1. INTRODUCTION: Fauji Fertilizer Company Ltd is a renowned name in UREA production.

Monthly ________ amount of packing material is required and is procured through various vendors. FFC success story is also related to quality of packing material used by the Company. While giving preference to cosmetic aspect of Bags for marketing purposes, FFC also strives for finding pollution free solutions for its packing material. 2. Scope: It is applicable to all types procurement related to packing material. 3. Procedure While establishing health working relations with existing vendor, Proc HO endures expansion of vendor base for healthy competition. Best working relations with all registered vendors would be established. The performance of existing registered vendors would be evaluated quarterly. Vendors having poor performance and high state of rejection would be de-listed. New vendors requesting for registration would undergo the following procedure: 3.1 Vendor Registration Procedure: Vendors request Proc Deptt for registration by providing introduction letter and profile of their company. Vendor profile is carefully studied and, if found suitable, their premises are visited by a board of Officers from Packing Committee to check type of equipment used, production capacity, financial health, skill level, safety arrangements etc. After all necessary checking and if vendor is dealing with required material by FFC, vendors are put up to SM-P for final approval. After SM-P approval, vendor is then forwarded to SAP MM Team (along with approved documents) for addition in SAP system.

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3.2

Performance Evaluation: Performance of previous quarter would be evaluated. Evaluation to include: a. Quality b. Timely delivery c. Conditional acceptance/rejections d. Use of raw material

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Any other violation of FFC standard procedures

3.3

Issue of RFQ: RFQs will be issued to the registered vendors only except in extreme compassionate cases having urgent (MD/SM-P) approval. Vendors with poor performance in last quarter will not be issued RFQ as penalty. Bid Opening Procedure: For bid opening of WPP bags/liners, following procedure will be followed: a. Only sealed bids addressed to SM-P will be accepted. b. Sealed bids are to be dropped in tender box. c. Bids without earnest money would not be accepted. d. Bids to open on given date and place in presence of all vendors/reps. e. Bids to be opened by BOC committee comprising of members from Proc, Internal Audit and Admin. Price Matching: After bid opening and evaluation of quotations, all vendors are asked to match the lowest price received.

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3.5

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3.6

Quota Allocation: Quota to be strictly allocated to the vendors as per following considerations: a. Past performance (particularly during crises period) b. Equipment held by the vendor c. Technical skills available with vendor d. Alternate source of power e. Financial position f. Printing standard g. Lab facility h. Use of raw material i. Safety arrangements

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Schedule/ Deliveries: Schedule for deliveries is issued to vendors along with PO. Number of bags/liners to be delivered is clearly mentioned month wise. No delay in given schedule be accepted unless otherwise beyond the control of the vendor.

3.8

LD Procedure: In case vendor fails to deliver the material within the delivery period, a penalty @ 1% per week up to 5% (max) will be imposed.

3.9 Consignment Inspection Procedure: 3.9.1 25 Bags randomly selected from each consignment of about 50,000-60,000 bags must pass test as per following testing procedure: a. Measure of weight, length, width and seam stitching bottom. Margin of minimum 20 bags randomly selected. All must pass the test. b. To determine ends picks(weave) of first 05 bags out of 20 bags at six places on each bag ends and picks(weave) should be minimum 10 x 10 per square inch. All must pass the test. c. To measure denier of 05 bags out of 20 bags whose weight appears to be lesser than the specified. It should be 1000=+/-2 %. All must pass the test. d. Quality test check of 2% of whole consignment will also be made. e. The consignment should be rejected if any one of the above tests is not according to specification limits. f. In case of acceptance of consignment not fully within the specification limits (acceptance under reserve), the supplier will be requested to change all bags getting damaged during inserting, filling and stitching operations. g. No deviation from specification will be allowed and bags weighing less than 106 grams +/-2% will be rejected outright. 3.10 Acceptance/Rejection of Supplies:

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3.10.4 3.10.5

On receipt of bags/liners at plant site, FFC will arrange various tests and inspection of material. General Manager (Plant) or his nominee shall decide within seven working days after receipt of each consignment if it is accepted or rejected. The supplier or his nominee shall be allowed to be present during inspection, if he so desires. For each acceptance of consignment, an acceptance certificate shall be issued to the supplier. In the case of rejected consignment, the supplier shall be immediately notified. The consignment not conforming to the specification contained and rejected as a result of inspection, may be removed by the supplier and sorted outside the plants boundary limit at his own cost. The sorted out consignment may be offered again for inspection. FFCL may accept the re-offered bags/liners, if any,if they conform to the specifications. In case a consignment is twice rejected, vendor will lift out material at his own risk and cost. SM-P may allow inspection for 3rd time otherwise the consignment will be permanently rejected.

3.11 Recycling of Rejected Material: Recycling of rejected consignment shall be strictly prohibited. In case bags from a rejected consignment are found in a new consignment, the later shall be rejected outright without any further tests. Repeated rejected recycling by the vendor will render the agreement liable for termination. 3.12 Risk Purchase: 3.12.1 If the supplier fails to deliver the bags as per schedule and as per requirement, FFCL shall treat such failure breach of agreement made with the vendor. In this situation, FFCL can resort to risk purchase and recover the amount of damages, if any, from the supplier. FFCL shall have the right to forfeit earnest money, security deposit, encashment of Bank Guarantee or withhold payments against pending bills If the loss sustained by FFCL is more than any of the above, the supplier shall pay the balance amount within 30 days of demand.

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3.13 Supplier to Remove Rejected Supplies:

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3.13.3

3.13.4

In the event of any supplies being rejected the supplier shall, upon notification of such rejection, remove forthwith the rejected items at his own cost. If the supplier fails to remove the rejected items within 2 weeks of the notification, the supplier will be liable to pay storage charges at the rate or 0.5 paisas per bag/liner per day to FFCL. FFCL shall arrange insurance of such consignment at suppliers cost for the period if the consignment is not lifted from FFCL premises by the supplier. The decision of General Manager (Plant) or his nominee as to whether supply is in accordance with the agreement specifications or not, shall be final and the binding on the supplier, the items so rejected, shall be treated as if these have not been supplied, and the supplier shall not be entitled to claim any payment thereof.

4. Counterfeit: To avoid fake/counterfeit products, barcode and security measures be introduced on Bags. Marketing group to also review and change cosmetic aspects of bags every year to counter this problem. 5. Vendor Training and Education: FFCL is committed to minimizing environmental pollution and new technologies and methods are forwarded to vendors for their education and use in their Bags production e.g. Oxi biodegradable technology for bags.