61426549 Inventory Managment in Barauni Refinery

7/29/2019 61426549 Inventory Managment in Barauni Refinery

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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY

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A

PROJECT REPORT

ON

INVENTORY MANAGEMENT IN

BARAUNI REFINAEY

SUBMITTED TO: FACULTY GUIDEMr.MUKESHKUMAR SWAGATA SENGUPTA

Sr.AccountsOfficer

SUBMITTED BY:POULAMI GHATAK

ROLL NO: L088135

A Report submitted in partial fulfillment of the requirement of M.B.A Programme ofHERITAGE INSTITUTE OF TECHNOLOGY

(Affiliated to All India Council for Technical Education)(An College under west Bengal university of technology Kolkata)


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CONTENT PAGE NUMBER

ACKNOWLEGEMENT.. 0 5

PREFACE. 06

INTRODUCTION. 8 - 14

yINDIAN OIL CORPORATION 08

yVISSION OF THE ORGANIZATION 14

yMISSION OF THE ORGANIZATION 15

ENVIRONMENTMANAGEMENT SYSTEM.. 16

ORGANOGRAMOFDIVISIONOFIOCL 17

FINANCEDEPARTMENTIN BARAUNIREFINERY.. 18

FINANCIALDEPARTMENTORGANOGRAM. 19

Functionsoffinance department. 20

Objectiveoffinance department...................... 20

FINANCIALANALYSIS OFBARAUNIREFINERY. 21

BALANCE SHEETOFBARAUNIREFINERY.. 22- 24

INTRODUCTIONOFINVENTORYMANAGEMENT 25

IMPORTANTCONCEPTININVENTORYMANAGEMENT 26

y EOQ 26

y SAWTOOTHMODEL 27

y INVENTORYMODEL 27

y JIT 28

INVENTORYMANAGEMENT 29-

PURCHASE PROCUREMENT

PROCUREMENT OF MATERIAL

y OBJECTIVE OF PURCHASE 30

y BASIC PRINCIPAL OF PURCHASE 30

y PURCHASE POLICY 30

y PURCHASE ORDER 31-38

TENDER AND CONCURRENCE

y INTRODUCTION 39

y TYPES OF TENDER 39-41


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y MODE OF TENDER 41-44

INVENTORY IN STORE OR IN TRANSIT

ABC ANALYSIS

y INTRODUCTION 45-46

y ALLOCATION OF ABC ITEMS 47

y SEGMENTATION OG ABC ITEMS 47

y GRAPH OF SHOWING ABC ITEMS 47

GOODS RECEIVED NOTE

y INTRODUCTION OF GOODS RECEIVED NOTE 48-50

y A SAMPLE OF GOODS RECEIVED NOTE 51

y T CODES IN SAP 52

PAYMENT

SERVICE TAX 53-55

FRIENGE BENEFIT TAX 55

EXCISE DUTY 56

ENTRY TAX 56

TDS 57

CENVAT 57-60

OTHERPAYMENT 61-63

RESEARCHANDMITHODOLOGY 64

OBSERVATION 65

SUGGESTION 66

BIBILIOGRAPHY 67


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ACKNOWLEGEMENT

The satisfaction and euphoria that accompanies the successful completion of any task will be

incomplete without mentioning the names of the people who made it possible, whose

constant guidance and encouragement crown all the efforts with success.

Im deeply indebted to all people who have guided, inspired and helped us in the successful

completion of this project. I owe a debt of gratitude to all of them, who were so generous

with their time and expertise.

It is my pleasure to place on record my sincere gratitude towards Mr. Avi jit Basu(CFM)

IOC Limited, Barauni, Mr. Mukesh Kumar ( SCAO) my Project Guides who spent their

precious time providing continuous ideas and expert guidance to my Report work. It was

their direction and encouragement at every moment and step that motivated m e to steer the

research work confidently and successfully.

I am also thankful to Prof. Aloke Ray, Director Of Heritage Institute Of Technology &

Swagata Sengupta and Dr. Gagan parekh whose encouragement, moral support provide the

valuable guidance, which has been a source of inspiration to me.

Last but not the Least, thanks to ALMIGHTY for the profuse blessings, which always

back us!!

POULAMI GHATAK

Student Id. No. L088135

MBA (FINANCE)


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PREFACE

It give me great pleasure to present this project report on Inventory Management ofIndian Oil Corporation Limited, Barauni Refinery Unit, Begusarai. This project report isintended to fulfill the partial requirement for the completion of Post-Graduation Program.

The real objective behind the partial training and presentation of the report is to gainexperience to the actual work environment and the required knock to guide knowledgetowards facilitating its application for any professional practical training and close contactwith the prevailing system in an organization is of great importance.

Efforts have been made to prepare this Project Report in most simple language. Whilepreparing this Project Report, a care has been taken to make it comprehensive, reliable andanalytical to make it easy to understand. Charts and Diagram have been used to avoid

difficulties.

UNDERGUIDANCEOF

MR.AVIJIT BASU

CHIEF ACCOUNTS MANAGER

INDIAN OIL CORPORATION

BARAUNI REFINERY

&

MR. MUKESH KUMAR

SENIOR ACCOUNTS OFFICERINDIAN OIL CORPORATION

BARAUNI REFINERY

POULAMI GHATAK

DATE:

PLACE:


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INTRODUCTION OF INDIAN OIL CORPORATION


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INDIAN OILCORPORATIONLIMITED

Indian Oil Corporation Limited (Indian Oil)

is the country's largest commercial

enterprise, with a sales turnover of Rs.1,50,

677 crore and profits of Rs. 4,891 crore for

fiscal 2004. And a sales turnover of Rs.

247,479 crore(US $ 61.70 billion) and profit

of Rs. 6,963 crore (US $ 1.74 billion) for the year 2007- 2008.

Indian Oil is Indias No.1 Company in Fortune's prestigious listing of the world's

500 largest corporations, ranked 116 for the year 2007 based on fiscal 2006

performance. It is also the 18th largest petroleum company in the world. The

company has also been adjudged No.1 in petroleum trading among the national oil

companies in the Asia-Pacific region, and is ranked 325th in the current Forbes' "Global 500"

listing of the largest public companies.

The Indian Oil Group of companies owns and operates 10 ofIndians 20 refineries with a combined refining capacity of 60.2 million metric

tonnes per annum(MMTPA, i.e. 1.2 million barrels per day ). These includes two r

refineries of subsidiary Chennai Petroleum Corporation Ltd.(CPCL). The

Corporations cross country network of crude oil and product pipelines, spanning

more than 10,000 kms and the largest in the Country, meets the vital energy needs

of the consumers in an efficient , economical and environment-fr iendly manner.

Indian Oil is investing Rs. 43,393 crore(US $10.8 billion) during the period 2007-

12 in augmentation of refining and pipelines capacities, expansion of marketinginfrastructure and product quality upgradetion as well as in integration and

diversification projects.


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Beginning in 1959 as Indian Oil Company Ltd.,Indian OilCorporation Ltd. was

formed in 1964 with the merger of Indian Refineries Ltd. (Estd. 1958).

In financial parlance, Inventory is defined as the sum of the

value of raw material, fuels & lubricants, spare parts maintaince consumables, semi

processed materials and finished goods at any given point of time. Operat ional

definition of Inventory would be: the amount required raw material , fuels,

lubricants , spare parts and semi-finished goods , stocked for smooth running of the

plant. Since these resources are idle when kept in store inventories is defined as an

idle resources of any kind having an economic value.

Indian refineryltd.

RefiningcompanyIncorporated

Indian Oil CompanyMarketing company

Incorporated

Indian OilCorporation

Merger


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ProcessOverviewand alltheproductofbarauni

refinery

IOCL is one of the navratan PSU of India. Its an petrochemical manufacturing company

The Refinery processes Imported Low sulphur & High sulphur crude oil to produce:

LPG

Naphtha (SRN)

Motor Spirit (Petrol)

Superior Kerosene Oil (Kerosene)

High Speed Diesel (Diesel)

Light Diesel OilLow Sulphur Heavy Stock

Raw Petroleum Coke

Carbon Black Feed Stock

Sulphur

Barauni Refinery, the lifeline of Bihar, meets the demand of vital petroleum products not

only of the State but also for sustenance and growth of industries all around. It has been

acting as a great synthesizer of a traditionally agrarian economy with indus trial development

ushering in prosperity, so much so, that the Refinery is referred to as a luminous jewel,

reflecting the development of Bihar.

The Petroleum Products from the Refinery are dispatched through Tank Trucks, Tank

Wagons (Rail) and Barauni-Kanpur-Lucknow pipeline. The pipeline passes through Patna,

Mughalsarai and Allahabad where Marketing Division taps off the products for local

distribution at the respective locations.

