RAM Cost Cutting and Reduction

A STUDY ON ROLE OF COST CUTTING AND COST REDUCTION IN KPCL
EXECUTIVE SUMMARY:
Karnataka Power Corporation Limited (KPCL) is a state-owned

power generating company. The company is engaged in power generation
and distribution across Karnataka. KPCL generates power through a
portfolio of hydro, thermal and wind energy power plants. The total
installed capacity of the company’s power plants is 5975.91Megawatts
(MW). KPCL also works for environment conservation, pollution
monitoring and the implementation of specific environment projects. The
company has a subsidiary, KPCL Bidadi Power Corporation (Private)
Ltd., which was established to implement its combined cycle project at
Bidadi. The company is headquartered in Bangalore, Karnataka in India.
Karnataka had the longest transmission line in the world in 1902, from
shivanasamudra to KGF, covering a distance of 147 km. and Karnataka
was the first state in the country to convince and set up a professionally
managed corporation to plan, construct operate and maintain power
generation projects in the state. That’s the legacy that KPCL started with
and built on.
Scope:
- Provides key company information for business Intelligence needs.

- The company’s strengths and weaknesses and areas of development or
Declines are analyzed. Strategic and operational factors are considered.
- The opportunities open to the company are considered and its growth
Potential assessed. Competitive and/or technological threats are
APS COLLEGE OF COMMERCE 1

Highlighted.
- The report contains critical company information – business structure
and Operations, the company history, major products and services, key
Competitors, key employees and executive biographies, different location
and important subsidiaries
Recent Developments:
Jan 18, 2009: Chhattisgarh to Tide Karnataka's Power Crisis, Will

Supply
300 MW Power.
Feb 02, 2009: KPCL Receives Approval for 270 MW Hydro Power
Project.
Nov 12, 2009: NTPC Looks At 1,000 MW Renewable Energy Projects
By
2017 In India.
With the consent of Finance Director of KPCL Company Ltd. To meet

my project requirements for the purpose of study, I have undertaken the
project titled as “A Role of Cost cutting and Cost Reduction” with
respect to KPCL under the title of the project I have set the following
objectives.

OBJECTIVE OF THE STUDY:
 To understand the impact on the profit and loss account due to cost
cutting or cost reduction.
 To study the different practices adapted by the company in respect
to cost cutting and cost reduction.
 To analyze the differences between cost cutting and cost reduction.
 To suggest the best procedure for cost cutting and cost reduction.
The guiding principle in presenting this exciting endeavour is
creativity and divergent thinking. Every chapter has been extensively
organized in order to give a better understanding to the reader.
Introductory chapter professes on the cost cutting and cost

reduction in KPCL and advantages, disadvantages and limitation of cost
cutting and cost reduction are mentioned. The chapter gives a brief
description about Power industry. It mentions the history of the industry
and its present scenario, board of directors. The company’s past, present
and efforts towards success are tried to mention clearly. And it
concentrates on Theoretical Perspective which gives a clear
understanding on what is service, and power projects offered by the
company. And Organizational chart of the company are clearly shown.
Next is the methodology that used to do a study. Through a face to

face interaction with the company existing members and staff the data
was collected through personal interviews. Data collection is done
through both primary and secondary source.

Analysis and interpretation gives a clear picture that what are the
tools used, methodology adopted. Here a company profit and loss account
is taken into consideration to analyze the data of the company with the
help of Table and charts an Analysis and Interpretation has been
interpreted.
Towards the end, a chapter a finding is drawn to shown the

company that what the strength and weakness of the company and what
the opportunities are that company have and threats.
Next part is suggestion, in order to modify current system for a

higher growth and progress.
The research study was an enlightening experience to me in three

dimensions. Firstly it gave me a practical work experience. Second it
enhanced creativity and dexterity of my knowledge, finally I completed
my project successfully for fulfillment of university degree requirement.

INTRODUCTION
COST CUTTING:
Cost cutting refers to temporary cut in cost which is

happened due to the economic recessions and industrial pressure both
internally and externally.
Some of the cost cutting procedures are as follows:
 Job cut
 Any allowances or facilities are being taken off.
 Budget reductions.
 Salary freezes.
 Layoff.
Cost cutting should be seen as a component of a consolidation strategy,

within which an enterprise is continually reviewing its external and
internal operations to improve productivity and cash flow. It relates to
other strategies as part of the golden circle concept. This emphasizes
consolidation as the centre of the circle around which the three other
strategies revolve – market penetration (selling more of the current
products or services to the existing customer base), market development
(selling to new customers in new markets existing products or services)
and product or service development (creating new products or services).
Cost cutting should be part of a long term policy, though it will be an
important element in any contingency plan, providing necessary short
term flexibility.

The reduction of the amount of money spent on the operations of an

organization or on the provision of products and services. Cost-cutting
measures such as budget reductions, salary freezes, and staff
redundancies may be taken by an organization at a time of economic
recession or financial difficulty or in situations where inefficiency has
been identified. Alternative approaches to cost-cutting include modifying
organizational structures and redesigning organizational processes for
greater efficiency.
Advantages of Cost cutting:
 It is the only way which can be adapted to overcome the

short term financial crisis.
 Cost cutting areas can be easily identified and necessary
steps can be taken quickly to reduce the cost till the time
economic pressure.
 Cutting cost other than the quality of product or services, the
company can reduce its fixed cost and can divert this amount
to improve the quality of product/services.
Disadvantages of Cost cutting:
 Excessive cost-cutting may affect productivity and quality

or the organization's ability to add value.
 Employees may not adapt to the changes very quickly.
 Cost cutting can discourage the employees to work
efficiently.
 Cost cutting may lead employees to quit the job more.

Limitations of Cost Cutting:-

 Impairs critical constraint resources
 Sacrifices long-term strategic objectives
 Induces “padding” of budgets
 Demoralizes employees & suppliers
 Reduces customer service
 Expansion/contraction cycles create waste
 Influenced by politics not mission
 Lack of organizational learning.
COST REDUCTION:
Cost reduction refers to real or permanent decrease in cost which is
achieved by the up gradation of technology or through new technology.
The three fold assumption involved in the definition of cost reduction
may is summarized as under:
 There is saving in a cost unit.
 Such saving is of a permanent nature.
 The utility and the quality of the goods remain unaffected,
Cost reduction may be defined as the achievement of real and permanent
reduction of cost unit of goods manufactured and services rendered
without impairing their suitability for the use intended or diminution in
the quality of the product.
Cost reduction is the key word for success in today’s global

competitive market scenario. It is the new economic mantra. Gone are the
days; where the vendor can pass on the cost of his inefficiency, low
productivity and bureaucratic way of functioning to the customer, as he

used to often do in the old sellers market’s days. Today’s customer has a
wide choice in a Net connected global market, where one or the other
market survey vendor is ready to offer the required quality of products
and services at competitive rates, often for strategic reasons of capturing
the unconquered market.
Challenging and redefining the existing business objectives based

on reengineering of business processes with a goal to rebuild the old,
sleepy giant into a new energetic, vibrant organization is the need of the
hour. Cost reduction measures hence need to be explored in right earnest,
not restricted to half-hearted cost saving measures of economizing just on
administrative costs of conveyance, staff welfare, stationery and
telephone, but should be backed up with harsh cost saving measures in all
major cost areas.
Cost reduction strategy that is the part of analysis activity for the
growth of the business. The survey is conducted which analyses the eight
potential operation strategies for more than 2,400 managers and
corporate-level Service Executives. Cost reductions; enhanced flexibility
and agility; reengineering and restructuring; integrated supply-chain
management; enterprise integration; Technology modernization; and
focus on core competencies.
According to survey has found that information

technology executives are beginning to focus almost as much on
improving service provided to their companies as on cost reduction by
consolidating and standardizing infrastructure.

Advantages of cost reduction:

 Cost reduction increases profits. It provides a basis for more
dividends to share holders, bonus to employees and more retention
of profits for expansion of the business.
 Cost reduction will provide money for employee welfare schemes
and thus improve men-management relationship.
 As a result of cost reduction, export price may be lowered which
may increase total exports.
Danger of cost reduction:

 Quality may be sacrificed at the cost of reduction in cost.
 In the beginning cost reduction programme may not be liked by the
employees and danger may be posed to the programme because
success of any cost reduction plan depends upon the willing
cooperation and active participation of employees.
 There may be a conflict between individual objective and
organizational objective.
COST REDUCTION STRATEGY :
 Designed Cost Reduction.

 Lean Production Cost Reduction.
 Overhead Cost Reduction.
 Standardization Cost Reduction.
 Product Line Rationalization Cost Reduction.
 Supply Chain Management Cost Reduction.
 Quality Cost Reduction.
 Total Cost Measurement to Support All Cost Reduction
Activities.

In 2006, CAPS released a critical issues report entitled Defining Cost

Reduction
 critical to the sourcing professional’s mission of reducing costs and

delivering savings is the proper categorization of the various types
of cost reduction and their application to the company’s operating
budgets and profit and loss measures;
 cost reductions come in two different categories: “hard” cost

savings and “soft” cost avoidance;
 a great deal of supply management’s efforts results in cost

avoidance, yet this category is more intangible than cost savings;
 even though many people might find it easy to discount cost
avoidance as “phantom” or lesser savings to the company, these are
“real” savings nonetheless and, despite the challenge, these savings
must be properly quantified;
 flexible and comprehensive IT systems are crucial, as they are the

medium that will provide the visibility needed to accurately assess
costs and expenditures;
 metrics to track cost savings and cost avoidance should be

standardized throughout the company, should be clearly defined,
and should be available to all personnel; and
 The key to success is to create a proper incentive structure for

supply management personnel.

