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A STUDY ON“BUDGET &BUDGETARY CONTROL”
AT
VISHAKAPATNAM STEEL PLANT(A report submitted to JNTU, Kakinada.)
In Partial fulfillment for the award of
MASTER OF BUSINESS ADMINISTRATION
By
GANDI.MAHALAKSHMI NAIDU
Under The Guidance Of
CH.LEELA SRINIVAS Dy.Manager (F&A) RINL, VISAKHAPATNAM
DEPARTMENT OF BUSINESS & MANAGEMENT STUDIES
AVANTHI INSTITUTE OF ENGG &TECH
CHURUKUPALLI, VIZIANAGARAM
2007-2009
MRS.V.BALA H.O.D Department of Business And Management Studies
CERTIFICATE
This is to certify that the project done by Mr. G.MAHALAKSHMI NAIDU Regd
No.07Q71E0018 during the academic year 2007-2009, in partial fulfillment for the award of
‘Master of Business Administration’. This project work is original and exclusively done by
him and has been never been a basis for award/fulfillment of any degree or similar title in this
University or in any other University.
(K.KUSUMA) (V.BALA) Asst. Professor & Project in-charge Head of the Department
CERTIFICATE OF PROJECT GUIDE
IN VISHAKAPATNAM STEEL PLANT
This is to certify that the project report entitled a study on “BUDGET
&BUDGETARY CONTROL”is a bonafide work done and submitted in partial fulfillment
of the requirement for the award of Master of Business Administration by
G.MAHALAKSHMI NAIDU, Regd.No.O7Q71E0018 under my guidance & supervision.
STATION: VISAKHAPATNAM:
DATE:.
Mr.CH.LEELA SRINIVAS
Dy .MANAGER (F&A)
RINL, VISAKHAPATNAM
DECLARATION
I, G.MAHALAKSHMI NAIDU, here by declare that the project report entitled a
study on “VISAKHAPATNAM STEEL PLANT on the topic “BUDGET
&BUDGETARY CONTROL”AT VISAKHAPATNAM. SUBMITTED BY ME IS A
BONIFIDE WORK DONE BY ME AND IT IS NOT SUBMITTED TO ANY OTHER
University or published anytime before. This project work is in partial fulfillment of the
requirements for the award of the Master of Business Administration by Jawaharlal Nehru
Technological University.
Place: VISAKHAPATNAM
Date:
(G.MAHALAKSHMINAIDU)
ACKNOWLEDGEMENT
The satisfaction that accompanies the successful completion of any task would
be incomplete with out mentioning people who made it possible and whose
encouragement and constant guidance crowned my effort with success. I wish to
express my deep sense of gratitude to V.BALA Head of the department, Avanthi
Institute of Eng&Tech, Cherukupalli, vizianagaram for permitting me to do the
project.
I would like to express my heartfelt thanks to Asst.proff K.KUSUMA project
guide, AIET, for giving me valuable guidance and sustained assistance at every stage
of this project successfully.
I am grateful to external project guide CH.LEELA SRINIVAS and I am
also thankful to SRI KOSIREDDY.RAJA GARU Dy. MANAGER, Coordinator
student trainees HRD&PROJECT WORKS the in VISHAKAPATNAM STEEL
PLANT for his co-operation and in providing the information of the company needed
by me.
I, especially thank all those who have helped me directly or indirectly. I
express my profound thanks to my affectionate parents for their constant
encouragement throughout my educational career
(GANDI.MAHALAKSHM
I NAIDU)
CONTENTS
CHAPTER-I
INTRODUCTION
Need for the study
Objectives of the study
Scope of the study
Methodology
LIMITATIONS
CHAPTER-II
Industry profile
CHAPTER-III
Company Profile
CHAPTER-IV
Budget & Budgetary Control-Theoretical Review
CHAPTER-V
Budget & Budgetary Control in RINL(VSP)
CHAPTER-VI
summary
Suggestions
BIBLIOGRAPHY
CHAPTER –1
INTRODUCTION
SIGNIFICANCE OF STUDY:
The significance of choosing “Budget and budgetary control”
as a study is because of its importance i.e., Budgetary control is the process of
determining various budgeted figures for the enterprises for the future period
and then comparing the budgeted figures with the actual performance for
calculating variances, if any. And also to ensure planning for future by
setting up various budgets. The requirements and expected performance of
the enterprise are anticipated. To co-ordinate the activities at different
departments. Fixation of responsibility on various individuals in the
organization.
OBJECTIVES OF THE STUDY:
The study is based upon the part of financial performance that has been taken in to
consideration i.e., budgetary concepts.
To understand the importance of Budget and Budgetary control.
To apply various theoretical aspects of budget and budgetary control.
To ascertain how budgetary control helps in planning and coordination of
various operations in an enterprise.
To ascertain how budgetary control helps in controlling the all operations of the
business enterprise
To know whether there is influence of budgets in profit making or not.
To know the steps taken by RINL (Visakhapatnam Steel Plant) in preparation of
budgets.
METHODOLOGY:
The information for the study has been obtained from two sources namely.
1. Primary Data
2. Secondary Data
Primary data: The data for study has been collected from the management of the
company. The information about the industry profile and company profile was
gathered from HRD, VSP and the data about the budget and budgetary control was
gathered from Financial Department, VSP.
Secondary data: This is taken from the annual reports, websites, company journals,
magazines and other sources of information of steel plant.
LIMITATIONS:
1. The period of study that is 4 weeks was not enough to go into the detailed aspects
of the study.
2. The study is carried basing on the information and documents provided by the
organization and based on the interaction with the various employees of the
respective departments.
3. Most of the matters related to budgets were confidential. So it is not possible to
gather much information.
4. Budgeting process is very dynamic.
5. Budget that were prepared are only based upon trend at the time preparation.
6. Flexibility with in the budget is not possible.
CHAPTER - 2PROFILE
OF
STEEL INDUSTRY
INDUSTRY PROFILE:
Steel is an alloy of iron usually containing less than 1% carbon is a versatile
material with multitude of useful properties used most frequently in the automotive and
construction industries. Steel can be cast into bars, strips, sheets, nails, spikes, wire,
rods or pipes as needed by the intended user. The consumption of steel is regarded as
the index of industrialization and the economic maturity any country has attained.
Though the production of steel in significant quantity started only after 1900,the
growth of steel industry can be conveniently studied by dividing the time in to pre and
post independence period.
The major steel and related companies in India are:
1. Bharat Refractories Limited.
2. Hindustan Steel Works Construction Limited.
3. Jindal Steel and Power Limited
4. Kudremukh Iron Ore Company Limited
5. Manganese Ore (India) limited.
6. Metal Scrap Trade Corporation Limited.
7. Metallurgical and Engineering Consultants India Limited.
8. National Mineral Development Corporation (NMDC)
9. Rashtriya Ispat Nigam Limited.
10. Sponge Iron India Limited.
11. Steel Authority India Limited.
12. Tata Iron And steel Company.
Pre-independence:
1830 Joins Marshall Heaqltin Camo can be considered as a pioneer
of modern steel industry in India constructed the first
manufacturing plant at poto novo in Madras presidency. But
it was a financial failure.
1874 Games Erskin founded the Bengal iron works. It passed on to
M/S HOGNE Killer and to M/S Martin and co in 1885
1899 Jamshedji TATA initiated the scheme for integrated steel
plant (first in the country)
1906 Sakchi in Bihar was chosen as the site for the TATA iron and
steel co (TISCO)
1911 TISCO started production, initially 1000 tons of ingots / year
and in 2 years it reached 5000 tons / year by 1939 it reached
production of 15000 tons ingot steel per year.
1918 Initially Indian iron and steel co (IISCO) was founded and the
Bengal iron and steel co merged with it in 1926. To start with,
IISCO restricted it self for manufacturing of pig iron for
export to UK and JAP AN. It produced steel.
1940-50 Formation of the Mysore iron and steel Ltd. Presently known
as Visveswarayya Iron and Steel Ltd. (VISL) at Bhadravathi
in Karnataka owing to the pioneering efforts of Sri.
Visveswarayya. It started manufacturing Ferro alloys and Sp.
Steels.
1951-1956 First five-year plan - The Hindustan Steel
Limited (HSL) was born in the year 1954 with
decision of setting up three plants each with 1
million tones ingot steel per year at Rourkela,
Bhilai, Durgapur. TISCO started its expansion
programme.
1956-1961 Second five-year plan - A bold decision was
taken up to increase the ingot steel output in
India to 6 million tones per year and its
production at Rourkela, Bhilai and Durgapur
Steel Plant started.
1961-1966 Third five-year plan – During the plan the three
steel plants under HSL, TISCO & TISCO were
expanded*
1964 Bokaro Steel Plant came into existence
1966-69 Recession period – Till the expansion programs
were actively existed during this period
1969-74 Fourth five-year plan – Salem Steel Plant started.
Licenses were given for setting up of many mini
steel plants and re-rolling mills government of
India. Plants in south are each in Visakhapatnam
and Karnataka. SAIL was formed during this
period on 24th January 1973.
1974-79 Fifth five-year plan – The idea of setting up the
fifth integrated steel plant, the first re-based plant
at Visakhapatnam took a definite shape. At the
end of the fifth five-year plan the total installed
capacity from six integrated plants was up to
10.6 million tons.
1979-1980 Annual plan. The Erstwhile soviet union agreed
to help in setting up the Visakhapatnam Steel
Plant.
1980-1985 Sixth five-year plan – Work on Visakhapatnam
Steel Plant started with a big bang and top
priority was accorded to start the plant. Schemes
for modernization of Bhilai Steel Plant, Rourkela
steel plant, Durgapur steel plant and TISCO were
initiated. Capacity at the end of sixth five-year
plan from six integrated plants stood 11.50
million tonnes.
1985-91 Seventh five-year plan – Expansion works at
Bhilai and Bokaro steel plant completed.
Progress of Visakhapatnam Steel Plant picked up
and the nationalized concept has been introduced
to commission the plant with 30 MT liquid steel
capacities by 1990.
1992-1997 Eight five-year plans – The Visakhapatnam Steel
Plant was commissioned in 1992. The cost of
plant has become around 8755 cores.
Visakhapatnam Steel Plant started the production
and modernization of other steel plants is also
duly engaged.
1997-2002 Ninth five-year plant – Restructuring of
Visakhapatnam Steel Plant and other public
sector undertakings.
Post-independence:
First five-year plan (1951 to 1956):
No new steel plant came up, as the first plan was mainly agriculture oriented.
However, IISCO was allowed to expand form IMT/year to 2 MT/year of ingots, and
from 0.5 MT/year to 1.0 MT/year of steel. And, the first five-year plan contemplated a
new steel plant to be erected in public sector.
Thus the Hindustan Steel Limited (HSL) was born on 19th Jan 1954 with the
decision of setting up three steel plants each with one million tons ingot steel per year at
Rourkela, Bhilai and Durgapur. Though TISCO and IISCO were scheduled to expand,
TISCO started its expansion program.
Second five-year plan (1956 to 1961):
During this period, additional steel producing capacity was added and a decision
was taken to increase the ingot steel output in India to 6 million tons per year. The three
one million ton steel plant one each at Rourkela, Bhilai and Durgapur were completed
during this period. They started production during the end of this plan. The salient
features are given below:
Plant capacity Location Collaboration Production
(tons)
RSP Sundargarh,
Orissa
Germany 720,000
BSP Durg, M.P. U.S.S.R 770,000
DSP Burdwan, W.B. UK 800,000
In addition to the above BSP and DSP each were having the capacity to produce
300,000 tons of pig iron for sale.
Third five-year plan (1961 to 1966):
During this period, the three steel plants under HSL, TISCO, and IISCO were
expanded as shown below. However, these could be completed only by 1968 - 1969.
STEEL PLANT ORIGINAL MT/YR EXPANDED TO
ROURKELA 1.0 1.8
BHILAI 1.0 2.5
DURGAPUR 1.0 1.6
TISCO 1.0 2.0
IISCO 0.5 1.0
Recession Period (1966 - 1969):
The ambling expansion program taken up during the third five-year plan could
not be completed during that period. All the expansion programs were actively executed
during this period.
Fourth five-year plan (1969 - 1974):
Balancing facilities were incorporated in all the steel plants. Salem steel plant
work was taken up during this period. Licenses were given for setting up of many mini
steel plants and rolling mills. Government accepted the idea of setting up two more steel
plants in the south one at Visakhapatnam and other at Hospet in Karnataka. Both of
them were envisaged to produce plain low carbon steel products initially with a capacity
of 2 MT/year of ingots. Steel authority of India ltd., was also formed during this period
on 2nd Jan 1973. Central Research and Development Organization was set up in June
1973 to tackle the research and development problems of Iron and Steel industry.
Fifth five-year plan (1974 to 1979):
Work on Salem project progressed well. Bokaro with 1.7 MT capacities started
in Feb 1978. The expansions of Bhilai steel plant form 2.5 MT to 4 MT and Bokaro from
1.7 MT to 4.0 MT picked up momentum. The idea of setting up the 5th integrated steel
plant at Vizag took a definite shape. By the end of fifth five-year plan the total installed
capacity from six integrated plants was 10.6 MT/year.
Annual plans 1979 to 1980: various plans named above were reviewed and the
progress on different plants consolidated. Soviet - Union has agreed to help in setting up
the Vizag steel plant.
