prior to release of the repeat order.
However, the Repeat Order should not be for the orders released more than two years
ago. No repeat order should be placed when the original order was placed on the basis
of higher prices for earlier delivery. Wherever earlier order was itself a Repeat Order of
an earlier order, the earliest order placed as per full tendering procedure should be
treated as the original Purchase Order. If, after placing the order, the vendor refuses to
supply the items on Repeat Order basis, fresh enquires have to be floated.
Total increase in quantity through amendments or repeat order should not exceed
100% of the originally ordered quantity by the same unit.
7.10 Procurement from Other HMT Units:
If an item is available within the company or any of its subsidiary companies, like
Watch Cases, Machine Tools etc., there should not be any enquiry floated to any
suppliers for such items. The Material Planning Department being aware of HMT’s
product range and the lead time to procure such items, places the Material Transfer
Indent/Material requirement Indent within the Company after obtaining sanction of
the Competent Authority. No other factors like price, payment terms etc., should
come in the way of procuring the materials. Guidelines on such purchases / transfers
of inter unit and inter subsidiary companies in practice at the time of transaction shall
be followed. However, for trading globally, purchase can be made from other than
HMT Units with the approval of Subsidiary Chief. However preference shall be given for
HMT Units.
7.11 World Bank Procurement
In respect of any item Procured / Purchased out of the soft loan assistance from World
Bank, the procurement procedures of the World Bank shall apply.
8. OPENING OF TENDERS:
8.1 All suppliers shall be required to submit their tenders in properly sealed covers
indicating the enquiry number and the closing date on the cover. On receipt, the
tenders will be deposited in the tender box. It should be specified in bold letters
in the tender terms & conditions that covers only stapled will not be accepted.
All tenders should be opened at the specified place and on the appointed date
and time specified for their opening in the presence of the representatives of
Purchase and Finance Departments and also the representatives of the vendors
who would like to be present. As soon as the tenders are opened, the same
should be read out and the members shall write the serial no of the tender vis‐à‐
vis the page of tenders, circle and initial all money value figures, attest and circle
all corrections made in items in the tender, if any and cross out all the blank
spaces against items in the tender. Page wise total number of corrections shall
also be written on each page and attested by the Tender Opening Committee
members. All the pages of the Commercial Bid are to be numbered serially and
signed by members of the Tender Opening Committee present along with date.
All covers of the tenders shall also be initialed and shall carry the same markings
as on the tender papers and preserved.
All deficiencies observed shall be recorded on the first page. Authorised agents

Page 12
 Purchase Manual

of the suppliers who submit tenders against Open Tenders and Limited Tenders
are permitted to witness the tender opening. A record of the tenderers/agents
present at the tender opening should be maintained. No amendment to the
tenders shall on any account be permitted after the opening of the tenders has
commenced. If any quotation is not signed by the vendor, the same will be
rejected and not considered.
8.2 Any tender received after the prescribed date and time shall be treated as late
tender and marked as late tender and rejected. Late tender should not be
opened and such tenderers are to be advised in writing to collect back their
documents.
In case where technical tenders and price tenders are obtained in separate
covers, technical tenders have to be opened first.
In a Two‐bid system, after opening of bids, all the envelop containing the
technical / price bids should be signed by members of the Tender Opening
Committee and at least any two of the trade representatives if present. The
unopened envelops containing price bids should be put in a bigger envelops/box
and properly sealed and the members of the Tender Opening Committee and at
least any two of the trade representatives if present should put their initials
(with date) on the sealed envelop containing price bid and kept in safe custody.
The price bids should be opened only in respect of those tenderers whose
technical bids have been found suitable. Price bids of those tenderers whose
technical bids have not been found suitable should be returned to the tenderers
without opening.
After release of letter of intent / Purchase Order, the unopened price bids shall
be returned to the rejected bidders along with the reasons for not opening their
price bids.
9. COMPARITIVE STATEMENT
9.1 Tenders are screened with reference to basic price (Ex‐works/FOB/FOR
destination), ED & ST, delivery, terms of dispatch, specification, payment terms,
validity of the offer, etc., in relation to enquiries floated and are recorded in the
comparative statement for analyzing the quotations on a like‐to‐like basis. Any
deviations from the tendered specifications, delivery period or normal terms and
conditions and any special conditions, assistance etc., stipulated by the firm,
shall be highlighted. It should be noted whether samples if required to be
submitted with the offer, are submitted or alternatively party agrees to submit
samples as required in the enquiry at a later date. The previous procurement
price may also be recorded for assessing the reasonableness of the cheapest
technically acceptable offer. The previous price will be treated only as one of the
parameters for selecting an offer and will not be looked at in isolation for
considering any source for placement of the Purchase Order. The impact of
payment terms, including advance payment, if any, has to be considered.
Taking into consideration all the above factors, a net price comparison of the
valid tenders only shall be prepared and the comparative statement shall be

Page 13
 Purchase Manual

endorsed L1, L2, L3 etc., to indicate 1st lowest, 2nd lowest, 3rd lowest and so forth.
The polices of Govt. of India for Purchase Preference for Public sector, (PPP) if
any, should be implemented while making price comparison.
In the case of quotations received in foreign currency, the exchange rates &
duties prevailing on the date of opening of tender should be considered for
evaluation. For evaluation TT Selling Exchange rate of Nationalised Banks shall be
considered.
Sufficient care should be exercised, while considering offers from different
Vendors having common ownership / links with each other.
The comparative statement should be signed by the Purchase Assistant
preparing the statement and countersigned by the concerned Purchase Officer.
It is advised that the purchases preferably be made directly from the
manufacturer. Either the Indian Agent on behalf of the foreign principal or
foreign principal directly could be in a tender but not both. Further, in cases
where an agent participates in a tender on behalf of one manufacturer, he
should not be allowed to quote on behalf of another manufacturer along with
the first manufacturer in a subsequent/parallel tender for the same item. One
agent cannot quote on behalf of two suppliers for the same item.
9.2 As a matter of policy the lowest offer only should be accepted. Negotiation should be
confined only with the lowest tenderer by the Purchase Committee.
As far as possible, it should be ensured that the two bid system is followed so that
proper assessment of the offers are made before the award of the contract work
order. In case L1 backs out, there should be re‐tendering in transparent and fair
manner. The authority may in such a situation call for limited and short notice
tender, if so justified in the interest of work and take a decision on the basis of
lowest tender.
A practice may be adopted to publish the details of all cases relating to tenders or
out of turn allotments or discretion exercised in favor of an employee/ party,
advertisement for lease, renting out or licensing on a long term basis, acceptance of
offer on such notification etc., on the notice board as well as regular publications of
the Organisation.
9.3 Situation may warrant dividing the orders amongst more than one developed and
suitable source in order to have more than one source as a prudent measure. The
parameters to be gone through are:
(i) Wherever it is intended to divide the order, the number of vendors and distribution
ratio should have been disclosed in the tender
(ii) The prices may be negotiated with reference to the lowest accepted offer and as a
last resort upto a variation of 5% on the lowest accepted offer at the discretion of
the Purchase Committee. During “Negotiations with L1” reasonableness of prices
proposed to be accepted should be properly reasoned out and recorded in the
purchase proposals.
(iii) It should be ensured that higher share of the quantity is given to the firm who have
quoted the lowest offer, other parameters remaining the same.

