Source: Clause 46A of GCC for Works
1. What is PVC?
PVC = Price Variation Clause
PVC is intended to:
Resolve disputes between Contractors and Railways arising from price fluctuations.
Protect the interests of both Contractors and Railways against rising or declining prices of contract components.
2. When is PVC Applicable?
PVC is generally applicable when the Contract Agreement Value is ₹2 Crores or more.
Important: The Contract Agreement Value is considered, not the Tender Value.
Special provision
The authority competent to accept the tender or the SAG officer of the Executive Department, whichever is higher, may decide:
Not to apply PVC even when the Contract Agreement Value is ₹2 Crores or more, or
To apply PVC even when the Contract Agreement Value is less than ₹2 Crores.
Such a decision requires the concurrence of Associated Finance and must be incorporated in the Special Conditions of Contract before issue of NIT.
Example
Tender estimated value as per NIT = ₹2.50 Crores
Contract Agreement Value = ₹1.75 Crores
PVC will not apply, even if the final value later becomes ₹2 Crores or more due to variation in quantities.
Key Point: Quantity variation after signing the Contract Agreement does not determine PVC applicability.
3. Contracts Where PVC Does Not Apply
PVC is not applicable to:
AMC (Annual Maintenance Contract)
Zonal Contract
4. Items for Which PVC Is Not Admissible
PVC is not admissible for:
Specific payments to Consultants
Materials supplied by Railways to the Contractor, either free of cost or at a fixed rate
Fixed component – 15%
Extra NS items introduced under Clause 39(1)(b) of GCC, outside the tender BOQ, except SSOR items, unless PVC applicability and Base Month have been specifically agreed while fixing the rates of such extra items
5. Base Month and Base Quarter
Base Month
The Base Month is normally the month immediately preceding the Tender Closing Date, unless otherwise specified.
Example:
Tender Closing Date = 5 July 2022
Base Month = June 2022
Base Quarter
The Base Quarter starts from the month immediately following the Base Month.
In the above example:
Base Quarter = July to September 2022
Price Index for PVC
Price variation is calculated using the average Price Index of the quarter under consideration.
Fixed component of 15% is not considered for price variation.
6. Labour Component – PVC Formula
The formula for the Labour Component is:
L = W × (Lq − Lb) × Lc / (Lb × 100)
Where:
L = Amount of price variation in Labour
W = Gross value of Work
Lq = Consumer Price Index Number for Industrial Workers – All India, based on the average price index of the 3 months of the quarter under consideration
Lb = Consumer Price Index Number for Industrial Workers – All India for the Base Period
Lc = Percentage of Labour Component
Gross Value of Work (W) excludes:
Specific payments to Consultants
Materials supplied by Railways free of cost or at fixed price
Price value of Steel and Cement
7. PVC During Extended Period of Contract
The applicability of PVC during an extension depends on who is responsible for the delay and whether the price movement is favourable to Railways.
| Reason for Extension | Price Movement | PVC |
|---|---|---|
| Railway's delay – Clause 17-A | Any applicable variation | Applicable |
| Contractor's delay – Clause 17-B | Prices increasing | Not Applicable |
| Contractor's delay – Clause 17-B | Prices declining | Applicable |
Easy Rule to Remember
Railway Delay → PVC Applicable
Contractor Delay → PVC only when price decline is favourable to Railways
8. Quick Revision – MCQ Points
PVC = Price Variation Clause
PVC provision = Clause 46A of GCC for Works
General threshold = Contract Agreement Value ₹2 Crores or more
Tender Value is not considered for this threshold.
Fixed component = 15%
PVC does not apply to AMC and Zonal Contracts
PVC is not admissible for:
Consultant payments
Railway-supplied materials
Fixed 15% component
Certain extra NS items
Base Month = One month before Tender Closing Month
Base Quarter = Month following Base Month + next two months
Price variation = Based on average Price Index of the quarter under consideration
Railway-caused extension → PVC applicable
Contractor-caused extension + rising prices → PVC not applicable
Contractor-caused extension + declining prices → PVC applicable
9. One-Line Exam Revision
PVC under Clause 46A protects both Railways and Contractors from price fluctuations; its normal threshold is ₹2 Crores based on the Contract Agreement Value, with a 15% fixed component excluded from price variation.
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