Enlistment of Vendors / Central

Procurement Cell activities

Formation of CPC
▪ Formed in 2014.

▪ Vision Document got approved by CMD in March’2015.

▪ Enlistment of Vendors for MEGs rolled out through CPC portal in 2015.

▪ Enlistment of Contractors for CEGs was rolled out.

▪ Responsibility was shared among all the RHQs. Consequent upon formation of SSCs, all the
groups responsibility was transferred to CPC in September 2018.

▪ CPC re-constituted and relocated to Raipur in December’2019.

Procurement Guidelines
▪ Procurement & Works Policy

➢ Procurement through tendering

➢ Limited Tender

▪ For materials with annual consumption value (For works: estimated value of work) more than
Rs 5 lakh each, vendors will be selected based on PQR through press advertisement and
approved vendor list shall be maintained.

▪ However, for materials with annual consumption value (For works: estimated value of work)
less than Rs 5 lakh each, vendors will be selected as per past data of own / other stations, DGTD
directory, DGS&D etc. If necessary, press advertisement can be issued.

▪ Number of materials is in several thousand. The grouping of materials as suggested in the

purchase manual is not appropriate as per the experience of stations. There is no guideline for
finalization of QR for enlistment of vendors for materials as well as for enlistment of vendors
for works.

▪ The materials /works in DGTD / DGS&D are not similar to ours. Even if the list of vendors are
identified from past experience and approved, if value of PR is more than Rs 50 lakh (in spite of
the fact that each PR is individually below Rs 5 Lakh), the case is to be processed through open
tender (press advertisement).
 General Financial Rules (GFR) 2017
▪ Rule 162 (iii) (c) Purchase through Limited Tender Enquiry may be adopted even where the
estimated value of the procurement is more than Rupees twenty-five Lakhs, in the following
circumstances.

(a) The competent authority in the Ministry or Department certifies that the demand is urgent
and any additional expenditure involved by not procuring through advertised tender enquiry is
justified in view of urgency. The Ministry or Department should also put on record the nature
of the urgency and reasons why the procurement could not be anticipated.

(b) There are sufficient reasons, to be recorded in writing by the competent authority,
indicating that it will not be in public interest to procure the goods through advertised tender
enquiry.

(c) The sources of supply are definitely known and possibility of fresh source(s) beyond those
being tapped is remote

▪ For Works as per GFR 2017 Rule 139

(a) Open tenders will be called for works costing Rs. Five lakh to Rs. Thirty lakh;

(b) Limited tenders will be called for works costing less than Rupees five lakhs;

Earlier Practices
Different Terminologies used:

▪ Vendor Registration

▪ Vendor Empanelment

▪ Vendor Enlistment

▪ Source Standardization through Open Tender

▪ Source Standardization

➢ The first four terminologies represent the same meaning: "Listing out pre-qualified vendors"
through process of advertisement. Source Standardization is done based on experience and
some criteria but without open tender as per the purchase manual.

➢ Hence, the terms Vendor Enlistment & Source Standardization will be used as below-

➢ Vendor Enlistment: Finalizing approved vendor list through PQR & open advertisement.
 ➢ Source Standardization: Finalizing vendors based on past experience and defined eligibility
criteria through Source Standardization committee.

▪ Vendor Selection & annual up dation at Site level

▪ respective stations may finalize approved vendor list based on their past experience, and
defined eligibility criteria, through a committee with members from O&M, C&M, Finance and
FES /FQA at minimum E5 level with the approval of the concerned head of the station.

▪ Vendor Selection will be done by each station for its own requirements & shall be valid for
three years subject to annual updation

▪ In spite of the circular 1917 dated 21.05.2013 issued by CVO to all stations/regions for
empanelment of vendors for procurement of regular materials and works as per P&W policy,
the progress has been very poor. Most of the stations for most of the materials as well as
contracts have been processing the cases through OT if the PR value (with a no. of items) is
more than Rs 5 lakh. This is causing increase in the tendering cost.

▪ It is therefore, necessary, that a correct and transparent process for enlistment of vendors
should be in place and vendor enlistment is done for uniformity at all stations.

Vision Document
▪ It is possible to identify the materials for which vendor enlistment can be done on Pan-NTPC
basis, since vendor base for many major items are at national level. For works packages also
enlistment can be done on Pan-NTPC basis. Though for contracts, contractors generally operate
at local or regional level, we should encourage the agencies from other regions also to
participate and eventually enhance our vendor base. This would avoid the possibility of
cartelization.

▪ Accordingly, “Vision document” was first prepared in year 2015 and subsequently Revision-1
was prepared in year 2018. Subsequent to formation of Unified Shared Services and in order to
cover Mega Contracts also for Enlistment, Revision-2 to Vision Document is in Progress.

Vision

“To simplify the process of vendor enlistment and support Stations by taking up vendor enlistment
activities for materials & works on Pan-NTPC basis as far as possible and ensure uniformity,
transparency, simplified e-procurement, reduction in procurement lead time & inventory, and have
latest, competent & reliable vendor base all the time who can execute supply of quality
materials/execute quality work making procurement process fair & cost effective.”
Strategic Sourcing Methods for NTPC Procurements-
• Centralized Rate Contracts with OEMs – for Just in Time Procurements and Inventory
optimization

• Rate Contracts for Bulk Consumables – for continuous supplies, economies of scale

• Vendor Enlistments & Source Standardization for Materials – Ensuring Reliability, Quality &
uniformity

• Enlistment of Contractors as per the optimized Contract Package lists

Strategic Sourcing in NTPC

For pan-NTPC requirements, dedicated Centralized Sourcing (Currently named CPC) Team shall look
after:

• Vendor Enlistments (Materials and Services)

• Rate Contracts

• MOUs

• Source Standardization

Expected Benefits:

• Maximum coverage of pre-approved sources and contracts for regular consumption items/
services

• Minimization of local sourcing on case to case basis, which is prone to subjectivity and non-
uniformity among different SSCs

Optimization in procurement Lead Time, Inventory & Manpower

Process of Vendor Enlistment

• Identification of Enlistment area/ group (Indenting group)

• Finalization of QR by QR Committee and Tech. Spec. & QP by Technical Members

• Publication on CPC portal and wide publication on NTPC Tender Website

• Application submission by interested Vendors (Opened for Six Months i.e. One Cycle)

• Evaluation of applications by Cross Functional committee and Approval

• Communication to SSCs & publication of Consolidated enlistment on CPC portal

Vendor Enlistment Process:-Responsibility

Activity By REMARKS

Identify and make groups of Indentor (presently CC-OS) Approval by ED (OS) or

MEGs/CEGs respective ED

Preparation of Technical Committee at AGM Level or Approval by ED (OS) or

specification & QP above: Indentor (CC-OS), Engg respective ED
and QA (Supporting role)

Technical qualifying requirement Committee at AGM Level or Approval by ED (OS) or

above: Indentor (CC-OS), CPC, respective ED
Engg & QA{for MEGs) and
Finance

Invite Online Enlistment application CPC Through CPC Web portal

Evaluate application, verification Committee at DGM Level or CPC to coordinate

from clients and find out technically above: CPC, OS , Fin and QA
qualified vendors (Supporting role)

QA- is not applicable for CEGs

Assess the technically qualified C&M/CPC & QA CPC to coordinate

vendor physically
Activity-Not applicable for
CEGs

Enlistment of vendor who are Committee at DGM Level or Approval by ED(CC&M)

technically suitable and passed in above: CPC, OS , Fin and QA
physical assessment(For MEGs only) (Supporting role)

QA- is not applicable for CEGs

Enlisted Vendors
▪ The vendors are evaluated based on Technical Qualifying Requirement. The Every enlisted
vendor are assigned two parameters namely (i) Average Annual Turn over (AATO) and (ii)
Execution Capability( EC).

▪ An Enlisted vendor does get opportunity to participate in a tender when his AATO and EC is
more than the value of the tender (estimated cost)

▪ Enlistments can be used for tenders up to 4 Cr for CEGs and 15 Cr for MEGs

Strategic Sourcing – Vendor Enlistments

Enlistment as on date:

• MEG: 96

• CEG: 71

• Existing MEGs: cover 25% (no. wise) and 50% (value wise) of LTE

• Existing CEGs cover : 40% of LTE

Vendor Base

• 872 unique vendors are enlisted with the portal (MEG: 318 & CEG: 554)

Valid Enlisted Vendors

• MEG: 498

• CEG: 1855

Advantages

• Perennially open for enlistment throughout the year.

• Total workflow is Paperless and No application fee

• Low lead time from PR to PO

• Procurements by this group shall be considered as deemed Open Tender.

Salient Feature of CPC Portal:

▪ The CPC Vendor portal is conceptualized by CPC and developed and maintained in house by CC-
IT.

▪ The workflow is Paperless and No application fee is charged from applicants

▪ Backbone of Pan NTPC Enlistment as it provides a seamless, integrated and comprehensive
workflow from vendor application, evaluation, and assessment to extraction of eligible enlisted
vendor list by the SSCs.

▪ Perennially open for enlistment applications and up gradation of AATO and EC of enlisted
vendors

▪ Reduces procurement time as the eligible enlisted vendors selection for issue of enquiry is
automated and done with a click of button. NTPC Users can also access Circulars for
MEGs/CEGs, Rate Contract/MOU with vendors, Source Standardisation at same place.

▪ At present 96 MEGs and 71 CEGs open for application from vendors.

▪ Currently 872 unique vendors are enlisted with the portal, out of which 318 are for Material
Enlistment Groups (MEGs) and 554 are for Contract Enlistment Groups (CEGs). The valid
enlisted vendors for MEG-498 & CEG-1855. (As on 14.12.2020)

Advantages of Enlistments
▪ Pan NTPC Enlistment will ensure uniformity in vendor database for all NTPC power stations.

▪ E procurement can be implemented easily

▪ Procurement lead-time will be reduced, thereby reducing the inventory. Procurement will be
cost effective due to minimization of open tender enquiries and low purchasing costs.

▪ This will enhance vendor base from different regions and will check possibility of cartelization.

▪ This will distribute the workload and shall eliminate multiple actions by all stations.

▪ There shall be more focus on vendor’s manufacturing and testing capabilities and technical
competencies, which will ensure reliability and quality of materials.

▪ Review of vendor enlistment centrally by the same responsibility center, will develop expertise
in the respective domain and others can benefits from that.

▪ Major Issues are:

▪ - Grouping of the materials/ finalizing package list for contracts

▪ - Broad description of materials Groups

 Strategic Sourcing – Rate Contracts

Nearly 40% Site Procurements (both by value and numbers) are with OEMs

Our Enablers

• Rate Contracts for Spares with all major OEMs

• Rate Contracts with Non-OEMs for common and regular consumption items

Rate Contract- Process flow

• Identification & requisition of common Materials/ Contracts by Indentor

• Tendering by CPC
• Evaluation and award placement by CPC
• Execution by/at Station. Automated Control Outline Agreement
• Individual Order by SSCs as per specific requirements from Sites
Major Rate Contracts (as on 26.07.2021)

S.No Name of package

1 Atlas Copco Compressor Spares – M/s Atlas Copco

2 Gear Box Spares- M/s PTL

3 Flowmore Pump Spares – M/s Flowmore

4 Sam Turbo Pump Spares

5 Fluidomat Fuid Coupling Spares – under finalisation

6 Rexrorth Hyadraulic Spares – under finalisation

7 LTSSA / RC with all BHEL Units - under finalisation

8 Chemicals – Caustic Soda & HCL - finalised

9 Trisodium Phosphate, Liquor Ammonia & Sulphuric Acid

Source Standardization
▪ When Technical Requirement & Quality is of utmost importance

▪ Responsibility-

▪ OS in association with Engg and QA

▪ OS can also delegate to Regional OS

▪ Approving authority by ED-OS

▪ CPC –

▪ Single nodal point for publication Source Standardization circular

Present Status (as on 26.07.2021)

Material Enlistment- 94

Contract Enlistment- 71

Rate Contract /MOU- 28

Standardization- 14
 Purchase / Services Order
processing, procurement of
Office requirements / IT / HR
Being specific in nature and incidental in requirements a separate section has been
developed for Services Order processing, procurement of Office requirements / IT / HR

In different Sections we have already well elaborated the Procurement processed. The IT
and HR has been given a dedicated section as their requirements varies from Normal O&M
procurement and contracts in many aspects.

As we know that “An order/contract is as good as its PR”. If all the points/ input details has been
well taken at PR /indent stage itself, The order shall be well executed / materialized.

Here being C&M professional it our obligatory responsibility to inform/ educate our valuable
customers to the updated policies and guidelines. This will enable them to create a well
define PR proposal. This will in turn help in ease of work in conversion of PR to PO and
subsequent execution of orders.

Here the main key areas have been elaborated which need attention by our IT and HR
department. This will enable them to have a hand on understanding of the procurement
process and easy access of New update / development pertaining to their areas.
DOP AND ITS APPLICABILITY

It is utter important to select the applicable DoP Clause for the Indent under consideration.
Same is required to be maintained in SAP also.

Hiring of services

Section 36A deals with contract proposals considering the nature of contract the PR
should be raised in that sub section

Sec IV Clause

Approval of estimate, calling of tenders and Award of consultancy 36

assignments related to socio-economic studies, studies related to R&R, A
CSR, IT, Engineering, HR, SD, R&D other general consultancy assignments
including post award variation, in consultation with Finance.

Technical approval and administrative approval of cost estimates for

works, services and indents for procurement, in consultation with
Finance.

a)Repair & Maintenance works of buildings 36Aa

b) (I) Repair & Maintenance of office furniture, fixtures, equipment’s/ 36A b (i)
systems, Hospital Equipment & Systems and AMCs thereof, etc.

ii) Repair and Maintenances of I.T & Communication Equipment, 36A b (ii)
Upgradation of Software, Hiring of Bandwidth, including AMC &
ATS thereof

iii) Hosting of Website, designing, redesigning & Maintenance of 36A b (iiii)

Website in consultation with IT and Finance.

iv)For services like hiring of cars/jeeps/bus/ambulance/ other passenger 36A b (iv)

vehicles on annual/ monthly or periodical basis, other services such as
transportation, travel maintenance of company vehicles, tree
plantation, horticulture, floriculture, printing, binding, pest
control, sanitation, housekeeping, logistics, C&F agent etc.

c) Addition/ New works of capital expenditure nature in township / 36A c

Modification/ alteration in buildings owned by the company

d) Expenditure relating to Furnishing of office owned/rented 36A d

e) Procurement/works for activities of approved R&R/CD/ ICD/ CSR/ SD 36A e

schemes
 Procurement of Material

Section 36B deals with Materials proposals. Considering the nature of procurement the PR should be
raised in that sub section

Sec IV Clause

Technical & administrative approval of indents for items to be purchased 36B

with estimated value thereof in consultation with Finance.

i)For furniture, fixtures ,furnishings, Medical equipment’s & furniture, 36B (i)
office equipment’s including photo copiers, fax machines, computer
systems/PCs/ work stations /ACs / I.T / Communication Systems
/expansion/upgradation of hardware and software including software
package/new software

ii) Motor vehicles as per approved norms 36B (ii)

iii) For Health Centre / Dispensary/ Hospital Stores, Spares, drugs and 36B (iii)
non-drug preparation

iv) Stock Items 36B (iv)

v) Non-stock items 36B (v)

Approvals shall be subject to specific provision in the MBOA / Capital Budget / O&M
Budget as applicable.

This is subject to procurement & works policy, Budget provision and instructions
issued from time to time.

The above delegation would also be applicable to accord administrative approval

for taking items on lease or hire except in case of PCs for which separate
delegation is provided.

For items to be procured for residential offices of the entitled officials, the
ndents shall be raised by the concerned officials as per their choice and
preference.

For items to be procured for office of EDs/GM/Head of the Project and above, the
indents shall be raised by HR Deptt. keeping in view the choice and preference of
the concerned officials. This would also be applicable for purchase of accessories
and other furnishings for car.

Original Equipment manufacturer (OEM)/Original Equipment Supplier (OES) /

Proprietary Article Certificate (PAC) and certificate of urgency shall be approved
at a level not less than AGM (E7)/CMO of the indenting department along with
indent.

While obtaining approval of the competent authority for limited tender for works
& services exceeding Rs. 50 lakh and in all cases of single tender inquires, reasons
for adopting such modes of tendering shall be recorded in writing. Such cases
shall be in consultation with Finance.

ED (HR) at CC & REDs at Region shall have Full Powers for calling of tender
for Housekeeping Contracts on Single Tender basis from Sulabh International
subject to guidelines issued by Corporate Centre from time to time.
Deposit Works

Sec IV Clause

a) Approval for award of Deposit Works to various Govt. Agencies 39A

including Technical approval and Administrative approval of Cost
Estimates, in consultation with Finance.

Remarks :(i) Only those works are to be carried out under deposit works
which fall under the jurisdiction of various Govt. agencies and it is obligatory
on the part of NTPC to get the work done through such agencies only.
However, concerned Executive Director may also approve works to be
executed as Deposit Works even in those cases where it is not obligatory on
the part of NTPC to do so, provided the work is being executed by Govt.
Departments.

Canteen, Guest House and Transit Camp, Security

Sec IV Clause

a) Technical & Administrative approval for Cost Estimate for running and 46
maintenance of Canteen, Guest House and Transit Camp at Projects/
Stations/Regional offices/ CC, in consultation with Finance.

b) Technical and administrative approval for cost estimates for security

contracts at Projects / Stations / Regional Offices / CC; in consultation with

Finance

c) Award of contract including invitation of tenders for running and

maintenance of canteen, Guest House and Transit Camp at Projects/Stations

/ Regional Offices / CC; in consultation with Finance.
d) Award of Security contract including invitation of tenders at Projects /

Stations / Regional Offices / CC, in consultation with Finance.

Petty works of emergent nature

Sec IV Clause

Award of work order for execution of petty works of emergent nature, in 48

consultation with Finance.

Remarks:

i) This power is to be exercised in those cases where normal tendering

procedure cannot be followed for reasons to be recorded in writing.

ii) Where the value of work exceeds Rs. 20,000/- on each occasion, Finance

Concurrence will be required.

CREATION OF PR
CREATION- ME51N

Before starting PR creation, we should have followings

● DoP clause & Section

● Account assignment P( Project) K ( Cost centre) A (Asset) etc.
● Item Category B(Limit) D( Services)
● Purchase group
● Material group S*
● G/L account / Cost Centre
● G/L account/WBS Element/Fund Code
● Material /Service Code, if
applicable Indent type

● N - Normal

● O-OEM/OES

● P-PAC

● U-URGENT

● VC shall be in the provided area i.e / Urgency / OEM OES PAC , Suggested Vendor

● Fund Source

● Scope of Work – Type

● DoP clause

● Department

● Material group S*

● BOQ – Short text- Qty-UoM –- Rate -Long text

● Text shall be provided in material PO text Regarding

● Scope of work

● Specials terms & condition

Scope of Work/Terms & Conditions and its implication / advantage
➢ Shall be well defined, complete and objective in nature- no subjectivity in scope
which leave room for conflicting interpretation
➢ Inclusion and exclusions shall clearly be spelled out so as provide clarity
➢ Specification shall be Generic and should have tolerance it must not be specific OEM/PAC
➢ Should be adequate & complete
➢ Vendor may take advantage of inadequacies in tender specification to offer rates
based on his/ their specifications- complication in evaluation
➢ If all vendors quote for same specification rates offered by different vendors
can be evaluated/ compared.

Following salient points must be provided along with PR

● NAME OF WORK

● BRIRF SCOPE OF WORK:

● GENERAL TERMS & CONDITION

● Completion period .. days/months/year

● Defect Liability period months ( as per GCC for civil works 12 months)

● Qty deviation shall be govern as per GCC , if any specific needs to be elaborated

● Rate is inclusive of all taxes and Duties , however Service tax if applicable
shall be paid extra as per prevailing practice .

● Price basis :firm/variable SPECIAL

 CONDITION OF CONTRACTS
● payment terms
● Evaluation criterion
● Splitting allowed/ NOT
● Reserved for Class I or Both Class I & II can participate

Inputs for further processing by C&M

● Technical Approval of Cost Estimate

● Cost Estimate

● Quality Plan

● Detailed Scope of work

● Details Technical Specifications

● Duly release PR
 Minimum Local Contents

As per latest Guideline

For procurements of items pertaining to other sectors not falling under MoP, guidelines as
issued by the respective Nodal Ministry shall be followed. In such cases, the indenting
department shall intimate the concerned C&M department regarding the value of Minimum
Local Content for each item/package to categorize a Bidder/Supplier as 'Class-I local
supplier'/ 'Class-II local supplier'/ 'Non-local supplier

For It related details https://www.meity.gov.in/esdm/ppo may please be visited

Notification of Electronic Products under the Public Procurement (Preference to Make in India)
Order 2017

Government has issued Public Procurement (Preference to Make in India) [PPP-MII] Order
2017 vide the Department for Promotion of Industry and Internal Trade (DPIIT) Order No.P-
45021/2/2017-B.E.-II dated 15.06.2017 and subsequent revisions vide Order No.
45021/2/2017-PP(BE-II) dated 28.05.2018, 29.05.2019, 04.06.2020 and 16.09.2020 to

encourage ‘Make in India’ and to promote manufacturing and production of goods, services
and works in India with a view to enhancing income and employment. This Order is issued
pursuant to Rule 153 (iii) of the General Financial Rules 2017. The salient features of the
aforesaid Order are as under:

• The Order is applicable for procurement by Ministry / Department / attached /

subordinate office of, or autonomous body controlled by, the Government of India
and includes Government companies as defined in the Companies Act.
• In procurement of all goods, services or works in respect of which the Nodal Ministry/
Department has communicated that there is sufficient local capacity and local
competition, only 'Class-I local supplier', as defined under the Order, shall be eligible
to bid irrespective of purchase value.
• The margin of purchase preference shall be 20%. ‘margin of purchase preference’
means the maximum extent to which the price quoted by a local supplier may be
above the L1 for the purpose of purchase preference.
 • Ministry of Electronics and Information Technology is the Nodal Ministry for
implementation of the Electronic Product Notifications issued in furtherance of PPP-
MII Order 2017.
Classes of Local Suppliers based on local content as per the revised PPP-MII Order dated
04.06.2020 issued by the Department for Promotion of Industry and Internal Trade (DPIIT) are
as under:

• Class-I Local supplier - a supplier or service provider, whose goods, services or works
offered for procurement, has local content equal to or more than 50%.
• Class-II Local supplier - a supplier or service provider, whose goods, services or works
offered for procurement, has local content more than 20% but less than 50%.
• Non-Local supplier - a supplier or service provider, whose goods, services or works
offered for procurement, has local content less than or equal to 20%.
• Only 'Class-I local supplier' and 'Class-II local supplier' shall be eligible to bid in
procurement of all goods, services or works, and with estimated value of purchases less
than Rs. 200 crore.
In furtherance of the aforesaid revised PPP-MII Order dated 04.06.2020, MeitY has notified
the mechanism for calculation of local content for the following 13 Electronic Products vide
Notification No. 43/4/2019-IPHW-MeitY dated 07.09.2020:

(i) Desktop PCs, (ii) Thin Clients, (iii) Computer Monitors, (iv) Laptop PCs, (v) Tablet PCs, (vi)
Dot Matrix Printers, (vii) Contact and Contactless Smart Cards, (viii) LED Products, (ix)
Biometric Access Control / Authentication Devices, (x) Biometric Finger Print Sensors, (xi)
Biometric Iris Sensors, (xii) Servers, and (xiii) Cellular Mobile Phones.
MeitY has also notified Cellular Mobile Phones under clause 3(a) of the PPP-MII Order which
mandates that public procurement of Cellular Mobile Phones from local suppliers only.
Selection of Consultants / ServiceProviders.
Consultants are being engaged by HR and IT departments to carry out wide range of
activities such as Social Impact Assessment, Media Agency Services, Event
Management, Website Development, Mobile app. development, Development of IT
enabled services and latest IT enablement technologies including Artificial
Intelligence etc.

Basis of Selection - Cost Based selection (Lowest Price method i.e. L-1 method)
and also Single Source Selection / Single Tender for award of consultancy works.

In the changing environment the two new method has been introduced in our
Work and Procurement policy, Which ensure the good balance between Cost and
Quality of the Consultants to be engaged to meet the desired requirements

Methodology for Quality and Cost Based Selection ( QCBS) and Least Cost Selection( LCS) with
minimum qualifying marks

The (Quality and Cost Based Selection) QCBS and LCS with minimum qualifying marks
for selection of Consultant / Service Provider should be used judiciously in such cases
where quality is of prime importance.

Indenting Department shall initiate a proposal indicating the reasons / rationale for
choosing QCBS / LCS with minimum qualifying marks method for selection of
Consultant / Service Provider. The above proposal initiated by indenting dept. shall be
put up for approval of Competent Authority as specified below:
 Award Approving Competent Authority for approval of methodology
Authority as per DOP (QCBS/ LCS with minimum qualifying marks)

ED or below Functional ED of Indenting dept. at CC / RED for

SSCs/Sites in consultation with executive of Contracts
and Finance dept. not below AGM level
Director and above Functional Director in consultation with executive of
Contracts and Finance dept. not below GM level

The proposal initiated by Indenting dept. shall also include at least the following:

• Scope of services and Terms of Reference

• Objectives and deliverables
• Time schedule
• Proposed bid evaluation method (QCBS or LCS with minimum
qualifying marks) along with reasons / rationale for choosing proposed
method
• Tentative cost estimate
 Quality and Cost Based Selection (QCBS) Method:
QCBS uses a competitive process which takes into account the quality and the cost of
the proposal in the selection of the successful Consultant / Service Provider. This
method of selection shall be used judiciously for critical assignments / specialized
services where quality is of prime importance and it is justifiable to pay appropriately
higher price for higher quality of services.

QCBS may be appropriate for assignments such as Strategic Consulting, Media Agency
services, Acquisition of Assets, Specialized IT services, Specialized Architectural or
Engineering consultancy services etc. or any other Consultancy assignment / services
of specialized nature where quality of services is of prime importance.

The aforesaid list is not exhaustive and the indenting department may propose QCBS
method for any other specialized services justifying rationale in its proposal for
adopting QCBS.

The adoption of QCBS methodology by indenting department shall be done judiciously

in consultation with Contracts and Finance Departments.

Evaluation of Quality and Cost:

The total score shall be obtained by applying the corresponding weightage to

the quality / technical score and cost score and adding them, as follows:

Technical Score (Ts) of the Bidder shall be calculated as below:

T
Te = 100 ×

Tb

Te= Normalized Technical Score assigned to Bid under evaluation

 Tb = Technical Score achieved by the Bid that was scored best among all
responsive Bids

T = Technical Score given to Bid under evaluation

Ts = Te × Weigℎtage of quality

Financial Score (Fs)

The price bid submitted by a bidder shall be converted to Financial Score (Fs) in the
following manner:

The lowest evaluated price bid will be given the maximum Financial Score i.e. 100. The
Financial Score (Fp) of the other Financial Proposals will be computed as follows:

FN
Fe = 100 ×

Fe = Normalized Financial Score of the bid under evaluation

FN = Lowest bid Price

F = Bidder’s price under evaluation.

Fs = Fe × Weigℎtage of cost

Combined Score for quality and cost shall be calculated as follows:

CoNbined Score (Cs) = Tecℎncial Score(Ts) + Financial Score (Fs)

• Subsequently, the bidders shall be ranked in terms of the Combined Scores obtained
starting from bidder getting highest Combined Score (H-1) and so on. The work shall
be awarded to the bidder obtaining the highest Combined Score.

• In the event of two or more Bidders having the same Combined Score, the Bidder with
higher Technical Score shall be considered as Successful Bidder. However, in the event of
Bidders having same Technical score, the Bidder scoring the highest score in the
methodology / presentation shall be considered as Successful Bidder.

Suggestive weightage of scores for QCBS

Based on nature of assignment following Quality/Cost score weightage is suggested

in QCBS method.

Nature of assignments Remarks Quality / Cost Score

Weightage (%) in
QCBS
Highly complex / Use QCBS with higher 80/20
downstream consequences / technical
specialised assignments weightage
Moderate complexity Majority of cases will fall 70/30
in this range
 Least Cost Selection (LCS) with Minimum
Qualifying Marks
LCS with minimum qualifying marks / technical score shall be used for consultancy
assignments having high technical / quality requirements and low consequential impact.

In this method of selection, Bidders submit both a technical proposal and financial proposal
at the same time. Minimum qualifying marks for quality of the technical proposal will be
prescribed as benchmark and indicated in the Bidding Documents along with a scheme
for allotting marks for various technical criteria / attributes. The technical evaluation
criteria along with marking scheme and minimum qualifying marks shall be finalized and
approved as specified for QCBS method.

In case of Open tender, the Qualifying Requirements (QR) / Eligibility Criteria shall also be
specified apart from specifying the technical criteria for evaluation of quality of proposal.

The evaluation of technical criteria shall be carried out as specified in QCBS methodology.
Any bidder who meets the requirement of Qualifying Requirements (QR) / Eligibility
criteria (if specified) and minimum qualifying marks / technical score for quality of the
proposal shall be declared as technically qualified for opening of their price bids. Lowest
price bid (L-1) out of the technically qualified bidders who have scored equal to or more
than minimum qualifying marks specified for quality of proposal shall be considered
for award.
Vehicle Hiring from PAP (Project Affected Families)
Preparation of Estimates

The project would estimate the requirement of hiring vehicles for the various

departments of the project from time to time viz. Construction stage, O&M stage
etc. Hiring of vehicles may be undertaken from PAFs.

NTPC would declare in advance its requirements of the type of vehicle viz. Open
jeep, closed vehicle, ambulance, bus etc. to PAFs through wider publicity.

The PAFs would be normallyy entitled for only one economic opportunity at a time
including hiring of vehicle subject to the availability of economic opportunityy and
to the extent possible.

Fixation of Rates at Project/ Station level

The rates shall be fixed by a committee comprising of members from HR, C&M and

Finance for different categories of vehicles and duration of development (such as

12 hr basis/ 24 hr basis, etc).

The rates would be worked out in such a manner that the owner/driver of the

vehicle gets at least a minimum wage equivalent to a semi-skilled worker (rates of

which would be declared by the State Government from time to time) after
payment of installments for the loan, if any, obtained from the bank.

The committee shall formulate the terms & conditions with respect to escalation
clause, if required.

These rates derived for considering deployment of vehicle by PAFs are applicable
only for vehicles owned by PAFs.
 Hiring Period

The vehicle shall be deployed for 03 years contract period from date of start. This
contract period may be extended for further period of 1 year, if required by NTPC
on satisfactory performance of the contract and having good running condition of
the vehicle subject to physical fitness examination by Auto base with valid fitness
certificate. The party has to give unconditional acceptance for the same.

For vehicle requirements for outstation duties, separate rates would be worked
out which would also include in addition to above, overtime, outstation charges,
etc.

Model & Specification

The model & specification for vehicles shall be decided by respective Stations/Projects.
However, the model should not be older than 1 year from date of notification/ NIT.

Allotment of vehicles.
Project/ Station shall invite tenders for hiring vehicles from PAFs as per
NTPC's contractual procedures.

Modality for deciding priority for hiring vehicle from PAFs:

(Land + Homestead) outsees assumed as Category-.A would be considered at

Ist priority (weightage on the basis of acreage of land acquired).

Homestead outsees assumed as Category-B would be considered at IInd priority and

Land outsees assumed as Category-C would be considered at IIIrd priority

(weightage on the basis of acreage of land acquired),
Vehicle applicants who are not engaged through direct / indirect employment by
the project /station will be preferred for the deployment of vehicle, subject to
above priority.
 However, if PAF falls in same category, the preference shall be as per the date of
birth of vehicle owner according to PAN/DU Aadhar card/10th certificate. Older
date of birth (oldest owner) shall be given first preference. The applicants who are
already engaged in running contract, their names shall be considered for award of
any contract against subject empanelment only after expiry of the existing
running contract.

If the numbers of eligible applicants meeting the NIT requirements are more than the
number of vehicles required, then the balance applicants shall be empaneled for
three years from the date of approval of empanelment, to meet any future
requirement of the vehicle at Stations/Projects. If required, NTPC may extend the
validity of the period of empanelment.

The PAF who has been awarded a contract for hiring vehicle shall be given
least priority in respective of category for consecutive contract of vehicle
hiring.

In case of certain projects, like taken-over projects, where PAFs records are
not available, the vehicle hiring contract shall be awarded on basis of NTPC's
Works & Procurement Policy.

Other Terms and conditions

The other detailed terms & conditions, including Performance/ Penalty related
clauses shall be formulated by respective Stations/Projects.

This shall be applicable to all Projects/Stations/Units wherever hiring is to be

done through PM's as per the CSR and R&R policy.

PAN NTPC basis no manual tendering is to be resorted for hiring of vehicles.

Tendering is to be done through online/e-tendering mode only.
 Vetting of Cost Estimate-reg.

One may has faced the issue that while preparing cost estimate of contract proposals,
scope of work was modified, however, same was not suitably explained in the proposal
note. As a result, the estimate was vetted based on LPP. Subsequently, the tender was
annulled and lot of time as well as effort was wasted.

Hence followings may beensured:

a) Any change in Scope of Work, Terms & Conditions and BOQ with respect to last

purchase/contract should be clearly brought out in the proposal note itself by the lndentor
along with basis ofestimate.

Further, if the estimate is not based on LPP and LPP of indented items/services are
available, the reasons of difference in estimated rates with respect to LPP to be
mentioned in the proposal note for ready reference to Finance while vetting the proposal.

b) In case, proposals for vetting of estimates received in Finance does not contain afore

mentioned details, Finance should obtain necessary clarification from indentor in

case major difference is observed in estimated rates with respect to LPP.

There should not be any revision of cast estimate after opening of price bids

Abnormally high and/or low rated items

During the bid evaluation stage itself. the tender committee will analyse the
individual item rates/prices (wherever the same have been called for in the bid) and
identify in the evaluation report the items of work for which ”abnormally high or low
rates” have been quoted .This analysis will be carried out only in respect of the bid
which is being recommended for award.

In case the tender committee observes that the recommended bidder has quoted
abnormally high or low rates/prices for certain items in the bid in relation to the
Engineer‘s Cost Estimate then the bidder will be required during pre-award
discussions to produce detailed price/rate analysis for all such items of Bill of
Quantities and demonstrate the internal consistency of these prices/rates with the
construction methods and schedule proposed. The tender committee after evaluating
such rate/price analysis may require the bidder to enhance the performance security
at the expense of the recommended bidder to a level, to protect NTPC interests
against likely financial losses in the event of default under the Contract, if award is
placed on the recommended bidder.

The permissible quantity variation limit of each such individual high/low rated items
will be specifically stipulated in the Letter of Award.
Procurement from GeM
and MSME Procurement
Hon'ble Prime Minister, based on recommendations of the Group of Secretaries,
decided to set up a dedicated e market for different goods & services procured by
Government Organisations / Departments / PSUs. This meant transforming DGS&D to
a digital ecommerce portal for procurement and selling of goods and services.

Government e Marketplace (GeM), created in a record time of five months, facilitates

online procurement of common use Goods & Services required by various Government
Departments / Organisations / PSUs. GeM aims to enhance transparency, efficiency
and speed in public procurement. It provides the tools of e-bidding, reverse e-
auction and demand aggregation to facilitate the government users, achieve the best
value for their money.

To ensure better transparency and higher efficiency an online Government e-Marketplace

(GeM– an e-commerce marketplace) has been developed for common use goods and
services. In GeM product or services are offered by a number of eligible sellers and all the
eligible buyers can view/ compare all the product/ services and select the product/
services offered by any one of the seller. In general, because online marketplaces
aggregate product/ services from a wide array of providers, selection is usually wider,
availability is higher, and prices are more competitive than in vendor-specific online retail
stores. The procurement process on GeM is online and electronic - end to end from
placement of supply order to payment to suppliers. The registration of suppliers on GeM
is online and automatic based on ID authentication etc. The procuring authorities have to
assess the reasonability of rates. Buyer’s transactions are processed by the GeM
portal and then product/ services are delivered and fulfilled directly by the participating
sellers.

Tools of reverse bidding and e-auction are also available which can be utilized for the
procurement of bulk quantities.
 Vision
To affect an evolution in public procurement promoting a transparent, efficient and inclusive
marketplace.

Mission

Institute a unified procurement policy to encourage behavioural change and drive reform.

Establish a lean, dynamic organization capable of continuous innovation and market driven
decision making.

Build an easy to use, fully automated platform to ensure transparency and efficiency in
procurement Demonstrate commitment to delivering value by ensuring right quality at right
price

Create a sustainable ecosystem covering all stakeholders and driving inclusive development in
India.

Values

Commitment

Responsiveness

Ownership and Accountability

Transparency and Integrity Social

Inclusion

Innovate to simplify

Be Bold and Think Big

 The Vision Mission and Values of GeM , an
Initiative of DGS&D under Digital India Programme
,clearly elaborate the purpose and Objective of this
Revolutionary tool in for Public procurement complying
all the seven principle of procurement.
 Steps towards GeM

As a buyer to have access for procurement in GeM there are definite steps to be taken to be

eligible. Same has been complied for ease of under standing

Users @GeM

Apart from Hod / Primary User

There are three types of secondary user based on the role assigned to them

Buyer- Who Place order

Consignee- who receive / accept material

PAO- Who make payment Authorizing officer

4|Page
 5W and 1H

Who?

All secondary users as “buyer”

Having registered Mobile no. linked with Aadhar

Having govt. e-mail ID

Activated by primary users

What?

• Wider range of Services Wider range of products

When?

24 x7 availability, With following Mile stone

Activity Time Action By

Selection of products Buyer
Add to cart Buyer
Approval Within 15days Buyer
Delivery period 15Days Buyer
Acceptance of material within 10 days Consignee
Payment towards material PAO
 5W and 1H

Where?

GeM portal www.gem.gov.in

Gem.gov.in is best viewed by Windows Operating System 8.x or higher,
– Chrome V50 or higher,
– Firefox V46.0 or higher,
– Internet Explorer 10
or higher or any other equivalent browsers

Why?

To compliance with Government

Directives To enhance participation on
GeM portal More transparent
Vigilance compliance
Wider range of product and
suppliers 5R’s

Right Time ......... Least lead time

Right Quality .......Well scrutinized by 3rd party

Right Quantity ... As per Your requirement

Right Source .......Supplier has been scrutinized by 3rd party

Right Price .........Competition among wider range

5W and 1H

How?

Procurement Through Gem can be done by following methods

• Direct Purchase
• Bidding
• Custom Bidding
• BoQ Bidding
The provision of Reverse auction may also be opted
 Direct Purchase

Procurement from GEM by User department can be done through Direct purchase as per
provision of DoP and WPP

Any single item less than 25,000/-

Comparison is mandatory for more than 25,000/-

PAC certificate / approval is required for Single

Source As per office order:428/2020 dtd:30.03.2020,

o Direct purchase option:- Up to Rs. 25,000.00

o L1 purchase (Compare any buy) option :- beyond Rs. 25000 up to
Rs.1,00,000.00 (Minimum Three Manufactures/ OEM )
Beyond Rs. 50,000 on GeM: Approval of their HOD not below the rank of AGM will be
required.
Simple Steps for Direct Purchase on GeM

Product selection on GeM

Freeze technical specification and rates via adding item to shopping

cart(Rates are inclusive of all duties & taxes and Free Delivery at Consignee
Site)

Take approval as per relevant clauses of sundry purchase:-

o a) under Clause 9 of Section-I

o b) under Clause 10 of Section-II

o c) under Clause 40 of Section-IV

Create PO within 10 days of adding item else item will be expired in cart and
rate may also vary.
 For payment to vendor

Find the vendor code

If vendor code is not in SAP, take requisite documents for vendor code creation

Generate request of vendor code in SAP through T Code-ZMMVENDREQ

Create SAP-PO on selecting ‘’Reg PO Cash Pur Gov/Coop’’ option via T-code ME21N.

Once material will be received to store

PRC (Provisional Receipt Certificate) is to be generated within 48 hours.

CRAC( Consignee's Receipt & acceptance certificate)by store within 10 days of

PRC for rejection/acceptance of materials.

If CRAC is not issued within 10 days, it will be generated in auto and cleared for

payment.

Concerned PAO will do the payment and update the same on GeM portal.

custom bidding where any material which is not available on GeM portal can be

tendered on portal by attaching the related specifications, drawings, QP,T&Cs,

SOW and other documents

 The Ministry of Micro, Small and Medium
Enterprises, a branch of the Government
of India, is the apex executive body for
the formulation and administration of
rules, regulations and laws relating to
micro, small and medium enterprises in
India.

This fall under Broader Obligations (Multiplicity) Principle of public procurements Over
and above transparency and professionalism, the procuring authorities have also the
responsibility and accountability to conduct public procurement in a manner to facilitate
achievement of the broader objectives of the government - to the extent these are
specifically included in the ‘Procurement Guidelines’:

By way of Preferential procurement from backward regions, weaker sections and Micro
and Small Enterprises (MSEs), locally manufactured goods or services, to the extent
specifically included in the ‘Procurement Guidelines’; and

Who are SMEs?

Government of India through Ministry of Micro, Small and Medium Enterprises has
notified the Public Procurement Policy for Micro and Small Enterprises (MSES) Order,
2012 (PPP 2012) with the objective of promotion and development of Micro and Small
Enterprises by supporting them in marketing their products and services while maintaining
core principle of competitiveness, adhering to sound procurement practices and execution
of supplies in accordance with a system which is fair, equitable, transparent competitive
and cost effective.

What are different benefits?

As per the relevant clauses of PPP 2012, Micro and Small Enterprises (MSES) are eligible
for various benefits in procurement of Goods and Services by Government entities/
Public Sector Enterprises, which are as under:

Issue of tender documents free of cost

Exemption from payment of Earnest Money Deposit (EMD)

Participating MSEs in a tender, quoting prices within the price band of L1+15%
shall be allowed to supply a portion up to 25% (in cases where splitting of quantity
is possible) of requirement by matching their prices to L1 price wherever L1 is non
MSE bidder. In case of more than one such MSE, the supply shall be shared
proportionately (to tendered quantity).

Further, as approved by Board of NTPC, incase of tender item is non-splitable

/ non-dividable, MSE quoting price within price band of L1+15% shall be awarded
full / complete quantity by matching their prices to L1 price where L1 is non-MSE

Every Central Ministry/Department/PSU shall set an annual goal of minimum 25%

of their total annual purchases of products or services from MSES. Out of the
mandatory 25% procurement from MSES, 4% is earmarked for units owned by
Schedule Castes/Schedule Tribes. Further, out of the total annual procurement
from Micro and Small Enterprises, 3 per cent from within the 25 per cent target
shall be earmarked for procurement from Micro and Small Enterprises owned by
women.
 In addition to the above, 358 items also reserved for exclusive purchase from MSE
sector.

The benefits is restricted only to Micro and Small Enterprise , Medium are not eligible

In order to bring uniformity of provisions in bidding documents in respect of PPP 2012

and bring clarity regarding benefits available to MSE bidders and their treatment while
evaluating MSE bids,

Applicability of MSE Benefits

a) The applicability of MSE benefits for a particular tendering package shall be clearly
specified in the Bidding documents (NIT and ITB/BDS) Package coordinator shall take
specific approval for applicability of MSE benefits for the package during bid documents
finalization and shall incorporate the relevant provisions in bidding documents
appropriately.

b) Benefits under PPP 2012 for MSEs as elaborated at para 2.0 above are applicable only
for (a) Goods produced and (b) Services provided by MSEs. In this regard, CM dated
9.11.2016 and its subsequent amendment/clarifications issued by MSME from time to
time regarding definition of Goods and Services may be referred. MSE benefits shall not
be applicable to Trader/Dealer of Goods. Further, MSE benefits shall also not be applicable
for Works Contracts.
 Who can take benefit?

The Existing Micro and Small Enterprises (MSE) registered before 30th June 2020 with the
following departments for Goods produced and Services rendered shall be eligible for MSE
benefits: shall continue to be valid for a period up to 31st December 2021
Udyog Aadhaar Memorandum (UAM)
District Industries Centers (DICs) NSIC
Khadi & Village Industries Commission (KVIC) Khadi &
Village Industries Board (KVIB)
Coir Board
Directorate of Handicrafts and Handloom
Any other body specified by Ministry of Micro, Small & Medium Enterprises as per
MSMED Act 2006

On line generation of Udyam Registration Certificate, by the entrepreneur, is available

from 1st July 2020. As per MSME Notification S.O. 2119 (E) dated 26th June 2020, ,
Udyam registration shall be the ONLY valid MSME Registration Document

How can SME benefit be claimed ?

MSEs seeking exemption and benefits should enclose a attested/self-certified copy of

registration certificate as a part of his bid, giving details such as stores/services, validity (if
applicable) etc. along with Undertaking failing which they run the risk of their bid being
passed over as ineligible for the benefits applicable to MSEs.
WHERE ITEM WISE EVALUATION IS APPLICABLE:

For availing MSE benefits, bidder shall confirm that some or all the items offered
/quoted are manufactured by them (specifying the name of items).

Further, Bidder. understands that the benefit of purchase preference will be

available only for such item(s) quoted/offered by bidder for which Bidder is a
manufacturer and for rest of the items, its bid shall be evaluated/treated as
Non-MSE bid.

In support of above claim regarding manufacturing of each of the specified

Item(s),Bidder will famish necessary details of Stores/ Category of items etc. as
mentioned in the MSE registration certificate along with the above Undertaking.
In case, such details are not available in the Registration Certificate furnished by
the Bidder for any of the above item(s), other relevant details / documentary
evidence will be furnished along with the Undertaking in support of the claim that
such item(s) are manufactured by the Bidder.

WHERE PACKAGE WISE EVALUATION IS APPLICABLE:

For availing MSE benefits for purchase preference, bidder shall confirm that they
are manufacturer of all the item(s) specified in the bidding documents, which are a
pre requisite for extending MSE benefits of purchase preference.

In case, Bidder is not a manufacturer of all such items which are a pre- requisite
for extending MSE benefits of purchase preference but is a manufacturer of at
least one of the item(s) of the package, then benefits of EMD and Tender fee
exemption only shall be extended in such cases and its bid shall be evaluated /
 treated as Non-MSE bid.

In support of above claim regarding manufacturing of each of the specified

Item(s). Bidder will famish necessary details of Stores/ Category of items etc. as
mentioned in the MSE registration certificate along with the above Undertaking.
In case, such details are not available in the Registration Certificate furnished by
the Bidder for any of the above item(s), other relevant details / documentary
evidence will be furnished along with the Undertaking in support of the claim that
such item(s) are manufactured by the Bidder.

How does SME benefit be given ?

Treatment of MSEs during Evaluation of Bids Supply of Goods Tenders/ Packages

During the time of bid opening, techno commercial offers of all bidders shall be
opened who have submitted eithor EMD and Tender Fee (if applicable) or relevant
certificates of MSEs in lieu of availing EMD & tender fee exemption along with other
documents required as per bidding documents.

In case of MSEs availing 'EMD and tender fee exemption based on relevant
certificates of MSEs and undertaking as elaborated below in para c) submitted by
them, it will be deemed that MSE benefits (for EMD and tender fee) have been
extended provisionally and detailed scrutiny/evaluation of documents submitted by
MSES for availing EMD and tender fee' benefits shall be done during evaluation after
opening of techno-commercial bids.
 However, in case of composite bidding, certificates/documents submitted by MSES
shall be checked/evaluated prior to opening of bids while extending EMD and
tender fee benefits

It will be mentioned in the Bidding documents that MSE bidder will furnish an
Undertaking along with the Bid as under

WHERE ITEM WISE EVALUATION IS APPLICABLE

Purchase preference to eligible MSE will be given only for the item(s) quoted by the
bidder for which bidder is a manufacturer. If the MSE Bidder has claimed 'EMD
and/or Tender fee benefit based on relevant Certificates/Documents for MSEs and If
it is found that none of the items offered/quoted by the MSE bidder is/are
manufactured by them, then bid of such bidder shall be rejected.

However, in case the MSE Bidder is manufacturing any some of the quoted item(s)
then Purchase Preference benefits for MSES shall be extended for such item(s) being
manufactured by them. For balance items, its bid shall be evaluated as "Non MSE"
bidder.

WHERE PACKAGE WISE EVALUATION IS APPLICABLE

Indenting department, shall specify the item(s) involved for which manufacturing
by bidder shall be the necessary pre-requisition for getting purchase preference
benefits for the entire package.

Purchase preference to eligible MSE will be given for entire package provided the
 bidder is manufacturer of such item(s) which is necessary prerequisite for getting
purchase preference as specified in bidding documents.

It will be clearly specified in NIT/IFB that MSE benefits will be extended only to such
Bidders who are manufacturer of the item(s) which is/are a pre requisite ( As
mentioned by indenting department) for extending MSE benefits. List/Details of
such items shall be provided in the Bidding documents.

If the MSE Bidder has claimed 'EMD and/or Tender fee benefit based on relevant
Certificates/ Documents for MSES and it is found that the MSE bidder is not a
manufacturer of any of the item(s) of the package, then bid of such bidder shall be
rejected. However, in case MSE Bidder is a manufacturer of any / some of the
item(s), of the package, then its bid shall be evaluated as "Non MSE" bidder.

Purchase preference will be given for entire package provided the bidder is
manufacturer of such item(s) which is necessary pre requisite as specified in bidding
documents.

Treatment of MSEs during Evaluation of Bids Service Contracts Tenders / Packages In

case of Service Contracts, the benefits to the participating Service Providers under PPP
2012 shall be applicable irrespective of product (Goods / Services) categories for
which bidder is registered as MSE.

When Package wise/ Item wise ?

For procurements of all Goods and Services, the indenting department shall specify
whether Item wise or Package wise evaluation is envisaged for the case, with the
approval of indent approving authority.
 In cases where Item wise evaluation is envisaged, the indenting department shall
further specify if the splitting of quantity for item(s) shall be applicable and the
same shall be dearly specified in the bidding documents with the approval of indent
approving authority.

