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Project Report

Submitted for the partial fulfillment of the Award

Master of Business Administration

(Session 2009-2011)
Anurag Mishra
Roll No. 0903270008
Internal Guide: Ms. Taru Maheshawari
Department of Management


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I Anurag Mishra declare that the work, which is being presented in this report entitled “financial

vetting and purchasing process: H.A.L Lucknow division” is an authentic record of my own
work carried out under the supervision of “Mr. A.K. Srivastava”. The matter embodied in this report
has not been submitted by me for the award of any other degree.

Date:_________ Anurag Mishra


This is to certify that the above statement made by the candidate is correct to the best of my


(Head of Department) Ms. Taru Maheshawari

Date________________ (Senior Professor)




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Finance as a subject of study, has received wide-spread support from both academic and

business segment people.

The Topic “Financial Vetting & Purchase Procedure and Progression” was selected as to

understand the timely and budgeted procurement and supply of material to the indenting

departments with special reference to HAL ACCESSORIES DIVISION LUCKNOW. This

report is also concerned with the study of different functions, which are dealt by finance and

accounts department. In the course of study I became aware of the concepts, which are used

in H.A.L., while dealing with efficient procurement and tendering related matters. The

project report incorporates the procedure and flow of work applied by different sections of

the account department and how these sections are linked. Although these sections are

separate and perform their separate operations but these are interrelated with each other.

It was a great opportunity to me to work with such a flagship organization. Management of

Hindustan Aeronautics Limited Lucknow Division has given me this golden opportunity to

get familiar with the organization and its functioning. This training gives me an opportunity

to make a study and analyse the system adopted by the organization. It was a great

opportunity extended to me to work with such a large organisation. Since it was not possible

to cover every aspect in detail in a short span of time but I have tried my best to justify all the

bookish knowledge in a practical environment. I tried my level best to give due consideration

to all important aspect related to my study. This study provided me practical exposure of the

functioning of accounts and finance department. The information so gathered for the

presentation of this report is collected by the personal contact with the concerned person of

different department. Because of a defence company we are not exposed to the data of the

HAL so there is no possibility of any analysis on the available data.

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The project report is the mere constitution of varied functions, which are handled by the

Accounts Department. In the due course of my study I became aware of the concepts, which

are used in HAL, with respect to the vetting and procurement functions. The system of

accounting, which prevails in HAL, is known as Integrated Accounting System and is unique

to the organization.

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First of all I thank God for giving me this wonderful opportunity to undertake this training

which is a part of my MBA program.

I wish to express my profound thanks to respected Mr. Rakesh Passi, ABES engineering

Colllege, Ghaziabad (GBTU) for giving practical tips and contour to my quest.

I oblige the HAL organization for providing me an opportunity to become aware with their

environment giving me an opportunity to study in such a large organisation and supporting

me as could be possible

I am grateful to Mr. A.K. Srivastava, Chief Manager (Fin); Mr. Shekhar Kaushik, Sr.

Manager (Fin); Mr Manoj Srivastava , Sr. Manager (Training).

I convey my thanks to all of them, whose names do not appear but who contributed

significantly. Their valuable suggestions considerably helped me in the final drafting of this

report. They helped me at every stage of project work. Their contribution, lesson of wisdom

has therefore been affectionately appropriate rather than grateful acknowledged. Many thanks

to all of them, for their patience and support to help me on this project work. Because of all

their help only my effort base fruits and made me able to present this report.

Anurag Mishra

MBA 2nd Year

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 Introduction 8

 Need of the study 71

 Scope of study 72

 Objective of survey 72


 Limitation 74


 Descriptive work on subtopic of study 77


 Analysis & Interpretation 123


 Finding/Suggestion 127-128

 Conclusion/ Recommendation 129


 Bibliography 134


 Appendices 136

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In December 1940, a farsighted Industrialist Late Sri Walchand Hirachand set up a Company

called Hindustan Aircraft Limited in association with Government of Mysore for overhauling

of aircraft. It was registered on 23rd Dec 1940 as a Private Ltd

Company with an authorized Capital of Rs.4 Crores.

With the dawn of Independence HAL redefined its objective to

work as an instrument of the National Policy of achieving self

reliance in Defence production and took up design and development

of Aircraft and Aeronautical Development along with licence production. Over the years

HAL grew into a high technology vertically integrated Aeronautic Industry with 19

manufacturing divisions and 10 R&D Centres spread over the length and the breadth of the

country. The annual turnover of the company has been increasing continuously at steady pace

and has attained a figure of 2400crores by the year 2000. The space agencies of the country

are heavily relying on the production capabilities of the company for manufacturing various

types of Aerospace equipment. The shift in manufacturing aircraft and helicopters for civil

purpose is in the anvil.

Hindustan Aeronautics Limited (HAL) came into existence on 1st October 1964. The

Company was formed by the merger of Hindustan Aircraft Limited with Aeronautics India

Limited and Aircraft Manufacturing Depot, Kanpur.

The Company traces its roots to the pioneering efforts of an industrialist with extraordinary

vision, the late Seth Walchand Hirachand, who set up Hindustan Aircraft Limited at

Bangalore in association with the erstwhile princely State of Mysore in December 1940. The

Government of India became a shareholder in March 1941 and took over the Management in


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Today, HAL has 19 Production Units and 9 Research and Design Centers in 7 locations in

India. The Company has an impressive product track record - 12 types of aircraft

manufactured with in-house R & D and 14 types produced under license. HAL has

manufactured over 3550 aircraft, 3600 engines and overhauled over 8150 aircraft and

27300 engines.

Hindustan Aeronautics Limited is a Navaratna Defence Public Sector Unit and is presently

ranked 34th among the global Defence companies. It has witnessed a steady growth over the

years and achieved a turnover of over Rs.8625 Crores. The turnover during 2008-09 was

Rs.10, 373 Crores. The product portfolio emanating both from indigenous in-house design

and license production, meets almost all the requirements of Indian Defence services through

Fighter Aircraft, Trainer Aircraft and Helicopters.

Major products currently in the production range are SU-30MK1, Jaguar, Hawk, Dornier 228,

Dhruv (Advanced Light Helicopter) Cheetal and Chetak helicopters, the Limited Series

Production of Light Combat Aircraft (LCA), Intermediate Jet Trainer (IJT) The Light

Combat Helicopter (LCH) which is in an advanced stage of development will be inducted

into services shortly. HAL has been successful in numerous R & D programs developed for

both Defence and Civil Aviation sectors. HAL has made substantial progress in its current


• Dhruv, which is Advanced Light Helicopter (ALH)

• Tejas - Light Combat Aircraft (LCA)

• Intermediate Jet Trainer (IJT)

• Various military and civil upgrades.

Dhruv was delivered to the Indian Army, Navy, Air Force and the Coast Guard in

March 2002, in the very first year of its production, a unique achievement.

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HAL has played a significant role for India's space programs by participating in the

manufacture of structures for Satellite Launch Vehicles like

• PSLV (Polar Satellite Launch Vehicle)

• GSLV (Geo-synchronous Satellite Launch Vehicle)

• IRS (Indian Remote Satellite)

• INSAT (Indian National Satellite)

HAL has formed the following Joint Ventures (JVs):

• BAeHAL Software Limited

• Indo-Russian Aviation Limited (IRAL)

• Snecma HAL Aerospace Pvt Ltd

• SAMTEL HAL Display System Limited

• HALBIT Avionics Pvt Ltd .

• HAL-Edgewood Technologies Pvt Ltd


Apart from these seven, other major diversification projects are Industrial Marine Gas

Turbine and Airport Services. Several Co-production and Joint Ventures with international

participation are under consideration. HAL's supplies / services are mainly to Indian Defence

Services, Coast Guards and Border Security Forces. Transport Aircraft and Helicopters have

also been supplied to Airlines as well as State Governments of India. The Company has also

achieved a foothold in export in more than 30 countries, having demonstrated its quality and

price competitiveness.

HAL has won several International & National Awards for achievements in R&D,

Technology, Managerial Performance, Exports, Energy Conservation, Quality and

Fulfillment of Social Responsibilities.

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Corporate Achievement in Quality and Efficiency at the International Summit (Global Rating

Leaders 2003), London, UK by M/s Global Rating, UK in conjunction with the International

information and Marketing centre (IIMC)

• HAL was presented the International -" ARCH OF EUROPE" Award in Gold

Category in recognition for its commitment to Quality, Leadership, Technology and


• At the National level, HAL won the "GOLD TROPHY" for excellence in Public

Sector Management, instituted by the Standing Conference of Public Enterprises (SCOPE).

• The Company scaled new heights in the financial year 2006-07 with a turnover of

Rs.7, 783.61Crores


The Company's steady organizational growth over the years with consolidation and

enlargement of its operational .base by creating sophisticated facilities for manufacture of

aircraft / helicopters, aero engines, accessories and avionics is illustrated below.

1940: H.A.L was set up by Seth Warchand Hirachand in association with the government of

Mysore as a private limited company.


AIRCRAFT” handed over to government of India.

1942: Company was handed over to the U.S. AIR FORCE. HAL repaired over 100 different

varieties of aircraft and 3800 piston engines.

1945: Government of India took over the management of HAL again after the Second

World War.

1949: First percivical apprentice aircraft assembled.

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1951: The control of HAL was shifted to ministry of defence from ministry

of industry.

1954: The first HINDUSTAN TRAINER II (HT—II) had its maiden flight.

1956: HAL comes under the public sector.

1960: Aircraft Manufacturing Department at Kanpur was established.


manufacture MIG-21 aircraft. Three factories at Nasik, Koraput, and Hyderabad were


1964: HAIL was dissolved and its assets merged with aeronautics India limited and

company by the name of HAL was formed.

1969: An agreement with USSR AWS reached for the license production of MIG-21


1970: Helicopters Division was established to manufacture Helicopters.

1973: Lucknow Division was formed for manufacture of more than 500 types of Instruments

and Accessories.

1976: An agreement with USSR for license for MIG-21 AND BIS –


1979: Agreement with British aerospace for manufacture JAGUAR


1982: Agreement with USSR for license manufacturing of MIG-27M


1983: Korwa Division lraged division for HAL formed.

1990: Design and Development of Advanced Light Helicopter.

1996: Major servicing of the first batch of MIRAGE – 2000 AIRCRAFT was under taken. It

conducted several “C” CHECKS ON BOEING 737 AIRCRAFT.

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1998: IGMT a new Division was established at Bangalore.

1998: Establishment of Industrial & Marine Gas Turbine Division for aerodoriative gas

turbines / Industrial engines.

2000: Establishment of Airport Service Service Centre for C0-ordinating the operations at

HAL Airport – Bangalore.

2002: Establishment of Sukhoi Engine Division at Koraput.

2002: Expansion of Nasik Division as Aircraft Manufacturing Division and Aircraft

Overhaul Division.

2006: HAL ranked 45th among Top Defense Firm in the World.

2006: 19th July, HAL – IAI cooperation in Aero structure.

2006: 21st July, Rolls – Royce & HAL celebrate 50 year of partnership.

2006: HAL launches newspaper from Minsk square on 1st September.

2006: 3rd September, SU-30 MKI Programme on schedule: HAL.

2006: 14th October, HAL Launches Helicopter ambulance, Charter Service named “Vayu


2006: 20th December, HAL receives EEPC Award for the year 2004-05.

2007: 5th June, HAL completes planting 25 Lakh saplings.

2007: 22nd June, HAL gets Navratna Status.

2007: 2nd July, Ashok Nayak is HAL’s new MD.

2007: 6th August, HAL ranked 34th among top 100 defence firm in the world.

2007: 16th August, DHRUV with SHAKTI ENGINE and Weapons make

maiden flight.

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Research and Development Centers of HAL

In the year 1951, when HT-2 the first indigenously designed primary trainer made its first

flight, it heralded the era of Research & Design at HAL this aircraft served as the back bone

of IAF's training fleet for more than three decades.

Subsequently, HAL's R&D capabilities have grown from strength to strength and have been

harnessed to achieve greater heights of self reliance. The Advanced Light Helicopter - ALH

(DHRUV) is the latest new generation helicopter designed and developed by HAL. It is under

production since 2002. The test flights on Technology Demonstrators (TD-I and II) and

Prototype Vehicles (PV-1 and 2) of Light Combat Aircraft - LCA (Tejas) are progressing

satisfactorily. The Intermediate Jet Trainer (IJT) is undergoing test flights.

In addition, HAL has successfully completed many systems updates and integration tasks.

HAL has 9 Research & Design Centers engaged in the design and development of combat

aircraft, helicopters, aero engines, gas turbines, engine test beds, aircraft communication and

navigation systems and mechanical system accessories.

The indigenously upgraded MiG-27M aircraft has received Initial Operation Clearance (IOC)

and the first batch of aircraft has been delivered. First flight test on Jaguar Nav WASS

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upgraded aircraft with indigenously developed mission computer with weapon delivery

capabilities has been carried out and retromod of fleet has been taken up.

Equipped with the latest facilities, the company is backed by high profile, highly skilled

manpower with an impressive track record of more than five decades of rich experience in all

discipline of aeronautics.

The Aircraft R & D Centre of HAL has a full spectrum of expertise in all facets of aircraft

design & development. Acquired through sustained learning and R & D, our proven

capabilities are backed by rich in-service experience spanning over five decades. Aircraft

R&D Center of HAL has eleven successful designs to its credits ranging from basic trainers

to front line combat aircraft. Nine of these designs have gone into series production and have

seen active service in the Indian Air Force.

The Centre has also integrated new weapons & systems on

existing military aircraft. The Centre has extensive state of

the art test facilities and full fledged Manufacturing

Infrastructure for building Aircraft prototype and Test

Articles & can support Flight Developments programs and has advanced CAD & Fully

Integrated Network System. The Centre, has been certified for the Development of Military

& civil airplane and has been recognized as an R&D Centre by the Department of Science

and Technology. We are committed to the pursuit of excellence through continuous

improvement and innovation.

• Current Projects in hand: -

o Light combat aircraft

 Fighter Version

 Trainer Version

 Naval Version

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o Intermediate jet trainer development (HJT - 36)

o Digitization of drawings for Boeing

o Development of flight simulators

o Upgrading / retrofit projects

• Future Programs: -

o Multi-Role Transport Aircraft (MTA) - Cargo Version.

o Unmanned Combat Air vehicle.

o HPT -32 Upgrade / Replacement

o Medium Combat Aircraft Pre-feasibilities studies are initiated

The Rotary Wing R & D Centre, with modern facilities and State of the art technologies,

spearheads HAL's thrust towards excellence in the field of helicopter design.

Expertise in the design and development of rotary wing aircraft has been built up over the last

three decades by progressive induction of qualified designers, optimal design, prototype

development, ground testing and flight testing.

The Centre is capable of undertaking challenging rotary wing and allied design tasks for Civil

and Military applications. The Centre has also upgraded the Cheetah and Chetak helicopters

to meet the requirements of Military and Civil customers.

The objective of the Centre is to research, innovate and create designs for rotary wing aircraft

to meet indigenous and global requirements.

The Centre holds recognition and approval for research, design and manufacture of Civil and

Military helicopters.

The Design Centre at HAL Nasik division established in 1964 to provide design support to

the manufacturing programme of MiG-21 FL aircraft has grown over the years in strength,

capability, infrastructure and facilities into a full-fledged Aircraft Upgrade Research, and

Design Centre (AURDC).

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Presently it has over 100 qualified designers with vast experience In all activities connected

with design viz. design improvements on MiG series aircraft to suit customer's needs,

support to indigenisation, technology upgradation, structural integrity studies for life

extension, flight test analysis and mid-life update. The Centre IS recognised by the

Department of Science and Technology, Govt. of India.

The Centre is supported by a full-fledged analytical laboratory and facilities for fabrication,

assembly, ground resource and flight testing of aircraft and its systems.
Our Quality

Our commitment to quality is reflected in our

determination to adopt and maintain a quality system of

the highest standard in the industry.

Our quality system is certified to ISO - 9001.

It is constantly reviewed and audited by a team of

dedicated quality professionals. Production processes are closely monitored at all times to

ensure compliance with the requirements.

Our quality culture, which we actively and continuously promote through training, is based

on individual accountability and continuous improvements.

Every worker is putting in his best, aiming to do it right from the first time and every time,

and doing it better the next time.

Our Objectives

• Mid-Iife upgrade of all types of aircraft, research, design and development support to

manufacturing and overhaul

• Product improvement

• Structural integrity studies and life extension

• Flight analysis

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• Indigenisation of aircraft materials, systems and spares

• Technology forecast and upgradation.


In April, 1971 the board of directors of HAL appointed a committee of HAL to review the

total functioning of the company and make its recommendations. One of the study teams set

up by committee had gone into various aspects of the objectives of HAL in great detail and

made valuable suggestions for determining the objectives of HAL.

The objectives of HAL can be divided into two parts:

1. Basic objectives

2. Other objectives

Basic Objectives:

1.) To serve as an instrument of the national policy to achieve self-reliance in the design,

development and production of aircraft and aeronautical equipment to meet the country’s

changing and growing needs with special emphasis on military requirements.

2.) In fulfillment of this objective the company shall regard itself fundamentally

responsible for design and development, relaying however upon such relevant facilities

as are available in other national institutions but always holding itself basically

responsible for the growth and furtherance of the country’s aeronautical capacity.

3.) To so conduct its business economically and efficiently that it can contribute its due

shares to the national efforts to achieve self-reliance and self-generating economy.

4.) Towards this end, to develop and maintain this organization which will readily respond

to and adopt the changing matrix of socio-techno economic relationship and wherein a

socio climate of growing professional competence, self-discipline, mutual

understanding, deep commitment and a sense of belonging will be fostered and each

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employee will encouraged to grow in accordance with his potential for the furtherance of

the organizational goal.

Other Objectives:

Consistent with the basic objective of the company, the personnel development of the

corporate office has adopted certain specific objectives which will act as a source of

inspiration and guidance in involving personal policies and farming rules and regulation for

growth and development of employees and to ensure their deep commitment and sense of

belonging to the company. The specific objectives are stated below:

1.) Ensure quality of personnel of all level and provide them the right work

environment, job satisfaction and professional challenges.

2.) Provide a healthy blend of employees who have growth with the organization and

those selected from outside.

3.) Ensure employment of minimum number of personnel and avoid surpluses.

4.) Motivate employees to be increasingly achievement oriented

5.) Provide adequate opportunities for personnel to improve the level of their professional


6.) Personnel with talent and potential growth to be developed to should have higher


7.) Ensure uniformity in principal conditions of service


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• To be in total alignment with Corporate Strategy.

• Maintain Human Resource at optimum level to meet the objectives and goals of

the Company.

