Upload
gopal-chandra-saha
View
222
Download
0
Tags:
Embed Size (px)
Citation preview
ANNEXURE – A
“Working capital management”
A project report submitted in partial fulfillment of the requirements for the
degree of Master of Business Administration of DSMS BUSINESS
SCHOOL.DURGAPUR.
WEST BENGAL UNIVERSITY OF TECHNOLOGY.
KOLKATA.
By
Binayak Purkayastha
DSMS Business School
Durgapur
ANNEXTURE -B
Student’s Declaration
I hereby declare that the project report entitled “Working Capital
Management” submitted in partial fulfillment of the requirements for the
Degree of Masters of Business Administration In Finance to DSMS BUSINESS
SCHOOL, DURGAPUR.(West Bengal University of technology, West Bengal.
India,) is my original work and not submitted for the award of any other degree,
diploma, fellowship, or any other similar title or prizes.
Place: Durgapur (Binayak Purkayastha)
Date: Reg No.092510710014
Roll No.09251009021
ANNEXTURE - C
A project report
By
Binayak Purkayastha
On
“Working Capital Management”
Is approved and is acceptable in quality and form
(Internal Examiner) (External Examiner)
Name: Name:
Qualification: Qualification:
Designation: Designation:
ANNEXTURE-D
This is to certify that the project report entitled
“Working Capital Management”
Submitted in partial fulfillment of the requirements for the Degree
of
“Masters of Business Administration”
from
“DSMS Business School”
Binayak Purkayastha
Registration No. 092510710014.
Master of Business Administration (MBA)
Has worked under my supervision and guidance and that no part of this report
has been submitted for the awarded of any other degree, Diploma, Fellowship or
other similar titles or prizes and that the work has not been published in any
journal or Magazine.
Certified
Guide’s name:
Qualification:
ACKNOWLEDGEMENT
I take this opportunity to convey my sincere regards and deepest sense of gratitude to Mr. Satyajit Roy Chowdhary (Manager, Finance & Accounts Depatment, the Durgapur Projects Limited) and Mr. Anup Ghoshal (Astt. Manager, Welfare & Training, The Durgapur Projects Limited) for giving me an opportunity to do my fall training and project in his esteemed organization. Given my limited knowledge in Finance sector at the time of joining, this project would not have been a success without their able guidance and timely inputs.
I am also indebted to Mr. Partha Chatterjee (Faculty, Dsms Buiness School, Durgapur) who judged my academics interest and professional aptitude, provided me the most valuable guidance and rendered necessary help and coordination which ultimately yielded the most valuable opportunity for me to make this project a success.
ByBinayak Purkayastha
Roll no. - 09251009021
Department of MBA
Durgapur Society of Management Science
Certificate
This is to certify that this is a bona fide project report on
Working Capital Management of D.P.L (Durgapur Projects Limited)
Submitted by
Binayak Purkayastha
{Roll No: 04 / MBA (Finance)}
Prof. Dr.D.P.Samanta Prof .Partha Chatterjee
(Principal, DSMS Business School) (HOD, MBA Dept)
METHODOLOGY
Research is a diligent and systematic inquiry or investigation into a subject in order to discover or revise facts, theories, application etc. Methodology is the system of methods followed by popular discipline.I furnish below the research methodology used for the project assigned to me.
Company selected for my project:-
DURGAPUR PROJECTS LIMITEDADMINISTRATIVE BUILDINGDURGAPUR-713201
Nature of the business of the company:-
Production, Generation and Distribution of power in West Bengal.
The approaches that are followed to collect the database from the company are
Primary data and Secondary data.
1. Primary data
This primary data are collected directly through various
interview performed with different personnel within and
outside the organization.
2. Secondary data
This secondary data are being collected from the website of
the company. The various data are being collected for further
analysis required for the project are database of various
Budget Estimate, Balance Sheet , Profit and loss account and
accounting policies of the company.
EXECUTIVE SUMMARY
INTRODUCTION
Working capital management is concerned with the problem in attempting to manage the current assets,the current liabilities and the inter-relationship that exists between them.The term current assets refers to those assets which in ordinary course of business can be, or will be, turned into cash within one year without undergoing a diminution in value and ithout disrupting the operating firm.While Current liabilities were those liabilities which intended at their inception to be paid in ordinary course of business within a year, out of the current assets or earnings of the concern.
WORKING CAPITAL=CURRENT ASSETS-CURRENT LIABILITIES.
OBJECTIVE
The main objectives of this project to analyse the working capita of DPL and find out liquidity,profitability,solvency and activity ratio of different units of DPL from financial year 2004-2005 to 2008-2009.Liquidity is essential for smoothly conducting business activities. High liquidity provides flexibility to take advantage of changing market conditions.
With the help of profitability ratios we will measure management’s overall efficiency as shown by the returns generated on sales and investments.Solvency ratio measures the extent to which the borrowed funds support the firm’s assets. The numerator of this ratio includes all debt, short term as well as long term fund and the denominator of this ratio is the total of all assets.Proprietor’s ratio is the ratio between shareholders fund and total assets. This ratio shows the proportion of total assets of a business financed by shareholders fund. This ratio can be used to ascertain the solvency and financial stability of the firm in the long run. Higher the ratio higher the degree of security to the lenders.
DURGAPUR PROJECTS LTD.
(A Government of West Bengal Undertaking)
Regd. Office, Head Office
and WorksCalcutta Office
Administrative Building
Durgapur - 713201
Fax (0343) - 282-3492
E-Mail :[email protected]
1,Shakespeare Sarani (1st Floor)
Calcutta - 700 001
Fax (033) - 282 - 3492
E-Mail : [email protected]
FORMATION:-
The Durgapur Projects Limited is a Government Company incorporated on
6th September, 1961, consisting of Coke Oven Batteries, Bye-products Plant, Gas
Grid Project, Thermal Power Plant and Water Works. It is under the
administrative control of the Department of Power, Government of West Bengal.
LOCATION:-
The Company’s Plants and Administrative Offices are located within 3 km
from Durgapur Railway Station and 1 km from the G. T. Road.
