What is Revenue Procurement?

In accordance with Rule 84 of General Financial Rules (GFR) 2017 the Expenditure to be incurred by the Government towards any procurement is classified into two broad categories i.e. Capital Expenditure & Revenue Expenditure. Significant expenditure incurred with the object of acquiring tangible assets of a permanent nature (for use in the organisation and not for sale in the ordinary course of business) or enhancing the utility of existing assets, shall broadly be defined as Capital expenditure. Subsequent charges on maintenance, repair, upkeep and working expenses, which are required to maintain the assets in a running order as also all other expenses incurred for the day to day running of the organisation, including establishment and administrative expenses shall be classified as Revenue expenditure.

To understand this better we can take an example. Let us assume that the GoI is planning to buy a new type of gun. Now this is going to be a significant expenditure, considering the price and overall cost w.r.t the qty required. Also it is a tangible & a permanent asset (as per definition). Therefore the expenditure planned to be incurred in procurement of this Gun would get classified as Capital Expenditure. Now once the Gun has been procured and the warranty period / AMC period is over the gun would be required to be sustained in terms of maintenance & repairs. The expenditure incurred towards this sustenance (which may be a repeated expenditure) is classified as Revenue Expenditure.

The procurement procedures for both the Capital Expenditure & Revenue Expenditure are also invariably different. The Capital expenditure being more significant, its procurement procedure is also more exhaustive with deliberations at every stage and exhaustive trials built in. While in case of Revenue Procurement procedure the process is relatively simple and may not include trials. Most of the tenders floated by the government are w.r.t Revenue Procurement only and this procurement may be undertaken through Government-e-Marketplace (GeM) Portal , Rate Contracts, Direct Local Procurement or through Advertised Tender Enquiry. Similarly Works may also get classified based on the quantum of expenditure.

Interestingly though, since the Capital Procurement Procedure is time consuming, Ministries / Departments have in some cases taken exemptions for certain categories of Goods, based on the urgency / necessity of such items. For example the Ministry of Defence has a list of item types which due to operational urgency have been categorised as 'Capital Budget Revenue Procedure'. That is to say that while the items sought to be procured fall under the definition of Capital Expenditure, their procurement would be allowed as per Revenue Procurement Procedure (Shorter process).

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