According to CAPS study, It has also developed a deep into

some types of metrics that could be used to measure savings and
reductions, indicate some general strategies that could be used to
identify opportunities for cost reduction, and describe how one could
structure a fair and comprehensive incentive-based compensation plan
based on these metrics that could be used to drive success in the
sourcing organization.
Cost Reductions may be “Hard” or “Soft”.
“Hard” cost savings, understood as tangible bottom line reductions, are

easily defined as/characterized by:
 year-on-year saving over the constant volume of purchased

product/service,
 actions that can be traced directly to the P&L,
 direct reduction of expense or a change in

process/technology/policy that directly reduces expenses,
 process improvements that result in real and measurable cost or

asset reductions,
 examination of existing products or services, contractual

agreements, or processes to determine potential changes that
reduce cost, and
 Net reductions in prices paid for items procured when compared to

prices in place for the prior 12 months or a change to lower cost
alternatives.
On the other hand, “soft” cost avoidance (cost reduction) is much more
difficult to define. Suggested definitions include:

 avoidance is a cost reduction that does not lower the cost of

products/services when compared against historical results, but
rather minimizes or avoids entirely the negative impact to the
bottom line that a price increase would have caused,
 when there is an increase in output/capacity without increasing

resource expenditure, in general, the cost avoidance savings are the
amount that would have been spent to handle the increased
volume/output, and
 Avoidances include process improvements that do not immediately

reduce cost or assets but provide benefits through improved
process efficiency, employee productivity, improved customer
satisfaction, improved competitiveness, etc.; over time, cost
avoidance often becomes cost savings.
STAGES IN COST REDUCTION:
Cost Positioning
Cost Design
Cost Management
Cost cutting

Stage 1- Cost Cutting
Cost Cutting involves cuts in spending based on arbitrary criteria.
Costs are divided into committed and discretionary categories.
Cuts target discretionary before committed; large before small; expedient

before sensitive.
Performance measured against historical standards.
Stage 2- Cost Management

Cost Management involves a systematic approach to cost reduction that
involves an understanding of relevant cost drivers.
Costs are organized by resources, activities, and cost objects.
Reductions achieved by eliminating unused capacity, non value-added

activities, and reducing activity cycle times.
Performance measured against long-term target standards.
Stage 3- Cost Design
Cost Design involves an evaluation and redesign of the internal value

chain. It seeks to improve the relationship among resources required and
work performed to satisfy customer requirements.
Costs are organized by process and sub process.
Reductions achieved by eliminating redundancy and conforming to

operational strategy.
Performance measured against best-in-class standards of performance.

Stage 4 -Cost Positioning

Cost Positioning involves an evaluation and redesign of the external
value chain. It seeks to improve the relationship among supply chain
members to enhance competitiveness.
Costs are organized by links in the value chain.
Reductions achieved by consolidation of links, sharing information, better

coordination, and exploiting synergies among supply chain members.
Performance measured against strategic objectives such as market share

and price targets.
COMPARISON OF STAGES:-
STAGES COST COST COST COST
CUTTING MANAGEMENT DESIGN POSITIONING
Basis Arbitrary spending Understanding cost Redesign Redesign external
cuts. drives. internal value chain.
value chain.
Objectives Achieve cost Satisfy customer Enhance Enhance chain’s
reduction targets. requirements. company competitiveness
competitive
ness
Time Short-term. Medium- term. Long-term. Long-term.
horizon
Perspective Internal. Internal. Internal. External.
Cost Classified into Organized by Organized Organized by links

committed and resource, activities & by links in in external value
measurement discretionary. cost objectives. internal chain.
value chain.
Reduction Reduce Eliminate unused Eliminate Consolidate links,
discretionary and capacity, NVA redundancy share information
methodology expedient cost. activities & reduce &conform co-ordination &
cycle times. to synergy.
operational
strategy.
Performance Historical Long-term standards. Best-in- Strategic
standards. class objectives.
Standards standards.
Common Standard costing. Kaizen costing. Activity Strategic cost
based plan. planning.
tool

OVERVIEW OF INDUSTRY:
The supply of electricity commenced in India in 1880’s with the

commissioning of a small 130 KW hydro electric plant at Darjeeling, now
in West Bengal. Thermal power plant based on coal was set up in
Calcutta in 1897. When India became independent in 1947, the country
had a power generating capacity of 1362 MW. Primarily was confined
mainly in and around urban centers, rural areas and villages did not have
electricity. Most of the ventures were due to the initiatives of private
entrepreneurs.
Legal provisions support and regulate the sector were put in place
through the Indian Electricity Act, 1910. Shortly after independence, a
second act The Electricity Act was formulated, paving the way for
establishing Electricity boards in the states of the union. The state
electricity Boards (SEB) has played the vital role in the rapid expansion
of the country’s electricity network.
National Thermal Power Corporation (NTPC) National Hydro

Electricity Corporation (NHPC) and Power Grid Corporation ltd (PGCL)
were formed by the government to assist in meeting the increasing
demand for electricity thorough out the country. The electricity sector is
in the “concurrent list”, meaning that both, state and central government’s
participate in the sectors development. The ministry of power in the
central government formulates the policies for the policies for the power
sector. The Central Electricity Authority (CEA) was established as an
authority to develop a second national power policy and also to function
as regulatory authorities. As per government’s guideline all power

projects above a certain capacity have to obtain techno-economic

clearance from CEA before they can be implemented.
The production of power was revised for the public sector in the
industrial policy resolution of 1956. The Public Sector (PSU) provided a
vital service to the nation in the post-independent era. From the few
transmission and distribution networks existing at the time of
independence in few urban centers. The PSU’s have established
network’s covering the entire length and breadth of the country. Since
then, almost all new investment (barring those by existing Licenses) in
power generation, transmission and distribution has been made in the
public sector. Besides massive rural electrification programs have
boosted agricultural programs have boosted agricultural production in a
big way. Today, India is self sufficient in food grains primarily because
of this.
Power utility sector is dominated by the state. Barring 5 private

sector Licenses catering to the cities of Mumbai, Ahmadabad, Surat and
Calcutta and one of the state of Orissa where distribution of power has
privatized, generation and distribution through out country are controlled
by state owned bodies.
The installed capacity, which was only 1362MW in 1947, had

increased to 97,000MW last year. The number of villages electrified
stood at a 0.5mn (85.2% of the total villages) and irrigation pump sets
energized numbered 11.8mn, out of a possible 14.5mn.

Despite the achievements, the power sector has been plagued by

serious shortage of supply vis-à-vis demand. During 1998-99, the country
faced peaking SHORTAGE OF AROUND 14% and energy shortage of
5.9%. Setting up a power plant is immensely capital intensive. Capital
cost per MW capacity, varying as per fuel, average Rs 35-30. This
implies that resource outlay on creation of power generation capacity will
be huge.
Power is the key input for industrial and economic development.

Power is one commodity that cannot import in to India, like food or oil.
So the shortage problem cannot be solved by imports. Investments in new
capacity are the only way to augment the supply, which is pre-requisite
for sustaining industrial growth.
India continues to be a power-starved nation, even after 50 years of

planning and a vast experience of putting up a 90,000MV generating
capacity with associating transmission and distribution systems. Power
shortage has resulted from low capital investment in the sector and
inefficient operation by state controlled enterprises. The financial helps of
SEB’s are the biggest problem faced by the power sector.
The ability to generate more, along with minimizing transmission

and distribution (T&D) losses needs to be looked into. It is not
uncommon to see that in one part of the country there is excess of power
and in other parts there is a shortage, this imbalance needs to be removed.
Low cost generation is another priority area the cost involved in putting
up a plant should be reduced.

INDUSTRY PLAYERS AND PROFILE:
The power sector reveals that it can be largely segregated into four
different categories on the basis of type of players in the industry. These
include:
 CENTRAL GOVERNMENT CORPORATIONS: Which

consists of corporations like National Thermal Power Corporation
(NTPC), Nuclear Power Corporation, National Hydro Electric
Power (NHPC), and some other smaller players?
 STATE GOVERNMENT CORPORATIONS: Which consist of
the various state electricity boards and other corporation that have
been promoted by the respective government?
 PRIVATE SECTOR LICENCEES: In the private sector, some
companies had been given licenses to carry o generation and
distribution activities. While some of these companies are
generation and distribution companies, others like Surat Electricity
are just distribution companies.
 INDEPENDENT POWER PRODUCERS: The independent
power producers (IPPs) are the companies that have been given a
nod to set up generation capacities.