BUSSINES:-
The Durgapur Projects Limited is the first undertaking of the State
Government which has been engaged in development of infrastructure for
Industries and was given the stature of an ‘Industry for Industries’. It has helped
in development of various large, medium and small scale industries in and
around Durgapur and also at other places within the State.
ACTIVITIES:-
1. Generation of power and its distribution at 11KV in its licensed area at
Durgapur and transmission of surplus power to WBSEB.
2. Production of Metallurgical Coke of Blast Furnace, Foundries etc., Coke
Oven Gas as industrial fuel and Crude Coal Tar available from its Recovery
type of Coke Oven Batteries.
3. Treatment and distribution of water for drinking and industrial use.
INFRASTRUCTURE:-
Land1910 acres comprising 1060 acres for Plant and 850
acres for Township.
Railway
Network
Separate Railway Exchange Yard (DCOP Siding)
with Railway maintained Weighbridge facility.
DPL THE EMERGENCE
Dr. Bidhan Chandra Roy was the chief architect of the Durgapur Project
Limited. His vision is visualized today.
A profit making west Bengal government enterprise DPL is justifiability
roaring in the ruhr of Bengal. With Dr.Roy’s personal initiative DPL was started
with a mere capital investment of Rs15 crore has now spread the wings with
more than 1500 crore.
The durgapur project limited was incorporated as private companion 6 th
september1961 and on 15th september1961 the company was took over by state
government. The company previously was managed by durgapur industrial
board constituted under government orders. The durgapur project limited has a
significant role in the nations economy turning the vast coal deposit of the
country into varied wealth for the nation. The formation of the company was
path breaking as the first determined entry of state enterprise in west Bengal into
the field of large scale industry.
Latter the company started its initiation in widely diversified enterprise
comprising coke oven plant, benzol recovery unit tar distillation, gas grid, power
plant, water works,township etc,units allinterlinked and interdependent in a basic
harmony of process.
COMPANY OVER-VIEW:-
Durgapur today assumes a significant position in the industrial map of West
Bengal. It has a whole gamut of manufacturing units - from steel to power
and from cement to mining machinery. In the growth and expansion of this
industrial base, Durgapur Projects Ltd, the multi-utility company, wholly
owned by the West Bengal Government, has been playing a pivotal role since
early 60s. DPL-set up in 1961-is primarily a power utility organization but it
has already made a mark in the market also as a manufacturer of world
standard coke for various metallurgical applications. It also produces coke
oven gas, which is being supplied to the neighboring district of Kolkata. It
produces another by-product, namely, crude coal tar. It's rich human
resources of 450 highly skilled engineers and professionals besides around
5000-trained work force. An 11-member Board of Directors acts as a
watchdog of the organization.
DPL today is a renovated and upgraded power utility. A total of six units of
different capacities have an aggregate 410-mega watt of installed capacity.
After fulfilling total requirement of its command area customers, DPL surplus
power goes to the West Bengal State Electricity Board (WBSEB). DPL is the
only power supplier within Durgapur.
One of the biggest advantages for DPL to serve its clients is its production
facilities being logistically linked with all the three major modes of
transportation- rail, road and sea. Besides, Kolkata and Haldia in the east,
ports like Vishakhapatnam, Chennai in the south and Mumbai in the west
also handle DPL products. Cutting across the states - from east to west and
south to north- DPL is also gearing up to spread its marketing wings abroad.
The proposed list of countries includes Sri Lanka, Bhutan, Dhaka and Qulin.
To ensure quality in every step of the product processing, DPL has a well
equipped laboratory having sophisticated and computerized instruments such
as GSR, CRI, Gas Chromatograph, Spectro photometer etc. Environment is a
key concern to the DPL authorities. The Environment laboratory is equipped
with bacteriological testing kits, ambient air quality testing instruments, stack
monitoring instruments, gas analyzers etc.
The sprawling township with adequate infrastructure facilities speaks for
DPL's concern for its most valuable resources-its employees. Besides
adequate accommodation facilities, the company runs a hospital and an
educational institution to take care of its employees.
BOARD OF DIRECTORS
CHAIRMAN- SHRI A.K.DUBEY.
MANAGING DIRECTOR- SHRI MRIGANKA MAZUMDAR.
DIRECTOR (T&D)- SHRI ALOK ROY CHOUDHURY.
DIRECTORS- SHRI B.K.MAZUMDAR. (I.A.S)
SHRI SUBRATA GUPTA. (I.A.S)
SHRI NILOTPAL ROY.
SHRI B.K.PAUL.
SHRI N.MANGUNATH PRASAD.(I.A.S)
SHRI U.N.BHADURI.(I.A.S)
SHRI R.P.SAMADDAR.(I.A.S)
SHRI S.MAHAPATRA.
REGISTERED OFFICE- ADMINISTRATIVE BUILDING
PO-DURGAPUR 713201
DIST-BURDWAN
WEST BENGAL
KOLKATA OFFICE- AIR CONDITION MARKET
1ST FLOOR
1, SHAKESPEARE SARANI
KOLKATA-700071
POWER PLANT
FIG:-1
The Company is generating power from its six power units with an
aggregate capacity of 395 M.W and distributing to its consumers of
various categories located in its command area at Durgapur and the surplus
power is transmitted through the West Bengal State Electricity Board
Grid. The Company ensures steady and uninterrupted supply of power to its
consumers.
Unit
No.Year of commissioning Present Capacity Renovated Capacity
I 10.8.60 30 MW 30 MW
II 10.6.60 30 MW 30 MW
III 23.6.64 70 MW 77 MW
IV 29.6.64 70 MW 77 MW
V 4.7.66 77 MW 77 MW
VI 1.1.87 110 MW 110 MW
The Durgapur project limited also starts 7th unit of 300MW capacity. This is the
first 300 MW unit in the Eastern region and executed by Chinese company Dong
Fang Electric Corporation.
POWER SUPPLY-TRADE INFORMATION:-
Unlike many other places, a major incentive for any entrepreneur to set up
industrial units, to expand existing units in Durgapur is the steady and
uninterrupted availability of power. Durgapur Projects Ltd is the sole supplier of
power (at 11KV) within Durgapur. It offers an attractive power supply package
to industry:
To maintain the quality of the product, stable power supply is one of the most
important ingredients. The industrial units in Durgapur unlike many other
industrial zones in the country enjoy this inevitablepowersituation.
