budgeting contrl in ntpc

Power Scenario in India

Overview

The power industry in India has been characterized by energy shortages. In fiscal2004, demand for electricity exceeded supply by an estimated 7.1% in terms of total requirements and 11.2% in terms of peak demand requirements. Although power generation capacity has increased substantially in recent years, it has not kept pace with the growth in demand or the growth of the economy generally.Historically, state and central governments entities played the dominant roles in the development of the Indian power industry. However capacity growth did not keep pace with demand, due to inadequate investment and the poor financial health of the SEB’S. In recent years, in light of persistent shortages, the government has taken significant action to restructure the industry and attract investment. This has included measures to restructure the SEB’S and improve their financial health. In addition, the government has liberalized policies relating to the generation and distribution sectors.

History

On a commercial basis, electric power generation in India is almost a century old but substantial power development efforts began only after independence. At the launch of the first five year plan in 1951, power generation was recognized as a major input for the country’s economic development and was accorded high priority. As a result of plan efforts, India’s installed power generation capacity grew to 16662 MW in 1974. but in the mid seventies it was recognized that relying solely on the SEB’S for power development was leading to power shortages and large inter-state imbalances, particularly in light of the uneven distribution of coal and hydroelectric resources throughout the country . to supplement the efforts of the states, the central government increased its role in the generation and transmission of power NTPC and NHPC were created in 1975 by the central government to establish thermal and hydro generating plants and to installed associated interregional transmission systems. In the same year, the central electricity authority (CEA) was established in its present form to develop a uniform national power policy. Additional power generating companies were established later. In 1992, the central entity known today as the Power Grid Corporation of India Limited (“POWERGRID”) established to construct, operate and maintain inter-state and interregional transmission

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systems. These entities are collectively referred to as the Central Power Sector Utilities (“CPSUs”) and are directly accountable to the MoP are the Power Finance Corporation (PFC) and the rural electrification corporation. The power trading corporation of India limited (“PTC”) was formed in 1999 to allow surplus power supplies to be efficiently traded to utilities with deficit power supplies. PTC is promoted by NTPC, POWERGRID, NHPC, and PFC.

Present scenario

As on March 2009, the total installed capacity of utilities stood at 112058 MW. Most of this installed capacity is under government control. The state governments control nearly 60% of the power generating capacity. Currently the central government owns about 30% of the power generating capacity in the country, the majority of which is in the thermal sector. Of the total installed thermal capacity of 25366.50 MW in Central sector, NTPC's share is 20092 MW (76.61%).

Source Central State Private Total % shareof total

Coal 21417.51 36302 4414.38 62130.89 59.22

Gas 4419.00 2661.70 4082.40 11163.10 10.64

Diesel 0 582.89 551.94 1134.80 1.08

Total Thermal 25836.51 39546.59 9045.72 74428.82 70.94

Hydro 3049.00 22636.0 576.20 26261.22 25.03

Nuclear 2720.00 0 0 2720.00 2.59

Wind 0 62.86 1444.60 1507.46 1.44

Total 31605.51 62245.47 11066.52 104917.5 100.00

Source MIS of NTPC1.7

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Power scenario in KOTA

Electric power is made available to Kota from the genration of electricity from Rana Pratap Sagar (172 mw), Jawahar Sagar (99 mw), Kota Thermal Power Station (850 mw), Rajasthan Atomic Power Project (440 mw). The third stage of Kota Thermal Power Plant (210 mw) has started, increasing thereby the total capacity to 850 mw. Out of the total 811 villages, 782 have were electrified upto 31 March 2000.

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Introduction of NTPC

NTPC is a public sector company incorporated in the year 1975 to accelerate power development in the country as a wholly owned company of the government of India. NATIONAL THERMAL POWER CORPORATION Ltd is the largest thermal power generating company of India. NTPC is the 6th largest in terms of thermal power generation and the second most efficient in terms of capacity utilization amongst the thermal utilities in the world. Within a span of 34 years, NTPC has emerged as a truly national power company, with power generating facilities in all the major regions of the country.

On 31 march 2009, its installed capacity was 23749 mw through its 13 coal based (19480 MW), 7 gas based (3955 MW) and 3 joint venture projects (314 MW). NTPC acquired 50% equity of the SAIL power supply corporation Ltd. (SPSCL). This JV company operates the captive power plants of Durgapur(120 MW), Rourkela(120 MW) and Bhilai(74 MW). NTPC is also managing Badarpur thermal power station (705 MW) of government of India.

Development of NTPC

At the time of independence in 1947, India had power generating capacity of a meagre 1362 mw. Power was not available in villages or rural areas, and only a few urban centres had electricity. Generation and distribution of power was carried out primarily by private utility companies. After independence, electricity was made subject to the concurrent jurisdiction of the concurrent jurisdiction of the state and central governments, although parliament was given the ability to exercise preemptive power. The electricity (supply) act, 1948 enacted in 1948, paved the way for creation of state electricity boards (SEB’s). the vertically integrated SEB’s were assigned the sole responsibility of generation, transmission and distribution of electricity within the state. In mid seventies it was realized that uneven distribution of coal and hydel resources within the country, power development only by SEBs as spatial units would not only create large inter-state imbalances but also they would not be in a position to meet the increasing power demand. At this juncture, government of India decided to create generating companies in the central sector to supplement the efforts of states. Consequently, national thermal power corporation ltd. (NTPC) and

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national hydroelectric power corporation ltd. (NHPC) were created in the year 1975 in the central sector to set up thermal projects and hydro projects respectively.