For the purpose of identifying items to be specified as pre-requisite for getting

purchase preference benefits, the indenting department will consider the major
and/or critical items in the scope of work of the package and/or the items required
for framing the QR of the package. Further, in cases where Package wise evaluation
is envisaged, the indenting department shall also specify the item(s) involved for
which manufacturing by bidder shall be the necessary pre-requisite for getting
purchase preference benefits for the entire package with the approval of indent
approving authority.

Same shall be suitably specified in the Bidding documents that Bidders may ascertain
their eligibility for availing benefits as per Public Procurement Policy (PPP) 2012
before submission of Bids.

. Look Ahead

As per latest guide line vide circular 815, Implementation of ‘Public Procurement
(Preference to Make In India), Order 2017’ (PPP-MII Order) in contracts / procurement
in NTPC – regarding eligibility/ preference to Eligibility of 'Class-I local supplier'/ 'Class-II
local supplier'/ 'Non-local suppliers' for different types of procurement has been
elaborated treatment of MSE preference /allocation may be modified accordingly for
details circular 815 may be read.
Management of Stores and
activities of Stores function
Process Flow From PO to Payment

• PO Copy is downloaded from SAP.

• The PO must be clear & without any ambiguity in following terms:-

• Price Basis : Defines the point at which transfer of legal ownership takes
place or point of sale execution

• Ex- Works (named place of delivery): This term places the maximum
obligation on the buyer & minimum obligation on the seller

Note : Please try to mention the vendor works address in “place of dispatch” as far as
possible instead of just the city.

b) FOR : Buyer’s Godown : This term places the Minimum obligation on the buyer.

• Freight Charges :

• Extra to NTPC Account& Mode of dispatch : By Road ( How Much Extra

?)………..ambiguous

• Extra to NTPC A/c & Mode of dispatch : through NTPC approved transporter
on To-pay basis. (Complete)

Please remember to incorporate freight in conditions tab against all items of the PO so that
the amount is reflected in landed price of material in all cases for respective.

• Inclusive (means the quoted rate is inclusive of freight charges on FOR

basis).

Vendor should not bill extra freight charges in his invoice.

• Freight Charges :

• Freight Charges : Vendors account & Conditions TAB FRC1 : Rs 1257/- per 1
No

Ambiguous PO.

Invoice is received including freight charges (What amount should be paid?)

Freight Charges : To be paid to vendor as per Annexure-1 or

Extra to vendors account as per freight conditions. (Invoice shall contain freight charges.
GST as applicable to material shall be levied on freight)

• Extra to vendors account maximum upto ….. In such cases release of

payment requires receipt from the transporter for the amount paid.

• Price Variation:

If the payment is to be made as per price prevailing at the time of supply same must be
incorporated in PO

• Payment Terms

• LSC (Letter of Short Credit) :X% against dispatch documents through bank

PO flag required : ‘Inv receipt’ under the ‘Invoice’ tab in transaction

ME21N/ME22N/ME23N. “GR-BSD IV” Check Box MUST NOT BE TICKED.

• SRV : Within 30 days after receipt and acceptance of material at site

PO flag required : ‘GR-BSD IV’ under the ‘Invoice’ tab in transaction MUST BE TICKED
ME21N/ME22N/ME23N

GR-BSD IV- Goods-Receipt-Based Invoice Verification

Note : Invoice can be only posted for a correspondent goods receipt. It is not possible to
post an invoice if there is not a previous reception.

• Process flow if the payment is through SRV.

 1. Goods clearance and dispatch

I. Arrange clearance of material from different clearing point i.e. Railway

Godown, Domestic Airport or Seaport for imported consignments through
T&CC.

II. In case of door delivery material is received at receipt section itself.

III. Despatch Documents may be received in advance or along with door

delivered consignment.

IV. The LR/RR details are entered in LR Register. Inbound delivery is entered in
SAP system on the basis of dispatch documents (VL31N) .

V. On receipt of consignment from transporter, packages are tallied with

Packing List/ LR. In case of shortage /damage or open delivery, Certificate of
Fact shall be obtained from transporter. The certificate shall be forwarded to
Risk Management group for lodging claim to carrier with copy to
underwriter.

2. Goods Inspection and Inward Section

I. Check the consignment with respect to inbound delivery.

II. Physical Verification/ identification and counting (Mvt 103)

III. Mvt 103 moves the consignment to GR Block Stock since GR Block stock
does not depend on physical storage location. Financial accounting
document is not created at this stage.

IV. Note : Although the GR block stock is updated in the PO History , the open
Po quantity is not reduced as a result.

Goods Inspection and Inward Section

I. Material Inspection, creation of SRV (Mvt 105)

 II. Mvt 105 releases the material from GR Block Stock. At this stage financial
accounting is created in SAP.

III. When the conditions for the acceptance of the material have been fulfilled,

the material is transferred to unrestricted-use stock from stock under quality inspection.

I. After completion of inspection, the following informations shall be reflected

in SAP:-

II. Quantity Accepted

III. Quantity Rejected, if any, with reasons.

IV. Other inspection remarks, if any.

V. In case of rejection, immediately return delivery documents (Mvt.122) to be

prepared.

• Quantity Accepted

Material is transferred to unrestricted-use stock. Item is valuated and inventory is created.

Material shift to custody (Mvt 313/ 311Q)

Issue of material (Mvt 313/201/z11/z73/z47/351)

• Quantity Rejected

Discrepancy/ Rejection Memo to vendor (ZMM032D)

Safe custody of the rejected material till collection by vendor/ dispatch to the vendor on
freight to pay at the risk & cost of vendor.

Invoice Parking

I. Documents one can park :Invoice, subsequent debit/credit.

II. MM and FI doc created (FI number assigned, information transferred to FI

but not posted )

III. PO history get updated.

IV. Payment is released in the FI doc generated (MIRO).

V. Bank Documents receive from bank by authorized stores executive upon

intimation by bank.
VI. Inbound delivery is created in SAP by stores and “Payment Process –
Inbound Delivery” is launched in PRADIP
 VII. Entering of LSC amount, number, Name of Bank and Date shall be done by
site stores.

VIII. Task will be closed by site user after providing LSC details and attaching
advance copy of documents received for LSC intimation.

Task created earlier will appear under “Inbound Delivery” tab of SSC- C&M.

I. After Parking, the documents are sent to Concerned executive in F&A.

II. Concerned Executive of F&A process payment in SAP and send payment to
bank.

III. After receipt of the payment, Bank handover the dispatch documents
containing original copy of the LR/RR to Store Employee.

IV. In case of door delivery, the transporter is intimated to deliver the

consignment by providing consignee copy of the LR. In other cases
consignments are collected from the godown of Transporter by Store.

• Scope Of Work

1. Hazardous chemicals, coal, steel, cement are not included.

2. Applicable for inter project transfer. But we have to allow minimum distance of 300
KM even if the actual distance is as low as 10 Kms/ 40 kms.

3. Deliveries to Training Center’s , PMI & Netra are included.

4. Transportation of repair & maintenance items & Gas filling is included.

• Excluded Payments

1. Goods Tax , Toll Tax , Handling, loading & Unloading enroute etc.

2. PVC / Diesel Escalation

Loading and unloading charges at consignor and consignee end.

 • Collection & Delivery Charges

1. Applicable only for small/ part load consignments.

2. Vendor works/ Shop/Godown should not be located beyond 100 KM from

transporters collection center.Beyond 100 Km mini truck rates shall be applicable

3. Example

Weight= 3 MT Distance =90 KM Price Basis= Ex works Collection Charges = Rs 2200/-

Weight= 3 MT Distance =150 KM Price Basis= Ex works Collection Charges = 150x 3X

8.70=Rs 3915/-

4. For delivery to NTPC stores only delivery charges are payable irrespective of
distance.

5. Consignment with freight paid upto transporter go down should be delivered as

soon as 5 MT weight of consignment’s is reached.

• Detention Charges

1. Free Loading & Unloading Time Elapsed { 24 Hrs from the date & time of placement
of truck (excluding holidays)}/ Delay being on account of NTPC/ Supplier :-

Mini truck @ Rs 900/- per Day , Truck @ Rs 1700/day, Trailer @ Rs 2500 per day (Vehicle
detention at CISF check post of NTPC stations is excluded ).

• Economy of operation

1. Maximum weight which can be delivered on small consignment beyond 300 Kms is
5.6 MT.(Min Passing capacity of truck is considered as 9 MT )

2. For consignment upto 4 MT and distance between 300 to 500 Kms (Maximum
allowable distance) to be delivered on FTL basis, mini truck with the passing
capacity upto 4 MT may be deployed.
3. Mini truck can be deployed to bring the consignment upto 6.7 MT on FTL basis
between 180 Kms to 300 Kms.

4. High value domestic/ imported consignments are than 50 Lacs should on FTL / Full
mini truck load.

5. For all other combinations transportation through small consignment basis shall be
an economical proposition.

• Transit Time & LD

1. Variables for LD calculation

i. LR Date

ii. Booking Type : FTL/ part load( 7 Days : 0-500 Kms;12 Days:501- 1000Kms; 20
days:1001-1500)

iii. Vehicle : Truck (@ 300 Kms per day)/ Trailer (@ 150 Kms per day)

iv. Delivery date acknowledged on LR

v. Distance

2. Example

LR date : 29-10-2019 ; Delivery Date : 04-11-2019; Consignment :FTL

Vehicle: Truck ; Distance : 900 Km

LD calculation

Allow Days : 3 ; Actual delivery days : 05; Delay : 02 Days

LD @ 2% of invoice value

GST @ 18% on LD amount.

Inventory Management
techniques
 CONTENT FOR C&M MODULE- INVENTORY MANAGEMENT CONTROL AND TECHNIQUES

Inventory management is regarded as a key element for reduction and control of total
generation cost and improvement of the level of service provided by the company. This
area plays very important role in overall cost of operations and supply chain of the
company.

Inventory is used as a cushion against the supply and demand uncertainties. At the same
time it is a double aged weapons since the lack of inventory leads to loss of generations
while excess inventory leads to loss of profitability .Thus inventory management has direct
and significant effect on operational performance and company finance .Effective inventory
management will always give a competitive advantage to the company over its
competitors.

Inventory management aims to optimize the investment by maintaining adequate and

satisfactory level of materials and spares capable of meeting the need in exigencies and
uncertainties.
 INVENTORY MANAGEMENT

INDEX

CHAPTER DESCRIPTION

1 Introduction and objectives of inventory management including Cost

Concepts(InventoryCarrying/Stockholdingcost,Purchasing/Buyingcost/
Setupcostandnon-availability/stock-outcost),ServiceLevel,Inventory
Turnover Ratio, its impact on working capital and profitability of the
organization

2 Lead-time and its impact on inventory holding, components of lead-time

And its analysis including issues to be addressed to reduce lead-time

3 Materials planning and indenting including classification of stock and

non-stock items

4 Replenishment Systems including provisioning of spares for

overhauling(outage)

5 Material Requirement Planning(MRP)

6 Selective Inventory Control Techniques

ABC Analysis, VEIN/ VED Analysis, ABC/VED Combination, XYZ Analysis, ABC/
XYZ Combination, FSN,FSN/XYZ Combination, PQR(HML) Analysis/
SDE (Scarce, Difficult and Easy) classification),

7 Classification of spares and capitalization, Pooling of common use high

Value spares

8 Obsolete, Unserviceable and surplus/redundant materials

9 Inventory Norms for Stores and Spares-monitoring thereof

 CHAPTER–1

INTRODUCTION & OBJECTIVES OF INVENTORY

MANAGEMENT
1.1 Defining Inventory

Inventory may be defined as “sum value of stocks of coal, fuel, maintenance spares &
consumable whether in stores or with user departments. This may also include value
of scrap and worn-out components”.
The sum value of inventories is part of working capital of the NTPC.

Inventory is quantity of materials held in stock for use in process of construction or

O&M of power plants
Since these resources are idle when kept in stock, inventories can also be classified
as idle resource of materials of any kind having economical worth.
Excess inventories do not add to value, rather deteriorate due to longer storage
and are wasteful capital that could otherwise had given a reasonable return if
invested in putting up new power plant. Properly controlled and maintained
inventories may be great assets, diminishing the non-availability cost and thus
improving plant load/availability factor.
1.2 Inventory Control

Inventory control is planned method of determining what to requisition, how

much to requisition and when to requisition so that purchasing and inventory
carrying costs are balanced without effecting construction of new as well
operation and maintenance of existing power plants
This may also be called as optimizing of stocks so that unnecessary scare working
capital is not locked in inventories and at the same time construction as well O&M
of existing power plant do not suffer due shortage of critically required stores and
spares.
1.3.1 Objectives of Inventory Management

(a) To ensure adequate supply of materials, stores, spare etc. and thereby
minimize stock outs and shortages, and avoid costly interruption in Operations
& Maintenance of power plants.
(b) To keep down investment in inventories; inventory carrying cost and
obsolescence losses to the minimum and thereby facilitating efficient
management of working capital and contributing to added profitability.
(c) To facilitates purchasing economics through meticulous planning of
requirements on the basis of past data available in the system.
(d) To eliminates duplication in ordering or in replenishing stocks by exhibiting
online data of quantities of individual item on hand as well in pipe-line
(Pending purchase Requisitions and /or Purchase Order including partially
executed)

(e) To identity high value common spares in various power stations for pooling
and thereby ensuring optimum utilization of available stocks by facilitating inter-
unit transfers within the organization.
(f) To identify and dispose of inactive and obsolete items of stores by effectively
using FSN (Movement Analysis) technique.
(g) To make cost and consumption comparisons between O&M of different operating
power plants.
(h) To facilitate cost accounting activities by providing a means for allocating
material cost to activities, department and other operating accounts.
(i) To provide a check against the loss of materials by carrying systematic stock
verifications and reconciliation of discrepancies noticed in the process.
(j) To promptly provide value of inventory for finalizing profit & Loss Accounts
and Balance Sheet of NTPC. Perpetual inventory values provide a consistent
and reliable basis for preparing financial statements.
Some of these objectives are of conflicting nature and efficiency of inventory
management lies in balancing one against the other so as to achieve optimum
results. When inventory management is effective both financial and optimum
power generation objectives are met. On the other hand, when inventory
management is ineffective, the operations are often hampered/rush purchases
are made/ urgent deliveries by special carriage arrangements, for want of stores/
spares and there may be large number of items having huge stocks but
 No issue from stores. There sult is shortage and excess go hand in hand.

The objectives of inventory control thus can be summarized as ensuring

availability of required quantity and quality of materials at the right time and at
the same time ensuring that unnecessary investment in the inventories are
prevented, reducing inventories without compromising O&M efficiencies, unlock
scarce resources in the form of working capital which can effectively be deployed
elsewhere and there by contributing to profitability of the organization.
1.3.2 Cost concepts in inventory management

There are three costs associated in inventory management and are guiding factors
in fixing the inventory levels. In order to achieve optimization of stocks, these costs
are to be balance, as these costs one way or the other effect the
inventories/procurement policies.
(i) Inventory carrying cost/Stockholding cost

(ii) Ordering cost/set up cost.

(iii) Stock-out cost/Non-availability cost.

1.4.1 Inventory carrying cost:

Inventory is liquid asset like money, but it is not as liquid as money in the bank.
Money in the bank earns interest while it actually costs to maintain inventories.
The main elements of inventory carrying co stare:

1.4.1.1 Capital cost:

Shall be14%perannumkeepinginviewfollowingaspects

❖ Interestchargesfortheworkingcapitaltiedupininventories-11-
12%perannumforworkingoutinventorycarryingcost
❖ Interest rate, however, are variable and regulated/guided by monetary
policy of Reserve Bank of India viz CRR (Cash Reserve Ratio), Repo Rate,
Reverse Repo Rate, SLR(Statutory Liquidity Ratio)
 ❖ If not paying interest for working capital than losing interest if the funds
are deposited with bank.
Opportunity Cost of capital/Return on capital

❖ It shall be more realistic to consider opportunity cost of money so tied up

in inventories. By opportunity cost is meant the cost that is incurred in
withdrawing funds from a productive activity to invest them in inventories.
Opportunity cost of capital is the rate of return earned by NTPC on its total
investment (which may bearound18-20%)
1.4.1.2 Storage and handling cost:

Shall be 3% of average inventories keeping in view following aspects

❖ Depreciation of storage facilities (sheds and building, material handling

equipments and related infrastructure of storage facilities);
❖ Salaries of officials working in stores;

❖ Operating cost of handling equipments(Fuel, maintenance & insurance),

❖ Insurance of inventories against fire and other losses;

❖ Security & safety

❖ Preservation of materials,

❖ Operating over-heads (power, water, communication, stationary etc).

❖ The storage cost varies widely with the type of material stored, type of
storage facilities used and layout of storage building, racking arrangements
and open stock-yards and other factors.
1.4.1.3 Deterioration & obsolescence cost:

Shall be 4% of average inventories keeping in view following

aspects Deterioration:
❖ If materials are stored for a longer period, as natural phenomena, they
start losing their properties/ strength and at a later stage become useless.
❖ This is because usage of every material cannot be determined accurately
and in the process some materials may be held in stores for a longer time
than what is desirable. Impact of deterioration is very high for items having
limited shelf life.
❖ This happen Inspite of various steps taken for proper preservation of
materials and also regulating flow of materials.
Obsolescence

❖ Obsolete items are not worn-out; they are not scrape arising but are brand

new items in stock having no utility to unit/NTPC due to certain reasons viz
• Phasing out of equipments,

• Modifications carried out in the plant from time to time,

• Renovation & modernization carried out in power plant to give them

a new lease of life.
• Obsolescence is one of the prices that have to be paid for industrial
and technological advancements. With the rapid changes in design
and engineering, obsolescence becomes a very alarming problem.
• Obsolescence cost is high in regard to store and spares required for
the maintenance of machinery and equipment subject to rapid
technological changes (very high for C&I/ electronic spares as
compared to mechanical &electrical spares) and low in regard to
stabilized items of stores and raw materials.
• Value of spares represent substantial part of our inventories

• Larger the accumulation of inventory, higher is the risk of wastage

and obsolescence. The loses so incurred by the organization are
categorized as deterioration (Spares/stores becoming unserviceable)
& obsolescence cost.
 1.4.1.4 In the context of NTPC, we may take 25% inventory carrying cost for
determining inventory management policies. This is percentage of average
inventory holding (Sum value of inventory as on 1st April + closing as on 31st
March off in a financial year, divided by 2) for a power project/station or
the organization and half of order value (number of units ordered
multiplied by unit (rate) for an individual item.
1.4.2 Ordering cost:

The ordering cost covers

• The cost of originating an indent,

• Calling of tenders,

• Processing the tenders,

• Placing the order,

• Inspection of materials,

• Preparing Stores Receiving Voucher, handing over the

materials to custody, binning and bringing the materials on
Stores as well PSL records
• Verifying the invoices and payments and

• Closing of orders

The composition of buying cost can be grouped as under:

1.4.2.1 Purchasing Cost:

❖ Cost of preparing and processing Purchase Requisition

❖ Cost of inviting offers and techno-commercial evaluation of bids to

determine most suitable bidder (Presently cost of publication of one open
tender in the newspaper is 4-4.5lakh).
❖ Cost of preparing and placing order.
1.4.2.2 Expediting & Miscellaneous costs

❖ Salary of purchase personnel

❖ Administrative and over-headcosts (power, water ,stationary ,communication etc)

❖ Expediting/Follow up (for execution of order)cost,

❖ Cost of office space and established related infrastructure

❖ Other Misc Cost(postage/courier etc)

1.4.2.3 Receipt & Inspection:

❖ Cost of collecting /receiving consignments from carriers/suppliers and

handling including bulk-breaking(Opening of packages)

❖ Cost of inspection(PDI, if required/ site inspection)

❖ Cost of completing receiving documentation including taking the materials

in stock records
1.4.2.4 If more purchases are made more people are required to order, follow upon
orders, receive, inspect and handle them. The average cost per item order over a
period, say a year shall be the sum of the costs as stated above and divided by the
numbers of item orders during the year. The cost of placing an order would
naturally be different for different categories of items such as locally available
items, indigenous items from the national market and imported items. It also
differs as to what mode of tendering is adopted, i.e. open tender or limited/single
tender.
1.4.2.5 We may consider ordering cost as

Rs. 20,000.00 per item ordered against limited tenders/ single

tenders and Rs.1,00,000.00 per item ordered against open
tenders
1.4.2.6 As for inventory control of the manufactured spares/item, the corresponding cost
is the setup cost. Every time a production run is taken up, there is loss of machine
time (disassembly and assembly of tooling, jigs and fixtures), operator time etc.
The cost of this time is included in the set up cost. In addition set up cost includes
cost of paper work involving issue of work orders, inspection, etc. involved with
 every production run. The set up cost increases when the batch size is smaller
and the number of batches is large.
1.4.2.7 These two costs viz inventory carrying and ordering costs are opposed to each
other. If purchases are made infrequently and as such in large quantities, the
order cost is small but inventory- carrying cost shall be large. On the contrary, if
purchases are made very frequently, therefore in small quantities, inventory-
carrying cost will be less but ordering cost shall be large.
In any case, the total cost will not be optimum, until these opposing costs are
balanced i.e. when both of the costs are equal, and the quantity, which represents
this minimum, cost inventory, shall be Economic Order Quantity (EOQ).
1.4.3 Stock-out cost:

❖ When an item is required and it is not available in stock, it is called“ stock-

out”. As a result of this, certain consequences follow and there is a certain
cost associated with these consequences. Such a cost is known as the
stock-out cost.
❖ If the consequences are serious such as

- Break down or shut down of plant and machinery,

- Menidle time,

- Loss of generation and resultant loss of profit,

- Failure of customer services or loss of goodwill, the stock-out cost is

considerable.
On the other hand, a stock-out may cause disruption of work in an
insignificance area and in that event, the cost would be negligible.
▪ Unlike inventory carrying cost, stock-out cost is highly
variable from item to item and place to place and depends
upon both intangible and tangible factors so that its
determination is much more complicated than that of
possession costs ordering cost and inventory carrying cost.
 ▪ Each organization has to work-out its own stock-out costs for
different items.
▪ This cost is very high for non-availability of critically required
component, resulting in loss of generation, having long lead-
time of procurement, in NTPC both for us and the industries
which operate on its power supply.
1.4.4 The objective of an effective inventory management system is to secure the best
balance between “too much and too less.” Too much inventory results financial
losses by way of higher inventory carrying cost whereas too less adversely affects
O&M of power plants. The real problem is not the reduction of the size of the
inventory but to secure a scientifically determined balance between several items
that make up the inventory i.e. optimization of scarce resources.
1.5. Service Level:

By service level we shall mean the extent to which an item shall be made available
by Stores, when needed. When we say 100% service level, it implies that as and
when item is requisitioned its requirement shall be met from stores and there shall
be no stock-out. This needs very high stock level. Similarly 90% service level
means, 90% assurance of meeting requirement but 10% chances are that there
may be stock-out i.e. when item needed and not available in stock. But that
situation may come or may not come. Service thus can be defined as the
percentage of compliance of demands of user. Service level is probability that the
inventory available during lead-time will meet demand. Service level as such can
also be defined the desired probability that chosen level of safety stock will not
lead to stock-out.
 When we wish to increase desired service there shall be corresponding increase in
safety stock. Thus service levels for various store items and spares shall set for the
organization; keeping in mind the availability of stand by facilities, non-availability
cost, length of lead time, geographical location of power plant, working capital
management etc as cost of providing 100% service level (i.e. meeting with all
demands for materials at all times) for each type of materials is prohibitively high.
1.5.1 Although service level is very useful and direct measurement of performance and
addressing as it is, may be difficult to apply, since it depends on a system for
recording unfulfilled demands for materials. This can be made feasible with
computerized aids (ERP) It shall be taken care that in the process of proper and
efficient inventory control both high service level and high turnover of stock may
not be feasible (a high service level in reality is only possible with high stock and
with high stock level of course, high turnover is not achievable) unless demand
can before casted accurately.
1.5.2 Service Level can very effectively be used as a tool to evaluate performance of
inventory control measures with availability of Stock Items (Items brought
Materials Requirement planning) as inventory control of these items is
responsibility of Stores Section of C&M Department and can be expressed as
under:
No. of stock items with nil stock X
100 Total No of items declared as
stock items
(Brought under Automatic Replenishment System)

The above calculations are more practical although they are linked with
availability and not requirements from user departments. Possibilities cannot be
ruled out, the items not available in stock, may not have any immediate demand
from users.
1.5.3 Service level shall also be linked with criticality i.e. stock out/ non-availability cost.
A higher service level shall be required for critical materials whereas lower service
level can be compromised for non-critical items.
 We can attain this by using VED (Vital, Essential and Desirable) Analysis and
efficiency shall be measured as under:
Vital items having nil stock X100
Total No. Of items classified as
Vital
1.6. Inventory Turnover Ratio & Inventory Turn Over Period:

1.6.1 Inventory Turnover Ratio: It is ratio which expresses relationship between values
of inventory consumed/issued from stores during the period under reference and
value of average inventory held in stock during that period. It is expression of
times the inventory is turn-over. In our case this ratio shall be computed as
under:

Value of materials issued from stores during the financial year

Value of average inventory held in the stock during the financial year
(Average inventory holding means sum value of inventory as on 1st
April+ closing on 31stMarch of financial year, divided by2)
1.6.2 Impact on Inventory turnover ratio on working capital and profitability of the
organization Rapid inventory turnover-over/stock velocity expresses efficient
management of inventories as faster the turnover, lesser the scares working
capital shall be tied up thereby reducing Inventory carrying cost, contributing to
increased profitability and signaling better performance. A lower inventory
turnover ratio may be a signal of over-stocking which may pose problems of
working capital, increased inventory carrying cost and losses of obsolescence. All
these factors resulting in lower profit.
1.6.3 Computation of inventory turnover ratio for different items of Stores and
comparison of turnover rates provides an important parameter for measuring
performance of inventory management. Higher turnover ratio implies that item is
fast moving whereas low turnover ratio indicates over investment and locking of
scares working capital.
1.6.4 Inventory Turnover Period: Average inventory period is referred to as months/day’s

Inventory or inventory holding period which implies the average time the inventory is held.

1.6.4.1 If 12 are divided by inventory turnover ratio as computed at 1.6.1, we may get
stock-holding equivalent to number of month’s consumption. We can also work
out this period in year but period in month shall be appropriate as our approved
norms are in no of months/days. Computation of Inventory turnover period (in
months) shall be as under Average Inventory of item or category of items during
the Financial Year X 12 Consumption/ Issue of item or category of items during
the Financial Year.
1.6.4.2 Turnover Period(in day):

Average Inventory of item or category of items during the Financial Year X 365
Consumption/ Issue of item or category of items during the Financial Year

1.6.5 Individual inventories should be looked at to find areas where the inventory and
inventory holding period can be reduced. Average inventory period shall be
compared with inventory holding norms as approved by management from time
to time and also between various business units of the organization and other
power utilities in public/private sectors.
1.6.6. Whereas every effort should be made to improve inventory turnover ratio and
reduce turnover period by ensuring regular flow of materials using techniques of
inventory management contained in the manual or otherwise.
1.7. Symptoms of ineffective inventory management

(a) Continuous increase in the value of inventories beyond level of normal

inflation in the market prices.
(b) Spares critically required are either not available or desired quantities
are not there and those not required are available in abundant i.e.
shortages and excesses are hand in hand.
(c) Materials shortages causing excessive downtime cost i.e. high stock-
outcost by way of generation loss, profit losses or loss of customer
goodwill.
(d) Periodical lack of storages pace due to huge arrival of stock

(e) High number and value of cash/rush purchases.

(f) High expediting cost by deputing personnel to vendor’s works for expediting

dispatches.

(g) High transportation cost for rush deliveries (bringing small load as full
truck load for faster delivery, using the services of organization ensuring
faster delivery but charging higher freight rates Organization like GATI)
(h) Large number of discrepancies in the process of stock taking/verification

(i) High number and value of non-moving and obsolete items.

(j) High write-offs due to deterioration losses of materials.

.

CHAPTER–2

LEAD-TIME AND LEAD-TIME

ANALYSIS
2 LEADTIME

Lead time mean the time that lapses between receipt of a Purchase Requisition by
Purchase Section from the user department or stores, duly approved by competent
authority, complete in all respect (fit for issuing tender enquiry) and receipt and
acceptance of materials at stores for issue to user departments.
Although substantial innovations have been made in the field of materials
handling and transportation, communication, production, use of IT in purchasing
etc, there is still a lead-time in supply which is often uncertain. Because of this
uncertainty optimization of inventory becomes difficult and also increases the cost
of holding inventories.
2.1 Its Importance in Inventory Management

Lead-time is of fundamental importance in determining inventory levels both

working as well safety stock. The level of inventory of an item depends upon the
length of lead-time. Longer the lead-time, higher will be the ordered quantity and
as such higher will be inventory and inventory carrying cost. Shorter the lead-time,
less back up stock that needs to be carried.
2.2 Impact of Lead-time on:-

2.2.1 Working Inventory: -Size of order depends on length of lead-time and if the lead-
time is long, larger shall be the ordered quantity. Calculation of inventory carrying
cost is done on half of ordered quantity/ value (In case of phased or staggered
deliveries are arranged, this calculation shall be on half of quantity/ value of each
lot)
2.2.2 Safety Stock

2.2.2.1 When the demand during lead-time is fairly stabilized i.e. Normal distribution:

(Normal distribution is symmetrical about the average values of past usage i.e. a
given deviation, in excess or below the average, is equally likely or we may say
that deviation shall be almost around mean average)
Safety Stock=K D
 Where K is service level and D is mean demand during lead-time

Value of K, which is constant, may vary between 1-4, depending upon, criticality
and degree of safety / service level required (keeping in view stock-out cost of
each item). If value of K is 1, it shall provide 84.22% service level i.e. there are
15.78 chances of stock-out Inspite of providing safety stock.
Value of K as 2 shall provide 97.7% service level, as 3, 99.87 % service level. For
100% service level, value of K shall be 3.9/4.

2.2.2.2 When the demand during lead time or length of lead time is highly fluctuating and
Irregular i.e. Poisson distribution working out safety stock as per 2.2.2.1 i.e. mean
average demand during lead-time may not be representative.
(For example demand during the four lead-times had been 6, 6, 8, 8 and in
another case demand during the last four lead-times might had been 0, 6, 8,
14.The mean average in both the cases is 7 whereas standard deviation in the first
case shall be 1 and in these cond case it shall be 5)
In statistics and probability theory standard deviation measures the amount of
variation or dispersion from average
A largest and ard deviation indicates that the data points can spread far from the
mean and a small standard deviation indicates that the data are spread around
means
We can therefore summarize that in the first case it was normal distribution and
in the second case it is Poisson distribution as consumption varies from 0 to 14
and in this case safety is-
Safety stock=K

(Poisson distribution is somewhat op sided, smaller us age values during the past
few lead-time occurring most frequently and large usage values occasionally. This
can be used when the requirement arises randomly and there is no specific
relationship between successive requirements)
Where K is constant and value depends as above (2.2.2.1) and is standard
deviation of demands during lead times.
 Safety stock is this case shall be= K

=K ∑(x-m)²

N-1

x-Each value in the sample

m- Mean (arithmetical average) of

values

n–Number of values
Or

=K ∑d²

N-1

D-Deviation from mean (arithmetical average) of

values

n–Number of values(4lead-times2.2.2.2above)

Longer the lead-time more will be the requirement during this period and higher
will be safety stock. On the contrary if the lead-time is smaller, lesser will be the
requirements during lead-time and reduced safety stock. In view of above facts,
lead-time has direct bearing upon inventory holding, both working and safety
stock.
2.3 Elements of Lead Time

(a) Administrative lead-time for finalizing purchase order.

(b) Suppliersleadtimetomanufacture/arrangethematerialsandmakereadyfordispatch.

(c) Transit lead time i.e. the time taken for transportation of materials from seller’s
works to buyer’s place.
(d) Administrative lead-time of bulk breaking (opening of
packages/boxes),inspection and completing receiving activities.
2.3.1.Administrative Lead- time- is the time taken to convert a Purchase Requisition into
a Purchase Order. This time, however, varies according to mode of tendering i.e.
Limited Tender/ Single Tender or open tender. Every effort shall be made not only
to keep this time limit to norms fixed by management from time to time.
(Present norms as indicated while securing ISO 9001 Certification are 3 months in
case ofLT & ST- Single Stage Single Envelope and 6 months in the case of OT-
bidding process being Two Stage or Single Stage Two Envelopes) but improve it by
closely monitoring it and soliciting cooperation of all departments involved in
purchasing process. The time taken by the indenting department in preparing,
approving and completing other related formalities is not included in this time,
which also needs to be closely monitored to ensure timely availability of materials
2.3.2 Supplier’s delivery Lead-time-is the time taken by the supplier to execute the
order upon its receipt and involves manufacturing/ arranging materials, getting
them inspected, if PDI is required, packaging to withstand transit hazards,
arranging despatches and billing.
❖ This timing is long (6-18months) for the dedicated spares of equipment
(manufactured by OEM/ OES) and
❖ Comparative short(1-3months)for the items which come in the category of
standard and mass production items, many of which are available off- the-
shelf delivery in the market.
2.3.3. Transit lead time-is the time (0.5to2 months) taken for transportation of materials from

Seller’s works to our business units buying the materials which depend upon

▪ Locations of business unit and suppliers,

▪ Mode of transportation viz rail, road, air or sea also

▪ Part (small consignments) load for full truck or wagon load or rack load in
case of rail transportation.
▪ Custom clearance and in land transportation in case of Imports
 Keeping in view urgency of requirement, safety of materials while in transit
and economy of freight, suitable instructions regarding despatch of
materials are incorporated in Purchase Orders.
2.3.4. Administrative lead-time of Receiving & Inspection (0.5 – 1month) is the time
taken for bulk breaking of packages, checking of materials with suppliers challans
/ packing slips/invoices, inspection (including performance testing/ laboratory
test at our labs or outside test-houses as the need be) and completing receiving
activities and taking the goods in book of account by respective custodian. If PDI
is done, inspection at stores may not be very stringent and limited only to
verification that suppliers have sent the same materials which were inspected
before despatch and there are no shortages or damages due to handling en-
route.
2.3.5. Total lead-time as such shall as under, which shall be considered while planning
for the materials and indenting
❖ 4-6 months for the items which come in the category of standard and mass
production items, most of the time available of the shelf delivery with the
supplier who normally hold the stocks to meet customer’s requirement.
❖ 18-24 months for the dedicated spares of equipment purchased from OEM/OES)

2.4 Lead-time Analysis:

It may not be possible to evaluate lead-time of entire range of individual items.

However efforts should be made to assess the lead-time of individual items of
class ‘A’ and class ‘B’&‘C’ based on the trade/market grouping. In case of spares,
assessment lead-time for each Original Equipment Manufacturer or supplier shall
be done. This data shall be shared with indenting departments so as work-out
optimum quantity and also take timely replenishment action.
The estimated lead-time greatly influences working out inventory holding levels
including mean average lead-time requirement and provisioning of safety/ buffer
stock (Reorder level).Also by monitoring of actual lead-time against estimate shall
provide opportunity for Realigning the planning and programming of materials in
line with the current trend to attain desired service level thereby optimizing scarce
 resources.
2.5 Step to Reduce Lead Time

Total Lead time=a)+b)+c)+d)-2.3asabove

a) & d) correspond to internal activities and are controllable. b) & c) are

largely uncontrollable by the buyer but can be reduced to some extent if
systematic efforts are made in this direction by establishing reliable
sources of supply, selecting proper mode of transportation and vigorous
expediting.
2.5.1 Administrative Lead Time for finalizing Purchase Order

(a) Ensure that Purchase Requisitions are complete in all respects so as to initiate
immediate procurement action.
(b) Rationalization of procurement procedures and review of DOP from time to time.

(c) Financial limits for open tender (NIT) shall be reviewed from time to time.

(d) More and more items shall be standardized with standardization of sources of supply.

(e) Lesser dependency for spares on OEM – development of alternative sources.

Every effort need to be made to identify items which are bought-out items of
OEM and also their sources so as to ensure direct purchase from them. This
will not only reduce cost of materials but will also reduce lead-time
substantially
(f) Import substitution.

(g) More and more items should be declared as stock item and brought under
automatic replenishment system(Materials Requirement Planning)
(h) Finalization of long-term rate/running contracts with suppliers/OEM/OES

(i) In cases where rate contract contracts are not feasible and there is long lead-
time and larger order quantities, possibilities of staggered/phase delivery shall
be explored so that inventory levels are low without scarifying desired service
levels.
 (j) Finalization of terms and conditions with suppliers especially those from
whom we are buying on OEM/OES/ PAC basis .(items purchased on single
tender basis)
(k) Empanelment/ enlistment of vendors for high value materials repeatedly
purchase to avoid NIT every time. This process also be done materials
category-wise (available in the market from same sources) to facilitate faster
procurement through limited tender process.
(l) E-Procurement should be increased.

(m) Updating list of approved vendors for various categories of items including evaluation of

vendor’s performances.

(n) Specifications, pre-qualifying requirement for the bidders and quality plan
shall be clearly spelled out.
(o) Stockless Buying: Under this buying system, NTPC shall have no financial
liability for inventory of goods being purchased. The supplier shall owe the
stocks which shall be located at our stores. We shall provide them storage
facilities and also take responsibility for safety and security. Whatever stocks
are consumed, payments are made as per agreed conditions (these
arrangements already exit for purchase of POL from Indian Oil Corporation
Ltd) The term ‘consignment buying’ is also used for such type of
arrangements. Stocks can also be located with supplier near the power station
but shall be dedicated to cater our requirements.
2.5.2 DELIVERYLEADTIMEOFVENDORS

(a) Post order progressing and expediting with vendors. Requirement of

expediting can be reduced if
- Lead-times are known and accepted

- Mutual concern exists between buyer and seller.

- Users do not frequently reschedule requirements.

- Expeditors do not raise the alarm too often unnecessarily

 - Capacity and capability of supplier is appraised before ordering.

- Specifications are clear, understood by supplier and fall within seller’s technical

capability.

- Delivery requirements are specified properly.

(b) Prompt clarifications to vendor’s queries.

(c) Prompt arrangements for PDI, if required.(Pre-dispatch Inspection)

(d) Prompt approval of samples, if required

(e) Prompt issue of Road Permit, if required for inter-state movement of materials

(f) Good buyer/seller relations including prompt payment to suppliers.

2.5.3 TRANSITLEADTIMEOFTRANSPORTATION

(a) Select the most suitable mode of transportation.

Following are some of the aspects to be considered for choosing the most
economical and effective carrier:

- Various modes of transportation available

- The carrier available

- The freight structure of various modes of transportation,

- The type of risk in transit and the extent, to which carriers are willing to accept,

- Freight structure of various commodities.

- The terminal facilities that various carriers offer.

- The facilities available with the various carriers for expediting and locating
goods, which are unduly delayed in transit.
(b) Efficient collection group with stores.

(c) Post dispatch monitoring–expediting deliveries of consignments unduly delayed–

Deputing chasers/ tracers.

 (d) Prompt retirement of documents if negotiated through bank.

2.5.4 ADMINISTRATIVE LEAD TIME OF BULK BREAKING, INSPECTION AND RECEIVING

ACTIVITIES
(a) Prompt bulk breaking (opening of packages and checking of contents of
incoming consignments)
(b) Prompt inspection of materials at stores by user or by independent inspection cell.

(c) Making available (at Receipt Section of Stores) inspection, testing and other

requisite facilities to inspection people.

(d) Prompt handing over of materials to custody group.

(e) Vigorous follow up of settlement of discrepancies–replacement supplies/ repair etc.

 CHAPTER–3

Materials planning and

indenting including
Classification of stock and
non-stock items
3 Materials planning and indenting including Classification of stock and non-stock items
3.1 For the purpose of materials planning, items shall be divided in to two categories
i.e. stock items (also known as recurring items) and non-stock items (non-
recurring items).
3.2 Stock items (Recurring items)
Stock items shall be those required by many user departments (in exceptional case
even by one department) regularly and have a stabilized/regular consumption
pattern so that those are brought under automatic replenishment system (also
known as Minimum & Maximum system of stock control by fixing their minimum
stock; also known as safety stock, reorder level, reorder quantity and maximum
stock)
3.2.1 As soon as available stock and quantity in pipe- line for an item reaches to
reorder level, need for replenishment is felt. Stores Section raises a purchase
requisition (This document serves as an authority for purchasing to initiate
procurement action) for pre-determined order quantity. Inventory levels are fixed
keeping in mind,
▪ Past consumption pattern,
▪ Anticipated changes in future requirement,
▪ Average length of lead-time, and
▪ Criticality of each items etc
Consolidated purchase requisitions for stock items shall be raised by stores rather
than for piece-meal requirement by various users. No other departments except
stores shall be allowed to raise purchase requisition for stock items.
3.2.2 In order to provide a satisfactory service level of stock items to various users at
project/stationinventorylevelsofixedshallbereviewedeverytimetheitemsreachtore
orderlevelso as to ensure that these inventory levels are in line with the current
consumption pattern. In absence of this review, both the situations of under-
stocking (when item is not available in stores) and over-stocking (reorder level is
not reached even after lapse of reasonable time), may prevail which are not good
sign of effective inventory control system.
3.3. Non-stock (Non Recurring) items
Items other than those declared as stock items shall be Non-stock,
material/spares, planning for which shall be done by individual user departments
and raise purchase requisitions keeping in view requirement of materials and
spares for preventive maintenance planning, overhauling of various units and
requirement for maintenance of break-down. This shall be done, keeping in view
▪ Past consumption pattern,
▪ Life expectancy of spares;
▪ Length of lead-time,
▪ Criticality and
▪ Philosophy of refurbishment of spares v/s replacement.
3.4 In planning and consolidating requirement of commonly used spares (normally
bought out items of OEM such as bearings and accessories, a number of electrical
components used by many sections of Electrical Maintenance and some may
even be common with C&I Maintenance) of various indenting sections/
departments, Maintenance Planning Group of O&M Department can play a very
vital role. By consolidated the demand and raising Purchase Requisition for bulk
quantity, thereby reducing purchasing cost and better response from
manufacturers, quantity being quite lucrative thereby availing quantity discounts
(by way of competitive offers from manufacturers)
3.5 It shall be preferred to have two different types of format of purchase
requisitions for stock and non-stock items (alternatively we consider a different
series for Purchase Requisition control serial number)
3.6. While raising a Purchase Requisition/ indenting either by Stores for stock items or
user departments/ Maintenance Planning for non-stock items, following aspects
must be taken care so as to ensure that those are complete in all respect and fit
for issuing tender enquiries. If any deficiencies are there, lot of time shall be
involved in seeking clarifications/ additional information which shall prolong
length of lead-time (for impact of lead-time on inventories please refer Section-2)
(a) Check item code (s) for materials /spares /equipment/ instruments being
purchased. If the item being indented is of repetitive nature, code shall
already be available. If the item is being indented for the first time (no
other project/ station ever requisitioned) a code shall be generated
through system by feeding the necessary attributes. It shall further be
ensured that specifications are complete in all respect.
(b) If the code is already available, quantities available, in pipeline i.e. pending
requisition (s)/ pending order (s) shall be checked in the system. In case
some quantity is available or any requisition is pending for placement of
order, possibilities of dropping the item from requisition may be looked
into, and item being critical nature, matter may be taken with purchase to
know the status and also expedite placement of order. In case PO (s)
pending fully or partly (Supplies yet to be made), Purchase Section may be
requested to expedite supplies rather than raising a fresh requisition (if the
outstanding quantities are enough to meet the intended demands).
(c) Before initiating procurement actions, possibilities of like items available in
stock, shall also be looked into so that those can be used as substitute,
especially when such items may be non-moving.
(d) Check the availability of item(s) at other projects/ stations of NTPC and
keeping in view the location/ transport economy/ urgency of
requirements, inter-unit transfer shall be arranged (especially when item(s)
under reference is/are surplus/ redundant with other units.
(e) Materials specifications including requirement of National/ International
Standards, drawings/ blue-prints, calling for samples, Inspection (Quality
plan) etc. shall be spelled out thoroughly so as to enable Purchase Section
to initiating immediate procurement action and avoid any reference to
indenting departments.
(f) Quantity & Delivery- optimum quantity to be worked out and also to
reflect suitable delivery period. Possibilities of phased/staggered delivery shall
also be spelled out so as to keep down inventory level and this accordingly
be stipulated in Tender Enquiry.
(g) Cost estimate of materials being requisitioned which can be worked out
keeping in view the last purchase price or price at which purchases for
same items were made by other projects/ stations or budgetary offer from
suppliers/manufacturers which is required for approval of expenditure and
also budget certification/ monitoring by Finance & Accounts Department
(h) As far possible, indentor shall also indicate in the Purchase Requisition
details of suggested/ kwon reputed suppliers which shall be useful to
purchase for sourcing quality products.
(i) For procurement of spares on Single Tender from Original Equipment
Manufacturer/Original Equipment Supplier it shall be ensured that Purchase
Requisitions are supported with appropriate certificate duly approved by
competent authority of indenting department/ HOP/HOS/RED (as the case
may be) that it is technically necessary to procure the item from the
Original Equipment Manufacturer / Original Equipment Supplier. Approval
of such certificate by the competent authorities shall be subject to
provision and procedures contained in relevant Sections of DOP as revised
from time to time.

(j) If source standardization has been done for the items so indented a
certificate to this effect shall be provided along with Purchase Requisition.
Source standardization shall be approved at a level not less than GM/ Head
of Project / Station. This approval may be operative for a period not
exceeding three years or provisions of DOP revised from time to time.
Wherever Multiple Sources have been standardized through process of
open tendering, and on the recommendation of a duly constituted
committee including a representative from Finance, DOP as applicable to
Open Tender may be applied provided tender enquiry has been issued to
all the Standardised sources not being less than four. This shall, however,
not apply to procurement through Single Source Standardisation.
(k) Certificate of availability from a single source including PAC (Proprietary
Article Certificate) or urgency shall be provided by the indenting
department along with indent. The certificate shall be approved by
competent authorities as per provision and procedures contained in
relevant Section of DOP.
(l) If the estimated value of PR is beyond monetary limits of procurement
through limited tender, there is no PAC, OEM/ OES, urgency or
standardization certificate. In such a situation, procurement has to be done
through open tender. Indenting department shall work out tentative/
proposed Qualifying Requirements/Pre-conditions which shall be approved
by the respective HOD. Such QRs shall be approved by HOP/ HOS or RED on
recommendations of duly constituted committees as per provision and
procedures contained in DOP. QRs shall be framed in an objective manner
and not left subjective with scope for any discretion. QRs shall further be
framed in most realistic manner so as to ensure that adequate number of
vendor qualify tender and generate healthy competition. It is therefore
important to stress that the Qualifying Requirements to be stipulated
should be objective, purposeful and practicable so as to encourage
competition meeting also the quality requirement. Relaxation/changes of
QRs after issue of NIT has to pass through very elaborate procedure,
thereby increasing length of lead-time and sometime may even effect
construction at new power project and O&M of generating power stations.
(m) The common High Value Critical Spares are to be considered as “Centralised
Spares” which are to be kept in a common pool for meeting any emergency in
any of the stations/ projects. Further, procurement of all Centralised Spares
shall be done subject to clearance by Corporate OS. While raising PR for
such spares, it shall be ensured that this requirement is met.
(n) PR shall be approved by competent authorities as per provision of relevant
Section of DOP. Cost estimates are to be vetted in Finance before approval
of the competent authority and the powers are to be exercised subject to
 Budget Provision.
(o) Review of high value PRs by designated Screening Committees so
constituted (comprising members of appropriate level from indenting
departments, C&M and F&A). We may consider constituting of committee
of HODs of respective departments for Purchase Requisition having
estimated value of Rs. 15 lakh and above and at Deputy General Manager
level for review of Purchase Requisitions valuing 5 lakh and above and less
than 15 lakh (these monetary limits we may be reviewed, as and when
necessary).During the process of review, Stores shall play a very proactive
role in suggesting use of available substitutes either because they are
excess in stock or on account of any other consideration. In a power station
operating for a period over fifteen years, whenever a new item is indented
and a new code is generated, indentor shall certify the need for adding new
item/code at this stage. This shall again be checked and certified by Stores
from their records. This double check shall be done only for items included
in the Requisitions referred to designated review committee i.e. high value
requisitions. This double check is essential in view of existence of duplicate
codes i.e. multiple codes for almost identical items and lack of complete
knowledge on substitutability in practical use of existing stocks under
different code numbers. This committee shall once again look into the
need for buying the item, availability of any substitute materials which can
be used and also quantity proposed to be purchased being optimum to be
consumed over a reasonable period.
 CHAPTER–4

Replenishment
Systems including
provisioning of spares
for

Overhauling (outage)
4 REPLENISHMENT SYSTEMS

4.1 Optimum inventory shall be worked out on the basis of re-ordering EOQ
(Economic Order Quantity) and Order Level Control. EOQ tells us how much to
order, reorder system tells us when to order. The problem of inventory control
shall arise due to uncertainty in consumption rate or length of lead- time. If the
demand is constant and so is lead- time, a fixed quantity can be ordered, at a
fixed interval? But both of them are variable in actual situations. It shall therefore
be not possible to keep both size and interval between orders as fixed.
4.1.1 One method to solve this problem shall be to fix the size of order and let the
ordering frequency vary based on consumption pattern. This is known as Q
system- Fixed Order Quantity System or Minimum-Maximum System of
reordering.
4.1.2 The other system shall be to fix order frequency of length of time between
orders, let the size of order vary with usage rate. This is known as P system or
Periodical Review System or Fixed Order Interval System or Cycle System of
reordering.
4.1.3 In either case an extra amount of inventory known as Safety Stock shall be
provided to take care of unexpected demands due to variation in usage or lead
time or both so as to avoid stock out
4.2 Q system (Fixed Order Quantity or Minimum & Maximum System of Inventory
Control System is based on Fixed Order Quantity System in which size of ordered
quantity every time to be purchased is fixed but the frequency of orders is based
on consumption pattern. System is also known as Continuous Review System as a
regular track is maintained so as to initiate replenishment action as soon the item
is reached re-orders level. The system shall be ideal for stock items with fairly
stabilized consumption pattern and normally of consumable nature. Since
quantities consumed are substantial, various level viz minimum, maximum,
reorder and reorder quantity can be worked out.
4.2.1 Requirements of the system:

(a) Pre-determination of a fixed order quantity shall be done to replenish item

every time, based on price, rate of usage and other pertinent factors i.e.
ordering and inventory carrying cost.

