Professional Documents
Culture Documents
On
“FINANCIAL VETTING AND PURCHASING PROCESS: H.A.L
LUCKNOW DIVISION”
Submitted for the partial fulfillment of the Award
Of
AFFILIATED TO
GAUTAM BUDHA TECHNICAL UNIVERSITY, LUCKNOW
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DECLARATION
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.
(MBA)
This is to certify that the above statement made by the candidate is correct to the best of my
knowledge.
(MBA
Department)
Date:_____________
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PREFACE
Finance as a subject of study, has received wide-spread support from both academic and
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
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.
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
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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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ACKNOWLEDGEMENT
First of all I thank God for giving me this wonderful opportunity to undertake this training
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
me as could be possible
I am grateful to Mr. A.K. Srivastava, Chief Manager (Fin); Mr. Shekhar Kaushik, Sr.
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
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CONTENTS
CHAPTER: 1 PAGE NO
Introduction 8
Scope of study 72
Objective of survey 72
CHAPTER: 2
Limitation 74
CHAPTER: 3
CHAPTER: 4
CHAPTER: 5
Finding/Suggestion 127-128
CHAPTER: 6
Bibliography 134
CHAPTER: 7
Appendices 136
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CHAPTER NO.1
INTRODUCTION
SCOPE OF STUDY
OBJECTIVE OF SURVEY
INTRODUCTION
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ABOUT THE COMPANY
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 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
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
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
1942.
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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
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
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
projects:
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
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,
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• HAL was awarded the "INTERNATIONAL GOLD MEDAL AWARD" for
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
• HAL was presented the International -" ARCH OF EUROPE" Award in Gold
Innovation.
• At the National level, HAL won the "GOLD TROPHY" for excellence in Public
• 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
1940: H.A.L was set up by Seth Warchand Hirachand in association with the government of
1942: Company was handed over to the U.S. AIR FORCE. HAL repaired over 100 different
1945: Government of India took over the management of HAL again after the Second
World War.
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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.
manufacture MIG-21 aircraft. Three factories at Nasik, Koraput, and Hyderabad were
established.
1964: HAIL was dissolved and its assets merged with aeronautics India limited and
1969: An agreement with USSR AWS reached for the license production of MIG-21
AIRCRAFT.
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 –
AIRCRAFT.
AIRCRAFT.
AIRCRAFT.
1996: Major servicing of the first batch of MIRAGE – 2000 AIRCRAFT was under taken. It
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1998: IGMT a new Division was established at Bangalore.
1998: Establishment of Industrial & Marine Gas Turbine Division for aerodoriative gas
2000: Establishment of Airport Service Service Centre for C0-ordinating the operations at
Overhaul Division.
2006: HAL ranked 45th among Top Defense Firm in the World.
2006: 21st July, Rolls – Royce & HAL celebrate 50 year of partnership.
2006: 14th October, HAL Launches Helicopter ambulance, Charter Service named “Vayu
Vahan”.
2006: 20th December, HAL receives EEPC Award for the year 2004-05.
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
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
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
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
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
Fighter Version
Trainer Version
Naval Version
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o Intermediate jet trainer development (HJT - 36)
• Future Programs: -
The Rotary Wing R & D Centre, with modern facilities and State of the art technologies,
Expertise in the design and development of rotary wing aircraft has been built up over the last
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
The objective of the Centre is to research, innovate and create designs for rotary wing aircraft
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
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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,
extension, flight test analysis and mid-life update. The Centre IS recognised by the
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
dedicated quality professionals. Production processes are closely monitored at all times to
Our quality culture, which we actively and continuously promote through training, is based
Every worker is putting in his best, aiming to do it right from the first time and every time,
• Mid-Iife upgrade of all types of aircraft, research, design and development support to
• Product improvement
• Flight analysis
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• Indigenisation of aircraft materials, systems and spares
OBJECTIVES OF HAL
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
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
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
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
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
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
1.) Ensure quality of personnel of all level and provide them the right work
2.) Provide a healthy blend of employees who have growth with the organization and
5.) Provide adequate opportunities for personnel to improve the level of their professional
knowledge.
6.) Personnel with talent and potential growth to be developed to should have higher
responsibilities.