The other major industrial establishments near the refinery are :

@ Barauni Thermal Power Station


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@ Hindustan Fertilizer Corporation Ltd. (Closed)

@ National Thermal Power Station, Barh (Upcoming)

MAJORPROCESSUNITS OFBARAUNIREFINERY:

PROCESS UNITS CAPACITY

(000 MTPA)

ATM & VACUUM UNIT-I, II & III 6000

DELAYED COKER UNIT-A 600

DELAYED COKER UNIT-B 500

LPG RECOVERY UNIT 192

CATALYTIC REFORMER UNIT 300

RESID FLUIDISED CATALYTIC CRACKING UNIT 1400

DIESEL HYDROTREATMENT UNIT 2200

HYDROGEN GENERATION UNIT 34 H2 GEN.

SULPHUR RECOVERY UNIT 2*40 MT/DAY S

PRODN.

As India's flagship national oi l company, Indian Oil accounts for 56% petroleumproducts market share among PSU companies, 42% national refining capacity and

69% downstream pipeline throughput capacity.

In Barauni Refinery, in the year i.e. 2008-2009 two projects have been undertakennamely:


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1. Yield optimization of AVU.

2. Yield optimization of LTU.

Apart from above measures to improve the profitability of the refinery a no. of

management schemes for improvement & product enhancement are also undertaken like Six

Sigma, TPM, ISRS.

y CAPACITY

Indian Oil controls 10 of India's 18 refineries - at Digboi, Guwahati, Barauni, Koyali, Haldia,

Mathura, Panipat, Chennai, Narimanam and Bongaigaon - with a current combined rated

capacity of 54.20 million metric tons per annum (MMTPA) Indian Oil accounts for 42% of

India's total refining capacity.

yREFINING

Born from the vision of achieving self-reliance in oil refining and marketing for the nation,

Indian Oil has gathered a luminous legacy of more than 100 yea rs of accumulated

experiences in all areas of petroleum refining by taking into its fold, the Digboi Refinery

commissioned in 1901 .Indian Oil controls 10 of Indias 19 refineries. The group refining

capacity is 60.2 million metric tons per annum (MMTPA) or 1.2 million barrels per day -the


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largest share among refining companies in India. It accounts for 40.4% share of national

refining capacity.

yMARKETING

Indian Oils countrywide network of over 21,000 retailsales points is backed for supplies by its extensive, well spreadout marketing infrastructure comprising 169 bulk storageterminals, installations and depots, 93 aviation fuel stations and79 LPG bottling plants. Its subsidiary, IBP Co. Ltd, is a stand-alone marketing company with a nationwide retail network ofover 2500 sales points. Indian Oil caters to over 53% of India'spetroleum consumption.

SERVO Technical ServicesMarketingTotal Fuel Management/ Consumer Pumps Commercial/Reticulated LPGLPG Business (Non-Fuel Alliances)Retail Business (Non- Fuel Alliances)

IndianOil Aviation ServiceLoyalty Programs

yRESEARCH & DEVELOPMENT

Indian Oils world-class R&D Centre has won recognition for its pioneering work inlubricants formulation, refinery processes, pipeline transportation and bio -fuels. It has

developed over 2,100 formulations of SERVO brand lubricants and greases for virtually all

conceivable applications automotive, railroad, industrial and marine meeting stringent

international standards and bearing the stamp of approval of all major original equipment

manufacturers. The Centre has to its credit over 90 national and international patents. The


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Centre has recently incorporated a subsidiary company for commercializing its innovations

and technologies.

The wide range of SERVO brand lubricants, greases, coolants and brake fluids meetstringent international standards and bear the stamp of approval of all major original

equipment manufacturers. The Centre has to its credit over 60 national and international

patents, including 5 from US.

Visionofthecorporation

ETHICS

TECHNOLOGYPEOPLE

ENVIRONMENT

CUSTOMARINNOVATION


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A major diversified, transnational, integrated

energy Company, with national leadership and a strong environment

conscience, playing a national role in oil security& public distribution.

Missionofthecorporation

To achieve international standards of excellence in all aspects of energy and

diversified business with focus on customer delight through value of products

and services, and cost reduction.

To maximize creation of wealth, value and satisfaction for the stakeholders.

To attain leadership in developing, adopting and assimilating state -of- the-art

technology for competitive advantage.

To provide technology and services through sustained Research andDevelopment.

To foster a culture of participation and innovation for employee growth and

contribution.

To cultivate high standards of business ethics and Total Quality Management for

a strong corporate identity and brand equity.

To help enrich the quality of life of the community and preserve ecological

balance and heritage through a strong environment conscience.


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ENVIRONMENTMANAGEMENT SYSTEM

Barauni Refinery has a full-fledge Environment protection cell. The worth nothing is that

this cell was established 36 years back in 1975. In India oil , Environment protection has

always remained a thrust area. The Environment protection cell having qualified engineers

coordinates all the activities required to achieve continuous improvem ent in environment

performance related to Environment Management in the Refinery.

The Refinery has a beautiful ecological park spread over an area of 75

acres. The park developed with in house expertise and resources has lush green lawns large


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variety of trees and shrubs and wonderful ECO pond where flora & fauna and aquatic life are

thriving on treated effluent.

ORGANOGRAMOFDIVISIONOFIOCL

IOCL

MARKETING

DIVISION

PIPELINE

DIVISION

REFINERY

DIVISION

R&D

DIVISION

ASSAM

OIL DIVISION

PANIPATH

GUWAHATI

HALDIA

BARAUNI

GUJARAT

MATHURA


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FINANCE DEPARTMENT

All the divisions have their respective finance functions within their structure. Forcoordination of the finance functions of all the divisio ns and to provide guidelines forfinancial matters , a corporate finance departmen t is also functioning under director (finance)

in the corporate office.

For the purpose of meeting the requirement of companies act,consolidation of balance sheet and the profit and loss accounts of the divisions and the R&DCentre is done by marketing divisions , Mumbai. Finally a consolidated balance sheet andprofit and loss accounts is prepared for the corporation as a whole. This project looks at thefinance functions within the finance department in the refinery divisions.

The general manager ( Finance) is the head of the finance department in the refinerydivisions. The E.D ( Finance) is appointed by the board and is delegated with specificfinancial powers. He also acts the principal staff advisor to the director on all financial

matters. All the proposals involving financial implications are required to bear theconcurrence of the E.D ( Finance) before they are submitted for the approval of director.Similarly at refinery units the Deputy General Manager( Finance) / Chief Finance Manager /Senior finance manager acts as a principal staff advisor on all principal matters to theExecutive Director / general Manager.


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Finance department organogram

2011-2012

S . C. BHANSALI

CFM

A.BASU( SFM)

A.K. LAL

SFM

B. SETHI

FM

S. KUMAR(DFM)

V.D JHA(SACO)

R.N.PRASAD(SACO)

A.K.RAKSHIT(ACO)

H.SEKHAR(ACO)

R.AGARWAL

(SACO)

L.P.SHARMA

(SACO

V.C.JAISWAL

(ACO)

S.LACHHIRAMK

A (ACO)

A.SONI( FM)

M.KUMAR SACO

R.K.SINGH SACO

A.KUMAR(SACO)

SANTOSH

KUMAR(SACO)

SUMIT

AGARWAL(ACO)

R.P.SINGH(DFM)

G.SHARMA(SACO)

A.K.SINHA SACO

U.K.PRASAD

(ACO)

U.S.SARAWAT

(ACO)


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FUNCTIONSOFTHEFINANCEDEPARTMENT

y Management of financial resources for meeting the cooperations programmes ofoperations and capital expenditure including investment of surplus fund , if any.

yEnsuring uniform financial and accounting policies and procedures to the extentpossible in the divisions.

yEstablish and maintain a system of financial scrutiny and internal checks and renderadvice on financial matter including examination of feasibility studies and detailedProjects report.

yEstablishment and maintain an appropriate system of budgetary control andmanagement information system for different levels of the management.

yCarry out periodical/ special studies with a view to control costs , reduce expenditure,economy in administrative expenditure, improve efficiency to maximize profitabilityof the corporation.

y Maintain the financial accounts , cost accounts and other relev ant books and recordsin accordance profitability of the corporation.

y Maintain the financial accounts , cost accounts and other relevant books and recordsin accordance with the various statutory and other requirement.

yAdvice on corporate cash planning, credit policy and pricing policies of thecorporation.

yEnsuring that the corporation acts in all financial and accounting matters as per

approved policies of the corporation within the framework of government policy forpublic enterprises.

OBJECTIVEOFFINANCEDEPARTMENT

y To ensure adequate return on capital employed and maintain a reasonable annualdividend on its equity capital.

y To ensure maximum economy in expenditure.

y To generate sufficient internal resources for financing partly / wholly expenditureon new capital Project.

y To develop long term corporate plans to provide adequate growth of the activitiesof the corporation.

y To endeavor to complete all plans project within stipulated time and withinstipulated cost estimate.


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FINANCIAL ANALYSIS OF BARAUNI REFINERY

In a dynamic business environment, financial performance is the lifeline, which sets the

basic foundation of the organization. Indian Oil is largest business organization and we have

drawn strength from our systems, procedures and transparent financial management.

The Finance function with the focus on profitability, cost cutting, effective forecasting,

innovative new financial products and optimum risk management is a key to management

information & decision support system.