Business Description

National Thermal Power Corporation is a thermal power generating company in India. A public sector company wholly owned by the government of India, it has power generating facilities in all the major regions of the country. The company's core business is the engineering, construction and operation of power generating plants. It also provides consultancy to power utilities in India and abroad.Promoters The promoter of the company is the president of India acting through the MoP, and holds 100% of the pre-issue paid up equity share capital of our company and will hold at least 89.5% of the fully diluted post-issue paid up equity share capital of our company.

NTPC’S SHARE IN INDIAN POWER SECTOR

As at the end of March 2009, NTPC’s installed capacity is about 19.79% of the total installed capacity of the country and it has contributed to 27.09% of the total power generation of the country during 2008-09. After adding the capacity and generation contributed by joint venture companies listed above, NTPC’s share of installed capacity increases to 20.06% accounting for 27.51% of the total generation in the country.

Growth of NTPC After incorporation in November 1975, NTPC has grown to become not only the largest utility of the country but also a leading power utility of international acclaim. The installed capacity of NTPC as on March 31, 2009 is 23749 MW through its 13 coal based (19480 MW), 7 gas/liquid fuel based (3955 MW) and 3 Joint Venture (coal based) Projects (314 MW). NTPC has generated 161557 million units (MUs) of electricity in 2004-05 including 2447 million units generated by JV Companies.

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Various plants of NTPC and their installed capacity

S.No. Coal based State CommissionedCapacity(MW)

1 Singrauli Uttar Pradesh 2,0002 Korba Chattisgarh 2,1003 Ramagundam Andhra Pradesh 2,6004 Farakka West Bengal 16005 Vindhyachal Madhya Pradesh 22606 Rihand Uttar Pradesh 15007 Kahalgaon Bihar Bihar 8408 Dadri Uttar Pradesh 8409 Talcher Kaniha Orissa 300010 Unchahar Uttar Pradesh 84011 Talcher Thermal Orissa 46012 Simhadri Andhra Pradesh 100013 Tanda Uttar Pradesh 440

Total (Coal) 19480

Gas based

14 Anta Rajasthan 41315 Auraiya Uttar Pradesh 65216 Kawas Gujarat 64517 Dadri Uttar Pradesh 81718 Jhanor-Gandhar Gujarat 64819 Kayamkulam Kerala 35020 Faridabad Haryana 430

Total (Gas) 3,955Through Joint Venture 314Grand Total (Coal + Gas + JV)

23,749

Power Stations Managed by NTPCSource MIS of NTPC1.1

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COMPLETED PROJECTSS.No Name of the

ProjectCapacity

(MW)Location(State)

PrimaryFuel

Cost(INR

Million)1 Korba 2100 Chhattisgarh Coal 16252.5

02 Ramagundam 2100 AndhraPradesh Coal 20592.2

03 Singrauli 2000 Uttar Pradesh Coal 11906.9

04 Farakka 1600 West Bengal Coal 31842.2

05 Vindhyachal –I 1260 MadhyaPradesh Coal 14603.7

06 Rihand 1000 Uttar Pradesh Coal 23874.0

07 Talcher -I 1000 Orissa Coal 25921.8

08 Vindhyachal- II 1000 Madhya Pradesh Coal 27020.0

09 Simhadri 1000 Andhra Pradesh Coal 36507.9

010 Kahalgaon 840 Bihar Coal 17158.9

011 NCTPP, Dadri 840 Uttar Pradesh Coal 16692.1

012 Talcher (Taken

Over) 460 Orissa Coal 3560.00

13 Tanda (Taken Over)

440 Uttar Pradesh Coal 6070.00

14 Unchahar – I (Taken Over)

420 Uttar Pradesh Coal 9250.00

15 Unchahar – II 420 Uttar Pradesh Coal 14120.90

16 Ramagundam-III 500 Andhra Pradesh Coal 18184.60

17 Talcher- II 2000 Orissa Coal 66488.00

18 Dadri Gas 817 Uttar Pradesh Gas 9603.50

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19 Auraiya 652 Uttar Pradesh Gas 6787.7020 Jhanor-Gandhar 648 Gujarat Gas 25000.0

021 Kawas 645 Gujarat Gas 15995.7

022 Faridabad 430 Haryana Gas 11636.0

023 Anta 413 Rajasthan Gas 4189.7024 Kayamkulam 350 Kerala Naphtha 13105.8

0TOTAL 22935* 446364.

1*In addition to the above, one unit of 500 MW in respect of Rihand Stage-II has been commissioned increasing the total installed capacity to 23435 MW as on March 31, 2009.


APPROVED PROJECTS UNDER CONSTRUCTIONS.No

Name of the Project

Capacity(MW)

Location(State)

PrimaryFuel

EstimatedCost(INR Million)

CompletionSchedule

1 Vindhyachal-III

1000 M.P. Coal 42015 Aug. 2011

2 Unchahar – III

210 U.P. Coal 9393 Nov. 2010

3 Sipat II 1000 Chattisgarh

Coal 40397 Apr. 2010

4 Sipat I 1980 Chattisgarh

Coal 83234 Aug. 2012

5 Barh 1980 Bihar Coal 86930 Nov. 2012TOTAL 6170 261969


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NTPC also operates the following stations as an equal partner of the Joint Venture Companies:

JOINT VENTURE PROJECTS

S.No Name of the Project

Capacity(MW)

Location(State)

PrimaryFuel

JV Partner

1 Durgapur 120 West Bengal

Coal NSPCL

2 Rourkela 120 Orissa Coal NSPCL

3 Bhilai 74 Chattisgarh

Coal BESCL

TOTAL 314


After adding capacity of 314 MW contributed by Joint Venture Companies, the total installed capacity of NTPC as on 31.3.2009 is 23749 MW.