(b) Pre-determination of a reorder point so that when stock on hand drops to this
point, a purchase requisition is raised for fixed reorder quantity. There order
point is based upon length of lead-time, consumption during lead-time plus a
safety allowance to cater the demands in the event of any increase in
consumption during lead-time or increase in length of lead-time or some time
even both; increase in demand and also supplies are delayed.
(c) Automatic replenishment feature shall be achieved by maintaining perpetual
records of inventory. As soon level fall to reorder point a requisition for
purchase shall be raised. The stocks, therefore, automatically remain between
planned minimum and maximum levels. The system utilizes management by
exception principle; no action shall be taken until action required i.e. until
item is reaches to reorder level.
(d) System is simple as detailed and frequent control shall not be required. Once
the levels are fixed, operation shall be, taken care by the Stores personnel.
However, whenever an item is reached to reorder level an assessment is made
that these inventory levels are in line with current consumption pattern so
that those are adjusted to avoid chances of either under-stocking or over-
stocking (under-stocking results in frequent stock outs-sometime even
effecting O&M and over-stocking results locking in of additional scarce
working capital unnecessarily)
(e) This system shall be suitable for large number of ‘C’ and low consumption value of ‘B’

Items which have regular and fairly stabilized pattern of consumption

(f) Safety stock is maintained at lower level as there is built in safety i.e. reorder
point varies with the rate of usage and safety stock has to provide protection
against variation in usage during lead-time or variation in length of lead-time.
If usage is higher, reorder point is reached earlier.
 (g) Since reorder quantity shall be based, as far possible, on EOQ, each material
can be procured in most economical quantity.
(h) Positive control shall be exerted to maintain total inventory investments at
the desired levels imply by manipulating and planning minimum and
maximum levels.
(i) Since the requisitioning of an item, under this system shall be the primary
duty of stores, other departments requiring materials are assured of ready
stock.
(j) Purchase requisitions shall be generated from one department i.e. Stores for
bulk quantities, which not only avoid piecemeal purchases but also attract
better rates from manufacturers/suppliers.
(k) Since number of purchase requisition shall be lesser, buying cost is controlled.

4.2.2 Limitation of the system:

(a) It shall function satisfactorily only when each of materials exhibits reasonably
stable usage and lead-time. When there are frequent fluctuations, a new
order quantity and a new order point has to be determined. System as such
may become cumbersome when applied to materials with unstable usage
pattern and lead-time.
(b) Slow moving items shall not be brought under this system otherwise it tends
to increase the inventory due to operation of different levels viz order
quantity, safety stock and reorder level.
(c) Since this shall be based on perpetual inventory records, error in posting or
wrong issue of materials distort book balances and lead to undetected
materials shortages or over-stocking.
(d) For management of inventory of spare parts, this system shall have only
limited application for those parts, which are fast moving and have stable
consumption pattern(items like grinding media- grinding rolls/ grinding ball,
bowl mills/Fans spares in thermal plant, some fast moving bearings etc). Since
consumption pattern of majority of spares is unpredictable and low, system
will not work and finally land up with higher inventory level.
4.3. Various levels under this system can be determined as under:

4.3.1 Minimum level:

This is the level below which stock should not normally drop and is also known as
safety/buffer stock to provide necessary cushion when the consumption is at
higher rate or the normal delivery period is exceeded or both. Thus the main
objective of safety stock shall be to absorb variability (due to uncertainties of
consumption and lead-time of replenishment supplies) and mitigate risk of stock-
out. Longer the lead-times are, the greater shall be variability of demand and
more safety stock shall be needed.
If there were no variation in consumption as well as lead–time, there would be no
need for safety stock. A fixed amount of materials may be ordered at a fixed
interval. The ideal situation would be as under:
When the stock level reaches P we order quantity Q, which arrives exactly when the stock
reaches Zero balance. The maximum stock therefore is Q and minimum is 0. In practical
situations such ideal situation does not exist. Either the rate of consumption may increase or
the quantities ordered may not come in time. The result is stock-out as under:
4.3.1.1 Determination of safety stock:

If the demand and length of past lead-times is fairly stabilized (Normal

Distribution), safety stock can be calculated as under:
Safety Stock=K D

Where K is service level and D is mean demand during lead-time

(DetailsinSection2.2.2.1)
(a) When the demand during lead time or length of lead time is highly fluctuating

and irregular (Poisson Distribution) the calculation of safety stock shall be

K
Where K is constant and value varies from 0-4 (refer section 2.2.2.1) and Is
standard deviation of demands during lead times.
Safety stock is this case shall be = K

=K ∑(x-m)²N-
1

x-Each value in the sample

m-Mean (arithmetical average) of

values

n–Number of values
Or

=K ∑d²

N-1

D-Deviation from mean (arithmetical average) of

values

n–Number of values
(Section2.2.2.2)
4.3.2 Reorder point:

Is the point or level at which replenishment order is issued to ensure that supplies
are received; by the time stocks on hand are consumed and there are no stock-
outs. It consists of mean expected demand during lead- time (Amount of time
between initiating action for placing an order and receiving the goods and
completing receiving documentation) and safety stock.
4.3.2.1 The calculations are as under:

Reorder level=D+K√D

Where D is mean expected demand during the lead-time plus safety stock

The quantities in pipeline are also to be taken care. In practice reorder point keeps
on fluctuating, based upon consumption pattern.

4.3.3 Standard order Quantity:

This shall be the quantity each time ordered as soon stocks reach to reorder level.
This quantity normally is Economical Order Quantity (EOQ is the quantity to be
ordered at one time that minimizes total inventory cost and ordering cost) and
calculated as under
EOQ=√2AS Where A=Annual consumption in
rupees I
S=order or setup cost per order.
I=Inventory carrying cost as % of total inventory value.

While determining standard order quantity various aspects such as vendor’s

discounts, shelf life of items, seasonal nature of materials, availability in the market
etc. are taken into account.
4.3.3.1 Derivation of EOQ Formula:

The average inventory will be Q and inventory carrying cost QXI

2 2

(Q is order quantity and inventory shall be half this quantity and I Is inventory
carrying cost as % of total inventory value)
The number of orders per year shall be A and ordering cost AXS

Q Q

(A is annual consumption value and S is per item

ordering cost) For the minimum cost inventory these
two costs are equal:
QXI =AS therefore Q²=2AS i.e .Q=√2AS

2 Q I I

This formula is further simplified when used for a particular organization.

EOQ = √2AS=√2S X √A

I I

2 is constant and so are values of S & I for a particular organization. The above
expression is reduced to:

EOQ =K√A

K is constant and its value will be 400 for NTPC where ordering cost is Rs. 20000 per
item order in case of LT/ST and inventory carrying cost is 25%
4.3.3.2 EOQ can also be worked out in quantitative terms rather than in
value as under EOQ=√2AS Where A= Annual consumption
in unit
PI S= order or setup cost per order.

I= Inventory carrying cost as % of

total inventory.
P=Price per unit
4.3.3.3 To facilitate purchasing we can also work out optimum number of orders per year
for each item
N-Optimum number of order per year =√AI

2S

Where annual consumption has to be in monetary value and

not in unit Quantity of each optimum order will be EOQ as
under:

Q= A =A = √2AS i.e. formula of EOQ discussed earlier

N √AI I

2S

4.3.3.3 Practical application of EOQ

Normally the purchases shall be guided by EOQ calculations but practical

departure can be made for good and valid reasons. If the changes in order
quantity are made ranging from 65% to 155% of theoretically calculated EOQ,
total cost increase will be less than 10% which can be proved with the following
calculations:

C–Co = (r-1)2 where

r=q/q0Co 2r
C0 Cost associated with EOQ

C Cost associated with any quantity other than

EOQQ o EOQ
q Any quantity other than EOQ
4.3.3.4 The following practical consideration shall be kept into consideration while
working out standard order quantity which suggest to buy different quantities
than EOQ
(a) Shelf life of items.

(b) Seasonal availability of items.

(c) Liberal discounts offered by vendors for bulk purchases

(d) Economy in transportation cost.

(e) Ordering in economic trade packing

(f) Simplification of routine-i.e. placing 2 orders in a year as against 3 as per EOQ

calculations.
4.3.3.5 These exceptions reveal that the quantitative aspect of EOQ has to be
supplemented by executive decisions. The formula takes into consideration ordinary
cost factors but executive decision takes into consideration extra-ordinary limiting
factors and compelling situations. Normally nearest practical quantity
approximating to EOQ should be ordered. Large deviation shall, however, be
critically analysed and accepted only if beneficial to the NTPC.
4.3.3.6 Assumption on which EOQ calculations are based shall be summarized as under:

(a) By and large uniformity of demand i.e. continuous and at a constant rate

(b) Absence of any limitations imposed by stores capacity

(c) Cost of ordering and carrying cost for a unit of materials are independent of
ordering quantity.
(d) Order and delivery quantities are equal (no phased or staggered deliveries)
 (e) There shall be no loss in value other than allowed for in computing possession
costs arising from deterioration and obsolescence.
(f) The prices of materials are stable and no discount available

(g) Lead-time is fixed and not variable

Even if all the above assumptions do not hold exactly, EOQ shall give us a good
indication as to whether the current ordered quantities are reasonable
4.3.3.7 In view of these assumptions and limiting factors, formula of EOQ shall be of little
use in dealing with materials whose price or usage fluctuates rapidly or the
materials whose usage cannot be predicted with a reasonable degree of accuracy.
Under such circumstances an EOQ, which is correct today may not be valid for
tomorrow.
4.3.4 Maximum level:

If the system is working properly, normally the maximum stock will be minimum
plus standard order quantity. In practice the maximum level varies in view of
changes in anticipated consumption pattern and length of lead-time.
Maximum Level=Reorder Level+ Reorder Quantity–minimum consumption during
Period required to obtain delivery
Or =Standard Order Quantity + Safety Stock
4.4 P system/ Fixed order Interval System/ Periodical Review System:

In this system order quantity shall vary but the order interval is fixed. A fixed
period of time shall be established at the end of which, item concerned be
reviewed and reordered in the quantity based on current demand.
4.4.1 In this system, inventory shall be divided into:

(a) Quantity intended to satisfy mean expected demand during interval between
placing of two successive orders i.e. review period, and
(b) Quantity to meet normal requirement during lead-time and a safety allowance
to provide protection against random variation in demand in the review
period and as well in lead-time.
4.4.2 Optimum review period is the one that reduces carrying and ordering cost to minimum.

N = √24S N -Optimum review period in months

IM M -Average monthly usage in monetary

value

S -Ordering cost per order

I -Carrying cost as % of inventory

4.4.3 This quantity will be equivalent to EOQ as is evident from the relationship of
above formula:

Q MN =M√24S =√24SM

IM I

=√2AS since
12M=AI
4.4.4 Characteristics of the system:

(a) System with its frequent and careful review shall be more suitable for ‘A’ and high
value ‘B’ items which shall be few in number and need close control by senior
executives of C&M Department.
(b) System shall be based on periodic reordering of all items. With every cycle the
stock of each item is brought up to their level which depends on review
period, the lead time and rate of usage
(c) Rapid turnover of inventory shall be possible if review period is short.

(d) In review system, higher safety stock has to be provided because it has to
provideprotectionforvariationofdemandduringreviewperiodandalsoduringlead
-time.
(e) Delegation of authority at low level shall extremely be difficult as it needs
freshly to determine the order quantity every time an order is placed since
decision on order quantity has to be made on judgment keeping in view past
consumption pattern, anticipated changes as per maintenance planning,
length of lead-time and criticality of each item.
 (f) The system compels a periodical review of all items. This in itself shall make
the system difficult. Because of changes in usage, many items may not be
required to be ordered until succeeding review period or usage may increase
to the point where they should have been ordered before current review
date. Consequently this system must be augmented with the minimum
balance figure which signs/signal for early reorder if usage is increased.
(g) System tends to peak the purchasing work-
loadaroundreviewdate.Thishowevershallbeavoidedsosomeextentbyregulating
frequencyofreviewfordifferentcategories.

4.5 Combination of both systems:

In practice best advantage shall be obtained by combining these two basic systems.

(a) System may basically be review system but also provides for issue of
replenishment orders when what may be called minimum level is reached for
instance if ordering cycle is 6 months or when arrive at minimum level,
whichever is earlier.

(b) Principally Minimum and Maximum System may provide that when reorder
level of one item is reached, a systematic review must be made of all the
related items. If case, it is found that for some items, their stocks are nearing
to reorder levels, they shall also be ordered simultaneously. Related items
shall be one, which are procured from the same sources of supply.

4.6 Determination of provisioning quantities of spares:

Spare parts are purchased in three stages in the life of machines:

4.6.1 Initial provisioning along with equipment, known as mandatory and/or

recommendatory spares:
The provisioning of initial spares shall be most challenging area of spare parts
management. Decision at this stage shall govern the effectiveness of spare parts
policy in future. Mandatory spares are those whose cost is included in the package
value for supply of equipments whereas recommendatory spares are those which
 are chosen by us from the recommended list of spares provided by
manufacturer/supplier of equipment. Their cost is not part of package and value is
separately paid in addition to package value.
The followings are the limitation at this stage:

(a) Relevant consumption/ usage data not available

(b) No experience regarding performance of machines

(c) Manufacturers recommended list of spares is the only relevant data available.

(d) Manufacturer really cannot indicate the optimum mix of spares due to his
own unfamiliarity with user economics and environment of buying
organization.
(e) Recommendations of manufacturers for life-time procurement of spares due
to faster changes in technology-no guarantee for supply of spares in future.
(f) In case of imported spares-fear of non-availability in future or long lead-time,
tempts to play safe and buy more.
(g) Drawings/ complete specifications are not available.

In view of the above limitations spares are usually purchased on

recommendations of manufacturers, with lack of necessary information to check
up such recommendations. In order to take rational decisions, a cross checking of
mandatory list spares shall done from operating power plants where similar
equipments have been installed in the past.
4.6.2 Operational stage of equipment:

(a) This stage covers repetitive replenishment of spares, which have been
consumed and procurement of new spares as and when required for first
time.

(b) Spares purchased during this stage of repetitive replenishment, some may
pass through process of inventory control somewhat similar to other stores.
(c) Based upon consumption data, usually their order level, order quantity and
periodicity of orders can be determined for fairly fast moving spares.
4.6.3 Phasing out stage of equipment:

(a) The third stage begins when the machines are phased out/replaced, by more
efficient ones, or the manufacturers discontinue production of
machine/equipment and their spares.
(b) If the equipment is phased out by the power plants, not only the utilization of
available spare is considered but further procurement of spares also has to be
monitored very closely so as to minimise obsolescence (review of pending
Purchase Requisitions and pending Purchase Orders)
(c) If production is discontinued by manufacturer, situation shall become similar
to life-time procurement of spares, considering it last opportunity for
purchase, higher quantities and many additional items are purchased, many of
which later prove slow-moving and even become obsolete.
4.7 Provisioning of Spares for Overhauling
Overhauling Term implies giving a new lease of life to an equipment or part of it,
when we undertake periodic overhauling of equipment on planned basis after pre-
determined days/ months of operation. Timing and extent of overhauling is
normally predictable with reasonable accuracy.
4.7.1 The following differences between overhauling and repair (Breakdowns) shall
helps to undertake proper forecasting and planning for spares so that those are
made available to ensure that here are no hold-back for want of spares during the
period of overhauling
(a) Timing and extent: repair is usually unscheduled and is resorted to when
equipment fails. Overhauling on the other hand is essentially a preventive
maintenance activity to avoid failure of expensive components due to
continuous operations.
(b) Requirement of majority of spares including repair kits and consumable can be
predicted (based upon recommendations of OEM or our own past experience)
with reasonable amount of accuracy. This is not so in unscheduled repair,
failure occurring at random times. Although rate of failure and average
consumption can be calculated from the past
 records exact time when failure will occur again is truly beyond predictions.
This in turn creates problem in spare parts provisioning.
(c) Repair is a corrective maintenance whereas overhauling is preventive maintenance.

(d) Rush purchases for sudden failure cannot be eliminated but can be controlled
to greater extent for overhauling requirements.
4.7.2. Requirement of overhauling spares:

During periodical overhaul or capital repair, many spares might be required to be

changed depending upon their condition. However, data of maintenance of each
equipment, If meticulously recorded, it would reflect failure rate and also causes.
Since majority of spares shall have long lead-time, planning/ indenting of spare
has to be done, two to three years ahead, keeping in view.
(a) Policy with regard to repairing / discarding shall have an important bearing on
procurement of spares.
(b) It may be advantageous to change the mating parts even if some may be serviceable.

(c) It shall be preferable to replaces lightly worm out cheap internal components
as their replacement later be costly apart from down time cost of vital
equipment.
(d) Repair kits wherever provided to be replaced into to.

(e) Rubber items such as fan belts, gaskets, hoses etc. are to be replaced fully.

(f) Maintenance expert’s knowledge, skill, experience and expertise shall always
be pooled in planning requirement of spares.
(g) Overhauling of engines, motors, compressors, pumps etc. If to be arranged
through OEM and such contracts include supply of spares also.
(h) Past history of consumption of spares or OEM's recommendations

4.7.3 Before restoring fresh procurement action, availability of spares shall be checked
from the store.
Requirement of spares so worked should be communicated to purchase well in
advance, keeping in view the length of total lead-time. If lead- times for various
types of spares are different, delivery shall be arranged in such a way that spares
are available when needed so as to optimize resources.
4.8 Provisioning of spares for preventive maintenance.

Like periodical overhaul/ outage or capital repair, planning for spares can also be
done for preventative maintenance (to keep the equipment nearest to the original
condition by programmed and periodic check-up and maintenance) with fairly
good amount of accuracy.

This activity although initially done on the recommendation of OEM/OES,

necessarychangesaremadeonthebasisofcumulativeexperienceofmaintenanceengi
neers.Certainparts are necessarily to be changed during preventive maintenance
and other may be on condition/need base
4.9. Provisioning of Spares for break-down maintenance.

Planning for spares for preventive maintenance and periodical overhaul can be
done with fairly good amount of accuracy. The real problem shall be provisioning
of spares for breakdowns. Although rate of failure and average consumption can
be calculated from the past records, exact timing when failures will again occur,
by and large, is beyond any prediction. Average consumption again may be
misleading as in extreme cases, for many months, there may not be any
consumption and for some months, it may be very high. This consumption pattern
may result in overstocking by way of provisioning high safety stock (When the
demand during lead time or length of lead time is highly fluctuating and irregular
i.e. Poisson distribution the calculation of safety stock shall be K (Refer section
4.3.1.1-Determination of Safety Stock). Past records shall, however, give us
feedback on life expectancy spares Provision for requisite service shall be made be
made as per VED and its combination with ABC (refersection6.3to6.3.11)
4.10 Provisioning of Insurance/ Capital Spares

4.10.1 Failure rate of Insurance/capital (for classification of spares and definition of

these spares-Ref.Section7) spares may be very low and many may not be
required to be used throughout life of equipment. However, stock out cost/ non-
availability cost, if needed and not available is extremely high. In view of these
facts, provisioning becomes very difficult. We do now know the probabilities of
failure. We can, however, indicate effect of stocking no spares or stocking one
spare. For example cost of a spare rotor is Rs. 10.00 crore and stock out cost is Rs.
 100 Crore, the loss for each combination of these two stocking policies and two
possible level of demand shall be as under:-

Stocking policy Cost of having a Cost of not having a spare

rotor when not needed
Req (including cost of spare
purchase
Late stage)

0 0 100Crore

1 10crores 0

If we stock 0 and demand turn out to be also 0, no loss is

incurred. But if demand is 1, there will be loss of Rs.100 crores
(For 0 stock)
Similarly if we stock one and there is no demand, the loss is
only the cost of one spare (carrying cost Is ignored) i.e. Rs.10
crores.
If the demand is one spare then the cost of not having a spare is 0.

(a) Suppose the (unknown) probability of requiring no spare is Po, then the
probability of requiring a spare is (1-Po) since we are considering the class of
spares which by and large may not be required more than once in the life time
of the machine, with the help of above we can work out total loss for each
stocking policy.

Stocking Policy Probability Cost of shortage Cost of Total cost

shortage spare

0 1-Po 100 crore - (1-Po)

100 crore

1 0 0 10 crore 10 crore

(b) We do not know value of Po but we know that for some value of Po, these two
costs must be equal and it would then, theoretically, be immaterial whether
 We Stock one spare or none. This value of Po can be calculated from relation
(1-Po) x100 core= 10 crore or 1-Po=0.1 Probability of requiring a spares is 0.1
i.e. 1% we call this the" indifference level".
(c) This mean if the probability of requiring the spare (once) was as little as 1%, it
would be immaterial whether we stock one spare or non-because the total
cost shall be the same for both the decisions.
(d) If this probability were less than 1%, the cost of stocking a spare would exceed
that of not stocking it; hence we should not stock it.
(e) But if probability of requirement exceeds 1% then the correct decision is stock 1 unit.

(f) It may be noticed from the above that the probability of requiring a spare has
still to be assessed but the problem has considerably narrowed down. It is
much easier to say whether the probability is greater or less than a given level,
then to state its exact value. On this basis, if C1 is the initial stage
procurement cost of a spare and C2 is the cost of down time (including late
purchase cost of spare)then the "indifferent level" of probability of requiring
one spare can be simply calculated as the ratio C1/C2.Thus if the down time
cost 100 time the present cost is 1/100 i.e. 0.01 or 1%.If we assess that
chances of requiring spare is less than even this low value, we need not stock
that item, if it is even little more than 1% than we must stock it.
4.10.2 The entire procedure as above can be simplified and summed up as under:

(a) Make an initial assessment of lifetime requirement of the range and quantity
of spares in consultation with manufacturers and O&M experts. This will be an
engineering assessment and at this stage without regard to cost.
(b) Make a PQR analysis (based on unit value of spare) P high unit value, Q-
medium unit value and R-low unit value and isolate high unit value P spares
for further study as in point(c)to(h)
(c) Reconsider high value item again critically and decide which one will almost
never be required. Remove these items from the list (It would be surprising to
see that many items would be removed at second thought)
(d) For the remaining items, isolate the item, which are most unlikely be required
more than once. For such items follow point (e) to (g).
 (e) Note the unit cost C1 for each of these spares and assess its cost of purchase
later, say, at the mid life of equipment. To this cost add likely down time cost
(like loss of revenue during lead-time) this total is C2.
(f) Calculate the ratio of C1/C2 to find out "indifferent level" as explained above.

(g) On a critical analysis of nature of spare and in consultation with O&M expert’s
assess whether the chances of requirement of spare during entire life-time of
the equipment is likely to be less than or greater than the "indifferent level" of
the probability for that spares. If the chance is less, delete the spare, if the
chance is more, stock 1.
(h) For spare which are likely to be required more than once (No. of such spare
will be very small) make an individual assessment of chances of requiring 1, 2
or 3 spares (this task is easier than those spares for which chances of requiring
even 1 spare is very low).
(i) For such spares carry out an analysis of cost as indicated in the following example

4.10.3 The above procedure - (a) to (g) for insurance spares will not give us guaranteed
accuracy. There would still be some error about 15%-20% of judgment depending
upon our engineering assessment. We might stock a spare, which may never be
required; we may not stock a spare but may be required later.
4.10.4 However, with the advent of conditioning-monitoring techniques of maintenance
and fault diagnosis, it is possible to identify requirement, at least, of some spares,
a little advance and initiate differed procurement action accordingly.
4.11 Provisioning of Rotational or unit assembly Spares:

Provisioning of these spares is first do neat initial stage when mandatory spares
are purchased and later during operating stage.
 Quantity of each rotational or unit assembly Spares either in stores or with base
workshop or with user departments can be worked out keeping in view the
population of unit in the plant, probability of failure/ running days working after
which unit has to be replaced, lead time of procurement, standby facilities,
criticality of unit in operation/stock out cost, repair time of defective unit, repair
to be carried by OEM/Reputed organization in the field of repair &
maintenance/in-house facilities. Since, some rotational or unit assembly Spares
items may be very expensive pooling arrangement in multi-plant organization, like
NTPC can also be thought of if interchangeability is there.
4.12 Provisioning of consumable spares:-

All those spares which require replacement due to wear and tear on their
inherently short life are classified as consumable spares -items like fasteners,
seals, gaskets, bearings (grinding rolls, bull ring segment in a thermal power
station).
Majorities of spares in the category are moving spares and repetitive
replenishment action is taken to maintain the optimum stock. These spares can
pass through process of inventory control somewhat similar to other stores.
Based upon consumption pattern, length of lead-time, criticality in operation etc.
their order level, order quantity and periodicity of orders can be determined for
fairly fast moving spares. ABC technique of inventory control can also be used.
4.13 Planning and provisioning of spares shall be done, keeping in view the following
problems which are related to spare parts management so as to make the
exercise more effective
4.13.1Problems of procurement:

(a) Long lead time taken by the manufacturer to supply spares. They process
manufacturing only when orders are there for optimum batch quantity for the
same generation equipment.
(b) The prices subsequently quoted by them are found very high as compared to
mandatory spares and keep on increasing from time to time without any link
with normal inflation.
 (c) Development of sources other than OEM (Original equipment manufacturer)
becomes difficult due to:
- Quantity of spares too small to attract a new source to establish
manufacturing facilities.
- OEM does not provide detailed specifications, drawings, and material
composition etc of spares.

- Alternate sources often fail to meet quality standards–resulting in frequent failures.

- Difficulties in producing technically complicated or higher precision items.

(d) Many of manufacturers do not have proper system of cataloguing spares,

which make identification difficult. Even if catalogues are there, part
numbers/ drawing numbers keep on changing very frequently that it becomes
difficult to keep track.
4.13.2 Problems of quality:

(a) It is almost impossible to check quality of each spare–range being so large.

(b) While each spare is highly specialized, supplier rarely supplies dimensional
drawings, critical parameters and quality tests (quality plans) to determine
their suitability, especially when these are bought out items for them.
(c) Even if those details are available very few users have means to test the spares.

(d) Users as such most of the time have to rely on the reputation of supplier and
may have to content with visual check.
(e) When spurious/ reconditioned spares abound in the market, it becomes very

difficult for plant engineer to assess quality.

(f) Actual trial of spares is also not possible all the time and even if it is, spares
once fitted may have some damages while removing.
(g) Warranties and guarantees offered by suppliers are of little use as majorities
of spares are slow-moving.
4.13.3 Problems of stocking and preservations:

(a) A very large range of spares in a plant requires hundred of racks and bins and
very disciplined and methodical location procedure.
 (b) Storage of particular spares for equipment at one place in stores creates
problems of mixing up of all types of spares and identification of common user
items. This problem can be solved, by keeping Mechanical, Electrical and C&I
spare in different stores and so are they codified. This system helps
maintenance people to identify and select parts of their discipline only. This
also helps potential interchangeability among parts.
(c) Some non-moving and insurance spares may be kept in stores for years
together and until proper methods of preservation, are adopted, their
deterioration, sometime even beyond use cannot be ruled out. For large
variety of materials made of different grades and natures, different
preservation methods are required, some may need dust free cold rooms
whereas others may need humidity free (hot) room. Many preservation
methods are of technical nature and store staff is generally ignorant of that.

(d) Many spares have limited shelf life and storage beyond that make them unusable.

4.13.4 Problems of obsolescence: Refer Chapter 8

4.13.5 Problem of inventory control in distribution:

(a) Investment in safety stock of slow moving spares shall often be out of
proportion to their utility- choice of location of some high value critical
common spares of some power plants shall become important, in NTPC being
multi-units organization.
(b) The advantage of such spares available at plant or shop floor is quick
availability of equipment to reduce down time.
(c) However, large decentralized spares shall tie up considerable capital;
centralization helps to reduce such inventories.
(d) A scientific mythology of identification and rational codification has to be
adopted so as avoid duplicate codes (items performing same functions but
slightly different nomenclatures may have different code). This becomes very
challenging when spares are numerous.
4.13.6 Centralized stocking, however, is fruitful under following conditions:

(a) Spares shall be common for number of plants/stations

(b) Faster and very reliable transport system for quick deliveries including packaging.

(c) Cheap but critical parts are located closest to point of use whereas
expensive and comparatively less critical spares are pooled
(d) Specifications are standardized, drawing / part numbers are upgraded as
and when information is made available.
 CHAPTER–5

Material Requirement Planning

& Just-in Time (JIT) Inventory
Management Techniques
5 Material Requirement Planning & Just-in Time (JIT) Inventory Management Techniques

5.1 Material Requirement Planning

Material Requirement (MRP) is a time phased production planning, inventory

control &scheduling technique that calculates material requirement and
schedules supply to meet demand across all materials and components in one or
more plants.
5.1.2 MRP may be defined as a technique which is concerned with both production
scheduling and inventory control. It is a material control system that attempts to
keep adequate inventory levels to assure that required materials are available
when needed. MRP is applicable in situations of multiple items with complex bills
of materials. MRP may not be fully utilized for continuous processes (like power
generation) that are tightly linked.
5.1.3 The aim of MRP is getting the right materials to the right place at the right time.
MRP process shall facilitate higher turns around of inventory of certain fast
moving consumable spares, certain general stores items, bulk chemicals, refractory
materials/ cement etc within a year. It shall readily be realized that a high
inventory turnover ratio shall be
highlyconducivetoloweringO&Mcostsincelesscapitalistieduptounusedinventory.
5.1.4. Although MRP is flow control system designed to make components (items with
dependant demand) available when they are required, it can also be effectively
used for independent demand some of items falling under category of MRO
(Maintenance, repair and operation supplies).
5.1.5 The subset of MRP that takes care of independent MRO items is known as Time
Phased Order Point. It attempts to minimize the need for the safety stock
inventory. MRP system can be used to achieve some JIT objectives relating to
reduction of lead-time and eliminating waste.
5.1.6 MRP can play an important role in arranging availability of materials including
spares required for preventive maintenance and periodical overhauls/ outages at
the appropriate time i.e. just when it is required through computerized
Maintenance Management System, we may analyse consumption data of
 materials including spares used in the last 5-6 overhauls. With the help of this
data, and length of lead time, requirement of materials including spares, can be
predicted with fairly good amount of accuracy for forth coming overhauls.
5.1.7 Advantages of MRP

(a) Planning process summarizes all requirements and facilitates coordination of

materials ordering. Hence reduces ordering of many small lots of the same
item.

(b) RP allows maintaining a reasonable safety stock level and minimizes or

eliminating unnecessary inventories.
(c) MRP is capable of identifying process problems and potential supply disruption.

5.1.8 We may use the MRP system available with ERP (Enterprise Resource Planning)
provided by SAP. Information technology plays a major role in designing and
implementing Material Requirements Planning systems and processes as it
provides information about O&M needs (linked with Maintenance
Management system) as well as information about inventory levels. MRP
techniques focus on optimizing inventory.
5.2 Just-in Time (JIT) Inventory

5.2.1 JIT concept really covers a wide range of applications. It is dependent on reliable
suppliers, total preventive maintenance, under- capacity scheduling and total
quality control. By integrating all the various descriptions of the philosophy the
following definition of JIT could be considered as appropriate and 0adequate:
“The disciplined and continuous problem solving approach which eliminates all
forms of wastage by employees, suppliers, product design and process design in
order to deliver all forms of goods and services at the right place and time since
the whole business takes part creatively in the progressive elimination of all non-
value adding activities and through the application of sound operations
management principles and guidelines for total quality control. The JIT philosophy
is based on two pillars, namely respect for people and elimination of waste”.
5.2.2 If the underlying reasons for keeping inventory can be eliminated, keeping
inventory can also be eliminated to a large extent. The spares and other materials
 including consumables do not arrive at reliable and predictable times, because
the suppliers are not always reliable especially in the case of OEM not only there
is longer delivery time, it is also highly variable.
Because of above reasons, inventories often exist ‘just in case’ something goes wrong
i.e. variation in length of lead-time or demand from O&M occurs. In such a concept,
inventory management system does not mean ‘just in time’ but ‘just in case’. JIT
inventory is the minimum necessary inventory to keep a perfect system running. In JIT
inventory management system, the exact amount of goods arrives at the movement
they are needed, not before or after the units are required.
5.2.3 It is designed to manage lead-time and eliminate waste with an emphasis on short,
consistent lead-time. Fundamental idea behind JIT is that “inventory exists to cover
up problems’.

Reducing inventory shall force to identify problem area and as a result to improve
operation process. To achieve JIT inventory, we must reduce variability caused
both internal and external factors. If the inventory exists because of variability in
the process, which is the case most of time, we must eliminate variability.
Inventory hides variability- a polite word for problems. If we can get rid of
variability, there is need for very little inventory.
5.2.4 The reasons for variability

(a) Long and variable administrative lead-time (Time that lapses between receipt
of Purchase Requisition and converting it into a Purchase order).
(b) Suppliers produce ordered materials that do not conform to standards, or late
or not the proper quality.
(c) Quantity of spares ordered on OEM is not enough to put in production line
asset up cost for them will be very high. As a result of this, they wait orders
from different customer, that too from the same generation plant, until
optimum batch can be put in production process (set cost involves- every time
a production run is taken up, there is loss of machine time, operator time etc.
which is included in set up cost. Set up cost also includes cost of paper work,
inspection, etc. involved with every production run. Set up cost increases
when the batch size are smaller and the number of batches is large)
 (d) Uncertainty of time while goods are in transit with carriers. There is almost no
guaranteed time for delivery of small load booked either by rail (goods/parcel)
or road transport
(e) Unpredictable requirement of materials at users end

5.2.5 The variability described above may force to hold various types of inventories in the
form of MRO (Maintenance, repair and operation supplies). MRO inventories exist
because need and timing of repair of equipment is unpredictable. The Just-in-case
approach to inventory management deals variability by de-coupling the various
stages of process. De-coupling is accomplished by increasing inventories, until
they are adequate to allow for all types of variability. If variability is large, we end
up with huge amount of inventories.
5.2.6 Figure as below shows a stream full of rocks. The water in the stream represents
inventory flow and the rocks represent problems such as late deliveries (either
due to delay on the part of supplier or carrier through which goods were
despatched) suppliers’ quality procurement procedures or machine break-down.
Higher water level in the stream in the form of excess inventories hides variability
and problems. Because problems are hidden by inventories, they are sometimes
hard to find. For smooth, efficient and economical O&M of power plant, water (in
the form of inactive and excessive inventories) must be lowered to expose hidden
rock (problems associated with procurement and inventory control).
5.2.7 Inventory covers the problems;

Problemsdampupinventory

Quality
VariabilityIn-
transitdelays

Machinebreak-
downLongsetups

Largelotsizes
MATERIALFLOW
Inaccurateengineeringdrawings

(A)

SMOOTHMATERIALFLOW

(B)

5.2.8 Therefore, to achieve just in time inventories, management must begin by

reducing them. Reducing the inventory uncovers the rocks that represent the
variability and problems currently tolerated. With reduced inventory,
management chips away at the exposed problems until the stream is clear and
then make additional cuts in inventory, chipping away at the next level of
exposed problems. Ultimately there will be no inventory and no problems
(variability).
5.2.9 Large safety stock in a conventional system of inventory control may be a
necessity to avoid stock-out either due to change in consumption patter or length
of lead- time or in a worst case both. But in the JIT concept, these are sign of
inefficiency and a source to hideproblems.JIT ensures to let the problems surface
so that they draw the management attention and also resultant solutions.
Perhaps the manager who said, “Inventory is the root of operation management
evils” was not far from the truth. If inventory is not evil, it tends to hide the evil at
great cost. JIT results in more coordinated scheduling with vendors and create
improvement. JIT system relies on high quality logistic management. In JIT as such
lead-times are highly predictable.
5.2.10 Apart from consist, short and predictable lead-time, JIT success further highly
dependable on quality of incoming materials. If goods are found to be of sub-
standard quality or damaged in transit, not only work immediately suffers for
want of materials, it takes time to settle discrepancies. The traditional approach
of leaving the quality to FQA/ indentor shall not be in line with JIT concept of
‘Quality at source’ which eliminates inspection after receipt and avoiding the
need to pack rejects and return for replacement. Supply of quality goods shall be
one of the important attribute of Vendors evaluation/ rating. TQM shall be
adopted as philosophy of quality assurance
5.2.11 Although JIT facilitate drastic reduction in inventories, it is not just technique of
inventory reduction but is a very useful tool of solving problems which are
impediment in the growth of the organization. It is a complete business
philosophy and process of formulating ways and means to climate wastage of any
kind
5.2.12 Adopting JIT and resultant lower inventory does not necessarily mean ‘zero’
inventory. In NTPC, engaged in power generation, unpredictable consumption
and high stock-out cost, JIT may not be possible for all type of store items
especially critical spares. But certainly there are some items where JIT can be
effectively used.
 CHAPTER–6

Selective Inventory Control

Techniques
6. SELECTIVE INVENTORY CONTROL TECHNIQUES:

In our large size stores, there may be a few thousands item having different
characteristics. Annual consumption value of some the items may be very high
whereas for some items this value might be insignificant. Some items might be
moving very fast, i.e. there might be many issues from stores in a month whereas
there may be some items, which might not have moved from stores for years
together. Some items may be imported whereas some might be indigenously
available. Some items may be vital in the operations of the organization and non-
availability might result in huge generation losses if they are required whereas
some items might be desirable

In view of this varying nature of various items, it really becomes difficult to

formulate parameters to control them .It is here, the selective control techniques
help us to control such a large variety of materials.

6.1 Selective Control Techniques used for the purpose of inventory control are as under

Classification Criteria

ABC Analysis (also known as Always

Annual value of consumption of Better control) items (not based on unit

price of items or the
importance of items in
operation)

VED Analysis (Vital, Essential & Criticality of the items i.e .non-
Desirable) availability of items shall effect
operations to what extent (stock-
out cost)
 XYZ (High, Medium & Low stock value) Value of items in the inventory at a
Given timei.e.31st March of
financial year in our case

FSN (Fast moving, slow-moving and Non-moving)

Movement i.e. issues from stores or
Velocity at which items move from
stores

HML/PQR (High, Medium and low

Unit rate) Unit price of the items i.e. price of one

Piece

6.2. ABC Technique of Inventor Control:

This technique is based on Pareto’s law which is relatively simple concept that
identifies and concentrates on only important items. Developed by economist
Vilfredo Pareto, in1886, the law states that in any series of elements to be
controlled, a selected small fraction in terms of number of elements would always
account for a large fraction in terms of effect. Conversely, the majority of the
items will be on relatively minor significance in terms of effect. Pareto’s law is an
important management concept although its practical value was not recognized for
several decades. Today it influences management control system of every kind.
There is most common application of Pareto’s law in inventory management
system, where it is familiarly known as ABC method of inventory control. The
significant items in a given group normally constitute a small portion of the total
items In a group and the majority of the items in the total will, in aggregate, be of
minor significance.
6.2.1 ABC and Inventory control

The first important step in the scientific inventory management is to adopt a

selective approach in laying down inventory levels, order quantities and extent
and closeness of control to be exercised. In absence of a selective approach to the
problem of control, one or both of the following consequences are bound to arise:

(A) The cost of control rises so uneconomically high that it exceeds the value of
any benefit arising out of control action.
(B) Control becomes so diffused and desultory that its very purpose is lost.

In the power stations there may be several thousand items, which may be
required to be purchased and kept in stock. It is very difficult to exercise same
extent of control on such a large number of items. ABC analysis helps getting over
this difficulty.

6.2.2 Categorization of inventory items into A.B.C.:

All the stores items in six power station representing the entire inventory were
analyzed in terms of annual consumption of each in rupee,
itwasfoundthatnotmorethan8-10% items (Annual Consumption Value Rs. 3,00,000
and above accounted for nearly 75-80% of the total annual consumption value,
about 15-20% items (Annual Consumption Value Rs.50,000 and above but less
than Rs. 3,00,000 accounted for another 15-20% of annual consumption value and
balance 70-75%items (annual Consumption Value less than Rs.50,000 accounted
for nearly 6-8% balance consumption value (Analysis Reports may be referred as
Annexure to this manual)

❖ High annual consumption value (Rs. 3,00,000 and above) but small
numbers of items are A class

❖ Medium annual consumption value (Rs.50,000 and above but less than
Rs.3,00,000) but medium number are B class

❖ Low annual consumption value (Less than Rs.50,000) but large number are

C Class items
6.2.3 Since ABC classification is based on annual consumption value of each item, the
items which have no issue during the year cannot be classified either A or B or C.
Such items shall be classified as D.

6.2.4 Effect of ABC Analysis on inventory policies:

6.2.4.1 ABC Analysis helps to put first things first and get control with the least amount of
controlling. It is an analytical approach that helps to concentrate the efforts in the
area, which needs it most. ‘C’ items being numerous and inexpensive, the control
on them is normally relaxed to the extent of even that these items may be
purchased in large quantity on estimated usage. A large safety stock can be
maintained. These items can be put under Fixed Order Quantity System
(Minimum & Maximum System) of inventory control also known Automatic
Replenishment System.

6.2.4.2 The method of fixing inventory policies & Control Techniques

‘A’ items which are small in number but which have high consumption value, very
careful attention and tight control shall be exerted in estimating requirements,
scheduling the deliveries , In prompt delivery and inspection. Their deliveries shall
be arranged on quarterly or even on monthly basis. These high consumption value
items shall frequently be reviewed and a close watch is maintained on their
consumption, forecasts for future demand; stock and progress of replenishment
orders. Little safety stock is maintained for these items and with all these,
inventory levels shall be kept under strict control. Maximum efforts shall be made
to reduce lead-time and as many sources as possible for each item through the
regular vendor enlisting activities. Review system of ordering has to be adopted.
Items “B” class in inventory shall also be watched closely, but review its ordering
strategy less often. Since items in "C" class in inventory shall be the least
expensive, we can order them in bulk and exercise minimal controls; all that really
matters is that there shall not be any stock-out of these items. High consumption
A class items, being few must be handled by senior officials where operation of C
class items can be left to lower staff, once the various levels are fixed.
6.2.5 Advantages of ABC Analysis:

Identification of both extremes concerning the ‘vital few’ and the ‘trivial many’,
the extent of the mal-distribution is usually shocking. ABC Analysis shall also
facilitate the development of appropriate policies, systems, and procedures
suitable to brining about improved control according to differing characteristics of
the established inventory classifications. Resources are better apportioned and
utilized in order to create cost savings and other benefits. It also helps in finding a
consensus view concerning priorities. This shall be a major contribution as It sets
the stage for action.
Following are some of the practical advantages:

(a) Saving in purchase prices due to concentration of efforts on A&B items and
larger order quantities of C items
(b) Reduced receiving & inspection costs through processing fewer orders and
elimination of handling and processing the materials and/or paper work for
many small value items.
(c) Reduced materials handling and internal transportation costs because of
fewer load and easier load.
(d) Saving in cost of processing and payment to vendors because of fewer
invoices to process.
(e) Improvement in service level in stores operation through better and balanced inventory.

(f) Reduction in total average inventory after the initial surge of larger C items
order quantities work down and as a better purchasing performance reflects
in reduced costs for A and B items due to more concentrated purchasing.
(g) General improvements in all involved departments because of elimination of
such unnecessary work and improvements attained through concentration of
the resource so relieved.
The area of this technique extends to almost every aspect of materials
management viz. purchasing, receiving of materials, inspection, store-keeping,
verification of bills, inventory control, value analysis both pre-design and pre-
 Purchase and related operations. VED (Vital Essential & Desirable) Analysis

In ABC analysis, items are categorized A, B and C on the basis of annual

consumption volume whereas in V E D Analysis items are categorized in V (Vital),
E (Essential) and D (Desirable) categories on the basis of criticality i.e. non-
availability of the items shall effect the operations to what extend (Stock-out cost
or non-availability cost).
V-Vital: Critical items which render equipment totally and immediately in
operative or unsafe to operate it any more i.e. If not in stock will
result in high losses and complete closure of plant for a considerable
time.
E-Essential: Important items, which reduce the equipment performance but do not
renderintounsafeorinoperativeimmediately.Stockoutofsuchitemswou
ldresultin expensive procurement, stoppage of work in a major area
of the plant for which no standby facilities are available. But if not
made available within reasonable time, may become Vital.
D- Desirable: Desirable but non-functional items, which do not affect the
performance of the equipment. Stock-out results in nominal
disruption for a short duration.
6.3.1 In case of spare parts VED classification shall be done with V E I N classification of
equipments used in the power plant i.e. equipment themselves are to be
classified as Vital, Essential, Important and Normal. This shall help to use this
technique more effectively.
Vital Equipments- Break-down of these equipments shall immediately result in

Loss of power generation

Essential equipments- Break-down of these equipments, having standby facilities,

Shall not immediately result in loss of power generation

but if not made operative, in next breakdown may
result in loss of generation.
Important equipments Break-down of these equipments shall result in disruption in

an important area which, however, shall not affect our

 prime businesss i.e. generation of power
Normal equipments- Break-down of these equipments shall result in disruption in

Area of insignificance

6.3.2 Combination of VED for individual item of spares and VEIN for the equipment
shall help to identify most critical spares, non-availability of which shall result
immediate loss of generation, the core business of NTPC.

6.3.3 Determination of essentiality or criticality should be done with the help of

maintenance and operation experts, whose judgment is essential to derive a
ranking of equipments VEIN and the individual items as Vital, Essential and
Desirable for Vital & Essential Equipments. The factor to be considered, are
essentiality, importance of each part to the ultimate goal, degree to which it can
be compensated for, if lost and urgency to which it must be replaced.
Classification of criticality has to be done carefully otherwise safety stocks shall
shoot up, thereby increasing inventories
6.3.4 ABC/VED Analysis

Conventional method of ABC shall have only a limited use in spare parts field.
What is more important here is the Criticality i.e. cost of not having a part which is
known as under-stocking cost. Thus a C category bolt costing a few hundred
Rupees may be very critical to operate the machine and hence the first step for
spare part management is VED Analysis.
Once the ABC/VED classification is done, jointly by Operating and Maintenance
and Materials Management Departments, a more effective and selective control
becomes possible.
Thus if a part is vital but a C category item, it shall be logical to carry a reasonably
high stock, on the contrary, if a spare is only desirable but an A category item,
then it is natural to carry as low stock as possible.
6.3.5 The following table will give a broad guideline.
 LOGIC FOR INVENTORY SYSTEM:

COST CRITICALITY

Vital Essential Desirable

A Medium Stock Low Stock Very low stock

B High stock Medium stock Low Stock

C Very high stock High stock Medium stock

6.3.6 STATISTICAL TABLE OF SERVICE LEVELS

Based on annual consumption value of spares:

A B C
Based on V 85% 95% 99.9%

Criticality of E 75% 85% 95%

Spares D 50% 75% 80

6.3.7 Safety stock shall be

(i) If the demand and length of past lead-times is fairly stabilized (Normal
distribution), safety stock can be calculated as under.
Safety Stock=K D
Where K is service level and D is mean demand during lead-time (Details in Section 2.2.2.1)

(ii) When the demand during lead time or length of lead time is highly
fluctuating and irregular (Poisson distribution) the calculation of safety
stock shall be K
Where K is constant and is standard deviation of demands during
lead times. Safety stock is this case shall be=K
 =K ∑(x-m)²N-
1
x-Each value in the sample
m- Mean (arithmetical average) of
values
n –Number of values

Value of K which is constant shall be 0-4 depending on how critical the spare is.
For the above service levels of percentage, please link with corresponding value of
K in the table-Section6.9. (Formoredetailsonservicelevel,ref1.5)
For details on determination of Safety Stock & Service refer 2.2.2.1&2.2.2.2

Value of ‘K’ Chances of Stock-out% Service Level%

0 50 50
0.5 30.85 69.1
5
1 15.70 84.2
2
1.5 4.68 93.3
2
2 2.28 97.7
2

2.5 0.62 99.3

8
3 0.13 99.8
7
3.5 0.02 99.9
8
3.9 00 100
6.3.8 For determination of safety stock, if value of K is taken as 0(zero), safety stock
shall also be 0 (zero) and if we initiate replenishment action when the available
stock is equal to mean average demand during this period, there are 50% chances
that consumption during lead-time may be more than the mean average
consumption during lead-time in the past and 50% percent chances are that
consumption may not be more than this stock. We can as such conclude that if
value of K is 0 and so is safety stock; there shall be 50% service level.
6.3.9 If we enhance the value of K from 0 to 3.9 incrementally there shall be increase in
safety stock and with this service level shall improve and chances of stock shall
correspondingly diminish. It shall, however, be noticed that with every increase in
the value of K there shall not be matching/ corresponding increase in service
level, it shall rather be diminishing. For instance we take value of K at 1 service
level will be improve from 50% to 84.22 i.e. improvement of 34.22%. However, if
the value of K is taken as 2 i.e. increasing safety stock to 100%, corresponding
service level shall be 97.72 and corresponding improvement shall only be 13.50%
(97.72% - 84.22%). Similarly, if we increase quantum of safety stock to three
times by taking value of K as three, corresponding service level shall be 99.87.
This time improvement shall be 2.15 (99.87-97.72) only. Again if take the value of
K as 3.9 i.e. increasing it to four time, improvement in service level shall only be
0.13% (100% -99.87%).
This is economics ‘Law of Diminishing Return’.

