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CHAPTER 1
INTRODUCTION
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INTRODUCTION
WORKING CAPITAL –
Meaning of Working Capital
Capital required for a business can be classified under two main categories via,
1) Fixed Capital
2) Working Capital
Every business needs funds for two purposes for its establishment and to carry out
its day- to-day operations. Long terms funds are required to create production facilities
through purchase of fixed assets such as p&m, land, building, furniture, etc. Investments
in these assets represent that part of firm’s capital which is blocked on permanent or fixed
basis and is called fixed capital. Funds are also needed for short-term purposes for the
purchase of raw material, payment of wages and other day – to- day expenses etc.
These funds are known as working capital. In simple words, working capital
refers to that part of the firm’s capital which is required for financing short- term or
current assets such as cash, marketable securities, debtors & inventories. Funds, thus,
invested in current assts keep revolving fast and are being constantly converted in to cash
and this cash flows out again in exchange for other current assets. Hence, it is also known
as revolving or circulating capital or short term capital.
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital:
1. Gross working capital
2. Net working capital
The gross working capital is the capital invested in the total current assets of the
enterprises current assets are those
Assets which can convert in to cash within a short period normally one accounting
year.
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CONSTITUENTS OF CURRENT ASSETS
1) Cash in hand and cash at bank
2) Bills receivables
3) Sundry debtors
4) Short term loans and advances.
5) Inventories of stock as:
a. Raw material
b. Work in process
c. Stores and spares
d. Finished goods
6. Temporary investment of surplus funds.
7. Prepaid expenses
8. Accrued incomes.
9. Marketable securities.
In a narrow sense, the term working capital refers to the net working. Net
working capital is the excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS – CURRENT
LIABILITIES.
Net working capital can be positive or negative. When the current assets
exceeds the current liabilities are more than the current assets. Current liabilities
are those liabilities, which are intended to be paid in the ordinary course of
business within a short period of normally one accounting year out of the
current assts or the income business.
CONSTITUENTS OF CURRENT LIABILITIES
1. Accrued or outstanding expenses.
2. Short term loans, advances and deposits.
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3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation, if it does not amt. to app. of profit.
6. Bills payable.
7. Sundry creditors.
The gross working capital concept is financial or going concern concept whereas net
working capital is an accounting concept of working capital. Both the concepts have their
own merits.
The gross concept is sometimes preferred to the concept of working capital for the
following reasons:
1. It enables the enterprise to provide correct amount of working capital at correct
time.
2. Every management is more interested in total current assets with which it has to
operate then the source from where it is made available.
3. It take into consideration of the fact every increase in the funds of the enterprise
would increase its working capital.
4. This concept is also useful in determining the rate of return on investments in
working capital. The net working capital concept, however, is also important for
following reasons:
It is qualitative concept, which indicates the firm’s ability to meet to
its operating expenses and short-term liabilities.
It indicates the margin of protection available to the short term
creditors.
It is an indicator of the financial soundness of enterprises.
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It suggests the need of financing a part of working capital requirement
out of the permanent sources of funds.
CLASSIFICATION OF WORKING CAPITAL
Working capital may be classified in to ways:
On the basis of concept.
On the basis of time.
On the basis of concept working capital can be classified as gross working
capital and net working capital. On the basis of time, working capital may be
classified as:
Permanent or fixed working capital.
Temporary or variable working capital
PERMANENT OR FIXED WORKING CAPITAL
Permanent or fixed working capital is minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current
assets. Every firm has to maintain a minimum level of raw material, work- in-process,
finished goods and cash balance. This minimum level of current assts is called permanent
or fixed working capital as this part of working is permanently blocked in current assets.
As the business grow the requirements of working capital also increases due to increase
in current assets.
TEMPORARY OR VARIABLE WORKING CAPITAL
Temporary or variable working capital is the amount of working capital which is required
to meet the seasonal demands and some special exigencies. Variable working capital can
further be classified as seasonal working capital and special working capital. The capital
required to meet the seasonal need of the enterprise is called seasonal working capital.
Special working capital is that part of working capital which is required to meet special
exigencies such as launching of extensive marketing for conducting research, etc.
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Temporary working capital differs from permanent working capital in the sense that is
required for short periods and cannot be permanently employed gainfully in the business.
IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL
SOLVENCY OF THE BUSINESS : Adequate working capital helps in
maintaining the solvency of the business by providing uninterrupted of
production.
Goodwill: Sufficient amount of working capital enables a firm to make
prompt payments and makes and maintain the goodwill.
Easy loans: Adequate working capital leads to high solvency and credit
standing can arrange loans from banks and other on easy and favorable terms.
Cash Discounts: Adequate working capital also enables a concern to avail
cash discounts on the purchases and hence reduces cost.
Regular Supply of Raw Material : Sufficient working capital ensures regular
supply of raw material and continuous production.
Regular Payment Of Salaries, Wages And Other Day TO Day Commitments:
It leads to the satisfaction of the employees and raises the morale of its
employees, increases their efficiency, reduces wastage and costs and enhances
production and profits.
Exploitation Of Favorable Market Conditions: If a firm is having adequate
working capital then it can exploit the favorable market conditions such as
purchasing its requirements in bulk when the prices are lower and holdings its
inventories for higher prices.
Ability To Face Crises: A concern can face the situation during the
depression.
Quick And Regular Return On Investments: Sufficient working capital
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enables a concern to pay quick and regular of dividends to its investors and
gains confidence of the investors and can raise more funds in future.
High Morale: Adequate working capital brings an environment of securities,
confidence, high morale which results in overall efficiency in a business.
EXCESS OR INADEQUATE WORKING CAPITAL
Every business concern should have adequate amount of working capital to run its
business operations. It should have neither redundant or excess working capital nor
inadequate nor shortages of working capital. Both excess as well as short working
capital positions are bad for any business. However, it is the inadequate working
capital which is more dangerous from the point of view of the firm.
DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL
1. Excessive working capital means ideal funds which earn no profit for the
firm and business cannot earn the required rate of return on its investments.
2. Redundant working capital leads to unnecessary purchasing and
accumulation of inventories.
3. Excessive working capital implies excessive debtors and defective credit
policy which causes higher incidence of bad debts.
4. It may reduce the overall efficiency of the business.
5. If a firm is having excessive working capital then the relations with banks
and other financial institution may not be maintained.
6. Due to lower rate of return n investments, the values of shares may also fall.
7. The redundant working capital gives rise to speculative transactions
DISADVANTAGES OF INADEQUATE WORKING CAPITAL
Every business needs some amounts of working capital. The need for working capital
arises due to the time gap between production and realization of cash from sales. There is
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an operating cycle involved in sales and realization of cash. There are time gaps in
purchase of raw material and production; production and sales; and realization of cash.
Thus working capital is needed for the following purposes:
For the purpose of raw material, components and spares.
To pay wages and salaries
To incur day-to-day expenses and overload costs such as office expenses.
To meet the selling costs as packing, advertising, etc.
To provide credit facilities to the customer.
To maintain the inventories of the raw material, work-in-progress, stores
and spares and finished stock.
For studying the need of working capital in a business, one has to study the business
under varying circumstances such as a new concern requires a lot of funds to meet its
initial requirements such as promotion and formation etc. These expenses are called
preliminary expenses and are capitalized. The amount needed for working capital
depends upon the size of the company and ambitions of its promoters. Greater the
size of the business unit, generally larger will be the requirements of the working
capital.
The requirement of the working capital goes on increasing with the growth and
expensing of the business till it gains maturity. At maturity the amount of working
capital required is called normal working capital.
There are others factors also influence the need of working capital in a business.
FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS
1. NATURE OF BUSINESS: The requirements of working is very limited in public utility
undertakings such as electricity, water supply and railways because they offer cash sale
only and supply services not products, and no funds are tied up in inventories and
receivables. On the other hand the trading and financial firms requires less investment
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in fixed assets but have to invest large amt. of working capital along with fixed
investments.
2. SIZE OF THE BUSINESS: Greater the size of the business, greater is the requirement
of working capital.
3. PRODUCTION POLICY: If the policy is to keep production steady by accumulating
inventories it will require higher working capital.
4. LENTH OF PRDUCTION CYCLE: The longer the manufacturing time the raw
material and other supplies have to be carried for a longer in the process with
progressive increment of labor and service costs before the final product is obtained.
So working capital is directly proportional to the length of the manufacturing process.
5. SEASONALS VARIATIONS: Generally, during the busy season, a firm requires
larger working capital than in slack season.
6. WORKING CAPITAL CYCLE: The speed with which the working cycle completes
one cycle determines the requirements of working capital. Longer the cycle larger is
the requirement of working capital.
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receivables
SALES
OVERHEADSEtc.
PAYABLES
INVENTORY
CASH
Equity & loan
Figure : 1
7. RATE OF STOCK TURNOVER: There is an inverse co-relationship
between the question of working capital and the velocity or speed with which
the sales are affected. A firm having a high rate of stock turnover wuill needs
lower amt. of working capital as compared to a firm having a low rate of
turnover.
8. CREDIT POLICY: A concern that purchases its requirements on credit and
sales its product / services on cash requires lesser amt. of working capital and
vice-versa.
9. BUSINESS CYCLE: In period of boom, when the business is prosperous,
there is need for larger amt. of working capital due to rise in sales, rise in
prices, optimistic expansion of business, etc. On the contrary in time of
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depression, the business contracts, sales decline, difficulties are faced in
collection from debtor and the firm may have a large amt. of working capital.
10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we shall
require large amt. of working capital.
11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more
earning capacity than other due to quality of their products, monopoly
conditions, etc. Such firms may generate cash profits from operations and
contribute to their working capital. The dividend policy also affects the
requirement of working capital. A firm maintaining a steady high rate of cash
dividend irrespective of its profits needs working capital than the firm that
retains larger part of its profits and does not pay so high rate of cash dividend.
12. PRICE LEVEL CHANGES: Changes in the price level also affect the
working capital requirements. Generally rise in prices leads to increase in
working capital.
OTHERS FACTORS: These are:
Operating efficiency.
Management ability.
Irregularities of supply.
Import policy.
Asset structure.
Importance of labor.
Banking facilities, etc.
MANAGEMENT OF WORKING CAPITAL
Management of working capital is concerned with the problem that arises in
attempting to manage the current assets, current liabilities. The basic goal of
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working capital management is to manage the current assets and current liabilities
of a firm in such a way that a satisfactory level of working capital is maintained,
i.e. it is neither adequate nor excessive as both the situations are bad for any firm.
There should be no shortage of funds and also no working capital should be ideal.
WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its
probability, liquidity and structural health of the organization. So working capital
management is three dimensional in nature as
1. It concerned with the formulation of policies with regard to profitability,
liquidity and risk.
2. It is concerned with the decision about the composition and level of current
assets.
3. It is concerned with the decision about the composition and level of current
liabilities.
WORKING CAPITAL ANALYSIS
As we know working capital is the life blood and the centre of a business.
Adequate amount of working capital is very much essential for the smooth
running of the business. And the most important part is the efficient management
of working capital in right time. The liquidity position of the firm is totally
effected by the management of working capital. So, a study of changes in the uses
and sources of working capital is necessary to evaluate the efficiency with which
the working capital is employed in a business. This involves the need of working
capital analysis.
The analysis of working capital can be conducted through a number of devices,
such as:
1. Ratio analysis.
2. Fund flow analysis.
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3. Budgeting.
1. RATIO ANALYSIS
A ratio is a simple arithmetical expression one number to another. The technique
of ratio analysis can be employed for measuring short-term liquidity or working
capital position of a firm. The following ratios can be calculated for these
purposes:
1. Current ratio.
2. Quick ratio
3. Absolute liquid ratio
4. Inventory turnover.
5. Receivables turnover.
6. Payable turnover ratio.
7. Working capital turnover ratio.
8. Working capital leverage
9. Ratio of current liabilities to tangible net worth.
2. FUND FLOW ANALYSIS
Fund flow analysis is a technical device designated to the study the source from
which additional funds were derived and the use to which these sources were put.
The fund flow analysis consists of:
a. Preparing schedule of changes of working capital
b. Statement of sources and application of funds.
It is an effective management tool to study the changes in financial position
(working capital) business enterprise between beginning and ending of the
financial dates.
3. WORKING CAPITAL BUDGET
A budget is a financial and / or quantitative expression of business plans and
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polices to be pursued in the future period time. Working capital budget as a part
of the total budge ting process of a business is prepared estimating future long
term and short term working capital needs and sources to finance them, and then
comparing the budgeted figures with actual performance for calculating the
variances, if any, so that corrective actions may be taken in future. He objective
working capital budget is to ensure availability of funds as and needed, and to
ensure effective utilization of these resources. The successful implementation of
working capital budget involves the preparing of separate budget for each element
of working capital, such as, cash, inventories and receivables etc.
Issues in Working Capital Management
Levels of current assets
Current assets to fixed assets
Liquidity Vs. profitability
Cost trade-off
Estimating Working capital
Current assets holding period
To estimate working capital requirements on the basis of average holding period
of current assets and relating them to costs based on the company’s experience in
the previous years. This method is essentially based on the operating cycle
concept.
Ratio of sales
To estimate working capital requirements as a ratio of sales on the assumption
that current assets change with sales.
Ratio of fixed investment
To estimate working capital requirements as a percentage of fixed investment.
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Working Capital Finance Policies
Long-term
Short-term
Spontaneous
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CHAPTER 2
COMPANY PROFILE
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COMPANY PROFILE
KASHIPUR SUGAR MILLS LTD
HISTORY
Kashipur Sugar Mills Limited operates in the Raw cane sugar sector. Kashipur Sugar
Mills Limited is an India-based company. During the fiscal year ended September 30,
2009 (fiscal 2009), the Company produced 1, 73,000 quintals of sugar. During fiscal
2009, the Company's mill crushed 19, 34,000 quintals of sugar cane. In our complete
report available for purchase the company is compared to: Empee Sugars And
Chemicals Limited, Venus Sugar Limited and Ravalgaon Sugar Farm Limited.
