Executive Summary

The Summer Project for 2 months includes study on The Shipping Corporation of India Ltd,

What is the company organization structure, How many departments are there in the Finance

and Accounts Divisions of the organization, what is the operation of different departments

related to Finance and Accounts department of SCI.

How different department of finance and account work with the collaboration of other

departments and sub- departments so that the work pressure is reduced and tasks performed are

fast and work efficiency increases.

Exploratory Research method was used for study of the project, which included interviews with

various officials from various departments regarding their work and other information which

could be helpful for me.

The major part of the project will include the study on the Finance and Accounts divisions of

different department and to learn about the working of F&A division in SCI.

1

Introduction

To understand the Finance and Accounts Departments and sub-departments will go through the

work flow process of each department.

Diagram No. 1

2

FINANCE &

ACCOUNTSDIVISION

FINANCE &

BUDGETING

TAXATION

CHARTERING

BULK CARRIER

&TANKER

LINER &

PASSENGER

FLOATING STAFF

SHORE PERSONNEL &

ACCOUNTCO-ORDINATION

CASH &

TREASURY

TECHNICAL&

OFFSHORE

OUTPORT

1. Finance and Budgeting Department.

Financing is a field that deals with the allocation of assets and liabilities over time Financing

Activities includes securing loans and Debt servicing of existing loans.

Budgeting is an estimation of the revenue and expenses over a specified future period of

time.

2. Chartering Department.

Chartering is a shipping activity where an individual and/or company acquire a vessel from

another shipping company on mutually agreed terms & conditions.

Chartering is done for vessels i.e. Bulk carriers, Tankers, Liner and offshore vessels.

3. Bulk carrier and Tanker Department.

Bulk Carriers

The diverse and versatile fleet is engaged in transportation of iron ore, coal, fertilizers, steel

and other bulk commodities throughout the world, which are the mainstay of international

bulk trade. Apart from catering to India’s Exim trade, our bulk carriers are also deployed for

coastal movement of bulk cargoes.

Diagram No. 2

Bulk Carrier Liner Tanker

3

Tankers

SCI’s crude oil tankers are primarily deployed to meet the demands of imported crude of

Indian refineries along with coastal movement / storage of indigenous crude. They are also

deployed on cross-trades worldwide. Product tankers are deployed for coastal movement,

import requirements and also cross-trades worldwide. The fleet of various sizes makes it

flexible enough to provide total logistic solution to the needs of the Indian Oil Industry. SCI

holds good position in carriage of crude oil and petroleum products amongst Indian shipping

companies and has been instrumental in maintaining supply lines of crude oil and petroleum

products even during wars and times of strike. Besides, SCI has pioneered ship-to-ship high

seas lighter age operations with its diversified fleet and in-house expertise ensuring the

maximum benefit of economies of scale while circumventing the infrastructural constraints

on the Indian coast, adding to its capability in providing total logistics solutions under one

roof.

Specialized Vessels

These vessels are engaged in the transportation of import/ coastal movement of LPG, import

of Phosphoric acid and also movement of Ammonia.

SCI is the first Indian shipping company to have heralded India’s entry into the highly

technology oriented and capital intensive field of LNG tankers. SCI in alliance with its

strategic partners owns and operates these tankers importing LNG, the fuel of the future, for

Petro net. SCI plans to consolidate itself as a significant regional player in the field of LNG

transportation.

4

4. Liner and passenger Department.

Liner service is a fleet of ships, with a common ownership or management, providing fixed

service, at regular intervals, between named ports, & offer transport to any goods in areas

served by those ports & ready for transit by the sailing dates.

Fixed itinerary, regular service, & to sail, filled or not, on date fixed by a published schedule

distinguish liner shipping from tramp shipping.

Diagram No. 3

Technical services repairs / retrofitting / dry-docking / surveys / ISM & ISPS compliance for

container ships & managed ships.

Coastal services & Passenger service operate domestic pax-cum-cargo services between

mainland and Andaman & Nicobar – government of India behalf.

5. Technical and Offshore Department.

It provide technical services for all type of vessels i.e. Bulk carrier & Tanker, Liner &

offshore vessels etc such as

Towing and Anchor handling operations in offshore.

Carriage of men and materials (i.e. fuel oil, cargo, water etc).

Carry out standby and rescue operations in offshore.

Carry out routine surveillance in offshore for safety and security reasons.

Carrying out Fire fighting duties.

Operations, Manning, Maintenance and Management services to vessels.

5

Liner Services

Technical Service Costal Service & Passenger Service

6. Floating & Shore personnel Accounts Department and Account Co-ordination

Department.

Diagram No. 4

7. Cash and Treasury Department.

The management of the organisation cash flows, its banking, money market and capital market

transactions; the effective control of the risks associated with those activities; and the pursuit of

optimum performance consistent with those risks. The objective of treasury management is to

help the business manage its working capital position in the best way possible, by providing

services and systems to assist the company achieve their optimal cash management model.

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Floating Staff Account

Ensure proper and timely payment towards wages and other allowances to the Floating

Staff Employees

1. Processing and payment of salaries for Officers, Petty Officers & Crew after statutory

and other deductions, if any.

2. Ensure proper Accounting of the Wages.

Shore Personnel&

Accounts Co-ordination

PayrollProvident Fund

GratuityStaff Welfare Fund

and Post Retirement Medical Scheme

( PRMS)Master Data Maintenance – Vendor

and Bank MasterAsset Accounting

Accounts Closing activitiesGovernance Risk and Control

Diagram No. 5

8. Out port Department.

As it is not feasible to open its offices on each and every port to perform required activities,

So SCI has appointed authorized Agents and agent duties are coordinated by Out port

department.

On behalf of SCI agents provides cash to master (captain of vessel) for disbursement of

salary to fleet employees i.e. Officers, Petty Officer & Crew.

The Ouport Accounts Department does a monthly reconciliation of booking of

collection/receipts/remittances made by agent in AFSYS system with the receipts reflected in

SAP.

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Cash & Treasury Management

Treasury Operations.

Cash Flows.

Investment of Surplus Funds.

Non Fund based Facilities.

Working Capital Management.

Finalizations of Accounts.

MIS Reports.

Other activities.

9. Taxation Department.

In the Indian tax structure, there are a lot of taxes that people pay for different reasons. Income

tax, sales tax, entertainment tax, value added tax etc. All these taxes are existent because in some

way or the other it impacts and helps the economy.

Tonnage Tax

Tonnage Tax is an alternative method of calculating corporation tax profits by reference to the

net tonnage of the ship operated. The tonnage tax profit replaces both the tax-adjusted

commercial profit/loss on a shipping trade and the chargeable gains/losses made on tonnage tax

assets.

Service Tax

Service tax is a tax levied by the government on service providers on certain service transactions,

but is actually borne by the customers.

The service provider pays the tax and recovers it from the customers.