Even the prospective investors can feel happy and comfortable while
considering new projects in Durgapur industrial belt as DPL has surplus
power and offers a number of incentives to set up units there.
DPL assures:
Continuous availability of power
Quick response for Electricity connection
Tariff concessions to all Industries (11 KV) link to Time-of-the Day
(ToD) metering.
Further incentives offered to new industries, industrial expansion projects
and
Rehabilitation of sick units as approved by the regulatory Commission.
Location and Capacity of three 132/11 KV Grid Sub-stations
"A" ZONE
Location At the factory premises of Hindustan Fertilizer
Capacity 20 MVA
Growth 31.5 MVA
Availability 40 MVA
Advantage ½ KM from G T Road and 3 KM from Durgapur
Railway Station
"B" ZONE
Location By the side of M/S MAMC
Capacity 63 MVA
Growth 31.5 MVA
Availability 40 MVA
Advantage 1 KM from G T Road and 4 KM from Durgapur
Railway Station
132 KV/ 11 KV B- Zone To be constructed
"C" ZONE
Location By the side of M/S Durgapur
Chemicals
Capacity 40 MVA
Growth Under process
Availability 20 MVA
Advantage 3 KM from G T Road and 3 KM from
Durgapur Railway Station
132 KV/ 11 KV C - Zone Under commissioning phase
TRANSMISSION & DISTRIBUTION:-
The transmission and distribution system of DPL with jurisdiction of an area of
about 60 sq kilometers includes the following :-a) 132 KV transmission line
measuring 19 circuit kilometers served through three sub-stations of 180
MVA capacity.
b) 11 KV transmission/distribution line measuring 393 circuit kilometers
c) LT distribution line network measuring 4250.5 circuit kilometers.
COKE
OVEN
FIG:-2
DPL's Coke Oven Complex is India's largest Merchant Cokery producing Coke
of global quality. 3 Number 4.5 mitre tall recovery type Coke Oven Batteries
with 100 oven of width 400 mm along with Coal Washery and Bye-products
Plant. Present Production capacity is 27,000 M.T. which can be increased to
40,000 M. T. with commissioning of 3rd Battery.
COKE:
The Coke Oven plant produces 0.5 million tones of Coke per annum. Coke
produced by DPL has already attained global standard. There are in all 100
ovens. Hard quality Coking coal required for Coke Ovens is sourced to China
and for Soft Quality Coking Coal is procured from China and Australia.
Five types of coke are produced at DPL's Coke Ovens. They include Foundry
Grade (+80 mm); BF Grade (25-65 mm); Nut (15-25 mm); Pearl (6-12 mm) and
Breeze (0-6 mm). While in Foundry and BF Grade the ash content is 12.5%, in
Nut it is little higher at 12.8%. In Pearl and Breeze types of Coke, the ash
content is 13.5 %.
Description #1 #2 #3 #4 #5 Total
No of
Ovens
30 30 - - 40 100
Status Operational Hot
Blank
Future
Rebuilding
Future
Rebuilding
Operational
Height
(Mtrs)
4.5 4.5 - - 4.5
Width
(mm)
400 400 - - 400
Length
(mm)
13400 13400 - - 13430
Eff.
Volume M3
21.74 21.74 - - 21.76
Type Twin flue
Side jet gas
gun system
Twin
flue Side
jet gas
gun
System
- - Twin flue
underjet
heat
regenerative
Oven
Availability
100% 100% - - 100%
FUEL GAS SUPPLY
DPL maintains a 170-kilometre-long gas grid for urban consumers. Its command
area for fuel gas supply ranges from Durgapur to Bally in Howrah district.
DPL's Fuel Gas Supply Capacity & Command Area
Description Coke Oven Gas Network
Capacity (NM3 /D) 200000
Heat Value (Gr) (Keal/NM3) 4500-5100
Distribution Gas Compressor, Gas Holder, Piping,
Metering etc.
Command Area Durgapur to Bally
Gas Grid (KM) 170
WATER WORKS
Originally
commissioned with a capacity of 6 MGD in 1960. The Water Works was
expanded unto the capacity 41 MGD of water treatment plant for water
available from Durgapur Barrage on River Damodar of DVC for use in
Company's Plant, Township and other industries and domestic consumers.
To supply industrial and drinking water to the residents of DPL township, the
company maintains its captive water storage facility. It has its own water
treatment plant. While water pumping capacity remains at 35 million gallon per
day (MGD), the water treatment capacity has been augmented by 6 MGD to 41
MGD.
Description Treatment Systems Total
1st Phase 2nd Phase
Pumping Capacity
(MGD)
35 - 35
Treatment Capacity
(MGD)
35 6 41
Type of Treatment Clariflocculator, filter &
chlorinator
Clariflocculator, filter &
chlorinator
Chemicals for
Treatment
Ferric Alum, Lime &
Chlorine
Ferric Alum, Lime &
Chlorine
Distribution Network Overhead Tank, Pumping
Station & Piping
Overhead Tank, Pumping
Station & Piping
PRODUCT QUALITY INFORMATION:
Durgapur Projects Limited's product list include two major product, namely,
Power and Coke and two by-products- Coke Oven Gas and crude Coal Tar. The
company also takes care of both industrial and drinking water requirements for
which it maintains its captive water storage and treatment facilities.
DPL also produces crude coal tar having 2.5% Moisture and 1.16 Specific
Gravity.
It also produces fuel gas being supplied through a pipeline between Durgapur
and Bally in Howrah district. To feed the industrial requirement , DPL maintains
comfortable reserve of industrial water. The drinking water requirement of the
resident of the DPL township is also met from captive resereves.