6.3.10 It shall be observed that law of diminishing shall be operating here. Facilitating
increasing level of assurance, increases investments in safety stock tremendously
and out of proportion to the benefit accruing out of higher level. Hence the level
of assurance has to be chosen very judiciously.
6.3.11 Thus we can safely conclude that additional inventory beyond a certain level do
not add to value but impact organizations profitability by burden of additional
inventory holding cost. Thus efforts need to be made not to increase the
inventory level to improve service level but to balance it to achieve optimization
of resources.
6.3.12 In the above Matrix (ABC/VED techniques), service level gradually decreases from
 99.9% for VC items to very low for AD items i.e. 50%- implying no safety stock.
Service level as such has bearing on inventory holding. Since the stock-out cost of
AV, BV and CV items is very high, service level between 85-99.9% shall be
recommended i.e. value of K between 1 and 3.9. As against this, stock out cost of
items falling in categories AD, BD and CD is low and service level of 50-80% shall
be recommended i.e. value of K between 0-0.8

6.3.13 Summary of Control Action:

Thus a combination of ABC and VED classification/ analysis helps in reallocating

scarce resources from non-critical areas to critical areas i.e. balancing our
inventory holding and optimizing resources utilization.
The above control action can be summarized as under:

a) The more critical spare to the function of machine is; high assurance of
availability has to be ensured, necessitating greater safety stock.
b) If the part is low value, we shall provide an extra assurance of
availability, the additional cost of safety stock being low.
c) The more frequently a spare is needed (higher consumption pattern);
the higher shall be the assurance of its availability which shall be
ensured through decentralization of stock i.e .some quantity shall be
available with user departments in unit sub-stores.
d) We shall, therefore, be most generous with safety stock of critical,
cheap and fast moving spares since cost of holding extra safety stock
(additional inventory holding cost) is small but cost of stock- out (losses
related to non-availability, when needed) shall greatly be diminished
(For vital C category items we can even go for value of K as 3.9/4
e) By the same logic, we shall reduce the safety stock of expensive, slow
moving and non-critical spares and thereby save ourselves of greater
deal of investment (value of K can be even 0)
6.4. XYZ classification:

XYZ Analysis is similar to ABC (Pareto) analysis but unlike ABC, this is based on the
value of inventory at the end of a period, normally closing date of financial year
and in our case it is stock value of each item on 31st March of Financial Year and
 not on annual consumption value. X items are those whose inventory value is
high, Y items whose inventory value is medium and Z whose inventory value is
low.
6.4.1 Items shall be classified as X Y and Z by working out stock value of each item in
stock as % of total inventory value arrange them in descending order of
magnitude and also indicating against each the accumulated value till value
reaches to around 70% of total inventory value of power station/ project. These
items are classified as x items. Similar exercise continues till the accumulated
value reaches to around 90% of total inventory value. Items falling Between 70%-
90% accumulated value shall be classified as Y and all the remaining items shall be
known as Z items,
6.4.2 In order to arrive at a common thresh- hold inventory value as on 31st March of
financial year for XYZ classification data of six power station for the financial year
11-12 and 12-13 was analyzed. It is found that X items with stock value
Rs.3,00,000 and above as on 31st March of FY accounted for 65-70% of total stock
value whereas these items represented 3-5% of total items in stock. Y items with
stock value Rs. 50,000 and above but less than Rs. 3,00,000 as on 31st March of FY
accounted for 15-20% of total stock value whereas these items represented 10-
15% of total items in stock. Z items with stock value less than Rs. 50,000 as on 31 st
March of FY accounted for 8-12% of total stock value whereas these items
represented 75-80% of total items in stock. (Analysis Reports may be referred as
Annexure to this manual)

In view of above thresh-hold stock value of stock as on 31st March of FY for the
purpose of XYZ Analysis shall be
X items stock value Rs.3,00,000 and above as on 31st March of FY

Y items stock value Rs .50,000 and above but less than Rs.3,00,000 as on 31st
March of FY
Z items stock value less than Rs.50,000 as on 31st March of FY
6.4.3 XYZ Analysis shall give us immediate reflection as to which expensive items are
held in stock and how the total inventory is spreads as main-group classification
wise and different indenting departments. XYZ is also a strategic technique which
enables management to exercise maximum control on high stock items.
6.4.4 This technique if used in combination with ABC classification and shall be an
effective tool in controlling the inventory holding and guiding the inventory
policies as is evident from the following matrix of XYZ and ABC.

X items Y items Z items

A items Critical analysis aiming at Attempts can be made items are

to within
Reducing stocks Reduce the stocks to Z The control

Category

B Items Consumption v/s stock Further action in Can be

control reviewed
Should be reviewed May not be necessary Twice a year.
as
Frequently Items are within control limits

C items Steps should be taken Control should be Can be

reviewed
To dispose of surplus lightened annually

Stock (Stock holding more

Than 6 years)
6.5 PQR (HML -High, Medium & Low Unit Rates) classification:

This classification is opposite to ABC i.e. in this case the criteria are unit rate of
item (value of one piece) and not annual consumption value and not the value of
stock holding at a given time. Items are listed in descending order of magnitude of
unit value and three categories that is P (High unit rates, also known as H items);
Q (medium unit rate also known as M items) and R (low unit rate also known L
items) limits are decided.
6.5.1 We may classify items with unit rate each of Rs.10,00,000 and above as P items
and those whose unit rates are Rs. 50,000 and above but less than 10, 00,000
each as Q items (intermediary items as medium unit value items) and below unit
of less than Rs.50,000 as R items (low unit value items). The data of six power
stations for FY 11-12 and 12-13 was analyzed (this exclude high unit rate items
which are capitalized and tagged under head ZCSP-non valued) found that
number of items with unit rate above Rs.10,00,000 and above is between 50-100
items (Analysis Reports may be referred as Annexure to this manual).

In view of above thresh-hold unit rates for PQR Analysis shall

be as under P Items-Unit rate Rs. 10,00,000 and above

Q Items-Unit rate Rs.50,000 and above but below

Rs.10,00,000

R Items- Unit rate Less than 50,000

6.5.2 On the basis of this classification management may delegate the authority of
procurement at various levels. Similarly authority to requisition and get the items
issued from Stores may also be delegated and can be used as an effective tool to
keep control over consumption at indentor’s end. Storing policies including
security in Stores may also be decided keeping in view this classification. Similarly
frequency of stock verification of P (H) items shall be determined
6.5.3 Identification of pooling spares: PQR (HML) shall be effectively used to identify
spares for pooling among power stations having common equipments. Pooling of
high unit rate items at various power stations shall contribute to reducing stock of
 such items at individual power station and optimize available resources.
6.6 F.S.N. (Fast moving, slow-moving and non-moving) Classification:

This classification is based on pattern of movement of items for a specific period

i.e. issues from stores (velocity with which they may be consumed) viz .fast
moving, slow-moving and non-moving items.

6.6.1 This analysis is based on average stay of item in stores and its consumption rate.
Longer is stay in stores; slower, shall be its movement. Conversely, fast moving
items shall have a shorter stay. Thus we will find in our stores that some items
have many issues in a month/year (Classified as F), some may have few issues in a
year (Classified as S), and some might have not been issued during year(s) and
classified as N
6.6.2 This classification is a very effective tool to control obsolescence and redundant
inventory. The reasons for non-movement of items are analyzed. There might be
a change in technology or modification or R&M in power station and these items
may not have any use in future. Efforts are made to find out alternative uses but
failing this, economical disposal shall be considered. Sometime the items become
non-moving due to change in specification. Movement analysis is the technique,
which helps to identify slow moving and non-moving items.
6.6.3 In NTPC, the following may be the criteria to identify slow moving and non-
moving items(based on inventory position as on 31st March of each financial year)
6.6.3.1 Since Spares by nature are slow moving, following shall be the criteria for
classification
Non-moving Spares: No issue for the last 5 years or more but stock exists.
Slow Moving Spares: Not issued more than twice in the last five years but stock exits.

6.6.3.2 Inventory items other than Spares

Non Moving: No issue for the last one year or more but stock exists.

Slow- moving items: Not issued more than twice in the last one year but stock
exits .Capital /insurance / rotational (Capitalized spares) spares are excluded
from this analysis:
6.6.4 Some of the fast-moving items other than spares shall be declared as ‘stock items’,
also known as recurring items (items brought under automatic replenishment
system), in order to ensure ready availability of these items for use all the time.
6.6.5 This technique can also be effectively used to establish most suitable stores
layout by locating fast moving items near the issue counter to reduce handling
time and cost.

6.6.6 Combination of Movement Analysis with XYZ

As stated above, this classification when used in combination with XYZ

classification shall be an effective guiding factor in lying down inventory policies.
This is made clear with the following matrix:

F Items S items N items

X items Tight inventory Reduce stock immediate review of

Control as to very low items To identify
stocks Are in level. surplus/redundant items
excess and arrange disposal at
Optimum cost

Y items Normal inventory Low level of stock Review as above and

Control disposal on priority

Z items Increase stocks Low level of stock Review and dispose of

Suitably as this surplus/redundant items,
low Action for X N and Y N
Stock-out anytime items

6.7 SDE (Scarce, Difficult and Easy) classification:

This classification is based upon the purchasing problems of availability of item in

the market, scarcity, length of lead-time and geographical location and reliability
 of suppliers
6.7.1 Scarce items are those, which are in short supply in the market and not easily
available. At times it might be necessary to develop an alternate source of supply
of these items. It may be an item, which is very difficult to manufacture, there
may be very limited number of suppliers and delivery lead-time by supplier is very
long (over 12-18 months)
6.7.2 As against this, there may be some items, which are not scarce but it is difficult to
buy and delivery period by supplier is long (over 3 months – 12 months); suppliers
few in number are at a long distance and there is long transit time.
6.7.3 Easy items are normally standard one and are routinely stored by vendor and
supplies are available ex-stock from local/regional market i.e. supply exceed
demand and there is buyer market; delivery lead-time by supplier is less than 3
months.

6.7.4 Control Action:

(a) For items falling in the category of scarce and difficult, high consumption
value (A class) and critical (Vital), perfect planning, maximum market
intelligence system, low inventory but minimum stock outs by application of
vigorous inventory control system, phased deliveries and constant follow up
shall be needed, certain high value spares (having interchangeability) shall be
considered for establishment of Spares Bank (Pooling of spares).

(b) High value items, slow moving either scarce or difficult but falling under non-
critical category, cost reduction techniques such as development of alternate
sources of supply (other than OEM) including import substitution shall be
considered. Pooling of spares/ establishment of Spares Bank can also be
considered for this category also.
(c) Technique of source development and import substitution shall initially be
limited to category b) above only and after its successful results; we shall look
for applying these techniques to items in category a) above.
 CHAPTER–7

Classification of spares and

capitalization, Pooling of
common use high value
spares
7.1. Classification of spares

Spare parts are to be classified into following two categories

(a) Capital Spares

(b) Inventory Spares

7.1.1Capital spares (major Insurance and rotational-insurance like unit assemblies)

received as mandatory are to be capitalized along with main plant and
transferred to fixed assets. Costs of capital spares are amortized over the useful
life of the related plant and machinery. Depreciation on main plant and
capitalized spares is charged accordingly. Such spares If procured, even after
commissioning, a real so capitalized after receipt and depreciated during residual
useful life of concerned plant and machinery.
7.1.2. Inventory spares are used for repair and maintenance are carried in stores at cost
and charged to revenue (O&M cost) when issued from stores
7.2 Defining Capital Spares

Major Items of spare parts which are not normally required for routine
maintenance as chance of failure may be very remote having very high inbuilt
potential of performance, some may have as long life as that of equipment (may
not be required during the entire life of equipment) but cost long shut down of
vital equipments or entire plant in case of non-availability, when needed for use,
are treated as capital spares. These major spares are generally, characterized by
irregular consumption not easily susceptible of closely foreseen are of high
reliability of performance and high value. An additional criterion for capital spares
is that there is long procurement lead time and are normally not available with
original equipment manufacturer, for off the shelf deliveries. These major spares
are normally capitalized and depreciated in such a way that their value is written
down during life span of plants. Following shall be, some of the characteristics of
these spares
 (a) These spares are also called emergency spares, critical spares or standby
spares. Since, these spares have a very high-inbuilt reliability of
performance; some may have as long life as that of equipment.
(b) These spares are usually purchased along with the equipment after making
life time assessment and are usually capitalized by depreciating over a
period of time. They are as such known as capital spares.

(c) Since, categorization of spares as capital spare is based upon factor such as
price, reliability, stock out cost, availability lead-time, obsolescence etc.
authority for this classification rest at substantial high level of
management.
(d) Non-availability/ Stock out cost of these spares when needed is very high,
obviously be more than, if part is purchased with the machine and
associated holding cost.
(e) Obsolescence is very high as far capital spares are concerned. By
capitalizing these spares, their value is depreciated over a period of time
and when the equipments are finally discarded/ phased out, write off and
subsequent disposal of insurance spares become easy, having small book
value. These are dedicated spares for particular equipment, as soon it is
phased out, and spares cannot be put to any alternative use and have to
be disposed of normally as scrap.
7.3 Rotational assemblies like Capital spares

Certain major assemblies, sub-assemblies, kept as standby, are replaced as a

complete unit to release defective assemblies for repair in order to cut down on
costly idle time of equipment. Such assemblies or sub-assemblies (Functioning unit
itself), which are to be replaced as complete unit for quick repair/ availability of
critical equipment, are classified as rotational assembly spare. Following shall be,
some of the characteristics of these spares
(a) Theses spares are known as rotation type capital spares as defective units
after replacement and repair are required to be stored for future replacement. It
is less expensive to repair them than discard and purchase new unit for
 replacement. Such complex assemblies have an important function in generating
equipment and which can be quickly replaced by a spare unit.
(b) Spare part assemblies such as pumps, engine, motors, and certain types of
valve, actuators, and clutch assy. Are some of the example of rotational
assemblies.
(c) These spares are not normally scrapped and must be repaired and used again.

(d) In order to reduce down time of equipment to the barest minimum,

replacement shall be done in such a way that stock of rotational or unit assembly
spares has to be maintained in stores or base workshop.
(e) These spares are expensive and as such holding cost is quite high and are
capitalized. Philosophy of maintaining stock is to cut down costly idle time of
equipment and normalize power generation and as such they shall not be treated
as part of normal working inventories.

(f) Similarly non-availability (stock out) cost of these spares is also very high
involving time of procurement/ repair of defective unit.
(g) In absence of in-house facilities for repair, these are normally sent to OEM
or reputed repair workshop for repair.
(h) If in-house facilities are used for repair, necessary provisioning of
components has also to be done.
7.4. Capitalization of Spares (Capital spares-major Insurance and rotational-
insurance like unit assemblies)
Mandatory spares supplied as per terms of agreement with plant equipment supplier, are

Kept as capital work–in-progress till the main plant is capitalized. From date of
capitalization of main plant, these spares are transferred to normal inventory
which are charged to revenue at the time of issue to O&M. Some of the major
spares which are capital spares by nature, as defined above, are capitalized along
with plant and machinery and are transferred as fix assets. Depreciation on the
main plant as well on capital spares is charged accordingly. These high value
spares are kept ready for standby use for the plant and their utilization depends
upon the need of plant. Such major spares procured, subsequent to
 commissioning, are also capitalized from the date of purchase and written off
during the remaining operative/ residual life of plant.

7.4.1 As stated above, is the standard accounting process of capitalization of Capital

spares (major Insurance and rotational-insurance like unit assemblies) and is as
per the AS10 (Accounting Standards) -Para 8.2 (notified by Companies Rules,
2006 as amended from time to time) on Accounting of Fixed Assets, reproduced
below:
“Stand by equipments and servicing equipments are normally capitalized. Machinery
spares are usually charged to the profit and loss statement as and when consumed.
However, if such spares can be used only in connection with an item of fixed assets
and their use is expected to be irregular, it may be appropriate to allocate the total
cost on a systematic basis over a period not exceeding the useful life of the principal
item”
7.4.2 Electricity (supply) Annual Accounts Rules 1985, relating to Electricity Boards and
approved by Comptroller & Auditor General of India (C&AG), as reproduced
below, also support this accounting system.
“Capitalization of capital spares at generating station”

Capital spares at generating station purchased prior to commissioning of

generating station shall be capitalized upon commissioning of generating station
for which the spares are purchased.
Capital spares subsequent to the commissioning of generating shall be capitalized upon

Purchase”

7.4.3 ICAI-Expert Advisory Committee, who keeping in view the above provisions of
AS10 and Electricity (Supply) Annual Accounts Rules 1985 has also confirmed,
above practice of capitalizing insurance/rotational/unit assembly spares received
along with equipments as mandatory/ recommendatory spares at the time of
commissioning also those which procured and received after commissioning of
plant, as under:
 “The Committee is of the opinion that spares which are of capital nature, e.g. standby
units be capitalized whether procured prior to or subsequent to the commencement of
commercial production”

7.4.4 Para4 of AS-2 in this regard is as under

“ ........... Inventories do not include machinery spares which can be used only in connection

With an item of fixed asset and whose use is expected to be irregular; such
machinery spares accounted for in accordance with Accounting Standard (AS) 10,
Accounting for fixed assets”.
7.4.5 The value of capital/insurance spares in stock (hither to be a part of working
capital) is transferred to fixed assets of the organization and there by subjecting
them to depreciation at the rate as applicable to the related principal equipment
as per the electricity supply Act.
7.4.6 Benefits of capitalization.

(a) Compliance to legal requirement

(b) Some of major capital spares may have as long life as operating life of
equipment. In case these are not used during life span of equipment, they
may become obsolete. Against original book value of these high values spares,
scrap value for disposal, if becoming obsolete, may be very small resulting in
huge write off.

(c) By capitalizing and depreciating these major spares, their total cost is adjusted
over a period of time. During late stages, when they become obsolete and
required to be disposed of as scrap may fetch an amount almost near to the
book value, thus avoiding high write off.

(d) Since movement of these spares is very low, their huge value shall unduly
affect the working inventory. By capitalizing some of high value and major
capital spares, working inventory can be balanced.
(e) By capitalizing the major spare we may also get relief of taxes on depreciation
as per rules.
 (f) Since these high values capital (major insurance/rotational assemblies) are
capitalized, purchased before or after commissioning of plant, rational
provisioning can be made without any constraint of working capital, thereby
ensuring higher plant load/availability factor, thereby improving customer’s
confidence and satisfaction, an important ingredient of organizations success.

(g) By evenly dividing depreciation, when such spares are used, their cost is not
suddenlydebitedtomaintenancecostandwillnothaveimmediatesubstantialeffec
tonprofitability. When the units are new, maintenance cost is low and
profitability is high. Gradually the unit will become older and maintenance
cost will increase, chances of using such major capital spares at this stage are
very high, whereas profitability tends to become lower. If original PSL cost of
spares is booked to maintenance cost at this stage it may have adverse impact
on profitability for that year although using the spares at this stage may result
in de-capitalizing its WDV having some comparatively small effect
7.4.7 Presently spares to be as covered under Accounts Circular No .2.19 dated No .15.3.2001,

2.38 dated 24.4.2003 and System Circular No. 63-2012 dated 28thSept 2012 or any
addition or deletion made in the list as per the provisions of AS 10 in this
respect or as agreed by CERC from time to time (CERC norms for 2014-2019
permit capitalization of initial spares @4% of Plant & Machinery cost on cut-
off date, excluding IDC-Interest during construction, IEDC- Incidental charges
during construction, land cost and cost of civil works).As indicated earlier
while placing orders/ contracting for main plant, provisions are also made for
mandatory spares. Out of these spares ZCSP nature spares are capitalized –
retained in stores as non-valued; and other spares kept in stock and charge
to revenue as and when issued. In view of this, we have to be very careful
and pre-assess what is permissible and what spares will be capitalized and
what will be the gap. To fill this gap, if any, of capitalization of spares, we
have to place orders for additional capital spares and procure within the cut
off date of capitalization (Within two years from COD-Commercial
Operational Date), of the project so that it gets
 capitalized before cut off date and advantage in tariff is availed.

st
7.4.8 As CERC (Terms & Conditions of Tariff) Regulation 2014 “Cut Off Date” means 31
March of the year closing after two years of the year of commercial operation of
whole or part of the project, and in case whole or part of the project is declared
under commercial operation in the last quarter of a year, the cut off date shall be 31 st
March of the year closing after three years of the year of commercial operation

Provided that the cut off date may be extended by the commission If it is proved
on the basis of documentary evidence that the capitalization could not be made
within the cutoff date for reasons beyond the control of the project developer.
The above meaning of cut off date for Tariff Regulation 2014-2019 is subject to
changes made in Regulation by CERC from time to time.

7.4.9 We should also continue identify high unit rate spares (falling under category P
i.e., unit rate of Rs, 10,00,000 and above as per PQR/HML analysis- Section 6.5)
and not moved for 5 years are more (Movement Analysis or FSN Analysis-Section
6.6) and in consultation with Corporate Finance & OS possibly of inclusion in the
‘list of items to capitalized’ should be explored from time to time.

7.5. Pooling of high value common spares

In view of very high non-availability cost of critical spares i.e. break down in major
area of plant and sometime even loss of generation, adequate stock holding of
such spares become essential. High availability of such spares is important in
order to ensure prompt break-down maintenance and some time even preventive
maintenance. However, some such spares being high value, inventory holding very
adversely impact working capital management and also inventory holding cost to
our profitability. In a big organization, like NTPC, having multi-plants, we can take
advantage of pooling such spares between identical units rather each holding
substantial stocks. This shall not only result in low investment in inventories,
saving scare working capital but also optimization of available resources.
Improved service level shall ensure higher PLF/ Plant availability factor. We shall
identify high unit rate spares (falling under category P i.e. ,unit rate of
Rs10,00,000 and above as per PQR/HML analysis-Section 6.5) which are critical,
slow moving spares common in few power station (commonality across NTPC
shall not be feasible) and declare them as pooling spares and details of such items
should be notified to beneficiary stations. Corporate OS shall be focal agency,
maintaining data of availability of such spares with various beneficiary power
stations and also coordinate inter-unit transfers in the event of need by them. We
may also establish mechanism for replenishment action as and when required,
keeping in view the provisions of Delegation of Power.

Following issues shall, however, be taken care to make the pooling more effective:

(a) There shall be one and only one code for pooled spares in code catalogues.

(b) Specifications with latest drawing no. /part no. of OEM for pooled spares shall
be standardized and freezed. No power station shall have excess to make any
modification even in the long text except concerned ERP group at CC.
(c) Such spares when received at power station, care shall be taken that original
packing is disturbed least and after inspection brought to original condition as
far possible and are kept ready for movement from one station to other in a
short notice.
(d) Proper infrastructure shall be developed for prompt transportation from one
location to the other whenever such spares are required to be moved.
(e) Since these slow moving spares remain in stores for long time, proper
preservation has to be ensured as per recommendations of Original
Equipment Manufacturers.
(f) Standing committees shall be constituted for major equipments of power
generation comprising of experts from corporate /regional OS, MTP &
maintenance experts of relevant power stations to identify commonality
between various units/plants and poolable spares and also beneficiaries. Such
data shall be made available to beneficiary power station and should be
updated from time to time. If required, details shall also be collected from
OEM. The nominee of corporate OS shall be the coordinator and also
responsible facilitating inter-unit and also replenishment.
 CHAPTER–8

Obsolete, Unserviceable and

Surplus/ Redundant Materials
8 Obsolete, Unserviceable and surplus/ redundant materials

Obsolescence is the price we have to pay for technological innovation and up-
gradation thereof. We cannot afford to continue with old technologies/ systems
and modification/ replacement has to be carried out from time to time to ensure
generation at the lowest possible costs and also to increase span of life of
operating units. Obsolescence as such cannot be avoided but it can be minimized if
concentrated efforts are made in this direction.
8.1 Defining obsolete items:

These are items, which are not damaged/ scrap brand new items in stock but are
no longer useful to the unit/ organization owing to many reasons such as
• Change in process and materials,

• Phasing out of equipments (where the equipment has either out lived or
has been replaced by some other make/model)
• Process of standardization,

• Renovation & Modernization may be another reason contributing in large

number of spare becoming obsolete when old generation equipments are
replaced to give a new lease of life to our old/ aging power stations.
Spare parts are more prone to obsolescence than other materials such as
consumable and raw materials. However, individual items need to be critically
reviewed before describing them as obsolete items.
Some facts about problem of obsolescence of spares:

(a) Raw materials never become obsolete. Consumable rarely become obsolete
and even if they do, they can be put to alternate uses.
(b) Spare parts do not have these advantages. It is very high in electronic
equipments and spares than any other category of materials.
(c) In spares again obsolescence shall be very high in C&I/ Electronic spares
where technological changes are very fast and disposal value of such spares is
almost negligible
(d) In case of bought out spares of OEM, obsolete spares may be used as they are
common in many equipments (Items like bearing, fuses, V belts, pipes & pipe
 fittings, valves, gauges etc). But this is not the case with dedicated or machine
specific spares which may be used only for a specified equipment.
There shall be no neat solutions to these problems, which are by-products of
industrial growth. However, if we are vigilant, effect of obsolescence can be
minimized, although it cannot be eliminated.
8.2. Reasons for obsolescence:

8.2.1 Problems in initial provisioning of spares:

Initially for mandatory/recommendatory spares we are simply guided by

recommendations of original equipment manufacturers and tend to buy some
spares, which do not move for years together and subsequently become obsolete.
Such situations arise due to:
• Relevant consumption/ usage data not available.

• No experience regarding performance of equipments.

• Manufacturer’s recommended list of spares, which is not reliable, all

the time, is the only relevant data available. Manufacturer really cannot
indicate the optimum mix of spares due to his own unfamiliarity with
user economics and environment. Manufacturers at times tend to
recommend slow moving and or non-moving items.
• In case of imported spares- fear of non-availability in future or long
lead-time, tempt to play safe and buy more
8.2.2. Phasing out of equipment:

Sometimes the equipment may become old and they may be phased out. Such
replacement may be with latest model of same or other manufacturer, more
effective and cheaper to maintain, due to technological renovation. The spares for
old equipment with stores or users become obsolete. Sometimes equipment itself
becomes obsolete due to non-availability of requisite spares in the market,
production of such equipment discontinued by the original equipment
manufacturer. Available spares also become obsolete along with such equipment.
8.2.3 Lifetime procurement of spares:

For equipment, which is subject to frequent technological changes, such as control

and instruments, computer, communication and electrical equipment etc.,
manufacturers recommend purchase of life time requirements of spares along
with, as they do not guarantee supply of spares in future. Many of lifetime spares
so acquired may not be used during the life of equipment and they may tend to
become obsolete.
A similar situation may also arise, if the manufacturer, owing to any reasons,
discontinues the production of equipment (As per contractual obligation,
manufacturers serve at least one year notice of impending discontinuation of
manufacturing spares). Considering this as last opportunity for purchase of spares,
higher quantities and many additional spares are procured, many of which later
prove slow moving/ non-moving and even become obsolete.
8.2.4 Process of rationalization/ standardization

Rationalization process including standardization, variety reduction, value analysis

etc. may also sometimes render items as obsolete.
8.2.5 Economic bulk buying:

Procurement decisions of buying in bulk, involving attractive discounts,

transportation economy etc. may also tempt to buy more than what is needed for
immediate future. The additional quantities so procured, sometime become
surplus and at a later stage even obsolete.
8.2.6. Higher stock-out/non-availability cost of spares:

Stock-out cost i.e. non-availability cost /down time cost of much critical equipment
may be very high and in our anxiety to ensure high availability of this equipment,
we may tend to requisition high quantities/additional spares, to be on safer side.
This increased inventory holding may times result in higher obsolescence losses.
8.2.7 Increased cost of spares-hoarding thereof:

The cost of spares may keep on increasing and sometime even steeply. In view of
this, we are tempted to buy more than what is needed immediately. Experience
 also tells that original equipment manufacturer quote very competitive rates of
mandatory/ recommendatory spares along with equipment to keep down cost of
total package while competing with other manufacturers. Once the equipment is
purchased, they charge normal rates of spares which most of the time are much
higher than mandatory/ recommendatory spares rates. In view of these
phenomena higher quantities/large varieties of spares are purchased. Such
additional quantities for many spares are later found excess/ surplus and
sometime become obsolete.
8.2.8 Improper codification and faulty storekeeping

Due to improper codification and faulty storekeeping, many items may remain in
stores unnoticed and not used for years together. Such items also at later stage
may become obsolete.
8.3 Steps to minimize impact of obsolescence:

8.3.1. Decision for modification of plant or phasing out of equipment are the decisions,
which are not taken over-night. Such decisions are taken after a lot of
deliberations and consultation amongst many departments. This is the crucial
period and our actions may help to minimize obsolescence, if not to eliminate it.
(a) As soon as we take a decision to phase out/modify equipment (a mechanism
has to be developed that any modification in plant or phasing out of
equipment is contemplated, those who are involved in spares parts
management viz maintenance engineer, stores purchase etc must be informed
of this process), the available spares for this equipment with stores or user
departments shall be assessed and their utility to the organization is
considered.
• The first action shall be to declare them as ‘obsolescent spares’ (in the
process of becoming obsolete and phasing out), they are not obsolete,
because neither the equipment is replaced nor modified. The ‘obsolescent’
spares still have utility for the unit/organization.
(b) Declaration of spares as ‘obsolescent’ shall be a signal to executives who are
planning and provisioning spares.
 • They shall review the requirements of such spares very thoroughly, and
if at all to buy, shall requisition only fast moving items for hand to
mouth inventories.
• Materials planning and Inventory Control Section of Stores department
shall review pending purchase requisitions/ purchase orders to stop
procurement action for certain items.
(c) Inspite of all these efforts, we may always not be in a position to utilize last of
the spares when equipment is phased out or modified. At this point of the
time, the left over spares shall be classified as obsolete as these shall no longer
be used at the unit/ organization (Spares till now tagged as ‘Obsolescent’ shall
now become obsolete
8.3.2. Inventory of slow-moving and non-moving items shall be reviewed from time to
time to identify surplus and obsolete items and disposal action taken in
consultation with users department.
8.3.3. Procurement of capital and mandatory spares shall be critically reviewed as
majority of high value obsolete spares fall under these categories.
8.3.4 While raising purchase requisition for procurement of spares and other slow
moving consumable (especially those which have limited shelf life), reasons for
obsolescence (8.2) shall always be kept into consideration to minimize impact of
obsolescence.

8.3.5 Attempts shall be made to introduce “Buy-back” clause at the time of procurement of
equipments and initial provisioning of spares, clearly spelling out our right to
exchange non-moving spares with fast moving ones during the next say five years.

8.3.6 Standardization of equipment at the industry level shall be thought of.

▪ NTPC being largest power generating company shall take a lead in this direction.

▪ The increased chances of inter-changeability of spares within the industry

will not only help in reducing requirements of working capital, otherwise
tied up in non-moving and slow-moving spares but
▪ Also reduce impact of obsolescence at unit level.
 ▪ Spare Banks can play an effective role in tackling these problems, apart
from improving service levels.
8.3.7 We may also consider having our own spares bank of high value critical/ capital
spares so that to ensure
• Optimization of resources among power stations having similar equipments.

• Pooling of such spares shall not only improve the service level of these critical
spares but also reduce investments by individual power plants.
8.4 Unserviceable Spares/ Stores

These are the items which are deteriorated due to storage for longer period.
Deterioration is a natural process although this can be slow down by applying
various measures of preservation. If the stores/ spares are kept in storage beyond
recommended shelf life, initially these start losing their properties/ strengths and
later become useless.
8.4.1Such spares/stores cannot be used in its present form and cannot be made usable
also and even if made, it may not be economical to do so e.g. Items having limited
shelf life, rubber items and spares with rubber component, paints/varnishes,
laboratory chemical, medicines, cements, refractory, electrodes etc for which shelf
life is over
8.5 Surplus/ Redundant materials

Surplus spares/items are not obsolete. When the quantity of an item is more than
the reasonably necessary to provide adequate service to user departments, the
excess over normal holding is said to be surplus. By analyzing the consumption
data of slow moving/ non moving items/spares with regard to stock position,
quantities outstanding against pending orders, if any and anticipated change in
consumption pattern, we shall work out details of surplus quantities. Procurement
action for pending PRs, if any, shall immediately be stopped and every effort shall
be made to cancel outstanding purchase orders partly or fully, where supplies are
yet to be executed (in consultation with indenting departments)
8.5.1 Reasons for surplus/ redundant items:

(a) Lower consumption than envisaged and keeping such spares/items in the
stores would not be cost effective in view of its unlikely faster utilization in
future.

(b) Improper inventory control, duplicate code and faulty purchasing.

(c) Unpredicted changes in consumption pattern due to rationalization, standardization,

(d) Modification or replacement of some equipment.

(e) Development of alternate and/ or cheaper materials.

8.5.2 Part of the quantity falling CX category shall always be surplus (items have low
consumption value based on ABC Analysis-
(C items having annual consumption value less than Rs.50,000) and having high
inventory holding based on XYZ analysis-
(X items are those whose inventory value is Rs.3,00,000 as on 31st March of
financial year).
This implies that stock-holding is equivalent to 6 or more years consumption-means
part of quantity being surplus.
8.5.3 As a general rule, surplus items are those whose stock on hand are more than
past one year consumption for A class items, one and half years consumption for
B class items and two years consumption for C class items.
8.5.4 The list of inventory spares/ stores which have not moved for more than five
years or whose stock as above (8.5.2 and 8.5.3 as on 31 st Dec of FY shall be taken
from ERP by C&M Department of the respective station/unit and shall be
circulated to the Head of various sections of O&M Department. Head of the O&M
Sections shall examine this list and indicate the likely date of use of such
spares/stores along with the quantity and identify surplus quantity considering
above definition (8.5). Such list shall be reviewed by Head of O&M Department
and forward the same to Head of C&M of respective station/unit within15days.
8.5.5 The Head of C&M Department shall put up such list of surplus items to a
 Separate committee (other than existing SSIDC at project/ station level) named
‘Scrap & Surplus Identification & Disposal Committee (SSIDC)’. The SSIDC shall
comprise members at E-7 level from O&M, Finance, C&M of the respective
station/unit and one member from OS Department of the concerned Regional
Office. This will be a standing committee and will be approved by Regional ED.
The member of the C&M Department will be the convener of the SSIDC. This
SSIDC at each of the station/ unit shall review the lists put up by the C&M
Department and identify surplus stores/ spares considering as defined above.

8.5.6 The SSIDC shall submit its report by 31st January of FY and the same shall be
approved by Head of Station/unit.

8.5.7 After approval of surplus spares/stores, the Head of C&M Department of the
respective station/ unit shall take the following actions for possible use by the
other stations/units of Company or by its subsidiary/Joint Venture Companies:
i) The storage location of such items shall be changed in ERP System

ii) The list of such items shall also be available in ERP system plant-wise

iii) The said list along with above mentioned details shall also be forwarded by
the stations to the Subsidiaries and Joint Ventures of the Company for
possible use by them.
8.6. Identification of obsolete and redundant items:

(a) Planned obsolescence shall be known before hand as in this process spares are
first declared ‘obsolescent’ and subsequently ‘obsolete’ when the equipment
is actually phased out/modified.
(b) It shall, however, be difficult to identify hidden obsolescence. Until
determined and systematic efforts are made in the direction, in absence of
which such items may remain in stock, incurring holding cost, year after year
and losing their value gradually.
(c) Movement/FSN analysis is the technique, which helps to identify slow moving
and non-moving items (refer Section 6.6-Selective Inventory Control
Techniques) Movement/ FSN analysis reports are reviewed by Indenting
 departments/ MTP/ Stores, obsolete and surplus items are identified. By
critically analyzing individual items of non-moving first in X category we shall
determine:
i) Items which have not moved but may be used in future and need to be
retained. In this case possibilities shall be explored to declare part of
quantities as surplus to initiate disposal action. Some of the items may be
classified as Capital/rotational Spares and possibilities shall be explored
ii) Items, which have no use to the Unit/organization owing to many reasons
and be declared as obsolete for most economic disposal purpose.
iii) After thorough review of ‘X’ class non-moving items, similar action need to
be taken for Y and Z.
iv) For identification of obsolete and surplus items, apart from data available in
stores, consultation with user departments shall be imperative.

v) Identification & declaration for disposal of unserviceable/obsolete

spares/stores as mentioned above shall be done by a separate (other than
existing SSIDC at project/station level) Scrap & Surplus Identification &
Disposal Committee (SSIDC) Ref section 8.5.5 above. Appropriate provision
shall be made in the accounts for items identified by the SSIDC as
unserviceable stores pending approval of the Competent Authority for write
off.
8.7. Disposal of Surplus Spares/Stores

For disposal of the identified surplus spares/ stores, the following procedure shall
be followed
(a) In case any item appearing in the ERP system as surplus is required by any NTPC
Station/subsidiary/ joint venture, on receipt of formal requisition the donor
station with the approval of Head of Station will arrange for transfer of the item to
requiring station immediately with appropriate documentation in this regard at
book value.
(b) After a lapse of two (2) months from the date of classifying the items as surplus in
ERP System, the List of un-disposed Spares shall be, displayed on NTPC website
 with an abridged version of advertisement in the newspapers as per the present
practice for drawing the attention of prospective buyers. This list will be updated
every month. The items would continue to be in the website for three (3) months
from the date of publishing of advertisement in NTPC-website. For wider publicity
the other external websites providing similar nature of services like
www.mafeynef.com, www.gate2feg.com etc. may also be considered. The list will
continue to be displayed in the Wide Area Network for wide circulation amongst
the stations/units
(c) Generally, no station/ unit will go for fresh procurement of such spares/stores
before utilization of the existing stock of surplus item in the station/ Company.
For this purpose, a warning message displayed by the ERP System at the time
of raising/ approval of indent shall be considered and checked by approving
authority. Further, the indent approving authority shall record reasons for
procurement for such items available as surplus on ERP
(d) At each station, a coordinator/nodal officer at the level of E5 from C&M shall
be identified, whose address will be indicated in the website and he will be the
nodal officer for coordinating between the Company and the prospective
buyers.
(e) The information (in form of Flash) regarding availability of surplus spares will
be displayed with every advertisement (related to tender) of NTPC published
in the newspapers.

(f) Prospective buyers, if any, will submit their offers directly to the nodal officer
of the concerned station/ unit indicating their expression of interest (E.O.I.)
which may be accepted one-mail also. After furnishing necessary details in
response to E.O.I., formal offer for purchase with price details will be obtained
by the coordinator of the concerned station/ unit. The priced offer so received
from the buyers will be put up to a standing committee (other than SSIDC)
comprising members from O&M, Finance and Materials at station (not below
E-5 level), which will process the offer(s) of the buyer for disposal such items
(g) Wherever the price received is equivalent or more than the book value for the
 Surplus spares & stores the concerned item can be disposed off to the
interested buyer immediately, with the approval of Head of the station. The
administrative approval for the sale order will be governed by relevant clauses
of DOP
(h) After expiry of three (3) months period from the date of publishing in the
website, in case no response is received from other stations/ units of the
Company or from Subsidiary/ JV, the following alternative measures may be
explored by the concerned user department:
• Technically assess the possibilities for enhancing the life of the existing
equipment (which have been in operation for a considerable period of
time) by replacing it with the surplus spares/stores
• Remaining surplus stores/spares which cannot be replaced due to the
fact that it would affect the continuous running of the station/ unit,
then stock of such spares/stores could be held till the next overhaul.
8.8. Valuation of Surplus Spares/Stores

For the valuation of surplus items of spares/stores as on 31 st March of FY, the

following procedure may be adopted.
a) Relevant accounting policies of the company with inventories are given below
for ready reference.
11.1 Inventories are valued at the lower of cost, determined on weighted
average basis and net realizable value
11.2 Diminution in value of obsolete and unserviceable stores and spares
is ascertained on review and provided for.
For addressing the valuation of surplus stores/ spares of inventory, it is
proposed that existing accounting policy11.2 may be modified as under

11.2 Diminution in value of obsolete, unserviceable and surplus stores and

spares is ascertained on review and provided for.
b) Keeping in view the above mentioned accounting policy of the Company,
surplus stores/ spares are to be stated in the book of accounts at lower of cost
or net realizable value
 c) To ensure proper valuation of the surplus stores’ spares, SSIDC will assess the
estimated net realizable value of remaining surplus stores/ spares lying in
stores bib/yards as on31st December of FY latest by 10 April of following FY.
The estimated net realizable value of the surplus stores/ spares shall be lower
of the following
• Rate obtained in response to the advertisement in the newspapers/
NTPC Website
• Lowest purchase price of the same item in the past

• Technical estimate of the SSIDC

• 5% of the book value, in case no quote is received for the past three
years in response to the advertisement in newspapers/ NTPC Website.
d) Based on the estimated value arrived at by the SSIDC, provision towards
diminution in value of such surplus stores/spares, if any shall be made in the
accounts
e) The provision created towards diminution in the value of surplus stores shall
be reviewed at the end of each year and updated by considering the net
realizable value as at the each balance sheet date.

8.8.1 Feedback system Surplus Spares/Stores.

Stations shall be submitting report about the progress of the work related to
this activity at the end of each quarter to Corporate Materials Department for
the information of Management in the format appended below:

Sl Total No. Of Status of action taken as per Cumulative Upto

No Stores/Spares P Guidelines for disposal During the
Identified as surplus quart

During the Cumulative Type of action No. value Nos Value

Quarter u
 1. Put on display

In ERP System

2. Put on display

On NTPC
Website

3. Used for

the
equipment

8.9 Disposal of obsolete spares/stores

(a) The spares once declared as obsolete by SSID Committee, the Station shall
make all efforts for its disposal. Use within the unit shall be considered by
consulting all the user departments-some of the items may be used as
substitute to some other materials, as it is or with some economical
modifications.
(b) To explore the possibility of use within NTPC or its subsidiaries/joint ventures,
the list of items shall be displayed by the station on in ERP System of NTPC; it
shall be ensured that full details and name/specifications, part number/
drawing, manufacturer and model of equipment and likely use by others are
furnished. This shall help other units to work out their requirements. It is
observed that if these details are not available, other units of the organization
do not respond favourably. Since unserviceable spares are of no use to the
company, they can be straightway disposed off as per existing practice for
disposal of scrap after its identification by the Committee.
(c) If case any item appearing in the ERP system is required by any NTPC Station/
subsidiary/ joint venture, on receipt of formal requisition the donor station
with the approval of Head of Station will arrange for transfer of the item to
requiring station immediately with appropriate documentation in this regard
 at book value. For capital spares Written Down Value (WDV) will be the base
for transfer of to the recipient station.
(d) After a lapse of two (2) months from the date of insertion in ERP System as
surplus, the List of un-disposed Spares shall be, displayed on NTPC website
with an abridged version of advertisement in the newspapers as per the
present practice for drawing the attention of prospective buyers. This list will
be updated every month. The items would continue to be in the website for
three (3) months from the date of publishing of advertisement in NTPC-
website. For wider publicity the other external websites providing similar
nature of services like www.mafeynef.com, www.gate2feg.com etc. may also
be considered. The list will continue to be displayed in the Wide Area Network
for wide circulation amongst the stations
(e) At each station, a coordinator at the level of E5 from C&M shall be identified,
whose address will be indicated in the website and he will be the nodal officer
for coordinating between the Company and the prospective buyers.

(f) Prospective buyers, if any, will submit their offers directly to the nodal officer
of the concerned station/ unit indicating their expression of interest (E.O.I.)
which may be accepted one-mail also. After furnishing necessary details in
response to E.O.I., formal offer for purchase with price details will be obtained
by the coordinator of the concerned station/ unit. The priced offer so received
from the buyers will be put up to a standing committee (other than SSIDC)
comprising members from O&M, Finance and Materials at station (not below
E-5level), which will process the offer(s) of the buyer for disposal of such item
(g) It may also be ensured that separate details are worked out for bought items
of OEM and dedicated spares of equipment (meant for specific equipment
only). Bought out items of OEM such as bearings, V belts, valves, pipe and pipe
fittings, gauges, electric components such as relays, fuses, contactors, CT,
cables & conductors, special tool in get c might behaving many alternative
uses
(h) If “Buy-back” clause (while buying mandatory spares) is operative with original
equipment manufacturer, surplus or obsolete spares should be returned to the
min exchange of certain fast moving immediately required spares.
(i) Originalequipmentmanufacturermayalsobeconsultedfordisposalofobsoletespa
res.They may furnish vital information as to who are the other customers
using such equipments so that they may be approached. Sometimes original
equipment manufacturer or supplier may take back obsolete materials to
meet the pressing needs of other customers.
(j) Return to OEM/OES shall even be made at basic price paid to them while
buying them without adding taxes, duties, packing, transport charges etc.
While disposing to other organizations, we may look forward realizing
PSL/purchase price as getting a customer at current market rate for old spares
many not be feasible
(k) There are cases where the items are in good condition, but are no more useful
to that particular station. These spares may be capable of being used by some
other stations within NTPC or outside. Therefore, to explore the possibility of
their disposal at a fair price, wide circulation of information about these items
will be required.
(l) After expiry of three (3) months period from the date of publishing in the
website, the items for which there is no response from the buyers, following
alternative will be considered

i) The items will be treated under the unserviceable category and action for
disposal shall be taken as per the policy/ systems/ guidelines already in
practice within NTPC, 'for disposal of scrap'. The obsolete category of items
may be disposed off at whatever price the approving authority considers
as maximum or scrap value as retaining them any further will just keep on
incurring heavy inventory holding cost.
ii) The differential amount of the PSL value of the item and the sale proceeds
will be written off as per DOP provision.
 iii) Before disposing such materials as scrap, possibilities of cannibalization
may also be explored as this also helps to take out optimum value from
such materials.
8.10 Valuation of Obsolete items

i) Wherever the price received is equivalent or more than the book value for
the obsolete spares & stores the concerned item can be disposed off to the
interested buyer immediately, with the approval of Head of the station.
ii) The administrative approval for sale order will be governed by Delegation
of Powers as provided under relevant clause of DOP as revised from time
to time in all cases where the net sale price is not less than the PSL price
(or Written down Value in case of capital spares).
iii) Wherever, the net sale price is less than the PSL price (or WDV in case of
capital spares), the similar administrative approval for sale order will be
governed by Delegation of Powers as revised from time to time
8.11 Disposal and valuation of Unserviceable spares/stores

a) Since unserviceable spares are of no use to the Company, they can be straight
way disposed off as per existing practice for disposal of scrap after its
identification by the committee
b) Procedures as per section 8.5.5), 8.9.i shall be followed for identification,
disposal and valuation of unserviceable spares/stores.
8.12 FEEDBACK SYSTEM FOR OBSOLETE AND UNSRVICEABLE SPARES/ STORES
Stations will be submitting reports about the progress of work related to this
activity at the end of each quarter to Corporate Materials Department for the
Information of Management in the format as appended herein after.
8.13 The above provisions of this chapter of manual regarding identification, disposal
and valuation of unserviceable, obsolete and surplus spares/ stores also include
Policy guidelines
–Disposal of Obsolete/Limited Shelf life/Unserviceable Spares/ Stores vide System
Circular No. 79 dated 08.09.2003 and Rationalized Policy Guidelines –
Identification &Valuation of surplus Spares/ Stores vide System Circular No. 94
 dated 24.04.2009 from Corporate Materials Management Department.

8.14 Summary of control action of obsolete, unserviceable and surplus items (In line
with System Circular No. OS/ED/SYSTCIRC/001dated31 stAug2011):
In view of rising trend of Non Moving Items (NIM), regular monitoring of such
inventory at station/ unit level is essential for its timely utilization and to prevent
further accumulation. In order to stream-line this process and have effective
control on non-moving items, it is to be ensured that
a) All stations/units shall periodically (at least twice in a year) review list of non-
moving items and identify surplus, obsolete and unserviceable items from the
list. Such list of items shall be sent to ERP core team for tagging in ERP
b) Quantities which are identified as surplus, obsolete and unserviceable shall be
moved to designated virtual storage location in ERP
c) Stations should update details of “end use equipment” and “manufacturer”
for items declared as surplus and obsolete in ERP in transaction ZMMSOR. This is
very important as this report shall be used for uploading details of surplus and
obsolete items in internet for prospective users/buyers outside NTPC.
d) ERP generates warning at all levels of release of PR if any of indented items is
surplus in other projects/ stations. Site should explore possibility of using surplus
stock available at other projects/ stations before deciding on fresh
procurement. Station should take action to dispose-off items which have been
declared as surplus, obsolete and unserviceable as per system circular.
e) Head of station should review the status of non-moving items quarterly with
reference to actions taken to arrest rising trend, utilization of usable items
within NTPC and disposal to agencies outside NTPC etc. A copy of minutes of
quarterly review meeting should be sent to the office of ED(OS) latest by last
day of the following month of the quarter.
f) Nodal officer at each stations/ units (as identified-section 8.7.d) shall be
responsible for coordinating activities listed above.
8.15 Financial provisions in the book of account for Obsolete, Unserviceable & Surplus
items of Spares/ Stores: (In line with ED (Finance) Circular No.
O1/CC/FA/Accounts2010-11/MGS/19dated3rdFeb2011)
In addition to control action– Section 8.14 as above, following system for financial
provisioning shall be ensured.

i) ERP Core Team shall provide a transaction code through which item-wise
provision towards diminution in the value of obsolete, unserviceable &
surplus items of stores/spares which have moved to the designated
storage location can be made as per existing instructions by CC
ii) For reconciliation of NMI items vis-a-vis provision in the accounts, a
statement in the following format shall be made available in ERP

Sl. Material Descriptio NMI Category Quantity Rate Value Provisio

n Code n (tagged n
o As Obsolete /surplus
/Unserviceable
/others

iii) Unit/station shall certify the status of NMI items based on the details
available in SAP system.
iv) Units/ stations shall follow the above procedures and ensure that the
provision towards obsolete, unserviceable & surplus items of stores/spares
out standing vis-a-vis the items tagged and transferred to virtual location
are in line with the above. Head of finance are required to take up the
issue with concerned C&M/ MTP Department and ensure that the
identified items are suitably tagged & transferred to virtual locations and
appropriate provision towards diminution in the value of obsolete,
unserviceable & surplus items of stores/ spares are maintained only for
those item stagged as obsolete/ unserviceable & surplus
 CHAPTER–9

Inventory Norms for Stores

and Spares-monitoring thereof
9. Inventory Norms for Stores and Spares-monitoring thereof

9.1 Inventory holding norms are monitory limits fixed by managements for investment in inventory.
These, as such, can be defined as permissible upper limit of inventory holding
9.2 Once inventory norms are formulated and approved by management, user departments and
materials management functionaries shall allocate the investment to various items to ensure the
smooth O&M of operating power plants as well timely construction & erection of new projects.
Factors to be considered for determination of stock levels for individual item for purpose of control
and monitoring shall be
(a) Lead time for deliveries and uncertainties involved in determining this time which is highly
variable for procurement of spares from Original Equipment Manufacturer/Original
Equipment Suppliers
(b) The rate of consumption and viability associated with.

(c) Future market availability.