BOARD OF DIRECTORS
NAMES POSITIONS
B.S. Yeddyurappa Chairman, honorable chief minister,

Govt. of Karnataka.
Kumari shobha karandlaje Vice chairman, honorable minister of
energy, Govt. of Karnataka.
Yogendra Tripathi IAS, Managing director.
R. Nagaraj Finance director,( ADDL) charge
Shamim Banu IAS, principal secretary, energy
department, Govt. of Karnataka.
I.S.N. Prasad IAS, secretary to honorable chief minister,
Govt. of Karnataka.
L.V. Nagaraj IAS, principal secretary, finance
H. Bhaskar IAS, principal secretary to Govt.
department of public enterprise, Govt. of
Karnataka.
D.Sathyanarayan IAS, principal secretary, water resource
G. Latha Krishna rao IAS, Managing director, KPTCL
Nesargi.S.V Director
Lehara Singh siroya Director
Shankar rao Director

RESEARCH DESIGN
TITLE OF THE STUDY: “A STUDY ON ROLE OF COST
CUTTING AND COST REDUCTION IN KPCL COMPANY LTD.”
RESEARCH DESIGN:
The research design is the conceptual structure which research is

conducted. It constitutes the blue print for the collection, measurement
and analysis of data. A research design is a basic plan, which guides the
data collection and analysis of the phases of the project. It is the
framework, which specifies the type of information to collect the source
of data collection procedure. Data was collected from primary and
secondary source.
Research design adapted for the study:

Explorative research is used in the study:-
Study of secondary information i.e., the annual report of the company.

OBJECTIVE OF THE STUDY:
 To understand the impact on the profit and loss account due to cost
cutting or cost reduction.
 To study the different practices adapted by the company in respect
to cost cutting and cost reduction.
 To analyze the differences between cost cutting and cost reduction.
 To suggest the best procedure for cost cutting and cost reduction.
SCOPE OF THE STUDY:
a. To reduce the cost of the company.

b. To maximize the productivity of the company and achieve the cost
leadership in the industry.
c. Make observations on various procedures followed in the industry
and to suggest the effective practices, so that the profitability of the
company increases and cost gets decreases.
STATEMENT OF PROBLEM:
To find out the different cost cutting and cost reduction Strategy
adopted by KPCL company and compare with other competitors
with the help of necessary charts. And impact of cost reduction and
cost cutting due to economic recession.

PLAN OF ACTION:
The data collected from annual report of the company and an

analysis, interpretation has been done. So, has to avoid wrong
interpretation.
 Planning the study.

 Collection of data from primary and secondary sources.
 Execution of collected data.
 Making the tables and charts.
 Analyzing the data and
 Interpretation.
METHOD OF ANALYSIS:
 Analyze the effectiveness with the help of annual reports of the

company.
 Own observation of various practices followed by the company.
DATA COLLECTION:
a. The Primary data is obtained from interaction with the concerned

officers in the departments, department manual and other
publication of the company.
b. The secondary data is mainly obtained from, internal reports,
magazines, website, and annual report of the company.

TOOLS USED:
The tools and technique is used for the analyzing the data, which
includes Table, Pie-diagram, Bar-chart and simple percentage method
have been used for the purpose of analysis and presentation. For data
analysis a subsequent interpretation as been interpreted.
PERIOD OF STUDY:
The Analysis has been done by considering the data of the year
2012-2013, 2013-2014, 2014-2015, and 2015-16 profit and loss account
of the company.
LIMITATION OF THE STUDY:
As for as possible I have put in my best efforts to collect the data

in the course of the entire study. Throughout the study, I found
some of limitations, which are
 The study is limited to Role of cost cutting and cost reduction in
KPCL.
 The study is limited to the information provided by the company.

AN OVERVIEW OF CHAPTER SCHEME
1. CHAPTER ONE: INTRODUCTION:

This chapter includes an introduction to finance, introduction to cost
cutting and cost reduction and advantages and disadvantages of cost
cutting and cost reduction, limitation of cost cutting and IT strategies and
stages of cost reduction and overview of industry.
2. CHAPTER TWO: RESEARCH DESIGN:
This chapter provides a plan of the study and it includes:
Statement of problem, Objectives of the study, Scope of the study, Tools
and techniques for collection of data, Limitations of the study, an
overview of chapter scheme.
3. CHAPTER THREE: PROFILE OF “KPCL”:

This chapter contains a complete profile of the organization including
history, nature of business, products and services, competitors, turnover
and number of branches etc.
4. CHAPTER FOUR : DATA ANALYSIS AND
INTERPRETATION:
This chapter provides an analysis of the data collected with interpretation
with tune with the objectives.
5. CHAPTER FIVE: FINDINGS, SUGGESTIONS AND

CONCLUSIONS:
This chapter provides summary of Findings, suggestions and conclusions.

COMPANY PROFILE
KPCL-POWERING KARNATAKA SINCE 1970 :
The Power to Lead.

The Power of Profile.
The Power to Grow And Prosper.
The Power to Make Dream Come True.
The Power to Beat the Clock.
The Power to Take On New Challenges.
The Power to Perform, the Power to Excel.
The Power to Move into New Direction.
The Power Technology.
The Power to Build Lasting Relationship.
The Power to give To the World what they have taken from it.
The Power for the Future.
Mission Statement:
KPCL seeks to touch higher vantage points in the world of power
engineering. Our formula for achieving this - start with a world class
organization, build-in efficiency and cost control and ensure that progress
is in harmony with the environment.

The Mission of KPCL is to maximize power generation by:
 Exploring, identifying and developing opportunities in power

generation.
 Devising innovative ways of setting up and operating power plants.
 Investing in a resource base of technical competence, systems,
processes and capability.
 Empowering people, work teams and the support network to
achieve these objectives.
VISSION STATEMENT
 Strive and propel work towards being global leaders in managing

and developing power in truly global way.
 To reach out to all power managers across the country through a
power management and developing management integrating their
involvement and strengthening the nations power sector by
sharping there competitive edge.
 Today KPCL has rich experience in planning investigation design
execution and effective operation of large power production and a
dedicated work force of 6582 qualified, experienced and committee
technicians, administration and supporting staff.
 It has set high standard in operation and maintain of Hydel and
thermal power and as well as in project management. It
consultancy it seeks to gain international recognitions in project in
abroad.

KPCL – A POINEER
Karnataka has the distinction of being the first state in the country
to setup a professionally managed corporation. The Karnataka Power
Corporation Limited, which is empowered to plan, constructs, operate
and maintain power generation in the state. Formed on 20th July 1970 as
sister concern to Karnataka Electricity Board (KEB). From the Mysore
Power Corporation Limited of 1970 (A successor to the Hydro Electric
Construction Department of Mysore State) to Karnataka Power
Corporation Limited of 21st century it has been a long, rewarding journey
of three decades.
Today, KPCL takes great pride in the experience it has gathered,

the expertise it has developed and skills it has owned especially in
planning, investigation, design, execution and effective operation of large
projects. A strong infrastructure coupled with modern technical and
management concept has helped KPCL meet the challenges of the rising
energy demands of Karnataka. A dedicated workforce of almost 8,000
professional shares the vision of KPCL. At helm of affairs it has an
effective, professional, corporate team of senior administrators and
technocrats. The managing Director, under the overall supervision of
Board of Directors, manages the general affairs of the company.
The Board headed by the chairman, who is the chief minister of the
state, comprises senior officers of the state government like the finance
secretary and eminent technical experts. With its rich experience and,
who is the chief minister of the state, comprises a senior officer of the

state government like the finance secretary and eminent technical experts.
With its rich experience and expertise, KPCL is well equipped to
undertake large- scale power projects from concept to commissioning and
operation on an EPC basis, with a host of separate auxiliary services.
GROWTH DEVELOPMENT & PRESENT STATUS OF THE

ORGANIZATION
POWER TECHNOLOGY
KPCL has always believed in keeping pace with latest

technologies. To keep them operating effectively and at maximum
efficiency even while increasing their capacity, KPCL has undertaken the
renovation, modernization and upgrading of its power stations in a phased
manner. The most advanced technology was utilized to upgrade all the 10
units of the Sharavathi generating station from 89.1 MW to 103.5MW,
thereby adding 144 MW capacities. Outdated rotary mechanical
governors have been replaced by the state of –art digital excitation
systems and governing system.
Additionally, a comprehensive time bound plan has been finalized

to modernize all old hydro stations. This plan envisions the setting up of
sophisticated equipment and controls hydro stations by the year
2005.KPCL also has the distinction of being the first state owned utility
in the power sector to have established computerized satellite
communication network through VSAT among all its power stations and
Bangalore. The hi-tech VSAT network called Shakthinet was
commissioned during 1997.

