Scrap Disposal

12.1.0 Definition Of Scrap :

Scrap can be defined as the material, which is no longer useful to the Railways for the purpose for which it was originally purchased or obtained. Scrap also consist of arisings of waste material from manufacturing and repairing processes such as turnings and borings, sweepings, foundry dross, off cuts of metals, waste paper, weeded out records, used tickets, wooden pieces and saw dust etc.

12.1.1 Types of Scrap : Scrap is a class by itself, and should be distinguished from surplus stores, and can be divided in two categories viz. :

(a) Ordinary scrap : These are the items, which have regular demands as raw material in the Railway Workshops such as cast iron, non-ferrous materials which are used for manufacturing various components of Rolling stock.

(b) Surplus Scrap : These are items which are not required by the Railways for their own use and are invariably disposed off by auction sale or other means. Even new or second hand material that is usable, may come in this category of scrap, if it is useless for the Railways. All surplus scrap is almost always `dead surplus".

12.1.2 Reasons For Arisings Of Scrap : The various reasons for arising of scrap are :

(a) By use, various components are worn out to such a condition that they can't be reconditioned economically or are beyond repair.

(b) In a manufacturing process some wastages are unavoidable and therefore some quantity of scrap material is generally generated

12.1.3 Sources Of Scrap : As explained above Scrap is a normal natural arising in any manufacturing or maintenance activity. The annual arisings of ferrous scrap on the Indian Railways and Production Units come to around 6/7 lacks tonnes.

o The major sources of arisings are :

(a) Railway workshops under Mechanical Engineering, Civil Engineering Electrical Engineering, Signal & Telecommunication Engineering Department, Printing Presses etc.

(b) Condemned Rolling stock such as wagons, coaches, locomotives, boilers, etc. These are kept at nominated central locations or kept with different Chief/Head train examiners Carriage Foremen, Loco Foremen in the Divisions.

(c) Scrap permanent way materials such as released condemned Rails, Tie bars, M.S.& C.I. Sleepers, track fittings, Points & Crossings, etc.

(d) Scrap building material such as off-cuts of bars and rounds, structures, pipe and pipe fittings which arise with the Inspector of Works of various divisions, administrative offices and Railway colonies.

(e) Inactive/surplus items being declared as scrap by Survey Committees.

12.1.4 Scrap Schedule : All Railways maintain a detailed and unified schedule of scrap items under Group 98 and PL Nos. have been allotted to each item of scrap. The schedule has been prepared keeping in view the ultimate use of material in the market.

• Some of the important sub-groups of group 98 in which scrap items have been classified are :

12.2.0 Receipt Of Scrap :

12.2.1 Location And Layout Of Scrap Yard : The location of scrap yards is determined largely on consideration of freight charges, space availability and proximity to the market for disposal. Arrangements should be made to see that double handling is avoided, as far as possible.

o For facilitating expeditious disposal of scrap, system of twin yards should be followed where the receipt and delivery of scrap lots is regulated from different work areas and the chance of sold lots getting mixed up with fresh receipts is also eliminated to large extent. An extension of this may be `Three yards' in which one yards is used for receiving scrap (say first four months), second yard for making lots and third yard for disposal of surveyed lots, as per classification in Scrap schedule.

12.2.2 The lay out of a scrap Yard may provide the following :

i) Central Sorting Yard : For receipt of mixed scrap and sorting them to make separate lots for ultimate disposal.

ii) Reclamation Section : Reclamation Section should be set up for salvaging such items of scrap that may be modified into other useful items. This section will pay huge dividends if it is properly worked.

iii) Yards (twin yard) : For Storage and Disposals, Bins in each of the twin yards for `Lot' formation and storage of each particular item of scrap.

iv) Godowns : For Valuable scrap Materials, with bins & proper security arrangements for storage of non-ferrous metals, alloy sheet etc.

v) Facilities : Office, parking place for trucks, roads, adequate yard lighting, basic security (like boundary wall etc.), weigh bridge, beam scale.