STRATEGY OF HAL
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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.
Company.
VALUES
CUSTOMER SATISFACTION
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.
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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.
pursuing and encouraging risk-taking, experimentation and learning at all levels within
operation, and a sense of belonging. We will strive for building empowered teams to
We value our people. We will treat each other with dignity and respect and strive for
INTEGRITY
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
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Exports
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Aerostructures
HAL’s cost-effective and widespread skills are available to the International Aerospace
Community.
HAL has proven capabilities and offers collaborative arrangements in the areas of
Some of the work packages for renowned international aerospace leaders include :-
Helicopters
Chetak
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.
Cheetah
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.
LANCER
The Lancer Helicopter is a light attack helicopter
helicopter.
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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
gun sight is provided for accurate aiming and firing by the pilot. Each pad carries one
(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.
Dynamic System (IDS), Anti-resonance Isolation System (ARIS), Full Authority Digital
Electronic Control (FADEC), Hingeless Main Rotor, Bearingless Tail Rotor, and Automatic
Engines
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HAL with its vast experience has acquired state-of-the-art technologies for manufacture,
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
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
Avionics
JAGUAR AVIONICS
(44 LK System)
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Spares and services
HAL provides Spares, Repair & Overhaul services for the following aircraft and engines:
Aircraft
• Jaguar
• DO-228
• Mirage 2000
• HS-748
Engines
• Garrett
• Dart
• Artouste IIIB
• R-11/ R-25
Softwares
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
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,
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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.
1. Hewlett Packard, IBM, Silicon Graphics and Sun Workstations and Servers on high
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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INTERNATIONAL AND DOMESTIC DEALS
INTERNATIONAL DEALS
The US$10 billion fifth-generation fighter jet program with the Sukhoi Corporation of
Russia.
Multi-role transport aircraft project with Ilyushin of Russia worth US$600 million.
US$250 million.
US$ 120 million deal to manufacture Dornier 228 for RUAG of Switzerland.
US$7million.
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
US$57 million upgrade of SEPECAT Jaguar fleet of the Indian Air Force.
CAE .
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
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 /
Technicians.
Military Aircraft :-
MiG Series, Jaguar, Mirage-2000, Sea Harrier, AN-32, Kiran MK-1 /MK-II , HPT-32, SU-
30MKI
Civil Aircraft :-
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.
FACILITES
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
Coating.
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
These facilities are in - house to cater for the needs of various production / servicing
requirements.
cabinets) where assembly & test activities for instruments, Hydraulics and Fuel factories take
place.
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'
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 &
AWARDS:
The ISO 9001 Certification for entire range of products and services.
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.
MICROPROCESSOR CONTROLLER
UNDERCARRIAGE, WHEELS AND BRAKES
EJECTION SYSTEM
Export Products
Supply of Retable and Spares of Jaguar International and Cheetah (Lama) / Chetak
(Alouette) Helicopters
Aircraft, Cheetah (Lama) / Chetak (Alouette) Helicopters and Dornier Multi-role Aircraft
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,
Outsourcing:
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
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
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
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
Distribution of surplus :-
Dividend paid by the company on equity shares during the 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
per
First Interim
12,05,00,000 4.00 48.20 8.19 56.39 56.39
Dividend
Second Interim
12,05,00,000 20.89 251.75 42.78 294.53 280.49
Dividend
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
The Accounts Department of HAL has been divided into different sections for the smooth
1. Bills Payable
(Payable to Suppliers)
2. Finance
3. Payroll
(Payment of salaries)
4. Bills Receivable
5. Cash Office
(Cash disbursement to employees)
6. Cost Accounts
7. Material Accounts
(Details of materials)
8. Book Keeping
(Annual Budget)
(Attendance records)
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.
Functions:
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
• The Pay roll record is updated from time to time entering therein increment drawn,
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.
of LIC premium. HDFC loan, income tax etc. are remitted to various agencies within the
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
• 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
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
etc.
• TA/DA: Those employees who are sent outside the company for any official job are
• 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
• 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
lakh.
BILLS RECEIVABLE
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.
OBJECTIVES:
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
To ensure that proper accounting is done as per the statutes and accounting
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.