Leadership begins with a vision
Lala Ram Narain ji [1880 – 1943], founder of the Kashipur Group, took on the task
of supporting his entire family at a very young age and shouldered his responsibilities
with fortitude and confidence. During this period he worked with a forest contractor but
the craving to press forward and accomplish, burnt deep within his heart. He soon
spotted an opportunity in supply of wooden sleepers, for laying new railway tracks and
boldly struck out on his own. His determination defied logistics and laid the
foundations of the Kashipur Group.
From such modest beginnings, he hand-crafted the destiny of the corporate house that
today, directly and indirectly, provides employment and livelihood to a large number of
individuals and families of the rural India.
In the early 1930’s, while the strategists debated over choice of role models on which to
shape the Indian economy, Lala Ram Narain ji anticipated the need for industrialization.
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The outcome of his foresight was investment in two sugar mills – one at Kashipur and
the other as a 50% partner, at Bareilly, in Uttar Pradesh.
The Kashipur Sugar Mill was commissioned in 1933.
Shri Murli Manohar ji [1916 – 1964], eldest son of Lala Ram Narain ji took up the
baton at an early age to carry forward the vision and legacy of his father. Even in face
of a youth spent in comparatively difficult circumstances, the indomitable will he
inherited from his father manifested itself in 1947 when the Indian Sugar Industry was
passing through a challenging phase.
He resisted efforts to divest the Kashipur unit and took over the Managing Agency of
the factory agreeing to pay a fixed dividend to his partners. He accomplished this task
with great élan and successfully turned around the fortunes of the Kashipur factory.
He passed away at the young age of 48 but the path for the future generations had
already been etched.
Kashipur Today
The Kashipur Group is spearheaded by its dynamic Chairman, Mr.V.K.Goel. His
visionary innovativeness and emphasis on continuous R&D have made the company a
technological leader in sugarcane processing and green energy solutions.
Starting from 300 TCD in 1933 the Kashipur Group has recorded an impressive
performance taking its crushing capacity of sugarcane to 39500 metric tonnes per day,
with power co-generation capacity of 145 MW and alcochem capacity of 270,000 liters
per day. Through its successful pioneering efforts, the Kashipur Group directed the
industry’s development by introducing new technologies like Fibrizors, Pressure
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Feeders, Fiber based single tandem, Pressure Evaporation System with Falling Film
Type Evaporator Bodies, Vertical Continuous Pans etc. These innovations became the
mainstay of sugar technology in India.
Kashipur is one of the most integrated sugarcane processing companies in India.
Kashipur's sugarcane co-generation capacity is one of the largest in the country and it
has perhaps the highest ethanol manufacturing capacity relative to it’s cane crushing
capacity, in the country. It is also the first and the largest producer of refined
sulphurless sugar in the country.
BOARD OF DIRECTORS
Mr. V.K. Goel
Promoter Director and Chairman, aged 69 years is a Chemical Engineer. He is a well
known Sugar Technologist and Entrepreneur with vast experience of around 47 years.
He is the source of inspiration for every innovation and R&D and has placed the
company among the global leaders in sugarcane technology. He has been the President
of Indian Sugar Mills Association (ISMA), an apex body of sugar manufacturers of
India. An avid sportsperson, he is also the Founder President of Delhi Squash
Association.
Mr. A.K. Goel
Promoter Director and Vice Chairman, aged 63 years, is a commerce graduate. He too
has vast experience of over 41 years in the Sugar and Paper Industry. He has been the
President of U.P. Sugar Manufacturers Association (UPSMA) and President of Indian
Sugar Manufacturers Association (ISMA). He is also the Founder President of Indian
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Agro Paper Mills Association (IAPMA). He is a dedicated bridge player and Founder
President of Contract Bridge Association. He has represented India at the Bridge
Olympiad and the Bermuda Bowl.
Mr. Gaurav Goel
Promoter Director and Managing Director. Mr. Gaurav Goel, aged 36 years is the son
of Mr. Ashok Kumar Goel. He is a Business Management Graduate from United
Kingdom and has been associated with the company since 1994. He is responsible for
the overall management of financial aspects. He has been the President of
Entrepreneurs Organization (EO), Delhi Chapter, for the year 2006-07. He takes avid
interest in Tennis, Bridge and Reading.
Mr. Gautam Goel
Promoter Director and Managing Director. Mr. Gautam Goel aged 36 years is the son
of Mr. Vijay Kumar Goel. He has been associated with the company since 1994. He is
responsible for the technical and working aspect of operations. He is presently the
Chairman of the Cogeneration Sub-Committee as well as of the Media and
Communications Sub-Committee of the Indian Sugar Mills Association (ISMA). He is
a dedicated sportsperson with special interest in Squash and has represented Delhi in
national tournaments.
Mr. Ashwani K. Gupta
Independent Director. Mr. Ashwani Kumar Gupta, aged 54 years, is a Chartered
Accountant, headquartered at Lucknow. He has experience of over 31 years and is
acknowledged as one of the leading Finance, Treasury, Real Estate, Securitisation, Re-
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construction of Assets Experts in the Industry today and is on the Board of various
prestigious companies. Mr.Gupta is Regional Council Member of Central India
Regional Council of Institute of Chartered Accountants of India. He has been
Government Nominee on the Board of Joint Sector Companies and RBI nominee on
the Boards of Bank.
Mr. M.P.Mehrotra
Independent Director. He is a Chartered Accountant with experience of over 41 years
and with vast exposure of finance and taxes. He has wide experience as an Auditor
and Tax Consultant and is an expert on Companies Act and Income Tax Act. He is the
founder Partner of Mehrotra & Mehrotra and member of several prominent
organizations such as Central Board of Trustees, Employees’ Provident Fund
Organization (EPFO), Ministry of Labour, Govt. of India, Task Force for MOUs,
Ministry of Heavy Industries & Public Enterprises, Govt. of India, Advisory
Committee, Handlooms, Ministry of Textiles,Govt. of India, PHDCCI and
ASSOCHAM and several others. He has been Director, Canara Bank and Trustee,
Cochin Port Trust.
Mr. Harish Saluja
Independent Director. He is a Chartered Accountant with experience of about 36
years and with vast exposure of the financial market in India.
Mr. Rahul Bedi
Independent Director, aged 57 years. Experienced Journalist. He is the India
Correspondent for the Daily Telegraph, UK and the Irish Times, Dublin. He
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specializes in military and security-related issues. An MA in English Literature from
Delhi University he was also at Oriel College, Oxford as the Reuters Fellow in the mid
1980's.He has co-authored several books. In the 1970's he was Assistant Master at The
Mayo College, Ajmer and The Doon School where he taught English, History and
Mathematics.
Mr. J.P. Sharma
Employee Director. A senior employee of the company, acting as Occupier for the
Factories of Company.
Mr. Priya Brat
Independent Director. He is a science graduate and started his career as an
academician but has been a banker since 1959. During his remarkable career he has
been associated with several major financial institutions. He has been on the boards of
State Bank of Patiala, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State
Bank of Indore, State Bank of Mysore, State Bank of Travencore, State Bank of
Saurashtra, M.P.State Development Corporation, M.P.State Electronic Development
Corporation and OPTEL.
Mr.B.B.Tandon
Independent Director. Mr. B.B. Tandon was a member of Indian Administrative
Services (IAS) 1965-2001, Election Commissioner of India w.e.f. 13.06.2001 to
15.05.2005, member of the Delimitation Commission w.e.f. 12.07.2002 to 15.05.2005
and Chief Election Commissioner of India w.e.f 16.05.2005 to 29.06.2006. He was
also invited as International Election Observer to observe the Second Cambodian
22
General Election held in Jul,2003. He also served as a member of the "Commission on
Constitutional and Electoral Reforms" set up by the Govt. of Mauritius in November,
2001. He also headed the working group on comprehensive revision of the Companies
Act,1956, which recommended several changes/amendments in the said Act. Having
joined the service in 1965, Shri Tandon held various top-level posts in the
Government of India including as Addl. Secy.- Ministry of Company Affairs and at
State level as principal secy. (power) - Govt. of Himachal Pradesh. He has also served
on the Board of several Public Sector Undertakings.
Ms. Romi Chakravorty
Nominee Director appointed by IDBI Ltd.
Mr. S.P.Arora
Nominee Director appointed by IFCI Ltd.
Mr. Amit Dhawan
Mr. Amit Dhawan is Nominee Director appointed by ICICI Bank Limited. He is
Deputy General Manager with the Corporate Banking Group of ICICI Bank Limited.
He joined ICICI Group in 1996 and has worked in various departments. Mr. Dhawan
is a B.E. (Mechanical) and Masters in Business Administration from University of
Delhi, India.
Mr. Dhawan was deputed to help set up the Bank’s operations in the USA. He
launched the loan Origination practice and was instrumental in forging some of the
Bank’s strategic alliances in the USA.
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MISSION & VISION
Kashipur stands tall with the collective confidence that our farmers, our workers, our
vendors and our stakeholders have pledged with us. Their sense of belonging, their
hopes and expectations motivate us to perform better each time. Preserving their trust
is our corporate mantra.
At Kashipur we have striven to realize a corporate environment of collaborative effort
and have worked towards continuous improvement in every sphere of our activity. In
our quest for excellence we have given special consideration to our social obligations,
whether it is caring for the rural hinterland or the environment we live in. A significant
and endearing feat for the Group is that some of its employees have been a part of the
Kashipur family for two to three generations.
Projections of the sugarcane based Industry in India are exceptionally promising and
Kashipur is totally geared up to think beyond the cube:
To provide energy alternatives to an energy-starved country through co-
generation and ethanol.
To value add on our product portfolio
To maximize the potential of the agro industry in India.
To continuously bring down the cost of conversion.
To encourage creativity and resourcefulness, and focus on continuous R&D.
To optimize the value of stakeholder investments with a continuous improvement
in financial performance.
To diversify and protect the bottom-line during industry downturn.
To attain the highest level of accountability, corporate governance and
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shareholder value.
In a country where agriculture is the predominant activity, sugarcane processing units
wield a tremendous impact on the area of their location. We continue to play our role
with absolute commitment and watch with fascination and pride as even the most
backward areas where our units are located, slowly transform into a beehive of
activity, touching the lives of thousands of people, now a part of the ever increasing
Kashipur family.
GLOBAL SUGAR INDUSTRY
After two years of consistently rising stocks and relatively low prices, the fundamental
outlook for sugar is changing, with a clear indication towards lower production in
2008-09. A combination of factors, including lower production in India and some
other countries; rising demand for sugar and ethanol; and general economic slowdown
have upset the world sugar balance.
World Sugar Balance
2008/09 (E) 2007/08 (P) Change mmtrv mmtrv absolute %
Opening stock 42.6 39.3 3.3 8.4Production 158.8 166.6 (7.9) 4.7
Consumption 162.1 157.1 5.0 3.2Surplus/deficit 39.3 48.8 (9.5) 19.5Import demand 47.4 44.8 2.6 5.8
Export availability 48.2 51.0 (2.8) 5.5End stocks 38.6 42.6 (4.1) 9.6
Stock/consumption ratio in% 23.8 27.1 (3.3) 12.1Source: USDA , FAS PSD database updated Nov 2008
mmtrv: million metric tones, raw value
During the current season (2007-08), the global availability of sugar has gone up on
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account of surpluses in Brazil (exported 19.75 mmtrv) and India (exported 4.9 mmt),
which has kept the sugar prices under check. Raw-white premium, however, remained
high because of lower quantities of white sugar being offered by refineries including
those in EU and rising demands. The high freight costs created regional demand and
supply clusters and India, therefore, emerged as a major regional supplier of white and
raw sugars in this year.
Global sugar consumption during 2007-08 has gone up to 162.1 mmtrv, up by 3.2%
over the previous year. The reasons for increase in consumption were rising global
demand, improved standard of living in developed/under developed countries and a
shift of population from rural to urban areas (around 3.3 bn people living in cities as
per the United Nations Population Fund).
The production levels in major sugar producing countries during this period and
estimates for the year 2008-09 are as under:
(Figures in mmtrv)
Country 2006-07 2007-08 (P) 2008-09 (E)Brazil 31.5 32.1 32.4India 30.8 28.6 22.8EU 17.8 17.7 16.9
China 12.9 15.9 15.8Thailand 6.7 7.8 7.9Australia 5.2 4.9 4.9
US 7.6 7.4 6.9World 164.5 166.6 158.8
Source: USDA, FAS PSD database updated Nov 2008
After touching the peak in 2007-08, global production is set to fall in 2008-09. Most of
the fall is due to changes that are taking place in India. While in response to the low
prices relative to rising costs and liquidity issues, going forward, production growth in
26
Brazil is likely to be minimal. Sugar production in China and Thailand are likely to
remain nearly constant for the 2008-09 season.
