1.

EXECUTIVE SUMMARY
This project report is on “Financial Analysis of South Eastern Coal-Field Limited
Bilaspur”. The purpose behind the research report is to get an exposure of the corporate
world as well as the culture by getting associated with the research. If this report will be
fruitful to any organization by any means, we will consider our work worthwhile. This
research helps in understanding the practical applicability, which is a part from
theoretical concept. Finally the findings records and suggestions are compiled. Coal and
oil are two primary natural fuels. Coal constitutes approximately 85% of total fossil fuel
reserves in the world. The Gondwana coal contributes about 99% of the country’s coal
resources. They are located in peninsular India and the too in the southeastern quadrant
bounded by 78° E longitudes & 24° N latitude, thus leaving a major part of country
devoid of any coal deposits. The major Gondwana Coalfields are represented by isolated
basins, which occur along prominent present day rivers viz Damodar, Sone, Mahanadi,
and Kanhan & Godavari. The relative minor resources of tertiary coal are located on the
either extremities of peninsular India. With the dawn of independence a greater need for
efficient coal production was felt in the first five-year plan. Coal being the most crucial
energy resource, was considered necessary to expedite development of modernization of
the coal industry.

Coal mining is the most prominent industry in Chhattisgarh in terms of employment

generation, economic infrastructure development and generation of revenue for the state
and the central Govt. Due to opening of coal mines in this region, rail connections and
power supply lines, roads and tele-communication have expanded over the past decades
and a large number of power houses and other industries have come up. The coal based
industry have in turn generated multiplier effect in the economy of Chhattisgarh and
Madhya Pradesh and the region has become the most important center of industrial
economy of Chhattisgarh and Madhya Pradesh. To complete this project I have a short
duration around 60 days. I have done this project with the help of Anup Singh who is CA
in South Eastern Coal-Field office Bilaspur and other related members, who helped me to
collect the related data’s.

1
 2.OBJECTIVES
< Different objectives behind conducting this project >
a) Primary objective < Main Objective>
b) Secondary objectives

2
 3.COMPANY PROFILE
(CIL & SECL)

India is the 3rd largest coal producing country.

Figure: 1 Picture of front wing of SECL head office Bilaspur.

SECL is the largest coal producing company. It is one of the subsidaries of Coal India
Ltd. A government of India undertaking under ministry of coal .SECL, the prime coal
company of Coal India ltd, is having 89 coal mines situated in the sate of Madhya
Pradesh and Chhattisgarh. The coal mines are geographically located at the heart of
country in CG and in M.P. inhabited by simple minded hard working people.Ever since
the formation in 1986-87 SECL has exceeded its physical and financial targets.

Coal mining is the most prominent industry in C.G. and in M.P. in terms of employment
generation and infrastructure development. The coal mining areas are spread over from

3
Sarguja and Korba district of C.G. up to Shadol and Umaria district further North west in
M.P. due to opening of coal mines in these region, rail connection, power supply,
telecommunication, other industries etc. have expanded over the past decades. A large
number of power houses have come up. The coal based industries have generated a good
multiplier effect in the economy of C.G. and M.P. The region has become the most
important centre of industrial activity. The SECL family consists of 84368 employees as
on 31-03-2007 who are predominantly locals. The success of the company is largely lies
in the disciplined and hard working employees of the company, excellent cooperation
from trade unions the state government and the local people.

Classification of coal:

Coal is naturally occurring mineral of dark brown or back color. Formation of coal
occurs through a series of gradual changes that take place as a result of slow
decomposition of vegetable matter buried deep underneath the earth in a limited supply
of air under high temperature and pressure prevailing there. This decomposition being the
prolonged process procedure various type of coal oat various stages of changes and are
known as carbonization. Coal constitutes approximately 85% total fossil fuel reserves of
the world. The deposits of India occur in two distinct stratigraphic horizon the Gondwana
and territory. The relative minor of territory coalfields is located on the either extreme
ends of peninsular.

1. COKING COAL.
2. SEMI COKING COAL.
3. NLW COKING COAL.
4. NON COKING COAL.
5. HARD COAL.
6. WASHED AND BENEFICIATED COAL.
7. MIDDLINGS.
8. REJECTS.
9. CIL - COKE / LTC COKE.
10. COAL FINES / COKE FINES.

4
 11. TAR / HEAVY OIL / LIGHT OIL / SOFT PITCH.
12. GRADATION OF COAL.
13. SUITABILITY OF COAL.

On the basis of carbonization:

Coal type Carbon content (%)

Anthracite 90 to 95

Coke 70 to90

Lignite 60 to 70

Dry peat 50 to 60

On the basis of cracking property:

Cooking coal are those which have caking and which are used in metallurgic industry.
again depending upon the quality of coke produced from them. cooking coal is
subdivided into prime cooking coal and semi cooking coal. similarly, non cooking coal is
categorized in seven grades(grade A To G)depending on its calorific value.

On the basis of sizes:

This is on commercial basis of classification where by coal can be of steam, slack or run
of mines(ROM) types.

5
Suitability of Coal
Industry
Steel making
Steel Making and for Sponge iron
industry
Cokeries / Coke Oven Plants
Briquette Making / Domestic Fuel
Making
Special Smokeless Fuel ( SSF )
Power Sector
Cement Sector
Glass and Potteries
Cast Iron Castings
Steel Castings Industries
Bricks
Old Boilers
Halwais, Domestic Use & Hotels
etc.
History of Coal Industry in India:
Type of coal required
Coking and Semi Coking Direct Feed and Washed .
Also Blendable coals and low ash % Assam and
Ranigunj Coals.
Non coking coal of high Initial Deformation
Temperature (IDT) (>1200 0C )
Coking and Semi coking
Semi Coking and Non-Coking, Middling & Rejects
of Washery
Semi Coking of Caking Index 8 – 10
Non Coking and Middlings of Coking coal
Washeries as well as Washed Coal of Non-Coking
Coal Washeries.
Non Coking, Middling of Coking Coal Washeries.
Long Flame Non Coking
Hard Coke
Non Coking
Non Coking, Middling of Coking Coal Washeries
Superior Grades of Non Coking
Non Coking Coal and CIL Coke/ LTC Coke
6
Figure: 2 A vision of coal mine.

Coal and oil are two primary natural fuels. Coal constitutes approximately 85% of total
fossil fuel reserves in the world. The Gondwana coal contributes about 99% of the
country’s coal resources. They are located in peninsular India and the too in the
southeastern quadrant bounded by 78° E longitudes & 24° N latitude, thus leaving a major
part of country devoid of any coal deposits. The major Gondwana Coalfields are
represented by isolated basins, which occur along prominent present day rivers viz
Damodar, Sone, Mahanadi, and Kanhan & Godavari. The relative minor resources of
tertiary coal are located on the either extremities of peninsular India.

State and Area wise Coal reserves in India:

7
 S. State name Standard Actual Expected Total % Of
No Reserve Reserve Reserve Reserve Reserve
1 Madhya 7565.50 9258.38 2934.49 19758.37 8.17
Pradesh
2 Chhattisgarh 9570.15 27432.89 4439.06 41442.10 17.14
3 Uttar Pradesh 765.98 295.82 1061.80 0.44
4 Maharashtra 4652.39 2432.18 1992.17 9076.74 3.75
5 Orissa 16910.63 30793.07 14295.56 61999.26 25.64
6 Andhra 8403.18 6158.17 2584.25 17145.60 7.09
Pradesh
7 Assam 314.59 26.83 34.01 375.43 0.16
8 Arunanchal 31.23 40.11 18.89 90.23 0.04
Pradesh
9 Meghalaya 117.83 40.89 300.71 459.43 0.19
10 Nagaland 3.43 1.35 15.16 19.94 0.01
11 West Bengal 25123.00 10.39
12 Jharkhand 64371.00 26.62
13 North East 864.00 0.36
Total 241786.9 100.00
0

Commercial coal mining in India with Coal as an article of trade started in 1874 at the
instance of Warren Hastings for the benefit of East India Co. for the manufacture of arms
and ammunitions. Coal is the only prime source of energy. Coal mining started in the last
quarter of 18th century in Raniganj field. Britishers took the lead to exploit the coal
reserves to meet their industrial requirements (arms and ammunitions) especially during
the Second World War. This was in the Raniganj Coalfields area along the western banks
of river Damodar over a track of land from Dissergarh to Raniganj town and coal mining
commenced here in surface mines, quarries or small opencast mines. In the year 1815
-20, the first shaft mine near Raniganj town was opened. In 1835, Raniganj coal mining
with all the land and buildings passed into the hands of Prince Dwarika Nath Tagore,
grandfather of poet Rabindra Nath Tagore and Carr-Tagore & Co. was formed in 1843.
M/S Carr-Tagore & Co. and another coal company M/S Gilmore Homfray & Co. were
amalgamated into Bengal Coal Co. Ltd., the first joint stock coal company in India. Since
then industrial operations continued on a low key principally as a result of neglect of coal

8
mining in India. Organized mining of coal started in the Raniganj coal field in the early
19th century. Transportation of coal from Raniganj to Calcutta was done through river
navigation along Bhagirathi opening of railway lines from Howrah and Raniganj and
introduction of Steam locomotives paved the way for expansion of coal production.

