Coal India is considering broad-spectrum changes in its procurement policy to save on contract value. With multi-billion dollar opencast equipment purchase plans on hand, the initiative may result in savings of thousands of crores of rupees.
CIL is scheduled to invite tenders for large numbers of high-tonnage dumpers, shovels, dozers and other equipment, beginning early 2013.
Maintenance contracts
The aim is two-fold: One, to take advantage of the slump in the global coal mining sector, and the resultant increased competition among gear-makers trying to get a slice of CIL orders.
And, two, to revisit its age-old tendering norms so as to offer suppliers a comfort zone and reduce its own cost of acquisition. While the company is considering introduction of dollar-based bidding for long-term maintenance and repair contracts (MARC) — over and above the value of the machine — an in-house committee has recommended a reduction in the MARC duration and the usage (availability) ratio.
“Traditionally, we seek maintenance coverage for the lifetime of the machine, spanning 11-12 years or more, at 85 per cent availability (usage) ratio. While this was done to ensure availability of spares, in effect, it increases the value of the contract in excess of three times, as suppliers try to take all uncertainties into consideration,” an official said.
Also, while the tenders demand that suppliers guarantee a high usage ratio, CIL mines generally end up using such machines for a maximum of 60 per cent (of working hours). “It means we end up paying suppliers for idling machines,” the source said.
The tender committee that recently met equipment-makers in pre-bid meetings, therefore, recommended reducing the span (number of years) of MARC coverage to half and lowering the ‘availability’ ratio. The move has reportedly found favour with all the gear-makers including public sector BEML and foreign giants.
“In our estimation, this should bring down the estimated contract value to half,” a source said. The company does not foresee much of a problem in getting spares either.
Servicing opportunities
“Since we are going in for large-scale procurement, sellers are expected to capitalise on the servicing opportunities. Maybe, we will give priority to sellers that have invested in facilities in India,” the official added.
But everything will not go in the suppliers’ favour. The company denies having acceded to the demands of two global majors to exclude tyres (very high-value OTR tyres) from the equipment contract.
“It is like buying a car without tyres. Only a section of suppliers were demanding this and we rejected the proposal,” the source said.
pratim@thehindu.co.in