KPCL today has the capability to undertake large scale power projects
from concept to commissioning. It can also operate the plant on an EPC
basis, with a host of exclusive auxiliary services.
KPCLs Consultancy and Engineering Services Division, an offshoot of its

core competency, offers its clients a wide spectrum of consultancy inputs
across the complete cycle of power project development. It has the
expertise in analysis and design of structures using STADPRO – 2006,
NISA – Finite Element package, AUTOCAD – 2006, micro station and
in-house developed software packages for reservoir operation, Stability of
Dams etc.,
Feasibility studies / evaluation and the compilation of detailed project

reports
 Design, Engineering, procurement and construction services

 Consultancy on both Thermal and Hydel Power Stations, including
handling of international competitive bids
 Project Management from project scheduling to preparation of
final invoice and certification.
 Supervision of erection, commissioning and operation of civil,
electrical,
mechanical systems and equipment.
 Operation and maintenance services,
 Rehabilitation of dams in distress
 Renovation, modernization and updating of hydro stations

Overall project and performance management
KPCL is a highly IT Savy company among the public sector units

in the state at large and power sector in particular and has the distinction
of being the first state owned company in the power sector to have
established SHAKTINET- a satellite based communication network
through VSATs among all its power stations and Bangalore. Local Area
Networks have been established at all Project locations and about 800
officials have been wired to corporate office with reliable VSAT back
bone. All the activities of the corporation are computerized and KPCL
has the unique distinction among power utilities of establishing voice and
data communication between its projects and Bangalore through the new
generation DAMA V-SATS on KPTCL’s "VIDYUTNET". The computer
services department of KPCL with fully dedicated engineers and software
professionals has developed and implemented all the software required
for its business activities and is geared to offer consultancy services in the
field of software development and networking.
Some of the software developed in-house is:
 Fuel Management system

 Human resource Information System
 Cash and Compilation Management system
 Establishment
 Integrated Inventory Management System
 Public Deposit System
 Generation Management System
 Billing software for Bellary Thermal power station
 Medicine Procurement system

Monthly Programmed Implementation Calendar (MPIC)

Generation
 Daily Generation
 Monthly Generation
 Monthly Cumulative Generation (KPCL)
 R.T.P.S Monthly Performance
H.R.D
 Staff Abstract
 Corporate cadre Seniority Lists
Finance
 Budget
 Annual Report
AWARDS AND ACHIVEMENTS:
 2014-2015 - KARNATAKA RATNA AWARD BY GOVERNMENT

OF KARNATAKA FOR BEST OVERALL PERFORMANCE
AMONG PSUs.
 2008 - FIRST PRIZE FOR UNIT-6 OF RTPS - BEST SAFE POWER
BOILER FROM DIRECTOR OF FACTORIES AND BOILERS
(37TH NSC).
 2014-2015 - BRONZE MEDAL FOR VARAHI HYDRO ELECTRIC
PROJECT FOR BEST PERFORMANCE.
 2014-2015 - GOLD MEDAL FOR VARAHI HYDRO ELECTRIC
PROJECT FOR EARLY COMPLETION OF THE PROJECT.
 2008 - FIRST PRIZE FROM IEEMA FOR EXCELLENCE FOR
SHARAVATHI GENERATION STATION.

 2013-2014 - BRONZE MEDAL FOR GERUSOPPA DAM POWER

HOUSE THIRD BEST PERFORMING HYDEL STATION.
 2012-2013 - BRONZE MEDAL FOR KODASALLI DAM POWER
HOUSE (KALI) THIRD BEST PERFORMING HYDEL STATION.
 2005-2006 - CERTIFICATE FOR VARAHI HYDRO ELECTRIC
PROJECT - BEST PERFORMANCE IN HYDEL STATION.
 2005-2006 - CERTIFICATE FOR ALMATTI DAM POWER HOUSE
UNIT 6 BEST EXECUTED PROJECTS.
CONCERN FOR THE ENVIRONMENT
KPCL is constantly and consciously striving to return to the

environment while carrying out its primary task of power generation,
KPCL has adopted a define policy that blends and harmonizes ecological
balance even it upholds human rights. Every time KPCL implements a
power project, it undertakes a comprehensive environmental impact
study, to examine the impact of proposed project on the environment
management plan complying with all the conditions stipulated by
Karnataka State Control Board (KSPCB).
KPCL’s compensatory aforestation work is carried out in

consultation with environmentalists and forest department officials.
Compensatory aforestation to the extent of 6300 hectares was carried out
in kalanandi and gerusoppa 1, 75,000 saplings have been planted in area
215 hectares around Raichur super thermal power station. It also proposes
to plant 25000 saplings every year. In order to maintain acqua balance in
reservoirs constructed for power generation fish fingerlings have been let
in. apart from developing fisheries in reservoirs, KPCL also undertakes
eco-friendly techniques like controlling blasting, constructing colonies

without in felling down trees, provision of fish ladders, installation of

electro state precipitators in thermal plants etc. particular care is also take
to minimizing pollution.
Fly ash disposal is a major environmental concern in thermal
power stations. It is establishing a center for fly ash utilization technology
and environmental conservation at the Raichur thermal power station
under an indo- Norwegian program. A separate environmental division is
functional at project areas to take care of the environmental aspects.
KPCL concern also extends to the rehabilitation of displaced

people in the project area compensation is paid, employment provided
whenever possible civic amenities provided in the new settlements and
developments works taken up on top priority. It’s excellent track record,
its many strengths, its vision and dynamism, its pioneering spirit, its
technological innovations and sound financial management, its people
oriented policies, its ability to adopt itself to changing markets and needs.
These have helped shape KPCL into an organization that benchmarks
itself against the best in the industry. Today KPCL looks ahead with
confidence at a bright, powerful, promising future.
KPCL’s power generation blueprint has a clear-cut policy on

environment management. Building in green-mapping concepts such as
sustainable development, which creates the framework for improving the
quality of life. Sustainable development goes hand-in-hand with
'environment protection'

KPCL has a comprehensive action plan in place that enables environment

management, pollution monitoring and the implementation of specific
environment projects.
All KPCL projects have the assurance of a comprehensive Environmental

Impact Study to evaluate the impact of the project on the environment. It
also prepares an Environmental Management Plan complying with all the
conditions stipulated by KSPCB/MOEF.
KPCL's Raichur Thermal Power Station has been accredited with

ISO 14001 -2004 for its efforts towards environment protection
management.
The following innovative and new measures to aid the process of

environment control have been put in place:
 A unique Ayurvedic greenhouse has been developed at Kadar

Project.
 Fish fingerlings in power generation reservoirs to maintain aqua-
balance.
 Eco-friendly control measures adopted such as controlled blasting.
 Construction of colonies with least destruction to ecology.
 Installation of Electro Static Precipitators in Thermal Plants.
 Measures across the board to minimize pollution.
 Fuel supply agreement with collieries to ensure high grade coal
supplies.
 Monitoring measures for ash minimization, ash emission control,
ash utilization and ash disposal.
 Recycling of water from ash ponds for alternative use.

 Modernization of sewerage treatment plant.

 Continuous monitoring of air quality in work environments &
environment management measures.
Fly ash Initiatives:
 MOEF/GOI has stipulated utilization of 100% Fly Ash generated at

Thermal power stations for manufacturing ash based products like
Bricks, Asbestos sheets, Embankments, Dams and Dykes. Fly Ash
is issued free of cost
 The approximate quantity of Fly Ash generated at Raichur Thermal
Power Station from 7 units for the year 2004-05 is 16.0 lakhs MT
 RTPS has the distinction of utilizing approx. 60 to 65% of Fly Ash
in a year
 Ash content - 22.02 lakhs tones
 (Weighted ash content 31.73 %)
 Fly ash (80%) 16.0 lakhs tones
 Bottom ash (20%) 4.40 lakhs tones
 Fly ash utilization (65%) 10.37 lakhs tones.
COMPUTERISATION:
In today’s world, computers play a very prominent role in almost
all spheres of human life. Computers can perform several million
operation per second, vast amount of data can be quickly processed
without difficulty. It replaces human labor and provides the management
with accurate information as and when it is required in the form needed
by the management.

Like any other business organization of today, computerization

has become inevitable in KPCL also. KPCL aims for 100%
computerization but computers are in vogue in almost all the functional
areas of KPCL. Computer application in three major functional areas of
KPCL.
SOCIAL RESPONSIBILITY:
 A garden with the name SHARAVATHI GARDEN was
developed in the Kidwai Cancer Hospital campus at a cost of Rs 5
lakhs.
 The corporation made a total contribution of Rs 25 lakhs to the
CM’s relief CM’s relief fund during the year 98-99.
 Passing on the benefit of cost cutting in construction, finance and
operation to the consumers.
 Maintaining interior roads near project location.
 Making available corporation-run schools, hospitals and
Community centers for the general public in the project area.
 Reduce cost and endure reliable power supply.
Strict compliance to environment laws, regulations and norms.

Generation
KPCL's record achievements:

 Highest generation of 26635 million units (2012-2013).
 Highest thermal generation of 11484 Million Units 2012-13, 2013-
14, 2014-15.
 Highest Plant Load Factor (PLF) of 90.39 % at Raichur Thermal
Highest capacity addition of 600 MW, in 1999.
 Highest Annual Turnover of Rs.3387 Crores (2012-2013).
Commissioning of Unit - 7 at RTPS in 25 Months - A National
record.
MILESTONES:
KPCL is trend setter in power generation with a track record of

commissioning 31 dams and 16 power houses of varying size from 35
MW to 1050 MW it has been a long journey;
 The longest transmission line in the world in 1902, from

Shivanasamudra to K G F, covering distance of 147 kms.
 Sharavathi Hydro Electric Project, on the banks of river
Sharavathi in Shimoga district, the backbone of the state’s power
generation with its 10 units has an installed capacity of 1035 MW.
Also part of Sharavathi Hydro Electric project.
 Shimshapura Generating Station set up in 1937 with 630 ft head
and generating capacity of 17200 KW.

