INTRODUCTION TO FINANCIAL MANAGEMENT

In the modern world, all the activities are concerned with the economic activities and
very particular to earning profit through any venture or activities. The entire business activities
are directly related with making profit. (According to the economics concept of factors of
production, rent given to landlord, wage given to labor interest given to capital and profit given
to share holders or proprietors), a business concern needs finance to meet all the requirements.
Hence finance may be called as capital, investment, fund etc.., but each term is having different
meanings and unique characters .Increasing the profit is the main aim of any kind of economic
activity.
NATURE OF FINANCIAL MANAGEMENT:
Financial Management is that managerial activity which is concerned with the planning
and controlling of the firms financial resources. As a separate activity or discipline it is of
recent origin it was a branch of economics till 1890. Still today it has no unique body of
knowledge of its own, and it draws heavily on economics for its theoretical concepts.
DEFINITION:
The subjects of financial management are of immerse interest to both academicians and
practicing managers. It is of great interest to academicians because the subject is still
developing, and there are still certain areas where controversies exist for which no unanimous
solutions have been reaching as yet. Practicing managers are interested in this subject because
among the most crucial decisions of the firms are those which relate to finance and an
understanding of the theory of financial management provides them with conceptual and
analytical insights to make those decisions skillfully.
SCOPE OF FINANCE FUNCTIONS
Three most important activities of a business firm are:
1

Finance

Production

Marketing.

The firm secures capital it needs and employs it in activities, which generate returns on
invested capital. A business firm thus is an entity that engages in activities to perform the
functions of finance, production and marketing.
The raising of capital funds and using them for generating returns and paying returns to
the suppliers of funds is called the finance function of the firm. The main functions of the
financial managers are to plan for analyzing and utilizing funds to make the maximum
contribution for the operation of the organization.
It realizes knowledge of the financial market from which the funds are drawn. It
realizes knowledge of how to make sound investment decisions and to simulate efficient
operations in the organization.
A large number of alternative choices involved in financial decisions. The choices
include the use of internal resources, external funds, Long-term funds a higher rate of growth
or lower rate of growth and soon.
FUNCTIONS OF FINANCE
1. Investment Decision
2. Working Capital Management
3. Financing Decision
4. Dividend Policy Decision
THE CHANGING ROLE OF FINANCIAL MANAGEMENT
As with many things in the contemporary world financial management has undergone
significant changes over the years. The financial management had a very limited role in a business
enterprise. Finance manager is responsible only for maintaining financial records, preparing
reports of the companys status, performance and arranging funds recorded by the company so that
it would meet its obligation in time.

The financial manager as a matter of fact, was regarded as a specialized staff officer in
the company concerned only with administering sources of funds. He was called upon only when
the company experienced the problem of shortage of funds. The management relates the financial
manager to locate suitable continued in recent years.
First there was been increased belief that source of capital produce requires accurate
measurements of the cost of capital. Secondly capital has been in short supply the old interest in
the ways of raising funds.
Third, there has been a continued activity that has led to revealed interest in takeovers.
Fourth accelerated progress in transportation and communication has brought the countries of the
world close together. They in turn have stimulated interest in the international finance. Finding the
firms appropriate role in efforts they solve these problems, demanding on increasing proportion of
these items of financial managers.
The financial system is possibly the most important institutional and functional vehicle
for economic transformation. Finance is a bridge between the present and the future and whether
the mobilization of savings or their efficient, effective and equitable allocation for investment, it
the access with which the financial system performs its functions that sets the pace for the
achievement of broader national objectives.
According to Christy, the objective of the financial system is to supply funds to various
sectors and activities of the economy in ways that promote the fullest possible utilization of
resources without the destabilizing consequence of price level changes or unnecessary
interference with individual desires.
According to Robinson, the primary function of the system is to provide a link between
savings and investment for the creation of new wealth and to permit portfolio adjustment in the
composition of the existing wealth.

A financial system or financial sector functions as an intermediary and facilitates the flow
of funds from the areas of surplus to the deficit. It is a composition of various institutions,
markets, regulations and laws, practices, money manager analyst, transactions and claims and
liabilities.
The word system implies a set of complex and interrelated factors organized in a
particular form. These factors are mostly interdependent but not always mutually exclusive. The
financial system of any country consists of several ingredients. It includes financial institutions,
markets, financial instruments, services, transactions, agents, claims and liabilities in the
economy.
Financial system is a system to canalize the funds from the surplus units to the deficit
units. Deficit units is a case where current expenditure exceeds their current income. There are
other entities whose current income exceeds current expenditure which is called as Surplus
Units. An efficient financial system not only encourages savings and investments, it also
efficiently allocates resources in different investment avenues and thus accelerates the rate of
economic development.
The financial system of a country plays a crucial role of allocating scarce capital
resources to productive uses. Its efficient functioning is of critical importance to the economy. It
is a system for the efficient management and creation of finance. The economic development of
a nation is reflected by the progress of the various economic units, broadly classified into
corporate sector, government and household sector. While performing their activities these units
will be placed in a surplus/deficit/balanced budgetary situations.
Definitions
According to Robinson, financial system provides a link between savings and
Investment for the creation of new wealth and to permit portfolio adjustment in the position of
the existing wealth.

According to Van Horne, financial system is defined as the purpose of financial Markets
to allocate savings efficiently in an economy to ultimate users either for investment in real
assets or for consumption.
Thus the financial system mainly stands on three factors:
1) Money is the unit of exchange or medium of payment. It represents the value of
financial transactions in qualitative terms.
2) Credit, on the other hand, is a debt or loan which is to be returned normally with
interest.
3) Finance is monetary wealth of the state, an institution or a person. Comprising these
factors in a systematic order forms a financial system.
Objectives of the financial system
Accelerating the growth of economic development.
Encouraging rapid industrialization.
Acting as an agent to various economic factors such as industry, agricultural sector,
government etc.
Accelerating rural development.
Providing necessary financial support to industry
Financing housing and small scale industries.
Development of backward areas, infrastructure and livelihood.
Imposing price control in need.
Protecting environment.
The evolution of the financial system in India is nothing but the reflections of its political
and economic history. The evolution process has been influenced by the factors of urbanization
of society, advent or large scale industrialization, introduction of railways and telegraphic
communications in the 19th century, nationalization of financial institutions in 20th century and
implementation of information technology on the eve of the 21st century. Government policies
have greatly influenced the interest rates, credit control and functions of financial intermediaries.

INTRODUCTION TO BUDGET & BUDGETARY CONTROL

The management is efficient if it is able to accomplish the objectives of the enterprise it
is effective when it accomplish the objectives with minimum effort and most in attain long-rang
efficiency and systematic approach in facilitate effective management performance is profit
planning and control or budgeting. Budgeting is therefore an integral part historical combination
of a goal setting machine for increasing an enterprises profits and a goal setting machine for
facilitating generation coordination

and planning while achieving machine for facilitating

generational coordination and planning while achieving the budgeted gets

MEANING OF BUDGET
It is a financial and quantitative statement prepared and approved or to a defined period
of time of policy to be pursued during that period purpose of attaining a gaining a given
objective it may include income expenditure and employment capital.
In other words it is a predefined detailed plan of action development distributed as a guide
operation and as partial bases for subsequent evolution of performance
MEANIING OF BUDGETORY
The process of planning all flows of financial resources into within form a entity doing
some specified future period it includes providing detailed allocation of available future
resources to projects responsibilities and time period form above definition I it clear that
budgeting is the actual act of carrying budget it is the process of evolving the final statement yet
is the end product of budgetary
ESSENTIAL OF GOOD BUDGET:
1) It is prepared prior defined period of time.
2) It is prepared for the definite future period.
3) It is monitory and /or quantitative statements of the policy.

MEANIING OF BUDGETORY CONTROL

It is the process of the establishing of the departmental budget relating the responsibilities
of executives to the requirements of a policy and the continuous comparison of actual with
budgeted results either to secure by individual action the objectives of that policy or to provide a
frame bases

for revision. First of all budgets are prepared and then actual results are the

comparison of budgeted and actual figures will enable management to out discrepancies and take
remedial measure at a proper time the budgetary controls a continuous process which helps in
planning and coordination it provides method of control to a budget is means and budgetary
control is the end results.
In the words of J.A. scolt budgetary control is the system of management control and
accounting in which all operations are forecast so as possible planned a head and actual results
compared with the forecast and the planned once
OBJECTIVES OF BUDGETORY CONTROL
The primary of budgetary controls to help the management a systematic planning controlling the
operations of enterprises the primary objective can be meat only if there is proper
communication and coordination among different organization. Thus the objectives can be stated
as;
Coordination
Communication
Controls and performance evolution.
BUDGET, BUDGETING AND BUDGETORY CONTROL
A budget is a blue print of a plan expressed in a quantitative terms budgeting is a
technique budgetary terms to the principles procedures and practice of achieving given
objectivities through budgets. Form the above definition we can differentiated the three terms as
budgets are the individual objectivities of a department etc where as budgeting may be said to
act of building budgets budgetary control embraces all and in addition includes the science of
planning the budgets to effect on overall management tool the business planning and control.

It is well recognized that budget are among the essential tools of management of any
organization unlike

other management aids, budgets are made use of practically by all

functionaries in the organization. Budgets not only reflect the plan of action for different levels
of management but are also useful to monitor various activates and initiate mid course
corrective actions. Budgets just do not reduce the managerial function to a mere formula but
aids as a managerial tool.
Hence effective use of this art as well science. Thus it needs continuous budget
education and creation of evaluation and performance through budgets.

Budgets provide

management summarized picture of the results to be expected, also forms the proposed plan of
operations. They enable the management to determine whether the plan is satisfactory. Budgets
serve as a guide to executives and departmental heads. They measure performance since
Budget Deviations reflect either the organization failure to achieve the planned standards of
performance or its ability to better them.
Thus budgeting is a means of obtaining the most productive and profitable use of the
companies resources through planning and control. Budgets are helpful in coordination the
various activities (Such as production, sales, purchase etc) of the organization with the result that
the activities precede according to the objective.
Budgets are means of communication. Ideas of the top management are given the
shape of the budget and are passed on the subordinates who are to give them the practical shape.
As the activities of various departmental heads are coordinated at the preparation of budget, it is
helpful in developing a team work which is very much needed for the very success of an
organization. Thus, a budget is necessary to plan for the future, to motivate the staff associated,
to coordi9nate the activities of different levels.

A budget is an overall blue print of a

comprehensive plan of action expressed in physical and financial terms; it includes plan for each
of the activity responsibility centers of the business and provides a link between the physical and
financial plans of various departments of a company. It is also a document to serve as control for
monitoring and review.

The budget system should be such that it makes it imperative for management to establish
goals and objectives, define policies, develop programmers both long term and short term,
measure performance against the targets and in the process, revises the part of management. In a
way of budgetary control system has been increasing an enterprises profits, and a goalsachieving machine for facilitating organizational coordination and planning while achieving the
budgeted targets.

NEED FOR BUDGETS

The rationales for budgets have five aspects:
1) Authorization: The budget is used to authorize the expenditure and activities contained
in it.
2) Evaluation of performance: The planned activities and expenditures contained in the
budget provide a standard against which the actual achievement of the firm can be
measured and evaluated.
3) Coordination of activities: The piecemeal budgets of the subunits of the firm are so
framed that each sun-unit is made to contribute to the achievement of the overall budget.
4) Control: The setting up of organizational machinery to direct efforts towards the planned
aims.

The budgets sets out the planned activity, subsequent deviations between

achievement and plan will indicate the need for investigation and corrective action.
5) Motivation: The budget is so constructed as to move employees form one target goal to
another; indeed it is bound up with the reward punishment type of organization
environment and bureaucratic decision processes, where employees are given incentives
to work towards the achievement of the firms targets.