Brazil sugar and ethanol production estimates: Year 2008-09 production estimate for
Brazil at 32.45 mmtrv level is almost similar to that of last year in spite of estimates of
higher cane production, with a fall in ending stocks by 9.6%. Total sucrose destined
for sugar and ethanol production is estimated at 40.5% and 59.5% for 2008-09
production against 45.5% and 54.5% respectively in 2007-08. With high crude oil
prices in 2007-08 onwards, Brazil had diverted a major part of its additional cane
production for manufacturing ethanol and consumed nearly 22.5 billion liters of
ethanol in 2007-08. In the 2008-09 season, sugar production has been marginally
lower than the last season. However, ethanol production is about 10% higher. Total
ethanol production in Brazil for 2008-09 is estimated at 26.9 bn liters, up by 20% as
compared to the previous season. With the influx of additional flex fuel vehicles at
87% of total new vehicles being added, Brazil ethanol demand is higher by 12% in
2008-09 and estimated to double by 2011-12, which may lead to unprecedented
diversion of cane for ethanol manufacturing. With nearly 20% devaluation of Real,
Brazilian sugar realization has improved in terms of domestic currency, partly
mitigating the impact of fall in sugar prices. However, further capacity expansion is
substantially curtailed because of lack of capital inflow. This may reduce sugarcane
processing in Brazil in 2008-09 and thereafter; affecting their exports and
consequently, supply of sugar and ethanol to the world.
India, a regional hub for white and raw exports: The most unique feature of sugar year
2007-08 has been the development of India's capabilities to export both raw and white
sugars simultaneously. India has exported over 4.9 mmt of sugar comprising 2.5
27
mmtrv of raw sugar which has been exported first time from India. With higher ocean
freight costs, the demand around the Indian sub-continent has mostly been met by
India. The quality of Indian raw has been appreciated by the buyers. Efficient logistics
and 45 ICUMSA sugar proved to be key to exports. In future, India may emerge as a
regular exporter of raw and premium white in its neighborhood, particularly in the
surplus cane years.
World sugar price trends: The world sugar prices remained highly volatile and
subdued on account of surplus sugar available. Except a marginal rise in January 2008
to a level above 14 cents a pound, the prices remained range bound between 10-12
cents. The price of white sugar peaked in August 2008 (over 400 USD per MT), and
went down thereafter, with the lack of Investing Funds’ interest in commodities
hedging. The white sugar premium during the year remained constantly high because
of lower supply from EU and rising consumption. The international prices, both of raw
and white have softened considerably, on account of economic and financial pressures
and are ruling at 11.28 cents/pound and USD 322 per mt respectively (as on
November 21, 2008).
The prices of Indian and international sugar have converged in 2007-08, with the
evolution of exports of raw and white and growing regional preferences of Indian
sugar.
L o n d o n v s . D e l h i P r i c e s
1400
1450
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
2050
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
M o n t h s
R s
. /
q t
l
230.0
250.0
270.0
290.0
310.0
330.0
350.0
370.0
390.0
410.0
U S
D /
M T
Delhi Prices London Prices
28
Global recession/ slowdown, impact on sugar and ethanol industry: Global sugar
industry did not remain unaffected with the financial meltdown and recent slowdown
in the world economy. The recessionary trends have impacted the liquidity position,
which depressed values and created new correlations between commodities, equities
and emerging market currencies. The reduction in risk appetite and withdrawals of
funds from commodity markets has reduced its depth and market making abilities.
Lower capital is being earmarked for future expansions and the Brazilian industry is
already showing sign of falling short of market expectations with regard to production
estimates for 2009-10 and beyond. Fall in crude prices to a level below US $50 per
barrel may impact the commercial viability of ethanol as a substitute to petroleum
products. The environmental impact of ethanol as a renewable fuel, however, will
keep its demand alive and nearly constant. The changing currency conversion rates
have started affecting domestic cost calculations and import/export values. Falling
freight rates, with Baltic freight indices gone down by nearly 90% from 11500 in May
2008 to around 1000 in November 2008, have made movement of sugar feasible to
longer distances. The trade clusters created in 2007-08 season are dismantling. While
these issues are creating short term disruption, the long term impact is difficult to
ascertain at present. However, the world sugar consumption is growing year after year.
Indian sugar, however, is expected to remain un-affected as it is driven by high
29
domestic demand which is least elastic; sugar constitutes small percentage of
household budgets; rising indirect consumption; sugar business is mostly in cash and
carry; and Indian farmers are not credit dependant. Some impact of slowdown,
however, would be seen in the form of fewer transactions in commodity exchanges,
lower pipeline stocks and slower growth. Higher interest costs would also affect the
industry, which is highly capital intensive. The financial stress may reduce flow of
funds to the sugar sector resulting in low capacity expansion, lack of working capital
finance, and lower funds investments in commodities.
Outlook for 2008-09 sugar year: 2008-09 should witness a fall in global production by
over 7.9 mmtrv; due to a fall in production by over 5 mmt in India and around 3
mmtrv in EU. Unlike Brazil, the sugar industry in these countries is largely dependent
on their domestic markets, and lower production will translate into lower exports from
these countries affecting the globally tradable sugar. Globally, floating sugar will
reduce to 48.2 mmtrv from 51 mmtrv in 2007-08. India is likely to produce 20 mmtrv
of sugar in the 2008-09, as per the latest official estimates available.
2008-09 will largely be driven by emerging markets; with India and China being the
main drivers. On a regional basis, Asia and Africa will have a more modest
consumption growth. With lower production and rising consumption, the stock to use
ratio at the end of 2008-09 is expected to be lower by 12.1%, from 27.1 mmtrv to 23.8
mmtrv. A marked contraction in Indian production, followed by a modest decline in
Brazilian sugar production in 2009-10, will reduce global production by nearly 6%
year-over-year in 2008/09 leaving the global balance in a 1.8 mmtrv deficit- a deficit
more than double is expected in 2009/10.
30
DOMESTIC SUGAR INDUSTRY
Changes in India are following the volatility in the world sugar balance. After record
crushing numbers in the 2006-07 season, the sugarcane crop has been marginally
lower in the 2007-08 season due to lower agricultural yields. With high carryover
stocks and current season surpluses, prices remained soft and flat up to March 2008.
However, they have shown upward movement thereafter, in anticipation of a lower
2008-09 crop.
India Sugar balancing (figs in mmt)
Sugar Year 2006-07 2007-08 P 2008-09 EOpening Stocks 3.6 9.2 8.1**
Production 28.3 26.3 19.5Imports - - -Total 31.9 35.5 27.6
Consumption- domestic 21.0 22.5 23.0Exports 1.7 4.9* 0.80
Closing Stock 9.2 8.1 3.8% age of consumption 43.8 35.9 16.5
*Till 12.09.2008, 4.8 mmt has been exported inclusive of 0.09 mmt awaiting loading
at the port.
**After accommodating for the stock adjustment
Source: ISMA/agst.xls/ras/sheet1updated on November10, 2008/ SSL estimates
The Indian sugar industry has emerged as a raw sugar manufacturer and exporter for
the first time this year. Out of a total export of 4.9 mmt, raw sugar accounts for 2.5
mmt.. White sugar export included the export of 45 ICUMSA grade sugar, which
fetched a premium in the world market. With the emerging price difference between
refined and plantation white sugar, domestic manufacturing for refined sugar is
enlarging as buyers are becoming more quality conscious. Ethanol adoption remained
31
subdued due to state level restrictions and alternative uses of alcohol. Bio-electricity is
emerging as valuable product with a potential to generate up to 5000 Mwh as against
actual power generation capacity of 1000 Mwh.
Domestic per capita sugar consumption has increased from 16.6 kg (year 2006) to 18.1
kg (year 2007); an increase of 9%, whereas the share of alternate sweeteners in total
sweetener consumption has declined from 5.3 kg to 5.0 kg per capita, which is still
much lower than the international standards (35 kg to 50 kg in most of the developed
countries). (Source: ISMA, F.O. Licht Year Book and SSL estimates). During the
period starting from 1980-81, the indirect consumption of sugar (in the form of soft
drinks, ready-to-eat food, etc) has gone up to 61% of the total free sugar consumption.
In developed countries this stands at 75% (EU). (Source: AC Neilson survey; April
2007).
Over the last decade, domestic sugar demand has witnessed a compounded annual
growth of 3.75%, which is expected to rise at a faster pace, going further. This is due
to rapid urbanization (expected at 3.3% p.a. between 2007-08 to 2011-12); increase in
population (expected 1.5% p.a.); shift from direct to indirect consumption of
sweeteners (where growth rate is much faster); and a shift of consumption from
alternate sweeteners to factory made sugar.
The Indian Council for Research on International Economic Relations (ICRIER) in its
report on ‘Demand and Supply Trends and Projections of Food in India’ of March
2008, has projected a sugar consumption at 29.3 mmt in year 2010-11 and per capita
consumption of 24.9 kg p.a. In case the GDP growth remains at 8% p.a, the projected
sugar consumption is estimated at 26.7 mmt, with per capita consumption of 22.6 kg
32
p.a. This demand is expected to grow up to 65.7 mmt in 2021, with a per capita
consumption of 48.8 kg p.a.
The possibility of growth in cane availability in the future is limited because of nearly
constant cultivable area and increasing competition with other food and cash crops;
stagnant farm yields; small landholding size further getting fragmented; lack of basic
research in improved agricultural practices and ever increasing costs of agriculture.
With limited crop growth and increasing demand, Indian sugar balances may turn
from surplus to shortages as it may not be able to balance demand from domestic
production year after year.
Induced cyclicality: Domestic sugar sector is always impacted by the induced
cyclicality of high sugar prices leading to payment of higher cane prices which in turn
leads to increase in production at the cost of other crops. This translates into higher
sugarcane production and higher sugar production resulting in lower sugar prices
affecting the ability of the mills to pay to farmers and creation of arrears. High arrears
cause a fall in cane cultivation in subsequent period, and the cycle restarts all over
again.
Trends in Indian sweetener/sugar production and consumption
33
In addition to the economic cycle, outline above, natural cycles, such as climate
variation, water availability and pest attacks, also affect sugar cane production. In the
current sugar cycle, production of sugarcane was affected on account of higher
realizations from other food crops such as wheat, paddy and oil. With two years of
excessive sugarcane/sugar production, the cycle is turning into lower production in the
sugar year 2008-09. With rising consumption and linkages with world sugar markets,
these cycles are becoming shorter and more volatile.
Sugar price and stock to use ratio: Like any commodity, the price of sugar too is
determined by demand-supply dynamics. The demand for sugar has been more or less
inelastic, with such factors as population growth and per capita income influencing it.
However, supply is affected by cyclicality and seasonality of production. There has
been an inverse correlation between price of sugar and stock to use ratio at the end of
each sugar year. Domestically, season end stock to use ratio of less than three months
consumption is considered low and free sugar price could be showing improvement
with falling stock levels.
Sugar Year Consumption (mmt) Stock use Ratio (%) Delhi free sale sugar
5
10
15
20
25
30
35
40
1980-81
1982-83
1984-85
1986-87
1988-89
1990-91
1992-93
1994-95
1996-97
1998-99
2000-01
2002-03
2004-05
2006-07
2008-09
2010-11
Sugar Consumption Sugar production Sweetener Consumption Total Sweetener production
34
(at end of season) price per qtl (Rs)2001-02 16.78 67.4 14782002-03 18.38 63.2 12992003-04 17.29 49.1 15002004-05 18.50 25.8 17872005-06 18.50 19.6 19532006-07 21.00 43.8 15672007-08 22.50 35.9 1655
Source: ISMA handbook/ monthly data compilation
In the recent past, to meet sugar demand in the years when stock to use ratio had been
lower, the country resorted to import of white or raw sugars.
Government Policy measures: A number of policy measures have been initiated by the
union/state governments which impacted this year’s operations in the sugar industry.
Sugarcane pricing issues in Uttar Pradesh remained the major cause of disagreement
between the state and millers. The state advised price (SAP) of Rs. 125 per qtl for the
2007-08 (for general varieties), has been challenged initially with Hon’ble Allahabad
High Court and thereafter with the Hon’ble Supreme Court on the rationality of non
consultation process and arbitrariness for fixation of cane price by the state
government. The court fixed an interim price of Rs. 110 per qtl instead. The matter is
still sub judice. Other policy issues initiated/implemented are:
Fixation of SMP at Rs. 81.18 per qtl linked to basic recovery of 9% with a premium of
Rs. 0.90 per every 0.1 point increase.
Increase in the rate of cess on sugar under SDF Act from Rs. 14 to Rs. 15 per qtl w.e.f.
January 1, 2008, and to Rs. 24 per qtl w.e.f March1, 2008.
Buffer stock of 5 mmt created in 2006-07. This has since been dismantled.
The E5 (5% blend of Ethanol with petrol) programme continued across the country
with few exceptions. The plan to increase it to E10 (10% blend) from October 2008
has been deferred. There has not been any change in ex factory purchase price of
ethanol of Rs. 21.50 per litre.
35
Transport subsidy of Rs. 1350/1450 per MT for sugar export has been introduced up to
September 2008.
The UP Government did not reformulate the sugar incentives policy, after its
premature withdrawal in May 2007 (Sugar industry promotion policy 2004-08) and
benefits promised in the policy remained unrealized. The matter has been referred to
the Hon’ble Allahabad High Court for resolution and is presently sub judice. In
respect of sugar year 2008-09, the state has fixed SAP of Rs. 140/- per qtl (for general
variety), which has been challenged in the Hon’ble Allahabad High Court.
Future outlook: Based on updated industry estimates, sugar production in the 2008-09
season is expected to be lower at 20 mmt on account of a smaller sugarcane crop, fall
in farm yields and initial estimates of sugar recoveries. These estimates have been
revised downward from 22 mmt (initial estimates endorsed by GOI). For the 2008-09
season, a large number of cane farmers have diverted to the cultivation of other
food/cash crops with changing farm economics. The reported carryover stocks from
the 2007-08 season at 10.5 mmt still show a healthy position. However, it is felt that
the country may need stock adjustment in the opening inventory of 2008, with actual
stocks being lower than the stocks reported. Taking this into account, the carry over
stock position by the end of ensuing sugar season may lead to a situation where the
season end stock to use ratio falls below the comfort level of three months. After three
years of record surpluses, the sugar cycle is now moving into deficit, having a positive
impact on sugar prices.