Sixth five-year plan (1980 - 1985):
Work in expansion of Bhilai and Bokaro plant was progressed. Bokaro's
intermediate stage of 2.5 MT completed. Many of the units were commissioned e.g. a)
Salem steel plant was commissioned b) on 31.9.81 work on Vizag steel plant started with
a bang; and c) top priority was accorded to modernize the plant at TISCO. Schemes for
modernization of BSP, RSP, DSP, and IISCO were initiated at the end of sixth five-year
plan. The capacity from six integrated steel plants stood at 11.56 MT.
Seventh five-year plan (1985 to 1991):
Almost all the units in the expansion work of Bhilai and Bokaro to 4 MT
completed. Progress of Vizag steel plant picked up and the rationalized concept has
been introduced to commission the plant with 3 MT liquid steel capacities by 1990.
Eighth five-year plan (1992ToT997):
All units of Vizag steel plant were commissioned by July 1992. Government of
India has given permission to set up mini steel plants in private sectors.
Ninth five-year plan (1998 to 2002):
National development council under central Government has deposited Rs.
859.200 corers in ninth five year plan that targets an overall 6.5% growth gross
domestic production and will necessitate a 7% growth in the remaining years of plan.
Tenth five-year plan (2002 to 2007):
Steel industry registers a growth of 9.9%. VSP has high regime targets.
Eleventh five year plan (2007-2012):
Details of plan expenditure during 11th five year plan
( as proposed to govt for which approval of govt is awaied)
Sl.no Name of
the scheme
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12
total
1 Amr
schemes
100 100 100 100 100 500
2 Coke oven
battery#4
125.56 - - - - 125.56
3 Expansion
to 6.3 Mt
2700.30 2966.89 1483.67 463.32 154.44 7768.62
4 Pulvarised
coal
injection
87 - - - - 87
5 Air
separation
plant
36 - - - - 36
6 Acquisitio
n of mines-
coal &ore
- 600 - - - 600
7 R&D 10 10 10 10 10 50
8 BF1
capital
repairs
27 - - - - 27
9 Spl.capex
value
added
products
200 175 - - - 375
Total 3285.86 3851.89 1593.67 573.32 264.44 9569.1
Global Scenario:
As per IISI
In March 2005 World Crude Steel output was 92.8MT when compared to
March 2004 (87.2 MT), the change in percentage was 6.5%.
China remained the world's largest Crude Steel producer in 2005 also (27.5MT)
followed by Japan (9.6MT) and USA (8.1MT). India occupied the 8th position
(8.8MT)
USA remained the largest importer of semi-finished and finished steel products
in 2002 followed by China and Germany.
Japan remained the largest exporter of semi-finished and finished steel
products in 2002 followed by Russia and Ukraine.
Other significant recent developments in the global steel scenario have been
under the auspices of the OECD (Organization for Economic Co-operation &
Development) the negotiations among the major steel producing countries for a
Steel Subsidy Agreement (SSA) held in 2003 with the objective to agree on a
complete negotiating text for the SSA by the middle of 2004. It also set subsidies
for the Steel Industry of a ceiling of 0.5% of the value of production to be used
exclusively for Research & Development.
The global economy witnessed a gradual recovery from late 2003 onwards.
China has become one of the major factors currently driving the world economy.
As a result of these economic developments IISI has projected an increase by
6.2% or 53 million metric tonnes in 2004 in the global consumption of finished
steel products. IISI has split the growth into two separate areas, China and the
Rest of the World (ROW). Steel consumption in China has been estimated to
increase by 13.1% or 31 mmt in 2004.
USA has repealed the safeguard measures on import of steel as a result of a
ruling, by a WTO Dispute Resolution Panel, which held these measures to be
illegal under the WTO regime.
Present Scenario of Indian Steel Industry:
India is uniquely placed to become a very large producer and consumer of
finished steel products in the world. Substantial reserves of high grade iron ore, low
wage rates, technical and managerial skills of a high order have all enabled India to
gain this stature, by becoming 10th largest producer of steel in the world. Unfortunately
for the Indian steel industry, the price and distribution controls to which it was
subjected till about economic liberalization process began in the early 1990's did not
permit the large integrated steel plants to modernize their steel manufacturing facilities
or to upgrade their technologies to the state of art levels from time to time.
With the economic liberalization that was initiated in 1992, Indian steel Industry
has to accept the inevitable i.e. to appreciate the implications of low import duty rated,
face foreign competition and some how improve its strengths and competitive edge to
produce good quality products at lower prices and learn to survive in the market place.
Following liberalization, the steel Industry is well set on the path of globalization. The
dynamics of the world steel industry has a close relation with Indian steel Industry.
Presently in India, Steel products are being produced from four different sources viz.
Integrated Steel Plants
Mini Steel Plants
Re-rolling Mills
Alloy & Special Steel Plants
Integrated Steel Plants have larger capacity and produce Steel from basic raw
materials and the other three categories mentioned are characterized by low investment
and low break-even point. Characteristics of Integrated Steel Plants.
They have large capacities.
Highly capital intensive.
They have long gestation period.
Labour intensive.
They would have all facilities including raw materials resources, water supply,
power supply, testing and inspection facilities, township facilities, medical,
educational and recreational etc.
Inter dependency of all the processing units on the proceeding and succeeding
units in the path of materials flow.
A potential source for earning foreign exchange through exports.
They serve as centers for the development of ancillary industries.
They are major consumer of refractory materials.
The integrated Steel Plants in India are:
Rourkela Steel Plant
Bhilai Steel Plant
Bokaro Steel Plant
Durgapur Steel Plant
Indian Iron and Steel Company (IISCO)
Tata Iron and Steel Company (TISCO)
Visakhapatnam Steel Plant (VSP)
EXIM POLICY (2002-07)
To facilitate sustained growth in exports to attain a share of 1% of global
merchandise trade.
To stimulate sustained economic growth by providing access to essential
raw materials, intermediates, components, consumables and capital goods
required for augmenting production and providing services.
To enhance the technological strength and efficiency of Indian
agriculture, industry and services, thereby improving their competitive
strength while generating new employment opportunities, and to
encourage the attainment of internationally accepted standards of quality.
To provide consumers with good quality goods and services at
internationally competitive prices while at the same creating a level
playing field for the domestic producers
The New Industrial Policy Regime:
The New Industrial policy has opened up the iron and steel sector for private
investment by
(a) Removing it from the list of industries reserved for public sector and
(b) Exempting it from compulsory licensing.
Imports of foreign technology as well as foreign direct investment are
freely permitted up to certain limits under an automatic route. Ministry of Steel
plays the role of facilitator, providing broad directions and assistance to new
and existing steel plants, in the liberalized scenario.
The Growth Profile
STEEL:
The liberalization of industrial policy and other initiatives taken by the
Government have given a definite impetus for entry, participation and growth of
the private sector in the steel industry. While the existing units are being
modernized/expanded, a large number of new/green field steel plants have also
come up in different parts of the country based on modern, cost effective, state
of-the-art technologies.
At present, total (crude) steel making capacity is over 34 million tonnes and
India, the 8th largest producer of steel in the world, has to its credit, the
capability to produce a variety of grades and that too, of international quality
standards. As per the ratings of the prestigious “World Steel Dynamics”, Indian
HR products are classified in the Tier II category quality products- a major
reason behind their acceptance in the world market. EU, Japan have qualified
for the top slot, while countries like South Korea, USA share the same class as
India.
In pig iron also, the growth has been substantial. Prior to 1991, there was only
one unit in the secondary sector. Post liberalization, the AIFIs has sanctioned
21 new projects with a total capacity of approx 3.9 million tonnes. Of these, 16
units have already been commissioned. The production of million tonnes in
2002-03. During the year 2003-04, the production of Pig Iron was 5.221
million tonnes.
Market Scenario
After liberalization, with huge scale addition to steel making
capacity.
Apparent consumption of steel increased from 14.84 million tonnes
in 1991-92 to 30.265 million tonnes in 2003-04.
The production of steel in 2003-04 is 36.193 million tonnes as
against 33.67 million tonnes in 2002-03 thereby registering 7.5%
growth.
The demand of steel has been firmed up both at home as well as
internationally.
Efforts are being made to boost demand particularly in rural areas and also to
increase exports.
Production:
Steel industry was de-licensed and decontrolled in 1991 and 1992 respectively.
India is the 8th largest producer of steel in the world.
In 2003-04, finished steel production was 36.193 million tonnes.
Pig iron production in 2003-04 was 5.221 million tonnes.
Sponge iron production was 80.85 million tonnes during 2003-04.
The annual growth rate of crude steel production in 2002-03 was 8% and in
2003-04 was 6%. Last 4 years production performance is as under:
Demand – Availability Projection
Demand- Availability of iron and steel in the country is projected by
Ministry of Steel annually.
Gaps in Availability are met mostly through imports.
Interface with consumers by way of Steel Consumer Council exists,
which is conducted on regular basis.
Interface helps in redressing availability problems, complaints related to
quality.
Pricing & Distribution
Price regulation of iron & steel was abolished on 16.1.1992.
Distribution controls on iron & steel removed except 5 priority sectors,
viz. Defence, Railways, Small Scale Industries Corporations, Exporters of
Engineering Goods and North Eastern region.
Allocation to priority sectors is made by Ministry of Steel.
Government has no control over prices of Iron & Steel.
Open market prices are generally on rise.
Price increases of late have taken place mostly in long products than flat
products.
Imports of Iron & Steel
Iron & Steel are freely importable as per the extant policy.
India has been annually importing around 2.05 Million Tonnes of Steel.
Import duty on several raw materials used by the steel sector like non-
coking coal, met coke and nickel has been reduced to 5%. Import duty on
coking coal has been reduced to ‘Nil’.
Last 7 year’s import of finished carbon steel is given below:-
IMPORT OF FINISHED CARBON STEEL
Im p o r t Q t y . ( i n m i l l i o n t o n n e s )
00 . 51
1 . 52
2 . 5
1 9 9 8 -9 9
1 9 9 9 -0 0
2 0 0 0 -0 1
2 0 0 1 -0 2
2 0 0 2 -0 3
2 0 0 3 -0 4
2 0 0 4 -0 5
Year
Import Qty. (in million
tonnes)
1998-99 1.13
1999-00 1.6
2000-01 1.41
2001-02 1.27
2002-03 1.55
2003-04 1.54
2004-05 2.05
EXPORTS OF IRON &STEEL
Iron & Steel are freely exportable and India is a net exporter of steel.
Advance Licensing Scheme allows duty free import of raw materials
for exports.
Duty Entitlement Pass Book Scheme (DEPB) also facilitates exports.
The Government has temporarily suspended the DEPB on iron & Steel &
ferroalloys w.e.f 27th March 2004 as a measure to increase iron & steel
availability in the domestic market.
Steel Exporter’s Forum has been set up to boost steel exports.
An Anti Dumping Directorate has been set up under the Ministry of
Commerce with adequate power to fight trade actions while remaining
within the WTO framework.
Last 7 year’s export of finished carbon steel is given below:-
EXPORT OF FINISHED CARBON STEEL
Year
Export Qty. (in million
tonnes)
1998-99 1.77
1999-00 2.67
2000-01 2.66
2001-02 2.7
2002-03 4.5
2003-04 4.84
2004-05 3.98
E x p o r t Q t y . ( i n m i l l i o n t o n n e s )
0123456
1 9 9 8 -9 9
1 9 9 9 -0 0
2 0 0 0 -0 1
2 0 0 1 -0 2
2 0 0 2 -0 3
2 0 0 3 -0 4
2 0 0 4 -0 5
Duties & Levies on Iron & Steel
Customs Duty
The peak rate of Custom Duty has been reducing sharply during
the last 5 years. In the interim budget for 2004-05, announced in
January’2004 the peak rate was reduced from 25% to 20%. In 2004
the Customs Duty on carbon steel items and pig iron was further
reduced to 5%.
The custom duty on scrap was nil.
Import duty on coking coal has been reduced to ‘nil’, and on
metallurgical coke reduced to 5%.
Excise Duty
The government has taken a number of steps to ensure the availability of
iron and steel items which inter-alias includes reduction in Excise Duty by 16%
with addition to Educational Cess 2% on 16%.
Levies on Iron & Steel
SDF LEVY
This was a levy started for funding modernization, expansion and
development of steel sector. The fund, inter-alias, supports:
1) Capital expenditure for modernization, rehabilitation,
diversification, renewal & replacement of Integrated Steel
plants.
2) Research & Development
3) Rebates to SSI Corporations
4) Expenditure on ERU of JPC
SDF levy was abolished on 21.4.94
Cabinet decided that corpus could be recycled for loans to Main
producers
Interest on loans to Main Producers is set aside for promotion of
R&D on steel etc.
An Empowered Committee has been set up to guide the R&D effort
in this sector.
CHAPTER -3
PROFILES OF
VISAKHAPATNAM STEEL PLANT
PROFILE OF VISAKHAPATNAM STEEL PLANT
Introduction
Origin- History of VSP
Milestones of VSP
Vision
Mission
Objectives
Core Values
Achievements & Awards
Raw Materials & Sources
Major Units of VSP
Production Performance
Product Mix
Process
Board of Directors
Organization Chart
Department Chart: Finance(Budget)
Description of Various Departments
Recent Trends
Financial Performance
Introduction
Steel is such a versatile commodity that every object we seen in our day to day
life have used steels either directly or indirectly in its products. To mention a few it
is used for such a small items as nails, pins, needles etc. Steel comprises one of the
most important inputs in all sectors of economy. Steel industry is both a basic and a
core industry. The economy of any nation depends on a strong base of iron and steel
industry in that nation. Today Steel occupies the foremost place amongst the
materials in use today and pervades all walks of life. All the key discoveries the
human genius – for instance, steam engine, railway, means of communication and
connection, automobile, aero place and computers are in one way or other, fastened
together with steel and with its sagacious and multifarious application.