WHY COMPARE ACTUAL AND BUDGET?

One of the objectives of budgeting is to provide a base against which actual performance can be
measured. This is only worth doing if action will be taken as a result.
In too many organizations the production of results compared to budget is seen as the end of the
process. If no action is taken on the basis of management accounts then there is little point in
producing them and even less point is wasting management time discussing them.
By identifying progress we are better informed regarding the effects of our actions and have a
clear understanding of the effect of any future action we take. Knowing how much is being
spent each month enables a manager to consider whether action needs to be taken to spend more
or less in the future. This process is only worthwhile if the budget is realistic. Analyzing
variances against an unrealistic budget is pointless.
However in a well runs organization the comparison between actual and budget is used as the
basis for deciding the appropriate action. This paper sets out how the analysis is used to
maximum effect. The process is really part of the normal control process.

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NEED FOR THE STUDY

1) Budgetary control is a strong tool of business is to maximize profits. The management is
therefore always trying to focus on the proper planning, effective coordination and
control in order to maximize profits. There are various managerial tools and techniques
useful for the management to plan and control business operations.
2) Budget is also used for the management to plan and control business operations and it is
widely used as a standard device of planning and control.
3) Budget provide as a valuable aid to management through planning, coordination and
control. It is a tool which measures the managerial performance of an organization.
4) It promotes good morale and generates harmony in the organization. Also it promotes
efficiency and facilities management by exceptions.
5) It helps in promoting a feeling of cost consciousness among the employees in the
organization.
6) On the other side, as a budget is based on estimates, it may or may not be true. It is not
substitute of management because, the efficiency and utility of the budgetary system
depends on the skill and experience of the management.
7) Through learning the budgetary control system in the production division, the said
functional area can be studied in the lights of cost ascertainment & control, activities &
the actual performance.

SCOPE OF THE STUDY

11

1. The project BUDGET & BUDGETERY CONTROL KESORAM CEMENT provides

information with regard to the recent trends in budgeting in KESORAM CEMENT.
2.

This project gives an insight of the various tools to ascertain and evaluated the financial
performance of the KESORAM CEMENT.

3. This study is undergone through the financial data published in the annual report of
company.
4. This study exhibits the overall financial performance of KESORAM CEMENT.

OBJECTIVES OF THE STUDY

12

The main objectives are stated below:

1) To determine business policies for the attainment of desired objectives during a particular
period of time. It provides definite targets of performance and gives the guidance for the
execution of activities and effort.
2) To co-ordinate the activities and efforts of different departments in the enterprise so that
the policies are successfully implemented.
3) To regulate the activities and efforts of people to ensure that the actual results conform to
the planned results.
4) To operate various cost centers and departments with efficiency and economy.
5) To correct the deviations from the established standards, and to provide a basis for
revision of policies.

METHODOLOGY OF THE STUDY:

13

Research is a procedure of logical and systematic application of the fundamentals of

science to the general and overall questions of a study and scientific technique by which provide
precise tolls, specific procedures and technical, rather than philosophical means for getting and
ordering the data prior to their logical analysis and manipulation.

Different type of research designs is available depending upon the nature of research
project, availability of able manpower and circumstances. The study about Trends and future of
derivatives in India is descriptive in nature. So survey method is used for study.

Sampling Procedure:
The small representative selected out of large population is selected at random is called
sample. Well-selected sample may reflect fairly, accurately the characteristic of population. The
chief of sampling is to make an INTERPRETATION about unknown parameters from a
measurable sample statistics. The statistical hypothesis relating population.

Sources of Data:
The sources of data include both primary sources and secondary data sources.

Primary Data:

The

primary data was collected through observation, personal interview and observation methods.

14

Secondary Data:
The secondary data was collected from Journals, Magazines and Project reports,
Management Books, Management Journals, Publications and Internet.
The secondary data include material collected from:
Newspapers
Magazine

Data collection instruments:

The various methods of data gathering involve the use of appropriate recording forms.
These are called tools or instruments of data collection.
Collection Instruments:
1. Observation
2. Interview guide
3. Interview schedule
Each tool is used for specific method of data gathering. The tool for data collection
translates research objectives into specific term/questions to response, which will provide
research objective.
The instrument data collection in our study interview schedule mainly. Every respondent
was conducted personally with an interview.
Schedule contains questions; Interview method was used because it can be explained
more easily and clearly and takes less time to answer.
Assumptions:
1) The methodology used for this purpose is survey and questionable method. It is assumed that
this method is more suitable for collection of data.
2) It is assumed that the respondent have sufficient knowledge to ensure questionable.

15

LIMITATIONS OF THE STUDY

1) Estimates are used as basis for budget plan and estimates are based on available facts and
best managerial judgment.
2) Budgetary control cannot reduce the managerial function to a formula. It is only a
managerial.
3) Tool which increase effectiveness of managerial control.
4) The use of budget may lead to restricted use of resources.
5) Efforts may therefore not be made to exceed the performance beyond the budgeted
targets.
6) Frequent changes may be called for in budgets due to fast changing industrial climate.
7) In order that a system may be successful, adequate budget education should be imparted
at least through the formative period. Sufficient training programs should be arranged to
make employees gibe positive response to budgetary activities.
8) The study is the limited up to the date and information provided by Kesoram cement
industry Limited and its annual reports.

16

INDUSTRY PROFILE
India, the worlds second largest producer of cement, the recent boom in infrastructure and the
housing market has only boosted its cement industry. Add to that an increasing global demand
and a flurry of activity in infrastructure projects highway roads, bridges, ports and houses has
sparked off a spate of mergers and acquisitions in the sector. Furthermore, the countrys Finance
Minister, P. Chidambaram, has stated that India would double spending on infrastructure over the
next five years to sustain its record economic growth and modernize its infrastructure.
Cement has been used in construction field with a historical record of change, from the
dwelling of early man through the celebrated monuments of ancient civilizations to the marvel of
modern times. It is required not only for the construction of commercial building like factories
but also roads, bridges, airfields, railway sleepers and so on. Cement constitutes around 10% of
total cost for them.
The production and availability of high quality cement makes an important chapter in the
history of construction. In cement industry two types of plants are available. They are mini
plants and major plants. Different types of cement are being produced in this industry.
Manufacture of cement was first started in Chennai in 1904. A real beginning was,
however, made in 1912-13 when three companies were formed by the time the plants started.
There were 21 factories with an ideal capacity of 3.26 million tons. The Government had a
complete control on the production, distribution and price of cement and the growth of the
cement industry. In 1977 the Government announced that 12% post return on net worth was fair
enough and retention prices would be fixed to ensure this industry. The real impetus was
17

provided when partial decontrol was announced in 1982, under this policy all existing cement
units were required to give up to 66.6% of their installed capacity as levy at controlled price.
(For new and sick units the requirement was kept at 50% of installed capacity.)

The balance production was treated as non levy cement and was allowed to be sold in
the market at the ruling prices. The 1989 budget announced total decontrol of cement. The
industry responded favorably to the new Government initiatives and the million tons by the end
of the 7th plan. As a result there was an unprecedented million tons in 1989-90, the cement
experienced recession in 1991. The production of cement rose to 48.6 million tons in 1990-91
and further 62.4 million tons in 1994-95. Statistics reveal that there are 54 large cement
companies having 106 plants in all the total installed capacity is of 77 million tons of which 67.5
million tons (88%) is with the private sector and only 9.5 million tons (12%) is with the public
sector.
SOME MILE STONS IN INDIAN CEMENT INDUSTRY:
1. By 1924 the installed capacity increased to 3, 60,000 tpa.
2. In 1935 A.C.C. Ltd., is formed by amalgamation of 11 existing companies with total
capacity of 14.6 lakh tpa.
3. In 1937 Dalmia and Jain group entered into the industry.
4. By 1947 the total capacity raised to 2.12 mtpa.
5. In 1951 the cement control order was promoted under INDUSTRIES DEVELOPMENT
AND REGULATIO ACT 1951, capacity was 3.2 mtpa.
6. In 1982 Government introduced partial decontrol under which companies were to
handover 2/3 of their capacity as Levy Cement.
7. Now, India reached to 4th largest cement producing country with the installed capacity of
95.25 mtpa.
CONSUMPTION OF DIFFERENT VARIETIES:
The quality of Indian cement is equivalent to the best in the world. With increased
production and the urge to go global, quality assumes paramount importance. The physical and
chemical characteristics are equivalent to most of International specifications.

The Indian

industry today produces 11 varieties of cement including ordinary Portland cement which
18

occupies 71% of total, Portland puzzling cement at 18%, Portland blast slag cement at 10% and
the balance of 1% is off oil well cement, IRST 40 cement, High Alumina cement and low heat
cement.
PRESENT STATUS:
The perception consumption of cement in India is very low when compared to some
developed countries. Now, production capacity utilizations have reached a satisfactory level,
prices have risen like never before not only to add higher margins to returns of company but also
to improve the bottom line of the manufacturers.
INDUSTRY PERFORMANCE:
When we look at past 8 years the cement industry in India is performing well. The
installed capacity increased from 61.55 million tons per annum in 1989 to 97.25 million tons per
annum in 1998. The industry had shown a growth rate of 12% during 96 and increased to 14%
in 97 respectively.
CEMENT INDUSTRY IN INDIA:
The INDIAN CEMENT INDSUTRY is the fourth largest in the world and by 2010; it
expects to be next to China. With a total of 54 million tons during 1993 from both large and mini
plants, cement consumption in India is equal to that of wheat. This makes cement the largest
consumed commodity in the country after rice and wheat.

Innumerable technological

development has been taken place in cement production. The wet kilns of seven ties were
replaced by dry kilns, reducing fuel cost of 30%. Further improvement in the thermal efficiency
was obtained by installation of preheats and further by addition of precalcinators. Finally
computerization and quality control of raw material in optimal usage of fuel and power.
CEMENT INDUSTRY IN ANDHRA PRADESH:
Andhra Pradesh, a south Indian state has a huge reserve of limestone and these are being
exploited by major plants and mini plants. Limestone the prime raw material for cement industry
is available inexhaustible quantities in Andhra Pradesh. Raw material required for cement
manufacture is coal, bauxite; gypsum and fly ash are available in Andhra Pradesh. One fourth of
the total cement grade reserves of the country are from Andhra Pradesh.
19

Coming to the production Madhya Pradesh is largest cement producing state in India next
stands Andhra Pradesh, which is 18% of total country production.
REGION WISE CAPACITY PRODUCTION:
The manufacturing of cement requires weight-loosing materials like lime stone, clay and
gypsum. The industry has the tendency to be attracted at point of minimum transportation costs
in relation to raw materials. 74% of the total raw material reserves are mainly in states of
ANDHRA PRADESH, MADHYA PRADESH.

ANDHRA PRADESH & RAJASTHAN

contributes 51.7% of total capacity. The rest of country dominates 40.17% of total production
followed by southern region 33.72% of the production. The western and southern regions are
provided with surplus production whereas the northern and eastern regions consumes more than
the production.
FORECAST OF CEMENT DEMAND:
The Indian Institute of Management has forecasted a minimum demand of 84-81 million
tons and a maximum demand of 107.5 million tons by 2000-02. The corresponding forecasts by
the National Council of Applied Economic Research are 93.89 million tons and 111.35 million
tons respectively. If economic growth shows further accelerates, the demand for the cement
could be even higher than the projected levels.
REVENUE FOR GOVERNMENT THROUGH CEMENT INDUSTRY:
Cement is a major contribution to the exchequer. The excise revenue during 1996-97 is
at 2,500 crores. Duty on integrated plants is Rs.350 tons while it is R s. 200 per mini plant.
MAJOR AND MINI CEMENT PLANTS:
Many major plants and mini plants are present. Mainly three plants are under public
sector and all other private sectors like Raasi Cement, Coromandel Cement, for the country as a
whole, the demand and supply will be balanced as the infrastructure constraints of power and
transportation, coal shortages shows no signs of easing. These will lead to lower capacity
utilization. The over demand growth rat e is expected to be in the region of 8.5 to 9.5%.