12.2.3 Before sending materials other than waste materials, they have to be first declared unserviceable by the competent authority. For most of the materials Branch officers of the technical departments are competent to classify the materials as unserviceable.

• All scrap/unserviceable materials are sent by different workshops and various subordinates in the field along with Advice Note for returned stores (form S-1539).
• Scrap materials are directly received in the scrap yard where they are weighed / measured / counted and then segregated / sorted. If twin yard system is being followed, then, all fresh receipts are received in the yard from which deliveries of sold materials are not being given at present.
• In any case it is to be ensured that there is no possibility of mix-up of fresh arisings with the materials already sold.

12.3.0 Formation Of Lots :

12.3.1 Scrap of a particular description (PL NO as classified in the Scrap schedule) received from different sources (in case of mixed scrap, after sorting) are placed in a particular lot. The idea of lot formation is to accumulate economic quantity. of a particular item of scrap to be attractive to participants in auction (too many lots also require more space). Therefore a lot should not be too small. This should also not be too large as this will restrict auction virtually to a few rich parties only, on account of high value and will promote "Cartel" or "Ring formation". Secondly, large lots take longer time for delivery and clearance is delayed.

Lot Registers have to be maintained as per Code para 2410-S.

12.3.2 As per extent orders size of the lot should not normally exceed the limit of 1000 tonnes. The depot officer may, however, form a bigger size lot (initial lot) where considered expeditious with the prior permission of Controller of Stores and F A & C A O and subject to overall delivery period not exceeding 120 days.

12.3.3 Receipt of scrap in Railway scrap yards is in such mixed consignments that with the existing facilities each input in a particular lot cannot be weighed with accuracy. Incoming scrap in wagons loaded with mixed scrap is accounted for on the basis of actual gross weight of full wagon as recorded on the weigh-bridge After deducting the tare weight of the wagon, the net weight of scrap is assessed. This quantity is distributed on approximate estimate to the different "Lots"' according to categories of scrap which are found in the wagon.

• Sometimes, however, there are extraneous materials in the wagons, e.g. dirt or refuse material lying on the floor of the wagon. No credit is afforded for these valueless substances. Therefore, owing to the dependence on the visual estimates, the quantity in a lot is bound to be approximate and discrepancies are likely to be found when making deliveries by actual weight / number. If some residual material is left, after the delivery is completed, this residual material is added in the fresh lot for similar items being surveyed and put up for auction.
• In case of shortage, the purchaser has to be given refund of the undelivered quantity after the shortage is verified by the concerned staff.

12.3.4 Necessary caution has to be exercised while giving deliveries because some purchasers have a tendency to pick and choose and leave behind the items which may not be lucrative to them and thus resulting in shortages and resultant refunds. This practice should be discouraged and constant vigil should be maintained by the depot supervisory staff when the deliveries are being effected. To minimize misappropriation on this account the purchasers should be compelled to remove the material from one end of the lot so that the entire range of items are lifted from that end onwards.

12.3.5 Lot Register : As per para 2410 of Stores code, Once the lots have been formed for the purpose of auction sale the details should be entered into Lot Register which should have columns for

• Lot No., 
• Description, 
• Book Rate, 
• Approximate Quantity for sale, 
• Rate secured at previous auctions, 
• Name of the Purchaser, 
• Rate at which auctioned, 
• Total value of stores and
• Remarks.

12.3.6 Sometimes it is expedient to sell mixed lots (though not desirable). These should be sold with the stipulation regarding excluded items which have to be returned back by the purchaser while taking deliveries. List of excluded items should be prepared with caution and this should include only those item which are likely to fetch higher rates.

12.4.0 Valuation Of Scrap :

12.4.1 Like other categories of stock items, numerical ledgers as well as price ledgers for all items of scrap are maintained on the computer under group 98. Individual receipts are priced according to the book rates of the particular PL No. and credit is afforded to returning departments for all items of Scrap. These book rates are required to be revised every six months on the basis of prices obtained during successive auctions.