COKE
Types Ash
(%)
VM
(%)
S (%) P (%) CSR CRI M40 M10
Foundry
grade(+80
mm)
12.5 0.8 0.5 0.025 65 24 85 6 to 7
BF grade(25-
65 mm)
12.5 0.8 0.5 0.03 65 22 86 6 to 7
Nut (15-25
mm)
12.8 0.9 0.55 0.03 - - - -
Pearl (6-12
mm)
13.5 1 0.6 0.032 - - - -
Breeze (0-6
mm)
13.5 1 0.6 0.032 - - - -
POWER
Power MU/Yr 2400
FUEL GAS
H2 55-58%
CH4 24-26%
Cn Hm 2.3-2.5%
CO 6-6.8%
CO2 3-4%
O2 0.4%
N2 3.0%
Gross CV (Kcal/NM3) 4500
TAR
Moist (%) 2.5
Specific Gravity 1.16
BI (%) 5.0
TI (%) 7
QI (%) 2.5
WATER
Installation Capacity
(MGD)
Current Status (MGD)
Industrial Water 21 18
Drinking Water 14 12
PRODUCTION FACILITY
Durgapur Projects Limited's total power generation capacity after the recent
renovation and upgradation, today stands at 401 megawatt (MW). It is engaged
in all the three functional areas of a power utility -Generation, Transmission and
Distribution. It generates and distributes power in an uninterrupted mode at grid
frequency. It has a cluster of six generation units of different capacities. The
largest unit is of 110 MW capacity followed by three of 77 MW each and two of
30 MW each. Two boilers are of B&W, UK make, two of B&W, USA make.
The remaining two boilers are of Mitsubishi and ABL. Except one of BHEL
make, all other five generators are supplied by Siemens. The coal input for all
the six units taken together is 6669 tonnes per day. The power tariff it offers to
all its end users, is reasonably cheaper than many other power utilities in the
country. The growth in power in the DPL command area is around 20% per
annum, the current demand being around120MW which is about 30% of the
total power generation capacity of the utility. It meets local demand through its
captive transmission and distribution networks.
DPL's unit wise power plant capacity, Coal input and Availability
Description Unit I Unit II Unit III Unit IV Unit VUnit
VITotal
Capacity(MW) 30 30 77 77 77 110 401
Coal Input MT/D 504 504 1260 1260 1293 1848 6669
Boiler MakeB&W,
UK
B&W,
UK
B&W,
USA
B&W,
USAMitsubishi ABL
Generator Make Siemens Siemens Siemens Siemens Siemens BHEL
Availability (%) 100 100 100 100 100 100
RENOVATION, MODERNISATION AND UPGRADATION OF
POWER UNITS :
The Units 1 to 5 Power Plant are being totally renovated and modernised
with a project cost of Rs. 363 crores carried out by M/S Powerplant
Improvement Ltd (a joint venture of Siemens AG and BHEL) to be
completed in plases by 31.3.3001. As a result the plant availability will be over
80% and PLF should increase upto 63.5% and there shall be availability of
substantial power without interruption.
QUALITY CONTROL AND ENVIRONMENT WING
Durgapur Projects Ltd continuously strives at not only maintaining but
improving the quality of its products further. Water, air and noise pollution is
controlled by sophisticated equipment and monitored closely. The process
control laboratories are fully equipped with sophisticated and computerized
equipments such CSR, CRI, Gas Chromatograph and Spectra Photometer.
The Environment Laboratory has state-of-the-art instruments such as
Bacteriological testing kits, Ambient air quality testing instruments, Stack
monitoring instrument, Gas analyzers, Noise meter and Noise Surrey Systems.
WELFARE ACTIVITIES:
Employees' welfare is one of the key focus areas of the Durgapur Projects
Limited. Besides a sprawling township, it maintains a Hospital and School.
Afforestation is a regular programme being undertaken by the authorities.The
township, spreading over 850 acres of land , has all the required facilities near
the river Damodar and Durgapur Barrage having more than 3500 residential
units, schools, market complex, clubs and public transport facilities. DPL meet
the water supply in the entire Durgapur by its water resources. Company also
take part in various social programme which get beneficial to the society. DPL
make good roads which is very essential for communication for both the
company itself and common people. Company contributed Rs.11,075,805 as
first installment and Rs.8.50 Lakhs as 2nd installment for improvement of
Dr.B.C.Roy Avenue and feder Road to DPL plant and township made by PWD.
HOSPITALS
DPL runs a 105-bed hospital, which has both indoor and outdoor patient
departments. The hospital is equipped with modern diagnostic facilities
including a Pathological Laboratory, X-Ray, ECG and Physiotherapy sections
and an Operation Theatre. The hospital has a number of Specialists associated
with different departments.
SPECIAL INCENTIVE FOR NEW INDUSTRIES :
The power tariff of DPL includes attraction for new industries based on Load
Factor, Power Factor, Payment through L/C etc. Some new residential units
have been set up in Durgapur and are availing such incentives.
GROWTH OF POWER DEMAND :
There has been inclusion of new industrial consumers with a contract
demand of about 30 MVA which is expected to increase by another about 50
MVA in near future.
EDUCATIONAL FACILITIES
To extend educational facilities to the wards of the DPL employees, it
maintains two Boys' High schools and two Girls' High schools ( controlled by
the West Bengal govt.). Besides, it has four Junior Basic Schools , one Nursery
& KG School and two Hindi Primary schools.
AFFORESTATION PROGRAMME
Afforestation is an important aspect of DPL's social welfare activities. The
company has been undertaking forestation programme on regular basis.
Plantation is done in the vacant land within the plant premises, Hospital and in
the township as well.
POLLUTION CONTROL
Actions were taken to supplement the strength of the Electrostatic
Precipitators through Flue Gas Conditioning by Ammonia, installation of Semi-
pulse Control system etc. The company has taken various other measures also
for improving the quality of Environment. However, DPL paid towards pollution
cost a sum of Rs.1.00 lakhs to West Bengal Pollution Control Board on July
2006.
ENVIRONMENTAL ACTIVITIES :
The waste water of Power Plant is treated in Ash Pond for sedimentation of
pollutants whereas the coke oven waste water containing toxic chemicals is
treated by root zone oxidation system and clear water meeting the prescribed
standard is discharged. For air pollution control ESPs have been
installed/being upgraded to maintain prescribed norms
AWARDS :
DPL Power Station has been given incentive award for reduced specific
secondary fuel consumption and auxiliary power consumption by the Ministry of
Power, Government of India on two occasions.
ACCOUNTING POLICIES OF COMPANY
1. BASIS OF ACCOUNTING:
The financial statements have been prepared ongoing concern concept under the
historical cost convention and in accordance with applicable accounting
standards.