Finance with the greater focus on simplifying and consolidating financial procedures,

following best practices of corporate governance, customer satisfaction, skill development

assists in achieving the goal of excellence with continuous improvement.

I am happy to note that in line with the expectations of the emerging global business

requirements; our Finance has re-scripted the Accounts and Finance manual. The new

manual has taken care of SAP implementation requirements, new accounting standards

issued by the Institute of Chartered Accountants of India and the changed policies and

guidelines.

I earnestly appreciate the initiative taken by the Finance Department to update the manual,

which I am sure this will greatly enhance the efficiency in our working and meet the

stakeholders expectation.

Why SAP Was Selected

ySupport for open XML Java standard

yIntegration with the existing SAP ERP applicationyHarmonized with all other components of the SAP Net Weaver technology platform

yIntegration tool for all SAP solutions

ySupport for industry-standard as Rosetta Net and chemical industry data exchange


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INDIAN OIL CORPORATIONLIMITED

Barauni RefineryBalance Sheet as at 31 March

2010Amou

nt in Rs.

Schedule March-11 March-10

SOURCES OF FUNDS

Shareholders' Funds:

a) Share Capital "A" 0 0

b) Share Capital Suspense Account "A1" 0 0

c) Reserves and Surplus "B" -2723863582 6558192042

-2723863582 6558192042

Regd. Office A/C (Division balances)

Loan Funds

a) Secured Loans "C" -100004550 -173014641

b) Unsecured Loans "D" 0 0

-100004550 -173014641

Deferred Tax Liability(Net)

Foreign Currency Monetary ItemTranslation Difference Account

"D1"0 0

TOTAL 2823868132 6385177401


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PARTICULARS SCHEDULE MARCH 11 MARCH

10

APPLICATION OF FUNDS

FIXED ASSETS AND INTANGIBLEASSETS:

1.1 Fixed Assets "E"

a) Gross Block2856030525

5 27614632652

b) Less : Depreciation-

13032158549 -11942246629

c) Less : Impairment Loss

d) Net Block1552814670

615672386023

1.2 Intangible Assets "E1"

a) Gross Block 69240362 72671073

b) Less : Amortisation -55560292 -57649718

c) Less : Impairment Loss

d) Net Block 13680071 15021355

1.3 Dismantled Capital Assets 42994900 42207966

1.4 Capital work in Progress "F" 8434382289 2996169812

2401920396

618725785156

Investments "G" 2500 2500

Advances for Investments "G-1" 0 0

Finance Lease Receivables

Current Assets, Loans andAdvances

a) Inventories "H"1215990182

89554181512

b) Sundry Debtors "I" -62252395 -41562195

b) Cash and Bank Balances "J" 1200 203852

c) Other Current Assets "J1" 5101115 0

e) Loans and Advances "K" 1273103123 1086257491

1337585487

110599080660

Less: Current Liabilities andProvisions

"L"

a) Current Liabilities-

2699959331-9494821128

b) Provisions-

84885892900

-

11188548621-9494821128


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2187306250 1104259531

c)Inter-Division Balances 487734816 369943248

d) Intra-Division Balances-

23870674911 -26585167836

NET CURRENT ASSETS(5-6)-

21195633845 -25110965057

Miscelleneous Expenditure ( to theextent not written off or adjusted)

"L-1" 0 0

TOTAL 2823572621 -6385177401

STATEMENT OF SIGNIFICANTACCOUNTING POLICIES "Q"

NOTES ON ACCOUNTS "R"

OTHER SCHEDULES FORMINGPART OF ACCOUNTS "S" to "X"


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INVENTORY MANAGEMENT

Inventory- A physical resource that a firm holds in stock with theintent of selling it or transforming it into a more valuable state.

Inventory System- A set of policies and controls that monitors levelsof inventory and determines what levels should be maintained, whenstock should be replenished, and how large orders should be maintained

A TYPICALMMCYCLEIN INVENTORY

INVOICE

VERIFICATION

REQUIRMENT

GOODS RECEIPT RFQ

PO/CALL UP CREATED CONTRACT

PAYMENT

INVO

ICE

DELIVERY

PO

MRP

PM/PS


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IMPORTENTCONCEPTS ININVENTORYMANAGEMENT

Models forInventoryManagement:

EOQ

EOQ minimizes the sum of holding and setup costs

Q = 2DCo/ChD = annual demand

Co = ordering/setup costsCh = cost of holding one unit of inventory


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SAWTOOTH MODEL

INVENTORY MODEL UNDER UNCERTAINTY


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JUST IN TIME (JIT) PRODUCTION

Just-in-time(JIT) is defined in the APICS dictionary as a philosophy of manufacturingbased on planned elimination of all waste and on continuous improvement of productivity.It also has been described as an approach with the objective of producing the right part in theright place at the right time ( in others words, just - in time). Waste results from any

activity that adds cost without adding value , such as the unnecessary moving of material ,the accumulation of excess inventory or the use of faulty production methods t hat createsproducts requiring subsequent rework. JIT ( also known as lean production or stocklessproduction) should improve profits and return on investment by reducing inventory levels(increasing the inventory turnover rate), reducing variability, improving products quality,reducing production and delivery lead times and reducing other costs( such as thoseassociated with machine setup and equipment breakdown). In a JIT system underutilized(excess) capacity is used instead of buffer inventories to he dge against problems that mayarise.

JIT applies primarily to repetitive manufacturing processes inwhich the same products and components are produced over and again. The general idea is toestablish flow processes (even when the facility uses a jobbing or batch process layout) bylinking work centers so that there is an even , balanced flow of materials throughout theentire production process , similar to that found in an assembly line. To accomplish this, anattempt is made to reach the goals of driving all inventory buffers towards zero achieving theideal lot size of one unit.

The basic elements of JIT were developed by Toyota in theyear 1950s and became known as the Toyota production system (TPS) . JIT was wellestablished in many Japanese factories by the early 1970s. JIT began to be adopted in theU.S in the 1980s ( General Electric was an early adopter) and the JIT / lean concepts arenow widely accepted and used.


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INVENTORY MANAGEMENT

PURCHASE

PROCEDUREINVENTORY

IN STORE OR IN

TRANSIT

PAYMENT


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PURCHASE PROCRDURE

PROCUREMENT OF METERIAL

0BJECTIVEOFPURCHASE1. To maintain continuity of supply so as to support production schedules.

2. It must ensure minimum investment in stores and materials inventory.

3. It must avoid duplication of purchases, wastes , obsolescence, and costly delays.

4. It must maintain quality standards based on suitability criterion.

5. It must procure materials at the lowest possible cost consistent with quality and service

requirements.

6. It must maintain material costs such that the company is in a competitive position.

BASICPRINCIPLEOFPURCHASING1) Buying the right quality,2) Buying the right quantity,

3) Buying the right price,4) Buying form the right source,5) Buying at the right time, &6) Buying for the right place.

PURCHASEPOLICYANDPROCEDURE1) A written well documented policy is helps in guiding the purchasing process.2) It eliminates the necessity to make fresh decisions every time when a comparable

situation arises.3) It contains details of approval authority of purchasing people.4) It should mention how many vendors to be maintained and their preferences rules.

5) Policy sets down the minimum no of quotes to be collected for selection & finalization.6) In case of deviation it should give the rules for getting sanction from higher authority.7) Penalty, Performance Guarantee/Warranty claims clauses to be mentioned.8) Credit terms of purchases should be specified in the policy.9) It should address issue of reciprocal buying.


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PurchaseOrder

y FOA/LOA shall be regularize through a purchase order(PO). All POs shall beprepared through SAP as per PO release strategy and shall be issued under the

signature of authorized officer of material Department as per DOAy A completed purchase requisition will be reviewed and approved in the Purchasing

Department according to the Universitys policy for requisition approval. Once therequisition has been approved, it will be used to create a Purchase Order (PO).

y When the supplier receives their copy of the PO and confirms acceptance of theinformation and terms, the PO becomes a formal contract between the University andthe supplier for that specific transaction.

y Both parties are required to comply with the terms on the PO as they would with aregular contract.

y Two copies of PO shall be sent to the vendor one of which should be signed and sent

back to the vendor as a token of acceptance.y Annual rate contract with approved vendor wherever possible may be entered into for

supply of regular consumables on staggered delivery basis is reduce the inventorylevel.

y For purchase order release through SAP on line PO release system, signed copy of POwill not be required for internal use and follow on process of GR , payment.

The Purchasing Department will send a copy of the PO to the employee to confirm that

the PO was sent to the supplier and to act as documentation during the receiving

process


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A COPY OF PURCHASE ORDER ON BARAUNI REFINERY

Indian Oil Corporation Limited(Refineries Division)

P.O. Barauni Oil Refinery

Barauni PIN-851114

_________________________________________________________________

Vendor Code-10215577KANORIA CHEMICALS& INDUSTRIES LTD71 PARK STREET,PARK PLAZA

KOLKATA-700016

West Bengal

Tel.:Fax :Email:

We are pleased to forward here with a document for your reference and action.For any further clarifications please use following contact information:

Purchasing Document Number: RBRM10V057/23353974

Document Date : 05.04.2011

Name & Designation : ,EMAIL :

PH :

FAX :

Corporate Website: http://www.iocl.com/

Corporate Tenders Site: http://www.IndianOilTenders.com/_________________________________________________________________Regd. Office: G-9, Ali Yavar Jung Marg, Bandra(E), Mumbai-51,India


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Vendor Code:10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE ORDER

KANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Payment Terms: PO No.:RBRM10V057/2335397471 PARK STREET,PARK PLAZA See Details Below PO Date:05.04.2011

West Bengal

Incoterms: FOR Total items on PO = 1DESTINATION Tot PO Amt(INR): 2,827,185.00Tel No:Fax No:

FOR ALL CORRESPONDENCE PLS. QUOTE PO No. AS ABOVE.