Bhilai Expansion project undertaken with JV partner BESCL is under construction and is scheduled to be commissioned in X plan. The project shall consist of two units of 250 MW each.

JOINT VENTURE PROJECTS UNDER CONSTRUCTIONS.No Name of the

ProjectCapacity(MW)

Location(State)

PrimaryFuel

JV Partner

1 Bhilai Expansion 500 Chattisgarh

Coal BESCL

TOTAL 500


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Financial performance

Balance Sheet

INR MillionAs At 31st March

2007 2006 2005

Net Fixed Assets 212,545 198,650 176,780Capital Works In Progress, Contn Stores.

74,953 63,863 63,863

Inventories 17,380 17,712 20,142Receivables 4,699 124,349 115,328Investments 173,380 36,674 40,281Other Current Assets

113,389 52,071 42,302

Total Assets 596,346 493,319 460,417Long Term Debt 149,415 127,090 113,161Short Term Debt 5,113 5,067 2,651Payable On Capital Account

10,855 12,072 9,196

Deferred Revenue (Net)

1,591 184 - 72

Development Surcharge Fund

3,784 0 0

Other Current Liabilities & Prov.

70,086 33,778 48,956

Total Liabilities 240,844 178,191 173,892Equity Capital 78,126 78,126 78,126Reserves & Surplus

277,376 237,002 208,399

Net Worth 355,502 315,128 286,525Total Liabilities + Net Worth

596,346 493,319 460,417

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Profit And Loss Account

INR Million

Year Ending 31st March

2007 2006 2005

Sales 188,371 190,206 177,868Consultancy & Other Income

71,271 8,293 7,513

Total Revenue

259,642 198,499 185,381

Fuel 122,150 312 103 ,991Emp Cost 8,835 8,213 8,036Repair & Maintenance Cost

5,897 5,846 6,153

Admn. & Overheads

3,916 5,023 5,379

Depreciation 20,232 15,291 13,784Prior Period Income (Net)

183 803 1

Other Costs Including Prov.

. 5,835 5,556 1,837

Total 167,048 151,044 139,181Profit Before Interest &Finance Charges

92,594 47,455 46,200

Finance Charges

92,594 47,455 46,200

Interest 5,994 5,487 6,900Finance Charges & Rebate

27,703 4,429 1,780

Total 33,697 9,916 8,680Profit Before Tax

58,897 37,539 37,520

Tax 6,289 1,464 2,124Profit After Tax 52,608 36,075 35,396

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KEY INDICATORS

Ratio 2007 2006 2005Total Liabilities to Net Worth

0.68 0.57 0.61

Interest Cover (post tax) (Times)

9.78 7.57 6.13

Debt to Equity 0.42 0.40 0.39EBDIT to Interest Expenditure

14.20 10.63 8.44

Debt Service Coverage Ratio

4.35 3.48 3.55

Notes: Figures of the previous years regrouped wherever necessary.

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Major Product & ServicesNational Thermal Power Corporation (NTPC) is a thermal power generating company in India. Its products and services include:

ProductThermal Power

Services

Engineering

Construction

Management

Consultancy Services

Major customers

The SEBs is the largest purchasers of power from NTPC and accounted for over 99% of their sales of power in fiscal 2005, 2006 and 2007.

Vision

“NTPC, a front runner in the Indian power sector, the vision is to be one of the largest and best power utilities of the world and thereby contributing to India’s emergence as one of the world’s leading economics.”For the new millennium NTPC’s vision is inspired by a glorious past, vibrant present and a brilliant future.

\

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Mission

Make available reliable and quality power in increasingly large quantities at competitive prices and ensure timely realization of revenues.

Adopt a broad based capacity portfolio including hydro power, LNG, nuclear power, and non-conventional and eco-friendly fuels.

Plan and speedily implement power projects using state-of-the-art technologies.

Be an integrated utility by implementing strategic diversifications in areas such as power trading, distribution, transmission, coal mining, coal benefication etc.

Develop a strong portfolio of profitable businesses in overseas markets including technical services, generation assets etc.

Continuously attract and develop competent and committed human resources to match world standards.

Lead fundamental and applied research for adoption research for adoption of state-of-the-art technologies, breakthrough efficiency improvements and new fuel.

Lead developmental efforts in the Indian power sector including assisting state utility reform, policy advocacy etc.

Be a socially responsible corporate entity with thrust on environment protection, ash utilization, community development, and energy conservation.

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Objectives

Business portfolio growth – To further consolidate NTPC’s position as the leading thermal

power generation company in India and establish a presence in hydro power segment.

To broad base the generation mix by evaluating conventional and non- conventional sources of energy to ensure long run competitiveness and mitigate fuel risks.

To diversify across the power value chain in India by considering backward and forward integration into areas such as power trading, transmission, distribution, coal mining, coal benefication, etc.

To develop a portfolio of generation assets in international markets.

To establish a strong services brand in the domestic and international markets

Customer focus- To foster a collaborative style of working with customers, growing to

be a preferred brand for supply of quality power. To expand the relationship with existing customers by offering a

bouquet of services in addition to supply of power e.g. trading, energy consulting, distribution consulting, management practices.