Steel is versatile material with multitude of useful properties making it
indispensable fro furthering and achieving the continual growth of the economy –
Be it construction, manufacturing, infrastructure or consumables. The level of steel
consumption has been regarded as an index industrialization and economic maturity
attained by a country. Keeping in view the importance of steel, the following
integrated steel plants with foreign collaborations were set up in the public sector in
the post – independence era:
S. NO. STEEL PLANT COLLABORATED BY
1. DURGAPUR STEEL PLANT BRITAIN
2. BHILAI STEEL PLANT ERSTWHILE USSR
3. BOKARO STEEL PLANT ERSTWHILE USSR
4. ROURKELA STEEL PLANT GERMANY
Origin and History of the organization
To meet the growing domestic needs of steel, the decision of the Government of
India to set up an Integrated Steel Plant at Visakhapatnam under Steel Authority Of
India Ltd.(SAIL) was announced by the Prime Minister Smt. Indira Gandhi in
parliament on 17th April 1970. The Selection Committee chose the site near
Balacheruvu creek at Visakhapatnam. The Prime Minister of India did the formal
inauguration and laid the foundation stone on 20th January 1971. The consultant,
M/s M.N.Dastur and company ltd., submitted a techno-economic feasibility report
for the plant, with an annual capacity of about 3.4 million tones of liquid Steel, in
October 1977.
The erstwhile USSR Government examined the detailed project report
prepared by Dastur & Company and offered Technical and Economic co-operation
for the same. The Govt.of India and erstwhile USSR signed an agreement on June
12th 1979, for co-operation in setting up a 3.4 million tones integrated steel plant at
Visakhapatnam. The USSR agreed to provide financial assistance of 3.4 million
Rouble credit to GOI specifically for setting up the steel plant. In terms of this
agreement, Soviets and Indian design organization revised the earlier detailed
project report of Dastur Co., jointly and a comprehensive revised detailed project
report for VSP was submitted in November 1980. A new company i.e. Rashtriya
Ispat Nigam Ltd. (RINL) was incorporated for faster implementation of the project.
The construction of the project commenced in 1982 with a schedule of 4 and 6 years
for the first and second stage respectively. During construction due to inadequate
fund availability, the project schedule could not be adhered to, resulting in huge cost
and time overruns. The project cost escalated to around Rs.8500 crs. In a bid to
reduce the capital investment, Rationalized concept was adopted in 1985. As per
this one Steel Melt Shop and one Rolling Mill i.e. the universal beam mill were
dropped. The other steel melt shop of 2.2 MTPA of liquid steel was up rated to 3
MTPA without any additional facilities. Further the capacities of Rolling Mills i.e.
Light and Medium Merchant Mill
(LMM), Medium merchant and structural mill (MMSM) and Wire Rod Mill
(WRM) were also up rated without any modification to make the project
economically viable.
The project cost with all these modifications was brought down to about
Rs.6281 crs. However during implementation further cost escalations took place and
finally the project was implemented at a capital cost of around Rs.8500 crs. Various
operating units were commissioned one after another from 1989 onwards and entire
project was completed by July 1992. The then Honorable Prime Minister Sri.
P.V.Narasimha Rao dedicated the plant to the Nation on 1st August 1992. Unlike
other integrated steel plants in the country, new technology, large-scale
computerization and automation etc. were incorporated in the plant. To operate the
plant at international levels and attain such labor productivity, the total manning of
the organization was frozen to 17,500 employees. The plant has a capacity of
producing 3.0 MT of liquid Steel and 2.656 MT saleable steel.
Milestones of Viskhapatnam steel plant:
SL NO. DATE MILESTONE
1. 17.04.1970 P.M. Of India announces in the parliament to construct a new steel plant at Viskhapatnam.
2. June 1970 Site selection committee appointed.
3. 30.11.1970 Committee’s report approved for site.
4. 20.01.1971 Foundation stone laid by P.M.
5. 27.02.1971 Consultant appointed. Feasibility reports submitted in 1972 and other investigation carried out.
6. 07.04.1974 First block of land taken over
for VSP.
7. 15.10.1977 Detailed project report submitted by consultant.
9. 12.06.1979 Inter government agreement signed between India and Erstwhile U.S.S.R at MOSCOW for the cooperation in the construction of VSP.
10. 19.10.1979 Government approved setting up of VSP. Soviet side carries out the revision of detailed project report.
11. Jan. 1980 Site leveling work started.
12. 30.11.1980 M.N. Dastur & co., principal consultant submits the comprehensive revised detailed
project report.13. 01.01.1981 Export committee submits
recommendation for approval of comprehensive revised detailed project report with certain modification.
14. 05.02.1981 Contract singed with Erstwhile soviet union for preparation of working drawings for coke ovens. Blast furnace and sinter plant.
15. 23.02.1981 Comprehensive revised detailed project report along with expert committee recommendations approved.
16. 10.07.1981 Protocol signed with Erstwhile soviet union for supply of equipments and specialists.
17. 23.01.1982
To
26.02.1982
Blast furnace foundation (1st
mass concreting in the project) laid.
18. 01.02.1982 Zero date of the construction of the project.
19. 18.02.1982 Rashtriya Ispat Nigam Ltd. (RINL) formed.
20 29.01.1987 Commissioning of structural shop. With this commissioning of various auxiliary units commenced.
21. 06.09.1989 Coke oven Battery no.1 starts pushing of cake. With this the commissioning metallurgical unit starts.
22. 14.11.1989 Sinter plant (Machine-1) commissioned.
23. 28.03.1990 “Godavari” the 1st blast furnace commissioned.
24. 03.05.1990 PM dedicates “Godavari” to the nation.
25. 06.09.1990 The 1st converter and the 1st
continuous casting machine of the steel Melt shop starts production.
26. 28.08.1990 Billet production in the light and medium Merchant mil started.
27. 21.11.1990 Wire Rod Mill commissioned.
28. 04.03.1991 The 2nd converter commissioned.
29. 30.06.1991 Yeleru Water supply scheme made ready for supply of water to VSP.
30. 28.10.1991 Trial production commences in the bar mill of light and Medium Merchant Mill.
31. 31.10.1991 Coke oven Battery No.2 commissioned.
32. 27.12.1991 Sinter Machine-2 commissioned.
33. 20.03.1992 Medium Merchant and structural Mill commissioned.
34. 21.03.1992 “Krishna” Blast furnace-2 commissioned.
35. July 1992 Coke Oven Battery No.3 commissioned.
36. July 1992 Converter no.3of steel milt
shop commissioned. This
marks the completion of
commissioning units of the
no.3 million tones plant.
37. Aug. 1992 Dedication of the plant to the
Nation by the Prime Minister.
Coke oven battery no.4
38 10.12.2003 Data of approval
39 10.12.2006 Schedule date of commissioning
(36 months from date of
approval)
Expansion proposal for 6.3 Mt
40 28.10.2005 Govt of India approval ref.6
(1) 2005-vsp approval date
41 28.10.2005 Commencement date
Highlights of Expansion to 6.3 MT Liquid Steel Capacities.
1. Govt of India approval ref: 6 (1) 2005-VSP dated 28th October 2005.
2. Commencement Date 28th October 2005
3. Main Units in Expansion
Raw Material Handling Plant
One Sinter Plant
One Blast Furnace 3.25 Mt / year Sinter
One Blast Furnace (BF-3800 C.2.50 Mt/ year Hot Metal
Calcining and Refractory Materials 12x500 t / day
One Steel Melt Shop 2.60 Mt / year Liquid Steel
Rolling Mills
Wire Rod Mill 600,000 t/ year
Seamless tube plant 300,000 t /year
Special bar mill (in Stage-II) 750,000 T / year
Light Structural Mill ( LSM) (in stage –II) 700,000 t/ year
Augmentation of existing TPP 1X67.5 MVV turbo – generator with TB
Power Plant (BOO Basis) 2x67.5 MVV capacity with all necessary facilities
Air Separation Plant (BOO basis) 2x1200 t / day Oxygen
Captive Mines Augmentation of capacities at Madharam.
Jaggayyapeta
and Garbham Mines.
Vision:
To be a continuously growing world class company we shall
Harness our growth potential and sustain profitable growth
Deliver high quality and cost competitive products and be the first choice of
Customers.
Create an inspiring work environment to unleash the creative energy of the
People.
Achieve excellence in enterprise management.
Be a respected corporate citizen, ensure clean and green environment and
develop
vibrant communities around us.
Mission:
To attain 16 million ton liquid steel capacity through technological up gradation,
operational efficiency and expansion; to produce steel at international standards of
cost and quality and to meet the aspirations of the stakeholders.
Objectives:
The objectives of the company are as follows:
Expand plant capacity to 6.3 million tone capacity by 2008-09 with the mission to
expand further in subsequent phases as per the corporate plan.
Sustain Gross margin to turnover ration>25%.
Be recognized as an excellent business organization by 2008-09.
Be amongst top five lowest cost steel producers in the world by 2009-10.
Achieve higher levels of customer satisfaction than competitors.
Instill right attitude amongst employees and facilitate them to excel in their
professional, personal and social life.
Be proactive in conserving environment, maintaining high levels of safety and
addressing social concern.
Core Values:
The core values of the company are:
Commitment
Customer satisfaction
Continuous improvement
Concern for environment
Creativity and innovation
Achievement and Awards:
The efforts of VSP have been recognized in various fora. Some of the major
awards by VSP are in the area of energy conservation, environment protection, safety,
quality, quality circles, Rajbhasha, MOU, sports related awards, and a number of
awards at a individual level.
Some of the important awards received recently by VSP are indicated below:
S.L
No.
AWARD YEAR
1. Commendation prize for strong commitment to
excellence – CII Exim bank Award for Business
Excellence 2006
2006
2. Strong commitment – CII HR Excellence Award 2006 2006
3. National Energy Conservation Award 2001-06
4. Organizational Excellence Award 2006,2004
5. Best Industrial productivity Award 2006
6. Golden Peacock Environment Management Award 2006
7. Safety Innovation Award. 2006
8. CII Leadership and Excellence Award in Safety, Health
and Environment 2005.
2006
9. Business Achievement Award for Excellence. 2005
10. CII- GBC National Award 2005
11. Energy Conservation Award by AP Productivity Council 2005
12. Certificate of Appreciation by Institution Of Engineers,
AP Chapter.
2005
13. National Award for Excellence in Water Management by
CII
2005,2004
14. Leadership and Excellence Award in Safety, Health & 2004
Environment.
15. CACCI Business Achievement Award 2004
16. World Quality Commitment International Star Award 2004
17. ICWA National Award 2004
18. Best Enterprise Award 2003-04
19. Rolling Shield For Environmental Protection 2002-03
20. Prime Minister’s Trophy 2002-03
21. Indira Priyadarshini Vrikshmitri Award 2002-03
22. Best Safety Standards by Green Tech Foundation 2002-03
23. Best HR Practices 2002
24. Environmental Excellence Award 2002
25. Best Enterprise Award, WIPS 2001-02
26. Award for Best Turnaround 2000-01
27. Best Management Award 2000-01
28. Shield For Best Efforts In Rain Water Harvesting 2001
29. SAIL Chairman’s Silver Plaque 2000
30 Paryavaran Parirakshak Award 2000
Major Sources of Raw Materials :
Iron ore lumps Bailadilla, M.P
BF Lime Stone Jaggayapeta, A.P
SMS Lime Stone UAE
BF Dolomite Dubai
SMS Dolomite Madharam, A.P
Manganese Ore Chipuripalli, A.P
Boiler Coal Talcher, Orissa
Cocking Coal Australia
Medium coking coal (Mcc) Gidi/swang/rajarappa/kargali
Raw Material Source
Major Units of VSP:
Department Annual capacity (‘000 T) Units (3.0MT stage)
Coke ovens 2261 3 batteries of 67 ovens
&7Mtrs.haght
Sinter plant 5256 2 sinter machines of 312
sq.Mtr.grate area
Blast furnace 3400 2 furnaces of 3200Cu .Mtr
volume each
Steel melt shope 3000 3 LD convertors each of
133cu.Mtr.volume and six
4 strand bloom casters
LMMM 710 4 stand finishing mill
WRM 850 2x10 stand finishing mill
MMSM 850 6 stand finishing mill
VSP is one of the most modern steel plants in India incorporating State-of-the-
Art technology. Following are some of the modern technologies adopted:
7 meter tall Coke Oven Batteries with coke dry quenching.
Biggest Blast Furnaces in the country
Bell-less top charging system in Blast Furnace
100% slag granulation at the BF Cast House
Suppressed combustion- Ld gas recovery system
100% continuous casting of liquid steel
“Tempcore” and “stelmor” cooling process in LMMM &WRM respectively
Extensive waste heat recovery systems and pollution control methods
Production Performance (‘000 Tonnes):
Year Hot
Metal
Liquid
Steel
Saleable
Steel
Power
Export(MW)
Gross
2000-2001 3120 2530 2217 44.2
2001-2002 3120 2730 2411 45.4
2002-2003 3400 3000 2675 30.6
2003-2004 3850 3235 2900 6.3
2004-2005 3950 3300 2958 3.6
2005-2006 4000 3500 3125 -0.4
2006-2007 4100 3567 3205 -6.28
2007-2008 4100 3620 3210 2.03
2008-2009 3850 3450 3080 0
Power Export(MW)
-100
1020304050
S
ale
ab
le
Ste
el
22
17
24
11
26
75
29
00
29
58
31
25
32
05
32
10
30
80
Liquid Steel 2530 2730 3000 3235 3300 3500 3567 3620 3450
Hot 3120 3120 3400 3850 3950 4000 4100 4100 3850
Power Export(MW)
Main Products of vsp;
Proc
e ss:
Following are the details of processes of main production units of VSP.