Utilization of molasses for the production of ethanol not only provides value-addition
to the by product, it can also ensure better price stability and price realization of
36
molasses for the sugar mills. This will improve the viability of the sugar mills, which
will in turn benefit cane growers. Further, cogenerated power is emerging as the
strongest revenue and profit generator for the mills. Availability of sugarcane and its
optimum utilization in the form of ethanol/power/plant utilization factor would be the
major revenue drivers for sugar industry going forward. Such flexibility has become
very relevant in the current scenario of economic liberalization and more particularly,
as a means to correct the aberrations in sugar production.
Alcohol/ ethanol usage and balancing: Energy security and environmental concerns
are motivating adoption of ethanol bio-fuel globally. Ethanol fuel demand is likely to
grow exponentially in the future. Most of the leading countries have mandated ethanol
doping at different per cent levels, in all commercial automobile fuels over the long
term. An increase in the demand of ethanol will result in lower sugar supplies. As
more cane would be diverted to ethanol, sugar prices would rise.
During 2007-08, out of the total alcohol produced in India, around 33% was used for
drinking purposes, and almost a similar amount was consumed by the chemical
industry as feed stock, leaving around one third for the fuel ethanol. If the trend
continues, and E5 is implemented fully, going forward there may be a gap in demand
and supply. With gasoline demand of 11.6 mmt in 2006-07, the requirement of ethanol
at 5 per cent blending is expected to be over 650 million litres. The sugar industry has
reiterated its commitments that it will not be lacking in meeting the ethanol demand by
the petroleum companies.
Current demand for alcohol for manufacturing potable alcohol is estimated at 1.2 bn
bulk litres with an annual growth rate of 9 to 10% p.a. With the increase in the
population in the drinking age and improvement in disposable income, this growth in
consumption will increase in future. Further, the use of alcohol for chemical industry
37
with a base consumption of 700 mn bulk litres (estimate for 2006-07) is growing by 5
to 6% p.a. Thus, with the overall demand of 2.50 bn bulk liters of alcohol for all the
three major consumption streams, going forward, India may find it difficult to meet its
alcohol demand from domestic supply. In India, almost all the alcohol is derived for
sugarcane molasses.
After two years of consistently rising stocks and relatively low prices, the fundamental
outlook for sugar is changing, with a clear indication towards lower production in
2008-09. A combination of factors, including lower production in India and some
other countries; rising demand for sugar and ethanol; and general economic slowdown
have upset the world sugar balance.
World Sugar Balance
2008/09 (E) 2007/08 (P) Change mmtrv mmtrv absolute %
Opening stock 42.6 39.3 3.3 8.4Production 158.8 166.6 (7.9) 4.7
Consumption 162.1 157.1 5.0 3.2Surplus/deficit 39.3 48.8 (9.5) 19.5Import demand 47.4 44.8 2.6 5.8
Export availability 48.2 51.0 (2.8) 5.5End stocks 38.6 42.6 (4.1) 9.6
Stock/consumption ratio in% 23.8 27.1 (3.3) 12.1Source: USDA , FAS PSD database updated Nov 2008
mmtrv: million metric tones, raw value
During the current season (2007-08), the global availability of sugar has gone up on
account of surpluses in Brazil (exported 19.75 mmtrv) and India (exported 4.9 mmt),
which has kept the sugar prices under check. Raw-white premium, however, remained
high because of lower quantities of white sugar being offered by refineries including
38
those in EU and rising demands. The high freight costs created regional demand and
supply clusters and India, therefore, emerged as a major regional supplier of white and
raw sugars in this year.
Global sugar consumption during 2007-08 has gone up to 162.1 mmtrv, up by 3.2%
over the previous year. The reasons for increase in consumption were rising global
demand, improved standard of living in developed/under developed countries and a
shift of population from rural to urban areas (around 3.3 bn people living in cities as
per the United Nations Population Fund).
The production levels in major sugar producing countries during this period and
estimates for the year 2008-09 are as under:
(Figures in mmtrv)
Country 2006-07 2007-08 (P) 2008-09 (E)Brazil 31.5 32.1 32.4India 30.8 28.6 22.8EU 17.8 17.7 16.9
China 12.9 15.9 15.8Thailand 6.7 7.8 7.9Australia 5.2 4.9 4.9
US 7.6 7.4 6.9World 164.5 166.6 158.8
Source: USDA, FAS PSD database updated Nov 2008
After touching the peak in 2007-08, global production is set to fall in 2008-09. Most of
the fall is due to changes that are taking place in India. While in response to the low
prices relative to rising costs and liquidity issues, going forward, production growth in
Brazil is likely to be minimal. Sugar production in China and Thailand are likely to
remain nearly constant for the 2008-09 season.
39
Brazil sugar and ethanol production estimates: Year 2008-09 production estimate for
Brazil at 32.45 mmtrv level is almost similar to that of last year in spite of estimates of
higher cane production, with a fall in ending stocks by 9.6%. Total sucrose destined
for sugar and ethanol production is estimated at 40.5% and 59.5% for 2008-09
production against 45.5% and 54.5% respectively in 2007-08. With high crude oil
prices in 2007-08 onwards, Brazil had diverted a major part of its additional cane
production for manufacturing ethanol and consumed nearly 22.5 billion liters of
ethanol in 2007-08. In the 2008-09 season, sugar production has been marginally
lower than the last season. However, ethanol production is about 10% higher. Total
ethanol production in Brazil for 2008-09 is estimated at 26.9 bn liters, up by 20% as
compared to the previous season. With the influx of additional flex fuel vehicles at
87% of total new vehicles being added, Brazil ethanol demand is higher by 12% in
2008-09 and estimated to double by 2011-12, which may lead to unprecedented
diversion of cane for ethanol manufacturing. With nearly 20% devaluation of Real,
Brazilian sugar realization has improved in terms of domestic currency, partly
mitigating the impact of fall in sugar prices. However, further capacity expansion is
substantially curtailed because of lack of capital inflow. This may reduce sugarcane
processing in Brazil in 2008-09 and thereafter; affecting their exports and
consequently, supply of sugar and ethanol to the world.
India, a regional hub for white and raw exports: The most unique feature of sugar year
2007-08 has been the development of India's capabilities to export both raw and white
sugars simultaneously. India has exported over 4.9 mmt of sugar comprising 2.5
mmtrv of raw sugar which has been exported first time from India. With higher ocean
freight costs, the demand around the Indian sub-continent has mostly been met by
India. The quality of Indian raw has been appreciated by the buyers. Efficient logistics
40
and 45 ICUMSA sugar proved to be key to exports. In future, India may emerge as a
regular exporter of raw and premium white in its neighborhood, particularly in the
surplus cane years.
World sugar price trends: The world sugar prices remained highly volatile and
subdued on account of surplus sugar available. Except a marginal rise in January 2008
to a level above 14 cents a pound, the prices remained range bound between 10-12
cents. The price of white sugar peaked in August 2008 (over 400 USD per MT), and
went down thereafter, with the lack of Investing Funds’ interest in commodities
hedging. The white sugar premium during the year remained constantly high because
of lower supply from EU and rising consumption. The international prices, both of raw
and white have softened considerably, on account of economic and financial pressures
and are ruling at 11.28 cents/pound and USD 322 per mt respectively (as on
November 21, 2008).
The prices of Indian and international sugar have converged in 2007-08, with the
evolution of exports of raw and white and growing regional preferences of Indian
sugar.
L o n d o n v s . D e l h i P r i c e s
1400
1450
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
2050
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
M o n t h s
R s
. /
q t
l
230.0
250.0
270.0
290.0
310.0
330.0
350.0
370.0
390.0
410.0U
S D
/
M T
Delhi Prices London Prices
41
Global recession/ slowdown, impact on sugar and ethanol industry: Global sugar
industry did not remain unaffected with the financial meltdown and recent slowdown
in the world economy. The recessionary trends have impacted the liquidity position,
which depressed values and created new correlations between commodities, equities
and emerging market currencies. The reduction in risk appetite and withdrawals of
funds from commodity markets has reduced its depth and market making abilities.
Lower capital is being earmarked for future expansions and the Brazilian industry is
already showing sign of falling short of market expectations with regard to production
estimates for 2009-10 and beyond. Fall in crude prices to a level below US $50 per
barrel may impact the commercial viability of ethanol as a substitute to petroleum
products. The environmental impact of ethanol as a renewable fuel, however, will
keep its demand alive and nearly constant. The changing currency conversion rates
have started affecting domestic cost calculations and import/export values. Falling
freight rates, with Baltic freight indices gone down by nearly 90% from 11500 in May
2008 to around 1000 in November 2008, have made movement of sugar feasible to
longer distances. The trade clusters created in 2007-08 season are dismantling. While
these issues are creating short term disruption, the long term impact is difficult to
ascertain at present. However, the world sugar consumption is growing year after year.
Indian sugar, however, is expected to remain un-affected as it is driven by high
domestic demand which is least elastic; sugar constitutes small percentage of
household budgets; rising indirect consumption; sugar business is mostly in cash and
carry; and Indian farmers are not credit dependant. Some impact of slowdown,
however, would be seen in the form of fewer transactions in commodity exchanges,
42
lower pipeline stocks and slower growth. Higher interest costs would also affect the
industry, which is highly capital intensive. The financial stress may reduce flow of
funds to the sugar sector resulting in low capacity expansion, lack of working capital
finance, and lower funds investments in commodities.
Outlook for 2008-09 sugar year: 2008-09 should witness a fall in global production by
over 7.9 mmtrv; due to a fall in production by over 5 mmt in India and around 3
mmtrv in EU. Unlike Brazil, the sugar industry in these countries is largely dependent
on their domestic markets, and lower production will translate into lower exports from
these countries affecting the globally tradable sugar. Globally, floating sugar will
reduce to 48.2 mmtrv from 51 mmtrv in 2007-08. India is likely to produce 20 mmtrv
of sugar in the 2008-09, as per the latest official estimates available.
2008-09 will largely be driven by emerging markets; with India and China being the
main drivers. On a regional basis, Asia and Africa will have a more modest
consumption growth. With lower production and rising consumption, the stock to use
ratio at the end of 2008-09 is expected to be lower by 12.1%, from 27.1 mmtrv to 23.8
mmtrv. A marked contraction in Indian production, followed by a modest decline in
Brazilian sugar production in 2009-10, will reduce global production by nearly 6%
year-over-year in 2008/09 leaving the global balance in a 1.8 mmtrv deficit- a deficit
more than double is expected in 2009/10.
DOMESTIC SUGAR INDUSTRY
Changes in India are following the volatility in the world sugar balance. After record
crushing numbers in the 2006-07 season, the sugarcane crop has been marginally
lower in the 2007-08 season due to lower agricultural yields. With high carryover
43
stocks and current season surpluses, prices remained soft and flat up to March 2008.
However, they have shown upward movement thereafter, in anticipation of a lower
2008-09 crop.
India Sugar balancing (figs in mmt)
Sugar Year 2006-07 2007-08 P 2008-09 EOpening Stocks 3.6 9.2 8.1**
Production 28.3 26.3 19.5Imports - - -Total 31.9 35.5 27.6
Consumption- domestic 21.0 22.5 23.0Exports 1.7 4.9* 0.80
Closing Stock 9.2 8.1 3.8% age of consumption 43.8 35.9 16.5
*Till 12.09.2008, 4.8 mmt has been exported inclusive of 0.09 mmt awaiting loading
at the port.
**After accommodating for the stock adjustment
Source: ISMA/agst.xls/ras/sheet1updated on November10, 2008/ SSL estimates
The Indian sugar industry has emerged as a raw sugar manufacturer and exporter for
the first time this year. Out of a total export of 4.9 mmt, raw sugar accounts for 2.5
mmt.. White sugar export included the export of 45 ICUMSA grade sugar, which
fetched a premium in the world market. With the emerging price difference between
refined and plantation white sugar, domestic manufacturing for refined sugar is
enlarging as buyers are becoming more quality conscious. Ethanol adoption remained
subdued due to state level restrictions and alternative uses of alcohol. Bio-electricity is
emerging as valuable product with a potential to generate up to 5000 Mwh as against
actual power generation capacity of 1000 Mwh.
Domestic per capita sugar consumption has increased from 16.6 kg (year 2006) to 18.1
44
kg (year 2007); an increase of 9%, whereas the share of alternate sweeteners in total
sweetener consumption has declined from 5.3 kg to 5.0 kg per capita, which is still
much lower than the international standards (35 kg to 50 kg in most of the developed
countries). (Source: ISMA, F.O. Licht Year Book and SSL estimates). During the
period starting from 1980-81, the indirect consumption of sugar (in the form of soft
drinks, ready-to-eat food, etc) has gone up to 61% of the total free sugar consumption.
In developed countries this stands at 75% (EU). (Source: AC Neilson survey; April
2007).
Over the last decade, domestic sugar demand has witnessed a compounded annual
growth of 3.75%, which is expected to rise at a faster pace, going further. This is due
to rapid urbanization (expected at 3.3% p.a. between 2007-08 to 2011-12); increase in
population (expected 1.5% p.a.); shift from direct to indirect consumption of
sweeteners (where growth rate is much faster); and a shift of consumption from
alternate sweeteners to factory made sugar.
The Indian Council for Research on International Economic Relations (ICRIER) in its
report on ‘Demand and Supply Trends and Projections of Food in India’ of March
2008, has projected a sugar consumption at 29.3 mmt in year 2010-11 and per capita
consumption of 24.9 kg p.a. In case the GDP growth remains at 8% p.a, the projected
sugar consumption is estimated at 26.7 mmt, with per capita consumption of 22.6 kg
p.a. This demand is expected to grow up to 65.7 mmt in 2021, with a per capita
consumption of 48.8 kg p.a.