• Be competent in Mapping, Analysis and. Upgradation of Knowledge and Skills

including Training, Re-training, Multi-skilling etc.

• Cultivate Leadership with Shared Vision at various levels in the Organization.

• Focus on Development of Core Competence in High-Tech areas.

• Build Cross-functional Teams.

• Create awareness of Mission, Values and Organizational Goals throughout the


• Introduce / Implement personnel policies based on performance that would ensure

growth, Rewards, Recognition and Motivation.



We are dedicated to building a relationship with our customers where we become partners

in fulfilling their mission. We strive to understand our customers ' needs and to deliver

products and services that fulfill and exceed all their requirements.


We are committed to continuous improvement of all our activities. We will supply

products and services that conform to highest standards of design, manufacture,

reliability, maintainability and fitness for use as desired by our customers.


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We believe that our success depends on our ability to continually reduce the cost and

shorten the delivery period of our products and services. We will achieve this by

eliminating waste in all activities and continuously improving all processes in every area

of our work.


We believe in striving for improvement in every activity involved in our business by

pursuing and encouraging risk-taking, experimentation and learning at all levels within

the company with a view to achieving excellence and competitiveness.


We believe in achieving harmony in work life through mutual trust, transparency, co

operation, and a sense of belonging. We will strive for building empowered teams to

work towards achieving organizational goals.


We value our people. We will treat each other with dignity and respect and strive for

individual growth and realization of everyone's full potential.


We believe in a commitment to be honest, trustworthy, and fair in all our dealings. We

commit to be loyal and devoted to our organization. We will practice self discipline and

own responsibility for our actions. We will comply with all requirements so as to ensure

that our organization is always worthy of trust.

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HAL’s cost-effective and widespread skills are available to the International Aerospace


HAL has proven capabilities and offers collaborative arrangements in the areas of

manufacturing of machine components, sheet metals, assemblies, sub-assemblies and design

and development tasks (Structural analysis, 3D modelling and testing).

Some of the work packages for renowned international aerospace leaders include :-

• Airbus A320 Forward Passenger Doors

• Boeing 757 Over Wing Exit Doors

• Boeing 777 Uplock Box Assembly

• Boeing 767 Bulk Cargo Doors

• Boeing 737 Freighter Conversion Kits

• BAE Systems – Tornado Pylons

• Fokker Aerostructures – F50 Horizontal Stablizers

• Boeing -3D-Modelling / Digitisation of Drawings



The Helicopter Division manufactures the versatile and

multi-purpose Chetak Helicopters for civil and military

applications both for Domestic and International

customers. The Chetak helicopter is a multi-role, seven-

seater Helicopter, spacious and simple in design. The Chetak is highly maneuverable and

well suited to flying over sea, tropical and desert conditions. The Chopper can be effectively

deployed for a variety of civil and military roles that include communication, rescue, aerial

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survey, cargo & passenger transport and combat. Armed with missiles and torpedoes, it also

caters to the exacting requirement of anti submarine and anti tank warfare. The automatic

starting system gives the Chetak an uncommon instant start capability cutting down the time

from start to take-off to less than a minute. With an all up weight of 2200 kg it can cruise at

185 kmph covering a range of 500 km and has endurance of 3.40 hours.


The Cheetah is simple in concept and rugged in

construction. This HAL version of Aerospatiale Lama SA

315, is a lightweight high performance helicopter,

specially designed for operations over a wide range of

weight, centre of gravity and altitude conditions. It is powered by the tried and trusted.

Artouste-IIIB engine, also manufactured at HAL under licence from Turbomeca of France.

The turbo-shaft engine produces 550 S.H.P. at 33500 rpm. The Cheetah also incorporates the

latest technologies viz., hydraulic servo controls, ultra sensitive constant speed governor and

an automatic starting system facilitating starting and take-off in less than a minute. With

minimal adaptation it can be transformed into an excellent sprayer. Agile and highly

manoeuverable, the Cheetah can carry external cargo up to 1 MT. The Cheetah also excels in

observation, surveillance, logistics support, earth resource survey and rescue operations. The

Cheetah comfortably seats five and can also operate in unfavorable environmental conditions.

The Lancer Helicopter is a light attack helicopter

developed by HAL as a cost-effective airmobile area

weapon system. The basic structure of the Lancer is

derived from the reliable and proven Cheetah


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The Lancer is optimized for anti-insurgency operations, close air support, suppression of

enemy fire, attack on vehicular convoys, destruction of enemy machine gun positions

and anti-armour applications.

The Lancer carries two jettisonable combination gun-

cum-rocket pods, one each on the right and left side, on

suspension points located on the armament pylon. A

gun sight is provided for accurate aiming and firing by the pilot. Each pad carries one

12.7 mm gun and three 70 mm rockets.


Dhruv (Advanced Light Helicopter)

With a proven track record and established technology for

the manufacture of helicopters and its components, the

Helicopter Division commenced series production of Dhruv

(Advanced Light Helicopter - ALH) in 2000 - 2001. The ALH is a multi-role, multi-mission

helicopter in 5.5 tonne class, fully designed and developed by HAL. Built to FAR 29

specifications, Dhruv is designed to meet the requirement of both military and civil operators.

Dhruv is designed to perform both utility and attack roles.

With a twin-engine configuration, Dhruv allows continued

flight virtually throughout the flight envelope. Dhruv

incorporates a number of advanced technologies; Integrated

Dynamic System (IDS), Anti-resonance Isolation System (ARIS), Full Authority Digital

Electronic Control (FADEC), Hingeless Main Rotor, Bearingless Tail Rotor, and Automatic

Flight Control System to name a few.


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HAL with its vast experience has acquired state-of-the-art technologies for manufacture,

repair and overhaul of engines.

HAL manufactures Adour, Dart, Garrett and Artouste engines in addition to the engines for

MiG 21 variants and MiG 27M. HAL’s Engine Divisions have specialised in the

development of small gas turbines and engine test beds.

HAL provides Spares and Services support on Dart, Artouste and MiG related engines for its

overseas customers.

HAL’s clientele spans across USA, Thailand, Malaysia, Nepal, Mauritius, Namibia, Sri

Lanka, Vietnam and Egypt.



• Inertial Navigation System

• Head-Up Display & Weapon

Aiming Computer (HUDWAC)

• Combined Map and Electronic Display (COMED)

• Flight Data Recorder (FDR)

• Laser Ranger and Market Target Seeker (LRMTS)

• Autostabliser System (AUTOSTAB)


Integrated Navigation And Sighting Complex

(44 LK System)

Flight Data Recorder (UZL TESTER)

• Recording duration of 3 Hours

• Crash Protected Recording System

• Records 38 Analogue and 32 Discrete Parameters

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Spares and services

HAL provides Spares, Repair & Overhaul services for the following aircraft and engines:


• Jaguar

• MiG-21 series aircraft

• DO-228

• Mirage 2000

• HS-748

• Cheetah (LAMA SA315 Helicopters)

• Chetak ( Alouette III)


• Garrett

• Dart

• Artouste IIIB

• R-11/ R-25

• Allison 501 KB5 and KC5 Industrial Marine Gas Turbine


HAL has capability in design development tasks such as Master Geometry Development,

Detail Design Analysis, Testing of Wind Tunnel models, Testing of aircraft structures and

sub-systems. HAL is also involved in digitization of drawings (2D and 3D modeling) for

leading aerospace companies in USA and Europe.

HAL's strength lies in its human resource consisting of highly qualified specialists engaged in

the areas of design and development of aviation equipment in addition to turnkey projects,

consultancy, system design and analysis. Their effectiveness is enhanced by state-of-the-art

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IT infrastructure comprising of high-end Workstations, high performance / high reliability

scalable Servers, high speed gigabit LANs and high speed Internet / ISDN facilities.

Current facilities at HAL include :-

1. Hewlett Packard, IBM, Silicon Graphics and Sun Workstations and Servers on high

speed gigabit LANs

2. Catia, Unigraphics, Enovia, Team Center Engineering and other CAD / CAM / VPM /
PDM packages
3. Elfini, Nastran, Nisa Finite Element Analysis packages

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 The US$10 billion fifth-generation fighter jet program with the Sukhoi Corporation of


 US$1 billion contract to manufacture aircraft parts for Boeing.

 Multi-role transport aircraft project with Ilyushin of Russia worth US$600 million.

 120 RD-33MK turbofan engines to be manufactured for MiG-29K by HAL for

US$250 million.

 Contract to manufacture 1,000 TPE331 aircraft engines for Honeywell worth

US$200,000 each (estimates put total value of deal at US$200 million).

 US$ 120 million deal to manufacture Dornier 228 for RUAG of Switzerland.

 Manufacture of aircraft parts for Airbus Industries worth US$150 million.

 US$100 million contract to export composite materials to Israel Aircraft Industries.

 US$65 million joint-research facility with Honeywell and planned production of

Garrett TPE331 engines.

 US$50.7 million contract to supply Advanced Light Helicopter to Ecuadorian Air

Force. HAL will also open a maintenance base in the country.

 US$30 million contract to supply avionics for Malaysian Su-30MKM.

 US$20 million contract to supply ambulance version of HAL Dhruv to Peru.

 Contract of 3 HAL Dhruv helicopters to Turkey in a deal worth US$20 million.

 Supply of HAL Dhruv helicopters to Mauritius' National Police in a deal worth


 Unmanned helicopter development project with Israel Aircraft Industries.


 180 Sukhoi Su-30MKI being manufactured at HAL's facilities in Nasik and

Bangalore. The total contract, which also involves Russia's Sukhoi Aerospace, is worth

US$3.2 billion.

 200 HAL Light Combat Helicopters for Indian Air Force and 500 HAL Dhruv

helicopters worth US$5.83 billion.

 US$900 million aerospace hub in Andhra Pradesh.

 US$57 million upgrade of SEPECAT Jaguar fleet of the Indian Air Force.

 US$55 million fighter training school in Bangalore in collaboration with Canada's


 64 MiG-29s to be upgraded by HAL and Russia's MiG Corporation in a program

worth US$960 million. Licensed production of 82 BAe Hawk 132.


Accessories Division of HAL was established in 1970 with the primary objective of

manufacturing systems and accessories for various aircraft and engines and attains self

sufficiency in this area. Its facilities are spread over 94,000 sqm of built area set in sylvan

surroundings. At present it is turning out over 1100 different types of accessories. The

Division started with manufacturing various Systems and Accessories viz, Hydraulics,

Engine Fuel System, Air-conditioning and Pressurization, Gyro & Barometric Instruments,

Electrical System items, Undercarriages, Electronic items all under one roof to meet the

requirements of the aircraft, helicopters and engines being produced by HAL. This was

followed up with manufacturing the same range of accessories for MiG series of aircraft,
International Jaguar and repair / overhaul of Mirage-2000 & Sea-Harrier accessories. In

addition the Division manufactures systems for Civil Aircraft i.e. Avro, Dornier and AN-32

& cheetah, chetak & Advanced Light Helicopters. The Division, right from the beginning,

laid a lot of emphasis on developing indigenous capability for Design and Development of

various System and Accessories. This capability has culminated in indigenous design and

development of a variety of systems and accessories for the Light Combat Aircraft (LCA)

and Advanced Light Helicopter (all versions i.e. Army, Airforce, Navy & Civil) - two

prestigious aircraft programs in the country and IJT (Intermediate Jet Trainer). The Division

has also developed and has made successful strides into the area of Microprocessor based

control systems for the LCA Engine as well as other systems.



The Division carries out Repair and Overhaul of Accessories, with minimum turnaround-

time. Site Repair facilities are offered by the Division by deputing team of expert Engineers /


Services provided for:

Military Aircraft :-

MiG Series, Jaguar, Mirage-2000, Sea Harrier, AN-32, Kiran MK-1 /MK-II , HPT-32, SU-


Civil Aircraft :-

Dornier-228 , AVRO HS-748

Helicopters :-

Chetak (Alouette) , Cheetah (Lama) , ALH (IAF / NAVY / COAST GUARD / CIVIL)
The Division has comprehensive manufacturing capabilities for various Hi-tech components,

Equipment and Systems to customer's specifications and ensures high quality, reliability and

cost effectiveness.


Process :-

Heat Treatment facilities for all types of steels, Aluminum alloys, Copper, Nickel &

Titanium alloys.

Protective Treatment :-

Treatment facilities of all types like Plating, Publishing etc, SPECIAL types of

Surface protection & Painting facility, i.e. RILSAN Coating PTFE Coating, MOLY DAG


Welding :-

Division has Electro Beam, Argon arc, Spot & Seam welding equipment to facilitate

intricate welding on thin metal bellows, capsules, stator Packs, Brushes etc. Our welders are

fully approved & certified by Civil Aviation Authority.

Rubber, Plastic, Foundry :-

These facilities are in - house to cater for the needs of various production / servicing


Assembly and Test :-

 8000 sq.mtrs of Clean/Air-conditioned room (class 10,000 with laminar flow

cabinets) where assembly & test activities for instruments, Hydraulics and Fuel factories take


 Attached facilities to Assembly Shops are:

Dedicated Test Equipment, Environmental Testing facilities to meet the

aeronautical acceptance standards.

Environmental Laboratory :-

Facilities for all types of Environmental testing as per requirements of BS, MIL &

JSS, available to meet regular requirements of type testing of all types of units'

designed/developed in the in-house R &D centre.

In addition the Lab also caters for the need of special type of testing for Wheels, Hydraulic

item etc. in dedicated test rigs/beds. Design Computer Centre with Unigraphic, CAD &

Analytical Software Packages.


The Accessories Division Certification is:

 The ISO 9001 Certification for entire range of products and services.

 ISO 14001 Certification for Environmental Management System.

The Accessories Division Approvals are:

 Approval from DGCA, Govt. of India for design and development, Manufacturing

and repair.

 Approval for Research & Design Centre by Department of Science and Technology,

Govt. of India.

 Approval of Director General Aeronautical Quality Assurance for Military Aviation

products and services.

Products in Current Manufacturing Range:










Export Products

 Supply of Retable and Spares of Jaguar International and Cheetah (Lama) / Chetak

(Alouette) Helicopters

 Repair / Overhaul of aircraft accessories of MiG series Aircraft, Jaguar International

Aircraft, Cheetah (Lama) / Chetak (Alouette) Helicopters and Dornier Multi-role Aircraft

 Supply of Ground Support Equipment for Aircraft such as MiG-23 I 21 I 29.Mirage-

2000, Jaguar, Light Combat Aircraft (LCA) Su-30 MKI, Sea Harrier, Domier DO-228,

Avro HS-748 (Specific Version), Cheetah (Lama) / Chetak (Alouette 111), Ml - 17,

Advanced Light Helicopter (ALH).


Division has embarked upon selecting and creating a strong base of suppliers for outsourcing

precision components, tooling and test equipment. Vendors are selected as per the corporate

guidelines, pursuing a vendor approval process. Applicant Organization with established

facilities & capabilities, willingness to learn and excel in producing aeronautical level of

quality product and with financial strength and preferably with DGAQA approval stand a

good chance in becoming part of the aeronautical industrial expanse.


Hindustan Aeronautics Limited is a large manufacturing organization and its main customers

is Indian Air Force which gives HAL various orders for manufacturing, repairs and overhaul,

design and development etc. and provides 90 % amount of ordering in advance and rest 10 %

after receiving the complete order, so in this way HAL realizes 90% ordering amount before

the supply of the items and only 10% of the amount blocks. Therefore, the need of working

capital in case of HAL is not much high with respect to other manufacturing organizations.

HAL has civil customers and it also takes contracts from Navy and Coast Guard,

Aeronautical Development Agency (ADA) etc. The projects undertaken by HAL are either

company financed or customer financed. It takes money from customers in advance for the

functioning of the projects. Company also finances some of the projects and in these cases

funds are provided by the government. Company does not suffers from losses because there

is no risk in the investment of projects because investment is made on the basis of orders and

some percentage of total amount of the project is provided to the company in advance to start

the project.

Capital structure theories are not applied by this organization because being a Public

Sector Unit; its main power is in the hands of government. Decisions taken by

government of India in relation to companies are followed by it. The Head Office

controls all the financial policies of different Divisions.

Hindustan Aeronautics Limited (HAL) has cruised past the Rs.10,000 crore mark for the first

time with a sales turnover of Rs.10,373 crores during the Financial Year 2008-09. The profit

of the Company (Profit Before Tax) soared to Rs.2,335 crores.

The highlights are given below :

Particulars 2007-08 2008-09 Rupees in Crores

Growth over Previous Year
Sales 8625 10373 20.27%
VOP 8791 11811 34.35%
Profit before tax 2164 2335 7.90%
Profit after tax 1632 1740 6.62%
Gross Block 2255 2638 16.98%

Financial highlight Of the Performance During 2008-09 :-

Particular 2008-09 2007-09

Turnover 10373.38 8625.33
Export 436.58 341.09
Profit Before Tax 2334.86 2164.23
Provision For Tax 595.00 532.35
Profit After Tax 1739.86 1631.88
R & D Expenditure 674.78 662.14
Interim Dividend On Equity Share 299.95 287.95
Proposed Final Dividend On Equity share 48.03 39.05
Total Dividend 347.98 327.00
Tax On Dividend 59.14 55.57

Total sales of the company :-

Financial ratios for the year 2008 and 2009 :-
Financial Ratios 2007 - 08 2008 - 09
251298 297897
Sales Per Employee
9 3
119660 119892
Value Added Per Employee
0 6
PBT to Sales 25.09 22.51
PBIT to Capital Employed 48.55 39.48
PAT to Net Worth 49.06 37.53
Debt Equity Ratio 0.00038 0.00030
Earnings Per Share 135.43 144.39
Dividend as %age of Equity 317.49 337.86

Distribution of surplus :-
Dividend paid by the company on equity shares during the year

and the previous year :-

2008-09 2007-08
P a r t ic u l a r s Number of Dividend Dividend Dividend Total out- Div
Total outflow
Shares per share of amount Tax (Rs. cr.) flow (Rs. including
Rs.10/- (Rs. cr.) cr.) Dividend Tax
First Interim
12,05,00,000 4.00 48.20 8.19 56.39 56.39

Second Interim
12,05,00,000 20.89 251.75 42.78 294.53 280.49
Sub-Total 24.89 299.95 50.97 350.92 336.88
Final Dividend 12,05,00,000 3.99 48.03 8.17 56.20 45.69

TOTAL 28.88 347.98 59.14 407.12 382.57


The Accounts Department of HAL has been divided into different sections for the smooth

functioning. These sections are as under:

1. Bills Payable

(Payable to Suppliers)

2. Finance

(Clearing Purchase Order files)

3. Payroll

(Payment of salaries)

4. Bills Receivable

(Collection of amount from customers)

5. Cash Office
(Cash disbursement to employees)

6. Cost Accounts

(Costing and pricing of products)

7. Material Accounts

(Details of materials)

8. Book Keeping

(Annual Profit & Loss Account and Balance Sheet)

9. Budget and MIS

(Annual Budget)

10. Time Office

(Attendance records)

11. Provident Fund

(Record of PF savings of employees)

12. Bills Services

13. Foreign Bills

(Letter of Credit, Sight Draft, Advance Payment, Direct Payment)

14. Civil Works


As the name suggests, this section is concerned with Salary, Wages, incentives and

correspondence with Time Office. It takes into consideration subsidies granted and providing

motivational benefits.


