A Project Report On Budget and Budgetry Control

Budget And Budget Control
INTRODUCTION
Budget is essential in every walk of our life – national, domestic and business. A
budget is prepared to have effective utilization of funds and for the realization of
objectives as efficiently, as possible. Budget is a widely practiced technique and most of
us use budgets in some way or the other.
Budget is one of the emphasized terms used in efficient methods of planning

and control. It is employed, no doubt, in large business houses, but even the small
businesses are using it, in some informal manner. Budget in common parlance is
understood as planning for expenditure.
A budget is defined as a comprehensive and Co-ordinate plan expressed in

financial terms, for the operations and resources of an enterprise for some specified
period in the future.
In the views of E. H. Graham of the Chrysler Corporation, “Of the

management tools used by Chrysler Corporation, including computers, PERT, Operations
Research (OR) and system analysis and so on, budgets are un doubly the most important
tool”.
Budget is always expressed in terms of money and quantity. The techniques of

budgeting are important applications of Management accounting.
Budgets are set in large business houses as well as in families. It is basically a

statement of expected income & expense under certain anticipated operating conditions.
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OBJECTIVES OF THE STUDY
1. To study the various aspects of budget and budgetary control.

2. To study the performance of the organization in terms of profitability.
3. To study revenue receipt and revenue expenditure of the organization
4. To study the actual performance with budget performance.
5. To facilitate centralized control with delegated authority and responsibility.
SCOPE OF THE STUDY
The scope of the study is very wide as it ranges from the various specific budgets
of each department to the Master Budget and Performance Budget of the organization.
Master Budget is a “Summary of the budget schedules in capsule form made

for the purpose of presenting in one report the highlights of the budget forecast”.
Performance Budget involves evaluation of the performance of the organization in the
context of both specific as well as overall objectives of the organization. According to the
National Institute of bank Management Performance Budgeting technique is, “The
process of analyzing, identifying, simplifying and crystallizing specific performance
objectives of a job to be achieved over a period in the frame work of the organization
objectives, the purpose and objectives of the job. The technique is characteristic by its
specific directions towards the business objectives of the organization”.
RESEARCH METHODOLOGY
Case study method has been adopted to carry out the study. Both primary and
secondary data have been used to complete the study. Primary data was collected
through interaction with personnel who are working in finance and Accounts Departments
of the organization.
Secondary data was collected from the company annual reports & other relevant
records. Afterwards, the data collected is processed and analyzed by using appropriate
analytical tools and techniques so as to examine the efficiency. The present study was
carried out for a period of thirty days in a prestigious organization i.e. Leo labs ltd.
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LIMITATION
This comparative study limits its coverage to 7 years. Information presented is

limited to the secondary data in the form of annual reports geographically; the field
research is limited to the city Hyderabad and Secunderabad.
The proposed study may not be free from certain limitation. For instance the
limitation of time and cost cannot be ignored. At the time, the findings of the study can be
applied to comparable firms and not to incomparable ones. Besides this, budgeted
amounts calculated at one point of time may not be informative as they suffer from short-
fluctuations.
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REVIEW OF LITEATURE
DEFINITION OF BUDGET
The term “Budget” appears to have been derived from the French word
“Baguette” which means “Little Bag” or a container of documents and accounts. A
budget can be seen as an “Economic plan” for a given period of time.
CONCEPT OF BUDGET
Budget is as quantified plan for future activities – quantitative blueprint for action.
It is referred as a plan relating to period of time expressed in monetary and in quantitative
terms.
The Charted institute of Management Accountants, (CIMA) defined budget as
follows: -
A plan expressed in money. It is prepared and approved prior to the budget period
and may show income, expenditure of the capital to be employed, may be drawn up
showing incremental effects a former budgeted or actual figures.
According to Gordon shilling law, “A business budget is pre-determined detailed
plan of action, developed and distributed as a guide to current operations and as a partial
basis for subsequent evaluation of performance”.
The Essentials of a Budget are:
 Financial and quantitative statement of the action plan.
 It is planning device and also serves as a bases for performance evaluation and
control.
 It is laid down prior to the budget period during which it is followed and based on
rights policy.
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BUDGET MANUAL
A budget Manual lays down the details of the organizational set up, the routine
procedures and programmers to be followed for developing budgets for various items and
the duties and responsibilities of the executives regarding the operation of the budgetary
control system.
A budget manual is defined as a document schedule or booklet which sets out,
inter alia, the responsibilities or the persons engaged in the routine of and the forms and
records required for budgetary control. Budgets are to be drawn keeping in view the
objectives of the organization given in the budget manual.
The following are some of the most important matters covered in a Budget
Manual.
 Introduction and brief explanation of the objectives, benefits and principles of
budgetary control.
 Organization chart giving the titles of different personnel’s with full explanation
of the duties and each to operating systems and preparation of departmental and
functional budgets.
 The entire process of budgeting programmer including the timetable for
periodical reporting.
 Length of budget periods and control periods should be clearly states.
 Procedures to be followed throughout the system should be explained in clear
terms.
 Outline of main budgets and their accounting relationships.
 Explanation of Key budgets.
The advantages to be derived from the use of budget manual are:
 Every one knows in writing that what is his role, what is to be done and how it is
to be done in the system of budgetary control.
 As every thing is in writing. Ambiguity is avoided and reliance on memory is

eliminated.
 As one of the objectives of budgeting is communication, it is important to have

budget manual so that everyone in the organization can refer to it for guidance and
information about the budgetary process.
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ADMINISTRATION OF BUDGETS
Budgeting takes up a lot of management time. Top managers want lower
level managers to participate in the budget process, because lower – level managers have
valuable knowledge about the day – to – day aspects of running the business. Participator
also. Creates greater commitment and responsibility towards the budget among lower
level manages.
The widespread prevalence of budgets indicates that the advantages of
budgeting systems outweigh their cost. To gain the benefits of budgeting. Management at
all levels of the company should understand and support the budget and all aspects of the
management control system.
Budgets should not be administered rigidly. Changing conditions usually call
for changes in plans. A manager may commit to the budget, but a situation might develop
in which some unplanned repairs or an unplanned advertising program would better serve
the in interest of the company. The managers should not defer the repairs of the
advertising as a way of meeting the budget – not if doing so will hart the company in the
long run. Attaining the budget should not be an end in itself.
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BUDGETING
It is concerned with the implementation of the approved programmed within
the long-range plan. It is the act of preparing budgets. Budgeting is a way of managing
Business and Industry.
CLASSIFICATION AND TYPES OF BUDGETS
The budgets are usually classified to their nature. The following are the types of
budgets, which are commonly used.
1. Classification according to Time

 Long – term Budgets
 Short – term Budgets
 Current Budgets
2. Classification on the basis of Functions
 Operating Budgets
 Financial Budgets
 Master Budgets
3. Classifications on the basis of Flexibility
 Fixed Budgets
 Flexible Budgets
1) CLASSIFICATION ACCORDING TO TIME
 Long – term Budgets: the budgets are prepared to depict long-term planning of the
business. The period of long-term budgets varies from five to ten years. The long-term
planning is done by top level management. Long time budgets are prepared for some
sectors of the concern such as capital expenditure, research and development, long-
term finances etc. These budgets are useful for those industries where gestation period
is ling i.e. machinery, electricity, engineering etc.
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 Short-term Budgets: These budgets are generally for one or two years and are in
the form of monetary terms. The consumer’s goods industries like sugar, cotton,
etc. Use short-term budgets.
 Current Budgets: The period of current budget is generally of months and

weeks. These budgets relate to the current activities of the business. According to
Institute of cost and Works Accounts, London “Current Budget is a budget which
is established for use over a short period of time and is related to current
conditions.
2) CLASSIFICATION ON THE BASIS OF FUNCTIONS
 Operating Budget: These budget relate to different activities or operations of a firm.

The number of such budget depends upon the size and nature of the business. The
commonly used operating budgets are:
 Sales Budget
 Production Budget
 Production cost Budget
 Purchase Budget
 Raw Material Budget
 Labour Budget
 Plan Utilization Budget
 Manufacturing Expense or Works Overhead Budget
 Administration and Selling Expenses Budget etc.
The Operating Budget for a firm may be constructed in terms of programme or

responsibility areas, and hence consists of:
 Programme Budget
 Responsibility Budget.
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Programme Budget: It consists of expected revenue and costs of various products or

projects that are termed as the major programmes of the firm such as budget can prepared
for each product line or project showing revenues, costs and the relative profitability of
the various programmes. Programme Budgets are, thus, useful in locating areas where
efforts may be required to reduce costs and increase revenues. They are also useful in
determining imbalances and inadequacies in programme so that corrective action may be
taken in future.
Responsibility Budget: When the budget of a firm is constructed in terms of

responsibility areas it is called the responsibility budget. Such shows the plan in terms of
persons responsible for achieving them. It is used by the management as a control device
to evaluate the performance of executives who are in – charge of various cost centers.
Their performance is compared to the targets (Budgets), set for them and proper action is
taken for adverse result, if any. The kinds of responsibility areas depend upon the size and
nature of business activities and the organizational structure. However, responsibility area
may be classified under three broad categories:
 Cost / Expense Centre
 Profit Centre
 Investment Centre
Financial Budget: Financial Budgets are concerned with case receipt and disbursements,
working capital expenditure, financial position and results of business operations. The
commonly used financial budgets are:
 Cash Budget
 Working Capital Budget
 Capital Expenditure Budget
 Income statement Budget
 Statement or Retained Earnings budget
 Budgeted Balance Sheet or position statement Budget
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 Master Budget: Various functional budgets are integrated into Master Budget.
The Budget is prepared by the ultimate integration of separate functional Budget.
According to Institute of Cost and Works Accounts, London, “The Master Budget
is the summary Budget incorporating its functional Budget”. The Budget Officer
prepares Master Budget and it remains with the top-level management. This
budget is used to co-ordinate the activities of various functional department and
also to help as a control device.
3) CLASSIFICATION ON THE BASIS OF FLEXIBILITY
 Fixed Budget: The fixed budgets are prepared for a given level of activity; the
budget is prepared before beginning of the financial year. If the financial year
starts in January then budget will be prepare a month or two earlier, November or
December. The changes in expenditure arising out of the anticipate changes will
not be adjusted in the Budget. These is a difference of about twelve months in the
budgeted an actual figures. According Institute of Cost and works Accounts,
London, “Fixed Budget is a budget which is designed to remain unchanged
irrespective of the level of the level f activity actually attained”. Fixed budget are
suitable under static conditions. If sales expenses and costs can be forecasted with
greater accuracy then this budget can be advantageously used.
 Flexible Budget: A flexible budget consists of series of Budgets for difference

level of activity. It therefore, varies with the level of activity attained. A flexible
Budget is prepared after taking into consideration unforeseen changes in the
conditions of the business.
A flexible Budget is defined as Budget which by recognizing the difference between

fixed, semi-fixed and variable cost is designed to change in relation to the level of
activity. The flexible budgets will be useful where level of activity changes form time to
time. When the forecasting of demand is uncertain and the undertaking operate under
shortage of materials, labor etc. this Budget will be more suited.
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OPERATING BUDGETS
1) Sales Budget: A Sales Budget is an estimate of expected sales during a Budget period.
A sales Budget is known as a nerve center or backbone of the enterprise. The degree of
accuracy with which sales are estimated will determine the practicability of operating
Budgets. A sales Budget is the starting points on which other budgets are also bases. A
sales Budget lay down potential sales figures in value as in quantity. It lays down a
comprehensive plan and programme for sales department. The sales manger is made
responsible for preparing Sale Budget. He uses all possible factors to be taken into
account while preparing a sales Budget.
2) Production Budget: Production Budget is built up in terms of quantities and money.