In the beginning of the 20th century our country had attained the capacity of producing
approximately 6 million tones of coal per annum during the First World War. In the
Second World War the demand of coal was increased. The Govt. as well as the business
community gave greater emphasis on increasing coal production. Coal recruiting
organization was set up to provide manpower and give a boost to the production drive.

Formation of Coal India Ltd:

Figure: 3 Mono of South Eastern Coal-Field Limited.

With the dawn of independence a greater need for efficient coal production was felt in the
first five-year plan. Coal being the most crucial energy resource, was considered
necessary to expedite development of modernization of the coal industry. Thus, by the
end of 1955-56 our country produced 38.4 million tones. During the second five-year
plan too the coal production was stepped up further to 60 million tones per annum. In
1956, National Coal Development Corporation (NCDC) was formed with 11 collieries
belonging to railways as its nucleus. NCDC was given the task of exploring new coal
fields and expediting development of new coal mines in the out laying coal fields.
Subsequently, in the context of conservation, safety, scientific development of coal
reserves, systematic and proper mining of coking coal and increasing demands from iron
and steel industries the Govt. of India took over all the coking coal mines on 16 th of

9
October 1971 and nationalized them on 1st of May 1972. A company known as Bharat
Coking Coal Ltd. was formed to manage the coking coal mines.

The Objectives of Nationalization were:

1. Planned development of available coal resources.

2. Improvement of safety standards.
3. Ensuring adequate investment for optimal utilization consistent with growth.
4. Improving the quality of life of the work force.
5. Prohibiting wasteful, selective and slaughter mining.

With the takeover of coking coal mines by the Govt. as mentioned above, the private coal
mine owners stopped capital investment for renewal of machineries/equipments as well
as for the development of new mines. The living conditions of the miners remained sub-
standard. The private mine owners indulged in unhealthy mining practices including
slaughter mining with the sheer objective of maximizing their short-term gains. The
private miners defaulted in payment of royalty and other dues to the state group,
deposition of CMPF contribution amount, under payment of wages to the workers; they
also adopted malpractices in sales and other corrupt practices and also violated safety
laws. Approximately 3.5 lakh workmen engaged in non-coking coal became restive on
account of wide variation in the terms and conditions of employment. At this junction the
company was in the urgent need of increasing coal production for meeting the increasing
demands of the growing industries. Keeping all these factors in view, the Govt. took over
the non-coking coal mines on 30th January 1973 and subsequently nationalized them on
1st May 1973.

For nearly seven to ten years, the non –cooking mines were owned by the Coal Mines
Authority Ltd. and were managed through three divisions i.e. Eastern, Western and
Central Divisions. On 1st Nov. 1975, Coal India Ltd was formed as a Holding Company
with its registered office at 10, Netaji Subhash Road, Calcutta. 700001. BCCL and

10
NCDC were transferred to CIL. Coal India Ltd has seven coal producing Subsidiary
Companies and one Subsidiary for planning, designing and research.

Figure: 4 Coal India & Its Subsidiaries.

The Head Quarters of Coal India Ltd and its subsidiary companies are
as below:

11
S. No Name of the Company formation Head Quarters
1. Coal India Ltd. (Holding Co.) 1972 Kolkata (West Bengal)
2. Eastern Coal Fields Ltd. 1975 Sanetoria (West Bengal)
3. Bharat Coking Coal Ltd. 1973 Dhanbad (Jharkhand)
4. Central Coal Fields Ltd. 1975 Ranchi (Jharkhand)
5. Western Coal Fields Ltd. 1975 Nagpur (Maharashtra)
6. South Eastern Coal Fields Ltd. 1986 Bilaspur (Chhattisgarh)
7. Northern Coal Fields Ltd. 1986 Singrauli (Madhya
Pradesh)
8. Mahanadi Coal Fields Ltd. 1992 Sambalpur (Orissa)

DEVELOPMENTS IN COAL
INDUSTRY
PRIOR TO 197OS EARLY 1996 2000-06
1972-73 1990 S

. 1972-73 COAL .1993 INTEGRATE

MOSTLY IN COAL MINES
MINES AMEDMENT IN D FUEL
PRIVATE (NATIONALISATION
NATIONALISA ACT TO POLICY- TO
HANDS ) AMENDMENT BILL
TION ACT ALLOW BRING -.PRICING AND
EXCEPT
CAPTIVE COMPETETI DISTRIBUTION
FOR TWO
.1975 CIL MINING BY ON- FULLY
PUBLIC
FORMED AS PRIVATE DECONTROL
DEREGULATED
SECTOR (COLIERY
HOLDING OPERATOR OF PRICE &
UNITS CONTROL ORDER
COMPANY AND NOT FOR DISTRIBUTI
NAMELY 2000)
WITH 6 SALE ON
SCCL &
SUBSIDIARIES . BUDGET06-07SOME
NCDC .1995-96 CIL BLOCK OPENED
BUDGETORY OR CAPTIVE
SUPPORT MINING
WITHDRAWN

12
Company Number of working Number of mines closed
mines since nationalization.

ECL 120 57

BCCL 89 16

CCL 68 13

NCL 09 01

WCL 90 38

SECL 95 17

MCL 22 --

NEC 7 --

CIL 500 142

13
 1 8
5 43

2COA
7 L
LIGNITE
6
91
0

Figure: 5 Shows Coal and Lignite resources in India.

14
 South eastern coalfields: A Profile

SECL is the largest coal producing company in the country. It is one of the eight
subsidiaries of CIL (A Govt. undertaking under Ministry of Coal). SECL, Coal India’s
premier coal company is operating its coal mines in the state of Madhya Pradesh and
Chhattisgarh state which is also geographically located at the heart of the country.
Chhattisgarh and Madhya Pradesh inhabited by simple minded and hard working tribes
with a rich cultural heritage. Chhattisgarh is not only the rice bowl if India but also rich in
mineral resources with coal being the prime mineral resource that is being exploited
commercially for about a century.

The different Coal Producing Area of SECL as on 31st March 07 are as

below: -

S. No. Name of Area State in which Located Type of Mines

01. Bhatgaon C.G. UG + OC
02. Bishrampur C.G. UG + OC
03. Baikunthpur C.G. UG
04. Chirimiri C.G. UG + OC + MIXED
05. Hasdeo C.G. + M.P. UG + OC
06. Jamuna & Kotma M.P. UG + OC
07. Sohagpur M.P. UG + OC
08. Johilla M.P. UG + OC
09. Raigarh C.G. UG + OC
10. Gevra C.G. OC
11. Kusmunda C.G. OC
12. Korba C.G. UG + OC

STATUS OF CAPTIVE MINE BLOCKS IN COMMAND AREA

OF SECL:

S. AREA GEOL. TENT.

NO COAL BLOCKS/ SQ.KM RES(MT GRAD
. FIELDS SUB-BLOCKS . ) E REMARKS
1. HASDO-ARAND 14 131 B-F

15
 ALLOTED TO JOINT VENTURE
COMPANY M/S
SEC,UTL,NBCL,PIL,ASPL&SIC
MADANPUR BISRAR(N) L
ALLOTED JOINT VENTURE
COMPANY
HASDO- MADANPUR M/SHZL,AIL,CSPL,CECL,,MSP
2. ARAND BISRAR(S) 20 241 B-F ETC.
HASDO-
ALLOTED TO CSEB
3. ARAND PATURIA 20 265 F
HASDO-
4. ARAND TARA 25 325 D-G Allotted to CMDC
HASDO-
5. ARAND GIDHMURI 14 75 D-G ALLOTED TO CSEB
HASDO-
6. ARAND PARSA 12 100 D-G
HASDO-
7. ARAND CHOTIA 30 60 C-D Allotted to Prakash Indust.
HASDO-
8. ARAND NAKIYA 15 500 D-F
HASDO- PANCHBAHIN ALLOTED TO SHRI RADHE
9. ARAND I 12 11 WG-IV INDUSTRIES
West of ALLOTED TO SAIMIK
10. KORAR UMARIA N.A FINANCE COAL INDUSTRIES
MAND-
11. RAIGARH GARE-I 850
MAND-
RAIGARH GARE-II 24.95

A new area known as Dipka Area has been separated from Gevra Area w.e.f. 1st of April
2006. Coal mining is the most prominent industry in Chhatisgarh in terms of employment
generation, economic infrastructure development and generation of revenue for the state
and the central Govt. Due to opening of coal mines in this region, rail connections and
power supply lines, roads and tele-communication have expanded over the past decades
and a large number of power houses and other industries have come up. The coal based
industry have in turn generated multiplier effect in the economy of Chhatisgarh and
Madhya Pradesh and the region has become the most important center of industrial
economy of Chhatisgarh and Madhya Pradesh.

16
The SECL family consists of 87590 employees as on 31 st March 2005 who are
predominantly locals. The success of the company is largely due to the discipline and
hard work of these employees, excellent cooperation of trade unions, the State Govt. and
the local people. SECL operates through 90 mines spread over eight districts (three of
Madhya Pradesh and five of Chhatisgarh). The Statewise, type wise composition of those
90 mines is given in Table below:

Type of Mine Chhattisgarh Madhya Pradesh Total

UG Mines 41 29 70
OC Mines 11 08 19
Mixed Mines 01 - 01
Total 53 37 90

ROLL OF SECL IN OUR ENVIRONMENT & SOCIETY:

ENVIRONMENT & SOCIETY - Our Concern

17
ECO FRIENDLY MINING:-

The company is highly concerned about protection of the environment and has taken
several steps in this regard. More than 2 crores (2, 30, 39, 240) saplings have been
planted till 1.4.2006 with over 90% survival rate. In the year 2005-06 total 7, 20,000
saplings have been planted 1562 ha mined out land has already been reclaimed. Regular
monitoring of air, water and noise pollutions in the mines. Total back-filling of about
2673 ha of land has been done. Research studies have been undertaken by various
research institutes at company’s initiative for self sustaining eco-restoration system on
overburden dumps and other mined out areas.

