Purchase Procedure

Every year, the Corporation invites offers from prospective Indian Made Foreign Liquor/BEER suppliers situated throughout the country by inviting tenders for entering into rate contract for sales and supply of “Indian Made Foreign Liquor” /BEER for the ensuing financial year (April to March). This is being done as per directions of the government. From Financial Year 2001-2002 the offer was extended for supply of “Foreign Made Foreign Liquor” also.

The invitation to offer is advertised positively by February/every year in important newspapers. Notices are also sent individually to the existing suppliers in this regard. The offer document stipulate the conditions for supply, the quality specifications, payment terms, general conditions to be complied etc. The offerors have also to submit an earnest money deposit of Rs.10 lakhs each for FMFL / IMFL / Beer for a value of business upto 15000 cases and shall progressively increase by Rs.1 lakhs upto addition of every 15000 cases transacted. The maximum Security Deposit is Rs.75 lakhs. For exclusive Wine suppliers the EMD is Rs.50,000 and for value of business of Wine above 550 cases and upto 1100 cases, Security Deposit will be Rs.1 lakh and shall progressively increase by Rs.25,000 for every additional sale of 550 cases of Wine. The maximum Security Deposit will be Rs.3 lakhs. The documents received within the stipulated date are tabulated and presented to the Board of Directors. Suppliers who satisfy the conditions stipulated for supply are accepted by the Board. The list of suppliers, so approved shall from the suppliers rolls of the Corporation for the ensuing financial year.

The rate contract agreement for supply of liquor is not a competitive tender. Each supplier has definite approved brands. Only the approved supplier who owns the brand can supply the respective brands to the Corporation Eg. Mc Dowelll brandy can only be supplied by Mc Dowell & Co. Ltd., Hercules Rum by M/S Khoday Industries and King Fisher by Premier Breweries Ltd. Therefore the choice of the Corporation is to accept the rate offered or to decide not to purchase the brand. As per the provision in the rate contract agreed the Board of Directors of the Corporation is empowered to fix the supply prices. Accordingly the Board of Directors fixes the supply prices at the time of finalization of the rate contract agreement, which will be FIRM during the rate contract period. The Corporation has however fixed a minimum price of Rs.235/- for a case of “Indian Made Foreign Liquor”. This is done on consideration of cost analysis of various elements that constitute cost and thereby the minimum price at which supply could be made is arrived at. The quality of Foreign Made Foreign Liquor and Indian Made Foreign Liquor and BEER supplied confirm to the standards indicated in the offer condition. This has been fixed in consultation with the Chief Chemical Examiner to the Government of Kerala. The Chemical Examination Certificate and a certificate showing that ENA has been used in production (in case of Indian Made Foreign Liquor) is to be sent to the Corporation against dispatch of each batch of Indian Made Foreign Liquor/Beer. For Indian Made Foreign Liquor such Chemical Certificates should be duly authenticated by the Chief Chemical Examiner/Authority recognized by the State and ENA Certificate by the Chief Executive of the distillery authenticated by Excise Authority. Chemical Examination Certificates of Beer should be authenticated by the Chemist/Brew. Master of the Brewery and duly authenticated by Excise authority of the Brewery. The Corporation also reserves the right to periodically subject the samples for Chemical Examination/Verification of standards and the Expenses incurred by the Corporation for such Chemical Examination/Verification will have to be borne by the supplier. These stipulations are strictly adhered to.

Government have issued guidelines vide G.O.No.24112/DL/85/TD dated 28.10.1985 to place orders “by and large only on replacement/replenishment basis”. Accordingly purchase of Indian Made Foreign Liquor and BEER are based on the average monthly sales of the respective supplier. The average is of the previous three month sales. The average monthly sales are reviewed every month and a re-order quantity (ROQ) based on the requirement is placed. The ROQ is normally 30 days, 40 days, 45 days requirement as the case may be. When the stock plus the order pending execution falls below the ROQ, the shortfall is replenished on a daily basis.

The arrangement to replenish stock could be applied only if a supplier has an average monthly sales. Unless an order is given to companies who quote for the first time there cannot be an average monthly sales for the respective supplier and consequently the norm cannot be implemented. It is to ensure this the initial order of a few loads are given for new suppliers at the commencement of the financial year. In order to ensure uniformity in placing purchase orders at the commencement of the year all the companies are uniformly given initial orders. Thereafter from the next fortnight onwards, orders as per formula indicated above is being given.

Special orders are also placed on trade discount basis to the supplies depending upon the requirement. That is if a company offers a trade discount of 10% for IMFL and 5% for Beer, special orders are placed to the extent of a maximum of two loads when the stock is nil or meager.

A Purchase Committee consisting of the Company Secretary, Internal Auditor, Finance Manager, Administrative Officer , Regional Manager and Senior Manager reviews the procedure above. Recommendations of the Committee are placed before MD, who gives final orders for placement of purchase orders. The orders so placed are subsequently ratified by the Board of Directors.