Presentation on theme: "IA Cell, FGK. To utilize the spare capacity after meeting the service demand, as per the policy of the government,ordnance factories may enter into."— Presentation transcript:
To utilize the spare capacity after meeting the service demand, as per the policy of the government,ordnance factories may enter into the civil trade i.e. Other non military department (including central and state govt, public bodies, municipalities, local board and other semi government institutions and foreign government. GMs are empowered to enter into the civil trade activities as per the delegation of financial power as under.
Nature of powerAuthorityExtent to which delegated RemarksWhether finance is to be consulted Documents in which delegation is contained 52. Execution of lease GMRs 5,000/- per year in each case YES MOD letter NO.1(82)/78/d(fy.I) Dated 31.12.79 53 Acceptance of order for civil trade items from govt dept state corporation municipalities & civilian customers GMFull powerPrice will be fixed in accordance with the existing govt order in consultation with finance division and subject to the conditions and guidelines for pricing relating to marginal cost being observed YES M of d letter NO.2(1)/89/d(Fy I) Dated 29.10.92 54. Contracts relating to steel melting & rolling GMUp to a monetary limit of rs 10 lakhs output per month per contract YES Annexure II to M of D letter Dated 14.2.64
Nature of powerAuthorityExtent to which delegated RemarksWhether finance is to be consulted Documents in which delegation is contained 55. Fixation of minimum price for civil trade and export quotation GM Full power for quoting prime cost(ie.direct labour and direct material charges )plus 20% of total variable and fixed overhead charges subjected to the provision of ministry of defense letter no.1/4/1/55/D(prod) dt-28.10.57 as amended from time to time NIL NO But cost data to be verified by L.A.O OFB letter no. 63/CT/I dated 6.10.80 56.Rectification /Replacement after issue. GM Full power as per contractual obligation NILNOOFB order NO.375/BS, dated 6.9.93
From the above table it may be seen that except S.NO 55 and 56 financial consultancy is necessary.
What is the current policy for determination of selling price ? For principal items,OFB proposed to determine the prices of their products based on previous years actual cost and upward or downward estimate of cost of element during the year of issue. In the case of issue to MHA it was decided in board meeting held on 28.02.06 that selling price of MHA will be 7% more than the cost of products or the selling rate fixed for the services.
OFB has also issue directive by their letter NO 016/MHA/P&P dated 09.05.2006 for 50%-60% advance payment from CPMFs and state police organization, and balance amount after getting the consignment. Balance amount not received after physical issue will be shown as outstanding assets in accounts.
1.On receipt of extract from OFB, Proforma invoice is being issued in advance without taking the prospective production plan based on current price list by the respective ordnance factories. 2. OFB is silence about other terms and condition that is the delivery schedule payment terms where as Proforma invoices are being issued by the ordnance factories with terms and condition without consulting local finance i.e. delivery schedule – that 31 st march or 6-9 month after receipt of payment whichever is later and recurring loss is being resulted.
From the above table it is clear that the factory is compelled to bear the loss as Proforma invoice are being issued just after getting the extract from the OFB,No quantity has been issued till 8.06.2011 but amount has been received on the different rate. Further it is seen that Proforma invoices has been issue for total quantity of 21599 against the outstanding extract of 23946 and target for MHA has been fixed only 1500.It also indicates that full quantity for which amount has been taken will not be issued during the current financial year, Only fixing the rate for MHA i.e more than 7% of army issue rate has been defeated and sometime issue rate of MHA is less than the army issue rate. Based on the above irregularities internal audit cell FGK has arrived a loss to the tune of Rs 3.16 crore for 08-09 and Rs 8.02 crore for 09- 10. OFB has also been advised to issue the guide lines to respective factories that Proforma invoice may be issue taking their production plan and to incorporate the clause that final rate will be applicable for the date of issue.