(d) Requirements of funds including constraints of working capital and opportunity cost of
capital so tied up in inventories
(e) Non-availability/Stock-out cost and Service Level promised to be provided to end users and
also Inventory Carrying/Buying costs.
(f) Seasonal consideration of price and availability.

(g) Government and other statuary restrictions/guidelines

9.3 Keeping in view the above factors, the following norms which were approved and adopted in NTPC
in the past, shall hold good, until those are reviewed and revised. These norms shall diligently be
followed in letter and spirit while raising Purchase Requisitions

9.3.1 INVENTORY HOLDING NORMS

a) CONSTRUCTION STORES INVENTORY LEVEL IN
DAYS/ MONTHS CONSUMPTION

…………………………….. ………………………………

1. CEMENT 01 to 02 months

2. STEEL
I. T or Steel/Re- 3months

enforcement Steel

II. Structural Steel 6months

3. OTHERS (VIZ.PIPE, PIPE FITTING 09 Months

CABLE ETC.)

b) O&M STORES

1. COAL
i) For Pit Head Stations 15 days

ii) For Non Pit Head Stations 30 days

2. FUEL (EXCLUDING COAL) 2 months (Furnace Oil)

3. SPARES (EXCLUDING INSURANCE SPARES)

i) INDIGENOUS 18 Months

ii) IMPORTED 18 Months

4. LOOSE TOOLS 06 Months

5. CHEMICALS GASES & EXPLOSIVES 03 Months

 6. OILS & LUBRICANTS 1 Months

7. STORES OTHER THAN SPARES

(CONSUMABLES & GEN. STORES) 06 Months

8. SCRAP 04 Months arising (Min. 3 disposals in a year)

9.4 Monitoring of Inventory norms

9.4.1 C&M Department at power station (not at projects) shall initiate procurement of
stores & spares upon certification on PR itself that inventory holding norms have duly
been considered while raising subject Purchase Requisition. On the basis input provided by
means of SRV/ SIV/ MTN, we shall generate and provide inventory status report quarterly
in 11 categories as specified in Section 10.3.1 indicating actual holding of inventories as
against approved norms. In addition Main Group-wise status report shall also be
generated. Whenever on such analysis of such reports marked deviations are noticed in
inventory holding particular group(s) with regard to norms, reason there to shall have to
be reviewed at appropriate level at user departments. Proposed corrective action also
shall be indicated and such reports are submitted to HOP/HOS.

9.4.2 Corporate Materials Management shall further monitor the progress of implementing the
corrective action so suggested and shall extend inter-station/ project co-ordination.
Various Insurance Policies take by
NTPC for its Station / Running
Projects, Insurance Claims
processing and other Insurance
policies
 List of Insurance policies processed by Corporate Materials
Sl No. Policy Description
Mega Risk Policy
1
Construction Plant & Machinery (CPM) along with stocks i.e. Locomotives, Wagons of MGR
2
Solar policy
3
Directors & Officers Liability Policy with Extensions
4
Group Personal Accidental Insurance Policy
5
Public Liability Insurance (PLI) Act Policy
6
Professional Indemnity Policy (For NTPC Medical Establishment)
7
Marine Open Cover Policy
8
Standard Fire & Special Perils and Standard Burglary policy for EOC & EOC Annex building and
10 PMI.
Special Contingency Insurance Policy for NETRA Building, Laboratory Equipments & Other
11 Assets
Standard Fire & Special Perils and Standard Burglary policy for SCOPE .
12
EDLI Policy
13
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

SCHEDULE - Attached to & forming part of

Policy Schedule for Mega Risk Policy No. 271400/11/2019/987
Policy No. 271400/11/2019/987 Period: 01.01.2019 to 31.12.2019
THE NTPC Limited
INSURED Engg. Block, A-8A, Sector – 24,
Noida, UP. (India) 201301 (GST No: 09AAACN0255D9ZO)
INTEREST VARIOUS PROPERTIES IN RESPECT OF STATIONS LISTED AS PER
INSURED Annexure A
All real and personal property installed used and kept to generate
electric power using coal, gas, hydro or any other such fuel, other
than such as excluded hereunder, belonging to the Insured or for
which he is legally responsible, principally comprising Buildings
(including basements),Plants, Equipment and Machinery, DAS & PCs
Foundations & Pilings, Electrical Installations, Spares and
Consumables, Fuels (other than Coal), Furniture, Fixtures, Fittings,
Cables, Transmission lines, Office Equipment, Chimneys with
foundations all within the plant boundaries and Raw Water Pump
Houses installed at either sea, river, canal, reservoir with associated
SECTION I
Piping located inside as well as outside the plant premises, &
Electronic Data Processing Equipments, Mainframe Computers etc
PROPERTY
and Communication System directly related with power generation,
monitoring & analysis in some of the stations functionally located
outside plant premises, Goods held in trust, Spontaneous
Combustion (loss or damage by fire to the property insured caused
by its own fermentation, natural heating or spontaneous
combustion), Assets like drainage, culvert, pavements, roads, dams,
reservoirs, canals, pipelines, tunnels, bridges, piers etc. and all
other civil works related to hydro plants.
Excluding: Land, Infrastructure such as flyovers, boundary walls,
roads,
culverts & canals other than hydro, township, premises outside
plant boundaries, ash dyke, ash slurry pipelines, street lighting,
earth moving equipment including dozers, cranes & trolleys, MGR
system containing
locos & wagon, coal stock.
The generation, transmission and sale of electricity and all and any
BUSINESS activities associated thereto including but not limited to such as
advisory and/or consulting services, property development and
management in connection
with Insured’s electricity operations.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY
LOCATIONS Within the boundaries of Power Stations (Coal, Gas and Hydro) as
INSURED described in the Annexure – A attached & whilst temporary
removal thereof through
India & Abroad
From: 01.01.2019 To: 31.12.2019
(00.01 hours) 24.00 hours
PERIOD OF (or subsequent period in respect of which the Insured shall have
INSURANCE paid and the Insurer shall have accepted, the premium required
for the renewal of this policy or its extension)
PREMIUM: Rs. 99,14,74,079/- GST @ 18%: Rs. 17,84,65,334/-
Total Premium Rs. 116,99,39,413 /-
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

THE SUM (S) INSURED

SECTION – 1 Physical Loss/ Damage: Coal & Gas Rs. 215674.51 Crores
All Risk Rs. 222320.38 Crores Hydro Rs. 6645.87 Crores
Machinery Breakdown: Coal & Gas Rs. 159202.02 Crores
SECTION – 2 Rs. 161080.25 Crores Hydro Rs. 1878.23 Crores
Rs. 6000 crores each and every occurrence/per location. However,
cumulative losses may exceed this amount and shall be limited
LIMIT OF only to the extent of the sum insured.
INDEMNITY However, Limit for glacial lake outburst flood (GLOF), in case of
Hydro Plants shall be INR 500 crores AOA & in the aggregate for
the policy
period. (combined single limit for all sections, MD+MBD)
Unless otherwise specifically stated, the liability of the insurers shall be limited in respect of
any one occurrence for each sub-limit as set out hereunder:

Clause
EXTENSIONS FOR SECTION-1 ONLY No. SUB-LIMITS OF INDEMNITY

Burglary/Theft 1.5 Rs. 5.00 Crore and Rs. 50.00 Crore

in
the aggregate
Public Authority 1.3. Rs. 15.00 Crore
1
Fire Fighting Expenses 1.3. Rs. 1.50 Crore
2
Leakage & Overflowing 1.3. Rs. 5.00 Crore
3
Contamination & mingling of Stocks 1.3. Rs. 2.50 Crore
4
Clause
EXTENSIONS FOR SECTION-2 ONLY SUB-LIMITS OF INDEMNITY
No.
Cover for Lubricating Oil & Refrigerant 2.3. Rs. 2.50 Crore
2
Cover for Refractory materials and/or
Refractory materials in heat 2.3. Rs. 2.50 Crore
recovery 3
Steam Generators & Boilers
Rs. 1.00 Crore and Rs.10.00 Crore
Electronic Equipment 2.3.
in the aggregate per plant.
4
 NTPC MEGA RISK INSURANCE PACKAGE POLICY
EXTENSIONS FOR SECTION- 1 & 2 Clause
ONLY No. SUB-LIMITS OF INDEMNITY
Up to 20% of Claim subject to max.
Expediting Expenses 3.1
of
Rs. 12.50 Crore
Minor Works 3.3 Rs. 50.00 Crore any one project
Inadvertent Omission 3.4 Rs. 10.00 Crore
Architects, Surveyors & Consulting
3.6 Rs. 15.00 Crore
Engineers fees
Capital Additions 3.7 Up to 5% of Total SI
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

Transit &Temporary Removal 3.9 Rs. 30.00 Crore per transit

Expenses to Minimize Loss 3.10 Rs. 15.00 Crore

Deliberate Damage 3.11 Rs. 10.00 Crore

Shut Down/ Start Up Cost 3.12 Up to 10% of Claim Amount.

Computer Systems Records 3.13 Rs. 5.00 Crore

Up to 10% of loss subject to max.
Removal of Debris (Including
3.14 of Rs. 50 crores for Coal, Gas &
External Debris for Hydro Only)
Hydro
based plants.
Rs 10.00 Crore and Rs.50 Crore in
Owners surrounding property 3.15 the aggregate during period of
insurance.
Third party liability 3.16 Rs 10.00 Crore and Rs. 50 Crore in
the
aggregate during period of
insurance.
DEDUCTIBLES

Section/ Inbuilt Extensions Deductibles

Section- 1 All Risk (AR) Rs. 6.00 crores AOA per Location

Section - 2 Machinery Breakdown (MBD) Rs. 6.00 crores AOA per Location

Extensions to Section-1 & 2 Deductibles

All Risk Transit & Temporary Removal Nil, Even in case of preventive
maintenance.
Burglary/Theft (Rs. 5 Cr.) Rs 1 Lac Each & Every Occurrence
Electronic Equipment Rs 1 Lac Each & Every Occurrence

EEL: Each and every loss

Occurrence: Loss due to an
accident.

Dated: 17th January, 2019

 NTPC MEGA RISK INSURANCE PACKAGE POLICY

Section 1: ALL RISKS OF PHYSICAL LOSS OR DAMAGE (AR)

INSURING CLAUSE

In consideration of the Insured named in the schedule, NTPC Ltd, hereto having
agreed to pay the premium due mentioned therein, the Insurer agrees (subject to
conditions, provisos and exclusions contained herein or endorsed or otherwise
expressed hereon, which shall be deemed to be conditions precedent to the right of
the Insured to recover hereunder) to indemnify the insured in respect of Sudden and
Accidental Physical loss, Destruction or damage to the Property insured or any part
of such property described in the schedule herein directly and wholly attributable
to any occurrence, except as hereinafter excluded, occurring during the period of
insurance, referred to hereafter as “damage”.

In no case shall the liability exceed the respective limits of Indemnity or sum insured
expressed in the schedule except as may be otherwise provided herein.
EXCEPTED CAUSES
This policy does not cover loss or damage proximately caused by:-
i) The deliberate and sustained operation of the Insured’s plant, machinery or
other equipment in excess of the manufacturers recommended design
specifications or guidelines on the specific and intentional instruction of the
Insured.
ii) Withdrawal or go slow of labour or cessation of work.
iii) Failure of supply of water, gas, electricity, fuel or power which has been
caused by a loss event which is not covered under this policy.
iv) Gradual subsidence and settlement, shrinkage or expansion or erosion of soil.
v) It is also understood and agreed that subject to the provisions below, this
Policy does not cover:
a) Wear and tear, gradual deterioration, rusting, corrosion, metal fatigue,
oxidation, auto- oxidation, damp, change in temperature or humidity, action
of air or light or natural heating or drying.
b) Fermentation, evaporation, loss of weight, contamination or change in quality
(except where such is directly caused by an occurrence which is not otherwise
excluded).
c) Failure, breakdown, malfunction, derangement collapse or rupture of any
mechanical or electrical or electronic machine apparatus or equipment
whatsoever. Short circuiting, self-heating, leakage or surge of electrical
current, overloading or excessive power.
d) The Cost of replacing, repairing or rectifying defective parts, materials,
workmanship, design or defect or omission in design or specification or latent
defects.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY
e) Leakage or overflowing of the contents of any storage tank, vessel or other
container or the flaring of the products other than as provided under Clause
1.3.3.
f) Loss of data, data media and records, as well as its regeneration, other than as
provided under Clause 3.13
g) Clean Up costs other than as provided under Clause 3.14
h) Seepage and/ or pollution and /or contamination, and or comingling directly
or indirectly, arising from any cause whatsoever other than as provided in
Clause 1.3.4
i) Infidelity of an employee

Provisions: v (a) - (f) above shall not be deemed to exclude any further destruction or
damage which itself is not excluded by any of the terms, conditions and excepted
causes of this policy, occasioned as a consequence of any of the contingencies listed
therein.
EXCLUDED PROPERTY
Unless otherwise expressly agreed, this section does not cover damage to any of the following:
(i) Property in course of construction or erection or dismantling or undergoing
testing or commissioning other than as provided elsewhere under this section,
however, this exclusion shall not apply in respect of normal maintenance and
testing. It is also understood that bringing up from shutdown shall not be
construed as testing.
(ii) Road vehicles, railway rolling stock, waterborne vessels or craft; but this
exclusion shall not apply to the Insured’s fire fighting vehicles used on the
Insured’s premises or within a radius of 20 kilometers of the Insured’s
premises, contractor’s plant and machinery to being the property of the
insured.
(iii) Land (including topsoil, backfill) runways, canals, dams, docks or roads (Other
than Hydro), and stock of coal within the locations insured.
(iv) Goods or property in transit, other than:
Temporary Removal (with transit thereto & there from by Road/Rail/Air/Inland
Water Way/ Sea and Storage and cover worldwide outside India at different
locations up to Rs 30 Crore per Transit of location).
(v) Property which is insured by a more specific policy.
(vi) a: Underground property other than pipelines, cabling, utilities and related
equipment of the plant.
b: Overhead transmission lines other than within the locations insured.
(vii) Property belonging to third parties unless specifically declared as insured hereunder or
in the Insured’s care, custody and control and for which they are responsible.
(viii) Consumable materials but only whilst in the course of process, production or
manufacture; other than as a consequence of damage covered hereunder.
(ix) Cash, bullion, coins, cheque, stamps, precious stones, jewelry, antiques,
securities, obligations of any kind, books of account, or other business books or
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

records, computer records or data, manuscripts, plans, drawings, patterns or

models other than as provided in Article 3.13

EXTENSIONS APPLICABLE TO THIS SECTION

Any Business Interruption loss following a loss covered under the here below cited
extensions is excluded

Public Authorities
This section of the policy includes such additional cost of reinstatement of property
covered hereunder and damaged by a peril not otherwise excluded by this policy and
as may be incurred solely by reason of the necessity to comply with any regulations,
bye laws or statutory provisions relating to the reinstatement of property provided
that: -
(i) The amount recoverable under this section extension shall not include:
(a) The cost of complying with any such regulations, bye laws, or statutory
provisions where damage occurs prior to inception of this policy, or is not
insured by this policy, or where notice to comply has been served upon the
Insured prior to the occurrence of any damage.
(b) Any increased rates, taxes, duties, charges, levies or assessment as a result of
complying with such regulations, bye-laws or statutory provisions.
(ii) The work of reinstatement must be commenced within 12 months of the date
of occurrence of any damage unless permitted by the Insurer within the said
12 months, and may be carried out wholly or partially upon another site,
provided that the liability of the Insurer is not increased thereby.

Subject to the sub-limits of indemnity as stated in the Schedule.

Fire Fighting Expenses

In the event of a fire or a series of fires arising directly or indirectly from the same
occurrence including fire threatening to involve the property insured under this
section of the policy, the Insured shall be entitled to recover:
i. The actual cost of materials used and/or damaged in extinguishing or
controlling or attempting to extinguish or control any such fire
ii. All other actual expenses (including wages and the like paid for fighting,
extinguishing or controlling or attempting to fight extinguish or control such fire
and/or localizing such fire.) All claims for personal injury are excluded.
Subject to the sub-limits of indemnity as stated in the Schedule.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

Leakage and Overflowing

Notwithstanding anything contained herein to the contrary, that this policy extends to
cover the loss of stock caused by leakage and/or overflowing from any storage tank or
vessel, arising out of a peril not otherwise excluded by this policy.
Subject to the sub-limits of indemnity as stated in the Schedule.

Contamination and mingling of Stocks

Notwithstanding anything contained herein to the contrary, that this policy extends
to cover damage to stocks as a result of contamination and/or mingling whilst in the
Insured’s care, custody or control, arising from a peril not otherwise excluded by this
policy.
Subject to the sub-limits of indemnity as stated in the Schedule.

Spontaneous Combustion
The Company agrees notwithstanding what is stated in the printed exclusions of the
policy to the contrary that the insurance by (item----of) this policy shall extended to
include loss or damage by fire only of or to the property insured caused by its own
fermentation, natural heating or spontaneous combustion. Subject to the Sub Limit of
Rs, 25 crores EEL.

CONDITIONS APPLICABLE TO THIS SECTION

Basis of Indemnification
In the event of damage to property insured hereunder by a contingency insured
against, the amount payable under each of the items of this section of the policy shall
be calculated on the basis of reinstatement or replacement of the property damaged,
subject to the following provisions:
Reinstatement or Replacement shall mean:
(i) Where property is lost or destroyed, the rebuilding of any building or the
replacement by similar property of any other property, in either case in a
condition equal to but not better or more extensive than its condition when
new.
(ii) Where the property is damaged, the repair of the damage and the restoration
of the damaged portion of the property to a condition substantially the same as
but not better or more extensive than its condition when new.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

(iii) Where by reason of the above provisions no payment is to be made for

rebuilding or replacement or if the Insured elects not to rebuild or replace, the
Insurer will pay to the Insured the actual value of the property at the time of
the happening of its damage. Actual Value means the cost which in the event
of damage to any item or part of the property Insured would be necessary to
replace it with one of the same age and capacity and similar make and quality,
inclusive of all materials, wages, freight, customs, duties and dues.

Special Provisions

(i) The work of replacement or reinstatement (which may be carried out upon
the same or another site and in any manner suitable to the requirements of
the Insured subject to the liability of the Insurer not being thereby increased)
must be commenced within 24 months of the date of the damage or such
further period as the Insurers shall in writing allow.
(ii) Where any property is damaged in part only, the liability of the Insurer shall
not exceed the sum representing the cost which the Insurer could have been
called upon to pay for reinstatement if such property had been wholly
destroyed.
(iii) No payment beyond the amount which would have been payable under this
section of the policy if this clause had not been incorporated therein shall be
made if at the time of any damage such property shall be covered by any other
Insurance effected by or on behalf of the insured which is not upon the
identical basis of reinstatement as stated in this section of the policy.
(iv) If, as a result of the application of any of these special provisions, no payment
is to be made beyond the amount which would have been payable under this
section of the policy if this clause had not been incorporated therein, the
rights and liabilities of the Insured and the Insurer in respect of the damage
shall be subject to the terms and conditions of the policy as if this clause had
not been incorporated therein.
(v) Shifting of the equipment’s from existing locations after dismantling and re-
erection, re- testing and commissioning at any other location within the
premises of power plants shall also be covered in this policy.

(vi) (a) All Interest except Stocks

If at the time of the reinstatement the Sum representing 80% of the cost which
would have been incurred in the reinstatement if the whole property covered
by such item had been damaged exceeds the Sum Insured thereon at the
commencement of any damage then the insured shall be considered as being
thereon own Insurer for the difference between the Sum Insured and the Sum
representing 100% of the cost of reinstatement of the whole of the property and
shall bear a ratable proportion of the loss accordingly.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

(b) Stocks (Heavy Fuel Oil, Naphtha, HSD, LSHS, and inventory of stocks):
If the stock hereby insured shall, at the time of damage, be collectively of
greater value than the Sum Insured thereon, then the Insured shall be
considered as being their own Insurer for the difference and shall bear a
ratable portion of the loss accordingly.
Every item, if more than one, of the policy shall be separately subject to this
condition.

72 Hours Clause Flood

Each occurrence by flood and all damage from this peril within a 72-hour period shall
be deemed to be one loss in so far as the total Sum Insured and the deductibles
provisions of this policy are concerned. The Insurer shall not be liable for any damage
caused by any flood occurring before the inception date and time of this policy,
however the Insurer will be liable for any damage occurring for a period of up to 72
hours after the expiration of this policy, provided that the first flood damage occurs
prior to the date and time of the expiration of this policy.

Wind and/or Rainstorm

Each occurrence by wind and/or rainstorm shall constitute a single occurrence
hereunder; provided, if more than one windstorm and/ or rainstorm caused by the
same atmospheric disturbance shall occur within any period of 72 continuous hours
during the period of insurance of the policy, such windstorm and/or rainstorm shall be
deemed to be a single windstorm and/ or rainstorm within the meaning thereof.

Earthquake
Earthquake shall constitute a single occurrence hereunder provided that more than
one earthquake shock occurring within any 72 continuous hours during the term of
this policy shall be deemed a single earthquake within the meaning thereof.

Burglary/Theft
It is hereby expressly agreed that the sub limit for burglary/theft is Rs 5 Crores any
one occurrence and Rs 50 Crores in the aggregate. The cover is limited to
loss/damage by violent forcible entry and exit. This cover is extended to cover theft
also but Infidelity and/or mysterious disappearance are excluded from the scope of
this cover.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

SECTION 2: MACHINERY BREAKDOWN

INSURING CLAUSE
In consideration of the insured named in the schedule hereto having agreed to pay
the premium mentioned therein, the insurer agrees (subject to conditions provisos
and exclusions contained herein or endorsed or otherwise expressed here on which
shall be deemed to be Conditions precedent to the right of the Insured to recover
hereunder) to indemnify the Insured in respect of Sudden and Accidental breakdown
of the property insured and part thereof which manifests itself at the time of its
occurrence by physical loss destruction or damage to such property that
necessitates repair or replacement of such property or part thereof subject to the
limitations, exclusions, terms and conditions contained herein.

In no case shall the limit of indemnity of the Insurer exceed the respective Sum Insured
or sub- limits of indemnity expressed in the Schedule, provided that the due
observance and fulfillment of the terms, conditions and endorsements so far as they
relate to anything to be done or complied with by the Insured shall be conditions
precedent to liability of the Insurer to make any payment under this policy
Breakdown shall mean sudden and accidental physical loss or damage necessitating
repair or replacement before working can be resumed resulting from:-
(i) Defects in material, design, construction, erection or assembly or
(ii) Fortuitous working accidents including but not limited to vibration,
maladjustment, loosening of parts, centrifugal force, abnormal stresses,
defective or accidental lack of lubrication, water hammer or local overheating,
failure or faults in protection devices or
(iii) Excessive voltage or current, failure or current, failure of insulation, short
circuits, open circuits or arching or the effects of static electricity or
(iv) Incompetence, negligent acts or lack of skill of employees or third parties or
(v) Falling, impact, collision or similar occurrences, obstruction or the entry of
foreign bodies or
(vi) Overpressure, except, except when caused by occurrences excluded in Article
2.1 (ii) of this section
(vii) Any other cause not hereinafter excluded.

This Insurance applies whilst the property insured is working or at rest or being
dismantled or moved for the purpose of cleaning, inspection, maintenance,
overhauling or being re-erected in another position within the locations shown in the
schedule.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

EXCEPTIONS APPLICABLE TO THIS SECTION

The insurer shall not be liable for
(i) loss or damage to exchangeable tools e.g. dies, moulds, engraved cylinders,
part which by their use and/ or nature suffer a high rate of wear or
depreciation e.g. refractory linings, crushing hammers, objects made of glass,
belts, ropes, wires, rubber tyres, operating media e.g. lubricants, fuels,
catalysts; other than as provided under Article 2.3.1, 2.3.2, 2.3.3
(ii) Loss or damage due to fire, direct lighting, chemical explosion, extinguishing of
a fire or subsequent demolition, aircraft or other aerial devices or articles
dropped there from, theft, burglary or attempts there at, collapse of buildings,
flood, inundation, earthquake, subsidence, landslide, avalanche, hurricane,
cyclone, volcanic eruption or similar natural catastrophes.
(iii) Loss or damage for which a supplier, contractor or repairer is responsible
either by law or under contract
(iv) Loss or damage caused by any faults or defects existing at the time of
commencement of this policy within the knowledge of the Insured or their
representatives, whether such faults or defects were known to the Insurer or
not
(v) Loss or damage arising out of the willful act or gross negligence of the Insured
or their representatives
(vi) Consequential loss or liability of any kind or description, any payments over
and above the indemnity for material damage as provided herein
(vii) Loss or damage as a direct consequence or the continued influence of
operation (e.g. wear and tear, material fatigue, cavitation, erosion, corrosion,
rust, boiler scale,) lack of lubrication, inherent vice, latent effect, gradual
cracking, settling shrinkage, bulging or expansion or operation against the
original equipment manufacturers recommendations. Provided this results in
to sudden and physical damage to the machine insured and then this exclusion
will apply to that part of machinery directly affected by causes listed in this
exclusion and resulting damage to other parts of the machine shall be covered.

CONDITIONS APPLICABLE TO THIS SECTION

Basis of Indemnification
(i) In cases where damage to a property insured can be repaired the Insurer shall pay
expenses necessarily incurred to restore any damaged machine to its former state of
serviceability plus the cost of dismantling and re-erection incurred for the purpose of
effecting the repairs as well as ordinary freight to and from a repair shop, customs
duties and dues, if any. If the repairs are executed at a workshop owned by the
Insured, the Insurer shall pay the cost of materials and wages incurred for the
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

purpose of repairs plus a reasonable percentage to cover overhead charges.

No deduction shall be made for depreciation in respect of parts replaced but the
value of any salvage shall be taken into account. If the cost of repairs as detailed
herein above equals or exceeds the actual value of the machinery insured
immediately before the occurrence of the damage, the item shall be regarded as
destroyed and settlement shall be made on the basis provided for in (ii) below.

(ii) (a) In cases where a property insured is destroyed - In the event the Property
destroyed is not the Reinstated or Replaced, the Insurer shall pay cash equal to the
actual value of the item immediately before the Occurrence, including charges for
ordinary freight, cost of erection and custom duties, if any, to the extent such
expenses have been included in the Sum Insured, such actual value to be calculated
by deducting appropriate depreciation from the replacement value of the property
insured.

The Insurer shall also pay any normal charges for dismounting of the machinery
destroyed, but the salvage shall be taken into account.
The actual value as referred in preceding paragraph, shall be arrived at by
depreciating 5% per year on a reducing method basis subject to a maximum
depreciation of 50%.
Any extra charges incurred for overtime, night work, work on public holidays, and
express freight shall be covered by this policy only if especially agreed in the
extensions.
The cost of alterations, additions, improvements or overhauls shall not be recoverable
under this policy. The cost of any provisional repairs shall be borne by the Insurer if such
repairs constitute part of the final repairs and do not increase the total cost of repair.

(ii) (b) In cases where property insured is destroyed – where the insured replaces the
equipment with the new one than no depreciation shall be applicable and the insured
will be paid the total expenditure incurred in the reinstatement of the property in line
with para (i) above.
The Insurer shall make payments only after being satisfied by production of the
necessary bills and documents that the repairs have been effected or replacement
has taken place, as the case may be.
If at the time of the reinstatement the sum representing 80% of the cost which would
have been incurred in the reinstatement if the whole property (Section-1) covered by
such item had been destroyed exceeds the sum insured (Section-1) thereon at the
commencement of any destruction or damage then the Insured shall be considered as
being his own Insurer for the difference between the sum insured and the sum
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

representing 100% of the cost of the reinstatement of the whole of the property
(Section-1) & shall bear a ratable proportion of the loss accordingly.
Thus, the adequacy of the sum insured for this section is based on 75% of the
reinstatement values as insured under Section-1.

Right of Inspection
The Insurer’s officials shall at all reasonable times have the right of access to the
premises in which the machines are situated provided they comply with all
reasonable site access requirements.

Due Diligence
It is agreed by the Insured that during the continuance of this policy the machine(s)
shall be maintained in good working order and not willfully operated beyond safe
limits and that Government or other regulations relating to the condition, operation
or inspection of machines(s) are observed. The Insured agrees to forward to the Insurer
copies of such inspection reports whenever required to do so by the Insurer

Repairs
In the event of a breakdown of any property insured, likely to give rise to a claim
hereunder, the Insurer shall have the right to take over and control all necessary
repairs to be completed to the satisfaction of the Insured.

Removal
Such insurance as is afforded under this section of the policy shall also apply while the
property insured is being removed because of imminent danger of loss or damage.

EXTENSIONS APPLICABLE TO THIS SECTION

Any business interruption following a loss covered under the here below cited
extensions is excluded:

Cover for Conveyor Belts and Chains

Notwithstanding condition 2.2.1 in the event of loss or damage to conveyor belts and
chains, the amount indemnifiable in respect of the items thus affected shall be
depreciated at an annual rate to be determined at the time of the loss, this rate being
not less than 10% per annum but not more than 60% in total, if no other depreciation
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

rate is specified by the manufacturer. Provided always that such loss of or damage to
conveyor belts and chains is caused by an occurrence indemnifiable under this policy.

Cover for Lubricating Oil and Refrigerant

Notwithstanding Condition 2.2.1 the insurer shall indemnify the insured for loss of
refrigerant and lubricating oil caused by a peril not otherwise excluded by this policy
subject to a deduction of proper depreciation according to the average life expectancy
indicated by the manufacturer.
Subject to sub-limits of indemnity as stated in Schedule.

Cover for Refractory Materials and or Refractory Materials in Heat Recovery

Steam Generators and Boilers
Notwithstanding Condition 2.2.1 in the event of loss or damage due to a peril not
otherwise excluded by this policy to refractory materials and/or masonry in industrial
furnaces and boilers, the amount indemnifiable in respect of the items thus affected
shall be depreciated at an annual rate to be determined at the time of loss, this rate
being not less than 15% per annum, but not more than 60% in total, if no other
depreciation rate is specified by the manufacturer.
Subject to sub-limits of indemnity as stated in Schedule.

Electronic Equipment
Notwithstanding Condition 2.2.1 machinery breakdown cover for low voltage
Electronic Equipment is limited to data acquisition systems, computers, mainframes
located outside the battery limits of the plant and in the offices. Data media is
excluded and cost of regeneration is not included under the scope of this cover.
Depreciation to be applied for such items is 10% per annum, to be applied on a
reducing balance method subject to maximum of 50% depreciation.
Subject to sub-limits of indemnity as stated in Schedule.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

SECTION – 3: EXTENSIONS APPLICABLE TO SECTIONS - 1 & 2

Any business interruption following a loss covered under the here below cited
extensions is excluded unless otherwise stated.

EXPEDITING EXPENSES
The Insurer shall also pay, in addition to the indemnity otherwise provided hereunder,
the reasonable extra cost of safeguarding, preserving, temporary repair and of
expediting the repair of such damaged property, including overtime and extra cost of
express and other rapid means of transportation including air freight.
Subject to sub-limits of indemnity as stated in Schedule.

IMMEDIATE REPAIRS
It is agreed that in case of loss the Insured, if they so decide, may immediately begin
repairs or reconstruction but such work shall at all times be open to supervision by the
insurer and in case of dispute as to the cost of repair and/or reconstruction the loss
shall be settled in accordance with the terms of this policy, the sole object of this
clause being not to deprive the insured from the use of operating properties which
may be necessary to their business.
Evidence of loss to be photographed and if any damaged items are replaced, the
same is to be preserved by the insured and passed to loss adjuster.

MINOR WORKS
These sections of the policy automatically include Minor alterations and/ or
construction and/or reconstruction and/or additions and/or work carried out work
carried out on any of the property insured under this policy, subject to a maximum
contract value of Rs 50 Crores any one project being the value of the said project at
the commencement thereof.
Notwithstanding other terms and conditions herein, this extension of the policy shall
only pay in excess of more specific insurance, if any, arranged in respect of minor
works. The deductibles of this policy shall not apply where the amount payable under
such other insurance exceeds the deductible herein but in no case shall be payable
below the deductibles amount herein.
Should an occurrence covered hereunder damage an existing property, such damage
to the existing property as well as the resulting business interruption (due to the
damage affecting the existing property) is covered hereunder.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

INADVERTENT OMISSION
The Insured having notified the Insurer of their intention to insure all property in which
they are interested and it being their belief that all such property is insured, if
hereinafter any such property shall be found to have been inadvertently omitted, the
insurer will deem it to be insured within the terms of the Policy.
Subject to sub-limits of indemnity as stated in Schedule.

HIRE PURCHASE OR LEASE AGRREMENTS

Certain items of the property may be the subject of hire purchase lease or other
agreements and the interest of other parties to these agreements is noted in this
insurance, the nature and extent of such interest to be disclosed in the event of loss,
destruction or damage.

ARCHITECTS, SURVEYORS & CONSULTING ENGINEERS FEES

The insurance by the policy shall include an amount in respect Architects, Surveyors &
Consulting engineers and legal and other fees necessarily incurred in the
reinstatement of the property insured consequent upon its destruction or damage but
not for preparing any claim, it being understood that the amount payable for such
fees shall not exceed those authorized under the scales of the various Institutions
and/or bodies regulating such charges. This extension shall also include reasonable
costs incurred by the Insured of a like nature.
Subject to sub-limits of indemnity as stated in Schedule.

CAPITAL ADDITIONS
The Insurance by this policy shall, subject to its terms and conditions extend to cover only:
(i) Any newly acquired buildings, machinery and plant to the existing locations so
far as the same are not otherwise insured, and;
(ii) Alterations, additions and improvements to buildings to buildings, machinery
and plant during the current period of insurance at any of the premises
hereby insured, provided that:
a. At any one location this cover shall not exceed 5% of the total sums insured on
such property without payment of additional premium.
b. The insured undertake to give particulars of any such capital additions beyond
10% of sum insured forthwith and pay such additional premiums on pro-rata
basis at the same rates, terms and conditions of this policy. This additional
premium however, would be chargeable only if such new construction,
addition or modification is for addition of capacity in the existing plants or any
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

other plant & machinery successfully commissioned & taken over as per the
agreement with the contractor.

REINSTATEMENT OF SUM INSURED FOLLOWING A LOSS

At all times during the period of insurance of this policy the insurance cover will be
maintained to the full extent of the respective sum insured. The sum insured shall be
automatically reinstated following a loss, at no additional premium.

TRANSIT & TEMPORARY REMOVAL

Subject to the following provisions, the property insured by this section of the policy is
covered whilst temporarily removed for cleaning, renovation, repair and similar
purposes, elsewhere on the same or to any other premises worldwide and in transit
thereto and there from by road, rail or inland water way and/or by sea and/or by air
whilst temporarily stored elsewhere.
The amount recoverable under this extension shall not exceed the amount which
would have been recoverable had the destruction or damage occurred in that part of
the premises from which the property is temporarily removed.
This extension does not apply to property if and so far, as it is otherwise insured, nor to
property held by the Insured in trust, other than machinery and plant.
Subject to sub-limits of indemnity as stated in Schedule.

EXPENSES TO MINIMISE A LOSS

In case of actual or imminent damage it shall be lawful and necessary for the Insured,
their factors, servants or assigns to sue, labour and travel for, in or about the
defense, safeguard and recovery of the property insured hereunder, or any part
thereof, without prejudice to this insurance policy nor shall the acts of the Insured or
the Insurer in recovering, saving and preserving the property the property insured in
case of loss or damage to be considered a waiver or an acceptance of abandonment.
The expense so incurred shall be borne by the Insurer.
Subject to sub-limits of indemnity as stated in Schedule.

DELIBRATE DAMAGE
This Policy covers physical loss of property insured or expenses incurred by the Insured
directly caused by an act or order of any governmental authority acting under the
powers vested in them to prevent or mitigate the pollution hazard or threat thereof,
resulting directly from the damage to the property insured, provided such act of
governmental authority has not resulted from the lack of due diligence by the Insured
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

to prevent or mitigate such hazard or threat.

Subject to sub-limits of indemnity as stated in Schedule.

SHUT DOWN/START UP COSTS

This policy extends to cover shut down and start up costs, subject to a limit of 10% of
Claim Amount, necessarily and reasonably incurred by the Insured consequent upon
damage covered by this policy.

COMPUTER SYSTEM RECORDS

The coverage herein shall be extended to cover loss of computer system data media and
records, as well as its regeneration, up to a limit of Rs. 5 Crores for any one occurrence,
subject to:
(i) The loss of data, data media and records having been caused by a damage
covered under sections 1 or 2.
(ii) Data / software back up being kept in fireproof safe kept in a building other
than the building in which computer system is installed.
(iii) The following special exclusion shall apply.
(a) Damage for which the repair company or maintenance company is contractually liable.
(b) Any costs for standard adjustment, rectifying functional failures and
maintenance of Insured object unless necessary in connection with the
repair of an insured loss.
(c) Normal wears & tears of media.
(d) Erroneous programming, perforating, loading or printing.

REMOVAL OF DEBRIS (Including External Debris Applicable for Hydro Projects only)
(subject also to clause in Sec 6)
This policy includes the cost and expenses of clearing debris (including external debris
applicable for Hydro projects only), including the cost of cleanup, after loss,
destruction or damage by a peril not otherwise excluded in this policy including but
not limited to the costs and expenses actually incurred in the necessary dismantling,
removal, demolition, shoring up or propping, clearance of drains and sewers
temporary boarding up of the property so destroyed or damaged including
undamaged portions and the Removal of debris (including the removal of contents
whether damaged or undamaged) provided that:
(i) Such costs are not recoverable under any other policy of insurance.
(ii) No liability is assumed for the expense of removal of any property or part
thereof, the removal of which is solely required by any governmental law or
public ordinance.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

Subject to sub-limits of indemnity as stated in Schedule.

Provided that this policy does not insure against the costs of decontamination or
removal of water, soil or any other substance on or under the premises insured
hereunder.

It is a condition precedent to recovery under this extension that the Insurer shall have
paid or agreed to pay for direct loss or damage to the property insured hereunder
unless such payment is precluded solely by the operation of any deductible and that
the Insured shall give notice to the Insurer of intent to claim for cost of removal of
debris or cost of cleanup not later than 12 months after the date of such physical
loss or damage.

OWNERS SURROUNDING PROPERTY

This insurance by this policy is extended to cover damage to property located at or
adjacent to the site and belonging to or held in care, custody, control of the insured
or the contractor(s) if occurring directly due to damage of items mentioned in the
schedule during the period of the insurance.
The insurers will pay to the insured the value of the damaged property at the time of
occurrence or reinstate or replace such damaged property or any part thereof: -
Subject to sub-limits of indemnity as stated in Schedule.

THIRD PARTY LIABLITY

The Insure shall indemnify the Insured up to limits of Indemnity specified in the
schedule in respect of any sums the Insured shall become legally liable to pay as
damages as a result of insuring occurrence causing:
(i) Accidental death of or bodily injury to or illness of third parties or
(ii) Accidental loss of or damage to property belonging to third parties
Subject to sub-limits of indemnity as stated in Schedule.

GOODS HELD IN TRUST

It is agreed that the property belonging to other parties but held in trust are under
the care, custody and control of the Insured is covered under the policy, if its value
forms part of total sum insured.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

SECTION – 4: CONDITIONS APPLICABLE TO SECTIONS 1 & 2

PROPERTY PLANT TESTING & COMMISSIONING CLAUSE
This insurance policy does not cover damage to property in course of construction or
erection, dismantling, or undergoing testing or commissioning mechanical,
performance testing and any business interruption arising there from.
Acceptance of property hereon is subject to satisfactory completion of the following procedures:
➢ Mechanical Testing
➢ Testing and commissioning
➢ Performance testing conforming to 100% contract design criteria and
continuous operation of minimum 72 hours duration. Any deviations to the
above relating to acceptance of a unit shall be mutually agreed between
insurer and the insured.
➢ Official acceptance by the Insured following formal hand over certificate
procedure (it being understood that no equipment faults or punch list items
affecting operation integrity of the plant are outstanding, unless agreed by
Insurer).
Provisions: This exclusion does not apply to on-going maintenance/ schedule
turnaround. This exclusion also does not apply to revamp work subject, however, to the
maximum contract value as declared within the minor works extension contained
within the policy.
Any deviations to the above relating to acceptance of a power station shall be mutually agreed.

WAIVER OF RECOURSE
This Insurance shall not be invalidated should the Insured waive, with Insurer’s
agreement, prior to damage affected thereby, any or all rights of recovery against
any party for damage to the property described herein, provided however, that the
Insurer’s rights of recourse against any manufactures and suppliers be maintained in
force.
It is specifically agreed to automatically waive rights of recourse against Contractors
of the insured (and /or their subcontractors) during the period of insurance but only
in respect of the normal maintenance activities of the insured. Normal Maintenance
activities shall be deemed to include work during normal shutdowns and the bringing
up from normal shutdowns.
EXPIRATION
If this policy should expire or be cancelled while an Insured event is in progress, it is
understood and agreed that the Insurer, subject to all other terms and conditions of
this policy, is responsible as if the entire loss had occurred prior to the Expiration of
this Policy.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

MARGIN CLAUSE
No adjustment in premium shall be made unless the values reported represent an
increase or reduction of 10% or greater from the previous values reported. The
premium shall be proportionately increased or reduced for the unexpired time of the
policy and shall be based on the difference between the previously reported values, or
the values at inception and those currently reported.

OEM CLAUSE
It is further noted and agreed that in the event of accidental physical loss or damage
to the property Insured, the Insured, at sole discretion, shall have the option to accept
repair or replacement terms as offered by the Original Equipment Manufacturer (OEM)
regardless of any other terms offered from other suppliers, manufacturer or
fabricators.

OBSOLETE PARTS
It is hereby understood and agreed, subject otherwise to the terms, conditions and
exclusions of the policy and endorsed hereon, that in the event of spares currently
insured hereunder and represented within the total Sum Insured under this policy,
becoming obsolete following a loss covered under the policy to the insured unit(s) to
which they belong such spare parts shall also be deemed a constructive total loss
provided always that such parts cannot be used as spares for any other units within
the premises of the insured . The company shall retail salvage rights over such parts.

CLAIM PREPARATION COST CLAUSE

Subject to the Sub-Limit of Liability as stated in the schedule of professional fees and
claims preparation Costs, the insurance under this item is to cover:
a) Such professional fees as may be payable by the Insured;
b) Such other expenses incurred by the Insured and not otherwise recoverable,
for preparation, providing and/or verification of claims made by the Insured
under this policy.
c) The cost of arbitration if incurred and such reasonable professional fees
and other reasonable expenses related thereto.
For the purpose of this Clause such reasonable professional fees shall include but not
be limited to fees for financial advisors, accountants, loss adjusters, insurance
intermediary, business interruption claims advocates and preparers and valuers
appointed by the Insured.

The Company’s maximum liability under this Clause shall not exceed INR 5 crores per
occurrence.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

SECTION - 5: CONDITIONS APPLICABLE TO ALL SECTIONS

OVERALL LIABILITY - Any Single Claim:

The limit of liability of Insurer for each & every occurrence/per location under all
sections, Section 1 All Risks, Section 2 - Machinery Breakdown, taken together shall
be limited to Rs 6000 Crore. The annual aggregate limit of indemnity in respect of each
power station is limited to the extent of Sum Insured for the particular power Station.

EXCLUSIONS
Unless Otherwise Expressly Agreed, this insurance does not cover any destruction or
damage occasioned by or through or in consequence of, directly or indirectly, any of
the following:
(i)
a. War, invasion, act of foreign enemy, hostilities or warlike operations (whether
war be declared or not), civil war.
b. Mutiny, civil commotion assuming the proportions of or amounting to a
popular rising, insurrection, rebellion, revolution, military or usurped power.
c. Terrorism and sabotage.
In any action, suit or other proceeding, where the insurer alleges that by reason of the
provisions of this condition any loss or damage is not covered by this insurance, the
burden of proving such loss or damage is covered shall be upon the insured.
(ii) Confistication, requisition, sequestration, nationalization or similar act.
(iii) Damage directly or indirectly caused by or arising from or in Consequence or
contributed to by:
a. Nuclear weapons material;
b. Ionizing radiations or contamination by radioactivity from any nuclear fuel or
from any nuclear waste from the combustion of nuclear fuel. Solely for the
purpose of this exclusion combustion shall include any self-sustaining process
of Nuclear Fission.
(iv) Excess applicable to all sections.

WRONG DESCRIPTION
If there be any material wrong description of any of the property hereby insured or of
the business carried out by the Insured or any misrepresentation as to any fact
material to be known by the insurer for estimating the risk or any omission to state
such fact, the Insurer shall not be liable under this Policy so far as it relates to
property affected by any such wrong description, misrepresentation or omission.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

ERRORS AND OMISSIONS

If there is any inadvertent error and/ or omission in the name of the Insured and/or in
the title or description by location or value of the property Insured hereunder or in the
Information upon which this Insurance or its renewal is based, this shall not void or
impair this Insurance provided the Insured shall advise the Insurer immediately upon
the discovery of any such discrepancy and pay additional premium reasonably
required by the Insurer in consequence of the revised information.

ALTERATIONS
If there is any alteration after the commencement of this insurance whereby the risk
of damage is increased the insurance shall cease to attach in respect of such loss or
damage which is directly or in directly attributable to such increase in risk, unless the
Insured, immediately upon becoming aware of such alteration, obtains the
agreement of the Insurer by endorsement upon the Policy.

CONTRIBUTION
If at the time of any damage happening to any property hereby Insured, there be any
other subsisting insurance or insurance’s covering the same property, the Insurer shall
not be liable to pay or contribute more than ratable proportion of such damage.

CLAIMS
On the happening of damage, the Insured shall forthwith give written notice thereof
to the Insurer by mail or facsimile and shall deliver to the Insurer:
(i) A claim in writing for the damage containing as particular an account as may
be reasonably practicable of all the several articles or items of property
damaged and of the amount of the damage thereto respectively, having regard
to their value at the time of the damage, not including profit of any kind,
together with particulars of any consequential loss resulting there from.
(ii) Particulars of all other insurances which are or could be applicable to loss, if any.
The Insured shall at their own expense produce, procure and give to the Insurer
all such further particulars, plans, specifications, books, vouchers, invoices,
duplicates or copies thereof, documents, proofs and information with respect
to the claim and the origin, cause and circumstances under which the
destruction or damage occurred, enquiry report and any matter affecting the
liability or the amount of the liability of the Insurer as may be reasonably
required by or on behalf of the Insurer together, if required by the Insurer, a
declaration on oath or in legal form of the truth of the claim and of any
matters connected therewith.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY
No Claim under this policy shall be payable unless the terms of this condition
have been complied with, and in the event of non-compliance therewith in any
respect, any payment on account of the claim already made shall be repaid to
the Insurer forthwith.

DUE DILIGENCE
The Insured shall at all times act with due diligence to prevent, or minimize the extent
of, any loss of or damage to the property insured.

REINSTATEMENT
The Insurer may at their option reinstate or replace the property damaged or lost or
any part thereof, instead of paying the amount of the damage, or may join with any
other company or Insurer in doing so, but only as circumstances permit and in
reasonably sufficient manner, and in no case shall the Insurer be bound to expend
more than the Sum Insured specified in the schedule.

If the Insurer so elects to reinstate or replace any property, the Insured shall, at their
expense, furnish the Insurer with such plans, specifications, measurements, quantities
and such other particulars as the Insurer may require, and no acts done, or caused to
be done by the Insurer with a view to reinstate or replace shall be deemed an election
by the Insurer to reinstate or replace.

PUBLIC AUTHORITIES
If, in any case, the Insurer shall be unable to reinstate or repair the property hereby
Insured, because of any municipal or other regulations in force affecting the
alignment of streets, or the construction of buildings, or otherwise, the Insurer shall,
in every such case, only be liable to pay such sum as would be requisite to reinstate or
repair such property if the same could lawfully be reinstated to its former condition.
Notwithstanding the foregoing this condition shall not be deemed to exclude cover
granted by the Public Authorities Extension herein.
In the event the Insured shall elect to receive monetary settlement per BASIS OF
INDEMNIFICATION, this condition applicable to all sections shall not be applicable.

SUBROGATION
The Insured shall, at the expense of the Insurer, do, and concur in doing, and permit to
be done, all such acts and things as may be necessary or reasonably required by the
Insurer for the purpose of enforcing any rights and remedies or obtaining relief or
indemnity from other parties to which the Insurer shall be or would become entitled
or subrogated, upon its paying for or making good any damage under this Policy,
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

whether such acts and things shall be or become necessary or required before or after
their indemnification by the Insurer.

DEDUCTIBLES
If the cover in respect of the property or any specified part of such property is indicated
as being subject to a deductible, the Insured shall, in respect of each and every
occurrence giving rise to a claim, first bear the full amount of such deductible stated
in the schedule and the Insurers liability after making all other adjustments to the
claim presented by the Insured shall be reduced accordingly.
In the event of a single indemnifiable loss or occurrence being insured under Sec I & Sec
II only one deductible shall be applicable whichever is the higher.

RECOVERIES
After expenses incurred in salvage or recovery are deducted, any salvage or recovery,
except recovery through subrogation proceedings, shall accrue entirely to the benefit
of the Insurer until the Sum paid by the Insurer has been recovered, except for any
amount assumed by the Insured (other than a deductible) over and above any
payment made under the Policy.
Any recovery as a result of subrogation proceedings, after expenses incurred in such
subrogation proceedings are deducted, shall accrue to the Insured in the proportion
that the amount of the deductible bears to the amount of the entire loss.

NO CONTROL
The Insurance shall not be affected by failure of the Insured to comply with the
provisions of this policy in any portion of the property over which the Insured has no
control.

BANKRUPTCY
In the event of Bankruptcy or the in solvency of the Insured, the Insurer shall not be
relieved thereby of the obligations under the Policy.

INTERIM PAYMENTS
Within a reasonable time after receipt of satisfactory documentation and agreement
to the Loss Adjusters report, the Insurer will make interim payment of the Claim
Amount as approved by the loss adjuster and shall follow guidelines mentioned in
Service Level Agreement (SLA) provided in Section IV.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

FRAUD
If the Insured shall make any claim knowing the same to be false or fraudulent, as
regards amount or otherwise, this policy shall be void and all claims hereunder shall
be forfeited.