Page 14
 Purchase Manual

9.4 Single Offer:

In case of single response to open / limited tenders for production / non production
items, re‐tendering should be considered in case the price and other terms are not in
line with the earlier accepted offers. In case of new items re‐tendering may be
adopted. However, where the requirement is urgent, orders could be for limited
quantities to overcome the urgency with approval of Purchase Co‐ordination
Committee. In such an eventuality the procurement should be restricted to meet the
immediate requirement. Thereafter, re‐tendering may be resorted to. If, it is felt that
there is no necessity for re‐tendering of contacting more parties and that the single
response has to be accepted, it should be processed with the recommendation of the
Purchase Co‐ordination Committee and approval from the Competent Authority,
provided it satisfies one or more of the following conditions:
(i) The rates and other terms are either equal to or less than the earlier
procurement price.
(ii) The tenderer is a well established source and his vendor rating is good.
(iii) The terms of payment are advantageous to HMT.
10. RE‐TENDERING:
Re‐tendering shall be considered in the following exceptional case(s) only, with approval of
Unit Chief:
(i) Less than three offers received subject to the offers received not satisfying
conditions as per clause 9.4 (i)/(ii)/(iii)
(ii) If the prices quoted are considered very high
(iii) In the opinion of the Purchase Committee, if it is suspected that there is a cartel
or ring existing and the prices have been manipulated
(iv) If material changes have been made in the basic specification after receipt of
tenders
(v) If none of the offers meet the desired specifications.
(vi) If the vendors withdraw the offers and do not agree for extension of validity
when it becomes necessary
(vii) If there is a sudden slump in the market
(viii) If, "order quantity is divided for the more than one vendor” is not mentioned in
the tender terms.
(ix) If L1 backs out, or fails to execute the order or does not agree for extension of
validity when it becomes necessary
11. TERMS OF PAYMENT:
11.1 For Indigenous Suppliers:
11.1.1. Normally the payment terms should be 60 days after receipt and acceptance
of the items. Efforts should be made to avail longer credit period from the
suppliers.

Page 15
 Purchase Manual

11.1.2. No offer should be accepted with the condition of opening Letter of credit for
indigenous items without the approval of Business Group Chief / Subsidiary
Chief. A format for approval for opening of L/C for indigenous purchases is as
As per Annexure‐7. However, approval of Unit Chief may be taken upto the
combined purchase value of Rs.5 Lakh.
11.1.3. In exceptional cases, part / full payment against dispatch documents /
delivery of goods either directly or through Bank can be accepted for items of
reputed suppliers,
11.1.4. Advance payment along with the Purchase Order should invariably be
discouraged. In very exceptional cases, where an Indian supplier insists upon
such advance payments and where there is no other alternative, the same
may be agreed to, based on the merits of the case, after obtaining financial
concurrence and Unit Chief’s approval. Bank Guarantee may be insisted
except in the case of Government and Public Sector Undertakings.
11.1.5. In the case of controlled items where the distribution is controlled by
Government agencies and the suppliers insist on full payment in advance
along with the order, the same may be agreed to, after satisfying whether
bank Guarantees are acceptable in lieu of advance payment or any other form
of securities.
11.1.6. The performance of the supplier against previous orders should
invariably be reviewed by the Purchase Officer at the time of recommending
fresh order on them as indicated in the Terms & Conditions of Tender (vide
clause 7.1.5‐ix). In this context, the outstanding amounts / claims due from
the supplier on account of rejections/shortages in the previous supplies
should also be invariably checked and settled before placing the fresh order.
11.2 For Foreign suppliers:
11.2.1. Payment should be arranged against shipping documents either on Sight Draft
basis or Letter of Credit, depending upon the terms of payment stipulated in
our purchase Order. Efforts should be made to obtain maximum credit period
from the suppliers. For sight drafts, the suppliers may negotiate the
documents through any foreign bank, but the same should be presented to
HMT only through the Company’s bankers for authorising payment. Similarly,
Letter of credit will also be established only through Company’s banks and
the same will be advised to the suppliers by the corresponding foreign bank in
that area. Wherever supplier insists upon receipt of Letter of Credit through a
particular bank specified by them, the same should be so arranged
accordingly. The L.C. application to Bank should be signed only by the Unit
Chief and Finance Chief.
11.2.2. Advance payments along with the Purchase Order or at intermediate points
should not normally be entertained. In exceptional cases, where the value of
the order is less than US $ 2000 and where reputed foreign supplier insists
upon advance payments, the same may be agreed to with the approval of
Unit Chief with financial concurrence. In the case of orders of higher value
prior approval of Business group chief / subsidiary chief should be obtained

Page 16
 Purchase Manual

on a case to case basis. In all such cases, efforts should be made to obtain
Bank Guarantee for the advance from the foreign supplier and RBI’s
permission obtained, if necessary. The import license specified in the order,
against which such advance payment is to be arranged must be valid upto the
date of shipment of the goods.
11.2.3. The performance of the foreign supplier against previous orders should
invariably be reviewed at the time of recommending fresh order on them as
indicated in the Terms & Conditions of Tender(vide clause 7.1.5‐ix). In this
context, the outstanding amounts / claims due from the supplier on account
of rejections / shortages in the previous supplies should invariably be checked
and settled.
12. PURCHASE PROPOSALS:
Purchase proposals are put up in the standard formats by the Purchase Department and
they should be technically and commercially clear and comprehensive. The purchase
proposal shall contain the following details:
a) Technical:
Clear data like Stock No., description of items, nomenclature, specification, and
other technical details and relevant drawing / standard sheet wherever
necessary, shall also be enclosed. In the case of proprietary items, details as per
suppliers catalogue and their part No. is to be enclosed.
b) Commercial:
 MPR No./quotation/Offers reference and date
 Quantity and value
 Statutory levies like duty, taxes
 Clearing and Forwarding Agent’s details
 Packing and forwarding charges
 Mode of transport
 Freight charges, if applicable
 Insurance
 Delivery
 Payment Terms
 Other terms and conditions
 Warranty
 Risk Purchase
 LD Clause

The MPR, comparative statement on which the proposal is based, suppliers

quotations, details of negotiations conducted, reasonableness of the prices proposed
to be accepted and all relevant correspondence should be filed and enclosed along
with the proposal. Each proposal should highlight the total additional cost savings as
compared to the existing prices. The purchase proposals are forwarded to Finance
Department for according financial concurrence.

Page 17
 Purchase Manual

13. FINANCIAL CONCURRENCE:

13.1 Verification
The purchase proposals put up to the Finance Department with all relevant details like
MPR, tender enquiry, quotation and comparative statement are scrutinized & verified
from commercial, propriety / correctness, inventory holding and budgetary control
angle by the Finance Department.
13.2 Budgetary Control:
13.2.1 Material Budget:
The Material Budget is prepared as one of the constituents of Unit’s Annual
Operational Plans for the approval of the Board. This Budget is prepared taking into
account the production and dispatch plan for the ensuing year of operation. Normally
the Material Budget contains estimated opening stock, purchases, consumption and
estimated closing stock at the end of the year of operation for each broad classification
of materials. The Material Planning Department, based on the production programme,
prepares the Material Budget in consultation with the Finance Department. The
material budget details the budgetary allocation under each major head for the year.
13.2.2 Budget Accounting:
The Purchase Department / Finance department shall indicate, in the proposal itself,
the Budget available against the particular head, commitments made so far and the
amount involved in the present proposal. These figures should also appear in the
concurrence register so that the unit will come to know how much the unit has made
commitment so far against each head of Materials. Besides Purchase Department,
Finance Department may also control the Material Budget independently. The
Purchase Committee shall review the procurement every month so as to curtail the
Material procurement and to avoid piling up of inventory.
13.2.3 Re‐appropriation of Budget:
Occasion may arise where the Unit would be short of Budget provision for certain
group of materials critically required, due to overall price increase, rise in duties,
taxes, etc; In such an event, the Unit may like to accommodate the proposed excess
commitment against some other group where enough provision is available, by re‐
appropriation of the Budget from one Head to another Head. Such Re‐appropriation
should have the approval of the Subsidiary Chief / Business Group Chief.
13.3 Concurrence
If the proposal is in order, Financial Concurrence is accorded by the Finance Chief and
the proposals are put up for sanction of the Competent Authority. Purchase proposals
should normally be disposed off within 3 working days but not later than 7 working
days of receipt by the finance department and clarification required to process the
proposals should not be sought in piece‐meal. Conditional concurrence should be
avoided and all issues should be sorted out by the Purchase Committee.
No proposals should be sanctioned by the Competent Authority without Financial
Concurrence, whether for Revenue or for Capital items. Proposals of fait accompli
nature for obtaining ex‐post‐facto sanction should be avoided.

