CONTENT

Chapter No

Particulars

Page No.

I INTRODUCTION Need & importance of the study Theoretical framework Objectives Scope and limitations Source of data Period of study Methodology

I-15

II III

COMPANY PROFILE BUDGET AND SYSTEM IN NTPC BUDGETARY

16-31 32-46

IV V

DATA ANALYSIS INTERPRETATION

and

47-59 67-69

CONCLUSIONS & SUGGESTIONS

BIBLIOGRAPHY

LIST OF TABLES:
1

A)

TABLES S.No 1 2 3 4 5 6 7 8 9 10

Tables No. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10

Title of the table Physical parameters of 2006 & 2007 Physical parameters of 2007-2008 Physical parameters of 2008-2009 Budget Vs Actual for the year 2007-09 Operational Expenditure of 2006-2007 Revenue for the year 2006-2007 Operational Expenditure for the year 2007-08 Revenues During the year 2007-08 Operational Expenditure of 2008-09 Purchase Budget for the year 2007-08

Page No 41 42 43 44 45 46 47 48 49

50

11 12

3.11 3.12

Purchase Budget 51 for the year 2008-09 Revenues during 52 the year 2008-09

CHAPTER I

INTRODUCTION DEFINITION: Budget is a financial and /or quantitative statement, prepared and approved prior to a defined Period of time of the policy to be pursued during that period for the purpose of attaining a given objective. It may include income, expenditure and employment of capital.

Features: Financial and/or Quantitative Statement. Futuristic prepare and approved prior to a defined period of time. Goal Oriented for the purpose of attaining a given objective. Components Income, Expenditure and Employment of Capital.

OBJECTIVES OF THE STUDY: To analyze the conventional budgetary system in NTPC Ltd, Ramagundam. To evaluate and modify the current budgetary system with reference to the various types of budget. To evaluate the efficiency of budgetary control system in NTPC Ltd, Ramagundam. To offer appropriate suggestions and recommendations for improving the system. To prepare projected financial statements for NTPC Ltd, Ramagundam from the data taken from various budgets.

SCOPE OF THE STUDY: The budgetary control system in RSTPS considers generation and transmission line projects as independent cost centers. This system prepares the operation and management budget for each of the cost centers as per the requirements of the cost system. The budget for the investment center is the sum of the budgets of the cost centers. Separate budgets are prepared for revenue activities other than Operations and Research Development, Consultancy Contracts. To facilitate management, budgets are phased into monthly or quarterly targets .The actual performance is analyzed against this budgeted performance in order to take corrective remedial actions if variances any exist. The projection of internal resources over a period of 5 to 15 years and updating 5 years plans of the company is also done.

RESEARCH METHODOLOGY: The research methodology deals with how the study was carried out. This consists of several stages where in the process proceeds through various stages to finally attain the objective of the study. Hence, for any project the objective of the objective or aim of the project is to be known and the objective of the project is to be set. The organization in which the project is to be carried out is to be selected. The profile of the organization is collected from various journals, monthly magazines, from the employees and widely

THEORETICAL FRAME WORK BUDGBT, BUDGETARY CONTROL AND BUDGETING: A Budget is a quantitative expression of a plan of action relating to future period of time. It represents a written operational plan of management the period. It is always expressed in terms of money and quantity; it is the policy to be followed during the budget period for attainment of specified organizational objectives.

The essential features of a budget are Financial and quantitative statement of the 3 action plan Lay down period to the budget period during which I followed. Prepared for specified objectives. Based on managements policy. In the CIMA terminology, a budget is defined as follows. "Budget is a financial and/ or quantitative statement, prepared and approved prior to a defined [period of time, of the policy to be pursued during that period for the purpose of attaining a given objective,, The term budgetary control and budgeting are often used interchangeably to refer to a system of managerial control.

BUDGETARY CONTROL: Budgetary control implies the use of a comprehensive system of budgeting bid management in carrying out its functions like planning, coordination and control. It is system, which uses budgets for planning and controlling different activities of business.

This system involves: Division of organization of functional basis into different sections (each section is technically known as a budget center) Consolidation of separate budgets to present over all organizational objectives during the during the forth coming budget period. Comparison of actual level of performance against budgets comparison process is stretched far enough to declare either attainment of objective or basis of revision of plan of action and of action.

In the Charted Institute of Management Accountants (CIMA), London terminology: "Budgetary control is the establishment of budgets relating to responsibilities of executives to the requirement of a policy ,and the continuous comparison of actual with budgeted results ,either to secure by individual action the objective of that the policy or to provide a basis for version." Budgeting is a way of managing business and industry, it emphasizes that management should anticipate problems and difficulties. Advance decision should be taken for the course of activities during the fourth coming budget period. Budgetary control denotes a formal system based on the concept of budgeting.

BUDGET AND FORECASTS: A forecast is a prediction of what going to happen as result of a given set of circumstances, A budget is an approved plan of action expressed in figure relating to a specified period of time.

A fore cast is a mere assessment of future events and budget is a plan of action proposed to be adhered to during a specified future period.

A budget prepared on the forecast made for the budget period and thus a forecast is not all that a budget is. A forecast can be made just by anybody competent to make judgment.

A budget is an approved plan of action that is set only by seasoned executives of an organization. Forecast can be made of purposes other than budgeting .Economic forecast of general business conditions may not have anything to do with budgeting.

Budget are always made with the objects of planning, continues ever after budget preparation. A forecast includes projection of variables either controllable or non-controllable that are used in development of budges.
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OBJECTIVES OF BUDGETARY CONTROL: PLANNING: Planning is an important managerial function. It helps to decide in advance, what to do, how to do, when to do and who has to do it. Planning thus helps the managers to anticipate eventualities, prepare for contingencies for achieving the ultimate goals; budget preparation drives the managers to plan ahead. Managers express their operational plans for anticipating business conditions. Without a procedure of budgetary control, many operating managers will not fine the time to plan ahead. Thus budgeting is an important planning device. COMMUNICATION: The employees of an organization should know organizational aims, objectives of subunits (budgets centers) and effectively communicate this information to employees. Besides, budgets keep different section of the organization informed about the contribution of different subunits in the attainment of over all organizational objective.

COORDINATION: To coordinate is to harmonies all the activities of a company so as to facilitate its working and its success. Coordination will lead to following results. Each department will work in harmony with other. Each department will know the specific role that it has to play in the accomplishment of over all organizational objectives, and The sequential arrangement of activities of different departments is so governed that overlapping of activities and wastage of time and labor is avoided. Functional budgets. In other words, a budget will preclude the Production department from producing more than the sales department can sell.

MOTIVATION: if employees have actively participated in budget preparation and if they are convinced that their personal interests are closely associated with the success of organizational plan, budgets provide motivation in the form of goals to be achieved. The budgets will motives the workers, depends purely on how the workers have been mentally and physically involved with the process of budgeting. CONTROL: under the system of budgetary control, budget forecast it thoroughly discussed and reviewed to be finally approved as functional budgets. There after a lot of 'cuts' and 'adjustments' are made to make functional budgets fit in the organizational objectives. The budget formation is followed by a feedback system to pinpoint the extent of verification between actual level of performance and budgeted level of
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performance, thus, the inbuilt mechanism of the routine of budgetary control is bound to precipitate to an operational control. APPROVED PLAN: A master budget provides an approved summary of results to be expected from proposed plan of operations. It concerns all functions of organization and serves as a guide to executives and departmental heads responsible for various departmental objectives.

REQUIREMENTS OF A GOOD BUDGETING, SYSTEM: Following are the requirements of a good budgeting system Budgeting process should be backed and supported by the chief executive of an organizational The organizational goal should be quantified and clearly stated, these goals should be within the framework of organizations strategic and long-rang plans. The organizational goals must be divided into functional goals. The functional goals should not conflict with overall organizational objectives. All in the organization should mentally accept the exercise of budget preparation. The persons responsible for execution of budget should participate in the budget preparation. The budget should be realistic. It should represent that goals that are reasonable attainable. The budget should be realistic. It should represent goals that are reasonable attainable. The budget should cover all the phase of the organizations. The budget should be prepared promptly, comparing budget and actual results, i.e., there should be effective budget implementation.
9

 Clear-cut organizational lines should be established with appropriate delegation of responsible for effective budget implementation. The budgeting system should be based on information, communication.

ADVANTAGES OF BUDGETARY CONTROL: A Budget program forces the managers to plan ahead. It forces early consideration of basic policies. All members of top management participate in budget committee. For this reason, even planning at departmental level gets benefit or experience of seasonal executives. All functional heads are compelled to make plans in harmony with the plans of other departments. It develops an attitude of cost consciousness stimulates the effective use of resources, and creates environment of profit minuteness throughout the organization. It demands the most economical use of labors, materials, facilities and capital. It inculcates a habit of timely, careful, adequate consideration of all factors before reaching important decisions. The use of budgets removes clouds of uncertainties for lower levels of managements regarding basic policies and objectives. It facilitates periodic self- analysis of the organization. It aids in obtaining bank credit. Management is forced to give timely and adequate attention to the effect of changing business conditions

10

LIMITATIONS OF BUDGETARY CONTROL: Estimates are used as basis for budget plan and estimates are based mostly on available facts and best managerial judgment Since a lot of human element is involved in exercising managerial judgment, it is but natural to give some allowance in interpretation and utilization of estimated results; Budgeting based on inaccurate forecasts is useless as a yardstick for measuring the actual performance. The circumstances are constantly changing and therefore, budgets and budgetary techniques will not be useful, till they are continually adapted. In order that a system may be successful, adequate budget education should be imparted at least through the formative period .sufficient training programs should be arranged to make employees give positive response to budgetary activities. Execution of budgetary control will not automatically occur. A continuous budget consciousness throughout the organization is needed for achievement of this objective. Budgetary control cannot reduce the managerial function to a formula. It is only a managerial tool, which increases effectiveness of managerial control. The use of budget may lead to restricted use of resources. Budgets are often taken as limits. Efforts may, therefore, not be made to exceed the performance beyond the budgeted targets, even though it may be physically possible. Frequent changes may be called for in budgets due to fast changing industrial climate. It may be difficult for a company to keep pace with these fast changes, because revision of budgets is expensive exercise.

