Budgetary Control

CONTENT
Chapter No
Particulars
Page No.
I-15
INTRODUCTION
Need & importance
of the study
Theoretical
framework
Objectives
Scope
and
limitations
Source of data
Period of study
Methodology
II
COMPANY PROFILE
III
BUDGET
AND
SYSTEM IN NTPC
IV
DATA
ANALYSIS
INTERPRETATION
CONCLUSIONS & SUGGESTIONS
BIBLIOGRAPHY
16-31
BUDGETARY
and
32-46
47-59
67-69
LIST OF TABLES:
A)
TABLES
S.No
Tables No.
Title of the table
3.1
Physical parameters of 2006 & 41

2007
3.2
Physical parameters of 2007- 42

2008
3.3
Physical parameters of 2008- 43

2009
3.4
Budget Vs Actual for the year 44

2007-09
3.5
Operational
2006-2007
3.6
Revenue for the year 2006-2007 46
3.7
Operational Expenditure for the 47

year 2007-08
3.8
Revenues During the

2007-08
3.9
Operational
2008-09
10
3.10
Purchase Budget for the year 50

2007-08
11
3.11
Purchase Budget for the year 51

2008-09
12
3.12
Revenues during the year 2008- 52

09
Expenditure
Expenditure
Page No
of 45
year 48
of 49
CHAPTER I
INTRODUCTION
DEFINITION:
Budget is a financial and /or quantitative statement, prepared and approved
prior to a
defined Period of time of the policy to be pursued during that period for the
purpose of attaining a given objective. It may include income, expenditure and
employment of capital.
Features:
Financial and/or Quantitative Statement.
Futuristic prepare and approved prior to a defined period of time.
Goal Oriented for the purpose of attaining a given objective.
Components Income,
Expenditure and Employment of Capital.
OBJECTIVES OF THE STUDY:

To analyze the conventional budgetary system in NTPC Ltd, Ramagundam.
To evaluate and modify the current budgetary system with reference to the
various types of budget.
To evaluate the efficiency of budgetary control system in NTPC Ltd,
Ramagundam.
To offer appropriate suggestions and recommendations for improving the
system.
To prepare projected financial statements for NTPC Ltd, Ramagundam

from the data taken from various budgets.
SCOPE OF THE STUDY:

The budgetary control system in RSTPS considers generation and
transmission line projects as independent cost centers. This system prepares the
operation and management budget for each of the cost centers as per the
requirements of the cost system. The budget for the investment center is the sum
of the budgets of the cost centers. Separate budgets are prepared for revenue
activities other than Operations and Research Development, Consultancy
Contracts. To facilitate management, budgets are phased into monthly or
quarterly targets .The actual performance is analyzed against this budgeted
performance in order to take corrective remedial actions if variances any exist.
The projection of internal resources over a period of 5 to 15 years and updating 5
years plans of the company is also done.
RESEARCH METHODOLOGY:
The research methodology deals with how the study was carried out. This
consists of several stages where in the process proceeds through various stages to
finally attain the objective of the study. Hence, for any project the objective of the
objective or aim of the project is to be known and the objective of the project is to
be set.
The organization in which the project is to be carried out is to be selected.
The profile of the organization is collected from various journals, monthly
magazines, from the employees and widely
THEORETICAL FRAME WORK

BUDGBT, BUDGETARY CONTROL AND BUDGETING:
A Budget is a quantitative expression of a plan of action relating to future period
of time. It represents a written operational plan of management the period.
It is always expressed in terms of money and quantity; it is the policy to be
followed during the budget period for attainment of specified organizational
objectives.
The essential features of a budget are

Financial and quantitative statement of the 3 action plan
Lay down period to the budget period during which I followed.
Prepared for specified objectives.
Based on managements policy.
In the CIMA terminology, a budget is defined as follows. "Budget is a financial
and/ or quantitative statement, prepared and approved prior to a defined [period
of time, of the policy to be pursued during that period for the purpose of attaining
a given objective,, The term budgetary control and budgeting are often used
interchangeably to refer to a system of managerial control.
BUDGETARY CONTROL:
Budgetary control implies the use of a comprehensive system of budgeting bid
management in carrying out its functions like planning, coordination and control.
It is system, which uses budgets for planning and controlling different activities
of business.
This system involves:

Division of organization of functional basis into different sections (each
section is technically known as a budget center)
Consolidation of separate budgets to present over all organizational
objectives during the during the forth coming budget period.
Comparison of actual level of performance against budgets comparison
process is stretched far enough to declare either attainment of objective or
basis of revision of plan of action and of action.
In the Charted Institute of Management Accountants (CIMA), London

terminology:
"Budgetary control is the establishment of budgets relating to
responsibilities of executives to the requirement of a policy ,and the continuous
comparison of actual with budgeted results ,either to secure by individual action
the objective of that the policy or to provide a basis for version."
Budgeting is a way of managing business and industry, it emphasizes that
management should anticipate problems and difficulties.
Advance decision should be taken for the course of activities during the
fourth coming budget period. Budgetary control denotes a formal system based
on the concept of budgeting.
BUDGET AND FORECASTS:

A forecast is a prediction of what going to happen as result of a given set of
circumstances, A budget is an approved plan of action expressed in figure
relating to a specified period of time.
A fore cast is a mere assessment of future events and budget is a plan of

action proposed to be adhered to during a specified future period.
A budget prepared on the forecast made for the budget period and thus a
forecast is not all that a budget is. A forecast can be made just by anybody
competent to make judgment.
A budget is an approved plan of action that is set only by seasoned

executives of an organization.
Forecast can be made of purposes other than budgeting .Economic forecast
of general business conditions may not have anything to do with budgeting.
Budget are always made with the objects of planning, continues ever after
budget preparation. A forecast includes projection of variables either
controllable or non-controllable that are used in development of budges.
OBJECTIVES OF BUDGETARY CONTROL:
PLANNING: Planning is an important managerial function. It helps to decide in
advance, what to do, how to do, when to do and who has to do it. Planning thus
helps the managers to anticipate eventualities, prepare for contingencies for
achieving the ultimate goals; budget preparation drives the managers to plan
ahead. Managers express their operational plans for anticipating business
conditions. Without a procedure of budgetary control, many operating managers
will not fine the time to plan ahead. Thus budgeting is an important planning
device.
COMMUNICATION: The employees of an organization should know
organizational aims, objectives of subunits (budgets centers) and effectively
communicate this information to employees. Besides, budgets keep different
section of the organization informed about the contribution of different subunits
in the attainment of over all organizational objective.
COORDINATION: To coordinate is to harmonies all the activities of a company

so as to facilitate its working and its success. Coordination will lead to following
results. Each department will work in harmony with other. Each department will
know the specific role that it has to play in the accomplishment of over all
organizational objectives, and The sequential arrangement of activities of
different departments is so governed that overlapping of activities and wastage of
time and labor is avoided. Functional budgets. In other words, a budget will
preclude the Production department from producing more than the sales
department can sell.
MOTIVATION: if employees have actively participated in budget preparation

and if they are convinced that their personal interests are closely associated with
the success of organizational plan, budgets provide motivation in the form of
goals to be achieved. The budgets will motives the workers, depends purely on
how the workers have been mentally and physically involved with the process of
budgeting.
CONTROL: under the system of budgetary control, budget forecast it thoroughly
discussed and reviewed to be finally approved as functional budgets. There after a
lot of 'cuts' and 'adjustments' are made to make functional budgets fit in the
organizational objectives.
The budget formation is followed by a feedback system to pinpoint the
extent of verification between actual level of performance and budgeted level of
performance, thus, the inbuilt mechanism of the routine of budgetary control is
bound to precipitate to an operational control.
APPROVED PLAN: A master budget provides an approved summary of results
to be expected from proposed plan of operations. It concerns all functions of
organization and serves as a guide to executives and departmental heads
responsible for various departmental objectives.
REQUIREMENTS OF A GOOD BUDGETING, SYSTEM:

Following are the requirements of a good budgeting system
Budgeting process should be backed and supported by the chief executive
of an organizational
The organizational goal should be quantified and clearly stated, these goals
should be within the framework of organizations strategic and long-rang
plans.
The organizational goals must be divided into functional goals.
The functional goals should not conflict with overall organizational
objectives.
All in the organization should mentally accept the exercise of budget
preparation.
The persons responsible for execution of budget should participate in the
budget preparation.
The budget should be realistic. It should represent that goals that are
reasonable attainable.
The budget should be realistic. It should represent goals that are

reasonable attainable.
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The budget should cover all the phase of the organizations.

The budget should be prepared promptly, comparing budget and actual
results, i.e., there should be effective budget implementation.
Clear-cut organizational lines should be established with appropriate
delegation of responsible for effective budget implementation.
The budgeting system should be based on information, communication.
ADVANTAGES OF BUDGETARY CONTROL:

A Budget program forces the managers to plan ahead.
It forces early consideration of basic policies.
All members of top management participate in budget committee. For
this reason, even planning at departmental level gets benefit or
experience of seasonal executives.
All functional heads are compelled to make plans in harmony with the
plans of other departments.
It develops an attitude of cost consciousness stimulates the effective use
of resources, and creates environment of profit minuteness throughout
the organization.
It demands the most economical use of labors, materials, facilities and
capital.
It inculcates a habit of timely, careful, adequate consideration of all
factors before reaching important decisions.
The use of budgets removes clouds of uncertainties for lower levels of
managements regarding basic policies and objectives.
It facilitates periodic self- analysis of the organization.
It aids in obtaining bank credit.
10
Management is forced to give timely and adequate attention to the

effect of changing business conditions
LIMITATIONS OF BUDGETARY CONTROL:

