Indian Railway Codes and Manuals-General Financial Rules-2017-Chapter- 7 (VII) GFR-2017.

 


Chapter – 7

INVENTORY MANAGEMENT

Rule 207

This chapter contains the basic rules applicable to all Ministries or Departments regarding inventory management. Detailed instructions and procedures relating to inventory management may be prescribed by various Ministries or Departments broadly in conformity with the basic rules contained in this chapter.

Rule 208 (1)

Receipt of goods and materials from private suppliers. (i) While receiving goods and materials from a supplier, the officer–in-charge of stores should refer to the relevant contract terms and follow the prescribed procedure for receiving the materials. (ii) All materials shall be counted, measured or weighed and subjected to visual inspection at the time of receipt to ensure that the quantities are correct, the quality is according to the required specifications and there is no damage or deficiency in the materials. Technical inspection where required should be carried out at this stage by Technical Inspector or Agency approved for the purpose. An appropriate receipt, in terms of the relevant contract provisions may also be given to the supplier on receiving the materials. (iii) Details of the material so received should thereafter be entered in the appropriate stock register, preferably in an IT-based system. The officer-incharge of stores should certify that he has actually received the material and recorded it in the appropriate stock registers.

Rule 209

Receipt/issue of goods and materials from internal divisions of the same organisation. (i) The indenting officer requiring goods and materials from internal division(s) of the same organisation should project an indent in the prescribed form for this purpose. While receiving the supply against the indent, the indenting officer shall examine, count, measure or weigh the materials as the case may be, to ensure that the quantities are correct, the quality is in line with the required specifications and there is no damage or deficiency in the materials. An appropriate receipt shall also be given to this effect by the indenting officer to the division sending the materials. (ii) In the case of issue of materials from stock for departmental use, manufacture, sale, etc., the Officer-in charge of the stores shall see that an appropriate indent, in the prescribed form has been projected by the indenting officer. A written/online acknowledgement of receipt of material issued shall be obtained from the indenting officer or his authorised representative at the time of issue of materials. (iii) In case of materials issued to a contractor, the cost of which is recoverable from the contractor, all relevant particulars, including the recovery rates and the total value chargeable to the contractor should be got acknowledged from the contractor duly signed and dated. (iv) If the Officer-in-charge of the stores is unable to comply with the indent in full, he should make the supply to the extent available and make suitable entry to this effect in the indentor’s copy of the indent. In case alternative materials are available in lieu of the indented materials, a suitable indication to this effect may be made in the document.

Rule 210

Custody of goods and materials. The officer-in-charge of stores having custody of goods and materials, especially valuable and/or combustible articles, shall take appropriate steps for arranging their s a f e c u s t o d y, p r o p e r s t o r a g e accommodation, including arrangements for maintaining required temperature, dust free environment etc.

Rule 211

Lists and Accounts. (i) The Officer-in-charge of stores shall maintain suitable item-wise lists and accounts and prepare accurate returns in respect of the goods and materials in his charge making it possible at any point of time to check the actual balances with the book balances. The form of the stock accounts mentioned above shall be determined with reference to the nature of the goods and materials, the frequency of the transactions and the special requirements of the concerned Ministries/Departments. (ii) Separate accounts shall be kept for (a) Fixed Assets such as plant, machinery, equipment, furniture, fixtures etc. in the Form GFR-22. (b) Consumables such as office s t a t i o n e r y, c h e m i c a l s , maintenance spare parts etc. in the Form GFR-23. (c) Library books in the Form GFR 18 (d) Assets of historical/artistic value held by museum/government departments in the Form GFR-24. Note: These forms can be supplemented with additional d e t a i l s b y M i n i s t r i e s / Departments as required.

Rule 212

Hiring out of Fixed Assets. When a fixed asset is hired to local bodies, contractors or others, proper record should be kept of the assets and the hire and other charges as determined under rules prescribed by the competent authority, should be recovered regularly. Calculation of the charges to be recovered from the local bodies, contractors and others as above should be based on the historical cost.

Rule 213 (1)

Physical verification of Fixed Assets. The inventory for fixed assets shall ordinarily be maintained at site. Fixed assets should be verified at least once in a year and the outcome of the verification recorded in the corresponding register. Discrepancies, if any, shall be promptly investigated and brought to account.