PRELIMINARIES CONTROL FOR OPERATION OF BUDGET Specification of organizational objective. Establishment of budget centers. Preparation of organizational chart. Linking of budget requirements with chart of accounts.
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 Establishment of budget committee Preparation of budget manual.

BUDGET PERIOD Charted Institute of Management Accountants (CIMA) defines budget period as "the period for which a budget is prepared and used, which may then be sub divided into control periods." Budgets having short durations are very costly, because revision of budget is an exercise requiring substantial expenditure and labor. Whether a budget is to be a long-termed or a short-term budget is to be decided primarily with reference to the fallowing two factors: Types of business and Amount of control required. KEY FACTOR It is also referred to as limiting factor, 'governing factor' and .principal factor'. Key factor is a factor whose influence must be first ascertained to ensure that functional budgets are reasonably capable of fulfillment. Usually this limiting factor is sales. A concern may not be able to sell as much as it can produce. But sometimes a concern can sell all it produces but limited due to the shortage of material, labor, plant capacity or capital.

FIXED BUDGET vs. FLEXIBLE BUDGET FIXED BUDGET: A fixed budget is used unaltered during the budget period. It is prepared for a particular activity level and it does not change with actual activity level being higher or lower than budgeting activity level. FLEXIBLE BUDGET: A flexible budget is a budget, which, by recognizing different cost behavior patterns, is designed to change as volume of output changes. It is designed to furnish budgeted cost at any level of activity actually attained. Flexible budget is also known as variable or sliding scale budget. MASTER BUDGET
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After all the functional budgets have been prepared, these are summarized in the form of a summary budget. The summary budget gives a forecast profit and loss account and forecast balance sheet for the budget period. The budget committee considers the summary budget and adjudges it as satisfactory or otherwise. If the budget committee does not find summary budget satisfactory, it issues directions for necessary changes. The proposed changes are incorporated and revised summary budget is prepared. The revised summary budget thus prepared presented to the Board of Directors for approval. After the board of Directors approves the summary budget, it is known as master budget. Thus, the master budget is the organization's formal plan of action for the forth-coming budget period. It is an integrated from of all functional budgets bearing approval of top management. The master budget is a complete financial presentation of the operating plans of the entire company for the budget period. It is the companyindividualized key to successful financial planning and control. ZERO-BASE/PRIORITY-BASE BUDGETING

Zero-base budgeting is a new technique of planning and decision-making. It is very challenging approach. Zero- base budgeting reverses the working process of traditional budgeting. traditional budgeting starts with previous year expenditure level as a base and then discussion is focused to determine the 'cuts' and 'additions' to be made in previous year spending. Zero-base budgeting is completely different to whether total budget is increasing or decreasing. What it does is to identify alternatives, so that if more money is required to be spent in one department, it can be saved in another area. CIMA has defined it as a method of budgeting where by all activities is revaluated each time a budget is set Main features of Zero-base budgeting are........... Manger of a decision unit has to completely justify shy there should be at all any budget allotment for his decision unit. This justification is to be made a fresh without making reference to previous level of spending in his department. Activities are identified in decision packages.
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 Decision packages are evaluated by systematic analysis. Under this approach there exists a frank relationship between superior and subordinates. Management agrees to fund for a specified service and manager of the decision unit clearly accept to deliver the service. Decision packages are linked with corporate objectives, which are clearly laid down. Available resources are directed towards alternatives in order of priority to ensure optimum result.

REPORT WRITING IN BUDGETARY CONTROL: A report is a document in which, a given problem is examined for the purpose of conveying information, putting forward ideas and sometimes making recommendations as the basis for actions. A report system should be tailored to give management the facts in the form that will be most easily understood. Common forms of reports are. Narrative Reports: These are descriptive and verbal reports. Statistical Reports: These reports rely on tables, numbers, graphs, charts, etc. Periodic Reports: Reports may be issued on regular scheduled basis, for example, daily weekly, monthly, quarterly and annually. Progress Reports: These reports include interim reports between the start and completion of a project. These reports are also called fallow-up reports. Special Reports: These reports are sent irregularly in response to a specification-routine request. Cost Reports: Cost accounting reports must be prepared and distributed to three levels of management, i.e.; top management, middle management and operating management. The greater is the degree of control required, the shorter should be the period of time covered in the report.

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ABBREVATIONS USED:

NTPC National Thermal Power Corporation RSTPS- Ramagundam Super Thermal Power Station MWs - Mega watts CEA- Central electricity Authority MUs Million Units MT Metric Tonns KL Kilo litres MOU Memorandum of Understanding PS/KWH Paisa per Kilo Watt Hour PLF Plant Load Factor APC Auxiliary Power Consumption O&M Operation & Maintenance

15

16

COMPANY PROFILE
VISION STATEMENT: To be the worlds largest and best power producer, powering Indiaa Growth CORE VALUE: BE COMMITED B: Business Ethics E: environmentally and economically sustainable C: Customer focus O: Organisational and professional pride M: Mutual respect and trust M: Motivating self and others I: Innovation and speed T: Total quality for excellence T: Transparent and Respected Organization E: Enterprising D: Devoted

MISSION: Develop and provide reliable power, related products and services at competitive prices, integrating multiple energy sources with innovative and eco-friendly technologies and contribute to society

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NTPC Limited is the largest thermal power generating company of India. A public sector company, it was incorporated in the year 1975 to accelerate power development in the country as a wholly owned company of the government of India. At present, Government of India holds 89.5% of the total equity shares of the company and FIIS, Domestic Banks, public and others hold the balance 10.57o.within a span of 3lyear, NTPC has emerged as a truly national power company, with power generating facilities in all major regions of the country. NTPC is the sixth largest thermal power generator in the world and the second most efficient utility in terms of capacity utilization based on data of 1998. NTPC'S core business is engineering, construction and operation of power generating plants. It also provides consultancy in the area of power plant p1 {tlri, constructions and power generation lo companies in India and abroad. As on date the installed capacity of NTPC is 30,644MW through its 15 coal based (22,895 MW)'7 gas based (3,955 MW) and 4 joint venture projects (1,0s4NIw). NTPC acquired 50%. equity other SAIL Power Supply Corporation Ltd.(SPSCL). This JV company operates the captive power plants of Durgapur (120MW) Rourkela (120NIW) and Bhilai (74 MW).NTPC also fraps ry.#% stake in Ratnagiri Gas & Power Private Limited (RGPPL) a joint venture company between NTPC ,GAIL, Indian Financial institutions and Maharashtra SEB Holding Co. Ltd.(The present capacity of RGPF'L is 740 MW ).

NTPC Limited (formerly National Thermal Power Corporation) (BSE: 532555, NSE: NTPC) is the largest state-owned power generating company in India. Forbes Global 2000 for 2009 ranked it 317th [3] in the world. It is an Indian public sector company listed on the Bombay Stock Exchange although at present the Government of India holds 84.5%(after divestment the stake by Indian government on 19october2009) of its equity. With a current generating capacity of 31134 MW, NTPC has embarked on plans to become a 75,000 MW company by 2017. It was founded on November 7, 1975. NTPC's core business is engineering, construction and operation of power generating plants and providing consultancy to power utilities in India and abroad. The total installed capacity of the company is 31134 MW (including JVs) with 15 coal based and 7 gas based stations, located across the country. In addition under JVs, 3 stations are coal based & another station uses naphtha/LNG as fuel. By 2017, the power generation portfolio is expected to have a diversified fuel mix with coal based capacity of around 53000 MW, 10000 MW through gas, 9000 MW through Hydro generation, about 2000 MW from nuclear sources and around 1000 MW from Renewable Energy Sources (RES). NTPC has adopted a
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multi-pronged growth strategy which includes capacity addition through green field projects, expansion of existing stations, joint ventures, subsidiaries and takeover of stations. NTPC has been operating its plants at high efficiency levels. Although the company has 18.79% of the total national capacity it contributes 28.60% of total power generation due to its focus on high efficiency. NTPCs share at 31 Mar 2001 of the total installed capacity of the country was 24.51% and it generated 29.68% of the power of the country in 2008-09. Every fourth home in India is lit by NTPC. 170.88BU of electricity was produced by its stations in the financial year 20052006. The Net Profit after Tax on March 31, 2006 was INR 58,202 million. Net Profit after Tax for the quarter ended June 30, 2006 was INR 15528 million, which is 18.65% more than for the same quarter in the previous financial year. 2005).
Diversified growth:
As per new corporate plan, NTPC plans to become a 75 GW company by the year 2017 and envisages to have an installed capacity of 128 GW by the year 2032 with a well diversified fuel mix comprising 56% coal, 16% gas, 11% nuclear energy, 9% renewable energy and 8% hydro power based capacity. As such, by the year 2032, 28% of NTPCs installed generating capacity will be based on carbon free energy sources. Further, the coal based capacity will increasingly be based on high-efficient-lowemission technologies such as Super-critical and Ultra-Super-critical. Along with this growth, NTPC will utilize a strategic mix of options to ensure fuel security for its fleet of power stations. Looking at the opportunities coming its way, due to changes in the business environment, NTPC made changes in its strategy and diversified in the business adjacencies along the energy value chain. In its pursuit of diversification NTPC has developed strategic alliances and joint ventures with leading national and international companies. NTPC has also made long strides in developing its Ash Utilization business.