SECL won prestigious “India Priyadarshini Vriksha Mitra Award" instituted by Ministry
of Environment & Forest, and "Jawahar Lal Nehru Memorial Award for Excellence in
Pollution Control" at New Delhi.

18
 SECL was awarded "Indira Gandhi Memorial NAtional Award for Pollution Control
implementation for the year 1999-2000" by Andhra Pradesh Central Public Sector
employee’s federation, Hyderabad

SECL was awarded Greentech Environment Excellence Silver Award ,New Delhi in
2004-05 and Kunwar Yudhwir Singh Afforestation award ,Raipur in 2005.

Districts where SECL is spreaded:

MADHYA PRADESH
1. SHAHDOL- Sohagpur area
2. UMARIA- Johilla area
3. ANUPPUR- Hasdeo & j&k area
CHHATTISGARH
1. KORBA- Korba, Gevra & Kusmunda
2. RAIGARH- Raigarh area
3. KOREA- Baikunthpur,Chirimiri & Hasdeo area
4. SURGUJA- Bishrampur & Bhatgaon
5. BILASPUR- SECL HQ.

• SECL IS THE LARGEST COAL PRODUCING COMPANY IN INDIA.

• SECL OPERATES THROUGH 12 ADMINISTRATIVE AREAS.
• SECL HAS 92 MINES.
• GEOGRAPHICAL COAL RESERVES 44.838 BILLION TES AS ON 1-01-2008.
• MINING RIGHTS OVER 956.41KM.
• ALL RIGHTS OVER 259.85KM.

SPECIFIC FUNCTIONS:

A. PRICING OF COAL.

19
 B. NEGOTIATION OF WAGES. (JBCCI-VII)
C. EXECUTIVE CADRE CONTROL - RECRUITMENT, PROMOTION/
POSTINGS, PAY/PERKS ETC.
D. MANPOWER PLANNING - HRD.
E. FOREIGN C0LLABORATION.
F. INTRODUCTION OF NEW TECHNOLOGY.
G. R&D ACTIVITIES.
H. MOBILISATION OF RESOURCES - LONG TERM & SHORT TERM.
I. CONSUMER SERVICES THROUGH REGIONAL OFFICES.

MISSION OF THE COMPANY-

To produce & market the planned quantity of coal efficiency and economically with due
attention to safety, conservation and quality.

 Optimum utilization of resources with human value.

 To improve the quality of life.
 To treats the employees not as recourses, but as a human.
 Human touch in behavior at work place.
 To enhance the morale of employees though welfare means.

20
 ORGANISATION STRUCTURE

Figure: 5 Shows organization structure of SECL management.

21
DEPARTMENTS OF S.E.C.L.

1. SALES
A. Linkages-System: Old concept.

B. Fuel Supply Concept: New concept.

 Linkages-system: Linkages is made between consumer and coal India regional

Industry by ministry. Commitment is on the side of CIL and CIL has to supply the
stated quantity of coal to the consumer, but there is no commitment on the side of
consumer, he may refuse to take the stated quantity of coal from CIL.

 Fuel-Supply Concept: An agreement is made between consumer and CIL industry,

in which there is Commitment of both consumer and industry (CIL).There is
provision for penalty, if consumer refuses to take the stated quantity of coal or, CIL
is not able to supply the stated quantity of coal.

 Advance payment is taken from the consumers before the supply of coal by CIL
industries.

 e-auction: some quantity of coal is sold through e-auction.

 NON-industry is given coal through e-auction.

 Rates of sale are same for all.

22
 ANNUAL ACTION PLAN (AAP)
• Annual Action Plan is made to set a target of production, for every CIL
industry on yearly basis.

• This year AAP target is 10 million tonnes.

• 72 million for power sector.

• NCDP (New Coal Distribution Policy):75% of distribution to power

sector under (MoU) if failed to give or receive penalty is taken.

• Model is made for each sector, also called `Fuel Supply

Agreement’(FSA), entered between SECL and consumer (from May-
2008)

• Indian coal is cheapest in the world, because of its poor quality. 46% of
ash in Indian coal makes it of low quality.

DISPATCH
It is the process of shipment of goods from factory to customer. It is of two
types in CIL industry:

1. Railway Dispatch.

2. Road Dispatch.

 RAILWAY DISPATCH: It is the dispatch made through railway. Some big

industry like NTPC has its own system of railway lines , CIL industry load the
coal in the railway container, and it is brought to the NTPC plant through a
circular chain of railway lines, which unload the coal from container and the
empty container is send back to the coal fields to fill it again.

 ROAD DISPATCH: First of all offer comes from the area, on that basis SECL
head office gives information in notice board the offer at head office. Accordingly

23
 consumer submits their application for release of coal from different mines and
areas (subjected to fuel supply agreement with SECL).

 Coal is allotted to consumer on that basis consumer pays the coal value
(deposited to SECL). SECL head quarter will issue delivery order
(D.O.) to different consumers after receiving the payment.

Delivery Order (D.O.) has four copies:

1. One for consumer.

2. Second and third copy to area to finance G.M.

3. And, one copy to head quarter.

• Accordingly coal will be issued from area colliery.

• Consumer will lift the coal from area.

• Till the coal is loaded in the rack, all the cost of transportation is beard
by SECL.

CORPORATE FINANCE COORDINATION (CFC):

Delegation of power is given to each officer in an organization, and they have to take
decisions according to the power delegated to them. In such condition it becomes
necessary to check for financial lapses. For this very purpose formation of CFC
department in SECL is done.CFC is a pre audit of a proposal i.e. it is an audit before the
event takes place.CFC department checks the viability of proposal according to budget
(i.e. fund allocation).

STUDY OF PERSONNEL DEPARTMENT-SECL:

24
There are 9, 1390 employees who are predominantly locals. Each member has his own
set of responsibility and is required to accomplish the job of his concerned area and
department. All the Managers report to the director (Personnel). The head office is
located at Kolkata. The Director (Personnel) then report to the chief Managing director,
SECL (Kolkata).

Personnel Dept. controls the following areas under GM (Personnel and

Administration)-

1- Industrial Relations-

It is controlled by GM (IR). This dept is responsible for managing harmonious relations

between the workers trade union and management at the same time it sorts out the
grievance through grievance redressal machinery.

2-Recruitment-

This dept is responsible for recruiting people. Presently, only the dependents of the
person, who worked with SECL and had died, are recruited.

3- Hindi-

This department takes care of all the typing matters which are carried out in Hindi
language for outside communication. Nearly 60-80% of paper work is done in Hindi in
SECL.

4-Non executive Establishment-

Matters relating to salary, increments, services related and promotions for are under
the control of this department.

Director (personnel) controls the following department directly-

25
1 Personnel and Administration-
It is controlled by GM (P&A), IR, Recruitment, Hindi and Non Executive Est.
Reports to GM (P&A).
2 Town Administration-
This dept. is controlled by GM(TA), It looks after cleaning, repairs, electricity
water supply etc. of town.
3 Manpower-
It is under GM (Manpower). It undertakes inventory management planning etc.
4 Executive Establishment-
It is controlled by GM (Exe Est.). It controls salary, promotion, increment etc. of
executions.
5 Welfare-
This dept is headed by GM (Welfare). It takes care of the activities relating to
Schools, Education, Medical, Housing, Sports, Culture and community
development for employees.

6 HRD-
It is controlled by GM (HRD). It is responsible for training and development of
skilled and unskilled people, executive and non executive staff.
7 Chief (Medical services)-
It takes care of the hospitals and other medical facilities, dispensary in each
mining area is set up which is cancelled by hospital officers.
8 Legal-
This department is controlled by GM (Legal). It takes care of all types of legal
matters.
9 Industrial engineering dept-
This department studies the time-study of manpower, technical department of the
employees.
10 WSS/CD-
It controls the welfare and social security and community development, provident
fund and pension schemers of the employees.

26
11 Security-
It is controlled by GM (Security). It is responsible for the security in mining areas,
colony of SECL.
MANPOWER PLANNING

SOUTH EASTERN COAL FLIEDS LIMITED (SECL) considers its human resource
more important as compared to its physical and financial resources therefore it has given
very high importance to managing human resources across all functional areas.

SOUTH EASTERN COAL FIELDS has established as a company in 1986. From the
1986 establishment of SECL Manpower of the company is described below year wise.