Page 18
 Purchase Manual

14. SANCTIONS FOR PROCUREMENT:

The officers as detailed below are empowered to issue sanctions after obtaining
financial concurrence.
Value of Proposals Rank of Officers
Upto Rs.1 lakh Material Chief / Chief of Purchase
Above Rs.1 Lakh Unit Chief
Note: proposals should not be split up so as to fall within the prescribed ceiling limit.
15. PLACEMENT OF ORDERS:
15.1 The officers as shown in the table below are empowered to sign the Purchase
Order after issue of sanction by the Competent Authority. Two officers should
sign the Purchase Orders:

Value of Proposals Rank of Officers

Upto Rs.10,000/‐ PS III and above
From Rs.10,000/‐ to Rs. 1 Lakh PS V and above
Above Rs.1 lakh Chief of Purchase / Materials

15.2 All purchase orders issued shall be serially numbered and entered in the
Purchase Order register with the following details:
 Serial No
 Purchase Order No. & Date
 Value of the Purchase Order
 Name of the Supplier
 Delivery Schedule
 No. of items
 Import License No. date and validity
 Letter of Credit No. & validity
 Date of order acknowledgement
 Dates when reminders sent
 Receipt details
 Payment details
 Details of Bank Guarantee (if any)
As per CVCs Office Orders No. 13/3/05 dated 16/03/2005 and No.46/07/05 dated
28/07/2005 a monthly summary of tenders / contracts awarded should be posted on
the website of the company every month, as per format specified in Annexure‐8.
However, HMTI has been exempted from posting information in respect of trading
activities vide CVC’s Office Memorandum dated 02/12/2009.
15.3 Amendment to Purchase Order:
Purchase Order should be initiated only after obtaining Financial Concurrence and
Sanction by Competent Authorities. However, amendment to Purchase Order for
corrections of typographical errors and omissions need not require financial
concurrence. All amendments to Purchase Orders are to be endorsed to Finance and
Accounts Department for regulating payments thereon.

Page 19
 Purchase Manual

15.4 Short Closing of Order:

In case the balance quantity of material outstanding on the supplier is no longer
required by the Material Planning department or in case the supplier regrets his
inability to supply a small balance quantity left against an order, the order may be
short‐closed with the consent of the Material Planning Department and Supplier.
15.5 Transfer of the Purchase Order to another name:
The name of the supplier in a Purchase Order may be changed, if so requested by him
due to the following reasons:
(i) The name of the firm is changed
(ii) The firm has been sold to /amalgamated with another firm
(iii) The supplier wants the order to be executed by his authorized dealers
Such change should be done with the approval of Sanctioning Authority and
concurrence of Finance Department after ensuring that all legal aspects of such a
transfer of Purchase Order in another name have been looked into and complied so
that the new entity is legally and contractually bound to execute the original order.
15.6 Review of Purchase Order
The Purchase Chief shall undertake a review of the purchase orders pending deliveries
beyond 30 days, after the due date, so that the requirement of materials could be re‐
examined and if necessary, action could be initiated for cancellation/short closing of
orders/diversion of orders.
16. PROCUREMENT OF CAPITAL ITEMS:
MPRs for capital items will be raised by the Project Department / Engineering Department as
the case may be for individual items as per the approved Capital Budget under
Replacement/ Renewal or for New Expansion / Modernisation projects under approved DPR
/ Plan Document.
Procurement of capital items should have the necessary approval from the Competent
Authority as per Delegation of Powers, before release of purchase order. Proposals for
procurement of Capital Items shall be regulated by the guidelines issued by the competent
authority from time to time.
Mode / procedure of purchase for capital items will be the same as that of procurement of
revenue items.
16.1 Open Tender:
If the capital item value is above Rs. 15 lakh, the enquires should be circulated
through Open tender i.e., by publishing in News Papers and in websites of company &
NIC and also to known manufactures / dealers with the recommendation of the
Purchase Committee and approval of the Unit Chief.
16.2 Limited Tender:
An enquiry shall be issued to approved vendors as per the list available with Unit and
to the reputed manufacturers/dealers.
16.3 Wherever the capital item is in the product range of HMT, such items should

Page 20
 Purchase Manual

not be procured from outside. Any deviation in such procurement should be put up for
CMD’s approval.
16.4 There should be a two bid system (technical & commercial) by which
technical tender bid and commercial tender are obtained in separate sealed covers.
Technical tenders should be opened first and the price bid should be opened only in
respect of those tenderers whose technical bids have been found suitable / responsive.
16.5 Procedure for opening of Tenders, proposals, financial concurrence and other
items will be the same as that of procurement of revenue items.
16.5 Purchase Order:
Once the sanction is obtained from the competent authority, the Purchase Order for
Capital Item will be signed by Project Department / Engineering Department & the
Chief of Materials.
16.6 Liquidated Damage:
Liquidated Damage should be levied at the rate of 0.5% per week of delay or part
thereof on the value of items to be delivered with a maximum ceiling of 10% of the
value of the order. Waiver of liquidated damage should have sanction from the Unit
Chief with financial concurrence.
16.7 Leasing:
Wherever feasible, the possibility of acquiring the equipment on lease should be
explored. Such leasing charges should be covered under the approved Operational
Plan.
17. OUTSOURCING:
Outsourcing has assumed enormous importance in the present day context as a facilitator
for cost reduction, reduced investments, higher focus on core components and better
workflow. Outsourcing may be taken up as subcontract for component manufacture or part
operation during component manufacture as well as contracts for services.
17.1 Component Sub contract:
Subcontract of components may be undertaken in cases as below:
 Low technology items that are not economical for in‐house operations and in‐
house facilities shall be fully utilized for better purpose
 Facilities not available internally.
 Lack of time to meet production and delivery schedules
 Cost advantages of sub contracting of items even after considering idle cost of in
house facility vis‐à‐vis cost of manufacture in house.
Approval of the Unit Chief should be taken for sub contracting the work with full
justifications and financial concurrence. If the value of outside procurement on sub
contract basis is more than Rs.15 Lakhs then approval should be obtained from
Subsidiary Chief / Business Group Chief. Competitive bidding process should be
followed for subcontracting of components.

Page 21
 Purchase Manual

17.2 Off loading of part operations:

Part operations during the manufacturing cycle of a component could also be
outsourced depending upon need in cases as above. The normal purchase procedure
like vendor rating, tendering and other purchase procedure may be followed for off
loading also.
The Company reserves the right of offloading part quantities without assigning any
reason and the supplier shall supply the ordered quantity as per accepted rates.
17.3 Outside procurement when in‐house facilities are unutilized fully:
Wherever capacity within the Company is available and is not being fully utilized,
procurement from outside sources should not be resorted to. Any deviation should
have prior sanction of Subsidiary Chief.
17.4 Contracts for services:
There may be occasions to enter into annual contracts with outside agencies for
services which are revenue in nature like clearing and forwarding of materials,
transportation, Courier Services, House Keeping, Canteen, AMC's etc.,
The request from the concerned departments shall be in the form of a proposal
detailing the nature of work to be done, justifying the necessity to go in for outside
contracts and indicating the estimated cost and the budget head.
There should be open tender in these cases and the same should be published in local
news papers. If the cost of services is less than Rs.5 lakhs p.a. the tenders may be
circulated to all the approved list of tenderers by post under certificate of posting./
courier. There should be separate tenders for technical details and financial details,
wherever applicable.
However, in the case of contracts for transportation of goods, customs clearance, etc.
where there are a number of items to be quoted and no single quotation can be
considered as the lowest among all the items under consideration, lowest of all the
quoted rates against each item may be offered to one or more of the tenderers who
have quoted lower rates, and negotiate with them to reach the lowest rates for the
contract as a whole. Loading pattern shall be mentioned in the tender. The period of
contract may be for a minimum of one year and maximum of three years.
The proposals will be processed by the Purchase Department in consultation with the
concerned department as per the normal tendering procedure and sanction obtained
from the Unit Chief.
18. GENERAL TERMS AND CONDITIONS OF CONTRACT:
The general terms and conditions of contract for the supply and the standard instructions to
tenderers framed by the Units shall inter alia, include the following; (individual terms can
however, be revised /modified in each case to reflect the terms and conditions negotiated
and agreed upon):