The quantities are entered at the beginnings and when the remainder of the Budget has
been built up and the cost of production calculated the costs are entered to compile a
production cost Budget. In preparing the production Budget the following factors should
be considered.
 Principal Budget factor, e.g. if the sales be the key factor then sales Budget,
otherwise other Budget.
 Production planning and determination of optimum capacity.
 The opening and closing stocks.
 Management policy regarding make or buy of components.
3) Production Cost Budget: A purchase Budget gives the details of the purchases which
must be made to meet the needs of the business. It includes all items of purchase, such as
raw materials, indirect materials and other equipment. However, purchase Budget for raw
materials is the most important and the following are required to be considering in
preparing this Budget.
4) Purchase Budget: A Purchase budget gives the details of the purchases which must be
made to meet the needs of the business. It includes all items of purchase, such as raw
materials, indirect materials and other equipments. However, purchase Budget for raw
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materials is the most important and the following factors are required to be considering in
preparing this Budget.
 Opening and closing stocks
 Unfulfilled orders at the beginning of the budget period.
 Storage space, economic buying quantity and financial resources.
 The prices to be paid.
4) Material Budget: A Materials Budget shows the estimated quantities as well costs of
raw materials and components required for producing goods as per production
Budget. At the stage of preparation of materials Budget is used to obtain the cost of
each material consumed. It serves the following purposes.
 It assists purchasing department in planning the purchases.
 It helps in the preparation of purchase Budget
 It provides data for raw materials control.
.6) Labour Budget: This Budget gives and estimates the requirements of directs labour
essential to meet the production target. This Budget may be classified into “Labour
requirement budget” and “Labor Requirement Budget”. The purpose of Labour Budget is
to assist in the provision of the correct number and type of
Employee for the projected output. Once the preliminary classification of labour into its
principal grades has been carried out, the labour requirements for each product are then
set with the help of time and motion studies. From the total mean-hour required for
production labour requirements are ascertained and from the estimated rate per hour,
labour cost per hour, labour cost per unit is determined.
7) Plant Utilization Budget: This budget indicates that the plan and machinery
requirement to meet the budgeted production during the period. Such a budget will detail
the machine load in every department and indicate the extent of under or over loading.
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Thus management may get useful information regarding the effective utilization of plants
and machinery in an organization.
8) Manufacturing Overheads Budget: This Budget gives an estimate of the works

overhead expenses to be incurred in a budget period to achieve the production target. The
budget includes the cost of indirect materials, indirect labour and indirect works expenses.
The budget may be classified into fixed cost, variable cost and semi-variable cost. It can
be broken into departmental overhead can be estimated on the basis of past information
after taking into consideration the expected changes which may occur during the Budget
period. Variable expenses are estimated on the basis of the budgeted output because these
expenses are bound to change with the changes in output.
9) Administration Cost Budget: All the administration costs relating to each Budget
center should be separately and then incorporated in the administration cost Budget. A
very important aspect of predetermining administration costs is to make sure that all
administrative functions are carried out as effectively as possible. Thus, this budget
represents forecast of the cost of selling and Distribution for Budget represents forecast of
the cost of selling and distribution of budget period and is clearly related to the sales
Budget. All expenses relating to selling and distribution of the various products as
indicated in the sales budget are included in it. These expenses are based on the volume of
sales distribution overhead. Long-term expenses advertisement are divided into fixed and
variable categories with reference to volume of sale, separate Budgets are of selling and
distribution costs as cost of transport department are
included in the departmental production cost Budget form control point view rather than
including in selling and distribution costs Budget.
FINANCIAL BUDGET
1) Cash Budget: This Budget gives and estimate of the anticipated receipts and payment
of each during the Budget period. So, this Budget is divided into two parts, one showing
the estimated cash receipt on account of cash sales, credit collections and miscellaneous
receipt and the other showing the estimate disbursement on account of cash purchases,
amount payable to creditors, wages payable to workers, indirect expenses payable,
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Budgeted, wages payable to workers, indirect expenses payable, budgeted capital

expenditure etc. In short, every factor which affects the receipts and payments of cash are
taken into accounts in the preparation of this Budget.
2) Capital Expenditure Budget: The Capital Expenditure Budget gives an estimate of

the amount of capital that may be needed for acquiring the fixed assets required for
fulfilling production requirements as specified in the production budget. The Budget is
prepared after taking into consideration the available productive capacities, probable
reallocation of the existing assets and possible improvement in production techniques.
Separates Budget may be prepared for different items of assets such as plant and
equipment Budget, building budget, etc.
The capital expenditure Budget is an important Budget providing for acquisition of

assets, necessitated by the following factors:
 Replacement of existing assets.
 Purchase of additional assets because of starting up of new lines of
production.
 Purchase of additional assets to meet a proposed increases in production
due to increase in demand.
 Installation of an improved type of machinery so as to reduce cost of
production.
Thus, Capital Expenditure Budget enables one to know what new fixed assets are
needed and what will their costs rate of return.
Purposes: The objectives of Capital Expenditure Budget are stated below:
 To enable the company to establish system of priorities in expenditure
 To correct capacity imbalances.
 To provide a tool for controlling capital expenditure.
 To make proper financial provision to meet planned expenditure.
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 To provide Budget of depreciation and maintenance costs for inclusion in
the department expense Budgets.
PERFORMANCE BUDGETING:
“Performance Budgeting” had its origin in the U.S.A after Second

World War. It tries to rectify some of the shortcomings in the traditional Budget. In the
traditional Budgets amounts are earmarked for the objects of expenditures such as
salaries, travel, office expenses, grant-in-aid etc. In such system of Budgeting the money
concept was given more prominence i.e. estimating or projecting rupee value for the
various accounting heads or classification of revenue and cost. Such system of budgeting
was more popularly used in government department and many business enterprises. But
such system Budgeting control of performance in terms of physical units or the related
costs cannot be achieved.
These days Budgets are established in such a way so that item of expenditure is
related to specific responsibility center and is closely linked with performance of that
standard. Developing work programs and performance expectations by assigned
responsibility is the achievement and objects of the enterprise. Thus, in performance
Budgeting classification of expenditure follows a three-tier pattern viz. Function-
Programme-Activity.
Advantages of Performance Budgeting: The following are the main advantages of

performance Budgeting.
 It presents clearly the purpose and objectives for which funds are required.
 It gives better appreciation of Budgeting by legislature.
 It improves Budget formulation process.
 It enhances accountability of the executives.
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ZERO BASE BUDGETING
Under Zero Base Budgeting methods, before preparing a Budget a base

determined form which the Budget process begins. Quite often current year’s Budget is
taken as the base or the starting point for preparing the next year’s Budget. The figures in
the base are charged as per the plan for the next year. This approach of preparing Budget
is called “Incremental Budgeting” since the Budget process is concerned mainly with the
increases or changes in operations that are likely to occur during the Budget period. For
example, sales of the current year’s Budget for sales will be current year’s sales plus and
allowance for price increases and expected changes in sales volumes. The man drawback
of this approach is that it perpetuates the past inefficiencies.
Zero Base Budgeting is an alternative to Incremental Budgeting. It was introduced

at Texas Instruments in USA in 1969 by peter phyrr, who is known as the father of Zero
Base Budgeting. It is managerial tool and is steadily gaining acceptance in the business
community. Zero Base Budgeting is not based on Incremental approach and precious
figures are not taken as the base for preparing next year’s budget. Instead, the Budget
figures are developed with zero as the base, which means that a budget will be prepared
as if it is being prepare for a new company for the first time.
In Zero Base budgeting, budget requests for appropriation are accepted on the
basis of cost / benefit approach, which ensures vale for money. If question long-standing
assumptions and systematically examines and perhaps abandons any unproductive
projects.
This means that those activities which are of no value find no value in the
forthcoming Budget even though these might have been an integral part of the past budget
prepared under the traditional approach. Zero Base budgeting in way are tries to locate
those activities not essential.
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The important steps in Zero Base Budgeting are:
 Identification of decision units in order to justify expenditure in their proposed

Budget.
 Preparation of Decision Packages. Each package is a separate and identifiable

activity. These packages are linked with corporate objectives.
 Ranking of decision packages based on cost benefit analysis
 Allotment of funds based on the above resulting by following pyramid-ranking

system to ensure optimum results.
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ZERO BASED BUDGETING
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PRELIMINARIES IN THE INSTALLATION OF BUDGET SYSTEM
Prerequisites for the successful implementation of a budgetary control system are

follows:
1) Establishment of Budget Centers: A Budget center is a section of entity for which

control of exercised and budget prepared. A Budget center may be a department or part
there of. Budget center must be clearly defined because a separate Budget has to be set
for each such center with the help of the department concerned.
2) Linking of Budget requirements with chart of Accounts: Budgets for different

budget centers are prepared on standard forms. If requirements of forms are linked with
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chart of accounts information of different Budget centers which is consistently compiled

involving minimum loss of time. Suppose advertisement Budget is being compiled and
information for miscellaneous expenditure is to be collected. It will be an essay exercise
together this information, if code heads to be referred to in this connection are specified in
the form on which information for Budgets is being collected.
3) Preparation of Organizational Chart: An Organization Chart should be prepared

which clearly shows the plan of the organization. Each member of management should
know the exact scope of his authority and responsibility and his relationship to others
members. An organizational chart is statement defining functional responsibilities of
executives. Each member of management should know the exact scope of his authority
and responsibility and his relationship with other members.
The Organization Chart shows:
 Functional responsibility of a particular executive

 Delegation of authority to various levels, and
 Relative position of a functional head with heads of other functions.
4) Establishment of Budget Committee: In small organization and in big organizations

having different units at different places, a Budget committee is formed having
representation having different units at different places., executive, budget officer and
heads of all Budgets centers. The Budget Officer acts as a secretary to chairman. Other
members of the Budget committee usually comprise various heads of functional
departments, like sales manager, purchase manager, production manager, chief accountant
etc. as shown in the above Organizational Chart.
5) Preparation of Budget Manual: A Budget manual has been defined by C.I.M.A.

