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No.
3(2)/PO(Def)2001 Date : 2nd November, 01
INTRODUCTORY 1.1 Purchase
of stores & equipments by Government Departments is governed by
the provisions of the General Financial Rules (GFR) of the Government
of India. The policy of Government has been that in the procurement
of articles manufactured abroad, offers received through India based
establishments would receive preference. Appendix VIII of the GFR and
Para 96 & 97 of the Manual of Office Procedure for Supplies, Inspection
and Disposal also refer to the same principle. On 31st January, 1989
the Ministry of Finance (Department of Expenditure) vide their Office
Memorandum No.F.23(1)-E.II(A)/89 issued its letter on `Indian Agents
of Foreign Suppliers – Policy on ‘ (Appendix – 1). Based on this order
the Ministry of Defence vide letter No.2250 – A/JS(O)/89,dt. 17th April,1989
issued guidelines on this subject. This order, under the umbrella of
the instructions quoted above , seeks to reflect the changed policy
of the government in the matter of its Policy on role of Authorized
Representatives \ Agents . 1.2
A comprehensive formulation of the role, if any, which Authorized Representatives
\ Agents \ or Sales Consultants or by whatever name called and employed
by Foreign suppliers for the promotion of their product , may legitimately
be expected to play, has been receiving the attention of Government
for some time. The entire policy has been extensively reviewed recently
with the objective of defining the scope, extent and the conditions
within which such Authorized Representatives \ Agents may be allowed
to represent a foreign supplier or suppliers 1.3 While it is not the policy of Government to encourage agents if the requisite supplies could be obtained and satisfactory after-sales service ensured, on reasonable terms, without their intercession, upon detailed examination the Ministry of Defence, concluded that there are advantages in involving Authorized representatives \ Agents
. Such an involvement of Authorized Representatives \ Agents would enhance
transparency levels, provide the Service HQs with additional information
about latest advances in sophisticated combat and non-combat technology.
Authorized Representatives \ Agents would also be of assistance in trial
evaluation of the systems, price negotiations, enhance the quality of
after-sales service, resolving performance and warranty issues. Payments
to Authorized Representatives \ Agents would be covered under the Income
Tax Act and attract Income Tax which would be deducted at source. 1.4
This revised order, therefore covers : the regulation of representational
arrangements through a system of registration; categorical and open
declaration by the foreign suppliers of the services to be rendered
by their Authorized Representatives \ Agents; and the remuneration payable
to them by way of fees, Commission or any other method. 1.5 As
the aforesaid Circular of the Department of Expenditure states the general
policy of the Government of India in the matter, and the instructions
contained therein, are applicable to all `civil purchases’ of imported
stores by all Government departments and public sector enterprises under
the administrative control of different Departments/ Ministries, thus,
Ministry of Defence are required to issue ‘Supplementary Instructions’
in respect of `defence purchases’. 1.6 In
that context, the following paragraphs lay down instructions supplementary
to those contained in Appendix-I. These instructions would apply to
all the Departments including the Integrated HQs of the MoD, the three
Services, the Coast Guard and all subordinate agencies under the administrative
control of the Ministry of Defence. REGULATORY
PROVISIONS IN RESPECT OF INDIAN AUTHORIZED REPRESENTATIVES \ AGENTS
WHERE PERMISSIBLE 2.1
An individual, a partnership, an association of persons, a limited company
private or public can be appointed as Authorized Representative \ Agent
\ Sales Consultant \ Adviser of a Foreign supplier \ suppliers, who
is either paid a retainer or is reimbursed his expenses or paid commissions
or a combination of either, on completion of a specified obligation,
by the Original Equipment Manufacturer. 2.2
Purchase of all imported stores shall be undertaken in conformity with
the policy laid down in the Department of Expenditure Circular of 31st
January, 1989(Appendix-I) and also subject to the additional clarifications
in the ensuing sub-paragraph. 2.3
Whenever representation of a foreign supplier by an Indian Authorized
representative \ Agent is permissible, as per the afore-stated policy,
it will be an open and declared representation, along with a simultaneous
commitment about observance of prescribed guidelines, norms by the foreign
firm as well as its agent. These Authorized representatives \ Agents
and the Foreign suppliers will have to fulfill the conditions stipulated
below :- (i)
A Foreign firm wishing to appoint an Indian Authorized Representative
\ Agent will formally inform the Ministry of Defence and furnish in
