Cost Accountants and Price - Cost Justification at the Time of Purchase of Materials In PSUs

Abstract

Purchase of raw materials and inventory is very important activity in Public sectors. Worth crores of rupees of inventory is purchased every year. But purchase is not easy job. Presently the purchase is made either through GeM (Government e-market) portal or through e-tenders

If material is not purchased in time, the purchase department faces the problem from higher management. But Purchase department of PSUs while purchasing materials, it has to follow strict guidelines, issued time to time. PSUs not only have to purchase from the bidder quoting lowest price but that lowest price also have to be justified in comparison to last purchase price (LPP) or Cost of production.

Again, under "Make in India" PSUs are supposed to prefer the material having an indigenous contents. The suppliers have to submit certificates from their Accountants, preferably CMAs in this regard.

This article discusses the role of CMAs in above cases, price justification and Make in India.