2. REVENUE RECOGNITION:
a) Revenue from sale of Electricity and A.G.M.C (Annual Guaranteed
Minimum Charges) is recognized on the basis of bills raised for the energy
supplied to the consumers. The sales include fuel surcharge at the prevailing
Government approved rates.
b) Delay payment surcharge bills are raised only after receipt of overdue
bills.
c) Sales of Coke and by-products are accounted for on ex-works delivery
basis. The Company allows discount to customers on the basis of
predetermined / approved quantities lifted as fixed by the Management and the
amount is adjusted with gross sales. In some other cases agreements have been
executed for allowing performance bonus which has been recognized in the
accounts as expenses. The above practice has shown been discontinued with
effect from 09.08.2003:
d) Sales of Water (process and drinking) / Gas are accounted for on the basis of
bills raised for the quantum of water / gas supplied during the year.
e). Miscellaneous Income including sale of scrap, is recognized on delivery and /
or billing basis
f). Interest on bank deposits are recognized on accrual basis
g) Dividend received are accounted for on realization basis
h) Purchases are recognized at the point of transfer of goods! Lifted goods.
i) All items of expenses are considered on a accrual basis unless expressly stated
otherwise.
3. FIXED ASSETS & DEPRECIATION:
a) Land is valued at cost of acquisition and subsequent development thereon.
b) In the case of commissioned assets, where final settlement of bills itch
Contractors is yet to be effected, capitalization is made on the L1asis of
completion certificate issued by the competent officers subject to necessary
adjustment in the year of final settlement
c) To the extent that the funds are borrowed specifically for the purpose of
acquisition of qualifying asset, the amount of borrowing cost identified reduced
by any income on temporary investment of those borrowings is capitalized as
part of the cost of the qualifying asset. Capitalization of borrowing costs ceases
when substantially all the activities necessary for the preparation of the fixed
assets for its intended use are complete.
d) Fixed Assets other than Land and developments, acquired on or after 2nd
April, 1987 are depreciated on Straight Line Method at the rates prescribed in
Schedule-’XIV’ to the Companies Act, 1956 as amended other than those
mentioned in items (e) & (f) below.
e) Fixed Assets acquired prior to 2ndApril, 1987 are depreciated on Straight
Line Methods at the rates consistently followed under Sec.205 of Companies
Act, 1956.
f).The assets used at Power Plant are depreciated under Straight Line Method
(pro-rata basis) in accordance with the provisions of the Electricity Act, 2003, in
terms of relevant regulations published by the WBERC from time to time.
g) Cost of Meters is capitalized to the extent of Credit raised to the Consumers
for electricity in case of meters purchased by consumers.
4. CAPITAL WORK-IN-PROGRESS:
a) Transfer to Fixed Assets from Capital Work-in-Progress is made on the basis
of completion certificates issued by the competent officials.
b) Materials which are issued for construction works at sites are fully charged to
Capital Work-in- progress.
5. INVESTMENTS:
Long term investments in shares are reflected at carrying cost unless there is
diminution in value thereof otherwise than of a temporary nature.
6. INVENTORIES:
a) Stock of raw materials at lower of cost or net realizable value:
For the purpose of valuation of stock of coal FIFO method is applied. Cost
includes purchase price, freight and handling charges after adjustment of claims
lodged for grade variation, missing wagons, and for misdirected coal wagons at
estimated value.
b) Other Raw materials are valued on FIFO method.
c) Stock of finished goods:
i) Valuation is made at lower of cost or net realizable value.
ii) Stocks of Tar at net realizable value.
d) Imported stores in stock are valued at cost plus customs duty, landing and
clearing charges.
e) Closing Stock of Stores and Spare Parts etc. are valued at Weighted Average
Cost.Coal in ovens for processing Coke as at the end of the year is not taken into
consideration.
g) Respect of oil, the value of year end stock is derived after taking into
consideration the aggregate cost of opening stock and materials purchased
during the year and after adjustment of consumption and shortage.
h) Closing stocks of Coal, Coke, etc. are physically verified on Contour Survey
Method.
I) Stock of Printing & Stationery and Medicine are taken on the basis of year-
end physical verification at last purchase price.
7. LIABILITIES:
Liabilities for Purchases and other Expenses are considered in the accounts on
the basis of:
a) Goods Received Notes;
b) Receipts from the Warehousing Agencies;
c) Receipts of Certified Bills of contractors for goods or services as available;
d) Sanction of competent officials, as the case may be, received within 15th June
of the succeeding accounting year
e) Estimates in respect of security expenses, salaries to railway staff, misdirected
wagons etc.
8. CONSUMPTION OF STORES:
a) Consumption of Stores & Spares is considered on the basis of Stores Issue
Vouchers.
b) Chemicals consumed in Water Works are treated as Consumable Stores.
c) Loose tools are charged to Profit and Loss account on purchase.
9. CLAIMS OF THE COMPANY:
a) Claims with the Railways for missing/misdirected Wagons and those with
Transport contractors and suppliers are accounted for as and when the claims are
preferred.
b) Claims lodged with the Insurance and Customs Authorities are accounted for
on settlement/receipt basis.
10. RETIREMENT& EMPLOYEES’ BENEFIT:
Retirement liabilities are in the nature of defined contribution plan and defined
benefit plan.
DEFINED CONTRIBUTION PLAN:
Provident Fund and Employees’ Family Pension belong to this category where
the Enterprise has no other obligation to pay except for the annual contribution
made to concerned Trustees. These are accounted for in terms of accrual
concept.
DEFINED BENEFIT PLAN:
Gratuity and Leave Salary relate to this plan. Under such scheme, employees are
entitled to defined benefit which based on actuarial calculation under Projected
Unit Credit Method in due cognizance of various factors of uncertainties i.e.
death probability, inflationary consequences, premature retirement and other
unforeseen predicaments
11. PRIOR PERIOD ADJUSTMENT:
a) Adjustments which arise due to omissions and errors in booking income and
expenditure, non-adjustment of rebate in power bills, delay in raising/waiving
annual guarantee/surcharge bills etc., in the respective years are passed through
Prior Period Adjustment Account
b) Income & Expenditure of extra-ordinary nature are booked in the current year
as per pronouncement of the relevant accounting standard.