 Kalanandi Hydro Electric Project set up near Diggi village in the

Western Ghats of Karnataka .its covering distance of 160 km.
generating capacity of 17000 MW.
 Almatti Dam Power House has generating capacity of 290 MW.
 Gataprabha Hydro Electric Project, with installed capacity of 32
MW.
 Linganamakki Dam power house with 2 units has an installed
capacity of 55 MW
 Gerusoppa Dam project with 4 units of 6 MW. Having an
installed capacity of 240 MW.
 Kalandi Hydro Electric Project. The Supa Dam Power house has
an installed capacity of 2*50 MW with an annual energy
generation of 450 MW.
 Bellary Thermal Power Station (Karnataka’s first 500MW power
station), Located near Kudatini Village. 22 kms from Bellary.
 Varahi Hydro Electric Project. Occupying pride of place on this
project is the state’s first underground power house, modern
tunneling methods were used to create the entire power house
complex, the pressure shafts, penstocks, tailrace tunnel, the control
and power cable tunnel, the ventilation tunnel and access tunnel
under ground. The Varahi Hydro Electric Project stage I has total
capacity, of 239 MW contributing 1100 MW annually. This
consists of 2*115 MW generating units at Varahi underground
power House and 2*4.5 MW at the Dam power house.
 Raichur Thermal Power Station ranked among the top ten
stations in the country, the coal-based power station at Raichur

generated around 24 million units per day from 6 units of 210MW

each. RTPS is regard as Fast-Track project; the RTPS expansion
scheme set record. Unit 5 was synchronized to grid in 28 months in
months ahead of schedule. The RTPS has more achievement to its
credit with modern and effective project management techniques,
no time and cost over run and early commissioning; the project had
a net savings of also 150 cores.
 KPCL is the first state owned utility in power sector to have
established computerized satellite communication network through
VSAT among all its power station and Bangalore. The state-of- art
VSAT called Shakthinet network was commissioned during 1997.
 Computer service department has installed the state-of-art, high
speed; Ethernet based two level area networks over 100 nodes at
Bangalore office. The two LAN comprises of 6 servers and over
100 nodes. The LANS has facility of.
 E-mail
 Internet
 File sharing
 Printer sharing
The Thermal Power Plant at Raichur, a prestigious project of

KPCL has bagged national awards for ‘Efficiency & Performance’
during the past 10 consecutive years & has won a ‘Gold’ in the
year 1990.

New Technologies:
 KPCL is implementing SCADA (Superior Control & Data Acquisition

System) in Varahi underground Powerhouse to facilitate remote control
of stations.
 KPCL is also planning microprocessor-based systems to connect smaller

power station to another station to enable better management.
 Power station operation & maintenance & project implementation are

monitored /reviewed from the corporate office through video
conferencing use of dedicated lease lines.
 All offices of KPCL at Ban galore and projects are totally computerized
& networked. High-end software like AutoCAD, Pro is deployed.
 Global positioning system (GPS) is used to synchronize the clock in all

Powerhouses spread over the state.

Future Prospects and Plans of the Organization.

Projects Capacity Cost Likely
commissioning
schedule
MW MU/ANNUM IN CRORES
NPH R&M* 45 Peaking 45 March 2009
Bidadi gas based 1400 9841 3750 2015-16

project
Bellary thermal 500 3504 2170 March-2010

project
RTPS VIII 250 1752 986 Oct-2009
Varahi-II 230 - 291 Nov-2009
TOTAL 2425 15097 7242 -
Functional Department Of The Organisation

The structure of KPCL is basically a horizontal one where most
of the authority and power rests with in the top-level management. A high
level of board of directors provides strategic architecture for the
company. The chief minister him self is the chairman of KPCL. The
managing director and other government nominated directors are senior
IAS officers besides being senior technocrats with proven record. Under
the managing director are the other chief executives, directors, and

engineers etc, KPCL today realizes that if one sits on lid of progress they
will be blown by it. The organization believes that competing for the
future is competing for the opportunity shares with the current portfolio
of core competencies. In today’s challenges the logic that public office is
the last refuge of the incompetent. Change has become a way of life for
this organization.
KPCL believes that chaotic action is better than orderly inaction.

People here know that they have just not joined a company but they have
joined an objective. KPCL has an efficient management system as an
integral part its Total Quality Management (TQM) pursuit. In keeping
with its commitment to TQM, several management disciplines in KPCL
subject themselves to the uncompromising eyes of TQM.

ORGANISATION STRUCTURE
BOARD OF DIRECTORS
PRESIDENT
(CHIEF EXECUTIVE OFFICER)
VICE PRESIDENT VICE PERSIDENT FINANCE VICE PRESIDENT

(CHIEF FINANCIAL MARKETING
OPERATIONS
OFFICERS)
TREASURER CONTROLER
 Capital budgeting  Cost accounting
 Cash management  Cost management
 Commercial banking  Data processing
& investment  General ledger (pay
banking, credit roll, A/Cs
management Receivables/ payable)
 Dividend  Government
management Reporting (IRS,
 Financial analysis & SEC)
planning  Internal control
 Investor relations  Preparing Financial
 Pensions statements

ADDRESS AND INFORMATION
REGISTERED OFFICE
SHAKTHI BHAVANA
NO.82, Race Course Road
Bangalore – 560 001
AUDITORS
Bandari, Madhusudan & Srinivasan

Chartered Accountants
Bangalore
BANKERS
State Bank of India

Syndicate Bank
Union Bank of India
Canara Bank
Vijaya Bank
State bank of Mysore
Indian Overseas Bank
ICICI Bank

DATA ANALYSIS AND INTERPRETATION:
To analyze the data of the company the tool used is profit and loss
account, some tools has been used such as Tables and Graphs. The
required information for the study is taken from Annual Reports of the
Company. The comparison of Revenue and Operating profit and Export
Revenue to Total Revenue and Gross profit to Total Revenue and
Operating profit to Total Revenue and comparison of Revenue
contribution from different power projects for the years 2012-2013, 2013-
2014, 2014-2015 and 2015-16.
TABLE 4.1- PROFIT AND LOSS ACCOUNT (Rs.in Crore)
Particulars 2012-13 2013-14 2014-15 2015-16
Revenue 3,750 3,651 4,431 4397
Operating Profit (PBIDT) 999 1,027 1,343 1628
Interest - - - -
Depreciation &
628 777 951 971
Amortization
Provision for taxation 77 44 115 125
PAT from ordinary

322 206 277 436
activities
Dividend 14.86 14.86 14.86 14.86

CHART 4.1-SHOWING INCREASING IN REVENUE AND PROFIT
5,000
4,500 4,431 4,397
3,750
4,000 3,651
3,500
3,000
2,500 Revenue
1,628
Operating profit
1,343
2,000
1,027
999
1,500
1,000
500
0
2012-13 2013-14 2014-15 2015-16
SOURCE: Profit and Loss account of the company.

ANALYSIS:
From the above table it can be seen that the company’s revenue
was Rs.3,750Cr in the year 2012-13, Rs.3,651Cr in the year,2013-14,
Rs.4,431Cr in the year 2014-15 and Rs.4397 in the year 2015-16. (It has
been observed that there is an increasing decrease in Revenue that is from
3,651Cr to 4,431Cr and 4,431 Cr to 4,397Cr which clearly shows that
there is an increase in revenue due to high productivity.)
Even operating profit has been increased during the year 13-14 that is in
12-13 it was Rs.999 and in 13-14 it is Rs. 1,027 and in 14-15 it is Rs.1,
343 and in 15-16 it has increased to1628.
This shows the operating profit also increased from year to year at an
increasing rate.
INTERPRETATION:
From the above analysis it can be seen that in the year 2012-13,
2013-14, 2014-15 and 2015-16 the total revenue was Rs.3, 750 Crs, it has
been decreased to Rs.3, 651Crs in the year 2013-14 and It has been
increased to Rs.4, 431 Crs in the year 2014-15 and it has again decrease
to4, 397 in the year 2015-16 due to high productivity. So that the
company should clearly monitor the cost aspect to increase more revenue
and to reduce cost in productivity of the company.

TABLE 4.2- PROFIT AND LOSS ACCOUNT RATIOS

(Rs.inCrore)
2012- 2013- 2014- 2015-
Particulars
13 14 15 16
Export revenue/total revenue (%) 91.54 91.61 93.61 93.87
Operating expenses/ Total revenue (%) 73.34 71.87 69.69 69.35
Gross Profit/ Total revenue (%) 66.35 73.07 64.13 73.25
Selling and marketing expenses/ Total 20.27

20.68 22.35 21.25
revenue (%)
General and administration expenses/ Total 11.28

10.77 11.44 11.71
revenue (%)
Employee costs/ Total revenue (%) 96.93 96.52 78.87 78.35
Operating profit/ Total revenue (%) 26.63 28.12 30.30 31.01
Operating profit after depreciation and 13.25

11.70 12.07 10.94
interest/ Total revenue (%)
Depreciation and amortization/Total 21.87

16.74 21.28 21.46
revenue (%)
Tax/ Total revenue (%) 2.05 1.20 2.59 1.87
PAT from ordinary activities/ Total 9.21

8.58 5.64 6.25
revenue (%)
SOURCE: Annual report of the company.

