Indian Railway procurement means the purchasing of material for the railways. The process of purchasing is generally based in the headquarters where there is the office of the Controller of Stores. The purchasing can be done by administration directly or by the Board in the Railway.
This report analyzes the case study on the procurement of Indian Railways and describes certain points in details. It explains the methods of selecting sources, the competition, and ethics in the procurement process. It also gives an overview of the regulations in the procurement procedures.
Methodology of Selecting the Sources
Sources in terms of railways refer to the vendors who supply the equipments and required resources to the railway departments. These sources must be analyzed and then selected for the railway. Different country follows a different method for selecting the vendors. The Russian railway company carries out a factor analysis which is a mathematical procedure.” In the factor analysis, we obtained a set of indicators that determine the production and business activities score of the vendor. This is done from the point of view of the consumer — Russian railway company.”( Vikharev, 2013, p.20 ). The Indian Railway follows a particular procedure for ensuring that the railway assets are working in a safe manner and are reliable in nature. The Railway Board maintains a list of vendors, those who are approved by the Board. Another list is also maintained that consists of the names of the agencies (Nag, 2013). The Board takes a decision, on which item is to be maintained by which vendors. The manufacturing units along with certain zones also take part in maintaining the list of the vendors for those items that are not mentioned by the Railway Board. The vendors register themselves online for enlisting their names in the list of approved vendors. The Research Designs and Standards Organization carry out a selection procedure in order to find out the most suitable vendor for the railways ( Nag, 2013). It checks the technical and financial capabilities along with the quality, infrastructure and manufacturing capacity in order to select a vendor. The name of the vendor is enlisted in a list of Part 2. These vendors provide 20 per cent of the supply for the first 15 months. After that the vendors move to the main list where they become the permanent vendors (Gupta, Prakash & Jadeja, 2015). Some vendors are even moved from or degraded from list 1 to list 2. This is a dangerous scenario for the vendors because once they have degraded they do not have the scope for promotion any more. The RDSO publishes the names of the approved vendors on the website after every six months. The reason for degradation can be downfall in the quality of the supplied materials and equipments. The source selection method is quite effective and efficient.
Procurement Regulation and Oversight
The government enacts several laws for regulating the methods of procurement. It is done in order to get the best quality of goods at a minimum cost. The emergence of the Indian Railways had taken place over 150 years ago. The government applies several methods for improving the quality and for the optimization of the cost. Rules and regulations are implemented for the proper working of any system. The most important rules that are applied in the Indian Railway purchasing and procurement method is the Indian Railway Financial Code, Indian railway Code for the Stores Department and the Indian Railway Code for the Accounts Department (Khorana & Subramanian, 2012). These codes are the base or fundamental rules and principles for procuring railway materials in a particular process. The management looks after the oversight of the procurement process. It helps to maintain the railway budget by taking care of the expenditure and it also help does not allow any misuse of power or authority. The procurement processes that take place in India are based on The Indian Contract Act 1872 and the Sale of Goods Act 1930. According to the Sale of Goods Act 1930, “Section 12 of the Act stipulates that a person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interest.”(Narayan & Shikha, 2013, p. 9). This means that in order to participate in the procurement process the suppliers must be of sound mind.
In the earlier time between the year of 1960 and 1990, the railways used to buy rails on from SAIL. “The railways bought rails only from SAIL and since there were very few other buyers for rails, the mill responded to fluctuations in orders from the railways by adjusting the number of shifts devoted to producing structural.” (Das et al., 2013, p.12). Later on competitions increased with the emergence of more suppliers. The system of registration of vendors includes the process of forming cartels. This cartel formation restricts a number of vendors that are approved. This leads to high level of competition in the market (Swarup et. al., 2012). The vendors need to qualify in order to sell their products (Sundarraj & Kumari, 2013). The qualification procedure promotes competition. A certain degree of competition is needed for better performance of the industry.
Ethics and Accountability in the Process of Procurement
The CVC plays a major role in maintaining fairness, transparency, and quality and money worth in the process of procurement. The main objectives of the public procurement process are accountability and efficiency. “A well-functioning and efficient public procurement system addresses issues like inefficiency, corruption, and waste (Jones, 2007), and thus, it helps the development process by improving the public administration.” (Hazarika & Jena, 2017, p.2). A corrupt person will get very easily caught under the supervision of CVC. It maintains high ethical values through extreme level of scrutiny. A decentralized method of procurement ensures that a high level of quality is maintained.
This report concludes that the procurement process of the Indian Railways is a systematic method and promotes fair level of competition. The CVV is responsible for carrying the procedure in an ethical way. This report talks about the selection procedure and also certain regulations that are needed for effective procurement and purchase for the railway department.
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