Year Date Upto Manpower

1986 – 87 01.04.1987 1,05,301
1987 – 88 01.04.1988 1,07,236
1988 – 89 01.04.1989 1,09,101
1989 – 90 01.04.1990 1,12,857
1990 – 91 01.04.1991 1,15,824
1991 – 92 01.04.1992 96,614
1992 – 93 01.04.1993 97,857
1993 – 94 01.04.1994 97,560
1994 – 95 01.04.1995 98,671
1995 – 96 01.04.1996 99,028
1996 – 97 01.04.1997 98,966
1997 – 98 01.04.1998 98,784
1998 – 99 01.04.1999 98,105
1999 – 00 01.04.2000 97,370
2000 – 01 01.04.2001 95,581
2001 – 02 01.04.2002 93,384
2002 – 03 01.04.2003 91,390
2003 – 04 01.04.2004 89,503
2004 – 05 01.04.2005 87,590
2005 – 06 01.04.2006 85,871

27
MANPOWER - Our Strength

• Total Manpower As on 1/4/2009 = 82,782

• As on 1/4/2009

Executives Monthly rated Daily rated Piece rated Co' Trg Total
2781 14,500 61,713 3473 315 82782

• As on 1/4/2009

SCHEDULE SCHEDULE OTHER BACKWARD

OTHERS
CASTE TRIBE CLASS
17301(20.91 %) 19048(23.01 % ) 15348(18.54 %) 31085(37.55 %)

• Total Manpower As on 1/4/2008 = 84,368

• As on 1/4/2008

Piece
Executives Monthly rated Daily rated Co' Trg
rated Total
2718 14,729 62,854 3645 422 84368

28
• As on 1/4/2008

SCHEDULE SCHEDULE OTHER BACKWARD

OTHERS
CASTE TRIBE CLASS
17717(21 %) 19405(23.0 % ) 15692(18.6 %) 31554(37.4 %)

• Total Manpower As on 1/4/2007 = 85,871

• As on 1/4/2007

Piece
Executives Monthly rated Daily rated CO' Trg Total
rated
2745 14,762 63,583 4360 421 85871

• As on 1/4/2007

SCHEDULE SCHEDULE OTHER BACKWARD

OTHERS
CASTE TRIBE CLASS
18033(21 %) 19750(23.0 % ) 15972(18.6 %) 32116(37.4 %)

Welfare Development:

Concerted efforts have been made in South Eastern Coalfields Limited in providing
welfare facilities like Housing, Water Supply, Medical facilities, Educational facilities,
Sports and Cultural activities, as well as Community Development activities under the 20
point program, since its formation on 01-01-1986.

Despite budgetary constraints, the company continues to leas in the matter of welfare
activities as in any other field. Policy on welfare activities is formulated, through
specially constituted welfare board at the corporate level which comprises representatives
of the Central Trade Unions, as well as the Management. Expenditure on welfare is made

29
out of the total welfare budget finalized in consultation with the welfare board. Welfare
activities in the company can be trouped as under:-

1. Housing

2. Water supply

3. Medical

4. Education

5. Sports, cultural & recreational activities and other related matters.

6. Tree plantation.

7. Community development under revises 20 point program.

(A) MEDICAL FACILITIES
1 Hospitals 17
2 Medical Officers 288
3 Dispensaries 47
4 Beds 952
(B) EDUCATION FACILITIES
1 Primary, Middle, Higher School 242
2 Central School. 07
3 D.A.V School 07
4 College 06
5 ITI 02
6 RVV 01
(C) STATUTORY REQUIREMENTS
1 Canteen 88
2 Pit head bath 22
3 Rest Shelters 46

(D) BANKING FACILITIES

1 Bank Branches 80
2 Extension Counter 24

30
3 Satellite Bank Branches 05
(E) RECREATION FACILITIES
1 Play Ground 57
2 Stadium 19
3 Children’s Parks 42
4 Libraries 24
5 Community Hall 28
6 Gymnasium 11
(F) CLUB
1 Officers 37
2 Staff 41
(G) CO-OPERATIVE
1 Primary Co-operative 04
2 Credit Societies 04
3 Central Co-operative Stores 07
(H) HOUSING
1 Target for the year (Standard) -
2 No. of standard houses constructed during the month. -
3 Cumulative total up to Jan. 2006 180
4 Total No. of houses available as on Dec. 2005 since 59279
nationalization.
5 No. of houses construction up to the month 541
(I) WATER SUPPLY
1 Target during the financial year -
2 Additional population covered during the month. -
3 Cumulative total population covered during the financial year. 900
4 Population covered since nationalization. 334490
(J) TREE PLANTATION
1 Target during the financial year 720000
2 Cumulative achievement during the financial year 711500

31
 SAFETY & RESCUE:-

Mission of the Company on Safety

The Company is fully committed to total safety in all aspects of its operations. The
company’s motto is that Safety overrides all production targets. The Company attaches
prime importance to safety of the employees which will not be compromised for any
other considerations.

Safety Policy

Mining is a hazardous profession with many of its activities forcing against the nature.
But in course of time we have learnt to excel in our profession to such an extent that
SECL has made multi-dimensional strides in the field of coal mining. we have formulated
Safety Policy comprises of 27 points, a few of these points attracts special importance are
as summarized below;

1. To plan and design all operations in such a way as to eliminate or materially

reduced the mining hazards.
2. To co-operate with the Directorate of Mines Safety and the mine equipment
manufacturers in developing safer mining systems and equipment as to provide safe
working conditions by suitable changes in technology.
3. To regard safe working as regular precedence for improvisation over unsafe
practices.
4. To bring about improvement in working conditions by suitable changes in
technology.
5. To organize appropriate forum, with employees’ representatives, for joint
consultation on safety matters and to secure their motivation and commitment in safety
management.

32
6. To prepare Annual Safety Plans and Long-term Safety Plans at the beginning of
every calendar year, both for the company and for the individual units, to effect improved
safety in the various operations, as per respective geo-mining conditions.
7. To improve safety standards through counseling and training the accident-prone
persons.
8. To arrange for multi-level monitoring of implementation of the Safety Plans
through Internal Safety Organization at the Head Quarters and at Area levels.To ensure
that all levels of employees continue to reflect safety consciousness in their working as
well as to inculcate accountability towards safety measures amongst them.
9. To institute continuous education, training and re-training of all employees, with
emphasis placed on the development of safety-oriented skill.
10. To make continuous efforts to provide all the employees a good Health - physical,
mental & social.
11. To investigate the cause of any incidence of accident and suggest preventive
measures by Safety Committee and follow up action for remedial measures.

Employees Benefits

Components of wages

1. Basic pay
2. Special dearness allowances @ 17.95 %of attendance bonus.
3. Variable allowance linked to all india consumer price index for industrial worker.
4. Attendance bonus paid quarterly @10% of basic pay.
5. Yearly bonus ( productivity linked /rewards)paid before dussehra festival.
6. Annual increment after completion of every one year of service.
7. Worker engaged in underground mines will be paid underground allowance
according to the basic pay.
Fringe Benefits:
1. Washing allowance
2. Transport subsidy

33
3. Additional transport subsidy
4. Conveyance allowance
5. Travelling over stiff gradient allowance
6. City compensatory allowance
7. Night duty allowance
8. National holiday allowance
9. Working allowance

34
 4.THEORETICAL BACKGROUND
RATIO ANALYSIS

Introduction
Alexander Wall made the presentation of an elaborate system of ratio analysis in 1919.
He criticized the bankers for their lopsided development owing to their decisions
regarding the grant of credit on current ratio alone. Alexander Wall, one of the foremost
proponents of ratio analysis, pointed out that in order to get a complete picture, it is
necessary to consider the other relationship in the financial statement than current ratio.
Since then, more & more types of ratios have been developed and are used for analysis
and interpretation point of view.

Ratio may be defined as “a number expressed in terms of another number.” It shows

relationship of one figure with another figure. It is found by dividing one number by
the other number. It may be expressed as a percentage or in terms of “times” or
proportion or as quotient.

According to Robert N. Anthony “A ratio is simply one number expressed in term of

another”.

Ratio Analysis, therefore, means the process of computing, determining and presenting
the relationship of related items and group of items of the financial statement. “The
relationship between two accounting figures, expressed mathematically, is known as
financial ratio. Ratio analysis is the process of identifying the financial strengths and
weakness of an enterprise by properly establishing relationships between the items of the
balance sheet and profit and loss account”.

35
“The essence of financial soundness of a company lies in balancing its goals, commercial
strategy, product market choices and resultant needs. The company should have financial
capability and flexibility to pursue its commercial strategy. Ratio analysis is a very useful
analytical technique to raise pertinent question on a number of managerial issues. It
provides bases or clues to investigate such issues in detail”.

Ratio analysis is the one of the powerful tools of the financial analysis. “A ratio can be
defined as the indicated quotient of mathematical expression” and as “the relationship
between two or more things”.

Accounting ratios can be expressed in various ways such as: -

A pure ratio, say ratio of current assets to current liabilities is 2:1 or,

i. A ratio, say current assets are two times of current liabilities or

ii. A percentage, say current assets are 200% of current liabilities.

Each method of expression has a distinct advantage over the other. The analyst will
select that method which will best suit his convenience and purpose.

Standard (or Basis) of Comparison of Ratio Analysis: -

The ratio analysis involves comparison for a senseful interpretation of financial

statement. A single ratio in itself does not indicate favourable or unfavourable condition.
It should be compared with some standard. According to Anthony, R.N. and Reece, J.S.
(Management Accounting Principle PP. 260-263), standard of comparison consist of –

1. Ratio calculated from past financial statement of the same enterprise.

2. Ratio developed using the projected or Performa, financial statements of the
same enterprise.
3. Ratio of some selected enterprise, especially the most progressive and
successesful, at the same point of time, and
4. Ratio of the industry to which the enterprise belongs.