full, the below stated information; (ii)
a) The accreditation of an Authorized Representative \ Agent would be
granted after approval at the level of Secretary of the Department or
an Officer authorized by him. (iii) a)
To ensure against foreign suppliers offering \ making illegal payments,
of any kind, directly or indirectly, for the purposes of winning a Contract,
they shall be asked, before the appointment of an Authorized Representative
\ Agent, to furnish a legally effective undertaking which, if infringed,
shall bind them to specified penalties. A foreign supplier will be entitled
to make only openly declared payments, in Indian rupees, of the agreed
fee \ commission, to his duly Authorized Representative \ Agent, for
rendering specifically defined obligations recorded in the Contract. (iv)
a) In all
purchases effected through the Authorized Representative \ Agent the
scale of commissions payable shall be as per the guidelines approved
from time to time. These would be determined by MoD in consultation
with MoD (Finance). (v) The
nature of services to be rendered by an Authorized Representative \
Agent and the commission payable to him shall unambiguously be reflected
in the contract. For this purpose, the model contractual clauses applied
by the Department of Supply may be adopted with suitable modifications,
whenever found necessary. (Reference DGS & D form 237, a copy of
which is at Appendix – II ) . (vi)
(a) All foreign suppliers along with their response to the Request
For Proposal should provide an undertaking signed by their Chief Executive,
that except for the Authorized Representative \ Agent, they are not
employing any other middleman, sales consultant or Adviser to influence
the outcome of the contract through any means. (vii)
(a) The agent shall not have any business contacts with any
other than the authorized personnel of the establishment dealing with
the equipment to be procured ; These
instructions would only apply to future contracts. 4.
In case of any doubt , necessary clarification may be sought from the
Department of Defence. (Ranjit
Issar. Joint Secretary)
No.F-23(1)-E.II(A)/89 Government
of India New
Delhi, the 31st January, 1989. OFFICE
MEMORANDUM Subject
: Indian Agents of Foreign Suppliers- Policy on. The
attention of Government has been drawn to certain doubts expressed regarding
existing instructions on the role of Indian agents of foreign suppliers
and agency commission they get in contracts entered into by Government
departments for purchase of imported stores and equipments. It is, therefore,
considered necessary to restate the policy with a view to strengthening
and streamlining the existing monitoring arrangements and introducing
control mechanisms. 2. Purchase
of stores and equipments by Government departments is governed by the
provisions of the General Financial Rules (GFRs) of the Government of
India. So far as imported items are concerned, Appendix VIII of the
GFRs provides that for articles manufactured abroad which need to be
specially imported, preference be given to offers received for supply
through India-based establishments. The same policy is laid down in
the Manual of office Procedure for supplies, inspection and disposal
(1960 Edition), namely, that in the procurement of articles manufactured
abroad, offers received through India-based establishments would be
given preference (Para 96 of the Manual). Para 97 goes further and states: “Subject
to the period of delivery, quality and price of goods being suitable
and subject to the existence of adequate after sales service in India,
wherever required, the DGS&D should place orders on authorized Indian
agents and not cross-mandate the indent to the foreign manufacturers
direct.” 3. The
Public Accounts Committee, in a series of reports in 1974-75, 1975-76
and 1976-77, examined the involvement of Indian agents and payment of
agency commission to them. In a follow-up of the recommendations made
in the 160th Report of PAC (1974-75), an Inter-Ministerial Working Group
was set up by the Government in June, 1975, with the Director General,
Revenue Intelligence as the convener, to study the matter in depth.
The recommendations of the Working Group were, by and large, accepted
by the Government and reported to PAC, which are incorporated in the
185th Report of the PAC (1975-76). These recommendations were also communicated
to the concerned purchasing Departments, vide Department of Supply No.P.III-3(5)/76
dated the 19th July, 1976. 4. The
Policy has been that involvement of Indian agents may be allowed where
they have to render after-sales-service; the quantum of agency commission
would be determined on the merits of each case and the commission would
be paid in Indian Rupees. Following a further recommendation made by
the PAC, in the 231st Report (5th Lok Sabha 1976-77) on procurement
of oil, the Department of Supply prepared and adopted standardized clauses
requiring inter alia disclosure of the details of their principals by
the Indian agents and of agency commission payable by the foreign suppliers.