Dear, sir/ Madam

Subject to the terms and conditions and instruction given herein, over leaf(ifany) along with enclosures please dispatch / deliver the following material.

Unless otherwise specified at item level.Supply to Plant: 9020, Barauni Refinery

Store: REVN, Revenue Store.

Sr.No. Material Code UOM Quantity Unit Price Amount

GROUP: 1PROCESS CHEMICALSHYDROCHLORIC ACIDFORMULA: HClSTRENGTH: 30%GENERAL APPERANCE: CLEAR YELLOWSPECIFIC GRAVITY 27 DEG.C: 1.145HYDROCHLORIC ACID CONTENT: 30.0%

SULPHATES CONTENT: 0.1%IRON CONTENT: 0.02%RESIDUE ON IGNITION: 0.1%FREE CHLORINE&BROMINE: 0.02%STANDARD CONFORM TO: IS-265/1973SULPHATES (AS SO2): 0.05%00010 8822320574 TO 1,500.000 1,884.79 2,827,185.00

Tone (metric tons) INR /1 TO INR

HYDORCHLORIC ACID, IS 265/1993, BW GRADE

Cenvat(Invt.) = 10.000 % E Cess(Invt.) = 2.000 %SE Cess(Invt.) = 1.000 % CST = 2.000 %

Delivery Schedule: 04.04.2012 ; Qty = 1,264.769


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Vendor Code:10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE ORDERKANORIA CHEMICALS Qtn.Dt.:20.01.2011

& INDUSTRIES LTD Payment Terms: PO No.:RBRM10V057/2335397471 PARK STREET,PARK PLAZA See Details Below PO Date:05.04.2011West Bengal Coll.Ref.:RBRM10V057

Sr.No. Material Code UOM Quantity Unit Price Amount

Item Text:SPECIFICATIONS OF HYDROCHLORIC ACIDTOTAL ACTIVITY(AS HCL),PERCENT BY WT :30(MIN)RESIDUE ON IGNITION,PERCENT BY WT :0.01(MAX)SULPHATES(AS H2SO4),PERCENT BY WT :0.1 (MAX)IRON(AS FE),PERCENT BY WT :20PPM MAX

FREE CHLORINE AND BROMINE(AS HCL),PERCENT BY WT:5PPM(MAX)SULPHITES(AS SO2),PERCENT BY WT :0.05(MAX)HEAVY METALS(AS PB),PERCENT BY WT :0.002(MAX)ARSENIC(AS AS),PPM MAX :5PPM(MAX)MERCURY(AS HG),PPM MAX :3PPM(MAX)STANDARD CONFORMS TO :IS 265: 1993 BW GRADE

NOTE : PLEASE IGNORE TECHNICAL SPECIFICATIONS MENTIONED ELSE WHERE INTHE PURCHASE ORDER OTHER THAN THE SPECIFICATIONS MENTIONED IN THE ITEMTEXT DULY ACCEPTED BY YOU.

______________________________________________________________________________________________________

Total PO Amount(INR):Exclusive of Header and Item conditions

2,827,185.00

Rs.TWENTY-EIGHT LAC TWENTY-SEVEN THOUSAND ONE HUNDRED EIGHTY-FIVE ONLY

______________________________________________________________________________________________________


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10215577 Qtn.Ref.:QR-7/1/P23 PURCHASEORDER(cont.)

KANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Currency:INRPO number:RBRM10V057/23353974

PO Date:05.04.2011

______________________________________________________________________________________________________

Header Text:TERMS AND CONDITION :-THIS HAS REFERENCE TO YOUR OFFER NUMBER SALES-21/65 DATED 20.01.2011 AGAINST

OUR NIT NO.RBRM10V057, OUR FOI DTD.04.04.2011 AND ALL SUBSEQUENTCORRESPONDENCES UP TO AND INCLUDING YOUR E-MAIL FOR PRICE BREAK-UP DATED04.04.2011, WE ARE PLEASED TO ISSUE THIS ORDER FOR SUPPLY OF HCL AS PER OURSPECIFICATION.

1. 100% PAYMENT WILL BE RELEASED WITHIN 30 DAYS AFTER RECEIPT AND

ACCEPTANCE OF MATERIALS AT OUR STORES.

2. EXCISE DUTY AT ACTUALS WILL BE PAID EXTRA WITHIN CDD. THE PRESENT RATE OFEXCISE DUTY BEING @ 10% AND CESS @ 3%. ANY INCREASE IN EXCISE DUTY BEYOND

CDD SHALL BE TO VENDORS ACCOUNT.

3. UNDER RULE 11 OF THE CENTRAL EXCISE RULES 2001 EFFECTING FROM 01.07.2001,EXCISABLE GOODS SHALL BE DELIVERED FROM THE FACTORY OR A WAREHOUSE

ONLY UNDER ANINVOICE WHICH IS PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THE SAID

RULE.

4. OUR NEW ECC NUMBER IS AAACI1681GXM079 W.E.F 01.12.2001 (AGAINST OLD ONE OF12-01070017) AND CODE OF CENTRAL EXCISE RANGE IS-120107 DIVISION CENTRAL

EXCISEDIVISION, CENTRAL REVENUE BUILDING. ANNEX, BIR CHAND PATEL MARG, PATNA,COLLECTORATE CENTRAL REVENUE BUILDING, B.C.PATEL MARG, PATNA. OUR PAN NO.

IS AAA C1 1681 G.

5. KINDLY ENSURE TO SEND A DUPLICATE COPY OF THE INVOICE FOR TRANSPORTERFULFILLING ALL REQUIREMENTS AS PER EXCISE RULE ALONGWITH CONSIGNMENT

FOR TAKINGCREDIT UNDER RULE 57G. OTHERWISE THE CENVAT AMOUNT WILL BE DEDUCTED

FROM YOUR

BILL.

6.SALES TAX @ 2% WILL BE PAID EXTRA. .C. FORM WILL BE ISSUED BY US. TAX PAYERIDENTIFICATION NO. (TIN) NO. FOR BIHAR VAT = 10360215078. TAX PAYERIDENTIFICATION NO. (TIN) NO. FOR CST = 10360215175. ANY CHANGES IN TAXES ANDDUTIES WITHIN CDD WILL BE AT OUR ACCOUNT AND BEYOND CDD WILL BE AT

VENDORSACCOUNT.


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10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE

ORDER(cont.)KANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Currency:INRPO number:RBRM10V057/23353974

PO Date:05.04.2011

______________________________________________________________________________________________________

7. FREIGHT CHARGES WILL BE PAID EXTRA RS.1600/- PER MT. FREIGHT CHARGES WILL BE

DIRRECTLY PAID TO THE VENDOR.

8. TRANSIT INSURANCE WILL BE ARRANGED BY YOU AT YOUR COST.

9. WE ARE ENCLOSING HEREWITH BIHAR ROAD PERMIT NO. __________________ .

10. FIRM PRICE : THE PRICE WILL REMAIN FIRM TILL THE EXECUTION OF THE ORDER

QUANTITY OR CONTRCTUAL DELIVERY DATE FOR TOTAL QUANTITY WHICH EVER ISEARLIER

11. PLEASE WRITE COMPLETE DESCRIPTION, ITEM CODE ( 10 DIGIT), PURCHASE ORDERNO.

ETC. ON THE CHALLAN/ INVOICE AND VENDOR HAS TO PRINT/ PASTE A SLIP/ WRITE

THEITEM CODE (* * * * * * * * * *) ON THE PACKING OR BOX OR DRUM ETC. FOR EASY

IDENTIFICATION OF THE MATERIALS AT OUR END

12. CONCENTRATION VARIATION : UPTO +/- 0.5% SHALL BE CONSIDERED WITHINTOLERANCE

LIMIT.

13. WEIGHT VARIATION : UPTO +/- 0.5% (100% BASIS) ON LYE WEIGHT WILL BE TREATEDWITHIN THE TOLERANCE LIMIT.

14. DELAYED DELIVERY : THE TIME AND DATE OF DELIVERY OF STORES/ MATERIALS/EQUIPMENTS AS STIPULATED IN ORDER SHALL BE DEEMED TO BE THE ESSENCE OF THECONTRACT. IN CASE OF DELAY IN EXECUTION OF THE ORDER BEYOND THE DATE OF

DELIVERY

AS STIPULATED IN THE ORDER OR ANY EXTENSIONS SANCTIONED. THE OWNER MAYAT HIS

OPTION EITHER.