To expand the future customer portfolio through profitable diversification into downstream businesses, inter alias retail distribution and direct supply.

To ensure rapid commercial decision making, using customer specific information, with adequate concern for the interests of the customer.

Performance leadership- To continuously improve on project execution time and cost in order

to sustain long run competitiveness in generation. To operate& maintain NTPC stations at par with the best run utilities

in the world with respect to availability, reliability, efficiency. Productivity and costs.

To effectively leverage information technology to drive process efficiencies.

To aim for performance excellence in the diversification businesses. To embed quality in all systems and processes.

Human resource development-15

To enhance organizational performance by institutionalizing an objective and open performance management system.

To align individual and organizational needs and develop business leaders by implementing a career development system.

To enhance commitment of employees by recognizing and rewarding high performance.

To build and sustain learning organization of competent world class professionals.

To institutionalize core values and create a culture of teambuilding, empowerment, equity, innovation and openness which would motivate employees and enable achievement of strategic objectives.

Financial soundness – To maintain and improve the financial soundness of NTPC by prudent

management of the financial resources. To continuously strive to reduce the cost capital through prudent

management of deployed funds, leveraging opportunities in domestic and international financial markets.

To develop appropriate commercial policies and processes this would ensure remunerative tariffs and minimize receivables.

To continuously strive for reduction in cost of power generation by improving operating practices.

Sustainable power development- To contribute to sustainable power development by functioning as a

responsible corporate citizen and discharge social responsibilities in the areas of environment protection and rehabilitation.

The corporation will strive to utilize the ash produced at its stations to the maximum extent possible.

Research and development- To carry out research and development for efficient & reliable

operation of power plants in the country.

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Supply and demand

Although electricity generation capacity has increased substantially in recent years, the demand for electricity in India is still substantially higher than the available supply. In fiscal 2004, India faced an energy shortage of approximately 7.1% of total energy requirements and 11.2% of peak demand requirements.

The following table presents data showing the gap between the total requirements for electricity versus the total amount of electricity made available from fiscal 2000 to fiscal 2004.

Actual Power Supply Position (Fiscal 2000-Fiscal 2004)

Fiscal year Requirement (Million units)

Availability(million units)

Surplus/deficit(+/-)(million units)

(%)

2000

2001

2002

2003

2004

480,430 507,216 522,437 545,983 559,264

450,494 467,400 483,350 497,890 519,398

-29,836 -29,816 -39,817 -48,093 -39,866

-6.2% -7.8% -7.5% -8.8% -7.1%


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Organization of the power industry

Generation Transmission Distribution Consumption

POWER TRADING COMPANES

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CPSUs

SEBs

IPPS and PRIVATE LICENSEESCAPTIVE

POWER GRIDSEBs

PRIVATE UTILITIES

DISTRIBUTION COMPANY

PRIVATE LICENSEES

SEBs

CAPTIVE CONSUMERSEND CONSUMERS

Major highlights for the year ended 31st march, 2011

100% realization for the second year in succession. With a share of 20.15% in the total installed capacity of the country,

NTPC generated 27.09% electricity during 2010-11. NTPC stations recorded a PLF of 87.5% which is the highest for any

financial year since inception. The PLF during previous year was 84.4%. NTPC’S coal stations achieved an operating availability of 91.2% NTPC recorded highest over generation of 159.11 billion units in 2010-

11 as against 149.17 billion units during previous year. The company added 2000 mw during the year 2010-11 taking its total

capacity to 23,749MW. Provisional and unaudited sales of energy of Rs.221,990 million during

the year 2010-11 as against Rs.188,519 million for the year 2009-10. However, provisional and unaudited gross revenue is Rs.250,577 million

during 2010-11 as against Rs.259,642 million for the year 2009-2010 including the effect of one-time settlement scheme for the earlier years.

Provisional and unaudited net profit after tax for the year 2010-11 is Rs.52920 million as compared to Rs.52, 608 million during the year 2009-10. Excluding the effect of one time settlement scheme of earlier years, the net profit after tax for the year 2009-10 was Rs.39, 869 million.

NTPC IPO over scribed by 13.14 times. Borrowings during the year Rs.30099 million for on-going projects. Capital expenditure incurred in 2010-11 on capital schemes Rs.52, 970

million compared to Rs.45, 807 million in 2009-10. NTPC has achieved all the targets to be rated “excellent” during 2010-11

for the eighteenth consecutive year since inception of the MOU system. Construction works on 9470 MW in progress. Further, work for 2600

MW (1300 MW) capacity from gas projects expansion at Kawas and Jhanor gandhar to start shortly.

Main plant packages for 4460 MW capacity for Sipat-I, (3660 MW)

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NTPC (Anta)(Pioneering green power)

IntroductionThe Anta gas power project (ANGPP) is the first gas power plant set up by NTPC in 1989.Anta project is the first in the series of combined cycle power projects. The installed capacity of ANGPP-stage I is 419MW comprising 3 gas turbines of 88 MW each and a steam turbine of 155MW. The gas source is the HBJ pipeline from south basin gas fields and the water source is the kota right main canal. For this project NTPC had acquired 356 acres of private agricultural lands from 152 families residing in three villages: anta, rataria and tamkheda.

Location The ANGPP is located at anta which is some 60 kms, south-east of Kota, and is situated in Baran district of rajasthan.