With effect from 1st June 2015 Service tax applicable is 14%

All the above Departments consist of various sub-departments. The process of each department

is different from another department and how one department is related to another department

while taking the Organization Decisions by taking in consideration of various aspects.

8

Tax Structure in SCI

Diagram No. 6

9

F & ADivision.

Tax

Indirect Tax

Deals with Central Board of

Excise and Customs (CBEC)

Service Tax

Direct Tax

Deals with Central Board of

Direct Taxation (CBDT)

Corporate Tax (Tonnage)

Objectives, Scope and Limitations

This project is to understand the organizational structure and work flow of The Shipping

Corporation of India with respect to Finance and Accounts Division.

To analyze the respondent’s view about the various Departments and how one department is

inter-linked to the others department while taking the financial decisions of the organization.

To learn about the various provisions of Direct and Indirect taxes applicable to The Shipping

Corporation of India Limited and how the Tax Departments linkages with other Departments in

the Overall Organizational decision making process.

Limitation is that it is concentrated to shipping corporation of India ltd, so policies and other

studies is limited to shipping industry only.

As per Company’s policy certain data and information are not disclosed for obvious reasons,

which would have been very much useful for the report.

There were time constraints for interviewing the concerned person of the organization as they

were busy with their job roles.

10

Indian Economy

The Economy of India is the seventh-largest in the world by nominal GDP and the third-largest

by purchasing power parity (PPP). The country classified as Newly Industrialized Country, one

of the G-20 major economies, a member of BRICS and a developing economy with

approximately 7% average growth rate for the last two decades. India’s economy became the

world's fastest growing major economy from the last quarter of 2014, replacing China's.

The long-term growth prospective of the Indian economy is moderately positive due to its young

population, corresponding low dependency ratio, healthy savings and investment rates, and

increasing integration into the global economy, The Indian economy has the potential to become

the world's 3rd-largest Economy by next decade, and one of the largest economies by mid-

century. And the outlook for short-term growth prospective is also good as according to IMF, the

Indian economy is the "bright spot" in the global landscape, India also topped World Bank’s

growth outlook for the year 2015-16 for the first time with economy grown 7.3% in 2014-15 &

expected to grow at 7.5-8.3% in 2015-16.

India has the one of fastest growing service sectors in the world with annual growth rate of above

9% since 2001, which contributed to 57% of GDP in 2012-13. India has capitalized its economy

based on its large educated English-speaking population to become a major exporter of IT

services, BPO services, and software services with $167.0 billion worth of service exports in

2013-14. It is also the fastest-growing part of the economy. The IT industry continues to be the

largest private sector employer in India. India is also the fourth largest start-up hub in the world

with over 3,100 technology start-ups in 2014-15 The agricultural sector is the largest employer in

India's economy but contributes to a declining share of its GDP (17% in 2013-14). India ranks

second worldwide in farm output. The Industry sector has held a constant share of its economic

contribution(26% of GDP in 2013-14).The Indian auto industry is one of the largest in the world

with an annual production of 21.48 million vehicles in FY 2013-14. India has $600 billion worth

of retail market in 2015 and one of world's fastest growing E-Commerce markets.

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India's two major stock exchanges, Bombay Stock Exchange and National Stock Exchange of

India, had a market capitalization of US$1.71 trillion and US$1.68 trillion respectively as of Feb

2015, which ranks 11th & 12 largest in the world respectively according to the World Federation

of Exchanges. India also home to world's third largest Billionaires pool with 97 billionaires in

2014 and fourth largest number of ultra-high-net-worth households that have more than 100

million dollars.

Statistics

GDP $2. 308 trillion (Nominal April 2015) $7.996 trillion (PPP, April 2015)

GDP rank 7th (Nominal) / 3rd (PPP)

GDP growth 7. 3% (2014-15)

GDP per capita $1,808(Nominal:131st2015) $6,265 (PPP: 121st; 2015)

Inflation (CPI) CPI: 5.01% WPI: -2.36% (May, 2015)

Ease-of-doing-business rank 142 (2015)

Public debt 64.9% of GDP (2014)

Budget deficit 4.1% of GDP (2014–15)

Revenues 27.5 trillion₹ (US$430 billion) (2015,IMF)

Expenses 37.6 trillion₹ (US$590 billion) (2015,IMF)

Credit rating

(Standard & Poor's)

BBB- (Domestic)

BBB- (Foreign)

BBB+ (T&CAssessment)

Outlook: Stable

Foreign reserves $353.33 billion (as of 17 July 2015)

s

Sector Information

12

India has 13 major ports and about 200 non-major ports. Cargo traffic, which was 976 million

metric tones (MMT) in 2012 is expected to reach 1,758 MMT by 2017. The Indian ports and

shipping industry plays a vital role in sustaining growth in the country’s trade and commerce.

India currently ranks 16th among maritime countries, with a coastline of about 7,517 km.

Around 95 per cent of India's trade by volume and 70 per cent by value takes place through

maritime transport, according to the Ministry of Shipping.

The Indian government continues to support the ports sector. It has allowed foreign direct

investment (FDI) of up to 100 per cent under the automatic route for projects regarding

construction and maintenance of ports and harbors. It has also facilitated a 10-year tax holiday to

enterprises engaged in developing, maintaining and operating ports, inland waterways and inland

ports.

Market size

The handling capacity of the major ports in India is sufficient to match with the trade demands.

The capacity of all major ports as on March 31, 2014 was 800.52 MMT against cargo traffic of

555.54 MMT handled in 2013-14. Thus the capacity utilization is around 70 per cent and as per

internationally-accepted norms the gap between the traffic and the capacity is usually around 30

per cent. Moreover, Government has taken many measures to improve the efficiency of

operations through mechanization, deepening the draft and speedy evacuation.

Significantly, publicly owned major ports in India reported healthy levels of container

throughput growth during April 2014 to February 2015, the first 11 months of fiscal year 2014-

15, compared to the volumes in the previous year, according to the latest provisional figures

compiled by JOC.com. Container-handling in the 11-month period expanded 7.15 percent year-

over-year to 7.25 million 20-foot-equivalent units from 6.77 million TEUs in the same period of

2013-14. Containerized cargo tonnage grew 4.4 percent to 109 million tons from 104 million

tons, the data showed.

In fiscal year 2013-14, which ended in March 2014, overall cargo volumes at major ports grew

1.78 percent year-over-year to 555.5 million tones (MT).

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The Indian ports sector received FDI worth US$ 1,637.30 million in the period April 2000–

February 2015, as per the Department of Industrial Policy and Promotion (DIPP), Ministry of

Commerce and Industry. The ports sector was also awarded 30 projects in FY14, investing over

Rs 20,000 crore (US$ 3.16 billion) which is a threefold increase over the preceding year.