• On the basis of appointment / transfer notification from Personnel Department,

individual files are opened in the Pay roll section to record the particular of the
employees. Such as grade, date of appointment / transfer / department code, permanent

batch number, scale of pay, quarter details etc.

• The Pay roll record is updated from time to time entering therein increment drawn,

promotion, transfer etc.

• The deductions to be made are forwarded by EDP section by means of deduction

statement in the form of checklist by 25th of every month. Pay roll section corrects the

same with reference to the various documents and recovery registers and sent it back to

the EDP Section for final adoption by 26th /27th of the month.

• The EDP Section prints the Pay roll in duplicate in which one copy is maintained in

the Pay roll section for record purpose and the original copy is distributed to the

employee concerned.

• Disbursement of Salaries & Wages: Payment of salary to the officers & employees

is made through the bank based on the payroll received from the EDP Section.

• Remittance of Recoveries: Various recoveries made from the employees in respect

of LIC premium. HDFC loan, income tax etc. are remitted to various agencies within the

stipulated date by means of cheque.

• Payment of Advances: Various types of advances such as Car/Scooter advance,

Contingency advance, TA/DA etc. are paid / adjusted as per the rules of the company.

Also reimbursement of expenses like medical, school fees, conveyance etc. is made as per

the rules followed by the company.

• Accounting Procedure: Monthly Pay roll journal entries are made both for

Supervisory and Non-Supervisory personnel and sent to Book Keeping Section for

adoption. For payments made to person from other divisions, proper accounting is done to

ensure that necessary advice is raised to the concerned division.

• To make payments to ex-employees towards the final settlement of their dues.

• To monitor the controllable expenditures like Medical expenditure, Conveyance

expenditure etc. on monthly basis and to ensure it does not exceed the budget provided

for it.

• Advances: Advances are refundable in nature. Their recovery is made from the salary

of the employee. These advances are paid according to the rules of the company like

Scooter Advance of Rs 27000/- is paid only to the employees and suitable amount per

month is being deducted. Contingency Advance is paid as per the rules of the company.

Amount for this advance is Rs.4000/- for employees and Rs.50007- for executives and its

recovery should be made within 10 months. Salary advance is also paid to the employees

subject to maximum twice in a year. Employees can also draw advance from prescribed

Banks. In that case, HAL will pay monthly subsidy upto a certain limit.

• Salary Payment: On the basis of attendance report received by the Pay rollsection,

salaries are made. Salary includes — Basic pay + DA + HRA +CCA + Conveyance

Allowance + Canteen Subsidy + Incentives + Washing Allowance + Magazine Allowance


• Medical Reimbursement: HAL provides for the benefit of medical reimbursement

for its employees subject to government rules

• TA/DA: Those employees who are sent outside the company for any official job are

paid TA/DA by the company. There are found elements under it -

• Fare: Amount of ticket of Air / Bus / Train are paid to the employees

• Dearness Allowance: It is paid as per the company's rules Hotel charges: Guest

house charges are paid, In case of non-availability of Guest House, hotel charges are paid

depending on limit prescribed by Company. Amount of Local Conveyance to attend his

duty at his temporary duty place is also paid.

• Conveyance Reimbursement: It is paid to those employees who are sent outside the

office for official duty within the city.

• Leave Travel Concession: This concession is available once in a block of four years.

The employee and the dependent members of his family are entitled to visit home town

twice (once in each block of two years) or visit his hometown once in one block of two

years and visit any place in India in the other block of two years or visit his hometown

once in one block of two years and encash the visit to any place in India. Now Company

has started Leave Travel Assistance scheme. In this system, company pays a certain

amount yearly basis in lieu of LTC. Employees can opt either LTC or LTA scheme.

• Retirement Element: On the retirement of the employee gratuity (15 days salary of

each completed year of employment is paid to him. Encashment of other due balances of

the employee is made. Amount of gratuity is maximum Rs.3.5 lakh (as per rules of the

company). In case of voluntary retirement employees gets the amount subject to Rs.3



This Section is responsible mainly for the preparation and submission of invoices etc. HAL's

regular customer is IAF, which accounts for around 85% share in total sales of the

organization and rest are mainly Navy, Army, ADA and others.


 To ensure that the dues from the customers in respect of the goods supplied and

services rendered are recovered timely as per the Fixed Price Quotation / Price Catalogue

approved by the Ministry in acceptance with the Government letter issued by Ministry of

Defence dated 24th August 1995.

 To ensure that the invoices relating to the advances, stage payment, final delivery

raised timely in order to have smooth cash flow position.

 To ensure that proper accounting is done as per the statutes and accounting

instructions laid down by the Corporate Office.

 To ensure that all statutory payments e.g. Sales tax, Excise duty, Customs duty is

recovered from the customers and is deposited timely with appropriate authority.


The following are the functions of the Bills Receivable Section:

 Preparation and rendering of invoices to Indian Air Force (IAF) in respect of the

following activities with the guidelines laid down in the government letter.

a) Manufacturing activity

b) Repairs and Overhaul

c) Supply of spares against RMSO

d) Deferred Revenue Expenditure

The following documents shall be produced in support of the invoices rendered.

a) Initial advances are recovered on the basis of customers' order,

i) Firm / Forecast task given by the Air Force

ii) Chief Resident Inspector (CRI) coordinated Inter Divisional Task Orders (IDTO) for

divisional tasks.

iii) Repairs Maintenance Supply Order

b) Subsequent stages / Final payments are claimed on the basis of dispatch Advices,

Acknowledgement received Air Force in Form Q423, Inspection Note certified by the

Chief Resident Inspector (CRI) about the progress of the work done.
In respect of the repairs and overhaul work the payment is strictly regulated based upon the

nature of the work carried out e.g. Functional test, Defect Investigation and Zero Hours

Servicing, Repair and Overhaul.

 To prepare and render invoices to Non-Indian Air Force customers in respect of the

following activities:

i) Development Sales for customer financed projects,

i) Supplies and services rendered to civil customers

iii) Supplies against Repair Maintenance Supply Orders (RMSO).

 To raise debit on other Divisions on Stock in Trade (SIT) in respect of

parts/accessories supplied for fitments in Engines/Aircraft /Helicopters manufactured by

them for supply to customers.

 To claim payment from Account Officer Defense Accounts Department (AODAD) on

the basis of fitment details received from those divisions.

 To provide details to Budget Section for compilation of Sales Budget on the basis of

Sales order, Firm / Forecast Task, IDTO for Budget estimates, revised estimates,


 To collect Sales Tax from the customers and deposit the same.

 To compile Sales Tax returns and submit the same to Integrated Material

Management (IMM) Department for onwards submission to Sales Tax authorities for


Production Control Memo:

The production department issues a memo called Production Control memo, which is issued

to intimate the dispatch section of the readiness of the items to be dispatched to the party

(customer) concerned.

Dispatch Advice [DA] :

When the item is received in physical form from the workshop, a dispatch advice is prepared

which contains the details as to the date when the order was placed, details of the items to be

dispatched, mode of transportation etc.

Procedure for Billing :

For the purpose of billing, the cost of work is arrived at for different kinds of Sales in

different manners, which are as follows:

 Fixed Price Quotation (FPQ): In case of 'repairs', the cost of sales is arrived at with

the help of a fixed price quotation memo, which is prepared in the Bills Receivable


 Price Catalogue: For the issue of fresh items, the cost of sales is arrived with the help

of a price catalogue. Revenue is said to be recognized only on the receipt of certification

from the CRI.

Flow of Work :



Bills Payable Section has two segregations, which perform their functions independently,

these sub-sections are as under:

1) Bills Payable (Indigenous)

2) Bills Payable (Services and Civil works)

3) Bills payable (foreign bills)


Here in this section, bills related to the Indian suppliers are paid off. It is not

concerned with any kind of foreign remittance. The job of this section starts after receipt of

information of any type from commercial or Purchase Department. It maintains the proper

accounts in relation to the work performed by this section. It also deals with the payment of

miscellaneous advances.


Purchase Order is sent by the Purchase Department after the approval. "Material

Procurement Committee" (MFC) approves it. Then Purchase order is sent to Bills Section,

which shows the details of the material required. Vendors are consulted for the purchase of

the material. The vendors send their quotation for supply the material. Then the concerned

authorities select the best quotation. Thereafter order is placed. Invoices are sent in case of

payment through bank and these invoices are matched with the purchase order and then

payment is made to the concerned party.

Invoices consist of the name of consignee, manufacturing code no., Challan No.

Customer No., date and time of invoice and date and time of removal of goods, product code,

description and specification of goods, type, total quantity of goods, rate, unit, assessable
value, packing and forwarding charges (P&F) rate of duty, duty paid, mode of transport,

freight, insurance, tax rate, sales rate etc.

Inland vendors for supplies / services are paid by one of the following procedure:-

1. Document through bank

2. Cheque against delivery

3. Advance payment

4. Open account

1. Document thorough bank

In respect of purchase order where payments are stipulated as 'through bank', the

bank intimation is sent to Bills Payable Section along with the copies of invoices. These are

entered in the documents received from one bank. Bills payment section after checking the

documents with the purchase order passes the invoices and sends the remittance voucher to

the cash section for arranging the payments and collection of the documents from the bank by

the Purchase Department.

2. Cheque against delivery:

In respect of local purchases made on cheque against delivery basis, the Purchase

Department furnishes to the Bills Payable Section details of the material ordered and to be

collected and amount of payment due. The Performa invoice received from the supplier is

enclosed with the intimation sent to the Bills Payable Section.

3. Advance Payment:

The Purchase Department forwards the Performa invoice received from the suppliers

to the Bills Payable Section. The Bills Payable Section after checking them with the

remittance vouchers to the cash section for arranging payment. In case where bank guarantees
are provided against advances, such bank guarantees received are entered in the bank register

and the guarantees are sent to the cash office for safe custody.

4. Open Account:

The supplier's invoices are received from the Purchase Department duly linked with

the Relevant purchase vouchers and intimations regarding recovery of liquidated damage

(LD)for delayed deliveries along with competent authority's approval and the same are

entered in the bills register. The relevant details are checked with purchase order e.g. unit

price, extension total etc. and passes the invoices for payment already made, deduction of

dues etc. Cash / remittance vouchers are prepared based on the passed invoices and

forwarded to the Cash Section for arranging payment through cash / cheque. Copies of

remittance vouchers are endorsed to the Purchase Department and the supplier. The details of

deduction, if any made from the invoices are furnished in the remittance voucher itself

separately and also forwarded to the supplier.


• Advance journal

• Cheque against delivery register

• Indigenous purchase journal

• Agency commission register

• Insurance claim register

Flowchart of Bills Payable Indigenous


Bills payable foreign deals with the payment to foreign suppliers as stipulated in the Purchase

order. This sub-section performs its function separately from the other subsections of this


• Payment and accounting of:

i. Advance to the suppliers as per the terms and conditions of Purchase Order.

ii. License fees, royalty etc. as per the licence agreement with the foreign Collaborator.

iii. Custom duty, freight bills

iv. Final bills

• Opening of Letter of Credit on advice of IMM Department and liaison with bank for

foreign exchange release and payment on maturity date.

• Maintenance of commitment registers for budgetary purpose.

• Pricing of RDR (Receiving cum Discrepancy Report) with Purchase Order rates and

loading of customs duty, freight and insurance charges.

• Priced RDR are sent to material accounts section / EDP for punching in batch mode

for the processing of materials ledger.


All Purchase Orders / Contracts received are entered into the registers before opening the

separate file for each Purchase order. All the LC opened in favour of foreign suppliers as per

the terms of purchase orders and entered in registers to record the particulars about their

extension, revalidation and utilization on maturity of the LC the bank adjustment voucher is

prepared on the basis of bank advice and sent to Cash Section for adjustment. Particulars of

payment are also noted in the relevant Purchase Order.

All the Contractual payments in respect of royalty, license fee and technical assistance fees

are made as per the license / collaboration agreement. Bills of entry received from the IMM

department are entered in register to record the value of the goods accessed, amount of duty

paid to ensure that the duty levied is correct and the amount of duty paid is loaded to the

inventory accounts correctly. After receipt of goods the stores department sends the RDR to

the foreign bills section for making necessary accounting. Pending the pricing of the RDR,
the payments made to foreign vendors through LC / Sight drafts are put temporarily in goods

in transit account. In respect of the material dispatched by the vendors against P.O. raised by

HAL, the liability is provided in the company's books of account, if payments have not been

made against such suppliers. Follow up with IMM Department is done for the timely release

of RDR so as to clear the GIT.

Foreign Bills :-

Foreign suppliers are paid by any one of the following methods as stipulated in the purchase

Order / License agreements / contracts:

• Letter of Credit

• Sight Draft

• Advance Payment

• Direct Payment

1. LETTER OF CREDIT: Letter of credit is the fastest mode of payment. Documents

negotiated by the suppliers against the LC opened by the company are paid directly by the

bank by debit in the company's account maintained with the bank and send the debit advice,

invoices, bills of lading etc. The bank advices for payment against letter of credit are noted in

the LC register and relevant Purchase Order files. A bank adjustment voucher / remittance

voucher is then prepared in respect of each such bank advise and sent to Cash Section for

accounting in the Cash / Bank book.

2. SIGHT DRAFT: This mode of payment takes more time as compared to LC where

Purchase Order stipulates payment terms as 'document through banks', the seller draws a

sight draft on the company and send it through bank accompanied by documents like

invoices, airways bills etc. The bank advice for the payments of the documents are collected

by the Purchase Department from the bank and sends the same to the Bills Payable Section
along with copies of invoices etc. These are entered into 'sight draft register' in the order of

receipt. In this procedure bank intimation is sent by PNB to this section for the authorization

of the payment. In bank intimation airway bill no., date etc. are mentioned as document

proof, after the authorization of the documents payment is made to the supplier.

3. DIRECT PAYMENT: Where the terms of the payment in the Purchase Order stipulates

payment after delivery or in the similar circumstances and the foreign supplier sends the

shipping documents etc. directly payments are arranged by the Bill Payable section on receipt

of relevant invoices and receiving reports etc. with due recommendations from the Purchase

Department by means of letter of authority cheque. Based on debit advices received from

bank payment particulars are noted in the sundry creditors register and a remittance voucher

is prepared and sent to the Cash Section for entering into the cash book / bank book.

4. ADVANCE PAYMENT: The Bills Payable Section on receipt of the Performa invoice

checks the same with the relevant purchase order and authorizes the bank by means of letter

of authority / cheque to arrange payment to the foreign supplier after obtaining the relevant

approval of the RBI which is required for the payment of advances. Normally such advance

payments are made after obtaining the bank guarantee. The bank after arranging the payment

sends a debit advice to the Bills Payable Section giving details of the amount debited to

HAL's account. On the basis of bank debit advice, payment particulars are noted in the

advance of suppliers register and a remittance voucher is prepared and sent to Cash Section

for entering into the Cash book / Bank book.

Flow Chart of Bills Payable (Foreign Bills) :-


Bills Payable Section deals with the preparation of bills of services and civil works in the

company. This sub-section is mainly responsible for service contracts, job contracts, medical

payments, advance payments, payments regarding construction of bonding etc. Accounting

related to all these are done by this section.


• Payment and accounting of advances, running bills to contractors and final bills.

• Adjustments and recovery of advances

• Accounting and adjustment of earnest money and security deposits.

• Capitalisation of buildings.

• Payment of all services like telephone, electricity, water, canteen, transportation,

sanitation etc.

• Payments to all consultants like architects, advocate, part time doctors etc.


In case of the running bills the works Account section links the bills submitted by

contractor duty certified by engineers in charge with the contract, acceptance letter, work

order etc. arranges payment after deducting income tax, balance security deposits and other

advances if any and training the prescribed percentage of the bill towards retention money no

deduction is made on this account.

Similarly the final bills are submitted by the contractor are checked and gross amount

payable is determined. The amount settled in the running bills, advances if any and penalty in

delay in completion of work, recovery toward consumption of material, IDS etc. are deducted

from the gross amount payable.

Material advances to the extent of 75% of the value of the materials brought by the

contractor and lying at the site are given on certification from the engineer in charge and are

recovered from the running / final bills.

Payment of bills for services like electricity, water, telephone etc. received from plant

maintenance department / concerned user duly verified by them and approved by the

competent authority are made. Payments in respect of other services received by the company
are made after the competent authority duly approves it. In case of job contracts payments is

made to casual employees other than the regular employees of the company. Three categories

are made and rate of these categories differ from each other.

Category Rate (Rs.)/ day

Skilled 156.56

Semi skilled 143.93

Unskilled 130.90

In case of service contracts like transport, AMC (Annual Maintenance Contract) of

Computer, photocopier etc. are not received in time LD charges are deducted from the

amount which lies between 1/2-5% per month as per rules of the company.


Cash is life blood for an organization. It is the thing around which, by which, through which,

and for which all tasks are done and efforts are employed. So in this respect Cash Section's

responsibility also increases. Cash section deals with the receipts and payment of cash and

cheques. Accounting of all cash or bank transactions is done as per the guidelines provided

by the corporate office.


All amounts collected by different sections either from employees or from external agencies

are sent to the Cash Office through cash credit vouchers.

Cash received in excess of requirement, cheque, bank drafts, postal orders are deposited into

the company's bank account the same day for realization.

Payment to employees such as medical reimbursement, TA/DA advances etc. are made

through payment vouchers, which are punched into the computer through online system. The

cash office in turn, after proper identification, makes the payment through cash teller.
For payments to outside parties cheques are made on the basis of remittance vouchers sent by

different sections. These cheques are being sent to the Purchase Department for taking

necessary action.

Entries are made every day on the basis of cash credit vouchers and remittance vouchers and

cash balance are arrived at, which is certified by the in charge of cash office.