1. Coke ovens & Coal chemicals plant:
Coking coal after selective crushing and proper blending is subjected to
destructive distillation (heating in the absence of air) in the Coke Ovens. After
heating for nearly a period of 16-18 hours at a temperature of about 1100 Degree
Celicious, coke is obtained and is used as a fuel as well as reducing agent in the Blast
Furnace. The Coke Ovens of VSP are engineering feats by themselves. They are the
tallest ovens of 7 meter tall constructed in the country. The Plant has 3 batteries of
67 ovens each. Another feature is the dry cooling of coke carried out by the inert gas
nitrogen thus, reducing pollution considerably. In the process considerable quantity
of gas is generated which carries large number of coal chemicals and heat value. A
by-product plant is provided for each battery to extract the coal chemicals and make
the resulting gas useful for heating various furnaces. By-products like benezene,
toluene, xylene, naphthalene, coal tar, creosote oil, pitch, and ammonium gas. VSP
produces, among other by-products, pushkala a prime fertilizer based on
ammonium Sulphate. Besides a bio-chemical plant separately undertakes the
treatment of effluents.
2. Sinter Plant
STEEL
PRODUCTS
BY PRODUCTS
Angles Nut Coke Granulated Slag
Billets Coke Dust Lime Fines
Channels Coal Tar Ammonium Sulphate
Beams Anthracene oil
Squares HP Naphthalene
Flats Benzene
Rounds Toulene
RE-bars Zylene
Wire Rods Wash Oil
Iron ore fines, coke breeze, limestone and dolomite along with recycled
metallurgical wastes are converted into agglomerated mass at the Sinter Plant,
which forms 80 % of iron bearing charge in the Blast Furnace. The Sinter Plant
comprises of two sinter machines each having 312 square meters of grate area with a
total production capacity of 5.256 million tones per annum.
3. Blast Furnace
VSP has two Blast Furnaces with an effective volume of 3200cu.m. each ,
which are the largest in the country. Blast Furnace is charged with coke, iron ore,
sinter and fluxes such as lime stone from the top. Hot air at very high pressure is
blown from the bottom. The iron ore and sinter charged from the top gets reduced
to hot metal by the time it reaches the hearth. Metal is tapped from the hearth of the
furnace at regular intervals. Its novel circular cast house with four tap holes ensures
continuous tapping of hot metal. Each furnace produces about 5000 tones of molten
iron per day. The annual
Production capacity of these Blast Furnaces is 3.4 million tones of liquid iron. The
furnace is operating at about 125% of their capacity at present.
In addition to hot metal the gang material present in the iron ore and sinter
also comes out in the form of molten slag while tapping. This molten slag is
converted to granulated slag in the slag processing plant. Granulated BF slag is used
for cement making and various other construction purposes. The hot metal
produced is carried to steel melt shop for further processing. The surplus hot metal
is taken to Pig Casting machines and cast into pig iron. The pig iron is sold to
foundries and exported to various other countries. Some pig iron is consumed in
steel melt shop also as coolant.
4. Steel Melt Shop & Continuous Casting:
Three Top blown converters, each of 133 cum. Volume, produce a total of 2.7
million tones of liquid steel per annum. The hot metal from blast furnace is charged
into the converters from the top. Along with hot metal steel scrap (coolant), lime
(flux) and other additives for making special steel if required are also added.
Oxygen is blown from the top for about 50min by which time the hot metal gets
converted to steel. The liquid steel thus produced is casted in six-4 strand bloom
casters. A special feature in energy conservation is the collection of Converter gas to
be used as a fuel in the plant. The entire molten steel cast at the radial type
continuous casting machines result in significant energy conservation and better
quality steel. 100% Continuous casting on such a large scale has been conceived for
the first time in India.
5. Rolling Mills:
The cast blooms from continuous casting department are heated and rolled in
the three high speed and fully automated rolling mills namely Light & Medium
Merchant Mill, Wire Rod Mill and Medium Merchant & Structural Mill, to produce
various long products like Reinforcement bars, rounds, squares, flats, angles,
channels, billets, wire rods etc. Rolling Mills adopt stelmor cooling process to get
high quality products. VSP
enjoys very high reputation for the quality of their products both in the domestic
and export markets.
6. Thermal power plant and blower house:
VSP has a separate thermal power plant to meet substantial part of its power
requirement. The power plant also includes blower house for blowing hot air to the
blast furnaces. The power plant utilizes surplus coke oven and blast furnace gasses
for heating boilers. To meet the balance requirement of the boilers thermal coal is
procured. Thus the power plant helps in reducing cost of production of VSP.
Board of Directors:
BOARD OF DIRECTORS
CHAIRMAN-CUM-MANAGING
DIRECTOR
Sri.P.K. Bishnoi
DIRECTOR (PERSONNEL) Sri.Y.Manohar
DIRECTOR (COMMERCIAL) SriC.G.Patil
DIRECTOR (OPERATIONAL) Sri.P.K.Misra
DIRECTOR (FINANCE) Sri.K.S.Shankar
CVO Sri.S.Srinivasan
GOVT. DIRECTORS Sri.Aran Kumar Rath
G.Elias
AGM (CA) & COMPANY
SECRETARY
Sri.P. Mohan Rao
OFFICE
Administrative Building
Visakhapatnam Steel Plant,
Visakhapatnam-530 031.
Organization Chart:
Chairman-cum-Managing Director
Department chart- Finance (Budget):
Co. Sec. CVOD(O)D(C)D(P)D(F)
GM (F&A) DGM (I/A)
ED(P&IR) AGM(Law)DGM(M&HS)
GM (TA)
GM (Per)
GM (IR)
DGM(Admn)
ED (MM)
GM(Sto.).)
GM(MM)
GM (Mktg)
ED(Proj) ED(W) GM(Mines)GM(IT)
GM(QATD) GM(Services) GM(Maint) GM(Steel) GM(IRM)
GM(Constn)GM(D&E)
(CorporateA/cs, Budget & cost)
(Budget and costing)
(Budget)
Major departments of VSP:
To carry out the major functions of Visakhapatnam steel plant following core
departments exist:
1) Marketing Department
2) Works Department
3) Materials Management Department
4) Finance and Accounts Department
5) Personal and Administration Department
6) Corporate strategic Management Department
7) Management services Department
8) Mines Department
Recent Trends:
ED(F&A)
DGM(F&A)
DCM(F&A)
DM(F&A)
JM(F&A)
VSP Becomes Minirathna Company:
Considering the Turn Around and the excellent physical and financial
performance in the last 4 years VSP has been awarded MINIRATHNA STATUS by
the GOI in the month of May 2006. This confers more DOP and AUTONOMY to
VSP Management in financial and policy matters. The BOD also will be
strengthened with more independent non-executive DIRECTORS.
VSP Expanding Its Capacity:
VSP has undertaken expansion of capacity from 3-million tone liquid steel to
6.3 million tone liquid steel at a cost of Rs.8692cr. Their entire expansion work is to
be completed within a period of 4 years from October 2006. The honorable Prime
Minister Of India has inaugurated the expansion project by laying foundation stone
on 20th May 2006. VSP will be producing special grade long products required for
automobile, railways and other special applications in the new mills which are going
to be installed. Further VSP will be producing Seamless tubes of 3 lakh tones which
are presently imported. The new products are value added products and likely to
contribute substantial profits to VSP in the years to come.
Joint Ventures:
VSP does not own any mines for extracting much required iron ore and low
ash metallurgical coal for its production. VSP depends on M/S.NATIONAL
MINERAL DEVELOPMENT CORPORATION for meeting its iron ore
requirements and import sources (Australia) for low ash metallurgical coal. These
sources have been increasing their prices disproportionately in recent times due to
very high demand because of capacity additions taking place in large scale. In order
to have raw material security and control over prices VSP has embarked upon
acquiring interest in coal mines and iron ore mines through joint ventures in India
and abroad. VSP has entered into MOU with M/S.NMDC for putting up sponge iron
plant in the State of Chattisgarh with an intention to own iron ore mines which are
available in plenty in this state. A number of teams have been visiting Australia,
USA and Canada scouting for joint venture interest in owning iron ore mines.
VSP Has Been Allotted Mining Rights In Mahal Coal Block:
GOI has allotted mining rites in Mahal Coal Block for VSP after continuous
persuasion relentless efforts. VSP has started exploratory work in Mahal coal block
to ascertain the feasibility and project cost for opening up a mining unit in this
place.
VSP Exploring Possibilities of Opening Up Foreign Branches:
Keeping in view the expansion of capacity and volatility of steel demand, VSP
is exploring possibility of opening up over sea branches in near by countries to
strengthen its presence in these places so that there will not be any difficulties in
marketing of its products in future.
Implementation of Addition Modification and Replacement:
In order to improve productivity, constantly upgrade the technology and
reduce the cost of production to become one of the worlds lowest cost producers VSP
is implementing number of AMR schemes on a continuous basis since last 5 years.
VSP is spending substantial amount of funds in the AMR schemes which are
yielding incremental benefits year after year.
Utilization of Renewable energy:
In order to meet its ever growing power requirement, to conserve the natural
resources and reduce the cost of energy VSP has taken up implementation of power
generation through renewable energy sources like wind, sunlight etc. A policy in this
regard has been unveiled on 29th May 2006 by the CMD of VSP.
Conservation of Water:
VSP has taken up a number of projects for conservation of precious water.
This is carried out in three methods.
Reduce the consumption of water in the process.
Treat the drainage and sewerage water and reuse where ever possible.
To construct check dams for diverting rainwater to underground.
Pollution Control:
In order to maintain a clean and green environment VSP is implementing a number
of pollution control projects inside the plant. Agro forestry program is also taken up
to maintain greenery and also to generate income from farm produce.
Production Plan 2008-2009: 000(Tonnes)
PRODUCT 2008-2009
Oven/Day(Nos) 275
Hot Metal 4030
Liquid Steel 3520
Pig Iron for Sale 393
Blooms for Sale/Stocks 83
Billets foredr Sale/Stock 60
Billets- Procured (-)72
Steel end Cuttings 17
Bar Products 900
Wire Rod Products 1075
MMSM Products 1085
Saleable Steel 3220
Demand - Availability Projection:
Demand- Availability of iron and steel in the country is projected by Ministry of
Steel annually.
Gaps in Availability are met mostly through imports.
Interface with consumers by way of Steel Consumer Council exists, which is
conducted on regular basis.
Interface helps in redressing availability problems, complaints related to quality.
Pricing & Distribution:
Price regulation of iron & steel was abolished on 16.1.1992. ~ Distribution
controls on iron & steel removed except 5 priority sectors, viz. Defence,
Railways, Small Scale Industries Corporations, Exporters of Engineering Goods
and I North Eastern region.
Allocation to priority sectors is made by Ministry of Steel.
Government has no control over prices of Iron & Steel.
Open market prices are generally on rise.
Price increases of late have taken place mostly in long products than flat
products.
Location: The plant is located on the coast of Bay of Bengal, 16Kms to the southwest
of the Vishakapatnam Port. It lies between the northern boundary of the national
highway No.5 from Chennai to Kolkata, and 7Kms to the southwest of Howrah Chennai
Railway line. The decision of Govt. of India to setup an integrated steel plant with an
annual capacity of 3 MT of liquid steel and 2.656 MT of saleable steel at vishakapatnam
in AP is yet another step towards the country’s steel production redefining steel imports
and removing the regional imbalances in the development.
CHAPTER – 4
BUDGET AND BUDGETARY
CONTROL
BUDGET:
Introduction
Definition
Need of budget
Essentials of budget
Advantages of budget
Limitation of budget
Types of budget
BUDGETARY CONTROL:
Nature of budgetary control
Objectives of budgetary control
Advantages of budgetary control
Limitation of budgetary control
Characteristics of good budgeting
Requisites for successful budgetary control system
Organization chart for budgetary control
Key factor
Difference between budget and budgetary control
BUDGET
Introduction:
Planning is the basic managerial function. It helps in determining the course of
action to be followed for achieving organizational goals. It is decision in advance,
what to do, how to do and who will do a particular task? Plans are framed to
achieve better results. Control is the process of checking whether the plans are being
adhered to or not, keeping a record of progress, comparing it with the plans, and
then taking corrective measures for future if there is any deviation. Every business
enterprise needs the use to control techniques for surveying in the highly
competitive and changing economic world. There are various control devices in use.
Budgets are the most important tool of profit planning and control. They also act as
an instrument of co-ordination.
Definition:
Budget is defined as a kind of future accounting in which problems of future are met
on the paper before transactions actually occur.
According to CIMA, Official Terminology, “A Budget is a financial and/or
quantitative statement prepared prior to a defined period of time, of the policy to be
pursed during that period for the purpose of attaining a give objective”.
According to Crown and Howard, “A budget is a predetermined statement of
management policy during a given period, which provided a standard for
comparison with the results actually achieved.”
Need of budget:
To forecast and to plan for the future to avoid losses and maximize profits i.e. to
help in planning.
To bring about coordination’s between different function of an enterprise i.e., to
help in co-ordination.
To control actual actions by ensuring that actual are in tune with target i.e., to
help in controlling.
Essentials of budget:
Budget is prepared on future course of action and is prepare in advance.
Budget is based on objectives to be achieved during a definite future period.