20

There is no cheap alternative to cement and construction in and indispensable activity for
growth, the producers can afford to pass on at least a part of these cost increases. The companies
in north and east will feel the heat while those in the west will perform at an average. The south
based companies will be the best performance.
With the Govt. continuing its thrust on infrastructure development, improving economic
activity and housing units the long-term output for the industry remains positive. Andhra Pradesh
has provided scope for mini plants to come up in large numbers.
Two advantages of mini plants are:
1. CAPITAL COST PER TON OF OUTPUT IS LOW AND
2. THEY CAN BE LOCATED IN INACCESSIBLE ACCESS.
MAJOR CEMENT PLANTS IN ANDHRA PRADESH
PLANT
RAASSI CEMENT
ANDHRA CMENT
COR OMANDEL
MADRAS CEMENT
PRIYADARSHINI
PANYAM CEMENTS
SRI VISHNU CEMENT LTD
TEXMACO
ORIENT
KCP

LOCATION
VADAPALLI
VISAKHAPATNAM DURGAPUR
YERRAGUNTALA
JAYANTHIPURAM
RAMAPURAM
CEMENT NAGAR
DONDAPADU
YER RAGUNTALA
DEVAPUR
MACHERLA

CAPACITY
17,00,000
5,00,000
10,00,000
12,00,000
6,00,000
5,31,000
13,00,000
22,00,000
4,50,000
2,54,000

MINI CEMENT PLANTS IN ANDHRA PRADESH

PLANT
NAGARJUNA CEMENT
HEMADRI CEMENT
SAGAR CEMENT
DECCAN CEMENT
KAKATIYA CEMENT
COROMANDEL

LOCATION
MATTAMPALLI
VEDADRI
MATTAMPALLI
HUZUR NAGAR
DONDAPADU
RAMAPURAM

PRODUCT DESCRIPTION:

21

CAPACITY
2,16,000
2,50,000
3,00,000
3,00,000
3,00,000
1,20,000

The product is a complex of tangible and intangible attributes, including packing, color,
price, manufacturers, prestige of retailers, manufacturers and services which buyer may accept as
offering satisfaction of wants and needs.
A product is simply a set of physical and chemical attributes assembled in recognized form.
TYPES OF CEMENT:
There are mainly eight varieties of cement. They vary from each other in chemical
composition and other properties. They are
1.
2.
3.
4.
5.
6.
7.
8.

ORDINARY PORTLAND CEMENT

PORTLAND SLAG CEMENT
PORTLAND POZZOLONA CEMENT
RAPID HARDENING PORTLAND CEMENT
HIGH ALLUMINA CEMENT
OIL WELL CEMENT
WHITE CEMENT
ACID RESISTANT CEMENT

ORDINARY PORTLAND CEMENT:

This is a mixture of limestone, marble, chalk etc., i.e., calcareous & argillaceous i.e. clay,
shale to which other materials like silica, alumna or iron ore are added. They are burnt at a
clinkering temperature and the resulting clinker is then ground. After burning, only gypsum or
air entering agent is added.
PORTLAND SLAG CEMENT:
A fine mixture of Portland cement clinker and granulated blast furnace slag makes
Portland cement. The clinker for this form is manufactured in same manner as for the Portland
ordinary cement. The granulated blast furnace slag is non-metallic product obtained by rapidly
chilling or dipping in water, steam or air. The molten slag tapped from the blast furnace of steel
plant.
The slag constituent should be less than 25% or more than 65% of the Portland slag
cement to comply with the requirements. Its special properties make it highly suitable for marine
structure, for structure involving large masses of concrete such as dams, bridges, for municipal
works such as foundations and roads.
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PORTLAND POZZOLONA CEMENT:

This is manufactured in two ways. Either by grinding together Portland cement clinker
and pozzolona such as burnt clay uniformly bending Portland cement and fine pozzolona used
varies 10-25 % by weight of cement.
RAPID HARDENING PORTLAND CEMENT:
It contains a higher percentage of Tricalcium silicate and secondly it is more finely grind
than ordinary Portland cement. It can attain just in 3 days, which is attaining in 7 days by OPC.
The cement is used is when a structure is required to carry loads earlier than that would be
possible. For example roads, air fields etc.
HIGH ALLUMINA CEMENT:
The major ingredient in this type of cement is hydraulic calcium aluminates. It hardens
very rapidly in one day, which takes 28 days by OPC. It is not recommended for structural used,
though it has a high resistance to chemical attack for sea water and update bearing soils. It
makes a good refractory concrete when used with crush bricks.
OIL WELL CEMENT:
This is a special kind of cement for using drilling of oil wells in the space between the
steel liming tubes and the well walls. It sets slowly in order to give sufficient time reach the
large depth of the oil wells. It also develops strength rapidly and remains stable at high
temperature.
WHITE CEMENT:
It is primarily used for decorative purposes and in manufacturing of tiles. The raw
material chosen is of maximum iron oxide. A variety of colors can be obtained by the addition of
pigments.
ACID RESISTANT CEMENT:
With a predominant base of silicates it is characterized by a quick set, good mechanical
strength and mechanical strength and a high resistance to most acids, organic chemicals, mineral

23

oils and greases. It is used for binding and joining acid proof bricks and tiles and in construction
of acid resistant industrial floorings.
Cement Production Process
1) Quarry: Typically limestone, marl and clays as well as other materials containing the required
proportions of calcium, silicon, aluminum and iron oxides are extracted using drilling and
blasting techniques.
2) Crusher: The quarried material is then reduced in size by compression and/or impact in
various mechanical crushers. Crushed rock is reduced in size from 120 cm to between 1.2
and 8 cm. Drying of raw material may also be necessary for efficient crushing and preblending.
3) Conveyor: Raw material is then transported from the quarry using conveyors, rail wagons or
other suitable logistics solutions specific to the cement plant.
4) Mixing bed: The crushed limestone and clay is homogenized by stacking and reclaiming in a
long layered stockpile. This material is then ready for milling and drying in the kiln.
5) Raw mill: The raw materials are milled and dried in a roller mill. Heavy roller are held over a
rotating table and the course material is milled unit it is fine enough to be carried by air to a
homogenizing silo.
6) Filter: Bag filters comprise filters of either woven fabric or needle felts to remove particles
from kiln exhaust. The exhaust gas from many kilns is used for drying raw materials, thus
improving the energy efficiency of the plant.
7) Presenters: Cyclone presenters enable the raw material of cement production to be preheated
before entry into the kiln. This increases the energy efficiency of the kiln as the material is
20-40% claimed at the point of entry into the kiln.
8) Kiln: The kiln is designed to maximize the efficiency of that transfer from fuel burning to the
raw material. In the preheated tower the raw materials are heated rapidly to a temperature of
about 10000C, where the limestone forms burnt lime In the rotating kiln, the temperature
24

teaches up to 20000C, At this high temperature, minerals fuse together to form predominantly
calcium silicate crystals cement clinker.
9) Cooler: The molten cement clinker is then cooled as rapidly as possible. The ambient air used
to cool the clinker is then fed into the kiln as combustion air ensuring high utilization of the
heat produced.
10) Clinker silo: Clinker may be either stored on site in preparation for grinding to form cement,
or transported to other sites.
11) Cement mill: Finish milling is the grinding together of cement clinker, with around 5% of
natural or synthetic gypsum. Other cementations materials such as slag, flash or other
pozzolans may also be incorporated into the final cement power.
12) Logistics: Final cement may be transported pre-bagged or as a bulk powder. The method of
transport selected varies according to location - and may include transport via truck, rail or
ship.
ENERGY CONSERVATION PROJECTS
1. ESP Dust Transport system:

Investment: Rs150 Lakhs

Savings: 0.43 KWH / MT of Clinker

2. Cement storage silo vent fan (bag filter)

Investment: Rs 0.45 Lakhs

Savings: 0. 3 KWH / MT of Clinker

High efficiency fan incorporated in place of old conventional fan.

3. R.M. silo vent fan

Investment: Rs 13.3 Lakhs

Savings: 0. 264 KWH / MT

High efficiency fan incorporated in place of old conventional fan

4. Fly ash handling system

Investment: Rs 65 Lakhs
Savings: 2.6 KWH / MT

Fly ash handling system incorporated with latest solid flow feeder.
25

5. Clinker Breaker Delta Delta starter

Investment: Rs 1 Lakhs
Savings: 0.14 KWH / MT

The motor is 75 KW and it was running with less load (below 50%). The same KW motor
is necessary for critical load conditions (cooler jam). Hence we are arranged Delta star Delta
starter. It will works on motor load conditions, like when there is a load it will automatically
changes to delta connection, and when there is no load it will come back to star connection. It
leads to energy saving. Normally motor always running in star connection only. (as per
theoretical aspects, energy savings can be achieved when a motor working in below 50% of its
full load by star connection)

Investment: Rs 13.3 Lakh

6. Raw mill Vent Fans:

Savings: 1.3 KWH / MT

High efficiency fan incorporated in place of old conventional fan
7. Cement mill Vent Fans:

Investment: Rs 4.4 Lakhs

Savings: 0.26 KWH / MT

High efficiency fan incorporated in place of old conventional fan

8. Coal mill separator

Investment: Rs 35.5 Lakhs

Savings: 1.82 KWH / MT

9. Cooler Modification to CIS MFR

Investment: Rs 120.2 Lakhs

Savings: 0.42 KWH / MT

Other projects implemented in our plant are:

1) Transfer point dust collecting arrangements
2) Energy efficient bulbs at offices.
3) Motor loading optimization.
26

4) Monitoring and control on idle running motors like belt conveyors

5) Automatic water level controllers to pump house.

COMPANY PROFILE
HISTORY OF THE KESORAM
The first unit at Basantnagar with a capacity or 2.1 lakh tons per annum in corresponding
suspension-preheated system was commissioned during the year of 1969 the second unit Was
setup in year 1971 with a capacity of 2.1 tons per annum and the third unit with a capacity of
2.5lakh tons per annum went on stream in the year 1978 the coal for this company is
being supplied iron singareni collieries and the power is obtained from APSEB the power

27

demand for the factory is about 21MW kesoram has got 2DG sets of 4MW each installed in
the year 1987.
Kesoram cement industry has set up a 15kw capacity power plant to facilitate for
uninterrupted power supply for manufacturing of cement starts at 24 august 2008 per hour 12
mw, actual power is 15mw.
Birla supreme in popular brand of kesoram cement from its prestigious plant of
Basantnagar

in A.P which has outstanding track record in performance and productivity

serving the nation for the last two and had decades It distinction by Bagging several
national awards .It also has the distinction optimum capacity utilization.
Kesoram

offers a choice of top quality portioned cement for light heavy

constructions and allied applications

quality is built every fact of the operations.

