1) Procurement need not necessarily be all the times be centralized, if there are minor and are of

very less value, may be possible to procure at plant level locally. Secondly, the urgent items may
also be purchased directly at plant levels.

Ans) Yes, there is a procurement team present at the Jamnagar J3 plant which is currently in
construction phase. The procurement done is not centralized to Mumbai. The team present in the
Jamnagar also procures materials which are required on different parameters like failure of the
materials procured, items which are of low value etc.. There are separate guidelines followed under
this process.

Concept of Decentralized procurement:

Decentralized procurement refers to purchasing materials by all departments and branches

independently to fulfill their needs. Such a purchasing occurs when departments and branches
purchase separately and individually. Under decentralized procurement, there is no one purchasing
manager who has the right to purchase materials for all departments and divisions. The defects of
centralized purchasing can be overcome by decentralized purchasing system. Decentralized
purchasing helps to purchase the materials immediately in case of an urgent situation.

Advantages Of Decentralized Procurement:

 Materials can be purchased by each department locally as and when required.

 Materials are purchased in right quantity of right quality for each department easily.
 No heavy investment is required initially.
 Purchase orders can be placed quickly.
 The replacement of defective materials takes little time.

2) Is it the Purchase department takes sanction of the budgeted items or the financial budget, or
the user department takes budgetary sanctions from Management.

Ans) It is the planning department which sanctions all the budgeted items. When materials are
required, Planning department takes role in doing the budget of the materials required, and they
also check the materials are procured in required times.
3) There are different types of materials procured by Purchase department, which may be of

a) for Production department, raw material is required on regular basis and continually. In such
case what practice is followed?

Ans) The Procurement department in Reliance as of now is only procuring materials which are
required for the construction of plant. As the J3 plant is not operational yet, there are material
procurement required for production as the production is not yet started.

b) In case of very high value items the signatory authorities will be different based on the value of
purchase order. Are there any restrictions and how the procurement decisions are taken, is it
individually, or any special committee will be formulated to scrutnise and give approval to
ahead. If so to what are the procedures followed in terms of value of purchase orders.

Ans) There no special committees which are present for scrutinizing and approval of the materials
which are procured. However, the approvals are made in procurement department itself. And the
approval is based on the level of authority here in Reliance.

If the value of item is less than 5 crore INR, Vice President of Procurement has the authority to
approve for the procurement of the item.

If the value of the item is upto 20 crores of INR, President of procurement has the authority to
approve the item for procurement.

If the value of item is greater than 20 crores of INR, Chief of Procurement has the authority to
approve the item for procurement.

c) In case of material procured indigeneously and imported, are there any different practices?

Ans) Items are procured from foreign vendors rather than from local vendors when different
factors come into picture like:

1) Risk involved like quality of the item.

2)Post Service of the item if there is any fault.

3) Does the local vendor is capable of manufacturing of the item.

4) Does the material from local vendor meets the quality test done under Supplier Quality
Surveillance.

5) Lifetime of the item if its local made.

If the materials are procured from foreign vendor, the different INCO terms like FCA, FOB are
used.

d) Is there any lead time analysis and what type of material analysis like ABC, FSN, VED, such
analysis are followed. Definitely being industry leader, they will be having many such good
governance practices followed.

Ans) There is no kind of material analysis which is followed here. Materials are procured as per
requirement and are planned by planning department. There are no such things like reorder point
and all which are followed here as there the inventory is of different kinds and is issued by stores
to construction as soon as required.