(I) ACCEPT DELAYED DELIVERY AT PRICES REDUCED BY A SUM EQUIVALENT TO ONEHALF OF

ONE PERCENT (1/2%) OF THE VALUE OF ANY GOODS NOT DELIVERED OR EVERY WEEKOF DELAY

OR PART THEREOF LIMITED TO A MAXIMUM OF 5% OF THE TOTAL ORDER VALUE.REPORTING OF MATERIAL AT OUR STORES WILL BE TREATED AS DATE OF RECEIPT.


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10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE

ORDER(cont.)

KANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Currency:INRPO number:RBRM10V057/23353974

PO Date:05.04.2011

______________________________________________________________________________________________________

CANCEL THE ORDER IN PART OR FULL AND PURCHASE SUCH CANCELLED QUANTITIESFROM

ELSEWHERE ON ACCOUNT AND AT THE RISK OF VENDOR, WITHOUT PREJUDICE TO ITSRIGHT

UNDER (I) ABOVE IN RESPECT OF GOODS DELIVERED

15. MSDS/TREM CARDMSDS/TREM CARD are required to be carried along with each tanker and the

instructions of safety must be followed strictly by the transporters.

16. P.P.Es(Personnel protective equipments)The drivers/khalasis must carry proper Personnel Protective Equipments(PPE)via :ACID/Alkali proof Hand Gloves, Helmet, Gumboot/ Safety shoes, Google, Apron up toknee high etc., related to industrial safety, with each tanker and wear the sameduring unloading of the materials from tanker.In case it is found that thedrivers/khalasis do not have the proper P.P.Es with them or not wearing the same,they will be fined with Rs.1000.00 in each occation,apart from taking othermeasure as may deemed fit.

17. Quantity Variation :- +/- 1.0 % is applicable.

18. Please arrange to submit PBG for 10% order value. The PBG should come fromyour Banker directly to us. PBG should valid for Contractual Delivery + 6 months.

19. SEALING OF TANKERTanker carrying the material shall be sealed properly to avoid any contamination in transit. Vendor has

to check all measure to avoid contamination and propersealing of material in transit.

20. GPCAll other terms and conditions shall be as per our GPC (General Purchase Conditions) which is duly

accepted by you along with your offer.

21. Testing and Sampling : You will send a sealed sample along with each supply. Material is to be sentpreferably in single chamber tankers and sample will be drawn by our lab. in presence of driver of tanker.Our lab. report will be final and binding to vendor. Payment will be made in accordance with our lab. Testreport.


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10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE ORDER(cont.)KANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Currency:INRPO number:RBRM10V057/23353974

PO Date:05.04.2011

______________________________________________________________________________________________________

In case variation in quality more than that of permissible limit sealed sample will be referred for testing.IOCL will be at liberty to reject any or all supply

which will not be found in line with our specification based on our lab. report.IOCL BARAUNI REFINERY lab report is final and binding to the vendor.

22. Schedule of supply : 250 MT ( +/- 25%) per month starting from first week ofApril'2011. IOCL will be at liberty to ask the vendor for any change in quantity

based on our requirement of plant and plant capacity.

23. Transporter to be advised by vendor for observance of all safety rule of

Refinery.24. Tanker should have all the valid documents as per traffic rule without whichtankers will not be permitted to enter Refinery premises. TANKER MUST FOLLOWGENERAL REGULATORY REQUIREMENTS UNDER MOTOR VEHICLES,RULES, 1989

ENCLOSE ASANNEXURE-A.

25. Our basis of ordering is FOT Destination and IOCL have no responsibility tillthe material is received at our Stores. Vendor should take sufficient care tosupply the right quality of material as per our specification.26.SUBMIT E-PAYMENT FORM ATTACHED ALONG WITH THIS SUPPLY. ALL PAYMENT

WILL BE

E-PAYMENT. SO YOUR SUPPLY DOCUMENT MUST INCLUDE FORMAT FILLED UP ALLCOLUMN WITH

SIGNATURE AND COMPANY SEAL FAILING WHICH PAYMENT WILL NOT BE RELEASED.PLEASE

IGONORE THIS IF YOU HAD ALREADY SUBMITTED THE SAME.ALSO MENTION THE PONUMBER

AGAINST WHICH YOU HAD SUPPLIED THE DOCUMENT.

For and on behalf of

INDIAN OIL CORPORATION LIMITED

P N Kumar

Chief Materials Manager


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TENDER AND CONCURRENCE

The objective of Financial Concurrence is protection of financial interests o f theCompany in the decision making while ensuring financial propriety as a part of internal

control system. The internal control is exercised through the vetting and concurrence byFinance department so that decision making is as per policy guidelines, r ules, regulations,provision of budgets, etc. and it is not detrimental to the financial interest of the Company.

The financial concurrence facilitates achievement of transparency in the decision makingwhich is subject to the scrutiny of various Government agencies like audit, Vigilance etc.

TYPESOFTENDER

They should follow tender system to procure materials at the most competitive rates

meeting quality parameters. There should be three kinds of tender which are in vogue,namely, open tender, limited tender and single/proprietary item tender.

y OPEN TENDER

y LIMITED TENDER

y SINGLE TENDER

yOPEN TENDER In this procedure, practically any contractor can submit a bid for the job. This

method was probably the traditional method until more sophisticated techniq ueswere accepted. The process begins by the placing of an advertisement in trade,magazines and newspapers highlighting the significant features of the project.This method of tendering has the benefit of attracting number of tenders andhence the price the obtained are usually very competitive.

For items of regular consumption nature where source of supply have alreadybeen established and where the list of approved vendors is maintained dulyupdated from time to time , press tender need not to be invit ed even if theestimated value is more than Rs. 50 lakhs but approval of competent authority for

waiver of press tendering s to be taken

Advantage of open tendering:

1. Unknown contractor can tender for the work2. Open tendering secures maximum competition.


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3. There is no restrictive list of tenders, which does not allow favoritism a valid point forlocal authorities who are publicly accountable.4. There is no obligation to tender therefore all tenders received will be genuine .

Disadvantage of open tendering:

1. Cost of tendering is expensive to the client who must bear the cost of reproducing multiplecopies of drawing, bills of quantities, etc.

2. The wrong contractor can be chosen. Little may known about the contractors theirrecord, experience, standard of workmanship, etc.

3. The lowest tender may not necessarily be a bargain. Choosing a low tender may result

in..poor work a large number of, or even permanent, defects may occur unless there is closesupervision by the clients agent..poor organization late completion, specialist subcontractors delayed, etc.

4. It is lengthy operation requiring skilled estimating, the cost of which must be recovered onthe job by the contractors. The higher the proportion of unsuccessful tend ers the higher thecost to be recovered on the job.

5. A contractor may be awarded work for which he has little or no experience and which he

be ill-equipped to deal with.

The use of open tendering on public sector contracts is required by law in severa l developingcountries. But In many countries, private sector clients generally avoid open tendering.

yLIMITED TENDERLimited Tender shall be considered in case enquiries are sent to at least three registered

vendors. There will be flexibility to send enquiries to less than three vendors in caseregistered vendors are less than three.

As far as possible single tender should be avoided. However, single tender canbe called for the following reasons :-

Proprietary in nature.


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Specific items from statutory authorities/Authorized Dealer/Stockiest/manufacturers/Govt. Dept.

Spares from original equipment manufacturer.

Urgency of the requirement certified by concerned Manager/HOD of thedepartment giving justification on indent. Any single response received from anopen tender or limited tender shall be treated as single tender and can be openedwith the approval of HOD of Purchase/Commercial dept. duly concurred byFinance Dept.

ySINGLE TENDER single tender should normally be avoided . however in case of emergencies ,

specialized jobs or in special circumstances , to which reason to be recorded,dingle tender may be issued. Approval of the competent authority within whose

power the approval of award of job lies but not above the rank of GM should beobtained for issuing of single tender equity. In order to follow uniform procedure by all department concerned , procedure to

line up an agency and award of job under single tender/ emergency situation shallbe prepared by the unit and got approved by the unit head.

Where an item has been identified or specified by process licensor and approvedby the general manager that the nature of the item is proprietary of singlemanufacture and no other substitute material is acce ptable for technical reason.

Slandered brand items are also permissible on single tender basis provided thereare strong justification which shall be recorded in writing.

Invitation ofTender /ModeofTendering/ Tenderopening

While concurring the proposals, it shall be ensured that the guidelines provided forinvitation of tenders, mode of Tendering and Tender opening as per MaterialsManagement Manual / Works Procedure Manual have been followed. Such guidelinesgenerally relate to pre-qualification criteria, special conditions of contract, tenderingsystem, publication of tender notice, tender fee/EMD, amendment/extension, tenderopening, numbering of tenders, authentication of cuttings/ over writings, witnessing of

tender opening, etc.

Single bid system:

In single bid system, offers are invited in single part in sealed envelope. Single bid system of tendering shall generally be followed where

estimated value of the procurement is less then Rs. 50.00 lakhs andtechnical specification are a comprehensive and deviation may not beenvisaged.