Hydro Power: In order to give impetus to hydro power growth in the country and to have a balanced portfolio of power generation, NTPC entered hydro power business with the 800 MW Koldam hydro project in Himachal Pradesh. Two more projects have also been taken up in Uttarakhand. A wholly owned subsidiary, NTPC Hydro Ltd., is setting up hydro projects of capacities up to 250 MW.

Renewable Energy: In order to broad base its fuel mix NTPC has plan of capacity addition of about 1,000 MW through renewable resources by 2017. Nuclear Power: A Joint Venture Company "Anushakti Vidhyut Nigam Ltd." has been formed (with 51% stake of NPCIL and 49% stake of NTPC) for development of nuclear power projects in the country.

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Coal Mining: In a major backward integration move to create fuel security, NTPC has ventured into coal mining business with an aim to meet about 20% of its coal requirement from its captive mines by 2017. The Government of India has so far allotted 7 coal blocks to NTPC, including 2 blocks to be developed through joint venture route.

Power Trading: 'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly owned subsidiary was created for trading power leading to optimal utilization of NTPCs assets. It is the second largest power trading company in the country. In order to facilitate power trading in the country, National Power Exchange Ltd., a JV of NTPC, NHPC, PFC and TCS has been formed for operating a Power Exchange.

Ash Business: NTPC has focused on the utilization of ash generated by its power stations to convert the challenge of ash disposal into an opportunity. Ash is being used as a raw material input by cement companies and brick manufacturers. NVVN is engaged in the business of Fly Ash export and sale to domestic customers. Joint ventures with cement companies are being planned to set up cement grinding units in the vicinity of NTPC stations.

Power Distribution: NTPC Electric Supply Company Ltd. (NESCL), a wholly owned subsidiary of NTPC, was set up for distribution of power. NESCL is actively engaged in Rajiv Gandhi Gramin Vidyutikaran Yojanaprogramme for rural electrification.

Equipment Manufacturing: Enormous growth in power sector necessitates augmentation of power equipment manufacturing capacity. NTPC has formed JVs with BHEL and Bharat Forge Ltd. for power plant equipment manufacturing. NTPC has also acquired stake in Transformers and Electricals Kerala Ltd. (TELK) for manufacturing and repair of transformers.

Business Development

NTPC, with a rich experience of engineering, construction and operation of around 35,000 MW of thermal generating capacity, is the largest and one of the most efficient power companies in India, having operations that match the global standards. Commensurate with our countrys growth challenges, NTPC has embarked upon an ambitious plan to attain a total installed capacity of 75,000 MW by 2017. Towards this end, NTPC has adopted a multipronged strategy such as Greenfield Projects, Brownfield Projects, Joint Venture and Acquisition route. Apart from this, NTPC has also adopted the Diversification Strategy in related business areas, such as, Services, Coal Mining, Power Trading, Power Exchange, Manufacturing to ensure robustness and growth of the company. JOINT VENTURE (JV) COMPANIES The following joint venture companies have been formed so far:

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JVs FOR CAPACITY ADDITION NTPC-SAIL POWER COMPANY (PVT) LTD (NSPCL) 1. A Joint Venture Company of NTPC and SAIL (50: 50 equity) was incorporated on 08.02.1999. 2. BESCL (Bhilai Electric Supply Co. Pvt Ltd), another JV Co. of NTPC and SAIL with 50:50 equity participation), has merged with NSPCL w.e.f 2nd August 2006. To own and operate captive power plants for SAILs steel manufacturing facilities located at Durgapur, Rourkela and Bhilai. To undertake expansion of Bhilai plants.

OBJECTIVE

NTPC TAMILNADU ENERGY COMPANY LIMITED This JV was incorporated on 23.05.2003 with Tamil Nadu Electricity Board, a State run Electricity Board in the State of Tamil Nadu engaged in generation, transmission and distribution of electricity. To set up a 1500 MW coal based power station at vallur, Ennore in Tamil Nadu OBJECTIVE utilising the existing infrastructure facility at Ennore and supply power mainly to Tamil Nadu and the states of Kerala, Karnataka and Pondicherry. NTPC: 50% TNEB : 50%

PROMOTERS' EQUITY

ARAVALI POWER COMPANY PRIVATE LTD The JV Company was Incorporated on 21.12.2006 with, Indraprastha Power Generation Company Ltd. (IPGCL) and Haryana Power Generation Company Ltd (HPGCL). To set up a coal-based power station of 1500MW capacity in Distt. Jhajjar, OBJECTIVE Haryana, in joint venture with IPGCL and HPGCL to supply power to Delhi and Haryana. PROMOTERS' EQUITY NTPC-50%, IPGCL-25%, HPGCL-25%

MEJA URJA NIGAM PRIVATE LIMITED

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The Joint Venture Company has been incorporated on 02.04.2008 with UPRVUNL. OBJECTIVE To set up a 2 X 660MW Thermal Power Plant at Meja, Distt. Allahabad in UP. NTPC: 50% UPRVUNL : 50%

PROMOTERS' EQUITY

RATNAGIRI GAS & POWER PVT. LIMITED This Joint Venture Company was Incorporated on 08.07.2005 To own and operate the assets of the erstwhile Dhabol Power Company ( 1967 MW) and 5 MMTPA LNG Re-gasification Terminal NTPC: 30.17% PROMOTERS' EQUITY GAIL: 30.17% IFIs: 21.77% (ICICI: 10.65%, SBI: 7.14%, CANARA BANK: 1.87%) MSEB HOLDING CO. LTD.: 17.89% Entire Power Block (1967 MW) of the Gas Power project is under commercial operation. Domestic gas from KG basin has been made available by MoPNG for long term requirement for operation of Gas Power Plant.

OBJECTIVE

NABINAGAR POWER GENERATING CO. PVT. LTD. The JV Company was Incorporated on 09.09.2008 with Bihar State Electricity Board To set up 3x660 MW Thermal Power Plant at New Nabinagar, Bihar and operation & maintenance thereof NTPC: 50% BSEB: 50%

OBJECTIVE

PROMOTERS' EQUITY

JVS FOR SERVICES NTPC -ALSTOM POWER SERVICES PVT. LTD. (NASL)

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The JV Company was incorporated on 27.09.1999 and formerly known as NTPC-ABB ALSTOM POWER SERVICES PVT. LTD) Undertake Renovation & Modernisation of power stations in India and other SAARC countries NTPC: 50% , ALSTOM Power Generation AG : 50%

OBJECTIVE

PROMOTERS' EQUITY

Company is engaged in undertaking works of Renovation & Modernization of Power Plants for Power plant life extension, performance optimization and improvement of availability & efficiency.

UTILITY POWER TECH LTD This JV company incorporated on 23.11.1995 has been promoted with Reliance Infrastructure Limited (formerly BSES Limited), a private sector Indian power company. To undertake project construction, erection and supervision in power sector and other sectors in India and abroad NTPC: 50% Reliance Infrastructure Ltd.: 50%

OBJECTIVE

PROMOTERS' EQUITY

NATIONAL HIGH POWER TEST LABORATORY PVT. LTD. (NHPTL) This JV was incorporated along with NHPC, PGCIL and DVC on 22.05.2009 To set up an Online High Power Test Laboratory for short circuit testing facility of electrical equipments. NTPC: 25% PROMOTERS' EQUITY NHPC: 25% PGCIL: 25% DVC: 25%

OBJECTIVE

JVs FOR POWER TRADING &POWER EXCHANGE

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NATIONAL POWER EXCHANGE LTD.(NPEX) This Joint venture Company was incorporated on 11.12.2008 along with NHPC, PFC and TCS To facilitate nation - wide trading of all forms of contract for buying and OBJECTIVE selling of all forms of electrical energy for clearing and settlement of trade in a transparent, fair and open manner NTPC: 16.67% NHPC :16.67% PFC: 16.66% PROMOTERS' EQUITY TCS: 19.04% BSE: 16.66 % IFCI: 5.72 % MEENAKSHI: 4.77 % DPSC: 3.81 %

JVs FOR COAL MINING NTPC SCCL GLOBAL VENTURES PRIVATE LTD

The JV Company with Singareni Coalieries Company Limited (SCCL) was incorporated on 31.07.2007
OBJECTIVE To jointly undertake Development and O & M of Coal Blocks(s) and Integrated Coal based Power Projects in India and overseas. NTPC - 50 % SCCL 50 %

Promoters EQUITY

INTERNATIONAL COAL VENTURES PVT. LIMITED (ICVL) The JV Company was incorporated on 20.05.2009 For procurement of metallurgical coking coal and thermal coal from overseas & acquisition of coal assets abroad NTPC: 14.28% NMDC: 14.28%

OBJECTIVE

PROMOTERS' EQUITY

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RINL: 14.28% CIL: 28.58% SAIL: 28.58%

JVs FOR MANUFACTURING & SUPPLY OF EQUIPMENT NTPC-BHEL POWER PROJECTS PVT.LTD The Joint Venture Company was incorporated on 28.04.2008 with BHEL To explore, secure and execute EPC contracts for Power plants and other OBJECTIVE Infrastructure projects in India and abroad. To engage in manufacturing and supply of equipments for power plants and other infrastructure projects in India and abroad. NTPC: 50% BHEL : 50%

Promoters EQUITY

BF NTPCENERGY SYSTEM LIMITED. This JV Company with Bharat Forge Limited (BF) was incorporated on 19.06.2008 To establish a facility for manufacturing of castings, forgings, fittings and High OBJECTIVE Pressure piping, required for Power and other industries, Balance of Plant (BOP) equipment for the power sector etc. NTPC: 49% BF : 51%