The said clause are contained in DGS&D Form-237. 5. Briefly,
the instructions governing Indian agents of foreign suppliers in matters
of Government purchases are restated below: It is not the policy of Government Per se to look for, encourage or engage agents. Wherever it is possible to secure supplies and ensure after-sales-services etc., on reasonable terms without the intercession of agents, there is no need for engaging any such agent. In all other cases, the employment of Indian agents by foreign supplies, as may be found necessary, on a case to case basis, shall be regulated by the following :
6. The
above guidelines will be applicable to all civil purchases of imported
stores by all Government
Departments and public sector enterprises under the administrative control
of different Ministries/ Departments. A review mechanism is being separately
set up to ensure compliance with the guidelines, as aforesaid and orders
in this regard would be issued later. The Financial Advisers of different
Ministries /Departments will ensure meticulous compliance of these instructions.
Supplementary instructions in regard to defence purchases will be issued
by the Ministry of Defence. 7. The arrangements indicated above are intended to build further safeguards into the existing system keeping in view various recommendations of the Public Accounts Committee and other expert bodies. 8. Hindi version will follow. Sd/- (
A. JAYARAMAN ) To 1. All
Ministries/Departments and C&AG, UPSC etc., with usual number of
spare copies.
Special conditions for stores in Addition to those contained in form DGS&D-230 I.
Offers should be admitted by the tenderers on the basis of FOB/FAS port
of Shipment of their Principals/Manufacturers; CIF. Indian Port/FOR.
The Purchaser reserves the right to place order on any such basis. II.
In case of FOB/FAS offers, the tenderers should indicate separately:- III. (A) Indian Agents/Associates quoting on behalf of the Principal/ Manufacturer abroad on FOB/FAS/CIF basis:-
(B)
Foreign firms quoting direct against the inquiry and who have Indian Agents/Associate
and/or servicing facilities in India should indicate in their offer the
name of their Indian Agents/Associates/or the representative they have
for servicing in India. They should quote net FOB/FAS. Price, exclusive
of the amount of remuneration or commission provided for the Indian Agents/Associates.
It should be understood that the purchaser will indemnify the supplier
against payment of such commission and would undertake to pay such commission
to the Indian Agents/ Associates in rupees in India in respect of a contract
arising out of invitation to the tender, where the Indian Agents/Associates
remuneration/or commission covers a part of the price against the tender. (C)
Besides the above, the following particulars should also be furnished
by the tenderers, the Indian Agents/Associates/and/or the foreign firms:-
N.B.
Tenders which do not comply with the above stipulations are liable to
be ignored. (D)
In case of FOB/FAS offers, the prices to be quoted should be Foreign Principals/
Manufacturer’s net FOB/FAS prices exclusive of profit, commission etc.
The Agency Commission payable to the tenderer/Indian Agent/Associate in
terms of the Agreement with their Principals/manufacturers should indicated
both in foreign currency as well as in Indian rupee to be converted by
supplying TT. Buying rate of Exchange ruling on the date of offer. The
agency commission finally payable to tenderer under the contract will,
however, be converted in Indian rupees at the TT buying rate of exchange
ruling on the date of placement of order which shall not be subject to
any further exchange variations. Quotation on FOB/FAS basis should be
supported by the Manufacturer’s Invoice. (E)
In case of FOR offers (a)
The tenderer should clearly indicate the break up of prices viz. Net FOB/FAS
value insurance, freight supported by manufacturer’s/supplier’s Performa
invoice and clearing/handling charges at the India Port, profit margin
and charges for dispatch up to destination. (b)
Exchange Rate Variation.
(c)
Custom Duty Variation.
(IV)
Payment Terms: (i) Unless otherwise
prescribed the payment for FOB/FAS contracts shall be as under :-
50% commission may be paid to the Indian Agent on installation, erection, commissioning etc on the expiry of the six months from receipt of supply portion of plant by the consignee, which ever is earlier, and the balance 50% on taking over of the plant/machinery, by the consignee and issue of Engineer’s certificate. 80%
commission may be paid to the Indian Agent on proof of payment to the
foreign supplier/Principals and the balance 20% on receipt of stores by
the consignee in good condition. 100%
commission to be paid on proof of payment to the supplier Principals abroad. 100% commission to be paid on proof of payment to the supplier Principals abroad.__(iii) Terms of Payment against CIF/C&F contracts placed on supplier in East European Countries:- The payment terms applicable to different types of contract are mentioned below:- (a)
Contracts where stores are inspected prior to dispatch and the suppliers
also undertake to furnish a warranty/Guarantee for a reasonable period. 90% payment to be made on the basis of maker test certificate and on proof of dispatch from Indian port, balance 10% on consignee’s receipt. 50% payment to be made on the basis of (i0 Make Test Certificate or Govt. Inspector of Supplies Country and (ii) a landing certificate certify in receipt of stores at port of entry in India. Further 25% after 4 months and final 25%, 8 months after receipt of stores at destination on production of consignee’s receipt. 90% payment to be made after inspection in India on the basis of Inspection Note; balance 10% on consignee’s receipt. 80% payment to be made on the basis of (I) Makers Test Certificate (ii) Inspection Certificate of Govt Inspector of Suppliers country and (iii) Landing Certificate certifying receipt of stores at port of entry in India, and dispatch from the port of Disembarkation and balance 20% after erection, inspection and test at site and on receipt of Acceptance Certificate from the Consignees.___ N.B.