Estimates are used as basis for budget plan and estimates are based mostly
on available facts and best managerial judgment Since a lot of human
element is involved in exercising managerial judgment, it is but natural to
give some allowance in interpretation and utilization of estimated results;
Budgeting based on inaccurate forecasts is useless as a yardstick for
measuring the actual performance.
The circumstances are constantly changing and therefore, budgets and
budgetary techniques will not be useful, till they are continually adapted.
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 give positive
response to budgetary activities.
Execution of budgetary control will not automatically occur. A continuous
budget consciousness throughout the organization is needed for
achievement of this objective.
Budgetary control cannot reduce the managerial function to a formula. It is
only a managerial tool, which increases effectiveness of managerial control.
The use of budget may lead to restricted use of resources. Budgets are often
taken as limits. Efforts may, therefore, not be made to exceed the
performance beyond the budgeted targets, even though it may be
physically possible.
Frequent changes may be called for in budgets due to fast changing
industrial climate. It may be difficult for a company to keep pace with these
fast changes, because revision of budgets is expensive exercise.
11
PRELIMINARIES CONTROL FOR OPERATION OF BUDGET

Specification of organizational objective.
Establishment of budget centers.
Preparation of organizational chart.
Linking of budget requirements with chart of accounts.
Establishment of budget committee
Preparation of budget manual.
BUDGET PERIOD
Charted Institute of Management Accountants (CIMA) defines budget period as
"the period for which a budget is prepared and used, which may then be sub
divided into control periods." Budgets having short durations are very costly,
because revision of budget is an exercise requiring substantial expenditure and
labor.
Whether a budget is to be a long-termed or a short-term budget is to be decided
primarily with reference to the fallowing two factors:
Types of business and
Amount of control required.
KEY FACTOR
It is also referred to as limiting factor, 'governing factor' and .principal factor'.
Key factor is a factor whose influence must be first ascertained to ensure that
functional budgets are reasonably capable of fulfillment.
Usually this limiting factor is sales. A concern may not be able to sell as
much as it can produce. But sometimes a concern can sell all it produces but
limited due to the shortage of material, labor, plant capacity or capital.
FIXED BUDGET vs. FLEXIBLE BUDGET

12
FIXED BUDGET: A fixed budget is used unaltered during the budget period. It is
prepared for a particular activity level and it does not change with actual activity
level being higher or lower than budgeting activity level.
FLEXIBLE BUDGET: A flexible budget is a budget, which, by recognizing
different cost behavior patterns, is designed to change as volume of output
changes. It is designed to furnish budgeted cost at any level of activity actually
attained. Flexible budget is also known as variable or sliding scale budget.
MASTER BUDGET
After all the functional budgets have been prepared, these are summarized in the
form of a summary budget. The summary budget gives a forecast profit and loss
account and forecast balance sheet for the budget period. The budget committee
considers the summary budget and adjudges it as satisfactory or otherwise.
If the budget committee does not find summary budget satisfactory, it
issues directions for necessary changes. The proposed changes are incorporated
and revised summary budget is prepared. The revised summary budget thus
prepared presented to the Board of Directors for approval.
After the board of Directors approves the summary budget, it is known as
master budget. Thus, the master budget is the organization's formal plan of
action for the forth-coming budget period. It is an integrated from of all
functional budgets bearing approval of top management.
The master budget is a complete financial presentation of the operating
plans of the entire company for the budget period. It is the companyindividualized key to successful financial planning and control.
ZERO-BASE/PRIORITY-BASE BUDGETING
Zero-base budgeting is a new technique of planning and decision-making. It is

very challenging approach.
Zero- base budgeting reverses the working process of traditional budgeting.
traditional budgeting starts with previous year expenditure level as a base and
then discussion is focused to determine the 'cuts' and 'additions' to be made in
previous year spending.
Zero-base budgeting is completely different to whether total budget is increasing
or decreasing. What it does is to identify alternatives, so that if more money is
required to be spent in one department, it can be saved in another area. CIMA
13
has defined it as a method of budgeting where by all activities is revaluated each

time a budget is set
Main features of Zero-base budgeting are...........
Manger of a decision unit has to completely justify shy there should be at
all any budget allotment for his decision unit. This justification is to be
made a fresh without making reference to previous level of spending in his
department.
Activities are identified in decision packages.
Decision packages are evaluated by systematic analysis.
Under this approach there exists a frank relationship between superior and
subordinates. Management agrees to fund for a specified service and
manager of the decision unit clearly accept to deliver the service.
Decision packages are linked with corporate objectives, which are clearly
laid down.
Available resources are directed towards alternatives in order of priority to
ensure optimum result.
REPORT WRITING IN BUDGETARY CONTROL:

A report is a document in which, a given problem is examined for the
purpose of conveying information, putting forward ideas and sometimes making
recommendations as the basis for actions. A report system should be tailored to
give management the facts in the form that will be most easily understood.
Common forms of reports are.
Narrative Reports: These are descriptive and verbal reports.
Statistical Reports: These reports rely on tables, numbers, graphs, charts, etc.
Periodic Reports: Reports may be issued on regular scheduled basis, for
example, daily weekly, monthly, quarterly and annually.
Progress Reports: These reports include interim reports between the start
and completion of a project. These reports are also called fallow-up reports.
14
Special Reports: These reports are sent irregularly in response to a

specification-routine request.
Cost Reports: Cost accounting reports must be prepared and distributed to
three levels of management, i.e.; top management, middle management and
operating management. The greater is the degree of control required, the shorter
should be the period of time covered in the report.
ABBREVATIONS USED:
NTPC National Thermal Power Corporation
RSTPS- Ramagundam Super Thermal Power Station
MWs - Mega watts
CEA- Central electricity Authority
MUs Million Units
MT Metric Tonns
KL Kilo litres
MOU Memorandum of Understanding
PS/KWH Paisa per Kilo Watt Hour
PLF Plant Load Factor
APC Auxiliary Power Consumption
O&M Operation & Maintenance
15
16
COMPANY PROFILE
VISION STATEMENT:
To be the worlds largest and best power producer, powering
Indiaa Growth
CORE VALUE:
BE COMMITED
B: Business Ethics
E: environmentally and economically sustainable
C: Customer focus
O: Organisational and professional pride
M: Mutual respect and trust
M: Motivating self and others
I: Innovation and speed
T: Total quality for excellence
T: Transparent and Respected Organization
E: Enterprising
D: Devoted
MISSION:
Develop and provide reliable power, related products and services at
competitive prices, integrating multiple energy sources with innovative
and eco-friendly technologies and contribute to society
17
NTPC Limited is the largest thermal power generating company of India. A

public sector company, it was incorporated in the year 1975 to accelerate power
development in the country as a wholly owned company of the government of
India. At present, Government of India holds 89.5% of the total equity shares of
the company and FIIS, Domestic Banks, public and others hold the balance
10.57o.within a span of 3lyear, NTPC has emerged as a truly national power
company, with power generating facilities in all major regions of the country.
NTPC is the sixth largest thermal power generator in the world and the second
most efficient utility in terms of capacity utilization based on data of 1998.
NTPC'S core business is engineering, construction and operation of power
generating plants. It also provides consultancy in the area of power plant p1 {tlri,
constructions and power generation lo companies in India and abroad. As on
date the installed capacity of NTPC is 30,644MW through its 15 coal based
(22,895 MW)'7 gas based (3,955 MW) and 4 joint venture projects (1,0s4NIw).
NTPC acquired 50%. equity other SAIL Power Supply Corporation Ltd.(SPSCL).
This JV company operates the captive power plants of Durgapur (120MW)
Rourkela (120NIW) and Bhilai (74 MW).NTPC also fraps ry.#% stake in
Ratnagiri Gas & Power Private Limited (RGPPL) a joint venture company
between NTPC ,GAIL, Indian Financial institutions and Maharashtra SEB
Holding Co. Ltd.(The present capacity of RGPF'L is 740 MW ).
NTPC Limited (formerly National Thermal Power Corporation)

(BSE: 532555, NSE: NTPC) is the largest state-owned power generating company
in India. Forbes Global 2000 for 2009 ranked it 317th [3] in the world. It is an
Indian public sector company listed on the Bombay Stock Exchange although at
present the Government of India holds 84.5%(after divestment the stake by
Indian government on 19october2009) of its equity. With a current generating
capacity of 31134 MW, NTPC has embarked on plans to become a 75,000 MW
company
by
2017.
It
was
founded
on
November
7,
1975.
NTPC's core business is engineering, construction and operation of power
generating plants and providing consultancy to power utilities in India and
abroad.
The total installed capacity of the company is 31134 MW (including JVs) with 15
coal based and 7 gas based stations, located across the country. In addition under
JVs, 3 stations are coal based & another station uses naphtha/LNG as fuel. By
2017, the power generation portfolio is expected to have a diversified fuel mix
with coal based capacity of around 53000 MW, 10000 MW through gas, 9000
18
MW through Hydro generation, about 2000 MW from nuclear sources and