Page 22
 Purchase Manual

18.1 Counter Terms and Conditions:

Purchase Department should persuade the supplier to accept Company's terms and
conditions. However, in cases when the supplier insists on their terms and conditions,
Purchase Chief can accept suppliers’ terms and conditions after examining the
implications, with financial concurrence and necessary sanction.
18.2 Taxes and Duties:
Normally quoted prices should indicate separately basic price, excise duty, sales tax,
octroi etc., as applicable to the item.
18.3 EMD:
EMD may be fixed for capital items wherever required and this should not be as
percentage but the amount should be decided by the Purchase Committee. EMD shall
be payable by way of Bank guarantee / cheque / demand draft/ pay order drawn on
the company payable at the location where the bids / quotations are received.
18.4 Inspection:
Materials from suppliers on their arrival will be inspected by the Inspection
department and Company's decision in regard to the acceptability of the goods will be
final. The rejected materials will be returned to the supplier for replacement on
“freight to pay” basis for arranging free replacement and all charges on the same will
have to be borne by the supplier. The supplier should arrange for replacement within a
reasonable time, failing which Company reserves the right to procure the items from
elsewhere at the risk and cost of the supplier and recover from him the extra
expenditure, if any, incurred by Company. This would be incorporated in the tenders
and the Purchase Orders. Wherever payment has been made by Company, partly or
wholly to the supplier the rejected material will be returned to the supplier only
against refund of amount paid by Company.
18.5 Delivery/Liquidated Damage:
Timely delivery is the essence of order and the items against the order must be
delivered by the supplier according to the delivery schedule indicated in the Purchase
Order. In case of any change, the supplier should inform company in advance and
obtain Company's approval to the revised delivery schedule. If the supplier fails to
deliver the material or part thereof as per the agreed delivery schedule, Company shall
be entitled, at its option, either to recover from the supplier agreed liquidated
damages or to cancel the order and purchase the materials elsewhere at the risk and
cost of the supplier. This should be clearly mentioned in the tender as well as the
Purchase Order.
18.6 Escalation:
No claims for increase in rates will be entertained during the currency of the order on
any account whatsoever to the maximum extent possible. However, in case of
abnormal changes in the price structure nationally / internationally due to external
factors, reasonable escalation in price may be considered with approval of Purchase
Committee and Sanction from the Unit Chief to meet the immediate production target.
Nevertheless subsequent procurements should follow the regular purchase procedure.

Page 23
 Purchase Manual

18.7 Warranty:
The supplier shall warranty that the materials/machinery/equipment to be supplied by
them shall be free from any defects arising from faulty material, design or
workmanship and shall be guaranteed for quality/satisfactory performance for a
suitable period to be laid down by mutual negotiations. During the warranty period, if
any defects are noticed arising from faulty material, design or workmanship, the
supplier shall remedy or replace such defective supplies at his own cost. In the case of
Capital items Performance Guarantee shall be insisted.
18.8 Indemnity:
The supplier shall at all times indemnify HMT / Company against all claims which may
be made in respect of alleged infringement of any rights protected by Patent
registration, design or trade mark.
18.9 Arbitration:
All disputes regarding the execution of order shall be referred to Appropriate
Authorities and the arbitration procedures shall be as per the Indian Arbitration and
Conciliation Act, 1996.
In the case of foreign Suppliers/Vendors, attempt should be made to make the vendors
agree to Indian Arbitration and Reconciliation Act 1996. However if the foreign vendor
insists on International arbitration, then the venue of arbitration should be in India and
preferably the place from where the contract is issued.
18.10 Jurisdiction:
The order shall be governed by the Laws of Indian Union. Only the competent court in
India at or nearest to HMT Unit (to be mentioned) shall be moved in case of any suits
by or against the Company.
18.11 Lien:
HMT / Company shall be entitled to appropriate and recover from any particular order
of a supplier all outstanding dues from the supplier in respect of other orders placed
on him.
19. OTHER PROCEDURES RELATED TO PURCHASE FUNCTION:
19.1 Procedure to treat Rejected Materials:
If the materials on inspection are found not suitable, the suppliers should be informed
in writing of the same by Purchase Department within 7 days from the date of
rejection report from Inspection Department, for replacement. If the supplier is not
responding within 15 days, arrangements should be made with a proper
documentation and the rejected item should be sent back to the supplier at their cost
(freight to pay basis, if it is outstation). If the items are procured with payment terms
of “Documents through Bank” or “ payment against delivery”, the rejected items must
not be returned back to the supplier till the items are replaced. If the items are not
replaced despite repeated correspondence/reminder within 3 months, legal action
should be initiated by the Purchase Department against the supplier. Such suppliers
who have not replaced the rejected items for which payment has been made and legal
action initiated, should be removed from the approved vendor list.

Page 24
 Purchase Manual

19.2 Excess Supply:

Acceptance of excess supply in exceptional cases is permissible within 10% of ordered
quantity in regard to regular production items subject to the approval of the
competent authority provided there is no downward trend in prices.
19.3 Delivery ahead of Schedule:
Delivery ahead of the stipulated delivery schedule in the purchase order is not
normally acceptable. However, if the production exigencies justify, and materials will
not deteriorate in quality while kept in stock, the same may be accepted by the
Purchase Chief, but payment to the supplier shall be made only on the due date, as per
payment terms with original delivery schedule. Suppliers should be asked not to send
dispatch documents through Bank in the case of early delivery.
19.4 Change in Statutory Levies:
Any change in statutory levies giving rise to additional payment than what is provided
in the Purchase Order needs to be approved by the sanctioning authority.
19.5 Issue of Statutory Forms:
Statutory forms related to purchase like “C” & “D” Forms etc., shall be provided by the
Finance Department to the Purchase Department for submission to the suppliers.
Issuance of such forms to supplier shall be entered in a Register by the Purchase
Department, and will be submitted to Finance / Accounts Department periodically for
obtaining fresh forms from Government Authority. No scope should be given to
suppliers to claim any additional charge on account of non‐issue/delay in issue of the
said forms.
19.6 Price Variation / Escalation
Purchase shall normally be made on the basis of firm prices. In exceptional cases
where material costs depend upon statutory regulations or otherwise controlled prices
or in cases where material costs are liable to wide fluctuations, price variation /
escalation clauses may be allowed. Normally in respect of long‐term contracts,
purchase enquiry shall include price variation/escalation clause based on significant
facts affecting the cost.
19.7 Avail of CENVAT:
In order to avail the CENVAT credit on items procured, the suppliers’ invoice should
indicate separately the element of Excise Duty and at no time the Invoice should
indicate all inclusive price(s). However, where deemed credit is available for items like
alloy steel, iron & steel scrap, etc., procured from authorised stockist, all inclusive rates
could be accepted.
19.8 Mode of Transport:
19.8.1 Inland Purchase:
Normally, the cheapest mode of dispatch should be adopted. Any deviation in
the mode of dispatch involving extra expenditure must be approved by the Chief
of the Materials/Purchase with reasons to be recorded in writing. If the
materials/spare parts are to be air‐lifted, approval from competent authority as
per delegation of powers is required.