In FY14, coal cargo traffic grew by 20.6 per cent to 104.5 MT from 86.7 MT in FY13. With

regard to commodities, there was a rise of 25 per cent in handling of fertilizers in April 2014 as

against April 2013. Iron ore handling also grew by 16.8 per cent during that period.

Government Initiatives

India’s basic infrastructure will be changed in five years, said Mr Nitin Gadkari, Union Minister

for Road Transport and Highways, Shipping, Government of India, while unveiling plans for Rs

10 trillion (US$ 158.19 billion) investment in highways and shipping sectors by 2019.

The Government of India has set an ambitious target to convert 101 rivers across the nation into

waterways in order to promoting water transport to propel economic growth, he said.

The Indian government will develop 10 coastal economic regions as part of plans to revive the

country’s Sagarmala (string of ports) project, according to the Daily Shipping Times. The zones

will be manufacturing hubs supported by port modernization projects and could cover 300-500

km of coastline. The government is also looking to develop the inland waterway sector as an

alternative to road and rail transport for getting goods to the nation’s ports and is hoping to

attract private investment into the sector.

Also, the Government has decided to set up two new major ports, one each at Sagar in West

Bengal and the other at Dugarajapatnam in Nellore district of Andhra Pradesh.

The Government is considering a proposal to set up an Integrated National Waterways Transport

Grid (INWTG) which covers mainly five National Waterways. The INWTG includes

development of the National Waterways with at least 2.5 meter Least Available Depth (LAD),

upgrading/ setting up of priority terminals, establishing road connectivity, wherever feasible, rail

and port connectivity.

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The Minister of State for Shipping, Mr Pon Radhakrishnan has informed that following steps

have been taken by the Government for capacity expansion of ports:

Up to 100 per cent FDI under the automatic route is allowed for port development

projects.

Income tax incentives are allowed as per Income Tax Act, 1961.

Enhanced delegation of financial powers to Shipping Ministry to accord investment

approval for PPP projects.

Streamlining of security clearance procedures.

Close monitoring of developmental projects in the Major Ports.

The Ministry of Shipping has formulated a Perspective Plan for development of the Maritime

Sector, namely, “The Maritime Agenda (2010-2020).” This Plan has estimated the traffic

projections and capacity additions at the ports up to the year 2020. Based on the estimated

growth, it has projected capacity of 3,130 MT by 2019-20.

Road Ahead

Increasing investments and cargo traffic point to a healthy outlook for India’s ports sector.

Services benefiting from these investments include operation and maintenance (O&M), pilot age,

and harboring and provision of marine assets like barges and dredgers.

The Planning Commission of India in its 12th Five Year Plan projects a total investment of Rs

180,626 crore (US$ 28.57 billion) for this industry. Also, through its Maritime Agenda 2010–

2020, the Ministry of Shipping has set a target capacity of over 3,130 MT by 2020, driven by

private sector participation. Over 50 per cent of this capacity is anticipated to be generated at

non-major ports.

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Company Information

Brief history

The Shipping Corporation of India was established on October 2nd, 1961.

For the last fifty four years, Shipping Corporation of India has been providing yeoman service to

the country’s economy by meeting its ocean transport requirements.

Starting out as a marginal Liner Shipping Company with just 19 vessels, the SCI has today

emerged as the undisputed leader in India’s shipping industry.

The SCI continues to be the only Indian mainline carrier providing liner services from India to

the major global destinations.

SCI’s owned fleet includes Bulk carriers, Crude oil tankers, Product tankers, Container vessels,

and Passenger-cum-Cargo vessels, Phosphoric Acid / Chemical carriers, LPG / Ammonia

carriers and Offshore Supply Vessels.

Sailing through for more than five decades, the SCI today has a significant presence on the

global maritime map.

As the country’s premier shipping line, the SCI owns and operates around 38% of the Indian

tonnage, and has operating interests in practically all areas of the Shipping business; servicing

both national and international trades.

With a highly diversified fleet and a network covering several major sea routes, SCI Reaffirms

its commitment to remain highly responsive and efficient in terms of its services, thus keeping

abreast of latest developments in shipping industry and maintaining itself as largest and most

diversified shipping company in India.

16

The Organizational Structure of Shipping Corporation of India

Diagram No. 7

17

Shipping Corporation Of India

Chairman &

Managing Director

Director(Bulk Carrier

&Tanker )

SrVice President

Vice President

General Manager

Deputy General Manager

Manager

Deputy Manager

Assistant Manager

Director(Liner

&Passenger )

SrVice President

Vice President

General Manager

Deputy General Manager

Manager

Deputy Manager

Assistant Manager

Director(Technical

&Offshore)

SrVice President

Vice President

General Manager

Deputy General Manager

Manager

Deputy Manager

Assistant Manager

Director(Finance

&Accounts )

SrVice President

Vice President

General Manager

Deputy General Manager

Manager

Deputy Manager

Assistant Manager

Director(Personal

&Administration )

SrVice President

Vice President

General Manager

Deputy General Manager

Manager

Deputy Manager

Assistant Manager

Finance and Accounts Division

Finance and Budgeting Department

Finance & Budgeting Hierarchy

Diagram No. 8

Budgeting Functions

Diagram No. 9

There are two types of budget

1. Revenue Budget

2. Capital Budget

18

Manager (Finance & Budget)

Vice President (Finance & Budget & Liner A/cs)

Director(F)

Assistant Manager (Finance & Budget)

Budget

Revenue Budget

Capital Budget

Revenue Budget

Annual Revenue Budget required to be approved by the Board before March 31 every year

Revenue Budget – Process

1. Revenue Budget process comprises of collating data from the profit centre & cost centre.

2. Data submitted by profit centre on the following

a. Estimated freight income.

b. Estimated direct operating expenses.

c. Estimated indirect operating expenses.

3. Data submitted by cost centre on the following

a. Estimated finance cost by Finance division.

b. Estimated management expenses by P&A.

4. Compute the Indirect Operating cost from estimates received on,

a. Standing charges from profit centre which include the following.

a. Wages.

b. Victual ling.

c. Insurance.

d. Repairs, Spares & Stores.

b. Other expenses, which include the following -

a. Interest expenses.

b. Management expenses.

5. Allocate the revenues & direct operating expenses to each vessel.

6. Allocate the Indirect Operating cost to each vessel (this also includes depreciation).

19

7. Estimate the ‘Other Income’ for the year

8. Compute the total budgeted profit after tax for the year

Capital Budget

1. Annual Plan includes the outlay towards the existing vessels on order and expected vessels to

be ordered during the year.

2. Other Capital expenditure to be incurred by the various divisions on ships as well as onshore

is collated.

3. Capital Budget is based on the Annual Plan Outlay for the year and other capital expenditure.

4. This Capital Budget forms the basis of incurring the capital expenditure for the year.

20

Chartering

Diagram No. 10

Chartering

Chartering is a shipping activity where an individual and/or company acquire a vessel from

another shipping company on mutually agreed terms & conditions.