Rule 213 (2)

Verification of Consumables: A physical verification of all the consumable goods and materials should be undertaken at least once in a year and discrepancies, if any, should be recorded in the stock register for appropriate action by the competent authority.

Rule 213 (3)

Procedure for verification : (i) Verification shall always be made in the presence of the officer, responsible for the custody of the inventory being verified. (ii) A certificate of verification along with the findings shall be recorded in the stock register. (iii) Discrepancies, including shortages, damages and unserviceable goods, if any, identified during verification, shall immediately be brought to the notice of the competent authority for taking appropriate action in accordance with provision given in Rule 33 to 38.

Rule 214

Buffer Stock. Depending on the frequency of requirement and quantity thereof as well as the pattern of supply of a consumable material, optimum buffer stock should be determined by the competent authority. Note: As the inventory carrying cost is an expenditure that does not add value to the material being stocked, a material remaining in stock for over a year shall generally be considered surplus, unless adequate reasons to treat it otherwise exist. The items so declared surplus may be dealt as per the procedure laid down under Rule 217.

Rule 215

Physical verification of Library books. (i) Complete physical verification of books should be done every year in case of libraries having not more than twenty thousand volumes. For libraries having more than twenty thousand volumes and up to fifty thousand volumes, such verification should be done at least once in three years. Sample physical verification at intervals of not more than three years should be done in case of libraries having more than fifty thousand volumes. In case such verification reveals unusual or unreasonable shortages, complete verification shall be done. (ii) Loss of five volumes per one thousand volumes of books issued/consulted in a year may be taken as reasonable provided such losses are not attributable to dishonesty or negligence. However, loss of a book of a value exceeding Rs. 1,000/- (Rupees One thousand only) and rare books irrespective of value shall invariably be investigated and appropriate action taken.

Rule 216

.Transfer of charge of goods, materials etc. In case of transfer of Officer-in-charge of the goods, materials etc., the transferred officer shall see that the goods or material are made over correctly to his successor. A statement giving all relevant details of the goods, materials etc., in question shall be prepared and signed with date by the relieving officer and the relieved officer. Each of these officers will retain a copy of the signed statement.

Rule 217

Disposal of Goods. (i) An item may be declared surplus or obsolete or unserviceable if the same is of no use to the Ministry or Department. The reasons for declaring the item surplus or obsolete or unserviceable should be recorded by the authority competent to purchase the item. (ii) The competent authority may, at his discretion, constitute a committee at appropriate level to declare item(s) as surplus or obsolete or unserviceable. (iii) The book value, guiding price and reserved price, which will be required while disposing of the surplus goods, should also be worked out. In case where it is not possible to work out the book value, the original purchase price of the goods in question may be utilised. A report of stores for disposal shall be prepared in Form GFR - 10. (iv) I n c a s e a n i t e m b e c o m e s unserviceable due to negligence, fraud or mischief on the part of a Government servant, responsibility for the same should be fixed. (v) Sale of Hazardous waste/Scrap Batteries/Electronic waste: Scrap lots comprising of hazardous waste, batteries etc. shall be sold keeping in view the extant guidelines of Ministry of Environment & Forest. Prospective bidders of such lots of hazardous waste/scrap batteries/ e-waste should be in possession of registration, valid on the date of e-Auction and on the date of delivery, as recycler/ preprocessor agency.

Rule 218

Modes of Disposal. (I) Surplus or obsolete or unserviceable goods of assessed residual value above Rupees Two Lakh should be disposed of by : (a) obtaining bids through advertised tender or (b) public auction. (ii) For surplus or obsolete or unserviceable goods with residual value less than Rupees Two Lakh, the mode of disposal will be determined by the competent authority, keeping in view the necessity to avoid accumulation of such goods and consequential blockage of space and, also, deterioration in value of goods to be disposed of. Ministries/ Departments should, as far as possible prepare a list of such goods. (iii) Certain surplus or obsolete or unserviceable goods such as expired medicines, food grain, ammunition etc., which are hazardous or unfit for human consumption, should be disposed of or destroyed immediately by adopting suitable mode so as to avoid any health hazard and/or environmental pollution and also the possibility of misuse of such goods. (iv) Surplus or obsolete or unserviceable goods, equipment and documents, which involve security concerns (e.g. currency, negotiable instruments, receipt books, stamps, security press etc.) should be disposed of/ destroyed in an appropriate manner to ensure compliance with rules relating to official secrets as well as financial prudence.

