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CONTENT

Chapter No Particulars Page No.

I I-15
INTRODUCTION

 Need & importance


of the study
 Theoretical
framework
 Objectives
 Scope and
limitations
 Source of data
 Period of study
 Methodology

II COMPANY PROFILE 16-31


III FINANCIAL ANALYSIS 32-46

IV DATA ANALYSIS and 47-59


INTERPRETATION
V CONCLUSIONS & SUGGESTIONS 67-69

BIBLIOGRAPHY

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INTRODUCTION

Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions. These
statements include the income statement, balance sheet, statement of cash flows, and a
statement of retained earnings. Financial statement analysis is a method or process
involving specific techniques for evaluating risks, performance, financial health, and future
prospects of an organization.[1]

It is used by a variety of stakeholders, such as credit and equity investors, the government,
the public, and decision-makers within the organization. These stakeholders have different
interests and apply a variety of different techniques to meet their needs. For example,
equity investors are interested in the long-term earnings power of the organization and
perhaps the sustainability and growth of dividend payments. Creditors want to ensure the
interest and principal is paid on the organizations debt securities (e.g., bonds) when due.

Common methods of financial statement analysis include fundamental analysis, DuPont


analysis, horizontal and vertical analysis and the use of financial ratios. Historical
information combined with a series of assumptions and adjustments to the financial
information may be used to project future performance. The Chartered Financial Analyst
designation is available for professional financial analysts.

HISTORY

Benjamin Graham and David Dodd first published their influential book "Security Analysis"
in 1934.[2] [3] A central premise of their book is that the market's pricing mechanism for
financial securities such as stocks and bonds is based upon faulty and irrational analytical
processes performed by many market participants. This results in the market price of a
security only occasionally coinciding with the intrinsic value around which the price tends
to fluctuate.[4] Investor Warren Buffett is a well-known supporter of Graham and Dodd's
philosophy.

The Graham and Dodd approach is referred to as Fundamental analysis and includes: 1)
Economic analysis; 2) Industry analysis; and 3) Company analysis. The latter is the primary
realm of financial statement analysis. On the basis of these three analyses the intrinsic
value of the security is determined.[4]

HORIZONTAL AND VERTICAL ANALYSIS

Horizontal analysis compares financial information over time, typically from past quarters
or years. Horizontal analysis is performed by comparing financial data from a past

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statement, such as the income statement. When comparing this past information one will
want to look for variations such as higher or lower earnings.[5]

Vertical analysis is a proportional analysis of financial statements. Each line item listed in
the financial statement is listed as the percentage of another line item. For example, on an
income statement each line item will be listed as a percentage of gross sales. This technique
is also referred to as normalization[6] or common-sizing.[7]

FINANCIAL RATIO ANALYSIS

Main article: Financial ratio

Financial ratios are very powerful tools to perform some quick analysis of financial
statements. There are four main categories of ratios: liquidity ratios, profitability ratios,
activity ratios and leverage ratios. These are typically analyzed over time and across
competitors in an industry.

 Liquidity ratios are used to determine how quickly a company can turn its assets into
cash if it experiences financial difficulties or bankruptcy. It essentially is a measure of a
company's ability to remain in business. A few common liquidity ratios are the current
ratio and the liquidity index. The current ratio is current assets/current liabilities and
measures how much liquidity is available to pay for liabilities. The liquidity index shows
how quickly a company can turn assets into cash and is calculated by: (Trade receivables
x Days to liquidate) + (Inventory x Days to liquidate)/Trade Receivables + Inventory.
 Profitability ratios are ratios that demonstrate how profitable a company is. A few
popular profitability ratios are the breakeven point and gross profit ratio. The breakeven
point calculates how much cash a company must generate to break even with their start
up costs. The gross profit ratio is equal to (revenue - the cost of goods sold)/revenue.
This ratio shows a quick snapshot of expected revenue.
 Activity ratios are meant to show how well management is managing the company's
resources. Two common activity ratios are accounts payable turnover and accounts
receivable turnover. These ratios demonstrate how long it takes for a company to pay off
its accounts payable and how long it takes for a company to receive payments,
respectively.
 Leverage ratios depict how much a company relies upon its debt to fund operations. A
very common leverage ratio used for financial statement analysis is the debt-to-equity
ratio. This ratio shows the extent to which management is willing to use debt in order to
fund operations. This ratio is calculated as: (Long-term debt + Short-term debt +
Leases)/ Equity.[8]

DuPont analysis uses several financial ratios that multiplied together equal return on
equity, a measure of how much income the firm earns divided by the amount of funds
invested (equity).