The possibility of growth in cane availability in the future is limited because of nearly
constant cultivable area and increasing competition with other food and cash crops;
45
stagnant farm yields; small landholding size further getting fragmented; lack of basic
research in improved agricultural practices and ever increasing costs of agriculture.
With limited crop growth and increasing demand, Indian sugar balances may turn
from surplus to shortages as it may not be able to balance demand from domestic
production year after year.
Induced cyclicality: Domestic sugar sector is always impacted by the induced
cyclicality of high sugar prices leading to payment of higher cane prices which in turn
leads to increase in production at the cost of other crops. This translates into higher
sugarcane production and higher sugar production resulting in lower sugar prices
affecting the ability of the mills to pay to farmers and creation of arrears. High arrears
cause a fall in cane cultivation in subsequent period, and the cycle restarts all over
again.
Trends in Indian sweetener/sugar production and consumption
In addition to the economic cycle, outline above, natural cycles, such as climate
variation, water availability and pest attacks, also affect sugar cane production. In the
current sugar cycle, production of sugarcane was affected on account of higher
realizations from other food crops such as wheat, paddy and oil. With two years of
5
10
15
20
25
30
35
40
1980-81
1982-83
1984-85
1986-87
1988-89
1990-91
1992-93
1994-95
1996-97
1998-99
2000-01
2002-03
2004-05
2006-07
2008-09
2010-11
Sugar Consumption Sugar production Sweetener Consumption Total Sweetener production
46
excessive sugarcane/sugar production, the cycle is turning into lower production in the
sugar year 2008-09. With rising consumption and linkages with world sugar markets,
these cycles are becoming shorter and more volatile.
Sugar price and stock to use ratio: Like any commodity, the price of sugar too is
determined by demand-supply dynamics. The demand for sugar has been more or less
inelastic, with such factors as population growth and per capita income influencing it.
However, supply is affected by cyclicality and seasonality of production. There has
been an inverse correlation between price of sugar and stock to use ratio at the end of
each sugar year. Domestically, season end stock to use ratio of less than three months
consumption is considered low and free sugar price could be showing improvement
with falling stock levels.
Sugar Year Consumption (mmt) Stock use Ratio (%)(at end of season)
Delhi free sale sugar price per qtl (Rs)
2001-02 16.78 67.4 14782002-03 18.38 63.2 12992003-04 17.29 49.1 15002004-05 18.50 25.8 17872005-06 18.50 19.6 19532006-07 21.00 43.8 15672007-08 22.50 35.9 1655
Source: ISMA handbook/ monthly data compilation
In the recent past, to meet sugar demand in the years when stock to use ratio had been
lower, the country resorted to import of white or raw sugars.
Government Policy measures: A number of policy measures have been initiated by the
union/state governments which impacted this year’s operations in the sugar industry.
Sugarcane pricing issues in Uttar Pradesh remained the major cause of disagreement
between the state and millers. The state advised price (SAP) of Rs. 125 per qtl for the
2007-08 (for general varieties), has been challenged initially with Hon’ble Allahabad
High Court and thereafter with the Hon’ble Supreme Court on the rationality of non
47
consultation process and arbitrariness for fixation of cane price by the state
government. The court fixed an interim price of Rs. 110 per qtl instead. The matter is
still sub judice. Other policy issues initiated/implemented are:
Fixation of SMP at Rs. 81.18 per qtl linked to basic recovery of 9% with a premium of
Rs. 0.90 per every 0.1 point increase.
Increase in the rate of cess on sugar under SDF Act from Rs. 14 to Rs. 15 per qtl w.e.f.
January 1, 2008, and to Rs. 24 per qtl w.e.f March1, 2008.
Buffer stock of 5 mmt created in 2006-07. This has since been dismantled.
The E5 (5% blend of Ethanol with petrol) programme continued across the country
with few exceptions. The plan to increase it to E10 (10% blend) from October 2008
has been deferred. There has not been any change in ex factory purchase price of
ethanol of Rs. 21.50 per litre.
Transport subsidy of Rs. 1350/1450 per MT for sugar export has been introduced up to
September 2008.
The UP Government did not reformulate the sugar incentives policy, after its
premature withdrawal in May 2007 (Sugar industry promotion policy 2004-08) and
benefits promised in the policy remained unrealized. The matter has been referred to
the Hon’ble Allahabad High Court for resolution and is presently sub judice. In
respect of sugar year 2008-09, the state has fixed SAP of Rs. 140/- per qtl (for general
variety), which has been challenged in the Hon’ble Allahabad High Court.
Future outlook: Based on updated industry estimates, sugar production in the 2008-09
season is expected to be lower at 20 mmt on account of a smaller sugarcane crop, fall
in farm yields and initial estimates of sugar recoveries. These estimates have been
48
revised downward from 22 mmt (initial estimates endorsed by GOI). For the 2008-09
season, a large number of cane farmers have diverted to the cultivation of other
food/cash crops with changing farm economics. The reported carryover stocks from
the 2007-08 season at 10.5 mmt still show a healthy position. However, it is felt that
the country may need stock adjustment in the opening inventory of 2008, with actual
stocks being lower than the stocks reported. Taking this into account, the carry over
stock position by the end of ensuing sugar season may lead to a situation where the
season end stock to use ratio falls below the comfort level of three months. After three
years of record surpluses, the sugar cycle is now moving into deficit, having a positive
impact on sugar prices.
Utilization of molasses for the production of ethanol not only provides value-addition
to the by product, it can also ensure better price stability and price realization of
molasses for the sugar mills. This will improve the viability of the sugar mills, which
will in turn benefit cane growers. Further, cogenerated power is emerging as the
strongest revenue and profit generator for the mills. Availability of sugarcane and its
optimum utilization in the form of ethanol/power/plant utilization factor would be the
major revenue drivers for sugar industry going forward. Such flexibility has become
very relevant in the current scenario of economic liberalization and more particularly,
as a means to correct the aberrations in sugar production.
Alcohol/ ethanol usage and balancing: Energy security and environmental concerns
are motivating adoption of ethanol bio-fuel globally. Ethanol fuel demand is likely to
grow exponentially in the future. Most of the leading countries have mandated ethanol
doping at different per cent levels, in all commercial automobile fuels over the long
term. An increase in the demand of ethanol will result in lower sugar supplies. As
49
more cane would be diverted to ethanol, sugar prices would rise.
During 2007-08, out of the total alcohol produced in India, around 33% was used for
drinking purposes, and almost a similar amount was consumed by the chemical
industry as feed stock, leaving around one third for the fuel ethanol. If the trend
continues, and E5 is implemented fully, going forward there may be a gap in demand
and supply. With gasoline demand of 11.6 mmt in 2006-07, the requirement of ethanol
at 5 per cent blending is expected to be over 650 million litres. The sugar industry has
reiterated its commitments that it will not be lacking in meeting the ethanol demand by
the petroleum companies.
Current demand for alcohol for manufacturing potable alcohol is estimated at 1.2 bn
bulk litres with an annual growth rate of 9 to 10% p.a. With the increase in the
population in the drinking age and improvement in disposable income, this growth in
consumption will increase in future. Further, the use of alcohol for chemical industry
with a base consumption of 700 mn bulk litres (estimate for 2006-07) is growing by 5
to 6% p.a. Thus, with the overall demand of 2.50 bn bulk liters of alcohol for all the
three major consumption streams, going forward, India may find it difficult to meet its
alcohol demand from domestic supply. In India, almost all the alcohol is derived for
sugarcane molasses.
Uttar Pradesh Sugar Industry is one of the largest sugar industries in the Indian
economy. The lavish measures in form of new promotional policies for the Uttar
Pradesh sugar industry by the state government of Uttar Pradesh was introduced at a
time when it was much needed to further boost the growth of the Uttar Pradesh sugar
industry. The improvements in the plant capacity and the introduction of new
techniques which enables the optimization of the existing plant capacities has the
50
further made the growth definite.
With the new promotional policies of the Uttar Pradesh sugar industry, the investors
have already starting eying the future prospects. There are 20 more sugar processing
units are coming up as a part of Uttar Pradesh sugar industry. The existing companies
under the Uttar Pradesh sugar industry are planning an investment pertaining to
expansion of about Rs 4,000 crore. At present the major companies in the Uttar
Pradesh sugar industry are Balrampur Chini, Simbhaoli Sugars Ltd., Bajaj Hindusthan
Ltd., etc. A batch of Brownfield and Greenfield expansion projects has already started
their activities of crushing cane. The increase in the capacity would help the Uttar
Pradesh sugar industry to churn out an extra 140,000 tons of crushed cane everyday to
the existing 2.5 million tons of sugar produced within a few years time. The total sugar
production under the Uttar Pradesh sugar industry would lead to 7.5 million tons,
making Uttar Pradesh the biggest manufacturer of sugar in India.
The Uttar Pradesh sugar industry has a bright future as one of the prospective players
in the global sugar market. The demand for sugar across the world has been growing
exponentially. The Uttar Pradesh sugar industry with its capacity can cater to this
international demand. The advantages of the Uttar Pradesh sugar industry are that the
cost of production is quite low and the climatic conditions and the conditions of the
soil are favorable to the sugarcane production. The region of India where the state of
Uttar Pradesh lies is one of the most fertile lands in India called the 'doab'. This is an
extremely fertile belt of lands between the rivers Ganges and Jamuna. To boost the
production of the Uttar Pradesh sugar industry, the government of Uttar Pradesh is
likely to set up a research and development unit which would develop better quality
sugarcane plants to have better yield and diseases-resistant crops to ensure that the
51
industry has a sustainable growth. The geographical position of the state of Uttar
Pradesh is one of the key advantages as it is very easy to access. With all these
developments the Uttar Pradesh sugar industry can meet the increasing domestic
demands in India, which due to the improvements in the economic conditions and the
rise in the general income level. The present consumption of sugar is nearly 19 mt
annually and it may go up to 24 MT on a yearly basis.
At present, the situation of the Indian sugar production can improve with all these
measures. In the financial year of 2004-2005, India had to import 8.89 lakh tons of
sugar from different countries due to the huge decline in the national sugar production.
These measures would have a long term effect on the sugar production of the state and
therefore of the entire country.
Sugar Industry in India is well developed with a consumer base of more than billions
of people. It is also the second largest producer of sugar in the world.
There is around 45 millions of sugar cane growers in India and a larger portion of rural
labourers in the country largely rely upon this industry. Sugar Industry is one of the
agricultural based industries. In India it is the second largest agricultural industry after
textile industry.
Statistics on Sugar Production
As to the statistics there were a total number of 571 sugar factories in India as on
March 31, 2005 compared to 138 during1950-51. These 571 sugar mills produce a
total quantity of 19.2 million tones (MT). Sugar production in India increased from
15.5 MT in 1998-99 to 20.1 MT in 2002-03.
Department of Agriculture and Co-operation, sugarcane production in 2004-05 is
estimated at 232.3 MT from 237.3 MT in 2003-04. Sugarcane production is expected
52
to reach 257.7 MT in 2005-06.
Sugar Production In states
The following table shows level of sugar production (In Lakh Tonnes) in Indian
States:
State 2002-03 2003-04 2004-05 Estimated
Uttar Pradesh 58.74 46.08 50.32
Maharashtra 61.64 31.99 22.29
Karnataka 17.98 11.57 13
Tamil Nadu 17.04 11.9 9.84
Andhra Pradesh 11.88 8.81 9.75
Gujarat 12.38 10.77 8.32
Haryana 5.99 5.86 4.03
Uttaranchal 4.59 3.93 3.82
Punjab 5.11 3.88 3.37
Bihar 4.21 2.77 2.77
Madhya Pradesh 0.85 0.94 0.85
Other 0.91 1.09 1.58
The sugar production in the states largely depends upon monsoon. From 1998-03 good
monsoon resulted a larger production of sugar in the country.
Sugar Pricing:
Government of India fixes Statutory Minimum Price (SMP) for sugarcane according
to Clause 3 of the Sugarcane Order. This statutory Minimum Price is designed through
the consent of Commission for Agricultural Coast and Prices (CACP) and respective
state Governments. For the year 2004-05, the rate was fixed at Rs. 74.50 per quintal
with a basic recovery of 8.5%.
INDIAN GOVERNMENT ON SUGAR INDUSTRY
The following policy initiatives are taken to boost the Sugar industry:
Government declared the new policy on August 20, 1998 with regards to licenses
53
for new factories, which shows that there will be no sugar factory in a radius of 15 km.
Setting up of Indian Institute of Sugar Technology at Kanpur is meant for
improving efficiency in the industry.
In the year 1982, the sugar development fund was set up with a view to avail loans
for modernization of the industry.
PRODUCT PROFILE
SUGAR:
BRAND : KASHIPURE
With the belief that the Indian consumer today is as quality and health conscious as any
other consumer today the world over, Kashipur Sugar Mills made an initiative to produce
a sugar comparable to the high standards of the western countries, in India. Kashipur
embarked on the project in 1996, under the aegis of the Sugar Technology Mission to
make sugar that would be sparkling white, pure and healthier. Kashipur perfected the
technique and the result was India's first double refined sulphurless sugar sold under it’s
brand Kashipure.
54
Kashipure is a better sugar simply because its processing continues long after that of
ordinary sugar has stopped.
• The secret behind Kashipure's purity is the unique Defeco Remelt Process, in
which the sugar after it has crystallized is melted all over again and all the impurities are
removed without the use of sulphur.
• Since no sulphur is used in the manufacturing of Kashipure sugar, it meets even
the strict standards of the European Union on sulphur content.