36
The easiest way to evaluate the performance of a company is to compare present or
current ratio with the past ratios. If financial ratios over a time are compared, it is known
as the time series or trend analysis. The trend analysis provides an indication of the
direction of change and reflects the performance of an enterprise.

Importance of (or advantage) Ratio analysis:-

Ratio analysis is the process of determining and presenting the relationship of items and
group of items in the financial statements. It is an important technique of financial
stability and health of a concern can be judged. The following are the main points of
importance or advantages of ratio analysis:

1. Useful in financial position analysis: - Accounting ratios reveal the financial

position of the concern. This helps the banks, insurance companies and other
financial institutions in leading and making investment decisions.

2. Useful in simplifying accounting figure: - Accounting ratios simplify,

summaries and systematize the accounting figures in order to make them more
understandable and in lucid form. They highlight the inter-relationship, which
exists between various segments of the business as expressed by accounting
statements.

3. Useful in assessing the operational efficiency: - Accounting ratios help to have

an idea of a concern. The efficiency of the enterprise becomes evident when
analysis is based on accounting ratios. They diagnose the financial health by
evaluating liquidity, solvency, profitability etc. This helps the management to
assess financial requirements and the capabilities of various business units.

4. Useful in forecasting purpose: - If accounting ratios are calculated for a number

of years, than a trend is established. This trend helps in setting up future plans and
forecasting. For example, expenses as a percentage of sales can be easily
forecasted on the basis of sales and expenses of the past years.

5. Useful in locating the weak spots of the business: - Accounting ratios are of a
great assistance in locating the weak spots in the business even through the

37
 overall performance may be efficient. Weakness in financial structure due to
incorrect policies in the past or present are revealed through accounting ratio.

6. Useful in comparison of performance: - Through accounting ratios comparison

can be made between one department of an enterprise with another of the same
enterprise in order to evaluate the performance of various departments in the
enterprise. Managers are naturally interested in such comparison in order to know
the proper and smooth functioning of such departments. Ratios also help them to
make any change in the organization structure.

Limitation of Accounting Ratios (or Ratio Analysis) :-

Ratio analysis is very important in revealing the financial position and soundness of the
business or enterprise. Ratio Analysis is very fashionable these days and useful but it has
some limitations also, which restrict its use. These limitations should be kept in mind
while making use of ratio analysis for interpreting the financial statements. The following
are the main limitations of accounting ratios.

1. False results: - Ratios are based upon the financial statement. In case, financial
statements are incorrect or the data upon which ratios are based is incorrect, ratios
calculated will also be false and defective. The accounting system itself suffers
from many inherent weaknesses, so the ratios based upon it cannot be said to be
always reliable.

For instance, if inventory value is inflated, not only will one have an exaggerated
view of profitability of the concern, but also of it financial position. Also the
ratios worked out on its basis are to be relied upon.

2. Variation in accounting policies: - Financial results of two enterprises are

comparable with the help of accounting ratios only if they follow the same
accounting policy or bases, comparison will become difficult if they two concerns

38
 follow different policies for providing depreciation, valuation of stock etc.
Similarly, if the enterprises are following different standards and methods, an
analysis by reference to the ratio would be misleading. The ratio of the one firm
cannot always be compared with the performance of other firm, if they do not
adopt uniform accounting policies.

3. Price level changes affect ratios: - The third major limitation of the ratio
analysis, as a tool of financial analysis is associated with price level change. This,
in fact, is a weakness of the Traditional Financial Statements, which are based on
Historical cost. As a result, ratio analysis will not yield strictly comparable and,
therefore, dependable results.

To illustrate, there are two firms, which have identical rates of return on
Investment, say, 15%. But one of these had acquired its Fixed Assets when prices
were relatively low while the other one had purchased them when prices were
high. The result will be that the book value of fixed assets of the former firm
would be lower, while that of the later will be high. From the point of profitability
the Return on Investment of the firm with lower book value are over-stated.

4. Absence of standard universally accepted terminology: - Different meanings

are given to particular term, such as some firms take profit before interest and
after tax, other may take profit before interest and tax. Bank overdraft is taken as
current liability but some firms may take it is as non-current. The ratios can be
comparable only when both the firms adopt uniform terminology.

5. Ignoring qualitative factors: - Ratio analysis is the quantitative measurement of

the performance of the business. It ignores the qualitative aspect of the firm, how
so ever important it may be. It shows that ratio is only one-sided approach to
measure the efficiency of the business.

6. No single standard ratio: - There in not a single standard ratio, which can
indicate the true performance of the business at all time, and in all circumstances.
Every firm has to work in different situations and circumstances, so a particular
ratio cannot be supposed to be standard for every one. Strikes, lockouts, floods,

39
 wars, etc. materially affect the performance, so it cannot be matched with the
circumstances in normal days.

7. Misleading results in the absence of absolute data: - In the absence of actual

data, the size of the business cannot be known. If Gross Profit Ratio of two firms
is 25% it may be just possible that the gross profit of one is 2,500 and sales Rs.
10,000, whereas the gross profit and sales of the other firm is Rs. 5,00,000 and
sales 20,00,000. Profitability of the two firms is the same but the magnitude of
their business is quite different.

8. Window dressing: -Many companies, in order to depict rosy picture of their

business indulge in manipulation. They conceal the material facts and exhibit
false position. It makes the Financial Statements and Ratio Analysis based upon
these statements defective. The process of manipulation includes under statement
of Current Liability, over statement of Current Assets, recording the transaction in
the next financial year, showing the purchases of raw material as purchases of
assets etc. Window dress restricts the utility of ratio analysis.

Even when the ratios are worked out correctly, it should be remembered that they
can at best be used like a Doctor uses symptoms – indication that something is
wrong somewhere. Just as the Doctor will try to get to the real reason, in the same
manner the analyst should try to identify the real factor leading to the present state
of affairs. Suppose the ratio of Gross Profit to Sale is low. The reason may be
poor sales, bad purchasing, defective pricing policy, wastage and losses etc. Ratio
thus point out the area that needs investigation –this is only a tool in the hand of
the person trying to get at the truth.

Types of Ratios and their uses:-

Ratios may be classified in a number of ways keeping in view the particular purpose.
Ratios indicating profitability are calculated on the basis of the Profit and Loss Account,
those indicating financial position are computed on the basis of the Balance Sheet and
those which show operating efficiency or productivity or effective use of resources are
calculated on the basis of figures in the Profit and Loss Account and the profitability and

40
 financial position of the business/company. To achieve this purpose effectively, ratios
may be classified into the following four important categories:

1. Liquidity Ratio,

2. Leverage Ratio / Solvency Ratio,

3. Activity Ratio / Turnover Ratio,

4. Profitability Ratio.

41
 5.RESEARCH METHODOLOGY

Liquidity Ratios
To study the liquidity position of the concern in order to highlight the relative strength of
the concern in meeting their current obligation liquidity ratios are calculated. These ratios
are used to measure the enterprise’s ability to meet short-term obligations. These ratios
compare short-term obligation to short-term (or current) resources available to meet these
obligations. From these ratios, much insight can be obtained about the present cash
solvency of the enterprise and the enterprises ability to remain solvent in the event of
adversity. A proper balance between the two contradictory requirements, i.e. Liquidity
and Profitability is required for efficient financial management. The important liquidity
ratios are: -

1. Current Ratio: - This is the most widely used ratio. It is the ratio of Current Assets to
Current Liabilities. It shows an enterprise ability to cover its current liabilities with its
current assets. It is expressed as follows: -

Generally, Current Ratio of 2:1 is considered ideal for any concern i.e. current assets
should be twice the amount of current liabilities. If the current assets are two times the
current liabilities, there will be no adverse effect on business operations when current
liabilities are paid off. If the ratio is less than 2 difficulties may be experienced in the
payment of current liabilities and day-to-day operations of the business may suffer. If the
ratio is higher than 2, it is very comfortable for the creditors but, for the concern, it
indicates accumulation of idle funds and a lack of enthusiasm for work. However this
standard of 2:1 is only quantitative and may differ from industry to industry.

42
2. Liquid or Acid Test or Quick Ratio: - This is the Ratio of Liquid Assets to Liquid
Liabilities. It shows an enterprises ability to meet current liabilities with its most liquid
(quick assets). It is expressed as follows: -

(Quick Assets = Current Assets – Inventory or Stock)

The quick ratio of 1:1 ratio is considered ideal ratio for a concern because it is wise to
keep the liquid assets at least equal to the liquid liabilities at all time. Liquid assets are
those assets, which can be readily converted into cash and will include cash balance, bills
receivable, sundry debtors, and short-term investments. Inventories and prepaid expenses
are not included in liquid assets because the emphasis is on the ready availability of cash
in case of liquid assets. Liquid liabilities include all items of current liabilities except
bank overdraft. This ratio is the “acid test” of a concerns financial soundness.

3. Super Quick or Absolute liquidity Ratio: - Though receivable are generally more
liquid than inventories, there may be debts having doubt regarding their realization in
time. So, to get idea about the absolute liquidity of a concern, both receivables and
inventories are excluded from current assets and only absolute liquid assets, such as cash
in hand, cash at bank and readily realizable securities are taken into consideration.
Absolute liquidity ratio is computed as follows:

43
The desirable norm for this ratio is 1:2, i.e., Rs. 1 worth of absolute liquid assets are
sufficient for Rs 2 worth of current liabilities. Even though the ratio gives a more
meaningful measure of liquidity, it is not in much use because the idea of keeping large
cash balance or near cash items has long since been disapproved. Cash balance yields no
return and as such is barren.