London as “A document which sets out the responsibilities for the persons engaged in the
routine of the forms and records required for budgetary control”. A budget manual is thus
a statement of budget policies. It lay down the details the organizational set up with duties
and responsibilities of executives including the Budget committee and budget Director
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and the procedures and programmes to be followed for developing Budgets for various
activities. The contents of a budget manual are summarized as follows:
 Description of the budget system and its objectives.
 Procedure and forms to be used in budget preparation.
 Responsibilities of Operational Executives, Budget Committee and budget

Director.
 Budget calendar, specifying definite dates for completion of each part of the
Budget and submission of the report.
 Methods of accounting and account codes in use.
 Procedure to be adopted in operating the system.
 Follow – up procedure.
6) Budget Period: Budget period is the length of time for which a Budget is prepared and
operated. Budget periods vary between short-term and long-term and no specific period
can be laid down for all budgets. It varies among concerns and industries for several
factors. Whether a budget is long-termed or short-termed, it is to decide primary these
two factors:
 Type of business.
 Amount of control required.
7) Determination of the key Factor: Also known as limiting factor, governing factor and
principal Budget factor, the key factor means the factor, which limits the size of output. It
is defined as “the factor the extent of whose influence must first be assessed in order to
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ensure that functional Budgets are capable of fulfillment”. Such a factor is of vital
important and effects all Budgets to large extent.
8) Budget Officer: The Chief Executive, who is at the top of the organization, appoints
some person as a budget Officer. The Budget Officer is empowered to scrutinize the
Budgets prepare by different functional heads and to make changes in them, if the
situation so demands. The actual performance of different departments is communicated
to the budget Officer. He determines the departments are communicated to the Budget
Officer. He determines the deviations in the Budgets and takes necessary steps to rectify
the deficiencies if any. He works as co-coordinator among different departments and
monitors the relevant information. He also informs the top management about the
performance of different departments. The Budget Officer will be able to carry out his
work fully well only if he is conversant with the working of the department.
9) Patronage from Top Management: For the true success of budgetary activities,
impetus and direction must come from the top management. If involvement of top
management is missing, it will be difficult for Budget Officer to bring round the reluctant
line managers to this way of thinking. Thus, right form the start, activities should be
initiated in such a manner that involvement of top management in budgetary activities
becomes apparent.
CONCEPT OF BUDGETARY CONTROL

Budgetary Control and Budgeting are often used inter changeably to refer to a
system of management control. “Budgetary Control” implies the use of a comprehensive
system of budgeting to aid management in carrying out its functions like planning, co-
ordination and control. According to C.I.M.A, London “Budgetary Control is the
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establishment of budget relating to the responsibilities of executive of a policy and to

continuous comparison of the actual with the budgeted results, either to secure by
individual action the objection of policy or to provide a basis for its revision”.
According to Brown and Howard “Budgetary Control is a system of controlling

costs which includes the preparation of budgets, co-ordinating the debts and establishing
responsibilities, comparing actual performance with the Budget and acting upon results to
achieve maximum profitability.
Characteristics of Budgetary Control: The main characteristics are as follows:
 Establishment of Budgets for each function or department f the organization.

 Comparison of actual performance with the Budgets on continuous basis.
 Analysis of variations of actual performance form that of the budgeted

performance to know the reasons there of.
Co-Ordinal Features: The three co-ordinal features of a “Budgetary Control” are as

follows:
 Planning
 Co-ordination
 Control
Therefore, Budgetary control embraces all and in addition includes sciences of
planning the Budgets to effects an overall management tool for the business planning and
control, quotes Rowland and William.
Objective of Budgeting Control
Budgetary control improves planning and in co-ordination and helps in control.

The reasons for producing budgets are as follows:
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1) To aid planning of annual operation.

2) To co-ordinate the activities of various parts and to ensure harmonious conditions
prevails in the organization with each other
3) To communicates plans to the various responsibility center managers.
4) To motivate managers to strive to achieve the organizational goals.
5) To control activities.
6) To evaluate the performance of managers.
Characteristics of a good budgeting
1) Budgeting process should be backed and supported by the chief executive of an

organization.
2) The Organization goal should be qualified and clearly stated. These goals should
be within the frame work of organization in plans.
3) There should be proper fixation and delegation of authority and responsibility.
4) The persons for execution of budget should participate in budget preparation.
5) The Budget should be realistic. It should present goals that are reasonably
attainable.
6) A good system of accounting is also essential to make the budgeting successful.
7) The budget should cover all the phases of the organization and be continuous
exercise.
8) Periodic report should be prepared. Comparing budget and actual results i.e..,
there should be effective follow up.
9) Clear-cut organizational lines should be established and the employees should be
impaired budgeting education.
10) The budgeting system should be bases on information, communication and
participation.
Requisites for a Successful Budgetary Control System
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1) The budgets are used to realize objectives of the business. In the absence of clear
goals, the budgets will also be unrealistic.
2) Budget preparation and control is done at every level of management. Every

though budgets are finalized at top level but the involvement of person form lower
levels of management is essential for their success. This necessitates proper
delegations of authority and responsibility.
3) An effective system of communication is required for a successful budgetary
control.
4) Budgetary control may not be taken only as control device by the employees but it
should be used as a tool improves their efficiency.
5) Budgeting is done4 for every segment of the business. It will also require the
active participation and involvement of all employees. The success of budgetary
control systems depends upon the participation of all employees of the
organizations.
6) Flexibility in budgets is required to make them suitable under changed
circumstances. Budgets are prepared for the future, which is always uncertain.
Flexibility will make the budgets more appropriate and realistic.
7) All persons should be motivated to improve their working so that budgeting is

successful. A proper system of motivation should be introduced for making this
system a success.
Advantages of Budgetary Control

 The Budget programme forces the managers into plan ahead.
 In forces early consideration of basic policies.
 All members of top management participate in budget committee. For this reason
even planning a departmental level gets benefits of experience of seasoned
executives.
 Management is forces to put down in cold figures, what is means by satisfactory
results.
 It demands the most economical use of labour, materials, facilities and capital.
 In inculcates a habit of timely, careful, adequate considerations of all factors
before reaching important decisions.
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 The use of budget promotes understanding of the problems of co-workers.

 It facilitates period self-analysis of the organization.
 The use of budgets removes clouds of uncertainties for lower levels of
management regarding basic policies and objectives.
 Management is forced to give timely and adequate attention to the effect of
changing business conditions.
 Budgeting co-ordinates the activities of various department and functions of the
business.
 Budgeting control aims at maximization of profits through careful planning and
control.
 It directs capital expenditure in maximization of profits through careful planning
and control
 It directs capital expenditure in the most profitable direction.
 Budgetary control system creates necessary conditions for the introduction of
standard casting techniques.
 A budgetary control system assists in delegation of authority and assignment of
responsibility.
Limitations of Budgeting
 Budgeting cannot take place of management but is only a tool of management the
budget should be regarded not as a master, but as a servant.
 A budget programme must be dynamic and continuously deal with the chaining
business conditions. Budgets will lose much of their usefulness if they acquire
rigidity and are not revised with the changing circumstances
 Budgeting is an expensive technique. The installation and operation of the

budgetary control system is costly affair as it requires the employment of
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specialized staff and involves other expenditure which small concern may find
difficult to incur.
 Estimates are used as basis for budget plan and estimates are based mostly on
available facts and beset managerial judgments. Since a lot of human element is
involved in exercising managerial judgment. It is but natural to give some
allowance interpretation and utilization of estimated results. Budgeting based on
inaccurate forecasts is use less as a yardstick for the measuring of the actual
performance.
 The circumstances are constantly changing and therefore budgets and budgetary
techniques will not be useful, till they are continually adapted.
 Budgetary control cannot reduce the managerial function to a formals. It is only a

managerial tool, which increase effectiveness of managerial control.
 The use of budgets may lead to restricted use of resources. Budgets are often
taken as limits. Efforts may, therefore, not be made to exceed the performance
beyond the budgeted targets, even though it may be physically possible..
THE BUDGETING PROCESS IN NON-PROFIT MAKING ORGANIZATION
It normally begins with the mangers of the various activities calculating the
expected cost of maintaining current ongoing activities and then adding to those, which
are considered desirable.
Churches, hospitals, charities and other no-profit making organizations produce

estimates for understanding activities and later find the means to finances then, or even
adjust the activities to the available financial resources. Once difficulty in it is that output
cannot be measured in monetary terms i.e., we cannot measure quality amount and
services rendered.
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INDUSTRY PROFILE AND COMPANY PROFILE

INDUSTRY PROFILE
Introduction
The Indian cement industry is directly related to the country's infrastructure sector and
thus its growth is paramount in determining the development of the country. With a
current production capacity of around 366 million tonnes (MT), India is the second
largest producer of cement in the world and fueled by growth in the infrastructure sector,
the capacity is expected to increase to around 550 MT by FY20.
India has a lot of potential for development in the infrastructure and construction sector
and the cement sector is expected to largely benefit from it. Some of the recent major
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government initiatives such as development of 100 smart cities are expected to provide a
major boost to the sector.
Expecting such developments in the country and aided by suitable government foreign
policies, several foreign players such as the likes of Lafarge, Holcim and Vicat have
invested in the country in the recent past. Another factor which aids the growth of this
sector is the ready availability of the raw materials for making cement, such as limestone
and coal.
Market Size
According to data released by the Department of Industrial Policy and Promotion (DIPP),
cement and gypsum products attracted foreign direct investment (FDI) worth US$
2,984.29 million between April 2000 and September 2014.
In India, the housing sector is the biggest demand driver of cement, accounting for about
67 per cent of the total consumption. The other major consumers of cement include
infrastructure at 13 per cent, commercial construction at 11 per cent and industrial
construction at nine per cent.
To meet the rise in demand, cement companies are expected to add 56 MT capacity over
the next three years. The cement capacity in India may register a growth of eight per cent
by next year end to 395 MT from the current level of 366 MT. It may increase further to
421 MT by the end of 2017. The country's per capita consumption stands at around 190
kg.
A total of 188 large cement plants together account for 97 per cent of the total installed
capacity in the country, while 365 small plants account for the rest. Of these large cement
plants, 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu. The
Indian cement industry is dominated by a few companies. The top 20 cement companies
account for almost 70 per cent of the total cement production of the country.
Investments
On the back of growing demands, due to increased construction and infrastructural
activities, the cement sector in India has seen many investments and developments in
recent times. Some of them are as follows:
 Lafarge and Holcim plans to request for the European Commission's approval for
their possible merger. The two companies had earlier unveiled plans in April 2014
to create the world's biggest cement group with US$ 44 billion in yearly sales.
 JSW cement plans to enter the Kerala market to cash in on the construction frenzy
in the state. JSW is presently building a three million tonnes per annum (MTPA)
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capacity plant at Chitrapur in Karnataka to add to the current 5.4 MTPA capacity
in South India.
 Zuari Cement through its subsidiary Gulbarga Cement Limited (GCL) plans to set
up a 3.23 MT cement plant in Gulbarga, Karnataka. The company along with the
cement plant is setting up a 50 MW captive power plant in the region.
 Malabar Cements plans to set up an automated cement handling and bagging unit
as well as raw materials import facility in the Kochi port. Malabar Cements has
projected a minimum throughput of 300,000 tonnes per annum which can be
extendable up to 600,000 tonnes per annum, apart from intermediate products and
raw materials such as clinker, limestone and coal.
 Reliance Cement Company (RCC), a subsidiary of Reliance Infrastructure, has
entered into the cement market of Bihar where the demand for the building
material is on the rise due to a realty boom. RCC presently has plants with total
installed capacity of 5.8 MTPA.
Government Initiatives
In the 12th FiveYear Plan, the government plans to increase investment in infrastructure
to the tune of US$ 1 trillion and increase the industry's capacity to 150 MT.
The Cement Corporation of India (CCI) was incorporated by the Government of India in
1965 to achieve self-sufficiency in cement production in the country. Currently, CCI has
10 units spread over eight states in India.
In order to help the private sector companies thrive in the industry, the government has
been approving their investment schemes. Some such initiatives by the government in the
recent past are as follows:
 The Andhra Pradesh State Investment Promotion Board (SIPB) has approved
proposals worth Rs 9,200 crore (US$ 1.48 billion) including three cement plants
and concessions to Hero MotoCorp project. The total capacity of these three
cement plants is likely to be about 12 MT per annum and the plants are expected
to generate employment for nearly 4,000 people directly and a few thousands
more indirectly.
 India has joined hands with Switzerland to reduce energy consumption and
develop newer methods in the country for more efficient cement production,
which will help India meet its rising demand for cement in the infrastructure
sector.
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 The Government of India has decided to adopt cement instead of bitumen for the
construction of all new road projects on the grounds that cement is more durable
and cheaper to maintain than bitumen in the long run.
Road Ahead
With the Government of India providing a boost to the infrastructure and various housing
projects coming up in urban as well as rural areas, the cement sector has enough scope for
development in the future.
Market Size
The Indian cement sector is expected to witness positive growth in the coming years, with
demand set to increase at a CAGR of more than 8 per cent in the period FY 2013-14 to
FY 2015-16, according to the latest report titled ‘Indian Cement Industry Outlook 2016’
by market research consulting firm RNCOS. The report further observed that India’s
southern region is creating the maximum demand for cement, which is expected to
increase more in future.
The cement and gypsum products sector has attracted foreign direct investments (FDI)
worth US$ 2,656.29 million in the period April 2000–August 2013, according to data
published by the Department of Industrial Policy and Promotion (DIPP).
Investments
 Prism Cement Ltd has become the first Indian company to get the Quality Council
of India's (QCI) certification for its ready-mix concrete (RMC) plant in Kochi,
Kerala. The company received the certification from Institute for Certification and
Quality Mark (ICQM), a leading Italian certification body authorised to oversee
QCI compliance.
 UltraTech Cement, an Aditya Birla Group Company, has acquired the 4.8 million
tonne per annum (MTPA) Gujarat unit of Jaypee Cement Corp for Rs 3,800 crore
(US$ 595.61 million).
 ACC Ltd plans to invest Rs 3,000 crore (US$ 470.22 million) to expand its
capacity by nearly 4 MT a year in three eastern region states, over the next three
years.
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 Reliance Cements Co Pvt Ltd will set up a 3 MTPA grinding unit at an estimated
cost of Rs 600 crore (US$ 94.04 million). The unit is likely to come up at
Raghunathpur in Purulia, West Bengal.
 Reliance Cement Co, a special purpose vehicle (SPV) of Reliance Infrastructure
Ltd, is commissioning its first 5 MTPA plant in Madhya Pradesh. The project has
been implemented at a cost of approximately Rs 3,000 crore (US$ 470.22
million).
 Zuari Cement plans to set up a cement grinding unit at Auj (Aherwadi) and
Shingadgaon villages in Solapur, Maharashtra. The new unit will have a
production capacity of 1 MTPA and is expected to be operational by the second
quarter of 2015.
 JSW Steel has acquired Heidelberg Cement India's 0.6 MTPA cement grinding
facility in Raigad, Maharashtra, for an undisclosed amount.
Government Initiatives
Giving impetus to the market, the Indian government plans to roll out public-private
partnership (PPP) projects worth Rs 1 trillion (US$ 15.67 billion) over the next six
months. The Principal Secretary in the Prime Minister's Office (PMO) will monitor these
projects.
Also, the steering group appointed by Dr Manmohan Singh, Prime Minister of India, to
accelerate infrastructure investments, has set deadlines for the awarding of projects such
as Mumbai rail corridor and Navi Mumbai Airport, among others.
The Goa State Pollution Control Board (GSPCB) has signed a memorandum of
understanding (MoU) with Vasavdatta Cement, a company with its plant in Karnataka.
The firm would use the plastic waste collected by the state agencies and village
panchayats from Goa as fuel for its manufacturing plant.
Road Ahead
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The globally-competitive cement industry in India continues to witness positive trends

such as cost control, continuous technology upgradation and increased construction
activities.
Furthermore, major cement manufacturers in India are progressively using other

alternatives such as bioenergy as fuel for their kilns. This is not only helping to bring
down production costs of cement companies, but is also proving effective in reducing
emissions.
With the ever-increasing industrial activities, real estate, construction and infrastructure,
in addition to the various Special Economic Zones (SEZs) being developed across the
country, there is a demand for cement.
It is estimated that the country requires about US$ 1 trillion in the period FY 2012-13 to
FY 2016-17 to fund infrastructure such as ports, airports and highways to boost growth,
which promises a good scope for the cement industry.
The 4th Annual India Cement Sector Business Sentiment Survey is nearly out and the
India Construction & Building Materials Journal provides the opportunity of an exclusive
look at the survey’s results before their sharing with the wider audiences. We are glad to
be able to present here some of the survey highlights and provide our readers with before-
hand data regarding the views and expectations of cement industry professionals.
Optimism continues to be the name of the game for the Indian cement industry – a
function of long-term trends as well as human nature. But on a closer look, the survey
shows that the optimism only runs skin deep and that it has already been eroded by an
increasing percentage of industry members who feel dissatisfied with the overall
performance of the field last year.
For instance, the percentage of those who believe the industry performed “well” dropped
from 43 percent in 2012 to 26 percent in 2013, while the number of respondents who
believe the industry performed poorly almost tripled from 8 percent last year to 22
percent in 2013. Regarding the future evolution of the industry, survey participants
continue to be on the optimistic side and hope for a “somewhat better” or “much better”
performance compared to the last 6 months.
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China tackles pollution and overcapacity
2013 has been the year that China's central planners took action against cement
production overcapacity and pollution. Consolidation plans for the industry followed
falling profits for cement producers in 2012. However, record air pollution levels in
Beijing in early 2013 shut the city down, raised public awareness and gave the
government a strong lever to encourage further industry consolidation through
environmental controls. By the middle of year profits of major producers were up but
production was also up. Finally in December 2013, China started to launch its emissions
trading schemes (ETS), led by Guangdong province, to create what will be the second
largest carbon market in the world after the EU ETS.
India faces a sticky wicket
Meanwhile, the world's second largest cement producing country has faced poor profits
and growth for cement producers blamed on paltry demand, piddling prices and
proliferating production costs. Compounding that, the Indian Rupee fell to a historic low
relative to the US Dollar in mid-2013, further putting pressure on input costs. Holcim
reacted to all of this by releasing plans to simplify its presence in the country between
Holcim India, Ambuja and ACC.
Sub-Saharan Africa draws up the battle lines
Competition in sub-Saharan Africa is set to intensify when Nigeria's Dangote Cement

opens its first cement plant in South Africa in early 2014. It is the first time Africa's two
largest cement producers, Dangote and South Africa's PPC, will produce cement in the
same country. Future clashes will follow across the region as each producer increasingly
advances toward the other.
The Kingdom needs cement... and workers
Saudi Arabian infrastructure demands have created all sorts of reverberations across the
Middle Eastern cement industry and beyond as the nation pushes on to build its six
'economic' cities amongst other projects. Back in April 2013 King Abdullah bin Abdulaziz
Al Saud of Saudi Arabia issued an edict ordering the import of 10Mt of cement. Then
some producers started to report production line shutdowns in the autumn of 2013 as they
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buckled under the pressure, although they consoled themselves with solid profit rises.
Now, cement sales have fallen following a government crackdown on migrant workers
that has hit the construction sector.
Competition concerns in Europe
Europe may be slowly emerging from the economic gloom but anti-trust regulators have
remained vigilant. An asset swap between Cemex and Holcim over units in the Czech
Republic, Germany and Spain has received attention from the European Commission. In
the UK the Competition Commission has decreed that further action is required for the
cement sector following the creation of new player Hope Construction Materials in 2012.
Lafarge Tarmac may now have to sell another one of its UK cement plants to increase
more competition into the market. Elsewhere in Europe, Belgium regulators took action
in September 2013 and this week we report on Polish action against cartel-like activity.
Don't forget South-East Asia, Brazil or Russia!
Growth continues to dominate these regions and major sporting tournaments are on the
way in Brazil and Russia, further adding to local cement demand. Votorantim may have
cancelled its US$4.8bn initial public offering in August 2013 but it is still has the highest
cement production capacity in Brazil. Finally, Indonesia may not have had any 'marquee'
style story to sum up 2013 but it continues to regularly announce cement plant builds. In
July 2013 the Indonesian Cement Association announced that cement sales growth had
fallen to 'just' 7.5% for the first half of 2013.
In the most general sense of the word, a cement is a binder, a

substance which sets and hardens independently, and can bind other materials together.
The word "cement" traces to the Romans, who used the term "opus caementicium" to
describe masonry which resembled concrete and was made from crushed rock with burnt
lime as binder. The volcanic ash and pulverized brick additives which were added to the
burnt lime to obtain a hydraulic binder were later referred to as cementum, cimentum,
cäment and cement. Cements used in construction are characterized as hydraulic or non-
hydraulic.
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The most important use of cement is the production of mortar and concrete—the bonding
of natural or artificial aggregates to form a strong building material which is durable in
the face of normal environmental effects.
Concrete should not be confused with cement because the term cement refers only to the
dry powder substance used to bind the aggregate materials of concrete. Upon the addition
of water and/or additives the cement mixture is referred to as concrete, especially if
aggregates have been added.
It is uncertain where it was first discovered that a combination of hydrated non-hydraulic
lime and a pozzolan produces a hydraulic mixture (see also: Pozzolanic reaction), but
concrete made from such mixtures was first used on a large scale by Roman
engineers.They used both natural pozzolans (trass or pumice) and artificial pozzolans
(ground brick or pottery) in these concretes. Many excellent examples of structures made
from these concretes are still standing, notably the huge monolithic dome of the Pantheon
in Rome and the massive Baths of Caracalla. The vast system of Roman aqueducts also
made extensive use of hydraulic cement. The use of structural concrete disappeared in
medieval Europe, although weak pozzolanic concretes continued to be used as a core fill
in stone walls and columns.
Modern cement
Modern hydraulic cements began to be developed from the start of the Industrial
Revolution (around 1800), driven by three main needs:
Hydraulic renders for finishing brick buildings in wet climates
Hydraulic mortars for masonry construction of harbor works etc, in contact with sea
water.
Development of strong concretes.
In Britain particularly, good quality building stone became ever more expensive during a
period of rapid growth, and it became a common practice to construct prestige buildings
from the new industrial bricks, and to finish them with a stucco to imitate stone.
Hydraulic limes were favored for this, but the need for a fast set time encouraged the
development of new cements. Most famous was Parker's "Roman cement." This was
developed by James Parker in the 1780s, and finally patented in 1796. It was, in fact,
nothing like any material used by the Romans, but was a "Natural cement" made by
burning septaria - nodules that are found in certain clay deposits, and that contain both
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clay minerals and calcium carbonate. The burnt nodules were ground to a fine powder.
This product, made into a mortar with sand, set in 5–15 minutes. The success of "Roman
Cement" led other manufacturers to develop rival products by burning artificial mixtures
of clay and chalk.
John Smeaton made an important contribution to the development of cements when he
was planning the construction of the third Eddystone Lighthouse (1755-9) in the English
Channel. He needed a hydraulic mortar that would set and develop some strength in the
twelve hour period between successive high tides. He performed an exhaustive market
research on the available hydraulic limes, visiting their production sites, and noted that
the "hydraulicity" of the lime was directly related to the clay content of the limestone
from which it was made. Smeaton was a civil engineer by profession, and took the idea
no further. Apparently unaware of Smeaton's work, the same principle was identified by
Louis Vicat in the first decade of the nineteenth century. Vicat went on to devise a method
of combining chalk and clay into an intimate mixture, and, burning this, produced an
"artificial cement" in 1817. James Frost,orking in Britain, produced what he called
"British cement" in a similar manner around the same time, but did not obtain a patent
until 1822. In 1824, Joseph Aspdin patented a similar material, which he called Portland
cement, because the render made from it was in color similar to the prestigious Portland
stone.
All the above products could not compete with lime/pozzolan concretes because of fast-
setting (giving insufficient time for placement) and low early strengths (requiring a delay
of many weeks before formwork could be removed). Hydraulic limes, "natural" cements
and "artificial" cements all rely upon their belite content for strength development. Belite
develops strength slowly. Because they were burned at temperatures below 1250 °C, they
contained no alite, which is responsible for early strength in modern cements. The first
cement to consistently contain alite was made by Joseph Aspdin's son William in the early
1840s. This was what we call today "modern" Portland cement. Because of the air of
mystery with which William Aspdin surrounded his product, others (e.g. Vicat and I C
Johnson) have claimed precedence in this invention, but recent analysis of both his
concrete and raw cement have shown that William Aspdin's product made at Northfleet,
Kent was a true alite-based cement. However, Aspdin's methods were "rule-of-thumb":
Vicat is responsible for establishing the chemical basis of these cements, and Johnson
established the importance of sintering the mix in the kiln.
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William Aspdin's innovation was counter-intuitive for manufacturers of "artificial

cements", because they required more lime in the mix (a problem for his father), because
they required a much higher kiln temperature (and therefore more fuel) and because the
resulting clinker was very hard and rapidly wore down the millstones which were the only
available grinding technology of the time. Manufacturing costs were therefore
considerably higher, but the product set reasonably slowly and developed strength
quickly, thus opening up a market for use in concrete. The use of concrete in construction
grew rapidly from 1850 onwards, and was soon the dominant use for cements. Thus
Portland cement began its predominant role. it is made from water and sand
Types of modern cement

Portland cement
Cement is made by heating limestone (calcium carbonate), with small quantities of other
materials (such as clay) to 1450°C in a kiln, in a process known as calcination, whereby a
molecule of carbon dioxide is liberated from the calcium carbonate to form calcium
oxide, or lime, which is then blended with the other materials that have been included in
the mix . The resulting hard substance, called 'clinker', is then ground with a small amount
of gypsum into a powder to make 'Ordinary Portland Cement', the most commonly used
type of cement (often referred to as OPC).
Portland cement is a basic ingredient of concrete, mortar and most non-speciality grout.
The most common use for Portland cement is in the production of concrete. Concrete is a
composite material consisting of aggregate (gravel and sand), cement, and water. As a
construction material, concrete can be cast in almost any shape desired, and once
hardened, can become a structural (load bearing) element. Portland cement may be gray
or white.
Portland cement blends
These are often available as inter-ground mixtures from cement manufacturers, but
similar formulations are often also mixed from the ground components at the concrete
mixing plant.
Portland blastfurnace cement contains up to 70% ground granulated blast furnace slag,
with the rest Portland clinker and a little gypsum. All compositions produce high ultimate
strength, but as slag content is increased, early strength is reduced, while sulfate
resistance increases and heat evolution diminishes. Used as an economic alternative to
Portland sulfate-resisting and low-heat cements.
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Portland flyash cement contains up to 30% fly ash. The fly ash is pozzolanic, so that
ultimate strength is maintained. Because fly ash addition allows a lower concrete water
content, early strength can also be maintained. Where good quality cheap fly ash is
available, this can be an economic alternative to ordinary Portland cement.
Portland pozzolan cement includes fly ash cement, since fly ash is a pozzolan, but also
includes cements made from other natural or artificial pozzolans. In countries where
volcanic ashes are available (e.g. Italy, Chile, Mexico, the Philippines) these cements are
often the most common form in use.
Portland silica fume cement. Addition of silica fume can yield exceptionally high
strengths, and cements containing 5-20% silica fume are occasionally produced.
However, silica fume is more usually added to Portland cement at the concrete mixer.
Masonry cements are used for preparing bricklaying mortars and stuccos, and must not
be used in concrete. They are usually complex proprietary formulations containing
Portland clinker and a number of other ingredients that may include limestone, hydrated
lime, air entrainers, retarders, waterproofers and coloring agents. They are formulated to
yield workable mortars that allow rapid and consistent masonry work. Subtle variations of
Masonry cement in the US are Plastic Cements and Stucco Cements. These are designed
to produce controlled bond with masonry blocks.
Expansive cements contain, in addition to Portland clinker, expansive clinkers (usually
sulfoaluminate clinkers), and are designed to offset the effects of drying shrinkage that is
normally encountered with hydraulic cements. This allows large floor slabs (up to 60 m
square) to be prepared without contraction joints.
White blended cements may be made using white clinker and white supplementary
materials such as high-purity metakaolin.
Colored cements are used for decorative purposes. In some standards, the addition of
pigments to produce "colored Portland cement" is allowed. In other standards (e.g.
ASTM), pigments are not allowed constituents of Portland cement, and colored cements
are sold as "blended hydraulic cements".
Very finely ground cements are made from mixtures of cement with sand or with slag or
other pozzolan type minerals which are extremely finely ground together. Such cements
can have the same physical characteristics as normal cement but with 50% less cement
particularly due to their increased surface area for the chemical reaction. Even with
intensive grinding they can use up to 50% less energy to fabricate than ordinary Portland
cements.
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Non-Portland hydraulic cements

Pozzolan-lime cements. Mixtures of ground pozzolan and lime are the cements used by
the Romans, and are to be found in Roman structures still standing (e.g. the Pantheon in
Rome). They develop strength slowly, but their ultimate strength can be very high. The
hydration products that produce strength are essentially the same as those produced by
Portland cement.
Slag-lime cements. Ground granulated blast furnace slag is not hydraulic on its own, but
is "activated" by addition of alkalis, most economically using lime. They are similar to
pozzolan lime cements in their properties. Only granulated slag (i.e. water-quenched,
glassy slag) is effective as a cement component.
Supersulfated cements. These contain about 80% ground granulated blast furnace slag,
15% gypsum or anhydrite and a little Portland clinker or lime as an activator. They
produce strength by formation of ettringite, with strength growth similar to a slow
Portland cement. They exhibit good resistance to aggressive agents, including sulfate.
Calcium aluminate cements are hydraulic cements made primarily from limestone and
bauxite. The active ingredients are monocalcium aluminate CaAl2O4 (CaO · Al2O3 or CA
in Cement chemist notation, CCN) and mayenite Ca12Al14O33 (12 CaO · 7 Al2O3 , or C12A7
in CCN). Strength forms by hydration to calcium aluminate hydrates. They are well-
adapted for use in refractory (high-temperature resistant) concretes, e.g. for furnace
linings.
Calcium sulfoaluminate cements are made from clinkers that include ye'elimite
(Ca4(AlO2)6SO4 or C4A3 in Cement chemist's notation) as a primary phase. They are

used in expansive cements, in ultra-high early strength cements, and in "low-energy"
cements. Hydration produces ettringite, and specialized physical properties (such as
expansion or rapid reaction) are obtained by adjustment of the availability of calcium and
sulfate ions. Their use as a low-energy alternative to Portland cement has been pioneered
in China, where several million tonnes per year are produced. Energy requirements are
lower because of the lower kiln temperatures required for reaction, and the lower amount
of limestone (which must be endothermically decarbonated) in the mix. In addition, the
lower limestone content and lower fuel consumption leads to a CO 2 emission around half
that associated with Portland clinker. However, SO 2 emissions are usually significantly
higher.
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"Natural" Cements correspond to certain cements of the pre-Portland era, produced by

burning argillaceous limestones at moderate temperatures. The level of clay components
in the limestone (around 30-35%) is such that large amounts of belite (the low-early
strength, high-late strength mineral in Portland cement) are formed without the formation
of excessive amounts of free lime. As with any natural material, such cements have highly
variable properties.
Geopolymer cements are made from mixtures of water-soluble alkali metal silicates and
aluminosilicate mineral powders such as fly ash and metakaolin.
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COMPANY PROFILE
ULTRATECH CEMENT:
UltraTech Cement Limited has an annual capacity of 18.2 million tonnes. It manufactures
and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland
Pozzalana Cement. It also manufactures ready mix concrete (RMC).
UltraTech Cement Limited has five integrated plants, six grinding units and three
terminals — two in India and one in Sri Lanka.
UltraTech Cement is the country’s largest exporter of cement clinker. The export markets
span countries around the Indian Ocean, Africa, Europe and the Middle East.
UltraTech’s subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco (P)
Limited.
The roots of the Aditya Birla Group date back to the 19th century in the picturesque town
of Pilani, set amidst the Rajasthan desert. It was here that Seth Shiv Narayan Birla started
trading in cotton, laying the foundation for the House of Birlas.
Through India's arduous times of the 1850s, the Birla business expanded rapidly. In the
early part of the 20th century, our Group's founding father, Ghanshyamdas Birla, set up
industries in critical sectors such as textiles and fibre, aluminium, cement and chemicals.
As a close confidante of Mahatma Gandhi, he played an active role in the Indian freedom
struggle. He represented India at the first and second round-table conference in London,
along with Gandhiji. It was at "Birla House" in Delhi that the luminaries of the Indian
freedom struggle often met to plot the downfall of the British Raj.
Ghanshyamdas Birla found no contradiction in pursuing business goals with the

dedication of a saint, emerging as one of the foremost industrialists of pre-independence
India. The principles by which he lived were soaked up by his grandson, Aditya Vikram
Birla, our Group's legendary leader.
[Type text] Page 43

FACT FILE
 Largest producer of grey cement, white cement and ready-mix concrete in India.
 Largest producer of white cement in India.
 Installed capacity of 62 MTPA.
 Presence with 12 integrated plants, 1 white cement plant, 2 WallCare putty plants,
1 clinkerisation plant in UAE, 16 grinding units; 12 in India, 2 in UAE, 1 in
Bahrain and Bangladesh each, 6 bulk terminals; 5 in India and 1 in Sri Lanka and
101 Concrete plants.
 Straddling export markets in countries across the Indian Ocean and the Middle
East.
Aditya Vikram Birla: putting India on the world map
A formidable force in Indian industry, Mr. Aditya Birla dared to dream of setting up a
global business empire at the age of 24. He was the first to put Indian business on the
world map, as far back as 1969, long before globalisation became a buzzword in India.
In the then vibrant and free market South East Asian countries, he ventured to set up
world-class production bases. He had foreseen the winds of change and staked the future
of his business on a competitive, free market driven economy order. He put Indian
business on the globe, 22 years before economic liberalisation was formally introduced
by the former Prime Minister, Mr. Narasimha Rao and the former Union Finance
Minister, Dr. Manmohan Singh. He set up 19 companies outside India, in Thailand,
Malaysia, Indonesia, the Philippines and Egypt.
Interestingly, for Mr. Aditya Birla, globalisation meant more than just geographic reach.
He believed that a business could be global even whilst being based in India. Therefore,
back in his home-territory, he drove single-mindedly to put together the building blocks to
make our Indian business a global force.
Under his stewardship, his companies rose to be the world's largest producer of viscose
staple fibre, the largest refiner of palm oil, the third largest producer of insulators and the
sixth largest producer of carbon black. In India, they attained the status of the largest
single producer of viscose filament yarn, apart from being a producer of cement, grey
[Type text] Page 44

cement and rayon grade pulp. The Group is also the largest producer of aluminium in the
private sector, the lowest first cost producers in the world and the only producer of linen
in the textile industry in India.
At the time of his untimely demise, the Group's revenues crossed Rs.8,000 crore globally,
with assets of over Rs.9,000 crore, comprising of 55 benchmark quality plants, an
employee strength of 75,000 and a shareholder community of 600,000.
Most importantly, his companies earned respect and admiration of the people, as one of
India's finest business houses, and the first Indian International Group globally. Through
this outstanding record of enterprise, he helped create enormous wealth for the nation,
and respect for Indian entrepreneurship in South East Asia. In his time, his success was
unmatched by any other industrialist in India.
That India attains respectable rank among the developed nations, was a dream he forever
cherished. He was proud of India and took equal pride in being an Indian.
Under the leadership of our Chairman, Mr. Kumar Mangalam Birla, the Group has
sustained and established a leadership position in its key businesses through continuous
value-creation. Spearheaded by Grasim, Hindalco, Aditya Birla Nuvo, Indo Gulf
Fertilisers and companies in Thailand, Malaysia, Indonesia, the Philippines and Egypt,
the Aditya Birla Group is a leader in a swathe of products — viscose staple fibre,
aluminium, cement, copper, carbon black, palm oil, insulators, garments. And with
successful forays into financial services, telecom, software and BPO, the Group is today
one of Asia's most diversified business groups.
Board of Directors
:: Mr. Kumar Mangalam Birla, Chairman
:: Mrs. Rajashree Birla
:: Mr. R. C. Bhargava
:: Mr. G. M. Dave
:: Mr. N. J. Jhaveri
:: Mr. S. B. Mathur
:: Mr. V. T. Moorthy
:: Mr. O. P. Puranmalka
:: Mr. S. Rajgopal
:: Mr. D. D. Rathi
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:: Mr. S. Misra, Managing Director
Executive President & Chief Financial Officer

:: Mr. K. C. Birla
Chief Manufacturing Officer

:: R.K. Shah
Chief Marketing Officer

:: Mr. O. P. Puranmalka
Company Secretary
:: Mr. S. K. Chatterjee
Our vision
"To actively contribute to the social and economic development of the communities
in which we operate. In so doing, build a better, sustainable way of life for the
weaker sections of society and raise the country's human development index."
— Mrs. Rajashree Birla, Chairperson,

The Aditya Birla Centre for Community Initiatives and Rural Development
Awards won
Year Award
IMC Ramkrishna Bajaj National Quality Award
2015-2016
Asociated with Govrmnent projects & Business World FICCI-SEDF

2014-2015
CSR Award
2013-2014 ASSOCHAM CSR Excellence Award for its "truly outstanding" CSR
[Type text] Page 46

activities
2010-2011 Subh Karan Sarawagi Environment Award
2010-2011 Business World FICCI-SEDF CSR Award
2010 Greentech Environment Excellence Gold Award
2010 IMC Ramkrishna Bajaj National Quality Award
2010 Asian CSR Award
2009-2010 National Award for Prevention of Pollution
2009-2010 Rajiv Gandhi Environment Award for Clean Technology
2009-2010 State Level Environment Award (Plant)
Making a difference
Before Corporate Social Responsibility found a place in corporate lexion, it was already
textured into our Group's value systems. As early as the 1940s, our founding father Shri
G.D Birla espoused the trusteeship concept of management. Simply stated, this entails
that the wealth that one generates and holds is to be held as in a trust for our multiple
stakeholders. With regard to CSR, this means investing part of our profits beyond
business, for the larger good of society.
While carrying forward this philosophy, his grandson, Aditya Birla weaved in the concept
of 'sustainable livelihood', which transcended cheque book philanthropy. In his view, it
was unwise to keep on giving endlessly. Instead, he felt that channelising resources to
ensure that people have the wherewithal to make both ends meet would be more
productive. He would say, "Give a hungry man fish for a day, he will eat it and the next
day, he would be hungry again. Instead if you taught him how to fish, he would be able to
feed himself and his family for a lifetime."
Taking these practices forward, our chairman
Mr. Kumar Mangalam Birla institutionalized the concept of triple bottom line
accountability represented by economic success, environmental responsibility and social
commitment. In a holistic way thus, the interests of all the stakeholders have been
textured into our Group's fabric.
The footprint of our social work today straddles over 3,700 villages, reaching out to more
than 7 million people annually. Our community work is a way of telling the people among
whom we operate that We Care.
[Type text] Page 47

Our strategy
Our projects are carried out under the aegis of the "Aditya Birla Centre for Community
Initiatives and Rural Development", led by Mrs. Rajashree Birla. The Centre provides the
strategic direction, and the thrust areas for our work ensuring performance management
as well.
Our focus is on the all-round development of the communities around our plants located
mostly in distant rural areas and tribal belts. All our Group companies —- Grasim,
Hindalco, Aditya Birla Nuvo, Indo Gulf and UltraTech have Rural Development Cells
which are the implementation bodies.
Projects are planned after a participatory need assessment of the communities around the
plants. Each project has a one-year and a three-year rolling plan, with milestones and
measurable targets. The objective is to phase out our presence over a period of time and
hand over the reins of further development to the people. This also enables us to widen
our reach. Along with internal performance assessment mechanisms, our projects are
audited by reputed external agencies, who measure it on qualitative and quantitative
parameters, helping us gauge the effectiveness and providing excellent inputs.
Our partners in development are government bodies, district authorities, village

panchayats and the end beneficiaries -- the villagers. The Government has, in their 5-year
plans, special funds earmarked for human development and we recourse to many of these.
At the same time, we network and collaborate with like-minded bilateral and unilateral
agencies to share ideas, draw from each other's experiences, and ensure that efforts are
not duplicated. At another level, this provides a platform for advocacy. Some of the
agencies we have collaborated with are UNFPA, SIFSA, CARE India, Habitat for
Humanity International, Unicef and the World Bank.
Our focus areas
Our rural development activities span five key areas and our single-minded goal here is to
help build model villages that can stand on their own feet. Our focus areas are healthcare,
education, sustainable livelihood, infrastructure and espousing social causes.
The name “Aditya Birla” evokes all that is positive in business and in life. It exemplifies
integrity, quality, performance, perfection and above all character.
[Type text] Page 48

Our logo is the symbolic reflection of these traits. It is the cornerstone of our corporate
identity. It helps us leverage the unique Aditya Birla brand and endows us with a
distinctive visual image.
Depicted in vibrant, earthy colours, it is very arresting and shows the sun rising over two
circles. An inner circle symbolising the internal universe of the Aditya Birla Group, an
outer circle symbolising the external universe, and a dynamic meeting of rays converging
and diverging between the two.
Through its wide usage, we create a consistent, impact-oriented Group image. This
undoubtedly enhances our profile among our internal and external stakeholders.
Our corporate logo thus serves as an umbrella for our Group. It signals the common
values and beliefs that guide our behaviour in all our entrepreneurial activities. It embeds
a sense of pride, unity and belonging in all of our 130,000 colleagues spanning 25
countries and 30 nationalities across the globe. Our logo is our best calling card that
opens the gateway to the world.
Group companies
:: Grasim Industries Ltd.
:: Hindalco Industries Ltd.
:: Aditya Birla Nuvo Ltd.
:: UltraTech Cement Ltd.
Indian companies
:: Aditya Birla Minacs IT Services Ltd.
:: Aditya Birla Minacs Worldwide Limited
:: Essel Mining & Industries Ltd
:: Idea Cellular Ltd.
:: Aditya Birla Insulators
:: Aditya Birla Retail Limited
[Type text] Page 49

:: Aditya Birla Chemicals (India) Limited
International companies
Thailand
:: Thai Rayon
:: Indo Thai Synthetics
:: Thai Acrylic Fibre
:: Thai Carbon Black
:: Aditya Birla Chemicals (Thailand) Ltd.
:: Thai Peroxide
Philippines
:: Indo Phil Group of companies
:: Pan Century Surfactants Inc.
Indonesia
:: PT Indo Bharat Rayon
:: PT Elegant Textile Industry
:: PT Sunrise Bumi Textiles
:: PT Indo Liberty Textiles
:: PT Indo Raya Kimia
Egypt
:: Alexandria Carbon Black Company S.A.E
:: Alexandria Fiber Company S.A.E
China
:: Liaoning Birla Carbon
:: Birla Jingwei Fibres Company Limited
:: Aditya Birla Grasun Chemicals (Fangchenggang) Ltd.
Canada
:: A.V. Group
Australia
:: Aditya Birla Minerals Ltd.
Laos
:: Birla Laos Pulp & Plantations Company Limited
North and South America, Europe and Asia
:: Novelis Inc.
Singapore
:: Swiss Singapore Overseas Enterprises Pte Ltd. (SSOE)
Joint ventures
[Type text] Page 50

:: Birla Sun Life Insurance Company

:: Birla Sun Life Asset Management Company
:: Aditya Birla Money Mart Limited
:: Tanfac Industries Limited
UltraTech is India's largest exporter of cement clinker. The company's production

facilities are spread across eleven integrated plants, one white cement plant, one
clinkerisation plant in UAE, fifteen grinding units, and five terminals — four in India and
one in Sri Lanka. Most of the plants have ISO 9001, ISO 14001 and OHSAS 18001
certification. In addition, two plants have received ISO 27001 certification and four have
received SA 8000 certification. The process is currently underway for the remaining
plants. The company exports over 2.5 million tonnes per annum, which is about 30 per
cent of the country's total exports. The export market comprises of countries around the
Indian Ocean, Africa, Europe and the Middle East. Export is a thrust area in the
company's strategy for growth.
UltraTech's products include Ordinary Portland cement, Portland Pozzolana cement and
Portland blast furnace slag cement.
 Ordinary Portland cement

 Portland blast furnace slag cement
 Portland Pozzolana cement
 Cement to European and Sri Lankan norms
Ordinary Portland cement

Ordinary portland cement is the most commonly used cement for a wide range of
applications. These applications cover dry-lean mixes, general-purpose ready-mixes, and
even high strength pre-cast and pre-stressed concrete.
Portland blast furnace slag cement
[Type text] Page 51

Portland blast-furnace slag cement contains up to 70 per cent of finely ground, granulated
blast-furnace slag, a nonmetallic product consisting essentially of silicates and alumino-
silicates of calcium. Slag brings with it the advantage of the energy invested in the slag
making. Grinding slag for cement replacement takes only 25 per cent of the energy
needed to manufacture portland cement. Using slag cement to replace a portion of
portland cement in a concrete mixture is a useful method to make concrete better and
more consistent. Portland blast-furnace slag cement has a lighter colour, better concrete
workability, easier finishability, higher compressive and flexural strength, lower
permeability, improved resistance to aggressive chemicals and more consistent plastic and
hardened consistency.
Portland Pozzolana cement
Portland pozzolana cement is ordinary portland cement blended with pozzolanic materials
(power-station fly ash, burnt clays, ash from burnt plant material or silicious earths),
either together or separately. Portland clinker is ground with gypsum and pozzolanic
materials which, though they do not have cementing properties in themselves, combine
chemically with portland cement in the presence of water to form extra strong cementing
material which resists wet cracking, thermal cracking and has a high degree of cohesion
and workability in concrete and mortar.
"As a Group we have always operated and continue to operate our businesses as Trustees
with a deep rooted obligation to synergise growth with responsibility."
— Mr Kumar Mangalam Birla, Chairman, Aditya Birla Group
The cement industry relies heavily on natural resources to fuel its operations. As these
dwindle, the imperative is clear — alternative sources of energy have to be sought out and
the use of existing resources has to be reduced, or eliminated altogether. Only then can
sustainable business be carried out, and a corporate can truly say it is contributing to the
preservation of the environment.
UltraTech takes its responsibility to conserve the environment very seriously, and its eco-
friendly approach is evident across all spheres of its operations. Its major thrust has been
[Type text] Page 52

to identify alternatives to achieve set objectives and thereby reduce its carbon footprint.
These are done through:
:: Waste management
:: Energy management
:: Water conservation
:: Biodiversity management
:: Afforestation
:: Reduction in emissions
Importantly, UltraTech has set a target of 2.96 per cent reduction in CO 2 emission
intensity, at a rate of 0.5 per cent annually, up to 2015-16, with 2009-10 as the baseline
year. This will also include CO2 emissions from the recently acquired ETA Star Cement
and upcoming projects.
Our strategy
Our projects are carried out under the aegis of the "Aditya Birla Centre for Community
Initiatives and Rural Development", led by Mrs. Rajashree Birla. The Centre provides the
strategic direction, and the thrust areas for our work ensuring performance management
as well.
Our focus is on the all-round development of the communities around our plants located
mostly in distant rural areas and tribal belts. All our Group companies —- Grasim,
Hindalco, Aditya Birla Nuvo and UltraTech have Rural Development Cells which are the
implementation bodies.
Projects are planned after a participatory need assessment of the communities around the
plants. Each project has a one-year and a three-year rolling plan, with milestones and
measurable targets. The objective is to phase out our presence over a period of time and
hand over the reins of further development to the people. This also enables us to widen
our reach. Along with internal performance assessment mechanisms, our projects are
audited by reputed external agencies, who measure it on qualitative and quantitative
parameters, helping us gauge the effectiveness and providing excellent inputs.
[Type text] Page 53

Our partners in development are government bodies, district authorities, village

panchayats and the end beneficiaries — the villagers. The Government has, in their 5-year
plans, special funds earmarked for human development and we recourse to many of these.
At the same time, we network and collaborate with like-minded bilateral and unilateral
agencies to share ideas, draw from each other's experiences, and ensure that efforts are
not duplicated. At another level, this provides a platform for advocacy. Some of the
agencies we have collaborated with are UNFPA, SIFSA, CARE India, Habitat for
Humanity International, Unicef and the World Bank.
Our vision
"To actively contribute to the social and economic development of the communities
in which we operate. In so doing, build a better, sustainable way of life for the
weaker sections of society and raise the country's human development index."
— Mrs. Rajashree Birla, Chairperson,
The Aditya Birla Centre for Community Initiatives and Rural Development
Making a difference
Before Corporate Social Responsibility found a place in corporate lexicon, it was already
textured into our Group's value systems. As early as the 1940s, our founding father Shri
G.D Birla espoused the trusteeship concept of management. Simply stated, this entails
that the wealth that one generates and holds is to be held as in a trust for our multiple
stakeholders. With regard to CSR, this means investing part of our profits beyond
business, for the larger good of society.
While carrying forward this philosophy, our legendary leader, Mr. Aditya Birla, weaved in
the concept of 'sustainable livelihood', which transcended cheque book philanthropy. In
his view, it was unwise to keep on giving endlessly. Instead, he felt that channelising
resources to ensure that people have the wherewithal to make both ends meet would be
more productive. He would say, "Give a hungry man fish for a day, he will eat it and the
next day, he would be hungry again. Instead if you taught him how to fish, he would be
able to feed himself and his family for a lifetime."
[Type text] Page 54

TABLE NO.1
SHOWING REVENUE EXPENDITURE BUDGET
2010-2011
(Rupees in
Lakhs)
S.No. Item Budget Actual Variation Variation
Estimates (Amount) (Percentage)
1. Salaries and 6231 5918.98 312.02 5

Other
Establishment
Charges
2. Travel 100.1 48.45 41.65 41.55
Expenses(Foreign
Trips)
3. Supplies and 19421 18558.61 862.39 4.44
Materials
4. Minor works 1984.1 1922.61 61.49 3.09
5. Interest and 16 16 - -
Depreciation
6. Motor Vehicle 120 76.64 43.36 36.13
7. Expenses 415 403.04 11.96 2.88
8. Administrative 45.8 22.15 23.65 51.64
Expenses
9. Rent, Rates 25 28.03 -3.03 -12.12
And Taxes
10. Others 1011 854.55 156.45 15.47
Totals 45,353 43,843.06 1509.94 3.32
[Type text] Page 55

REVENUE EXPENDITURE BUDGET FOR YEAR 2010 -2011
Reasons for Variations between Budget estimate & Actual Expenditure 2010-2011
 Increase in the cost of raw materials/prime consumables.
 Download revision in the power-tariff by state.
 Saving on account of deferment of Leave Concession for employees by the
Government.
TABLE NO. 2
[Type text] Page 56


2011-2012
(Rupees in
Lakhs)
1. Salaries and 6274 6087.90 186.10 2.96

Other
Establishment
Charges
2. Travel 100 61.26 38.74 38.74
Expenses(Foreign
Trips)
3. Supplies and 19515 16744.60 2770.4 14.19
Materials
4. Minor works 2481 2057.72 423.28 17.06
5. Interest and 16000 16000 - -
Depreciation
6. Motor Vehicle 90 109.20 -19.2 -21.33
7. Expenses 427 441.34 -14.34 -3.35
8. Administrative 45 23.17 21.83 48.51
Expenses
9. Rent, Rates 30 12.57 17.43 58.10
And Taxes
10. Others 1148 956.86 191.14 16.64
Totals 46,110 42,494.62 3615.38 7.84
[Type text] Page 57

Reasons for Variations between Budget Estimate & Actual Expenditure 2011-2012
 Non-revisions of the rate of prime raw materials which was anticipated and also
short supply of the same by the supplier.
 Partial withdrawal of increased power tariff by the State Government Non-filling
of vacant and new posts as per policy of the Government
TABLE NO. 3
2012-2013
[Type text] Page 58
(Rupees in
Lakhs)
1. Salaries and 6241 6686.20 -445.2 -7.13

Other
Establishment
Charges
2. Travel 120 72.88 47.12 39.26
Expenses(Foreign
Trips)
3. Supplies and 21162 20844.36 317.64 1.50
Materials
4. Minor works 2234 1889.79 344.21 15.40
5. Interest and 28200 28200 - -
Depreciation
6. Motor Vehicle 135 51.96 83.04 61.50
7. Expenses 500 470.98 29.02 5.80
8. Administrative 30 29.69 0.31 1.03
Expenses
9. Rent, Rates 17 25.57 -8.57 -50.4
And Taxes
10. Others 732 652.34 79.66 10.88
Totals 59,371 58,923.77 447.23 0.75
[Type text] Page 59

Reasons for Variations between Budget Estimate & Actual Expenditure 2012- 2013
 Excess under salaries due to payment of updating allowance.

 Saving under the head minor works due to less rates claimed by M/s. APGPCL.
 Saving under supplies and materials for postponement of procurement of certain
materials.
TABLE NO. 4
2013-2014
[Type text] Page 60

(Rupees in
Lakhs)
1. Salaries and 6231 5682.13 548.87 8.8

Other
Establishment
Charges
2. Travel 116 73.53 42.47 36.61
Expenses(Foreign
Trips)
3. Supplies and 22078 25452.56 -3374.56 -15.28
Materials
4. Minor works 2288 1560.31 727.69 31.80
5. Interest and 7500 9850 -2350 -31.33
Depreciation
6. Motor Vehicle 125 46.76 78.24 62.59
7. Expenses 506 424.35 81.65 16.13
8. Administrative 35 33.58 1.42 4.05
Expenses
9. Rent, Rates 18 26.80 -8.8 -48.88
And Taxes
10. Others 1289 1303.07 -14.07 -1.09
Totals 40,186 44,453.09 -4267.09 -10.61
[Type text] Page 61

Reasons for Variations between Budget Estimate & Actual Expenditure 2013-2014
 Saving under the head Salaries due to shifting due to shifting of provision to new
cities head.
 Saving under the Head Traveling Expenses, Office Expenses, foreign Expenses,
due to economy.
 Increase under supplies and materials due to upward revision of manuals
 Savings under the head of motor vehicles due to postponement of replacement of
same vehicles for the next year.
TABLE NO. 5
2014 - 2015
[Type text] Page 62

(Rupees in
Lakhs)
1. Salaries and 6100 6216.18 -116.18 -1.90

Other
Establishment
Charges
2. Travel 83 34.1 48.90 58.91
Expenses(Foreign
Trips)
3. Supplies and 28349 25497.79 2851.21 10.05
Materials
4. Minor works 2040 2102.44 -62.44 -3.06
5. Interest and 9850 8896 954 9.68
Depreciation
6. Motor Vehicle 125 53.92 71.08 58.86
7. Office Expenses 506 445.90 60.1 11.87
8. Administrative 35 35.31 -0.31 -0.88
Expenses
9. Rent, Rates 26 26.20 -0.2 -0.76
And Taxes
10. Others 1286 1335.27 -49.27 -3.83
Totals 48,400 44,643.11 3,756.89 7.76
[Type text] Page 63

Reasons for Variations between Budget Estimate & Actual Expenditure (2014 –
2015)
 Increase in Salaries due to merger of 50% of Dearness allowance on 01-04-2007.
 Saving under the head traveling Expenses, Office expenses due to Economy
measure.
 Decrease is mainly due to MDU supply and other materials based on production
schedule.
 Savings under Motor vehicles due to non-receipt of sanctions.
TABLE NO. 6
2015- 2016
[Type text] Page 64
(Rupees in
Lakhs)
1. Salaries and 6650 6743.42 -93.42 -1.40

Other
Establishment
Charges
2. Travel 78 75.83 2.17 2.78
Expenses(Foreign
Trips)
3. Supplies and 27052 30947 -3895 -14.39
Materials
4. Minor works 2102 2373.98 -271.98 -12.93
5. Interest and 7300 5500 1800 24.65
Depreciation
6. Motor Vehicle 103 52.47 50.53 49.05
7. Office Expenses 475 503.69 -28.69 -6.04
8. Administrative 35 36.53 -1.53 -4.37
Expenses
9. Rent, Rates 35 38.5 -3.5 -4.37
And Taxes
10. Others 1507 1544..82 -37.82 -2.50
Totals 45,337 47,816.24 -2,479.24 -5.46
[Type text] Page 65

Reasons for Variations between Budget Estimate & Actual Expenditure (2015-
2016)
 Increase in salaries on Account of liberated LTC provision
 Increase in Office Expenses on Account of increases Transport and issue of
Uniform for Ministerial Staff
 Increase in Rent, Rates & Taxes as per demand for property Tax.
TABLE NO. 7
[Type text] Page 66


2016 - 2017
(Rupees in
Lakhs)
1. Salaries and 7150 7032.21 117.79 1.64

Other
Establishment
Charges
2. Travel 70 74.40 -4.4 -6.28
Expenses(Foreign
Trips)
3. Supplies and 26872 37477.15 -10605.15 -39.46
Materials
4. Minor works 2600 2191.55 408.45 15.70
5. Interest and 2000 2000 0 0
Depreciation
6. Motor Vehicle 150 66.17 83.83 55.88
7. Office Expenses 35 36.53 -1.53 -4.37
8. Administrative 35 36.53 -1.53 -4.37
Expenses
9. Rent, Rates 35 28.60 6.4 18.28
And Taxes
10. Others 39 33.31 5.69 14.58
Totals 39,489 49,495.88 -10,006.88 -25.34
[Type text] Page 67

Reasons for Variation between Budget Estimate & Actual Expenditure (2016- 2017)
 Saving under the Head Salaries due to shifting of provision of shifting of

provision to new cities head.
 Increase under supplies and materials due to upwards revision of manuals.
 Saving under the head of motor vehicles due to postponement of replacement of
same vehicles for the next year.
Salaries
Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Variation amount 312.02 186.1 -445.2 548.87 116.18 -93.42 111.79
Variation
Percentage 5 2.96 -7.13 8.8 -1.9 -1.4 1.64
[Type text] Page 68

Interpretation
The variations that need to be commented are those falling in a range above +(or) 5
percentage The years in which such variations occurred are 2010-11 where the variation
is +5 percentage on account of liberated LTC provisions and it has increased to 8.8% in
2013-14.
Travel expenses
Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Variation amount 41.65 38.74 47.12 42.47 48.9 2.17 -4.4
Variation
Percentage 41.6 38.74 39.26 36.61 58.91 2.78 -6.28
Interpretation
The travel expenses had over short the budget consistently five out of seven years under
study. The range was 36 percent to 59 percent which indicated lack of control and
absence of economy measures. The company realized these facts in 2010-2011 and put in
place a package of economy measures which raised the bar for out of budget expenditure.
The measures have worked well and as a result the variance of travel expenses over and
above budget was controlled almost in 2012-2013 and more than expected 2014-2015.
The control was so effective that a negative variance have set in year 2016-2017of the
order of -6.28
Supplies and materials

Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Variation 82.39 2770.4 317.64 -3374.56 2851.21 1853 0605.2
Amount
Variation 4.44 14.19 1.5 -15.28 10.05 2863 4439.46
Percentage
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Interpretation
It signifies that the trend of increase in the negative variation in last 2 years is on account
of postponement of procurement of materials in the year 2010-2011, 2011- 2012, 2012-
2013 which is not a healthy sign. Under procurements of materials points out to delay in
implementation of projects and impartial negative effects on profitability which needs to
be probed into in detail.
Minor works
Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Variation
Amount 61.49 423.28 344.21 727.69 -62.44 -271.98 408.45
Variation
Percentage 3.09 17.06 15.4 31.8 -3.06 -12.93 15.7
Interpretation
The acceptable range is + (or) - 5%. In general the variation was with in the rage only in 2
out of 7 years. In 4 out of 7 years it was positive variation of 15% to 31% which is
indicative of the fact that the budgetary process was not being diligently adhered to in the
case of budgets for minor works. There is thus a need to fine-tune budgetary process
implementation in this category.
Interest and Depreciation

Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Variation amount 0 0 0 -2350 954 1800 0
Variation
Percentage 0 0 0 -31.33 9.68 24.65 0
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Interpretation
Acceptable range is + (or) - 10%. The variation beyond the above range is observed in
case of 2010-2011 and 2013-2014. The reason was on account of general and rapid
reduction in rates of interest charged by banks
Motor vehicle
Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Variation
Amount 43.36 -19.2 83.04 78.24 71.08 50.53 83.83
Variation
Percentage 36.13 -21.33 61.5 62.59 56.86 49.05 55.88
Interpretation
The acceptable range is + (or) – 25%., As the age of vehicles stock is more, allowing for
increased expenditure in repairs and maintenance on account of age of vehicle stock it
was found that the expenditure under the head was “uncontrollable”. With the range of
over expenditure being from 36% to 63%. There is and urgent need to formulate and
implement a cost reduction program.
Office Expenses
Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Variation
Amount 11.96 -14.34 29.02 81.65 60.1 -28.69 -1.53
Variation
Percentage 2.88 -3.35 5.8 16.13 11.87 -6.04 -4.37
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Interpretation
The acceptable range is + (or)-5%. The variation above the range was found to be sizable
in the case of 2010-2011 and 2011-2012 due to issue of uniform to ministerial staff and
increase transport
Administrative Expenses
Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Variation
Amount 23.65 21.83 0.31 1.42 -0.31 -1.53 -1.53
Variation
Percentage 51.64 48.51 1.03 4.05 -0.88 -4.37 -4.37
Interpretation
The acceptable range is + (or)-5%. It was observed that the budget for administrative
expenses was periodically increased to accommodate the positive variation in previous
year during period 2010-2011. Thus the budget peaked in year 2011-2012, while the
variation is high in 2010-2011 and 2011-2012.
Rent, Rates and Taxes
Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Variation
Amount -3.03 17.43 -8.57 -8.8 -0.2 -3.5 6.4
Variation
Percentage -12.12 58.1 -50.41 -48.88 -0.76 -10 18.28
Interpretation:
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The acceptable range is + (or) - 20%. The abnormal years were observed to be 2010-2017
which a positive variation of 58% in 2011-2012 to negative variation of around 50% in
2010-2011 and 2012-2013. This is and account of changes in government / taxes /
municipal polices and changes in valuations during the relevant years.
Others
Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Variation
Amount 156.45 191.14 79.66 -14.07 -49.27 -37.82 5.69
Variation
Percentage 15.47 16.64 10.88 -1.09 -3.83 -2.5 14.58
Interpretation:
The acceptable range is + (or) - 20% as the item indicates miscellaneous of expenditure
the variance is found to be with in the acceptable range.
CONCLUSION
 In conclusion, I wish to summarize the budget and budgetary control process and
how each manger can draw out of the budgetary planning and control system
concrete objective to improve the operating performance and profitability of the
business.
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 This is some times called Management by objectives, but it is also, in a very real
sense, managing for practical result. A good system of Budgeting is two-sided
affair that provides.
 A formal planning process leading to an overall goal to departmental objectives
within goal.
 Control reports and procedures that leading management to assure that such
objectives become accomplished results.
 At the beginning, it is emphasized that budgeting is simply and extension of the
basic management process of planning, execution and control. Also stressed was
the importance of broad participation on a grass root basis of all levels of
management in budgetary planning and control process.
 It should be evident that the effect of this is to enlarge the abilities of all levels of
management to carry out their basic management functions.
 Its is also evident that good budgeting is more than financial exercise and that, in
fact the role of the budget director and of accounting personnel is largely one of
the role of the Budget director and of accounting personal is largely one of
administrative and coordinate guidance, combined with the rather routine job of
translating operating plans results into the language of the dollar.
 Leo labs. has been achieving highest production year over the year by rescuing the
corresponding expenditure and attained no only self sufficiency but also been
supportive to the power Plants spread all over India.
 With the help of proper budgetary planning and control system, Leo Labs has
been able to improve operating performance and profitability of the Organization.
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 The financial system in Leo Labs has been very quick and well planned one,
which could be implanted in other such government organization.
 The organization have followed effective budget system and control for
maintaining the expenditure within the appeared Budget and it also kept the
profile high and achieving the targeted production within the appeared Budget and
it also kept the profile high and achieving the targeted production by minimum
expenditure which expenditure which is evident form the last seven years
Revenue Expenditure Budget.
 Form the variations between Budget Estimates and Actual Expenditure of last five
years it may be seen that the percentage of variation is becoming marginal from
year to year which reflects improved system of Budgeting as well as control of
Expenditure.
FINDINGS AND SUGGESTIONS
 Suggestions must be taken from all departments of the organization for proper
planning and control of budgets.
 There is an urgent need to formulate and implement cost reduction program.
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 It is important to have budget manual so that everyone in Leo Labs can refer to it
for guidance and information about the budgetary process.
 The variances arising out of each factor should be correctly segregated, and
reported to the management.
 There is under procurement of materials with consequences for profitability,
which needs to be proved into in detail.
 Uncontrollable variances are beyond the control of the organization.
 Controllable variances should be reported immediately, so that responsibility can
be fixed and action taken against the individuals responsible.
 Budgetary process has been effective in case of travel expenses and in effective in
case of motor vehicle repairs and maintenance and minor works.
 Budget process has worked well in controlling travel expenses
BIBLIOGRAPHY
1. Advance Cost Accountancy, S.P. Jain and K.L. Narang, Kalyani
Publishers.
[Type text] Page 76

2. Advance Cost Accountancy, Lall Nigam, G.L. Sharma, Himalaya
Publishers.
3. Management Accountancy, M.Y. Khan and P.K.Jain, Tata Mc. Graw Hill
Ltd.,
4. Cost and Management Accountancy, S.N. Maheswari, S. Chand
Publishers.
5. Websites:
Google Search Engine
www.ultratechcements .com
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A Project Report On Budget and Budgetry Control

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A Project Report On Budget and Budgetry Control

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Budget And Budget Control

Budget is one of the emphasized terms used in efficient methods of planning

A budget is defined as a comprehensive and Co-ordinate plan expressed in

In the views of E. H. Graham of the Chrysler Corporation, “Of the

Budget is always expressed in terms of money and quantity. The techniques of

Budgets are set in large business houses as well as in families. It is basically a

OBJECTIVES OF THE STUDY

1. To study the various aspects of budget and budgetary control.

SCOPE OF THE STUDY

Master Budget is a “Summary of the budget schedules in capsule form made

This comparative study limits its coverage to 7 years. Information presented is

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The Essentials of a Budget are:

 Financial and quantitative statement of the action plan.

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 As every thing is in writing. Ambiguity is avoided and reliance on memory is

 As one of the objectives of budgeting is communication, it is important to have

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Budgeting takes up a lot of management time. Top managers want lower

The widespread prevalence of budgets indicates that the advantages of

management control system.

Budgets should not be administered rigidly. Changing conditions usually call

long run. Attaining the budget should not be an end in itself.

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It is concerned with the implementation of the approved programmed within

Business and Industry.

CLASSIFICATION AND TYPES OF BUDGETS

budgets, which are commonly used.

1. Classification according to Time

1) CLASSIFICATION ACCORDING TO TIME

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 Current Budgets: The period of current budget is generally of months and

2) CLASSIFICATION ON THE BASIS OF FUNCTIONS

 Operating Budget: These budget relate to different activities or operations of a firm.

The Operating Budget for a firm may be constructed in terms of programme or

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Programme Budget: It consists of expected revenue and costs of various products or

Responsibility Budget: When the budget of a firm is constructed in terms of

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3) CLASSIFICATION ON THE BASIS OF FLEXIBILITY

 Flexible Budget: A flexible budget consists of series of Budgets for difference

A flexible Budget is defined as Budget which by recognizing the difference between

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2) Production Budget: Production Budget is built up in terms of quantities and money.

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 Opening and closing stocks

 Unfulfilled orders at the beginning of the budget period.

 Storage space, economic buying quantity and financial resources.

 The prices to be paid.

 It assists purchasing department in planning the purchases.

 It helps in the preparation of purchase Budget

 It provides data for raw materials control.

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8) Manufacturing Overheads Budget: This Budget gives an estimate of the works

Budgeted, wages payable to workers, indirect expenses payable, budgeted capital

2) Capital Expenditure Budget: The Capital Expenditure Budget gives an estimate of

The capital expenditure Budget is an important Budget providing for acquisition of

Purposes: The objectives of Capital Expenditure Budget are stated below:

 To enable the company to establish system of priorities in expenditure

 To correct capacity imbalances.

 To provide a tool for controlling capital expenditure.

 To make proper financial provision to meet planned expenditure.

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