Budget is a tool for developing the co-operation, co-ordination and control
among employees.
Advantages of budget:
It formulates basic policies necessary to achieve organizational objectives.
It forces all levels of management to participate in the process of setting and
Fulfillment of targets.
It creates the feeling of co-operation and understanding between different
Departments of the business
It ensure optimum utilization of resources with a view to maximize returns.
It highlights upon the in efficiency in the business and thus helps the
Management to take remedial actions.
Types of budget:
The Budgets are usually classified according to their nature. The following are the
types of budgets, which are commonly used.
a) Classification According to Time:
1. Long-term budgets
2. Short-term budgets
3. Current budget
b) Classification on the basis of function:
1. Operation Budgets
2. Financial Budgets
3. Master Budgets
c) Classification on the basis of Flexibility:
1. Fixed budget
2. Flexible budget
d) Classification on the basis of nature of business:
1. Capital Expenditure
2. Revenue Expenditure
A) Classification According to Time: -
1) Long Term Budgets — The Budgets are prepared to depict long term planning of
the business. The period of long term budgets various between five to ten years. The
long term planning is done by the top-level management it is not generally known to
lower levels of management's. Long-term time budgets are prepared for some
sectors of the concern such as capital expenditure research and development. Long
term finances etc these budgets are useful for those industries where gestation
period is long i.e. machinery, electricity, and organization.
2) Short Term Budgets -These budgets are generally for one or five Years and are in
the form of monetary terms. The consumer’s goods industries like sugar, cotton,
textiles, etc. use short-term budget.
3) Current Budget — The Period of current budget is generally of one to twelve
months. The budgets relate to the current activities of the business. According to
I.C.W.A. London. "Current budget is a budget which is established for use over a
short period of time and is related to current conditions.
B) Classification on the basis of function: -
1. Operating Budgets: These budgets relate to the different activities of operations of
a firm. The number of such budget upon the size and nature of business. The
commonly used operating budgets are;
A. Sales Budget
B. Production Budget
C. Production cost Budget
D. Purchase Budget
E. Raw Material Budget
F. Labour Budget
(2) Financial Budget : - Financial Budget are concerned with cash receipts and
disbursements, working capital. Expenditure, financial position and result of
business operations. The commonly used financial budgets are:
a. Cash Budget
b. Working Capital Budget
c. Capital Expenditure Budget
d. Income Statement Budget
e. Statement of Retained Earnings Budget
f. Budget Balance sheet or position statement Budget
(3) Master Budget: - Various functional budgets are integrated into master budget.
This budget is prepared by the ultimate integration of separate function budgets.
According to I.C.W.A. London. "The master budget is the summary budget in
corpora-ting its functional budgets". Master budget is prepared by the budget
officers remained with the top-level management. This budget is used to co-ordinate
the activities of various departments and also to help as a control device.
(c) Classification on the basis of Flexibility:-
(1) Fixed budget: - The fixed budgets are prepared for a given level of activity, the
budget is prepared before the beginning of the financial year, if the financial year
starts in January then the budget will be prepared a month or two earlier, i.e.
November or December. The charge in expenditure arising out of the anticipated
changes will not be adjusted in the budget. There is a difference of about twelve
months in the budgeted and a actual figures. According to I.C.W.A. London, "Fixed
budget is a which is designed to remain unchanged irrespective of the level of
activity actually attained". Fixed budgets are suitable under static conditions. If
sales, expenses and costs can be forecasted with greater accuracy then this budget
can be advantageously used.
(2) Flexible Budget: - A flexible budget consists of a series of budgets for
different level of activity. It therefore, various with the level of activity attained. A
flexible budget is prepared after taking into consideration unforeseen changes in the
conditions of the Business. A flexible budget is defined as a budget, which by
recognizing the difference between fixed, semi fixed and variable cost is designed to
change in relation to the level of activity.
(d)Classification of on the basis of nature of business:-
(1)Capital expenditure budget:- Budget which are related to the creation of
manufacturing facilities are knows as capital expenditure budgets
(2)Revenue expenditure budget:- Budget which are prepared for routine activities or
operations are called revenue budget
BUDGETARY CONTROL
Introduction:-
Budget is formal plan of future course of action. When the budget is use to
evaluate the actual performance it is known as budgetary control.
“Budgetary control is the planning in advance of various functions of business so
that the business as whole can be controlled.”
Objectives of budgetary of control:
To control departmental activities.
To help in systematic planning of protection and formulation of policies.
To control direct and indirect expenses by limiting the chances of wastages.
To control income and expenditure of production functions.
To compare the pre-determined targets with the amount of actual expenses.
Advantages of budgetary control:
The budgetary control system has got some advantages of its own. Some of them
are:
It acts as yardstick with which actual are compared and necessary
corrections can be made so that it promotes efficiency and there by helps the
management for taking future courses of action.
Co-ordination is established among the different departments and
individuals through planning policy and control.
Limiting factors can be utilized properly by the application of this system.
Otherwise less important factors can pay the most significant role without,
however, utilizing the scarce sectors, which should have been used in view of
their importance. As a result, there may be loss instead of profit.
It provides saleable aids to the management by several managerial
functions and thus helps the management to adopt the future courses of action in
a scientific way.
The top management can exercise control over the various activities of the
business since each and every aspect of the business is reviewed.
Limitation of budgetary control:
The budgetary control systems are however not free from short coming which
are as follows;
This system proves useless in that firm where policies, processes, techniques, etc.,
are frequently changing since it does not take into account such changes.
It is very costly in case of small firm and serves no purpose in the event of
abnormal situations, such as strikes, lockouts etc.
There are many factors over which the management has no control but the
budgetary control depends on them. In that case, if its is prepared, it may be
inaccurate and fails to serve the purpose for which it is meant.
Characteristics of good budgeting:
A good Budgeting system should involve persons at different levels while
preparing the budgets. The subordinates should not feel any imposition of them.
There should be a proper fixation of authority and responsibility. The delegation
of authority should be done in a proper way.
The targets of the budgets should be realistic; if the targets are difficult to be
achieved then they will not ensure the persons concerned.
A good system of accounting is also essential to move the budgetary successful.
The budgeting system should have a whole-hearted support of the top
management.
Requisites for successful budgetary control system:
1. Clarifying Objectives:
The budgets are used to realize objectives of the business. The objectives must be
clearly spelt out so that budgets are properly prepared. In the absence of clear
goals, the budgets will also be unrealistic.
2. Proper Delegation of Authority and Responsibility:
Budget preparation and control is done at every level of management. Even
though budgets are finalized at top level but involvement of persons from lower,
levels of management are essential for their success. This necessitates proper
delegation of authority and responsibility.
3. Proper Communication System :
An effective system of communication is required for a successful budgetary
control. The flow of information regarding budgets should be quick so that these
are implemented. The upward communication will help in knowing the difficulties
in implementation of budgets.
4. Budget Education :
The employees should be properly educated about the benefits at budgetary
system. They should be educated about their role in the success of this system. The
employees may not take budgetary control only as a control device but it should be
used as a tool to improve their efficiency.
5. Participation of all Employees :-
Budgeting is done by every segment of the business. It will also require the active
participation and involvement of all employees. In practice the budgets are to be
executed at lower levels of Management. Those for whom the budgets are framed
should be actively associated with their preparation and execution. The employees,
on the basis of their past experience, may give more practical and useful
suggestions.
6. Flexibility :-
Flexibility in budgets is required to make them suitable under changed
circumstances – Budgets are prepared for the future, which is always uncertain.
Even though budgets are prepared by considering the future possibilities but still
some occurrences late on may necessitate more appropriate and realistic.
7. Motivation :
Budgets are to be implemented by human beings. Their successful
implementation will depend upon the interest shown be improve their working
so that budgeting is successful.
Budgets are to be implemented by human beings. Their successful
implementation will depend upon the interest shown be improve their working
so that budgeting is successful.
Organization chart for budgetary control:
Key factor:
The factor that sets a limit to the total activity is known as key factor which
influence budgets. It is also called limiting factor or governing factor principal
budget factor. For example, there may be a high demand for a particular product
but due to non-availability of the supply of raw materials, production may have to
be destructed and this factor is known as key factor. It is highly significant during
the budgeting for production or sales. Sometimes, there may be several key factors,
such as, labour capital, sales, etc. However the following are examples of key factor.
1. MATERIALS : I
ii)
Availability of supply
Restriction imposed by licenses,
quotas etc.,
2. LABOUR : I)
ii)
General storage
Shortage of skilled labor
3. SALES : I)
ii)
Consumer demand
Inadequate advertising and
Managing Director
Chief Executive
Budget Committee
Budget Officers
Sales Manager
Production Manager
Purchasing Manager
Personal Manager
Development Manager Accountant
iii)
warehousing facilities
Dearth of experience or
successful salesman;
4. PLANT : I)
ii)
iii)
iv)
Limited capacity due to lack of
capital;
Limited capacity due to lack of
space
In sufficient capacity due to
shortage of supply;
Bottleneck incretion key
processes;
5. MANAGEMENT : I)
ii)
Shortage of efficient executive
ness;
Insufficient capital
The key factor does not create any permanent problem in the business
operations since it is possible to solve any problem with proper management action
in figure.
Difference between budget and budgetary control:
The budget is an act of planning whereas budgetary control is an act of
controlling.
The budget concerns itself with the future. Budgetary control, is however,
concerned with the present activities although it is prepared on the basis of data
collected from the past budget. But the activities that the budgetary control
involves are not limited to that budget only. It is also related to the questions as
to how far the budget can effectively
Utilized in future
The budget fixes the target and budgetary control helps to arrive at that target.
The budget fixes the target and budgetary control to determine the variation
between the budget and the actual performance and analyze the reasons for the
variations. But this is not performed by budgets of course; they are extremely
useful at the time of preparing a revised budget.
The actual performance is measured not by the budget by budgetary control.
CHAPTER – 5
BUDGET AND BUDGETARY
CONTROL IN VSP
BUDGETARY PROCESS IN VIASAKHAPATNAM STEEL PLANT:
Every organization prepares budgets so that it can plan for its future and meet
any unforeseen contingencies and Visakhapatnam. Steel plant is no exception to this
rule. In many organizations, the budgetary process is taken up by any senior
executive of finance department. Since Visakhapatnam Steel Plant is a large
organization it has a separate budget section in the finance department, which takes
care of the budgetary process.
Objectives of preparing budget in Visakhapatnam Steel Plant:
The following are the objectives at preparing Budget in Visakhapatnam Steel
Plant:
To generate profits and formulate the policies to achieve the goal.
To perform integration and co-ordination among the various departments like
construction department, works department, raw material handling department,
finance department, etc.
To motivate the closely related departments and the persons for attaining the
desired goal.
To act as a guide to management decision so that management can know how
successfully the objectives being attained.
STEPS IN BUDGETARY CONTROL IN VISAKHAPATNAM STEEL
PLANT:
Before a well establishment budget comes into being, a number of things
have been done so that there is a strong foundation for budgetary some of them
are:
1. Preparation of organization chart :-
In Visakhapatnam Steel Plant, the C.M.D is the head of the organization.
The head of the departments (usually G.M. or D.G.M.) of each department at
Visakhapatnam Steel Plant prepare a budget for their department and put up to
C.M.D. Budget Section of Finance Department will consolidate the department
projection and prepare over all company budget which indicate the Company
projected Financial. The budgets after being approved by the C.M.D. are placed
before the Board of directors (which includes C.M.D.). It is the board of
directors, who approves the budget for Budget Period (usually coming financial
year).
Board of directors
Chairman-cum-managing Director
Budget Committee
(Comprising heads of department of various departments and senior officials of
finance department)
Organization chart for budgetary control in Visakhapatnam Steel Plant.
Establishing budget Centers :
A budget center is a section of the organization of an undertaking and is defined
as such from the point of view at budgetary control. Visakhapatnam Steel Plant
has a number of well is on the basis at collection of closely related works into one
budget center. There are as many as eighteen budget centers in Visakhapatnam
Steel Plant. The different budget centers and their functions are described below
briefly.
a) Corporate planning Department:
This department is headed by the General Manger (Corporate Planning) and is
responsible for drawing up the policy to be followed by the company.
b) Medical Department:
Headed by the chief medical officer, this department is responsible for
maintaining the health of the employees of the company and their department.
c) Marketing Department:
Headed by General Manager (Marketing) this department is responsible for
procuring orders for the company and selling the goods produced by
Visakhapatnam Steel Plant
d) Works Department :
Headed by Director (Operation), this is the life and flood of the company as this
department is responsible for manufacturing the various items.
e) Additional G.M. (Maintenance) Department :
Heads by additional General Manager, this department is entrusted with the
responsibility of maintaining the various machines and keeping the break down
to a minimum level.
f) Systems Department :
This department is responsible for maintaining the various computer facilities in
the company and improving the efficiency of production.
h) Ancillary Development Department:
Headed by General Manager (Ancillary Development) this department is
responsible for over seeing the development at ancillary industries in and around
the plant.
i) Town and administration Department:
Headed by the Chief Town Administrator, this department is responsible for
maintaining the Steel Plant Township and meeting its requirements.
j) Personnel department:
Headed by Director (Personnel), this department is responsible for maintaining
employee records.
k) Commercial Department:
Headed by Director (Commercial), this department is responsible for material
management in the company.
l) Project Division :
Headed by General Manager (Construction) this division is responsible for the
construction activity in the plant.
m) Human Resource Development:
This department is responsible for developing the skills of the employees by conducting various personality development programme.
n) Training Department:
This department is responsible for providing on the job training and off the job training for fresh recruits.
o) Finance Department:
Headed by Director (Finance) this department is responsible for per forming the
various financial activities at the company. It also prepares the pay rolls.