Rule 219

Disposal through Advertised Tender. (i) The broad steps to be adopted for this purpose are as follows : (a) P r e p a r a t i o n o f b i d d i n g documents. (b) Invitation of tender for the surplus goods to be sold. (c) Opening of bids. (d) Analysis and evaluation of bids received. (e) Selection of highest responsive bidder. (f) Collection of sale value from the selected bidder. (g) Issue of sale release order to the selected bidder. (h) Release of the sold surplus goods to the selected bidder. (i) Return of bid security to the unsuccessful bidders. (ii) The important aspects to be kept in view while disposing the goods through advertised tender are as under:- (a) The basic principle for sale of s u c h g o o d s t h r o u g h advertised tender is ensuring transparency, competition, fairness and elimination of discretion. Wide publicity should be ensured of the sale plan and the goods to be sold. All the required terms and conditions of sale are to be incorporated in the b i d d i n g d o c u m e n t comprehensively in plain and s i m p l e l a n g u a g e . Applicability of taxes, as relevant, should be clearly stated in the document. (b) The bidding document should also indicate the l o c a t i o n a n d p r e s e n t condition of the goods to be sold so that the bidders can inspect the goods before bidding. (c) The bidders should be asked to furnish bid security along with their bids. The amount of bid security should ordinarily be ten per cent. of the assessed or reserved price of the goods. The exact bid security amount should be indicated in the bidding document. (d) The bid of the highest acceptable responsive bidder should normally be accepted. However, if the price offered by that bidder is not acceptable, negotiation may be held only with that bidder. In case such negotiation does not provide the desired result, the reasonable or acceptable price may be counter offered to the next highest responsive bidder(s). (e) In case the total quantity to be disposed of cannot be taken up by the highest acceptable bidder, the remaining quantity may be offered to the next higher bidder(s) at the price offered by the highest acceptable bidder. (f) Full payment, i.e. the residual amount after adjusting the bid security should be obtained from the successful bidder before releasing the goods. (g) In case the selected bidder does not show interest in lifting the goods, the bid security should be forfeited and other actions initiated including re-sale of the goods in question at the risk and cost of the defaulter, after obtaining legal advice. (iii) Late bids i.e. bids received after the specified date and time of receipt should not to be considered.

Rule 220

Disposal through Auction. (i) A Ministry or Department may undertake auction of goods to be disposed of either directly or through approved auctioneers. (ii) The basic principles to be followed here are similar to those applicable for disposal through advertised tender so as to ensure transparency, competition, fairness and elimination of discretion. The auction plan including details of the goods to be auctioned and their location, applicable terms and conditions of the sale etc. should be given wide publicity in the same manner as is done in case of advertised tender. (iii) While starting the auction process, the condition and location of the goods to be auctioned, applicable terms and conditions of sale etc., (as already indicated earlier while giving vide publicity for the same), should be announced again for the benefit of the assembled bidders. (iv) During the auction process, acceptance or rejection of a bid should be announced immediately on the stroke of the hammer. If a bid is accepted, earnest money (not less than twenty-five per cent. of the bid value) should immediately be taken on the spot from the successful bidder either in cash or in the form of Deposit-at-Call-Receipt (DACR), drawn in favour of the Ministry or Department selling the goods. The goods should be handed over to the successful bidder only after receiving the balance payment. (v) The composition of the auction team will be decided by the competent authority. The team should however include an officer of the Internal Finance Wing of the department

Rule 221

Disposal at scrap value or by other modes. If a Ministry or Department is unable to sell any surplus or obsolete or unserviceable item in spite of its attempts through advertised tender or auction, it may dispose of the same at its scrap value with the approval of the competent authority in consultation with Finance division. In case the Ministry or Department is unable to sell the item even at its scrap value, it may adopt any other mode of disposal including destruction of the item in an eco-friendly manner.

Rule 222

Asale account should be prepared for goods disposed of in Form GFR 11 duly signed by the officer who supervised the sale or auction.

Rule 223 (1)

Powers to write off. All profits and losses due to revaluation, stock-taking or other causes shall be duly recorded and adjusted where necessary. Formal sanction of the competent authority shall be obtained in respect of losses, even though no formal correction or adjustment in government accounts is involved. Powers to write off of losses are available under the Delegation of Financial Powers Rules.