SCI hires vessels from other vessel owners, and provides the same to customers as per the

requirement. In this case income is received from the Charterer and paid to the owner.

21

Chartering&

Freight

Bulk Carrier And Tanker Department

Bulk Carrier Department

Bulk Commercial

Bulk Accounts

Tanker Department

Tanker Commercial

Tanker Accounts

Specialized Vessels (Lng)

Liner And Passenger

Department(only Freight)

Liner Accounts

It includes

1. The terms & conditions between the owner & charterer – charter party.

2. All regular expenses – Bunker, Terminal charge, entry, exit etc (Running Expenses) are on

account of charterer.

Types of charter

1. Voyage charter

2. Time charter

3. Bareboat charter / Demise charter

Voyage charter

Voyage charter is the hired vessel for a voyage.

Time charter

Time charter is hired for a specific time period.

Bareboat charter / Demise charter

Bareboat charter / Demise charter is hiring of vessel where the charterer takes over the vessel

along with the right of management & control.

22

Bulk Carrier and Tanker Department

Bulk Carrier & Tanker Division (B&T), the largest profit centre of SCI, operates “State of the

Art” and “Diversified” fleet comprising of vessels designed to carry dry, liquid and liquefied

gaseous bulk cargoes. The diversity of B&T fleet plays a major role in hedging SCI’s business

risk.

The division broadly comprises of 3 segments viz. bulk carriers, tankers and specialized vessels.

Bulk and Tanker Accounts

Diagram No. 11

23

Bulk &Tanker Accounts

Income Booking And Collection

B&T commercial raises invoices

Debit notes & credit notes.

B&T accounts books

the same in SAP.

Financial

Accounting

System

Bank A/C

Cash Book

Collections Through

Functions performed by Bulk carrier & Tanker Accounts

Preparation of Provisional Results and generation of MIS.

Debtor’s reconciliation.

Brokerage payments.

Payments to P&I club and other payments.

Closing activities and Audit related work.

LNG Accounting.

24

Liner and Passenger Accounts DepartmentLiner Freight

Work Flow Activity

Diagram No. 12

25

CORPORATE FREIGHT

DEPARTMENT

RECEIPT OF

COLLECTION

S

RECONCILIATION CELL

AUTO MATCHED

BILL OF

LADING

DESTINATION BDESTINATION ATRANSPORTATI

ON

SHIPPE

R

CONSIGNEE

CONTRACT OF CARRIAGE

OF GOODSCOMPILATION OF B/L

PREPERATION OF FREIGHT

MANIFEST

SETTING UP FRT

COLLECTIBLES IN SCI

SYSTEMIf matching

Out

port

Account

s

Bills Of Lading

A Bill of Lading is a document issued by a carrier to a shipper acknowledging that specified

goods have been received on board as cargo.

Issuance of Bills of Lading gives Birth to an obligation at a price.

Mother of All Documents.

Cannot possibly fulfill the obligation without appropriate documentation.

Reconciliation

Diagram No. 13

1. Ensuring accuracy of freight collectible with reference to the original documents such as

freight manifest and amendments thereto.

2. Liaison with Agents for establishing the reasons for mismatch.

3. Follow up with agents for remittance of outstanding freight if any.

4. Rectifying the entries of Freight Department.

5. In some cases, agents send proof of remittance of freight for which details are not

available. Such cases are referred to accounts department for rectifications.

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Collection Finance Division

collectibles

Reconciliation

Ship Management Services

The system follows the cycle of execution of monthly allocation for determining the

proportionate management overheads for managing the vessels.

Execution of daily run/ monthly run for transfer of expenses on managed vessels to danaos

for raising of invoices on customers.

Assisting operating division for raising of monthly invoices on customers as well as debit

notes for quarterly advances due.

Scrutiny (on continuous basis) & reconciliation (at quarter end / yearend) of customer

accounts of government agencies department.

Preparation of vessel wise statement of accounts at the end of each financial year in respect

of all the managed vessels.

Statement of accounts prepared in standard format showing various heads of expenditure/

earnings at the end of each financial year in respect of all managed vessels.

Arranging for audit of the above mentioned vessel wise statement of accounts

Submission of the vessel wise audited statement of accounts to the various govt. Agencies or

departments.

Attending to queries or correspondence from the various govt. Agencies / departments with

respect to accounting matters of managed vessels.

Reconciliation of vendor/ customer accounts (owners / charterers of vessels on time charter

basis).

Attending to statutory audit / internal audit / govt. Audit (CAG) / ISO audit requirements for

liner.

Liaison with regional offices (Delhi, Kolkata, Chennai, port Blair) in connection with

managed vessels related matters.

Submission of monthly reports to management regarding outstanding dues position & age

wise analysis of debtors.

At quarter end/ year end passing of adjustment entries for provisioning/ prepaid expenses not

entered / entered through the sub systems (DANAOS/AFSYS), providing detailed

information for balance sheet disclosure (e.g. Related party transactions, ageing analysis,

etc.).

Technical and Offshore Department

27

Technical and Offshore Hierarchy

Diagram No. 14

Technical and Offshore services

Technical and Offshore services activities are as follows

1. Towing and Anchor handling operations in offshore

2. Carriage of men and materials (i.e. fuel oil, cargo, water etc)

3. Carry out standby and rescue operations in offshore, if required

4. Carry out routine surveillance in offshore for safety and security reasons

5. Carrying out Fire fighting duties

6. Operations, Manning, Maintenance and Management services to vessels owned by ONGC.

Income from Managed Vessels

28

Director Finance

Vice President

Manager Deputy Manager Assistant Manager

Diagram No. 15

Income from managed vessels is composed of two categories

1. Remuneration which is receivable only after a statement of income & expenses for quarter

end is prepared.

2. Share of Management expenses will be worked out only after SCI’s total management

expenses are known.

Pre-requisites for invoice preparation

Following are Pre-requisites to complete the three cycles to prepare invoices through Danaos for

managing vessels.

1. Completion of daily run.

2. Depreciation run for respective month.

3. Management expenses allocation run.

Technical service – Revenue

Consultancy Fees for Technical services for Ship Building are as follows

1. Andaman & Nicobar Island Administration.

2. Union Territory of Lakshadweep.

3. Geological Survey of India.

4. Consultancy Charges.

5. Recovery of Salary of officers.

6. Recovery of other expenses such as Tour, Survey etc.

Floating Staff Accounts Department

29

Income from Managed Vessels

Remuneration

Share of Market Expenses

FSAC Hierarchy

Diagram No. 16

Work Flow Activities

The functions of Floating Staff is to ensure proper and timely payment to the Floating Staff

Employees, Accounting of the Wages, Processing and payment of salaries for Officers, Petty

Officers & Crew.