PROMOTERS' EQUITY

NTPC-TELK

The shares of Transformers & Electricals Kerala Ltd. (TELK) was bought by NTPC on 19.12. 2009
OBJECTIVE For Manufacturing and repair of Transformers NTPC: 44.6% Govt. of Kerala: 54.56%

PROMOTERS' EQUITY

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Public: 0.84%

ENERGY EFFICIENCY SERVICES LTD. (EESL) This JV was incorporated on 10.12.2009 amongst NTPC, PFC, POWERGRID and REC with equal equity participation. To carry out and promote the business of Energy Efficiency, Energy OBJECTIVE Conservation and Climate Change including manufacture and supply of energy efficiency services and products. NTPC: 25% PROMOTERS' EQUITY PFC: 25% POWERGRID: 25% REC: 25%

CIL-NTPC URJA PRIVATE LIMITED (CNUPL) This JV was incorporated on 27.04.2010 with Coal India Limited (CIL) in New Delhi for incorporation of Joint Venture Company with 50:50 equity participation Development of Brahmini & Chichro Patsimal coal mine blocks for meeting coal requirement of Farakka and Kahalgaon expansion projects of NTPC. NTPC: 50% CIL: 50%

OBJECTIVE

PROMOTERS' EQUITY

ANUSHAKTI VIDHYUT NIGAM LIMITED (ASHVINI) This JV was incorporated on 27.01.2011 with Nuclear Power Corporation of India Ltd (NPCIL) for entering into the business of nuclear power generation OBJECTIVE Setting up of nuclear power projects NPCIL: 51% NTPC: 49%

PROMOTERS' EQUITY

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PROPOSED JOINT VENTURES /MOUs/ AGREEMENTs Joint Venture Agreement has been signed with Asian Development Bank (ADB) and Kyuden International Corporation (Kyushu) on 24.11.2010 for forming a JV Company to develop projects and establish, over a period of three years, a portfolio of about 500 MW of Renewable Power Generation in India.

ACQUISITION Business development through Acquisition serves both NTPC's own commercial interest as well as the interest of the Indian economy. Taking over, being a part of the acquisition process, is also an opportunity for NTPC to add to its power generation capacity at a very low gestation period. NTPC has, over the years, acquired the following power stations belonging to other utilities/SEBs and has turned around each of them using its corporate abilities.
POWER STATIONS TAKEN OVER YEAR ORIGINAL OWNER

2x210 MW FEROZE GANDHI UNCHAHAR THERMAL POWER STATION 4x60 MW +2x110 MW TALCHER THERMAL POWER STATION Orissa State Electricity Board

1991

UP Rajya Vidyut Utpadan Nigam Limited

1995 Orissa State Electricity Board

4x110 MW TANDA THERMAL POWER STATION

2000

UP Rajya Vidyut Utpadan Nigam Limited

705MW Badarpur Thermal Power Station Central Electricity Authority DIVERSIFICATION

2006 Central Electricity Authority

To broad-base the business and also to ensure growth, diversification in the areas related to NTPC's core business of power generation such as Hydro power, Distribution, Trading, Coal mining, LNG etc. have been identified as priority areas. A.BACKWARD INTEGRATION- COAL MINING COAL MINING The policy changes in coal sector provides an opportunity to NTPC to enter captive coal mining business. Production is expected by 2012 in one coal block already allotted (Pakri Barwadih in the state of Jharkhand). Five more blocks (~40MTPA) have been allotted to NTPC, including two in JV with

27

CIL. In addition to development of its own domestic coal mines NTPC is exploring various other options including acquisition of stake in coal mines abroad for sourcing of thermal coal for addressing fuel security concerns.

THE OPERATIONS

28

RSTPS At A GLANCE Approved Capacity ' Installed Capacity 2600 Mw Stage I: 3X 200 MW Stage II: 3X 500 MW Stage III: lX 500 MW Location Coal Source Karimnagar,Andhra Pradesh (i) South Godavari Coat Fields of Singareni Collieries for Stage I&II (ii) Korba Coal Fields of SECL for stage III (iii) Singareni colleries Water Source Sri R(am Sager bam on Godavari River, D83 Canal from pochampad Reservoir" Pondicherry, Goa, Kerala ,Karnataka, Tamil Nadu, AP,PGCIL(for HVDC) Rs.2059.22 Cr Stage I &II Rs.1818.46 Cr Stage III International Assistance IDA IBRD loan OPEC KI'W EXIM Bank, Japan. SFD

Beneficiary States

Approved Investment

29

NTPC RAMAGUNDAM POLICY

NTPC Ramagundam shall achieve performance excellence the best every time, to the satisfaction of over state holders. We are committed to over vision, mission, core values safely and statutory as well as corporate requirements. We shall have the project environment on prevention of pollution and continually improve in areas of Fuel conservation. Ash utilization Waste minimization Effluents circulation Afforesting Environmental awareness In this endeavor we get to continually improve over team work knowledge skills and competencies.

THE ONSET OF RSTPS

NTPC Ramagundam was the 3'd in the series of super thermal stations set up by the corporation. Late Shri Morarji Desai, then Prime Minister of India, laid the foundations stone for this station on 14 Nov 1978.

The station is situated on the bank of river Godavari in Karimnagar District of Andhra Pradesh across the coal pithead of Singereni Collieries Company Limited. The station has an installed capacity of 2100 MW is the backbone of the southern grid.
30

Within a decade the station constructed and commissioned 3 units of 200MW each and 3 units of 500 MW each capacity units. NTPC Ramagundam has the rate distinction of being the only station in tl-re country to commission all the 6 units ahead of a feat will remain a record for a long time.

The station has earned the name as the beacon Light of Southern States. The station has excelled in all facets Operations, namely generation, plant load Factor, Environment management, safely Human resource Development.

31

CHAPTER III BUDGET & BUDGETERY SYSTEM IN NTPC

32

BUDGET AND BUDGETARY SYSTEM

IN NTPC-RSTPS

The budgeting process is used in the performance budgeting for the construction of phase, which includes pre-commissioning activities. Besides meeting the essential requirements of managerial control, the budget provides the basis for procurement of funds from Government in the form of equity and loan. The budgeting exercise also covers the long term capital budgeting, which is presented in the form of annual plan.

The NTPC-RSTPS has budgeting process in two stages. One is the construction or capital expenditure budget and another is operating maintenance budget. The capital expenditure budget and another is operating maintenance budget. The capital expenditure budget shows the list of capital projects selected for investment along with their estimated costs. Operating & Maintenance budget refers to the repairs & maintenance budgets. The special budgets are rarely used in an organization like long-term budgets, research& development budget and budget for consultancy

OBJECTIVES OF THE BUDGETARY SYSTEM:

To prepare annual budgets in such a manner those managers at various levels in the organization carry out periodical exercise in respect of each contact or responsibility center for physical planning and matching resources broke up into monthly targets or cash flows: To introduce and operate responsible for achievement of specified targets with resources allocated for the purpose. To bring about effective co-ordination of all activities of the organization of all activities of the organization and to gear up service divisions to meet effectively the requirements of project.

33

 To identify and account for cost over runs and to analyses contributory factors into deviations and cost escalations. To control budgets with reference to standards of performance ascertain various of actual expenditure over budget provision and analyses the reasons.

BUDGET PERIOD AND PHASING:

The budget period or annual budgets should correspond with the financial year. In October every year, the budget should be drawn up for the ensuring financial year in the form of budget estimates financial year in the form of Revised Estimates (R.E.)..In addition , the budgets are to be revised on monthly basis by project review teams, in the light of actual expenditure and projections in the budget period. Budgets should indicate monthly phasing of expenditure and targets for the first and quarterly phasing for the second half of the year. At the time of review of the budget estimates to frame revised estimates, the quarterly phasing should be broken up into monthly phasing.

While drawing up the annual budget in October every year, the long term capital budget for ongoing and new schemes should be formulated as a part of exercise for preparation of annual plan. The long term capital budget should indicate for a period of six years following the budget period project wise annual phasing of the capital expenditure and physical schedules resource based networks, internal generate on of resources and net budgetary support from government.

BUDGET HEADS:

For uniform accounting, it is essential that costs are collected for each system of the station though this may involve splitting up payments against contracts which embrace more than one system. Allocation of the cost as system wise affords a sound basis for cost accounting, inter-firm comparisons and provides valuable inputs to databank. Budget provisions are related to project estimates and monitoring of actual expenditure. Power and control cables belong to electrical system where as control cables for part control and instrumentation system.
34

Station piping, includes pipelines, for ash water mains, compressed air system and civil works piping. There are auxiliary pumps for water treatment plant and civil works system. If there are any contracts not covered in the budget heads provision for such contracts should be shown against the appropriate system head by adding code number.