CHART 4.2 - SHOWING RATIOS OF PROFIT AND LOSS

ACCOUNT
500
PAT from ordinary activities
450
Tax
400
Depreciation and amortization
350
Operating profit after
depreciation and interest
300
Operating profit
250
Employees cost
200 General and administration

expenses
150 Selling and marketing expenses
100 Gross profit
50 Operating expenses
0 Export revenue
2012-13 2013-14 2014-15 2015-16
SOURCE: P&L account of the company.
ANALYSIS:
The above diagram shows the profit and loss account ratios for
different revenues and expenses like operating, selling and marketing
,administration, depreciation and operating expenses of the of the
company for the past three previous years 2012-13, 2013-14, 2014-15 and
for the current year 2015-16.

TABLE-4.2(a): SHOWING THE BEHAVIOUR OF EXPENSES

(Rs.in Crore)
Particulars 2012-13 2013-14 2014-15 2015-16
General and administration 12.25

10.77 11.44 11.71
expenses
Employee costs 96.93 96.52 78.87 77.01
CHART-4.2(a): SHOWING THE BEHAVIOUR OF EXPENSES

WITH ADMINISTRATION AND EMPLOYEE EXPENSES
120
96.93 96.52
100
78.87 77.01
80
60
40
20 10.77 11.44 11.71 12.25
0
2012-13 2013-14 2014-15 2015-16
SOURCE: Profit and Loss account of the company

ANALYSIS:
The above table shows the behaviour of administration expenses

and employee cost. During the year 12-13 the expenses of the company
has being increased. The ratio of Administration expenses during the year
12-13 it was 10.77% but during the year 13-14 the ratio has being
increased to 11.44%, then it has increased to 11.71% in the year 14-15
again in the year 2015-16 it has increased to 12.25. In the case of
Employee cost ratio it was 96.93% during the year 12-13, but in the year
13-14 it has decreased to 96.52% and again decreased by 78.87% in the
year 14-15, now totally it has decrease to 77.01 in the year2015-16.
INTERPRETATION:
The above analysis shows that the ratio of Administration expenses

and employee cost has raised drastically, but when compared to 12-13,
13-14 and 2014-15 the employee costs have been decreased in the
year2015-16 the company has to reduce cost of administration expenses,
but employee cost has been reduced, because the company is following
cost cutting techniques and the company to clearly monitor the cost
aspects of the company.

TABLE -4.2(b): SHOWING THE BEHAVIOUR OF EXPENSES
(Rs.in Crore)
Particulars 2012-13 2013-14 2014-15 2015-16
Operating expenses 73.34 71.87 69.69 69.35
Selling and marketing 20.27

20.68 22.35 21.25
expenses
CHART-4.2(b): SHOWING THE BEHAVIOUR OF EXPENSES

WITH OPERATING AND SELLING & MARKETING EXPENSES
80
71.87
73.34
69.69 69.35
70
60
50
40
30
20.68 22.35 21.25 20.27
20
10
0
2012-13 2013-14 2014-15 2015-16
Operating expenses Selling and marketing expenses

ANALYSIS:
The above table shows the behavior of operating expenses and

Selling and marketing expenses. During the year 13-14 the expenses of
the company has being increased. The ratio of Operating expenses during
the year 12-13 it was 73.34%, but during the year 13-14 the ratio has
being decreased to 71.87%... Then also it is decreased to 69.69% in the
year 14-15 again in the year it has decreased to 69.35% in the year 2015-
16. In the case of Selling and marketing expenses it was 20.68% during
the year 12-13 but in the year 13-14 it has raised to 22.35%, then it has
been decreased to 21.25% in the year 14-15 same way it has decreased to
20.27% in the year2015-16.
INTERPRETATION:
The above analysis shows that the ratio of Operating expenses is

decreasing from the year 2012-13, 2013-14, 2014-15 and 2015-16 Selling
and marketing expenses has raised drastically but it is better when
compared to 12-13 and 13-14,2014-15 . From the above table we can see
the operating expenses are decreasing form 2006-2010. But at the same
time Selling and marketing expenses are more in the year 2013-14, when
compared to 2012-13, 2014-15 and 2015-16. The company has to reduce
cost in selling and marketing expenses.

TABLE 4.2(c) - SHOWING THE BEHAVIOUR OF EXPORT

REVENUE
EXPORT REVENUE = E XPORT REVENUE X100

TOTAL REVENUE
(Rs.in Crore)
Particulars 2012-13 2013-14 2014-15 2015-16

Export revenue 3,434 3,345 4,148 4,395
Total revenue 3,751 3,651 4,431 4,515
Ratio (%) 91.54 91.61 93.61 93.87
CHART 4.2(c)-SHOWING EXPORT REVENUE CONTRIBUTION

TO
TOTAL REVENUE IN TERMS OF PERCENTAGE
___________________________________________________________
_____
5,000
4,431 4515
4,500
3,751 3,651
4,000
3,500
4,395
3,000
4,148
2,500 3,434 3,345 Export revenue
2,000 Total revenue
1,500
1,000
500
0
2012-13 2013-14 2014-15 2015-16

ANALYSIS:
The above table shows the behavior of export revenue was Rs.3,
434 in 12-13 and Rs.3, 345 in 13-14 and Rs.4, 148 in 14-15 and 4, 515 in
the year 2015-16. The total revenue was Rs.3, 751 in 12-13 and Rs.3,
651in 13-14 and Rs. 4,431 in 14-15 and 4,395 in the year 2015-16. Ratio
of the company has declined from the year 12-13, 13-14, 14-15, 2015-16
that is from 91.54% to 91.61% to 93.61% to 93.87% this shows that the
export revenue is also contributing to total revenue with increasing rate of
93.87% in the year 2015-16.
INTERPRETATION:
The above analysis shows that during the year 15-16 the export
revenue ratio of the company is increased, so because the companies
major revenue is from exports and during the year 14-15 the ratio has
being increased .when compared to last three years. which has put the
company into serious pressure to reduce its cost... from past three year the
export revenue is increasing in 2012-13 at the starting rate of 91.54% to
91.61% to 93.61% and 93.87% in the year 2015-16. It increases the
profits of the company. This is due to generating and exporting of power
by the company.

TABLE 4.2(d) - SHOWING THE BEHAVIOUR OF GROSS

PROFIT
GROSS PROFIT = GROSS PROFIT X100
TOTAL REVENUE
(Rs.in Crore)
Particulars 2012-13 2013-14 2014-15 2015-16

2,489 2,668 2,842 3,115
Gross Profit
3,751 3,651 4,431 4,652
Total revenue
66.35 73.07 64.13 73.25
Ratio (%)
CHART 4.2(d) - SHOWING GROSS PROFIT CONTRIBUTION TO

TOTAL REVENUE
___________________________________________________________
5,000 4,652
4,431
4,500
4,000 3,751 3,651

3,500
3,000
2,489
2,500 Gross profit
2,842 3,115 Total revenue
2,000 2,668
1,500
1,000
500
0
2012-13 2013-14 2014-15 2015-16

ANALYSIS:
The above table shows the behavior of gross profit of the

company. The gross profit ratio of the company has declined from the
year 2012-13 was 2,489 and it increased to 2,668 in 2013-14 and it
increased to 2,842 in 2014-15 then 3,115 in the year 2015-16.The ratio
was 66.35% in 2012-13, then ratio was 73.07% in 2013-14 and the ratio
was 64.13% in 2014-15 and the ratio was 73.25% in 2015-16. In this
from 66.35% to 73.07% to 64.13% to73.25% the ratio has increased.
INTERPRETATION:
The above analysis shows that during the year 15-16 the Gross
profit ratio of the company is increased when compared to 12-13, 13-14
and 14-15. The gross profit was 66.35% in 12-13 and then increased to
73.07% in 13-14 and suddenly decreased to 64.31% and again increased
to73.25% in 15-16. This increase is due to high productivity. Gross profit
contributed more to total revenue in the year 2015-16. Increase in gross
profit ratio has made the company to clearly monitor the cost aspect of
the company .this is due to adopting various cost cutting and cost
reduction techniques by the company..

TABLE 4.2(e) - SHOWING THE BEHAVIOUR OF OPERATING

PROFIT
O.P = OPERATING PROFIT X100

TOTAL REVENUE (Rs. In
Crores)
2012- 2013- 2014- 2015-16
Particulars 13 14 15
1,628
999 1,027
1,343
Operating Profit
4,652
3,751 3,651
4,431
Total revenue
26.63 28.12 30.30 31.01
Ratio (%)
CHART 4.2(e) - SHOWING OPERATING PROFIT

CONTRIBUTION TO TOTAL REVENUE IN TERMS OF
PERCENTAGE
5000 4,431 4,652
4500
3,751 3,651
4000
3500
3000
2500 Operating profit
2000 Total revenue

1,628
1500 1,343
1,027
1000 999
500
0
2012-13 2013-14 2014-15 2015-16

ANALYSIS:
From the above table shows the behavior of operating profit of the
company. The operating profit of the company has increased Rs.999 Crs
in the year 12-13 to Rs.1, 027 Crs in the year 13-14 and to Rs.1, 373 Crs
in the year 14-15 and to Rs.1, 628 in the year 2015-16. The total revenue
was
Rs.3, 751 Crs in the year 2012-13.then it decreased to Rs.3, 651 Crs in
the year 2013-14.then it increased suddenly in the year 2014-15 by
Rs.4.431 Crs again in the year 2015-16 it increased to 4,652Crs.The
operating profit is increasing due to the reductions and cutting made in
purchasing of raw materials.
INTERPRETATION:
The above analysis shows that during the year 2015-16 the
operating profit ratio of the company is increased, increase in operating
profit ratio is due to additions in overall sales of the company and this has
lead to the reduction in operating profit ratio. The operating profit is
increased with 31.01% in the year 15-16, when compared to year 12-13,
13-14 and
14-15, this is due to increasing in productivity and sales by adopting cost
reductions in manufacturing and cost cutting in employee cost. The
company has good cost benefit position.