APPLIACBLE LAW
This insurance is issued subject to, and shall be governed by, the law of the Republic of India.

CANCELLATION
This Insurance may be terminated at any time at the request of the Insured with 60
days written Notice and may also be terminated at the option of the Insurer on 60
days written Notice to that effect being given to the Insured. In either case the
premium due to the Insurer shall be in proportion to the time the policy has remained
in force and the balance amount shall be refunded within 30 days after cancellation
of the policy.

ARBITRATION
If any dispute(s)or difference(s) of any kind whatsoever arise between the Parties
hereto in connection with or arising out of this Contract, the Parties hereto shall
negotiate with a view to its amicable resolution and settlement. In the event no
amicable resolution or settlement is reached within a period of thirty (30) days from
the date on which the dispute(s)or difference(s) arose, such dispute(s) or differences
shall be referred to and settled by arbitral tribunal comprising of three (3) arbitrators,
one to be appointed by each party, the third arbitrator to be appointed by both the
arbitrators. In case of difference(s), the third arbitrator shall be appointed by the
Hon’ble Chief Justice of Delhi High Court or the Authority nominated/authorized by him
in this regard or the President of Institution of Engineers.

The arbitration proceedings shall be in accordance with the prevailing Arbitration Laws
of India as amended or enacted from time to time. The existence of any dispute(s) or
difference(s) or the initiation or continuance of the arbitration

proceedings shall not permit the Parties to postpone or delay the performance by the
parties of their respective obligations pursuant to this Contract. The venue of the
arbitration shall be Delhi, India.
In the event of dispute or difference arising between one Public Sector Enterprise and
a Government Department the provision of DPE as per memorandum No. DPE OM
No. DPE/4(1)/2011-DPE(PMA)-GL dated 12th June 2013 shall be applicable.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

SECTION 6: ADDITIONAL CONDITIONS APPLICABLE TO ALL SECTIONS/

WHOLE OF THE POLICY
PROPERTY & ELECTRICAL GENERATING PLANT AND
EQUIPMENT
Fuels Quality Clause: It is hereby noted and agreed that: Except where all fuel
specifications are monitored by appropriate proven engineering means and best
practices designed to ensure that the fuel supply is maintained at all means within
manufacturers, ‘or recognized equipment suppliers’, written and authorized engineer
specifications and operating guidelines.
This insurance doesn’t cover failure destruction of or any damages including flash
back or flame out to property in normal operation or course of construction or
erection, dismantling, refurbishment or undergoing testing or commissioning
including mechanical performance testing, unscheduled shutdowns and any Business
Interruption resulting arising out of ‘the fuel (gas, liquid or solid) supplied to the
apparatus not being of consistent quality and does not meet the manufacturer’s or
equipment supplier’s fuels written technical specifications (including but not limited to
pressure, temperature, calorific value, hydrocarbon dew point) at all times.
Notwithstanding the above attachment of property and plant hereon to be agreed by the
Insurers.

ELECTRONIC DATA RECOGNITION CLAUSE (EDRC) (B)

Section – 1

The Insurance does not cover any loss, damage, cost, claim or expense whether
preventive, remedial or otherwise arising out of or relating to change, alteration or
modification for:
The calculation, comparison, differentiation, sequencing or processing of date
involving the date change to the year 2000, or any other date change, including leap
year calculations by any computer system, hardware, programme or software and/or
any microchip, integrated circuit or similar device in computer equipment or
computer equipment, whether the property of the insured or not; or any change,
alteration or modification involving the date change to the year 2000 or any other
date change including leap year calculations to any such computer system, hardware,
programme or software or any microchip, integrated circuit or similar in computer
equipment or non-computer equipment, whether the property of the insured or not’.
The clause applies regardless of any other cause or event that contributes concurrently
or in any sequence to the loss, damage, cost, claim or expense. However, this section
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

shall not apply in respect of physical damage occurring at the insured’s premises
arising out of the perils of fire, lightening, explosion, aircraft or vehicle impact, falling
objects, windstorm, hail, tornado, hurricane, cyclone, riot, strike, vandalism,
malicious mischief, earthquake, volcano, tsunami, freeze or weight of snow.

ELECTRONIC DATA ENDORSEMENT B

1. Electronic Data Exclusion

Notwithstanding any provision to the contrary within the policy or any endorsement
thereto, it is understood and agreed as follows:
a. The Policy does not insure, loss, damage, destruction, distortion, erasure,
corruption or alteration of Electronic Data from any cause whatsoever (including
but not limited to Computer Virus) or loss of use, reduction in functionality,
cost, expenses of whatsoever nature resulting there from, regardless of any other
cause or event contributing concurrently or in any other sequence to the loss

Electronic Data means facts; concepts and information converted to a form

useable for communications, interpretation or processing by electronic and
electromechanical data processing or electronically controlled equipment and
includes programme, software and other coded instructions for the processing
and manipulation of data or the direction and manipulation of such equipment.
Computer Virus means a set of corrupting, harmful or otherwise unauthorized
instructions or code including a set of Maliciously introduced unauthorized
instructions or code, programmatic or otherwise that propagate themselves
through a computer system or network of whatsoever nature. Computer Virus
includes but is not limited to ‘Trojan Horses, worms and time or logic bombs’.
b. however, in the event that a peril listed below results from any of the matters
described in Para (a) above, this policy subject to all its terms, conditions an
exclusions will cover Physical damage occurring during the period of insurance to
property insured by this policy and caused by such listed perils.
➢ Listed Perils
➢ Fire
➢ Explosion

2. Electronic Data Processing Media Valuation

Notwithstanding any provision to the contrary within the Policy or any endorsement
thereto, it is understood and agreed as follows:
Should Electronic Data media insured by this Policy suffer physical Loss or damage
then the basis of valuation shall be the cost of the blank media plus the cost of
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

copying the electronic data from back up or from originals of a previous generation.
These costs will not include research and engineering nor any costs of recreating,
gathering or assembling such Electronic Data. If the media is not repaired, replaced or
restored the basis of valuation shall be the cost of blank media. However, this policy
does not insure any amount pertaining to the value of such Electronic Data to the
insured or any other party, even if such Electronic Data cannot be recreated,
gathered or assembled.

MICROORGANISM EXCLUSION (MAP) (absolute)

This policy does not insure any loss, damage, claim, cost, expense or other sum
directly or indirectly arising out of or relating to:
Mold, mildew, fungus, mushroom, spores or any other micro-organism of any type,
nature or description, including but not limited to any substance whose presence
poses an actual or potential threat to human health.
This exclusion applies regardless whether there is
(i) Any physical loss or damage to Insured property
(ii) Any insured peril or cause, whether or not contributing concurrently or in sequence
(iii) Any loss of use, occupancy, or functionality or
(iv) Any action required, including but not limited to repair, replacement, removal,
cleanup, abatement, disposal, relocation, or steps taken to address medical or
legal concerns.
This exclusion replaces and supersedes any provision in the policy that provides
insurance, in whole or in part for these matters.

WEH ASBESTOS ENDORSEMENT 1984

A. This policy only insures asbestos physically incorporated in an insured building
or structure, and then only that part of the asbestos which has been physically
damaged during the policy period by one of these listed perils:
Fire, Explosion, Lightening, windstorm, Hail, Direct impact of vehicle, aircraft
or vessel, Riot, Vandalism or malicious mischief or accidental discharge of Fire
protective equipment.

This coverage is subject to all limitations in the policy to which the endorsement is
attached and, in addition, to each or the following specific limitations:
1. The said building or structure must be insured under this policy or damage by
that listed peril.
2. The listed perils must be immediate, sole cause of the damage to the asbestos.
3. The insured must report to the Insurer/ Underwriters the existence and the
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

cost of the damage as soon as practical after the listed peril first damaged the
asbestos. However, this policy does not insure any such damage first
reported to Insurer/ Underwriters more than 12 (twelve months) after the
expiration, or termination, of the policy period.
4. Insurance under this policy in respect of asbestos shall not include any sum relating to:
a. Any faults in design, manufacture or installation of the asbestos.
b. Asbestos not physically damaged by the listed peril including any
governmental or regulatory authority direction or request of whatsoever
nature relating to undamaged asbestos
xBc.ept asEset forth in the foregoing Section A, this policy does not insure asbestos or any
sum relating thereto.

BIOLOGICAL OR CHEMICAL MATERIAL EXCLUSION

It is agreed that this insurance excludes loss, damage, cost or expense of whatsoever
nature directly or indirectly caused by, resulting from or in connection with the actual
or threatened malicious use of pathogenic or poisonous biological or chemical
materials regardless of any other cause or event contributing concurrently or in any
other reference thereto.

ADDITIONAL LIMITATIONS AND CONDITIONS ENDORSEMENT (STANDARD)

The endorsement contains provisions in clauses 6.7.2, 6.7.5 and 6.7.6 that may limit
or prevent recovery under this policy for debris removal (as provided in Clause 6.7.2)
and/ or Resulting Loss (as provided in Clause 6.7.5)

Land Water and Air Exclusion Clause

Forms part (or within any other endorsement which forms part of this Policy), this
policy does not insure land (including but not limited to land on which the insured
property is located), water or air howsoever and wherever occurring, or any interest
or right therein. The foregoing exclusion shall not apply to water which is contained in
plumbing or firefighting installations in the Insured’s building at the time of any
damage insured by this policy.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

Debris Removal Clause

Nothing contained in this clause shall override any seepage and / or pollution and/or
contamination exclusion or any radioactive contamination exclusion or any other
exclusion applicable to this policy. The Inclusion of this Clause shall in no event
increase the liability of Insurer/ Underwriters under this policy or any other
endorsement applicable to this policy.

Any provision within this policy (or within any Endorsement which forms part of this
Policy) which insures debris removal is cancelled and replaced by the following.

1) In the event of direct physical damage to property, for which insurers agrees
to pay hereunder, or which but for the application of a deductible or
underlying amount they would agree to pay (herein after in this clause referred
to as DAMAGE), this policy also insures, subject to the limitations below and
method of calculation in clause 6.7.6 of this endorsement and to all other
terms and conditions of this policy, expense
a. Which is reasonably and necessarily incurred by the insured in the removal
from the premises of the Insured at which the damage occurred, of debris
which results from the damage; and
b. Of which the Insured becomes aware and advises the amount to insurers
hereon within one year of the commencement of the damage.
Provided, however, that nothing in this clause shall insure any expense provided
under the clause 6.7.5 of this endorsement.
2) The maximum amount for expense for removal of debris (subject to
limitations of Para 1 above) that can be included in the method of calculation
in clause 6.7.6 of this endorsement, shall be the greater of INR 14,00,000/- or
10% of the amount of damage from such expense results.

Disposal of Salvage
The agrees not to sells or otherwise dispose of any property, which is the subject of a
claim hereunder without the written consent of insured provided that:
a) The insured can establish to satisfaction of insurer that to have done so would
have been prejudicial to their interests in which event the insured agree to allow the
insurer to deduct from the amount of claim and amount equivalent to the intrinsic
value any such property to the insured.
b) If (a) is unsatisfactory, the insurer agrees to give the insured first option to re-
purchase such property at its intrinsic value derived by surveyor through standard
auction process. (As per CVC Guidelines)
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

Seepage and / or Pollution and / or Contamination Exclusion Clause

Notwithstanding any provision to the contrary within the policy of which this
endorsement forms part (or within any other endorsement which forms part of this
policy), this Policy does not insure:
(i) any loss, cost or expense; or
(ii) any increase in insured loss, damage, cost or expense; or
(iii) any loss, damage, cost, expense, fine, penalty or any sum which is incurred,
sustained or imposed by, or by the threat of, any judgment, order, direction,
instruction or request of, or any agreement with, any court, government
agency, any public, civil or military authority or any other person (and whether
or not as a result of public or private litigation).
This arises any kind of seepage or any kind of pollution and/or contamination,
or threat thereof, whether or not caused by or resulting from a peril insured, or
from steps or measures taken in connection with the avoidance, prevention,
abatement, mitigation, remediation, clean – up or removal of such seepage or
pollution and/ or contamination, or threat thereof.

The term ‘any kind of seepage or any kind of pollution and/ or contamination’ as used in this
Endorsement includes (but is not limited to):
(i) seepage of, or pollution and /or contamination by, anything, including but not
limited to, any material designated as a hazardous substance by the United
States Environment Protection Agency or as a “hazardous material” by the
United States Department of Transportation, or defined as “toxic Substance” by
the Canadian Environment Protection Act for the purpose of Part II of that Act,
or any substance designated or defined as Toxic, Dangerous, hazardous or
deleterious to persons or the environment under any other law, ordinance or
regulation; and
(ii) The presence, existence, or release of anything which endangers or threatens to
endanger the health, safety or welfare of persons or the environment.

Listed Perils Resulting from Seepage and/or Pollution and/or Contamination

Clause
This policy is amended as set forth below. All other terms and conditions of this policy
remain unchanged and continue to apply with full force and effect. Nothing
contained in this clause shall override any radioactive contamination exclusion
applicable to this policy. If any of the perils listed below results from seepage and/ or
pollution and/ or contamination, then such resultant perils shall not be excluded
solely by the foregoing seepage and/ or Pollution and/ or Contamination Exclusion
Clause.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

Listed Perils – Fire & Explosion

Nothing in this clause, however, shall extend this Policy to insure

(i) Loss, Damage, cost, Expense Fine or Penalty, or other Sum, arising from any
kind of seepage of any kind of pollution and/ or contamination that causes or
results from a listed peril; or
(ii) Loss or damage at any premises other that the premises where the listed peril
took place; or
(iii) Property and/ or interests other than those insured by this policy against the listed perils.

Limited Seepage and/or Pollution and/or Contamination Resulting from the Physical
Damage Caused by Listed Peril Clause

This clause is void and no force or effect unless an amount is specified in Para (2) below
The policy is amended as set forth below. All other terms and conditions of this policy
remain unchanged and continue to apply with full force and effect. Nothing
contained in this clause shall override any radioactive contamination exclusion or,
except as set forth herein, the foregoing seepage and/ or pollution and / or
Contamination Exclusion Clause. The inclusion of this clause shall in no event increase
the liability of underwriters under this policy or in any endorsement applicable to this
policy.
1 If

a) any of the perils listed below is the sole, immediate and direct cause of physical
damage to property insured by this policy against such listed peril hereinafter
in this clause
referred to as “Original damage”; and
b) the Original damage is the sole, immediate and direct cause of seepage and/ or
pollution and/ or contamination of property which is:
(i) at the same premises as the original damage; and
(ii) insured by this policy against the listed peril causing the original damage and
c) said property is damaged thereby (herein in this clause referred to as
‘Resulting Damage’, then this policy, subject to the following additional terms
limitations and the method of calculation in clause 6.7.6 of this endorsement,
also insures;
d) The Resulting damage; and
e) The reasonable and necessary expense incurred by the assured for debris
removal and/or cleanup which is:
(i) Limited to the same premises as the original Damage.
(ii) Made necessary solely by the Resulting Damage.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

but which shall in no event include any expense of clean up or removal of land,
water or air, (which Resulting Damage and Expense of debris removal and/ or
clean up, hereinafter in this clause are referred to as ‘Resulting Loss’); provided,
however, that this policy only insures the resulting loss, where;
f) The insurers have agreed to pay for the Original Damage or, but for the
operation of a deductible or underlying amount, would have been agreed to
pay for the original damage; and
g) Within one year of commencement of the listed peril which caused the original
damage, the Insured became are and advised underwriters of the amount of:
(i) The Resulting Loss; and
(ii) Any other interest to be claimed under this policy as a result of the
Resulting Damage, whether Physical damage, business interruption,
extra expenses or otherwise.
Listed Perils
➢ Fire
➢ Lightening
➢ Explosion
Nothing in this clause, however, shall extend this policy to cover any condition that
existed prior to the original damage nor to insure any loss, damage, cost, expense,
fine, penalty or other sum which is incurred, sustained or imposed by, or by the threat
of, any judgment, order, direction, instruction or request of, or any agreement with,
any court, government agency, any public or military authority or any other person
(and whether or not as a result of public or private litigation), connection with any
kind of pollution and/ or contamination from any cause.
(2) The maximum amount for any resulting loss and any other interest claimed under
this policy as a result of the resulting Damage, whether physical damage,
business interruption, extra expense or otherwise, that can be included in the
method of calculation in Clause 6.7.6 of this endorsement is 10% of the claim
amount.

Method of Calculation
In calculating the amount, if any, payable under this policy for a claim including
expense of debris removal (as provided for and limited in clause 6.7.2 of this
endorsement) and/ or resulting loss (as provided for and limited in clause 6.7.5 of this
endorsement), the amount of such expense of debris removal and/or such Resulting
Loss shall be added to:
a. the amount of the Damage (as defined in Clause 6.7.2 or the amount of
the original Damage (as defined in clause 6.7.5); and
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

b. all other amounts, if any, insured under this policy as a result of the same
occurrence that the underwriters hereon agree to pay or, but for the
application of a deductible or underlying amount, they would agree to
pay, then the resulting sum shall be amount to which first all deductibles
and then any underlying amounts to which the policy is subject shall be
applied and the balance, if any, shall be the amount payable, subject to all
other provisions of this policy and to the applicable limit(s), sub-limit(s)
and aggregate limit(s)

COINSURANCE MEMORANDUM
It is hereby declared and agreed that the Insurers named hereunder severally agreed
each for the proportion set against their name.
(a) to Pay or make good to the Insured the value of the property at the time of
happening of its loss or destruction or the amount of such damage thereto as
provided for under the policy and/or
(b) to indemnify the Insured against liability at law for damage to property and/
or injuries to persons as provided for under the policy.

Provided always that

1. The liability of the Insurers shall in no case exceed in respect of each item of the
sum expressed in the said schedule to be insured hereon or in the total sum
insured hereby of such other sum or sums as may be substituted thereof by
endorsement.

2. The liability of each of the Insurers individually in respect of such loss or

destruction or damage or indemnity shall be limited to the proportion set against
its name or such other proportion as may be substituted thereof by endorsement.

It is understood, however, that the Insured shall have the right at all times during the
currency of the policy to communicate only, with issuing office of the lead Insurer in
all, matters pertaining to this insurance.

Otherwise subject to the terms, exceptions, conditions and limitations of this policy.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

CO- INSURANCE SHARING ARRANGEMENT:

The Coinsurers Share (%) Premium (Rs)

Oriental Insurance Co. Ltd. 40 396589632
New India Assurance Co. Ltd. 20 198294816
ICICI Lombard Gen. Ins. Co Ltd 20 198294816
Bajaj Allianz Gen Ins. Co. Ltd. 20 198294815

PLANT WISE CAPACITY & SUM INSURED Annexure – Attached to Policy No

11/2019/987
S. COAL BASED PLANT Capacit Section -1 All Section -2
N LOCATIONS
o (@ Rs. 4.83 crs/Mw) y Risk Sum MBD Sum
(MW) Insured (in crs) Insured (in crs)
1 BADARPUR 705 3405.15 0.00
2 DADRI (THERMAL) 1820 8790.60 6592.95
3 FARAKKA 2100 10143.00 7607.25
4 KAHALGAON 2340 11302.20 8476.65
5 KORBA 2600 12558.00 9418.50
6 MOUDA 2320 11205.60 8404.20
7 RAMAGUNDAM 2600 12558.00 9418.50
8 RIHAND 3000 14490.00 10867.50
9 SIMHADRI 2000 9660.00 7245.00
10 SINGRAULI 2000 9660.00 7245.00
11 SIPAT 2980 14393.40 10795.05
12 TALCHER (K) 3000 14490.00 10867.50
13 TALCHER (T) 460 2221.80 1666.35
14 TANDA 440 2125.20 1593.90
15 UNCHAHAR 1550 7486.50 5614.88
16 VINDHYACHAL 4760 22990.80 17243.10
17 BARH 1320 6375.60 4781.70
18 BONGAIGAON 500 2415.00 1811.25
19 KUDGI 2400 11592.00 8694.00
20 SOLAPUR 660 3187.80 2390.85
21 LARA 800 3864.00 2898.00
TOTAL (A) 4035 194914.65 143632.13
5
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

S. GAS BASED PLANT Capacit Section -1 All Section -2

N LOCATIONS y Risk Sum MBD Sum
o (@ Rs. 5.168 crs/Mw) (MW) Insured (in crs) Insured (in crs)
1 ANTA 419 2165.39 1624.04
2 AURAIYA 663 3426.38 2569.79
3 DADRI (GAS) 830 4289.44 3217.08
4 FARIDABAD 432 2232.58 1674.43
5 GANDHAR 657 3395.38 2546.53
6 KAWAS 656 3390.21 2542.66
7 KAYAMKULAM 360 1860.48 1395.36
TOTAL (B) 4017 20759.86 15569.89
GRAND TOTAL (A+B) 4277 215674.51 159202.02
2
S. HYDRO PLANT Capacit Section -1 All Section -2
N y Risk Sum MBD Sum
o (MW) Insured (in crs) Insured (in crs)
1 KOLDAM 800 6645.87 1878.23
TOTAL (C) 800 6645.87 1878.23
TOTAL (A+B+C) 4357 222320.38 161080.25
2
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

POLICY SCHEDULE - Attached to & forming part of Stand

Alone Terrorism Policy No. 271400/11/2019/989
Policy No. 271400/11/2019/989 Period: 01.01.2019 to 31.12.2019
THE INSURED NTPC Limited
Engg. Block, A-8A, Sector – 24,
Noida, UP. (India) 201301 (GST No: 09AAACN0255D9ZO)
INTEREST INSURED VARIOUS PROPERTIES IN RESPECT OF STATIONS LISTED AS
PER Annexure A
SECTION – 1 THE All real and personal property installed used and kept to generate
electric power using coal, gas, hydro or any other such fuel,
PROPERTY other than such as excluded hereunder, belonging to the Insured
or for which he is legally responsible, principally comprising
Buildings (including basements), Plants, Equipment and
Machinery, DAS & PCs Foundations & Pilings, Electrical
Installations, Spares and Consumables, Fuels (other than
Coal),Furniture, Fixtures, Fittings, Cables, Transmission lines,
Office Equipment, Chimneys with foundations all within the
plant boundaries and Raw Water Pump Houses installed at
either sea, river, canal, reservoir with associated Piping located
inside as well as outside the plant premises & Electronic Data
Processing Equipment’s, Mainframe Computers etc and
Communication System directly related with power generation,
monitoring & analysis in some of the stations functionally
located outside Plant premises. Assets like drainage, culvert,
pavements, roads, dams, reservoirs, canals, pipelines, tunnels,
bridges, piers etc. and all other civil works related to hydro
plants.
Excluding: Land, Infrastructure such as flyovers, boundary walls,
roads, culverts & canals other than hydro, township, premises
outside plant boundaries, ash dyke, ash slurry pipelines, street
lighting, earth moving equipment including dozers, cranes &
trolleys, MGR system containing
locos & wagon, coal stock.
LOCATIONS Within the boundaries of Power Stations (Coal, Gas & Hydro) as
INSURED described in the Annexure – A attached & whilst temporary
removal thereof through India & Abroad
PERIOD OF From: 01.01.2019 To: 31.12.2019
INSURANCE (00.01 hours) (24.00 hours)
PREMIUM Rs. 85,00,000 GST @ 18% Rs. 15,30,000
TOTAL PREMIUM Rs. 1,00,29,999/-
 NTPC MEGA RISK INSURANCE PACKAGE POLICY
INSURER’S LIMIT For Coal, Gas & Hydro - Rs. 2050 crore any one event and in
OF LIABILITY the Annual Aggregate, Property Damage cover on First Loss
Basis, with one Free Automatic Reinstatement.

TOTAL DECLARED VALUE OF INTEREST INSURED:

SECTION – 1 Property Damage Rs. 222320.38 Crores

Notice of Claim The Oriental Insurance Company Limited
Nominee DO XI, 30/26, First Floor, Nazgia Park, Shakti Nagar, Delhi - 110 007.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

DEDUCTIBLE (S)

SECTION – 1 (Physical Loss / Damage) Rs. 600 lakhs AOA per location

Dated: 17th January, 2019 Sr. Divisional Manager

 NTPC MEGA RISK INSURANCE PACKAGE POLICY

SECTION – 1: PROPERTY DAMAGE

INSURING CLAUSE

Subject to the exclusions, limits and conditions hereinafter contained, this Insurance
insures the Property Insured specified in the Schedule against physical loss or physical
damage by an Act or series of Acts of Terrorism and/or Sabotage, as herein defined,
occurring during the period of this Policy as stated in the Schedule attaching to and
forming part hereof, (hereinafter referred to as the “Schedule”).
For the purpose of this Insurance, an Act of Terrorism, means an act, including the use of force
or violence, of any person or group(s) of persons, whether acting alone or on behalf of or in
connection with any organisation(s), committed for political, religious or ideological
purposes including the intention to influence any government and/or to put the public in fear
for such purposes.
An Act of Terrorism shall also include any act which is verified or recognised by the
Government of India as an act of Terrorism.
For the purpose of this Insurance, an Act of Sabotage means a subversive act or series
of such acts committed for political, religious or ideological purposes including the
intention to influence any government and/or to put the public in fear for such
purposes.
LOSSESS EXCLUDED
This Policy DOES NOT INSURE AGAINST: -
1. Loss or damage arising directly or indirectly from nuclear detonation, nuclear
reaction, nuclear radiation or radioactive contamination, however such nuclear
detonation, nuclear reaction, nuclear radiation or radioactive contamination may
have been caused.
2. Loss or damage occasioned directly or indirectly by war, invasion or warlike
operations (whether war be declared or not), hostile acts of sovereign or
government entities, civil war, rebellion, revolution, insurrection, civil commotion
assuming the proportions of or amounting to an uprising, military or usurped
power or martial law or confiscation by order of any Government or public
authority.
3. Loss by seizure or illegal occupation unless physical loss or damage is caused
directly by an Act of Terrorism and/or an Act of Sabotage.
4. Loss or damage caused by confiscation, requisition, detention, legal or illegal
occupation, embargo, quarantine, or any result of any order of public or
government authority which deprives the Insured of the use or value of the
Property Insured, nor for loss or damage arising from acts of contraband or illegal
 NTPC MEGA RISK INSURANCE PACKAGE POLICY
transportation or illegal trade.
5. Loss or damage directly or indirectly arising from or in consequence of the
discharge of pollutants or contaminants, which pollutants and contaminants shall
include but not be limited to any solid, liquid, gaseous or thermal irritant,
contaminant of toxic or hazardous substance or any substance the presence,
existence or release of which endangers or threatens to endanger the health,
safety or welfare of persons or the environment.
6 ss Lor damage by chemical or biological release or exposure of any kind.

7. Loss or damage by electronic means including but not limited to computer

hacking or the introduction of any form of computer virus or corrupting or
unauthorised instructions or code or the use of any electromagnetic weapon.
This exclusion shall not operate to exclude losses (which would otherwise be
covered under this Policy) arising from the use of any computer, computer system
or computer software programme or any other electronic system in the launch
and/or guidance system and/or firing mechanism of any weapon or missile.
8. Loss or damage caused by vandals or other persons acting maliciously or by way
of protest or strikes, riots or civil commotion unless physical loss or damage is
caused directly by an Act or series of Acts of Terrorism and/or Sabotage
9. Loss or increased cost occasioned by any Public or Civil Authority’s enforcement
of any ordinance or law regulating the reconstruction, repair or demolition of any
property insured hereunder which was not applicable prior to the Loss.
10. Any consequential loss or damage caused by any other ensuing cause except
where such ensuing cause is directly caused by an Act or series of Acts of Terrorism
and/or Sabotage, or where Business Interruption coverage is provided by addition
of an endorsement to this Policy.
11. Loss of use, delay or loss of markets, however caused or arising, and despite any
preceding loss insured hereunder.
12 Loss damage caused by cessation, fluctuation or variation in, or insufficiency
of, water, gas or electricity supplies and telecommunications of any type or
service.
Loss or increased cost as a result of threat or hoax, in the absence of physical
damage due to an Act or series of Acts of Terrorism and/o r Sabotage.
12. Loss or damage caused by or arising out of burglary, house-breaking, theft or
larceny or caused by any person taking part therein.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

PROPERTY EXCLUDED
This policy does not cover:
1. Land or Land Values.
2. Power Transmission or feeder lines unless such Power Transmission or feeder
lines are the responsibility of the Insured.

3. Aircraft or any other aerial device, or watercraft.

4. Any land conveyance, including vehicles, locomotives or rolling stock, unless such
land conveyance is declared hereon and solely whilst located at the property
insured herein at the time of its damage.

5. Animals, plants and living things of all types.

ONUS OF PROOF
In any claim and/or action, suit or proceeding to enforce a claim for loss under this
policy, the burden of proving that the loss is recoverable under this Policy and that no
limitation or exclusion of this policy applies and the quantum of loss shall fall upon
the Insured.

OTHER INSURANCE
This Policy shall be excess of any other insurance available to the Insured covering a
loss covered hereunder except such other insurance which is written specifically as
excess insurance over this Policy. When this Policy is written specifically in excess of
other insurance covering the peril insured hereunder, this Policy shall not apply until
such time as the amount of the underlying insurance, (whether collectible or not), has
been exhausted by loss and damage covered by this Policy in excess of the
deductible with respect to each and every covered loss.

LOCATIONS INSURED
This Policy insures the Property Insured whilst located as described in the Schedule.

SUM INSURED
The Underwriters hereon shall not be liable for more than the sum insured stated in
the Schedule in respect of each Occurrence and in the aggregate.

DEDUCTIBLE
Each occurrence shall be adjusted separately and from the amount of each such
adjusted loss the sum stated in the Schedule shall be deducted.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

OCCURRENCE
The term “Occurrence” shall mean any one loss and/or series of losses arising out of
and directly occasioned by one Act or series of Acts of Terrorism and/or Sabotage for
the same purpose or cause. The duration and extent of any one “Occurrence” shall be
limited to all losses sustained by the Insured at the property insured herein during any
period of 72 consecutive hours arising out of the same Act or series of Acts of
Terrorism and/or Sabotage. However, no such period of 72 consecutive hours may
extend beyond the expiration of this policy unless the Insured shall first sustain direct
physical damage by an Act or series of Acts of Terrorism and/or Sabotage prior to
expiration and within said period of 72 consecutive hours nor shall any period of 72
consecutive hours commence prior to the attachment of this Policy.

DEBRIS REMOVAL
This Policy also covers, within the sum insured, expenses incurred in the removal of
debris of property covered hereunder which may be directly destroyed or damaged by
an Act or series of Acts of Terrorism and/or Sabotage.
The cost of removal of debris shall not be considered in determination of the
valuation of the property covered.

PROFESSIONAL FEES
This Policy includes Architects', Surveyors', Consulting Engineers' or other professional
fees necessarily incurred in the reinstatement of the Property Insured consequent
upon its loss or damage but not for preparing any claim it being understood that the
amount payable for such fees shall not exceed those authorised by the appropriate
professional body.
The liability of Underwriters under this clause shall in no case exceed the limit of
liability stated in the Schedule to this Policy.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

CONDITIONS
1. DUE DILIGENCE
The Insured (or any agent, sub or co-contractor of the Insured) shall at all times and
at his own expense use due diligence and do (and concur in doing and permit to be
done) all things reasonably practicable (including but not limited to precautions to
protect or remove the property and interests insured herein) to avoid or diminish any
loss herein insured.

2. PROTECTION MAINTENANCE
It is agreed that any protection provided by the Insured for the safety of the insured
property shall be maintained in good order throughout the currency of this Policy and
shall be in use at all relevant times, and that such protection shall not be withdrawn
or varied to the detriment of the interests of the Underwriters without their consent.

3. VALUATION
It is understood that, in the event of damage, settlement shall be based upon the
cost of repairing, replacing or reinstating (whichever is the least) on the same site, or
nearest available site (whichever incurs the least cost) with material of like kind and
quality without deduction for depreciation, subject to the following provisions:

(a) The repairs, replacement or reinstatement (all hereinafter referred to as

“replacement”) must be executed with due diligence and dispatch;
(b) Until replacement has been affected the amount of liability under this policy in
respect of loss shall be limited to the actual cash value at the time of loss;
The Underwriters’ liability for loss under this Policy including this Condition shall
not exceed the smallest of the following amounts: -

(i) The amount of the Policy applicable to the destroyed or damaged property;
(ii) The replacement cost of the property or any part thereof identical with such
property and intended for the same occupancy and use;
(iii) The amount actually and necessarily expended in replacing said property or any part thereof.

4. BY LAW EXTENSION
Should any bylaw, regulation, ordinance or law be invoked as a result of any loss
insured hereunder, the loss settlement shall include the cost of demolition, including
demolition of undamaged structures, value of undamaged portion, clearing the site
and repairs, replacement and reconstruction to the extent of the minimum
requirement of such bylaw, regulation, ordinance or law at the time of repair. If the
use of the same site is not permitted the total payable shall include the cost of
complying with the minimum requirements of any bylaw, regulation, ordinance or
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

law applicable to the site actually used. Payment for repairs, replacement and/or
reconstruction shall not be made until these have been effected.

5. UNDER INSURANCE WAIVER

If the values declared of the Interest Insured are less than the correct values by more
than 20% then any recovery otherwise due hereunder shall be reduced in the same
proportion that the values declared bear to the values that should have been
declared, and the Insured shall co-insure for the balance.

6. NOTIFICATION OF CLAIMS
The Insured, upon knowledge of any occurrence likely to give rise to a claim
hereunder, shall give written advice thereof to the Underwriters, as soon as practicable
of such knowledge of any occurrence.

7. PROOF OF LOSS
The Insured shall render a signed and sworn proof of loss within sixty (60) days after
the occurrence of a loss (unless such period be extended by the written agreement of
Underwriters) stating the time, place and cause of loss, the interest of the Insured and
all others in the property, the sound value thereof and the amount of loss or damage
thereto.
If Underwriters have not received such proof of loss within two years of the expiry
date of this policy, they shall be discharged from all liability hereunder unless an
extension has been specifically filed with Underwriters.

8. SUBROGATION
If the Underwriters become liable for any payment under this Policy in respect of loss
or damage the Underwriters shall be subrogated, to the extent of such payment, to all
the rights and remedies of the Insured against any party in respect of such loss or
damage and shall be entitled at their own expense to sue in the name of the Insured.
The Insured shall give to the Underwriters all such assistance in his power as the
Underwriters may require to secure their rights and remedies and, at Underwriters’
request shall execute all documents necessary to enable Underwriters effectively to
bring suit in the name of the Insured including the execution and delivery of the
customary form of loan receipt.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

9. SALVAGE AND RECOVERIES

All salvages, recoveries and payments recovered or received subsequent to a loss
settlement under this Policy shall be applied as if recovered or received prior to the
said settlement and all necessary adjustments shall be made by the parties hereto.

10. FALSE OR FRADULENT CLAIMS

If the Assured shall make any claim knowing the same to be false or fraudulent, as
regards amount or otherwise, this Policy shall become void and all claim hereunder
shall be forfeited.

11. ABANDONMENT
There shall be no abandonment to the Underwriters of any property.

12. INSPECTION AND AUDIT

The Underwriters shall be permitted but not obligated to inspect the Insured Property
at any time. Neither the Underwriters’ right to make inspections nor the making
thereof nor any report thereon shall constitute an undertaking, on behalf of or for the
benefit of the Insured or others, to determine or warrant that such property is safe.
The Underwriters may examine and audit the Insured’s books and records at any time
during the Policy period and extensions thereof and within two years after the final
termination of this Policy, as far as they relate to the subject matter of this Insurance.

13. ASSIGNMENT
Assignment or transfer of this Policy shall not be valid except with the written
consent of Underwriters.

14. RIGHTS OF THIRD PARTIES EXCLUSION

This Policy is affected solely between the Insured and Underwriters. This Policy shall
not confer any benefits on any third parties, including shareholders, and no such third
party may enforce any term of this Policy. This clause shall not affect the rights of the
Insured.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

15. CANCELLATION
This Insurance may be terminated at any time at the request of the Insured with 60
days written Notice and may also be terminated at the option of the Insurer on 60
days written Notice to that effect being given to the Insured. In either case the
premium due to the Insurer shall be in proportion to the time the policy has remained
in force and the balance amount shall be refunded within 30 days after cancellation
of the policy.

16. LAW AND JURISDICTION

Any dispute concerning the interpretation of the terms, conditions, limitations and/or
exclusions contained herein is understood and agreed by both the Insured and the
Insurers to be subject to Indian Law.
Each party agrees to submit to the jurisdiction of any court of competent jurisdiction
within India and to comply with all requirements necessary to give such court
jurisdiction.
All matters arising hereunder shall be determined in accordance with the law and
practice of such court.

17. ARBITRATION
If any dispute(s)or difference(s) of any kind whatsoever arise between the Parties
hereto in connection with or arising out of this Contract, the Parties hereto shall
negotiate with a view to its amicable resolution and settlement. In the event no
amicable resolution or settlement is reached within a period of thirty (30) days from
the date on which the dispute(s)or difference(s) arose, such dispute(s) or differences
shall be referred to and settled by arbitral tribunal comprising of three (3) arbitrators,
one to be appointed by each party, the third arbitrator to be appointed by both the
arbitrators. In case of difference(s), the third arbitrator shall be appointed by the
Hon’ble Chief Justice of Delhi High Court or the Authority nominated/authorized by him
in this regard or the President of Institution of Engineers.
The arbitration proceedings shall be in accordance with the prevailing Arbitration Laws
of India as amended or enacted from time to time. The existence of any dispute(s) or
difference(s) or the initiation or continuance of the arbitration proceedings shall not
permit the Parties to postpone or delay the performance by the parties of their
respective obligations pursuant to this Contract. The venue of the arbitration shall be
Delhi, India.
In the event of dispute or difference arising between one Public Sector Enterprise and
a Government Department the provision of DPE as per memorandum No. DPE OM
No. DPE/4(1)/2011-DPE(PMA)-GL dated 12th June 2013 shall be applicable.
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

18. SEVERAL LIABILITY

The subscribing Underwriters’ obligations under policies to which they subscribe are
several and not joint and are limited solely to the extent of their individual
subscriptions. The subscribing Underwriters are not responsible for the subscription of
any co-subscribing Insurer who for any reason does not satisfy all or part of its
obligations.

19. CAPITAL ADDITIONS EXTENSION

The Insurance by this Policy includes insofar as the same are not otherwise insured:-
a) any newly-acquired or newly-erected property;
b) Alterations, additions and improvements to property; and
c) additional rent for a period not exceeding 72 months where the Assured
are responsible for effecting specific insurance thereon;
PROVIDED that: -
i) at any one situation this cover shall not exceed 20% of the top value
location insured hereunder;
ii) the Assured undertakes to provide Underwriters with particulars of such
additional cover at anniversary / renewal date of this Policy and to effect
specific insurance thereon
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

SECTION – 2: COINSURANCE MEMORANDUM

It is hereby declared and agreed that the Insurers named hereunder severally agreed
each for the proportion set against their name.
(a) to Pay or make good to the Insured the value of the property at the time of
happening of its loss or destruction or the amount of such damage thereto as
provided for under the policy and/or
(b) to indemnify the Insured against liability at law for damage to property and/or
injuries to persons as provided for under the policy.
Provided always that
3. The liability of the Insurers shall in no case exceed in respect of each item of the
sum expressed in the said schedule to be insured hereon or in the total sum
insured hereby of such other sum or sums as may be substituted thereof by
endorsement.
4. The liability of each of the Insurers individually in respect of such loss or
destruction or damage or indemnity shall be limited to the proportion set against
its name or such other proportion as may be substituted thereof by endorsement.
It is understood, however, that the Insured shall have the right at all times during the
currency of the policy to communicate only, with issuing office of the lead Insurer in all
matters pertaining to this insurance.
Otherwise subject to the terms, exceptions, conditions and limitations of this policy.

CO- INSURANCE SHARING ARRANGEMENT:

The Coinsurers Share (%) Premium (Rs)

Oriental Insurance Co. Ltd. 40 3400000
New India Assurance Co. Ltd. 20 1700000
ICICI Lombard Gen. Ins. Co. Ltd. 20 1700000
Bajaj Allianz General Ins Co. Ltd. 20 1700000
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

ANNEXURE – B

PLANT WISE CAPACITY & SUM

INSURED
Annexure – Attached to Policy No
11/2019/989
S. No COAL BASED PLANT Capacity Section -1 All
LOCATIONS (MW) Risk Sum
(@ Rs. 4.83 crs/Mw) Insured (in crs)
1 BADARPUR 705 3405.15
2 DADRI (THERMAL) 1820 8790.60
3 FARAKKA 2100 10143.00
4 KAHALGAON 2340 11302.20
5 KORBA 2600 12558.00
6 MOUDA 2320 11205.60
7 RAMAGUNDAM 2600 12558.00
8 RIHAND 3000 14490.00
9 SIMHADRI 2000 9660.00
1 SINGRAULI 2000 9660.00
0
1 SIPAT 2980 14393.40
1
1 TALCHER (K) 3000 14490.00
2
1 TALCHER (T) 460 2221.80
3
1 TANDA 440 2125.20
4
1 UNCHAHAR 1550 7486.50
5
1 VINDHYACHAL 4760 22990.80
6
1 BARH 1320 6375.60
7
1 BONGAIGAON 500 2415.00
8
1 KUDGI 2400 11592.00
9
2 SOLAPUR 660 3187.80
0
2 LARA 800 3864.00
1
TOTAL (A) 4035 194914.65
5
 NTPC MEGA RISK INSURANCE PACKAGE POLICY
GAS BASED PLANT Capacity Section -1 All
S. No LOCATIONS
(@ Rs. 5.168 crs/Mw) (MW) Risk Sum
Insured (in crs)
1 ANTA 419 2165.39
2 AURAIYA 663 3426.38
3 DADRI (GAS) 830 4289.44
4 FARIDABAD 432 2232.58
5 GANDHAR 657 3395.38
6 KAWAS 656 3390.21
7 KAYAMKULAM 360 1860.48
TOTAL (B) 4017 20759.86
GRAND TOTAL (A+B) 4277 215674.51
2
S. No HYDRO PLANT Capacity Section -1 All
(MW) Risk Sum
Insured (in crs)
1 KOLDAM 800 6645.87
TOTAL (C) 800 6645.87
TOTAL (A+B+C) 4357 222320.38
2
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

ANNEXURE-C

MEMORANDUM OF UNDERSTANDING BETWEEN

NTPC LTD. & THE ORIENTAL INSURANCE CO. LTD
FOR EFFECTIVE IMPLEMENTATION OF
MEGA RISK INSURANCE PACKAGE POLICY 2019.

For effective implementation of Package Policy for NTPC stations (Coal, Gas & Hydro)
starting from 01.01.2019, following has been agreed upon:

1. The detailed policy wordings, terms and conditions, extensions, clauses,

exclusions, rates etc., shall be common and applicable to all NTPC stations
uniformly. The policy has to be submitted by 28.02.2019.
2. Any policy extension (up to the period of 3 months) will be allowed subject to
incurred claim ratio being less than 60%- and 10-days advance intimation to
be given to the lead insurer with valid reason for extension. Agree for capital
additions exceeding 5% of location sum insured subject to maximum limit of
10% of the location sum insured on same rates, terms and conditions on pro-
rata basis. This will be in line with the policy wordings. For any capital addition
exceeding above limits, 10 days prior intimation to be given by NTPC to cover
the addition on pro rata basis. The premium for the same will be paid by the
NTPC project site offices to the Insurance Company.
3. Insurer will assist and coordinate with project officials at the time of claim and
as and when necessary.
4. The performance of insurance companies based on claim servicing, risk
management support and other service parameters shall be monitored
closely.
5. The Oriental Insurance Co. Ltd has to confirm that they have placed 100%
business (including terrorism) in the GIC / Re-insurance market.
6. "On account payment" of claims to the tune of 50% of the assessed loss will
be released, based on surveyors Interim Survey Report (ISR) upon admission of
the liability as per the Time Limits given below:
a) Time Limit for visit of Surveyor: Within 1 week after reporting of the
loss to the Insurance Company.
b) Time Limit for submission of Interim Survey Report: Within 30 days
after giving all the relevant papers to the surveyor as per his request.
c) In case the Insurance Company fails to make the payment within the
scheduled time period (within 3 weeks of survey report of up to Rs. 2 crores
 NTPC MEGA RISK INSURANCE PACKAGE POLICY
and 6 weeks for claim above Rs. 2 crores) after receipt of the final discharge
voucher for "on account payment" or final payment as the case may be, they
should pay interest at SBI PLR for the delay in making the payment from the
schedule date to the actual date of payment.
7. As the valuation of our Power Plant taken for the purpose of Package Policy, it
has been agreed that an abridged form of calculation to arrive at the sum
insured may be submitted by NTPC to the Insurance Company which will be
discussed by the Insurance Company with their surveyors to come to
consensus to avoid any discrepancy relating to under insurance in case of
claim.
8. In order to understand the Package Policy effectively, M/s The Oriental
Insurance Co. Ltd will organize 2 to 3 seminars/workshops in NTPC station/
Corporate Office at mutual convenient locations. However, a joint workshop
will be held on a convenient date where representatives from all NTPC
projects and The Oriental Insurance Co. Ltd Site/Corporate office
representatives, along with lead surveyor will participate. M/s The Oriental
Insurance Co. Ltd will organize Risk Insurance seminars on half yearly basis
exclusively for NTPC officials.
9. Insurer in consultation with NTPC shall make panel of surveyors for the
purpose of handling NTPC claims. NTPC may use their discretion in deputing
surveyors from the panel, when required.

1) B S Chawla & Co.

2) Rohit Kumar Singla & Co.
3) Protocol Surveyor & Engineers P Ltd.
4) Proclaim Insurance Surveyor & Loss Assessors P Ltd. (Cunnigham Lindsey)
5) Mehta & Padamssey
6) R L Aggarwal Surveyors P Ltd

FOR NTPC LTD.,

NOIDA
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

Contact Points:

Insurer: The Oriental Insurance Co

Ltd Loss Intimation:

Any loss has to be intimated to Insurance Company representatives based out of New
Delhi. Contact
details are:

First Level Contact Escalation

Point
Name : Mr Chhoturam Name : Mr Ish Kumar Munjal
Designation : Sr. Divisional Manager Designation : CRM
Email : Email :
choturam@orientalinsurance.co.in ish.munjal@orientalinsurance.co.in
Mobile No : 9811580081 Mobile No : 9814405594

Insured:

For any loss follow-up on all claims, to be done with below representatives of Insured
(NTPC). Contact details are:

First Level Contact Escalation

Point
Name : Hemant Kumar Name : D K DUTTA
Designation : DGM(CM) Designation : Addl. General Manager
(CC&M)
Email : Email : dilipdutta@ntpc.co.in
hemantkumar01@ntpc.co.in
Mobile No : 9650998709 Mobile No : 9650998031
 NTPC MEGA RISK INSURANCE PACKAGE POLICY

Premium Calculation Sheet

Mega Risk Package Insurance Policy for NTPC Operating Stations

2018-19
Premium Schedule for the policy period 01.01.2019 to 31.12.2019
SL. Provision PREMIU
No. al Sum
AREA OF COVERAGE Insured Rate M GST TOTAL
AMOUN
T
NTPC Mega Risk (Per
Policy 2018-19 ( Rs.100
Thermal @ (Rs. 0) Rs. 18.00%
4.83/Mw & Gas @ Crores) (4
5.168/Mw) digits
after
decima
l)
ALL RISK(Section - I)
1 Including Earthquake, 215674.5 0.1486 3204923 576886 37818094
Flood & RSMD 1 22 18 0
Coverage - Coal &
Gas
2 MBD (SECTION - II) - 159202.0 0.3753 5974851 1075473 70503251
Coal 2 81 33 4
& Gas
3 Hydro ALL RISK 6645.87 0.8321 5530028 995405 65254335
4 1
4 Hydro MBD 1878.23 0.9688 1819629 327533 21471625
2 3
TOTAL OF MEGA 9914740 1784653 11699394
79 34 14
5 TERRORISM 222320.3 0.003823 8500000 153000 10029999
8 311 0
TOTAL PREMIUM Deductible 600 9999740 1799953 11799694
(FIGURES) lakhs 79 34 13

Premium in words: Rupees One hundred seventeen crores ninty nine lakhs sixty nine
thousand four hundred thirteen only.
 CPM POLICY (Construction Plant Machinery)

INSURED: NTPC LIMITED

Whereas the insured named in the schedule has applied to the ICICI LOMBARD GENERAL
INSURANCE COMPANY LIMITED (hereinafter called the Company) for the insurance hereinafter
contained and has paid the premium as consideration for such insurance in respect of accidental
loss or damage by contingencies as stated below, in the Scope of Cover, occurring during the
period of insurance stated in the Schedule (s) or during any subsequent period for which the
insured pays and the Company may accept the premium for the renewal of this policy.

NOW THIS POLICY OF INSURANCE WITNESSETH

That subject to the terms, exceptions, exclusions, provisions and conditions contained herein or
endorsed hereon, the Company will at its own option by payment or reinstatement or repair
indemnify the insured against unforeseen and sudden physical damage by contingencies as stated
below, in the Scope of Cover, to any insured property specified in the attached schedule (s),
necessitating its immediate repair or replacement. This Policy shall apply to the insured items
whether they are at work or rest, or being dismantled for the purpose of cleaning or overhauling or
in the course of the aforesaid operations themselves or when being shifted within the premises,
station to station. Railway workshop, any station workshop or during subsequent re-erections but
in any case only after the successful commissioning. The liability of the Company shall not exceed
in the aggregate in any one period of insurance the Sum insured set in the attached Schedule (s) i.e.
Rs. 100 Crores.

SECTION I (All Risk)

SCOPE OF COVER

Total Loss of or damage to the construction machinery of all types including Locos & Wagons located
anywhere in India:

(a) Due to Fire, Lightening, Explosion/implosion, impact by any external means and /or space devices and
/ or articles dropped there from, Riot, Strike, Malicious damage.
 CPM POLICY (Construction Plant Machinery)

(b) Storm, Tempest, Cyclone, Flood and inundation, impact damages during handling of material.
Topping. Subsidence, Land Slide including Rock Slide) and Earthquake (Fire & Shock)

(c) Theft, Burglary

(d) Any Breakdown to the construction Machinery e.g. Electrical and Mechanical breakdown
and/or such failure whilst It is in operation during overhauling and even in standstill
condition, except mobile equipment (MV Act).