A Dividend discount model (DDM) may also be used to value a company's stock price based
on the theory that its stock is worth the sum of all of its future dividend payments,

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discounted back to their present value.[9] In other words, it is used to value stocks based on
the net present value of the future dividends.

Financial statement analyses are typically performed in spreadsheet software and


summarized in a variety of formats.

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.

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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 management’s 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.

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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.

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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

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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.

 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.

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 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 motor credit.

 Management is forced to give timely and adequate attention to the


effect of changing business conditions

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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.

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.

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 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


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
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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 company-
individualized 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
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.

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 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.
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.

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ABBREVATIONS USED:

MARUTI SUZUKI – 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

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COMPANY PROFILE

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INTRODUCTION TO
AUTOMOBILE INDUSTRY

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COMPANY’S PRODUCTS

It provides 13 brands of cars ranging over 150


variants. Suzuki Motor Corporation, the parent
company, is a global leader in mini and compact cars
for three decades. Suzuki’s technical superiority lies
in its ability to pack power and performance into a
compact, lightweight engine that is clean and fuel
efficient.

MARUTI 800

MARUTI
OMNI

GYPSY

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ALTO SWIFT
A-STAR
DZIRE

SWIFT WagonR

SX4 VERSA

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LATEST LAUNCHES

RITZ

GRAND
VITARA

NEW ZEN
ESTILO
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MARUTI FINANCE

 MARUTI LAUNCHED MARUTI FINANCE IN


JANUARY 2002.

 PRIOR TO THE START OF THIS SERVICE


MARUTI HAD STARTED TWO JOINT
VENTURES CITICORP MARUTI AND
MARUTI COUNTRYWIDE WITH CITI GROUP
AND GE COUNTRYWIDE RESPECTIVELY TO
ASSIST ITS CLIENT IN SECURING LOAN.

 MARUTI TIED UP WITH ABN AMRO BANK,


HDFC BANK, ICICI LIMITED, KOTAK
MAHINDRA, STANDARD CHARTERED
BANK, AND SUNDARAM TO START THIS
VENTURE INCLUDING ITS STRATEGIC
PARTNERS IN CAR FINANCE.

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 AGAIN THE COMPANY ENTERED INTO A
STRATEGIC PARTNERSHIP WITH SBI IN
MARCH 2003 SINCE MARCH 2003, MARUTI
HAS SOLD OVER 12,000 VEHICLES
THROUGH SBI-MARUTI FINANCE.

Maruti insurance

IT
IS LAUNCHED IN 2002 MARUTI PROVIDES
VEHICLE INSURANCE TO ITS CUSTOMERS
WITH THE HELP OF THE NATIONAL
INSURANCE COMPANY, BAJAJ ALLIANZ,
NEW INDIA ASSURANCE AND . SUNDARAM.
THE SERVICE WAS SET UP THE COMPANY
WITH THE INCEPTION OF TWO
SUBSIDIARIES MARUTI INSURANCE
DISTRIBUTORS SERVICES PVT. LTD AND
MARUTI INSURANCE BROKERS PVT.
LIMITED .

This service started as a benefit or value addition to


customers and was able to ramp up easily. By December
2005 they were able to sell more than two million
insurance policies since its inception.

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MARUTI TRUE VALUE

MARUTI TRUE SERVICE OFFERED BY MARUTI UDYOG


TO ITS CUSTOMERS. IT IS A MARKET PLACE FOR USED
MARUTI VEHICLES. ONE CAN BUY, SELL OR EXCHANGE
USED MARUTI VEHICLES WITH THE HELP OF THIS
SERVICE IN INDIA

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FINANCIAL PERFORMANCE

FINANCIAL PERFORMANCE OF EVERY


COMPANY DEPENDS UPON ITS SALES AND
PROFIT VOLUMES.