4. Cash Ratio: - Since cash is the most liquid assets, a financial analyst may examine
cash ratio and its equivalent to current liabilities. Trade investment or marketable
securities are equivalent of cash; therefore, they may be included in the computation of
cash ratio:

Ratio of inventory to working Capital: - In order to ascertain that there is no

overstocking; the ratio of inventory to working capital should be computed. It is worked
out as follows:

Working capital is the excess of current assets over current liabilities. Increase in volume
of sales requires increase in size of inventory, but from a sound financial point of view,
inventory should not exceed amount of working capital. The desirable ratio is 1:1.

Leverage Ratio / Solvency Ratio

Long term creditors like debenture holders, financial institution etc., are more concerned
with long-term financial strength of an enterprise. The leverage/ capital structure ratios
are very helpful in judging the long-term solvency position of an enterprise. Leverage
ratio may be calculated from the Balance Sheet items to determine the proportion of debt
in total financing. Many variations of these ratios exist; all these ratios indicate the same
thing i.e., the extent to which the enterprise has relied on debt in financing assets.
Leverage ratios are also computed from the income statement items by determining the

44
extent to which operating profits are sufficient to cover the fixed charges. The important
long-term solvency/leverage/capital structure ratios are as follows:

1. Debt-Equity Ratio: - This ratio relates debts to equity or owners funds. Here, Equity
is used in a broader sense as net worth (i.e., capital + retained earnings) while debt
normally means long-term interest bearing loans.

External equities are outsiders fund while internal equities represent shareholders funds.
Outsiders’ fund includes Long-term debt / liabilities. Shareholders funds or equity
consists of preference share capital, equity share capital, profit & loss a/c (Cr. Balance),
Capital reserves, revenue reserves and reserves representing marked surplus, like reserves
for contingencies, sinking funds for renewal of fixed assets or redemption of debentures
etc., less fictitious assets. In other words, shareholders funds or equity is equal to Equity
share capital + preference share capital + reserves & surplus etc.
This ratio is very useful for analysis for long-term financial condition. This ratio
signifies the excess of proprietor’s funds over outsiders’ funds and thereby indicates the
soundness of the financial / capital structure of the business enterprise.

2. Proprietary Ratio: -This ratio indicates the relationship between proprietary fund and
total assets. The Proprietary funds include Equity Share Capital, Preference Share
Capital, Revenue, Capital Reserves and accumulated surplus. Total Assets include Fixed,
Current and Fictitious assets.
This ratio is very important for the creditors, because they know the share of
Proprietors Funds in the total assets and satisfy how far their loan is secured. The higher
the ratio, the more safety will be to the creditor. The ratio also shows the general financial
position of the company also. 50% is supposed to be the satisfactory Proprietary Ratio for
the creditors. Less than 50% is the sign of risk for creditors. The following formula is
used to calculate Proprietary Ratio: -

45
 (Total Assets = Fixed Assets + Current Assets)
3. Debt Ratio: -Several debt ratios may be used to analyze the long-term solvency of an
enterprise. The enterprise may be interested in knowing the proportion of the interest
bearing debt (also called funded debt) in the capital structure. It may, therefore, compute
debt ratio by dividing total debt by capital employed or net assets.

4. Capital Employed to Net Worth Ratio: - There is yet another alternative way of
expressing the basic relationship between debt and equity. One may want to know, how
much funds are being contributed together by lenders and owners for each rupee of the
owners contribution. This can be found out by calculating the ratio of capital employed or
net assets or net worth.

(Capital Employed = Shareholders fund + Long-term liabilities)

Activity or Turnover Ratio:

These ratios are very important for a concern to judge how well facilities at the disposal
of the concern are being used or to measure the effectiveness with which a concern uses
its resources at its disposal. In short, these will indicate position of assets usage. These
ratios are usually calculated on the basis of sales or cost of sales and are expressed in
integers rather than as a percentage. Such ratios should be calculated separately for each
type of assets. The greater the ratio more will be efficiency of assets usage. The lower

46
ratio will reflect underutilization of the resources available at the command of concern.
The concern must always plan for efficient use of the assets to increase the overall
efficiency. The following are the important activity or turnover ratios usually calculated
by a concern:

1. Sales to capital Employed (or Capital Turnover) Ratio: - This ratio shows the
efficiency of capital employed in the business by computing how many times capital
employed is turned over in a stated period. The ratio ascertained as follows:

(Shareholders Fund +Long-term Liabilities)

The higher the ratio, the greater are the profits. A low capital turnover ratio would mean
that sufficient sales are not being made and profits are lower.

2. Sales to Fixed Assets (or Fixed Assets turnover) Ratio: - This ratio measures the
efficiency of the assets use. The efficient use of assets will generate greater sales per
rupee invested in all the assets of a concern. The inefficient use of the assets will result in
low sales volume coupled with higher overhead changes and under utilization of the
available capacity. Hence the management must strive for using total resources at
optimum level, to achieve higher ratio. This ratio expresses the number of times fixed
assets are being turned over in a stated period. It is calculated as under:

(Net Fixed Assets = Fixed Assets Less Depreciation)

This ratio shows how well the fixed assets are being used in the business. The ratio is
important in case of manufacturing concern because sales are produced not only use of

47
current assets but also by amount invested in fixed assets. The higher in the ratio, the
better is the performance. On the other hand, a low ratio indicates that fixed assets are not
being efficiently utilized.

3. Sales to working capital (or Working Capital Turnover) Ratio: - This ratio is
shows the number of times working capital is turnover in a stated period. It is calculated
as below: -

(Net Working Capital = Current Assets – Current Liabilities)

The higher is the ratio, the lower is the investment in working capital and the greater are
the profits. However, a very high turnover of working capital is a sign of overtrading
which may put the concern into financial difficulties. On the other hand, a low working
capital turnover ratio indicates that working capital is not efficiently utilized.

4. Total Assets Turnover Ratio: - This ratio is calculated by dividing the net sales by
the value of total assets.

(Total Assets = Net Fixed Assets + Investments + Current Assets)

A high ratio is an indicator of overtrading of total assets while a low ratio reveals idle
capacity. The traditional standard for this ratio is two times.

5. Inventory or Stock Turnover Ratio: - This ratio indicates the number of times
inventory is rotated during the year. It is calculated as follows:

and Cost of goods sold = Sales – Gross profit )

48
If only closing inventory data is given and opening inventory data is not available then
the formula will be as follows:

However, this formula should be applied only when the opening inventory figures are not
available.

The inventory turnover ratio measures how quickly stock is sold. It is really a test of
stock (inventory) management. In general high inventory turnover ratio is good. Yet a
very high inventory turnover ratio requires careful analysis. Because very high ratio will
lower investment in inventory, and lower investment in inventory is considered to be very
dangerous. Similarly, very low inventory turnover is also dangerous as there will be very
heavy amount invested in inventory.

6. Receivable (or Debtors) Turnover Ratio: - Receivable turnover ratio is the

comparison of sales with uncollected amounts from debtors or customers to whom goods
were sold on credit basis. If the enterprise is having a large amount of debtors, it will
have a low ratio. Conversely, with prompt collection from debtors, the debtor’s balance
will be low and the debtors’ turnover ratio will be high. In other words, the debtors or
receivable turnover is the test of liquidity of a business enterprise.

If some information, i.e. figures for Credit sales, opening figures of debtors or bills
receivable etc., is not available them the following formula can be used:

49
It should be noted that the first formula is superior to second formula as the question of
speed of conversion of sales into cash arises only in case of credit sales.

7. Creditors Turnover (or Accounts Payable) Ratio: - This ratio gives the average
credit period enjoyed from the creditors and is calculated as under:

(Average Account Payable = (Average Creditors + Average Bills Payable)

A low ratio indicates that the creditors are not paid in time while a high ratio gives an
idea that the business in not taking full advantages of credit period allowed.

Profitability Ratio:

Profitability is the overall measures of the companies with regard to efficient and
effective utilization of resources at their command. It indicates in a nutshell the
effectiveness of the decision taking by the management from time to time. Profitability
ratios are of at most importance for a concern. These ratios are calculated to enlighten the
end result of business activities, which is the sole criterion of the overall efficiency of a
business concern. The following are the important profitability ratios:

1. Gross Profit Ratio: - This ratio tells gross profit on trading and is calculated as under:

(Gross Profit = Net Profit + Interest + Prior Period Item + Extra Ordinary Expense –
Extra Ordinary Income)

Higher the ratio the better it is, a lower ratio indicates unfavorable trends in the form of
reduction in selling prices not accompanied by proportionate decrease in cost of goods or
increase in cost of production.

50
A high gross profit margin ratio is a good sign to management or owners. This high ratio
can be due to:

(i) High sales price, cost of good sold remaining constant,

(ii) Lower cost of good sold, sales prices remaining constant,

(iii) An increase in the proportionate volume of higher margin items.

(iv) A combination of variations in sales prices and costs, the margin widening.

A low gross profit margin ratio may be due to:

(i) Higher cost of goods sold as the enterprise is not getting the raw materials at
lower prices.

(ii) Inefficient utilization of production capacity.

(iii) Over-investment in plant and machinery.