(e) Inland Transit: This insurance covers the outward movement of CPM equipment/ rolling
stocks, against the perils covered under this Policy whilst in transit by road, rail or inland
waterway,mfrom one NTPC station to any other station/railway workshop, within the
Geographical limits of India including self propelled equipment running on its own or as
attached.

(f) Removal of Debris: This Policy insures the cost of removal of debris and/or any other
expenses including hiring charges of overhead cranes necessarily incurred in connection
with site clearing operations and/or salvaging for transporting from site to workshop,
including damage caused by such operations, dismantling, shoring up, propping; in the event
of circumstances giving rise to indemnifiable loss or damage by any of the perils insured
under this Policy.

(g) INSURANCE COVER OF ANY GOVT.AGENCY’S PROPERTY:- NTPC is also operating

Locos/Wagons of Indian railways on held in trust basis in addition to the owned by NTPC
such as 1770 Nos of Wagons, 30 Nos brake vans and 30 Nos of Locos of Indian Railway
operating in NTPC premises like MGR, Railway sidings and Exchange yards etc shall be
covered under this comprehensive policy as “ Insurance Cover to Goods held in Trust”.

(h) There will not be any depreciation applicable on the Total loss of wagons owned by NTPC, if
reinstated.

(I) Transportation of crane/Dozers in dismantled condition; Transportation of cranes/Dozers in

dismantled condition shall be considered in the policy. Any loss during dismantling and
reassembling shall also be considered.

(j) MID TERM INCLUSION: Any additional equipments can be included in the policy during the
currency of the policy as declared by the NTPC stations/Projects, to the servicing office of
the insurer for the inclusion in the policy. Endorsement copy shall be issued to NTPC
concern project with copy at Corporate Material –Risk Management Group, Noida.
 CPM POLICY (Construction Plant Machinery)

The premium for the same shall be calculated and paid on pro-rata basis on the rates, and
shall be calculated based on, total Premium divided by Sum insured upto three decimal
places.

(k) Under Insurance: Under Insurance upto 20% shall be ignored/waived off at the time of
settlement of each claim.

(l) SETTLEMENT OF CLAIM:

i) In case of any claim towards Indian Railways Wagons/Locos, the claim amount will be
settled on the basis of Indian Railway declared claimed amount and no further
justification/Clarification shall be asked for as Indian railways do not give any
justification

ii) In case of total loss of NTPC owned Locos/Wagons, the claim will be settled on the
basis of Purchase order placed by any of NTPC’s station /Project against which
supplies have not been effected /pending on the date of claim or

Order is placed after the date of claim of concerned station/Project or Diversion

of Locos/Wagons against order of any other station /Project without waiting for
actual reinstatement

iii) In case of total loss including Indian railways & NTPC’s Locos and wagons and no
reinstatement is done, the applicable depreciation will be @3.33% per annum subject
to maximum 50% at the time of settlement of claim.

iv) In case of Mild steel salvage for wagons etc, the relevant MS scrap rate as per MSTC
quarterly bulletin on the date of loss shall be considered for calculation of salvage
value.

m) Deductibles:

The policy excess shall be as under:

(a) All Risk Claims-Rs 5 lakh in each claim

(b) Third Party Liability: Rs. 10,000 in each claim
(c) Terrorism Cover: Rs. 5 Lakhs in each claim

n) Policy copies: Two copies of policy shall be issued by the insurer of package policy to all
Projects. All claims arisen out of policy shall be dealt by the respective stations / projects.
 CPM POLICY (Construction Plant Machinery)

EXCLUSIONS:

THE COMPANY SHALL NOT BE LIABLE UNDER THIS POLICY IN RESPECT OF:

a) Loss or damage to replaceable parts and attachments such as bits drills knives or other
cutting edges, saw blades dyes, moulds, patterns, pulverizing and crushing surfaces, screens
and sieves, ropes, belts, chains, elevator and conveyor belts, batteries, tyres, connecting wires
and cables, flexible pipes, joining and packing materials regularly replaced unless loss or
damage to the equipment/machinery is identifiable in terms of the policy.

b) Loss of or damage to vehicles designed and licensed for general road use unless these
vehicles are exclusively used on construction sites likes Hydra, Forklift, Cranes, Bulldozers etc

c) Loss or damage to the Hull and Machinery of waterborne vessels or craft; however this
exclusion shall not apply to contractor’s plant and machinery mounted on water borne
vessels or craft for the purpose of use for the contract work;

d) Loss or damage as a direct consequence of the continuous influence of operation (e.g. wear
and tear, corrosion, rust, deterioration due to lack of use and normal / atmospheric
conditions);

e) Loss or damage as a direct consequence of Gradual Developing Flaws, defects or cracks

unless resulting into breakdown.

f) Loss or damage occurring whilst any insured item is undergoing a test of any kind or is being
used in any manner or for any purpose other than that for which it was designed;

g) Loss or damage to plant and/or machinery working underground, mines.

h) War, Invasion, act of foreign enemy, hostilities or war like operations (whether war be
declared or not.) Civil War, Revolution , Insurrection, Mutiny, Civil Commotion, military or
usurped power, martial law, conspiracy, confiscation, commandeering a group of malicious
person or persons acting on behalf of or in connection with any political organization,
requisition or destruction or damage by order of any government demure or de facto or by
any public Municipal or Local Authority.
i) Loss or damage directly or indirectly caused by, or arising out of, or aggravated by nuclear
reaction or radioactive contamination.

j) Loss or damage due to any faults or defects existing at the time of commencement of this
policy within knowledge of the insured or his representatives, whether such faults or defects
were known to the company or not.
 CPM POLICY (Construction Plant Machinery)

k) Loss or damage directly or indirectly caused by or arising out of or aggravated by the willful
negligence of the insured or his representative.

l) Loss or damage for which the supplier or manufactures is responsible either by law or under contract.

m) Consequential loss or liability of any kind or description even if it is due to any insured risk.

n) Loss or damage discovered only at the time of taking an Inventory or during routine servicing.

o) Loss or damage during transit/erection /commissioning of new equipment purchased after

issue of this policy. However any losses arising after successful commissioning of the
machine is covered. Insured will provide specific information to the Insurance co. for the
inclusions of new equipment.

p) Loss or damage due to total or partial immersion in tidal water.

q) Insufficiency or unsuitability of packing or preparation of the subject matter insured.

r) Cost incurred /time involved in the movement of machinery and/or personal outside the
territorial limits of India other than the cost of delivery or replacements for machinery lost or
damaged.

s) Capture, seizure, arrest, restraint or detainment and the consequences thereof or any attempt
threat.

t) Derelict mines bombs or other derelict weapons or war.

u) Loss or damage occasioned by or through or in consequence of the burning of property by

order of any public Authority or Subterranean fire.

v) Any loss or damage occasioned by or through or in consequence indirectly by or of Burning,

whether accidental or otherwise of forest, bush and jungles and the clearings of lands by fire.

w) Loss or damage where any inmate or member of the insured’s household or of his business
staff/employee or any other person lawfully in the premises is concerned in the actual theft
or damage to any of the insured property or where such loss or damage have been
expedited or anyway assisted or brought about by any such person or persons.

x) Derangement of the insured property not accompanied by damage otherwise covered by this policy.

y) Loss, destruction, or damage directly occasioned by pressure wave caused by aircraft and
other aerial devices traveling at sonic or supersonic speed.
 CPM POLICY (Construction Plant Machinery)

z) Loss or damage directly or indirectly caused by the failure or interruption of any gas, water or
electricity service or supply.

(a) Loss or damage as a direct consequence of the continual influence of the operation (e.g.
wear & tear, cavitation, erosion, corrosion) or of gradual deterioration due to
atmospheric conditions.

(b) Any cost incurred in connection with the maintenance of the insured items, such
exclusion also applying to parts exchanged in the course of such maintenance
operations.

(c) Aesthetic defects such as scratches on painted, polished or enameled surfaces.

(d) Any cost arising due to false programming, punching, labeling or inserting, inadvertent
canceling of information or discarding of data media or loss of information caused by
magnetic fields.

In any action/suit or other proceedings where the company allays that by reason of the provisions of
exclusions

(j) to (n) above any loss, destruction or damage is not covered by this policy, the onus of proving
that such loss, destruction or damage is covered shall be upon the insured.

PROVISIONS

BASIS OF INDEMNITY

(a) SUM INSURED AND AVERAGE CLAUSE:

It is the requirement of this insurance that sum insured shall be equal to the cost of replacement of
the insured property by new property of the same kind and same capacity, which shall mean its
replacement cost including freight, taxes and custom duties, if any and erection cost. If the sum
insured is less than the amount required to be insured as stated above, the company, in case of a
claim will pay only in such proportion as the sum insured bears to the amount required to be
insured. Each and every item shall be subject to this condition separately. However under
insurance upto 20% shall be ignored/waived off at the time of settlement of claim.
 CPM POLICY (Construction Plant Machinery)

b) In case where damage to an insured item can be repaired the company will pay expenses
necessarily incurred to restore the damaged machine to its condition / immediately prior to the
accident / loss plus the cost of dismantling and re-erection included for the purposes of affecting the
repair as well as ordinary freight to and from a repair-shop and customs duties if any.

If the repairs are executed at a workshop owned by the insured, the company will pay the cost of
materials and wages incurred for the purpose of repairs plus a reasonable percentage to cover
overhead charges. No deduction shall be made for depreciation in respect of parts replaced,
except those with limited life, but the value of the machinery insured immediately before the
occurrence of the damage.

Any extra charges incurred for overtime, night work, work on public holidays, express freight are
covered under this insurance only if especially agreed to in writing.

In the event of the maker’s drawing patterns and core boxes necessary for the execution of repair
not being available, the company shall not be liable for the cost of making any such drawings,
patterns and core boxes.

The cost of any alteration, improvements or overhauls shall not be recoverable under this policy.

The cost of any provisional repairs will be borne by the company if such repairs constitute part of
the final repairs, and do not increase the repair expenses.

The company will make payments only after being satisfied, by production of the necessary bills
and documents, that the repairs have been affected or replacement have taken place, as the case
may be.

Excess Clause:

The amount of excess is Rs 5,00,000/- for each and every loss under all risk section.

ACT OF GOD PERILS (AOG PERILS)

It is understood that the following perils will be constructed as Act of god Perils

a) Earthquake (Fire & Shock).

 CPM POLICY (Construction Plant Machinery)

b) Landslide, Rockslide, Subsidence.

c) Flood, Inundation.

d) Storm, tempest, Hurricane, typhoon, Cyclone.

SECTION - II (THIRD PARTY LIABILITY)

This policy of insurance Witnessed that subject to end in consideration of the insured having paid
to the company the premium mentioned in the said Schedule (s) and subject to the Terms,
exclusions, provisions and conditions contained herein or endorsed hereon the company will
indemnify the insured in the manner and to the extent hereinafter provided.

The company will indemnify the insured against:

(a) Legal liability for accidental loss or damage caused to the property of other persons
including property held in trust by or under custody of the insured for which he is responsible
excluding any such property used in connection with erection thereon.

(b) Legal liability (liability under contract expected) for fatal or non- fatal injury to any persons
other than the insured’s own employee or workmen or employee of the owner of the works or
premises or other firms connected with any other erection work therein or members of the
insured’s family or of any of the aforesaid, directly consequent upon or solely due to the erection
of any property described in the Schedule (s).

(C) CISF personal are deployed by Ministry Home affairs on deputation at the request of NTPC
to be considered as third party.

Provided that the total liability for the company during the period of insurance under this clause shall
not exceed the limit of indemnity set opposite thereto in the Schedule (s).

In respect of a claim for compensation to which the indemnity provided herein applies, the
company will, in addition, indemnify the insured against:

(a) All costs and expenses incurred with the written consent of the company.

(b) The exclusions contained in Para (d), (f) and (g) of section I of this policy shall
also apply to this section.
 CPM POLICY (Construction Plant Machinery)

Excess clause:

The amount of excess is Rs 10,000/- for each and every loss under Third party Liability claims.

EXCLUSIONS TO SECTION – II:

The company will not indemnify the insured, under this extension in respect of:

1. Expenditure incurred in doing or redoing or making good or repairing or replacing

anything covered or coverable under section I of this policy, under this section.

2. Liability consequent upon:

2.1. Bodily injury to or illness of employees/working/members of the families of the insured or of

the owner of the works/site/premises/ location or of any other firm/ contractors connected with
any other work at the works/site/premises/location.

2.2. Loss of or damage to property belonging to or held in trust by or under custody of the owner of
the works/site/ premises/location of any other firm/contractors or/an
Employee /workmen/ family members of any of the aforesaid.

Any accident caused by vehicles licensed for general road use or by water borne vessels or aircraft.

Any agreement by the insured to pay any sum by way of indemnity or otherwise unless
such liability would have attached also in the absence of such agreement.

3. War, Invasion, act of foreign enemy, hostilities or war like operations (whether war be
declared or not). Civil War, Rebellion, Revolution, insurrection, Mutiny, Civil Commotion,
Military or usurped power, martial law, conspiracy, confiscation, commandeering a group
pf malicious person or persons action on behalf of or in connection with of any government
de jute or de facto or by any public Municipal or local Authority.

4. Loss or damage directly or indirectly caused by, or arising out of or aggravated by nuclear
reaction, nuclear radiation or radioactive contamination.

5. Loss or damage directly or indirectly caused by or arising out of or aggravated by the willful
negligence of the insured or his representatives.

6. Consequential loss or liability of any kind of description.

7. Lesser damage outside the Geographical Limits of India.

 CPM POLICY (Construction Plant Machinery)

CONDITIONS APPLYING SECTION - II

1. No admission, offer, promise, payment of indemnity shall be made or given by or on behalf of

the insured without the written consent of the company who shall be entitle, they so desire, to
take over and conduct in the name of the insured the defense or settlement of any claim or to
prosecute for their own benefit in the name of the insured any claim for indemnity or damage
or otherwise and shall have full discretion in the conduct of any proceedings or in the
settlement of any claim and the insured shall give all such information and assistances as the
company may require,

2. The company may, so far as any accident is concerned, pay to the insured the limit of
indemnity for any one accident/subject to limit of any one period, after deducting there from in
such case any sum/s already paid as companion in respect thereof or any lesser sum for which
the claim or claims arising from such accident can be settled and the company shall thereafter
be under no further liability in respect of such accident under this section.

SECTION III: (INCREASED COST OF WORKING)

The company hereby agrees to indemnify the insured up to, but not excluding the limit of
indemnity stated in the schedule for all additional costs which the insured shall incur to ensure
continued operation on substitute equipment if such costs arise as an unavoidable consequence, of
an identifiable loss or damage during the period insurance to property insured under the material
damaged Section, Section I of this policy SPECIAL EXCLUSIONS TO SECTION III The company shall
not be liable for:

(i) Costs for replacement of data media, date and regeneration of old data.

(ii) Costs arising out of circumstances, which are not connected with the insured material
damages. In particular the company shall not be liable for additional costs arising out of
a. Bodily Injuries.

b. Orders or measures imposed by any public authority

c. Expansion and improvements of the equipments

d. Lack of funds causing delay in repairs or replacement of damages equipments

e. Any other consequential loss such as loss of market or interest.

 CPM POLICY (Construction Plant Machinery)

PROVISION APPLICABLE TO SECTIONS-III:

Memo 1: Indemnity Period

The indemnity period shall commence with putting the substitute equipments into
operation. The insured shall bear that proportion of each claim corresponds to the Time
Excess agreed.

Memo 2:Sum Insured

The total sum insured shall represent the aggregate limit of indemnity payable for all
events occurring during the period of insurance. However, the liability of the company for a
claim otherwise admissible shall be limited to any one event limit as cited in the schedule.
The station wise Total Sum Insured inclusive of India railways hired wagons is Rs. 3199.13
Crs (as per annexure-1g)

Memo 3: Loss Settlement

The company shall indemnify those costs and expenses like cost of hiring replacement,
urgent procurement cost for replacement of parts etc. which can be proved to have been
insured during the indemnity period to maintain operation to their previous extent, which
would have been incurred during the same period if no insured event had occurred.

Time Excess: NIL

Provided always that

i) The interruption shorter than the Time Excess stated in the schedule shall be
excluded from the scope of this policy and
ii) In respect of interruption longer than the Time Excess the insured shall bear that
proportion of each claim, which corresponds to the Time Excess.

SECTION IV TERRORISM COVERS

• TERRORISM COVERS for NTPC’s Locomotives, Wagons, MGR Tracks & Bridges shall be
covered as per terrorism LMA 3030 Policy wording (Attached as Annexure

• This includes terrorism cover for locomotives , Wagons ( Including ( 1770 Nos of Wagons, 30
Nos brake Vans and 30 Nos of Locos of Indian Railway operating in NTPC premises like
 CPM POLICY (Construction Plant Machinery)

MGR, Railway Sidings and Exchange yards etc as Goods held in trust), Railway Tracks and
Bridges.

This insurance include loss, damage cost or expenses of whatsoever nature directly or
indirectly caused by, resulting from or in connection with any act of terrorism regardless of
any other cause or event contributing concurrently or in other sequence to the loss. The
maximum liability of the company will be Rs 100 crores.

Excess :

The amount of excess under this section is Rs 5,00,000/- of each and every loss.

SPECIAL EXCLUSIONS TO SECTION IV

1. Total or partial cessation of work or the retardation or cessation of any process or

operations of omission of any kind.

2. Permanent or temporary dispossession resulting from confiscation., commandeering,

requisition or destruction by order or Government or any lawfully constituted authority.

3. Permanent or temporary dispossession of any building or plant or unit of machinery

resulting from unlawful occupation by any person of such building or plant or unit or
machinery or prevention of access to the same.

4. Burglary, house breaking, theft, larceny or any such attempt or any omission of any kind of
any person (whether or not such act is committed in the course of a disturbance or public
peace) in any action taken in respect of an act of terrorism.

5. Loss or damage, cost or expenses of whatsoever nature directly or indirectly caused by,
resulting from or in connection with any action taken in respect of any act of terrorism.

If the company alleges that by reason of this exclusion, any loss, damage, cost or expenses is not
covered by this insurance the burden of proving the contrary shall be upon the insured.
 CPM POLICY (Construction Plant Machinery)

PROVISION APPLICABLE TO ALL SECTIONS:

Memo 1: Mid Term inclusion

Any addition of any equipment during the currency of the policy will be declared by NTPC
station/ Projects under construction and any premium will be paid by them on pro-rata
basis on the agreed rates to the servicing office of the insurer for the inclusion in the policy.

Memo 2. Transportation of crane in dismantled condition

The Policy also covers the Transportation of Crane in dismantled condition at times from
one NTPC station to any where in India, as otherwise it is not feasible.

Memo 3. Insurance cover of any Govt Agency’s property

1770 Nos of wagons, 30 Nos brake vans and 30 Nos of Locos of Indian Railway operating in
NTPC Premises like MGR, Railway sidings and Exchange Yards etc shall be covered under
this comprehensive policy as “Insurance cover to Goods held in Trust”

GEOGRAPHICAL LIMITS:

Section I, II III & IV: On or about the site and anywhere in India as per schedule.

GENERAL CONDITIONS:

1) This policy and the attached schedule (s) shall be read together as one contract and any words
expressions to which specific meaning have been attached in any part of this policy or of the
attached schedule (s) shall bear the same meaning wherever they may appear.

(2) The insured shall:

a. Take all practicable steps including in the case of machinery lost or stolen or willfully
damages and giving of immediate notice to the police to recover any property lost
or stolen and in the case of theft or willful damage to discover the guilty person or
persons.
 CPM POLICY (Construction Plant Machinery)

b. Produce or give access to any property alleged to be damaged and the insured shall
be bound to satisfy the company by such reasonable evidence as the company may
require that the loss, destruction or damage in respect of which a claim is made is
actually arisen from one of the risks insured.

(3) OBLIGATIONS OF THE INSURED:

a) The insured shall take all reasonable steps to maintain the insured property in efficient
working order and to ensure that no item is habitually or intentionally overloaded. The
insured shall fully observe the manufactures instructions for operating, inspection and
overhaul, as well as government statutory, municipal and all other binding regulations in
force concerning the operations and maintenance of the insured plant and machinery.

b) The Insurance company’s officials shall at their discretion have the right to inspect and
examine any property insured hereunder and the insured shall provide the officials of the
company with all details and information necessary for the assessment of the risks. The
company shall provide the insured with a copy of the inspecting official’s report, which
shall however be treated as strictly confidential, both by the insured and the company.

c) In the event of any:

(i) Material change in the original risk.

(ii) Alteration, modification or addition to an insured item.

(iii) Departure from prescribed operating conditions, whereby the risk of loss or damage increases.

(iv) Changes in the insured’s interest (such as discontinuation or liquidation of the business
or being placed in receivership) taking place, the policy shall be void unless its
continuance be agreed by endorsement signed by the company

4) DUTIES FOLLOWING AN ACCIDENT:

In the event of any occurrence which might give rise to a claim under this policy the insured shall:

(a) Immediately notify the company by telephone or telegram as well as in writing,

giving an indication as to the nature and extent of loss or damage.

(b) Take all reasonable steps within its power to minimize the extent of the loss or
damage or liability.
 CPM POLICY (Construction Plant Machinery)

(c) Preserve the damages or defective parts and make them available for inspection by
an official or surveyor of the company.

(d) Furnish all such information and documentary evidence as the company may require.

The company shall not be liable for any loss or damage of which no notice has been
received by the company within Fourteen days of its occurrence.

Upon notification of claim being to the company under this condition, the insured may carry out
the repair or replacement of any minor damage not exceeding Rs. 5,00,000/-. In all other cases a
representative of the company shall have the opportunity of inspecting the loss or damage before
any repair or alternations are effected. If a representative of the company does not carry out the
inspection with in a period of time which would be considered as adequate under the
circumstances the insured is entitled to proceed with the repair or replacement.

The liability of the company under this policy in respect of any item of property sustaining damage,
for which indemnity is provided, shall cease, if the said item is not repaired properly without delay.

5) OTHER INSURANCE

If at the time of any claim arises under this policy there is any other insurance covering the
same loss, damage or liability, the Company shall not be liable to pay or contribute more than
its retable proportion of such loss, damage or liability.

6) POSITION AFTER CLAIM

a) The Insured shall not be entitled to abandon any property to the company whether
taken possession of by the company or not,

b) The premium for the amount of claim paid will be calculated prorata from the date
of loss till the expiry of the policy and the same shall be adjusted from the net claim
payable.

7) TRANSFER OF INTEREST

The insurance granted by this policy, shall cease to attach to any items described in the
Schedule(s) the interest in which shall pass from the insured otherwise than by will or
operation of law, unless the consent of the company for the continuance of the insurance
shall be obtained and signified by endorsement hereon.
 CPM POLICY (Construction Plant Machinery)

8) TERMINATION OF INSURANCE

This insurance may be terminated at any time at the request of the insured, in which case the
company will retain the premium calculated at the customary short period rate for the time
the policy has been in force.

This insurance may also at any time be terminated at the option of the company on 7 days
notice to that effect being given to the insured , in which case the company shall be liable
to repay on demand a rate able proportion of the premium for the un-expired term from
the date of the cancellation.

9) RECOURSE

The insured shall at the expense of the company do and concur in doing and permit to be
done, all such acts and things, as may be necessary or required by the company in the
interest of endorsing any right or remedies or of obtaining relief indemnity from parties
(other than those insured under this policy), to which the company shall be or would
become entitled or subrogated upon their paying for or making good of any loss or damage
under this policy, whether such acts and things shall be or become necessary or required
before or after the insured’s indemnification by the company.

10) ARBITRATION

If any dispute(s)or difference(s) of any kind whatsoever arise between the Parties hereto in
connection with or arising out of this Contract, the Parties hereto shall negotiate with a
view to its amicable resolution and settlement. In the event no amicable resolution or
settlement is reached within a period of thirty (30) days from the date on which the
dispute(s)or difference(s) arose, such dispute(s) or differences shall be referred to and
settled by arbitral tribunal comprising of three (3) arbitrators, one to be appointed by each
party, the third arbitrator to be appointed by both the arbitrators. In case of difference(s),
the third arbitrator shall be appointed by the Hon’ble Chief Justice of Delhi High Court or the
Authority nominated/authorized by him in this regard or the President of Institution of
Engineers.

The arbitration proceedings shall be in accordance with the prevailing Arbitration Laws of
India as amended or enacted from time to time. The existence of any dispute(s) or
difference(s) or the initiation or continuance of the arbitration proceedings shall not permit
the Parties to postpone or delay the performance by the parties of their respective
obligations pursuant to this Contract. The venue of the arbitration shall be Delhi, India.
 CPM POLICY (Construction Plant Machinery)

In the event of dispute or difference arising between one Public Sector Enterprise and a
Government Department the provision of DPE as per memorandum No. DPE OM No.
DPE/4(10)/2001-PMA-GL I dated 22nd Jan. 2004 shall be applicable.

Annexure

Terrorism Insurance - LMA 3030 POLICY

WORDINGS Physical Loss or Physical Damage

Wording

INSURING CLAUSE

Subject to the exclusions, limits and conditions hereinafter contained, this Insurance insures
property as stated in the Risk Details attaching to and forming part of this policy (hereinafter
referred to as the “Risk Details section”) against physical loss or physical damage occurring during
the period of this policy caused by an Act of Terrorism or Sabotage, as herein defined.

For the purpose of this Insurance, an Act of Terrorism means an act or series of acts, including the
use of force or violence, of any person or group(s) of persons, whether acting alone or on behalf of
or in connection with any organisation(s), committed for political, religious or ideological purposes
including the intention to influence any government and/or to put the public in fear for such
purposes.

For the purpose of this Insurance, an act of sabotage means a subversive act or series of such acts
committed for political, religious or ideological purposes including the intention to influence any
government and/or to put the public in fear for such purposes.

Section 2: Losses Excluded

This Policy does not insure against:-

1. Loss or damage arising directly or indirectly from nuclear detonation, nuclear reaction,
nuclear radiation or radioactive contamination, however such nuclear detonation, nuclear
reaction, nuclear radiation or radioactive contamination may have been caused.
 CPM POLICY (Construction Plant Machinery)
2. Loss or damage occasioned directly or indirectly by war, invasion or warlike operations
(whether war be declared or not), hostile acts of sovereign or local government entities, civil
war, rebellion, revolution, insurrection, martial law, usurpation of power, or civil
commotion assuming the proportions of or amounting to an uprising.

3. Loss by seizure or legal or illegal occupation unless physical loss or damage is caused
directly by an Act of Terrorism or an Act of Sabotage.

4. Loss or damage caused by confiscation, nationalization, requisition, detention, embargo,

quarantine, or any result of any order of public or government authority which deprives the
Insured of the use or value of its property, nor for loss or damage arising from acts of
contraband or illegal transportation or illegal trade.

5. Loss or damage directly or indirectly arising from or in consequence of the seepage and or
discharge of pollutants or contaminants, which pollutants and contaminants shall include
but not be limited to any solid, liquid, gaseous or thermal irritant, contaminant or toxic or
hazardous substance or any substance the presence, existence or release of which
endangers or threatens to endanger the health, safety or welfare of persons or the
environment.

6. Loss or damage arising directly or indirectly from or in consequence of chemical or biological

emission, release, discharge, dispersal or escape or chemical or biological exposure of any
kind.

7. Loss or damage arising directly or indirectly from or in consequence of asbestos emission,

release, discharge, dispersal or escape or asbestos exposure of any kind.

8. Any fine or penalty or other assessment which is incurred by the Insured or which is
imposed by any court, government agency, public or civil authority or any other person.

9. Loss or damage by electronic means including but not limited to computer hacking or the
introduction of any form of computer virus or corrupting or unauthorized instructions or
code or the use of any electromagnetic weapon.

This exclusion shall not operate to exclude losses (which would otherwise be covered under this
policy) arising from the use of any computer, computer system or computer software programme
or any other electronic system in the launch and/or guidance system and/or firing mechanism of
any weapon or missile.
 CPM POLICY (Construction Plant Machinery)

10. Loss or damage caused by vandals or other persons acting maliciously or by way of protest
or strikes, labour unrest, riots or civil commotion.

11. Loss or increased cost occasioned by any public or government or local or civil authority’s
enforcement of any ordinance or law regulating the reconstruction, repair or demolition of
any property insured hereunder.

12. Loss or damage caused by measures taken to prevent, suppress or control actual or potential
terrorism or sabotage unless given by Loss control Clause herein.

13. Any consequential loss or damage, loss of use, delay or loss of markets, loss of income,
depreciation, reduction in functionality, or increased cost of working.

14. Loss or damage caused by factors including but not limited to cessation, fluctuation or
variation in, or insufficiency of, water, gas or electricity supplies and telecommunications or
any type of service.

15. Loss or increased cost as a result of threat or hoax.

16. Loss or damage caused by or arising out of burglary, house - breaking, looting, theft or larceny.

17. Loss or damage caused by mysterious disappearance or unexplained loss.

Loss or damage directly or indirectly caused by mould, mildew, fungus, spores or other
microorganism of any type, nature or description, including but not limited to any substance
whose presence poses an actual or potential threat to human health.

PROPERTY EXCLUDED

This policy does not cover physical loss or physical damage to:

1. Land or land values.

 CPM POLICY (Construction Plant Machinery)

2. Power transmission, feeder lines or pipelines not on the Insured’s premises, unless declared
under the information section.

3. Any building or structure, or property contained therein, while such building or structure is
vacant or unoccupied or inoperative for more than thirty days, unless the property is intended
to be unoccupied in its normal operations.

4. Aircraft or any other aerial device, or watercraft.

5. Any Land conveyance, including vehicles, locomotives or rolling stock, unless such land
conveyance is declared hereon and solely whilst located at the property insured herein at the
time of its damage.

6. Animals, plants and living things of all types.

7. Property in transit not on the Insured’s premises.

CONDITIONS

1. JOINT INSURED

The Underwriters’ total liability for any loss or losses sustained by any one or more of the Insured
under this insurance will not exceed the limit shown in the Risk Details Section. The Underwriters
shall have no liability in excess of the limit whether such amounts consist of insured losses
sustained by all of the Insured or any one or more of the Insured.

2. OTHER INSURANCE

This policy shall be excess of any other insurance available to the Insured covering a loss covered
hereunder except such other insurance which is written specifically as excess insurance over this
policy. When this policy is written specifically in excess of other insurance covering the peril
insured hereunder, this policy shall not apply until such time as the amount of the underlying
insurance, (whether collectible or not), has been exhausted by loss and damage covered by this
policy in excess of the deductible with respect to each and every covered loss.

3. SITUATION

This Policy insures property described in the Risk Details section.

 CPM POLICY (Construction Plant Machinery)

4. SUM INSURED

The Underwriters hereon shall not be liable for more than the Limit stated in the Risk Details Section
in respect of each occurrence and in the policy aggregate.

5. DEDUCTIBLE

Each occurrence shall be adjusted separately and from each such amount the sum stated in the
Risk Details Section shall be deducted.

6. OCCURRENCE

The term “Occurrence” shall mean any one loss and/or series of losses arising out of and directly
occasioned by one Act or series of Acts of Terrorism or Sabotage for the same purpose or cause.
The duration and extent of any one “Occurrence” shall be limited to all losses sustained by the
Insured at the property insured herein during any period of 72 consecutive hours arising out of the
same purpose or cause. However no such period of 72 consecutive hours may extend beyond the
expiration of this policy unless the Insured shall first sustain direct physical damage by an Act of
Terrorism or an Act of Sabotage prior to expiration and within said period of 72 consecutive hours
nor shall any period of 72 consecutive hours commence prior to the attachment of this Policy.

7. DEBRIS REMOVAL

This Policy also covers, within the Limit, expenses incurred in the removal from the insured
location of debris of property stated in the Risk Details section damaged by an Act of Terrorism or
an Act of Sabotage.

The cost of removal of debris shall not be considered in determination of the valuation of the

property covered.

8. DUE DILIGENCE
The Insured (or any of the Insured’s agents, sub or co-contractors) must use due diligence and do
(and concur in doing and permit to be done) everything reasonably practicable, including but not
limited to taking precautions to protect or remove the insured property, to avoid or diminish any
loss herein insured and to secure compensation for any such loss including action against other
parties to enforce any rights and remedies or to obtain relief or indemnity.
 CPM POLICY (Construction Plant Machinery)

9. PROTECTION MAINTENANCE

It is agreed that any protection provided for the safety of the property insured shall be maintained in
good order throughout the currency of this Policy and shall be in use at all relevant times, and that
such protection shall not be withdrawn or varied to the detriment of the interests of the
Underwriters without their consent.

10. VALUATION

It is understood that, in the event of damage, settlement shall be based upon the cost of repairing,
replacing or reinstating (whichever is the least) property on the same site, or nearest available site
(whichever incurs the least cost) with material of like kind and quality without deduction for
depreciation, subject to the following provisions: -

The repairs, replacement or reinstatement (all hereinafter referred to as “replacement”) must be

executed with due diligence and dispatch;

Until replacement has been effected the amount of liability under this policy in respect of loss shall
be limited to the actual cash value at the time of loss;

If replacement with material of like kind and quality is restricted or prohibited by any by-laws,
ordinance or law, any increased cost of replacement due thereto shall not be covered by this Policy.

The Underwriters’ liability for loss under this Policy shall not exceed the smallest of the following

amounts: - The policy limit applicable to the destroyed or damaged property,

The replacement cost of the property or any part thereof which was intended for the same
occupancy and use, as calculated at the time of the loss,

The amount actually and necessarily expended in replacing said property or any part thereof.

The Underwriters will normally expect the Insured to carry out repair or replacement of the
insured property, but if the Insured and the Underwriters agree that it is not practicable or
reasonable to do this, the Underwriters will pay the Insured an amount based on the repair or
replacement costs, less an allowance for fees and associated costs which are not otherwise
incurred. The Underwriters will only pay the Insured up to the Limit shown in the risk Details
section.
 CPM POLICY (Construction Plant Machinery)

11. INCORRECT DECLARATION PENALTY

If the values declared as stated in the Risk details are less than the correct insured values as
determined above, then any recovery otherwise due hereunder shall be reduced in the same
proportion that the values declared bear to the values that should have been declared, and the
Insured shall co-insure for the balance.

12. NOTIFICATION OF CLAIMS

The Insured, upon knowledge of any occurrence likely to give rise to a claim hereunder, shall give
written advice as soon as reasonably practicable to the Underwriters and or the Broker, named for
that purpose in the Schedule, who is to advise Underwriters within 7 days of such knowledge of any
occurrence and it is a condition precedent to the liability of Underwriters that such notification is
given by the Insured as provided for by this policy.

If the Insured makes a claim under this insurance he must give the underwriters such relevant
information and evidence as may reasonably be required and co-operate fully in the investigation
or adjustment of any claim. If required by the underwriters, the Insured must submit to
examination under oath by any person designated by the underwriters.

13. PROOF OF LOSS

The Insured shall render a signed and sworn proof of loss within sixty (60) days after the
occurrence of a loss (unless such period be extended by the written agreement of Underwriters)
stating the time, place and cause of loss, the interest of the Insured and all others in the property,
the sound value thereof and the amount of loss or damage thereto.

If Underwriters have not received such proof of loss within two years of the expiry date of this
policy, they shall be discharged from all liability hereunder.

In any claim and/or action, suit or proceeding to enforce a claim for loss under this policy, the
burden of proving that the loss is recoverable under this Policy and that no limitation or exclusion
of this policy applies and the quantum of loss shall fall upon the Insured.

14. SUBROGATION

Any release from liability entered into in writing by the Insured prior to loss hereunder shall not
affect this policy or the right of the Insured to recover hereunder. The right of subrogation against
any of the Insured's subsidiary or affiliated companies or any other companies associated with the
Insured through ownership or management is waived;

In the event of any payment under this policy, the Underwriters shall be subrogated to the extent
of such payment to all the Insured's right of recovery therefore. The Insured shall execute all
papers required, shall cooperate with Underwriters and, upon the Underwriters’ request, shall
attend hearings and trials and shall assist in effecting settlements, securing and giving evidence,
 CPM POLICY (Construction Plant Machinery)

attaining the attendance of witnesses and in the conduct of suits and shall do anything that may
be necessary to secure such right. Underwriters will act in concert with all other interests
concerned (including the Insured) in the exercise of such rights of recovery. If any amount is
recovered as a result of such proceedings, such amount shall be distributed in the following
priorities:

(i) Any interest, (including the Insured’s), exclusive of any deductible or self insured retention,
suffering a loss of the type covered by this policy and in excess of the coverage under this policy
shall be reimbursed up to the amount of such loss (excluding the amount of the deductible);

(ii) Out of the balance remaining, the Underwriters shall be reimbursed to the extent of
payment under this policy;

(iii) The remaining balance, if any, shall inure to the benefit of the Insured, or any insurer
providing insurance primary to this policy, with respect to the amount of such primary insurance,
deductible, self insured retention, and/or loss of a type not covered by this policy.

The expense of all proceedings necessary to the recovery of any such amount shall be apportioned
between the interests concerned, including that of the Insured, in the ratio of their respective
recoveries as finally settled. If there should be no recovery and proceedings are instituted solely on
the initiative of Underwriters, the expense thereof shall be borne by the Underwriters.

15. SALVAGE AND RECOVERIES

All salvages, recoveries and payments recovered or received subsequent to a loss settlement under
this Policy shall be applied as if recovered or received prior to the said settlement and all necessary
adjustments shall be made by the parties hereto.

16. FALSE OR FRAUDULENT CLAIMS

If the Insured shall make any claim knowing the same to be false or fraudulent, as regards amount or
otherwise, this Policy shall become void and all claims and benefit hereunder shall be forfeited.

17. MISREPRESENTATION

If the Insured has concealed or misrepresented any material fact or circumstance relating to this
Insurance, this Insurance shall become void. If the Insured is unsure what constitutes material fact
(s) or circumstance (s), they should consult their broker or agent.
 CPM POLICY (Construction Plant Machinery)
18. ABANDONMENT

There shall be no abandonment to the Underwriters of any property.

19. INSPECTION AND AUDIT

The Underwriters or their agents shall be permitted but not obligated to inspect the Insured’s
property at any time.

Neither the Underwriters’ right to make inspections nor the making thereof nor any report thereon
shall constitute an undertaking, on behalf of or for the benefit of the Insured or others, to
determine or warrant that such property is safe.

The Underwriters may examine and audit the Insured’s books and records at any time up to two
years after the final termination of this Policy, as far as they relate to the subject matter of this
Insurance.

20. ASSIGNMENT
Assignment or transfer of this Policy shall not be valid except with the prior written consent

of Underwriters.

21. RIGHTS OF THIRD PARTIES EXCLUSION

This Policy is effected solely between the Insured and Underwriters.

This Policy shall not confer any benefits on any third parties, including shareholders, and no such
third party may enforce any term of this Policy.

This clause shall not affect the rights of the Insured.

22. CANCELLATION

This Policy shall be non-cancellable by Underwriters or Insured except in the event of non-payment
of premium where Underwriters may cancel the Policy at their discretion.

In the event of non-payment of premium this policy may be cancelled by or on behalf of the
Underwriters by delivery to the Insured or by mailing to the Insured or the Broker by registered,
certified, or other first class mail, at the Insured’s address as shown in this Policy, written notice
stating when, not less than 15 days thereafter, the cancellation shall be effective. The mailing of
such notice shall be sufficient proof of notice and this Policy shall terminate at the date and hour
specified in such notice.
 CPM POLICY (Construction Plant Machinery)

If the period of limitation relating to the giving of notice is prohibited or made void by any law
controlling the construction thereof, such period shall be deemed to be amended so as to be equal
to the minimum period of limitation permitted by such law.

23. ARBITRATION

If the Insured and Underwriters fail to agree in whole or in part regarding any aspect of this Policy,
each party shall, within ten (10) days after the demand in writing by either party, appoint a
competent and disinterested arbitrator and the two chosen shall before commencing the
arbitration select a competent and disinterested umpire.

The arbitrators together shall determine such matters in which the Insured and Underwriters shall
so fail to agree and shall make an award thereon and the award in writing of any two, duly verified,
shall determine the same, and if they fail to agree, they will submit their differences to the umpire.

The parties to such arbitration shall pay the arbitrators respectively appointed by them and bear
equally the expenses of the arbitration and the charges of the umpire.

24. SEVERAL LIABILITY

The Underwriters’ obligations under this Policy are several and not joint and are limited solely to
their individual subscriptions. The Underwriters are not responsible for the subscription of any
cosubscribing Underwriter who for any reason does not satisfy all or part of its obligations.

25. LEGAL ACTION AGAINST UNDERWRITERS

No one may bring a legal action against Underwriters unless:

There has been full compliance by the Insured with all of the terms of this

policy; and The action is brought within two (2) years after the expiry or

cancellation of this Policy.

26. MATERIAL CHANGES

The Insured shall notify Underwriters of any change of circumstances which would materially
affect this insurance.

27. EXPERTS FEES

This insurance includes, within the Limit, the necessary and reasonable fees of architects, surveyors,
consulting engineers and other professional experts which are incurred in reinstating or repairing
the insured property following damage insured under this policy.
 CPM POLICY (Construction Plant Machinery)
28. LAW

As specified in the schedule.

29. JURISDICTION

As specified in the schedule.

30. NON USA LEGAL SERVICE

Any summons, notice or process to be served upon the Underwriters for the purpose of instituting
any legal proceedings against them in connection with this insurance may be served upon TORUS
SYNDICATE 1301 OF 88 LEADENHALL STREET,5TH FLOOR,LONDON EC3A 3BP,of who have authority
to accept service on their behalf. LMA 3030

01/09/2006

LOSS CONTROL CLAUSE

Notwithstanding any provision contrary within this policy, it is understood and agreed that this
policy includes cover against physical loss or physical damage to insured property directly caused
by the actions of the government or state (or its military authority ) where the insured property is
located and such damage takes place during the act of terrorism and/or sabotage

If the insured is eligible for compensation or indemnity from any government compensation plan or
other similar scheme in respect of the damage described above, this policy shall be excess of any
payment due from such plan or scheme.

For the purpose of the aforesaid inclusion clause “military authority” shall mean armed forces,
paramilitary forces, police or any other authority constituted by the government for maintaining
law and order or armed security guards (holding valid names license) employed by the insured, or
by a contractor providing security services to the insured’s business.
 CPM POLICY (Construction Plant Machinery)

SANCTIONS LIMITATIONS AND EXCLUSION CLAUSE

No (re)insurer shall be deemed to provide cover and no (re)insurer shall be liable to pay any claim
or provide any benefit hereunder to the extent that the provision of such cover, payment of such
claim or provision of such benefit would expose that (re)insurer to any sanction, prohibition or
restriction under United nations resolutions or the trade or economic sanctions, laws or regulations
of the European union, united kingdom or united states of America.

PREMIUM PAYMENT TERMS

Notwithstanding any provision to the contrary within this contract or any endorsement hereto, in
respect of nonpayment of premium only the following clause will apply.

The (Re)insured undertakes that premium will be paid in full to (Re)Insurers within Ninety (90) days
of inception of this contract (or, in respect of installment premiums, when due).

If the premium due under this contract has not been so paid to (Re)Insurers by the Ninetieth (90th)
day from the inception of this contract (and, in respect of installment premiums, by the date they
are due) (Re)Insurers shall have the right to cancel this contract by notifying the (Re)Insured via the
broker in writing. In the event of cancellation, premium is due to (Re)Insurers on a pro rata basis for
the period that (Re)Insurers are on risk but the full contract premium shall be payable to
(Re)Insurers in the event of a loss or occurrence prior to the date of termination which gives rise to
a valid claim under this contract.

It is agreed that (Re)Insurers shall give not less than Fifteen (15) days prior notice of cancellation to
the (Re)insured via the broker. If premium due is paid in full to (Re)Insurers before the notice period
expires, notice of cancellation shall automatically be revoked. If not, the contract shall
automatically terminate at the end of the notice period.
 SOLAR POLICY

STANDARD FIRE AND SPECIAL PERILS POLICY

SCHEDULE - Attached to & forming part of Policy
Schedule for Policy No. 271400/11/2021/1044
Policy No. 271400/11/2021/1044
THE INSURED NTPC Limited
(GST No: 09AAACN0255D9ZO)
Engg. Block, A-8A, Sector – 24, Noida, UP. (India)
VARIOUS PROPERTIES IN RESPECT OF STATIONS LISTED AS PER Annexure A.
INTEREST The Scope of Standard Fire & Special Perils Insurance Cover & add on covers shall
INSURED include all operating solar stations of NTPC as detailed in Annexure-A. This will
include all plants, equipments such as Solar Panels, Transformers,
Inverters etc. & Buildings within Plant premises.
PERIOD OF From: 01.02.2021 To: 31.01.2022
INSURANCE (00.01 hours) (midnight)
Sum Insured Rs. 4397,59,00,000/- (Four thousand three hundred ninety seven crores fifty nine
lakhs only)
Premium Rs. 5,46,31,344.00
GST @ 18% Rs. 98,33,642.00 Total: 6,44,64,986.00
Notice of The Oriental Insurance Company Limited
Claim DO XI, 30/26, First Floor, Nangia Park,
Nominee Shakti Nagar, Delhi - 110 007.
Email: vinay.malhotra@orientalinsurance.co.in
Up to 10 crores 5% of the claim amount subject to minimum of Rs.
10,000/-
Between 10 to 100 crs 5% of claim amount subject to minimum of Rs. 25000/-
Deductibles Between 100 to 1500 5% of claim amount subject to minimum of Rs. 5 lakhs
crs
Between 1500 to 2500 5% of claim amount subject to minimum of Rs. 25 lakhs
crs
Above 2500 crs 5% of claim amount subject to minimum of Rs. 50 lakhs
Terrorism Deductible will be as per Indian Terrorism Pool guidelines
Reinstatement value clause
Local Authority Clause
Omission to insure additions & alterations for 5% of sum insured
Add on Escalation for 10%
Covers
Earthquake Fire and Shock (Only at Dadri, Port Blair, Faridabad & Rojmal
location)
STFI (Hail Storm, Typhoon, Flood and Inundation)
Terrorism as per Indian Terrorism pool
Forest Fire (Up to limit of Rs. 50 Crores)
 SOLAR POLICY

Dated: 09th February, 2021

CONSOLIDATED POLICY STAMPS PAID AS PER ORDER F.NO. 10(18818)/COS (HQ)/CONS. DUTY/6784
dt. 17/03/2015 OF COLLECTOR OF STAMPS, NEW DELHI
 SOLAR POLICY

ANNEXURE -A attached to Policy no

271400/11/2021/1044
NTPC LTD SOLAR POWER STATIONS
Deductible
S. Capacit Sum 5% of claim Earthquake
N Location y Insured Cover
amount
o s (MW) (in crores) Opted
subject to
minimum of
1 Dadri 5 23.31 25000 YES
2 Port Blair 5 23.31 25000 YES
3 Faridabad 5 23.31 25000 YES
4 Rojmal Wind Power 50 290.67 50000 YES
0
5 Rama Gundam 10 46.63 25000 NO
6 Talcher -K 10 46.63 25000 NO
7 Unchahar 10 46.63 25000 NO
8 Rajgarh 50 233.13 50000 NO
0
9 Singrauli 15 69.94 25000 NO
10 Anathapuramu 250 1165.6 50000 NO
3 0
11 Bhadla 260 1212.2 50000 NO
5 0
12 Mandsaur 250 1165.6 50000 NO
3 0
13 Singrauli Small Hydro 8 44.77 25000 NO
14 Kawas (Floating PV) 1 5.77 10000 YES
Total 929 4397.5
9
 SOLAR POLICY

STANDARD FIRE AND SPECIAL PERILS POLICY

(MATERIAL DAMAGE)

IN CONSIDERATION OF the Insured named in the Schedule hereto having paid to The Oriental
Insurance Company Limited (hereinafter called the Company) the full premium mentioned in the
said schedule, THE COMPANY AGREES, (Subject to the Conditions and Exclusions contained herein or
endorsed or otherwise expressed hereon) that if after payment of the premium the Property
insured described in the said Schedule or any part of such Property be destroyed or damaged by any
of the perils specified hereunder during the period of insurance named in the said schedule or of
any subsequent period in respect of which the Insured shall have paid and the Company shall
have accepted the premium required for the renewal of the policy, the Company shall pay to the
Insured the value of the Property at the time of the happening of its destruction or the amount of
such damage or at its option reinstate or replace such property or any part thereof:
I. Fire
Excluding destruction or damage caused to the property insured by
(a) (i) its own fermentation, natural heating or spontaneous combustion.
(ii) its undergoing any heating or drying process.
(b) Burning of property insured by order of any Public Authority.
II. Lightning
III. Explosion/Implosion
Excluding loss, destruction of or damage
a) to boilers (other than domestic boilers), economizers or other vessels, machinery or
apparatus (in which steam is generated) or their contents resulting from their own
explosion/implosion,
b) caused by centrifugal forces.
IV. Aircraft Damage
Loss, Destruction or damage caused by Aircraft, other aerial or space devices and articles
dropped there from excluding those caused by pressure waves.
V. Riot, Strike and Malicious Damage
Loss of or visible physical damage or destruction by external violent means directly caused to
the property insured but excluding those caused by
a) total or partial cessation of work or the retardation or interruption or cessation of
any process or operations or omissions of any kind.
b) Permanent or temporary dispossession resulting from confiscation,
commandeering, requisition or destruction by order of the Government or any
lawfully constituted Authority.
c) Permanent or temporary dispossession of any building or plant or unit of machinery
resulting from the unlawful occupation by any person of such building or plant or unit
or machinery or prevention of access to the same.
d) Burglary, housebreaking, theft, larceny or any such attempt or any omission of any
 SOLAR POLICY

kind of any person (whether or not such act is committed in the course of a
disturbance of public peace) in any malicious act.
VI. Hail Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation
Loss, destruction or damage directly caused by Storm, Cyclone, Typhoon, Tempest,
Hurricane, Tornado, Flood or Inundation excluding those resulting from earthquake, Volcanic
eruption or other convulsions of nature. (Wherever earthquake cover is given as an “add on
cover” the words “excluding those resulting from earthquake volcanic eruption or other
convulsions of nature” shall stand deleted).
VII. Impact Damage
Loss of or visible physical damage or destruction caused to the property insured due to
impact by any Rail/ Road vehicle or animal by direct contact not belonging to or owned by
a) the Insured or any occupier of the premises or
b) their employees while acting in the course of their employment.
VIII. Subsidence and Landslide including Rock slide
Loss, destruction or damage directly caused by Subsidence of part of the site on which the
property stands or Land slide/Rock slide excluding:
a) the normal cracking, settlement or bedding down of new structures
b) the settlement or movement of made-up ground
c) coastal or river erosion
d) defective design or workmanship or use of defective materials
e) demolition, construction, structural alterations or repair of any property or
groundwork or excavations.
IX. Bursting and/or overflowing of Water Tanks, Apparatus and Pipes
IX. Missile Testing operations
X. Leakage from Automatic Sprinkler Installations
Excluding loss, destruction or damage caused by
a) Repairs or alterations to the buildings or premises
b) Repairs, Removal or Extension of the Sprinkler Installation
c) Defects in construction known to the Insured.