All amounts received are recorded in a receipt register by respective Sections and sent to the

Cash office accompanied by the Cash credit vouchers. Likewise cash credit vouchers for cash

remittance made by the employees towards repayment of advances, bus/train passes, canteen

receipts etc. are sent by the respective sections of the Accounts Department. After receipt of

cash / cheque etc. cashier initials in the receipts register in acknowledgement and issue

officials receipts for cash cheque received.

Remittance vouchers are made by the various accounting sections for payment to suppliers,

contractors and others and sent to cash office for writing cheques. The cheques are written /

typed by the cash office and the officer authorized to sign the cheques sign the same.


The Time Office department is primarily concerned with recording of each worker's time 'IN'

and 'OUT' of the factory, maintaining leave record and feeding of attendance record to

Computer Department. It maintains the receipts of approved leave applications and also

provides data for the vacation leave provision to be made in the books of accounts.


• To issue leave cards for the calendar year to all the employees / officers of the

• To maintain leave ledge P.B.No. (Permanent Batch Number) wise for all the

personnel. Credit is given to each account according to his entitlement as per laid down by

the Corporate Office and the posting is done simultaneously from the attendance reports

received from the concerned department.

• To verify the application for Vacation Leave (V/L) encashment and advice according

to Pay Roll section.

• To make calculations for payment of attendance bonus to Group-A to Group-F


• To make calculations for provision for Vacation Leave to be accounted for Final




Employees who are borne on regular rolls of the company are eligible for vacation leave at

the rate of 2.5 days for every 30 days of service. Vacation Leave can be accumulated upto

300 days. There is a provision of encashment of earned leave. The minimum encashable

vacation leave is 10 days. The maximum no. of days for encashable leave will be one half of

the V/L at credit of the employees on date of encashment. Leave encashment will be allowed

only once during a calendar year. The encashment will be at the rate of Basic Pay (including

Service weight age pay in respect of workmen and special pay and personally pay, if any,

which are counted as pay for all purposes) + Dearness Allowance drawn at the time of


Rate of Encashment = Basic Pay (monthly) + DA

(Per day) 26 days

Employees who are borne on regular rolls of the company are eligible for 12 days of Casual

Leave in a calendar year. Casual leave can be availed up to a maximum of 8 working days at

a stretch, subject to the same being sanctioned. Casual Leave can be availed for half a. day



It would be available to regular married female employees for 12 weeks inclusive Sundays

and holidays.


Entitlement of sick leave is 15 days in a calendar year.


It is an ex-gratia payment. It is being provided to employees for long illness e.g. T.B., Cancer

like diseases. During first six months of leave employee is paid 50% of his monthly basic

salary. For next six months employee is not paid any amount. Total duration of the prolonged

leave is one year.

Other provisions also exist like –

• Vacation leave in advance

• Leave salary / salary advance

• Extension of leave

• Encashment of Vacation leave on termination of service Leave without payment

• Increment postponement

• Special leave / compensation for employment injury

• Carry forward of leave by management trainees / executive trainees/ technician

• Carry forward / encashment of vacation leave / half pay / sick leave in respect of

absorbed deputation / employees joining the company on fresh appointment from central /

state government and other public sector undertakings.


It is being paid to sportsman, ex-serviceman for replacement / treatment of artificial limbs, to

office bearers of recognized Unions for attending conciliation proceedings etc.


After the completion of a task or in its due course there is a need to maintain an accounting

record, which is duly fulfilled by passing on a journal entry in almost every finance and

accounting section with some exceptions. After its proper journalisation, a bunch of journal

vouchers are forwarded to Book Keeping Section for consolidation. Therefore, this section is

responsible for proper maintenance of accounts of the company as per the requirements of the



• Journal entries originated by the various sections of finance and accounts department

are sent to Book-Keeping section. These entries are serially numbered and punched into the

computer and thereby posted to the general ledger.

• Preparation of Trial Balance, Profit and Loss Account and Balance sheet. Since the

maintenance of accounts is computerized, the accounts can be prepared at any time, though

they are prepared for every quarter as on 30th June. 30th September, 31s' December and final

Accounts as on 31st March.

• Maintenance of fixed assets register and depreciation schedule :

• For capital items purchases, RDR are furnished by the Bills Payable section, likewise

details of assets like works section to the Book Keeping section. The maintenance of asset

ledger is computerized in which the details like date of purchase, nature of item, purchase

order no., location of assets is fed.

• Depreciation on capital asset is calculated as per the policy of the company and is

accounted by the means of the journal entries both in respect of opening balance as well as


• Physical verification of fixed assets is done as per the guidelines of the Corporate

Office in co-ordination with the book keeping section.


• Maintenance of journal and general ledger:

• Journal entries originated by the various accounting sections and their approval by the

competent authority are sent to Book Keeping section. This journal voucher after scrutiny is

serially numbered month wise and entered in the main journal. From the journal, posting are

made to the general ledger.

• After ensuring that all the entries for the month have been received and posted in the

general ledger, the accounts in the general ledger are totalled.


For its effective operation, management must know what are its resources, what is are to be

achieved, whether operations are going in accordance to the plans set and such other things,

which are to be considered. So for this purpose it also required that the plans must be laid

down into verifiable terms i.e. quantitative tarns and for that necessary guidelines with target

period for achievement are to be set. This format structure is called Budget. In his manner a

Budget can be defined as:

"It is a financial statement of facts laid down prior to the period of its implementation during

which it has to be followed based on management's policy and prepared for specified

objectives achievement."

A Capital expenditure is that which helps to increase the production whereas revenue

expenditure is that which helps as consumption in production process.

There are many types of Budget prepared but it has been bifurcated under two heads as





It is the most important budget that involves huge funds and is prepared for long term

investment. This budget is related to the capital items, which are to be used for long period

for the betterment of the organization for many task accomplishments such as plants and

machinery, building, roads, vehicles etc.

In this way it is a long-term budget. It is a base for all activities. It involves huge capital

outlays projects and long-term commitments. It affects decisions over a period of a year. It

involves large risks and uncertainties. Thus, its preparation is handed over to senior and

experienced executives. It serves following purposes:

• Helps to evaluate capital expenditure proposals.

• Helps to formulate other organizational budget.

• Helps to consider best proposals according to which priority can be fixed.

• Helps to control capital expenditure i.e. Utilization in effective manner.

• Helps in systematic procedure for appraising profitability performance of the

Generally top executives of the Corporate and operational level take initiation of

proposals of capital expenditure as per requirements. It is generally concerned department

and project in charge that feel its need. Here in capital budget is laid down under

following heads:

• New projects

• Existing Projects

• Improvement and Rationalization

• Replacement

• Welfare

• Design & Development

• Information & Technology


This budget is also termed as Revenue Budget but due to misconceptions, which might be

taken by other it, is named as Performance Budget. This budget can be recognized as the type

of budget related to different fields, which directly or indirectly affect profitability. Its

benefits are realized in short period of time but some exceptional cases are there e.g. Sales

budget, DRE, Manpower budget etc. This type of budget contains different types of budgets,

which are explained below:

• Order status budget

• Purchase Budget

• Sales Budget

• Production Budget

• Manpower Budget

• Foreign Exchange Budget

• Training Budget

• Welfare Budget

• Ways and Means budget

• Deferred Revenue Expenditure budget


Management information system implies a type of task performed here by budget section to

provide information to the concerned department with respective need for future

performance. By it, the future contingency can be controlled too a great extent. It is a very

handy system so a great responsibility is handed over to qualified personnel. This system

holds a very important position in the organization and its responsibility is handed over to

budget section. For it according to organization’s guidelines, section has to frame some

important statements for providing information to responsible executives in concerned

department. Some of these statements are:-

Sales Analysis:-

It is prepared after information supplied by B/R section and customer service department

after mutual co-ordination. It is based on the analysis regarding Manufacture sales, Spares,

Repair & Overhaul task, Development sales, miscellaneous sales, IDTO sales, Export sales,

etc. So altogether it consists of all information regarding ordered contracts. It consists of all

details with terms and conditions, specifications, price, etc.

Capital & Deferred revenue expenditure for new Projects:-

It specifically shows capital as well as DRE. In addition to above specification it contains

information regarding cumulative in case of commitments and expenditure.

Cash Flow:-

Cash flow statement’s information is provided by cash section. It contains information

regarding total receipts and their different sources as well as total expenditures under main
heads. In addition to it, it serves as a cash budget. Also it states probable receipts and

expenditures in future succeeding three months. Income sources may be receipts from IAF,

Non-IAF and expenditure contains both capital expenditure as well as revenue expenditures.

Revenue Expenses:-

A statement separately for all revenue expenses which are minutely bifurcated is prepared

containing information as actual and estimated expenditure under cumulative heads.

Status of Foreign Commitments & Expenditure:-

It is shown to inform in respect of foreign commitments and expenditures made accordingly.

As delay in this expenditure and eagerness to pay both may affect the organization in drastic

manner because foreign exchange so its regulation must be done in an effective manner. It

contains both Western and Russian commitments regarding capital and revenue items.

Sundry Debtor’s Position:-

It is also clarified by way of previous dues, current month’s dues, period of dues, and reason

for pending which may be due to wait of Government Orders, due to audit, pending with

other divisions, pending for want of RMS & Q 423. It contains information with balance,

additions, realized & balance accordingly. It helps to judge our debtor’s position and

accordingly measures can be taken in future projects and this one.

Financial Highlights:-

Financial highlights with respect to sales, value of production, profit, values added in terms

of different heads are shown to make at a glance evaluation of major responsible, productive

components of organization.

An Inventory Report:-

It is also submitted according to Goods in Transit, Stores, Work in Progress, Stock in Trade

with remarks from commercial and store department by inspection.


This section ensures the timely collection of provident fund money from members every

month. The money so collected from employees is invested in approved securities. Employee

provident fund came into existence in year 1952. Provident Fund trust deals all the

functioning of this department. Trust holds its rules and regulations for the proper



• The P.F. subscription of members is deducted monthly from their salary. The amount
so deducted, which is 12% of the pay along with the company's contribution, is collected
from the pay roll section and credited to the funds account.
• Payment of loans (refundable and non-refundable) to members as per the rules of the
company subject to the availability of the funds.
• The investment of provident fund money is made in the approved securities and the
board of trustees approves a detail of investment.
• To watch timely recovery of interest and keep watch on securities.
• Interest is credited in the account of each member at such rate as may be determined
by the board of trustees, taking into account the income of trust during each financial
• To maintain family pension account of each member and remittance to RPFC at the
stipulated dates and file monthly and yearly returns.
• To remit the amount of PF deduction for contractual/ casual workers by cheque to
RPFC and file the return in respect of the same.
• To distribute annual statement of PF to all the members in the format prescribed by
• To make final payment of PF due to a member on his retirement/ resignation or due to
a nominee in the case of the death of a member as per the rules.
• To maintain accounts of provident fund transactions and get it audited by the mutorv
auditor of the company and approved by the board of trustees.


• To ensure that all the receipts and issues of materials from stores are recorded and

accounted for properly.

• To ensure that all the receipts and issues of materials from stores are recorded and

accounted for properly.

• To ensure that all non moving/ slow moving materials are identifies as surplus by

I.M.M. and a suitable redundancy provision is maid against them and are disposed off.

• To ensure that Bin Card balances are reconciled with the material ledger balances in

co-ordination with I.M.M. and the balances of material ledgers tallies with the general



• To send the priced R.D.R. received from Bills Payable section to E.D.P. for punching

in the Batch Mode and thus all the Receipts are recorded and control is exercised over all

the Purchases Value-wise.

• To generate exception list for missing R.D.R. and getting it resolved with Bills

Payable Sections.

• All the materials drawn excess when returned are credited to stores through Stores

Return voucher.

• The E.D.P. after processing of all M.R./ Issue Vouchers prints the Material Issue

Analysis Statements monthly indicating :-

a. The cost of materials drawn against various Job Orders, Expense accounts;

b. The cost of material issued to Contractors and others;

c. The cost of tools issued to various tool cribs from Main Tool Stores;
d. Based on the above statements accounting for issue of materials is done by debit to

Work-in-progress / Expense/ Contractors account and credit to relevant inventory


e. On the basis of List of Materials / transfers reclassifications indicating the material

Code No. / Quantity and Value, necessary Journal entries are passed by debit / credit to

relevant inventory accounts.

f. On the basis of stock verification sheets indicating stock verification Note No.,

Material Code No., Shortage /Overages, necessary Journal entries are passed after

obtaining clarifications from Stores Department by credit / debit to relevant inventory

accounts after taking approval of C.F.A. wherever required for adjustments / write-off of


g. A list of materials not moved for over 5 years is given by E.D.P. which is reviewed by

Stores / concerned programming department Materials not required for production or for

other purposes are identified and suitable action is taken by I.M.M. for finding their usage

in other Divisions or is auctioned.

h. Redundancy provision is made in the books of accounts at the rate of 100% for Non

Moving inventory and for closed Projects as special provision on the basis of list given by

E.D.P. Further a normal provision at 1.5% is made on the balance inventory.

Material issue analysis statement indicates the following:-

a) The cost of material drawn against various job orders; expense accounts.

b) The cost of material issued to contractors and others.

c) The cost of tools issued to various tools cribs from main tool stores.

Different types of Material Stores in HAL Lucknow Division are:-

1. Commercial Store.

2. Raw Material.
3. Jaguar’s parts.

4. Russian project.

5. Western project.

Flow of work



The Finance

Section has the responsibility of carrying out the scrutinizing function which has a major role

to play in capital and revenue expenditure decisions in regard to purchase of materials/

stores / tools and other services. It also ensures that all expenditure is made in accordance to

the principle of financial propriety. Finance Department ensures that the funds are in

proportion to meet out the approved budgeted amount. It also ensures that the financial

proposals are routed to competent authority as per delegation of power (DOP) so as to ensure

the compliance of the provisions of company's act, the Memorandum and Articles of

association of the company and the relevant rules and regulations of the company and the

guidelines issued by the company.

• To scrutinize and give financial concurrence as per delegation of power for each

proposal involving -

 Capital expenditure
 Revenue expenditure

 Purchase of material store/Tools and other services

 Manpower requirement

 Waiver of dues / write off of losses

 Cases involving relaxation of rules etc. as per the delegation of powers

 Sale, lease, alienation or disposal of company's assets

 Contracts entered into with suppliers / collaborations / sub-contractors

 Award of Contract in respect of civil works/ electrical works/ other works.

 Project Reports etc.

• Certification for availability of funds with reference to capital and performance

budget and appropriation of funds.

Procedure (Financial Vetting):

Finance section plays a major role in Accounts Department. It can be termed as center point

of activities, because this section clears all the files for proceedings by the concerned

authorities as per delegation of power.

First of all material purchase requisition is sent by the Purchase Department, it is request for

procurement of material which is sent to Store and then store sends this file to Finance

Section for further proceedings. These requisitions are broadly classified as under:

1. Non-Recurring items

2. Recurring items

Concerned authorities in the Section approve the file. Committee members as per the amount

mentioned in the files, do approval of the files. Different Committees have been formed for

different approvals like different Committee approves the proposals which amounts up to

Rs.5 lakh, different committee is authorized for the amount above Rs.5 lakh and so on.
Approval is done by CM (IMM), Manager (Maintenance), Senior Manager (Maintenance) as

the case may be. After the CM's approval, it is sent back to Commercial Department and the

Commercial Department sends it back to Finance Section, including specifications which

shows that it is suitable or not. Finance Department approves Purchase Order files.

MPRR Comprises of:

Code Full Quantity Approx Recurring/ Job Source Date Reason Remarks
No. description required cost Nonrring order of requir for
of material No. supply ed requirem
required ent

Material purchase request consists of description and specification of item, Part no., Code

No. Quantity required, Carton specification, estimated cost, MPR, Purchase Order, quantity

of order, Min., Max, re-order, monthly consumption, reference of old supply, delivery date,

department requisitioning etc.

In the same manner for foreign purchase request PRS (Procurement Review Sheet) is

prepared. Procedure for clearance of foreign material request is same as followed in

indigenous case.


For the success of every business customers are at the core center. Customers are the one who

consume and use the product. So they decide what to buy and what not to buy. Products or

services which meet the requirement or the needs are preferred. But in any business or

industry there is no monopoly of one company, there are always competitors. These

competitors never let you standby.

External environmental factors, internal factors, influence the scope of the business. So in

such a competitive environment customer satisfaction becomes of prime importance. If

customers are satisfied they will become an asset for the company on whom it can rely. But if

the customers are dissatisfied they will switch over to competitors brand and will be a loss for

the company.

The need of vetting is there because with the help of that the organization have the options of

purchase and with the help of that they can get the quality and cost effective production can

be done. when this is done in a manner or can say on time then the company provide goods

on time and will help in reduce lead time, cost and enlarge the customer satisfaction this also

provides the transparency in the purchasing process.


The scope of the study can view as:-

1. In future if better relationship is maintained with the supplier, then it will be fruitful for the


2. The raw material can be procured at effective price.

3. It helps the organisation to maintain their budget and fluctuations in prices in future.

4. It will provide the customer satisfaction by providing the goods on time and at effective



The purchase procedure outlined in this manual aims to fulfil the following objectives:

a) To ensure uninterrupted/ timely flow of materials, equipment & services of goods of

required quality to meet and support production plans and other requirements of internal and

external customers.
b) To buy competitively and wisely authorized supplies to desired specifications from

approved / reliable sources at the available reasonable prices within the time schedule to

support production plans and other requirements.

c) To ensure that fair open and uniform purchase practices are followed to develop healthy

and long term relationship with suppliers and to foster the commercial and technological

interest of HAL in the local, national and international market.

d) To ensure timely formulation and commitment of purchase budget, including foreign

exchange requirements.

e) To serve as information center on materials knowledge prices, sources of supply,

specifications etc. to all other departments.

f) To ensure that investment made on inventory is at an optimum level and continuously

strive for reduction in material costs, Capital costs and Overhead expenses. Develop sources

of supply to maintain competition and sustained supplies.

g) Training of purchase personnel in the latest techniques of Materials Management.

h) To keep management appraised of the likely shortfalls in purchase performance by

introducing appropriate reporting systems with a view to seek management’s intervention in


i) To adhere to commercial procedures & maintain cannons of financial propriety to

safeguard economic, legal and other interests of HAL. Commercial procedures cover the

Purchase Manual as well as guidelines issued by way of Materials Management Circulars/

CVC guidelines/ MoD instructions etc. from time to time.

j) Maintain and improve the quality of materials procured. Lay emphasis on Quality


Limitation of the study:

1. By having vetting process for procuring the raw material, better relationship may not be

maintained with the suppliers because every time a new supplier have the chance of getting

selected by his quotation.