The plant layout is rational to begin with the limestone is rich in calcium carbonate a key
factor that influence the quality of final product the day process technology used in the
latest computerized monitoring

overseas the manufacturing process samples

are sent

regularly to the bureau of Indian standards national council of constructions and Building
material for certification of derived quality norms
The company has vigorously undertaking different promotional measures their
product

through

different media which includes the use of newspapers ,magazines

,hoardings etc
Kesoram cement industry distinguished itself among all the cement factories in India
by bagging

the national productivity award consecutively for two years and the year 1985

-1987.the

federation

of Andhra Pradesh

chamber

of commerce

and

industries

also

conferred

kesoram cement an award for the best Industrial promotion expansion efforts

in the year 1981.kesoram also bagged FAPCCI Awarded for best family planning effort in
the state for the year 1987-1988.
28

One among the industrial giants in the country today serving the nation on the
industrial front kesoram industrials Ltd has a cheque red and eventful history dating Back
to the twenties when only a textile mill under its banner 1924 it grew from Strength to
spread and activities

10 newer fields

like Rayan pulp Transport paper spun

pipes

refractivites types and other products

Looking to the wide gap between the demand and supply of a vital commonly cement
Which plays UI important role in national building activity the government of India had
de-licensed

the cement

industry

in the

year 1966

with

a view

to attract

private

entrepreneurs to augment the cement industry production kesoram rose to the occasion And
divided to setup a few cement plants in the country
Kesoram cement undertaking marketing activities extensively in the states of Andhra Pradesh,
Karnataka, Tamilnadu, Kerala, Maharashtra, and Gujarat. In AP sales depots are located in
different areas like karimnagar, Warangal, Nizamabad, Vijayawada and Nellore .In other states
it has opened around 10 depots.

AWARDS WON BY KESORAM

Kesoram cement bagged prestigious awards like national awards for productivity
and technology and conservation and several state awards for year 1984 kesoram cement is
best family planning effort in the federation of Andhra Pradesh chamber of commerce And
industry and also national award for two successive years 1985-86&1986-87.It has also
bagged the national award for energy efficiency for the year 1989-90 for the performance
among all cement plants in India .thus award stall-by national council. For cement and
building material in association with the government of India.

29

Kesoram bagged the prestigious Andhra Pradesh state productivity award in 1987-1989
also Annexed state award for industrial management in 1988-1989.and also Best Industrial
promotion expansion efforts in the state and yajamanya ratna and best efforts an industrial
unit in the state to develop rural economy was bagged for its contribution towards the year
1991.
It also bagged the may day award of the government of India For the best management and
the Pandit Jawaharlal Nehru silver rolling trophy for the industrial productivity effort in the
state of Andhra Pradesh

by FAPCCI and also the Indira Gandhi memorial national award

of the government of Andhra Pradesh for the year 1993.

During the last 3 years the government of Andhra Pradesh has given the following awards
Best awards for the year 1994.
Best industrial relation award for 1994.
To keep the ecological balance they have also undertaken massive tree plantation in the
economy and government of India has nominated township areas and them for
VRIKSHMITHRA award Best effort of an industrial unit in March 1996.
In the year March 2008 Best management award 2008 for the best management practices in
kesoram cement industry presented by chief minister.

CEMENT PRODUCTION WORLDWIDE

Country
China
Japan
U.s.a
India
Italy
Germany

1981
83
88
65
21
43
30

1983
108
85
61
25
40
28

1986
106
73
71
36
36
24

30

1989
210
82
70
45
4
27

1990
210
87
72
48
41
40

World ranking
1
2
3
4
5
6

Today in the cement industry is producing 58.3 million tons per annum indication surplus
conditions while its demand is 56.7 million tones lies per annum Now The cement market
has become buyer market which was A selling market till 1970s and so the quality &brand
taken an upper edge for cement marketing.
Today installed at the India cement industry is 771lakh tones But in India 106
Major plants are producing 583lakh tones leaving the balance for exports.
INDIAS LARGEST CEMENT COMPANIES POST ACQUISITION
Company

Cement capacity

Cement % of

In TPA

Sales

Larsen& turbo

12.0

20

ACC

11.3

93

GRASIM

9.7

28

INDIAN CEMENT

6.6

92

GUJRATHI AMBHUJA

6.5

100

WEAKNESSES:
The per capita consumption of the cement in India is very low
The transport costs in India are very high
The cement industry is facing with acute power shortage and raw material
problem
The industry is also facing major packaging problems

31

OPPORTUNITIES:
The industry has tremendous potential for growth in India
In near future cement is going

to replace tar for the construction of roads

There are good prospects for export with cement export promotion council
The government polices of reduction in excise duty and exempting cement from
the just packaging may act as boon to the industry.
AIMS:
1)
2)
3)
4)
5)

Continuous effort to improving productivity.

Evaluating individual skill trough training and motivations.
Total involvement through participants management activities.
Creating healthy and safe environment.
Social development

STATE WISE CEMENT PLANTS

S.NO

STATE

NO. OF CEMENT PLANTS (LARGE)

01

Assam

02

Andhra Pradesh

19

03

Bihar

04

Delhi

05

Gujarat

13

06

Haryana

07

Himachal Pradesh

08

Jammu and Kashmir

09

Karnataka

10

Kerala

1
32

11

Meghalaya

12

Maharashtra

13

Madhya Pradesh

23

14

Orissa

15

Rajasthan

15

16

Tamilnadu

17

Uttar Pradesh

18

West Bengal

TOTAL

123

DIRECTORS OF KESORAM INDUSTRIES LIMITED

CHAIRMAN -

Shri. B.K. Birla

DIRECTORS
1. Smt. K.G. Maheshwari
2. Shri. Pramod Khaitan
3. Shri. B.P. Bajoria
4. Shri. P.K. Chokesy
5. Smt. Neeta Mukerji
6. (Nominee of I.C.I.C.I.)
7. Shri. D.N Mishra
8. (Nominee of L.I.C.)
9. Shri Amitabha Ghosh
10. (Nominee of U.T.I.)
33

11. Shri P.K Malik

12. Smt Manjushree Khaitan
SECRETARY -

Shri S.K. Parilk

SENIOR EXECUTIVES
Shri K.C.Jain (Manager of the company)
Shri J.D. Poddar
Shri O.P. Poddar
Shri P.K. Goyenka
Shri D.Tandon
AUDITORS - Messrs Price Waster house

SUBSIDIARY COMPANIES OF KESORAM INDUSTRIES

1)
2)
3)
4)

Bharat General & Textile Industries Limited

KICM Investment Limited
Assam Cotton Mills Limited
Softshree Estates Limited

34

THEORETICAL FRAMEWORK
Everyone is familiar with the idea of a budget because as it is essential in every walk of
our life national, domestic & business. Business budgets help managers in developing financial
plan to guide them in allocating their resources over a specific future period.
Dont be intimidated by the B word. Its simply an organized way of managing your
finances. A budget can be as simple or as complicated as you wish. Basically, it gives you an
overall picture of where your money is coming from, when its coming in and how its being
spent. Above all, a budget should be flexible, and always changing according to your situation.
MEANING OF BUDGETBudget can be defined as followsAccording to CIMA Budget is a financial and for quantitative statement, prepared, and
approved prior to a period of time of policy to be pursued during that period for the purpose of
attaining a given objective
35

A budget is a pre-determined statement of management policy during for comparison

with the results actually achieved Brown and Howard.

Characteristics of Budget1. A budget is prepared for definite future period

2. it is a plan expressed in monetary/quantitative terms
3. budget is always based on management is policy
4. It is prepared to attain a given objective for each area of business activity separate budget.

Classification of budgetsDifferent types of budgets have been developed keeping in view the different purposes they
serve.
It can be as follows.

Long term

Time

Types of
budgets

These can b

Medium term
Flexibility
Short term

Functions

Fixed

Flexible

36

Operating

Financial

Master

37

ACCORDING TO TIMEOn the basis of time budgets can be as followsa) Long term budget - they are concerned with long term planning of business. its period
varies between 5 to 10 years
b) Medium term budget - it is also called as current budgets. it is prepared for months
and weeks ranging to 1 year
c) Short term budget- these are usually prepared for one two years.

ACCORDING TO FLEXIBILITYBased on level of activity (or) capacity utilization, budgets are classified into fixed and
flexible budget.
1) Fixed budget - it is also called as static budget (or) constant budget. A fixed
budget is designed to remain unchanged irrespective of volume of output (or)
turnover attained. This budget has limited practical application as it does not deal
with comparison with actual performance. It is rigid and drawn on assumption that
there will be no change in budgeted level of activity.
2) Flexible budget- it is also called asvariable budget. It designed to furnish
budgeted cost at any level of activity actually attained it is prepared after taking into
consideration unforeseen changes in business conditions.

ACCORDING TO FUNCTIONBudget can be classified on basis of various functions performed in the undertaking. The
usual functional budgets are

Operating budgets

Financial budgets

Master budgets

38

a) Operating budgetsThe budgets which relate to operations of firm are operating budgets these are

Types of operating budgets1. Sales budget

2. Production budget
3. Production cost budget
4. Purchase budget
5. Plant utilization budget
6. Raw material budget
7. Labor budget
8. Manufacturing expenses
9. Administrative & selling budget
10. Expenses budget etc..
The most operating budget of above are1. sales budget
2. production budget
Sales budget -it is the most important primary budget and also different to prepare. It forms the
basis on which all other budgets are built up. It is known as back bone of the firm.
Factors-while preparing sales budget following factors should be considered

past sales figures and trends

estimation of sales by agents

business projects & its policy

analysis of new market

seasonal fluctuations, competition

capacity of plant & availability of raw materials

availability of funds

39

Production budget- It is a forecast of the production for the budget period expressed in terms of
units, hours. Production budget is the initial step in budgeting manufacturing operations.
Factors-in preparing the production budget, consideration should be given on following
Policy of management regarding manufacturer (or) purchase of different components.
Policy of finished stock caring from one budget period to another budget period.
Optimum plant capacity, storage facilities
Determining annual production.
Budgeted quantity of production can be ascertained with the help of following formula

Budgeted units= (estimated sales +closing stock)-opening stock

Methodology of the production budgetThe methodology of production budget includes 3 different components as follows.

Sales

Closing stock

Opening stock

Financial budgetsThe sales and production budgets are inter dependent because production budget is
governed by sales budget and sales budget is largely determined by production capacity.
Kinds of financial budgets1. Cash budget
2. Working capital budget
3. Capital expenditure budget
4. Income statement budget
5. Statement of retained earnings budget
6. Budgeted balance sheet
40

7.

position statement budget.

Master budgetDefinition- Master budget is the summary budget incorporating its functional budgets.
-------CIMA.
This budget summaries functional budget to produce a budgeted profit and loss account and a
balance sheet as an end of budgeted period.
When all functional budgets have been drawn then a final budget incorporating figures
from various functional budgets is prepared which is known as master budget (or) summarized
budget (or) finalized profit plan it is useful mostly for top level management.
Zero based budgetingIt is a recent development in the area of management control system and is steadily
gaining importance in the business world. It is prepared starting from zero (or) from a clean state.
Origin It was first used in 1924 by a British budgeting officer E.HILTON YOUNG. It was
proposed by PETER A.PHYRR at company TEXAS INSTRUMENTS and he right known
as the father of ZBB. He published it in famous HARWARD BUSINESS REVIEW
magazine.
Definition
Zero based budgeting is defined as a method of budgeting where by all activities
formulated CIMA.LONDON.
FEATURES OF ZBB

Zero is taken as base instead of previous year data.

It is highly flexible technique

It is a target oriented technique

Decision packages are evaluated by systematic analysis.

41

Essentials of zero based budgetinga. Clearly defined objectives of firm

b. Full support of top management
c. Co ordination among different levels of management
d. Efficient and effective information system.
Process of zero based budgeting-

Determination of budget objectives

Determination of budget scope

Determination of decision unit

Development of packages
Ranking of decision packages

Funding of decision packages

42

BUDGETARY CONTROLThe act of preparing budgets is called budgeting. Budgetary control is a system of
controlling costs through preparation of budgets. The use of budgets to monitor and regulate the
operational activity of the origination in a systematic manner is called budgetary control.
DefinitionThe term budgetary control cal be defined as follows.
Budgetary control is a system which uses budget as a means of planning and
controlling all aspects of producing and for selling commodities (or) services.
CHARACTERSTICS OF BUDGETARY CONTROLThe main features of budgetary control are.
Establishing budgets for each department of firm
Taking remedial action where necessary
It compares actual with budgets
It is a device to control performance of employees by preparing different types of
budgets.
OBJECTIVES OF BUDGETARY CONTROLIt is a technique of control which help in other functions of management. Its main objectives are
as follows.
To provide a detailed plan of action for a business over a period of time
To coordination the different units and activities of the organization
To motivate organizational members to perform well
Management can identify areas of weaknesses and control to reduce cost
It improves efficiency in organization as a whole

43

SCOPE OF BUDGETARY CONTROL

Main activities (or) scope of budgetary control includes following steps for proper
implications of budgetary control.