XII. Bush Fire

Excluding loss, destruction or damage caused by Forest Fire.
PROVIDED that the liability of the Company shall in no case exceed in respect of each item
the sum expressed in the said Schedule to be insured thereon or in the whole the total Sum
Insured hereby or such other sum or sums as may be substituted therefore by memorandum
hereon or attached hereto signed by or on behalf of the Company.
(A) GENERAL EXCLUSIONS
1. This Policy does not cover (not applicable to policies covering dwellings)

Up to 10 crores The First 5% of claim amount subject to minimum of Rs. 10000/-

Between 10 to 100 crs The First 5% of claim amount subject to minimum of Rs. 25000/-
Between 100 to 1500 crs The First 5% of claim amount subject to minimum of Rs. 5 lakhs
 SOLAR POLICY

Between 1500 to 2500 crs The First 5% of claim amount subject to minimum of Rs. 25 lakhs
Above 2500 crs The First 5% of claim amount subject to minimum of Rs. 50 lakhs
For Terrorism: Deductible will be as per Indian Terrorism Pool guidelines

The Excess shall apply per event per insured.

2. Loss, destruction or damage caused by war, invasion, act of foreign enemy hostilities or war like
operations (whether war be declared or not), civil war, mutiny, civil commotion assuming the
proportions of or amounting to a popular rising, military rising, rebellion, revolution,
insurrection or military or usurped power.
3. Loss, destruction or damage directly or indirectly caused to the property insured by
a) ionising radiations or contamination by radioactivity from any nuclear fuel or from any
nuclear waste from the combustion of nuclear fuel
b) the radioactive toxic, explosives or other hazardous properties of any explosive nuclear
assembly or nuclear component thereof
4. Loss, destruction or damage caused to the insured property by pollution or contamination
excluding
a) pollution or contamination which itself results from a peril hereby insured against.
b) any peril hereby insured against which itself results from pollution or contamination
5. Loss, destruction or damage to the stocks in Cold Storage premises caused by change of
temperature.
6. Loss, destruction or damage to any electrical machine, apparatus, fixture, or fitting arising from
or occasioned by over-running, excessive pressure, short circuiting, arcing, self heating or
leakage of electricity from whatever cause (lightning included) provided that this exclusion shall
apply only to the particular electrical machine, apparatus, fixture or fitting so affected and not
to other machines machines, apparatus, fixtures or fittings which may be destroyed or
damaged by fire so set up.
7. Expenses necessarily incurred on
(i) Architects, Surveyors and Consulting Engineer's Fees and
(ii) Debris Removal by the Insured following a loss, destruction or damage to the Property
insured by an insured peril in excess of 3% and 1% of the claim amount respectively.
8. Loss of earnings, loss by delay, loss of market or other consequential or indirect loss or
damage of any kind or description whatsoever.
9. Loss, or damage by spoilage resulting from the retardation or interruption or cessation of
any process or operation caused by operation of any of the perils covered.
10. Loss by theft during or after the occurrence of any insured peril except as provided under Riot,
Strike, Malicious and Terrorism Damage cover.
11. Any Loss or damage occasioned by or through or in consequence directly or indirectly
due to earthquake, Volcanic eruption or other convulsions of nature.
12. Loss or damage to property insured if removed to any building or place other than in which
 SOLAR POLICY

it is herein stated to be insured, except machinery and equipment temporarily removed for
repairs, cleaning, renovation or other similar purposes for a period not exceeding 60 days.
(B) GENERAL CONDITIONS
1. THIS POLICY shall be voidable in the event of mis-representation, mis-description or non-
disclosure of any material particular.
2. All insurances under this policy shall cease on expiry of seven days from the date of fall or
displacement of any building or part thereof or of the whole or any part of any range of
buildings or of any structure of which such building forms part.
PROVIDED such a fall or displacement is not caused by insured perils, loss or damage which is
covered by this policy or would be covered if such building, range of buildings or structure were
insured under this policy.
Notwithstanding the above, the Company subject to an express notice being given as soon as
possible but not later than seven days of any such fall or displacement may agree to continue the
insurance subject to revised rates, terms and conditions as may be decided by it and confirmed in
writing to this effect.
3. Under any of the following circumstances the insurance ceases to attach as regards the
property affected unless the Insured, before the occurrence of any loss or damage, obtains the
sanction of the Company signified by endorsement upon the policy by or on behalf of the
Company: -

a. If the trade or manufacture carried on be altered, or if the nature of the occupation

of or other circumstances affecting the building insured or containing the insured
property be changed in such a way as to increase the risk of loss or damage by Insured
Perils.
b. If the building insured or containing the insured property becomes unoccupied and so
remains for a period of more than 30 days.
c. If the interest in the property passes from the insured otherwise than by will or
operation of law.
4. This insurance does not cover any loss or damage to property which, at the time of the
happening of such loss or damage, is insured by or would, but for the existence of this policy,
be insured by any marine policy or policies except in respect of any excess beyond the amount
which would have been payable under the marine policy or policies had this insurance not
been effected.
5. This insurance may be terminated at any time at the request of the Insured, in which case
the Company will retain the premium at customary short period rate for the time the policy
has been in force. This insurance may also at any time be terminated at the option of the
Company, on 15 days' notice to that effect being given to the Insured, in which case the
Company shall be liable to repay on demand a ratable proportion of the premium for the
unexpired term from the date of the cancellation.
6. (i) On the happening of any loss or damage the Insured shall forthwith give notice thereof to
the Company and shall within 15 days after the loss or damage, or such further time as the
 SOLAR POLICY

Company may in writing allow in that behalf, deliver to the Company

a. A claim in writing for the loss or damage containing as particular an account as may be
reasonably practicable of all the several articles or items or property damaged or destroyed,
and of the amount of the loss or damage thereto respectively, having regard to their value at
the time of the loss or damage not including profit of any kind.
b. Particulars of all other insurances, if any
The Insured shall also at all times at his own expense produce, procure and give to the
Company all such further particulars, plans, specification books, vouchers, invoices,
duplicates or copies thereof, documents, investigation reports (internal/external), proofs and
information with respect to the claim and the origin and cause of the loss and the
circumstances under which the loss or damage occurred, and any matter touching the liability
or the amount of the liability of the Company as may be reasonably required by or on
behalf of the Company together with a declaration on oath or in other legal form of the truth
of the claim and of any matters connected therewith.
No claim under this policy shall be payable unless the terms of this condition have been complied
with
(ii) In no case whatsoever shall the Company be liable for any loss or damage after the
expiry of 12 months from the happening of the loss or damage unless the claim is the subject
of pending action or arbitration; it being expressly agreed and declared that if the Company
shall disclaim liability for any claim hereunder and such claim shall not within 12 calendar
months from the date of the disclaimer have been made the subject matter of a suit in a
court of law then the claim shall for all purposes be deemed to have been abandoned and shall
not thereafter be recoverable hereunder.
7. On the happening of loss or damage to any of the property insured by this policy, the Company
may
a. enter and take and keep possession of the building or premises where the loss or damage
has happened.
b. take possession of or require to be delivered to it any property of the Insured in the
building or on the premises at the time of the loss or damage.
c. keep possession of any such property and examine, sort, arrange, remove or otherwise
deal with the same.
d. sell any such property or dispose of the same for account of whom it may Concern.
The powers conferred by this condition shall be exercisable by the Company at any time until
notice in writing is given by the insured that he makes no claim under the policy, or if any
claim is made, until such claim is finally determined or withdrawn, and the Company shall
not by any act done in the exercise or purported exercise of its powers hereunder, incur any
liability to the Insured or diminish its rights to rely upon any of the conditions of this policy in
answer to any claim.
If the insured or any person on his behalf shall not comply with the requirements of the
Company or shall hinder or obstruct the Company, in the exercise of its powers hereunder,
all benefits under this policy shall be forfeited.
The Insured shall not in any case be entitled to abandon any property to the Company
 SOLAR POLICY

whether taken possession of by the Company or not.

8. If the claim be in any respect fraudulent, or if any false declaration be made or used in
support thereof or if any fraudulent means or devices are used by the Insured or any one
acting on his behalf to obtain any benefit under the policy or if the loss or damage be
occasioned by the willful act, or with the connivance of the Insured, all benefits under this
policy shall be forfeited.
9. If the Company at its option, reinstate or replace the property damaged or destroyed, or any
part thereof, instead of paying the amount of the loss or damage, or join with any other
Company or Insurer(s) in so doing, the Company shall not be bound to reinstate exactly or
completely but only as circumstances permit and in reasonably sufficient manner, and in no
case shall the Company be bound to expend more in reinstatement than it would have cost
to reinstate such property as it was at the time of the occurrence of such loss or damage
nor more than the sum insured by the Company thereon. If the Company so elect to
reinstate or replace any property the insured shall at his own expense furnish the
Company with such plans, specifications, measurements, quantities and such other
particulars as the Company may require, and no acts done, or caused to be done, by the
Company with a view to reinstatement or replacement shall be deemed an election by the
Company to reinstate or replace.
If in any case the Company shall be unable to reinstate or repair the property hereby
insured,
because of any municipal or other regulations in force affecting the alignment of streets or
the construction of buildings or otherwise, the Company shall, in every such case,
only be liable to pay such sum as would be requisite to reinstate or repair such property if
the same could lawfully be reinstated to its former condition.

10. If the property hereby insured shall at the breaking out of any fire or at the commencement
of any destruction of or damage to the property by any other peril hereby insured against be
collectively of greater value than the sum insured thereon, then the Insured shall be
considered as being his own insurer for the difference and shall bear a ratable proportion
of the loss accordingly. Every item, if more than one, of the policy shall be separately
subject to this condition.
11. If at the time of any loss or damage happening to any property hereby insured there be any
other subsisting insurance or insurances, whether effected by the Insured or by any other
person or persons covering the same property, this Company shall not be liable to pay or
contribute more than its rate able proportion of such loss or damage.
12. The Insured shall at the expense of the Company do and concur in doing, and permit to be
done, all such acts and things as may be necessary or reasonably required by the
Company for the purpose of enforcing any rights and remedies or of obtaining relief or
indemnity from other parties to which the Company shall be or would become entitled or
subrogated, upon its paying for or making good any loss or damage under this policy,
whether such acts and things shall be or become necessary or required before or after
his indemnification by the Company.
 SOLAR POLICY

13. If any dispute or difference shall arise as to the quantum to be paid under this policy (liability
being (otherwise admitted) such difference shall independently of all other questions be
referred to the decision of a sole arbitrator to be appointed in writing by the parties to or if
they cannot agree upon a single arbitrator within 30 days of any party invoking arbitration, the
same shall be referred to a panel of three arbitrators, comprising of two arbitrators, one to be
appointed by each of the parties to the dispute/difference and the third arbitrator to be
appointed by such two arbitrators and arbitration shall be conducted under and in
accordance with the provisions of the Arbitration and Conciliation Act, 1996.
It is clearly agreed and understood that no difference or dispute shall be referable to
arbitration as hereinbefore provided, if the Company has disputed or not accepted liability
under or in respect of this policy.
It is hereby expressly stipulated and declared that it shall be a condition precedent to any
right of action or suit upon this policy that the award by such arbitrator/ arbitrators of the
amount of the loss or damage shall be first obtained.

14. Every notice and other communication to the Company required by these conditions must
be written or printed.
15. At all times during the period of insurance of this policy the insurance cover will be
maintained to the full extent of the respective sum insured in consideration of which
upon the settlement of any loss under this policy, pro-rata premium for the unexpired
period from the date of such loss to the expiry of period of insurance for the amount of
such loss shall be payable by the insured to the Company.
The additional premium referred above shall be deducted from the net claim amount payable
under the policy. This continuous cover to the full extent will be available notwithstanding
any previous loss for which the company may have paid hereunder and irrespective of the
fact whether the additional premium as mentioned above has been actually paid or not
following such loss. The intention of this condition is to ensure continuity of the cover to the
insured subject only to the right of the company for deduction from the claim amount, when
settled, of pro-rata premium to be calculated from the date of loss till expiry of the policy.
Notwithstanding what is stated above, the Sum Insured shall stand reduced by the amount of
loss in case the insured immediately on occurrence of the loss exercises his option not to
reinstate the sum insured as above.

Note: Following are the wordings of the endorsement/ clauses attached with the policy issued.
Only those clauses stands covered which are mentioned on the schedule of the policy.
Removal of Debris Clause

Policy may be extended to cover the above subject to following endorsement wordings:
It is permissible to cover cost necessarily incurred by an insured in the removal of debris from the
premises of the insured, dismantling, demolishing, shoring up or propping of Insured property
following destruction or damage by Insured Peril by incorporating the following clause
 SOLAR POLICY

“On costs and expenses necessarily incurred by the insured

(a) In the removal of debris from the premises of the Insured;
(b) dismantling or demolishing;
(c) shoring up or propping;
of the portion or portions of the property insured by (as per schedule) this policy destroyed or
damaged by perils hereby insured against but not exceeding in the aggregate Rs. 10 lakhs.”

Note: 1. (b) & (c) above should be deleted when neither Building nor Machinery are covered.
Note: 2. The cover may be given by separate item in the policy for an amount not exceeding
10% of the total Sum Insured.
Omission to Insure additions, alterations or extensions

The Insurance by this Policy extends to cover Buildings and/or Machinery, Plant and other Contents
as defined in the schedule hereof which the insured may erect or acquire or for which they may
become responsible: -
a) at the within described premises
b) for use as factories
i) The liability under this Extension shall not exceed in respect of (a) above, 5% of the Sum
Insured by each item, in respect of (b) above, 5% of the Sum Insured by item as per
schedule
ii) The Insured shall notify the Insurer of each additional insurance as soon as it shall
come to their knowledge and shall pay the appropriate additional premium thereon from
the date of inception.
iii) Following the advice of any additional insurance as aforesaid, cover by this extension shall
be fully reinstated.
No liability shall attach to the insurers in respect of any Building, Machinery, Plant or other Contents
while such property is otherwise insured.
1) All new additions to Buildings and/or Machinery and Plant not specifically
insured/included during the currency of the policy should be declared at the end of the year
and suitable additional premium paid on pro rata basis from the date of completion of the
construction /erection of additions may be suitably adjusted.
If the insured fails to declare the values of such additions within 30 days after the expiry of
the there policy, shall be no refund of the advance premium collected.
2) Other Contents in the above clause shall mean ‘Furniture and Fittings’ and does not include
‘Stocks’.
3) This clause should be incorporated at the time of issuing the policy.
ESCALATION CLAUSE

“In consideration of the payment of an additional premium amounting to 50% of the

premium produced by applying the specified percentage (over & above 10%) to the first or
the annual
 SOLAR POLICY

premium as appropriate on the under noted items(s) the Sum(s) Insured thereby shall, during
the period of insurance, be increased each day by an amount representing 1/365th of the
specified percentage increase per annum.
Unless specifically agreed to the contrary the provisions of this clause shall only apply to
the sums insured in force at the commencement of each period of insurance.
At each renewal date the insured shall notify the Insurers: -
(i) The sums to be insured under each item above, but in the absence of such instructions the
Sums Insured by the above items shall be those stated on the policy (as amended by any
endorsement effective prior to the aforesaid renewal date) to which shall be added the
increases which have accrued under this Clause during the period of insurance up to that
renewal date, and
(ii) The specified percentage increase(s) required for the forthcoming period of insurance, but in
the absence of instructions to the contrary prior to renewal date the existing percentage
increase shall apply for the period of insurance from renewal.
All the conditions of the policy in so far as they may be hereby expressly varied shall apply
as if they had been incorporated herein.
LOCAL AUTHORITIES CLAUSE

Reinstatement Value Policy may be extended to cover additional cost of reinstatement solely by
reason of the necessity to comply with the regulations of local authority by incorporating the
following clause in the policy.
"The insurance by this policy extends to include such additional cost of reinstatement of the destroyed
or damaged property hereby insured as may be incurred solely by reason of the necessity to comply
with the Building or other Regulations under or framed in pursuance of any act of Parliament or with
Bye-laws of any Municipal or Local authority provided that
1) The amount recoverable under this extension shall not include:
a) the cost incurred in complying with any of the aforesaid Regulations or Bye-laws,
i) in respect of destruction or damage occurring prior to the granting of this extension,
ii) in respect of destruction or damage not insured by the policy,
iii) under which notice has been served upon the insured prior to the happening of the
destruction of damage,
iv) in respect of undamaged property or undamaged portions of property other than foundations
(unless foundations are specifically excluded from the insurance by this policy) of that portion
of the property destroyed or damaged,
b) the additional cost that would have been required to make good the property damaged or
destroyed to a condition, equal to its condition when new had the necessity to comply with
any of the aforesaid Regulations of Bye-laws not arisen,
c) the amount of any rate, tax, duty, development or other charge or assessment arising out of
capital appreciation which may be payable in respect of the property or by the owner thereof
by reason of compliance with any of the aforesaid Regulations or Bye-laws.
2) The work of reinstatement must be commenced and carried out with reasonable dispatch
and in a case must be completed within twelve months after the destruction or damage or
 SOLAR POLICY

within such further time as the Insurers may (during the said twelve months) in writing allow
and may be carried out wholly or partially upon another site (if the aforesaid Regulations or
Bye-laws so necessitate) subject to the liability of the Insurer under this extension not being
thereby increased.
3) If the liability of the insurer under (any item of) the policy apart from this extension shall
be reduced by the application of any of the terms and conditions of the policy then the
liability of the Insurers under this extension (in respect of any such item) shall be reduced in
like proportion.
4) The total amount recoverable under any item of the policy shall not exceed the sum insured
thereby.

5) All the conditions of the policy except in so far as they may be hereby expressly varied shall
apply as if they had been incorporated herein."
6) No additional premium shall be charged for inclusion of this clause in this policy.

REINSTATEMENT VALUE CLAUSE

Reinstatement value insurance may be granted on Buildings, Machinery Furniture, Fixture and
Fittings only subject to the incorporation of the following memorandum in the policy:
“It is hereby declared and agreed that in the event of the property insured under (as per schedule)
within the policy being destroyed or damaged, the basis upon which the amount payable under
(each of the said items of) the policy is to be calculated shall be cost of replacing or reinstating on
the same site or any other site with property of the same kind or type but not superior to or more
extensive than the insured property when new as on date of the loss, subject to the following
Special Provisions and subject also to the terms and conditions of the policy except in so far as the
same may be varied hereby.”
Special Provisions

1. The work of replacement or reinstatement (which may be carried out upon another site and
in any manner suitable to the requirements of the insured subject to the liability of the
Company not being thereby increased) must be commenced and carried out with reasonable
dispatch and in any case must be completed within 12 months after the destruction or
damage or within such further time as the Company may in writing allow, otherwise no
payment beyond the amount which would have been payable under the policy if this
memorandum had not been incorporated therein shall be made.
2. Until expenditure has been incurred by the Insured in replacing or reinstating the property
destroyed or damaged the Company shall not be liable for any payment in excess of the
amount which would have been payable under the policy if this memorandum had not been
incorporated therein.
3. If at the time of replacement or reinstatement the sum representing the cost which would
have been incurred in replacement or reinstatement if the whole of the property covered had
been destroyed, exceeds the Sum Insured thereon or at the commencement of any
destruction or damage to such property by any of the perils insured against by the policy,
then the insured shall be considered as being his own insurer for the excess and shall bear a
 SOLAR POLICY

ratable proportion of the loss accordingly. Each item of the policy (if more than one) to which
this memorandum applies shall be separately subject to the foregoing provision.

4. This Memorandum shall be without force or effect if

a) The Insured fails to intimate to the Company within 6 months from the date of
destruction or damage or such further time as the Company may in writing allow his
intention to replace or reinstate the property destroyed or damaged.
(b) The Insured is unable or unwilling to replace or reinstate the property destroyed or
damaged on the same or another site.

TERRORISM DAMAGE CLAUSE (Material Damage Only)

INSURING CLAUSE
Subject otherwise to the terms, exclusions, provisions and conditions contained in the Policy and in
consideration of the payment by the Insured to the Company of additional premium as stated in the
Schedule, it is hereby agreed and declared that notwithstanding anything stated in the ‘Terrorism Risk
Exclusion” of this Policy to the contrary, this Policy is extended to cover physical loss or physical
damage occurring during the period of this Policy caused by an act of terrorism, subject to the
exclusions, limits and excess described hereinafter.
For the purpose of this cover, an act of terrorism means an act or series of acts, including but not
limited to the use of force or violence and/or the threat thereof, of any person or group(s) of persons,
whether acting alone or on behalf of or in connection with any organisation(s) or government(s), or
unlawful associations, recognized under Unlawful Activities (Prevention) Amendment Act, 2008 or any
other related and applicable national or state legislation formulated to combat unlawful and terrorist
activities in the nation for the time being in force, committed for political, religious, ideological or
similar purposes including the intention to influence any government and/or to put the public or any
section of the public in fear for such purposes.
This cover also includes loss, damage, cost or expense directly caused by, resulting from or in
connection with any action taken in suppressing, controlling, preventing or minimizing the
consequences of an act of terrorism by the duly empowered government or Military Authority.

Provided that if the Insured is eligible for indemnity under any government compensation plan or
other similar scheme in respect of the damage described above, this Policy shall be excess of any
recovery due from such plan or scheme.
For the purpose of the aforesaid inclusion clause, "Military Authority" shall mean armed forces, para
military forces, police or any other authority constituted by the government for maintaining law and
order.

LOSSES EXCLUDED

This cover shall not indemnify loss of or damage to property caused by any or all of the following: -
1. loss by seizure or legal or illegal occupation;
2. loss or damage caused by:
(i) voluntary abandonment or vacation,
(ii) confiscation, commandeering, nationalisation, requisition, detention, embargo, quarantine, or
any result of any order of public or government authority, which deprives the Insured of the use or
 SOLAR POLICY

value of its property;

3. loss or damage arising from acts of contraband or illegal transportation or illegal trade;
4. loss or damage directly or indirectly arising from or in consequence of the seepage and or
discharge of pollutants or contaminants, which pollutants and contaminants shall include but not be
limited to any solid, liquid, gaseous or thermal irritant, contaminant or toxic or hazardous substance
or any substance the presence, existence or release of which endangers or threatens to endanger the
health, safety or welfare of persons or the environment;
5. loss or damage arising directly or indirectly from or in consequence of chemical or biological
emission, release, discharge, dispersal or escape or chemical or biological exposure of any kind;
6. loss or damage arising directly or indirectly from or in consequence of asbestos emission, release,
discharge, dispersal or escape or asbestos exposure of any kind;
7. Any fine, levy, duty, interest or penalty or cost or compensation/damages and/or other
assessment which is incurred by the Insured or which is imposed by any court, government agency,
public or civil authority or any other person;
8. loss or damage by electronic means including but not limited to computer hacking or the
introduction of any form of computer virus or corrupting or unauthorised instructions or code or the
use of any electromagnetic weapon. This exclusion shall not operate to exclude losses (which would
otherwise be covered under this Policy) arising from the use of any computer, computer system or
computer software programme or any other electronic system in the launch and/or guidance system
and/or firing mechanism of any weapon or missile;
9. loss or damage caused by vandals or other persons acting maliciously or by way of protest or
strikes, labour unrest, riots or civil commotion;
10. loss or increased cost occasioned by any public or government or local or civil authority’s
enforcement of any ordinance or law regulating the reconstruction, repair or demolition of any
property insured hereunder;
11. any consequential loss or damage, loss of use, delay or loss of markets, loss of income,
depreciation, reduction in functionality, or increased cost of working;
12. loss or damage caused by factors including but not limited to cessation, fluctuation or variation
in, or insufficiency of, water, gas or electricity supplies and telecommunications or any type of
service;
13. loss or increased cost as a result of threat or hoax;
14. loss or damage caused by or arising out of burglary, house - breaking, looting, theft, larceny or
any such attempt or any omission of any kind of any person (whether or not such act is committed in
the course of a disturbance of public peace) in any action taken in respect of an act of terrorism;
15. loss or damage caused by mysterious disappearance or unexplained loss; loss or damage directly or
indirectly caused by mould, mildew, fungus, spores or other micro-organism of any type, nature or
description, including but not limited to any substance whose presence poses an actual or potential
threat to human health;
16. Total or partial cessation of work or the retardation or interruption or cessation of any process or
operations or omissions of any kind.
LIMIT OF INDEMNITY
The limit of indemnity under this cover shall not exceed the Total Sum Insured given in the Policy
Schedule or INR 20,000,000,000 whichever is lower.
ln respect of several locations being covered under a single policy on a floater basis, the maximum
aggregate loss suffered from all the locations mentioned in the Policy schedule shall not exceed Total
Sum Insured as mentioned in the Policy Schedule or Rs. 20,000,000,000/- whichever is lower.
 SOLAR POLICY

In respect of several insurance policies within the same compound/location with one or different
insurers, the maximum aggregate loss payable per compound/location by any one or all insurers shall
be INR 20,000,000,000. If the actual aggregate loss suffered at one compound/location is more than
INR 20,000,000,000, the amounts payable under individual policies shall be reduced in proportion to
the sum insured of the policies.
EXCESS
Shops & Residential Risks: 1% of claim amount for each and every claim subject to minimum of INR
10,000 and Maximum of INR 500,000.

Non-Industrial Risks: 1% of claim amount for each and every claim subject to minimum of INR 25,000
and Maximum of INR 1,000,000.
Industrial Risks: 5% of claim amount for each and every claim subject to minimum of INR 100,000 and
Maximum of INR 25,000,000.
ADD ON COVERS
It is further declared and agreed that the limit of indemnity including the claim on add on cover(s)
shall not exceed total sum insured plus separate sublimit opted for add on cover(s) or INR
20,000,000,000 whichever is lower. In respect of several insurance policies with in the same
compound /location, the maximum aggregate loss payable per compound/location by any one or all
insurers shall be INR 20,000,000,000.

MID TERM COVER

In case the coverage under this endorsement is granted during the currency of the policy, no claims
will be payable for loss or damage to property caused by an act of terrorism occurring during the first
15 (fifteen) days from the date of granting such cover.
SANCTION, LIMITATION AND EXCLUSION CLAUSE
No (re)insurer shall be deemed to provide cover and no (re)insurer shall be liable to pay any claim or
provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or
provision of such benefit would expose that(re) insurer to any sanction, prohibition or restriction
under United Nations resolutions or the trade or economic sanctions, laws or regulations of the
European Union, United Kingdom or United States of America.
CANCELLATION CLAUSE
Notwithstanding the cancellation provisions relating to the basic insurance policy on which this
endorsement is issued, there shall be no refund of premium allowed for cancellation of the Terrorism
risk insurance during the period of insurance except where such cancellation is done along with the
cancellation of the basic insurance. Where a policy is cancelled and rewritten mid-term purely for the
purpose of coinciding with the accounting year of the insured, pro-rata refund of the cancelled policy
premium will be allowed.
If the cancellation is for any other purpose, refund of premium will only be allowed after charging
short term scale rates.
 SOLAR POLICY

Attached to and forming Part of the Policy No. 271400/11/2021/1044

Communicable Disease Exclusion Clause

1. Notwithstanding any provision, clause or term of this Contract to the contrary, this Contract
excludes any loss, cost, damage, liability, claim, fines, penalty or expense or any other amount of
whatsoever nature, whether directly or indirectly and/or in whole or in part, related to, caused by,
contributed to by, resulting from, as a result of, as a consequence of, attributable to, arising out
of, arising under, in connection with, or in any way involving (this includes all other terms
commonly used and/or understood to reflect or describe nexus and/or connection from one thing
to another whether direct or indirect):
a Communicable Disease and/or the fear or threat (whether actual or perceived) of a
Communicable Disease and/or the actual or alleged transmission of a Communicable
Disease regardless of any other cause or event contributing and/ or occurring concurrently
or in any sequence thereto, and
a pandemic or epidemic, as declared by the World Health Organisation or any governmental
authority.

2. As used herein, Communicable Disease means: any infectious, contagious or communicable

substance or agent and/or any infectious, contagious or communicable disease which can be
caused and/or transmitted by means of substance or agent where:

the disease includes, but is not limited an illness, sickness, condition or an interruption or disorder
of body functions, systems or organs, and
the substance or agent includes, but is not limited to, a virus, bacterium, parasite, other organism
or other micro- organism (whether asymptomatic or not); including any variation or mutation
thereof, whether deemed living or not, and
the method of transmission, whether direct or indirect, includes but not limited to, airborne
transmission, bodily fluid transmission, transmission through contact with human fluids, waste or
the like, transmission from or to any surface or object, solid, liquid or gas or between organisms
including between humans, animals, or from any animal to any human or from any human to any
animal, and
the disease, substance or agent is such:
that causes or threatens damage or can cause or threaten damage to human health or
human welfare, or
that causes or threatens damage to or can cause or threaten damage to, deterioration to,
contamination of, loss of value of, loss of marketability of or loss of use or usefulness of, tangible or
intangible property.

For avoidance of doubt, Communicable Disease includes but is not limited to Coronavirus Disease
2019 (Covid -19) and any variation or mutation thereof.
 SOLAR POLICY

3. For further avoidance of doubt, any contingent or other business interruption loss, cost, damage,
loss of income, loss of use, increased cost of working and/or extra expense arising out of or
attributable to:

any partial or complete closure of and/or slowdown in, including but not limited to any closure
by or under the advisories of public, military, government or civil authorities, or any denial of
access to reinsured premises, or customer and or supplier premises (including service / utility
providers), or

change in consumer behavior, or

an absence of infected employees or employees suspected of being infected shall not be covered by
this Contract.

4. For still further avoidance of doubt, loss, cost, damage, liability, claim, fines, penalty or expense or
any other amount excluded hereby, includes but is not limited to any cost to identify, clean-up,
detoxify, disinfect, decontaminate, mitigate, remove, evacuate, repair, replace, monitor, sanitize
or test: (1) for a Communicable Disease or (2) any tangible or intangible property covered by this
Contract that is affected by such Communicable Disease.
5. It is clarified that (1) no other prior, concurrent or subsequent provision, clause, term or exception
of this Contract (including (but not limited to) any prior, concurrent or subsequent endorsement
and/or any provision, clause, term, buy back or exception that operates, or is intended to operate,
to extend the coverage of, or protections provided by, this Contract by whatever name called like
any coverage extension, additional coverage, global extension, exception to any exclusion); (2) any
change in the law, clause or similar provision; (3) any follow the fortunes clause or similar
provision; and/or (4) no change in the law or any regulation (to the extent permitted by applicable
law), shall operate to provide any reinsurance, coverage or protection under this Contract that
would otherwise be excluded through the exclusion set forth in this Clause.

6. If the insurer alleges that by reason of this Clause any amount is not covered by this Contract the
burden of proving the contrary shall rest in the insured.
 SOLAR POLICY

BURGALARY POLICY
SCHEDULE - Attached to & forming part of Policy
Schedule for Policy No. 271400/48/2021/5290
Policy No. 271400/48/2021/5290 From: 01.02.2021 to 31.01.2022
THE INSURED NTPC Limited
(GST No: 09AAACN0255D9ZO)
Engg. Block, A-8A, Sector – 24, Noida, UP. (India)
VARIOUS PROPERTIES IN RESPECT OF STATIONS LISTED AS PER Annexure A.
INTEREST The Scope of Burglary Insurance Cover shall include operating solar stations of
INSURED NTPC as detailed in Annexure-A.
This will include all plants, equipment such as Solar Panels, Transformers,
Inverters etc. within Plant premises.
PERIOD OF From: 01.02.2021 To: 31.01.2022
INSURANCE (00.01 hours) (midnight)
Sum Insured Rs. 854,09,00,000/- (Eight hundred fifty four crores nine lakhs only)
Premium Rs. 5,12,460.00
Service Tax Rs. 92,243.00 Total: 6,04,703.00
The Oriental Insurance Company Limited
Notice of Claim DO XI, 30/26, First Floor, Nangia Park,
Nominee Shakti Nagar, Delhi - 110 007.
Email: vinay.malhotra@orientalinsurance.co.in
Deductibles Rs 1,00,000/- each and every claim

Dated: 18th February, 2021 Divisional Manager

CONSOLIDATED POLICY STAMPS PAID AS PER ORDER F.NO. 10(18818)/COS (HQ)/CONS. DUTY/6784 dt.
17/03/2015 OF COLLECTOR OF STAMPS, NEW DELHI
 SOLAR POLICY

ANNEXURE -A attached to Policy no

271400/48/2021/5290
NTPC LTD SOLAR POWER STATIONS

Deductible 5% of
Capacit Sum claim amount
S. No Location
y Insured subject to minimum
s
(MW) (in crores) of
1 Dadri 5 23.31 100000
2 Port Blair 5 23.31 100000
3 Faridabad 5 23.31 100000
4 Rojmal Wind Power 50 290.6 100000
7
5 Rama Gundam 10 46.63 100000
6 Talcher -K 10 46.63 100000
7 Unchahar 10 46.63 100000
8 Rajgarh 50 290.6 100000
7
9 Singrauli 15 69.94 100000
10 Singrauli Small Hydro 8 44.77 100000
11 Kawas (Floating PV) 1 5.77 100000
Total 168 854.0
9
 SOLAR POLICY

BURGLARY & HOUSEBREAKING INSURANCE POLICY

(Business Premises)

WHEREAS the Insured described in the Schedule hereto (hereinafter called the "Insured") by a
proposal and declaration which shall be the basis of this contract and is deemed to be incorporated
herein has applied to The Oriental Insurance Company Ltd. (hereinafter called the "Company") for
the insurance hereinafter contained and has paid the premium stated to the said Schedule as
consideration for such insurance during the period stated in the said Schedule or during any further
period for which the Company may accept payment for the renewal or extension of this policy.

The Company hereby agrees subject to terms, conditions and exclusions herein contained or endorsed
or otherwise expressed hereon to indemnify the Insured to the extent of intrinsic value of.

a. Any loss of or damage to property or any part thereof whilst-contained in the

premises described in the Schedule hereto due to Burglary or House-breaking (theft
following upon an actual forcible and violent entry of and/or exit from the premises)
and Hold-up.
b. Damage caused to the premises to be made good by the insured resulting from
burglary and/or housebreaking or any attempt there at any time during the period of
insurance.

Provided always that the liability of the Company shall in no case exceed the sum insured stated
against each item or Total Sum Insured stated in the Schedule.

EXCLUSIONS
The Company shall not be liable in respect of:

I. Gold or Silver articles, watches or jewellery or precious stones or models or coins or curios,
sculptures, manuscripts, rare books, plans, medals, moulds, designs, deeds, bonds, bills of
exchange, bank, treasury or promissory notes, cheques, money, securities, stamps, collection
of stamps, business books or papers, unless specifically insured.
II. Loss or damage where any inmate or member of the Insured's household or of his business stall
or any other person lawfully in the premises in the business is concerned in the actual theft or
damage to any of the articles or premises on where such loss or damage have been expedited
or any way assisted or brought about by any such person or persons.
III. Loss or damage which is recoverable under Fire or Plate Glass Insurance Policy, or any other policy.
IV. a. Loss or damage directly or indirectly, proximately or remotely occasioned by or which
arises out of or in connection
with Riot and Strike, Civil Commotion, Terrorist activities, earthquake, flood, storm,
volcanic eruption, Typhoon, Hurricane, Tornado, Cyclone or other convulsions of nature or
atmospheric disturbances.
b. Loss or damage whether direct or indirect arising from war, warlike operations and foreign
enemy hostilities (whether war be declared or not), civil war, revolution, insurrection, civil
commotion, military or usurped power, seizure, capture, confiscation, arrests, restraints
and detainment by Order of any governments or any other authority.
 SOLAR POLICY

In any action, suit or other proceedings where the Company alleges that by reason of the
above provisions any loss
or damage is not covered by this insurance, the burden of proving that such loss or
damage is covered shall be upon the insured.
V. a. Any loss or damage to any property whatsoever or any loss or expense whatsoever resulting
or arising there from of any Consequential Loss and any Legal Liability of whatsoever
nature - directly caused by or contributed to by or arising from ionising radiation or
contamination by radioactivity from any source whatsoever.
b. Any accident, loss, destruction, damage or Legal Liability directly or indirectly caused by
or contributed to by or arising from Nuclear weapons material.
VI. Consequential Loss or Legal Liability of any kind.
VII. Loss of money and/or other property, abstracted from sale following the use of the key to the
said sale or any duplicate thereof belonging to the insured unless such key has been obtained
by assault or violence or any threat thereat.
This policy shall cease to attach:

VIII. a. If the premises shall have been left uninhabited by day and night for seven or more
consecutive days and nights while the premises are left uninhabited.
b. If the insured shall cause or suffer any material alteration to be made in the premises
or anything to be done whereby the risk is increased.
c. To any property the interest of the insured in which shall pass from the insured
otherwise than by will or operation of law. Unless in every case the consent of the
Company to the continuance of the insured thereon is obtained and signified on the
policy.

SPECIAL: CONDITIONS

1. MAINTENANCE OF BOOKS AND KEYS: The Insured shall keep a daily record or the amount of
cash contained in the safe or Strong room and such record shall be deposited in a secure
place other than the said safe or strong room and produced as documentary evidence in
support of a claim under this policy. The keys of the safe or strong room shall not be left on
the premises out of business hours unless the premises are occupied by the insured or any
authorised employee of the insured in which case such keys if left on the premises shall be
deposited in a secure place not in the vicinity of the safe or strong room.
2. ADJUSTMENT OF PREMIUM: The premium in so far as it related to Cash-in-Transit is to be
regulated by the amount of such money in transit during each period of insurance and for this
purpose a proper record shall be kept in the books of the insured which the insured shall at all
reasonable times allow the Company to inspect. Within one month from the expiry of each
period of insurance the insured shall furnish the Company with a correct account of the
amount of all such money in transit during the period and if the ascertained amount shall
differ from the estimated amount on which premium has been paid, the difference in
premium shall be met by a further proportionate payment to the Company or by a refund to
the Insured as the case may be but in no case shall the refund be more than fifty percent
(50%) of the premium stated in the Schedule and retention of premium shall not be less than
the minimum of Rs. 100/-
 SOLAR POLICY

3. RIGHTS OF RECOVERY: The Company shall be entitled in the name of the insured to have the
absolute conduct and control of all or any proceedings that it considers necessary for the
purpose of tracing and recovering money lost or of securing reimbursement in respect of
money lost and the Insured shall at the Company's expense furnish all such assistance as may
reasonably be required by the Company in connection with such proceedings and in the event
of any or all of the money being recovered, it shall be imperative upon the Insured to refund
to the Company such a proportion of the sum allowed by way of compensation as the amount
recovered bears to the total amount of money lost.

GENERAL:

1. NOTICE: Every notice and communication to the Company required by this Policy shall be in
writing to the office of the Company through which this insurance is affected.
2. DUTY OF DISCLOSURE: This Policy shall be void and all premium paid hereon shall be
forfeited to the Company in the event of misrepresentation, Mis description or non-disclosure
of any material fact.
3. REASONABLE CARE: The insured shall take all reasonable steps to safeguard the property
insured against accident, loss or damage.
4. CLAIMS PROCEDURE: Upon the happening of any event giving rise or likely to give rise to a
claim under this policy.
a. The insured shall give immediate notice of the police and to the policy issuing office of
the Company and take all practicable steps to discover the guilty person or persons
and to recover the Cash lost.
b. The insured shall deliver to the Company, within 14 days of the date on which the
event shall have come to his knowledge & detailed statement in writing of the loss.
c. The insured shall furnish all explanation, vouchers, proof of ownership and other
evidence to substantiate the claim and the Company may, if it deems necessary
require corroborative evidence of the statement of the insured or any of insured's
family members of employee/s.
5. CONTRIBUTION: If at the time of the happening of any loss or damage covered by this policy
there shall be subsisting any other insurance of any nature whatsoever covering the same
property whether effected by the insured or not, then the Company shall not be liable to pay
or contribute more than its ratable proportion of any loss or damage.
6. FRAUD: If any claim under this Policy shall be in any respect fraudulent or if any fraudulent
means or devices are used by “the insured or anyone acting on the insured's behalf to obtain
any benefit under this Policy, all benefits and rights under the Policy shall be forfeited.
7. CANCELLATION: The Company may at any time, cancel this Policy, by giving 7 days’ notice in
writing by Regd. A.D. to the insured at his last known address in which case, in respect of
Section I, of the Schedule, the premium paid shall be adjusted on the basis of the actual
amount in transit, during the period of insurance, and in respect of Section II, on pro-rata
basis. The insured may also cancel the policy by giving 7 days’ notice in writing, to the
Company, in which case the premium under Section I shall be adjusted on basis of the actual
amount in transit during the period of insurance, and in respect of Section II, on the
Company's customary short period scales.
8. ARBITRATION AND DISCLAIMER: If any difference shall arise as to the quantum to be paid
under this Policy (liability being otherwise admitted) such difference shall independently of all
 SOLAR POLICY

other questions be referred to the decision of any arbitrator to be appointed in writing by the
parties in difference or if they cannot agree upon a single arbitrator to the decision of two
disinterested persons as arbitrators or whom one shall be appointed in writing by each of the
parties within two calendar months after having been required so to do in writing by the
other party in accordance with the provisions of the Arbitration Act 1940 as amended from
time to time and for the time being in force. In case either party shall refuse or fail to appoint
arbitrator within two calendar months after receipt of notice in writing required, and
appointment the other party shall be at liberty to appoint sole arbitrator, and in case of
disagreement between the arbitrators, the difference shall be referred to the decisions of an
umpire who shall have been appointed by them in writing before entering on the reference
and who shall sit with the arbitrators and preside at their meetings.
It is clearly agreed and understood that no difference or dispute shall be referable to
arbitration as herein before provided, if the Company has disputed or not accepted liability
under or in respect of this Policy.
It is also hereby expressly stipulated and declared that it shall be a condition precedent to any
right of action or suit upon this Policy that award by such arbitrators or umpire of the amount
of the loss or damage shall be first obtained.
It is also hereby expressly agreed and declared that if the Company shall disclaim liability to
the insured for any claim herein under and such claim shall not within 12 calendar months
from the date of such disclaimer have been made the subject matter of a suit in a court of law,
then the claim shall for all purpose be deemed to have been abandoned and shall not
thereafter be recoverable hereunder.
9. OBSERVANCE OF TERMS AND CONDITIONS: The due observance and fulfilment of the terms,
conditions and endorsement of this policy in so far as they relate to anything to be done or
complied with by the insured, shall be a condition precedent to any liability of the Company
to make any payment under this Policy. '
10. RENEWAL NOTICE: The Company shall not be bound to accept any renewal premium not give
notice that such is due.
 SOLAR POLICY

DEFINITIONS

1. “Property Damage” means actual physical damage to the Insured Premises caused by
actual or attempted Housebreaking.
2. “Property” means assets, machinery, equipment, furniture, fixtures and fittings, electrical
installations and stock and stock-in-trade in the Insured’s premises described in the Schedule
to this Policy including items contained therein for which the Insured is accountable.
3. “Period of Insurance” means the period between the commencement date and the expiry
date shown in the Schedule.
4. “Proposal” means any signed proposal by filling up the questionnaires and declarations,
written statements and any information in addition thereto supplied to Company by Insured
or on Insured’s behalf.
5. “Insured Premises” means the place(s) declared for insurance and named in the Schedule
attached to the policy.
6. “Policy” means the Policy Booklet, the Schedule, the Proposal and any applicable
endorsements or memoranda. The policy contains the details of the extent of the cover
available to the Insured, what is excluded from the cover and the conditions, warranties on
which the Policy is issued.
7. “Schedule” means the latest schedule issued by the Company as part of the Policy. It
provides details of the Insured’s Policy including full description of properties covered which
are in force and the period of cover against the properties described. Whenever, the Insured
requests for a change in the cover, the same will be communicated by way of an
endorsement, subject to payment of premium by the Insured as demanded by the Insurer
for such change in cover.
8. “Sum Insured” means the Monetary Amounts shown against item/s insured.
9. "Burglary or Housebreaking” means theft following upon an actual forcible and violent
entry of or exit from the premises by the person or persons committing such theft.
10. "Theft” means the dishonest misappropriation of Insured’s property with the intention
of permanently depriving the Insured of the property by the person or persons other than
the insured’s employees or their representatives acting on behalf of the insured. (Theft is an
optional cover under the policy and needs to be specifically opted for by payment of
additional premium)
11. “Robbery” means the theft of contents at the insured premises using unforeseen,
aggressive and violent means against the insured and / or their employees.
12. “Hold-up” means forcible removal by actual or threatened violence against the Insured
or Employee(s) of the Insured.
13. “Excess” means the amount stated in the Schedule, which shall be borne by the Insured
in respect of each and every Claim made under this Policy.
14. “Contents” means items declared for insurance and specified in the Schedule.
15. “Business” means the business of the Insured as stated in the Schedule.
16. “Claim” means a claim under an Operative Clause in respect of an insured event that has
taken place or is likely to take place.
17. “Employee” means any person with whom the Insured has entered into a contract of service.
18. “Business Hours” or “Office Hours” means the Insured’s normal trading hours or whilst
the Insured or their authorized employees are on the premises for the purpose of the
business.
19. “Money” means Cash, current coins, Bank and Currency Notes, Cheques, Postal Order,
 SOLAR POLICY

Current postage stamps which are not part of a collection and luncheon Voucher.
20. “Intrinsic Value” means reinstatement value of insured property or item less due
allowance for betterment, wear and tear and/or depreciation
21. “Market Value” means replacement value of insured property or item as New at the
time of Damage or Loss less due allowance for betterment, wear and tear and/or
depreciation.
 SOLAR POLICY

MEMORANDUM OF UNDERSTANDING BETWEEN

NTPC LTD. & INSURER FOR EFFECTIVE IMPLEMENTATION OF STANDARD FIRE
& SPECIAL PERIL INSURANCE POLICY INCLUDING TERRORISM
2021-2022.

For effective implementation of Package Policy for NTPC Solar stations starting from 01.02.2021,
following has been agreed upon:

1. The Oriental Insurance Company Limited shall be insurer for NTPC STANDARD FIRE & SPECIAL
PERIL INSURANCE and shall act for whole of NTPC for effective coordination and implementation of
the policy.

2. The detailed policy wordings, terms and conditions, extensions, clauses, exclusions, rates etc., shall
be common and applicable to all NTPC stations uniformly. The policy has to be submitted by
01.03.2021.

3. Insurer will assist and coordinate with project officials at the time of claim and as and when necessary

4. Any addition or deletion of sum insured due to fresh capacity addition or

modification/alteration/closure what so ever, the same shall be insured on same rates, terms and
conditions on pro-rata basis. This will be in line with the policy wordings. The premium for the
same will be paid by the NTPC project site offices to the Insurance Company.

5. The performance of insurance company based on claim servicing, risk management support and
other service parameters shall be monitored closely.

6. "On account payment" of claims to the tune of 50% of the assessed loss will be released, based on
surveyors Interim Survey Report (ISR) upon admission of the liability as per the Time Limits given
below:

a) Time Limit for deputation of Surveyor: 1 week after reporting of the loss to the Insurance Company.
b) Time Limit for submission of Interim Survey Report: 30 days after giving all the relevant papers to
the surveyor as per his request.
c) In case the Insurance Company fails to make the payment within the scheduled time period (within
3 weeks of survey report of up to Rs. 2 crores and 6 weeks for claim above Rs. 2 crores) after
receipt of the final discharge voucher for "on account payment" or final payment as the case may
be, they should pay interest at SBI PLR for the delay in making the payment from the schedule date
to the actual date of payment.

7. As regards the valuation of our Power Plant taken for the purpose of Package Policy, it has been
agreed that an abridged form of calculation to arrive at the sum insured may be submitted by NTPC
to the Insurance Company which will be discussed by the Insurance Company with their surveyors
to come to consensus to avoid any discrepancy relating to under insurance in case of claim.
 SOLAR POLICY

8. In order to understand the Package Policy effectively, M/s The Oriental Insurance Company
Limited will organize 2 to 3 seminars/workshops in NTPC station/ Corporate Office at mutual
convenient locations. However, a joint workshop will be held on a convenient date where
representatives from all NTPC projects and The Oriental Insurance Company Limited
Site/Corporate office representatives, along with lead surveyor will participate. M/s The Oriental
Insurance Company Limited will organize Risk Insurance seminars on half yearly basis exclusively
for NTPC officials.

9. Insurer in consultation with NTPC shall make panel of surveyors for the purpose of handling NTPC
Claims. NTPC may use their discretion in deputing surveyors from the panel, when required.
 SOLAR POLICY

Premium calculation sheet 2021-2022

Sl.
Area of Coverage Sum Rate @ Premiu GST Total
No. m Premiu
Insured %o
Amoun m
t
(Rs. (Per 18.00
Crores) Rs. %
1000
)
Standard Fire & Special
1 Perils Insurance Policy
excluding
Terrorism
2 STFI

3 EQ

4 Terrorism

5 Burglary/Theft
TOTAL

Our Bank Details

Account Name
Bank Name & Address
IFSC Code
Account No