2. Sometimes the organisation may not receive the desired level of response.

3. Sometimes the organisation may not receive the desired quotation from the suppliers.

4. If organisation receives the quotation higher then the expectation then there will be loss of

the company and price fluctuation is there.




Duties and Responsibilities of Materials Management

Material Planning & Control:

a) Timely provisioning of materials and raise demands in appropriate proforma

(MPR/PR’s) considering production programme, bill of materials, available stock,

dues in, production allowances, contingency, shelf life, procurement lead time based

on stage of build/ structural breakdown and other factors like indigenisation plan etc.

b) Follow up for progression of MPRs.

c) Liaise with related departments like design, methods for updated documents.

d) Authorise issue of materials

e) Liaise with shop engineering for day-to-day production problems relating to


f) Inventory Control and analysis

g) Review of slow moving / non-moving stocks and take corrective action including


Purchase :

a) Preparation of RFQ and tendering

b) Receiving quotations/Tender opening, commercial, vetting, evaluation of quotes and

compilation of comparative statement.

c) Convening and coordinating PC/MPC meetings.

d) Arrange for negotiations if any,

e) Arrange for Long Term Business Agreement/Rate Contract if any.

f) Issuance of Purchase order after coordination with Finance and approval of proposal

at Division/ Complex/ Corporate Office level as the case may be.

g) Purchase order progression for ensuring availability of material in time.

h) Ensure prompt payment to supplier after receipt of material.

i) Follow up of replacement /rectification against any rejections and warranty claims.

j) Vendor evaluations and directory.

k) Coordinate with regards to contract management, licence agreement, co-production

agreement etc.

l) Resolve commercial dispute / arbitration.

m) Preparation of Purchase Budget / Foreign exchange budget.

Stores :

Stock Control

a) Identification of Stock items

b) Raising of indents in appropriate forms (MPRs) based on fixing of stock

levels/reorder levels, consumption data, supply lead time etc.

c) Rationalisation and variety reduction


d) Arrange for custom clearance and collection of goods.

e) Prefer claim on vendor/Insurance as the case may be in case of rejection/damage.

f) Preparation of receiving report and arrange for clearance of goods from inspection.

g) Arrange for storing of rejected material in a separate quarantine stores, advise

purchase to take up with the supplier, organize periodical discrepancy. Review

committee meeting for disposal of rejected items.


h) Arrange for all dispatch documents, packing of goods after inspection, custom

clearance and handing over the consignment to carrier/consolidating agency. Inform

vendor/customer of dispatch details.

i) Finalise insurance policies and ensure continuity of coverage by prompt payment of


Holding Stores

j) Proper storage / preservation of materials, issue against authorized material


k) Carry out perpetual stock/physical verifications.

l) Review of slow-moving / non-moving lists and take appropriate disposal action.

m) Ensure FIFO for lifed items and arrange for disposal of life expired items.

Tool Cribs

n) Proper storage / preservation of tools, issue against token.

o) Keep up to date record of calibration status and arrange for periodical calibration/

reconditioning of tools.

Sub-Contracting :

a) Vendor registration & pre-qualification

b) Vendor development & Vendor rating.

c) Maintenance and updating of approved vendor list.

General :

a) M.I.S. to various agencies

b) Compilation of procurement / commercial data bank

c) Commercial policies / policy matters

d) Training & Development

e) Computerisation / E-Commerce.


Objectives :

The purchase procedure outlined in this manual aims to fulfil the following objectives:

a) To ensure uninterrupted/ timely flow of materials, equipment & services of goods of

required quality to meet and support production plans and other requirements of internal and

external customers.

b) To buy competitively and wisely authorized supplies to desired specifications from

approved / reliable sources at the available reasonable prices within the time schedule to

support production plans and other requirements.

c) To ensure that fair open and uniform purchase practices are followed to develop healthy

and long term relationship with suppliers and to foster the commercial and technological

interest of HAL in the local, national and international market.

d) To ensure timely formulation and commitment of purchase budget, including foreign

exchange requirements.

e) To serve as information center on materials knowledge prices, sources of supply,

specifications etc. to all other departments.

f) To ensure that investment made on inventory is at an optimum level and continuously

strive for reduction in material costs, Capital costs and Overhead expenses. Develop sources

of supply to maintain competition and sustained supplies.

g) Training of purchase personnel in the latest techniques of Materials Management.

h) To keep management appraised of the likely shortfalls in purchase performance by

introducing appropriate reporting systems with a view to seek management’s intervention in


i) To adhere to commercial procedures & maintain cannons of financial propriety to

safeguard economic, legal and other interests of HAL. Commercial procedures cover the

Purchase Manual as well as guidelines issued by way of Materials Management Circulars/

CVC guidelines/ MoD instructions etc. from time to time.

j) Maintain and improve the quality of materials procured. Lay emphasis on Quality


Purchase Functions :

Purchase Department is responsible for the following functions:

a) Creation of a comprehensive and regularly updated directory of selected reliable vendors

and exchange the same with other Divisions to expand sources of supply.

b) Maintenance of vendor evaluation and rating records.

c) Carry out Market surveys with a view to establishing / developing new reliable and better

sources of supply and keep updated with information on latest products / developments.

d) Analysing bids / offers for decision-making by the Competent Authority.

e) Arranging negotiations with Vendors, when necessary.

f) Issue of Purchase Orders in time.

g) Keeping watch on trends in Foreign Exchange Rate variations and obtaining timely release

of FE, obtaining Technical Clearance and Import Licence when required.

h) Follow-up of Purchase Orders till the arrival of materials and acceptance at destination and

to ensure after sales service during warranty and post-warranty periods.

i) To finalise the required rate contracts/ Long Term Agreements for regular stock items.

j) To work out periodically procurement lead time for various categories of items from

international and local markets and advise the same to user departments so, that they take

timely action in initiating purchase requests.

k) Maintaining a library of product catalogues and manufacturers/Distributor’s price lists etc.

l) Maintaining up to date information regarding sales tax, excise and custom duty-rates etc.

m) Submit MIS reports and other periodic returns.

n) Entering into service contracts for Transportation, Customs Clearance and other

miscellaneous services like repairs to capital equipment / plant, advertising, printing, packing,

tailoring, maintenance service contracts, materials handling services etc.

o) Entering into Transit Insurance agreements for goods in transit.

p) Entering into contracts for sub-contracting prototype development, trial orders etc.

q) Finalisation and operation of licence agreements.

r) To ensure that objectives of purchase are realised and exceptional cases are brought to the

notice of Divisional head/ management.

s) To be alert about and responsive to the changes in production programme and change in

requirements of material.

t) Ensure timely payments to suppliers.

u) Maintaining records of Price Index in the past and likely trends in future in India and other

dealing Countries.

v) Maintaining records of price escalation formulae for various categories of materials and

price trends in the market.


For efficient purchasing, it is necessary that the relevant classifications of materials

are properly understood, so that suitable purchasing methods may be adopted for the

purchases in question. Broadly, the following classifications are pertinent to HAL purchases :

Capital Equipment :

Capital equipment consists of machine tools, plant, office equipment, workshop / office

furniture, vehicles and reconditioning/ refurbishing of machinery etc. The requirements of

capital items for the Divisions are sanctioned by the Board in the annual purchase budget.

The Purchase Department, in consultation with the Planning Department, should draw up a

detailed plan to meet the commitments. The plan should consist of:

i) Timely publication of requirements on the HAL web site and in the Press / India Trade

Journal / Indian Export Service Bulletin when it is obligatory.

ii) Obtaining Technical clearance for import from the concerned authority, if necessary.

iii) Obtaining import clearances, where necessary.

iv) Inviting maximum competition by approaching all the approved / well-known

manufacturers of equipment, Commercial Attachés of the Embassies.

v) Requesting our own Embassies and Resident Managers when sufficient sources are not


The Purchase Department should also actively associate itself with the Technical Wing in

drawing up specifications / details of requirements including after sales service, spare parts

holding policy and training of maintenance engineer. Capital purchase requests are to be

raised by the Chief Production Engineer/ Head of Facility Planning / authorised officer.

Purchase of capital equipment shall be done by Limited / Open tendering as per guidelines in

delegation of financial powers.

Direct Project Material/ Production Material :

Direct Project Materials or Production Materials are those which form part of the end

product and are either directly consumed in production/ Overhaul or are required for supply

against indents/ RMS order/ Customers' orders.. These are raw materials, consumables,

components, spares and accessories, castings and forgings etc., which go into the

manufacture / repair / overhaul of Aircraft / Engine and other Systems/ end products. The

bulk of the production materials in the aircraft industry falls in the category of bonded /

aeromaterials and is required to be purchased only from approved sources. (Refer Chapter

III). Approved sources are those who are borne on the current approved list of firms

maintained by the Company. Such stores are required to be covered by Release Note /

Airworthiness certificate or any other document as prescribed by Quality, bearing the

signature of an approved inspection authority. Therefore, the most appropriate mode of

purchase for Bonded aero material will be generally LIMITED TENDERING or Proprietary

purchasing. The requirement of production material is linked with production programme of

the Company and Material Purchase Requests are to be raised by Material Planning/ Control


Overhead Materials/ Commercial Materials :

All other types of materials which are not directly used in production but are required for

the production process/ or functioning of the organisation are classified as overhead

materials/ commercial materials. Such materials fall under two main categories:

a) Stock Items: These are regular consumption items where stock levels are maintained

and procurement initiated based on re-order levels. Such items are required to be

stocked for issue as and when required.

b) Non-stock Items: Demand for such items arise based on specific requirements of user

departments as per Material Purchase Request Requisition (MPRR)/ First Time

Requirements (FTR) raised by user departments. Such materials will generally be

issued to respective users immediately upon receipt.

Tool And Gauges :

The material purchase request for these items shall originate from Tool Planning

Department. This category of items includes hand tools, standard / special cutting tools,

measuring gauges, jigs, fixtures, grinding wheels and honing stones. Quality and volume of

production largely depends on timely supply of accurate tools and precision gauges. It is,

therefore necessary that dealings are restricted to only reliable sources which should be

approved after visiting the manufacturers, facilities and surveying their processes and quality

assurance methods, financial soundness and commercial standing. A team consisting of

Quality, Finance and IMM representatives may, if required, visit the premises of

manufacturers / suppliers before enlisting the concerned parties.

Maintenance Spares Including Vehicle Spares :

The supply of Maintenance spares is vital to keep the factory's capital equipment /

machine tools / plant in serviceable condition. At the time of selecting plant and equipment,

special care shall be taken to study in detail the after - sales services offered by the Supplier

and Plant Maintenance Department shall undertake VED analysis in order to restrict

purchases only to inescapable insurance items. Commonly available spares of general nature,

like belts, bearings, lamp filaments etc. shall not be purchased in bulk and attempts shall be

made to establish local reliable sources and where possible rate contracts shall also be

finalised so that plant maintenance can avail of these facilities directly avoiding delay.

Materials purchase Requests for these items shall be raised by Plant Maintenance

Civil Engineering Requirements :

The Chief of Civil Engineering or his authorised representative shall raise Material Purchase

Requests for items of Civil Works like steel, Cement, Pipes, Sand, Bricks, Sanitary items etc.

Civil engineering requirements fall in two categories viz., items that are Government / trade

controlled like steel, cement, pipes etc., and items that are freely available in the open market.

For controlled items, care must be taken to approach controlling authorities through the

Administrative Ministry in time for issuance of permit. For non-controlled items which are

frequently required and in bulk, attempts shall be made to enter into rate contract with the

manufacturers / suppliers of quality products.

Canteen Provisions And Welfare Items :

Administration Department shall raise Material Purchase Requests for welfare items

such as uniforms, personal utility items etc. and provisions for running the canteen services.

Since these items are generally of a recurring nature and their non – provisioning / non -

receipt in time can create industrial unrest, the Purchase Department shall carefully select

reliable suppliers who are capable of meeting the requirements in time. The best method for

such supplies is to enter into rate contracts and authorise the user departments to operate the

contracts. For small value purchases, Bazaar / spot purchase shall be resorted to, as given

under heading “Petty Purchases” in Chapter 6 Model Terms and Conditions of Purchase

Contract, in respect of Canteen/ Grocery Items, are placed at Annexure- 34 for reference.

Medicines And Hospital Requirements :

The Chief of Medical Services shall assess the requirements of these items, based on

projected consumption, stocks available and life. To control inventory and to ensure prompt

supply of correct medicine, the ordering and receipt shall be handled in close association with

the Chief of Medical Services who will nominate a Medical Officer to inspect the

consignment. Purchase Department, under the Chief of Medical Services, shall carry out
market survey and enter into rate contracts with manufacturers / accredited dealers for supply

of medicines at the Hospital / Government controlled bulk rates. For emergent requirements

and for medicines needed infrequently or in small quantities, local reliable dealers shall be



In respect of items which are not covered above Material Purchase Requests shall be raised

by the head of the user department as per fixed scales or authority granted by the General

Manager/ Head of the Division.



The main objective of the Purchase Department is timely procurement and supply of

material to the indenting departments. Non-receipt of materials ahead of time would be a

burden on the cash flow of the Company and add to inventory carrying costs. It is therefore

important that right source is contacted. To achieve this aim each Division shall carry out

intensive market survey and prepare a register/ Database of Approved Suppliers. The

following procedure shall be followed in respect of market survey, source selection and

registration of supplies in each Division.

Market exploration, Vendor sourcing and registration of approved suppliers shall be the

responsibility of the Head of the IMM Department in each Division. For regular reference the

Division shall maintain the list of approved suppliers in the format as prescribed by ERP

system (Annexure 7), in database format. Such database will be readily reproducible or

printable as follows:

(a) Product wise suppliers (b) Alphabetically listed suppliers.

The Divisions shall utilize the database of other Divisions for widening their source of

supplies. The databases shall be regularly updated, but at least once in a year.



All purchase requirements are to be properly assessed in accordance with the

inventory policy of the Company and are to be formally authorised by the competent

authority as per the delegation of powers in force. The provisioning of the stores needs to be

done with utmost care taking into account the available stock, outstanding dues / supplies, the

past consumption pattern, average life of the equipment/ spares. The requirements also need

to be consolidated so as to get the most competitive and best prices. The requirements should

not be bifurcated / split, without valid reasons or to avoid approval from higher authorities.

No purchase action is to be initiated without a valid written request. Purchase requests shall

be raised as per details given below :

a) MATERIAL PURCHASE REQUEST (MPR) : Form Annexure 17 shall be used by

indenting departments for all revenue items.

b) CAPITAL PURCHASE REQUEST (CPR) : From Annexure - 18 shall be raised by the

Head of Planning or any other officer specifically authorised by the local management for

purchasing the sanctioned capital equipment.

c) MATERIAL SUB-CONTRACTING REQUEST (MSR): Form Annexure - 19 shall be


d) URGENT PURCHASE REQUEST (UPR) : Form Annexure-20 shall be used.

e) PETTY PURCHASE REQUEST LESS THAN Rs. 5000 (PPR) : Form Annexure – 21

shall be used.
As the estimated rate is a vital element in establishing the reasonableness of prices, it is

important that the same is worked out in a realistic and objective manner on the basis of

prevailing market rates, last purchase Prices, economic indices for the raw material/ labour,

other input costs, wherever applicable and assessment based on Engineering estimates,

intrinsic value etc. Preparation of estimated rates by merely extrapolating the last purchase

price or by applying a uniform yearly compounded escalation over previous price may not be

sufficient. It should be ensured that the estimates are not accessible to outside agencies.

Registration Of Purchase Requests :

All Purchase Requests shall be centrally registered in the Purchase Department in the

Purchase Request Progression Register/ Database.

Scrutiny Of Purchase Requests :

Purchase requests shall be scrutinised within 48 hours of the their receipt by the concerned

officer. Scrutiny of purchase requisitions shall cover the following points:

a) Description of Part No., Code No., Specification, Quantity, etc., indicated appears to be


b) Proper authorisation of competent authority exists as per delegation to approve purchase


c) Catalogue number is given against each item wherever required.

d) Drawings, wherever applicable, are enclosed in sufficient number of sets.

e) In case of repeat purchase, last purchase price, and source of supply is mentioned.

f) Delivery requested is realistic.

g) Price estimate is realistic.

h) Purchase request for imported capital items is supported with technical justification for

import and catalogues / pamphlets describing the machine tools.

i) CPR shall also make reference to item serial No. in the Capital Budget.
j) The officer after scrutiny shall endorse clearly the tendering mode on the purchase

requisition and send the same to purchase assistant for further progression.



The invitation to tender and instructions at enquiry stage are an important step as the vendor's

offer is based upon these instructions. Any ill-conceived, indifferent and incomplete action at

this stage will result in unnecessary delays, increase in paper work and rush purchases. The

enquiry shall be carefully prepared indicating requirements in clear terms. Some suggested

Conditions of Tender for inland and foreign enquiries are placed at Annexure 15 and 16


a) The enquiry/ tender shall indicate full description and specifications of the required


b) Drawings, wherever available, shall be sent along with the enquiry / tender.

c) Enquiry / Tender must be invited to standard specifications as far as possible. Under no

circumstances, terminology such as 'best quality', 'commercial quality' or 'as per previous

supply' etc. shall be used.

d) In case where no drawing is available and which cannot be correctly described, a sample is

to be shown to the vendors or they may be requested to submit their sample.

e) In cases where HAL reserves the option to supply material, the firms may be asked to give

alternative offers with their own supply of materials and with HAL supplied material.

f) Delivery expected shall be realistic and specifically indicated. (Words like “Urgent” /

“Immediate” etc are to be avoided). In order to meet the project requirement, it would be

prudent to incorporate an acceptable range of delivery period with the stipulation that no
credit will be given for earlier deliveries and offers with delivery beyond the acceptable range

will be treated as unresponsive

g) In case quantity required is not readily marketed, Minimum Order Quantity stipulation

shall be requested in the tender enquiry.

h) Clauses relating to Earnest money, if called for, Delivery Schedule, Payment terms,

Performance/Warranty Bank Guarantee, Pre-despatch inspection, Arbitration, Liquidated

Damages/Penalty for the delayed supplies and Risk-purchase etc. must be incorporated in the

bid/ enquiry documents.

i) It should be made clear inn bid documents that conditional discounts shall not be

considered in evaluation of tenders.

j) All requests for quotations/ tender enquiry must specify “Last Date for submission of

Quotes”. The tender must also state “Tenders received after due date and time shall not be

opened and shall not be considered.” This should be prominently mentioned in the tender

enquiry. In cases where Bidders’ representative are required to be offered to witness tender

opening, date and time of opening of the tender shall also be mentioned in the tender/


k) A clause in the tender/ enquiry shall be included stating that HAL will not be responsible

for the loss or delay in receipt of tender documents/ tender in transit. HAL reserves the right

to reject Late / incomplete tenders.

l) The exemptions / relaxations applicable to SSI’s, ancilliary units, PSU’s should be

specified in the tender notice (in line with prevailing Govt. directives) In order to ensure that

enquiries are sent to the right source, the Purchase Groups shall use the Approved Supplier's

List both for imported and indigenous purchases. It shall be the responsibility of the Head of

IMM Department to ensure periodical updating of this list. To generate adequate competition,

it is necessary that sufficient number of sources is addressed. For this purpose, a system of
calling tenders by rotation giving equal opportunity to all approved suppliers, other things,

like rating etc, being equal, should be followed. Proof of dispatch of Enquiries to the

prospective bidders must be placed in the purchase file. Depending upon mode of dispatch of

enquiry, it could be Certificate of registration (dispatch by post), or Courier’s receipt, or Fax

Transmission record or a receipt acknowledgement. For this purpose, Central Registry shall

be instructed to maintain separate folios for dispatch of each tender enquiry, paste the postal

registration slips and forward to IMM so as to file in the respective purchase files.