Scope of budgetary control

Preparation of the budget

Actual performance to be recorded

Comparison between actual &budget figures

Corrective steps deviations between actual & budget

Revision of the budget

The above steps should be implemented for budgeting system as to control expenses and
fro continuous comparison of actual with budgets to judge degree of achievement of budgets.

44

ADVANTAGES OF BUDGETARY CONTROL

Budgetary control a tool in the hand of management & plays an important role in functions of
management

Estimates future
Advantages of
budgetary control

Tool for measuring performance

Coordinates various acts
Good labor relations
Motivates to attain goals
Maximum utilization of resources

45

DISADVANTAGES OF BUDGETARY CONTROL-

Estimates may not be true

Problem of coordination
Disadvantages of
budgetary control

Expensive technique
Danger of rigidity
Limits performance of employees

Depends on top management

Constant review needed

Organization for budgetary controlIt is a necessary that a concern must have a definite plan of organization for
preparing, maintaining and administering the budget. The following steps should be considered.
I.

Establishment of budget centersIt is a section of the organization for which separate budgets can be prepared and

control exercised each functional section can be technically called as budgets centre.
II. Preparation of budget manualIt is a written document (Or) booklet containing standing instructions regarding the
procedures to be followed and time schedules to be observed.

46

III. Established of budget committeeBudget committee should be set up for established and execution of the plan. It
contains to help departmental managers by submitting past information fixing of individual
responsibilities, to participate in discussion for evaluating the different projects.
IV. Fixation of budget periodA budget period is time period for which a budget is prepared and acted upon. The
length of the budget period is usually determined by

The type of business

The control aspect

V. Determination of key factorKey factor is also known as limiting factor (or) governing factor (or) principal
budget factor.
It is the factor to extent of whose influence must be first assessed in order to ensure
that all budgets are reasonably capable of fulfillment. It is essential to locate limiting factor as it
influences almost all budgets.
The limiting factor may be
a) Sales activity
b) Plant capacity
c) Raw materials
d) Labor
e) Management etc.

47

VI. Budget reportEstablishing budgets is in itself of on use unless a comparison is made regularly
between actual performance, and the results brought to the notice of management through
reports.

Organization chart
Managing director
Budget officer
Budget committee

Purchase
Manager

Purchase
Budget

Production
Manager

Production
&
Plant
budget

Sales
Manager

Sales
Budget

Personnel
Manager

Research
Manager

Finance
Manager

Labor
Budget

R&d
Budget

Cash
Budget

MASTER BUDGET

48

Objectives of budgetary control

To control departmental activities.
To help in systematic planning of protection and formulation of policies.
To control direct and indirect expenses by limiting the chances of wastages.
To control income and expenditure of production functions.

Requisites for successful budgetary control system

1) Clarifying Objectives
The budgets are used to realize objectives of the business. The objectives must be clearly
spelt out so that budgets are properly prepared. In the absence of clear goals, the budgets will
also be unrealistic.

2) Proper Delegation of Authority and Responsibility

Budget preparation and control is done at every level of management. Even though
budgets are finalized at top level but involvement of persons from lower, levels of
management are essential for their success. This necessities proper delegation of authority
and responsibility.

3) Proper communication system

An effective system of communication is required for a successful budgetary control. The
flow of information regarding budgets should be quick so that these are implemented. The
upward communication will help in knowing the difficulties in implementation of budgets.

4) Budget Education
The employees should be properly educated about the benefits at budgetary system. They
should be educated about their role in the success of this system. The employees may not
take budgetary control only as control only as a control device but it should be used as a tool
to improve their efficiency.

49

5) Participation of all Employees

Budgeting is done by every segment of the business. It will also require the active
participation and involvement of the employees. In practice the budgets are to be executed at
lower levels of management. Those for whom the budgets are framed should be actively
associated with their preparation and execution. The employees, on the basis of their past
experience, may give more practical and useful suggestions.

6) Flexibility
Flexibility in budgets is required to make them suitable under changed circumstances
budgets are prepared for the future, which is always uncertain. Even though budgets are
prepared by considering the future possibilities but still some occurrences late on may
necessitate more appropriate and realistic.

ESSENTIALS OF BUDGETARY CONTROL

1. Organization for budgetary control:
The proper organization is essential for the successful preparation maintenance
and administration

of budgets A budgetary committee is formed which

comprises the

departmental heads of various departments All the functional heads are entrusted

with the

responsibility if ensuring proper implementation of their respective departmental budgets

The chief executive is the overall in the charge of budgetary system he constitutes
a budget committee for preparing realistic budgets A budget officer is the convener of the
budget committee who co-ordinates the budgets of different departments responsible
their departmental budgets.

2. Budget officer:
50

fro

The chief executives appoints the budget officer such budget officer also called as
Budget

controller or budget Director thus

rank should

be equal to other

functional

managers.
The Budget officer does not have the direct responsibility of preparing the budgets the
various functional managers prepare the budgets his role is that of a supervisor the budget
officer has the specific duty of the budgeting activity by various departments and for coordination between

them so that there is a proper link between them He is empowered to

scrutinize the budgets prepared by different functional heads and to make changes in them if
the situation so demands.
The budget officer works as a coordinator among different departments he continuously
monitors the actual performance different departments steps to rectify the defiance

if any he

also informs the top management about the performance of different departments
The budget officer will be able to carry out his work only if he is versant with the working of all
the departments

he must have technical knowledge of the business and should also process

accounting knowledge
BUDGET COMMITTEE:
A budget committee is formed to assist the budget officer. The heads all the important
departments are made members of this committee. The committee is responsible for preparation
and execution of budgets. The chambers of this committee put up the case of their respective
departments to help the committee to take collective decisions if necessary. The budget
committees responsible for reviewing the budgets prepared by various functional heads
coordinate all the budgets and approve the final budgets. The budget officer acts as a coordinate
of this committee all the functional heads are entrusted with the responsibility of ensuring proper
implementation of their respective final departmental budgets.
BUDGET CENTERS:
51

A budget center is the part of the organization for which the budget is prepared. A
budget creator may be a department section of department or any other part of department
ideally; the head of every center should be a member of the budget committee. However it must
be ensured that each budget center at least has an indirect representation in the budget
committee.
The establishment of budget centers is essential for covering all parts of the
organization becomes easy when different centers are established the budget centers are also
necessary for cost control purpose.
BUDGET MANUAL:
1. A budget manual is a document that spells out duties and responsible the various
executives conquered with it specifies among various functional areas A budget manual
covers the following matters.
2. A budget manual clarity defines the objectivities of budgetary control systems it also
gives the benefits and principles of this system.
3. The duties and responsibilities of various persons dealing with preparation and execution
of budgets are also given in the budget manual it enables the management to know the
persons dealing with various aspects to budgets and provides clarity on their duties and
responsibilities it gives the information about the sanctioning authorities of various
budgets the financial powers of sanctioning authorities of various budgets the financial
powers of different manages are given in the manual for enabling the spending amount
on various expenses.
4. A dropper table for budgets including the sending of performance reports is drawn so that
every work starts in the and a systematic control is exercised.
5. the specimen forms and number of copies to be lased fro ore oaring budget reports is
also stated budget centers involved should be clearly stated.
6. the length of various budget periods and control points is clearly given
52

7. The problem follow all in the centre system clearly stated.

8. A method of accounting to be used for various expenditures is also stated in the manual...
A budget manual helps the documentation the role of every employee his duties
responsibilities the ways of undertaking various tasks etc thus it also helps n reducing
ambiguity at any point of time
BUDGET PERIOD:
A budget period is the length of time for which a budget is prepared upon a number of factors
the choice of a budget period depends upon the following considerations the type of budget
(long\short).
The nature of demand for the products
The timing for the availability of the finance
The construction situation of the cycles
All the above mentioned factors are taken into account while fixing the period of budgets
The financial manager usually responsible for organizing this budget he must perform
the following functions.
To decide the general polices and guidelines
To offer technical advice.
To suggest changes.
To receive and review individual budget estimates.
To reconcile divergent with or without revisions.
To coordinate budgeting activities.
To approve budgets with or without revisions.
To scrutinize control reports later on
To scrutinize to budget reports later on.
To disseminate these guidelines.
53

After finalizing the budget proposal the budget committee subjects the final budget to the
Board of Directories or Budget Director for approval.
CONTINUOUS BUDGETING SYSTEM:
A continuous budgeting system is a method of having two different budget periods
within the sane budget the purpose of having this system is to have greater control in terms
of operational activities without losing sight is have greater control in terms of it results in
incorporating the effect of changes in the short term on the long-term targets of the
organization
DETERMINATION OF KEY FACTOR:
The budgets are prepared for all functional areas these budgets are dependent and
inter-related A proper co-ordination among different budgets is necessary for budgetary
control to be successful The constraints some budgets too A factor which influences all other
budgets is known as key factor or principal factor.
The key factor may not necessarily remain the same the raw materials may be limited
at one time but it may be easily available at another similarly other factors may also
improve at different times. The key factor highlights the limitations of the enterprise. This will
enable the management to improve the working of those departments we here scope for
improvement exists.

BUDGET AND BUDGETARY SYSTEM IN KESORAM CEMENT INDUSTRIES

LIMITED, BASANTH NAGAR, KARIMNAGAR
The budgeting process is used in the performance budgeting for the construction of phase
which includes pre commissioning activities. Besides meeting the essential requirements of
managerial control the budgeting exercise also covers the long term capital budgeting, which is
presented in the form of annual plan.

54

OBJECTIVES OF THE BUDGETARY SYSTEM

To prepare annual budgets in such a manner those managers at various levels in
organization carry out periodical exercise in respect of each contact or responsible centre for
physical planning and matching resources broke up into monthly targets or cash flows.
To introduce and operate responsible for achievement of specified targets with the
recourses allocated for the purpose.
To bring about effective co-ordinate of all activities of the organization and to gear up
service divisions to meet effectively the requirements of project.
BUDGET PERIOD AND PHASING:
The budget period or annual begets should with the financial year. In October every year
the budget should drawn up for the ensuring the financial year in the form of Budget estimates
financial year in the form of Revised Estimates [R.E]...In addition the budgets are to be reviewed
on monthly basis by project review teams, in the light of actual expenditure and projections in
the budget period. Budget should indicate monthly phasing of expenditure and targets for the
first and quarterly phasing for the second half of the year. At the time of review of the budget
estimates to frame revised estimates the quarterly phasing should be broken up into monthly
phasing.
While drawing up the actual budget in October every year, the long term capital budget
for ongoing and new schemes should be formulated as apart of exercise as preparation of annual
plan. The long term capital budget should indicate for a period of six years following the budget
period of six years following the budget period of six years following the budget period wise
annual phasing of the capital expenditure and physical schedules recourse based network.

55

BUDGET HEADS:
For uniform accounting, it is essential that costs are collected for each of the factory
though this may involve splitting up of payments against contracts which embrace more than one
system. Allocation of the cost as system wise affords a sound basis for cost accounting, inter-firm
comparisons and provides valuable inputs to the data bank. Budget provisions are related to
project estimates and monitoring of actual expenditure where as control variables for part control
and instrumentation system. Factory piping which includes pipelines, for ash water mains,
compressed air system and civil works piping.
Auxiliary pumps for water treatment plant and civil works system. If there are, any
contracts not covered in the budget heads provision for such contracts should be shown against
the appropriate system by head by adding code number.