2. Gross Margin Ratio: - This is also known as gross margin. It is calculated by diving
gross margin by net sales. Thus

(Gross Margin = Gross Profit + Depreciation of P/L + Depreciation of Sch 10(SOH)

+ Extra Ordinary expenses – Extra Ordinary Income)

3. Net Profit Ratio: - This ratio explains per rupee profit generating Capacity of sales. If
the cost of sales is lower, then the net profit will be higher and then we divide it with the
net sales, the result is the sales efficiency. The concern must try for achieving greater
sales efficiency for maximizing the Ratio. This ratio is very useful to the proprietors and
prospective investors because it reveals the over all profitability of the concern. This is
the ratio of net profit after taxes to net sales and is calculated as follows:

51
The ratio differs from the operating profit ratio in as much as it is calculated after
deducting non-operating expenses, such as loss on sale of fixed assets etc., from
operating profit and adding non-operating income like interest or dividends on
investments, profit on sale of investments or fixed assets etc., to such profit.

Higher the ratio, the better it is because it gives idea improved efficiency of the concern.

4. Operating Expenses Ratio: - It is an important ratio. It explains the changes in the

profit margin ratio. The operating expenses ratio is calculated as follows:

(Operating Expenses = Net sales - Net Profit before Tax )

Note: - Interest on loans will not be included in operating expenses.

A higher operating expenses ratio is not favorable, as it will leave a very small amount of
operating income to meet interest and dividend etc.

6. Return on capital Employed: - This ratio is an indicator of the earning capacity of

the capital employed in the business. This ratio is calculated as follows:

(Operating Profit = Profit before interest on long-term borrowings and tax)

52
Capital Employed = Equity Share Capital + Preference Share Capital + Undistributed
profit + Reserve & Surplus + Long-term Liabilities – Fictitious Assets – Non-business
Assets )

Or

Tangible Fixed Assets and Intangible Assets + Current Assets – Current Liabilities.

This ratio considered being the most important ratio because it reflects the overall
efficiency with which capital is used. This ratio is a helpful tool for making capital
budgeting decisions; a project yielding higher return is favored.

6. Return on Investment (ROI): - The term investment may refer to total assets or net
assets. The funds employed in net assets are known as capital employed.

Net Assets = Net Fixed Assets + Current Assets – Current Liabilities (excluding Bank
loans)

Or

Capital Employed – Net Work + Debt.

Higher the ratio, better it is.

53
 6.DATA ANALYSIS
Some ratios and their comment based on the Annual Accounts of South Eastern
Coalfields Ltd. are computed below. There data is Rs. in lakhs)

Liquidity Ratio
(1) Current Ratio (CR): -

Year 2007 2008 2009 2010

Current 607796.57/ 729358.83/634860.4 829503.93/708286.7 939596.30/

Ratio 513682.02 =1.15 4 803840.21
=1.18 =1.17 =1.17

1.2
1.18 1.15 1.17 1.17
1.0

0.8
Current Ratio

0.6

0.4

0.2

0.0
2007 2008 2009 2010

Years
54
 Figure: 6 Shows current ratio in different financial year.

Comment: -
From the above figures it is evident that Current Ratio decreases from 1.18 to 1.17
from 2007 to 2010 financial year. The decrease has been on account of decrease in
Cash and Bank balances and Advances. Ideal Current Ratio is taken as 2:1
however it is quantitative rather than qualitative thus despite the Current Ratio
being less than 2 the company’s liquidity position is sound.

(2) Liquid Ratio (LR) / Quick Ratio / Acid Test Ratio: -

Year 2007 2008 2009 2010

Current 561956.42/ 681944.71/634860.40 780082.75/708286.7 875095.57/

Ratio 513682.02 =1.07 4 803840.21
=1.09 =1.10 =1.09

1.09 1.07 1.10 1.09

1.0

0.8
Liquid Ratio

0.6

0.4

0.2

0.0
2007 2008 2009 2010
Years
Figure: 7 Shows current ratio in different financial year.

55
Comment: -
Generally Quick Ratio / Liquid Ratio of 1:1 is considered satisfactorily. As we
can see the company’s Quick / Liquid Ratio is found almost constant in financial
years from 2007 to 2010 except 2008. This shows sound liquidity position of the
company.
(3) Cash Ratio (CR): -

Current Liabilities

Year 2007 2008 2009 2010

Current 321261.18/ 399620.79/ 545136.34/7082 699522.84/

Ratio 513682.02 634860.40 86.74 803840.21
=0.63 =0.63 =0.76 =0.87

0.87

0.8 0.76

0.63 0.63
0.6
Cash Ratio

0.4

0.2

0.0
2007 2008 2009 2010

years
Figure: 7 Shows Cash ratio in different financial year.

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 Comment: -
Increase in Cash Ratio is an indicator of strong liquidity position of the company. This
shows that the company has a good paying capacity and the Creditors / lenders can safely
rely on the company for the credit provided to the company by them.

4. Inventory to Working Capital Ratio: -

Year 2007 2008 2009 2010

Current 51863.34/9 50812.81/9 49421.18/12121 64500.73/1

Ratio 8947.65 9087.21 7.19 35756.09
=0.52 =0.51 =0.41 =0.48

0.51 0.52
0.5 0.48
Inventory to working Capital Ratio

0.41
0.4

0.3

0.2

0.1

0.0
2007 2008 2009 2010
Years
Figure: 8 Shows Inventory to working capital ratio in different financial year.

57
Comment: -
Generally the Inventory to Working Capital Ratio less than 1 is considered satisfactorily.
We can see this Working Capital is almost decreases with respect to financial years
showing sound working capital position of the company.

Leverage Ratio

(1) Debt- Equity Ratio: -

Year 2007 2008 2009 2010

Current 37529.99/4 33730.13/4 39218.3447668 31479.72/5

Ratio 08028.47 45952.47 1.14 39765.09
=0.092 =0.076 =0.082 =0.058

0.092

0.082
0.08 0.076

0.058
Debt-Equity Ratio

0.06

0.04

0.02

0.00
2007 2008 2009 2010

years
Figure: 9 Shows debt-equity ratio in different financial year.

58
Comment: -

This ratio reflects share of debt in the Net Worth. The company’s Ratio of 0.058 indicates
a moderate level of debt in the company. Reduction of Debt – Equity Ratio shows that
the company has liquidated its debt in time. The Debt-Equity of 0.058 also shows that the
company is mainly relying on shareholders fund for doing the business.

(2) Proprietary Ratio: -

Year 2007 2008 2009 2010

Current 408028.47/ 445952.47/ 476681.14/1218 539765.09/

Ratio 927174.48 1084760 422.2 1366815
=0.44 =0.41 =0.39 =0.39

59
 0.44
0.41
0.4 0.39 0.39

0.3
Proprietary Ratio

0.2

0.1

0.0
2007 2008 2009 2010

Figure: 10 Years
Shows Proprietary Ratio in different financial year.

Comment: -

Creditor’s loan is safe because Proprietary Ratio is 0.44 as against the satisfactory ratio of
0.5 times.

(3) Debt Ratio: -

60
Year 2007 2008 2009 2010

Current 37529.99/4 33730.13/4 39218.34/51589 31479.72/5

Ratio 45558.46 79682.6 9.45 71244.81
=0.084 =0.07 =0.076 =0.055

0.084
0.08 0.076
0.07

0.06
0.055
Debt-Ratio

0.04

0.02

0.00
2007 2008 2009 2010

Figure: 11 Years
Shows Debt Ratio in different financial year.

61
Comment: -
This ratio reflects share of debt in the Capital Employed. The company’s ratio of
0.055 in 2010 indicates a low level of Debt in the company. Reduction of Debt
Ratio from 0.084 in 2007 to 0.055 in 2010 shows that the company is
continuously relying on own funds.

4. Capital Employed to Net Worth: -

Year 2007 2008 2009 2010

Current 445558.46/ 479682.6 515899.45/4766 571244.81/

Ratio 408028.47 /445952.47 81.14 539765.09
=1.09 =1.07 =1.08 =1.05

62
 1.09 1.07 1.08
1.05
1.0
Capital Employed to Net Worth

0.8

0.6

0.4

0.2

0.0
2007 2008 2009 2010
Figure: 12 Yearsratio in different financial year.
Shows Capital Employed to Net Worth

Comment: -
This shows that as on 31st March 2010 for every rupee of owner’s contribution. Rs. 1.09
is contributed together by Lenders and Owners. This reflects that the company is not
dependent on borrowed capital.

Activity Ratio

(1). Sales to Capital Employed Ratio: -

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 Year 2007 2008 2009 2010

Current 764625.56/ 872803.55 1016660.93/515 1121901.69

Ratio 445558.46 /479682.6 899.48 /571244.81
=1.71 =1.82 =1.97 =1.96

2.0 1.82 1.97 1.96

1.71
Sales to Capital Employed Ratio

1.5

1.0

0.5

0.0
2007 2008 2009 2010
Years
Figure: 13 Shows Sales to Capital Employed Ratio in different financial year.

Comment: -

This Ratio ensures whether the capital employed has been effectively used or not. The
increase in the ratio to 1.71 in 2007 from 1.97 in 2009 shows better utilization of
resources in the year 2009.