Officers’/Petty Officers’ salary is processed through FLAPS

1. Kardex from Fleet Personnel Department;

2. SIMS- On Board advances and portage bills

3. FLAPS – Floating Staff Accounts Processing System

4. Monthly Payroll – OSV FS Employees

Masters Disbursement Account

1. Delivery of Cash to Master through Agents;

2. Receipt of monthly disbursement account from ships and accounting via SIMS

3. PDA is created for CTM in Danaos and payment is processed in SAP.

Allotments for Officers/Petty Officers/Crew

30

Director Finance

Vice President

Manager Deputy Manager Assistant Manager

1. Monthly

2. Casual

Crew Wages

1. Joining advances in office

2. On Board advances during article period

3. Account of Wages (Portage Bill) generated on board thru SIMS

4. Balance of Wages settled in office

Provident Fund Accounting

1. Officers/Petty Officers PF is transferred to the SCI PF Trust on the basis of FLAPS data

processed.

2. Crew PF data (deductions as per Bills) received from Ship and the same is accounted and

remitted to The Commissioner, Seamen’s PF Office.

Full and Final Settlement

1. For Officer

a. Provident Fund

b. Gratuity Balance

c. Leave Salary

2. For Crew

a. Gratuity

Year-end Work

1. Collection of data from ships as on 31st March

a. Officers allowances as on 31st March

b. Crew Portage bill for incomplete articles

2. Processing of Income tax Certificates (Form 16) at the end of the Financial Year

3. Annual EDR (Earnings and Deduction Register)

Shore personnel and accounts co-ordination DepartmentSPAC Hierarchy

31

Diagram No. 17

Payroll

1. Processing of monthly payroll in SAP HCM for shore staff

2. Posting monthly payroll to SAP FI & Transfer of Total Salary payable to respective regional

offices through SAP FI entry for reconciliation.

3. Generating the ECS (Electronic clearing system) file for Mumbai region and forwarding the

ECS file to the bank to ensure timely credit of salary to the employees’ bank account.

4. Intimating all the regions for creating ECS files at their end for credit to respective bank

accounts.

5. Ensuring timely payment of Profession Tax and filing of returns.

Provident Fund

1. Shore staff & Floating staff PF settlements

a. Calculation of PF dues and get approval of PF Trustees.

b. Arranging for pre audit by Internal Audit department

c. Preparing Final Settlement Receipt (FSR) and couriering to beneficiaries’ address.

d. After receiving signed FSR, preparing PF settlement cheques.

2. Issuing TDS certificates and other TDS related compliance viz. filing returns and timely

deposit of TDS wherever applicable.

a. Maintaining records of PF Settlements.

3. PF Loan (Refundable and Non Refundable)

a. Verification of PF Loan applications and supporting documents on the basis of PF

Trust Rules.

32

Director Finance

Vice President

Manager Deputy Manager Assistant Manager

b. Calculation of Loan Entitlement.

c. Obtaining Trustees approval for Loan amount.

d. Disbursement of loans

e. Feeding monthly installment for recovery through salary for shore employee.

f. Intimating monthly loan installment to Floating Staff Accounts Department.

4. Generation of Annual PF slips & distribution to all locations.(annual)

5. Monthly uploading of PF recoveries in Version Software.(monthly)

6. Appointment of Statutory Auditors ,preparing PF Trust Accounts and arranging for Statutory

Audit.(annual)

7. Investment and management of Trust funds.(periodic)

8. Obtaining tax exemption, filing returns, obtaining refunds, replying to scrutiny notices etc

through an approved CA firm.(periodic)

9. Arranging trustee meetings of PF trust & preparing minutes of meeting (periodic).

Gratuity

1. Shore & Floating staff Gratuity settlements

a. Preparing Final Settlement Receipt (FSR) and couriering to beneficiaries’ address.

b. After receiving signed FSR, preparing Gratuity settlement cheques.

2. Issuing TDS certificates and timely deposit of TDS.(periodic)

3. Filing returns , obtaining exemptions, Liasioning with Income Tax offices for refunds

through an approved CA Firm(periodic)

4. Investment and management of Trust funds.(periodic)

5. Appointment of Statutory Auditors, preparing Gratuity Trust Accounts & arranging for

Statutory Audit (annual)

6. Arranging trustee meetings of Gratuity Trust & preparing minutes of meeting. .(periodic)

Asset accounting

1. Obtaining Asset Code Creation Request Forms from concerned users.

33

2. Verification & Creation of asset master record in SAP.

3. Opening and carry forward of asset balances to new fiscal year in asset module

4. Ensure capitalization of vessels on completion of maiden voyage.

5. Pass entries for sale of vessels & booking of profit/loss on sale of vessels.

6. Maintaining Fixed Asset Register in Asset Module.

7. Reconciliation of financial records with physical verification report.

8. Passing of necessary entries in Asset module on the basis of Physical Verification Report.

Corporate Accounts

1. Closure of SAP FI period and opening new period after the closure of DANAOS & AFSYS

period & updating of monthly rates

2. Co-ordinate with all divisions to ensure that all entries are booked before closure of SAP FI

period

3. Execute allocation cycles after execution of Managed vessel and Empties cycle by Liner and

T & OS accounts division

a. Allocation of unallocated expenses and income to vessels

b. Allocation of common profit centre expenses to vessel voyage

c. Execute unfinished voyage program, Post entries for unfinished voyage income &

expenses.

d. Execution of foreign currency revaluation for all vendors, customers, open item and

non - open item managed GLs.

e. Checking and manually rectifying the errors thrown by the system while execution of

valuation cycles

Prepare financial results.

34

1. Coordinating with various departments for data required to prepare "Notes to Accounts”.

2. Replying to internal audit queries

3. Providing data required for Analysis of financial results.

4. Uploading of quarterly financial results on SCI website after the approval of same by board

of directors in board meeting .

5. Preparation of Balance Sheet , Profit and Loss Account as per Companies Act, Cash Flow

Statement ,supporting schedules and notes to accounts

6. Compiling contingent liability report by collating inputs received from all divisions

7. Compiling financial data for PSE Survey

8. Phase I & Phase II Audit by CAG

9. Creation of GL Codes in GL master and ensuring the correct mapping in financial statement

10. Foreign currency Valuation errors

11. PF Balances mismatch

12. Disclosure of foreign currency receipts & payments

13. Advisory services for PF & Gratuity Trust investments

14. PF Loan module implementation.

Cash and Treasury Department

35

Cash and Treasury Hierarchy

Diagram No. 18

Treasury Operations

1. Handling cash and online payments.

2. Receiving cash/cheques/DD and issuing necessary receipts.

3. Monitoring funds of Domestic and International bank accounts.

4. Fund allocation to various divisions.

5. Transfer of funds to Regional offices as per requirements.

6. Buying and Selling of currencies through online bidding.

7. Liasioning with banks and Documentation.

8. Reconciliation of cash and bank accounts.

Cash Flows

36

Director Finance

Vice President

Manager Deputy Manager Assistant Manager

1. Monitoring division wise Cash Inflows & Outflows.

2. Daily cash inflows are prepared to decide disbursement plan for the day.

3. Consolidated cash flow position prepared fortnightly / monthly.

Investment of Surplus Funds

1. Surplus funds are invested in Fixed Deposits (FD) & Mutual Funds(MF).

2. Funds are invested in the ratio of 60:40 in PSU and Private Banks based on DPE guidelines.

3. Card rates are taken from various banks and investment made at the best available rate.

4. Funds are invested in debt based MF(PSU) subject to a maximum of 30% of the surplus

fund with overall cap of Rs 250 crore.