TYPES OF BUDGETS IN NTPC: According to the nature, expenditure, budgets are classified under: Direct capital outlay on works Technical consultancy Incidental expenditure during construction Employee cost

Other establishment expenses: Training and recruitment Preliminary expenses Miscellaneous brought-out assets Cash budget Township budget Foreign exchanges budget

35

Brief explanation to the nature of expenditure included in each budget is indicated below:

INCIDENTAL EXPENDITURE DURING CONSTRUCTION PERSONNEL PAYMENT:

These comprises of salaries, wages, allowances, contribution to PF and other funds and welfare expenses such as LIC, Medical reimbursement, canteen subsidy etc., any provision for areas of salary/D.A. OFFICE AND OTHER EXPENSES: Expenses incidental to construction and capital works not traceable directly to incidental expenditure, during contribution equipments, vehicles running expenses, office rent, and cost of drawings, traveling expenses, printing & stationary, communication expenses, advertisement for tenders etc., are the major items in this category. TRAINING RECRUITMENT & OTHER DIFFERED REVENUE EXPENDITURE: The first part of budget consists of expenses for training executives, and nonexecutives trainees, including stipends, faculty fees, course material, traveling allowances, courses. The second part consists of expenses for recruitment such as advertisement for recruitment, interview expenses, T.A. to candidate etc., the third part combines preliminary expenses including share registration fees and research and development expenses. MISCELLANEOUS BOUGHT OUT PASSES: Vehicles, furniture and fixtures equipments, hospital and medical and equipment, miscellaneous assesses township figure in this budget. REVIEW PROJECT BUDGET: MONTHLY REVIEW: At monthly intervals, the budgets should be reviewed by project review committee (PRC). Project budget should report actual expenditure against budget heads. Work heads corporate budget by the 7th of the month following the reporting month. The monthly review should be examined by project review team
36

(PRT), who should record reasons for major variations and action proposed for expending works in the minutes of the meetings, reasons for any variations in the case of budget heads exceeding 10% of the budget estimates/revised estimates or whichever is lower Rs.5lakhs should be analyzed and reported upon.

QUARTERLY REVIEW: PRT should conduct a quarterly budget review with a view to projecting anticipated expenditure during the year against approved budget estimates/revised estimates. As time in essence of such review, only a quick estimate of anticipated expenditure for individual budget heads involving provisions exceeding Rs.50 lakhs in each case should be made and reported upon in minutes of PRT. For this purpose, Project budget should furnish all the relevant data to general manager (project) and planning and systems by the 10 th of the month following the quarter project budget committee should review the actual expenditure and access anticipated expenditure contract coordination/engineers-in-charge. The assessments of anticipated expenditure should be furnished by the project budget committee to general Manager (project) by the 30th of the month following the quarter under review. BUDGET OF SERVICE DIVISION/CORPORATE BUDGETS: Corporate budget committee should conduct a review of budgets of service and corporate divisions at quarterly intervals. For this purpose, corporate accounts should report actual expenditure up to the end of the quarter by 10th of the month following quarter to corporate budget and budget coordination of the remaining period of the year. Corporate budget should be sent to corporate budget committee (CBC), which should put up a consolidated report division wise and project wise by the 15th of May, August, November and February every year.

OBJECTIVES OF THE CURRENT BUDGETARY CONTROL SYSTEM IN NTPC-RSTPS:

The current budgetary control system operating phase has been compiled to achieve the following objectives. To control actual performance with reference, to standards / norms adopted in the budget, ascertain the deviations analyze and establish the reasons.

37

 To identify constrains in generation and timely action for estimation of constraints. To monitor the generation of internal resources so as to ensure availability of adequate funds. To prepare revenue budget so as to forecasting the periodical profitability of the organization. To develop standards / norms of performance in the various areas of operation and maintenance based on the experience. To involve managers at various in the process of developing performance budget so as to introduce the concept of responsibility accounting and participate management. To ensure effective co-ordinate planning of all activities so that all the inputs and services necessary for achieving the physical targets are available at appropriate time. To create cost consciousness among the managers responsible for decision making. To provide data regarding operational norms and costs for the purpose of formulating tariff. To provide data a basis for assessment of working capital requirements. To control the working capital particularly book debts, spares and other items of inventory. To improve profitability and internal resources generation.

SCOPE OF THE PERFORMANCE BUDGET:

The budget for operation and maintenance activities will be called performance budget operation. This, in effect, means that all financial targets in the budget will be based on performance targets in physical terms.

The current budgetary control system operation phase envisages generation and transmission line projects as independent investment centers. It becomes
38

applicable to a project in the year in which it plans to commercialize its first generation unit. However, the budgeting for expenses (net of revenue) from the date of synchronization to the date of commercial generation (i.e. during trail run ) are to be taken in case of capital budget of the respective project. Similarly, in the case of transmission line project, the system becomes applicable from the year in which it plans to commission its first line along with the sub-station or the date commercial generation of the first unit of generating project, with which line is associated, whichever is later. For subsequent lines, O&M will be prepared from the date of energization. The system envisages the preparation of operation and maintenance budget for each of the cost centers as per the requirements of costing systems (i.e. operation, maintenance and services cast center).

The sum total budgets of the cost centers will be the budget for the investment center. However, the budget of the profit center will be worked out by apportioning the revenue and cost of various cost centers to individuals profit centers based on specific norms.

The performance budget operation will consists of the following budgets along with the supporting schedules:

Budget balance sheet Budget profit and loss account Cash budget.

In addition, separate budget for revenue activities other than operation for research and development consultancy contracts etc.

The expenses in the respect of developmental expenditure for improvement, addition, replacement, renewals, balancing facilities etc., are of capital nature and will be budget for in the construction budget of budgetary control systemconstruction phase.

39

To facilitate management control the system also envisages, phasing of these budget into monthly/quarterly targets. The actual performance then will be reason for variation and it will be analyzed and established for taking corrective actions. The scope also includes projection of internal resources for a period ranging from 5 to 15 years and updating of 5 years plan as well as perspective plan of the company.

STAGES IN THE FORMULATION OF PERFORMANCE BUDGET:

The system provides for two stage formulation for performance budget operation, the stages are given below: INITIAL PROPOSAL:

In the initial proposal, the project is required to indicate yearly targets. In the addition, to furnishing basic information like synchronization and commercial generation dates.

Constraints on coal operation at less than the designed specification, calorific value of coal and oil, material consumption value in Rs.5 lakhs or more, planned shut down for a maintenance and overhauling and norms for various operating parameters provided for design specification and in the tariff agreements to the corporate budget committee.

After the initial proposal is planned to be submitted after considering these factors and keeping in view the perspective plan, the organization fixes the norms for various operating parameters. These targets and norms are then communicated to all stations and transmission line offices in the last week of July to be used for formulating detailed budget in the form of final proposal. FINAL PROPOSAL: The final proposal will consists of detailed budgets in the form of budgeted balance sheet. Budget profit & loss account and cash budget along with supporting schedules for each of the investment/cost center. This final proposal needs to be submitted to corporate center within 3 weeks of receiving approval for initial proposal.
40

The final proposal, after approval by board, will become the basis of monitoring performance for cost centers and investment centers.

The frequency & extent review and monitoring will be as under:

i)

The monitoring of actual performance against budgeted targets for investment center/ profit center on monthly basis and for cost centers on quarterly for remedial/corrective action. The review of performance budget on quarterly basis to assess the anticipated profitability.

ii)

The first step in the preparation of budget, O & M is the formulation of maintenance and overhauling schedules for boiler, then considering the grid demand, the availability of inputs and stations problems, if any. The utilization of capacity will be worked out on monthly basis for the budget period. The gross generation targets can be worked accordingly.

If the new units are included in the scope of budgeting, the dates for commercial generation will also need to be indicated operation should not be more than three months for a 200MW unit and four months in case of 500MW unit. If more time is provided between the date commissioning and commercial generation, justification will need to be furnished.

NET GENERATION:

The sales value will be determined from quantum of net generation (i.e. gross generation-auxiliary consumption).

41

AUXILIARY CONSUMPTION/CONSUMPTION BY UTILITIES:

The power consumption by each of the cost centers for individuals unit auxiliaries, station auxiliaries as well as transformer losses are to be estimated separately based on designed specifications and added in order to workout total auxiliary consumption rather than fixing a overall percentage. Similarly, consumption by utilities will also need to be indicated by cost centers/departments like township and construction (Electrical erection) departments. This will be valued at cost net generation to arrive the sales values for own consumption.

The consumption of power by unit auxiliaries will be available unit-wise. The consumption of power by station auxiliaries (common) and by utilities will need to be worked consumption by station auxiliaries and utilities are to be prorated to individuals units in the ration of gross generation. ENERGY SENT OUT & SALES: By subtracting the consumption by utilities from net generation, energy sent out can be worked out which will determine the sales value based on the tariff rates.

If a new station is entering O&M phase during the budget period, tariff rate will be provided by corporate commercial divisions.

Similarly, sales revenue for transmission charges will be worked on the basis of either to be indicated along with a brief note on the nature of contract, terms of payments, time schedule and progress of work etc.

HEAT RATE: Fixation of heat rate target of the budget period will be very crucial decision as far as the profitability of generating station is concerned. The definition of heat rate will be same as given in the operation performance monitoring system (OMS) issued by corporate.

42

Heat rate is dependent on MW load, quality of inputs, makes up water consumption, combustion performance of condenser & mulls and temperature and pressure at various points in the system. Therefore, all these factors must be considered before fixing targets for heat rate.

For budgeting purposes Station Heat Rate will be as sum total of heat per unit rate or fixed charge per month depending upon the terms of tariff agreement.

ELECTRICITY DUTY: The payment of electricity duty is to be worked out from gross generation/ net generation/ energy sent out as applicable to individual stations and states. The same amount should be shown as recovery from electricity boards on the revenue side.

OTHER REVENUES: Normally, investment centers will not have any income from consultancy because revenue for all major consultancy contracts etc is to be reckoned against corporate center as per separate profit and loss account based on instructions. However, if any consultancy jobs are under taken by investment centers, the income from such contracts will need from coal (Kcal/kg) or oil (Kcal/Kg) or (Kcal/Kg) to generate one unit of electrical to energy. The heat rate input of coal for this purpose should be calculated after including handling loss in the coal consumption. The unit heat rate calculation will not include handling loss of coal.

FUEL CONSUMPTION: The sum total of coal and oil consumption is treated as fuel consumption for budgeting. The specific oil consumption factor will be fixed based on past performance of each unit since station heat rate is a derivative of specific coal and oil consumption already fixed.