TABLE 4.3- SHOWING GROWTH RATIOS
(Rs.in Crore)
Particulars 2012-13 2013-14 2014-15 2015-16
Export revenue (%) 31.79 45.97 19.28 29.35
Total revenue (%) 30.66

31.6 45.65 19.01
Operating profit (%) 29.53
28.56 41.35 17.47
Net profit from
Ordinary activities (%) 30.23 56.01 18.35 39.82
CHART 4.3- SHOWING GROWTH RATIOS OF THE COMPANY

60
50
Export revenue
40
Total revenue
30
Operating profit
20
Net profit from ordinary
activities
10
0
2012-13 2013-14 2014-15 2015-16
SOURCE: Profit and loss account of the company.

ANALYSIS:
From the above table shows that the growth ratio of export
revenue is being decreased that is from 45.97% to 19.28% again increase
to 29.35, total revenue ratio has reduced from 45.65% to 19.01% again
increase to 30.66 and operating profit ratio has being decreased from
41.35% to 17.47% again increased to 29.53 during the 13-14,and even the
ratio of the Net profit from other activities has being decreased that is
from 56.01(12-13) to 18.35 (13-14) again increased to 39.82(15-16).the
export revenue, total revenue , operating profit , and net profit from
ordinary activities are increased in the year 15-16,when compared to the
year 12-13, 14-15 and 2014-15.
INTERPRETATION:
The above analysis shows that overall exports revenue of the

company has come down, and even the Earnings per share has come
down, so there is a severe pressure on the company to increase profits and
give good returns to the share holders of the company, and this has forced
the company to REDUCE ITS COST due to economic slowdown. The
company adopted new technique to overcome these losses. The profits
are very high in the year 2015-16. When compared to current year. The
company has to follow some cost reduction techniques to overcome this.

TABLE 4.4- SHOWING GENERATION PERFORMANCE

COMPARISON.
(Rs.in Crore)
Particulars 2012-13 2013-14 2014-15 2015-16
Hydro 15,012 14,509 12,897 12,757
Thermal 11,483 10,875 11,717 13,263
DG 139 214 451 512
Wind 11.06 14.01 13.89 12.66
CHART 4.4- SHOWING GENERATION PERFORMANCE

COMPARSION
WITH DIFFERENT POWERS
16,000
15,012
14,509
14,000
12,897 12,757
12,000 13,263
11,483 11,717
10,875
10,000
Hydro
8,000 Thermal
DG
6,000
Wind
4,000
2,000 139 214 451 512

11.06 14.01 13.89 12.66
0
2012-13 2013-14 2014-15 2015-16
SOURCE: Company annual report.

ANALYSIS:
From the above table shows the overall generation performance

has been compared between different powers that is from the above table
we came to know that the generation performance of the company is
keeps on decreasing in hydro power in 2014-15 is decreased to Rs.12,897
Crs and again decreased in 2015-16 to 12,757 Crs , when compared to
12-13, 13-14, 14-15 increasing in thermal power by Rs.13, 263 Crs in the
year 2015-16 and DG power by Rs.512 Crs in the year 2015-16 .when
compared to 12-13, 13-14, 14-15 it also decreasing in wind power by
Rs.12.66 Crs in 2015-16, when compared to 2013-14.
INTERPRETATION:
The above analysis reflects that the overall generation of the

company. Hydro and wind power is decreasing when compared to 13-14.
But the generation in thermal and DG power is increasing in 15-16
compared to other past 2 years.
The company has to work on cost cutting and reduction techniques

to increase its generation performance in hydro and wind power.

TABLE 4.5- SHOWING REVENUE CONTRIBUTION

COMPARISON OF DIFFERENT POWER PROJECTS FOR THE
COMPANY
(Rs in Crores)
Particulars THERMAL OTHER

HYDRO STATIONS
STATIONS STATIONS
Revenues -07 14,782 14,272 12,681
Revenues -08 10,539 9,970 10,714
Revenues -09 25,471 24,463 23,845
Revenues -10 26,892 26,532 24,562
CHART 4.5- REVENUE COMPARISON OF FOUR FINANCIAL

YEAR
30,000 25,471 26,892
25,000
26,532
24,463
20,000 14,782
Hydro stations
15,000 10,539 Thermal stations
14,272
23,845 Other states
10,000 24,562
9,970
12,681
5,000 10,714
0
Revenues-12 Revenues-13 Revenues-14 Revenues-15
SOURCE: Profit and loss Account of the company.

ANALYSIS:
From the above table shows the overall revenue has been
compared between different power generation stations that is from the
above table we came to know that the revenue of the company is keeps on
increasing in 2007 it was Rs.147, 82 Crs and decreased to Rs.10, 539 in
the year 2008 and increased to Rs.25, 471 in the year 2009 and again
increased to 26,892 in 2010. Hydro is increased, when compared to 2007
and 2008. Like the way the revenue from thermal station is also
increasing it was Rs.14, 272 Crs in the year 2007 and it decreased to Rs.9,
970 Crs in the year 2008 and increased to Rs.23, 845 Crs in the year 2009
and again increased to 26,532 in2010. When compared to 2007 and 2008
it has increased. Same as it also increased in other stations compared to
the year 2007 & 2008.when compared to thermal and other stations,
hydro stations are contributing more to the total revenue.
INTERPRETATION:
The above analysis reflects that the overall revenue of the company
in Different stations. Year 2015-16 is increasing its revenue in three
stations when compared to 2012-13, 2013-14, and 2014-15. Therefore the
cost techniques adopted by the company in the current year should be
continued. The year 2015-16 has more revenue compared to past 3 years.
Therefore we can assume that the company is following the cost cutting
and cost reduction techniques in manufacturing and in other activities.

TABLE 4.6- SHOWING VARIOUS TYPES OF RAW MATERIAL

CONSUMED BY THE COMPANY
(Rs in Crores)
Particulars 2015-16
2012-13 2013-14 2014-15
COAL 170.29 162.65 214.14 315.31
FURNANCE OIL 10.08 63.60 16.10 17.09
CHEMICALS 2.86 2.31 2.83 3.15
LUB OIL 12.50 10.30 4.07 5.06
Total 195.73 238.86 237.14 340.61
CHART 4.6- SHOWING VARIOUS TYPES OF RAW MATERIAL
_______________________________________________________________
________________________
350
300
250
Coal
200
Furnace oil
150 Chemicals
Lub oil
100
50
0
2012-13 2013-14 2014-15 2015-16
SOURCE: Annual Report of the company.

ANALYSIS:
The above table shows the various types of raw material consumed
the company. The more of raw material consumed by the company comes
from year 2013-14 by 238.86 Crs. Second comes from the year 2014-15
by 237.14 Crs. And at last is 2012-13 by 195.73 Crs and 340.61 Crs. The
raw material like coal and chemical has been increased compared to
previous year. But furnace oil and lub oil is decreased compared to
previous year 2015-16.
INTERPRETATION:
The above analysis clearly shows that the various types of raw
material consumed the company in generating power. The company
adopted reduction techniques in utilizing raw materials like furnace and
lub oil because both are decreased when compared to previous year.
But in raw materials like coal and chemicals are increasing compared to
previous year. Still the KPCL should utilize its raw-material in a proper
manner to increase its productivity as well as the profits.

TABLE 4.7: REVENUE SEGMENTATION

(Rs.in Crore)
Particulars HYDRO THERMAL OTHER

STATIONS STATIONS STATIONS
Revenues -10 26,892 26,532 24,562
Percentage (%) 34.52 33.16 32.32
CHART 4.7- SHOWING REVENUE SEGMENTATION IN

PERCENTAGE.
Revenues-10
Hydro station
Thermal stations
Other stations
SOURCE: Annual report of the company.

ANALYSIS:
The above table shows the revenue segmentation of the year 2009
of the company. The major revenue of the company comes from hydro
power station that is 34.52%, from thermal station it is 33.16%, and from
other station it is 32.32%.
So these are the major revenues which the company gets for its
activities. There is a slight difference between one station and the other
stations.
INTERPRETATION:
The above analysis clearly shows that the major revenue of the
company comes from hydro station.
So even the profits of the company fully based on the revenue of

the hydro generation station and thermal stations and other stations. Will
affects the total profit of the company. So a cost cutting and cost
reduction allows the company to increase its profits.