FUNCTIONS:
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
ii) Chief Resident Inspector (CRI) coordinated Inter Divisional Task Orders (IDTO) for
divisional tasks.
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
To prepare and render invoices to Non-Indian Air Force customers in respect of the
following activities:
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,
Forecast.
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
assessment.
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.
which contains the details as to the date when the order was placed, details of the items to be
For the purpose of billing, the cost of work is arrived at for different kinds of Sales in
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
Section.
Price Catalogue: For the issue of fresh items, the cost of sales is arrived with the help
Flow of Work :
BILLS
PAYABLE
SECTION
Bills Payable Section has two segregations, which perform their functions independently,
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.
PROCEDURE:
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
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,
Inland vendors for supplies / services are paid by one of the following procedure:-
3. Advance payment
4. Open account
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
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
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
• Advance journal
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
department.
FUNCTIONS:
• 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.
• Opening of Letter of Credit on advice of IMM Department and liaison with bank for
• Pricing of RDR (Receiving cum Discrepancy Report) with Purchase Order rates and
• Priced RDR are sent to material accounts section / EDP for punching in batch mode
PROCEDURE:
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
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
Foreign Bills :-
Foreign suppliers are paid by any one of the following methods as stipulated in the purchase
• Letter of Credit
• Sight Draft
• Advance Payment
• Direct Payment
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
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
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
• Payment and accounting of advances, running bills to contractors and final bills.
• Capitalisation of buildings.
sanitation etc.
• Payments to all consultants like architects, advocate, part time doctors etc.
PROCEDURE:
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
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
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
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.
Skilled 156.56
Unskilled 130.90
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 SECTION
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
FUNCTIONS:
All amounts collected by different sections either from employees or from external agencies
Cash received in excess of requirement, cheque, bank drafts, postal orders are deposited into
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.
WORKING:
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
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.
FUNCTIONS
• To issue leave cards for the calendar year to all the employees / officers of the
division.
• 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
• To verify the application for Vacation Leave (V/L) encashment and advice according
employees.
• To make calculations for provision for Vacation Leave to be accounted for Final
Accounts.
TYPES OF LEAVES
VACATION LEAVE
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
encashment.
CASUAL LEAVE
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
also.
MATERNITY LEAVE
It would be available to regular married female employees for 12 weeks inclusive Sundays
and holidays.
SICK LEAVE
PROLONGED LEAVE
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
• Extension of leave
• Increment postponement
trainees
• Carry forward / encashment of vacation leave / half pay / sick leave in respect of
absorbed deputation / employees joining the company on fresh appointment from central /
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
status.
FUNCTIONS
• 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
• 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
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
• 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
addition.
• Physical verification of fixed assets is done as per the guidelines of the Corporate
PROCEDURE
• 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
• After ensuring that all the entries for the month have been received and posted in the
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
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
There are many types of Budget prepared but it has been bifurcated under two heads as
under:
1. CAPITAL BUDGET
2. PERFORMANCE BUDGET
CAPITAL BUDGET
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
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
company.
Generally top executives of the Corporate and operational level take initiation of
and project in charge that feel its need. Here in capital budget is laid down under
following heads:
• New projects
• Existing Projects
• Replacement
• Welfare
PERFORMANCE BUDGET
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,
• Purchase Budget
• Sales Budget
• Production Budget
• Manpower Budget
• Welfare 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
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
Cash Flow:-
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
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.
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
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
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
functioning.
FUNCTIONS:
• 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
year.
• 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
RPFC
• 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.
MATERIAL ACCOUNTING SECTION
OBJECTIVES:-
• To ensure that all the receipts and issues of materials from stores are recorded and
• To ensure that all the receipts and issues of materials from stores are recorded and
• 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
ledger.
FUNCTIONS :-
• 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
• 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
a. The cost of materials drawn against various Job Orders, Expense accounts;
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
accounts.
Code No. / Quantity and Value, necessary Journal entries are passed by debit / credit to
f. On the basis of stock verification sheets indicating stock verification Note No.,
Material Code No., Shortage /Overages, necessary Journal entries are passed after
accounts after taking approval of C.F.A. wherever required for adjustments / write-off of
stores.