2. Budget Manual :
A budget manual is defined as a document which sets out the responsibilities of
the persons engaged in the routine of and the forms and records required for
budgetary control Visakhapatnam Steel Plant also has a well laid out budget
manual which enlists the responsibilities of different managers and Headed of
Department of various budget centers.
3. Budget Committee :
A budget committee is a group of executives at various major functions eg.
Managing director, Works Manager, Production Manager, Sales Manager,
Accountant etc., in Visakhapatnam Steel Plant, the budget committee consists of
the Board at Directors, Chairman-cum-Managing Director of Visakhapatnam
Steel Plant acts as the chairman of the committee.
4. Budget Period :
It refers to the period for which the budget is prepared and employed. There is
no fixed time for budget period. The length of the period depends on.
The nature of the production.
The native of the demand & supply of the product.
Extent of control.
5. Key Factor :
The factor, which sets a limit to the total activity, is known as the key factor due
to difficult and the high costs involved in the procurement of raw materials and
also due to less demand for the product.
Types Of Budgets Prepared By Visakhapatnam Steel Plant:
Visakhapatnam Steel Plant prepares two kindly of budgets
Capital Budget
Operation Budget
A) Capital Budget :
Capital Budget deals with the new schemes to be implemented during the
current year and also with the completion of schemes already implemented. It is
prepared and approved by Visakhapatnam Steel Plant and sent to ministry of
Finance to incorporate the projected capital expenditure in the over all Planned
expenditure of GOI.
The capital Budget consists of :
1. Continuing Schemes be divided into :
Land & Site Development
Civil Works
Structural Steel Works
Plant and Equipment
Repayment of Loans and credit
Additional/Modification and replacement schemes.
Research and development schemes.
2. New Schemes can be Divided into:
Expansion to 6.3MT Stage
Land acquisition for mines
COB-4
B) Operations Budgets :
This is the main budget prepared by Visakhapatnam Steel Plant. This budget
deals with the cash from operations of various items produced by the steel plant.
Operations budget is a short term budget and is prepared for a period of one
year. It is fixed budget there is periodic review of the budget to check whether
the actual figures match the budgeted figures. It may be as follows:
Step – I The Chairman-cum-Managing Director at Visakhapatnam Steel
Plant in consultation with the board at Directors decides the
production schedule for a particular year.
Step – II The production schedule as approved by to board of Directors is
then circulated to all departments.
Step – III The need of each of the 19 budget centers then presents the budget
for his center to CMD’s approval.
Step – IV After discussions with the head of each center with some
modification if necessary is approved.
Step – V After receiving all the budgets, the board of Directors formulates
the master budget for the particular year.
Step –VI The master budget is then circulated to all the department.
Step – VII The budget at each budget center and the master budget are
reviewed frequently, some times even daily, using a computerized
monitoring system in case Administrative Expenditure.
PROCESS FOR PREPRATION OF MONTHLY WORKING
RESULTS IN RINL(VSP):
Introduction:
Monthly working result (MWR) is management information Report (MIS) report
compiled by the budget section of the F&A Deptt.. Every month based on
information obtained from Production deptt, Mktg Deptt,cash section, raw
materials Account, General account, work accounts operation bills, pay section etc.
The compilation is done at gross level. It is rough estimation of monthly profit based
on monthly production and sales. These estimates are purely on volume basis and
not based on accounting transaction data.
Details of Data Collected: The following are details of data collected from
various Deptt/Section:
S.No Details of Data Deptt/Section1. Daily Flash Statement from by Product
Section-MktgBy Product sale Sections
2. Important Raw Materials Stock at Port T&S3. Interest on RM Credit Rate Variance Material A/cs Section4. Voucher data from operation bills accounts Operation bills A/cs5. Voucher data from general A/cs General A/cs6. Voucher data from works A/cs Works A/cs7. Voucher data from stores A/cs Stores A/cs8. Stores and Spares inventory from Stores A/cs Stores A/cs9. NSR from by products Section Sales(finance)10. Raw material Receipts Raw Material Deptt11. Power details from DNW DNW12. Production and Closing Balance of main
product PPM
13. Monthly Report from PPM PPM14. Region wise, Branch wise sales a statement Mktg15. Export sales and shipment plan Exports Sales Section16. Cost of production for the month Costing Section17. Interest Details From cash Section Cash Section18. Raw Material Prices (Imported) for the month T&S19. Dispatch money earned T&S20. Raw Material Prices Variance for the Month MM Deptt21. Fuel Rate for the Month MM Deptt22. NSR for the month and up to the month Branch Sales A/cs23. Wage Analysis Pay Section24. By Product Prices Mktg Deptt
The General Format of MWR:
S.No Particulars Previous Month Actuals
Current Month Up to Month
Sus. Plan Actual Sus. Plan
Actual
A Income 1 Gross Sales 2 Net Sales 3. Export Benefits 4 Sale of Power 5 Interest of Term Deposits 6. Miscellaneous income
Total (1 to 6)
B Expenditure 7 Stock accretion (-) decretion 8 Raw Material Consumptions 9 Stores & Consumables 10 Employees Remn. Benefits 11 Power, Fuel & Water 12 Repairs & Maintenance 13 Other Expenses
Total (7 to 12)C Gross Margin D Interest charges E Cash Profit F Depreciation & DRE written
off G Net Profit ( Before Tax) (E-
F)H Provision for income Tax
incl. FBT, Deferred Tax Provision for income Tax Provision for FBT Provision for Deferred Tax Liability
I Net Profit ( after tax) for the year (G-H)
J Addl. Income Tax Liability of the year 2003-04 & 2004-05
K Net Profit ( after tax) ( i-j)
Computation of Items in MWR:
(i) Gross Sales: This item is derived directly from the data fed from monthly
NSR report given by the Branch sales A/cs.
(ii) Net Sales: This item also derived from the Data fed from Monthly NSR
report given by the branch Sales A/cs
(iii) Export Benefits; This item is derived based on the Export benefits per ton
and Export Quantities given by Export Sales Section. (Export Benefit =
Export benefit per ton X Qty Exported)
(iv) Interest on Term Deposit: This item is derived directly from data given by
the cash Section.
(v) Interest Others: This item is estimated based on previous year actuals,
However current year actuals to be compared and necessary adjustments to
be incorporated.
(vi) Miscellaneous Income: This item is estimated based on previous year.
However current year actuals to be compared and necessary adjustments to
be incorporated.
(vii) Stock accretion /depletion; Excess production over sales Qty is accretion. If it
is other wise it is stock depletion. Accretion /depletion quantities are valued
at cost or NSR which ever is low.
(viii) Raw Material Consumption: Consumption quantites of various Raw material
are valued at weighted average prices of the same consumption quatities
includes handling loss, Transit losses, Moister loss etc. Consumption quatities
are obtained from PPM reports whereas raw material prices are as per MM
Deptt. Report.
(ix) Stores & Consumables; This item is derived based on stores JV details
obtained from stores accounts. And also from General accounts voucher
details.
(x) Empoyess Remn&Benefits: This item is derived based on Salary JV
generated by pay section and some items under this grouping are based on
estimates based on previous year actuals.
(xi) Power,Fuel &Water: This item is derived based on consumption quantites
given by DNW and PPM and pricing information given by MM deptt.
(xii) Repairs &Maintenance: This item is based on voucher data obtained from
General A/cs, Operation Bills, Works bills, Stores A/cs etc. Some are
estimated at previous year level.
(xiii) Other Expenses: This item is based on estimated contractual rates for scrap
processing quantities and some are on the basis of estimations at previous
year actual level.
(xiv) Adjustments: All the above items are subjective to revision or
adjustments based on realities and likely provision that may arise.
FINANCIAL TARGTS(MOU) Vs. ACTUALS
YearGross Sales Net sales Gross Margin Interest Cash Profit
Target Actual Target Actual Target Actual Target Actual Target Actual1999-00 3463 2973 2824 2386 468 265 491 382 -23 -1172000-01 3124 3436 2572 2766 364 504 418 351 -55 1532001-02 3562 4081 2945 3305 486 690 398 291 88 4002002-03 4219 5058 3496 4221 657 1162 290 187 368 9752003-04 4728 6169 3949 5215 851 2073 164 49 686 20242004-05 5425 8181 4529 6987 1251 3271 32 11 1219 32602005-06 8793 8482 7657 6998 2233 2369 25 31 2208 23382006-07 8749 9151 7325 7594 2112 2633 36 49 2077 25842007-08 9136 10433 7592 8670 2050 3513 25 32 2025 3482