Rule 223 (2)

Losses due to depreciation : Losses due to depreciation shall be analysed, and recorded under following heads, as applicable :- (I) normal fluctuation of market prices; (ii) normal wear and tear; (iii) lack of foresight in regulating purchases; and (iv) negligence after purchase.

Rule 223 (3)

Losses not due to depreciation : Losses not due to depreciation shall be grouped under the following heads :- (I) losses due to theft or fraud; (ii) losses due to neglect; (iii) anticipated losses on account of obsolescence of stores or of purchases in excess of requirements; (iv) losses due to damage, and (v) losses due to extra ordinary situations under ‘Force Majeure’ conditions like fire, flood, enemy action, etc.; 

Multiple choice questions:

  1. What is the primary focus of the rules contained in the given chapter?
    • a) Financial management
    • b) Human resource management
    • c) Inventory management
    • d) Project management
      Answer: c) Inventory management
  2. What should be done when receiving goods and materials from a private supplier?
    • a) Store them immediately
    • b) Check the quantities and quality, and issue a receipt
    • c) Only measure the quantity
    • d) Record them without inspection
      Answer: b) Check the quantities and quality, and issue a receipt
  3. What is required at the time of receipt of materials to ensure correct quantities and quality?
    • a) Technical inspection
    • b) Financial audit
    • c) Legal review
    • d) Marketing analysis
      Answer: a) Technical inspection
  4. Which form is used to maintain accounts for fixed assets such as plant and machinery?
    • a) GFR-22
    • b) GFR-23
    • c) GFR-18
    • d) GFR-24
      Answer: a) GFR-22
  5. How often should physical verification of fixed assets be conducted?
    • a) Once every five years
    • b) Once every two years
    • c) At least once a year
    • d) Monthly
      Answer: c) At least once a year
  6. Which of the following is a reasonable loss rate for library books in a year?
    • a) 2 volumes per 1,000 volumes issued/consulted
    • b) 5 volumes per 1,000 volumes issued/consulted
    • c) 10 volumes per 1,000 volumes issued/consulted
    • d) No loss is acceptable
      Answer: b) 5 volumes per 1,000 volumes issued/consulted
  7. What should be done if an item becomes unserviceable due to negligence or fraud?
    • a) Dispose of the item immediately
    • b) Investigate and fix responsibility
    • c) Ignore the incident
    • d) Transfer the item to another department
      Answer: b) Investigate and fix responsibility
  8. In what form is a report of stores for disposal prepared?
    • a) GFR-10
    • b) GFR-18
    • c) GFR-23
    • d) GFR-24
      Answer: a) GFR-10
  9. What is the recommended frequency of physical verification for libraries with over 20,000 but up to 50,000 volumes?
    • a) Annually
    • b) Every two years
    • c) Every three years
    • d) Every five years
      Answer: c) Every three years
  10. What action should be taken for hazardous waste like scrap batteries?
    • a) Store them indefinitely
    • b) Sell them according to Ministry of Environment & Forest guidelines
    • c) Dispose of them in regular trash
    • d) Reuse them within the department
      Answer: b) Sell them according to Ministry of Environment & Forest guidelines
  11. When transferring charge of goods and materials, what must the officers do?
    • a) Exchange a verbal agreement
    • b) Prepare and sign a detailed statement
    • c) Hand over the materials without documentation
    • d) Notify their superior officer only
      Answer: b) Prepare and sign a detailed statement
  12. What is the role of the Officer-in-charge of stores regarding consumable goods?
    • a) Ignore the stock balance
    • b) Conduct a physical verification annually
    • c) Store goods indefinitely without verification
    • d) Dispose of all goods after a year
      Answer: b) Conduct a physical verification annually
  13. When can an item be declared surplus or obsolete?
    • a) When it is no longer in use
    • b) When it has been in stock for over six months
    • c) When the cost is recovered from the contractor
    • d) When there is a technical defect
      Answer: a) When it is no longer in use
  14. Which form is used for keeping accounts of consumables such as office stationery?
    • a) GFR-18
    • b) GFR-22
    • c) GFR-23
    • d) GFR-24
      Answer: c) GFR-23
  15. Who should verify the physical stock of library books in case of unusual shortages?
    • a) The head librarian
    • b) An external audit team
    • c) The Officer-in-charge of stores
    • d) The procurement officer
      Answer: b) An external audit team

16.What is the preferred mode of disposal for surplus or obsolete goods with an assessed residual value above Rupees Two Lakh?