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
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
a) The cost of material drawn against various job orders; expense accounts.
c) The cost of tools issued to various tools cribs from main tool stores.
1. Commercial Store.
2. Raw Material.
3. Jaguar’s parts.
4. Russian project.
5. Western project.
Flow of work
FINANCE
SECTION
The Finance
Section has the responsibility of carrying out the scrutinizing function which has a major role
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
Functions:
• To scrutinize and give financial concurrence as per delegation of power for each
proposal involving -
Capital expenditure
Revenue expenditure
Manpower requirement
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
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
shows that it is suitable or not. Finance Department approves Purchase Order files.
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,
In the same manner for foreign purchase request PRS (Procurement Review Sheet) is
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
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
SCOPE OF STUDY:
1. In future if better relationship is maintained with the supplier, then it will be fruitful for the
organisation.
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
price.
OBJECTIVES OF STUDY:
The purchase procedure outlined in this manual aims to fulfil the following objectives:
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
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
exchange requirements.
strive for reduction in material costs, Capital costs and Overhead expenses. Develop sources
time.
safeguard economic, legal and other interests of HAL. Commercial procedures cover the
j) Maintain and improve the quality of materials procured. Lay emphasis on Quality
Management.
CHAPTER NO. 2
LIMITATIONS
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
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
DESCRIPTIVE WORK ON
SUBTOPIC OF STUDY
FINANCIAL CONCURRENCE
dues in, production allowances, contingency, shelf life, procurement lead time based
on stage of build/ structural breakdown and other factors like indigenisation plan etc.
c) Liaise with related departments like design, methods for updated documents.
materials.
disposal.
Purchase :
f) Issuance of Purchase order after coordination with Finance and approval of proposal
agreement etc.
Stores :
Stock Control
f) Preparation of receiving report and arrange for clearance of goods from inspection.
Dispatch
h) Arrange for all dispatch documents, packing of goods after inspection, custom
premium.
Holding Stores
requisitions.
m) Ensure FIFO for lifed items and arrange for disposal of life expired items.
Tool Cribs
o) Keep up to date record of calibration status and arrange for periodical calibration/
reconditioning of tools.
Sub-Contracting :
General :
e) Computerisation / E-Commerce.
Objectives :
The purchase procedure outlined in this manual aims to fulfil the following objectives:
required quality to meet and support production plans and other requirements of internal and
external customers.
approved / reliable sources at the available reasonable prices within the time schedule to
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
exchange requirements.
strive for reduction in material costs, Capital costs and Overhead expenses. Develop sources
time.
safeguard economic, legal and other interests of HAL. Commercial procedures cover the
j) Maintain and improve the quality of materials procured. Lay emphasis on Quality
Management.
Purchase Functions :
and exchange the same with other Divisions to expand sources of supply.
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.
g) Keeping watch on trends in Foreign Exchange Rate variations and obtaining timely release
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
l) Maintaining up to date information regarding sales tax, excise and custom duty-rates etc.
n) Entering into service contracts for Transportation, Customs Clearance and other
miscellaneous services like repairs to capital equipment / plant, advertising, printing, packing,
p) Entering into contracts for sub-contracting prototype development, trial orders etc.
r) To ensure that objectives of purchase are realised and exceptional cases are brought to the
s) To be alert about and responsive to the changes in production programme and change in
requirements of material.
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
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
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
ii) Obtaining Technical clearance for import from the concerned authority, if necessary.
v) Requesting our own Embassies and Resident Managers when sufficient sources are not
known.
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
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 /
purchase for Bonded aero material will be generally LIMITED TENDERING or Proprietary
the Company and Material Purchase Requests are to be raised by Material Planning/ Control
Department.
All other types of materials which are not directly used in production but are required for
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
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
Quality, Finance and IMM representatives may, if required, visit the premises of
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
Department.
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
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.
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
appointed.
Miscellaneous:
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
PAYING MATERIALS
MARKET EXPLORATION AND SOURCE SELECTION
The main objective of the Purchase Department is timely procurement and supply of
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
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:
supplies. The databases shall be regularly updated, but at least once in a year.
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
Head of Planning or any other officer specifically authorised by the local management for
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.