:- In regard to the contracts categorized against items (a), (b) and (c)
in the foregoing para, the suppliers will, interalia, be required to issue
a Warranty requiring quality to be valid for a period of 15 months after
delivery or 12 months after the arrival of the stores at ultimate destination
in India, whichever is earlier. This Warranty to be provided by the manufacturers/suppliers
shall be backed and enforced by the provisions of acceptable performance
Bond in the contracts for stores like Power Plant Equipments or complete
Power plant. V.
Inspection Unless,
otherwise prescribed the Inspection Clause shall be as under:- Inspection
Authority – Deputy Director General (Inspection), DGS&D, New Delhi. VI. Guarantee/Warranty As
contained clause 27 of DGS&D 230 Guarantee/warranty shall apply except
that it shall be for a period of twelve months from the date of receipt
of equipment in good condition at site by the consignee in case of supply
Contracts and twelve months from the date of the installation and satisfactory
taking over of the equipment at site by Consignee where installation and
commissioning is involved. VII.
Insurance If
a contract is placed as a result of this invitation to tender, and if
Indentor requires insurance of stores tenderers are required to effect
insurance of stores only through the Life Insurance Corporation of India
and payment should be made in rupee only. The tenderer should indicate
in their tender FOB cost freight and Insurance separately in addition
to the CIF value. VIII.
Liquidated damages for delay in suppliers. It
may be noted that clause 14(7) (I) of General conditions of contract (Form
No.DGS&D-68 Revised) which will govern contracts placed as a result
of this invitation to tender, provides for recovery of liquidated damages
on the cost of delayed supplies at the rate of 2 per cent per month or
a part of a month delayed. Liquidated damages for delay in supplies thus
accrued will be recovered by the overseas paying authority specified in
the contract from the Bills for payment of the cost of stores submitted
by the Contractor or his foreign principals in accordance with the terms
of the contract. IX.
Submission of tender. The
tenderers in their own interest are requested to send their offers by
Registered Air Mail Post instead of by Air Parcel to avoid delay in clearance
and in receipt of tenders by the Govt. purchaser. While forwarding the
tender documents by Air Mail Post, they should clearly indicate on the
packet that the same contains only tender documents. Tender samples, if any, should be forwarded separately also by Registered. Air Mail Post, enclosing a clear declaration on the effect that the same is only a free tender sample against the tender inquiry No________dated______floated by DGS&D and also enclosing a copy of the uncharged invoice. The original copy of the uncharged invoice should be enclosed with a covering letter addressed to DGS&D intimating particulars regarding the date when parcel has been sent and this should be forwarded DGS&D separately by Air Mail. The
Purchaser will not be responsible for any de caused by the dispatch of
tenders by Air Parcel through the Airlines as the clearance of such packet
from the customs involves unavoidable cumbersome procedure. X.
Shipping instructions and documentation : As per Annexure I,II and III
attached. XI.
Export License, import from USA. On FAS/FOB basis. For items on order requiring an export License the contractor shall furnish to the Indian Supply Mission, Washington DC, USA Export License application at the contractors own cost and expenses on the appropriate form duly filled in showing Indian Supply Mission as the applicant (in case of commodities requiring Export License from US Department of Commerce, schedule ‘B’ number and processing code No 1 shall also be indicated). On receipt, Indian Supply Mission, Washington DC, USA Export License application at the contractors own cost and expenses on the appropriate form duly filled in showing Indian Supply Mission as the applicant (in case of commercial ties requiring Export License from US Deptt., Commerce, schedule ‘B’ number and processing code No 1 shall also be indicated). On receipt, Indian Supply Mission will forward the application to USA Government authorities for issue of the requisite export License. In case the Export License is of any account not issued by the US Government be revoked subsequently by the US Government on contract would be deemed to be frustrated and the parties discharged of all the liabilities under the contract. Nodal Officer --- For cases of Appointment of Authorised Representative of Foreign Suppliers : (i) Department of Defence Production And Supplies : Shri Adhir Jha
, Deputy Secretary(SY & BEL) |
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