Human resourceThe project has a strength of 228 committed employees which includes 93 executives, 05 supervisors and 130 workmen. For the purpose of human resource development, a training institute has been developed for imparting self developmental programmes and improving professional skills of employees. Suggestion schemes, quality circles and professional circles have been formed in most of the departments to strive all around development.

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PROJECT PROFILE ANTA STAGE-IInstalled capacity : 413 MW

Location : Dist. Baran, RajasthanGas source : HBJ Pipeline South Basin Gas Field Water source : Kota Right main canalUnit Size :3x88 1x155Unit : Unit-I 88MW GT,Commissioned January 1989 Unit-II 88MW GT, March 1989 Unit-III 88MW GT May 1989 Unit-IV 155 MW ST, March 1990Beneficiary States: Rajasthan, Uttar Pradesh, Himachal Pradesh, Jammu & Kashmir, Chandigarh, Haryana, Punjab and DelhiApproved : Rs.418.97 crore Investment

Quality Policy NTPC-Anta is committed to customer satisfaction by providing reliable and quality power through system approach and dedicated efforts of all employees.

Environmental Policy We at NTPC-Anta are committed to continually improve our Environmental Performance through prevention of pollution in our activities. This, we strive to achieve by : Complying with the applicable legislation Conserving natural resources Reducing leakage and gaseous emissions Safe waste management Creating awareness about environmental responsibility and competence on Environmental Management System.

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Introduction

Meaning of budget

A budget is a detailed plan of operations for some specific future period. It is an estimate prepared in advance of the period to which it applies.

Budget general idea

Budgets are plans, controls, commitments, fiduciary enablers, and performance measures. The budget represents ongoing programs and commitments as well as new initiatives. It focuses on operational needs but also includes capital needs. The budgeting process is integrated with the planning process to help unit coordinators (i.e., budget heads) to develop budgets that are consistent with their unit objectives as well as the strategic goals and objectives.

Budgeting in a business sense is the planned allocation of available funds to each department within a company. Budgeting allows executives to control overspending in less productive areas and put more company assets into areas which generate significant income or good public relations

In a personal financing sense, budgeting can mean estimating monthly living expenses based on previous bills and wages.

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Objectives

Budget essentially lays down the physical and financial operating plan/targets for the budget period and lays down the standards/yardsticks for inputs and the outputs associated with the various activities. It is an important tool for managerial appraisal and control. It also provides an estimate of internal generation of funds from operations, which would be available for financing the capital expenditure, meeting the loan repayment obligations, etc.

The main objectives of the budgeting system are to ensure that:

• Specific budgets in physical and financial terms are laid down for all activities and the respective budget / responsibility / cost centers are held accountable for them• Co-ordination in planning so that all the inputs necessary to achieve the physical targets are available in time• There is a basis of control over operational expenses and working capital and to inculcate greater cost consciousness in the organization• A basis for forecasting profitability and planning for cash/ funds is provided• Standards and yard sticks are laid down for measuring performance in physical and financial terms, ascertain variances, identify responsibilities for under-performance, to analyze contributory reasons thereof and determining corrective actions

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Advantages

1. Brings economy in working

2. Buck-Passing avoided

3. Establishes coordination

4. Guards against undue optimism

5. Acts as a safety signal

6. Decrease in production cost

7. Optimum Capitalization

Limitations

1. The accurate position of the Business can not be estimated due to

changing economy.

2. Experience must be required.

3. Cooperation Required

4. Implementation Problem

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Introduction

This report describes the budgeting system for the stations that are in the operation phase. The report describes the budget preparation process, budget formats and the reporting requirements to monitor the budget.

Objectives

Budget essentially lays down the physical and financial operating plan/targets for the budget period and lays down the standards/yardsticks for inputs and the outputs associated with the various activities. It is an important tool for managerial appraisal and control. It also provides an estimate of internal generation of funds from operations, which would be available for financing the capital expenditure, meeting the loan repayment obligations, etc.

The main objectives of the studying budgeting system of NTPC are:-

To ensure specific budgets in physical and financial terms are laid down for all activities and the respective budget / responsibility / cost canters are held accountable for them.

Standards and yard sticks are laid down for measuring performance in physical and financial terms, ascertain variances, and identify responsibilities for under-performance, to analyze contributory reasons thereof and determining corrective actions.

Source of data collection

Primary sources

Observation

Notation

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Secondary sources

Manuals of NTPC

Magazines

Monthly publications of NTPC

Books

Reports

Journals

MIS of NTPC Anta

Websites

Other literature

LimitationsLimited time of training.

Figures are not available for study.

Employees are very busy so they can not give sufficient time.

CoverageIn this report researcher cover the introduction of NTPC and its development.

Current & completed projects of NTPC.

Budget procedure of NTPC.

Budget period and time schedule for preparation of budget in NTPC.

Budget formats which are use in NTPC.

Budget monitoring system in NTPC.

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STUDY ONBUDGETING PROCEDURE IN NTPC

OVERALL FRAME WORK OF BUDGETING SYSTEM

This part provides an overall framework of the performance based budgeting system for O&M activity.Performance budgetingThe budget estimates should reflect both the financial and physical targets. The financial targets should be worked out based on the budgeted physical outputs/ inputs and activities for the budget period.