SALES VOLUMES OF A COMPANY

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PROFIT VOLUMES OF A
COMPANY.

ACHIEVEMENTS OF A
COMPANY

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FINANCIAL ANALYSIS IN MARUTI SUZUKI

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BUDGET AND BUDGETARY SYSTEM

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 MARUTI SUZUKI-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.
 To identify and account for cost over runs and to analyses contributory
factors into deviations and cost escalations.

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 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 afsuzukis a
sound basis for cost accounting, inter-firm comparisons and provides valuable
inputs to datamotor. 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.

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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 MARUTI SUZUKI:


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

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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 non-
executives 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

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(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 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:
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 10th 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


MARUTI SUZUKI-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.

31
 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.

The current budgetary control system operation phase envisages generation and
transmission line projects as independent investment centers. It becomes

32
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 individual’s 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
will be budget for in the construction budget of budgetary control system-
construction phase.

33
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:
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.

34
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:

The sales value will be determined from quantum of net generation (i.e. gross
generation-auxiliary consumption).

35
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 pro-
rated 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:
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.

36
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.
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.

37
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:
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

38
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.

 Major overhaul
 Preventive maintenance

 Break down maintenance

39
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 manufacturer’s 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
and O & M in the ratio of capital expenditure and sales during the respective
years.

40
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.

41
DATA ANALYSIS
AND INTERPRETATION

42
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

2006-07 402811 11130 70000

2007-08 366744 65420 40000

2008-09 173380 19233 80000

2009-10 207977 61323 60000

2010-11 139835 13181 70000

2011-12 148071 14763 65000

Total 4316969 659714 660000

43
Pv of cash inflows 659714
PI= ----------------------- = --------------------------
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.

44
PAY BACK

YEARS Initial Cash inflows in Cash outflows


investments (millions) in (millions)
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

2006-07 25000 2900 11000

2007-08 12000 1100 22000

2008-09 90000 1600 80000

2009-10 30000 1200 70000

2010-11 37830 2930 27700

2011-12 52300 3250 29300

Total 513130 36280 329000

45
Initial investments 40000
PAY BACK PERIOD = ----------------------- = -------------------
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 2010-11 is 52300.
b) Cash inflows are in the order decreasing to increasing from 2008-09 to
2009-2010.

46
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 6.90 6.50 -0.40


consumption (%)

Auxiliary 1452.45 1399.453 -52.997


consumption(MU)

Coal(MT) 12559545 12604543 44998

Oil(KL) 5210.00 4978.50 231.50

47
TABLE 1.2
PHYSICAL PARAMETERS 2010-11

PARTICULARS BUDGET ACTUALS VARIANCE

Generation(MU) 20498 19690.837 -807.163

Plant load factor 90.00 86.45 -3.55


(%)

Auxiliary 6.60 6.40 -0.20


consumption
(%)

Auxiliary 1352.12 1259.259 -92.861


consumption
(MU)

Coal (MT) 11847844 11778688 -69156

Oil (KL) 5110.00 4725.175 -384.825

48
TABLE 1.3
PHYSICAL PARAMETERS 2011-12

PARTICULARS BUDGET ACTUAL VARIANCE

Generation (MU) 19985.00 20247.702 262.702

Plant load factor 87.75 88.90 1.15


(%)

Auxiliary 6.40 6.21 -0.19


consumption (%)

Auxiliary 1279.00 1258.2650 -20.735


consumption
(MU)

Coal consumption 12219428 12503168 283740


(MT)

Oil consumption 5070.00 3824.075 -1245.925


(KL)

49
TABLE 1.4
PHYSICAL PARAMETERS

PARTICULARS BUDGET ACTUAL VARIANCE

Generation (MU) 20985 21272.604 287.604

Plant load factor 94.90 95.50 0.59


(%)

Auxiliary 7.60 7.21 -0.39


consumption(MU)

Auxiliary 1386 1364.2760 -21.724


consumption (%)

Coal 13329536 13624486 294950


consumption
(MT)

Oil consumption 6080 5036.025 -1043.975


(KL)