around 1000 MW from Renewable Energy Sources (RES). NTPC has adopted a
multi-pronged growth strategy which includes capacity addition through green
field projects, expansion of existing stations, joint ventures, subsidiaries and
takeover of stations.
NTPC has been operating its plants at high efficiency levels. Although the
company has 18.79% of the total national capacity it contributes 28.60% of total
power generation due to its focus on high efficiency. NTPCs share at 31 Mar 2001
of the total installed capacity of the country was 24.51% and it generated 29.68%
of the power of the country in 2008-09. Every fourth home in India is lit by
NTPC. 170.88BU of electricity was produced by its stations in the financial year
2005-2006. The Net Profit after Tax on March 31, 2006 was INR 58,202 million.
Net Profit after Tax for the quarter ended June 30, 2006 was INR 15528 million,
which is 18.65% more than for the same quarter in the previous financial year.
2005).
Diversified growth:
As per new corporate plan, NTPC plans to become a 75 GW company by the year 2017 and envisages
to have an installed capacity of 128 GW by the year 2032 with a well diversified fuel mix comprising
56% coal, 16% gas, 11% nuclear energy, 9% renewable energy and 8% hydro power based capacity.
As such, by the year 2032, 28% of NTPCs installed generating capacity will be based on carbon free
energy sources. Further, the coal based capacity will increasingly be based on high-efficient-lowemission technologies such as Super-critical and Ultra-Super-critical. Along with this growth, NTPC will
utilize a strategic mix of options to ensure fuel security for its fleet of power stations.
Looking at the opportunities coming its way, due to changes in the business environment, NTPC made
changes in its strategy and diversified in the business adjacencies along the energy value chain. In its
pursuit of diversification NTPC has developed strategic alliances and joint ventures with leading
national and international companies. NTPC has also made long strides in developing its Ash Utilization
business.
Hydro Power: In order to give impetus to hydro power growth in the country and to have a
balanced portfolio of power generation, NTPC entered hydro power business with the 800 MW
Koldam hydro project in Himachal Pradesh. Two more projects have also been taken up in
Uttarakhand. A wholly owned subsidiary, NTPC Hydro Ltd., is setting up hydro projects of
capacities up to 250 MW.
Renewable Energy: In order to broad base its fuel mix NTPC has plan of capacity addition of
about 1,000 MW through renewable resources by 2017.
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Nuclear Power: A Joint Venture Company "Anushakti Vidhyut Nigam Ltd." has been formed
(with 51% stake of NPCIL and 49% stake of NTPC) for development of nuclear power projects
in the country.
Coal Mining: In a major backward integration move to create fuel security, NTPC has
ventured into coal mining business with an aim to meet about 20% of its coal requirement
from its captive mines by 2017. The Government of India has so far allotted 7 coal blocks to
NTPC, including 2 blocks to be developed through joint venture route.
Power Trading: 'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly owned subsidiary was
created for trading power leading to optimal utilization of NTPCs assets. It is the second
largest power trading company in the country. In order to facilitate power trading in the
country, National Power Exchange Ltd., a JV of NTPC, NHPC, PFC and TCS has been formed
for operating a Power Exchange.
Ash Business: NTPC has focused on the utilization of ash generated by its power stations to
convert the challenge of ash disposal into an opportunity. Ash is being used as a raw material
input by cement companies and brick manufacturers. NVVN is engaged in the business of Fly
Ash export and sale to domestic customers. Joint ventures with cement companies are being
planned to set up cement grinding units in the vicinity of NTPC stations.
Power Distribution: NTPC Electric Supply Company Ltd. (NESCL), a wholly owned
subsidiary of NTPC, was set up for distribution of power. NESCL is actively engaged in Rajiv
Gandhi Gramin Vidyutikaran Yojanaprogramme for rural electrification.
Equipment Manufacturing: Enormous growth in power sector necessitates augmentation of

power equipment manufacturing capacity. NTPC has formed JVs with BHEL and Bharat Forge
Ltd. for power plant equipment manufacturing. NTPC has also acquired stake in Transformers
and Electricals Kerala Ltd. (TELK) for manufacturing and repair of transformers.
Business Development
NTPC, with a rich experience of engineering, construction and operation of around 35,000 MW of
thermal generating capacity, is the largest and one of the most efficient power companies in India,
having operations that match the global standards.
Commensurate with our countrys growth challenges, NTPC has embarked upon an ambitious plan to
attain a total installed capacity of 75,000 MW by 2017. Towards this end, NTPC has adopted a multipronged strategy such as Greenfield Projects, Brownfield Projects, Joint Venture and Acquisition route.
20
Apart from this, NTPC has also adopted the Diversification Strategy in related business areas, such as,
Services, Coal Mining, Power Trading, Power Exchange, Manufacturing to ensure robustness and
growth of the company.
JOINT VENTURE (JV) COMPANIES
The following joint venture companies have been formed so far:
JVs FOR CAPACITY ADDITION
NTPC-SAIL POWER COMPANY (PVT) LTD (NSPCL)
1. A Joint Venture Company of NTPC and SAIL (50: 50 equity) was incorporated on 08.02.1999.
2. BESCL (Bhilai Electric Supply Co. Pvt Ltd), another JV Co. of NTPC and SAIL with 50:50 equity
participation), has merged with NSPCL w.e.f 2nd August 2006.
OBJECTIVE
To own and operate captive power plants for SAILs steel manufacturing facilities
located at Durgapur, Rourkela and Bhilai. To undertake expansion of Bhilai plants.
NTPC TAMILNADU ENERGY COMPANY LIMITED

This JV was incorporated on 23.05.2003 with Tamil Nadu Electricity Board, a State run Electricity
Board in the State of Tamil Nadu engaged in generation, transmission and distribution of electricity.
To set up a 1500 MW coal based power station at vallur, Ennore in Tamil Nadu
OBJECTIVE
utilising the existing infrastructure facility at Ennore and supply power mainly
to Tamil Nadu and the states of Kerala, Karnataka and Pondicherry.
PROMOTERS' EQUITY
NTPC: 50%
TNEB : 50%
ARAVALI POWER COMPANY PRIVATE LTD

The JV Company was Incorporated on 21.12.2006 with, Indraprastha Power Generation Company Ltd.
(IPGCL) and Haryana Power Generation Company Ltd (HPGCL).
OBJECTIVE
To set up a coal-based power station of 1500MW capacity in Distt. Jhajjar,

Haryana, in joint venture with IPGCL and HPGCL to supply power to Delhi and
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Haryana.
PROMOTERS' EQUITY NTPC-50%, IPGCL-25%, HPGCL-25%
MEJA URJA NIGAM PRIVATE LIMITED

The Joint Venture Company has been incorporated on 02.04.2008 with UPRVUNL.
OBJECTIVE
PROMOTERS' EQUITY
To set up a 2 X 660MW Thermal Power Plant at Meja, Distt. Allahabad in UP.

NTPC: 50%
UPRVUNL : 50%
RATNAGIRI GAS & POWER PVT. LIMITED

This Joint Venture Company was Incorporated on 08.07.2005
OBJECTIVE
To own and operate the assets of the erstwhile Dhabol Power Company ( 1967
MW) and 5 MMTPA LNG Re-gasification Terminal
NTPC: 30.17%
PROMOTERS' EQUITY
GAIL: 30.17%
IFIs: 21.77% (ICICI: 10.65%, SBI: 7.14%, CANARA BANK: 1.87%)
MSEB HOLDING CO. LTD.: 17.89%
Entire Power Block (1967 MW) of the Gas Power project is under commercial operation. Domestic gas
from KG basin has been made available by MoPNG for long term requirement for operation of Gas
Power Plant.
NABINAGAR POWER GENERATING CO. PVT. LTD.

The JV Company was Incorporated on 09.09.2008 with Bihar State Electricity Board
OBJECTIVE
To set up 3x660 MW Thermal Power Plant at New Nabinagar, Bihar and

operation & maintenance thereof
PROMOTERS' EQUITY NTPC: 50%
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BSEB: 50%
JVS FOR SERVICES

NTPC -ALSTOM POWER SERVICES PVT. LTD. (NASL)
The JV Company was incorporated on 27.09.1999 and formerly known as NTPC-ABB ALSTOM POWER
SERVICES PVT. LTD)
OBJECTIVE
PROMOTERS' EQUITY
Undertake Renovation & Modernisation of power stations in India and other

SAARC countries
NTPC: 50% ,
ALSTOM Power Generation AG : 50%
Company is engaged in undertaking works of Renovation & Modernization of Power Plants for Power
plant life extension, performance optimization and improvement of availability & efficiency.
UTILITY POWER TECH LTD

This JV company incorporated on 23.11.1995 has been promoted with Reliance Infrastructure Limited
(formerly BSES Limited), a private sector Indian power company.
OBJECTIVE
PROMOTERS' EQUITY
To undertake project construction, erection and supervision in power

sector and other sectors in India and abroad
NTPC: 50%
Reliance Infrastructure Ltd.: 50%
NATIONAL HIGH POWER TEST LABORATORY PVT. LTD. (NHPTL)

This JV was incorporated along with NHPC, PGCIL and DVC on 22.05.2009
OBJECTIVE
To set up an Online High Power Test Laboratory for short circuit testing facility
of electrical equipments.
PROMOTERS' EQUITY NTPC: 25%
23
NHPC: 25%
PGCIL: 25%
DVC: 25%
JVs FOR POWER TRADING &POWER EXCHANGE

NATIONAL POWER EXCHANGE LTD.(NPEX)
This Joint venture Company was incorporated on 11.12.2008 along with NHPC, PFC and TCS
To facilitate nation - wide trading of all forms of contract for buying and selling
OBJECTIVE
of all forms of electrical energy for clearing and settlement of trade in a

transparent, fair and open manner
NTPC: 16.67%
NHPC :16.67%
PFC: 16.66%
PROMOTERS' EQUITY
TCS: 19.04%
BSE: 16.66 %
IFCI: 5.72 %
MEENAKSHI: 4.77 %
DPSC: 3.81 %
JVs FOR COAL MINING

NTPC SCCL GLOBAL VENTURES PRIVATE LTD
The JV Company with Singareni Coalieries Company Limited (SCCL) was

incorporated on 31.07.2007
OBJECTIVE
To jointly undertake Development and O & M of Coal Blocks(s) and Integrated

Coal based Power Projects in India and overseas.
Promoters
NTPC - 50 %
EQUITY
SCCL 50 %
24
INTERNATIONAL COAL VENTURES PVT. LIMITED (ICVL)

The JV Company was incorporated on 20.05.2009
For procurement of metallurgical coking coal and thermal coal from overseas
OBJECTIVE
& acquisition of coal assets abroad

NTPC: 14.28%
NMDC: 14.28%
PROMOTERS' EQUITY RINL: 14.28%

CIL: 28.58%
SAIL: 28.58%
JVs FOR MANUFACTURING & SUPPLY OF EQUIPMENT

NTPC-BHEL POWER PROJECTS PVT.LTD
The Joint Venture Company was incorporated on 28.04.2008 with BHEL
To explore, secure and execute EPC contracts for Power plants and other
OBJECTIVE
Infrastructure projects in India and abroad.

To engage in manufacturing and supply of equipments for power plants and
other infrastructure projects in India and abroad.
Promoters
NTPC: 50%
EQUITY
BHEL : 50%
BF NTPCENERGY SYSTEM LIMITED.