Visakhapatnam Steel Plant F&A – Budget Section
ESTIMAATED WORKINNG RESULTSFor the Month of Mar-2008
Sl.No ParticularsPrev.Month
Feb-08 Actual
Current Month Mar-08Cumulative Cum.Upto
Mar-08
Sus.Plan(Alt-1)** Actual
Sus.Plan (Alt-1)** Actual
A. Income
Gross Sales 1054.52 1014.59 1551.37 9850.39 10433.07
1 Net Sales 887.87 844.07 1257.76 8194.85 8669.99
2 Exprot Benefits 3.53 1.49 (-)6.84 14.48 9.84
3 Sale of Power 0.45 -- (-)4.63 -- --
4 Interest on Term Deposits 57.12 40.83 64.39 520.26 691.26
5 Interst others 3.18 3.28 (-)1.55 38.6 33.38
6 Miscellaneous Income 2.24 2.92 138.04 35 169.89
Total (1 to 6) 954.39 892.59 1447.17 8803.19 9574.36
B. Expenditure
7 Stock accretion(-)/decretion 45.33 79.81 126.45 (-)106.79 (-)343.17
8 Raw Material Consumption 358.61 352.63 296.17 4116.33 4280.22
9 Stores & Consumables 38.31 40.34 54.29 475 364.06
10 Employees Remn.& Benefits 89.97 68.97 242.19 812.05 1030.72
11 Power, Fule & Water 22.21 27.61 12.88 343.85 281.8
12 Repairs & Maintenance 7.28 10.72 40.82 126.23 125.79
13 Other Expenses 20.73 31.17 160.98 366.95 320.01
Total (7 to 12 ) 582.44 611.25 933.78 6133.62 6059.43
C Gross Margin (A-B) 371.95 281.34 513.39 2669.57 3514.93
D Interest Charges 3.23 2.11 7.06 24.84 31.57
E Cash Profit (C-D) 368.72 279.23 506.33 2644.73 3483.36
F Depreciation & DRE Written off 19.25 26.99 197.25 317.87 488
G Net Profit(Before Tax) (E-F) 349.48 252.25 309.06 2326.85 2995.36
H Provision for Income Tax 127.29 88.78 82.35 826.38 1064.39
Provision for Income Tax & FBT 127.29 91.28 210.52 856.38 1192.56
Provision for Deferred Tax Liability -- (-)2.50 (-)128.17 (-)30.00 (-)128.17
I Net Profit(AfterTas)for the year 222.19 163.46 226.71 1500.48 1930.97
JAddl.Income Tax Liaibilit of previous years
-- (-)11.77 (-) 11.77
I Net Profit(after tax) 222.19 163.46 238.48 1500.48 1942.74
**Alt-1-with out envisaging purchase of Billets.
VISAKHAPATNAM STEEL PLANT (RINL)
Projections of financials for the year 2000-2001, 2001-2002 (Rs. In Crores)
Particulars Budget 2000-01
Actuals 2000-01
Budget 2001-02
Actuals 2001-02
Income Gross Sales 3123.51 3435.96 3493.34 4080.95Net Sales 2571.62 2765.71 2902.73 3305.19Stock Accretion & Decretion
4.56 103.38 -0.66 -62.37
Export Benefits 0.00 72.49 74.69 55.29Miscellaneous Income
174.33 50.84 4.00 54.29
Sale of Power 0.00 56.46 81.04 42.70Total Income 2750.51 3048.88 3061.80 3395.10ExpenditureRaw Material 1375.02 1443.68 1532.18 1602.10Stores, Spares & Consummates
265.26 278.69 265.00 291.44
Employees Remuneration
302.83 407.65 346.26 375.02
Repair & Maintenance
223.99 192.03 63.00 170.26
Power, Fuel & Water
66.00 60.29 242.69 67.93
Other Expenses 153.23 163.13 189.70 198.72Total Expenditure 2386.33 2545.47 2638.83 2705.47Gross Margin (net) 364.18 503.41 422.97 689.63Interest 48.11 350.59 410.12 290.52Cash Profit 316.07 152.82 12.85 399.11Depreciation & DRE
476.15 444.60 464.87 474.98
Net Profit -160.08 -291.78 -452.02 -75.87
VISAKHAPATNAM STEEL PLANT (RINL)
Projections of financials for the year 2002-2003, 2003-2004 (Rs. InCrores)
Particulars Budget 2002-03
Actuals 2002-03
Budget 2003-04
Actuals 2003-04
Income Gross Sales 4417.82 5058.25 4727.60 6169.00Net Sales 3668.85 4220.62 3948.93 5214.63Stock Accretion & Discretion
-24.37 -281.09 -5.87 -25.61
Export Benefits 47.02 78.17 97.54 78.90Miscellaneous Income
25.00 40.98 30.00 53.93
Sale of Power 56.25 26.43 9.13 9.02Total Income 3772.75 4085.20 4079.73 5330.87ExpenditureRaw Material 1926.71 1805.65 1985.75 2050.43Stores, Spares 300.00 322.82 328.00 347.73Employees Remuneration
398.31 405.99 428.78 481.15
Repair & Maintenance
103.00 77.99 93.00 84.48
Power, Fuel & Water
216.84 200.99 195.17 220.04
Other Expenses 185.03 216.67 198.21 209.95Total Expenditure 3129.89 3029.29 3228.91 3393.78Gross Margin (net) 642.86 1055.91 850.82 1937.09Interest 227.50 123.19 164.37 49.05Cash Profit 415.36 932.72 686.45 1888.04Depreciation & DRE
515.36 454.01 464.20 470.47
Net Profit -100.00 477.71 222.25 1417.57
VISAKHAPATNAM STEEL PLANT (RINL)
Projections of financials for the year 2004-2005, 2005-2006 (Rs. In Crores)
Particulars Budget 2004-05
Actuals 2004-05
Budget2005-06
Actual2005-06
Income Gross Sales 5424.83 8181.34 8793.32 8482.44Net Sales 4528.63 6987.09 7657.20 6998.27Stock Accretion & Discretion
-6.84 310.39 0.00 -65.85
Export Benefits 85.07 11.30 0.00 24.43Miscellaneous Income
99.02 266.29 217.55 423.01
Sale of Power 10.46 9.10 0.00 8.44Total Income 4770.34 7584.17 7874.75 7388.30ExpenditureRaw Material 2043.70 3019.64 3884.78 3584.62Stores, Spares &Consummates
353.06 310.40 400.95 338.95
Employees Remuneration
465.67 480.58 585.44 572.34
Repair & Maintenance
99.00 89.33 141.51 97.24
Power, Fuel & Water 311.56 224.22 328.03 235.10Other Expenses 192.34 189.00 301.30 191.10Total Expenditure 3465.33 4313.17 5642.01 5019.35Gross Margin (net) 1305.01 3271.00 2232.74 2368.95Interest 32.24 11.11 24.58 31.00Cash Profit 1272.77 3259.89 2208.16 2337.95Depreciation & DRE 464.51 1006.12 474.00 448.29Net Profit 808.26 2253.77 1734.16 1889.66
VISAKHAPATNAM STEEL PLANT (RINL)
Projections of financials for the year 2006-2007 (Rs. In Crores)
Particulars Budget 2006-07
Actuals 2006-07
Budget 2007-08
Actuals up to
Feb’08
Income Gross Sales 8748.84 9150.570 9136.16 8881.70Net Sales 7325.01 7593.85 7592.16 7412.23Stock Discretion -5.75 23.760 -6.61 -469.62
Export Benefits 19.50 12.179 12.28 16.68Miscellaneous Income 558.52 609.91 594.04 31.85Sale of Power 21.04 19.44 3.13 4.63Total Income 7918.32 8259.139 8195 6995.77
ExpenditureRaw Material 3998.34 3889.04 4103.31 3984.05Stores, Spares &Consummates
460.06 357.27 475.00 309.77
Employees Remuneration
633.55 746.940 812.05 788.53
Repair & Maintenance 137 109.70 129.23 84.97Power, Fuel & Water 322.68 257.650 350.46 268.92Other Expenses 266.07 243.580 373.25 159.03Total Expenditure 5817.70 5604.18 6243.3 5595.27Gross Margin (net) 2100.59 2654.959 1951.7 1400.5Interest 35.60 48.94 24.84 24.51Cash Profit 2065.02 2606.019 1926.86 1375.99Depreciation & DRE 374.34 361.600 317.87 290.75Net Profit 1690.65 2244.40 1608.99 1085.24
VISAKHAPATNAM STEEL PLANT (RINL)
Projections of financials for the year 2007-2008 (Rs. In Crores)
Particulars Budget 2006-07
Actuals 2006-07
Budget 2007-08
Actuals 2007-08
Income Gross Sales 8748.84 9150.570 9850.39 10053.81Net Sales 7325.01 7593.85 8194.85 8364.92Stock Discretion -5.75 23.760 0 0
Export Benefits 19.50 12.179 14.48 14.48Miscellaneous Income
558.52 609.91 35.00 35.00
Sale of Power 21.04 19.44 0 0Total Income 7918.32 8259.139 8909.99 9080.23ExpenditureRaw Material 3998.34 3889.04 4116.33 4280.82Stores, Spares &Consummates
460.06 357.27 475.00 475.00
Employees Remuneration
633.55 746.940 812.05 812.05
Repair & Maintenance
137 109.70 126.23 126.23
Power, Fuel & Water 322.68 257.650 343.85 343.77Other Expenses 266.07 243.580 366.95 366.95Total Expenditure 5817.70 5604.18 6240.42 6404.82Gross Margin (net) 2100.62 2654.959 2669.57 2675.40Interest 35.60 48.94 24.84 24.84Cash Profit 2065.02 2606.019 2644.73 2650.57Depreciation & DRE 374.34 361.600 317.87 317.87Net Profit 1690.68 2244.419 1707 2995
VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2000-2001
(Rs. In Crores)
Particulars Budget Actuals Variance Favorable Adverse
Income Gross Sales 3123.51 3435.96 312.45 312.45Net Sales 2571.62 2765.71 194.09 194.09Stock Accretion & Discretion
4.56 103.38 98.82 98.82
Export Benefits 0.00 72.49 72.49 72.49Miscellaneous Income
174.33 50.84 123.49 123.49
Sale of Power 0.00 56.46 56.46 56.46Total Income 2750.51 3048.88 298.37 298.37ExpenditureRaw Material 1375.02 1443.68 68.66 68.66Stores, Spares & Consummates
265.26 278.69 13.43 13.43
Employees Remuneration
302.83 407.65 104.82 104.82
Repair & Maintenance
223.99 192.03 31.96 31.96
Power, Fuel & Water
66.00 60.29 5.71 5.71
Other Expenses 153.23 163.13 9.90 9.90Total Expenditure
2386.33 2545.47 159.14 159.14
Gross Margin (net)
364.18 503.41 139.23 139.23
Interest 48.11 350.59 302.48 302.48Cash Profit 316.07 152.82 163.25 163.25Depreciation & DRE
476.15 444.60 31.55 31.55
Net Profit -160.08 -291.78 131.70 131.70
VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2001-2002
(Rs. In Crores)
Particulars Budget Actuals Variance Favorable AdverseIncome Gross Sales 3493.34 4080.95 587.61 587.61Net Sales 2902.73 3305.19 402.46 402.46Stock Accretion & Discretion
-0.66 -62.37 61.71 61.71
Export Benefits
74.69 55.29 19.40 19.40
Miscellaneous Income
4.00 54.29 50.29 50.29
Sale of Power 81.04 42.70 38.34 38.34Total Income 3061.80 3395.10 333.30 333.30ExpenditureRaw Material 1532.18 1602.10 69.92 69.92Stores, Spares & Consummates
265.00 291.44 26.44 26.44
Employees Remuneration
346.26 375.02 28.76 28.76
Repair & Maintenance
63.00 170.26 107.26 107.26
Power, Fuel & Water
242.69 67.93 174.76 174.76
Other Expenses
189.70 198.72 9.02 9.02
Total Expenditure
2638.83 2705.47 66.64 66.64
Gross Margin (net)
422.97 659.63 266.66 266.66
Interest 410.12 290.52 119.60 119.60Cash Profit 12.85 399.11 386.26 386.26Depreciation & DRE
464.87 474.98 10.11 10.11
Net Profit -452.02 -75.87 376.15 376.15
VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2002-2003
(Rs. In Crores)
Particulars Budget Actuals Variance Favorable AdverseIncome Gross Sales 4417. 82 5058.25 640.43 640.43Net Sales 3668.85 4220.62 551.77 551.77Stock Accretion & Discretion
-24.37 -281.00 256.77 256.77
Export Benefits
47.02 78.17 31.15 31.15
Miscellaneous Income
25.00 40.98 15.98 15.98
Sale of Power 56.25 26.43 29.82 29.82Total Income 3772.75 4085.20 312.45 312.45ExpenditureRaw Material 1926.71 1805.65 121.06 121.06Stores, Spares & Consummates
300.00 322.00 22.00 22.00
Employees Remuneration
398.31 405.99 7.68 7.68
Repair & Maintenance
103.00 77.99 25.01 25.01
Power, Fuel & Water
226.84 200.99 25.85 25.85
Other Expenses
185.03 216.67 31.64 31.64
Total Expenditure
3129.89 3029.29 100.60 100.60
Gross Margin (net)
642.86 1055.91 413.05 413.05
Interest 227.50 123.19 104.31 104.31Cash Profit 415.36 932.72 517.36 517.36Depreciation & DRE
515.36 454.01 61.35 61.35
Net Profit -100.00 477.71 577.71 577.71
VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2003-2004
(Rs. In Crores)
Particulars Budget Actuals Variance
Favorable Adverse
Income Gross Sales 4727.60 6169.00 1441.40 1441.40Net Sales 3948.93 5214.63 1265.70 1265.70Stock Accretion & Discretion
-5.87 -25.61 19.74 19.74
Export Benefits 97.54 78.90 18.64 18.64Miscellaneous Income
30.00 53.93 23.93 23.93
Sale of Power 9.13 9.02 0.11 0.11Total Income 4079.73 5330.87 1251.14 1251.14 ExpenditureRaw Material 1985.75 2050.43 64.68 64.68Stores, Spares & Consummates
328.00 347.73 19.73 19.73
Employees Remuneration
428.78 481.15 52.37 52.37
Repair & Maintenance
93.00 84.48 8.52 8.52
Power, Fuel & Water
195.17 220.04 24.87 24.87
Other Expenses 198.21 209.05 10.84 10.84Total Expenditure
3228.91 3393.78 164.87 164.87
Gross Margin (net)
850.82 1937.09 1086.27 1086.27
Interest 164.37 49.05 115.32 115.32Cash Profit 686.45 1888.04 1201.59 1201.59Depreciation & DRE
464.20 470.47 6.27 6.27
Net Profit 222.25 1417.57 1195.32 1195.32
VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2004-2005
(Rs. In Crores)
Particulars Budget Actuals Variance Favorable AdverseIncome Gross Sales 5424.83 8181.34 2756.51 2756.51Net Sales 4582.63 6987.09 2404.46 2404.46Stock Accretion & Discretion
-6.84 310.39 317.23 317.23
Export Benefits 85.07 11.30 73.77 73.77Miscellaneous Income
99.02 266.29 167.27 167.27
Sale of Power 10.46 9.10 -1.36 1.36Total Income 4770.34 7584.17 2813.83 2813.83ExpenditureRaw Material 2043.70 3019.64 975.94 975.94Stores, Spares & Consummates
353.06 310.40 42.66 42.66
Employees Remuneration
465.67 480.58 14.91 14.91
Repair & Maintenance
99.00 89.33 9.67 9.67
Power, Fuel & Water
311.56 224.22 87.34 87.34
Other Expenses 192.34 189.00 3.34 3.34Total Expenditure
3465.33 4313.17 847.84 847.84
Gross Margin (net)
1305.01 3271.00 1965.99 1965.99
Interest 32.24 11.11 21.13 21.13Cash Profit 1272.77 3259.89 1987.12 1987.12Depreciation & DRE
464.51 1006.12 541.61 541.61
Net Profit 808.26 2253.77 1445.51 1445.51
VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2005-2006
(Rs. In Crores)
Particulars Budget Actuals Variance Favorable AdverseIncome Gross Sales 8793.32 8482.44 310.88 310.88Net Sales 7657.20 6998.27 658.93 658.93Stock Accretion & Discretion
0.00 -65.85 65.85 65.85
Export Benefits
0.00 24.43 24.43 24.43
Miscellaneous Income
217.55 423.01 205.46 205.46
Sale of Power 0.00 8.44 8.44 8.44Total Income 7874.75 7388.30 486.45 486.45ExpenditureRaw Material 3884.78 3584.62 300.16 300.16Stores, Spares & Consummates
400.95 338.95 62.00 62.00
Employees Remuneration
585.44 572.34 13.1 13.1
Repair & Maintenance
141.51 97.24 44.27 44.27
Power, Fuel & Water
328.03 235.10 92.93 92.93
Other Expenses
301.30 191.10 110.2 110.2
Total Expenditure
5642.01 5019.35 622.66 622.66
Gross Margin (net)
2232.74 2368.95 136.21 136.21