12.MISCELLANEOUS EXPENDITURE TO THE EXTENT NOT
WRITTEN OFF OR ADJUSTED
Share Issue Expenditure is amortized over a period of 10(ten) years.
13. FOREIGN EXCHANGE:
a) The foreign currency transactions are accounted for at the equivalent rupee
realized/incurred as per advice from bankers.
b) The foreign currency transactions remaining unsettled at the year end are
translated at the rates prevailing at the end of the year and the difference is duly
adjusted.
c) Fixed assets acquired from overseas sources out of the proceeds of external
sources of fund (supplier or Bank of financial institution) is capitalized by
exchange loss or gain till the date of bringing the assets in use. Subsequent to
bring the assets schedule, impact of exchange fluctuation towards its financial
source of acquisition is directly charged to revenue.
14. SEGMENT INFORMATION:
a) The Company’s primary segments consist of activities of Power Generation,
Manufacture of Coke & By-products and Processing of Raw Water.
b) Inter-segment transfers are valued at rates approved by the Board of Directors.
c) The company also maintains common service and central workshop units for
which apportionment of common expenses and depreciation to the various
segments have been done at predetermined rates as approved by the management.
d) Unallocated interest on Govt. Loans are apportioned to various segments on the
basis of gross average fixed assets.
15. IMPAIRMENT OF ASSETS:
The test of impairment loss of various assets is done by comparison of carrying cost
of the assets of Cash Generating Units (CGU), with their recoverable value being
the higher of net selling price during assessed life span of the CGU and the
discounted cash flows of future generation and adjustment carried out accordingly,
as per requirement ofAS-28.
16. CONTINGENT LIABILITIES:
Under circumstances of any present obligation arising as a result of a past event
with a probable outflow of resources to settle the obligation for which a reliable
estimate can be made, provision is made in the accounts towards such obligation.
WORKING CAPITAL : Working Capital is more a measure of cash flow than a ratio. The result of this calculation must be a positive number. It is calculated as shown below:
Working Capital = Total Current Assets – Total Current Liabilities Loans are often tied to minimum working capital requirements.
WORKING CAPITAL OF THE DPL :
YEAR 2008-09 2007-08 2006-07 2005-06 2004-05
Current Assets - Current Liabilities
= WORKING CAPITAL
662,22,94,745
- 4103314796
= 2518979949
693,63,42,65
7 - 4594160022
= 2342182635
6449024771 –3584261565
=2864763206
5826460873 -2168359089
=3658101784
4063974040 -2433141198
=1630832842
WorkingCapital = (C.A.- C.L.)
25189799492342182635
2864763206
3658101784
1630832842
0500000000
100000000015000000002000000000
2500000000300000000035000000004000000000
2007-08 2006-07 2005-06 2004-05 2003-04
YEAR
WO
RK
ING
CA
PIT
AL
WORKING CAPITAL
COMMENT: -
Working capital in The D.P.Ltd shows remarkable variation since 2003-04 to 2007-08. During 2003-04 to 2004-05 working capital increases due to a great expectation of bright future from a new power unit (7th unit) as well as less realization from debtors. The expectation yielded some positive result in subsequent years. But due to negative market constraints as well as worldwide problem of depression, the organization failed to creep out the benefit of plant modernization and establishment of new power unit. It can also be mentioned that the organization still trying to revive the project by utilizing its working capital which is very prominent from the above figures of 2005-06 to2007-08.
CURRENT RATIO CURRENT RATIO OF COCK-OVEN GROUP OF PLANTS:
YEAR 2007-08 2006-07 2005-06 2004-05 2003-04
Current Assets . Current Liabilities
= Current Ratio
24,6994,746.53 30,25,97,545.52 =0.82
58,80,03,135.18 35,95,49,243.80
=1.63
677744176 485888107
= 1.39
971185030 481453979
= 2.02
689057186 741298503
= 0.93
*Ideal Ratio = 2:1
0.82
1.631.39
2.02
0.93
0
0.5
1
1.5
2
2.5
3
2007-08
2006-07
2005-06
2004-05
2003-04
YEAR
CU
RR
EN
T R
AT
IO
CURRENT RATIO
COMMENT: - According to conventional rule, ideal current ratio is 2:1 or more is considered satisfactory. In this type ratio is higher, the greater the ability of the company to meet the financial obligations. With analyzing five year data of cock-oven group of plants. From fig. it can be seen that in the year 2003-04 the firm’s current ratio is not satisfactory. But in the year 2004-05 firm maintained the ideal ratio 2:1 which a firm requires to maintain the financial stability between the current assets & current liabilities. In the year 2005-06 again it is declined but in
the year 2006-07 it gradually improved the current ratio. But in the year 2007-08 current ratio is very low according to ideal ratio i.e. not good sign for the firm. Comparing with other years it can be seen that one year ratio is declining while other year ratio is increasing. This means firm’s current ratio is volatile and shows poor liquidity position of the firm. Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit may occur huge loss and huge capital block.
ACID TEST RATIOACID TEST RATIO OF COCK-OVEN GROUP OF PLANTS:
YEAR 2007-08 2006-07 2005-06 2004-05 2003-04
Quick Assets . Current Liabilities
= Acid Test Ratio
3,07,87,302.20 30,25,97,545.52 = 0.10
18,57,79,465.50 35,95,49,243.80
= 0.52
357165934 485888106
= 0.74
674809749 481453979
= 1.40
502582019 741298503
= 0.68
*QUICK ASSETS = Current Assets – (Inventories + Prepaid Expences )*Ideal Ratio = 1:1
0.1
0.520.74
1.4
0.68
0
0.5
1
1.5
2
2007-08
2006-07
2005-06
2004-05
2003-04
YEAR
AC
ID T
ES
T R
AT
IO
ACID TEST RATIO
COMMENT: -According to conventional rule, the Quick ratio is 1:1 or more is considered to be satisfactory. Because the quick assets are equal to current liabilities then the firm can easily meet all current obligations. An asset is liquid if it can be converted into cash immediately without a loss in value. Inventories are considered to be less liquid. With analyzing five-year data of cock-oven group of plants. Here C.O.G.P. quick ratio is 0.68 in 2003-04 which shows poor
liquidity position of the firm and much amount of exposures in inventories. In 2004–05 ratios has increased to 1.40 compared to its previous year 2003-04 which shows sound liquidity position and less amount of exposures in inventories. It means that unit has increased their investment in the inventories but the ratio is not creating any threat for company. While in the years 2005-06, 2006-07 & 2007-08 it again decreased to 0.74, 0.52 & 0.10 respectively and they are very low according to ideal ratio i.e. not good sign for the firm and which shows poor liquidity position of the firm .Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit may occur huge loss and huge capital block.