TYPES OF BUDGETS IN KESORAM CEMENT INDUSTRIES LIMITED:

According to the nature expenditure budget are classified under:
Direct capital outlay on works
Technical consultancy
incidental construction during construction
Employee cost
Other establishment expenses:
Training and recruitment
Preliminary expenses
misc.brought-out assets
cash budget
Township budget

56

BRIEF EXPLANATION TO THE NATURE OF EXPENDITURE INCLUDED IN EACH

BUDGET IS INDICATED BELOW:
Incidental expenditure during construction personal payment:
These comprises of salary,wages,allowance,contribution of PF and other funds and other
expenses such as LIC,medical reimbursement, canteen subsidy etc. any provision of areas of
salary D.A.
Office and other expenses:
Expenses incidental to construction and capital works not traceable directly to incidental
expenditure, during contribution equipments, vehicle running expense, office rent.LC and cost
of drawings, travelling expenses, printing and stationary, communication expenses,
advertisement for tenders etc. are major items in the category.
Training recruitment & other deferred revenue expenditure:
The first part of the budget consists of expenses for training executives, and non
executive trainees, rent for training halls and expenses for management development courses.
The second part consists of expenses for recruitment such as advertisement for recruitment,
interview expenses, T.A. candidate etc. the third part combines preliminary expenses including
registration fees and research ad development expenses.
Miscellaneous bought out passes:
Vehicles, furniture and fixtures equipments, hospital and medical equipment.
Miscellaneous assesses township figure in the budget.

57

REVIEW OF PROJECT BUDGET:

Monthly review:
At monthly intervals the budget should be reviewed by project review committee [PRC].
Project budget should report actual expenditure against budget heads. Work heads and corporate
budget by the 7th of month following the report month. The monthly review should be examined
by project review team[PRC],who should record variations for any variations and proposed for
expending works in the minutes of the meetings reasons for any variations in the case of budget
heads exceeding 10% of the budget estimates revised estimates or whichever is Rs.5 lakhs
should be analyzed and report upon.
Quarterly review:
PRT should conduct a quarterly budgets review with a view to projecting anticipated
expenditure during the year against approved budget estimates/revised estimates. As time is
essence of such review, only a quick review of anticipated expenditure for individual budget
heads involving provisions exceeding Rs.50 lakhs in each case should be made and reported in
minutes to PRT. For this purpose, project budget should furnish all the relevant data to project
manager [project] and planning and system by the 10th, of the month following the quarter
project budget committee should review the actual expenditure and assess anticipated
expenditure contract co-ordination/engineers in charge. The assessments of anticipated
expenditure should be furnished by the project budget committee to General Manager [project]
by the 30th of the month following the quarter under review.
BUDGET OF SERVICE DIVISION CORPORATE BUDGETS:
A review of budgets of service and corporate divisions should be conducted at quarterly
intervals by corporate budget committee[CS'C].For this purpose corporate accounts should report
actual expenditure up to the need of the quarter by the 10th of the month following quarter to
corporate budget and budget-coordination of the remaining period of the year should be sent to
the corporate budget should put up a consolidated report division wise and project wise to
corporate budget committee[CBC] by the 15th of the may, August, November and February
every year.
58

OBJECTIVES OF THE CURRENT BUDGETARY CONTROL SYSTEM IN

KESORAM CEMENT INDUSTRIES LIMITED, BASANTH NAGAR:
The current budgetary control system-operating phase has been compiled to achieve the
following objectives.
To control actual performance with reference to standards/norms adapted in the
budget ascertain the deviations analyze and establish the reasons.
To identify constraints in generation and timely action for estimation constraints.
To monitor the generation of internal recourses so as to ensure the availability of
adequate funds.
To prepare the revenue budget so as to forecasting the periodical profitability of
the organization.
To develop standards/norms of performance in the various areas of operation and
maintenance based on the experience.
To ensure effective coordinate planning of all activities so that all the inputs and
services necessary for achieving the physical targets are available at appropriate
time.
To create cost consciousness among the managers responsible for decision
making
To provide data regarding operational norms and cost for the purpose of
formulating tariff.

59

 To provide data basis for assessment of working capital requirements

To control the working capital particularly book debts spares and other items
inventory.
To improve profitability and internal resources generation.

SCOPE OF THE PERFORMANCE BUDGET:

The budget for operation and maintenance activities will be called performance budget
operation. This in effect means that all financial targets in the budget will be based on
performance targets in physical terms.
The current budgetary control system operation pays envisages generation and
transmission line projects as independents investment centers. It becomes applicable to a project
in the year in which it plans to commercialize its first generation unit. However, the budget infer
expenses from the date of synchronization to the date of commercial generation is to be taken
care of in the capital budget of the respective project similarly in the case of transmission line
projects the system becomes applicable from the year in which it plans to commissions its first
line along with substation or the date commercial generation of the first unit of generative project
with which this line is associated, whichever is later. For subsequent lines, the O&M will be
prepared from the case generation of energisation.
The system investigates the preparation of operation and maintenance budget for each of
the cost centers as per the requirements of coasting systems.
The performance budget operation will consists of following budgets along with the
supporting schedules:
1. Budget balance sheet.
2. Budget profit and loss account.

60

3. Revenue budget.
In addition, separate budgets for revenue activities other than operation for research and
development consultancy contracts etc.
The expenses respect of developmental expenditure for improvements additions
replacement, renewals, balancing facilities etc. arc of capital nature and will be budgeted for in
the construction budget of budgetary control system-construction pairs.
To facilitate management control the system also investigates, phasing of these budgets
into monthly targets. The actual performance then will be reasons for variation s will be analyzed
and established for taking corrective remedial actions.
STAGES IN THE FORMULATION OF PERFORMANCE BUDGET:
The system provides for a two stages formulation for performance budget operation the
stages are given below:
Initial proposal:
In the initial proposal the project is required to indicate yearly targets. In the addition to
furnishing basic information like synchronization and commercial generation dates.
Constraints and coal operation at less than the designed specification calorific value of
raw material and limestone, material consumptions. In physical terms for items whose
consumption value in Rs.5 lakhs or more planned shutdown for a maintenance and overhauling
and norms for serious operating parameters provided for designs specifications and in the tariff
agreements to the corporate budget committee.
In the initial proposals is planned to be submitted after considering else factors and
keeping in view the perspective plan of the organization, as well as norms for various operating
parameters. These targets and terms are then communicated to all stations and transmissions line
offices of the last week of July to be used for formulating detailed budget in the final proposal.
61

Final proposal:
Budgeted balance sheet. Budgeted profit and loss account and budgets in the form of cash
budget along with the final proposal will consist of detailed supporting schedules for each of the
investment centre/cost centre. This final proposal needs to be submitted to corporate centre
within three weeks of receiving approval for initial proposal.
The final proposal, after approval by board, will become the basis of monitoring
performance for cost centers and investment centers.
The frequency and extent review and monitoring will be done is under:
a. The monitoring of actual performance against budgeted target for investment
center/profit center on monthly basis and for cost centers on quarterly for
remedial/corrective action.
b. The review of performance budget on quarterly basis to assess the anticipated
profitability.
The first step in the preparation of performance budget, O&M is formulation of
maintenance and overhauling schedules for boiler and TO with generation, then considering the
grid demand, the availability or inputs and factory problems, if any the utilization of capacity
will be worked out on month-month basis for the budget period the gross generation targets can
be worked and accordingly.
NET GENERATION:
The sales value will be determined from quantum of net generation [i.e., grass generation
aux. consumption].

62

AUXILLARY CONSUMPTION/CONSUMPTION BY UTILITIES:

The cement consumption by each of the cost centers for individual unit auxiliaries,
station auxiliaries as well as transformer losses are to be estimated separately based on designed
specification and added in order to work out total auxiliary consumption rather than fixing
overall percentage similarly consumption by utilities will also need to be indicated by concerned
cost centers like township and construction department this will be valued at cost net generation
to arrive at the sales values for owns consumption.
CHEMICAL CONSUMPTION:
The chemicals are used by many cost centers by many cost centers for treatment of water.
The consumption of chemicals will be co-related with volume of water certain norms will have
to be developed for different type of chemicals and different type of treatments.
Based on these norms each of the cost centers will indicate consumptions of chemicals in
quantitative as well as financial terms the most centre wise requirement will be consolidated to
arrive at total chemicals consumption to be charged to profit and loss account.
EMPLOYEE COST:
The basis of employee cost will be the approved manpower budget effective of respective
years of budget period. The estimation of employee cost is to be done for each grade considering
mid-point as the scale as basis pay and after reading various allowances like "D.A., H.R.A.,
C.C.A" project allowance etc. admissible in respective grades. This is to be worked 49 out or
each of the budget periods based on existing strength (at the time of estimation) in each grade
and additions during each quarter (taking 70% satisfaction for additions).
The provisions of LTC medical reimbursement, PF and other welfare expenses in
previous years are taken into account policies changes, if any the details of welfare expenses like
liveries and uniforms, safety expenses, accident compensation, games & sports, canteen subsidy
etc. are to list out as per chart of account the provisions for incentive, bonus and payments of one
time nature are to be shown separately based on total employee cost for executives, supervisors

63

and non-supervisors and total man power in these categories ,separates of cost per employee will
be worked out for each of these categories as under.
1. Salaries and allowance
2. Contribution of PF and other funds
3. Welfare expense
The cost centre of employee cost will be worked out based on these rates separately for
theses executives, supervisors and non-supervisors. This will again be consolidated separately for
operations, maintenance and common [service] function. The employee cost of common
functions will be appropriated between construction and O&M budgets in ratio of capital
expenditure and sales during respective years.

REPAIRS & MAINTAINENCE:

In line, with costing system following three activities can represent major classification
of repairs and maintenance.
1. Major overhaul
2. Preventive maintenance
3. Breakdown maintenance
Normally, budgeting will be done for the former two; under each activity separate
estimates will be prepared for consumption of materials and maintenance jobs. This estimation
will be done at ach of sub cost centre wise details are required to be mentioned.
The consumption material for repairs and maintenance will be classified into spares,
lubricant loose tools and plants, consumables and others. The cost centre totals separately for
three activities will be added to arrive at summary of material consumption and maintenance
jobs, which will be reflected in the profile & loss account.

64

The material consumption, especially of spares, can be estimated based on the expected
life of various components/spares in the installed equipment the frequency of breakdowns in the
past and the requirement for preventive maintenance and major overhauls.
The actual life of components may be different from that indicated in the manufacturer's
specification. Therefore, it is very difficult to estimate requirements of spares. But this estimation
will become gradually accurate as more experience is gained. For new stations it will be
advisable to collect such information from old stations that have gained experience in this field.
Normally, maintenance of equipment through contractors should be avoided. But in
certain areas, if the expertise and in house capability or sufficient man power is not available,
maintenance jobs can be got done through contractors. Such contracts will need to be listed out
separately .If owner supply items are covered in such contracts the cost of these items will be
included in the material cost.

FACTORY & GENERAL OVERHEADS:

All the items of an expenditures under this head will be estimated based on past trend
with due adjustment for policy changes. The estimates will be given by cost centre needs for
items identified with respective cost centers. The total administrative cost of service cost centers
will be allocated between construction and O&M in the ratio of capital expenditure and sales
during respective years.

Depreciation:
This is to be charged as per ES act from the year following the year in which assets have
been capitalized value and, rates of depreciation furnished by the site finance and account for
different categories of assets. Cost centre-wise depreciation will be added to arrive at total
deprecation for the investment centre.

Interest on fixed capital:

As per existing accounting policy, the interest is to be charged to profit & loss account
based on the loan content in the capitalized assets restricted to total accrued interests on actual
loans.
65

For budgeting purposes, interest will be worked on equated loan content or equated loan
whichever is less.