Page 25
 Purchase Manual

19.8.2 Foreign Purchases:

Sensitive and costly electronic component orders from abroad may be air
freighted to avoid damage/deterioration likely in transit if sent by sea‐freight. All
other materials should normally be transported by the cheapest mode of
transport with due regard to the safety of the materials. If, however, any
material is required urgently or if there is difficulty or delay in transporting by the
cheapest mode of transport, a quicker mode of transport including air freight
may be sanctioned by the Purchase Chief after recording the reasons provided.
The total freight charges involved do not exceed 10% of the cost of materials. In
cases where it exceeds 10%, it would require the approval of the Unit Chief with
the concurrence of the Finance Chief.
20 OTHER ACTIVITIES RELATED TO PURCHASE FUNCTION:
20.1 MANAGEMENT REPORTING:
The Purchase Chief should arrange for submission of Management Reports to the Unit
Chief every month, as detailed below:
(i) Purchase budget, category‐wise, vis‐à‐vis the actual commitment during the
month.
(ii) Cost savings/increase effected in the purchase activity every month.
(iii) Orders placed for capital items and the position as at the end of the
month.
(iv) Monthly status of Material‐in‐transit.
(v) Pending Air and Sea consignments at customs.
(vi) Material receipts (group‐wise), monthly and cumulative (to be obtained
from Stores Department).
(vii) Pending payments to suppliers’ age‐wise analysis (to be obtained from the
Finance Department).
(viii) Statement of the L/Cs opened and L/Cs matured (to be obtained from
Finance Department).
Further, the purchase chief should also arrange for publishing information (except for
trading information) on the website as per Annexure‐8.
20.2 COMPUTERISATION:
The Units shall make all out efforts to computerize the total material planning,
purchase and stores functions so as to strive towards an Integrated Material
Management System at the earliest.
20.3 USE OF INTERNET FACILITIES:
Internet has become an important tool to aid the Purchase activities. Internet facility
should be made use of by the Purchase Department for information on product
specifications, new suppliers, alternate products, new products, indicative price, which
will aid in improving the tendering process and also for better negotiations
20.4 DO's and DON'Ts
Brief list of DO's and DON'Ts for Purchase activity (extract from compendium of CVC &
other guidelines for purchase and works contracts issued by CVO, HMTL) is enclosed as
Annexure‐9 for quick reference.

Page 26
 Purchase Manual

LIST OF ANNEXURES

Annexure Page
Title
No No

1 Definition of Terms – Quick reference 28

Responsibilities of Purchase & Finance Departments in

2 33
Purchase function

3 Constitution of Committee 35

4 Vendor Registration Format 36

5 Proprietary Article Certificate 38

6 Format for approval for imports 39

Format for approval for opening L/C for indigenous

7 40
purchases

Format for publishing on the website, the details of

8 41
contracts awarded during the month

9 Do & Don’ts for purchase function 42

Page 27
 Purchase Manual

ANNEXURE‐1
DEFINITIONS FOR QUICK REFERENCE

MPR
Material Purchase Request, authorized by material engineering chief
OFFER
An offer is the response from a source to an Enquiry. An offer is considered to be valid if it is
not a late/regret/unsolicited offer. It refers to the submission of quotation by a firm in the
form of price for supplying the item to the required specification and quantity or for a
service to be rendered in response to an enquiry. The quotations submitted by Tenderers
may be classified as in time, regret, unsolicited, and late.
IN‐TIME OFFER
In‐time offer refers to valid offer received in time against a tender enquiry.
REGRET OFFER
Regret offer refers to 'Nil' quotation from the Tenderer indicating that the Tenderer is not
interested in the Tender Enquiry.
UNSOLICITED OFFER
Unsolicited Offer shall refer to submission/receipt of quotation from a supplier who has not
been contacted/to whom no enquiry was sent, in a limited tender. However, an offer
received in time from the authorized agent or a sister concern on behalf of the manufacturer
contacted in a tender enquiry can be treated as a solicited offer provided it could be
established that the enquiry sent to the manufacturer was passed on to his authorized agent
/dealer of sister concern by the manufacturer for submitting quotation.
LATE OFFER
Late offer is one which is received after the closing due date and time.
PURCHASE ORDER
Purchase Order is a contract placed on a supplier with our agreed terms and conditions on
acceptance of his valid offer for supply of the items/services stated therein. The purchase
order value for comparison refers to total value including the applicable levies and
taxes/duties i.e., total cost to the company.
REPEAT ORDER
Repeat orders are those that are placed on same suppliers / vendor based on previous order
without calling fresh offers / tenders.
COMPETENT AUTHORITY
Competent Authority shall refer to the authority competent to sanction/approve the
purchase proposals as per the "Delegation of Powers",

Page 28
 Purchase Manual

CAPITAL ITEM
An item is said to be of capital nature when there is enduring benefit spread over a longer
period. It relates to addition to the fixed assets of the company. It is in the form of
acquisition of a new asset duly covered in the capital budget.
DGS&D RATE CONTRACT
This refers to procurement of materials by availing the Rate contracts finalized by the
Director General of Supplies and Disposal (DGS&D) for placing either a supply order or a
direct order availing the Rate Contract prices.
LETTER OF INTENT
Letter of intent is an authorisation to the supplier for taking up production and supply of the
item mentioned therein, subject to regularisation by a purchase order within a reasonable
time but not later than 30 days.
RPAD – Registered Post Acknowledgement Due
L/c: Letter of Credit
Company means HMT or its subsidiaries/Units as the case may be
However, in the case of imports / procurement from foreign sources International
Commercial Terms (INCOTERMS) shall be used as appropriate. A brief definition and the
terms used are as follows:
INCOTERMS
When negotiating an international sales contract, both parties need to pay as much
attention to the terms of sale as to the sales price. To make it as clear as possible, an
international set of trade terms (INCOTERMS) has been adopted by most countries that
defines exactly the responsibilities and risks of both the buyer and seller including while the
merchandise is in transit.
"Incoterms" is an abbreviation of International Commercial Terms, which were first
published in 1936 by the International Chamber of Commerce (ICC). Since that time there
have been six different revisions and updates to the Incoterms. The Incoterms provide a
common set of rules for the most often used international terms of trade.
The goal of the Incoterms is to alleviate or reduce confusion over interpretations of shipping
terms, by outlining exactly who is obligated to take control of and/or insure goods at a
particular point in the shipping process. Further, the terms will outline the obligations for the
clearance of the goods for export or import, and requirements on the packing of items. The
Incoterms are used quite frequently in international contracts, and a specific version of the
Incoterms should be referenced in the text of the contract.
Although the Incoterms are widely used and exceedingly handy, they are not meant for
every type of contract. Specifically, the terms used in a contract state exactly when the
shipper unloads and relinquishes obligation, and when the buyer takes over for carriage and

Page 29
 Purchase Manual

insurance. The Incoterms are not meant to replace statements in a contract of sale that
outline transfers of ownership or title to goods. Therefore, the Incoterms may not be of use
when looking to resolve disputes that may arise regarding payment or ownership of goods.
The 13 Incoterms fall into four different groups. These four groups are:
 Departure (E)
 Main Carriage Unpaid (F)
 Main Carraige Paid (C), and
 Arrival (D)
Each group's letter makes up the first letter of Incoterm. For example, if your agreement
with a buyer calls for the release of goods by the seller to occur at the seller's location, the
Ex Works (EXW) Incoterm would be used. This term states among other things that the
buyer is to take over carriage and insurance responsibilities at the sellers dock. Alternatively,
if the seller were to deliver goods to the buyers dock, including all carriage and insurance, a
term from the Arrival group such as DDP would be appropriate. The DDP term stands for
Delivered Duty Paid and includes in its definition that the seller will deliver goods to the
buyers dock with all carriage, insurance, and duties paid. DDP represents the most
obligations for the seller, whereas EXW represents the least.
Caution must be exercised when using Incoterms because the Incoterms relate to particular
modes of transportation. For example, some of the Incoterms deal solely with transport by
sea. Terms such as FOB and CIF can be used only for ocean bound freight. FOB, meaning Free
on Board, translates to the shipper (seller) having upheld his/her part of the agreement
when the goods pass the ship's rails at the port of exit. The receiving party (buyer) assumes
risk and costs associated with the goods once they pass the ship's rail in the seller's home
port. Due to the specific mention of the ship's rails, an aircraft or other mode of transport
could not be used with FOB. For a shipment scheduled for delivery by air, rail, or some other
form of transport with the same agreement as FOB one would need to use the Incoterm
FCA, or Free Carrier. FCA can include other modes of transportation such as road, rail,
interland waterway, and air. Whereas transfer under FOB takes place when the cargo passes
the ship's rails, transfer with FCA occurs when delivery of goods has been made at a
destination previously outlined by the buying party.