TABLE 4.8- COST ACTIVITIES OF THE COMPANY
ACTIVITIES 2013-14 2014-15 2015-16

MANUFACTURING 23.5 26.5 27.5
FINANCIAL PRODUCTS 37.4 35.7 34.5
FINANCIAL SERVICES 19.3 21.6 21.8
OTHERS 19.8 16.2 16.2
TOTAL 100% 100% 100%
SOURCE: ANNUAL REPORTS OF THE COMPANY
CHART 4.8: SHOWING COST ACTIVITIES OF THE COMPANY
40
35
30
25
Manufacturing
20 Financial products
Financial services
Others
15
10
0
2012-13 2013-14 2014-15
SOURCE: ANNUAL REPORTS OF THE COMPANY

ANALYSIS:
The above table shows the activities of the company. The main
activity of the company is from financial services, that is it provides
various information to its clients based on their requirements, but during
the year 2013-2014 the percentage has being decreased from 37.4%
(2013-2014) to 35.7 %(2014-2015) and to 34.5 (2015-16), but it has
increased its percentage in Manufacturing activities that is from 23.5%
(2013-2014) to 26.5% to 27.5%, and even there is a slight increase in its
percentage of financial products that is from 19.3% (2013-2014) to 21.6%
%(2014-2015) and again to 21.8% in (2015-16).
INTERPRETATION:
The above analysis clearly shows that the companies’
performance in manufacturing and all other is good, but there is a slight
decrease in its financial services and others. so the above analysis shows
that the companies services has come down during the year 2015-16.and
there is a slight decrease in other activities of the company when it
compared to previous year 2014 . The company should take measures to
increase its cost benefit.

SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION
FINDINGS:
 The revenue of the company has being increased during the year
2014-15 and slightly decreased in the year 2015-16.
 The operating profit of the company is being increasing during the
2015-16.
 The company’s cost is incurred more for financial services, rather
than other activities
 The company is increasing its export rates in the year 2015-
16.when it is compared to 2012-13, 2013-14 and 2014-15.
 The economic pressure has made the company to reduce its cost in
selling and administration expenses.
 Most of the revenue is contributed to the company by Hydro
Stations.
 The Most Power Generation is generated from Hydro Stations.
 The Operating and Gross Profits are increasing, when compared to
past two previous years.
 The Growth Ratio is decreasing, when it is compared with past two
previous years.
 The raw-materials are not utilized properly by the company in
different power generation stations.

SUGGESTIONS:
The analysis has shown that there has being a pressure on company
because of a slight increase in revenue and profits.
So during this economic pressure and global financial crisis
company has to take some cost cutting measures and should encourage
cost reduction programmed in the company and should balance both cost
as well as profit at the same time.
Some of the cost cutting measures the company can adapt to

overcome the financial crisis, they are as follows:
 The KPCL should reduce the importing of power from other states.
 The KPCL should adopt the latest technology in generation of
power in the power stations
 The company should cut employee bonuses and compensation
packages once in a particular year.
 Introduce productivity based payment: The productive hours they
spend in the company. This may result in salary.
 The KPCL has to cut its employee travel costs and should
withdraw free snacks and food facility in canteen.
 Reduce the overall budget of the company.
 Encourage the employees to go off pay holidays: it means
encourage the employees to take leave, but during this leave period
the employee cannot draw leave salary.

 Strictly instruct the employees to turn off the monitor, when it is

not in use, so that company can eliminate unnecessary waste and
can reduce its power consumption.
 Clearly monitor the telephone bills to prohibit surplus payment.
 Provide any regional vacations (like Christmas, ramzan etc), during
this time the company should not pay the amount for the vacations.
 Try to reduce phone calls and instruct the employees to undertake
the interactions through emails.
 Reduce postal charges by utilizing electronic media like internet.
 Avoid unnecessary printing cost.
 Reduce the salary for the fresher’s during the training period.
 The KPCL should adopt Cost reduction and cost cutting as a tool to
eliminate unnecessary cost in generation of power.
 Company should increase the operating efficiency in controlling
the operating expenses, to achieve net profit margin.
 The area chosen for cost reduction is:
Administrative overheads: office stationary expenses (printing
expenses.

Purpose of adapting PRINT CENSOR:
 To eliminate unnecessary printing cost and make employees

to use only for company purpose.
 To clearly monitor the printing activities.
 To allocate standards or number of quotas for taking print
out for each department.
 To forecast the requirements of stationary.
 To clearly check the printing data and the particular
employee who has taken print outs.
 To determine the per employee cost with respect to printing
activities.
 Adopting print censor KPCL will save time and money.
I like to suggest if the company adopts this print censor method

that reduces the cost of printing and stationary.

CONCLUSION:
Based on the study made at KPCL, on Cost cutting and Cost

reduction, the following conclusions are made by researcher-
 Cost cutting is an temporary arrangement to reduce the cost which

is because of the following reasons they are:
 The role of cost cutting is for short period or may be for long
period based on the below situations.
 Economic pressure.
 Financial crisis.
 Economy slow down.
 So cost plays a major role during the economic pressure which

enables the company to bring the cost down till the pressure goes
on.
 Cost reduction is a routine exercise which is carried out for

attainment of operational efficiency. Cost reduction is a corrective
function because it challenges the predetermined costs and seeks to
improve the performance by reducing cost; it is a continuous
function of self-analysis for making more and more improvements
in performance.
 If KPCL adopt this method it can easily eliminate unnecessary cost

in Manufacturing and Administration activities.

 The role of COST REDUCTION is for a longer period of time

and the reduction made in the services are real in nature and will be
playing a role by implementing innovative ideas from time to time
which is done as a continuous activity.
I am completely indebted to the company and learned a lot. It’s my

immense opportunity to do Project report in KPCL Bangalore.

BIBLIOGRAPHY
 DR.N.K. Agarwal, Cost Accounting, Shuchita

Prakashan Publication Ltd, Allahabad, 5th Edition.
 M.N. Arora, Cost Accounting, Himalaya Publications
Private Ltd, Mumbai, Edition 2006.
 Jain.S.P, Narang.K.L, Cost Accounting, Kalyani
Publication, New Delhi, Edition 1999.
REPORTS:
 FINANCIAL REPORTS OF KPCL.

 JOURNALS AND ANNUAL REPORTS OF THE
COMPANY.
 ANNUAL BUDGETS OF KPCL.
WEBSITE:
www.kpcl.com
www.google.com
www.karnatakapower.com

RAM Cost Cutting and Reduction

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

RAM Cost Cutting and Reduction

Uploaded by

Copyright:

Available Formats

A STUDY ON ROLE OF COST CUTTING AND COST REDUCTION IN KPCL

Karnataka Power Corporation Limited (KPCL) is a state-owned

- Provides key company information for business Intelligence needs.

APS COLLEGE OF COMMERCE 1

Jan 18, 2009: Chhattisgarh to Tide Karnataka's Power Crisis, Will

With the consent of Finance Director of KPCL Company Ltd. To meet

APS COLLEGE OF COMMERCE 2

OBJECTIVE OF THE STUDY:

Introductory chapter professes on the cost cutting and cost

Next is the methodology that used to do a study. Through a face to

APS COLLEGE OF COMMERCE 3

Towards the end, a chapter a finding is drawn to shown the

Next part is suggestion, in order to modify current system for a

The research study was an enlightening experience to me in three

APS COLLEGE OF COMMERCE 4

Cost cutting refers to temporary cut in cost which is

Cost cutting should be seen as a component of a consolidation strategy,

APS COLLEGE OF COMMERCE 5

The reduction of the amount of money spent on the operations of an

Advantages of Cost cutting:

 It is the only way which can be adapted to overcome the

Disadvantages of Cost cutting:

 Excessive cost-cutting may affect productivity and quality

APS COLLEGE OF COMMERCE 6

Limitations of Cost Cutting:-

Cost reduction is the key word for success in today’s global

APS COLLEGE OF COMMERCE 7

Challenging and redefining the existing business objectives based

According to survey has found that information

APS COLLEGE OF COMMERCE 8

Advantages of cost reduction:

Danger of cost reduction:

COST REDUCTION STRATEGY :

 Designed Cost Reduction.

APS COLLEGE OF COMMERCE 9

In 2006, CAPS released a critical issues report entitled Defining Cost

 critical to the sourcing professional’s mission of reducing costs and

 cost reductions come in two different categories: “hard” cost

 a great deal of supply management’s efforts results in cost

 flexible and comprehensive IT systems are crucial, as they are the

 metrics to track cost savings and cost avoidance should be

 The key to success is to create a proper incentive structure for

APS COLLEGE OF COMMERCE 10

According to CAPS study, It has also developed a deep into

Cost Reductions may be “Hard” or “Soft”.

“Hard” cost savings, understood as tangible bottom line reductions, are

 year-on-year saving over the constant volume of purchased

 actions that can be traced directly to the P&L,

 direct reduction of expense or a change in

 process improvements that result in real and measurable cost or

 examination of existing products or services, contractual

 Net reductions in prices paid for items procured when compared to

APS COLLEGE OF COMMERCE 11

 avoidance is a cost reduction that does not lower the cost of

 when there is an increase in output/capacity without increasing

 Avoidances include process improvements that do not immediately

STAGES IN COST REDUCTION:

APS COLLEGE OF COMMERCE 12

Stage 1- Cost Cutting

Cost Cutting involves cuts in spending based on arbitrary criteria.

Costs are divided into committed and discretionary categories.

Cuts target discretionary before committed; large before small; expedient

Performance measured against historical standards.

Stage 2- Cost Management