5. Facility of Corporate liquid Deposits on current accounts.

6. Documentation, Record keeping and Accounting.

Non Fund based Facilities

Liasioning with banks for issuance / extension of

1. Bank guarantees (Domestic as well as Foreign).

2. Counter guarantees.

3. Performance guarantees.

4. Letter of credits.

Working Capital Management

In order to manage the working capital requirement, options available are as follows

1. Short term loan from Banks.

2. Loan against Fixed Deposits.

3. Commercial Papers.

4. Buyers Credit.

Finalizations of Accounts

37

1. Control of main accounts from Functional ledger accounts pertaining to Cash & Treasury

Department.

2. Preparing quarterly statement in respect of accrued interest on Bank deposits.

3. Preparation and submission of quarterly statement showing actual and accrued interest on

bank deposits and NAV of Mutual Fund Investments.

4. Attending to observations of Internal Auditors, Statutory Auditors and Govt. Auditors.

MIS Reports

1. Daily Cash & Bank Balances.

2. Weekly cash and bank balances and the projections of monthly funds requirements.

3. Monthly statement of placement of Funds in short term instruments to the Board.

4. Quarterly status of Mutual Fund Investment.

5. Quarterly status of Bank Guarantees issued as well as received in co-ordination with the

concerned departments.

Other activities

1. Preparation of Board Agenda for opening / closing of banks accounts, change of authorised

signatories for all bank accounts including regional offices.

2. Preparation of Board Agenda for other treasury operations.

3. Maintaining daily Exchange rates for records.

4. Any other work related to regulatory requirements for treasury operations.

Out port Accounts Department

38

Process Flow for Agents Funding and Settlement

Out port Process

Diagram No. 19

The various functions preformed are as follows

1. Pre-funding of Agents.

2. Weekly invoice reports sent to Agents.

3. Receiving FDA (Final Disbursement Account) Invoices from Agents and sending them for

scanning.

4. Maintaining Electronic Inward Receipt register for Agents FDA.

5. Settling Agents FDA on Final Authorization by SCI.

6. Bank Reconciliation of Freight Bank Accounts.

7. Quarterly provisions basis paid/final, locked, failed items.

Accounting in the ERP System

39

Followed By Hard Copies / Scanned

Pdf Files On WeeklyBasis

Adjustment of Excess PDA

FDA Approval AndSettlement

PDA Sent By Agent

AuthorizationBy Operating Dept.

Remittance Against PDA

FDA Entered&

Closed By Agent

1. Agents are required to use 2 main ERP related systems in their offices/ locations from Afsys

and Danaos.

2. Afsys: A daily Freight collection deposited by the agents in SCI Freight Bank Accounts is

accounted in SCI books, through Afsys system used by agent.

Expenses and Income related to PDA & FDA

1. Voyage PDA/FDAs for vessel related expenses – E.g.: Pilot age, Port expenses, stuffed

container expenses, crew expenses etc.

2. General PDA/FDAs for expenses which are not related to any specific vessel call –E.g.:

Empty container expenses, monthly communication expenses etc.

Stages in Danaos System for PDA/FDA are as follows

1. PDA(Prefunding) – Locked, Sent to Finance, Paid / Final

2. FDA (Actual invoices) – Draft, Invoicing, Closed, Approved 1, Approved 2, Final

3. Disallowances in FDA

4. Final Settlement of FDA

a. Agents’ accounts (maintained in SAP), to be automatically debited with any

disallowances made by Operating department in Danaos. Agents can view the same

in Danaos.

b. Final settlement for each voyage / General PDA to be made as soon as all FDA line-

items in the said Voyage / General PDA is authorized at level 2 in Danaos.

c. Once all line items are authorized at level 2 status of the FDA changes as Final.

Insurance

40

There’s separate Insurance department in SCI which handles all insurance related

things whether it be insurance of ships, or personnel (Fleet and shore).

Some policies are taken through insurance companies and some through

international shipping union Clubs.

Below is the major insurance expense for SCI.

Hull & Machinery Rs 38.88Cr.

War Risk Marine Insurance – Rs75.93Cr.

Protection & Indemnity (P&I) - $63,00,875.

Time Charter’s Liability Cover - $3,37,603.

Container insurance - $62,000.

Freight Demurrage & Defense Class - $2,84,530.

Special Contingency (Marine Piracy) - $198,000.

Taxation Department

41

Tax Hierarchy

Diagram No. 20

The above diagram shows the hierarchy of the taxation department. The main objective of the

Taxation department is timely recording of tax related liabilities and payments.

In the taxation department various tasks which are performed by the employees are as follows.

42

Director Finance

Taxation Department

Taxation (Sr Vice President)

Shore Personnel And Floating Staff - TDS

(DGM)

Service Tax(Deputy

Manager)

Service Tax(Assistant Manager)

Corporate Tax (Assistant Manager)

Shore Personnel and Floating staff-TDS

1. Floating staff salary - TDS

2. Shore staff salary - TDS

3. TDS payable on expenses other than salaries

Service Tax

1. Service tax and CENVAT credit.

2. Sales tax/Value Added Tax.

Corporate Income Tax

1. Corporate tax.

2. Wealth tax.

3. Dividend distribution tax.

4. Foreign/Freight tax.

5. Customs duty.

6. Works contract tax (WCT).

The employees work with collaboration with each other so that the tasks can be performed

efficiently and effectively and also the tasks are divided so that the process work efficiency

increases and work pressure is reduced.

Shore personnel and floating staff- TDS (tax deduction at source)

43

The Shore personnel and floating staff –TDS tasks are performed by DGM of taxation

department. In the organization the employees are bifurcated into two categories shore personnel

staff and floating staff. The shore personnel staff are the employees which are working on shore

i.e. Managers, Deputy Managers, Assistant managers, Vice President, Director and Chairman

and Managing Director. The floating staff are employees which are working on ships.