• It, however, be kept in mind that the rates at which scrap materials are ultimately disposed off, by the scrap Yard Depots are usually very much higher than the book rate of scrap at which credit is initially afforded to the returning departments against relevant Advice Notes for Returned Stores. The Price difference between the disposal rate and the book rate is accounted under the Stock Adjustment Account and the net amount of debit or credit as remaining in the Stock Adjustments Account No. is distributed among various departments on prorata basis.

12.5.0 Survey Of Scrap And Other Materials :

12.5.1 Survey Committees : Survey committee comprises officers of various departments including stores department Stores Depot Officer acts as a convener member and one senior Officer as Secretary, This committee is a standing committee appointed by General Manager for the purpose of inspecting critically the condition of all Stores :

(a) That have deteriorated in value, for any reason,

(b) Broken or damaged in transit, or while in stock,

(c) Lying in the custody of the Stores Department for a long time and considered by Controller of Stores as having become unserviceable owing to obsolescence or other causes and received as scrap from the line.

12.5.3 After critical and careful examination of lots, survey committee submits its recommendations on the above line to COS office.

• Recommendations can be accepted by CMM/COS if the value of the lot is up to Rs. 25,000/- and
• Above this value by GM (AGM on behalf of GM) on acceptance of recommendations by competent authority (COS/CMM/AGM) sanction is communicated to the respective Depot Officer and also to associated Accounts Officer.

12.5.4 Survey Sheets are prepared on the prescribed proforma given below. Recommendations against each item are recorded by the Secretary of the Committee or the member of the concerned department

• Sr. No. 
• Lot No. 
• Price List No. 
• Description of stores
• Qty.(No. or weight in tonnes) 
• Book rate per MT in Rs. 
• Value per MT in Rs. 
• Total Scrap Value (Rs.) 
• Remarks by the Committee
• Initials of the Secretary
• Remarks by the COS for GM’s orders
• General Remarks 1 2 3 4 5 6 7 8 9 10 11 12

12.5.5 Items exempted from Survey : Some items are exempted from survey. These items are turnings and borings, waste paper, fire wood, saw dust etc. Survey is not required for condemned Rolling Stock and Rails and sleepers on line for which condemnation certificates given by Chief Work shop Manager and Chief Track Engineer respectively are considered adequate. Lots of small value (Rs 1000 at present) are also not required to be surveyed for which depot officers have been given powers to decide.

12.5.6 As mentioned in para 12.5.1 above, survey committee is not only for surveying scrap materials. They also survey the surplus stores lying in the depot to classify them dead surplus or scrap. Item declared as surplus if are not disposed off by sale, transfer or issue within twelve months of recommendations of Survey Committee, should be classified as scrap and book value adjusted in accordance with the rules (2229-S).

o Survey committee normally meets once in a month at a place, time & on date fixed by depot officer. 12.5.7 Following are the modes of disposal based on the recommendations of Survey Committee.

(a) Issue to particular Department of the Railway either for direct use or using in lieu of some other item.

(b) Sale / Transfer - The item may be transferred / sold to other Railway or to some other Govt. Department.

(c) Retaining the item as Emergency Stores.

(d) Sale to public

(e) Sale to staff.

12.6.0 Sale Of Scrap Materials :

12.6.1 Methods Of Sale : There are four methods of sale as described below :

(a) Sale through Public Auction By conducting public auctions at regular intervals and putting the materials in those auctions.

(b) Sale through Tenders: By inviting tenders for the materials to be sold either through advertised tenders or giving tender inquiries to likely purchasers.

(c) Direct Sale Some materials may be sold directly at pre- determined rates to Railway employees and other government organizations. The rates are generally based on last auction rates/book rates.

(d) Quoting for Sale For some of the items we may submit quotations/tenders to other organizations if they have floated tenders for purchase of scrap.