INCOTERMS 2000 are internationally accepted commercial terms defining the respective
roles of the buyer and seller in the arrangement of transportation and other responsibilities
and clarify when the ownership of the merchandise takes place. They are used in
conjunction with a sales agreement or other method of transacting the sale.
 EXW ‐ Ex Works ‐‐ Title and risk pass to buyer including payment of all transportation
and insurance cost from the seller's door. Used for any mode of transportation.

Page 30
 Purchase Manual

 FCA ‐ Free Carrier ‐‐ Title and risk pass to buyer including transportation and
insurance cost when the seller delivers goods cleared for export to the carrier.Seller
is obligated to load the goods on the Buyer's collecting vehicle; it is the Buyer's
obligation to recieve the Seller's arriving vehicle unloaded.
 FAS ‐ Free Alongside Ship ‐‐Title and risk pass to buyer including payment of all
transportation and insurance cost once delivered alongside ship by the seller. Used
for sea or inland waterway transportation. The export clearance obligation rests with
the seller.
 FOB ‐ Free On Board and risk pass to buyer including payment of all transportation
and insurance cost once delivered on board the ship by the seller. Used for sea or
inland waterway transportation.
 CFR ‐ Cost and Freight ‐‐ Title, risk and insurance cost pass to buyer when delivered
on board the ship by seller who pays the transportation cost to the destination port.
Used for sea or inland waterway transportation.
 CIF ‐ Cost, Insurance and Freight ‐‐ Title and risk pass to buyer when delivered on
board the ship by seller who pays transportation and insurance cost to destination
port. Used for sea or inland waterway transportation.
 CPT ‐ Carriage Paid To ‐‐ Title, risk and insurance cost pass to buyer when delivered to
carrier by seller who pays transportation cost to destination. Used for any mode of
transportation.
 CIP ‐ Carriage and Insurance Paid To ‐‐Title and risk pass to buyer when delivered to
carrier by seller who pays transportation and insurance cost to destination. Used for
any mode of transportation.
 DAF ‐ Delivered at Frontier ‐‐ Title, risk and responsibility for import clearance pass to
buyer when delivered to named border point by seller. Used for any mode of
transportation.
 DES ‐ Delivered Ex Ship ‐‐ Title, risk, responsibility for vessel discharge and import
clearance pass to buyer when seller delivers goods on board the ship to destination
port. Used for sea or inland waterway transportation.
 DEQ ‐ Delivered Ex Quay (Duty Paid) ‐‐ Title and risk pass to buyer when delivered on
board the ship at the destination point by the seller who delivers goods on dock at
destination point cleared for import. Used for sea or inland waterway transportation.
DDU ‐ Delivered Duty Unpaid ‐‐ Title, risk and responsibility of import clearance pass
to buyer when seller delivers goods to named destination point. Used for any mode
of transportation. Buyer is obligated for import clearance.
 DDU ‐ Delivered Duty Unpaid ‐‐ Seller fulfills his obligation when goods have been
made available at teh named place in the country of importation
 DDP ‐ Delivered Duty Paid ‐‐ Title and risk pass to buyer when seller delivers goods to
named destination point cleared for import. Used for any mode of transportation.
 Note: EXW, CPT, CIP, DAF, DDU and DDP are commonly used for any mode of
transportation. FAS, FOB, CFR, CIF, DES, and DEQ are used for sea and inland
waterway

Page 31
 Purchase Manual

The following chart summarizes the responsibilities of both the buyer and seller for each of
the current 13 INCOTERMS.

EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ DDU DDP
Delivered
Free Free Cost Carriage Delivered Delivered Delivered
Ex Free Cost & Carriage Delivered Ex Quay
SERVICES Alongside Onboard Insurance Insurance At Duty Duty
Works Carrier Freight Paid To Ex Ship Duty
Ship Vessel & Freight Paid To Frontier Unpaid Paid
Unpaid
Warehouse
Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Storage
Warehouse
Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Labor
Export
Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Packing
Loading
Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Charges
Inland Buyer/
Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Freight Seller*
Terminal
Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Charges
Forwarder's
Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller
Fees
Loading On
Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Vessel
Ocean/Air
Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller
Freight
Charges
On Arrival
Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Buyer Buyer Seller Seller Seller
At
Destination
Duty, Taxes
& Customs Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller
Clearance
Delivery To
Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller
Destination

* There are actually two FCA terms: FCA Seller's Premises where the seller is responsible only for
loading the goods and not responsible for inland freight; and FCA Named Place (International
Carrier) where the seller is responsible for inland freight.

Page 32
 Purchase Manual

ANNEXURE‐2

A. RESPONSIBILITIES OF PURCHASE DEPARTMENT:

The functions of Purchase Department, inter alia, are:
(i) Adherence to guidelines contained in the purchase manual
(ii) Maintenance of an updated Vendor Register system.
(iii) To issue enquires / tenders, analyse the quotations received and prepare
comparative statements with a view to obtain competitive prices to HMT.
(iv) To conduct negotiation with L1 tender.
(v) To keep tender box with lock for receiving offers in sealed tenders. Tender box shall
be opened in the presence of vendors and representative of finance department in
the case of Open Tender, Limited Tender, Single Tender etc.,.
(vi) To ensure fair opportunity to tenderers / suppliers and competitive prices & terms
and assured quality to HMT
(vii) To issue Purchase Orders in time after obtaining competent authority’s sanction and
follow up for supplies and periodical review of pending Purchase Orders.
(viii) To follow‐up with suppliers for timely supply and replacement/settlement of claims
and other dues from suppliers and closure of purchase order is ensured.
(ix) To co‐ordinate and assist Finance and Inspection Dept. in settlement of bills and
recovery of dues if any.
(x) To submit applications for import clearance and obtain technical clearances and
Import Licenses wherever applicable.
(xi) To enter into annual rate contracts with committed delivery schedules for standard
items, wherever advantageous to HMT.
(xii) To enter into service contracts for transportation, customs clearance and
maintenance of equipment, etc.,
(xiii) To ensure after‐sales‐service is fulfilled by the supplier during warranty and post‐
warranty period .
(xiv) To effectively plan and control the inventory level.
(xv) To be alert and responsive to the changes in production programme and change in
requirement of material.
(xvi) To keep abreast with Government regulations relating to purchases, various
statutory levies thereon and Import‐ Export policy. To ensure claim of all
taxes/duties exemptions/duty drawbacks etc., as applicable, for national
/international procurements
(xvii) To submit monthly MIS reports.
(xviii) To interact frequently with Purchase Departments of other Units with a view to
sharing of information regarding price, source of supply, payment terms, vendor
rating etc.,
(xix) To ensure that insurance claims are preferred in time, for items damaged / lost in
transit.

Page 33
 Purchase Manual

(xx) Standardization and computerization of Purchase activities and inventory controls.