CURRENT RATIO
CURRENT RATIO OF POWER PLANT:
YEAR 2007-08 2006-07 2005-06 2004-05 2003-04
Current Assets . Current Liabilities
= Current Ratio
234,70,51,744.53 356,81,95,876.63 =0.66
185,12,69,432.05 401,05,10,730.30
=0.46
3111677337 2691743632
= 1.16
3267849961 1219936211
= 2.68
2362173597 1232896593
= 1.92
*Ideal Ratio = 2:1
0.660.46
1.16
2.68
1.92
0
0.5
1
1.5
2
2.5
3
2007-08
2006-07
2005-06
2004-05
2003-04
YEAR
CU
RR
EN
T R
AT
IO
CURRENT RATIO
COMMENT: -According to conventional rule, ideal current ratio is 2:1 or more is considered satisfactory. In this type ratio is higher, the greater the ability of the company to meet the financial obligations. With analyzing five year data of Power Plant. In 2003-04 current ratio of Power Plant is 1.92 that is nearest to Ideal ratio for the company. Comparing with five year it can be seen that in the year 2004-05 the ratio is 2.68 which is higher than the ideal ratio 2:1 which a firm requires to maintain the financial stability between the current assets & current liabilities and it means that the company maintaining a sound liquidity position. In 2005-06 the company’s current ratio is 1.16 that means the company is lack behind of ideal ratio. But in the year 2006-07 & 2007-08 current ratio is very low according to ideal ratio that means the company in extra liabilities i.e. not good sign for the firm. Because in these years company’s refunded the Loans & Advances which the company took in the previous years for establishing a new unit of Power Plant. Much amount of exposures in inventories and Bank
balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit also may occur huge loss and huge capital block.
ACID TEST RATIO
ACID TEST RATIO OF POWER PLANT:YEAR 2007-08 2006-07 2005-06 2004-05 2003-04
Quick Assets . Current Liabilities
= Acid Test Ratio
167,36,84,831 3568195876.63
= 0.47
1391558571.36 4010510730.30
= 0.35
2689976081 2691743632
= 0.99
2988461342 1219936211
= 2.45
2132478607 1232896593
= 1.73
*QUICK ASSETS = Current Assets – (Inventories + Prepaid Expences )*Ideal Ratio = 1:1
0.47 0.35
0.99
2.45
1.73
0
0.5
1
1.5
2
2.5
3
2007-08
2006-07
2005-06
2004-05
2003-04
YEAR
AC
ID T
ES
T R
AT
IO
ACID TEST RATIO
COMMENT: -According to conventional rule, the Quick ratio is 1:1 or more is considered to be satisfactory. Because the quick assets are equal to current liabilities then the firm can easily meet all current obligations. An asset is liquid if it can be converted into cash immediately without a loss in value. Inventories are considered to be less liquid. With analyzing five year data of Power Plant. In the years 2003-04 & 2004-05 the acid test ratio is 1.73 & 2.45 this indicates that the firm was in sound liquidity position i.e. good for the company. In the year 2005-06 the firm maintains ideal ratio i.e. satisfactory for the firm. But in recent financial years 2006-07 & 2007-08 quick ratio are very low according to ideal ratio i.e. not good sign for the firm. Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit also may occur huge loss and huge capital block.
CURRENT RATIOCURRENT RATIO OF WATER WORKS:
YEAR 2007-08 2006-07 2005-06 2004-05 2003-04
Current Assets . Current Liabilities
= Current Ratio
19,74,20,395.27 1,21,02,856.66
= 16.31
17,75,45,126.601,22,87,858.35
= 14.45
179290675 34904869
= 5.14
215390565 28520102
= 7.55
170374847 22171697
= 7.68
*Ideal Ratio = 2:1
16.3114.45
5.147.55 7.68
0
5
10
15
20
2007-08
2006-07
2005-06
2004-05
2003-04
YEAR
CU
RR
EN
T R
AT
IO
CURRENT RATIO
COMMENT: -
According to conventional rule, ideal current ratio is 2:1 or more is considered satisfactory. In this type ratio is higher, the greater the ability of the company to meet the financial obligations. With analyzing five year data of Water Works. Here the main reason for high current ratio is that the industry itself requires a higher reserve of current assets for its various activities. Comparing with five year it can be seen that in the year 2005-06 the ratio is declining it means that the company going with aggressive policy that is good for the company. While in the recent financial years 2006-07 & 2007-08 it again gradually increased to 14.45 & 16.31 respectively i.e. not a good sign for this unit . Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit may occur huge loss due to unnecessary block of huge capital.
.
ACID TEST RATIO
ACID TEST RATIO OF WATER WORKS:
YEAR 2007-08 2006-07 2005-06 2004-05 2003-04Quick Assets . Current Liabilities
= Acid Test Ratio
193117321.73 12102856.66
= 15.96
170661455.73 12287858.35
= 13.89
171965919 34904869
= 4.93
209297449 28520102
= 7.34
186575449 29450247
= 6.34*QUICK ASSETS = Current Assets – (Inventories + Prepaid Expences)*Ideal Ratio = 1:1
15.9613.89
4.937.34 6.34
0
4
8
12
16
20
2007-08
2006-07
2005-06
2004-05
2003-04
YEAR
AC
ID T
ES
T R
AT
IO
ACID TEST RATIO
COMMENT: -
According to conventional rule, the Quick ratio is 1:1 or more is considered to be satisfactory. Because the quick assets are equal to current liabilities then the firm can easily meet all current obligations. An asset is liquid if it can be converted into cash immediately without a loss in value. Inventories are considered to be less liquid. With analyzing five year data of Water Works. Comparing with ideal ratio it can be seen that acid test ratios is very high it means that Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit may occur huge loss due to unnecessary block of huge capital.