Interest 24.58 31.00 6.42 6.42Cash Profit 2208.16 2337.95 129.79 129.79Depreciation & DRE
474.00 448.29 25.71 25.71
Net Profit 1734.16 1889.66 155.50 155.50
VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2006-2007
(Rs. In Crores)
Particulars Budget Actuals Variance Favorable AdverseIncome Gross Sales 8748.84 9150.570 401.73 401.73Net Sales 7325.01 7593.85 268.84 268.84Stock Discretion -5.75 23.760 29.51 29.51Export Benefits 19.50 12.179 -7.321 7.321Miscellaneous Income
558.52 609.91 51.39 51.39
Sale of Power 21.04 19.44 -1.6 1.6Total Income 7918.32 8259.139 340.819 340.819ExpenditureRaw Material 3998.34 3889.04 109.3 109.3Stores, Spares & Consummates
460.06 357.27 102.79 102.79
Employees Remuneration
633.55 746.940 -113.39 113.39
Repair & Maintenance
137 109.70 27.3 27.3
Power, Fuel & Water
322.68 257.650 65.03 65.03
Other Expenses 266.07 243.580 22.49 22.49Total Expenditure
5817.70 5604.18 213.52 213.52
Gross Margin (net)
2100.62 2654.959 554.339 554.339
Interest 35.60 48.94 13.34 13.34Cash Profit 2065.02 2606.019 540.999 540.999Depreciation & DRE
374.34 361.600 12.74 12.74
Net Profit 1690.68 2244.419 553.739 553.739
GROSS SALES
BUDGET ACTUALS VARIANCE FAVOURABLE ADVERSE
2000-2001 3123.51 3435.96 312.45 312.45
2001-2002 3493.34 4080.95 587.61 587.61
2002-2003 4417.82 5058.25 640.43 640.43
2003-2004 4727.6 6169.00 1441.40 1441.40
2004-2005 5424.83 8181.34 2756.51 2756.51
2005-2006 8793.32 8482.44 -310.88 -310.88
2006-2007 8748.84 9150.57 401.73 401.73
2007-2008 9136.00 10433.00 1297.00 1297
-2000
0
2000
4000
6000
8000
10000
12000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
BUDGET
ACTUALS
VARIANCE
FAVOURABLEADVERSE
NET SALES
BUDGET ACTUALS VARIANCE FAVOURABLE ADVERSE
2000-2001 2571.62 2765.71 194.09 194.09
2001-2002 2902.73 3305.19 402.46 402.46
2002-2003 3668.85 4220.62 551.77 551.77
2003-2004 3948.93 5214.63 1265.70 1265.70
2004-2005 4582.63 6987.09 2404.46 2404.46
2005-2006 7657.20 6998.27 -658.93 -658.93
2006-2007 7325.01 7593.85 268.84 268.84
2007-2008 7592.00 8670.00 1078 1078
-2000
0
2000
4000
6000
8000
10000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
BUDGET
ACTUALS
VARIANCE
FAVOURABLE
ADVERSE
TOTAL INCOME
BUDGET ACTUALS VARIANCE FAVOURABLE ADVERSE
2000-2001 2750.51 3048.88 298.37 298.37
2001-2002 3061.80 3395.10 333.30 333.30
2002-2003 3772.75
40 85.20 312.45 312.45
2003-2004 4079.73 5330.87 1251.14 1251.14
2004-2005 4770.34 7584.17 2867.83 2867.83
2005-2006 7874.75 7388.30 -486.45 486.45
2006-2007 7918.32 8259.139 340.819 340.819
2007-2008 8909.99 9080.23 170.24 170.24
-2000
0
2000
4000
6000
8000
10000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
BUDGET
ACTUALS
VARIANCE
FAVOURABLE
ADVERSE
TOTAL EXPENDITURE
BUDGET ACTUALS VARIANCE FAVOURABLE ADVERSE
2000-2001 2386.33 2545.47 -159.14 159.14
2001-2002 2639.83 2705.47 -66.64 66.64
2002-2003 3129.89 3029.29 100.60 100.60
2003-2004 3228.91 3393.78 -164.87 164.87
2004-2005 3465.33 4313.17 -847.84 847.84
2005-2006 5642.01 5019.35 622.66 622.66
2006-2007 5817.70 5604.18 213.52 213.52
2007-2008 6240.42 6404.82 -164.40 164.40
-2000
-1000
0
1000
2000
3000
4000
5000
6000
7000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
BUDGET
ACTUALS
VARIANCE
FAVOURABLE
ADVERSE
GROSS MARGIN
BUDGET ACTUALS VARIANCE FAVOURABLE ADVERSE
2000-2001 364.18 503.41 139.23 139.23
2001-2002 422.97 689.63 266.66 266.66
2002-2003 642.86 1055.91 413.05 413.05
2003-2004 850.82 1937.09 1086.27 1086.27
2004-2005 1305.01 3271.00 1965.99 1965.99
2005-2006 2232.74 2368.95 136.21 136.21
2006-2007 2100.62 2654.959 554.339 554.339
2007-2008 2669.57 2675.40 5.83 5.83
0
500
1000
1500
2000
2500
3000
3500
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
BUDGET
ACTUALS
VARIANCE
FAVOURABLE
ADVERSE
INTEREST
BUDGET ACTUALS VARIANCE FAVOURABLE ADVERSE
2000-2001 48.11 350.59 302.48 302.48
2001-2002 410.12 290.52 -119.60 119.60
2002-2003 227.5 123.19 -104.31 104.31
2003-2004 164.37 49.05 -115.32 115.32
2004-2005 32.24 11.11 -21.13 21.13
2005-2006 24.58 31.00 6.42 6.42
2006-2007 35.6 48.94 13.34 13.34
2007-2008 24.84 24.84 0
-200
-100
0
100
200
300
400
500
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
BUDGET
ACTUALS
VARIANCE
FAVOURABLE
ADVERSE
CASH PROFIT
BUDGET ACTUALS VARIANCE FAVOURABLE ADVERSE
2000-2001 316.07 152.82 -163.25 163.25
2001-2002 12.85 399.11 386.26 386.26
2002-2003 415.36 932.72 517.36 517.36
2003-2004 686.45 1888.04 1201.59 1201.59
2004-2005 1272.77 3259.89 1987.12 1987.12
2005-2006 2208.16 2337.95 129.79 129.79
2006-2007 2065.02 2606.019 540.999 540.999
2007-2008 2644.73 2650.57 5.84 5.84
-500
0
500
1000
1500
2000
2500
3000
3500
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
BUDGET
ACTUALS
VARIANCE
FAVOURABLE
ADVERSE
0.
NET PROFIT
BUDGET ACTUALS VARIANCE FAVOURABLE ADVERSE
2000-2001 -160.08 -291.78 -131.70 131.7
2001-2002 -452.02 -75.87 376.15 376.15
2002-2003 -100.00 477.71 577.71 577.71
2003-2004 222.25 1417.57 1195.32 1195.32
2004-2005 808.26 2253.77 1445.51 1445.51
2005-2006 1734.16 1889.66 155.50 155.50
2006-2007 1690.68 2244.419 553.739 553.739
2007-2008 1707.00 2995.00 1288 1288
-1000
-500
0
500
1000
1500
2000
2500
3000
3500
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
BUDGET
ACTUALS
VARIANCE
FAVOURABLE
ADVERSE
W.r.t
2000-01
Net Profit after Tax 2000-2001 -291.78 Reasons
Reasons- Favorable
Gross sales Net salesStock accretionExport benefitsSale of powerRepairs & maintenancePower, fuel, waterGross marginInterest
AdverseMiscellaneous incomeRaw material consumptionStoresEmployees RemunerationOther expenditureDepreciationCash ProfitNet Profit
312.45194.0998.8272.4956.4631.965.71139.23302.48
123.4968.6613.43104.829.931.55163.25131.70
Sale increased more then budget
stores required
generated more power
deposits in bank
wastage the sources production increased
employees are increased expenses are increased compare to the budget
W.r.t
2001-02
Net Profit after Tax 2001-2002
-75.15 Reasons
Reasons-Favorable
Gross sales Net salesMiscellaneous incomePower, fuel, waterGross marginDepreciationCash profitNet Profit
AdverseStock accretionExport benefitsSale of powerRaw material consumptionStoresEmployees RemunerationRepairs & maintenanceOther expenditureInterest
597.61402.4650.92174.76266.6610.11386.26376.15
61.7119.4038.3469.9226.4428.77107.269.02
119.60
All income sources are in a favorable
condition that’s why lose is decreased
The expenses are increased to compare
with budget result
W.r.t
2002-03
Net Profit after Tax 2002-2003
477.2 Reasons
Reasons- Favorable
Gross sales Net salesExport benefitsMiscellaneous incomeRaw material consumptionRepairs & maintenancePower, fuel, waterGross marginCash profitNet Profit
AdverseStock discretionSale of powerStoresEmployees RemunerationOther expenditureInterestDepreciation
640.43551.7731.1515.98121.0625.0125.85413.05517.36577.71
256.7729.8222.827.6831.64104.3161.35
Expenditure is controlled and income
sources are fixed
Value of steel decreased
W.r.t
2003-04
Net Profit after Tax 2003-2004
1457.19 Reasons
Reasons-Favorable
Gross sales Net salesMiscellaneous incomeRepairs & maintenanceGross margi DepreciationCash profitNet profit
AdverseStock accretionExport benefitsSale of powerRaw material consumptionStoresEmployees RemunerationPower, fuel, waterOther expenditureInterest
1441.401265.7023.938.52
1087.176.27
1201.591195.32
19.7418.640.1164.6819.7352.3724.8710.84115.32
a
Sales increased to compare with previous
year
Expenditure increased to compare with budget is a miner
difference
W.r.t
2004-05
Net Profit after Tax 2004-2005
2008.09Reasons
Reasons- Favorable
Gross sales Net salesStock accretionMiscellaneous incomeStoresRepairs & maintenancePower, fuel, waterOther expenditureGross marginDepreciationCash ProfitNet Profit
AdverseExport benefitsRaw material consumptionEmployees RemunerationInterestSale of power
2756.512404.46317.23167.2742.669.6787.343.34
1965.99541.611987.121445.51
73.77975.9414.9121.131.36
The expenditure and decreased income sources are increased
Row material consumption is
increased
W.r.t2005-06
Net Profit after Tax 2005-2006
1252.37 Reasons
Reasons- Favorable
Export benefitsMiscellaneous incomeSale of powerRaw material consumptionStoresEmployees RemunerationRepairs & maintenanceOther expenditurePower, fuel, waterGross marginInterestCash profitNet profit
AdverseGross sales Net salesStock accretionDepreciation
24.43205.468.44
300.1662.0013.144.27110.292.93136.17
6.42129.79155.50
310.88658.9365.8525.71
All the income and
expenditure are favorable condition
Sales decreased and the profit is less then
budgeted profit
W.r.t2006-07
Net Profit after Tax 2006-2007
1363.43 Reasons
Reasons-Favorable
Gross sales Net salesMiscellaneous incomeRaw material consumptionStoresRepairs & maintenancetPower, fuel, waterStock discretionOther ExpGross MarginInterestCash ProfitNet Profit
AdverseExport benefitsSale of powerEmployees Remuneration
401.73268.8451.39109.3102.7927.365.0329.5122.49
554.33913.34
540.999553.739
7.3211.6
113.39
It shows the income improvement in a
little amount
Employees remuneration is increased more
W.r.t2007-
08Net Profit after Tax
2007-2008
1504.34 Reasons
Reasons-Favorable
Gross sales Net salesRaw material consumptionCash ProfitNet Proift
AdversePower & Fuel
203.42170.07164.4927.35.8412.88
.080
It shows the income improvement in a
little amount
Expenditure incurred
CHAPTER- 6
SUMMARY & SUGGESTIONS
SUMMARY :
Introduction part of the report portrays to importance of steel
Industry, Iron & Steel Industry scenario. Giving brief account on, world
and Indian Steel scenario, this explains about the demand & Production
capacities of steel. It also explains about the Birth, Growth and development
of steel in India.
The report gives brief introduction of budget and budgetary control
and the few definitions about budget and budgetary control, the study
explain the need, essentials, advantages and types of budget and budgetary
control. It also explains about the type of budgeting method is followed by
Viskhapatnam steel plant.
SUGGESTIONS:
If we can observe the overall management performance of the Visakhapatnam
steel plant, we find some favorable & adverse impacts on the organizations
profitability. Therefore I would like to recommend some suggestions, which
may useful to maximize the profits.
If we look at the Stores, R&M, Power & Other expenses it was increased.
Continuously.
While look at the financial results about employee remuneration
expenditure was observed that the total employee remuneration
expenditure was increased. Continuously from 2000-2001. Therefore the
HRD department should concentrate on this issue although the employee
satisfaction is important but employee performance must be increased to
increase the production and reduce the cost of production.
In the recent years the demand for the steel is rapidly increasing. Even if
the market survey has been done properly, it is only valid for some period
and it is hard to estimate for whole year. Assuming the market changes
budgets should therefore be revised each and every time there is a change.
Port is situated at 18 kms from the plant and transportation cost, which is
paid, is as some as 50 kms distance. Talks should be initiated to
downstream the costs.
The power export variance also informed that the actual were less than the
budgets from last two years therefore the top management should take care
about the misuses of power and should motivate the employees at all levels
for proper use of power.
Conclusion:
The Visakhapatnam Steel Plant has been dedicated to nation in 1992
and it is one of the major steel plants in the Asia and having much more
capital investment. We know that the Visakhapatnam Steel Plant as a large
organization might have long gestation period and while establishing the
Visakhapatnam Steel Plant so much of lands were taken from the local
people and provided the jobs to them in VSP thought they may not skillful.
But the top management of VSP conducts so many training and
development programs to improve their performance, not only this but also
frequent technological changes due to the above factors in the initial stage.
The VSP incurred some losses but with the remedial measures taken by the
top management the past scenario was changed and the organization was
stepped towards the profits and recorded 449.66 crores as a profit for the
year 2002. However the top management must take care to improve the
profitability and must try to reduce / remove the accumulated losses, which
is important for the wealth of the organization.
BIBILIOGRAPHY
REFERENCE:
FINANCIAL MANAGEMENT : I M PANDEY
ADVANCED ACCOUNTING : R.L, GUPTA,
M.RADHA SWANIY
BUDGETRY CONTROL & STANDARD COST : J.A. SCOTT
PROJECT MANAGEMENT & CONTROL AND REVIEW : Prof. PRASANNA CHANRA
JOURNALS SOURCE:
ANNUAL REPORT OF VSP 2005-06.
VSP PUBLISHED JOURNALS AND MAGAZINES
THE MANAGEMENT ACCOUNTS JOURNALS
WEBSITES:
WWW.vizagsteel.com
WWW. Jpcindiansteel.org
