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What is Mobilazation Advance (Accounts)

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This query is : Resolved


( Author )
06 September 2008

Dear Experts,

please guide me whats is mobilization advance and how to recover mobilization advance in normal terms.


CA. Dashrath Maheshwari

( Expert )
06 September 2008

Mobilization payments are payments of funds to a supplier or contractor before, in anticipation of, and for the purpose of performance under the contract. Since these payments are not measured by contract performance, they differ from partial payments which are based on actual performance of tasks in furtherance of the contract.

**DM


CA. Dashrath Maheshwari

( Expert )
06 September 2008

Advance payments may, for example, be advisable to cover the initial mobilization expenses for large civil works or custom-made goods. Any advance payments are to be liquidated from payments made to the supplier or contractor during performance of the contract, usually by deducting a percentage from each scheduled payment for performance.

**DM


CA. Dashrath Maheshwari

( Expert )
06 September 2008

The basic purpose of Mobilisation advance is to extend financial
assistance within the terms of contract to the contractor to mobilize the
man and material resources for timely and smooth take off of the project
or procurement of equipment material or other services contract. But, the
Mobilisation Advance, especially the interest free advance was being
misused in absence of either necessary safeguards or in absence of
implementation of these safeguards provided in the contracts. Thus, the
Mobilisation Advance so paid was prone to misuse by the contractors in
building their own capital or for the purpose other than the one for which
it was disbursed. In fact, the grant of interest free advance was proving to
be counter-productive. In view of the history of its misuse, Commission
vide its Circular No.NU/POL/19 dated 8th December1997 banned the
provision of interest free Mobilisation. However, recently in view of
representations from various organization, Commission has reviewed the
earlier instructions and allowed the organizations to stipulate interest
free advance with elaborate mechanism for safeguards against its misuse
vide circular No.10/4/07 issued vide letter No.4CC-1-CTE-2 dated
10.04.2007. `More importantly the BGs taken in lieu of Mobilisation
Advance need to be properly examined within respect to the acceptable
format and any condition deterrent to the Govt.’s interest should be got
withdrawn before acceptance besides verifying the genuineness of the
Bank Guarantees from the bankers. Timely action for
revalidation/encashment of BGs also need to be taken so as to protect the
Govt. interest.

**DM


ravinder singh rawat

( Author )
07 September 2008

Dear Sir,
thanks for answer sir,


is it possible that Mobilization advance can be adjust with every running bill with some fixed percentage and after some time it will be write off automatically.



Thanks & Regards
Ravinder


CA. Dashrath Maheshwari

( Expert )
12 September 2008

Yes, you can do that...


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