  • A) Donation to charitable organizations
  • B) Private negotiation
  • C) Advertised tender or public auction
  • D) Destruction in an eco-friendly manner
  • Answer: C) Advertised tender or public auction

17.What action should be taken if a Ministry is unable to sell surplus goods even at their scrap value?

  • A) Donate the goods to another department
  • B) Return the goods to the supplier
  • C) Destroy the goods in an eco-friendly manner
  • D) Store the goods for future use
  • Answer: C) Destroy the goods in an eco-friendly manner

18.Which of the following is NOT a head under which losses due to depreciation should be recorded?

  • A) Normal wear and tear
  • B) Negligence after purchase
  • C) Lack of foresight in regulating purchases
  • D) Theft or fraud
  • Answer: D) Theft or fraud

19.What percentage of the assessed or reserved price of goods is usually required as bid security during disposal through advertised tender?

  • A) 5%
  • B) 10%
  • C) 20%
  • D) 25%
  • Answer: B) 10%

20.What should be done if a selected bidder does not show interest in lifting the goods after winning the bid?

  • A) Offer the goods to the next highest bidder
  • B) Return the bid security to the bidder
  • C) Cancel the auction and restart the process
  • D) Forfeit the bid security and consider re-sale at the defaulter's risk and cost
  • Answer: D) Forfeit the bid security and consider re-sale at the defaulter's risk and cost

21.Which of the following items should be disposed of immediately due to the possibility of health hazards or environmental pollution?

  • A) Office furniture
  • B) Expired medicines
  • C) Computer equipment
  • D) Surplus office stationery
  • Answer: B) Expired medicines

22.What is the minimum amount of earnest money required from the successful bidder during an auction?

  • A) 10% of the bid value
  • B) 15% of the bid value
  • C) 20% of the bid value
  • D) 25% of the bid value
  • Answer: D) 25% of the bid value

23.What document must be prepared and signed by the officer who supervised the sale or auction of goods?

  • A) GFR-10
  • B) GFR-11
  • C) GFR-22
  • D) GFR-24
  • Answer: B) GFR-11

24.What should be done if there are discrepancies found during the physical verification of consumables?

  • A) Ignore the discrepancies
  • B) Report them in the stock register for appropriate action
  • C) Adjust the stock without reporting
  • D) Inform the supplier for a refund
  • Answer: B) Report them in the stock register for appropriate action

25.How should surplus goods that involve security concerns be disposed of?

  • A) Through public auction
  • B) By destruction in an appropriate manner
  • C) Donated to non-profit organizations
  • D) Stored for future disposal
  • Answer: B) By destruction in an appropriate manner

26.What type of goods should be sold keeping in view the extant guidelines of the Ministry of Environment & Forests?

  • A) Office supplies
  • B) Hazardous waste, batteries, e-waste
  • C) Office furniture
  • D) Historical artifacts
  • Answer: B) Hazardous waste, batteries, e-waste

27.Who should prepare the auction plan for goods to be auctioned?

  • A) The highest bidder
  • B) The auctioneer
  • C) The Ministry or Department
  • D) The Finance Department
  • Answer: C) The Ministry or Department

28.Which of the following losses is considered a loss due to depreciation?

  • A) Losses due to theft or fraud
  • B) Losses due to normal fluctuation of market prices
  • C) Losses due to neglect
  • D) Losses due to extraordinary situations under ‘Force Majeure’
  • Answer: B) Losses due to normal fluctuation of market prices

29.Which form is used to record the sale account of disposed goods?

  • A) GFR-10
  • B) GFR-11
  • C) GFR-18
  • D) GFR-22
  • Answer: B) GFR-11

30.What should be done if a Ministry or Department cannot dispose of an item through advertised tender or auction?

  • A) Store the item indefinitely
  • B) Return the item to the original supplier
  • C) Dispose of the item at scrap value or destroy it
  • D) Transfer the item to another department
  • Answer: C) Dispose of the item at scrap value or destroy it

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