50
Table-2.1
BUDGET Vs ACTUAL

S DESCRIP 2010-11 2010-11 2011-12 2011-12 2009- 2009-


. TION BUDGET ACTUAL BUDGET ACTUAL 2010 2010
N (in (in (in (in BUDGE ACTUAL
O millions) millions) millions) millions) T (in (in
million) millions)

1 Employee 6,959 7,364 7,884 8,666 8,768 9,876


cost

2 Repairs 7,000 7,258 6,890 6,676 7,970 8,796


and
maintena
nce

3 Station 5,500 4,061 4,061 4,621 4,725 4,932


overheads

GRAND 19,459 18,683 18,835 21,963 21,463 23.604


TOTAL

51
REVENUE
(2011-12)

PARTICULARS BUDGET FOR ps/KWH ACTUAL FOR Ps/KWH


2011-12 2011-12
AMOUNT (in AMOUNT(in
millions)) millions)

SALES

Fixed charges 68,670 34.36 68,670 34.36


recovery

Variable charges 1,64,822 82.47 1,72,486 85.19


recovery

Fuel price 14,422 7.22 21,077 10.41


adjustment
recovery

TOTAL 2,47,914 124.05 2,62,233 129.51

52
REVENUE

Particulars Budget for Ps/KWH Actual for Ps/kwh


2009-2010 2009-2010
Amt(in Amt(in
Millions) Millions)

Sales

Fixed 70126 44.72 703044.720 45.60


charges

Variable 1,78,764 85.33 1,76,275 85.44


Charges

Fuel price 792 0.44 11942 6.56


Adjustment

TOTAL 2,49,682 130.50 2,58,517 137.60

53
OPERATIONAL EXPENDITURE BUDGET

SL.N PARTICULARS BUDGET PS/KW ACCURALS PS/K


O ESTIMAT FOR THE W
ED FOR YEAR
THE AMOUNT(i
YEAR n millions)
AMOUNT(
in
millions)

1 Variable Cost

Coal 112560 58.42 111220.56 66.83

Oil

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

2 Operations and
maintenance cost

Chemical &Water 3660.00 0.26 256.00 0.15

Repairs and 5252.00 3.16 5040.00 3.03


Maintenance

Employee cost 5785.00 5.79 6292.00 3.78


stationary&
General expenses

Share of c.c. 1845.00 1.19 1777.33 1.07

54
expenses

Total of 2 16542 10.04 13365.33 8.03

3 Depreciation 12576.00 10.36 19297.00 11.60

4 Finance charges

Rebate 3885.00 2.26 3238.00 1.95

Interest on fixed 2048.00 1.45 2346.66 1.41


capital

Total of 4 5933.00 3.71 5584.66 13.01

Grand 16540592 101.33 171580.74 103.8


Total(1+2+3+4)

55
OPERATIONAL EXPENDITURE BUDGET

SNO PARTICULARS BUDGET Ps/KW ACTUAL Ps/KW


FOR THE H FOR THE H
YEAR(200 YEAR
6-2007) (2006-
AMOUNT 2007)
(in AMOUNT
millions) (in millions)

1 VARIABLE COST

Coal 1,57,292 78.45 1,57,392 79.25

Oil

High furnace oil 895 0.45 2094 0.65


&high speed diesel

TOTAL OF 1 1,58,187 78.95 1,59,484 79.90

2 OPERATIONS &
MAINTENANCE
COST

Chemical 375 0.20 296 0.18

Repairs 8000 4.41 7500 4.69


&maintenance

Employee cost 7959 4.49 8364 4.74

Station general 6175 3.52 4785 2.92


expenses

56
Share of C.C 3770 1.76 3757 1.90
expenses

TOTAL OF 2 26,278 14.38 24,702 14.43

3 DEPRECIATION 18,925 9.75 19.284 9.50

4 FINANCE
CHARGES

Interest on fixed 8373 4.10 7264 3.74


capital

Rebate 5326 3.11 5550 3.31

TOTAL OF 4 12,699 7.21 12,814 7.05

GRAND 2,16,089 110.30 2,16284 110.88


TOTAL(1+2+3+4)