12.6.2 Disposal Of Special Items : The best disposal is through auction sale, since it is best suited for speedy disposal of scrap. Tender sales are adopted only for items for which long term contracts can be entered into, say for turning & borings, waste paper, timber off cuts etc. Since these items have regular arisings and also occupy much space. Realistic estimation of the quantity for such contracts is essential to avoid delays in deliveries or refunds etc. Tender sales are also resorted to for breaking the ring formation, and to get better prices.

12.6.3 Scrap Rails : These are sold on `as is where is' basis by proxy without bringing the rails the Scrap Yard and the deliveries are arranged by PWI. However proper lot formation at the places approachable by road is important These may be sold on running meter basis or on weigh basis. Weight at site can be found out by measuring the length.

12.6.4 Condemned Rolling Stock : Locos, Boilers, Coaches, Wagons etc. are condemned by the Mechanical Department and are auctioned from the nominated cutting Yards. The excluded fittings like non-ferrous items, Wheels, Brake Blocks etc., are required to be removed before auction or handed over back by the purchaser to the Railway after cutting up of the Rolling stock and before the deliveries are effected. These items are put up in auction only after receipt of condemnation and reclamation (C&R) certificate signed by competent authority is received.

12.6.5. Waste Paper & Tickets : There are two hazards to be guarded against :

(a) Fire hazard

(b) Misuse

o Money value books in usable stage should not be offered for deliveries. Normally scrap tickets which are used tickets collected from the stations and misprinted tickets in the printing press, if disposed off, should be shredded before disposal to avoid any malpractice. In case the shredding machine is out of commission there should be no hesitation in burning the accumulated scrap tickets.

12.6.6 Machinery & Plants Items : These items are normally sold on number basis. Proper estimate of material contents (ferrous / non- ferrous). Other details like make, purchase price, depreciation value, with or without motor, motor details if with motor etc., must be furnished by the returnee official along with Advice Note for returned stores.

12.7.0 Auction Sales :

12.7.1 Auction may be conducted either through an auctioneer or departmentally. Auctioneer is appointed on commission basis and the contract is normally for 3 years. Before the auction is conducted, time, date, venue and the items to be included in the auction are put in a catalogue for circulation to the prospective bidders by the auctioneer.

• On the nominated date and time auction is started. In order to restrict entries of undesirable elements, a system of entry fee has been introduced. The entry fee is Rs. 2000/-. This entry fee is refundable but can be forfeited if the person depositing it has not maintained proper discipline during the auction proceedings.

12.7.2 The auction normally is conducted by the Depot Officer who is in the rank of senior scale or above. The presence of a representative of Accounts Department is also required. As per Codal provisions, presence of an Inspector of Stores Accounts is adequate but in some cases Store Accounts Officer of the depot concerned or an officer from the Head quarter office may attend auction. In addition to above a representative of Security department may also be present to maintain proper discipline during the auction. Although in case of auction through the auctioneer earnest money is collected by the auctioneer and then deposited to the Cash Office, it may, however, be desirable that a representative of Chief Cashier is also present.

12.7.3 On the pre-decided date and time, auction is started, first of all conditions of sale are read and advised to all the bidders present at the time of auction. It is better that the auction is conducted on the lot itself and the auction conducting officer, auctioneer and the bidders may keep on moving from lot to lot.

12.7.4 Reserve Price : The decision to sell or not to sell a particular lot during the auction is taken by the Depot Officer. For taking this decision, he fixes a Reserve Price of each lot in advance. This reserve price is fixed keeping in mind last sale rates, market trend and also condition of the lot.

• Generally for ferrous items, reserve price is fixed by the Auction Supervising Officer but in certain cases such as non-ferrous items valuing more than certain amount (Rs. 25,000), condemned locomotives and some exceptionally large lots, reserve price may be fixed by Headquarters Office in consultation with Finance Department.
• Depot Officer has also discretion to accept below the reserve price by certain amount (normally 5%) if the bids to the reserve price are not coming and there are reasons for accepting the bids at lower rates.