43

The specific coal consumption factor can be worked out as under:

Specific fuel consumption = heat rate/Gross Calorific value (or) = = Kg / KWH= Kcal / KWH K.cal+.Kcal-K.cal

Once the specific coal consumption (kg/KWH) is the quality of coal. Consumption can be obtained depending upon the gross generation level.

Coal consumption = specific coal consumption ( kg/ KWH) *Gross Generation.

The handling loss of the coal is to be restricted to 1.5% as per recommendation of the committee for this purpose. This handling loss from the point of receipt in the tract hopper up to gravis/ metric feeders will be added to coal consumption as indicated above to arrive at gross coal consumption.

CHEMICAL CONSUMPTION: The chemicals are used by many cost centers for treatment of water. The consumption of chemicals will be correlated with volume of water treated and certain norms will have to be developed for different type of chemicals and different types of treatment. Based on these norms, each of the cost centers will indicate consumption of chemicals in quantitative as well as financial terms. The valuation of chemicals will be done at current prices only. EMPLOYEE COST: The basis of employee cost will be the approved manpower budget effective for respective years of budget period. The estimation of employee cost is to be done for each grade considering mid-point of the scale as basic pay and after adding various allowances like D.A., H.R.A., C.C.A., project allowance etc., as admissible in respective graders. This is to be worked out for each of the budget period based
44

on existing strength (at the time of estimation) in each grade and additions during each quarter (taking 70% satisfaction for additions. The provisions for medical reimbursement, PF and other welfare expenses is to be made based on trend of expenses in previous year and taking into account the policy changes, if any. The details of welfare expenses like liveries and uniforms, safety expenses, accident compensation, games & sports, canteen subsidy etc., are to be listed out as per the chart of account. The provisions for incentives, bonus and payment of one time nature are to be shown separately based on total employee cost for executives, supervisors and non-supervisors and total manpower in these categories, separate rates of cost per employee will be worked out for each of these categories as under

Salaries and allowances. Contribution to PF and other funds. Welfare expenses.

The cost center of employees cost will be worked out based on these rates separately for executives, supervisors and non-supervisors. This will again be consolidated separately for operations, maintenance and common (service) function. The employee cost of common function will be appropriated between construction and O & M budgets in the ratio of capital expenditure and sales during the respective years.

REPAIRS AND MAINTENANCE:

In line, with costing system, major classification of repairs and maintenance can be represented by the following three activities.

Major overhaul Preventive maintenance Break down maintenance

45

Normally, budgeting will be done for the former two under each activity separate estimates will be prepared for consumption of materials and maintenance jobs. This will be done at each of the sub cost center wise details are required to be mentioned. The consumption material for repairs and maintenance will be classified into spares, lubricants, loose tools and plants, consumables and others. The cost center wise totals are done separately for three activities which will be added to arrive at summary of material consumption and maintenance jobs which will be reflected in the profit & loss account. The material consumption, especially of spares, can be estimated based on the expected life of various components/spares in the installed equipment the frequency of breakdowns in the past and the requirement for preventive maintenance and major overhauls. The actual life of components may be different from that indicated in the manufacturers specifications. Therefore, it is very difficult to estimate requirements of spare. But this estimation will become gradually accurate as more experience is gained. For new stations it will be advisable to collect such information from old stations that have gained experience in this field. Normally, maintenance of equipment through contractors should be avoided. But in certain areas, if the expertise and in house capability or sufficient manpower is not available, maintenance jobs can be done through contractors. Such contracts will need to be listed out separately. If any owner supply items are covered in such contracts the costs of these items will be included in the material costs.

STATION & GENERAL OVERHEADS: All the items of expenditures under this head will be estimated based on past trend with due adjustment of policy changes. The estimates will be given by the cost center needs for items identified with respective cost centers. The total administrative cost of service cost centers will be allocated between construction and O & M in the ratio of capital expenditure and sales during the respective years.

46

DEPRECIATION: This is to be charged as per ES act from the year following the year in which assets have been capitalized. This will be done separately by each of the cost centers on the basis of capitalized value and rates of depreciation furnished by the site finance and account for different categories of assets. Cost center-wise depreciation will be added to arrive at total depreciation for the investment center.

INTEREST ON FIXED CAPITAL: As per existing accounting policy, the interest is to be charged to profit & loss account based on the loan content in the capitalized assets restricted to total accrued interested on the actual loans. For budgeting purposes, interest will be worked on equated loan content or equated loan whichever is less.

EQUATED LOAN CONTENT: Equated loan content is taken as 50% total capital cost & adjusted for number of operating months in respective years. In case of generating stations, the cost for each profit center will be taken as per actual or anticipated capital cost.

The equated loan content is to be appropriated to individual units. The total capital cost will be taken as proposed in the performance budget constructions.

47

CHAPTER - IV DATA ANALYSIS AND INTERPRETATION

48

DATA ANALYSIS AND INTERPRETATION PROFITABILITY INDEX

YEAR

INVESTMENTS (in millions)

CASH(Pv)Inflows (in millions) 18180 24780 45060 54640 18630 16120 19210 11130 65420 19233 61323 13181 14763 659714
49

Cash(initial)outflows (in millions) 20000 30000 60000 80000 30000 22000 33000 70000 40000 80000 60000 70000 65000 660000

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Total

292507 303029 319244 306118 354521 901587 399145 402811 366744 173380 207977 139835 148071 4316969

Pv of cash inflows PI= ----------------------Initial cash outlays =

659714 -------------------------660000

0.99%

Interpretation:

a) The profitability index of present value of cash inflows and cash outflows is fluctuation from year to year in the year 1997-1998 the present value of cash inflows is 18180 where as in the year 2009-2010 has been increased with 14763 millions. b) The highest cash inflows has been recorded in 2005-2006 as 65420 and lowest has been recorded as 16120 in the year 2002-2003.

50

PAY BACK

YEARS

Initial investments in(millions) 40000 60000 70000 20000 10000 66000 25000 12000 90000 30000 37830 52300 513130

Cash inflows in (millions)

Cash outflows in (millions)

1998-09 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Total

8000 1600 2200 4500 4000 3000 2900 1100 1600 1200 2930 3250 36280

12000 15000 12000 16000 16000 18000 11000 22000 80000 70000 27700 29300 329000

51

Initial investments PAY BACK PERIOD = ----------------------=

40000 ------------------8000

Annual cash inflows

= 5 years

INTERPRETATION:

a) In the pay back method the investment period and the cash inflows are fluctuating from year to year where as in the year 1998-99 it is 40000 and in the year 2008-09 is 52300. b) Cash inflows are in the order decreasing to increasing from 2006-07 to 2009-2010.

52

TABLE 1.1 PHYSICAL PARAMETERS 2006-2007

PARTICULARS Generation(MU) Plant load factor (%) Auxiliary consumption (%) Auxiliary consumption(MU) Coal(MT) Oil(KL)

BUDGET 20998.00 98

ACTUALS 21200.432 99.40

VARIANCE 202.432 1.40

6.90

6.50

-0.40

1452.45

1399.453

-52.997

12559545 5210.00

12604543 4978.50

44998 231.50

53

TABLE 1.2 PHYSICAL PARAMETERS 2007-2008

PARTICULARS Generation(MU) Plant load factor (%) Auxiliary consumption (%) Auxiliary consumption (MU) Coal (MT) Oil (KL)

BUDGET 20498 90.00

ACTUALS 19690.837 86.45

VARIANCE -807.163 -3.55

6.60

6.40

-0.20

1352.12

1259.259

-92.861

11847844 5110.00

11778688 4725.175

-69156 -384.825

54

TABLE 1.3 PHYSICAL PARAMETERS 2008-2009

PARTICULARS Generation (MU) Plant load factor (%) Auxiliary consumption (%) Auxiliary consumption (MU) Coal consumption (MT) Oil consumption (KL)

BUDGET 19985.00 87.75

ACTUAL 20247.702 88.90

VARIANCE 262.702 1.15

6.40

6.21

-0.19

1279.00

1258.2650

-20.735

12219428

12503168

283740

5070.00

3824.075

-1245.925

55

TABLE 1.4 PHYSICAL PARAMETERS 2009-2010

PARTICULARS Generation (MU) Plant load factor (%) Auxiliary consumption(MU) Auxiliary consumption (%) Coal consumption (MT) Oil consumption (KL)

BUDGET 20985 94.90

ACTUAL 21272.604 95.50

VARIANCE 287.604 0.59

7.60

7.21

-0.39

1386

1364.2760

-21.724

13329536

13624486

294950

6080

5036.025

-1043.975

56

Table-2.1 BUDGET Vs ACTUAL S DESCRIP . TION N O 20072008 BUDGET (in millions) 6,959 20072008 ACTUAL (in millions) 7,364 20082009 BUDGET (in millions) 7,884 20082009 ACTUAL (in millions) 8,666 20092010 BUDGE T (in million) 8,768 20092010 ACTUAL (in millions) 9,876

Employee cost

2 Repairs and maintena nce

7,000

7,258

6,890

6,676

7,970

8,796

3 Station 5,500 overheads GRAND TOTAL 19,459

4,061

4,061

4,621

4,725

4,932

18,683

18,835

21,963

21,463

23.604

57

REVENUE (2008-2009)

PARTICULARS

BUDGET FOR 2008-2009 AMOUNT (in millions))

ps/KWH

ACTUAL FOR 2008-2009 AMOUNT(in millions)