(xxi) All relevant data regarding Purchase Function should be recorded and maintained,
as required for the internal use as well as providing the information as per present
provision of Right To Information Act.
(xxii) No purchase orders shall be placed against anticipated customer orders except
under special circumstances for which prior specific approvals of competent
authority shall be taken(Project Department / Engineering Department).
(xxiii) Review of show cause Notice from Customs, counter claims from vendors and
advance payments for items rejected subsequently.
(xxiv) Minimize dependency on imports.
(xxv) Serve as an information center on materials viz., prices, sources of supply,
specifications etc., to all other Units / Departments.
(xxvi) Ensure inventory is at an optimum level.
(xxvii) Ensure that the economic and legal interests of the organization are safeguarded at
all lengths.
(xxviii) Ensure that advanced new technologies like usage of internet etc are adopted for
more effective procurement practices.

B. RESPONSIBILITIES OF FINANCE DEPARTMENT:

(i) To ensure that the prescribed rules and procedures have been followed and that
the canons of financial propriety have been observed in the procurement.
(ii) To extend necessary help to minimize the lead time
(iii) To have effective inventory control on the material procurement.
(iv) To be responsive to the changes in production programme and change in
requirement of material.
(v) To ensure maximum credit facility is available from vendors so that the working
capital could be effectively managed.
(vi) To ensure that the insurance claims are preferred for items damaged in transit in
co‐ordination with stores and purchase department.
(vii) Obtaining of Statutory Forms from Government Authorities and coordinate with
Purchase Department / Stores in respect of activities relating to issue of C & D
Forms as per clause pertaining to “Issue of Statutory Forms”.

Page 34
 Purchase Manual

ANNEXURE‐3
Constitution of Committee

Purchase Committee:

The constitution of the Unit Purchase Committee shall be as under:

Material Chief Chairman
Finance Chief Member
Purchase Chief Convener
All purchase proposals should be routed through the above committee.

Purchase Co‐ordination Committee:

For value upto 1 Lakh:
Material Chief Chairman
Finance Chief Member
Purchase Chief Convener

For value above 1 Lakh:

Unit Chief Chairman
Material Chief Member
Finance Chief Member
Purchase Chief Convener

The Chiefs of Engineering, Design / R&D and Inspection Departments can be invited as and
when required, while the indenter shall also be invited for the meeting to take collective
decision. Purchase Co‐ordination Committee should meet at least once in a week.

The proceedings of the Purchase Co‐ordination Committee shall be recorded in the relevant
files and duly authenticated by the Chairman of the committee.

Page 35
 Purchase Manual

ANNEXURE‐4
Vendor Registration Format

Sl.
Particulars Details
No
(a) Name and address of the vendor
(b) Please specify whether you are : Manufacturer /
Manufacturer's Authorised Distributor / Authorised
Dealer / Stockist. (In case of Manufacturer, please specify
address of works / office if any.)
1 (c) Telephone No.
(d) Fax. No.
(e) Email ID
(f) Company Profile (Please enclose)
(g) Turnover of the Company for the past three years
(h) Bankers Details
2 Quality system implemented – ISO 9000 / QS 2000 etc.
3 Name, address & Telephone No. of the owner / proprietor
4 Details of HMT Employees having financial interest in the Unit.
5 Central Excise Range / Division to which the unit belongs
6 Sales Tax Registration No. – Central & State
7 Registration No. (SSI etc.)
8 Details of products offered. Please enclose product catalogue
9 Details of Machinery / facilities available
10 Details of Inspection / Testing facility
11 Manpower / Organization structure
12 Details of your Major customers
Are you exporting products / services? If so, please furnish
13
details of exports for past 3 years.
Are you supplying to any other units of HMT and if so, give
14
details of the Units.
Do you have your authorized dealers / service centers, if so,
15 please furnish the details of network of your Authorized
Dealers/Service Centers in India.
Declaration: I / We declare that the details given above are true and correct.

Place: Signature of Authorised person

Date With Company Seal

Page 36
 Purchase Manual

FOR OFFICE USE ONLY

REMARKS:

Signature of Head of Purchase

Date

Recommended for Total Not Recommended

Purchase Order / Sample

Authorised Signatory

VENDOR CODE ALLOTED: NO:……………………

"R" (Registered) Status given

After receiving the Goods, they are inspected and the following status is given:
(a) Approved with "A" Status if accepted

(b) If rejected get replacement – Inspect and follow Sl.No.1

(c) Not approved if rejected

Page 37
 Purchase Manual

ANNEXURE‐5

PROPRIETARY CERTIFICATE

1. Item Nomenclature:

2. Part No. / Description / Qty:

3. To be procured from:

4. Since when the item is being procured from above Vendor:

5. Reason for declaring as Proprietary Item:

(Tick the applicable one and score out ones not applicable)
I. No equivalent or near equipment available from any other source
II. All possible suppliers quote the rate of the product of only one manufacturer
III. Material with registered patent and not offered by any other source
IV. Material required for production or maintenance of plant and equipment
which necessarily have to be of a particular make or manufacture
V. Item manufactured as a development effort by any manufacturer based on
design / drawing of HMT
6. Whether thorough scrutiny of all possible sources was carried out before declaring
the above item as a single proprietary item.

7. Names / Signatures / Designations of members of Purchase Committee.

8. Concurrence of Finance Department.

9. Name / Designation / Signature of the Unit Chief

Page 38
 Purchase Manual

ANNEXURE‐6
FORMAT FOR IMPORT APPROVAL

COMPANY UNIT :
REF: Unit/
REQUEST FOR APPROVAL FOR IMPORTS DURING (Year) DATE:
IMP/Prop/Year/SN

Covered Under
1. Machine/Product : Customer : Order : (Confirmed
Order No ) ‐‐‐‐‐‐‐‐‐‐‐‐
‐‐‐
For
M Deliver
F y Delivery
Item Supplier’s Offer Value (CIF)
LC Landed Pay Date
Supplier / Offer
Sno * Cost Ment
Place Ref.&Dat
Rs. Terms
e
Qty. Exchange Valu Reqd Indica‐
Descriptio Curren Total
Planned Conversio e In By Ted In
n cy Value
(Nos.) n Rate Rs. Unit Offer

Total
Covered Under
2. Machine/Product : Customer : Order : (Confirmed
Order No ) ‐‐‐‐‐‐‐‐‐‐‐‐
‐‐

Total
* MFLC – Multiplication Factor for landed cost

Unit APPROVED
Materials
ROUTE Indentor Proposer Finance Unit Chief Concurred (Competent
Chief
Chief Authority)
SIGN
DATE

Page 39
 Purchase Manual

ANNEXURE‐7
Format for Approval for opening of L/C for indigenous Purchases.

FAX / E‐MAIL / COURIER Page: 1 of …..

HMT Limited
To: From:

(Complete Address with Tel. No., Fax No. E‐ (Complete Address with Tel. No., Fax No. E‐
mail ID etc.,) mail ID etc.,)

APPROVAL FOR PAYMENT THROUGH INDIGENOUS L/C

NO………… DATE…………
Particulars
Total Purchase
Sl.No Description Stock No Rate Qty
Amount Order Ref
1
2
3
Total
Excise Duty @
C.S.T. @
Total
Rounded Off
Payment Terms:

Remarks

Material Finance Unit

Route Subsidiary Chief
Chief Chief Chief
Signature

Date

Page 40
 Purchase Manual

ANNEXURE‐8
Format for publishing on the website, the monthly details of contracts awarded