57
OPERATIONAL EXPENDITURE BUDGET

S.NO PARTICULARS BUDGET Ps/KW ACTUAL Ps/KW


FOR THE H FOR THE H
YEAR(201 YEAR
0-11) (2010-11)
AMOUNT AMOUNT
(in (in millions)
millions)

1 VARIABLE COST

Coal 1,56,292 76.25 1,56,360 79.40

Oil

High furnace oil 875 0.43 1,094 0.56


&high speed diesel

TOTAL OF 1 1,57,167 76.68 1,57,454 79.96

2 OPERATIONS &
MAINTENANCE
COST

Chemical 325 0.16 276 0.14

Repairs 7,000 3.41 7,258 3.69


&maintenance

Employee cost 6,959 3.39 7,364 3.74

Station general 5,175 2.52 3,785 1.92


expenses

Share of C.C 3,570 1.74 3,657 1.86


expenses

58
TOTAL OF 2 23,029 1.22 22,340 11.35

3 DEPRECIATION 17,905 8.73 18,184 9.23

4 FINANCE
CHARGES

Interest on fixed 8,373 4.08 7,164 3.64


capital

Rebate 4,326 2.11 4,550 2.31

TOTAL OF 4 12,699 6.19 11,714 5.95

GRAND 2,10,800 102.84 2,09,692 106.49


TOTAL(1+2+3+4)

59
OPERATIONAL EXPENDITURE BUDGET

S.NO PARTICULARS BUDGET Ps/KW ACTUAL Ps/KW


FOR THE H FOR THE H
YEAR(201 YEAR
1-12) (2011-12)
AMOUNT AMOUNT
(in (in millions)
millions)

1 VARIABLE COST

Coal 1,60,166 80.14 1,69,574 83.75

Oil

High furnace oil 1,487 0.74 969 0.48


&high speed diesel

TOTAL OF 1 1,61,653 80.88 1,70,543 84.23

2 OPERATIONS &
MAINTENANCE
COST

Chemical 250 0.13 307 0.15

Repairs 6,890 3.45 8,676 4.28


&maintenance

Employee cost 7,884 3.94 8,666 4.28

Station general 3,811 1.91 4,314 2.13


expenses

Share of C.C 3,791 1.90 3,691 1.82

60
expenses

TOTAL OF 2 22,626 11.32 25,655 12.67

3 DEPRECIATION 15,650 7.83 17,017 8.40

4 FINANCE
CHARGES

Interest on fixed 7,716 3.86 7,501 3.70


capital

Rebate 4,475 2.24 5,5761 2.85

TOTAL OF 4 12,191 6.10 13,262 6.55

GRAND 2,12,120 106.14 2,26,476 111.85


TOTAL(1+2+3+4)

61
OPERATIONAL EXPENDITURE BUDGET

S.NO PARTICULARS BUDGET Ps/KW ACTUAL Ps/KW


FOR THE H FOR THE H
YEAR(200 YEAR
9-2010) (2009-
AMOUNT 2010)
(in AMOUNT
millions) (in millions)

1 VARIABLE COST

Coal 1,72,177 83.15 1,79,579 89.75

Oil

High furnace oil 1,498 0.76 988 0.49


&high speed diesel

TOTAL OF 1 1,73,675 83.91 1,80,567 90.24

2 OPERATIONS &
MAINTENANCE
COST

Chemical 260 0.14 328 0.18

Repairs 6,950 3.67 8982 4.32


&maintenance

Employee cost 7,992 3.98 8,778 4.30

Station general 3,856 1.96 4,517 2.19


expenses

Share of C.C 3,995 1.98 3693 1.82


expenses

62
TOTAL OF 2 23,063 11.73 26,298 12.67

3 DEPRECIATION 16,890 8.12 18,019 8.78

4 FINANCE
CHARGES

Interest on fixed 7,817 3.96 7,402 3.62


capital

Rebate 4,479 2.24 5,882 2.92

TOTAL OF 4 12,296 6.13 13,284 6.54

GRAND 2,25,924 109.14 3,57,168 118.37


TOTAL(1+2+3+4)