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Stages in single bid system

In single bid system they first prepare technical specificationwith that they making the price bid and after checking all the product with their quantity andprice the prepare the CS. the procedure are as follows,

Two bid system:

In case where detailed Engineering specification are notworked out by the Engineering Department or the specification are notcomprehensive / well, and the scope involves design work also to be doneby the bidder , a system of two part tendering shall be adopted.

Two bid system of tendering shall be followed whereestimated value of the procurement is more than Rs.50.00 lakhs.

However indenter / mererial department consider it

necessary to issue the enquiry under two bid system, two bid system can befollowed irrespective of any value limit.

Tender should be asked to submit Earnest Money Depositalong with technical bid only. In case of bank guarantees, if these are sentdirectly by the bank, a certified copy of the said BG shall be enclosed alongwith the techno commercial offer.

Technical specification

Price bid

Cs prepared


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Stages in two bid system

:

Tender committee

The Tender Committee will consist of head of Purchase, Works and Finance Dept.Representative of the concerned department may be co -opted wherever necessary.

Tender Committee is empowered for final recommendation to the Competent Authoritymainly for the raw materials and other materials wherever value of the procurement is Rs. 10lacs andabove.

Consideration , evaluation and recommendation to the competent authorities for approvalof the offers/tenders for purchase, works, disposal of surplus/obsolete/scrap items of assetsand service contracts shall be done by a tender committee whose constitution shall be asfollows :

One representative from Finance Depts.One representative from Materials/Contract Cell/Tendering Deptt.One representative from the user deptt.

Technical

specification

Check by expert

Technically accepted CBA

prepared

Price bid

openCS prepared

Tender

committee


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The representatives from the other depts. shall be nominated onegrade higher than the Finance member. The nomination of the Finance member shall be asper guidelines in this behalf. If no officer in appropriate grade is there in the department, the

officer in the next grade shall attend the Tender Committee meeting. In case of proposalsreceived from EIL and others, our consultants for Plan projects, it is not necessary toconstitute tender committee and proposals may be examined by the respective department forapproval of competent authority

Consideration by tender committee shall not be required in case ofproposals on single tender/proprietary basis. However, proposals involving loneoffer/lone technically offer shall be considered by Tender Committee. Further, the

recommendations of the tender committee shall also be concurred by Finance (by anauthority not lower than the finance representative in T.C.) irrespective of the factthat the T.C. member happens to be the concurring authority for approval of theproposal.


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INVENTORY MANAGEMENT AND STORES

ABC ANALYSIS

1. Classifies items based on the annual usage value (AUV)

2. Identifies a small percentage of items which account for most of the total inventory

value

Paretos law applied to inventories

The relationship between the percentage of items and the percentage of AUV followsa pattern

A about 20 % of items account for about 80 % of the AUV

B - about 30 % of items account for about 15 % of the AUV

C - about 50 % of items account for about 5 % of the AUV

Different Controls used with different classes

A Items: High priority Tight control including complete accurate records, regular andfrequent review by management, frequent review of demand forecast and close follow-upand expediting to reduce lead time

B Items: Medium priority Normal Control

C Items: Lowest priority Simplest possible control. Periodic review system. Orderlarger quantities and carry sufficient safety stock.

A ITEMS

For "A" category items relating to

(I) Forecasting,

(II) Material planning,


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(III) Value analysis,

(IV) Lead time analysis,

(V) Market research, source selection, source development and follow -up

(VI) Safety stock determination,

(VII) Materials consumption control,

(VIII)Physical stock verification,

(IX) Stores, and

(X) Accounting and inspection.

The degree of control should be rigorous for "A" itemsand should be moderate for B items and minimum for "C" it ems.

B ITEMS

The stocking policy for 'B' items need not be highly sophisticated. For theitems which are available ex-stock or of the shelf or in the near proximity, the re -order level

shall be fixed at 3 1/2 - 4 months stock.

C ITEMS

Procurement for these items shall be made in one or two lots per annum i.e.procurement for 6 months or 12 months at a time as far as practicable . Items which areperishable or bulky shall be omitted from this arrangement.

'C' items shall be reviewed once a year according to a phased time table or when reorderlevel is reached if that is earlier.


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ABC Inventory Categories

SEGMENT NO OF ITEMS % VALUE OF STOCK IN SEGMENT

A 2748 9.69% 1,144,503,294.22 80.00%

B 5093 17.75% 214,554,731.32 15.00%

C 20529 72.36% 71,524,668.24 5.00%

TOTAL 28370 100%% 1,430,582,693.78 100%

= VALUE STOCK

= NO OF ITEMS


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GOODS RECEIVED NOTE

Once a Purchase Order has been completed the information sits i n the system until the goods

/ service is received. Once this has happened and you have an invoice it is time to completea goods Received Note. The Goods Received Note has information relating to what has beenreceived, how much and when. On completion of the GRN a copy is sent to payments, withthe invoice, for payment.

In a larger business, a goods received note (GRN) is

generated whenever a delivery is made to the business. The GRN details whatgoods and quantities have been received and when. A copy of the GRN is sent to

the accounts department to enable them to match it to the purchase order (thatwould have been raised when the goods were originally ordered from thesupplier).

In that case Stock(Revenue/Capital) Account is gettingdebited and corresponding clearing Account (e.g. GR/IR clearing, Freightclearing, Inspection clearing, Misc. Clearing Etc.) gets credited.

If material is excisable but not cenvatable for IOCL, then excise amountshall become a part of stock valuation. If material is cenvatable, Financeshall capture cenvat amount thru T code J1IEX. While preparation of PO,one thing must be remembered that basic price of materials shouldexclusive of excise duty. If excise duty is included in basic price in PO,

then excise duty cannot be captured thru J1IEX and material valuationwill be wrong.

After cenvat entry, GRNs is to be linked with bills / files (where bankpayments already released) and shall be verified with reference to thepurchase orders. After checking, MIRO has to be performed in SAP withrespect to the GRN/s. In many cases, various related charges like Freight ,TPI charges is to be paid to agencies other than suppliers. In such cases, T

code YMIROPRD has to be performed for suppliers payment and T CodeYMIROOTH has to be done for other agencies payment.


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In case of import PO, Finance has to perform T Code

YMIROOTH for Bill of Entry amount before receipt of materials in SAP.After this entry, Finance has to capture cenvat amount thru T code J1IEXand inform Stores department for preparation of GRN using B/E No. After

receipt of GRN, Finance shall post cenvat amount thru J1IEX

Normally, for import purchases, payments like FOB, freight, insurance, portcharges, clearing agent charges is getting paid by IOCL port offices andDebit note were raised by them. Finance while performing MIRO (GRN

Verification) for GRN, should ensure that all costs is gettingaccounted/adjusted and exchange variation is getting properly booked.

Before the bills are passed for payment, the following checks shall beexercised: That all particulars in the supplier's bill such as name of thesupplier, specifications of the material quantity, price, taxes, freight etc. arein conformity with the provisions of the corresponding purchase order.

After MIRO transaction, Bank voucher will be prepared thru T code F-53and shall be sent to the Cash Section after having been signed by thecompetent authority. For e-payment, Finance shall prepare 83 series

documents capturing documents generated thru MIRO.

All payments to suppliers including advance payments shall be made byway of crossed account payee cheques or Bank drafts.

Cash Section while sending cheques/ drafts to the suppliers shall attach aforwarding letter generated thru T Code YF88 showing details of paymentand deductions, if any, and a 'C' form duly filled in, if applicable (under theCentral Sales Tax Act). The Section shall maintain a register of C formsissued.


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No correspondence shall be undertaken directly with the suppliers exceptrelating to payment details and issue of 'C' form etc. Letters received from

suppliers concerning the matters of contractual performance andobligations shall be passed on to the Materials Department.

Care shall be taken to see that all linked bills are passed promptly as soonas they are received in the Section. Normally a bill shall be cleared within7 days of receipt of GRN in the Section.

Debit notes received from Head Office in respect of purchases made byHead Office on behalf of units shall be responded by performing MIROand subsequent adjustment thru F-04 or F-51. Proper care is to be taken so

that no payment can be released from Units in case of HQ payments.

In respect of bills for supply where no GR Notes are prepared, such billsshall be passed on the basis of certification by the Department concernedconfirming that such supplies have been received. However, this should beavoided as far as possible.

After passing, the bills along with supporting papers shall be filed properlyand kept in safe custody till the annual audit is over. After the audit, the

bills shall be transferred to the record room duly indexed.

A GOODS RECEIVED NOTE

Goods Received Note


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Supplier..................................................Date................................................. Advice note number..................................................

Order Number.........................................Delivery Location.....Cost-

Centre...................................

Goods

Pack

Size

Price Order

Quantity

Delivered

Quantity Comments

1

2

3

4

5

6

7

8

9

10

Received by...................................................................................... Checkedby..................................................................................