All Purchase Requests shall be centrally registered in the Purchase Department in the
Purchase requests shall be scrutinised within 48 hours of the their receipt by the concerned
a) Description of Part No., Code No., Specification, Quantity, etc., indicated appears to be
correct.
requisition.
e) In case of repeat purchase, last purchase price, and source of supply is mentioned.
h) Purchase request for imported capital items is supported with technical justification for
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.
PURCHASE MODE
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
respectively.
a) The enquiry/ tender shall indicate full description and specifications of the required
material.
b) Drawings, wherever available, shall be sent along with the enquiry / tender.
circumstances, terminology such as 'best quality', 'commercial quality' or 'as per previous
d) In case where no drawing is available and which cannot be correctly described, a sample is
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
g) In case quantity required is not readily marketed, Minimum Order Quantity stipulation
h) Clauses relating to Earnest money, if called for, Delivery Schedule, Payment terms,
Damages/Penalty for the delayed supplies and Risk-purchase etc. must be incorporated in the
i) It should be made clear inn bid documents that conditional discounts shall not be
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/
enquiry.
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
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
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
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
followed.
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
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
b) The EMD to be charged shall be a fixed amount, based on estimated value of stores as
follows:
c) For tenders of the value of rupees one lakh or less, EMD need not be called for.
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
from the scheduld Banks (or, in case of foreign suppliers, from Bank of International
b. That offers not accompanied with requisite amount of EMD or EMD not submitted
c. That, in case of 2 – Bid system, EMD should submitted along with Technical Bid/
Offer.
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
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
g) EMD will not carry any interest for the period it is retained with HAL and this shall be
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
Tender Enquiry must clearly ask for Vendor's ability to arrange export License from his Govt
In general a period of three weeks for indigenous sources and four weeks for foregin sources
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
The sale of tenders should be kept open till the date of tender opening.
MODES OF TENDERING
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
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
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
such documents must be made on the web site notice and intending bidders be asked to
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
c) Request for proposals for non-lethal items (i.e. items not connected with any warfare)
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
Government.
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
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
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
Global Tendering :
Global Tendering is same as Open Tendering except where items to be procured are not
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
India.
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
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
source purchase. The specifications of the equipment need to be prepared in such manner as
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
f) Supplies from fair price shops, super bazars, Government, Semi-Government, Cooperative
undertakings.
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
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.
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
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
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
Where a firm is not ready to offer DGS & D Rate Contract prices to HAL, these prices may
HAL Corporate Office also enters into Rate Contracts for items which are commonly used in
a) Supplier is assured of expected volume of business and hence can offer better prices.
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.
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,
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
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
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
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
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
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
committee/ authority that approved the specifications originally. Such changes will be
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
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
Opening of Tenders :
All tenders must be opened at the specified place on the date and time specified for their
opening.
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
c) Any alterations in rate shall be encircled and initialed. It is desirable to write rate in words
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
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
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
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
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.
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.
Tender Value
a) upto Rs.5 lakhs Dy. Manager (IMM) and Dy. 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 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.
Committee/ CH/ MD/ Director, the Technical evaluation committee shall be headed
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
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
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
ii) Basic price and the quantities for which it is valid. Also whether the price if firm and / or
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.
vi) Firm's willingness to accept penalties / compensation for late delivery as well as HAL's
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
viii) The terms of payment and request for advance payments / willingness to offer Bank
Guarantee.
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
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.
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
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
intended to fulfill but the same will however not affect the safety or functional performance
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
f. As such, the responsibility of approving the specification on the above lines rests with the
TC.
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
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
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
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
The concerned Purchase Officer shall make a note of specific points on which TEC/
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.
1) RFQ for the system should clearly bring out the anticipated quantity and the period of
2) Quotes should be obtained for the prototypes and also for the subsequent series production
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
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.
till the facilities are set up in India. Cost of DI/ROH is also to be quoted in his offer; with
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
8) The lead-time for supply of spares is to be clearly defined to ensure timely procurement
action
9) The supplier has to confirm that any documents pertaining to up-gradation of the system
10) In the event of the supplier not meeting the product support requirements, his offer is to
11) The proposal will be evaluated on the Life Cycle Cost basis
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
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
Deptt.