DATA ANALYSIS AND INTERPRETATION

Kesoram Industries Limited Revenue Budget (2011-12)

Table-I
S.no

Particulars

Budget

Actual

Estimated

Amount(Rs.

Amount(Rs.

Crores)

Variance

Crores)
Sales
1

Fixed and recovery

689

599

90

Variable cost recovery

745

652

93

Fuel price adjustment recovery

784

823

-39

Own consumption

116

128

-12

Total of (14)

2334

2202

132

Average intensives

98

91

Other income

51

43

Grand total(5+6+7)

2483

2336

147

Interpretation:
The data pertaining to the generation and consumption of cement at kesoram Industries
Limited have been obtained from the year 2011-12 and presented in Table-1.The aspect included
are total generation of cement in (cores Rs) and utilization for auxiliary consumption, raw
material consumption and line store respectively.
During the year 2011-12 the sales, fixed cost, variable cost, fuel price, consumption was
decreased. Sales decreased by 132 crores to the estimated budget.
During the year 2011-12 the average intensives are decreased by 7 crores. There income
also decreased by 8 crores respectively.
66

Finally, with regard to the result in revenue budget of kesoram cement industries limited,
totally decreased by 147 crores in the year 2011-12 respectively
Kesoram Industries Limited Operational expenditure budget for the year 2011-12
Table-II
S.no

Particulars

Budget

Actual

Estimated

Amount(Rs.

Amount(Rs.

Crores)

Variance

Crores)
Variable cost
1

Raw material

400

423

23

Lime stone

430

450

20

Total of (1,2)

830

873

43

Operative
maintained cost
4

Chemicals and

120

140

20

water
Repairs &

240

275

35

maintenance
6

Employee cost

290

335

45

Stationary &

55

70

15

10
8

12
10

2
2

723

842

119

11

charges
Deprecation

38

11

-27

12

Interest on fixed

18

20

general expenses
8
9

Rebate
Share of
operating

10

expenses
Total of(4..9)
Finance

capital
67

13

Totalof-3
Gland total

56
1609

31
1746

-25
137

(3+10+13)

Interpretation:
Observed from the above table that the "Operational Expenditure Budget" of kesoram cement
industries Limited in the year 2011-12.
In the year 2011-12 variable cost components, Raw material consumption 23 crores increased
and the lime stone consumption 20 crores also increased.
In operating & maintain aces cost components, chemicals & water, repair & maintenance,
employee cost, stationary & general expenses rebate and share of other expenses in all are
fluctuating expenses of the year 2011-12.how ever the total operating maintenance costs are 119
crores increasing respectively.
In finance charges depreciation and interest on fixed capital, has been included, the total
finance charges recording decreasing 25 crores in the year 2011-12 respectively.

68

Kesoram Industries Limited Revenue Budget (2012-13)

Table-I
S.n

Particulars

Budget

Actual Amount(Rs.

Estimated

Crores)

Variance

Amount(Rs.
Crores)
1

Sales
Fixed and

689

617

72

recovery
Variable cost

829

735

94

recovery
Fuel price

815

856

-41

adjustment
4

recovery
Own

110

132

-22

consumption
Total of

2443

2340

103

(14)
Average

93

86

intensives
Other income

49

38

11

Grand

2585

2464

121

total(5+6+7)

Interpretation:
The data pertaining to the generation and consumption of cement at kesoram Industries
Limited have been obtained from the year 2012-13 and presented in Table-1.The aspect included
69

are total generation of cement in (cores Rs) and utilization for auxiliary consumption, raw
material consumption and line store respectively.
During the year 2012-13 the sales, fixed cost, variable cost, fuel price, consumption was
decreased. Sales consumption is deceased by 103 crores respectively.
During the year 2012-13 the average intensives are decreased by 7 crores and there
income also decreased 11 crores respectively.
Finally, with regard to the result in revenue budget of kesoram cement industries limited,
totally decreased by 121 crores in the year 2012-13 respectively.

Kesoram Industries Limited Operational expenditure budget for the year 2012-13
Table-II

70

S.no

Particulars

Budget

Actual

Estimated

Amount(Rs.

Amount(Rs.

Crores)

Variance

Crores)
Variable cost
1

Raw material

Lime stone

419

449

30

420

465

45

Total of(1,2)
Operative maintained cost

839

914

75

Chemicals and water

121

148

27

Repairs & maintenance

232

289

57

Employee cost

314

348

34

Stationary & general

59

77

18

expenses
8

Rebate

11

13

Share of operating

10

745

885

140

38
18

14
20

-24
2

34
1833

-22
193

expenses
10

Total of(4..9)
Finance charges

11
12

Deprecation
Interest on fixed capital

13

Total of(11,12)
Grand total (3+10+13)

56
1640

Interpretation:

71

Observed from the above table that the "Operational Expenditure Budget" of kesoram cement
industries Limited in the year 2012-13.
In the year 2012-13 variable cost components, Raw material consumption 30 crores
increased and the lime stone consumption 45 crores also increased.
In operating & maintain aces cost components, chemicals & water, repair & maintenance,
employee cost, stationary & general expenses rebate and share of other expenses in all are
fluctuating expenses of the year 2012-13.how ever the total operating maintenance costs are
140crores increasing respectively.
In finance charges depreciation and interest on fixed capital, has been included, the total
finance charges decreasing by 22 crores in the year 2012-13 respectively.

Kesoram Industries Limited Revenue Budget (2013-14)

Table-I
72

s.no

Particulars

Budget

Actual

Estimated

Amount(Rs.

Amount(Rs.

Crores)

Variance

Crores)
1

Sales
Fixed and recovery

721

611

110

Variable cost

815

729

86

recovery
Fuel price

810

823

-13

recovery
Own consumption

121

131

-10

5
6

Total of (14)
Average intensive

2467
97

2294
92

173
5

7
8

Other income
Grand total(5+6+7)

53
2617

48
2434

5
183

adjustment

Interpretation:
The data pertaining to the generation and consumption of cement at kesoram Industries
Limited have been obtained from the year 2013-14 and presented in Table-1.The aspect included

73

are total generation of cement in (cores Rs) and utilization for auxiliary consumption, raw
material consumption and line store respectively.
During the year 2013-14 the sales, fixed cost, variable cost, fuel price, consumption was
decreased. Sales consumption is decreased by 173 crores respectively.
During the year 2013-14 the average intensives are decreased by 5 crores and their
income also decreased 5 crores respectively.
Finally, with regard to the result in revenue budget of kesoram cement industries limited,
totally decreased by 183 crores in the year 2013-14 respectively.

Kesoram industries limited operational expenditure budget for the year 2013-14
Table-II

74

S.no

Particulars

Budget

Actual

Estimated

Amount(Rs.

Amount(Rs.

Crores)

Variance

Crores)
Variable cost
1
2
3

Raw material
Lime stone
Total o(1,2)

418
442
860

445
465
910

27
23
50

Operative
maintained cost
4

Chemicals and

128

150

22

water
Repairs &

265

296

31

maintenance
6

Employee cost

316

348

32

Stationary &

63

80

17

11
7

13
10

2
3

790

897

107

general expenses
8
9

Rebate
Share of operating
expenses

10

Total of(49)
Finance charges

11

Deprecation

41

15

-26

12

Interest on fixed

17

19

13

capital
Total of(11,12)

58

34

-24

1841

133

Grand total

1708

(3+10+13)

Interpretation:

75

Observed from the above table that the "Operational Expenditure Budget" of kesoram
cement industries Limited in the year 2013-14.
In the year 2013-14 variable cost components, Raw material consumption 27 crores
increased and the lime stone consumption 23 crores also increased.
In operating & maintain aces cost components, chemicals & water, repair &
maintenance, employee cost, stationary & general expenses rebate and share of other
expenses in all are fluctuating expenses of the year 2013-14.how ever the total operating
maintenance costs are increasing by 107 crores respectively.
In finance charges depreciation and interest on fixed capital, has been included, the
total finance charges recording decreasing by 24 crores in the year 2013-14 respectively.
Finally with regard to the operational expenditure budget of kesoram cement
industries limited the total profit has increased by 133 crores during the year 2013-14.
The overall budget results of kesoram cement industry is industries limited is earning more
profits.

Kesoram cement industry Revenue Budget (2014-15)

Table-I

76

S.n

Particulars

Budget

Actual

Estimated

Amount(Rs.

Amount(Rs.

Crores)

Variance

Crores)
1

Sales
Fixed and

724

618

106

recovery
Variable cost

840

740

100

recovery
Fuel price

820

863

-43

4
5
6

recovery
Own consumption
Total of (14)
Average

132
2516
102

148
2369
98

-16
147
4

7
8

intensives
Other income
Grand

56
2674

49
2516

7
158

adjustment

total(5+6+7)

Interpretation:
The data pertaining to the generation and consumption of cement at kesoram Industries
Limited have been obtained from the year 2014-15 and presented in Table-1.The aspect included
are total generation of cement in (cores Rs) and utilization for auxiliary consumption, raw
material consumption and line store respectively.
77

During the year 2014-15 the sales, fixed cost, variable cost, fuel price, consumption was
decreased. Sales consumption is decreased by 147 crores respectively.
During the year 2014-15 the average intensives are decreased by 4 crores and, their
income also decreased 7 crores respectively.
Finally, with regard to the result in revenue budget of kesoram cement industries limited,
totally decreased by 158 crores in the year 2014-15 respectively

Table showing operating expenditure of for the year 2014-2015

Table-II
Particulars
S.no

Budget

Actual amount

Estimated amount

(RS. Crores)

Variance

(Rs. Crores)
1

Variable cost
Raw material

420
78

450

30

2
3
4
5
6
7
8
9
10
11
12
13

Lime stone
Total of (1,2)
Operative maintained cost
Chemicals and water
Repairs & maintenance
Employee cost
Stationary & general expenses
Rebate
Share of operating expenses
Total of(4...9)
Finance charges
Deprecation
Interest on fixed capital
Total of(11,12)
Grand total (3+10+13)

450
870

470
920

20
50

130
280
320
65
11
8
814

150
300
350
80
13
10
903

20
20
30
15
2
2
89

42
18
60
1744

15
20
35
1858

-27
2
-25
114

Interpretation:
Observed from the above table that the "Operational Expenditure Budget" of kesoram
cement industries Limited in the year 2014-15.
In the year 2014-15variable cost components, Raw material consumption 30 crores
increased and the lime stone consumption 20 crores also increased.
In operating & maintenances cost components, chemicals & water, repair &
maintainance,employee cost, stationary & general expenses rebate and share of other expenses in
all are fluctuating expenses of the year 2014-15.how ever the total operating maintenance costs
are 89 crores increasing respectively.

79

In finance charges depreciation and interest on fixed capital, has been included, the total
finance charges recording decreasing by 25 crores in the year 2014-15respectively
finally with regard to the operational expenditure budget of kesoram cement industries limited
the total profit has increased by 114 crores during the year 2014-15.
The overall budget results of kesoram cement industry is industries limited is earning
more profits.

80

CHARTS

81

SALES
Table showing total sales of Kesoram cement industry

2011-12

2012-13

2013-14

2014-15

BE

2334

2443

2467

2516

ACT

2202

2340

2294

2369

Figure showing on sale of kesoram cement industry

2600
2500
2400
BE

2300

ACT
2200
2100
2000
2011-12

2012-13

2013-14

2014-15

Interpretation:
In the year 2011-12 the actual amount is less compared to budgeted amount as the budget
is accurate. In the 2011-12 it shows a slight change between budgeted amount and actual. In the
year 2014-15 budgeted amount is more compared to actual. It shows that the quantity is more
comparing to market. Selling of cement product less than the estimates.