Enquiries by E-mail may be resorted to only after having ensured that system provides for

confirmation regarding dispatch of enquiries. In case of purchases of highly technical stores,

where, although technical requirements are fully established, specifications of the stores to be

purchased are not defined to the last detail and there exists possibility of offer of alternative

systems meeting the technical requirements listed in the enquiry, two-bid system shall be


Two Bid System: In this system, the firms are requested to give two separate offers, both in

sealed covers. It is explained to the vendors that both the offers will be exactly the same,

except the offer No. 1 will have all prices / rates/ values blanked out and will be called

TECHNICAL BID. The offer No. 2 will be COMMERCIAL / COMPLETE BID including

the prices. Each bid will be put in separate sealed covers, each marked with the Tender

number, due date and as TECHNIAL BID or COMMERCIAL BID as the case may be. Both

the sealed covers will be put in a single cover, which will be again sealed and super scribed

with Tender number and due date. On the opening date, only the Technical Bids are opened

in the presence of representatives of the firms, who have quoted and choose to be present.

The offer No. 2 (COMMERCIAL BID) will be opened only after the Technical Bids are

technically evaluated. The Commercial Bids of only those firms, whose technical bids are

found to be technically acceptable, will be opened with due notice to be present for the
opening, if they choose to. However, when only one offer is found technically acceptable,

this Commercial Bid may be opened without calling Firm’s rep. for tender opening, so that

the concerned firm will not get the information that only their offer is technically acceptable

which may affect possible negotiations if required. The Commercial Bids of those firms,

which have not been accepted by Technical committee, shall be retained intact in sealed

condition and will not be returned or destroyed.

Earnest Money: The primary objective of submission of Earnest Money Deposit is to

establish the earnestness of the bidder so that he does not withdraw, impair or modify the

offer within the validity of the bid. It also helps in restricting, if not eliminating ‘speculative',

'frivolous' or 'wait and see' bids. Except in case of Proprietary/ Single/ Limited Tender or a

mode of tendering, where selection of Vendor/s has been made by the buyer taking care of

suitability, reliability and capability of the Vendor to quote suitably, thereby eliminating the

need for EMD, submission of EMD should invariably form a condition of Tender in all other

cases. The terms & conditions, where EMD has been asked, should clearly stipulate that the

offers without Earnest Money Deposit would be considered as unresponsive and rejected.

Stipulation of Earnest Money Deposit as percentage of the tender cost, instead of fixed

amount, will give every bidder a good indication of the prices quoted by the competitors by

making back calculations. A bidder can use this information to the disadvantage of his

competitor, if prices are subsequently modified. The Earnest Money Deposit needs to be

incorporated as a fixed and reasonable amount on the basis of estimated value of the

purchase. In case of 2-bid system, condition for enclosing EMD in Technical Bid Envelope

must be clearly specified in the tender enquiry. In case of doubt, on receipt and opening of

Technical Bids, payment of EMD can be ascertained from the Vendor instead of opening the

commercial bid to determine whether EMD is given or not. The following guidelines may be

observed while calling for EMD :

a) Earnest Money Deposit (EMD) shall be specified in all cases of Open Tender.

b) The EMD to be charged shall be a fixed amount, based on estimated value of stores as


Estimated value of Tendered EMD

Indian ` (lakhs) Foreign* US $
` 1-25 Lakhs .20 400
` 25-50 Lakhs .40 800
` 50-100 Lakhs .75 1500
` 100-250 Lakhs 1.75 3500
` 250 Lakhs and above 3.00 6000
* may be rounded to nearest $10, depending upon exchange rate.

c) For tenders of the value of rupees one lakh or less, EMD need not be called for.

d) The tender documents/ Notice inviting Tenders must clearly specify:

a. The form in which EMD shall be acceptable (Cash/ DD/ Bankers Cheque/ Pay

order/ Bank Guarantee). In case, EMD has been specified to be deposited in Cash/ DD

only, no other form of EMD should be accepted. In case EMD is specified as Bank

Guarantee, the same is to be submitted in the form of irrevocable Bank Guarantee

from the scheduld Banks (or, in case of foreign suppliers, from Bank of International

Repute) valid for 28 days beyond the validity of the Bid.

b. That offers not accompanied with requisite amount of EMD or EMD not submitted

in the specified form shall be summarily rejected.

c. That, in case of 2 – Bid system, EMD should submitted along with Technical Bid/


d. That, Vendors exempted from the payment of Tender fee and/ or submission of

EMD as per Govt. of India directives must submit certified copy of GOI’s authority

for such exemption in lieu of Tender Fee/ EMD.

e) EMD received along with tenders should be forwarded to the Finance Deptt within 3 days

of the opening of the Tenders with the details of the participating firms.
f) EMD furnished by the successful bidder may be appropriated for security deposit or

Performance Guarantee for the warranty period.

g) EMD will not carry any interest for the period it is retained with HAL and this shall be

made clear in the Terms & Conditions in enquiry.

For ensuring that only competent and financially sound parties are invited to quote in the case

of time bound programme or for entering into long term rate contracts, the enquiry shall

clearly spell out the basis on which parties offering their services will be selected and short

listed for participating in the subsequent price tendering.

Tender Enquiry must clearly ask for Vendor's ability to arrange export License from his Govt

and supply goods to India, in case an order is placed.

In general a period of three weeks for indigenous sources and four weeks for foregin sources

may be given for submission of quotations. , except, in cases of recorded emergent

requirements/ proprietary/ single tender, wherein also, a reasonable time should be permitted

and tenders should be sent by faster means like speed post/ fax/ e-mail, after taking approval

of Head of IMM, with recorded reasons.

The sale of tenders should be kept open till the date of tender opening.


Open Tendering :

Open / Public tendering is a system whereby even non-registered dealers are free to

participate. Under this system all the known and possible sources for the supply of a

particular material are made aware of the requirements and allowed to quote. To this end, one

of the following methods shall be adopted :

i) Giving an advertisement in at least three leading English langauge newspapers of All India

Circulation and where time permits, also in the Indian Trade Journal / Indian Export Service
Bulletin (IESB). Simultaneously copies of the advertisement may be sent to all the known

and likely sources.

ii) Addressing all the known and likely sources for a particular product.

a) The complete bid documents along with application form shall be published on HAL

web site. It should be ensured that, there is no necessity for prospective bidders to ask/

obtain some other related documents from the department manually for participation in

the tender process. i.e. all documents up to date are and remain available as equally

legally valid for participation in the tender process as manual documents obtained from

the department through manual process. Any exceptions, such as Part Drawings, Lofts or

quality documentation, which form part of tender documents but cannot be placed on web

site, for reasons to be recorded, must be approved by General Manager. A mention of

such documents must be made on the web site notice and intending bidders be asked to

obtain documents by a written request, by post/ by hand, before a specified date.

b) The complete application form should be available on the web site, till last date of

submission of tenders, for purposes of downloading and application made on such a form

shall be considered valid for participating in the tender process.

c) Request for proposals for non-lethal items (i.e. items not connected with any warfare)

will also be published on MoD Website

d) The web site address must be given in the advertisement/ Notice Inviting Tender (NIT)

published in the newspapers along with e-mail address of the Division/ Office.

e) In case, it is considered necessary to charge for the application form downloaded from

the computer then the bidding party may be asked on the Web-site to pay the amount by

draft/ cheques etc. at the time of submission of the application form and bid documents.

This system is not mandatory for purchase of production items from already approved /

proprietary / developed sources and also where Licence Agreements / Long Term Contracts
are in force besides such other items where prices are controlled / administered by the


The open tender method as indicated above is adopted for all tenders whose estimated value

is as per DoP for this mode of tendering. However, due to special circumstances of the

purchase, for valid reasons to be recorded, the open tender procedure may be waived and

limited tenders issued with prior approval of authorities as given below:

Where Purchase is to be approved by GM : By MD

Where Purchase is to be approved by

MD / FD / CH / PSC / Board : By CH

b) In case of import of Capital equipment cositng more than the ceiling as specified in

the current import policy advertisements in the Indian Trade Journal / Indian Export

Services Bulletin (IESB) shall be compulsory.

Tenders may be issued free of cost to Trade Commissioners of foreign countries, Govt.

Undertaking, firms registered with DGS & D, DGTD, NSIC, Director (SSI) and ancillaries

attached to other PSUs.

Global Tendering :

Global Tendering is same as Open Tendering except where items to be procured are not

indigenously available. Advertisements may be released in leading National Newspapers as

well as in the Indian Trade Journal / Indian Export Services Bulletin. In addition, copies of

the tender documents may be made available to the Indian Embassies in potential vendor

countries abroad for issuing to the tenderers beside making the documents available to the

Trade Commissioners of Foreign Embassies in India and HAL Resident Managers outside


Limited Tender :
In limited tender, only the most likely and suitable sources are addressed. To invite adequate

competition, it is necessary that at least five sources of supply are addressed. Where the

number of available sources of supply is less than as specified, the number of suppliers to be

addressed may be reduced at the discretion of the General Manager. Wherever available,

evaluated vendor lists maintained by the division shall be used. In other cases, the list of

suppliers shall be carefully made based on vendor rating or past experience. It is preferable to

include the name of last suppliers also.

Single Tender :

When the purchase is finalised on the basis of a single offer or an offer from a single source

is invited, this is called a 'Single Tender Purchase'. It needs to be recognised that the

competition is totally eliminated and the possibility of paying higher prices cannot be ruled

out. It is imperative that the purchase on Single tender basis be made with the detailed

justification in its support and with the approval of Competent Authority, including

associated finance. In a number of cases, the specifications prepared are copied from a

manufacturer’s catalogue in such a detail as to exclude competition and result in a single

source purchase. The specifications of the equipment need to be prepared in such manner as

to give very essential requirements leaving other parameters as “desirable” or “preferred”

Common occasions of this category are given below:

a) When market research reveals that there is only one known reliable source of supply.

b) When the management in the interest of real long term economy and quality assurance and

assured service standards of delivery etc. standardises on a particular brand / make (like

Shoes, Khaki drill from reputed manufacturers, Gauges from a reputed manufacturer etc.).

c) There is a single party ready to undertake the risk of provisioning / development of item

required and the value of order is such that it is not economical to develop alternative sources

of supply.
d) The manufacturer / Government has canalised the supply only through a single source.

e) The item is known to be in short supply and its stocks happen to be available only with one

source at the time of purchase.

f) Supplies from fair price shops, super bazars, Government, Semi-Government, Cooperative


g) HAL’s Cutomer has specified the specific item to be purchased from a specific source As

far as possible offers shall be invited from the manufacturers / their authorised agent general

stockist of repute.

Proprietary Tender :

This is a tender which is addressed only to a proprietary manufacturer / his authorised agent

because no equivalent or near equivalent is available from any other source and / or all

possible suppliers quote only the product of one manufacturer. For this tendering, Proprietary

Certificate (Annexure-02) needs to accompany MPR.

Spot Tendering :

Spot tendering is to be resorted only for emergent requirements. All the readily approachable

and well – known vendors are requested to assemble and their offers are obtained after the

requirement is explained / shown to them on the spot. In case it is not possible to arrange for

the suppliers to assemble at one place, then a team of officers comprising of representatives

from the Purchase, Finance and the User Department accompanied by an Inspection Officer,

where necessary, shall proceed to the market and obtain spot offers from vendors after

physically verifying and inspecting the goods and obtaining the assurance that items are

offered ex-stock.



a) Director General of Supplies and Disposal enters into rate contracts for various items to

cater to the requirement of different Govt. organisations. List of stores on rate / running

contract is published by DGS & D from time to time for the use of Direct Demanding

Officers (DDO). This list is available on DGS&D website (

b) It may be mentioned that running contracts are distinct from rate contracts. Running

contracts provide for guaranteed quantity to be supplied by the contractors with a agreed

percentage of variation. These contracts can be operated by DGS & D only. No order on

running contracts can be placed directly by indentors.

c) Some of the Public Sector Enterprises are Direct Demanding Officers and can place orders

directly on rate contract terms. All Divisions of HAL are not on the list of DDO. However,

many Rate Contract holding firms are normally offering DGS & D Rate Contract prices to

HAL and the same shall be availed. Orders are to be released on the normal HAL purchase

order form on DGS & D Rate Contract prices are as per mutually agreed other commercial

terms. When there is more than one DGS & D Rate Contract for the same item, order shall be

released to any one of them offering better commercial terms.

Where a firm is not ready to offer DGS & D Rate Contract prices to HAL, these prices may

be utilised for negotiation purpose while finalising the Purchase Order.

HAL Rate Contract :

HAL Corporate Office also enters into Rate Contracts for items which are commonly used in

different Divisions of HAL. The advantages of this arrangement are:

a) Supplier is assured of expected volume of business and hence can offer better prices.

b) HAL is assured of continuous supply as per requirement.

c) Assurance of sustained quality supplies.

d) Effective controls on inventory build up.

e) Purchasing cost is kept low.

In respect of stock items for which HAL Corporate Office has not finalised Rate Contracts,

Divisions shall enter into Rate Contract for as many items as possible. A copy of Rate

Contract entered at the Division level shall be sent to the IMM at Corporate Office for the

benefit of other Divisions. Suggested draft format for entering into Rate Contract is enclosed

at annexure- 37.

Except in case of purchase of production items from already approved/ proprietary/

developed sources and where License Agreements/ Long Term Contracts are in force, Rate /

Running Contracts or other long supply agreements should be entered with reliable and

established sources of supply after obtaining competitive offers through Open Tender. Where

Rate / running Contracts are entered into, other than by open tender, with single response,

report of such contracts should be made to the next higher authority.

HAL Licence Agreements :

At the time of finalisation of licence agreements Purchase Agreements are also entered which

enable HAL to procure its requirements without calling for offers. The Purchase Agreement

is valid for the period of main Licence Agreement and an agreed escalation clause governs

the prices applicable on supplies to HAL.

Repeat Order :

In this case also fresh tenders are not invited. Repeat Order refers to Purchase Order placed

on the previous supplier (without obtaining fresh quotations) for the same items which were

earlier ordered on the firm as a result of Open / Limited Tender. Repeat Orders may be placed

within 12 months from the date of completion of supplies, subject to total quantity on such

repeat orders does not exceed the quantity on original order and in the meantime further

market research has not revealed a cheaper source of supply.

Imprest Purchase System :

The Purchase Department shall arrange for cash purchase of urgent production items as well

as other items of low value. Here again no formal offers are invited. The concerned officer is

authorised to record reasonableness of rates and approve the purchase. The value of each item

will not exceed Rs. 2000 for each case for this type of purchases. Purchase –cum receiving

report format Annexure-35 is to be used.

Petty Purchases :

Items of nominal value i.e. upto Rs. 5000 in each case can be indented by various

departments. This request shall be signed by the Departmental Head. Purchase up to a value

Rs. 5000 could be made directly from the market without issuing a formal order. Receipt of

such materials will be certifiedby the user department on the Cash Memo for accounting

purpose. No receiving report shall be raised and the value shall be charged off as expense

under appropriate head. Petty Purchase Request –Annexure - 21 is to be used.

Order On Ancillaries :

Ancillaries, which have entered into formal agreement with HAL for rates and volume of

business for a certain period, shall be issued with orders without inviting offers subject to the

ancillary meeting the quality and delivery requirements.


Proper care in the receipt, opening and sorting out of tenders is essential to avoid any

suggestion of malpractices. The instructions to the suppliers for submitting their tenders

should be comprehensive and clear. Suppliers shall be notified to submit tenders in sealed

covers superscribed with Tender Number and Due Date etc.

Any change to specifications recommended after tendering shall be approved by the same

committee/ authority that approved the specifications originally. Such changes will be

notified in the same manner as the original tendering was done.

Tender Box :

A locked and sealed Tender Box must be maintained in a prominent place for all tenders

received against other than Proprietary/ single tender enquiry. Tenders received by Post up to

the prescribed closing date and time for the tender shall essentially be dropped into the

Tender Box.

Individuals bringing tenders in person should be directed to hand them over in central registry

or drop them in the Tender Box.

Unsealed tenders or tenders received without any marking on them or through Fax/ E-mail

which get opened like other incoming mail shall be sealed by the Office of the Head of IMM

Department and the same put in the tender box maintained for the purpose. An endorsement

on the cover shall be made that tender was received without marking and got opened in the

mail. The original cover of the tender is to be preserved as far as possible.

Opening of Tenders :

All tenders must be opened at the specified place on the date and time specified for their


a) Tender Box shall be opened by the authorised person or the Tender Committee. Only

tenders due on that date shall be taken out and Tender Box shall be sealed thereafter.

b) Tender envelopes shall be opened by the Tender opening authority. Each page of the offer

shall be initialled, dated and numbered indicating the Serial Number of the Tender vis-à-vis

the total number of tenders.

c) Any alterations in rate shall be encircled and initialed. It is desirable to write rate in words

if not already written in the tender.

d) Any doubt regarding any other terms like excise, delivery, taxes, etc., is to be underlined

and initialled.

e) Blank space, if any, is to be crossed out and initialled.

f) All envelopes of tenders shall be initialled and shall carry the same markings as on the

tender papers.

g) All deficiencies observed shall be recorded on the first page in red ink.

h) Authorised suppliers or their agents who submit tenders are permitted to witness the tender

opening. A record of the tenderers / agents present at the tender opening should be

maintained. The officer opening the tender shall read out the important particulars regarding

quality, price, etc., and shall prepare an abstract of the tenders received.

i) No amendments to the tenders shall on any account be permitted after the opening of the

tenders has commenced.