12.7.5 Realization Of Sale Value : At the time of auction, once highest bid of a bidder has been accepted by the Auction Conducting Officer, the purchaser is required to immediately deposit the earnest money.

This earnest money is

• Full sale value, if the total value of a lot is less than Rs. 2000/-, 
• 25% of value of sold lot subject to a minimum of Rs. 2000/- if the value of the sold lot is between Rs. 2000/- and 10,000/- and
• 10% of value of sold lots subject to a minimum of Rs. 2500/- for the lots valuing more than Rs. 10,000.

The purchaser is required to deposit balance sale value within a period of 

• 10 days from the date of auction if the value of sold lot is less than Rs.1 lakh and
• Within a period of 20 days if it is more than Rs.1 lakh. For high value lots valuing over Rs.2 lakhs, 
• Facility of paying in installments may also be granted with the approval of COS. Usually more than 2-3 installments are not allowed

In case of default, the earnest money may be forfeited or, at the discretion of Railway Administration, the purchaser may be granted extension which are always subject to payment of full interest normally at the rate of 2% higher than the bank lending rate.

12.7.6 Bid Sheet : At the time of auction when the lot has been sold, a Bid Sheet is prepared which contains

• Details of lot No. 
• Brief description of the lot, 
• Quantity sold, 
• The rate at which sold, 
• The earnest money realized and
• The total value payable and
• Special conditions, if any.

o Bid sheet is signed by the representative of auctioneer, Auction Conducting Officer, Accounts Representative, Custodian DSK of scrap yard and the purchaser.

12.7.7 Issue Of Delivery Order :When the balance sale value has been paid by the purchaser in full and he has fulfilled all the other conditions of sale, a Delivery order is issued to him by the Depot Officer in case of departmental auction or by the Auctioneer if the auction is conducted through auctioneer. Delivery order is an authority for the purchaser to take delivery from the Scrap Yard. It specifies the date by which the delivery is to be taken. In case facility of installment has been allowed to the purchaser, delivery orders are also issued in installments for the quantity for which payment has been received. In such cases, we have to ensure that earnest money deposited is adjusted only at the end.

12.7.8 Free Delivery Time :As per conditions of sale, a purchaser is allowed a free time during which he has to lift the material from Railway premises. This period is generally

• 25 calendar days for the lots sold on number basis and
• 40 calendar days for the lots sold on weight basis.

1. Sometimes more delivery time will be allowed on the merit of thecase but normally time more than 90 days is not allowed.
2. If the purchaser is not able to lift the material within the free delivery period, he required extension. Such extensions are generally granted after levying ground rent but in some genuine cases, levy of ground rent may be waived.

12.7.9 Delivery Of Sold Material To The Purchaser :The purchaser approaches DSK incharge of scrap Yard/stock holder like PWI etc., with delivery order for taking delivery. Delivery is given by the nominated DSK / Stock Holder which is witnessed by

• A representative from Accounts (normally a Stock Verifier) and
• A representative from Security Department (normally an Asst. Sub Inspector).

At the time of delivery it is to be ensured that ;

(a) The delivery is given from the lot actually purchased by the purchaser ;

(b) Delivery is given from one side and no picking and choosing is allowed.

(c) Fresh arisings of similar material are neither dumped on the sold lot nor delivery of these is given at the time of delivery.

(d) The purchaser does not have access to other lots.

(e) Proper record of weighment is maintained.

(f) Normally delivery of ferrous items is given by weighment on a lorry weigh-bridge but delivery of a non-ferrous items is given by weighing on beam scale.

• After the delivery is completed a Sale Issue Note is prepared, and the details of progress of delivery are also maintained on the back of the Sale Issue Note. When the Sale Issue note is signed by officer, a Gate Pass is issued and it is the duty of the Delivery Witnessing Officials to escort the lorry up to the gate so that there is no possibility of mixing any other material within the depot.