CURRENT RATIOCurrent Ratio of DPL:
YEAR2007-08 2006-07 2005-06 2004-05 2003-04
Current Assets Current Liabilities
= CURRENT RATIO
662,22,94,745 4103314796
= 1.61
693,63,42,657 4594160022
= 1.51
6449024771 3584261565
= 1.80
5826460873 2168359089
= 2.69
4063974040 2433141198
= 1.67*Ideal ratio= 2:1
1.61 1.511.8
2.69
1.67
0
0.5
1
1.5
2
2.5
3
2007-08
2006-07
2005-06
2004-05
2003-04
YEAR
CU
RR
EN
T R
AT
IO
CURRENT RATIO
COMMENT :-According to conventional rule, ideal current ratio is 2:1 or more is considered satisfactory. In this type ratio is higher, the greater the ability of the company to meet the financial obligations. With analyzing five year data of DPL .In 2003-04 current ratio of DPL is 1.67 that is below to the Ideal ratio for the company. Comparing with five year it can be seen that in the year 2004-05 the ratio is 2.69 which is higher than the ideal ratio 2:1 which a firm requires to maintain the financial stability between the current assets & current liabilities and it means that the company maintaining a sound liquidity position. In 2005-06 the company’s current ratio is declining it means that the company going with aggressive policy that is good for the company. In the year 2006-07 current ratio is 1.51 that means the company is lack behind of ideal ratio that means the company in extra liabilities i.e. not good sign for the firm. Because in these years company’s paid the Loan & Advances for which they took in the previous years for establishing a new Power Plant. But in 2007-08 it gradually improved the current ratio i.e. good sign for the firm. But comparisons’ with other years it can be seen that the one year ratio is declining and other year ratio is increasing. It means that the firm maintaining the ratio according to its requirement. This mean firm’s current ratio is volatile. In these years company’s refunded the Loans & Advances which the company took in the previous years for establishing a new unit of Power Plant. Much amount of exposures in inventories and Bank balance are found. Operational
Inefficiency in this project as a whole is found in different respect. In near future this unit may occur huge loss due to unnecessary block of huge capital.
ACID TEST RATIO
Acid Test ratio of DPL :YEAR 2007-08 2006-07 2005-06 2004-05 2003-04
Current Assets Current Liabilities
= Quick ratio
1897589455 4103314796
=0.46
1747999493 4594160022
=0.38
3219107934 3219107934
= 1
3872568540 2168359089
= 1.78
2821636075 2433141198
=1.16*QUICK ASSETS = Current Assets – (Inventories + Prepaid Expences)*Ideal Ratio = 1:1
1.38 1.31
1
1.78
1.16
0
0.5
1
1.5
2
2007-08 2006-07 2005-06 2004-05 2003-04
YEAR
AC
ID T
ES
T R
AT
IO
ACID TEST RATIO
COMMENT :-According to conventional rule, the Quick ratio is 1:1 or more is considered to be satisfactory. Because the quick assets are equal to current liabilities then the firm can easily meet all current obligations. An asset is liquid if it can be converted into cash immediately without a loss in value. Inventories are considered to be less liquid. With analyzing five year data of DPL. In the years 2003-04 & 2004-05 the acid test ratio is 1.16 & .1.78 which is higher than the ideal ratio 1:1 which a firm requires to maintain the financial stability between the Quick assets & Current liabilities and it means that the company maintaining a sound liquidity position and less amount of exposures in inventories. In 2005-06 the company’s quick ratio is declining it means that the company going with aggressive policy that is good for the company. In the year 2005-06 the firm maintains ideal ratio i.e. satisfactory for the firm. While in the recent financial years 2006-07 & 2007-08 it again gradually increased to 1.31 & 1.38 respectively Comparing with ideal ratio it can be seen that acid test ratios is very high it
means that Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this project as a whole is found in different respect. In near future this unit may occur huge loss due to unnecessary block of huge capital. Because in these years company’s refunded the Loans & Advances which the company took in the previous years for establishing a new unit of Power Plant.
CONCLUSION
Analyzing the above all facts and figures it can be said that the current ratio and also acid test ratio shows the company’s unstable position in respects of the working capital. At initial stage it depicts a picture showing that company can maintain a healthy situation. But in next phase of analysis it is found that the variation from year to year in respects of working capital may jeopardize its production as well as operational activity. Low demand of coke in open market may affect the operational efficiency of the coke producing unit . At the same time low generation in power producing unit with higher utilization of working capital may affect the power unit adversely. Both the adverse effect may certainly affect the water producing unit as a part of the total project at the same time. So the project as a whole may suffer a great loss due to the above reasons as analyzed in the former segment of this report.
Bibliography
The following books/sources are being referred during completion
of the project.
Financial data procedure by Mr. Satyajit Roy-Choudhury (Manager, Finance & Accounts Department, The Durgapur Projects Limited.) And Mr. Anup Ghoshal ( Asstt Manager, Welfare & Training, The Durgapur Projects Limited )
Financial Management- I.M.Pandey.
Financial Management & Policy-James C.Van Horne.
Working Capital Management-V.K.Bhalla.
Working Capital Management-Hrishikesh Bhattacharya.
Annual Accounts of the DPL.
Official Website of the DPL
Research Guide: Mr. Satyajit Roy Choudhury
RECOMMENDATION
Durgapur Project Limited (DPL) is one of the important industry in the progress
of WEST BENGAL. It is a state government concern.
I fell myself very fortunate to be a part of this concern through the project. After
going through the whole process of the company as well as the Working capital
management my opinion for DPL is that-
1. DPL should make a steady emphasis on gross profit& net profit.
Profitability ratio of DPL is needed to improve.
2. The components of current assets and liabilities should be
monitored for maintaining sound liquidity position.
3. An efficient inventory management system should be adopted by
introducing techniques like ABC analysis so that the inventory level
remains as per with the proper industrial standard.
4. As DPL increasing its capacity of producing power it also require
to increase the manpower so there could be made utmost utilization
of resources.
5. The liquidity position can appropriately be improved and a consistency in doing so can be maintained by introducing an efficient working capital management system.