1. Accounts/Finance dept. copy2. Supplier Copy3. Stores/Goods Inwards copy

TCODES IN SAP

Action to be taken in SAP T Code


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Raising PR ME51N

Approval/Release of PR ME54

PR for material on Capital Account CN22

Creation of RFQ ME41

F

or entering quotation details in SAP ME47Comparative Statement YMR166

Chapter ID table J1ID

PO Proposal printout YM43

Creating of PO ME21N

Approval/release of PO ME28

Display PO ME23N

Entry of material received against PO MIGO

Viewing GRV MB51

Payment against PO MIRO

Cancellation of MIRO MR8M

EMD Cheque Receipt Voucher F-43BG Entry F-40

Initial Advance F-48

For E-payment F-57 (Document No. willbe in 83 series)

Capturing of Cenvatable amount J1IEX

LSC Adjustment F-51

Preparation of Bank Voucher F-53

Printing of Payment voucher YFR121

Cheque forwarding letters YF88

PAYMENT


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SERVICE TAX FRINGE BENEFIT TAX EXCISE DUTY VAT

TDS CENVAT/ MODVAT

SERVICE TAX

Service tax is a central tax collected by Govt. of India. Service tax was levied for thefirst time in the year 1994, under the Finance Act, 1994. There is yet no separateService Tax Act as such. Also the Finance Act, 1994, does not define service. The

Act only states what are taxable services.

Service tax is payable on about 108 taxable services as defined in section65(105) of finance act 1994. Service provided or to be provided is taxableevent . thus service tax is payable when advance is received.

Service required 2 parties. One cannot give service to himself. It cant be leviedon value of goods.

Rate of service tax is 10.03%.

DUTY PAYMENT

Payment of service tax is required to be deposited by 5th of the followingmonth, and in case it is deposited electronically through internet banking,the date is 6th of the following month.

Service tax is not payable on basis of amount charged in the bills/ invoice,but only on amount actually received during the relevant period.

A person liable to pay service tax can pay amount in the advance toward sfuture service tax liability. After such payment he should inform

superintendent of central excise within 15 days. When he adjusts theadvance , he should indicate details in the subsequent return filed.

Tax is payable by GAR- 7 challan using appropriate accounting code. E payment is compulsory to those who are paying service tax of more than Rs.50 lakhs per annum. For others e - payment is optional.

Mandatory interest for late payment of service tax is 13 %.


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SERVICETAXACCOUNTINGIN SAP

y IncaseofanyserviceP.Othere isnoliabilityonaccountservice tax, use the tax code as V0 which debit the entire

servicecostintoourconsumptionaccount.

y Whereverserviceiseligibleforinput

serviceforavailmentofCENVATbenefitputthe

appropriatetaxcode.Taxcodesarecreated forallthe

plantsunderonecompanycode.

y WHEN SERVICE TAX IS APPEARING IN THE BILL OF THE

VENDORANDTHE SAME IS ELIGIBLEFOR IOCLANDALSO

PAYABLETOTHE VENDORWITH THEBILLAMOUNT

EXPENDITURE DEBIT . DR. (BILL AMOUNT EXCLUDING ST)

TO VENDOR (BILL AMOUNT+ST/CESS-TDS/CESS)

CLAIM SERVICE TAX. DR. (SERVICE TAX AMOUNT)

CLAIM CESS ON SERVICE TAX DR. (CESS ON SERVICE TAX)

TO TDS (TDS AMOUNT)

TO CESS ON TDS (CESS ON TDS AMOUNT)

y WHEN SERVICETAXISNOTAPPEARINGINTHEBILLOFTHEVENDORANDTHE SAMEIS ELIGIBLEFORIOCLANDIS TOBE

DEPOSITEDBYIOCL.

EXPENDITURE DEBIT.. DR. (BILL AMOUNT EXCLUDING

ST)

CLAIM SERVICE TAX . DR. (SERVICE TAX AMOUNT)

CLAIM CESS ON SERVICE TAX.. DR. (CESS ON SERVICE TAX)

TO SERVICE TAX LIABILITY (SERVICE TAX AMOUNT)

TO CESS ON SERVICE TAX LIABILITY ( CESS ON SERVICE TAX)


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TO TDS ( TDS AMOUNT)

TO CESS ON TDS (CESS ON TDS AMOUNT)TO VENDOR (BILL AMOUNT-TDS/CESS)

y PAYMENT OF SERVICE TAX THROUGH INVOICEVERIFICATION

METHOD

GR/IR CLEARING DEBIT DR. (BILL AMOUNT EXCLUDING ST

TO VENDOR (BILL AMOUNT+ST/CESS- TDS/CESS)

CLAIM SERVICE TAX. DR. (SERVICE TAX AMOUNT)

CLAIM CESS ON SERVICE TAX.. DR. (CESS ON SERVICE TAX)

TO TDS (TDS AMOUNT)

TO CESS ON TDS ( CESS ON TDS AMOUNT)

FRINGE BENEFIT TAX

Fringe Benefit Tax (FBT) has been introduced in the Finance Bill 2005 w.e.f.1.4.2005. Fringe Benefit Tax is to be borne by Companies on the value of Fringe

Benefit and deemed fringe benefits provided during the financial yea r. The rate of taxapplicable is the same as Corporate Tax i.e. 33.99% (inclusive of applicable surchargeand education cess) for the relevant Assessment Year

FBT is introduced basically to tax such fringe benefits that are difficult to be identifiedwith any one particular employee but enjoyed by the employees collectively orotherwise. FBT is not payable by the Company on deemed fringe benefits provided tothe employees on which tax has been paid by the employees. In other words,company has to pay FBT on the expenses covered under FBT and employees areexempt from payment of tax on such expenditure reimbursed to them.

y Just like advance taxes, FBT is payable in four installmentsfalling due on 15th June, 15 th September, 15th December and finally on 15th Marcheach year on projected expenditure to be incurred during the year.


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y Determination of FBT payable would be based on the amountaccounted and reflected in the financial books under those expenses on which FBTis payable. Broadly the financial codes applicable to FBT are expenses reported inSchedule O and O 1 of P & L Account.

y Expenses debited to Schedule F-1 (CWIP) is not to beconsidered for FBT. The payment of FBT shall be made by Marketing Division atMumbai. Refinery Division is required to submit details for calculating FBT in theprescribed format by 10th of the month. Units should, therefore, submit datarelating to FBT to Head Office by 4th of the month

EXCISE DUTY

Excise duty/ Sales tax will be paid extra at actual within the contractual delivery date.Any increase in the rates of Excise Duty & Sales Tax beyond the contractual completion dateor approved extended contractual completion time will be borne by IOCL to the extentCenvatable documents passed on to IOCL and IOCL is in a position to get the CENVATclaim from the Excise authorities. However, the benefit of any reduction must be passed onto IOCL.

ENTRY TAX

Entry tax is levied on that product which transfer or enter a product from-one state toanother state or one District to another district,if you sale as such the product notrestructuring. Barauni Refinery is paying 2% Entry tax on Crude Oil and 8 % on Electricalitems and 4 % on pipelines.

TDS

In simple terms, TDS is the tax getting deducted from the person the amount bythe person paying such amount (Employer/Deductor). This is applicable for certaintypes of payments, as applicable under the Act


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The tax so deducted at source by the payer, has to be deposited in the Government

treasury to the credit of Central Govt, within the specified time. The tax so deducted from the

income of the recipient is deemed to be payment of Income -tax by the recipient at the time of

his assessment.

TDS Certificates

A tax deductor is also required to issue TDS certificate to the deductee within specified

timed under section 203 of the I T Act. The certification from the deductor, for the deduction

and payment of the respective TDS amount to the bank, issued to the deductee is a TDS

certificate.

The deductee should produce the deta ils of this certificate, during the regular assessment

of income tax, to adjust the amount of TDS against the Tax payable by the Deductee[assesse].

Types of TDS certificates

Salaries - Form 16

Non-salaries - Form 16A

TCS Certificates - Form 27D

CENVAT OR MODVAT

The Modified Value Added Tax (MODVAT) was extended to Petroleum Ministry in theUnion Budget of 1994, under which IOCL entitled to claim MODVAT credit. In the sameyear, credit was also introduced for capital goods first time in the MODVA T scheme.

Service provider can avail cenvat credit of service tax paid on input servicesand excise duty paid on capital goods. The credit can be utilized for payment of service taxon output services.

Definition: of input service is wide. Any service in relation to business is input services..


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credit can be availed on the basis of proper and complete specified original duty payingdocuments.

Taxation of inputs, like raw materials, components and otherintermediaries had a number of limitations. In production process, raw material passesthrough various processes stages till a final product emerges. Thus, output of the firstmanufacturer becomes input for second manufacturer and so on. When the in puts are used inthe manufacture of product À', the cost of the final product increases not only on account ofthe cost of the inputs, but also on account of the duty paid on such inputs. As the duty on thefinal product is on ad valorem basis and the final cost of product À' includes the cost ofinputs, inclusive of the duty paid, duty charged on product À' meant doubly taxing rawmaterials. In other words, the tax burden goes on increasing as raw material and final productpasses from one stage to other because, each subsequent purchaser has to pay tax again andagain on the material which has already suffered tax. This is called cascading effect ordouble taxation.