Further, in case of ‘Two bid' system, after opening of the technical bids, the price bids, which

are to be opened subsequently, will not be kept as loose envelopes. It is to be ensured that the

tender opening officer/ committee has signed on the envelopes and the envelopes are placed

in a bigger envelope/ box duly sealed and signed by the tender opening officer/ committee.

Offers received against Proprietary Tender or tender issued to a single party may be opened

before the due date at the discretion of Head of IMM.

Tender Opening Register :

Tender Opening Register shall be maintained in the Purchase Department. Tender No., type

of tender, name of tenderers - whose tenders have been opened and signature of the tender

opening authority shall be recorded in the register. Signatures of tenderers / agents present at

the time of tender opening shall also be obtained on the same page. Concerned dealing

Purchase Officer shall sign while receiving the tender offers for further processing.
Late Tender :

Any tender received after the prescribed date and time shall be marked as late tender. Any

tender envelope bearing postal mark indicating date after the due date of opening of tender

shall be considered as late tender.

Any bid received by the Company after the due date specified in tender/ RFQ must be kept

intact, un-opened/ sealed and not considered. The same will be retained in the concerned

purchase file. Quotations/ bids, which are received late through Fax, shall also be treated in

the same manner.

In case, the tender is against “Single Tender” enquiry (Proprietary/ Customer nominated), a

late tender may be considered after obtaining the approval of General Manager.

Postponement of Due Date :

In case of Open / Limited Tenders due date shall not be postponed normally. However, if it is

decided to extend the due date for any reasons, the postponement shall be intimated well in

advance to all tenderers. Any change in the tender terms & conditions, specifications or

tender opening date etc. is to be notified to all the bidders and posted on web site (in case the

original tender was also published on web site), sufficiently in advance of the revised tender

opening date.

Authority for Tender Opening :

The Tender Opening Officer / Committee shall be as follows :

Tender Value

a) upto Rs.5 lakhs Dy. Manager (IMM) and Dy. Manager (Fin)

b) Above Rs. 5 Lakhs Sr. Manager(IMM) and Sr. Manager (Fin)

Tender Evaluation :
Tender evaluation is the major responsibility of the Purchase Department and shall be given

highest priority and care. All management decisions are based on the information tabulated in

the tender evaluation sheet.

The Purchase Department shall study offers and prepare a comparative statement for

endorsing the offers that are prima facie suitable (that is the offer was received in time and is

not an unsolicited or qualified offer and the offer is accompanied by Earnest Money Deposit

if required, as per the Tender Conditions). The file then is to be passed to Technical

Evaluation Committee/ Production Engineering / User Department for the further study and

their recommendations.

Technical Evaluation Committee shall be constituted as follows:

a) In case of CFA for approval of the proposal is Board/ Procurement Sub-

Committee/ CH/ MD/ Director, the Technical evaluation committee shall be headed

by General manager with following members

Head of Production Planning Deptt.

Head of Quality Department

Head of User Department

b) In case of sanction by Procurement Sub-Committee & Board, Head of Corporate

Planning or his representative will be member of Technical Committee.

c) In case of CFA for approval of the proposal is General Manager, the Technical

evaluation committee shall be headed by ‘the 2nd senior most executive of the

Division in the Technical Discipline with following members

Representative of Production Planning Deptt.

Representative of Quality Department

Representative of User Department

To be nominated by the respective Head of Departments.

d) The Head of Technical Committee may co-opt other members from within &/or

outside Divisions based on expertise required.

The Technical Evaluation Committee’s report in the existing Purchase proposal format shall

bring out in detail compliance report of each technical feature of the RFQ, deviations if any,

and the reasons for acceptance/ rejection of bids and should be signed by all members of the

Committee. The report shall bring out acceptance or otherwise of the bids without any

ambiguity and make clear recommendations.

Following points shall be paid special attention while compiling information on the tender

evaluation sheet :

i) The offer was received in time and is not an unsolicited or qualified offer and the offer is

accompanied by Earnest Money Deposit if required, as per the Tender Conditions.

ii) Basic price and the quantities for which it is valid. Also whether the price if firm and / or

any escalation formula is offered.

iii) Sales Tax, Excise Duty and any other imposts / taxes that are payable.

iv) Terms of delivery i.e. ex-factory, HAL stores and other terms and conditions.

v) Packing and Forwarding charges.

vi) Firm's willingness to accept penalties / compensation for late delivery as well as HAL's

Standard Conditions of Contract.

vii) Specifications offered are the same as demanded / alternative offered and benefits

claimed for it. Tender not meeting the laid down specifications may not be ranked in

consultation with Technical Department.

viii) The terms of payment and request for advance payments / willingness to offer Bank


ix) Assurance / Methods to replace defective supplies.

x) After - sales - service arrangement and cost of such services, if any.

xi) Samples if required are submitted with the offer or alternatively party agrees to submit

samples as required in the enquiry.

xii) Validity period is adequate.

xiii) Due price preference to Public Sector Undertakings, Ancillaries, Small scale Industries

and Indigenous manufacturers as per Govt. Directives, issued from time to time.

Taking into consideration the above factors, a net price comparison of the valid tenders only

shall be prepared and tender evaluation sheet(s) shall be endorsed L1, L2, L3 etc., to indicate

1st lowest, 2nd lowest, 3rd lowest and so forth. In this tender evaluation statement, the

tenders which are not meeting technical specification and where the tender formalities have

not been complied with, and which were received late / delayed shall not be included.

An endorsement with reasons for non - consideration / non - inclusion of parties shall be

separately made on the comparative price statement in red ink.

The Commercial Evaluation Statement shall be signed by the dealing officer and shall be

vetted and countersigned by the next higher officer of the Purchase Department.

Tender Evaluation of Capital Equipment :

Following procedure shall be followed for procurement of Capital Equipment:

a. A Divisional Technical Committee (TC) is to be institutionalized which will be responsible

for approving the Technical Specifications of the Equipment. The committee is to be headed

by the AGM in charge of the planning functions of the Division and supported by the Chief

of Plant maintenance, Chief of Quality and Chief of Methods Engg / Facility Planning who

will be the secretary of the committee. AGM / DGM of the user department will be the co

opted member.

b. The Divisional TC should prepare a general brief on the scope of requirements. Initially,

this should be sent by the TC to the various leading manufacturers of the machine tools

asking for detailed technical specifications/ features of their products to meet the
requirements as a Request for Information (RFI). This data along with information available

in the division / other divisions will form the basis for preparing the detailed machine tool

specification. While approving the same, the TC should clearly identify the Essential and

Desirable parameters of the machine tool as detailed below.

c. Essential. These are the Essential requirements in the performance of the equipment, non-

compliance of which will make the equipment technically not suitable. Accordingly the

‘essential’ classification to a requirement must result from an in-depth critical analysis of the

necessity of requirement.

d. Desirable. All parameters other than essential will be classified as 'desirable'. This

classification should be assigned to requirements corresponding to tasks that the machine is

intended to fulfill but the same will however not affect the safety or functional performance

in any way. The non-compliance of a requirement classified as `desirable' is in itself not a

sufficient reason to reject the tender.

e. The classifications as above should be for internal use only and should not be reflected

anywhere in the machine specification which will be subsequently sent as part of the RFQ by

the Commercial Deptt.

f. As such, the responsibility of approving the specification on the above lines rests with the


g. The technical bids on their receipt need to be studied in detail by the Technical Evaluation

Committee (TEC) which will evaluate the bids and identify the extent of variation /

differences, if any in the technical characteristics of the equipment offered with reference to

the specification. While preparing the compliance statement, the TEC will confirm that two

or more vendors have not offered the same equipment and if so, the equipment offered by the

OEM alone will be accepted. The TEC will carry out discussions with individual vendors,

one at a time, to understand and seek clarifications on their offers. The TEC, during
discussions with Vendor, may come to know of certain features / facilities, which have not

been included in the tendered specifications. The TEC shall discuss in detail the need to

include such features, vis-a-vis requirements, and improve and freeze the technical

specifications. It should be ensured that the revised specifications do not reflect the approach

of any one particular vendor.

h. While improving and freezing the Technical Specifications after technical interactions with

the vendors, care should also be taken to ensure that the specification clearly identifies the

requirements of standard / optional accessories and components prove out and that the basic

parameters are not changed drastically.

i. The TEC along with IMM rep, shall call for a joint meeting of the Technically Acceptable

Vendors (if possible) or send the finalized technical specifications to all Vendors whose

offers are technically acceptable (for competitive bidding), with instructions to send a

technical compliance report against each parameter in the specification document and, send a

sealed price bid, if the vendor considers price revision ( with full justification ) or confirm

that technical discussions / clarifications have no impact on his price (i.e. the sealed bid

already submitted). It must also be ensured that no extra time is given to any vendor to

upgrade his product to suit our specification.

On receipt of Technical Compliance Report from Bidders, The file is to be passed to TEC/

Production Engineering / User Department for the further study and Technical acceptance of

offers. The TEC shall also carry out selection of accessories, special tooling, maintenance

requirements and spares, special civil works etc., if any, needed, in respect of Technically

acceptable offers. Some of the essential factors which shall be taken into consideration are :

a) Estimated operation cost, maintenance cost, and the total cost over the probable life

of equipment.

b) availability of service at the initial stage and regular after - sales - service
c) availability of spares on ex-stock basis or delivery at short notice

d) financial considerations including Foreign Exchange

e) the existence of similar - make machines in service

f) training of operators in case of special - purpose machine.

The concerned Purchase Officer shall make a note of specific points on which TEC/

Production Engineering/ user's comments are sought..

After technical study, a final price comparative statement shall be prepared in co-ordination

with the TEC/ Production Engineering/ User Department to arrive at the ultimate price.

Tender Evaluation for selection of Systems for Aircraft/ Helicopters/Accessories :

The following procedure is to be followed for selection of any system.

1) RFQ for the system should clearly bring out the anticipated quantity and the period of

requirement in addition to all other technical and commercial requirements.

2) Quotes should be obtained for the prototypes and also for the subsequent series production

requirements linked to an escalation formula based on recognized price indices.

3) In case the quantity required is high, ToT for manufacture is to be sought. This aspect is to

be decided before issue of RFQ based on the product and the likely investments required

considering the technology. In case of strategic technologies, ToT is to be insisted upon, in

case of foreign Vendors.

4) In all cases, RFQ should specify the essential need for ToT for ROH in India. Quotes for

the licence fee/ documentation cost/ Royalty is to be obtained along with the cost of facilities

for ROH.

5) Suppliers commitment for technical assistance in setting up manufacturing/overhaul

facilities is to be insisted upon.

6) Supplier has to confirm that he would undertake defect investigation and repair/ overhaul,

till the facilities are set up in India. Cost of DI/ROH is also to be quoted in his offer; with

escalation formula similar to equipment supplies.

7) The supplier has to confirm uninterrupted supply of spares for lifetime product support.

List and norms of consumption of spares with their individual prices are to be quoted in his

offer. In case of Standard Price Catalogues, copy of the same is to be attached.

8) The lead-time for supply of spares is to be clearly defined to ensure timely procurement


9) The supplier has to confirm that any documents pertaining to up-gradation of the system

during its course of exploitation will be forwarded.

10) In the event of the supplier not meeting the product support requirements, his offer is to

be considered as technically invalid.

11) The proposal will be evaluated on the Life Cycle Cost basis

Comparative Price Statement :

Utmost care shall be exercised while preparing the Comparative Price Statement of tenders.

Any deviations from the tendered specification, delivery period or normal terms and

conditions and any special conditions, assistance etc., stipulated by the firm, shall be

highlighted. It shall be the responsibility of the concerned Purchase Officer to ensure prompt

preparation of price statements as well as finalisation of the tender papers. The statement

shall be signed by Head of IMM & Head of Finance where CFA is Director/ Chairman/ PSC/

Board; and by respective officers as designated by IMM & Finance Heads in other cases.

Format as per Purchase Proposal Format at Encl-2, Appx C to Annex VIII of DoP shall be

used for this.

Correspondence with Vendors :

Indenting departments should not carry out any correspondence with suppliers. While

Methods Engg./ Facility Planning, responsible for preparing specifications etc may

correspond with various manufacturers to firm up their specifications, once a demand has

been raised and sent to IMM for processing for any item/ equipment, all correspondence with

Vendor/s, whether on technical or commercial points, has to be carried out only by IMM


Acceptance of Tenders :

As a matter of policy, the lowest offer conforming to the requirement in regard to

specifications, delivery and other terms shall be accepted. Special care shall be taken to

ensure proper scrutiny in the matter of financial soundness and technical capability of the

firm. When, for valid reasons, it is necessary to accept a tender other than the lowest, the

reason for overlooking the lowest offer much be clearly recorded in the file.

In case, the quantity to be ordered is much more than L1 alone can supply, quantity order

may be distributed to next higher bidders in such a manner that the purchase is done in a fair

transparent and equitable manner.

Tenderers offering competitive prices but not accepting some of HAL's standard tender

conditions such as credit terms, penalty for delayed delivery, etc., may be accepted on merits

by appropriate authorities delagated with Purchase Powers.

Price Preference - Public Sector Undertakings, Ancillaries, Small Scale Industries And

Indigenous Manufacturers :

Government directives, issued from time to time, lay down policies regarding price

preference to be given to Purchases from Public Sector Undertakings, Ancillaries, Small

Scale Industries and Indigenous Manufacturers and these shall be taken note of while
carrying out price comparisons. Where price preference to be given exceeds the prescribed

limits in force, prior approval of Chairman shall be obtained.

Negotiations :

There should not be any negotiations, where there has been competitive bidding.

Negotiations, if at all, shall be held with L-1 only. Counter offers tantamount to negotiations

and should be treated at par with negotiations.

Negotiations can be recommended in exceptional circumstances only after due application of

mind and recording valid, logical reasons justifying negotiations. The negotiations should not

unnecessarily delay the award of work/ contract.

Negotiations may be resorted to, to arrive at a fair price in the case of purchase of proprietary

articles or where tendering has evoked limited response or where the items to be purchased

are such that there is only one or two established sources of supply and where the parties

appear to have over - quoted. Procedure for Holding Price Negotiation with Vendor shall be

as prescribed in DoP

Re – Tendering :

Re - tendering is not to be resorted to in the normal course. However, re-tendering shall be

considered in the following exceptional cases:

a) When the prices quoted are considered very high.

b) When it is suspected that there is a ring existing and price have been manipulated.

c) Material change in the basic specification has been introduced after receipt of


d) None of the offers meet the desired specifications.

e) The L1 bidder withdraws the offer or fails to execute the order or do not agree for

extension of validity when it becomes necessary.

f) When there is a sudden slump in the market.

Re-tendering when resorted to shall be only after obtaining the approval of an officer one step

above the officer empowered to approve the purchase or General Manager. In case of stock

out, a part quantity may be purchased on an emergent basis.


Monitoring is a vital part of any efficient managerial functioning. The efficiency of

purchasing largely depends on a good and effective purchase progression system. The

progression system should ensure the following in respect of each purchase request received

by the Purchase Department :

i) Enquiry is sent in time

ii) Offers are received in time

iii) Order is placed in time within the validity of offer

iv) Goods on order are received as per delivery schedule and bills / discrepancies are

settled promptly.

For ensuring the above, a progression cell should be specially organised in the Purchase

Department to operate directly under the Head of the Purchase Department. Care should be

taken to ensure that the cell deals with real time information and does not become a

postmortem cell to find faults with the other sub-departments of Purchase. The cell shall

provide a positive service by providing timely warning signals where delays are occurring so

that timely corrective action is initiated by the Buyer.

Computer facilities are now available with the various Divisions of HAL. It is therefore, in

the prime interest of Purchase Department to plan timely input of purchase date to the

computer for obtaining Purchase Progression Service from the Computer Center. In the

intervening period, the cell shall monitor the progression of purchases with the help of

i) Purchase Request / Indent Progression Register/ Database (Pre contract stage)

ii) Purchase Order Progression Register/ Database (Post - contract stage)

Purchase Request / Indent Progression Register/ Database :

All indents received shall be entered in the Indent Progression Register/ Database. The

register/ Database shall have the following columns:

a) Serial Number

b) Indent Number and Date

c) Brief description of the item

d) No. of items on the indent

e) Estimated Value

f) Date Indent received

g) Date Enquiry issued

h) Due date for receipt of offers

i) Date of tender opening

j) No. of tenders received

k) Date comparative statement was prepared

l) Date of of putting up proposal for approval

m) Purchase Order Number and Date

n) No. of items in the Purchase Order

o) Name of Supplier

p) Value of the Purchase Order

q) Remarks

The Indent Progression Register/ Database shall be reviewed daily by the Purchase Officer /

Progress Assistant and a weekly report sent to the Senior Commercial Manager / Purchase

Manager giving details of

i) Indents where enquiries are not issued in time

ii) Quotations not received as per due date

iii) Price comparative statement not made within six (6) days after tender opening

iv) Purchase Proposals / Purchase Orders not raised for more than 10 days

v) Files pending for more than 7 days with outside Department

vi) Cases where Import Clearance has been received within 3 weeks

Purchase Order Progression Register/ Database :

All Purchase Orders issued shall be entered in the Purchase Order Progression Register/

Database. The register/ Database shall have the columns as given in Annexure – 38.

The register/ Database shall be reviewed by concerned officer. Letters / Telex reminders shall

be sent at least 8 weeks in advance of scheduled delivery date in the case of foreign suppliers

and 4 weeks in advance in the case of indigenous suppliers. A report is to be sent to the

Commercial Manager / Purchase Manager in respect of the following:

a) Where Order Acknowledgements are not received within 30 days in respect of

foreign suppliers and 15 days in respect of local suppliers.

b) Where Letters of Credit require revalidation / extension

c) If supplies are overdue by more than 2 weeks

d) Inspection reports not finalised within 2 weeks after receipt of items

e) Details of rejections / refund of amount paid for rejected materials

f) Suppliers bills outstanding for payment more than 15 days.

Extension Of Delivery Period :

If the supplies are not effected within 2 weeks after the delivery date or if the suppliers ask

for extension of time, the attention of the authority who signed the order shall be drawn.

Action for necessary Purchase Order Amendment shall be taken in accordance with para on
“Purchase Order Amendment” (para 8.7). While granting extension of delivery time,

financial implications shall be examined and financial concurrence obtained where it involves

financial implications

Cancellation Of Orders And Penalty :

For cancellation of order the approval of the CFA shall be obtained. Before imposing any

penalty less than what has been laid down in the General Terms and Conditions of Supply the

approval of General Manager / CFA shall be obtained.