Ps/KWH

SALES Fixed charges recovery 68,670 34.36 68,670 34.36

Variable charges 1,64,822 recovery Fuel price adjustment recovery TOTAL 14,422

82.47

1,72,486

85.19

7.22

21,077

10.41

2,47,914

124.05

2,62,233

129.51

58

REVENUE (2009-2010) Particulars Budget for 2009-2010 Amt(in Millions) Sales Fixed charges Variable Charges Fuel price Adjustment TOTAL 2,49,682 130.50 2,58,517 137.60 792 0.44 11942 6.56 70126 44.72 703044.720 45.60 Ps/KWH Actual for 2009-2010 Amt(in Millions) Ps/kwh

1,78,764

85.33

1,76,275

85.44

59

OPERATIONAL EXPENDITURE BUDGET (2005-2006)

SL.N O

PARTICULARS

BUDGET PS/KW ESTIMAT ED FOR THE YEAR AMOUNT( in millions)

ACCURALS FOR THE YEAR AMOUNT(i n millions)

PS/K W

Variable Cost Coal Oil High fuel oil High speed diesel Total of 1 225 265.92 113050.92 0.22 0.27 58.91 186.87 283.98 111691.41 0.8 0.17 67.8 112560 58.42 111220.56 66.83

Operations and maintenance cost Chemical &Water Repairs and Maintenance Employee cost stationary& General expenses Share of c.c. 3660.00 5252.00 0.26 3.16 256.00 5040.00 0.15 3.03

5785.00

5.79

6292.00

3.78

1845.00
60

1.19

1777.33

1.07

expenses Total of 2 3 4 Depreciation Finance charges Rebate Interest on fixed capital Total of 4 Grand Total(1+2+3+4) 3885.00 2048.00 2.26 1.45 3238.00 2346.66 1.95 1.41 16542 12576.00 10.04 10.36 13365.33 19297.00 8.03 11.60

5933.00 16540592

3.71 101.33

5584.66 171580.74

13.01 103.8

61

OPERATIONAL EXPENDITURE BUDGET (2006-2007)

SNO

PARTICULARS

BUDGET Ps/KW FOR THE H YEAR(200 6-2007) AMOUNT (in millions)

ACTUAL Ps/KW FOR THE H YEAR (20062007) AMOUNT (in millions)

VARIABLE COST Coal Oil High furnace oil 895 &high speed diesel TOTAL OF 1 1,58,187 0.45 2094 0.65 1,57,292 78.45 1,57,392 79.25

78.95

1,59,484

79.90

OPERATIONS & MAINTENANCE COST Chemical Repairs &maintenance Employee cost Station general expenses 375 8000 0.20 4.41 296 7500 0.18 4.69

7959 6175

4.49 3.52

8364 4785

4.74 2.92

62

Share of C.C expenses TOTAL OF 2 3 4 DEPRECIATION FINANCE CHARGES Interest on fixed capital Rebate TOTAL OF 4 GRAND TOTAL(1+2+3+4)

3770

1.76

3757

1.90

26,278 18,925

14.38 9.75

24,702 19.284

14.43 9.50

8373

4.10

7264

3.74

5326 12,699 2,16,089

3.11 7.21 110.30

5550 12,814 2,16284

3.31 7.05 110.88

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OPERATIONAL EXPENDITURE BUDGET (2007-2008) S.NO PARTICULARS BUDGET FOR THE YEAR(200 7-2008) AMOUNT (in millions) Ps/KW H ACTUAL FOR THE YEAR (20072008) AMOUNT (in millions) Ps/KW H

VARIABLE COST Coal Oil High furnace oil 875 &high speed diesel TOTAL OF 1 1,57,167 0.43 1,094 0.56 1,56,292 76.25 1,56,360 79.40

76.68

1,57,454

79.96

OPERATIONS & MAINTENANCE COST Chemical Repairs &maintenance Employee cost Station general expenses Share of C.C expenses 325 7,000 0.16 3.41 276 7,258 0.14 3.69

6,959 5,175

3.39 2.52

7,364 3,785

3.74 1.92

3,570

1.74

3,657

1.86

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TOTAL OF 2 3 4 DEPRECIATION FINANCE CHARGES Interest on fixed capital Rebate TOTAL OF 4 GRAND TOTAL(1+2+3+4)

23,029 17,905

1.22 8.73

22,340 18,184

11.35 9.23

8,373

4.08

7,164

3.64

4,326 12,699 2,10,800

2.11 6.19 102.84

4,550 11,714 2,09,692

2.31 5.95 106.49

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OPERATIONAL EXPENDITURE BUDGET (2008-2009) S.NO PARTICULARS BUDGET FOR THE YEAR(200 8-2009) AMOUNT (in millions) Ps/KW H ACTUAL FOR THE YEAR (20082009) AMOUNT (in millions) Ps/KW H

VARIABLE COST Coal Oil High furnace oil 1,487 &high speed diesel TOTAL OF 1 1,61,653 0.74 969 0.48 1,60,166 80.14 1,69,574 83.75

80.88

1,70,543

84.23

OPERATIONS & MAINTENANCE COST Chemical Repairs &maintenance Employee cost Station general expenses Share of C.C 250 6,890 0.13 3.45 307 8,676 0.15 4.28

7,884 3,811

3.94 1.91

8,666 4,314

4.28 2.13

3,791
66

1.90

3,691

1.82

expenses TOTAL OF 2 3 4 DEPRECIATION FINANCE CHARGES Interest on fixed capital Rebate TOTAL OF 4 GRAND TOTAL(1+2+3+4) 7,716 3.86 7,501 3.70 22,626 15,650 11.32 7.83 25,655 17,017 12.67 8.40

4,475 12,191 2,12,120

2.24 6.10 106.14

5,5761 13,262 2,26,476

2.85 6.55 111.85

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OPERATIONAL EXPENDITURE BUDGET (2009-2010)

S.NO

PARTICULARS

BUDGET Ps/KW FOR THE H YEAR(200 9-2010) AMOUNT (in millions)

ACTUAL Ps/KW FOR THE H YEAR (20092010) AMOUNT (in millions)

VARIABLE COST Coal Oil High furnace oil 1,498 &high speed diesel TOTAL OF 1 1,73,675 0.76 988 0.49 1,72,177 83.15 1,79,579 89.75

83.91

1,80,567

90.24

OPERATIONS & MAINTENANCE COST Chemical Repairs &maintenance Employee cost Station general expenses Share of C.C 260 6,950 0.14 3.67 328 8982 0.18 4.32

7,992 3,856

3.98 1.96

8,778 4,517

4.30 2.19

3,995
68

1.98

3693

1.82

expenses TOTAL OF 2 3 4 DEPRECIATION FINANCE CHARGES Interest on fixed capital Rebate TOTAL OF 4 GRAND TOTAL(1+2+3+4) 7,817 3.96 7,402 3.62 23,063 16,890 11.73 8.12 26,298 18,019 12.67 8.78

4,479 12,296 2,25,924

2.24 6.13 109.14

5,882 13,284 3,57,168

2.92 6.54 118.37

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PURCHASE BUDGET(2008-09) (REVISED ESTIMATES)

S.N O

MATERIA L DESCRIPT ION

UNIT

OPENIN G STOCK( PROVISI ONAL) 508 6,568 1,101 220

PURCH ASE DURING THE YEAR 13,012 1,70,402 6,299 1,142 1,72,126 322 192

CONSUMPT CLOSI ION NG DURING STOCK THE YEAR

Coal

000KT Rs millions KL Rs millions

12,970 1,70,402 6,700 1,195 1,71,600 325 180

550 7,1150 700 165 7,315 15 200

Oil

TOTAL 3 4 Chemicals

Rs millions 6,768 Rs millions 18

Consumabl Rs millions 188 es Spares Lubricants Others TOTAL GRAND Rs millions 9,112 Rs millions 75 Rs millions 139 Rs millions 9,532 Rs millions 16,320

5 6 7

6,068 210 121 6,913 1,79,039

4,080 160 15 4,760 1,76,360

11,100 125 245 11,685 19,000

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PURCHASE BUDGET 2009-2010 (BUDGETED ESTIMATES)

S.NO MATERIAL DESCRIPTI ON

UNIT

OPENING STOCK(PR OVISIONA L)

PURCHASE DURING THE YEAR

CONSU CLOSING MPTION STOCK DURING THE YEAR 13,222 1,71,885 4,075 862 1,72,747 401 190 550 7,150 525 131 7,281 20 200

Coal

000KT Rs Millions KL Rs Millions Rs Millions Rs Millions

550 700 700 165 7,315 15 200

13,222 1,71,885 3,900 829 1,72,714 406 190

Oil

TOTAL 3 4 Chemicals

Consumable Rs Millions s Spares Lubricants Others TOTAL GRAND Rs Millions Rs Millions Rs Millions Rs Millions RsMillions

5 6 7

11,100 125 245 11,685 19,000

4,310 160 75 5,141 1,77,855

4,310 185 20 5,106 1,77,853

11,100 100 300 11,720 19,001

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EXPLANATION TO THE ABOVE TABLES The installed capacity of NTPC-RSTPS is 2600 MW. 1000 MW=1 MU 2600 MW=2.6 MU Power generation per annum in NTPC-RSTPS is i.e.

installed capacity per annum is, = 2.6 MU*24 HOURS * 365 DAYS = 22,776 MU per annum

PLANT LOAD FACTOR: Generally, because of so many factors like periodical maintenance, machine break down, shortage of fuel, lack of demand, etc., the power station cannot attain the maximum capacity generation of 22,776 MU per annum. So generally, actual/budgeted generation will be less than 22,776 MU per annum. Plant load factor (PLF) is the term used to indicate the average generation of station in relation to maximum capability during the reference period.