This very often distorted the production structure and did not allow the correct assessm entof the tax incidence. Therefore, the Government tried to remove these defects of the CentralExcise System by progressively relieving inputs from excise and countervailing duties. Anideal system to realize this objective would have been to adopt value added taxation (VAT).However, on account of some practical difficulties it was not possible to fully adopt thevalue added taxation.

Hence, Government evolved a new scheme, `MODVAT' (Modified Value Added Tax).

MODVAT Scheme which essentially follows VAT Scheme of taxation. i.e. if a manufacturerA purchases certain components(raw materials) from another manufacturer B for use in itsproduct. B would have paid excise duty on components manufactured by it and would haverecovered that excise duty in its sales price from A. Now, A has to pay excise duty onproduct manufactured by it as well as bear the excise duty paid by the supplier of rawmaterial B. Under the MODVAT scheme, a manufacturer can take credit of excise duty paidon raw materials and components used by him in his manufacture. It amounts to excise dutyonly on additions in value by each manufacturer at each stage.

The modvat scheme is regulated by Rules 57A to 57U of the Central Excise Rules and the

notifications issued there under (The Central Excise Rules, 2002 (Section 143 of theFinance Act, 2002).

Modvat Scheme ensures the revenue of the same order and at same time the price of t hefinal product could be lower. Apart from reducing the costs through elimination of cascadeeffect, and bringing in greater rationalization in tax structure and also bringing in certainty inthe amount of tax leviable on the final product, this scheme wi ll help the consumer tounderstand precisely the impact of taxation on the cost of any product and will, therefore,


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enable consumer resistance to unethical attempts on the part of manufacturers to raise pricesof final products, attributing the same to higher taxes.

Subsequently, MODVAT scheme was restructured into CENVAT( Central Value Added

Tax) scheme. A new set of rules 57AA to 57AK , under The Cenvat Credit Rules, 2004,were framed and whatever restrictions restrictions were there in MODVAT Scheme were putto an end and comparatively, a free hand was given to the assesses.

Under the Cenvat Scheme, a manufacturer of final product or providerof taxable service shall be allowed to take credit of duty of excise as well as of service taxpaid on any input received in the factory or any input service received by manufacturer offinal product.

The term "Input" means: -

1. All goods, except light diesel oil, high speed diesel oil and motor spirit, commonlyknown as petrol, used in or in relation to the manufacture of final products whetherdirectly or indirectly and whether contained in the final product or not and includeslubricating oils, greases, cutting oils, coolants, accessories of the final products clearedalong with the final product, goods used as paint, or as packing material, or as fuel, orfor generation of electricity or steam used in or in relation to manufacture of finalproducts or for any other purpose, within the factory of production

2. All goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known

as petrol and motor vehicles, used for providing any output service;

Explanation 1 : The light diesel oil, high-speed diesel oil or motor spirit,commonly known as petrol, shall not be treated as an input for any purposewhatsoever.

Explanation 2 : Inputs include goods used in the manufacture of capital goodswhich are further used in the factory of the manufacturer;"

The term "Input service" means any service: -

1. Used by a provider of taxable service for providing an output service; or

2. Used by the manufacturer, whether directly or indirectly, in or in relation to themanufacture of final products and clearance of final products from the place ofremoval,


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And includes services used in relation to setting up, modernization, renovation or repairsof a factory, premises of provider of output service or an office relating to such facto ry orpremises, advertisement or sales promotion, market research, storage up to the place ofremoval, procurement of inputs, activities relating to business, such as accounting, auditing,

financing, recruitment and quality control, coaching and training, computer networking,credit rating, share registry and security, inward transportation of inputs or capital goods andoutward transportation upto the place of removal;"

Manufacturer and service providers can avail Cenvat credit of capital goods used bythem. The plant and machinery and allied items are purchased by a manufacturer. Suchgoods known as capital goods may be duty paid. The capital goods shall be used inmanufacture of final products or for providing output service. The CENVAT credit in respectof duty paid on capital goods shall be taken only for an amount not exceeding fifty percent ofthe duty paid in the same financial year and the credit of balance amount can be take in any

financial year subsequent to the financial year in which the capital goods were received.

WHEN AND HOW MUCH CREDIT CAN BE TAKEN

1. The Cenvat Credit in respect of inputs may be taken immediately on receipt of theinputs.

2. The Cenvat credit in respect of Capital Goods received in a factory at any point oftime in a given financial year shall be taken only for an amount not exceeding fifty

percent of the duty paid on such capital goods in the same financial year and thebalance of Cenvat Credit may be taken in any subsequent financial year.

3. The Cenvat credit shall be allowed even if any inputs or capital goods as such or afterbeing partially processed are sent to a job worker for further processing, testing, repairetc. and it is established from the records that the goods are received back in thefactory within180 days of their being sent to a job worker.

4. Where any inputs are used in the final products which are cleared for export, theCenvat Credit in respect of the inputs so used shall be allowed to be utilised towardspayment of duty on any final product cleared for ho me consumption and where for anyreason such adjustment is not possible, the manufacture shall be allowed refund of

such amount.

OTHERMODEOFPAYMENT


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When goods are sold on cash, the payment is received either before the goods are

shipped (cash in advance) or when goods are delivered (cash on delivery). Cash in advance is

generally insisted upon when goods are made to order. In such a case, the seller would like to

finance production and eliminate marketing risk. Cash on delivery is often demand ed by the

seller if it is in a strong bargaining position and the customer is perceived to be risky open

account system. In this case the seller first delivers the goods and then sends the invoice

(bill). The creditor (cash period, cash discount for prompt payment, the period of discount as

on) are stated in the invoice which is acknowledged by the buyer.

CREDIT PERIOD:

OTHER

PAYMENT

CREDIT

PERIOD

CASH

DISCOUN

T

DRAFTLETTER

OF

CREDIT

CREDIT

ALLOW

ED


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The credit period refers to the length of time the customer is allowed to pay for itspurchases. It is usually mentioned in days from the date of invoice. For example 15 days, 30days, 60 days etc.

CASH DISCOUNT:

Firms generally offer cash discount to include customer to make prompt payment. Forexample 2/10 which means if the payment is made within 10 days one will get 2% discount.

DRAFT:

Whether goods are sent on an open account or consignment, the seller doesnt havestrong evidence of the buyers obligation. So a more secure arrangements usually in the formof draft, is sought. A draft represents an unconditional order issued by the seller asking thebuyer to pay on demand or a certain future date. It serves as a written evidence of definiteobligation

LETTER OF CREDIT :

A letter of credit is issued by a bank on behalf of its customers (buyer s), to the seller.As per this document, the bank agrees to honors he drafts as drawn on it for the suppliers tothe customer (buyer), if the seller fulfills the condition laid down in the letter of credit.

IN CONTEXT OF BARAUNI REFINERY UNIT (IOCL)

Through bank payment mode is followed in Barauni Refinery unit (IOCL). The

vendor sends two intimation copies to the bank and one copy to the Finance Department. Thetwo intimation copies include Lorry Receipt (LR) and the invoice. The units begin operationonly when it gets the intimation letter from the bank. Cheques is drawn by the FinanceDepartment first in the name of Yourself account and then transferred to the bank. Thebank then receive the cheques, first credits to the party account with the amount of paymentand then releases the original endorsement consignee copy to the Finance Department. It isthen sent to the stores department, which takes it to the transporters and gets the possessionof the materials.


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There are as such no creditors of this unit but the time it takes the payment to theparties (For Chemicals and stores and spares) creates such creditors for that period.

PERIOD OF CREDIT ALLOWED:

The period of credit depicts the period for which any firm is allowed to havepossession of the materials without prior payment. The Barauni unit basically dos not dealwith any sort of credit as per the main goods for the unit is concerned. Thus there isnt anysuch credit payment except the accessories, which are used for the comfort of the staffmembers here.

RESEARCH

METHODOLOGY


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Intensive research has been done during this project to find out the necessaryinformation regarding the procurement of raw material and payment to the vendor in theBarauni Refinery and the various projects that are being implemented to optimize profit andproduct yield. While working in the organization, I get much information during the practical

work. The methodology applied to gather the necessary information is discussed below:

PRIMARY DATA:-

This is mainly concerned with first-hand information. It consists of preparingquestionnaire or taking interviews. In my project I had queries w hich were answered bydifferent responsible personals of various departments like purchase department , storedepartment and payment department.

SECONDARY DATA:-

This is mainly concerned with second hand information. It consists of collectingrelevant information from different documents, books, journals, previous reports, manuals,

etc. For my project I used secondary data as Accounts Manual, Brochures, FinancialAppraisal, Annual Operation Report, and Web site.


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OBSERVATION

# IOCL , Barauni is a major contributor in oil production in India. At present itsproduction capacity is 6 MMPTA , producing a wide range of petroleum products.

# The Indian oil group of companies owns and operates 10 of Indians 20 refinerieswith a combined refining capacity of 60.2 million metric tons per year.

# Both crude oil & material are purchased through tender procedure. Barauni re

Documents

61426549 Inventory Managment in Barauni Refinery