63
PURCHASE BUDGET
(REVISED ESTIMATES)

S.N MATERIA UNIT OPENIN PURCH CONSUMPT CLOSI


O L G ASE ION NG
DESCRIPT STOCK( DURING DURING STOCK
ION PROVISI THE THE YEAR
ONAL) YEAR

1 Coal 000’KT Rs 508 13,012 12,970 550


millions
6,568 1,70,402 1,70,402 7,1150

2 Oil KL Rs 1,101 6,299 6,700 700


millions
220 1,142 1,195 165

TOTAL Rs millions 6,768 1,72,126 1,71,600 7,315

3 Chemicals Rs millions 18 322 325 15

4 Consumabl Rs millions 188 192 180 200


es

5 Spares Rs millions 9,112 6,068 4,080 11,100

6 Lubricants Rs millions 75 210 160 125

7 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

64
PURCHASE BUDGET
(BUDGETED ESTIMATES)

S.NO MATERIAL UNIT OPENING PURCHASE CONSU CLOSING


DESCRIPTI STOCK(PR DURING MPTION STOCK
ON OVISIONA THE YEAR DURING
L) THE
YEAR

1 Coal 000’KT Rs 550 13,222 13,222 550


Millions
700 1,71,885 1,71,885 7,150

2 Oil KL Rs 700 3,900 4,075 525


Millions
165 829 862 131

TOTAL Rs Millions 7,315 1,72,714 1,72,747 7,281

3 Chemicals Rs Millions 15 406 401 20

4 Consumable Rs Millions 200 190 190 200


s

5 Spares Rs Millions 11,100 4,310 4,310 11,100

6 Lubricants Rs Millions 125 160 185 100

7 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

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EXPLANATION TO THE ABOVE TABLES
The installed capacity of MARUTI SUZUKI-RSTPS is 2600 MW.

1000 MW=1 MU
2600 MW=2.6 MU

Power generation per annum in MARUTI SUZUKI-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 2011-12

Budget Generation
PLF (MU) = ---------------------- * 100
Installed capacity
20985MUs
= -------------
66 *100 = 92.13%
22776 MUs
Actual generation
PLF (ACTUAL) = Actual generation
------------------------------ *100
F (ACTUAL) = ------------------------------
Installed capacity *100
Installed capacity
21272.604
=21272.604
-------------- *100 =93.39%
= --------------
22776MUs *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

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ANALYSIS AND INTERPRETATION

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

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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.

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.

Table 1.2 shows the physical parameters (both budgeted and actual) for the year
2010-11. 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.

Table 1.3 shows the physical parameters (both budgeted and actual) for the year
2011-12. 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

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generation is 19690 MU but the actual power generation is 20255 MU.565 more
than the expected, there by increasing PLF by 0.59%.

TABLE2.1
BUDGET VS ACTUAL:
Shows that in the year 2010-11 actual of the employee cost is more than the
budgeted estimates. Similarly in the year 2011-12 the actual cost increased to
8,666 than the previous year 2010-11. 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 (2011-12) 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.

70
ANALYSIS AND COMPARISON OF ACTUAL FIGURE FOR
THE YEARS 2011-12 AND 2009-2010.

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 2011-12 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.

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PURCHASE BUDGET revised estimates for the year 2011-12 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
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

72
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.

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.

73
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.

74
SUGGESTIONS:

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 MARUTI SUZUKI, 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 MARUTI SUZUKI
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;

75
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
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.

76
Bibliography

1. E. Gup Benton & W . Kolari James, Commercial Motoring 3rd

Edition,Singapore ,John Wiley &sons (Asia) ,2005 .

2. Shekher K C & Shekher Lekshmy , Motoring theory and practice 19th Edition,

NewDelhi, Vikas Publishing House ,2007 .

3. Natarajan S & Parameswaran, Indian Motoring 5th Edition ,NewDelhi,

Sulthan Chand &Co ltd ,2007 .

4. Maheswari S. N & Paul R R,Motoring theory &practice 3rd Edition ,NewDelhi,

Kalyani publishers,2006 .

WEBSITES

 www.Maruti Suzukimotor.com

 www.motornetindia.com

 www.mymotorersmotor.com

 http://www.rbi.org.in

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