Key factors

The factors determining the performance of the station include mainly the generation (volume and revenue), O&M expenses and working capital management.The key factor for the budget estimates shall be the generation level. The generation level should be fixed keeping in view the following:-• Generating capacity• Availability of units• Machine condition and overhauling of units• Fuel availability• Thresh-hold level of generation/ availability to recover the full fixed cost• Maximization of incentives or and minimization of disincentives• The following aspects should also be kept in mind while finalizing the generation targets:-• Under the ABT regime, demonstration of power supply in line with the declared availability assumes importance to avoid any penalties/ Unscheduled interchange charges(UI)• Sales realization level.• The norms as per the Tariff Order, Norms as per design, past/ actual performance and perspective plan should form the basis for fixing the budget targets.

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Budget Centre

Each station is a budget centre and hence each station should prepare the budget estimates.The station level budgets are to be consolidated at the region level (RHQ) and then at theCorporate Centre (CC) level to arrive at the company budget. The RHQ and CC would also be budget centers for the activities controlled by them and the expenditure incurred at the RHQ and CC level.

Budget concept

Within a budget centre, the “bottom up approach” should be followed in formulating the budget. The budget estimates should be prepared by the department/ cost centre responsible for the incurrence of expenditure/ controlling the budgeted activities. The budget estimates should be based on Zero Based Budgeting concept i.e. each and every item of the budget is to be assessed without any reference to the expenditure incurred on this account in the past. The review of the budget should also be based on the concept of zero-based budgeting.

Budget heads

The stations should compile the budgets for the cost centre/ cost heads as per the Costing system. The budget estimates for the administrative costs should be prepared under the account heads as per the Chart of Accounts.The budgets should be presented primarily under the budget heads and the cost centre wise information for the major cost items shall act as the basis to review and monitor the budgets.

Budget periodThe budget is to be prepared on an annual basis for a financial year. The process of preparation of the budget shall start in the month of January and the final approved budget for the next financial year should be in place by the 31st of March. The budget estimates are to be prepared in respect of the following:• Revised estimates for the next financial year• Budget estimates for the year thereafter

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The annual budgets should also be broken into monthly targets. In addition, the budget centre should project the balance period performance on a quarterly basis. This process shall enable review of the actual performance during the year and to take corrective/ remedial measures to achieve the budgets. This exercise is in terms of control only.

All comparisons and variance analysis should be with respect to the original budgeted figures only (i.e. not with respect to the performance projected for the balance period).

Budget approval

The budget estimates are to be reviewed and recommended by the budget committee at theStation and at RHQ and are to be approved at CC level.The stations should prepare and submit the initial proposals to RHQ. At RHQ, the budget estimates should be consolidated for the region and then submitted to CC.The approved initial proposals should form the basis for the final budget estimates. The budget centre should submit a copy of the final budget to RHQ and CC. The monthly phasing of the final budget should be compiled on the basis of the approved initial proposal.

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BUDGETING PROCESS

This part provides the process for budget formulation at the Station and review at RHQ and finalization at CC.

Procedure: Preparation and submission of Initial Budget Proposal

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31

S.No

Activity PersonResponsible

Frequency Remarks

1 Issue a circular to all the stations for compilation of the budget estimates containing the following instruction/ information:• Target dates for submission ofinitial/final budget proposal• Responsibility for preparation of estimates• Approving authority• Main issues to be addressed• A list of formats/ documents to be submitted to RHQ and CC• Any amendments effected to the formats/ basis of compilation, etc. from the previous year• Circulars, if any, to be adhered to• Interest on loans allocated to the stations• Specific requirements, if any

F&A –Commercial,CC

By the 1st weekof January

2. Receive the budget circular from CCIssue a circular to all the concerned departments/ sections for preparationof the estimates specifying the target dates for formulation of the budget estimates along with the formats for providing the estimates

F&A –Station

By 1st week ofJanuary (within 3 daysof CC-Fin Comm’scommunication)

S.No


Frequency Remarks

Preparation of budget estimatesGross Generation budget

3. Provide the following Information to the O&E Group of stations:

By the 12th ofJanuary

Procedure : Final BudgetS.No


Frequency Remarks

1 Receive the approved budgetestimates from CC

F&A –Station

By 31st ofMarch

2 Discuss the budget as approved by the Corporate Centre with the respective departments Carry out the necessary amendments to the budget estimates and finalisethe budget Forward the final budget estimates to the station budget Committee for hisReview

O&E/ MTP/F&A

By 1st weekof April

3 Review, hold discussions with the officials of the departments.

BudgetCommittee-Station

By 1st weekof April

4 Forward the final budget to RHQ and CC

F&A –Station

By 1st weekof April

5 Receive the approved final budgetfrom stations

F&A – FinanceCommercial Group, CC RHQ- F&A Deptt

By 30thApril

Source Manual of NTPC 4.2

32

Process: Monthly/ Quarterly reporting

This process describes the procedure for generation of periodic reports for reporting the actual performance against the budget estimates.

Procedure: Monthly ReportsS.No


Frequency Remarks

Physical parameters and generation1 At the end of every

month, capture the details of operating parameter’s, from the Online Plant PerformanceMonitoring System.Review the performance and compare with the budget estimates Forward the report for review at the Monthly Operations Review Meetings

O&EDepartment

1st of thefollowingmonth

Actual expenditure vs. budgeted2 Generate a report of the

actual expenditure incurred against budgets after ensuring that the books for the month have been closed Forward the report to the concerned departments for comments on the significant variations with the budget estimatesReceive the comments from the various departments, compile the same and forward the

F&A –Department

7th of thefollowingmonth

33

reports alongwith the comments on the variances and present the same for review at the Monthly Budget Review Meetings

3 Receive the report, review the same along with the comments of the officials, hold discussions with therespective officials (if required) and recommend the future course of actionForward the minutes of the meeting to the ED, RHQ and CC for review and monitoring