This JV Company with Bharat Forge Limited (BF) was incorporated on 19.06.2008
To establish a facility for manufacturing of castings, forgings, fittings and High
OBJECTIVE
Pressure piping, required for Power and other industries, Balance of Plant
(BOP) equipment for the power sector etc.
PROMOTERS' EQUITY
NTPC: 49%
BF : 51%
25
NTPC-TELK
The shares of Transformers & Electricals Kerala Ltd. (TELK) was bought by NTPC
on 19.12. 2009
OBJECTIVE
For Manufacturing and repair of Transformers

NTPC: 44.6%
PROMOTERS' EQUITY
Govt. of Kerala: 54.56%

Public: 0.84%
ENERGY EFFICIENCY SERVICES LTD. (EESL)

This JV was incorporated on 10.12.2009 amongst NTPC, PFC, POWERGRID and REC with equal equity
participation.
To carry out and promote the business of Energy Efficiency, Energy
OBJECTIVE
Conservation and Climate Change including manufacture and supply of energy

efficiency services and products.
NTPC: 25%
PROMOTERS' EQUITY
PFC: 25%
POWERGRID: 25%
REC: 25%
CIL-NTPC URJA PRIVATE LIMITED (CNUPL)

This JV was incorporated on 27.04.2010 with Coal India Limited (CIL) in New Delhi for incorporation of
Joint Venture Company with 50:50 equity participation
OBJECTIVE
PROMOTERS' EQUITY
Development of Brahmini & Chichro Patsimal coal mine blocks for meeting
coal requirement of Farakka and Kahalgaon expansion projects of NTPC.
NTPC: 50%
CIL: 50%
26
ANUSHAKTI VIDHYUT NIGAM LIMITED (ASHVINI)

This JV was incorporated on 27.01.2011 with Nuclear Power Corporation of India Ltd (NPCIL) for
entering into the business of nuclear power generation
OBJECTIVE
Setting up of nuclear power projects

NPCIL: 51%
PROMOTERS' EQUITY
NTPC: 49%
PROPOSED JOINT VENTURES /MOUs/ AGREEMENTs

Joint Venture Agreement has been signed with Asian Development Bank (ADB) and Kyuden
International Corporation (Kyushu) on 24.11.2010 for forming a JV Company to develop projects and
establish, over a period of three years, a portfolio of about 500 MW of Renewable Power Generation in
India.
ACQUISITION
Business development through Acquisition serves both NTPC's own commercial interest as well as the
interest of the Indian economy. Taking over, being a part of the acquisition process, is also an
opportunity for NTPC to add to its power generation capacity at a very low gestation period. NTPC has,
over the years, acquired the following power stations belonging to other utilities/SEBs and has turned
around each of them using its corporate abilities.
POWER STATIONS TAKEN OVER
YEAR
2x210 MW FEROZE GANDHI UNCHAHAR THERMAL POWER

STATION
4x60 MW +2x110 MW TALCHER THERMAL POWER STATION
Orissa State Electricity Board
4x110 MW TANDA THERMAL POWER STATION
1991
Authority
27
UP Rajya Vidyut Utpadan

Nigam Limited
1995 Orissa State Electricity Board
2000
705MW Badarpur Thermal Power Station Central Electricity
ORIGINAL OWNER
UP Rajya Vidyut Utpadan

Nigam Limited
2006 Central Electricity Authority
DIVERSIFICATION
To broad-base the business and also to ensure growth, diversification in the areas related to NTPC's
core business of power generation such as Hydro power, Distribution, Trading, Coal mining, LNG etc.
have been identified as priority areas.
A.BACKWARD INTEGRATION- COAL MINING
COAL MINING
The policy changes in coal sector provides an opportunity to NTPC to enter captive coal mining
business. Production is expected by 2012 in one coal block already allotted (Pakri Barwadih in the
state of Jharkhand). Five more blocks (~40MTPA) have been allotted to NTPC, including two in JV with
CIL.
In addition to development of its own domestic coal mines NTPC is exploring various other options
including acquisition of stake in coal mines abroad for sourcing of thermal coal for addressing fuel
security concerns.
THE OPERATIONS
28
RSTPS At A GLANCE
Approved Capacity '
2600 Mw
Installed Capacity
Stage I: 3X 200 MW
Stage II: 3X 500 MW
Stage III: lX 500 MW
Location
Karimnagar,Andhra Pradesh
Coal Source
(i) South Godavari Coat Fields of Singareni

Collieries for Stage I&II
(ii) Korba Coal Fields of SECL for stage III
(iii) Singareni colleries
Water Source
Sri R(am Sager bam on Godavari River, D83 Canal from pochampad Reservoir"
Beneficiary States
Pondicherry, Goa, Kerala ,Karnataka, Tamil

Nadu, AP,PGCIL(for HVDC)
Approved Investment
Rs.2059.22 Cr Stage I &II
29
Rs.1818.46 Cr Stage III
International Assistance
IDA
IBRD loan
OPEC
KI'W
EXIM Bank, Japan. SFD
NTPC RAMAGUNDAM POLICY
NTPC Ramagundam shall achieve performance excellence the best every time, to
the satisfaction of over state holders.
We are committed to over vision, mission, core values safely and statutory as well
as corporate requirements.
We shall have the project environment on prevention of pollution and continually
improve in areas of Fuel conservation.
Ash utilization
Waste minimization
Effluents circulation
Afforesting
Environmental awareness
In this endeavor we get to continually improve over team work knowledge skills
and competencies.
30
THE ONSET OF RSTPS
NTPC Ramagundam was the 3'd in the series of super thermal stations set up by
the corporation. Late Shri Morarji Desai, then Prime Minister of India, laid the
foundations stone for this station on 14 Nov 1978.
The station is situated on the bank of river Godavari in Karimnagar District of

Andhra Pradesh across the coal pithead of Singereni Collieries Company Limited.
The station has an installed capacity of 2100 MW is the backbone of the southern
grid.
Within a decade the station constructed and commissioned 3 units of 200MW

each and 3 units of 500 MW each capacity units. NTPC Ramagundam has the
rate distinction of being the only station in tl-re country to commission all the 6
units ahead of a feat will remain a record for a long time.
The station has earned the name as the beacon Light of Southern States. The
station has excelled in all facets Operations, namely generation, plant load
Factor, Environment management, safely Human resource Development.
31
32
CHAPTER III
BUDGET & BUDGETERY SYSTEM IN
NTPC
33
BUDGET AND BUDGETARY SYSTEM
IN NTPC-RSTPS
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 budget provides
the basis for procurement of funds from Government in the form of equity and
loan. The budgeting exercise also covers the long term capital budgeting, which is
presented in the form of annual plan.
The NTPC-RSTPS has budgeting process in two stages. One is the

construction or capital expenditure budget and another is operating maintenance
budget. 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 budget
refers to the repairs & maintenance budgets. The special budgets are rarely used
in an organization like long-term budgets, research& development budget and
budget for consultancy
OBJECTIVES OF THE BUDGETARY SYSTEM:
To prepare annual budgets in such a manner those managers at various

levels in the organization carry out periodical exercise in respect of each
contact or responsibility center 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 resources allocated for the purpose.
To bring about effective co-ordination of all activities of the organization of
all activities of the organization and to gear up service divisions to meet
effectively the requirements of project.
34
To identify and account for cost over runs and to analyses contributory
factors into deviations and cost escalations.
To control budgets with reference to standards of performance ascertain
various of actual expenditure over budget provision and analyses the
reasons.
BUDGET PERIOD AND PHASING:
The budget period or annual budgets should correspond with the financial year.
In October every year, the budget should be drawn up for the ensuring 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 revised on monthly basis by
project review teams, in the light of actual expenditure and projections in the
budget period. Budgets 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 annual budget in October every year, the long term
capital budget for ongoing and new schemes should be formulated as a part of
exercise for preparation of annual plan. The long term capital budget should
indicate for a period of six years following the budget period project wise annual
phasing of the capital expenditure and physical schedules resource based
networks, internal generate on of resources and net budgetary support from
government.
BUDGET HEADS:
For uniform accounting, it is essential that costs are collected for each system of
the station though this may involve splitting up 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 databank. Budget provisions are related to project estimates and
monitoring of actual expenditure. Power and control cables belong to electrical
system where as control cables for part control and instrumentation system.
35
Station piping, includes pipelines, for ash water mains, compressed air system
and civil works piping. There are 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
head by adding code number.
TYPES OF BUDGETS IN NTPC:

According to the nature, expenditure, budgets are classified under:
Direct capital outlay on works
Technical consultancy
Incidental expenditure during construction
Employee cost
Other establishment expenses:

Training and recruitment
Preliminary expenses
Miscellaneous brought-out assets
Cash budget
Township budget
Foreign exchanges budget
36
Brief explanation to the nature of expenditure included in each budget is

indicated below:
INCIDENTAL EXPENDITURE DURING CONSTRUCTION

PERSONNEL PAYMENT:
These comprises of salaries, wages, allowances, contribution to PF and

other funds and welfare expenses such as LIC, Medical reimbursement, canteen
subsidy etc., any provision for 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, vehicles running
expenses, office rent, and cost of drawings, traveling expenses, printing &
stationary, communication expenses, advertisement for tenders etc., are the
major items in this category.
TRAINING RECRUITMENT & OTHER DIFFERED REVENUE
EXPENDITURE:
The first part of budget consists of expenses for training executives, and nonexecutives trainees, including stipends, faculty fees, course material, traveling
allowances, courses. The second part consists of expenses for recruitment such as
advertisement for recruitment, interview expenses, T.A. to candidate etc., the
third part combines preliminary expenses including share registration fees and
research and development expenses.
MISCELLANEOUS BOUGHT OUT PASSES:
Vehicles, furniture and fixtures equipments, hospital and medical and
equipment, miscellaneous assesses township figure in this budget.
REVIEW
PROJECT BUDGET:
MONTHLY REVIEW:
At monthly intervals, the budgets should be reviewed by project review
committee (PRC). Project budget should report actual expenditure against budget
heads. Work heads corporate budget by the 7th of the month following the
reporting month. The monthly review should be examined by project review team
37
(PRT), who should record reasons for major variations and action 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 lower Rs.5lakhs should be analyzed and reported upon.
QUARTERLY REVIEW:
PRT should conduct a quarterly budget review with a view to projecting
anticipated expenditure during the year against approved budget
estimates/revised estimates. As time in essence of such review, only a quick
estimate of anticipated expenditure for individual budget heads involving
provisions exceeding Rs.50 lakhs in each case should be made and reported upon
in minutes of PRT. For this purpose, Project budget should furnish all the
relevant data to general manager (project) and planning and systems by the 10 th
of the month following the quarter project budget committee should review the
actual expenditure and access anticipated expenditure contract coordination/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:
Corporate budget committee should conduct a review of budgets of service and
corporate divisions at quarterly intervals. For this purpose, corporate accounts
should report actual expenditure up to the end of the quarter by 10 th of the month
following quarter to corporate budget and budget coordination of the remaining
period of the year. Corporate budget should be sent to corporate budget
committee (CBC), which should put up a consolidated report division wise and
project wise by the 15th of May, August, November and February every year.
OBJECTIVES OF THE CURRENT BUDGETARY CONTROL SYSTEM IN