Acceptance of Tenders :
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
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
Price Preference - Public Sector Undertakings, Ancillaries, Small Scale Industries And
Indigenous Manufacturers :
Government directives, issued from time to time, lay down policies regarding price
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
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
mind and recording valid, logical reasons justifying negotiations. The negotiations should not
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 :
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
tenders.
e) The L1 bidder withdraws the offer or fails to execute the order or do not agree for
above the officer empowered to approve the purchase or General Manager. In case of stock
PURCHASE PROGRESSION
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
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
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
All indents received shall be entered in the Indent Progression Register/ Database. The
a) Serial Number
e) Estimated Value
o) Name of Supplier
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
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
vi) Cases where Import Clearance has been received within 3 weeks
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
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
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
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
Finance Departments, for movement of the necessary documents for releasing the payments.
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
working days.
3. The Purchase Department will retire the documents from the Bank within one day.
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
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
Report.
2. The Finance Department will release the payment within 3 days from the date of
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.
ETHICS OF PURCHASING
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,
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
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.
CHAPTER - 4
ANALYSIS
AND
INTERPRETATION
SWOT ANALYSIS
STRENGTH:
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
technologies.
4) The monitoring of the Finance and the manufacturing and delivery of Aircraft to the
5) The reputation of HAL being the Defence organization has its importance and
Navratna and carries ISO: 14001 company .Quality in the world/Internal Business
Organization.
WEAKNESSES:
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
raw-material because there are some parties who can not supply without advance
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
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
OPPORTUNITIES:
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
THREATS:
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
CONCLUSION
AND
SUGGESTIONS
FINDINGS
1) The beginning of H.A.L. can be traced to the year 1940 when the Late S.W. Hirachand
2) Today, H.A.L. has 14-production division/ unit. Seven at Bangalore and one each at
3) These centers are engaged in the design & development of Combat Aircraft, Helicopters,
Aero engines, Test Beds, Aircraft Communication & Navigation system and Accessories
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
6) Only 40% of Internal Resources are available for funding capital expenditure and Rest
8) The share of H.A.L. is 45%. The share of Government is 51% and the rest 4% share are
10) Replacement cost involves cost of machine and the processing charges which include
11) HAL has no big competitor in the whole market. i.e. means H.A.L. has monopoly in the
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
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
17) Efficiency of direct workers is calculated 66%. Earlier it is used to be 75%. It is decreased
20) Tight security is made to avoid any kind of distortion. Without entry pass no outsider can
SUGGESTION
1) There should be facility of intranet so fax and such other things must be done through it
can be mentioned.
3) The time delay between rising of purchase order and preparation of RDR should be
reduced.
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-
7) Officers should be promoted also on the basis of performance and not only on the basis of
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
possible.
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
10) The company should give some stipend to Industry guide for summer training due to
11) The source of supply with the details of Purchase Orders and dealers, if any available in
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
14) Similar kind of working conditions should be provided to employees of same level.
CONCLUSION
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
Asia.
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
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
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
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.
LIST OF ABBREVIATION:-
BIBLIOGRAPHY
BIBLIOGRAPHY
• www.hal-india.com
• www.hindubusiness.com
• www.mag-india.com
• www.domail-b.com
• www.wikipedia.org
• www.scribd.com
CHAPTER -7
APPENDICES
APPENDICES
Loan Funds 3
Secured Loans
Unsecured Loans
Deferred Liabilities (Net) 4
APPLICATION OF FUNDS
Fixed Assets
Gross Block 5
Less : Depreciation 6
Less : Impairment loss 6a
Net Block
Capital Work-in-progress 7
8
Special tools and equipments 9
Investments 9a
Deferred tax 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 :
HINDUSTAN AERONAUTICS LIMITED
PROFIT AND LOSS ACCOUNT ACCESSORIES DIVISION, LUCKNOW
For the year ended ...... (Rupees in lakhs)
Particulars Sch. 31st March ’09 31st March ’08
INCOME
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
EXPENDITURE
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
withdrawn
Profit after Tax
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 :
(Received Rs. Twelve Lakhs Two Thousand Three Hundred Twenty Only)
(AUTHORISED SIGNATORY)