TDS

Diagram No. 21

Work flow Activity

44

TDS

Shore Staff Salary

Withholding Tax

Vendor/Party

Floating staff Salary

The task performed for shore staff & floating staff -TDS are as follows

1. Checking & Entering in SAP External Saving Declarations on monthly basis.

2. Assessment of Tax Liabilities of Employees.

3. Monthly TDS remittances.

4. Issuance of salary certificates to shore staff employees.

5. Filing of quarterly e-TDS Return.

6. E-TDS Assessment related proceedings / hearings.

The tasks performed for Vendors are as follows

1. Monthly deposit of TDS deducted from Vendors to Income Tax Dept.

2. Quarterly filing of E-TDS Return.

3. Quarterly issue of TDS Certificates.

4. Reconciliation of TDS Accounts.

5. E-TDS Assessment related proceedings / hearings.

The tasks performed which are related to Withholding tax are as follows

1. Monthly payment of Withholding Tax.

2. Quarterly E-TDS Return.

3. Attending to matters, appeals, etc. relating to withholding tax on charter hire of vessels

from non-resident ship-owners.

4. Filing of relevant appeals with CIT (A) & ITAT.

5. Attending meeting with counsel on Tax Matter.

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Service tax

The service tax tasks are performed by Deputy Manager and Assistant Manager of Tax

Department. Shipping Corporation of India Ltd is providing various services which are related to

shipping industry transporting goods from source to destination via ships and vice versa as per

the requirement of Clients. So According to the provision of Government of India Service tax is

applicable and is paid by the organization.

While applying service tax respective department (B&T, L&PS, T&OS, etc) which creates

invoice for service provided to clients uses Tax codes in SAP

1. For Example T1 – 10.3%, T2 – 12.36%, T4 – 14%.

2. Major work of Tax department in SCI includes compilation of service tax data from

different departments.

3. Tax department also works out output tax liability and input tax for availing CENVAT

credit.

Work Flow Activity

The various tasks performed related to service tax are as follows

1. Monthly Payment of Service Tax.

2. Filing of Half Yearly Service Tax Return.

3. Compilation of Data/information from Various Departments for submitting to Assessing

Officer / Comm. Of Service Tax/ CESTAT.

4. Attending to Service tax authorities in connection with Notices received from time to

time.

5. Handling of Internal Queries from different Departments.

6. Filing of relevant Appeals with Comm. Of Service Tax (A) and CESTAT.

7. Meeting with Advocates & Counsels in relation with Service Tax Appeals and Hearings

on regular basis.

8. Attending Service Tax hearings before Assessing Officer / Commissioner / CESTAT.

46

CENVAT

Diagram No. 22

Without CENVAT Credit With CENVAT Credit

Company A B A B

Purchase - 220 - 200

Value Added 200 30 200 30

Sub Total 200 250 200 230

Service Tax

10%

20 25 20 23

Total 220 275 220 253

Let us assume that service tax on Service is 10% of value. ‘A’ renders service to ‘B’ at Rs. 200.

Thus, ‘B’ gets the service at Rs. 220, inclusive of tax @ 10%. He further provides services to ‘C’

at Rs 250. While he calculates his charges, ‘B’ has considered his cost of service as Rs. 220 and

added Rs. 30 as his service charge. While providing service to C, B will charge tax again @

10%. Thus C will get the service at Rs 275 (250 + 10% tax). In fact, ‘Value added’ by B is only

Rs 30 (250-220), tax on which would have been only Rs. 3, while the tax paid was Rs. 25. As

stages of providing the service continue, each subsequent recipient has to pay tax again and again

on the service which has already suffered tax. This is called cascading effect.

In the example illustrated above, ‘B’ will receive service from ‘A’ @ Rs. 220, which is inclusive

of duty of Rs. 20. Since ‘B’ is going to get credit of duty of Rs. 20, he will not consider this

amount for his costing. He will charge conversion charges of Rs. 30 and sell his service at Rs.

230. He will charge 10% tax and raise invoice of Rs. 253 to ‘C’ (230 plus tax @10%). In the

47

Cenvat

Excise Service Tax

Invoice prepared by ‘B’, the duty shown will be Rs. 23. However, ‘B’ will get credit of Rs. 20

paid on the service received by him from ‘A’. Thus, effective duty paid by ‘B’ will be on Rs 3.

‘C’ will get the service at Rs.253 and not at Rs. 275 which he would have been the price in

absence of CENVAT. Thus, in effect, ‘B’ has to pay duty only on Rs.30, which is the value

added by him

‘B’ is receiving service from ‘A’. In second case, his service price is Rs 200/- as he is entitled to

Cenvat credit of Rs 20/- i.e. tax paid on services. His invoice shows tax paid as Rs 23. However,

since he has got credit of Rs. 20/- , is paying in effect only Rs 3/- as tax, which is 10% of Rs

30/-, i.e. 10% of ‘value added’ by him. The ‘Value added’ is difference between cost of input

service and output service. In the above example, ‘value’ added by B is Rs 30 and hence, by tax

credit system he is paying tax only on Rs 30. At each stage the service provider pays duty only

on the ‘value’ added by him. Thus, it does not make any difference even if a service passes

through a number of stages.

Sales Tax & Value Added Tax (VAT)

Sales tax/VAT is applicable while selling of ships when the ship is getting scrapped.

The various tasks performed related to Sales tax/VAT are as follows

1. Payment of Sales tax/ VAT dues.

2. Filing of Sales tax/ VAT return with different Sales tax / VAT authorities

3. VAT Audit of Maharashtra and Gujarat

4. Attending to sales tax / VAT related other matters in consultation with SCI’s Sales

tax / VAT advisor.

Corporate Income tax (Tonnage)

48

The corporate income tax tasks are performed by Assistant manager of Taxation department.

Work flow activity

The task performed related to corporate tax is as follows

1. Computation for estimating advance tax liability for quarterly/timely payments of

Corporate/Tonnage Tax.

2. Compilation/Reconciliation of Large No. of TDS Certificates from Parties & Banks.

3. Preparation and filing of Annual Tax Return.

4. Compilation of Data/information from Various Departments for submitting to Assessing

Officer/CIT/ ITAT.

5. Filing of relevant Appeals with CIT (A) and ITAT and High Court.

6. Meeting with Advocates & Counsels in relation with Income Tax Appeals and Hearings on

regular basis.

7. Attending Income tax hearings before Income Tax Officer / Commissioner / ITAT /High

Court on regular basis.

The tasks performed related to Wealth tax & Dividend distribution tax are as follows.

1. Preparation and filing of annual Wealth tax return and attending to related matters.

2. Computation and payment of dividend distribution tax and filing of annual return and

attending to related matters.

3. Computation of foreign tax liability based on Freight register for passing tax provision

entries.

METHODOLOGY

49

Type of Research

According to project “Study on Finance and Account Division of Shipping Corporation of India

Ltd”, Research Methodology applicable would be Exploratory Research.

Exploratory Research

The main purpose of exploratory research is the description of functionalities of different

Departments and task performed by each department. This type of research methodology relies

on the Experiences and Observations. The research is carried out to know what has happened and

what is happening with respect to the Finance and Accounts Divisions of Shipping Corporation

of India Ltd.