NTPC-RSTPS:
The current budgetary control system operating phase has been compiled to
achieve the following objectives.
To control actual performance with reference, to standards / norms adopted in
the budget, ascertain the deviations analyze and establish the reasons.
38
To identify constrains in generation and timely action for estimation of

constraints.
To monitor the generation of internal resources so as to ensure availability
of adequate funds.
To prepare 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 involve managers at various in the process of developing performance
budget so as to introduce the concept of responsibility accounting and
participate management.
To ensure effective co-ordinate 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 costs for the purpose of
formulating tariff.
To provide data a basis for assessment of working capital requirements.
To control the working capital particularly book debts, spares and other
items of 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.
39
The current budgetary control system operation phase envisages generation and
transmission line projects as independent investment centers. It becomes
applicable to a project in the year in which it plans to commercialize its first
generation unit. However, the budgeting for expenses (net of revenue) from the
date of synchronization to the date of commercial generation (i.e. during trail run
) are to be taken in case of capital budget of the respective project. Similarly, in
the case of transmission line project, the system becomes applicable from the
year in which it plans to commission its first line along with the sub-station or the
date commercial generation of the first unit of generating project, with which line
is associated, whichever is later. For subsequent lines, O&M will be prepared
from the date of energization.
The system envisages the preparation of operation and maintenance budget
for each of the cost centers as per the requirements of costing systems (i.e.
operation, maintenance and services cast center).
The sum total budgets of the cost centers will be the budget for the
investment center. However, the budget of the profit center will be worked out by
apportioning the revenue and cost of various cost centers to individuals profit
centers based on specific norms.
The performance budget operation will consists of the following budgets along
with the supporting schedules:
Budget balance sheet

Budget profit and loss account
Cash budget.
In addition, separate budget for revenue activities other than operation for
research and development consultancy contracts etc.
The expenses in the respect of developmental expenditure for improvement,

addition, replacement, renewals, balancing facilities etc., are of capital nature and
40
will be budget for in the construction budget of budgetary control systemconstruction phase.
To facilitate management control the system also envisages, phasing of these

budget into monthly/quarterly targets. The actual performance then will be
reason for variation and it will be analyzed and established for taking corrective
actions. The scope also includes projection of internal resources for a period
ranging from 5 to 15 years and updating of 5 years plan as well as perspective
plan of the company.
STAGES IN THE FORMULATION OF PERFORMANCE BUDGET:
The system provides for two stage 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 on coal operation at less than the designed specification, calorific

value of coal and oil, material consumption value in Rs.5 lakhs or more, planned
shut down for a maintenance and overhauling and norms for various operating
parameters provided for design specification and in the tariff agreements to the
corporate budget committee.
After the initial proposal is planned to be submitted after considering these

factors and keeping in view the perspective plan, the organization fixes the norms
for various operating parameters. These targets and norms
are then
communicated to all stations and transmission line offices in the last week of July
to be used for formulating detailed budget in the form of final proposal.
FINAL PROPOSAL:
41
The final proposal will consists of detailed budgets in the form of budgeted
balance sheet. Budget profit & loss account and cash budget along with
supporting schedules for each of the investment/cost center. This final proposal
needs to be submitted to corporate center within 3 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 & extent review and monitoring will be as under:
i)
The monitoring of actual performance against budgeted targets for

investment center/ profit center on monthly basis and for cost centers
on quarterly for remedial/corrective action.
ii)
The review of performance budget on quarterly basis to assess the

anticipated profitability.
The first step in the preparation of budget, O & M is the formulation of

maintenance and overhauling schedules for boiler, then considering the grid
demand, the availability of inputs and stations problems, if any. The utilization of
capacity will be worked out on monthly basis for the budget period. The gross
generation targets can be worked accordingly.
If the new units are included in the scope of budgeting, the dates for
commercial generation will also need to be indicated operation should not be
more than three months for a 200MW unit and four months in case of 500MW
unit. If more time is provided between the date commissioning and commercial
generation, justification will need to be furnished.
NET GENERATION:
42
The sales value will be determined from quantum of net generation (i.e. gross
generation-auxiliary consumption).
AUXILIARY CONSUMPTION/CONSUMPTION BY UTILITIES:
The power consumption by each of the cost centers for individuals unit
auxiliaries, station auxiliaries as well as transformer losses are to be estimated
separately based on designed specifications and added in order to workout total
auxiliary consumption rather than fixing a overall percentage. Similarly,
consumption by utilities will also need to be indicated by cost
centers/departments like township and construction (Electrical erection)
departments. This will be valued at cost net generation to arrive the sales values
for own consumption.
The consumption of power by unit auxiliaries will be available unit-wise.

The consumption of power by station auxiliaries (common) and by utilities will
need to be worked consumption by station auxiliaries and utilities are to be prorated to individuals units in the ration of gross generation.
ENERGY SENT OUT & SALES:
By subtracting the consumption by utilities from net generation, energy sent
out can be worked out which will determine the sales value based on the tariff
rates.
If a new station is entering O&M phase during the budget period, tariff rate
will be provided by corporate commercial divisions.
Similarly, sales revenue for transmission charges will be worked on the basis
of either to be indicated along with a brief note on the nature of contract, terms of
payments, time schedule and progress of work etc.
HEAT RATE:
43
Fixation of heat rate target of the budget period will be very crucial decision
as far as the profitability of generating station is concerned. The definition of heat
rate will be same as given in the operation performance monitoring system
(OMS) issued by corporate.
Heat rate is dependent on MW load, quality of inputs, makes up water

consumption, combustion performance of condenser & mulls and temperature
and pressure at various points in the system. Therefore, all these factors must be
considered before fixing targets for heat rate.
For budgeting purposes Station Heat Rate will be as sum total of heat per
unit rate or fixed charge per month depending upon the terms of tariff
agreement.
ELECTRICITY DUTY:
The payment of electricity duty is to be worked out from gross generation/ net
generation/ energy sent out as applicable to individual stations and states. The
same amount should be shown as recovery from electricity boards on the revenue
side.
OTHER REVENUES:
Normally, investment centers will not have any income from consultancy
because revenue for all major consultancy contracts etc is to be reckoned against
corporate center as per separate profit and loss account based on instructions.
However, if any consultancy jobs are under taken by investment centers, the
income from such contracts will need from coal (Kcal/kg) or oil (Kcal/Kg) or
(Kcal/Kg) to generate one unit of electrical to energy. The heat rate input of coal
for this purpose should be calculated after including handling loss in the coal
consumption. The unit heat rate calculation will not include handling loss of
coal.
FUEL CONSUMPTION:
The sum total of coal and oil consumption is treated as fuel consumption for
budgeting.
44
The specific oil consumption factor will be fixed based on past performance of
each unit since station heat rate is a derivative of specific coal and oil
consumption already fixed.
The specific coal consumption factor can be worked out as under:
Specific fuel consumption = heat rate/Gross Calorific value
(or)
=
Kg / KWH= Kcal / KWH
K.cal+.Kcal-K.cal
Once the specific coal consumption (kg/KWH) is the quality of coal.

Consumption can be obtained depending upon the gross generation level.
Coal consumption
=
specific coal consumption ( kg/ KWH) *Gross Generation.
The handling loss of the coal is to be restricted to 1.5% as per recommendation

of the committee for this purpose. This handling loss from the point of receipt in
the tract hopper up to gravis/ metric feeders will be added to coal consumption as
indicated above to arrive at gross coal consumption.
CHEMICAL CONSUMPTION:
The chemicals are used by many cost centers for treatment of water. The
consumption of chemicals will be correlated with volume of water treated and
certain norms will have to be developed for different type of chemicals and
different types of treatment.
Based on these norms, each of the cost centers will indicate consumption of
chemicals in quantitative as well as financial terms. The valuation of chemicals
will be done at current prices only.
EMPLOYEE COST:
45
The basis of employee cost will be the approved manpower budget effective for
respective years of budget period. The estimation of employee cost is to be done
for each grade considering mid-point of the scale as basic pay and after adding
various allowances like D.A., H.R.A., C.C.A., project allowance etc., as admissible
in respective graders. This is to be worked out for each of the budget period based
on existing strength (at the time of estimation) in each grade and additions
during each quarter (taking 70% satisfaction for additions.
The provisions for medical reimbursement, PF and other welfare expenses is
to be made based on trend of expenses in previous year and taking into account
the policy changes, if any. The details of welfare expenses like liveries and
uniforms, safety expenses, accident compensation, games & sports, canteen
subsidy etc., are to be listed out as per the chart of account. The provisions for
incentives, bonus and payment of one time nature are to be shown separately
based on total employee cost for executives, supervisors and non-supervisors and
total manpower in these categories, separate rates of cost per employee will be
worked out for each of these categories as under
Salaries and allowances.

