Appendix 11 — GFR

APPENDIX - 11 [See Rule 225

(viii) (b)] FORMULA FOR PRICE VARIATION CLAUSE The formula for Price Variation should ordinarily include a fixed element, a material element and a labour element. The figures representing the material element and the labour element should reflect the corresponding proportion of input costs, while the fixed element may range from 10 to 25%. That portion of the price represented by the fixed element will not be subject to variation. The portions of the price represented by the material element and labour element alone will attract Price variation. The formula for Price variation will thus be: P1 =P0 F+a - P0 Where P1 is the adjustment amount payable to the supplier (a minus figure will indicate a reduction in the Contract Price) P0 is the Contract Price at the base level. F is the Fixed element not subject to Price variation. a is the assigned percentage to the material element in the Contract price. b is the assigned percentage to the labour element in the Contract Price. L0 and L1 are the wage indices at the base month and year and at the month and year of calculation respectively. M0 and M1 are the material indices at the base month and year and at the month and year of calculation respectively. If more than one major item of material is involved, the material element can be broken up into two or three components such as Mx, My & Mz. Where price variation clause has to be provided for services (with insignificant inputs of materials) as for example in getting technical assistance normally paid in the form of per diem rates, the price variation formula should have only two elements viz. a high fixed element and a labour element. The fixed element can in such cases be 50% or more, depending on the mark-up by the supplier of the Periderm rate vis-à- vis the wage rates. M0

RATES OF GUARANTEE FEE Guarantee fees based on credit score and tenor for Domestic as well as external borrowings Less than or equal to 5 years More than 5 years Category A 0.5 0.6 Category B 0.7 0.9 Suggested Framework for Risk assessment of Guarantee proposals Interest + Principal Current assets Current liabilities Category A Category B More than or equal to 1.5 Less than 1.5 iii) Debt to Equity Ratio (D/E): It depicts the ability to pay off debt in future and calculated as under: Category A Category B Less than or equal to 1 More than 1 Overall Risk Rating Less than or equal to 1.5 More than 1.5 Category A Category B Example: The above framework has been illustrated as under: