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GANDI.MAHALAKSHMI NAIDU
CH.LEELA SRINIVAS
Dy.Manager (F&A)
RINL, VISAKHAPATNAM
CERTIFICATE
This is to certify that the project done by Mr. G.MAHALAKSHMI NAIDU Regd
No.07Q71E0018 during the academic year 2007-2009, in partial fulfillment for the award of
‘Master of Business Administration’. This project work is original and exclusively done by
him and has been never been a basis for award/fulfillment of any degree or similar title in this
(K.KUSUMA) (V.BALA)
Asst. Professor & Project in-charge Head of the Department
CERTIFICATE OF PROJECT GUIDE
STATION: VISAKHAPATNAM:
DATE:.
Mr.CH.LEELA SRINIVAS
Dy .MANAGER (F&A)
RINL, VISAKHAPATNAM
DECLARATION
Place: VISAKHAPATNAM
Date:
(G.MAHALAKSHMINAIDU)
ACKNOWLEDGEMENT
The satisfaction that accompanies the successful completion of any task would
be incomplete with out mentioning people who made it possible and whose
encouragement and constant guidance crowned my effort with success. I wish to
express my deep sense of gratitude to V.BALA Head of the department, Avanthi
Institute of Eng&Tech, Cherukupalli, vizianagaram for permitting me to do the
project.
I would like to express my heartfelt thanks to Asst.proff K.KUSUMA project
guide, AIET, for giving me valuable guidance and sustained assistance at every stage
of this project successfully.
I am grateful to external project guide CH.LEELA SRINIVAS and I am
also thankful to SRI KOSIREDDY.RAJA GARU Dy. MANAGER, Coordinator
student trainees HRD&PROJECT WORKS the in VISHAKAPATNAM STEEL
PLANT for his co-operation and in providing the information of the company needed
by me.
I, especially thank all those who have helped me directly or indirectly. I
express my profound thanks to my affectionate parents for their constant
encouragement throughout my educational career
(GANDI.MAHALAKSHM
I NAIDU)
CONTENTS
CHAPTER-I
INTRODUCTION
Need for the study
Objectives of the study
Scope of the study
Methodology
LIMITATIONS
CHAPTER-II
Industry profile
CHAPTER-III
Company Profile
CHAPTER-IV
Budget & Budgetary Control-Theoretical Review
CHAPTER-V
Budget & Budgetary Control in RINL(VSP)
CHAPTER-VI
summary
Suggestions
BIBLIOGRAPHY
CHAPTER –1
INTRODUCTION
SIGNIFICANCE OF STUDY:
The study is based upon the part of financial performance that has been taken in to
consideration i.e., budgetary concepts.
1. Primary Data
2. Secondary Data
Primary data: The data for study has been collected from the management of the
company. The information about the industry profile and company profile was
gathered from HRD, VSP and the data about the budget and budgetary control was
gathered from Financial Department, VSP.
Secondary data: This is taken from the annual reports, websites, company journals,
magazines and other sources of information of steel plant.
LIMITATIONS:
1. The period of study that is 4 weeks was not enough to go into the detailed aspects
of the study.
2. The study is carried basing on the information and documents provided by the
organization and based on the interaction with the various employees of the
respective departments.
3. Most of the matters related to budgets were confidential. So it is not possible to
gather much information.
4. Budgeting process is very dynamic.
5. Budget that were prepared are only based upon trend at the time preparation.
6. Flexibility with in the budget is not possible.
CHAPTER - 2
PROFILE
OF
STEEL INDUSTRY
INDUSTRY PROFILE:
Though the production of steel in significant quantity started only after 1900,the
growth of steel industry can be conveniently studied by dividing the time in to pre and
post independence period.
1918 Initially Indian iron and steel co (IISCO) was founded and the
Bengal iron and steel co merged with it in 1926. To start with,
IISCO restricted it self for manufacturing of pig iron for
export to UK and JAP AN. It produced steel.
1940-50 Formation of the Mysore iron and steel Ltd. Presently known
as Visveswarayya Iron and Steel Ltd. (VISL) at Bhadravathi
in Karnataka owing to the pioneering efforts of Sri.
Visveswarayya. It started manufacturing Ferro alloys and Sp.
Steels.
1951-1956 First five-year plan - The Hindustan Steel
Limited (HSL) was born in the year 1954 with
decision of setting up three plants each with 1
million tones ingot steel per year at Rourkela,
Bhilai, Durgapur. TISCO started its expansion
programme.
1956-1961 Second five-year plan - A bold decision was
taken up to increase the ingot steel output in
India to 6 million tones per year and its
Thus the Hindustan Steel Limited (HSL) was born on 19th Jan 1954 with the
decision of setting up three steel plants each with one million tons ingot steel per year at
Rourkela, Bhilai and Durgapur. Though TISCO and IISCO were scheduled to expand,
TISCO started its expansion program.
In addition to the above BSP and DSP each were having the capacity to produce
300,000 tons of pig iron for sale.
Third five-year plan (1961 to 1966):
During this period, the three steel plants under HSL, TISCO, and IISCO were
expanded as shown below. However, these could be completed only by 1968 - 1969.
7 R&D 10 10 10 10 10 50
8 BF1 27 - - - - 27
capital
repairs
9 Spl.capex 200 175 - - - 375
value
added
products
Total 3285.8 3851.8 1593.6 573.3 264.4 9569.1
6 9 7 2 4
Global Scenario:
As per IISI
In March 2005 World Crude Steel output was 92.8MT when compared to
March 2004 (87.2 MT), the change in percentage was 6.5%.
China remained the world's largest Crude Steel producer in 2005 also (27.5MT)
followed by Japan (9.6MT) and USA (8.1MT). India occupied the 8th position
(8.8MT)
USA remained the largest importer of semi-finished and finished steel products
in 2002 followed by China and Germany.
Japan remained the largest exporter of semi-finished and finished steel
products in 2002 followed by Russia and Ukraine.
Other significant recent developments in the global steel scenario have been
under the auspices of the OECD (Organization for Economic Co-operation &
Development) the negotiations among the major steel producing countries for a
Steel Subsidy Agreement (SSA) held in 2003 with the objective to agree on a
complete negotiating text for the SSA by the middle of 2004. It also set subsidies
for the Steel Industry of a ceiling of 0.5% of the value of production to be used
exclusively for Research & Development.
The global economy witnessed a gradual recovery from late 2003 onwards.
China has become one of the major factors currently driving the world economy.
As a result of these economic developments IISI has projected an increase by
6.2% or 53 million metric tonnes in 2004 in the global consumption of finished
steel products. IISI has split the growth into two separate areas, China and the
Rest of the World (ROW). Steel consumption in China has been estimated to
increase by 13.1% or 31 mmt in 2004.
USA has repealed the safeguard measures on import of steel as a result of a
ruling, by a WTO Dispute Resolution Panel, which held these measures to be
illegal under the WTO regime.
At present, total (crude) steel making capacity is over 34 million tonnes and
India, the 8th largest producer of steel in the world, has to its credit, the
capability to produce a variety of grades and that too, of international quality
standards. As per the ratings of the prestigious “World Steel Dynamics”, Indian
HR products are classified in the Tier II category quality products- a major
reason behind their acceptance in the world market. EU, Japan have qualified
for the top slot, while countries like South Korea, USA share the same class as
India.
In pig iron also, the growth has been substantial. Prior to 1991, there was only
one unit in the secondary sector. Post liberalization, the AIFIs has sanctioned
21 new projects with a total capacity of approx 3.9 million tonnes. Of these, 16
units have already been commissioned. The production of million tonnes in
2002-03. During the year 2003-04, the production of Pig Iron was 5.221
million tonnes.
Market Scenario
• After liberalization, with huge scale addition to steel making
capacity.
• Apparent consumption of steel increased from 14.84 million tonnes
in 1991-92 to 30.265 million tonnes in 2003-04.
• The production of steel in 2003-04 is 36.193 million tonnes as
against 33.67 million tonnes in 2002-03 thereby registering 7.5%
growth.
• The demand of steel has been firmed up both at home as well as
internationally.
• Efforts are being made to boost demand particularly in rural areas and also to
increase exports.
Production:
Steel industry was de-licensed and decontrolled in 1991 and 1992 respectively.
India is the 8th largest producer of steel in the world.
In 2003-04, finished steel production was 36.193 million tonnes.
Pig iron production in 2003-04 was 5.221 million tonnes.
Sponge iron production was 80.85 million tonnes during 2003-04.
The annual growth rate of crude steel production in 2002-03 was 8% and in
2003-04 was 6%. Last 4 years production performance is as under:
Im p o r t Q t y . (in m illio n t o n n e s )
2.5
2
1.5
1
0.5
0
1 9 9 8 -1 9 9 9 -2 0 0 0 -2 0 0 1 -2 0 0 2 -2 0 0 3 -2 0 0 4 -
99 00 01 02 03 04 05
Iron & Steel are freely exportable and India is a net exporter of steel.
Advance Licensing Scheme allows duty free import of raw materials
for exports.
Duty Entitlement Pass Book Scheme (DEPB) also facilitates exports.
The Government has temporarily suspended the DEPB on iron & Steel &
ferroalloys w.e.f 27th March 2004 as a measure to increase iron & steel
availability in the domestic market.
Steel Exporter’s Forum has been set up to boost steel exports.
An Anti Dumping Directorate has been set up under the Ministry of
6
5
4
3
2
1
0
1 9 9 8 1- 9 9 9 2- 0 0 0 2- 0 0 1 2- 0 0 2 2- 0 0 3 2- 0 0 4 -
99 00 01 02 03 04 05
• The peak rate of Custom Duty has been reducing sharply during
the last 5 years. In the interim budget for 2004-05, announced in
January’2004 the peak rate was reduced from 25% to 20%. In 2004
the Customs Duty on carbon steel items and pig iron was further
reduced to 5%.
• The custom duty on scrap was nil.
• Import duty on coking coal has been reduced to ‘nil’, and on
metallurgical coke reduced to 5%.
Excise Duty
SDF LEVY
This was a levy started for funding modernization, expansion and
development of steel sector. The fund, inter-alias, supports:
1) Capital expenditure for modernization, rehabilitation,
diversification, renewal & replacement of Integrated Steel
plants.
PROFILES OF
Introduction
Milestones of VSP
Vision
Mission
Objectives
Core Values
Production Performance
Product Mix
Process
Board of Directors
Organization Chart
Recent Trends
Financial Performance
Introduction
Steel is such a versatile commodity that every object we seen in our day to day
life have used steels either directly or indirectly in its products. To mention a few it
is used for such a small items as nails, pins, needles etc. Steel comprises one of the
most important inputs in all sectors of economy. Steel industry is both a basic and a
core industry. The economy of any nation depends on a strong base of iron and steel
industry in that nation. Today Steel occupies the foremost place amongst the
materials in use today and pervades all walks of life. All the key discoveries the
human genius – for instance, steam engine, railway, means of communication and
connection, automobile, aero place and computers are in one way or other, fastened
together with steel and with its sagacious and multifarious application.
Steel is versatile material with multitude of useful properties making it
indispensable fro furthering and achieving the continual growth of the economy –
Be it construction, manufacturing, infrastructure or consumables. The level of steel
consumption has been regarded as an index industrialization and economic maturity
attained by a country. Keeping in view the importance of steel, the following
integrated steel plants with foreign collaborations were set up in the public sector in
the post – independence era:
To meet the growing domestic needs of steel, the decision of the Government of
India to set up an Integrated Steel Plant at Visakhapatnam under Steel Authority Of
India Ltd.(SAIL) was announced by the Prime Minister Smt. Indira Gandhi in
parliament on 17th April 1970. The Selection Committee chose the site near
Balacheruvu creek at Visakhapatnam. The Prime Minister of India did the formal
inauguration and laid the foundation stone on 20th January 1971. The consultant,
M/s M.N.Dastur and company ltd., submitted a techno-economic feasibility report
for the plant, with an annual capacity of about 3.4 million tones of liquid Steel, in
October 1977.
The erstwhile USSR Government examined the detailed project report
prepared by Dastur & Company and offered Technical and Economic co-operation
for the same. The Govt.of India and erstwhile USSR signed an agreement on June
12th 1979, for co-operation in setting up a 3.4 million tones integrated steel plant at
Visakhapatnam. The USSR agreed to provide financial assistance of 3.4 million
Rouble credit to GOI specifically for setting up the steel plant. In terms of this
agreement, Soviets and Indian design organization revised the earlier detailed
project report of Dastur Co., jointly and a comprehensive revised detailed project
report for VSP was submitted in November 1980. A new company i.e. Rashtriya
Ispat Nigam Ltd. (RINL) was incorporated for faster implementation of the project.
The construction of the project commenced in 1982 with a schedule of 4 and 6 years
for the first and second stage respectively. During construction due to inadequate
fund availability, the project schedule could not be adhered to, resulting in huge cost
and time overruns. The project cost escalated to around Rs.8500 crs. In a bid to
reduce the capital investment, Rationalized concept was adopted in 1985. As per
this one Steel Melt Shop and one Rolling Mill i.e. the universal beam mill were
dropped. The other steel melt shop of 2.2 MTPA of liquid steel was up rated to 3
MTPA without any additional facilities. Further the capacities of Rolling Mills i.e.
Light and Medium Merchant Mill
(LMM), Medium merchant and structural mill (MMSM) and Wire Rod Mill
(WRM) were also up rated without any modification to make the project
economically viable.
The project cost with all these modifications was brought down to about
Rs.6281 crs. However during implementation further cost escalations took place and
finally the project was implemented at a capital cost of around Rs.8500 crs. Various
operating units were commissioned one after another from 1989 onwards and entire
project was completed by July 1992. The then Honorable Prime Minister Sri.
P.V.Narasimha Rao dedicated the plant to the Nation on 1st August 1992. Unlike
other integrated steel plants in the country, new technology, large-scale
computerization and automation etc. were incorporated in the plant. To operate the
plant at international levels and attain such labor productivity, the total manning of
the organization was frozen to 17,500 employees. The plant has a capacity of
producing 3.0 MT of liquid Steel and 2.656 MT saleable steel.
1. Govt of India approval ref: 6 (1) 2005-VSP dated 28th October 2005.
2. Commencement Date 28th October 2005
3. Main Units in Expansion
Raw Material Handling Plant
One Sinter Plant
One Blast Furnace 3.25 Mt / year Sinter
One Blast Furnace (BF-3800 C.2.50 Mt/ year Hot Metal
Calcining and Refractory Materials 12x500 t / day
One Steel Melt Shop 2.60 Mt / year Liquid Steel
Rolling Mills
Wire Rod Mill 600,000 t/ year
Seamless tube plant 300,000 t /year
Special bar mill (in Stage-II) 750,000 T / year
Light Structural Mill ( LSM) (in stage –II) 700,000 t/ year
Augmentation of existing TPP 1X67.5 MVV turbo – generator with TB
Power Plant (BOO Basis) 2x67.5 MVV capacity with all necessary facilities
Air Separation Plant (BOO basis) 2x1200 t / day Oxygen
Captive Mines Augmentation of capacities at Madharam.
Jaggayyapeta
and Garbham Mines.
Vision:
Objectives:
Expand plant capacity to 6.3 million tone capacity by 2008-09 with the mission to
expand further in subsequent phases as per the corporate plan.
Sustain Gross margin to turnover ration>25%.
Be recognized as an excellent business organization by 2008-09.
Be amongst top five lowest cost steel producers in the world by 2009-10.
Achieve higher levels of customer satisfaction than competitors.
Instill right attitude amongst employees and facilitate them to excel in their
professional, personal and social life.
Be proactive in conserving environment, maintaining high levels of safety and
addressing social concern.
Core Values:
The efforts of VSP have been recognized in various fora. Some of the major
awards by VSP are in the area of energy conservation, environment protection, safety,
quality, quality circles, Rajbhasha, MOU, sports related awards, and a number of
awards at a individual level.
Some of the important awards received recently by VSP are indicated below:
S.L AWARD YEAR
No.
1. Commendation prize for strong commitment to 2006
excellence – CII Exim bank Award for Business
Excellence 2006
2. Strong commitment – CII HR Excellence Award 2006 2006
3. National Energy Conservation Award 2001-06
4. Organizational Excellence Award 2006,2004
5. Best Industrial productivity Award 2006
6. Golden Peacock Environment Management Award 2006
7. Safety Innovation Award. 2006
8. CII Leadership and Excellence Award in Safety, Health 2006
and Environment 2005.
9. Business Achievement Award for Excellence. 2005
10. CII- GBC National Award 2005
11. Energy Conservation Award by AP Productivity Council 2005
12. Certificate of Appreciation by Institution Of Engineers, 2005
AP Chapter.
13. National Award for Excellence in Water Management by 2005,2004
CII
14. Leadership and Excellence Award in Safety, Health & 2004
Environment.
15. CACCI Business Achievement Award 2004
16. World Quality Commitment International Star Award 2004
17. ICWA National Award 2004
18. Best Enterprise Award 2003-04
19. Rolling Shield For Environmental Protection 2002-03
20. Prime Minister’s Trophy 2002-03
21. Indira Priyadarshini Vrikshmitri Award 2002-03
22. Best Safety Standards by Green Tech Foundation 2002-03
23. Best HR Practices 2002
24. Environmental Excellence Award 2002
25. Best Enterprise Award, WIPS 2001-02
26. Award for Best Turnaround 2000-01
27. Best Management Award 2000-01
28. Shield For Best Efforts In Rain Water Harvesting 2001
29. SAIL Chairman’s Silver Plaque 2000
30 Paryavaran Parirakshak Award 2000
Major Sources of Raw Materials:
VSP is one of the most modern steel plants in India incorporating State-of-the-
Art technology. Following are some of the modern technologies adopted:
Power Export(MW)
50
40
30
20 Power Export(MW)
10
0
-10
2411
Saleable
2217
2675
2900
2958
3125
3205
3210
3080
Steel
Liquid Steel 2530 2730 3000 3235 3300 3500 3567 3620 3450
Hot 3120 3120 3400 3850 3950 4000 4100 4100 3850
Main Products of vsp;
STEEL BY PRODUCTS
PRODUCTS
Angles Nut Coke Granulated Slag
Billets Coke Dust Lime Fines
Channels Coal Tar Ammonium Sulphate
Beams Anthracene oil
Squares HP Naphthalene
Flats Benzene
Rounds Toulene
RE-bars Zylene
Wire Rods Wash Oil
Process:
Following are the details of processes of main production units of VSP.
2. Sinter Plant
Iron ore fines, coke breeze, limestone and dolomite along with recycled
metallurgical wastes are converted into agglomerated mass at the Sinter Plant,
which forms 80 % of iron bearing charge in the Blast Furnace. The Sinter Plant
comprises of two sinter machines each having 312 square meters of grate area with a
total production capacity of 5.256 million tones per annum.
3. Blast Furnace
VSP has two Blast Furnaces with an effective volume of 3200cu.m. each ,
which are the largest in the country. Blast Furnace is charged with coke, iron ore,
sinter and fluxes such as lime stone from the top. Hot air at very high pressure is
blown from the bottom. The iron ore and sinter charged from the top gets reduced
to hot metal by the time it reaches the hearth. Metal is tapped from the hearth of the
furnace at regular intervals. Its novel circular cast house with four tap holes ensures
continuous tapping of hot metal. Each furnace produces about 5000 tones of molten
iron per day. The annual
Production capacity of these Blast Furnaces is 3.4 million tones of liquid iron. The
furnace is operating at about 125% of their capacity at present.
In addition to hot metal the gang material present in the iron ore and sinter
also comes out in the form of molten slag while tapping. This molten slag is
converted to granulated slag in the slag processing plant. Granulated BF slag is used
for cement making and various other construction purposes. The hot metal
produced is carried to steel melt shop for further processing. The surplus hot metal
is taken to Pig Casting machines and cast into pig iron. The pig iron is sold to
foundries and exported to various other countries. Some pig iron is consumed in
steel melt shop also as coolant.
BOARD OF DIRECTORS
Chairman-cum-Managing Director
GM (TA)
GM (Per)
GM (IR)
ED (MM) GM (Mktg)
DGM(Admn)
GM(Sto.).
GM(MM)
)
GM(D&E) GM(Constn)
ED(F&A)
DM(F&A) (Budget)
JM(F&A)
To carry out the major functions of Visakhapatnam steel plant following core
departments exist:
1) Marketing Department
2) Works Department
3) Materials Management Department
4) Finance and Accounts Department
5) Personal and Administration Department
6) Corporate strategic Management Department
7) Management services Department
8) Mines Department
Recent Trends:
Considering the Turn Around and the excellent physical and financial
performance in the last 4 years VSP has been awarded MINIRATHNA STATUS by
the GOI in the month of May 2006. This confers more DOP and AUTONOMY to
VSP Management in financial and policy matters. The BOD also will be
strengthened with more independent non-executive DIRECTORS.
VSP has undertaken expansion of capacity from 3-million tone liquid steel to
6.3 million tone liquid steel at a cost of Rs.8692cr. Their entire expansion work is to
be completed within a period of 4 years from October 2006. The honorable Prime
Minister Of India has inaugurated the expansion project by laying foundation stone
on 20th May 2006. VSP will be producing special grade long products required for
automobile, railways and other special applications in the new mills which are going
to be installed. Further VSP will be producing Seamless tubes of 3 lakh tones which
are presently imported. The new products are value added products and likely to
contribute substantial profits to VSP in the years to come.
Joint Ventures:
VSP does not own any mines for extracting much required iron ore and low
ash metallurgical coal for its production. VSP depends on M/S.NATIONAL
MINERAL DEVELOPMENT CORPORATION for meeting its iron ore
requirements and import sources (Australia) for low ash metallurgical coal. These
sources have been increasing their prices disproportionately in recent times due to
very high demand because of capacity additions taking place in large scale. In order
to have raw material security and control over prices VSP has embarked upon
acquiring interest in coal mines and iron ore mines through joint ventures in India
and abroad. VSP has entered into MOU with M/S.NMDC for putting up sponge iron
plant in the State of Chattisgarh with an intention to own iron ore mines which are
available in plenty in this state. A number of teams have been visiting Australia,
USA and Canada scouting for joint venture interest in owning iron ore mines.
GOI has allotted mining rites in Mahal Coal Block for VSP after continuous
persuasion relentless efforts. VSP has started exploratory work in Mahal coal block
to ascertain the feasibility and project cost for opening up a mining unit in this
place.
Keeping in view the expansion of capacity and volatility of steel demand, VSP
is exploring possibility of opening up over sea branches in near by countries to
strengthen its presence in these places so that there will not be any difficulties in
marketing of its products in future.
In order to meet its ever growing power requirement, to conserve the natural
resources and reduce the cost of energy VSP has taken up implementation of power
generation through renewable energy sources like wind, sunlight etc. A policy in this
regard has been unveiled on 29th May 2006 by the CMD of VSP.
Conservation of Water:
Pollution Control:
PRODUCT 2008-2009
Oven/Day(Nos) 275
Hot Metal 4030
Liquid Steel 3520
Pig Iron for Sale 393
Blooms for Sale/Stocks 83
Billets foredr Sale/Stock 60
Billets- Procured (-)72
Steel end Cuttings 17
Bar Products 900
Wire Rod Products 1075
MMSM Products 1085
Saleable Steel 3220
Location:
The plant is located on the coast of Bay of Bengal, 16Kms to the southwest
of the Vishakapatnam Port. It lies between the northern boundary of the national
highway No.5 from Chennai to Kolkata, and 7Kms to the southwest of Howrah Chennai
Railway line. The decision of Govt. of India to setup an integrated steel plant with an
annual capacity of 3 MT of liquid steel and 2.656 MT of saleable steel at vishakapatnam
in AP is yet another step towards the country’s steel production redefining steel imports
and removing the regional imbalances in the development.
CHAPTER – 4
CONTROL
BUDGET:
Introduction
Definition
Need of budget
Essentials of budget
Advantages of budget
Limitation of budget
Types of budget
BUDGETARY CONTROL:
Key factor
BUDGET
Introduction:
Planning is the basic managerial function. It helps in determining the course of
action to be followed for achieving organizational goals. It is decision in advance,
what to do, how to do and who will do a particular task? Plans are framed to
achieve better results. Control is the process of checking whether the plans are being
adhered to or not, keeping a record of progress, comparing it with the plans, and
then taking corrective measures for future if there is any deviation. Every business
enterprise needs the use to control techniques for surveying in the highly
competitive and changing economic world. There are various control devices in use.
Budgets are the most important tool of profit planning and control. They also act as
an instrument of co-ordination.
Definition:
Budget is defined as a kind of future accounting in which problems of future are met
on the paper before transactions actually occur.
Need of budget:
To forecast and to plan for the future to avoid losses and maximize profits i.e.
to help in planning.
To bring about coordination’s between different function of an enterprise i.e., to
help in co-ordination.
To control actual actions by ensuring that actual are in tune with target i.e.,
to help in controlling.
Essentials of budget:
Advantages of budget:
Types of budget:
The Budgets are usually classified according to their nature. The following are the
types of budgets, which are commonly used.
2) Short Term Budgets -These budgets are generally for one or five Years and are in
the form of monetary terms. The consumer’s goods industries like sugar, cotton,
textiles, etc. use short-term budget.
(2) Financial Budget: - Financial Budget are concerned with cash receipts and
disbursements, working capital. Expenditure, financial position and result of
business operations. The commonly used financial budgets are:
a. Cash Budget
b. Working Capital Budget
c. Capital Expenditure Budget
d. Income Statement Budget
e. Statement of Retained Earnings Budget
f. Budget Balance sheet or position statement Budget
(3) Master Budget: - Various functional budgets are integrated into master budget.
This budget is prepared by the ultimate integration of separate function budgets.
According to I.C.W.A. London. "The master budget is the summary budget in
corpora-ting its functional budgets". Master budget is prepared by the budget
officers remained with the top-level management. This budget is used to co-ordinate
the activities of various departments and also to help as a control device.
BUDGETARY CONTROL
Introduction:-
Budget is formal plan of future course of action. When the budget is use to
evaluate the actual performance it is known as budgetary control.
The budgetary control systems are however not free from short coming
which are as follows;
This system proves useless in that firm where policies, processes,
techniques, etc., are frequently changing since it does not take into account such
changes.
It is very costly in case of small firm and serves no purpose in the event of
abnormal situations, such as strikes, lockouts etc.
There are many factors over which the management has no control but
the budgetary control depends on them. In that case, if its is prepared, it may
be inaccurate and fails to serve the purpose for which it is meant.
1. Clarifying Objectives:
The budgets are used to realize objectives of the business. The objectives must be
clearly spelt out so that budgets are properly prepared. In the absence of clear
goals, the budgets will also be unrealistic.
4. Budget Education :
The employees should be properly educated about the benefits at budgetary
system. They should be educated about their role in the success of this system. The
employees may not take budgetary control only as a control device but it should be
used as a tool to improve their efficiency.
6. Flexibility :-
Flexibility in budgets is required to make them suitable under changed
circumstances – Budgets are prepared for the future, which is always uncertain.
Even though budgets are prepared by considering the future possibilities but still
some occurrences late on may necessitate more appropriate and realistic.
7. Motivation :
Budgets are to be implemented by human beings. Their successful
implementation will depend upon the interest shown be improve their working
so that budgeting is successful.
Chief Executive
Budget Committee
Budget Officers
Key factor:
The factor that sets a limit to the total activity is known as key factor which
influence budgets. It is also called limiting factor or governing factor principal
budget factor. For example, there may be a high demand for a particular product
but due to non-availability of the supply of raw materials, production may have to
be destructed and this factor is known as key factor. It is highly significant during
the budgeting for production or sales. Sometimes, there may be several key factors,
such as, labour capital, sales, etc. However the following are examples of key factor.
The key factor does not create any permanent problem in the business
operations since it is possible to solve any problem with proper management action
in figure.
CONTROL IN VSP
Every organization prepares budgets so that it can plan for its future and meet
any unforeseen contingencies and Visakhapatnam. Steel plant is no exception to this
rule. In many organizations, the budgetary process is taken up by any senior
executive of finance department. Since Visakhapatnam Steel Plant is a large
organization it has a separate budget section in the finance department, which takes
care of the budgetary process.
Board of directors
Chairman-cum-managing Director
Budget Committee
b) Medical Department:
Headed by the chief medical officer, this department is responsible for
maintaining the health of the employees of the company and their department.
c) Marketing Department:
Headed by General Manager (Marketing) this department is responsible for
procuring orders for the company and selling the goods produced by
Visakhapatnam Steel Plant
d) Works Department:
Headed by Director (Operation), this is the life and flood of the company as this
department is responsible for manufacturing the various items.
f) Systems Department :
j) Personnel department:
Headed by Director (Personnel), this department is responsible for maintaining
employee records.
k) Commercial Department:
Headed by Director (Commercial), this department is responsible for material
management in the company.
l) Project Division :
2. Budget Manual :
3. Budget Committee :
4. Budget Period :
It refers to the period for which the budget is prepared and employed. There is
no fixed time for budget period. The length of the period depends on.
5. Key Factor :
The factor, which sets a limit to the total activity, is known as the key factor due
to difficult and the high costs involved in the procurement of raw materials and
also due to less demand for the product.
Operation Budget
A) Capital Budget :
Capital Budget deals with the new schemes to be implemented during the
current year and also with the completion of schemes already implemented. It is
prepared and approved by Visakhapatnam Steel Plant and sent to ministry of
Finance to incorporate the projected capital expenditure in the over all Planned
expenditure of GOI.
COB-4
B) Operations Budgets :
This is the main budget prepared by Visakhapatnam Steel Plant. This budget
deals with the cash from operations of various items produced by the steel plant.
Operations budget is a short term budget and is prepared for a period of one
year. It is fixed budget there is periodic review of the budget to check whether
the actual figures match the budgeted figures. It may be as follows:
Step – III The need of each of the 19 budget centers then presents the budget
for his center to CMD’s approval.
Step – IV After discussions with the head of each center with some
modification if necessary is approved.
Step – V After receiving all the budgets, the board of Directors formulates
the master budget for the particular year.
Step –VI The master budget is then circulated to all the department.
Step – VII The budget at each budget center and the master budget are
reviewed frequently, some times even daily, using a computerized
monitoring system in case Administrative Expenditure.
Details of Data Collected: The following are details of data collected from
various Deptt/Section:
S.No Details of Data Deptt/Section
1. Daily Flash Statement from by Product By Product sale
Section-Mktg Sections
2. Important Raw Materials Stock at Port T&S
3. Interest on RM Credit Rate Variance Material A/cs Section
4. Voucher data from operation bills accounts Operation bills A/cs
5. Voucher data from general A/cs General A/cs
6. Voucher data from works A/cs Works A/cs
7. Voucher data from stores A/cs Stores A/cs
8. Stores and Spares inventory from Stores A/cs Stores A/cs
9. NSR from by products Section Sales(finance)
10. Raw material Receipts Raw Material Deptt
11. Power details from DNW DNW
12. Production and Closing Balance of main PPM
product
13. Monthly Report from PPM PPM
14. Region wise, Branch wise sales a statement Mktg
15. Export sales and shipment plan Exports Sales Section
16. Cost of production for the month Costing Section
17. Interest Details From cash Section Cash Section
18. Raw Material Prices (Imported) for the month T&S
19. Dispatch money earned T&S
20. Raw Material Prices Variance for the Month MM Deptt
21. Fuel Rate for the Month MM Deptt
22. NSR for the month and up to the month Branch Sales A/cs
23. Wage Analysis Pay Section
24. By Product Prices Mktg Deptt
(i) Gross Sales: This item is derived directly from the data fed
from monthly NSR report given by the Branch sales A/cs.
(ii) Net Sales: This item also derived from the Data fed from
Monthly NSR report given by the branch Sales A/cs
Cumulative Cum.Upto
Current Month Mar-08
Prev.Month Mar-08
Sl.No Particulars Feb-08
Actual Sus.Plan(Alt- Sus.Plan (Alt-
1)** Actual 1)** Actual
A. Income
Gross Sales 1054.52 1014.59 1551.37 9850.39 10433.07
1 Net Sales 887.87 844.07 1257.76 8194.85 8669.99
2 Exprot Benefits 3.53 1.49 (-)6.84 14.48 9.84
3 Sale of Power 0.45 -- (-)4.63 -- --
4 Interest on Term Deposits 57.12 40.83 64.39 520.26 691.26
5 Interst others 3.18 3.28 (-)1.55 38.6 33.38
6 Miscellaneous Income 2.24 2.92 138.04 35 169.89
Total (1 to 6) 954.39 892.59 1447.17 8803.19 9574.36
B. Expenditure
7 Stock accretion(-)/decretion 45.33 79.81 126.45 (-)106.79 (-)343.17
8 Raw Material Consumption 358.61 352.63 296.17 4116.33 4280.22
9 Stores & Consumables 38.31 40.34 54.29 475 364.06
10 Employees Remn.& Benefits 89.97 68.97 242.19 812.05 1030.72
11 Power, Fule & Water 22.21 27.61 12.88 343.85 281.8
12 Repairs & Maintenance 7.28 10.72 40.82 126.23 125.79
13 Other Expenses 20.73 31.17 160.98 366.95 320.01
Total (7 to 12 ) 582.44 611.25 933.78 6133.62 6059.43
F Depreciation & DRE Written off 19.25 26.99 197.25 317.87 488
G Net Profit(Before Tax) (E-F) 349.48 252.25 309.06 2326.85 2995.36
Income
Gross Sales 8748.84 9150.570 9136.16 8881.70
Net Sales 7325.01 7593.85 7592.16 7412.23
Stock Discretion -5.75 23.760 -6.61 -469.62
Expenditure
Raw Material 3998.34 3889.04 4103.31 3984.05
Stores, Spares 460.06 357.27 475.00 309.77
&Consummates
Employees 633.55 746.940 812.05 788.53
Remuneration
Repair & Maintenance 137 109.70 129.23 84.97
Power, Fuel & Water 322.68 257.650 350.46 268.92
Other Expenses 266.07 243.580 373.25 159.03
Total Expenditure 5817.70 5604.18 6243.3 5595.27
Gross Margin (net) 2100.59 2654.959 1951.7 1400.5
Interest 35.60 48.94 24.84 24.51
Cash Profit 2065.02 2606.019 1926.86 1375.99
Depreciation & DRE 374.34 361.600 317.87 290.75
Net Profit 1690.65 2244.40 1608.99 1085.24
VISAKHAPATNAM STEEL PLANT (RINL)
12000
10000
BUDGET
8000
ACTUALS
6000
VARIANCE
4000
2000 FAVOURABL
E
0 ADVERSE
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
-2000
2001 2002 2003 2004 2005 2006 2007 2008
NET SALES
10000
8000
6000 BUDGET
ACTUALS
4000 VARIANCE
FAVOURABLE
2000 ADVERSE
0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
-2000 2001 2002 2003 2004 2005 2006 2007 2008
TOTAL INCOME
10000
8000
6000 BUDGET
ACTUALS
4000 VARIANCE
FAVOURABLE
2000 ADVERSE
0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
2001 2002 2003 2004 2005 2006 2007 2008
-2000
TOTAL EXPENDITURE
7000
6000
5000
4000 BUDGET
ACTUALS
3000
VARIANCE
2000
FAVOURABLE
1000
ADVERSE
0
-1000 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
2001 2002 2003 2004 2005 2006 2007 2008
-2000
GROSS MARGIN
3500
3000
2500 BUDGET
ACTUALS
2000
VARIANCE
1500
FAVOURABLE
1000 ADVERSE
500
0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
2001 2002 2003 2004 2005 2006 2007 2008
INTEREST
500
400
300
BUDGET
200 ACTUALS
VARIANCE
100 FAVOURABLE
ADVERSE
0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
-100 2001 2002 2003 2004 2005 2006 2007 2008
-200
CASH PROFIT
3500
3000
2500
BUDGET
2000
ACTUALS
1500 VARIANCE
FAVOURABLE
1000
ADVERSE
500
0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
-500
2001 2002 2003 2004 2005 2006 2007 2008
0.