50

Sources of Data

Primary data

1. Interview

2. Observation

Secondary data

1. Manuals

2. Annual Reports

3. Letters

4. Show cause Notices

5. Agreements

6. Web information

7. Historical data and information

Data Collection Instrument

51

The Data Collection Instrument included are Interview, Observation and Reading.

Interview

Unstructured interview is interaction with Department persons of various Divisions with a

sequence of questions to understand the core functions and task performed by them.

Transcribing Data will be recorded from verbal interaction with the respondents and will be

transcribed i.e. convert the sound speech into words as accurately as possible.

Observation

Observation is very important method for obtaining the comprehensive data to understand the

process.

Participant Observer as a member of subject of study while observing and keeping notes of the

attributes of subject that is being researched so that can directly experience the phenomenon

being studied by this approach and can get the first hand experience with Informants.

Reading

Reading of Documents Limitation in this approach is document may be protected, I may not

have access to them as they are the Confidential Documents .As per the Company policy such

Documents cannot be Disclosed.

Population

52

The population of the project study is “Employees working in Finance & Accounts Division of

Shipping Corporation of India Ltd”.

1. Tax Cell – N.R.Sariaya (Senior Vice President)

2. Tax Cell (Service Tax) – Piyush Srivastava (Deputy Manager)

3. Tax Cell (Service Tax) - Shweta Amladi (Assistant Manager)

4. Tax Cell (Corporate Income Tax) – Indar Rathi(Assistant Manager)

5. Tax Cell (Salary TDS) – Vitthal Gabhale (Deputy General Manager)

6. Tanker Commercial – Aniket Bhalerao (Assistant Manager)

7. Bunker Commercial – Kunal Medhe (Assistant Manager)

8. Bunker Commercial – S.N.Patnaik (Deputy General Manager)

9. Finance And Budgeting – Karthik Karolia (Assistant Manager)

10. Chartering – Lankesh. G (Vice President)

11. Cash & Treasury – Abhay Baral(Deputy Manager)

12. Shore Personnel (Gratuity) – Sanjay Ambekar (Deputy Manager)

13. Shore Personnel (Provident Fund) – Nitin Tare (Manager)

14. Accounts Co-Ordination – Swapnita Rane (Assistant Manager)

15. Shore Accounts - B.K.Patel (Vice President)

16. Insurance – P.V.Kulkarni (Vice President)

Sampling Method

Opportunity Sampling

53

Simply Selecting the Senior Authorities that are available at that time as per their Convenience

i.e. Approaching Department Heads and requesting them to be interviewed.

An opportunity sample is obtained by asking members of the Department relevant Queries and

Questions regarding the Department with respect to Finance and Account Division of Shipping

Corporation of India Ltd.

Advantages

This Method of sampling is Quick, Convenient, Simple, Economical and most common type of

Sampling Method.

Sample Size

The sample size was 16.

Conclusion

Major sources of income for SCI

Diagram No. 23

54

Bulk and Tanker Services

IncomeChartering Tax Cash and Treasury (Liability & Payment)

LinerFreight

Freight

Expense

Salary

Floating StaffShore Personnel

Floating staff Accounts Department

Advance to Employees

Out port Account

Payment to Agents as per the Duties performed

Bunker / Repairs and Other Expenses

Tax Bills

Major Expenses for SCI

Diagram No. 24

Major Heads of Operating Earnings

Freight Income

An Income earned for carriage or transportation of goods by water is called as freight.

Charter Hire Income

55

Technical & Offshore Services Ship Management Services

When a vessel is given on hire for a specific period of time the income earned is called as

Charter hire.

Demurrage Income

Demurrage income arises when there is a delay in loading or unloading of cargo.

Major Sources of income for SCI

Bulk & Tanker services – Chartering & freight.

Liner & passenger Services – Freight.

Technical & offshore services – consultancy services.

Above are the major sources from which SCI books its income respectively. All the above

services income is processed through various respective operational, commercial and accounts

department within which they book income and applicable taxes through various ERP like SAP,

DANOS & AFSYS.

After booking various Taxes by respective department, TAX cell consolidates all the taxes from

various departments and process it further for payment through Cash & Treasury Department.

Major expenses by SCI

Salary – Shore personnel & Floating Staff.

Port dues, light dues , canal dues, Insurance , Container leasing cost, other miscellaneous

expenses.

Bunker / Repairs – Fuel charges, Maintenance of ships (Dry Dock), Technical service such as

workshop assistance.

Above are the major expenses incurred by SCI, which is processed through various respective

departments and while booking expenses Tax is booked in system and TAX cell pays all the tds

deducted. Bills are processed and paid through bills department.

As SCI has major source of income come through international freight it losses on CENVAT

Credit.

56

As Financials of SCI shows it is a cash rich company but due to a public sector unit its

investment horizons gets limited due to directives from department of public enterprise doesn’t

allow that freedom which an private company can enjoy.

As SCI is one of the biggest shipping company in India Fleet wise, its Bunker requirement is also

high but due to slow decision making and being a PSU under DPE guidelines they cannot Hedge

it.

Being PSU and into High Tax payer category they still don’t enjoy relief from repeated enquiries

from Tax department, due to which TAX cell major concentration gets diverted towards court

cases from various Tax department, plus point is that this also makes SCI more accountable.

As Being a PSU they loose on something but they gain also on some part, SCI enjoys add-on

Credit from BPCL, HPCL, Oil India corporation for bunkering which SCI private competitors

doesn’t enjoys, which helps a lot for SCI in maintain cash flow.

Its Technical and offshore Division is wholly dependent on ONGC for its work that to ONGC

and SCI both being PSU they got that contract . So they should acquire more clients in that line

of business and not solely depend on single client.

Being PSU and into High Tax payer category they still don’t enjoy relief from repeated enquiries

from Tax department, due to which TAX cell major concentration gets diverted towards court

cases from various Tax department, plus point is that this also makes SCI more accountable.

Being one the biggest shipping company of India SCI was loss making company for last three

years, this year SCI made Rs 200 crore profit due change in depreciation method and fall in

crude oil prices till $40 in last quarter of 2013-14 financial year.

Major Income of SCI is in USD and their Payments are also in USD so on this part SCI is

secured that they are not majorly loosing on currency fluctuations.

57

So from this it can be concluded that SCI being a PSU it has some disadvantage on decision

making but enjoys some facility because of PSU status. So in short one of the biggest shipping

company can also be one the profitable company on shipping industry if there is fast pace

decision making which would make it more efficient but with responsibility there should be

accountability as SCI is a national asset.

Though Finance and accounts division and their sub departments are not the revenue generator

for shipping corporation of India, but it holds that work which cannot be avoidable and needed

for smooth functioning of SCI as they deals with monetary things which ultimately matters for

any company at the end because that only shows how’s company performing.

58