Cir. Ref.: 71/DIV/TRF/05 27th May 2016

To all members of IEEMA Distribution Transformer division, All listed Utilities and Purchasing bodies

Sub: Use of Aluminium prices while operating the PV Clauses of Distribution Transformers

IEEMA had revised the PV clause for Distribution Transformers, made effective from 1st June 2015 vide Cir. No. 127/DIV/TRF/05 dated 4th August 2015.

We understand that Utilities/Purchasing bodies have started using the revised PV clause, especially the LME Average Aluminium prices for Price Variation calculations. We welcome this decision.

There are certain issues in terms of the pending contracts finalized prior to June 2015 while using the “two stage” calculation methodology recommended by IEEMA. For selecting the source of Aluminium prices, whether domestic or LME, we recommend the following guidelines:

1. Option of choosing the source of Aluminium has been given to both buyers and suppliers in August 2013 vide IEEMA Cir. No. 135 dated 1st August 2013 for “future contracts”.

2. It is recommended that choice of source of Aluminium is to be finalized with mutual agreement between both buyer and supplier at the beginning of the contract/finalizing the tender.

3. The source of Aluminium, whether domestic or LME, should remain unchanged throughout the execution of the contract period. Midway changing of the source is not consistent with the fundamental principles of application of IEEMA PV Clause.

For all new tenders/contracts finalized after June 2015 using revised IEEMA PV formulae of Distribution & Power Transformers, we recommend that while finalizing the tender/contract the source of Aluminium should be finalized. In case the source of Aluminium is not finalized, we recommend using LME Average Aluminium to be the “default source”.

Sr. Director

(Pl find attached the scan copy of the original circular for perusal)