BudgetReviewMeetings

Monthly

Report on the expected performance for the balance period4 Generate a report on the

budgeted performance for the balance period (department wise) Forward the report to the various departments for review and commentin respect of significant variations

F&ADepartment

Quarterly

5 Review the reports and provide the comments on the variations with the expected performance for the balanceperiod and after approvals from the competent authority forward the same to the F&A Department for consolidation

DepartmentalHeads

34

6 Receive the reports from the various departments. Consolidate the comments and present the same at theBudget Review Meeting for the month

F&ADepartment

7 Review the reports, hold discussions with the concerned officials andrecommend the future course of action

BudgetReviewMeeting

8 Forward the report to RHQ and CC for their review

F&A Deptt,Station


35

Document – RecordsDocumentTitle

DocumentType

Frequency Distribution

Report on Actual expenditure Vs.Budget estimates–Cost centre-wise

MIR Monthly -Department Heads- F&A Deptt- GM, Station

Report on Actual expenditure Vs.Budget estimates–consolidated

MIR Monthly - Budget Review Meeting- ED (Region)- CC

Report on theexpected performancefor the balance period

MIR Quarterly - Budget Review Meeting- ED (Region)- CC


36

BUDGETING AT THE STATION LEVEL

The stations are responsible for providing the following information:-

• Operating parameters

• Fuel expenditure

• O&M expenditure i.e. employees, repairs & maintenance and overheads

• Depreciation

• Working capital (other than debtors)

• Miscellaneous income

• Other Finance charges (excluding rebates)

The following aspects are not controlled at the station level and therefore are not required to be budgeted by the station. However, the station is to incorporate the following information provided by RHQ/CC:

• Interest budget –

The details of loans contracted, repayment schedule of outstanding loans, applicable rates of interest, etc are controlled at Corporate Centre and hence Corporate Centre should workout the interest cost for the year and allocate the same to the stations. These details should be communicated to the site along with the budget circular.

• Debtors budget –

The budget in respect of debtors and rebates based on the billing and collection pattern should be prepared by RHQ. The details should be communicated to the stations for inclusion in the initial budget proposal. For this purpose, the station should first communicate the generation targets to RHQ.In overall terms the budget at the station level would consist of the following:-• Balance Sheet• Profit and loss Account before taxes• Cash Flow Statement

37

Budget heads

The budget estimates are to be prepared in respect of each account head as per the Chart of Accounts.

However, the account heads should be consolidated into the specified budget heads for reporting purposes.Budgeted cost statements

The budgeted cost statements should be prepared based on the methodology and formats as provided in the manual on the costing system.

Budget formats

The formats in which the budget estimates are to be prepared and the responsibility for preparation of the same has been mentioned afterward

The budget formats for the detailed budget are broadly classified under the following heads:

• Summary forms of budgeted Balance Sheet, Profit & Loss Account, Cash Budget, Operating Parameters and Schedules (A series)

• Month wise phasing of the budget estimates (Current year RE) – B series

38

BUDGETED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT

The F&A department should prepare the budgeted Balance sheet considering the following:

• Profit and Loss account

• Working capital budget

• Capital addition

• Changes in CWIP and construction stores

• MBOA budget

• Employee Loans and advances

The additions to CWIP should be as per the Construction budget.

39

Budgeted Balance SheetStation: Form No.:A/02 Responsibility : F&A Rs. / lakhSl.No.

Description CrossRef.

Actual(previousyear)

BudgetEstimate(Currentyear)

RevisedEstimate(Currentyear)

BudgetEstimate(next year)

A SOURCES OF FUNDS

1 Shareholders Funds- Capital- Reserves & Surplus

2 Loan Funds- Loans from GOI- Foreign Loans- Cash credit from Banks

3 Inter unit balance

4 Inter unit cash credit

TOTAL–AB APPLICATION

OF FUNDS1 Fixed Assets

Gross BlockLess: DepreciationNet Block

2 Capital Work in Progress

3 Construction Stores andAdvances

4 Investments

40

5 Current assets, loans andadvances- Operation- Construction

Sub Total6 Current

liabilities andProvisions- Operation- ConstructionSub Total

7 Net Current Assets (5-6)- Operation- ConstructionMiscellaneous expenditure (tothe extent not written off)TOTAL- B


41

Budgeted Profit and Loss accountStation: Form No. : A/03Responsibility : F&A Rs. / lakh

Sl.No.

Description CrossRef.

Actual(previousyear)




A INCOME

1 Sales Revenue A/S/01

2 Other Revenues A/S/02

Total – AB EXPENDITURE

1 Fuel costa. Coalb. Oilc. Gasd. Napthae. HSD Sub-total

A/S/03A/S/04A/S/05A/S/06

2 Water Charges A/S/07

3 O&M cost( excl CC) A/S/08

4 Finance chargesa. Depreciationb. Interest on fixed capitalc. Interest on workingcapital

A/S/09

42

d. Rebate/ LC chargese. Provisionsf. Prior period adjustmentsg. Others

Sub Total

5 TOTALEXPENDITURE(B)

C Station Profit / Loss

D Share of CC and Regionalexpense

E Net profit and Loss


CASH BUDGET

Based on the above budgets, the F&A department should prepare a cash budget for the station as a whole specifying the source wise cash inflows and outflows.

The Cash budget should also indicate the capital items, loans and advances that are to be financed from O&M budget.