Contribution to PF and other funds.
Welfare expenses.
The cost center of employees cost will be worked out based on these rates
separately for executives, supervisors and non-supervisors. This will again be
consolidated separately for operations, maintenance and common (service)
function. The employee cost of common function will be appropriated between
construction and O & M budgets in the ratio of capital expenditure and sales
during the respective years.
REPAIRS AND MAINTENANCE:
In line, with costing system, major classification of repairs and maintenance

can be represented by the following three activities.
46
Major overhaul
Preventive maintenance
Break down 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 will be done at each of the sub cost center wise details are required to be
mentioned.
The consumption material for repairs and maintenance will be classified into
spares, lubricants, loose tools and plants, consumables and others.
The cost center wise totals are done separately for three activities which will be
added to arrive at summary of material consumption and maintenance jobs
which will be reflected in the profit & loss account.
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 manufacturers specifications. Therefore, it is
very difficult to estimate requirements of spare. 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
manpower is not available, maintenance jobs can be done through contractors.
Such contracts will need to be listed out separately. If any owner supply items are
covered in such contracts the costs of these items will be included in the material
costs.
STATION & GENERAL OVERHEADS:

All the items of expenditures under this head will be estimated based on past
trend with due adjustment of policy changes. The estimates will be given by the
cost center needs for items identified with respective cost centers. The total
administrative cost of service cost centers will be allocated between construction
47
and
O & M in the ratio of capital expenditure and sales during the respective
years.
DEPRECIATION:
This is to be charged as per ES act from the year following the year in which
assets have been capitalized. This will be done separately by each of the cost
centers on the basis of capitalized value and rates of depreciation furnished by
the site finance and account for different categories of assets. Cost center-wise
depreciation will be added to arrive at total depreciation for the investment
center.
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 interested on the actual loans.
For budgeting purposes, interest will be worked on equated loan content or
equated loan whichever is less.
EQUATED LOAN CONTENT:

Equated loan content is taken as 50% total capital cost & adjusted for number
of operating months in respective years. In case of generating stations, the cost
for each profit center will be taken as per actual or anticipated capital cost.
The equated loan content is to be appropriated to individual units. The total
capital cost will be taken as proposed in the performance budget constructions.
48
CHAPTER - IV
DATA ANALYSIS
AND INTERPRETATION
49
DATA ANALYSIS AND INTERPRETATION

PROFITABILITY INDEX
YEAR
INVESTMENTS
CASH(Pv)Inflows
Cash(initial)outflows
(in millions)
(in millions)
(in millions)
1997-98
292507
18180
20000
1998-99
303029
24780
30000
1999-00
319244
45060
60000
2000-01
306118
54640
80000
2001-02
354521
18630
30000
2002-03
901587
16120
22000
2003-04
399145
19210
33000
2004-05
402811
11130
70000
2005-06
366744
65420
40000
2006-07
173380
19233
80000
2007-08
207977
61323
60000
2008-09
139835
13181
70000
2009-10
148071
14763
65000
Total
4316969
659714
660000
50
Pv of cash inflows
PI=
-----------------------
659714
=
--------------------------
Initial cash outlays
660000
0.99%
Interpretation:
a) The profitability index of present value of cash inflows and cash outflows is
fluctuation from year to year in the year 1997-1998 the present value of
cash inflows is 18180 where as in the year 2009-2010 has been increased
with 14763 millions.
b) The highest cash inflows has been recorded in 2005-2006 as 65420 and
lowest has been recorded as 16120 in the year 2002-2003.
51
PAY BACK
YEARS
Initial
investments
in(millions)
Cash inflows in
(millions)
Cash outflows
in (millions)
1998-09
40000
8000
12000
1999-00
60000
1600
15000
2000-01
70000
2200
12000
2001-02
20000
4500
16000
2002-03
10000
4000
16000
2003-04
66000
3000
18000
2004-05
25000
2900
11000
2005-06
12000
1100
22000
2006-07
90000
1600
80000
2007-08
30000
1200
70000
2008-09
37830
2930
27700
2009-10
52300
3250
29300
Total
513130
36280
329000
52
Initial investments
PAY BACK PERIOD =
-----------------------
40000
=
Annual cash inflows
------------------8000
= 5 years
INTERPRETATION:
a) In the pay back method the investment period and the cash inflows are
fluctuating from year to year where as in the year 1998-99 it is 40000 and
in the year 2008-09 is 52300.
b) Cash inflows are in the order decreasing to increasing from 2006-07 to
2009-2010.
53
TABLE 1.1
PHYSICAL PARAMETERS 2006-2007
PARTICULARS
BUDGET
ACTUALS
VARIANCE
Generation(MU)
20998.00
21200.432
202.432
Plant load factor

(%)
98
99.40
1.40
Auxiliary
consumption (%)
6.90
6.50
-0.40
Auxiliary
consumption(MU
)
1452.45
1399.453
-52.997
Coal(MT)
12559545
12604543
44998
Oil(KL)
5210.00
4978.50
231.50
54
TABLE 1.2
PARTICULARS
BUDGET
ACTUALS
VARIANCE
Generation(MU
)
20498
19690.837
-807.163
Plant
load
factor (%)
90.00
86.45
-3.55
Auxiliary
consumption
(%)
6.60
6.40
-0.20
Auxiliary
consumption
(MU)
1352.12
1259.259
-92.861
Coal (MT)
11847844
11778688
-69156
Oil (KL)
5110.00
4725.175
-384.825
55
TABLE 1.3
PARTICULARS
BUDGET
ACTUAL
VARIANCE
Generation (MU)
19985.00
20247.702
262.702
Plant load factor

(%)
87.75
88.90
1.15
Auxiliary
consumption (%)
6.40
6.21
-0.19
Auxiliary
consumption
(MU)
1279.00
1258.2650
-20.735
Coal consumption
(MT)
12219428
12503168
283740
Oil consumption
(KL)
5070.00
3824.075
-1245.925
56
TABLE 1.4
PARTICULARS
BUDGET
ACTUAL
VARIANCE
Generation (MU)
20985
21272.604
287.604
Plant load factor

(%)
94.90
95.50
0.59
Auxiliary
consumption(MU
)
7.60
7.21
-0.39
Auxiliary
consumption (%)
1386
1364.2760
-21.724
13329536
13624486
294950
6080
5036.025
-1043.975
Coal
consumption
(MT)
Oil consumption
(KL)
57
Table-2.1
BUDGET Vs ACTUAL
S DESCRIP
. TION
N
O
20072008
BUDGET
(in
millions)
20072008
ACTUAL
(in
millions)
20082009
BUDGET
(in
millions)
20082009
ACTUAL
(in
millions)
20092010
BUDGE
T (in
million)
20092010
ACTUAL
(in
millions)
Employee
cost
6,959
7,364
7,884
8,666
8,768
9,876
2 Repairs
and
maintena
nce
7,000
7,258
6,890
6,676
7,970
8,796
3 Station
5,500
overheads
4,061
4,061
4,621
4,725
4,932
18,683
18,835
21,963
21,463
23.604
GRAND
TOTAL
19,459
58
REVENUE
(2008-2009)
PARTICULARS
BUDGET FOR
2008-2009
ps/KWH
AMOUNT (in
millions))
ACTUAL FOR
2008-2009
Ps/KWH
AMOUNT(in
millions)
SALES
Fixed charges
recovery
68,670
34.36
68,670
34.36
Variable charges 1,64,822

recovery
82.47
1,72,486
85.19
Fuel price
adjustment
recovery
14,422
7.22
21,077
10.41
TOTAL
2,47,914
124.05
2,62,233
129.51
59
REVENUE
(2009-2010)
Particulars
Budget for
2009-2010
Ps/KWH
Actual for
2009-2010
Amt(in
Amt(in
Millions)
Millions)
Ps/kwh
Sales
Fixed
charges
70126
44.72
703044.72
0
45.60
Variable
1,78,764
85.33
1,76,275
85.44
792
0.44
11942
6.56
2,49,682
130.50
2,58,517
137.60
Charges
Fuel price
Adjustment
TOTAL
60
OPERATIONAL EXPENDITURE BUDGET (2005-2006)
61
SL.N
O
PARTICULARS
BUDGET
PS/KW
ESTIMAT
ED FOR
THE
YEAR
AMOUNT(
in
millions)
ACCURALS
FOR THE
YEAR
AMOUNT(i
n millions)
PS/K
W
Variable Cost
112560
58.42
111220.56
66.83
High fuel oil
225
0.22
186.87
0.8
High speed diesel
265.92
0.27
283.98
0.17
Total of 1
113050.92
58.91
111691.41
67.8
Chemical &Water
3660.00
0.26
256.00
0.15
Repairs and
Maintenance
5252.00
3.16
5040.00
3.03
Employee cost
stationary&
General expenses
5785.00
5.79
6292.00
3.78
Share of c.c.
expenses
1845.00
1.19
1777.33
1.07
Total of 2
16542
10.04
13365.33
8.03
Depreciation
12576.00
10.36
19297.00
11.60
Finance charges
Coal
Oil
Operations and
maintenance cost
Rebate
3885.00 62 2.26
3238.00
1.95
Interest on fixed
capital
2048.00
2346.66
1.41
1.45
63
SNO
PARTICULARS
BUDGET
Ps/KW
FOR THE H
YEAR(200
6-2007)
AMOUNT
(in
millions)
ACTUAL
Ps/KW
FOR THE
H
YEAR
(20062007)
AMOUNT
(in millions)
VARIABLE COST
1,57,292
78.45
1,57,392
79.25
High furnace oil

895
&high speed diesel
0.45
2094
0.65
TOTAL OF 1
1,58,187
78.95
1,59,484
79.90
Chemical
375
0.20
296
0.18
Repairs
&maintenance
8000
4.41
7500
4.69
Employee cost
7959
4.49
8364
4.74
Station general
expenses
6175
3.52
4785
2.92
Share of C.C
expenses
3770
1.76
3757
1.90
TOTAL OF 2
26,278
14.38
24,702
14.43
DEPRECIATION
18,925
9.75
19.284
9.50
FINANCE
CHARGES
4.10
7264
3.74
Coal
Oil
OPERATIONS &
MAINTENANCE
COST
64
Interest on fixed
capital
8373