82

AVERAGE INTENSIVES
Table shown on average intensives of kesoram cement industry

2011-12

2012-13

2013-14

2014-15

BE

98

93

97

102

ACT

91

86

92

98

Figure showing on Average Intensicves of kesoram cement industry

105
100
95
BE

90

ACT
85
80
75
2011-12

2012-13

2013-14

2014-15

83

Interpretation:
In the year 2011-12 the actual amount is less compared to budgeted amount as the budget
is accurate. In the 2011-12 it shows a slight change between budgeted amount and actual. In the
year 2014-15 budgeted amount is more compared to actual. It shows that the quantity is more
comparing to market. Selling of cement product less than the estimates.

OTHER INCOME
Table shown on other income of kesoram cement industry

2011-12

2012-13

2013-14

2014-15

BE

51

49

53

56

ACT

43

38

48

49

Figure showing on other income of kesoram cement industry

60
50
40
BE

30

ACT
20
10
0
2011-12

2012-13

2013-14

84

2014-15

Interpretation:
In the year 2011-12 the actual amount is less compared to budgeted amount as the budget
is accurate. In the 2011-12 it shows a slight change between budgeted amount and actual. In the
year 2014-15 budgeted amount is more compared to actual. It shows that the quantity is more
comparing to market. Selling of cement product less than the estimates.

VARIABLE COST
Table showing on variable cost of kesoram cement industry

2011-12

2012-13

2013-14

2014-15

BE

830

839

860

870

ACT

873

914

910

920

Figure showing on variable cost of kesoram cement industry

85

940
920
900
880
BE

860

ACT

840
820
800
780
2011-12

2012-13

2013-14

2014-15

Interpretation
FORM above table it can be under that the estimated amount and actual amount of
kesoram cement was recorded at raw materiel 830 during the year 2011-2012 it is increased to
actual raw material 873 in the year 2011-2012. It shows that there is an increased in budget to the
actual. The highest amount in budget was recorded in year 2014-2015.

OPERATIVE MAINTAINED COST

Table showing on operative maintained cost of kesoram cement industry

2011-12

2012-13

2013-14

2014-15

BE

723

745

790

814

ACT

842

885

897

903

Figure showing on operative maintained cost of kesoram cement industry

86

1000
900
800
700
600
500

BE

400

ACT

300
200
100
0
2011-12

2012-13

2013-14

2014-15

Interpretation:
1) Form the above table it can be understood that the budget of kesoram cement was
recorded the estimated value 723 during the year 2011-2012 and it is decreased to 842
during the year 2011-2012.
2) It shows that there is on decreased in the budgetary to the actual 2014-15.
3) The lowest investment in budgetary was recorded in year 2014-15.

87

FINANCE CHARGES
Table showing on finance charges of kesoram cement industry

2011-12

2012-13

2013-14

2014-15

BE

56

56

58

60

ACT

31

34

34

35

Figure showing on finance charges of kesoram cement industry

70
60
50
40
BE
30

ACT

20
10
0
2011-12

2012-13

2013-14

2014-15

Interpretation:
1) Form the above table it can be understood that the budgetary of kesoram cement was
recorded at 56 value of estimation during the year 2011-2012.and it decreased to 31 of
actual value in during year 2011-2012.
2) It shows that there is increase in the budgetary the lower value in the 2011-2012.
3) The lowest investment in budgetary was recorded in year 2014-2015.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2015
88

Cash flow from operating

PARTICULARS

RS:

RS:

activities
Net profit before tax

3,41,78,32,892

80, 92, 92132

Depreciation

58, 30, 64,022

51, 57, 16,762

Adjustments for:

Loss/profit on food 5, 45, 85,229

5, 76, 15,772

assets sold/disable
Loss on sale of long 3, 58,952

-----

term investments
Income from
long term

4,91,46,881

2,61,37,771

33, 50, 30,376

32, 75, 37,771

investment(other
trader)
Interest
paid/payable

on

loans etc
Interest receivable 2, 50, 55,563

9, 05, 21,426

on loans
Provision for doubtful
Debts/deposits in 3,82,15,119

--------

add
Provision for doubtful
Debts/deposits (net)
Debt/advance/depos

-----------------5, 34, 50,070

93, 92,067
55, 44,394

its written off

Long-term

-----------

7,700

investment

written

off
89

Unrealized loss/gain on
Foreign

currency 2, 95, 96,073

19, 16,075

fluctuation
Provision for diminution
in
Value of investment

---------------

1, 10, 09232

Operating profit before

working capital changes:
Adjustment for:
Inventories
Trade and

(1,21,69,75,334)
other (50, 17, 40, 397)

receivable
Trade payables
Cash

generated

65, 61, 02,594

(24,94,24,615)
2, 92, 62,288
(20,01,35,318)

from

operations
Direct taxes/ refund (93, 49, 80,671)
Net cash from 1,98,37,48,569

(20,01,35,318)
1,10,42,01,672

operating activities

Interpretation:
Observed from the above table that cash flow statement of kesoram cement industries
limited in the year 2014-2015. In the year 2014-2015variable net profit before tax, depreciation,
loss/profit on food asset sold/disable, loss on sale of long term investments, interest paid/payable
on loans etc have been increased.

90

In operating profit before working capital changes of inventory, trade receivable and
trade payables of the year 2014-2015. However the total operating profits is increasing
respectively.
In cash generated from operations the direct taxes/refund has been included, the total cash
generated from operations increase in the year 2014-2015 respectively.
Finally with regard to the cash flow statement of kesoram cement industries limited the
total cash flow has been increased during the year 2014-2015. The overall budget results of
kesoram cement is industries limited is earning more cash flows.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31stMARCH 2015

PARTICULARS
Schedule Income
Sales
Less excise duty
Net sales

RS
2013-2014
18,17,81,55,294
2,04,63,80,752
16,13,17,74,542
91

Rs
2014-2015
25,16,45,89,369
3,07,41,00,000
22,06,9660,339

Other income

53, 74, 29,621

16,66,92,64,153

49, 04, 06,410

22,58,00,66,749

7,61,14,89,922
7,40,51,67,576
59, 52, 33,509
1, 48,449,493
51, 57, 16,762
32, 75, 37,771

9,20,98,35,678
9,03,43,03,781
53, 05, 56,255
1, 21, 74,437
53, 30, 64,022
33,50,30,375

75, 00, 00,000

1, 22, 00,000
45, 70,92,132

34, 00, 00,000

1,10,00,00
2,65,68,32,892

45,70,92,132

2,65,68,32,892

13, 72, 29,954

1, 92, 46,501
--------------

-----------------------------------18, 29, 73,272

--------------5, 00, 00,000

20, 64, 70,455
25, 06, 15,677

2, 56, 62,001
30, 00, 00,000
50, 86, 35,273
2,14,81,97,619

9.99%

58.08%

Expenditure
Finished goods
Manufacturing selling
Deprecation
Rescue of assets
Schedule
Interest
Profit before taxation
Provision for
Current taxation
Provision benefit tax
Profit after taxation
Profit available for
appropriation
Appropriation
Proposed dividend
Tax on proposed Dividend
In tend Dividend
Tax on in tend
Dividend
General resend
Balance carried to schedule2
Earnings per share

Interpretation:
Observed from the above table that the profit and loss account of kesoram cement
industries limited in the year 2014-2015 In the year 2014-2015.sales and income increased
EXPENDITURE of finished goods, manufacturing selling, and administration expenses are also
increased, deprecation, less transfer from capital, rescue of assets is decreased.
Profit before taxation increased from Rs.34, 00, 00,000 to 75, 00, 00,000 and profit after
taxation also increased from Rs.45, 70, 92,132 to 2,65,68,32,892 in the year 2013-2014
respectively.
92

Finally with regard to the profit and loss account of kesoram cement industries Limited
the total profit has been increased the year 2014-2015. The overall budget result of kesoram
cement is industries limited is earning profits.

FINDINGS
1) There is a huge increase in INCOME of the company in 2014-2015, compared to 20132014.
2) Huge increase in earnings per share in 2014-2015, when compared to 2013-2014.
3) In the year 2013-14 and 2014-15 represents actual are less than budgeted so less
purchases made in every department. In the year 2011-12 and 2012-13 actual is more
than budgeted it shows that greater importance given to purchases.
4) In the year 2011-12 civil expenses are at a very high range. Accruals are high compared
to budget because of construction of cold storage sector, cement plant and bore wells. In
the year 2013-14 actual are less compared to budgeted because as the expenses are less.
In the year 2014-15 it incurred high volume of expenses than the budgeted because it
incurred heavy expenses.
93

5) In the year 2014-15 budgeted amount is more compared to actual. It shows that the
quantity is more compared to market. Selling of cement products, less than the estimates.
6) In the year 2014-2015 sales and income increased EXPENDITURE of finished goods,
manufacturing selling, and administration expenses are also increased, deprecation, less
transfer from capital, rescue of assets is decreased.

SUGGESTIONS
Planning has become the primary function of management most of the planning relates to
individual situations and individual proposals. Budgets are nothing but expressions largely in
financial terms, budgetary control has, therefore become and essential tool of management for
controlling and maximizing profits.
a. Continuous comparison of actual performance with budgeted performance.
b. The company has to maintain super quick assets in order to maintain sound liquidity.
c. A company has to recollect their own standing amount from the debtors regularly.
d. The company has to maintain funds for long-term investment.
e. The company has to monitory from liability position in regular intervals.

94

f. The company must be conscious about their working capital position.

g. There is lot of pretension consistence demand the cement industry as a cement
producer the company can able to source, their funds throw more share holders funds.
h. Company is maintaining the inventories a part from current assets for the entire study
period. To show that excessive inventory level are not good for any organization and
any company. Since the company has it concentrate much more on inventory
maintain.
i.

During study period there is negative working capital levels for the company so the
company must maintained enough current assets to keep working capital, figure
positively.

CONCLUSION
a. Every organization has predetermined set of objectives and goals, but reaching their
objectives and goals by proper planning and executing of these plans economically.
b. The kesoram cement industries Limited objectives of planning and organizing promoting
an integrated development of Cement Company.
c. The corporation machine of kesoram cement industries is to make available and quickly
cement in increasingly small quantities, the company will spear head the process of
accelerated development of cement sector by expeditiously.
d. The organization needs the capable personalities as management makes the plans and
implement of these plans are expressed in terms of budget and budgetary control.

95

e. The Kesoram cement Industries Limited has budget process in two stages. one is the
capital expenditure budget and another is operating maintenance budget, the capital
expenditure budget shows the list of capital projects selected for investment along with
their estimated costs, operating maintenance budgets, the medical budgets are rarely used
in the organization like long term budgets, search & development budget for consultancy.
f. The Kesoram cement industries is to make efficient utilization of its resources and
implementation of sophisticated technology to produce available and quality cement and
also creating ambience of collective working of its employees.

BIBLIOGRAPHY
1. Prasanna Chandra, Financial Management: Theory and Practice, 7/e, 2008, Tata McGrawHill Education.
2. I.M.Pandey, financial management: Principles and Practice 9/e, 2005, Vikas publishing.
3. R.K Sharma Shashi K Gupta, financial management: Principal and Management, 7/e, 2002,
Kalyani Publishers.
4. Dr.S N Maheshwari: management Accounting and financial control, 6/e, 1996, sultan chand
and sons.
5. M.Y.Khan, and P.K Jain: Basic financial management, 3/e, 1982, Tata McGraw-Hill.
6.

A. W. Willsmore: business budget and budgetary control, 2/e1949, pitman&sons.

7. Edward J Mock: Financial decision making, 2/e, 1969, International Textbook.

8. Eugene F. Brigham: Financial management, 12/e, 2008, cengage learning.
9. 88th annual report of kesoram cement industries limited.

96

10. detailed project report of kesoram cement industries limited

WEBSITE

www.kesoram.com
www.kesoramcement.com
www.kesocorp.com
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