FOR THE FINANCIAL YEAR 2008-2009 Budget Generation PLF (MU) = ---------------------Installed capacity 20985MUs = ------------- *100 22776 72 MUs = 92.13% * 100

Actual generation PLF (ACTUAL) = F (ACTUAL) = Actual generation ------------------------------ *100

------------------------------ *100 Installed capacity Installed capacity 21272.604 21272.604 = -------------- *100 =93.39% =93.39%

= -------------- *100 22776MUs 22776MUs

Therefore, Plant Load Factor (PLF) shows the percentage of power generation to the maximum capability.

PAISA/KILO WATT HOUR:

We know that, 1 MU =1000 MW

And 1 MW = 1000 KWH

1MU = (1000*1000) KWH

1MU = 10,00,000 KWH

ANALYSIS AND INTERPRETATION

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PROFITABILITY INDEX (PI): It is benefit cost ratio. It is ration of present value of cash inflows at the required rate of return, to the initial cash outflow of the investment PV of cash inflows PI = -----------------------Initial cash outlay

Acceptance rule: Accept if PI > 1 Reject if PI < 1 May accept if PI = 1 PI is a relative measures of projects profitability

PAY BACK: It is defined as the number of years required to recover the original cash outlay in a project. If project generates constant annual cash inflows, the pay back period is completed as follows. Initial Investment PAY BACK= --------------------

Annual cash inflow

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In case of unequal cash inflows, the payback period can be found out by adding up the cash inflows until the total is equal to initial cash outlay.

Acceptance Rule: Accept if calculated value is less than standard fixed by the management otherwise reject it. In case of ranking method, accept the lowest rank. Table 1.1 shows the physical parameters (both budgeted and actual) for the year 2006-2007. From the table it can be seen that in the year 2006-2007, actual generation is more than the budgeted generation due to more scheduling by the beneficiaries. As a result, other physical parameters have also come down. The PLF has increased by 1.40 in comparison with the budgeted PLF. Auxiliary consumption was less than the budgeted having a variance of -52.997. Similarly actual of coal increased and oil got decreased.

Table 1.2 shows the physical parameters (both budgeted and actual) for the year 2007-2008. From this table it can be seen that actual generation is less than the budgeted and PLF was decreased by 3.55% in comparison with budgeted PLF. Auxiliary consumption has been constrained to 6.40 as against the budgeted figure of 6.60 as against the budgeted figure of 6.60% making a reduction of 0.20% which is favorable. The savings in auxiliary power consumption (APC) yields revenue.

Table 1.3 shows the physical parameters (both budgeted and actual) for the year 2008-2009. From this table it can be seen that the actual generation is more than the budgeted generation having a variance of 262.702 and PLF has been increased by 1.15% in comparison to budgeted PLF. Inspite of more generation, the Auxiliary power consumption has been constrained to 6.21% as against the budgeted figure of 6.40% making a reduction of 0.19% which is favorable.

Table1. 4 for the year (2009-2010) shows the actual generation is more than the budgeted generation having a variance of 565.PLF has been increased by 0.59 in comparison the budgeted PLF .The auxiliary power consumption has been constrained to 7.21% as compared to budgeted figure of 7.60% making a reduction of 0.39%.For the financial year 2009-2010 the budgeted power
75

generation is 19690 MU but the actual power generation is 20255 MU.565 more than the expected, there by increasing PLF by 0.59%.

TABLE2.1 BUDGET VS ACTUAL: Shows that in the year 2007-2008 actual of the employee cost is more than the budgeted estimates. Similarly in the year 2008-2009 the actual cost increased to 8,666 than the previous year 2007-2008. In the year 2009-2010 the actual employee cost is increased to 9876 in comparison to budgeted 8765. Repairs& maintenance and station overheads. The total of actual increased when compared to budget estimates. Employee cost and repairs & maintenance per KWH have increased considerably where as there is control in station & General expenses in comparison to budgeted figure. Variance is the difference between the actual and budget figures. In case of expenditure, negative variance is favorable to the company and incase of income, positive variance is favorable to the company.

OPERATIONAL EXPENDITURE BUDGET In operational expenditure budget (2008-2009) the variable cost actual was 84.23ps/KWH when compared to budget 83.91 Ps/KWH, variable cost increased. The increase in fuel cost is recovered in the form of fuel price adjustment. Any variation in price and calorific values of fuel is adjusted through fuel price adjustment. Fuel cost is treated as variable cost as it varies in direct proportion to generation. Other costs are treated as fixed costs, which vary in inverse direction to generation. In operational expenditure budget 2009-2010, variable cost per unit is 90.24% against budget cost of 83.91ps/KWH. Employee cost and repairs & maintenance cost is higher than the budget cost. It is understood that onetime expenditure on plant and machinery has been increased during this year, which increases the actual expenditure. It is also given to understand that provision for wage revision has been considered in actual expenditure, which was not envisaged during the preparation of budget. This causes increases increase in employee cost. Depreciation also has marginally increased as there was a capitalization during the year with regard to rebate, it varies with realization of dues from the beneficiaries. Rebate is given to beneficiaries for making prompt payment on sale of energy.

76

ANALYSIS AND COMPARISON OF ACTUAL FIGURE FOR THE YEARS 2008-2009 AND 2009-2010.

As station runs continuously and as units are over 20 years old in an average, it warrants more maintenance. Interest depends upon the loan amount and loan repayment. In case of foreign currency loan, exchange rate variation also influences the interest. Various components of Revenues:

Fixed charges recovery Variable charges recovery Fuel price adjustment Incentive Miscellaneous income

Variable charges recovery is for reimbursement of fixed cost incurred by the power station. In 2008-2009 fixed charges of Rs.69126lakhs was considered as budgeted figure and in actual same has been revised by Central Electricity Regulatory Commission (CERC) in the final tariff as Rs.68128lakhs. So, fixed charges is fully recovered. Similarly in 2009-2010 also, the fixed charge is fully recovered. The variation in unit cost (ps/KWH) is due to variation in generation. As the generation increases cost per unit will come down since the charge is fixed.

Various types of materials, spares, components and lubricants are used to carry out the repairs and maintenance work of plant and machinery during the course of operation. Coal and oil are used as fuel to power station. In order to meet the spares consumption and fuel consumption, purchase budget shall also be prepared along with operation and maintenance budget for procurement of spares and raw materials.

77

PURCHASE BUDGET revised estimates for the year 2008-2009 and Purchase budget, budget estimates for the year 2009-2010 shows that every year operations and maintenance budget is prepared. Budget estimate is done for the next year and revised estimate is done for the current year. Periodically, actual expenses are compared with budget figures and variations if any is analyzed to bring the cost into control.

PROFITABILITY INDEX (PI): It is benefit cost ratio. It is ration of present value of cash inflows at the required rate of return, to the initial cash outflow of the investment PV of cash inflows PI = -----------------------Initial cash outlay Acceptance rule : Accept if PI > 1 Reject if PI < 1 May accept if PI = 1 PI is a relative measures of projects profitability PAY BACK: It is defined as the number of years required to recover the original cash outlay in a project. If project generates constant annual cash inflows, the pay back period is completed as follows.

Initial Investment PAY BACK= --------------------Annual cash inflow

78

In case of unequal cash inflows, the payback period can be found out by adding up the cash inflows until the total is equal to initial cash outlay.

Acceptance Rule: Accept if calculated value is less than standard fixed by the management otherwise reject it. In case of ranking method, accept the lowest rank.

CONCLUSIONS AND SUGGESTIONS

CONCLUSIONS: In spite of a good financial plan, the desired results may not be achieved if there is no effective control to ensure its implementation. The budget represents a set of yardsticks or guidelines for the use in controlling internal operations of an organization. The management through budget, can evaluate the performance at every level of an organization. Budget is an important tool for planning and control. No system of planning can be successful without having an effective and efficient system control. Budgeting is closely connected with control. Budgetary control is an important device for making the organization more efficient on all fronts. It is an important tool for controlling costs and achieving the overall objectives. A careful analysis and continuous comparison of actual with budgeted results will definitely improve the overall performance.

79

SUGGESTIONS:

Every organization has predetermined set of objectives and goals, but for accomplishing the objectives and reaching goals, proper planning and economic execution of plans are at-most requirements.

In real life, every activity has scope for improvement; similarly, the activities of power station, which are complex in nature, have also scope for improvement.

EMPLOYEE COST: In the area of stiff competition, cost reduction and quality improvement are the only way to sustain in the market. When revenues are fixed, the only way to earn more profit is to reduce the cost. In NTPC, Ramagundam power station the man: MW ratio is approx 0.65.by bringing the man: MW ratio down to optimum level, there can be a saving in employee cost. Since NTPC is a good paymaster, a small increase in manpower may cost crores of rupees. So, employee cost is one area where sizeable reduction is possible. Effective rationalization of existing manpower could help in avoiding increase in power.

MATERIAL COST: Periodical preventive and routine maintenance avoid break down maintenance there by reducing repairs and maintenance expenditure and increasing the profit. Necessary control shall be exercised to reduce the repairs and maintenance cost.

HEAT RATE: A measurement used in the energy industry to calculate how efficiently a generator uses heat energy. Heat rate is a measure of power plant thermal efficiency. Heat rate is the Kcal required to generate one KWH of electrical energy. The determinants of Heat Rate are quality of coal and oil;
80

make up water consumption, combustion performance of condenser & mills and temperature and pressure of various points in the system. When the determinants are maintained well and efficient and proper up keep is done then the heat rate will be low. As result fuel consumption will be low and profit will be more.

FINANCE CHARGES: Loans with lower rate of interest should be resorted to and loans having higher rate of interest should be replaced with the loan having lower rate of interest by way of loan swapping. This will reduce the in interest and will increase the profit.

STATION OVERHEADS: Efforts should be made to made to reduce the station overheads such as communication expenses, traveling expenses, etc.

81