S.NO
PARTICULARS
BUDGET
Ps/KW
FOR THE H
YEAR(200
7-2008)
AMOUNT
(in
millions)
ACTUAL
FOR THE
YEAR
(20072008)
AMOUNT
(in millions)
Ps/KW
H
VARIABLE COST
1,56,292
76.25
1,56,360
79.40
High furnace oil

875
&high speed diesel
0.43
1,094
0.56
TOTAL OF 1
1,57,167
76.68
1,57,454
79.96
Chemical
325
0.16
276
0.14
Repairs
&maintenance
7,000
3.41
7,258
3.69
Employee cost
6,959
3.39
7,364
3.74
Station general
expenses
5,175
2.52
3,785
1.92
Share of C.C
expenses
3,570
1.74
3,657
1.86
Coal
Oil
OPERATIONS &
MAINTENANCE
COST
65
TOTAL OF 2
23,029
1.22
22,340
11.35
DEPRECIATION
17,905
8.73
18,184
9.23
FINANCE
CHARGES
Interest on fixed
capital
8,373
4.08
7,164
3.64
Rebate
4,326
2.11
4,550
2.31
TOTAL OF 4
12,699
6.19
11,714
5.95
GRAND
TOTAL(1+2+3+4)
2,10,800
102.84
2,09,692
106.49
66

S.NO
PARTICULARS
BUDGET
Ps/KW
FOR THE H
YEAR(200
8-2009)
AMOUNT
(in
millions)
ACTUAL
FOR THE
YEAR
(20082009)
AMOUNT
(in millions)
Ps/KW
H
VARIABLE COST
1,60,166
80.14
1,69,574
83.75
High furnace oil

1,487
&high speed diesel
0.74
969
0.48
TOTAL OF 1
1,61,653
80.88
1,70,543
84.23
Chemical
250
0.13
307
0.15
Repairs
&maintenance
6,890
3.45
8,676
4.28
Employee cost
7,884
3.94
8,666
4.28
Station general
expenses
3,811
1.91
4,314
2.13
Share of C.C
expenses
3,791
1.90
3,691
1.82
Coal
Oil
OPERATIONS &
MAINTENANCE
COST
67
TOTAL OF 2
22,626
11.32
25,655
12.67
DEPRECIATION
15,650
7.83
17,017
8.40
FINANCE
CHARGES
Interest on fixed
capital
7,716
3.86
7,501
3.70
Rebate
4,475
2.24
5,5761
2.85
TOTAL OF 4
12,191
6.10
13,262
6.55
GRAND
TOTAL(1+2+3+4)
2,12,120
106.14
2,26,476
111.85
68
S.NO
PARTICULARS
BUDGET
Ps/KW
FOR THE H
YEAR(200
9-2010)
AMOUNT
(in
millions)
ACTUAL
Ps/KW
FOR THE
H
YEAR
(20092010)
AMOUNT
(in millions)
VARIABLE COST
1,72,177
83.15
1,79,579
89.75
High furnace oil

1,498
&high speed diesel
0.76
988
0.49
TOTAL OF 1
1,73,675
83.91
1,80,567
90.24
Chemical
260
0.14
328
0.18
Repairs
&maintenance
6,950
3.67
8982
4.32
Employee cost
7,992
3.98
8,778
4.30
Station general
expenses
3,856
1.96
4,517
2.19
Share of C.C
expenses
3,995
1.98
3693
1.82
Coal
Oil
OPERATIONS &
MAINTENANCE
COST
69
TOTAL OF 2
23,063
11.73
26,298
12.67
DEPRECIATION
16,890
8.12
18,019
8.78
FINANCE
CHARGES
Interest on fixed
capital
7,817
3.96
7,402
3.62
Rebate
4,479
2.24
5,882
2.92
TOTAL OF 4
12,296
6.13
13,284
6.54
GRAND
TOTAL(1+2+3+4)
2,25,924
109.14
3,57,168
118.37
PURCHASE BUDGET(2008-09)
70
(REVISED ESTIMATES)
S.N
O
MATERIA
L
DESCRIPT
ION
UNIT
OPENIN
G
STOCK(
PROVISI
ONAL)
PURCH
ASE
DURING
THE
YEAR
CONSUMPT CLOSI
ION
NG
DURING
STOCK
THE YEAR
Coal
000KT Rs
millions
508
13,012
12,970
550
6,568
1,70,402
1,70,402
7,1150
KL Rs
millions
1,101
6,299
6,700
700
220
1,142
1,195
165
Oil
TOTAL
Rs millions 6,768
1,72,126
1,71,600
7,315
Chemicals
Rs millions 18
322
325
15
Consumabl Rs millions 188

es
192
180
200
Spares
Rs millions 9,112
6,068
4,080
11,100
Lubricants
Rs millions 75
210
160
125
Others
Rs millions 139
121
15
245
TOTAL
Rs millions 9,532
6,913
4,760
11,685
GRAND
Rs millions 16,320
1,79,039
1,76,360
19,000
PURCHASE BUDGET 2009-2010

71
(BUDGETED ESTIMATES)
S.NO MATERIAL
DESCRIPTI
ON
UNIT
OPENING
STOCK(PR
OVISIONA
L)
PURCHASE
DURING
THE YEAR
CONSU
CLOSING
MPTION STOCK
DURING
THE
YEAR
000KT Rs
Millions
550
13,222
13,222
550
700
1,71,885
1,71,885
7,150
KL Rs
Millions
700
3,900
4,075
525
165
829
862
131
TOTAL
Rs Millions
7,315
1,72,714
1,72,747
7,281
Chemicals
Rs Millions
15
406
401
20
Consumable Rs Millions
s
200
190
190
200
Spares
Rs Millions
11,100
4,310
4,310
11,100
Lubricants
Rs Millions
125
160
185
100
Others
Rs Millions
245
75
20
300
TOTAL
Rs Millions
11,685
5,141
5,106
11,720
GRAND
RsMillions
19,000
1,77,855
1,77,853
19,001
Coal
Oil
EXPLANATION TO THE ABOVE TABLES

72
The installed capacity of NTPC-RSTPS is 2600 MW.

1000 MW=1 MU
2600 MW=2.6 MU
Power generation per annum in NTPC-RSTPS is i.e.
installed capacity per annum is,

= 2.6 MU*24 HOURS * 365 DAYS
= 22,776 MU per annum
PLANT LOAD FACTOR:

Generally, because of so many factors like periodical maintenance, machine
break down, shortage of fuel, lack of demand, etc., the power station cannot
attain the maximum capacity generation of 22,776 MU per annum.
So generally, actual/budgeted generation will be less than 22,776 MU per
annum.
Plant load factor (PLF) is the term used to indicate the average generation of
station in relation to maximum capability during the reference period.
FOR THE FINANCIAL YEAR 2008-2009

Budget Generation
PLF (MU) =
----------------------
100
Installed capacity
Actual generation
20985MUs
PLF (ACTUAL) =
------------------------------ *100
=
------------- *100
= 92.13%
Installed capacity
22776 MUs
21272.604
= -------------- *100
22776MUs
73
=93.39%
Actual generation
F (ACTUAL) =
------------------------------ *100
Installed capacity
21272.604
= -------------- *100
=93.39%
22776MUs
Therefore, Plant Load Factor (PLF) shows the percentage of power generation to
the maximum capability.
PAISA/KILO WATT HOUR:
We know that,
1 MU =1000 MW
And 1 MW = 1000 KWH
1MU = (1000*1000) KWH
1MU = 10,00,000 KWH
ANALYSIS AND INTERPRETATION
74
PROFITABILITY INDEX (PI):

It is benefit cost ratio. It is ration of present value of cash inflows at the required
rate of return, to the initial cash outflow of the investment
PV of cash inflows
PI = -----------------------Initial cash outlay
Acceptance rule:
Accept if PI > 1
Reject if PI < 1
May accept if PI = 1
PI is a relative measures of projects profitability
PAY BACK:
It is defined as the number of years required to recover the
original cash outlay in a project.
If project generates constant annual cash inflows, the pay back
period is completed as follows.
Initial Investment
PAY BACK=
--------------------
Annual cash inflow
In case of unequal cash inflows, the payback period can be found out by adding
up the cash inflows until the total is equal to initial cash outlay.
75
Acceptance Rule:
Accept if calculated value is less than standard fixed by the management
otherwise reject it.
In case of ranking method, accept the lowest rank.
Table 1.1 shows the physical parameters (both budgeted and actual) for the year
2006-2007. From the table it can be seen that in the year 2006-2007, actual
generation is more than the budgeted generation due to more scheduling by the
beneficiaries. As a result, other physical parameters have also come down. The
PLF has increased by 1.40 in comparison with the budgeted PLF. Auxiliary
consumption was less than the budgeted having a variance of -52.997. Similarly
actual of coal increased and oil got decreased.
2007-2008. From this table it can be seen that actual generation is less than the
budgeted and PLF was decreased by 3.55% in comparison with budgeted PLF.
Auxiliary consumption has been constrained to 6.40 as against the budgeted
figure of 6.60 as against the budgeted figure of 6.60% making a reduction of
0.20% which is favorable. The savings in auxiliary power consumption (APC)
yields revenue.
2008-2009. From this table it can be seen that the actual generation is more than
the budgeted generation having a variance of 262.702 and PLF has been
increased by 1.15% in comparison to budgeted PLF. Inspite of more generation,
the Auxiliary power consumption has been constrained to 6.21% as against the
budgeted figure of 6.40% making a reduction of 0.19% which is favorable.
Table1. 4 for the year (2009-2010) shows the actual generation is more than the
budgeted generation having a variance of 565.PLF has been increased by 0.59 in
comparison the budgeted PLF .The auxiliary power consumption has been
constrained to 7.21% as compared to budgeted figure of 7.60% making a
reduction of 0.39%.For the financial year 2009-2010 the budgeted power
generation is 19690 MU but the actual power generation is 20255 MU.565 more
than the expected, there by increasing PLF by 0.59%.
76
TABLE2.1
BUDGET VS ACTUAL:
Shows that in the year 2007-2008 actual of the employee cost is more than the
budgeted estimates. Similarly in the year 2008-2009 the actual cost increased to
8,666 than the previous year 2007-2008. In the year 2009-2010 the actual
employee cost is increased to 9876 in comparison to budgeted 8765. Repairs&
maintenance and station overheads. The total of actual increased when compared
to budget estimates. Employee cost and repairs & maintenance per KWH have
increased considerably where as there is control in station & General expenses in
comparison to budgeted figure. Variance is the difference between the actual and
budget figures. In case of expenditure, negative variance is favorable to the
company and incase of income, positive variance is favorable to the company.
OPERATIONAL EXPENDITURE BUDGET