• The double refined Kashipure sugar has no impurities, so its crystals have natural
translucent white colour and don't require bleaching with sulphur-dioxide.
• Kashipure is packed under a controlled environment, untouched by hand, assuring
impeccable hygiene.
POWER
COGENERATION CAPACITY : 145 MW
(80 MW GRID INTERACTIVE)
BAGASSE, the residual fiber of sugarcane after crushing and extraction, is a valuable
by-product generated during the sugar manufacturing process. It has high calorific value
and is therefore used to generate steam and thereby electricity, which is a conventional
thermal alternative and eliminates emission of green house gases.
55
In 1994, Kashipur was the first sugar company in India to start eco-friendly cogeneration
at one of it’s units, with a low project outlay as compared to conventional power plants.
Conventionally, this was restricted to providing captive power in order to meet the
energy requirements of the sugar factory. However, Kashipur was one of the first to
realize the tremendous potential it had towards reducing the power deficit, by supplying
to the grid, thereby contributing to the bio-energy effort undertaken by the country.
An additional benefit of using bagasse is that it is a renewable source of fuel and does
not contribute to Greenhouse gasses as the sugarcane plantation consumes more carbon
dioxide than that generated in burning bagasse. Today, the Group’s combined co-
generation capacity stands at 145 MW with 80 MW of grid interactive power.
Kashipur is the first in the world to install 105 kg.cm2 boiler and turbine in its sugar
division, which has increased efficiencies in bagasse usage and made it perhaps the most
efficient cogeneration unit in the world. Kashipur additionally installed energy saving
devices which would further increase bagasse savings. This saving would enable the
company to run its power plants without external bagasse purchases. Power generation in
non-sugar season as well, will result in consistent cash inflows.
Kashipur was the first sugar company in Uttar Pradesh, which was allowed export of
power under ‘Open Access’ (during off-season), from 1st October, 2009, resulting in
higher realizations.
ETHANOL
CAPACITY : 270 KL Per Day
Ethanol is a generic name for Ethyl Alcohol which is a product of sugarcane molasses
and juice, prepared by fermentation and distillation processes. It is a volatile, flammable
56
and colourless liquid, widely used as a solvent of substances intended for human contact
or consumption, including fragrances, flavoring, colouring and medicines. When
blended, as an additive with fuel for motor vehicles, it is known as Motor Fuel Grade
Alcohol or Power Alcohol. It can be blended with petrol in varying quantities up to any
extent depending upon the technology of the engine. Up to 15% blend no modifications
are required in the engines.
Usage of ethanol-blended gasoline began in the late 1970s. Environmentally, the use of
ethanol blends has assisted in reducing carbon monoxide emissions. In the United States,
one out of every eight gallons of gasoline sold contains ethanol. Most of this ethanol is
purchased as blends of 10% ethanol and 90% gasoline, known as E10, and is used as an
octane enhancer to improve air quality.
In India we are presently using E5 that is, 5% ethanol blend with gasoline but a
government order for 10% blend is expected in the near future.
A SUGAR INDUSTRY PERSPECTIVE & ETHANOL PRODUCTION
Most sugar companies in India are evolving into integrated players as diversification into
distillery, ethanol and power has become possible. This has improved the demand for
molasses and ensures better economics.
The Government of India has made blending of 5% Ethanol in motor vehicle fuels,
compulsory all over India. This directive has provided sugar mills the opportunity to
implement forward integration.
A 5% ethanol blend on an all-India basis would require around 500 million liters. The
current installed capacity would be adequate to meet this requirement as also for E10
57
blend, even after fully meeting the requirement of the chemical industry and potable
sectors, as India is the second largest producer of sugar in the world.
Ethanol blended fuels are advantageous due to the following characteristics:
Renewable source of energy
Renewable source of energy
Use Molasses which is readily available and is a by-product of the sugar manufacturing
process
Diversifies the Sugar Industry
Utilizes industrial installed capacity, improving the economy of the industry.
Energy security, trade balance and risk reduction.
Reduce use of gasoline and ensures less dependence on imports of oil
Market opportunity for agricultural crops
Rural economic development and boost to the agricultural sector
Environmental benefits (reduced carbon dioxide and carbon monoxide emission. It does
not contribute to the harmful greenhouse gasses)
Displaces dangerous and environmentally damaging components in gasoline, such as
benzene.
India presently has an installed capacity of over 3,000 million liters per annum but is
producing less than 50% of installed capacity.
58
CHAPTER 3
59
OBJECTIVE OF THE STUDY
60
OBJECTIVE OF THE STUDY
Objective of the study:
To understand the cash inflow and outflow of the organization
To compare the cash inflow and outflow of the organization with the help of two
years.
To compare the actual and budgeted cash inflow and outflow of the organization.
Scope of the study:
It will helpful to understand the cash inflow and outflow of the organization
It will helpful to compare the cash inflow and outflow of the organization with the
help of two years.
It will also helpful to compare the actual and budgeted cash inflow and outflow of
the organization.
I will be able to learn a lot of theory is available of banking sector from various
acts, banking sector besides many expert have also contributed among them main
contributors are :- this report will be application in any organization.
Cash management is ultimately about cash flow -- and very few small businesses are
awash in cash. Even successful, growing companies are vulnerable to cash flow problems
because they tend to add employees and inventory rapidly. This may quickly deplete the
company coffers and lead to cash shortages.
Because having cash at the right time is so important, entrepreneurs must pay close
attention to cash management.
Here are some tips for saving money and managing cash flow:
Make financial projections. Forecast both expenses and anticipated revenues for at least
the coming year. This will help you predict when you're likely to have cash and when
you're likely to need it. You should also maintain a cash reserve if possible.
61
Create contingency plans. Have several budget projections, including best case and
worst case scenarios, and think about how you might respond. In the event sales don't
take off as expected or there's some unforeseen problem, you'll be better prepared.
Keep a lid on spending. One of the most common problems with new businesses is the
owners' tendency to spend freely. There's no need to have lavish offices or expensive
furniture. Remember, you're in this for the long haul: You should try to get as much value
as possible out of every transaction, whether you're leasing office space or stocking the
company kitchen.
Keep inventory low. Don't stock inventory based on your fantasy of what you think
you'll be selling in six months. Instead, stock only what you know you can sell in the
short term.
Lease, don't buy. Another good way to conserve cash is to lease equipment instead of
buying it. Although leasing can be more expensive in the long run, it helps you avoid
laying out a lot of capital all at once for things like office furniture, computers and
copiers.
Delay hiring employees. Try to improve the productivity of current employees (without
burning them out), use independent contractors and consider outsourcing certain
nonessential functions. Employees are expensive, so you should put off adding
permanent hires as long as you can -- or at least until you're earning the revenue to
support them.
Go without a salary. Some experts recommend stockpiling a year's worth of living
expenses before going into business. Admittedly, this may be difficult, but you should at
least avoid paying yourself an excessive salary. Too many entrepreneurs waste cash by
paying themselves big salaries without the revenues to justify them.
62
Speed up customer payments. Try to get customers to pay on time or early, if possible.
Offer incentives like discounts or late fees, and adopt more effective collection
techniques for deadbeat customers.
Don't be wasteful. Recycle and reuse what you can -- for example, boxes, computer
discs and file folders. The savings may not be large on any given item, but they can add
up over time.
63
CHAPTER 4
RESEARCH METHODOLOGY
64
RESEARCH METHODOLOGY
Research Objective: This research is basically done for the comparison b/w product
after by different broking houses.
Research design: For the study, exploratory design was undertaken to classify the
investors on their risk and return profile.
Sampling method- for this research work I have chosen non- probability convenience
sampling method. I have chosen this method because time for the completion of the work
is limited and also managers and employees are not available all the time.
Area of study- KASHIPUR SUGAR MILLS
Duration – 2 months.
Data collection method- I have used both primary and secondary sources of data
collection .
For primary I have used questionnaire & for secondary I have used internet, magazines
and newspaper etc.
Research Design
Research design is simply the framework or plan for a study, used as a guide in collecting
and analyzing data. There are three types of Research Design:-
1.Exploratory Research Design:- The major emphasis in exploratory
Research design is on discovery of ideas and insights.
2.Descriptive Research Design:- The Descriptive Research Design
Study is typically concerned with determining the frequency with which something
occurs or the relationship between two variables.
3.Casual Research Design:- A Casual Research Design is concerned
With determining cause and effect relationship.
Sampling Design
65
(a) Population:
Element: Businessmen and Servicemen in Kashipur.
Extent: KASHIPUR SUGAR MILL
Time:
(b)Sampling Unit: -Employees of Kashipur Sugar Mill
(e) Sampling Method:-
There are two methods of sampling:-
1. Probability Sampling: It is based on the concept of random selection of a controlled
procedure that assures that each Population element is gives a non-zero chance of
selection. Probability Sampling is of following types:
Simple Random
Systematic
Cluster
Stratified
Double
2. Non-Probability Sampling: Non probability sampling is non-random and subjective.
That is each member does not have a known non zero chance of being included. Types of
Non-Probability Sampling
1. Convenience
2. Judgement
3. Quota
Researcher selects the sample as per their convenience.
Data Collection Method
Data for the present study is collected from two sources:
Primary sources:
66
The data are collected directly from the universe by conducting interviews, etc. these are
the original sources from which the researcher directly gathers data which are not
previously referred.
Secondary sources:
The data are collected from the secondary sources such as magazines, journals, etc.
These sources consist of already variable data in the form of statements, and reports,
which may include sensory reports, financial statements of the company, reports of
governments departments, etc.
2- Data Approach- There are several Approach of data collection. The primary
sources of data collection are done through –
Observation
Interviewing
Stimulation
Mail survey
Projective techniques
Observation:
Observation is a mode of primary data collection through which we directly get the data
from a universe and based on that data one can carry on the research.
Interviewing:
Interviewing is another mode of direct data collection, which provides complete
information about the universe.
Stimulation:
Stimulation is a technique of performing experiments on the model of a particular
system. The experiment is done on the model and not on the real system because the
latter will be inconvenience and expansive.
67
Research Diagram:
Figure 2: Research Process Diagram
Introduction to the problem
Review concepts & theories
Review Empirical Evidences
Formulate Hypothesis
Design Research (including sample design)
Collect DataFinding & Analysis InterpretationSuggestion
Review of literature
68
CHAPTER 5
FINDINGSAND
ANALYSIS
69
FINDINGS AND ANALYSIS
CASH FLOW STATEMENTYEAR : 03-04FORM NO : 25DIVISION : KASHIPUR SUGAR MILLS LTD.
DESCRIPTION ACTUAL BUDGET FLASH ACTUAL2002-03 2003-04 2003-04 2003-04
INFLOW (OPERATIONS)DIRECT AGAINST ADVANCESNON SSD 13435 17650 29792 32166RECEPT AGAINST CURRENT DESP.1) SSD. Incl. Libya. 19482 905 4420 31092) NON SSD 77356 94889 68390 68062SUB – TOTAL 110273 113544 102602 103337
EXPERT INSENTIVE 3310 2817 2891 2696OTHER RECIPT 5062 2125 2808 3490SUB – TOTAL 8372 4942 5699 6186
CASH INFLOW (OPERATION) 118645 118486 108301 109523OUTFLOW (OPERATIONS)1. METERIAL (INDIGENOUS)1) SSD 6528 4250 6765 96102) NON SSD 10440 9836 12498 119612. MATERIAL (IMPORTED) 26657 25343 20163 197643. CUTOM DUTY 1802 1702 1622 16024. PMT. TO SUB-CONT (FAB) 849 1150 1045 1096SUB- TOTAL 46276 42281 42093 44033
PERSONNEL PAYMENTS 23999 25187 23744 24423SALES TAX 2915 3970 3313 3186EXCISE DUTY 8599 10866 9456 9310OTHER EXPENSES 1) SSD 2099 2524 2438 2332 2) NON SSD 4853 5983 6839 6793INTEREST:DIRECT (OTHERS) 44 50 65 56ALLOCATION FROM CORP. OFF -306 1000 -411 -530
EXCHANGE VARIATION 485 0 0 0SUB-TOTAL 42688 49580 45444 45570
TOTAL OUTFLOW (OPERATIONS) 88964 91861 87537 89603OPERATING SUR./DEFICIT 29681 26625 20764 19920INFLOW NON- OPERATIONS 0 0 0 0SUB TOTAL (INFLOW NON- OPERATIONS)
0 0 0 0
OUT FLOW (NON-OPERATION)SHARE OF TAX & DIV. & OTHERS 2863 4562 6975 6975CAPITAL EXPENDITURE 7606 7390 4975 4740REPMT. OF LOAN (DIRECT) 0 0 2170 91PAYMENT ON BEHALF OF OTHERS 1345 1473 1153 1110OUT FLOW (NON OPERATION) 11814 13425 15273 -12916TOTAL OUT FLOW (OPERATION) 100778 105286 102810 102519OVERALL SUR./DEFICIT 17867 13200 5491 7004
70
CASH FLOW STATEMENT
YEAR : 04-05FORM NO : 25DIVISION : KASHIPUR SUGAR MILLS LTD.
