The Tamil Nadu government is on a gold hunt now. It is not digging for the yellow metal at any site. It has instead tendered out its intention to buy 400 kg of gold for around Rs. 120 crore.
Tamil Nadu's Social Welfare and Nutritious Meals Programme Directorate on Wednesday issued a tender for buying 100,000 gold coins of 22 carat each weighing 4gm through competitive bidding by manufacturers and dealers of the yellow metal.
The gold coins are to be given to the eligible poor beneficiaries of the government's five marriage assistance schemes.
The last date for submission and the tender opening is November 22. A pre-bid meeting will be held October 28.
"It is going to be a challenging task. Availability of gold is the major challenge. Imports of gold is allowed only against export," said Jayantilal Challani, president of Madras Jewellers and Diamond Merchants Association.
According to the government, the successful bidder has to supply the coins at the designated locations in 32 district treasuries/pay and accounts offices in 32 districts.
The delivery of the coins should be completed within 30 days of placing the firm order by the government. The successful bidder should provide a bank guarantee of Rs. 50 lakh for every 10,000 coins supplied. The quality/purity of the gold coins will have to be certified to the state government by an assayer approved by Bureau of Indian Standards (BIS) or any international agency. The cost of quality control tests and the wastage of coins will be billed to the government separately.
According to the government, if the quality of the coin is suspect, the one who gave the tender should buy back the same at a price paid for them by the government or the open market price at the time of buy-back, whichever is higher plus the overhead cost. The government can also take criminal action for supply of defective coins.
The cost of gold will include the metal price fixed by the London Bullion Market Association London Gold Fixing AM and at the Reserve Bank of India reference Rate-INR/1 $ as on the day following the date of finalisation of tender.
The bid amount should also include cost of insurance, making and packing charges, transport and others. The earnest money deposit will be Rs. 1.20 crore. A bidder should have posted an average annual turnover of R100 crore for the last two successive years.
Besides that, a bidder should be in the gold business for at least three years on the date of bidding. The bidder should supply at least 25,000 gold coins with BIS Hallmark. The tenderer should offer not less than 25,000 coins by December 31.
The rate offered in the tender should be valid for 90 days from the date of opening the technical bid.
According to Challani, the government should reduce the 25,000 coins bid limit to 10,000 coins and the turnover stipulation of Rs. 100 crore to Rs. 60 crore so that supplies could be effected without much problem. He said the margin would be very thin and the bidders were expected to quote very competitive rates.
"The price of gold and the exchange rate is well known. There is not major technology involved in making the coins except making the dye to imprint the government emblem. The challenge will be the availability of the yellow metal," Challani said.
He added that the possible rate for a 4gm coin would be around R13,000 and the outgo for the government for 100,000 coins, around R130 crore. According to the tender document, Madurai, Kanyakumari, Vellore and Tiruchirapalli districts will get 5,000 coins each followed by Coimbatore, Cuddalore, Kanchipuram, Salem with 4,500 coins each.