In operational expenditure budget (2008-2009) the variable cost actual was
84.23ps/KWH when compared to budget 83.91 Ps/KWH, variable cost increased.
The increase in fuel cost is recovered in the form of fuel price adjustment. Any
variation in price and calorific values of fuel is adjusted through fuel price
adjustment. Fuel cost is treated as variable cost as it varies in direct proportion to
generation. Other costs are treated as fixed costs, which vary in inverse direction
to generation.
In operational expenditure budget 2009-2010, variable cost per unit is 90.24%
against budget cost of 83.91ps/KWH. Employee
cost and repairs & maintenance cost is higher than the budget cost. It is
understood that onetime expenditure on plant and machinery has been
increased during this year, which increases the actual expenditure. It is also
given to understand that provision for wage revision has been considered in
actual expenditure, which was not envisaged during the preparation of budget.
This causes increases increase in employee cost. Depreciation also has
marginally increased as there was a capitalization during the year with regard to
rebate, it varies with realization of dues from the beneficiaries. Rebate is given to
beneficiaries for making prompt payment on sale of energy.
ANALYSIS AND COMPARISON OF ACTUAL FIGURE FOR

THE YEARS 2008-2009 AND 2009-2010.
77
As station runs continuously and as units are over 20 years old in an average,
it warrants more maintenance. Interest depends upon the loan amount and loan
repayment. In case of foreign currency loan, exchange rate variation also
influences the interest.
Various components of Revenues:
Fixed charges recovery

Variable charges recovery
Fuel price adjustment
Incentive
Miscellaneous income
Variable charges recovery is for reimbursement of fixed cost incurred by the

power station. In 2008-2009 fixed charges of Rs.69126lakhs was considered as
budgeted figure and in actual same has been revised by Central Electricity
Regulatory Commission (CERC) in the final tariff as Rs.68128lakhs. So, fixed
charges is fully recovered. Similarly in 2009-2010 also, the fixed charge is fully
recovered. The variation in unit cost (ps/KWH) is due to variation in generation.
As the generation increases cost per unit will come down since the charge is
fixed.
Various types of materials, spares, components and lubricants are used to

carry out the repairs and maintenance work of plant and machinery during the
course of operation. Coal and oil are used as fuel to power station. In order to
meet the spares consumption and fuel consumption, purchase budget shall also
be prepared along with operation and maintenance budget for procurement of
spares and raw materials.
PURCHASE BUDGET revised estimates for the year 2008-2009 and Purchase
budget, budget estimates for the year 2009-2010 shows that every year
operations and maintenance budget is prepared. Budget estimate is done for the
78
next year and revised estimate is done for the current year. Periodically, actual
expenses are compared with budget figures and variations if any is analyzed to
bring the cost into control.
PROFITABILITY INDEX (PI):

It is benefit cost ratio. It is ration of present value of cash inflows at the required
rate of return, to the initial cash outflow of the investment
PV of cash inflows
PI = -----------------------Initial cash outlay
Acceptance rule :
Accept if PI > 1
Reject if PI < 1
May accept if PI = 1
PI is a relative measures of projects profitability
PAY BACK:
It is defined as the number of years required to recover the
original cash outlay in a project.
If project generates constant annual cash inflows, the pay back
period is completed as follows.
Initial Investment
PAY BACK= --------------------Annual cash inflow
In case of unequal cash inflows, the payback period can be found out by
adding up the cash inflows until the total is equal to initial cash outlay.
79
Acceptance Rule:
Accept if calculated value is less than standard fixed by the
management otherwise reject it.
In case of ranking method, accept the lowest rank.
CONCLUSIONS AND SUGGESTIONS
CONCLUSIONS:
In spite of a good financial plan, the desired results may not be
achieved if there is no effective control to ensure its implementation. The budget
represents a set of yardsticks or guidelines for the use in controlling internal
operations of an organization. The management through budget, can evaluate the
performance at every level of an organization.
Budget is an important tool for planning and control. No system of
planning can be successful without having an effective and efficient system
control. Budgeting is closely connected with control. Budgetary control is an
important device for making the organization more efficient on all fronts. It is an
important tool for controlling costs and achieving the overall objectives.
A careful analysis and continuous comparison of actual with budgeted
results will definitely improve the overall performance.
SUGGESTIONS:
80
Every organization has predetermined set of objectives and goals, but for
accomplishing the objectives and reaching goals, proper planning and economic
execution of plans are at-most requirements.
In real life, every activity has scope for improvement; similarly, the activities of
power station, which are complex in nature, have also scope for improvement.
EMPLOYEE COST:
In the area of stiff competition, cost reduction and quality improvement are the
only way to sustain in the market. When revenues are fixed, the only way to earn
more profit is to reduce the cost. In NTPC, Ramagundam power station the man:
MW ratio is approx 0.65.by bringing the man: MW ratio down to optimum level,
there can be a saving in employee cost. Since NTPC is a good paymaster, a small
increase in manpower may cost crores of rupees. So, employee cost is one area
where sizeable reduction is possible. Effective rationalization of existing
manpower could help in avoiding increase in power.
MATERIAL COST:
Periodical preventive and routine maintenance avoid break down
maintenance there by reducing repairs and maintenance
expenditure and increasing the profit. Necessary control shall be
exercised to reduce the repairs and maintenance cost.
HEAT RATE:
A measurement used in the energy industry to calculate how
efficiently a generator uses heat energy. Heat rate is a measure of power plant
thermal efficiency. Heat rate is the Kcal required to generate one KWH of
electrical energy. The determinants of Heat Rate are quality of coal and oil;
make up water consumption, combustion performance of condenser & mills and
temperature and pressure of various points in the system. When the
determinants are maintained well and efficient and proper up keep is done then
81
the heat rate will be low. As result fuel consumption will be low and profit will be
more.
FINANCE CHARGES:
Loans with lower rate of interest should be resorted to and loans having
higher rate of interest should be replaced with the loan having lower rate of
interest by way of loan swapping. This will reduce the in interest and will increase
the profit.
STATION OVERHEADS:
Efforts should be made to made to reduce the station overheads such as
communication expenses, traveling expenses, etc.
82

Budgetary Control

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Budgetary Control

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CONTENT

CONCLUSIONS & SUGGESTIONS

Title of the table

Physical parameters of 2006 & 41

Physical parameters of 2007- 42

Physical parameters of 2008- 43

Budget Vs Actual for the year 44

Revenue for the year 2006-2007 46

Operational Expenditure for the 47

Revenues During the

Purchase Budget for the year 50

Purchase Budget for the year 51

Revenues during the year 2008- 52

OBJECTIVES OF THE STUDY:

To prepare projected financial statements for NTPC Ltd, Ramagundam

SCOPE OF THE STUDY:

THEORETICAL FRAME WORK

The essential features of a budget are

This system involves:

In the Charted Institute of Management Accountants (CIMA), London

BUDGET AND FORECASTS:

A fore cast is a mere assessment of future events and budget is a plan of

A budget is an approved plan of action that is set only by seasoned

COORDINATION: To coordinate is to harmonies all the activities of a company

MOTIVATION: if employees have actively participated in budget preparation

REQUIREMENTS OF A GOOD BUDGETING, SYSTEM:

The budget should be realistic. It should represent goals that are

The budget should cover all the phase of the organizations.

ADVANTAGES OF BUDGETARY CONTROL:

Management is forced to give timely and adequate attention to the

LIMITATIONS OF BUDGETARY CONTROL:

PRELIMINARIES CONTROL FOR OPERATION OF BUDGET

FIXED BUDGET vs. FLEXIBLE BUDGET

Zero-base budgeting is a new technique of planning and decision-making. It is

has defined it as a method of budgeting where by all activities is revaluated each

REPORT WRITING IN BUDGETARY CONTROL:

Special Reports: These reports are sent irregularly in response to a

NTPC Limited is the largest thermal power generating company of India. A

NTPC Limited (formerly National Thermal Power Corporation)

MW through Hydro generation, about 2000 MW from nuclear sources and

Equipment Manufacturing: Enormous growth in power sector necessitates augmentation of

NTPC TAMILNADU ENERGY COMPANY LIMITED

ARAVALI POWER COMPANY PRIVATE LTD

To set up a coal-based power station of 1500MW capacity in Distt. Jhajjar,

MEJA URJA NIGAM PRIVATE LIMITED

To set up a 2 X 660MW Thermal Power Plant at Meja, Distt. Allahabad in UP.

RATNAGIRI GAS & POWER PVT. LIMITED

NABINAGAR POWER GENERATING CO. PVT. LTD.

To set up 3x660 MW Thermal Power Plant at New Nabinagar, Bihar and

PROMOTERS' EQUITY NTPC: 50%

JVS FOR SERVICES

Undertake Renovation & Modernisation of power stations in India and other

UTILITY POWER TECH LTD

To undertake project construction, erection and supervision in power

NATIONAL HIGH POWER TEST LABORATORY PVT. LTD. (NHPTL)

PROMOTERS' EQUITY NTPC: 25%

JVs FOR POWER TRADING &POWER EXCHANGE

of all forms of electrical energy for clearing and settlement of trade in a

JVs FOR COAL MINING

The JV Company with Singareni Coalieries Company Limited (SCCL) was

To jointly undertake Development and O & M of Coal Blocks(s) and Integrated

INTERNATIONAL COAL VENTURES PVT. LIMITED (ICVL)

& acquisition of coal assets abroad

PROMOTERS' EQUITY RINL: 14.28%