TATA STEEL

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TATA STEEL - WEST BOKARO DIVISION

SANCTION REQUEST
MD
WBD / QSE / DM /15
November 20,2015
Sub: Sanction Request for
1. Placement of Full Maintenance Contract on M/s Revathi Equipments Limited (REL) for
Drill Machines numbered 1 & 2 till 5 years or 45000 Hrs
2. Placement of order on Mls Revathi Equipments
Limited
(REL)for Procurement
of
Structures and Components for major structural overhauling of machines numbered 1 to
5
In Q - SE, there are 7 drill machines in operation. All these drill
by its OEM, M/s REL under Full Maintenance Contract (FMC) model.
are done in 2 phases (5 machines in phase 1 and 2 machines in phase 2)
5 are under FMC phase #1 and drill machines numbered 6 & 7 are under

machines are being maintained

The FMC of these 7 machines
. Drill machines numbered 1 to
FMC phase #11.

In Drill FMC, there are four rate components

1. Manpower Rate (Rs./Month)
2. Onsite Support/Logistics Rate (Rs./Month)
3. Spares Rate (Rs./Hr)
a. Excise Spares Rate (in order to get CENV AT benefit, we procure spares through
Purchase Order route and total value of Excise spares consumed will be reconciled with
total HM Reading the machine has run. The 70010 of spares in terms of value are
excisable spares)
, b. Repair and Maintenance rate (remaining ~30% spares in Rs./Hr basis)
4. Procurement of Ground Engaging Tools (GETs)
Apart from these four components, major overhauling and rehabilitation is done as and when required
wherein structural components are replaced in order to maintain the structural strength of the machines
FMC for Drill No 1 &2
As per the terms ofFMC the validity of the contract is for 5 years or 36000 run hrs. DM-l has already
clocked 36000 Hrs and DM-2 is likely to reach it shortly. As the condition of machines are still good it
has been decided to run both these drills for 45000 Hrs. Accordingly, M/s REL was asked to submit
their offer. M/s REL's proposal is given in annexure I(A). Multiple rounds of negotiations were done
with the vendor and mutually decided points against the above M/s REL's final proposal is given in
annexure I(B).
The vendor has submitted the repair and maintenance rate of Rs. 1250/Hour (service tax extra) for
Year 1 (Nov' 15 - act' 16) and 5% y-o-y increase and proposed a structural rehabilitation (considering
the age ofthe machines). The repair and maintenance rates offered are 75% higher than the last rate.

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The increase in the rate is due to

the fact that machines have become older and already crossed OEM recommended life
the expected run hour of these machines will be lesser due to non - availability of land leading
to lesser utilization and HMR
the mines has gotten more deeper and machines are being marched more leading to more wear
and tear and less component life
Mls REL claimed that they are making loss in other drill machines and the increased R&M rate
for all 7 machines

Major structural overhauling of machines numbered 1 to 5 (Details in Annexure-4)

Based on the departmental evaluation of existing condition of the machines and in order to run these
machines for another 3 years safely, Major overhauling is required to be done.
Drill machines numbered 1 to 5 need to undergo major overhauling and structural rehabilitation.
The vendor was asked to submit the offer for all the items. The vendor has submitted their offer and
during negotiations, the vendor has agreed to match the Last Purchase Price for all the items. The rates
agreed ( LPP ) are valid only upto 31103/2016 and 3% y-o-y increase in rates from 0110412016.
Considering the machine condition and anticipating the requirement, the vendor had already procured
the item Direct Drive (Part No. W082511 01). So, Mls REL won't be able to pass on CENV AT credit
on this single item for 7 nos. (Out of total requirement of 10 nos, Mls REL will give CENV AT credit
for 3 nos.).
The total order value for procurement of structures/components for major overhauling of 5 drill
machines is Rs. 2.51 Crore (Gross of CENV AT) and considering 3% escalation is Rs. 2.58 Crore
(Gross ofCENVAT).
Payment on Account of Accidental and other damages :
The replacement of spares/components and services rendered by vendor due to damages arising out of
operations is not under the scope of FMC and we need to pay this extra. Based on the past damages
claim, the user department has tentatively projected this damage claim to be Rs. 2 Lakhs/Machine/Year.
The total tentative damage claim for 7 machines for 3 years is projected to be Rs. 42 Lakhs at the rate
of Rs 2 Lakhs per machine per year. The payment will be done on actual only if there is damage due to
operations and duly certified by Chief and Head of the department after joint inspection with the
vendor.

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Accordingly, we solicit your approval for following

1. Placement of Full Maintenance Contract on M/s Revathi Equipments Limited for Drill
machines numbered 1 & 2 for 3 years from 01111/2015 to 3111012018 or 45000 Hrs whichever
is earlier for a total order value of Rs. 2.47 Crore on account of Repair and Maintenace charges.
The Repair and Maintenance rate is Rs. 1250/Hr (service tax extra) for Year 1 and 5% y-o-y
increase for next 2 years. (Manpower and Onsite support fee approval is already taken vide SR
No. WBD/GMl405/0034114 Dated 07/01/2014).
2. Placement of separate order (approximate order value - Rs. 1.70 Crore) for procurement of
excisable spares within the approved value of Rs. 2.47 Crore for DM 1 and 2 (List of items is
attached in Annexure - 7) and addition of spares mentioned in annexure - 7 in order numbers
4700044809 & 4700034897 for DM 3, 4, 5 and DM 6, 7 respectively within the already
sanctioned order value
3. Placement of order on M/s Revathi Equipments Limited for Procurement of Structures and
Components for major structural overhauling of machines numbered 1 to 5 for a total order
value ofRs. 2.58 Crore (Gross ofCENVAT).
4. Approval for payment against replacement of spares/components due to any likely damage
during operations on actual for a total value of Rs. 42 Lakhs for all 7 machines for 3 years from
0111112015 to 30/10/2018
5. Any variation in taxes and duties within the contractual period will be borne by us.
6. GM (West Bokaro) may be authorized to sign the agreement

-y\\\\~
Chief P ocuremenVtKficer
End: Annexure-I -SR No: 0034 &0972, Annexure-II- Details of machines, Annexure-III-R&M
List of components for MOR & rehabilitation,

Annexure-V-Contract

rate, Annexun:

value of FMC, Annexure-VI-

Contract value for rehabilitation, Annexure VII-PriceList

Recommended

Recommended

VP (RM)

VP (CS)

Approved

MD