DESCRIPTION ACTUAL BUDGET FLASH ACTUAL2003-04 2004-05 2004-05 2004-05
INFLOW (OPERATIONS)DIRECT AGAINST ADVANCESNON SSD 32166 15950 21994 25524RECEPT AGAINST CURRENT DESP.1) SSD. Incl. Libya. 3109 50592 49804 497352) NON SSD 68062 72831 79223 84619SUB – TOTAL 103337 139373 151021 159878
EXPERT INSENTIVE 2696 2033 1204 904OTHER RECIPT 3490 2090 3117 3155SUB – TOTAL 6186 4123 4321 4059
CASH INFLOW (OPERATION) 109523 143496 155342 163937OUTFLOW (OPERATIONS)1. METERIAL (INDIGENOUS)1) SSD 9610 7260 12558 126142) NON SSD 11961 14163 17269 183032. MATERIAL (IMPORTED) 19764 41430 48051 499883. CUTOM DUTY 1602 2420 1556 13604. PMT. TO SUB-CONT (FAB) 1096 2400 1490 1512SUB- TOTAL 44033 67673 80924 83777
PERSONNEL PAYMENTS 24423 25550 25057 24788SALES TAX 3186 4313 3271 3261EXCISE DUTY 9310 1640 8125 7985OTHER EXPENSES 1) SSD 2332 2552 3162 3345 2) NON SSD 6793 6582 6822 6880INTEREST:DIRECT (OTHERS) 56 95 70 51ALLOCATION FROM CORP. OFF -530 322 -400 -680
EXCHANGE VARIATION 0 0 0 14SUB-TOTAL 45570 41054 46107 45644
TOTAL OUTFLOW (OPERATIONS) 89603 108727 127031 129421OPERATING SUR./DEFICIT 19920 34769 28311 34516INFLOW NON- OPERATIONS 0 0 0 0SUB TOTAL (INFLOW NON- OPERATIONS) 0 0 0 0
OUT FLOW (NON-OPERATION)SHARE OF TAX & DIV. & OTHERS 6975 8940 6588 8074CAPITAL EXPENDITURE 4740 4666 2016 2012REPMT. OF LOAN (DIRECT) 91 166 118 117PAYMENT ON BEHALF OF OTHERS 1110 1620 986 928OUT FLOW (NON OPERATION) -12916 -15392 9780 -11131TOTAL OUT FLOW (OPERATION) 102519 124119 136739 140552OVERALL SUR./DEFICIT 7004 19377 18603 4587
71
CASH FLOW STATEMENT
YEAR : 05-06FORM NO : 25DIVISION : KASHIPUR SUGAR MILLS LTD.
DESCRIPTION ACTUAL BUDGET FLASH ACTUAL2004-05 2005-06 2005-06 2005-06
INFLOW (OPERATIONS)DIRECT AGAINST ADVANCESNON SSD 25524 18650 21342 20730RECEPT AGAINST CURRENT DESP.1) SSD. Incl. Libya. 49735 19745 20326 203962) NON SSD 84619 142871 1149091 118862SUB – TOTAL 159878 181266 156569 159988
EXPERT INSENTIVE 904 4478 1749 2108OTHER RECIPT 3155 2580 3786 4015SUB – TOTAL 4059 7058 5535 6123
CASH INFLOW (OPERATION) 163937 188324 162104 166111OUTFLOW (OPERATIONS)1. METERIAL (INDIGENOUS)1) SSD 12614 10250 17150 183052) NON SSD 18303 24874 33408 345742. MATERIAL (IMPORTED) 49988 48605 37038 365793. CUTOM DUTY 1360 2480 2675 26164. PMT. TO SUB-CONT (FAB) 1512 2800 2560 2528SUB- TOTAL 83777 89009 92831 94602
PERSONNEL PAYMENTS 24788 26974 27857 27490SALES TAX 3261 6801 4378 4178EXCISE DUTY 7985 18444 10228 10304OTHER EXPENSES 1) SSD 3345 3581 3265 2511 2) NON SSD 6880 8065 7620 7196INTEREST:DIRECT (OTHERS) 51 120 70 56ALLOCATION FROM CORP. OFF -680 -200 -500 -1007
EXCHANGE VARIATION 14 0 0 0
SUB-TOTAL 45644 63785 52918 50728
TOTAL OUTFLOW (OPERATIONS) 129421 152794 145749 145330OPERATING SUR./DEFICIT 34516 35530 16355 20781INFLOW NON- OPERATIONS 0 0 0 0SUB TOTAL (INFLOW NON- OPERATIONS)
0 0 0 0
OUT FLOW (NON-OPERATION)SHARE OF TAX & DIV. & OTHERS 8074 11678 127078 12710CAPITAL EXPENDITURE 2012 8730 2392 2141REPMT. OF LOAN (DIRECT) 117 242 195 300PAYMENT ON BEHALF OF OTHERS 928 1750 996 1043OUT FLOW (NON OPERATION) -11131 -22400 -16290 -16194TOTAL OUT FLOW (OPERATION) 140552 175194 162039 161524OVERALL SUR./DEFICIT 23385 13130 65 4587
72
CASH FLOW STATEMENT
YEAR : 06-07FORM NO : 25DIVISION : KASHIPUR SUGAR MILLS LTD.
DESCRIPTION ACTUAL BUDGET FLASH ACTUAL2005-06 2006-07 2006-07 2006-07
INFLOW (OPERATIONS)DIRECT AGAINST ADVANCESNON SSD 20730 17980 43090 50856RECEPT AGAINST CURRENT DESP.1) SSD. Incl. Libya. 20396 3799 2742 29462) NON SSD 118862 178266 171832 161272SUB – TOTAL 159988 200045 217664 215074
EXPERT INSENTIVE 2108 692 464 464OTHER RECIPT 4015 3240 4045 4134SUB – TOTAL 6123 3932 4509 4598
CASH INFLOW (OPERATION) 166111 203977 222173 219672OUTFLOW (OPERATIONS)1. METERIAL (INDIGENOUS)1) SSD 18305 18020 19650 211762) NON SSD 34574 30925 35583 350072. MATERIAL (IMPORTED) 36579 43570 41040 409073. CUTOM DUTY 2616 2570 3691 36774. PMT. TO SUB-CONT (FAB) 2528 3000 2596 2638SUB- TOTAL 94602 98085 102560 103405
PERSONNEL PAYMENTS 27490 29081 28261 28216SALES TAX 4178 8236 6849 6750EXCISE DUTY 10304 13697 11491 11633OTHER EXPENSES 1) SSD 2511 3706 3441 3198 2) NON SSD 7196 8589 9244 9343INTEREST:DIRECT (OTHERS) 56 110 118 108ALLOCATION FROM CORP. OFF -1007 -500 -2000 -2000
EXCHANGE VARIATION 0 0 0 0SUB-TOTAL 50728 62919 57404 57248
TOTAL OUTFLOW (OPERATIONS) 145330 161004 159964 160653OPERATING SUR./DEFICIT 20781 42973 62209 59019INFLOW NON- OPERATIONS 0 0 0 0SUB TOTAL (INFLOW NON- OPERATIONS)
0 0 0 0
OUT FLOW (NON-OPERATION)SHARE OF TAX & DIV. & OTHERS 12710 17441 15613 15612CAPITAL EXPENDITURE 2141 10750 6084 6363REPMT. OF LOAN (DIRECT) 300 490 316 320PAYMENT ON BEHALF OF OTHERS 1043 1150 2015 1895OUT FLOW (NON OPERATION) -16194 -29831 24028 -24190TOTAL OUT FLOW (OPERATION) 161524 190835 183992 184843OVERALL SUR./DEFICIT 4587 13142 38181 34829
73
CASH FLOW STATEMENT
YEAR : 07-08FORM NO : 5.1DIVISION : KASHIPUR SUGAR MILLS LTD.
DESCRIPTION ACTUAL BUDGET ACTUAL APPOVED2006-07 2007-08 2007-08 BE 2008-09
INFLOW (OPERATIONS)DIRECT AGAINST ADVANCESNON SSD 50856 40050 59338 57800RECEPT AGAINST CURRENT DESP.1) SSD. Incl. Libya. 2946 3419 2837 13942) NON SSD 161272 216954 182316 284978SUB – TOTAL 215074 260423 244487 344172
EXPERT INSENTIVE 464 750 279 750OTHER RECIPT 4143 4050 4085 4225SUB – TOTAL 4598 4800 4364 4975
CASH INFLOW (OPERATION) 219672 265223 248851 349147OUTFLOW (OPERATIONS)1. METERIAL (INDIGENOUS)1) SSD 21176 20150 24179 225412) NON SSD 35007 31280 41556 400752. MATERIAL (IMPORTED) 40907 51070 37371 960583. CUTOM DUTY 3677 5250 6603 145104. PMT. TO SUB-CONT (FAB) 2638 3300 3431 3800SUB- TOTAL 103405 111050 113140 176984
PERSONNEL PAYMENTS 28216 33173 32151 38590SALES TAX 6750 9100 5234 7300EXCISE DUTY 11633 20237 13883 23270OTHER EXPENSES 1) SSD 3198 4177 3410 4348 2) NON SSD 9343 12600 12514 16021INTEREST:DIRECT (OTHERS) 108 170 130 219ALLOCATION FROM CORP. OFF -2000 -2100 -3670 -3801
EXCHANGE VARIATION 0 0 -63 0SUB-TOTAL 57248 77357 63589 85947
TOTAL OUTFLOW (OPERATIONS) 160653 188407 176729 262931OPERATING SUR./DEFICIT 59019 76816 72122 86216INFLOW NON- OPERATIONS 0 0 0 0SUB TOTAL (INFLOW NON- OPERATIONS)
0 0 0 0
OUT FLOW (NON-OPERATION)SHARE OF TAX & DIV. & OTHERS 15612 20116 23228 23035CAPITAL EXPENDITURE 6363 20448 7720 22426REPMT. OF LOAN (DIRECT) 320 415 326 524PAYMENT ON BEHALF OF OTHERS 1895 1190 1718 1540OUT FLOW (NON OPERATION) -24190 -42169 -32992 -47525TOTAL OUT FLOW (OPERATION) 184843 230576 209721 310456OVERALL SUR./DEFICIT 34829 34647 39130 38691
74
Cash inflow (operation)Actual
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
0
50000
100000
150000
200000
250000
300000
actual
Series2
Series3
year
ca
sh
in
flo
w (
op
era
tio
n)
Interpretation: Cash inflow are rising every year with a slow pace .there hasn’t been any
steep rise after year 2003-2004.
Cash outflow (operation)Actual
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
020000400006000080000
100000120000140000160000180000200000
actual
Series2
Series3
year
tota
l ou
tflo
w(o
pera
tion
)
Interpretation: Cash outflow are rising every year with a sloe pace.there hasn’t been any
steep rise after year 2003-2004
75
Overall surplus/deficit (Actual)
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
05000
1000015000200002500030000350004000045000
actual
Series2
Series3
year
ov
era
ll s
ur/
de
fic
it
Interpretation: It is showing an irregular trend i.e steep rise &steep fall.In financial year
06 -07 rose sharkey however during current year in rise is slow.
In 05-07 it declined heavily but soon it ecovered dasticcally in 06 -07.
Cash inflow (budget)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-090
50000
100000
150000
200000
250000
300000
budget
Series2
Series3
year
ca
sh
infl
ow
(bu
dg
et)
Interpretation: Cash inflow (budget) are rising with a slow pace . there hasn’t been any
steep rise & don’t budget show in 2003-2004.
76
Total outflow (budget)
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
0
50000
100000
150000
200000
budget
Series2
Series3
year
tota
l ou
tflo
w (
bu
dg
et)
Interpretation: Total outflow are rising every year with a slow pace.there hasn’t been any
steep rise &don’t budget show in 2003-2004.
Overall surplus /deficit (budget)
77
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
05000
10000150002000025000300003500040000
budget
Series2
Series3
year
ove
rall
sur/
def
icit
(b
ud
get
)
Interpretation: company has the policy of spending more money every year as compare to
previous year.
CHAPTER 6
LIMITATION
78
LIMITATIONS
The study is based on secondary data.
There is no special arrangements for trainees.
Lack of time
Difficulties in the identification of the source
Employees does not create interest to give the data to the trainees
79
CHAPTER 7
SUGGESTIONS
80
SUGGESTION
No doubt SSD and its cash department are very good. They are performing their
functions in a very impressive way but if the company thinks about these following
points then the working will be better.
Staff of the cash department should be sufficient because the load always very much
there on them. So it will be good if organization increases its working force for their cash
department.
Cash section should not be very far away from other departments like finance department
which controls the cash section. So that employees would not have to face difficulties,
because every time they have to go there again and again.
Cash section should not be very small in size. Specially book keeping section. It should
not be very congested. So organization must provide enough space.
81
CHAPTER 8CONCLUSION
82
CONCLUSION
It is very difficult to elaborate all the work of cash section. But I have tried my level best
to cover all the work done by it.
This project was undertaken in order to know the effectiveness of cash section of finance
department of the company. I would like to conclude my project with these points:
Cash department is the backbone of the finance department and organization itself. All
money transactions are done through this department.
Cash department should be totally connected with corporate office. It works on the
instruction of corporate office. That is why the system is called centralized cash
management system.
All tools should be used by cash department & in a efficient and reliable way. Salary
disbursement, system should be marvelous and other tools like bank book, cash book,
voucher, cash draft etc. should be helpful to maintain account up to date and in a
systematic form.
Staff of cash section should be a mixture of youth & experience, knowledgeable and hard
working. They should perform their work efficiently with a team spirit. Environment of
cash department should be very cooperative.
So at last I can say it was a good experience. I learnt a lot through out my project and I
am sure that this knowledge will help me forever.
83
CHAPTER 9BIBLIOGRAPHY
84
BIBLIOGRAPHY
BOOKS:
I M Pandey “ Financial Management” Vikas Publishers
Agrawal J. D, “Education Finance: Facts & Fancies”, Finance India Vol II No.3,
Sept 1998, pp 321-338
Brigham F. Eugene, “Fundamentals of Financial Management,” Dryden Press
Brigham F. Eugene, Ehrhadt c. Michael, “Financial Theory and Practice”;
Thomson South Western
Bryant James W, “Financial Modeling in Corporate Management”, Wiley-
Interscience
Clark, John J., el, al, “Financial Management: A Capital Market Approach”,
Allyn Publications
Khan and Jain, “Financial Management”, Tata Mc Graw Hill Publications
Kuchhal S.C, “Financial Management: An Analytical & Conceptual Approach,
“Chaitanya Allahabad, 1980
Kulkarni, PV, Financial Management,” Himalaya, Bombay, 1983.