NET PROFIT
3500
3000
2500
2000 BUDGET
ACTUALS
1500
VARIANCE
1000
FAVOURABLE
500 ADVERSE
0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
-500
2001 2002 2003 2004 2005 2006 2007 2008
-1000
W.r.t
2000-01
Net Profit after Tax
2000-2001 -291.78 Reasons
Reasons- Favorable
Adverse
Miscellaneous income 123.49 wastage the sources
Raw material consumption 68.66 production increased
Stores 13.43
Employees Remuneration 104.82 employees are increased
Other expenditure 9.9 expenses are increased
Depreciation 31.55 compare to the budget
Cash Profit 163.25
Net Profit 131.70
W.r.t
2001-02
Reas
Net Profit after Tax -75.15
ons
2001-2002
Reasons-Favorable
W.r.t
2002-03
Reasons
Net Profit after Tax 477.2
2002-2003
Reasons- Favorable
W.r.t
2003-04
Reasons
Net Profit after Tax 1457.19
2003-2004
Reasons-Favorable a
W.r.t
2004-05
Reasons
Net Profit after Tax 2008.09
2004-2005
Reasons- Favorable
Gross sales
2756.51 The expenditure and
Net sales
2404.46 decreased income
Stock accretion
317.23 sources are increased
Miscellaneous income
Stores 167.27
Repairs & maintenance 42.66
Power, fuel, water 9.67
Other expenditure 87.34
Gross margin 3.34
1965.99
Depreciation
541.61
Cash Profit
1987.12
Net Profit 1445.51
Reasons- Favorable
Export benefits All the income and
Miscellaneous income 24.43
205.46 expenditure are
Sale of power favorable condition
Raw material consumption 8.44
Stores 300.16
Employees Remuneration 62.00
Repairs & maintenance 13.1
Other expenditure 44.27
Power, fuel, water 110.2
Gross margin 92.93
Interest 136.17
Cash profit 6.42
Net profit 129.79
155.50
Reasons-Favorable
Adverse
7.321 Employees
Export benefits 1.6 remuneration is
Sale of power 113.39 increased more
Employees Remuneration
W.r.t
2007-08
1504.34 Reasons
Net Profit after Tax
2007-2008
Reasons-Favorable
Adverse
Power & Fuel .080 Expenditure incurred
CHAPTER- 6
SUGGESTIONS:
If we can observe the overall management performance of the Visakhapatnam
steel plant, we find some favorable & adverse impacts on the organizations
profitability. Therefore I would like to recommend some suggestions, which may
useful to maximize the profits.
The power export variance also informed that the actual were less
than the budgets from last two years therefore the top management should
take care about the misuses of power and should motivate the employees at
all levels for proper use of power.
Conclusion:
The Visakhapatnam Steel Plant has been dedicated to nation in 1992
and it is one of the major steel plants in the Asia and having much more
organization might have long gestation period and while establishing the
Visakhapatnam Steel Plant so much of lands were taken from the local
people and provided the jobs to them in VSP thought they may not skillful.
development programs to improve their performance, not only this but also
frequent technological changes due to the above factors in the initial stage.
The VSP incurred some losses but with the remedial measures taken by the
top management the past scenario was changed and the organization was
stepped towards the profits and recorded 449.66 crores as a profit for the
year 2002. However the top management must take care to improve the
profitability and must try to reduce / remove the accumulated losses, which
JOURNALS
SOURCE:
ANNUAL REPORT OF VSP 2005-06.
VSP PUBLISHED JOURNALS AND MAGAZINES
THE MANAGEMENT ACCOUNTS JOURNALS
WEBSITES:
WWW.vizagsteel.com
WWW. Jpcindiansteel.org