Page 41
 Purchase Manual

ANNEXURE‐9
DO’S AND DON’T’S

Subject : Indent
SN Dos Donts
01 Indicate Drg no. Spec and ALL other Don’t give incomplete information.
required information
02 Estimate to be realistic
03 Delivery date to be practical Do not indicate impractical delivery
dates.
04 If single tender – exact reason as per Single Do not get confused between ST and
Tender clause of Purchase Policy to be Proprietary.
indicated.
05 Emergency indents to have a speaking note Do not create Emergency. Do not forget
as per purchase policy. to enclose speaking note.
06 If specific brand name / make are indicated, Do not treat it as LT just because more
it is proprietary. than 1 dealer / trader is contacted.
07 All ST indents to be certified by Head of Do not process without certification by
indenting dept. head of indenting dept.
08 Indents and further amendments to be Amendments cannot be signed by an
signed by competent authority as per authority lower than the authority who
delegation of power, based on value has signed original Indent.
09 Source standardization should be the Do not mix‐up between Source
approval of Head of the unit as per relevant standardization and Proprietary.
clause of policy.
10 If some of the items have to be procured as Without this, Do not ask for
a package from a single source‐Indicate procurement from single vendor after
clearly, with reasons. tender opening.
11 Process Emergency indents with due speed Do not delay, defeating the purpose of
emergency.
Subject : Enquiry
SN Dos Donts
01 Contact approved vendors
02 Evaluate customer approved vendors before Do not combine developmental
price bid opening order/vendors with regular enquiry
03 Obtain competent authority’s approval for Do not tender w/o proper approval
tendering, as per Policy.
04 Circulate tender to all approved vendors Do not omit any approved vendor
without proper justification and
approval of Unit Chief
05 Minimum Tender time of 2 wks for limited Do not fail to get approval by recording
tender & 3 wks for open tender can be reasons.
reduced with recorded reasons and approval
from Unit Chief.

Page 42
 Purchase Manual

SN Dos Donts
06 Indicate, Loading factors, buying items as a Do not change terms of Enquiry
package from single source, Load distribution without giving equal opportunity to
criteria etc. (refer details under R/C) ALL.
07 Indicate the Annexures enclosed, in the Do not forget to indicate total No. of
enquiry. Helps vendor to notice in case any pages and enclosures sent with Enq.
enclosure is missing.
08 When reqt. Is likely change, high value etc. If single part bid DO NOT reject for
resort to TWO part bid. reasons like new vendor which should
have been considered before
tendering.
09 Completely fill the Enq. Check list before Do not leave checklist blank/routinely
signing enquiry. fill without verifying.
10 Despatch thro’ Reg/speed post or courier, Do not/avoid dispatch thro’ normal
File proof of dispatches. post.
11 Freeze all Tech. Requirements & Comml. Do not open price bid without freezing
Terms before price bid opening techl & comml. Terms.
12 Give reasonable opportunity to all vendors Do not proceed unilaterally.
for clarifications.
13 Reasons for Rejecting offer to be informed to Do not open price bid with out this
vendors before price bid is opened
14 If necessary obtain revised price bid/
additional prices for revised scope of supply.
14 BG to be obtained from Nationalized or
scheduled bank for the required value
16 In case advance/stage payment, BG for the Do not allow BG to lapse or fail to get
equivalent value to be valid till the END of BG value enhanced if PO value gets
contract or delivery of a marketable product. amended upwards.
17 Price bids of tech. acceptable vendors only be
opened.
18 Be consistent in evaluation / Load sharing
19 Indicate Purchase preference clause in Enq.
(If applicable).
20 Open tender in Public
21 ALL pages of offer to be signed by both
Finance and MM representative at the time
of tender opening.
22 Any corrections in offer to be re‐written and
signed by tender committee.
23 Total number of corrections in each page to Do not forget this. It will be helpful in
be written and signed to avoid any mischief case of verification.
in future. Also, indicate total no of offers
received on each offer Eg.1/5, 2/5 etc.

Page 43
 Purchase Manual

Subject : Comparison statement.

SN Dos Donts
01 Should be on total cost to HMT Do not go by basic rate only
02 Calculate on for HMT / Site as the case may
be for ALL
03 Ensure that vendors quote % of applicable Do not presume or omit
taxes and duties
04 Modvat to be deducted wherever applicable
05 Decide Ranking on the Final price Do not decide on basic price
06 Ranking on package or item wise to be Do not change terms after price bid
decided based on Enquiry terms. opening.
07 Statement to be signed and counter signed Do not leave unsigned.
after verification
08 For comparison, exchange rate as on the Do not take ER as on CST preparation,
date of tender opening to be considered. since this can tilt rankings daily.
Subject : Negotiation
SN Dos Donts
01 Negotiation proposal to be approved by one Do not negotiate without approval
step higher authority
02 Negotiation with L1 only
03 If enquiry indicates that load shall be Do NOT negotiate with ALL vendors for
distributed on >1 vendor, then specify ALL items.
number of vendors and with specified
vendors negotiate for items for which they
are L1 only. Then counter offer L1 rates to
other specified number of vendors.
04 If L1 backs out either before or after Do not proceed with L2, if L1 backs out.
ordering L2 does not become L1. Re float.
05 Get the price reasonableness form indentor
06 Equip with data for effective negotiation. Do not hold negotiation blindly or on
adhoc basis.
07 Negotiation discussions to be minuted Do not fail to record MOM
08 Incase of counter offer, price to be justified.
Subject : Ordering
SN Dos Donts
01 Preferable to enclose a detailed note and Do not miss/hide any point in the note /
fixing flags for relevant papers proposal
02 If quantify tolerance is applicable then
proposal value shall be for the maximum
qty. though payment is restricted to actual.
03 Obtain finance concurrence before
approval, as per delegation of power.
04 Indicate terms and conditions clearly
05 Indicate agreed delivery date Do not indicate del. date unilaterally

Page 44
 Purchase Manual

06 Penalty for delayed delivery to be decided

after analyzing the reasons for delay and
fixing responsibility.
07 Insist for order acceptance from Vendor
08 Repeat order approval by one step higher
authority. Conditions as per Pur policy
09 PO amendments – approval by one step
higher authority in each case limited to unit
head
Subject : Rate Contract (R/C)
SN Dos Donts
01 Based on annual plan, collect the Without approximate value and
approximate requirement from Indentor / approval, do not send Enquiry
Material Plng Dept
02 Based on the quantity, calculate approximate
value of R/C and get approval for tendering
03 In the Enquiry indicate clearly
 Enquiry for R/C
 Period of R/C Do not deviate from what is indicated
 No. of vendors with whom R/C shall be in Enquiry
entered into
 Load distribution pattern among original Do not add any new condition without
L1, L2 etc. giving equal opportunity to ALL
 Loading for Payment terms, BG etc. vendors.
 Whether items shall be procured as a
package from a single source.
 R/C shall be entered into with number of
vendors provided they agree for L1 rates
(optional).
04 After price bid opening, prepare CST on total Do not go by basic rates alone.
cost considering all Taxes & duties, less Do not forget to add Loading factors &
modvat as applicable. Loading factors to be deducting modvat wherever applicable.
added while working out rankings.
05 Get the approval of competent authority Do not negotiate W/O approval.
(one step higher) for negotiation as per
policy (if you decide to negotiate)
06 Negotiate with L1 vendor or with Vendors for Do not negotiate with ALL vendors for
L1 items only. ALL items.
07 After negotiation, counter offer L1 rates to Do not fail in attempt to bring ALL
others vendors to L1 rate.
08 Enter into Rate contract with vendors who
agree for L1 rates. In rare cases, if it
becomes very essential to have R/C with
differential rates, full justification has to be
given in the PO proposal and competent
authority’s approval to be obtained.

Page 45
 Purchase Manual

09 Procurement/Loading shall be done on non Do not fail to inform vendors about

L1 judiciously, and with proper justification, their performance/failure and the pros
backed by documents. & cons.
10 Proposals of Enq. Negotiation and ordering Do not forget to indicate the R/C value
shall be approved by authority decided based and get approval at each of these
on the approximate value for entire R/C stages.
period.
11 Each of the PO proposal to have a chart
indicating (i) Loading done so far, (ii) Original
ranking – L1, L2 etc. (iii) Load now proposed
(iv) % of total value ordered so far. These to
indicated against each vendor.

Page 46