64
2. Sales to Fixed Assets Ratio: -

Year 2007 2008 2009 2010

Current 764625.56/ 872803.55 1016660.93/121 1121901.69

Ratio 927174.48 1084760 8422.2 /1366815
=0.82 =0.8 =0.83 =0.82

0.82 0.80 0.83 0.82

0.8
Sales to fixed assets Ratio

0.6

0.4

0.2

0.0
2007 2008 2009 2010
Years
Figure: 14 Shows Sales to Fixed Assets Ratio in different financial year.

65
 Comment: -
As we know in case of Sales to Fixed Assets Ratio that the higher the ratio the better in
the performance. From the above data there is almost constant in ratio, this means that the
utilization of fixed assets is not sufficient effective. It indicates not an ideal performance.

3. Sales to Working Capital Ratio: -

Year 2007 2008 2009 2010

Current 764625.56/ 872803.55/ 1016660.93/121 1121901.69

Ratio 99087.21 98947.65 217.19 /135756.09
=7.7 =8.8 =8.3 =8.3

66
 8.8
8.3 8.3
Sales to Working Capital Ratio 8 7.7

0
2007 2008 2009 2010

Figure: 15 Shows Sales to WorkingYears

Capital ratio in different financial year.

Comment: -
This shows that the company could manage to achieve better result in 2007 with less
Working Capital. This above ratio also shows that during the year 2008 the company
could not utilized its resources in the way it utilized in 2007.

3. Debtors in No. Of Month Sales (DMS): -

Year 2007 2008 2009 2010

Current 25905.42/6 27641.41 19860.63/84721 21234.87/9

Ratio 3718.8 /72733.63 .8 3491.8
=0.41 =0.38 =0.23 =0.24

67
(Per month Gross Sales = Gross Sales / 12)

0.41
0.4
0.38
Debtors in No. Of Month Sales (DMS)

0.3

0.23 0.24

0.2

0.1

0.0
2007 2008 2009 2010
Years
Figure: 16 Shows Debtors in No. Of Month Sales (DMS)in different financial
year.

Comment: -

The decrease in ratio in the years (in comparison with 2007), shows better realization
position of the company against its sales in 2008-2010 financial years.

4. Store of Stock & Spares in Numbers of Months Consumption (Revenue Mines): -

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 Year 2007 2008 2009 2010

Current 50812.81/7 51863.34 49421/8868 64500.73/9

Ratio 746 /7076.84 =5.6 162.5
=6.6 =7.3 =7
Store of Stock & Spares in Numbers of Months Consumption

7.3
7
7
6.6

6 5.6

0
2007 2008 2009 2010
Figure: 17 Shows Store of Stock & SparesYears
in Numbers of Months Consumption in
different financial year.

69
Comment: -
The reduction in the ratio in 2009 shows better utilization of fund and better inventory
management of the company. It also shows that the company has avoided unnecessary
locking of its funds in inventory.

5. Total Assets Turn-over : -

Year 2007 2008 2009 2010

Current 632369.85/ 718159.31/ 848567.45/1218 937156.86/

Ratio 927174.48 1084760 422.2 1366815
=0.68 =0.66 =0.7 =0.68

70
 0.7
0.68 0.66 0.68
Total Assets Turn-over

0
2007 2008 2009 2010
Years
Figure: 18 Shows Total Assets Turn-over in different financial year.

Comment: -

The increase in the ratio in 2009 shows better utilization of its resources.

Profitability Ratio

1. Gross Profit Ratio: -

Year 2007 2008 2009 2010

Current 28.11% 28.79% 21.42% 32.69%

Ratio

71
 2007
2008
26% 2009
2010

25%

19%

29%

Figure: 19 Shows Gross Profit Ratio in different financial year.

Comment: -

The increase in the ratio shows the better performance of the company in the year 2010 as
compared to 2009.

2. Net Profit Ratio : -

72
 Year 2007 2008 2009 2010

Current 19.6% 18.9%/ 12.2% 22.6%

Ratio

2007
2008
2009
2010 17%

31%

26%

27%
Figure: 20 Shows Net Profit Ratio in different financial year.

Comment: -

The increase in the ratio shows the better performance of the company in the year 2010 as
compared to 2009.

73
3. Operating Expenses Ratio : -

Year 2007 2008 2009 2010

Current 59.5% 58.6% 65.6% 56.2%

Ratio

74
 70

60
59.5 58.6
65.6
56.2
2007
2008

Operating Expenses Ratio

50

40
2009
30
2010
20 27%
10

0
2007 2008 2009 2010
years

23%

24%

25%

Figure: 21 Shows Operating Expenses Ratio in different financial year.

Comment: -

The increase in the ratio shows the better performance of the company in the year 2009 as
compared to other financial years.

7.FINDINGS
SECL being a public sector company has its primary function, to operate towards the
benefit of the society and also to contribute towards national economy. The responsibility
of a public sector company is mainly aimed at the national interest. Since, the sales is
increasing over the year this results in the reduction in the cost. SECL has a monopoly in
its industry having competition only with other subsidiaries of CIL which is an added
advantage to increasing its sales and profit. SECL have recently awarded with MINI
RATNA AWARD.

75
A Current Ratio show continues decrease in Cash, Bank balances and Advances of
company in 2007 to 2010 financial years. Company has sound liquidity in 2007-
2010 financial years. We have seen that Working Capital is almost decreases with
respect to financial years showing sound working capital position of the company. Debt
– Equity Ratio shows that the company is mainly relying on shareholders fund for doing
the business. Proprietary Ratio indicates that the creditor’s loan is safe. Capital Employed
to Net Worth ratio reflects that the company is not dependent on borrowed capital. Sales
to Capital Employed Ratio increases in 2007 to 2009 shows better utilization of resources
in the year 2009.

We can see this Working Capital is almost decreases with respect to financial years
showing sound working capital position of the company. Net Worth ratio reflects share
of debt in the Net Worth. The company’s Ratio of 0.058 indicates a moderate level of
debt in the company. Reduction of Debt – Equity Ratio shows that the company has
liquidated its debt in time. The Debt-Equity of 0.058 also shows that the company is
mainly relying on shareholders fund for doing the business. Creditor’s loan is safe
because Proprietary Ratio is 0.44 as against the satisfactory ratio of 0.5 times. This ratio
reflects share of debt in the Capital Employed. The company’s ratio of 0.055 in 2010
indicates a low level of Debt in the company. Reduction of Debt Ratio from 0.084 in
2007 to 0.055 in 2010 shows that the company is continuously relying on own funds.
This shows that as on 31st March 2010 for every rupee of owner’s contribution. Rs. 1.09
is contributed together by Lenders and Owners. This reflects that the company is not
dependent on borrowed capital. This Ratio ensures whether the capital employed has
been effectively used or not. The increase in the ratio to 1.71 in 2007 from 1.97 in 2009
shows better utilization of resources in the year 2009. As we know in case of Sales to
Fixed Assets Ratio that the higher the ratio the better in the performance. From the above
data there is almost constant in ratio, this means that the utilization of fixed assets is not
sufficient effective. It indicates not an ideal performance. This shows that the company
could manage to achieve better result in 2007 with less Working Capital. This above ratio
also shows that during the year 2008 the company could not utilized its resources in the
way it utilized in 2007. The decrease in ratio in the years (in comparison with 2007),
shows better realization position of the company against its sales in 2008-2010 financial

76
years. The reduction in the ratio in 2009 shows better utilization of fund and better
inventory management of the company. It also shows that the company has avoided
unnecessary locking of its funds in inventory. The increase in the ratio in 2009 shows
better utilization of its resources.

8.SUGGESTIONS / RECOMMENDATIONS

77
 9.CONCLUSION
SECL, emphasis on the compliance of environmental legislation prevention of
pollution .It has tried to maintain harmonious relations between the management, workers
and trade union. At the same time it has developed a sound and active industrial relation.
With the good industrial relation which is being prevailing in SECL is helping industry to
grow as one of the leading companies in India. the employees are satisfied mostly by the
decision of the consultative committee the decision are made by taking into account the
suggestion of the union which are their to help the workers so that they could not get
suppress by the management and could be treated as assets of the company and not as
mere resources. Some basic conclusions are:

78
 A Current Ratio show continues decrease in Cash, Bank balances and Advances of
company in 2007 to 2010 financial years. Company has sound liquidity in 2007-
2010 financial years. We have seen that Working Capital is almost decreases with
respect to financial years showing sound working capital position of the company. Debt
– Equity Ratio shows that the company is mainly relying on shareholders fund for doing
the business. Proprietary Ratio indicates that the creditor’s loan is safe. Capital Employed
to Net Worth ratio reflects that the company is not dependent on borrowed capital. Sales
to Capital Employed Ratio increases in 2007 to 2009 shows better utilization of resources
in the year 2009.

10.BIBLIOGRAPHY
• Saha, suranjan-Practical Business Mathematics and Statistics, first edition (Tata McGraw
Hill, New Delhi)
• Kothari, C.R-Research Methodology, second edition , (New Age International
Publishers)
• C.B mamoria -Personal management (Himalaya Publishing House. Mumbai)
• T.N chhabra-Human resource management (Dhanpati rai publication)

• SECL PROFILE 2007-2010 Published by SECL Bilaspur

79
• SECL MONTHLY REPORT

• “Welfare Activities in SECL”-Journal Published by SECL Bilaspur.

WEBSITES:

1. www.SECL.nic.in-Official website of SECL Bilaspur.

2. www. secl@google.com
3. www.coalindia.ac.nic

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