I.M. Pandey.Financial Management.
WEBLIOGRAPHY :
wikimapia.org/1233903/Kashipur-Sugar-Mills-Ltd
msn.bankbazaar.com/kashipur-sugar-mills-ltd/stock?scid=2687
85
CHAPTER 10APPENDIX
86
APPENDICES
CASH FLOW STATEMENTYEAR : 03-04FORM NO : 25DIVISION : KASHIPUR SUGAR MILLS LTD.
DESCRIPTION ACTUAL BUDGET FLASH ACTUAL2002-03 2003-04 2003-04 2003-04
INFLOW (OPERATIONS)DIRECT AGAINST ADVANCESNON SSD 13435 17650 29792 32166RECEPT AGAINST CURRENT DESP.1) SSD. Incl. Libya. 19482 905 4420 31092) NON SSD 77356 94889 68390 68062SUB – TOTAL 110273 113544 102602 103337
EXPERT INSENTIVE 3310 2817 2891 2696OTHER RECIPT 5062 2125 2808 3490SUB – TOTAL 8372 4942 5699 6186
CASH INFLOW (OPERATION) 118645 118486 108301 109523OUTFLOW (OPERATIONS)1. METERIAL (INDIGENOUS)1) SSD 6528 4250 6765 96102) NON SSD 10440 9836 12498 119612. MATERIAL (IMPORTED) 26657 25343 20163 197643. CUTOM DUTY 1802 1702 1622 16024. PMT. TO SUB-CONT (FAB) 849 1150 1045 1096SUB- TOTAL 46276 42281 42093 44033
PERSONNEL PAYMENTS 23999 25187 23744 24423SALES TAX 2915 3970 3313 3186EXCISE DUTY 8599 10866 9456 9310OTHER EXPENSES 1) SSD 2099 2524 2438 2332 2) NON SSD 4853 5983 6839 6793INTEREST:DIRECT (OTHERS) 44 50 65 56ALLOCATION FROM CORP. OFF -306 1000 -411 -530
EXCHANGE VARIATION 485 0 0 0SUB-TOTAL 42688 49580 45444 45570
TOTAL OUTFLOW (OPERATIONS) 88964 91861 87537 89603OPERATING SUR./DEFICIT 29681 26625 20764 19920INFLOW NON- OPERATIONS 0 0 0 0SUB TOTAL (INFLOW NON- OPERATIONS)
0 0 0 0
OUT FLOW (NON-OPERATION)SHARE OF TAX & DIV. & OTHERS 2863 4562 6975 6975CAPITAL EXPENDITURE 7606 7390 4975 4740REPMT. OF LOAN (DIRECT) 0 0 2170 91PAYMENT ON BEHALF OF OTHERS 1345 1473 1153 1110OUT FLOW (NON OPERATION) 11814 13425 15273 -12916TOTAL OUT FLOW (OPERATION) 100778 105286 102810 102519OVERALL SUR./DEFICIT 17867 13200 5491 7004
87
CASH FLOW STATEMENT
YEAR : 04-05FORM NO : 25DIVISION : KASHIPUR SUGAR MILLS LTD.
DESCRIPTION ACTUAL BUDGET FLASH ACTUAL2003-04 2004-05 2004-05 2004-05
INFLOW (OPERATIONS)DIRECT AGAINST ADVANCESNON SSD 32166 15950 21994 25524RECEPT AGAINST CURRENT DESP.1) SSD. Incl. Libya. 3109 50592 49804 497352) NON SSD 68062 72831 79223 84619SUB – TOTAL 103337 139373 151021 159878
EXPERT INSENTIVE 2696 2033 1204 904OTHER RECIPT 3490 2090 3117 3155SUB – TOTAL 6186 4123 4321 4059
CASH INFLOW (OPERATION) 109523 143496 155342 163937OUTFLOW (OPERATIONS)1. METERIAL (INDIGENOUS)1) SSD 9610 7260 12558 126142) NON SSD 11961 14163 17269 183032. MATERIAL (IMPORTED) 19764 41430 48051 499883. CUTOM DUTY 1602 2420 1556 13604. PMT. TO SUB-CONT (FAB) 1096 2400 1490 1512SUB- TOTAL 44033 67673 80924 83777
PERSONNEL PAYMENTS 24423 25550 25057 24788SALES TAX 3186 4313 3271 3261EXCISE DUTY 9310 1640 8125 7985OTHER EXPENSES 1) SSD 2332 2552 3162 3345 2) NON SSD 6793 6582 6822 6880INTEREST:DIRECT (OTHERS) 56 95 70 51ALLOCATION FROM CORP. OFF -530 322 -400 -680
EXCHANGE VARIATION 0 0 0 14SUB-TOTAL 45570 41054 46107 45644
TOTAL OUTFLOW (OPERATIONS) 89603 108727 127031 129421OPERATING SUR./DEFICIT 19920 34769 28311 34516INFLOW NON- OPERATIONS 0 0 0 0SUB TOTAL (INFLOW NON- OPERATIONS) 0 0 0 0
OUT FLOW (NON-OPERATION)SHARE OF TAX & DIV. & OTHERS 6975 8940 6588 8074CAPITAL EXPENDITURE 4740 4666 2016 2012REPMT. OF LOAN (DIRECT) 91 166 118 117PAYMENT ON BEHALF OF OTHERS 1110 1620 986 928OUT FLOW (NON OPERATION) -12916 -15392 9780 -11131TOTAL OUT FLOW (OPERATION) 102519 124119 136739 140552OVERALL SUR./DEFICIT 7004 19377 18603 4587
88
CASH FLOW STATEMENT
YEAR : 05-06FORM NO : 25DIVISION : KASHIPUR SUGAR MILLS LTD.
DESCRIPTION ACTUAL BUDGET FLASH ACTUAL2004-05 2005-06 2005-06 2005-06
INFLOW (OPERATIONS)DIRECT AGAINST ADVANCESNON SSD 25524 18650 21342 20730RECEPT AGAINST CURRENT DESP.1) SSD. Incl. Libya. 49735 19745 20326 203962) NON SSD 84619 142871 1149091 118862SUB – TOTAL 159878 181266 156569 159988
EXPERT INSENTIVE 904 4478 1749 2108OTHER RECIPT 3155 2580 3786 4015SUB – TOTAL 4059 7058 5535 6123
CASH INFLOW (OPERATION) 163937 188324 162104 166111OUTFLOW (OPERATIONS)1. METERIAL (INDIGENOUS)1) SSD 12614 10250 17150 183052) NON SSD 18303 24874 33408 345742. MATERIAL (IMPORTED) 49988 48605 37038 365793. CUTOM DUTY 1360 2480 2675 26164. PMT. TO SUB-CONT (FAB) 1512 2800 2560 2528SUB- TOTAL 83777 89009 92831 94602
PERSONNEL PAYMENTS 24788 26974 27857 27490SALES TAX 3261 6801 4378 4178EXCISE DUTY 7985 18444 10228 10304OTHER EXPENSES 1) SSD 3345 3581 3265 2511 2) NON SSD 6880 8065 7620 7196INTEREST:DIRECT (OTHERS) 51 120 70 56ALLOCATION FROM CORP. OFF -680 -200 -500 -1007
EXCHANGE VARIATION 14 0 0 0
SUB-TOTAL 45644 63785 52918 50728
TOTAL OUTFLOW (OPERATIONS) 129421 152794 145749 145330OPERATING SUR./DEFICIT 34516 35530 16355 20781INFLOW NON- OPERATIONS 0 0 0 0SUB TOTAL (INFLOW NON- OPERATIONS)
0 0 0 0
OUT FLOW (NON-OPERATION)SHARE OF TAX & DIV. & OTHERS 8074 11678 127078 12710CAPITAL EXPENDITURE 2012 8730 2392 2141REPMT. OF LOAN (DIRECT) 117 242 195 300PAYMENT ON BEHALF OF OTHERS 928 1750 996 1043OUT FLOW (NON OPERATION) -11131 -22400 -16290 -16194TOTAL OUT FLOW (OPERATION) 140552 175194 162039 161524OVERALL SUR./DEFICIT 23385 13130 65 4587
89
CASH FLOW STATEMENT
YEAR : 06-07FORM NO : 25DIVISION : KASHIPUR SUGAR MILLS LTD.
DESCRIPTION ACTUAL BUDGET FLASH ACTUAL2005-06 2006-07 2006-07 2006-07
INFLOW (OPERATIONS)DIRECT AGAINST ADVANCESNON SSD 20730 17980 43090 50856RECEPT AGAINST CURRENT DESP.1) SSD. Incl. Libya. 20396 3799 2742 29462) NON SSD 118862 178266 171832 161272SUB – TOTAL 159988 200045 217664 215074
EXPERT INSENTIVE 2108 692 464 464OTHER RECIPT 4015 3240 4045 4134SUB – TOTAL 6123 3932 4509 4598
CASH INFLOW (OPERATION) 166111 203977 222173 219672OUTFLOW (OPERATIONS)1. METERIAL (INDIGENOUS)1) SSD 18305 18020 19650 211762) NON SSD 34574 30925 35583 350072. MATERIAL (IMPORTED) 36579 43570 41040 409073. CUTOM DUTY 2616 2570 3691 36774. PMT. TO SUB-CONT (FAB) 2528 3000 2596 2638SUB- TOTAL 94602 98085 102560 103405
PERSONNEL PAYMENTS 27490 29081 28261 28216SALES TAX 4178 8236 6849 6750EXCISE DUTY 10304 13697 11491 11633OTHER EXPENSES 1) SSD 2511 3706 3441 3198 2) NON SSD 7196 8589 9244 9343INTEREST:DIRECT (OTHERS) 56 110 118 108ALLOCATION FROM CORP. OFF -1007 -500 -2000 -2000
EXCHANGE VARIATION 0 0 0 0SUB-TOTAL 50728 62919 57404 57248
TOTAL OUTFLOW (OPERATIONS) 145330 161004 159964 160653OPERATING SUR./DEFICIT 20781 42973 62209 59019INFLOW NON- OPERATIONS 0 0 0 0SUB TOTAL (INFLOW NON- OPERATIONS)
0 0 0 0
OUT FLOW (NON-OPERATION)SHARE OF TAX & DIV. & OTHERS 12710 17441 15613 15612CAPITAL EXPENDITURE 2141 10750 6084 6363REPMT. OF LOAN (DIRECT) 300 490 316 320PAYMENT ON BEHALF OF OTHERS 1043 1150 2015 1895OUT FLOW (NON OPERATION) -16194 -29831 24028 -24190TOTAL OUT FLOW (OPERATION) 161524 190835 183992 184843OVERALL SUR./DEFICIT 4587 13142 38181 34829
90
CASH FLOW STATEMENT
YEAR : 07-08FORM NO : 5.1DIVISION : KASHIPUR SUGAR MILLS LTD.
DESCRIPTION ACTUAL BUDGET ACTUAL APPOVED2006-07 2007-08 2007-08 BE 2008-09
INFLOW (OPERATIONS)DIRECT AGAINST ADVANCESNON SSD 50856 40050 59338 57800RECEPT AGAINST CURRENT DESP.1) SSD. Incl. Libya. 2946 3419 2837 13942) NON SSD 161272 216954 182316 284978SUB – TOTAL 215074 260423 244487 344172
EXPERT INSENTIVE 464 750 279 750OTHER RECIPT 4143 4050 4085 4225SUB – TOTAL 4598 4800 4364 4975
CASH INFLOW (OPERATION) 219672 265223 248851 349147OUTFLOW (OPERATIONS)1. METERIAL (INDIGENOUS)1) SSD 21176 20150 24179 225412) NON SSD 35007 31280 41556 400752. MATERIAL (IMPORTED) 40907 51070 37371 960583. CUTOM DUTY 3677 5250 6603 145104. PMT. TO SUB-CONT (FAB) 2638 3300 3431 3800SUB- TOTAL 103405 111050 113140 176984
PERSONNEL PAYMENTS 28216 33173 32151 38590SALES TAX 6750 9100 5234 7300EXCISE DUTY 11633 20237 13883 23270OTHER EXPENSES 1) SSD 3198 4177 3410 4348 2) NON SSD 9343 12600 12514 16021INTEREST:DIRECT (OTHERS) 108 170 130 219ALLOCATION FROM CORP. OFF -2000 -2100 -3670 -3801
EXCHANGE VARIATION 0 0 -63 0SUB-TOTAL 57248 77357 63589 85947
TOTAL OUTFLOW (OPERATIONS) 160653 188407 176729 262931OPERATING SUR./DEFICIT 59019 76816 72122 86216INFLOW NON- OPERATIONS 0 0 0 0SUB TOTAL (INFLOW NON- OPERATIONS)
0 0 0 0
OUT FLOW (NON-OPERATION)SHARE OF TAX & DIV. & OTHERS 15612 20116 23228 23035CAPITAL EXPENDITURE 6363 20448 7720 22426REPMT. OF LOAN (DIRECT) 320 415 326 524PAYMENT ON BEHALF OF OTHERS 1895 1190 1718 1540OUT FLOW (NON OPERATION) -24190 -42169 -32992 -47525TOTAL OUT FLOW (OPERATION) 184843 230576 209721 310456OVERALL SUR./DEFICIT 34829 34647 39130 38691
91