Settlement Of Vendors Bills :

In order to maintain credibility and project a proper image of the Company, it is of utmost

importance that the bills of the vendors are paid in a reasonable time. Purchase Department

being the sole contact point, it is necessary that the Purchase Department takes the

responsibility of arranging timely payments by co-ordinating with Inspection, Stores and

Finance Departments, for movement of the necessary documents for releasing the payments.

Retirement Of Documents Through The Bank :

The Purchase Department ensures that the advices such as FLSC, etc., are collected on a day-

to-day basis from the bank, scrutinise with the Purchase Order and recommends payments to

the Finance Department for preparing the cheques. The Purchase Department collects the

cheques, hands over to the Bank, retires the documents and forwards the same to the Stores

for collection of the goods from carriers such as Roadways / Railways / Airways. For a

general guidance, the following time schedule may be followed for retirement of the

documents :

1. The Purchase Department will verify with reference to the terms of Purchase Order

and issue amendment where necessary, and forward the LSCs to the Finance

Department within 3 working days.

2. Finance Department will send the cheques to the Purchase Department within 2

working days.

3. The Purchase Department will retire the documents from the Bank within one day.

4. Purchase Department will forward documents such as LR / RR / AWB etc. to stores

for collection of materials on the same day / next day.

Direct Payments on Open Account and Balance Payments :

It should be specified in the Purchase Orders that vendors should submit their bills to the

Purchase Manager. The Secretariat Department should be advised to deliver all the vendors

invoices to the Purchase Department. If some bills are received in Finance direct, the same

should be redirected immediately to Purchase Department.

1. The bills received by the Purchase Department are scrutinised with reference to terms

of Purchase Order and the Receiving Reports and then recommended for payment to

the Finance Department within 3 days from the date of receipt of the bills / Receiving


2. The Finance Department will release the payment within 3 days from the date of

receipt of the recommendation from Purchase Department.

In case of any difficulty or delay in finalisation of Receiving Reports and for releasing

payment by the Finance Department, the matter has to be sorted out by mutual discussion by

officers of concerned Department. If the differences still persist, IMM should discuss with the

Finance and if necessary with the GM so that the payment could be arranged without any

delay. In order to achieve this, the Purchase Department may establish a system of having

weekly or fortnightly meetings with Finance Department to resolve any outstanding problem.


Relationship with the suppliers :

In all their dealings and transactions, the personnel of the Purchase Departments shall

conduct themselves in an exemplary manner in keeping with the best interest, dignity and

tradition of the Company and their profession. In this connection, the 'Code of Conduct &

Ethics' adopted by the Indian Institute of Materials Management, which is reproduced below,

shall serve to guide their actions.

a) To consider first, the TOTAL interest of one's organisation in all transactions

without impairing the dignity and responsibility of one's office.

b) To buy without prejudice, seeking to obtain the maximum ultimate value for each

Rupee of expenditure.

c) To subscribe and work for honest and truth in buying and selling, to denounce all

forms and manifestations of commercial bribery, and to eschew anti – social practices.

d) To accord a prompt and courteous reception, so far as conditions will permit, to all

who call upon a legitimate business mission.

e) To respect one's obligations and those of one's organisation, consistent with good

business practices.

Filing System :

The procurement files are very important and sensitive documents and thus there is a need to

have a single file system with proper page numbering. In case of urgency, if opening of the

part files is unavoidable, the same should thereafter be merged with the main file. The

decisions and deliberations of the individuals or the Tender Committees also need to be

properly recorded and well documented. The filing system must ensure accountability.





1) H.A.L. is headed by an excellent and extra ordinary chairman, who is most capable of

managing the organization by getting the work load from Indian Air Force, Navy,

Army and Coast Guard for its financial growth and management.

2) The technological know how are very confidential and have the best – suited for

making and overhauling the Defence Aircraft that is incomparable with any


3) H.A.L. is a very good pay-master to its employees as it is very much financially

healthy due to its existence under Ministry of Defence.

4) The monitoring of the Finance and the manufacturing and delivery of Aircraft to the

customers timely for the best use of the same.

5) The reputation of HAL being the Defence organization has its importance and

technically and financially renowned among PSUs (Public Sector undertakings) as

Navratna and carries ISO: 14001 company .Quality in the world/Internal Business


1) IAF is fully satisfied with the performance of HAL so far as the following of licences

Technical knowhow are concerned, but due to recent Air crashes of MIG Aircraft and

few other Aircrafts there are few problems which are minor.

2) Sometimes the foreign vendors on whom HAL depends for procuring raw materials

for projects are not in a position to deliver the same in time this causes financial loses

to H.A.L. by paying liquidated damages to IAF / Customers.

3) Sometimes HAL use to make payment to suppliers as advance for procurement of

raw-material because there are some parties who can not supply without advance

payment due to their financial problems.

4) Sometimes H.A.L. does not get the approval from IAF against the items appeared in

FPQ (Fixed Price Quotation) at the rate prevalent in the International market with

then approved suppliers. Escalation percentage in respect of the items where it is

much more than permissible limit can put to loss to the extent it is more.

5) Machineries required from Foreign vendor take abnormal time leading to-delay in the

normal manufacturing function, hence now H.A.L. wants get similar type of

machineries if approved by the customers.


1) H.A.L. is the only manufacturer of the Defence Aircrafts; hence the job opportunities

as well as profit earning opportunities are more today and in the forthcoming years.

2) Promotion opportunities are in-vogue to all the professionals including technical and

non-technical areas Departments.

3) As H.A.L. has monopoly in the manufacturing and overhauling of aircraft, so it can

explore all the advantages related to this field.

4) As H.A.L. has developed its own R & D centers so now it would not have to depend

on Russia for Technical knowhow.


1) HAL has fear to terrorist as it is a defence organisation producing fighter aircrafts.

2) Though H.A.L. is manufacturing fighter Aircrafts in confidence and getting the same

inspected by the authorized officials of Airforce. There is a fear that during testing

there should not be any unwanted happening / rejections of Aircrafts which may cause

the losses.

3) During war, H.A.L. has its fear of attack by enemy – countries as H.A.L. is very

famous for a very good supporting organisation with arms / fighter aircraft.

4) Threatening is given by many agencies / users that the materials modules / parts /

equipment are not be touched by any country’s ship or otherwise. In case any project

is given by false that the above, materials / modules / part have been touched by any

ship during importing then the user suspect on unnecessarily.





1) The beginning of H.A.L. can be traced to the year 1940 when the Late S.W. Hirachand

set up a company called Hindustan Aircraft Limited, Bangalore.

2) Today, H.A.L. has 14-production division/ unit. Seven at Bangalore and one each at

Nasik, Koraput, Kanpur, Lucknow, Korwa, Hyderabad and Barrackpore.

3) These centers are engaged in the design & development of Combat Aircraft, Helicopters,

Aero engines, Test Beds, Aircraft Communication & Navigation system and Accessories

of Mechanical & fuel system & instruments.

4) In case of Customer financed Projects, funds are provided by the parties other than IAF.

For eg, Navy, Coast guard or Border Security Forces. H.A.L. has to work for them.

5) The term loan or other Government loan which is provided to H.A.L. by IAF is at very

minimum rate of interest i.e. 2-3%.

6) Only 40% of Internal Resources are available for funding capital expenditure and Rest

60% is used in provisions & Reserves.

7) H.A.L. invests 60% in the form of securities.

8) The share of H.A.L. is 45%. The share of Government is 51% and the rest 4% share are

taken by Tata Steel.

9) While purchasing any machines H.AL. adopt payback period in order to know the period

in which total cost of the machines can be recovered.

10) Replacement cost involves cost of machine and the processing charges which include

labour overhead and installation charges.

11) HAL has no big competitor in the whole market. i.e. means H.A.L. has monopoly in the

field of aircraft industry.

12) HAL is listed amongst the top ten public sector units in the country.

13) Main customer of HAL is IAF; ADA is one other customer of HAL. Ratio between IAF

and other customers is 87:13 approx.

14) All standards related to production more or less depend upon direct workers.

15) Pricing policy which is adopted by HAL is based on FPQ. 10% profit is taken on total

cost, which is fixed price of the company.

16) Production depends upon the direct and indirect workers.

17) Efficiency of direct workers is calculated 66%. Earlier it is used to be 75%. It is decreased

by 9%. It is one of the causes of increasing of MHR.

18) Establishing of rapport direct and indirect workers is very well.

19) Company is performing its responsibilities by providing employment to 4000 people in

their division itself.

20) Tight security is made to avoid any kind of distortion. Without entry pass no outsider can

enter into the premises of factory.


1) There should be facility of intranet so fax and such other things must be done through it

that can reduce time and money.

2) For attendance finger print system should be adopted so that actual person’s attendance

can be mentioned.

3) The time delay between rising of purchase order and preparation of RDR should be


4) Wages to direct workers should be given through piece rate system.

5) Efficiency of indirect workers should be measured so that slackness can be sorted out.

6) Employees should be included in brainstorming and also should be given liberty and non-

monetary incentives as appreciation.

7) Officers should be promoted also on the basis of performance and not only on the basis of

number of years worked.

8) Workers who have talent and compatible with office grade but restricted to work only at

non-supervisory position, the policy should be such so that grade promotion could be


9) Profit calculation by project cell for project evaluation is different from costing section. In

this way project evaluation is not proper. So it must frame its cost-benefit evaluation and

focus on only licensing fee and other DRE and framing of analysis should be done as per

actual recoverable profit percentage.

10) The company should give some stipend to Industry guide for summer training due to

which they will take more interest in providing guidance.

11) The source of supply with the details of Purchase Orders and dealers, if any available in

India alternatively should be computerized and maintained.

12) Lead time for receiving raw materials from suppliers is more, it should be reduced.

13) Many employees are very qualified and well endorsed with valuable ideas; their ideas

should be taken into consideration.

14) Similar kind of working conditions should be provided to employees of same level.

HAL is one of the largest PSU under the department of defense production, GOI and is a

“NAVRATNA” company ranked 34th in the list of world’s top 100 defense companies. HAL

with its wide spectrum of expertise in design, development and manufacture of aircrafts,

helicopters, engines, accessories and avionics has emerged as major aeronautical complex in


HAL is listed among top ten public sector units which are running in profit. Its main

customer is IAF; its other customers are ADA and other civil customers, Navy, Air Force and

Coast Guard etc.

As H.A.L. has number of projects, which need huge investment so it also used appraisal

method like pay-back period method for evaluating the capital expenditure proposals. But as

pay-back period method does not consider the time value of money so it must adopt

discounted cash flow techniques which consider the time value of money. Pay – back period

method does not able to tell post pay-back profitability. These factors can only be judged by

net-present value method or internal rate of return method.

The topic undertaken for study was too wide to be studied in detail & in all aspects. Duration

of the summer training was limited and the sample size was restricted to accessories division

Lucknow only. The data so collected to write this report is the result of direct personal

accounts department. This study not only makes me familiar with big organization like HAL,

but also provided me the practical view that how the financial functions and theories are

applicable in an organization.

HAL is listed among top ten public sector units which are running in profit. Its main

customer is IAF; its other customers are ADA and other civil customers, Navy, Air Force and

Coast Guard etc.

All sections of Finance & Accounts department are functioning separately but in a

coordinated manner. Their functioning depends on each other. One section provides data as

an input to other section, the section processes it and gets output in this manner these sections

are interdependent.


P.O. Purchase Order

R.D.R. Receiving cum Discrepancy Report
G.I.T. Goods In Transit
S.I.T. Stock In Trade
B/E Bill of Entry
L/C Letter of Credit
M.I.S. Management Information System
F.P.Q. Fixed Price Quotation
P.C. Price Catalogue
I.D.T.O. Inter Divisional Transfer Order
I.F.D. Inter Factory Demand
D.R.E Deferred Revenue Expenditure
R.M.S.O. Repairs Maintenance Supply Order
L.T.B. Labor Time Booking
W.I.P. Work In Progress
A.H.Q. Air Head Quarters
M.R. Material Requisition
C.F.A. Competent Financial Authority
B.E. Budget Estimates
R.E. Revised Estimates
F.C. Forecast
AO (DAD) Accounts Officer(Defense Accounts Department)
E.D.P. Electronic Data Processing
M.S.D. Management Service Department
B.O.M. Bills Of Material
I.M.M. Integrated Material Management
S.M.H. Standard Minimum Hours
L.O.H. Labor Overheads
P.O.H. Production Overheads
N.P.O.H. Non Productive Overheads
I.A.F. Indian Air Force
A.D.A. Aeronautical Development Agency



1) Annual Report of H.A.L. Lucknow.

2) Introduction of Accountancy by S.N. Maheshwari.

3) Financial Management by Khan & Jain.

4) Financial Management by I.M.Pandey.

5) Journals and Magazines etc.

6) Financial websites:










As at ..... (Rupees in lakhs)
Particulars Sch. 31st March ’09 31st March ’08
Shareholder’s Funds
Head Office Control Account 1
Reserves and Surplus 2

Loan Funds 3
Secured Loans
Unsecured Loans
Deferred Liabilities (Net) 4

Deferred Tax liabilities 4a

Fixed Assets
Gross Block 5
Less : Depreciation 6
Less : Impairment loss 6a
Net Block
Capital Work-in-progress 7

Special tools and equipments 9
Investments 9a
Deferred tax assets

Current Assets, Loans & advances

Inventories 10
Sundry Debtors 11
Cash and Bank balances 12
Loans and Advances 13

Less : Current Liabilities and provisions

Liabilities 14
Provisions 14

Net Current Assets

Intangible Assets 15
Gross Carrying Amount
Less : Cumulative amortisation & impairment loss
Net carrying amount

Notes on Accounts 24
Schedule ‘1’ to ‘24’ and Accounting Policies attached form part of the accounts.
Subject to our report of even date


Place :
Date :
For the year ended ...... (Rupees in lakhs)
Particulars Sch. 31st March ’09 31st March ’08

Gross Sales
Less Excise Duty
Net Sales
Transfer to Inter Divisional Units 16a
Changes in WIP/SIT/Scrap 23a/b
Other Income 17
Charges Received on Inter Divisional Transfers 17a
Transfer from R&D Reserve 2

Consumption of Raw Material, Components, etc. 18
Amortisation & other charges 19
Salaries and Wages 20
Other Expenses 21
Charges Paid on Inter Divisional Transfers 21a
Interest 22
Depreciation 6
Provisions 22a
Inter Services / Common Services
Transfer of IDT

Deduct : Expenditure relating to capital account and others 23

Net Expenditure

Profit for the year

Less :
Provision for current taxation
Provision for Fringe Benefit Tax
Provision for Deferred Taxation (Net)
Provision for taxation of earlier years no longer required

Profit after Tax

Profit available for appropriations

Debenture Redemption Reserve
Interim Dividend
Proposed Final Dividend
Tax on Dividend (Interim and Final)
General Reserve
Balance carried to Balance Sheet
Total of Appropriations

Notes on Accounts 24
Schedule ‘1’ to ‘24’ and Accounting Policies attached form part of the accounts.
Subject to our report of even date


Place :
Date :


(Accessories Division)
LUCKNOW – 226016
UPTT NO. LK-609113, CST NO. LK-5042553, SERVICE TAX NO. 141-ST/MRS-27/LKO-II/04-
TIN NO. 09352300077
TEL NO. : 0522-2350996,2340335

Director General (For Principal Director Aviation) Invoice No. BR/CG/115/2009-10

Coast Guard HQ Date- 02.03.2010
National Stadium Complex Your Order No.
New Delhi- 110001 Date
DA No.
Docket No.


Claim for Overhauling Charges of

COOL AIR UNIT 1 107463 786015 288353 1074638

Part no.
SI no.
Taxable value
Add CST @12.5% 98252 98252
Add Service Tax @10.3% 29700 29700
Total Amount Due (Rs.) 1202320


(Accessories Division), Lucknow

(Received Rs. Twelve Lakhs Two Thousand Three Hundred Twenty Only)


Tenders Of Lucknow Division

Accessories Division,
Luck now Post Office,
Uttar Pradesh, India.


HAL –ADL/9974/04/FM-Maint-M/(SU- 24 May 2010 Annual Maintenance for Operation
30y)2250 and Daily Maintenance of 06 Nos. Air
HAL-AD/9904/3311/CE/2010/ 21 May 2010 Repair of demand outside plaster at
western side of design building and
replacement of old MS windows with
aluminium window
HAL-AD/9904/3294/CE/2010/ 21 May 2010 Term contract for operation of
incinerator burning of paper waste
and periodical removal of collected
HAL-ADL/9975/41/10/FM- 21 May 2010 Comprehensive AMC of Aplab Make
MAINT/IF/2248 Frequency Converters qty. 18 nos.
CE/1/10-11 21 May 2010 Replacement of damaged roof
treatment of NGL & ALH building
HAL-ADL/9975/41/10/FM- 18 May 2010 Renewal of AMC of
MAINT/IF/2186 Pressure/Temperature Controllers &
Recorders qty. 129 nos. of R&P, F&F
shop and Process, H.T. shop
HAL-ADL/9978/01/FM-Maint/FF/2249 18 May 2010 Repairing of Siemens make DC drive
and panel at Fadec Area
CE/2/10-11 18 May 2010 Civil construction/extension of
Buildings including electrical works
for SU-30 MKI Overhaul Project at
HAL, Accessories Division, Lucknow
HAL-AD/9904/3298/CE/2010 18 May 2010 Product exhibition casing in ASERDC
HAL-AD/9904/3311/CE/2010 18 May 2010 Repair of damage outside plaster at
western side of design building and
replacement of old MS windows with
aluminium window
HAL-ADL/Maint/9991/Air/40 18 May 2010 Laying of compressed air line
HAL-ADL/9975/41/10/FM- 13 May 2010 Repair of Maho 400P Machine’s DRO
MAINT/IF/2206 TNC 135 Make HeidenHain of Gyro
Machine Shop-1

HAL-ADL/9973/AC-356/10/FM- 13 May 2010 Annual Operation and all in

Maint/2197 Comprehensive Service Maintenance
Contract of 350 TR Screw Water
Chilling Plant of SU30 Factory
HAL-ADL/9975/41/10/FM- 13 May 2010 Repairing of 1500 Kgf Electro-
MAINT/IF/2207 Dynamic Vibration Shaker Syatem of
Aron Hurley Make of Environmental
HAL-ADL/Maint/9991/Air/40 11 May 2010 Laying of Compressed air line
HAL-ADL/9975/41/10/FM- 11 May 2010 Miscellaneous work of Instrument
MAINT/IF/2162 Factory area
HAL-ADL/9973/AC-339/10/FM- 05 May 2010 Annual Operation and in all
Maint/2171 Comprehensive Service Maintenance
Contract of 250 TR Reciprocating
Water Chilling Point