43

Cash Budget – Cash from operationsStation: Form No. : A /05Responsibility : F&A Rs. / lakh

S.No.

Description Actual(previousyear)




CASH FLOW FROM OPERATING ACTIVITIES

A Net profit (as per FormA/03)Adjustment for non-cashitems:- Depreciation- Amortized expenditure- Provisions- Others

B Operating profit beforeworking capital changes

Adjustment for workingcapital changes:- Sundry debtors- Inventories- Other current assets- Sundry creditors- Other creditors/liabilities

C Cash generated

44

fromOperations

D Operation funds utilizedfor capital/ other items:− MBOA− Employee Loans andadvances

E Net Cash Flows fromoperations (C-D)

Note:• The budget estimates for sales realisation to be provided by RHQ


45

Purchase Budget

The Purchase budget for the year should be prepared based on the total requirement for materials as budgeted in the Maintenance Budget.

The responsibility for preparing this budget would lie with the MTP and the Purchase departments.

The following factors should be considered while framing the purchase budget:• The requirement for materials as per the maintenance budget

• The stock in hand, minimum safety stock

• The lead time for purchases

• Current market or contractual rates

46

PURCHASE BUDGET A/06RE/BEStation --------------Responsibility -------------------

S.No

MaterialDescription

Unit OpeningStock

Purchasesduringtheyear

Materialconsumedduring theyear

ClosingStock

Closing stockin No of daysconsumption

1 Coal/Gas/Naptha

000’ KTRs /Lakhs

2 Oil KL Rs/Lakhs

Total3 Chemicals Rs/Lakhs4 Consumable

sRs/Lakhs

5 Spares Rs/Lakhs

6 Lubricants Rs/Lakhs

7 Others Rs/Lakhs

Total

Grand Total

Note :The Material consumption during the year should tally with the Repairs and Maintenance –Materials (as per A/S/07.3) and for chemicals as included in the O&M Expenses (as per formatA/S/07.4)


47

REVENUE BUDGETS

The sales revenue should be based on the ESO and the applicable tariff.In case of a station commissioned during the year the tariff rate to be adopted should be obtained from the Commercial Department - CC.

No budget estimates are required to be made in respect of charges for Unscheduled Interchanges (UI).

SALES REVENUE A/S/01StationResponsibility : Commercial/ F&A – Station/ RHQS.No

Description Unit ActualPreviousYear

BECurrentyear

RECurrentyear

BENextyear

1 Revenue from Sales- Fixed charges- Variable charges- Fuel Price Adjustment- UI charges- Incentive/ Disincentive- ED- OthersSub-total

2 Revenue from OwnConsumption-- Township- Others (to specify)Sub-total

3 Grand totalSource Manual of NTPC 4.12

48

Fuel Budget

Fuel should be budgeted for considering the following:

• Heat Rate

• Specific oil consumption

• GCV of oil

• Quantity of oil

• Heat input from coal (i.e. Heat rate – heat input from oil)

• GCV of coal

• Quantity of coal

• Transit and handling losses of coal

The above estimates should be prepared after considering the following:

• Machine condition

• Budgeted operating plan

Fuel consumption – Quantity

In order to budget for the fuel consumption for the station in quantity terms, the first step should be to fix the budgeted heat rate for the units and then consolidated for the station.

Fuel consumption – cost

The fuel cost should be worked out for the budgeted quantity based on the current or contractual prices.Other consumables budget

49

FUEL CONSUMPTION – COAL A/S/ 03StationResponsibility : O&MS.No


BECurrentyear

RECurrentyear

BENextyear

1 Grade of coal2 Average Calorific

valueKcal/Kg

3 Heat input Kcal/Kwh

4 Specific coal consumption (3/2)

Kg/kwh

5 Generation MUs

6 Consumption (4*5)

000’s MT

7 Handling loss %

8 Gross consumption(incl.Loss)

000’s MT

9 Price Rs/MT

10 Value (8* 9) Rs./lacs

11 Cost per Kcal [9/2]

Ps

12 Cost per Kwh (11*3)

PS / kwh

Note :- This information is to prepared unit-wise and then consolidated for the station- Handling losses to be indicated only in the consolidated station statement


50

FUEL CONSUMPTION – GAS A/S/ 04StationResponsibility : O&MS.No

Description Unit ActualPreviousyear

BECurrentyear

RECurrentyear

BENextyear

1 Average Calorific value

Kcal/Cum

2 Heat input Kcal/Kwh3 Specific

consumption (2/1)

Cum/kwh

4 Generation Mus5 Consumption

(3*4)000’s Scm

6 Price Rs/Scm7 Value(5*6) Rs./lacs8 Cost per

Kcal (6/1)Ps


PS / kwh

Note:• The information is to be obtained unit-wise and then consolidated


51

FUEL CONSUMPTION – OIL A/S/05StationResponsibility : O&M/ Commercial/ F&A

S.No


BECurrentyear

RECurrentyear

BENextyear

1 Average Gross Calorificvalue

Kcal/ lt

2 Specific oil consumption

Ml /kwh

3 Heat input (1*2)

Kcal/Kwh


(4*2)KL

6 Price Rs/KL7 Value (5* 6) Rs/ lacs8 Cost per

Kcal [6/1]Ps


Ps/ kwh

Note:• This form needs to be filled up separately for the various categories of oil i.e. HSD/ HFO/ LDO/ LSHS• The information is to be prepared unit-wise and then consolidated


52

FUEL CONSUMPTION –NAPTHA A/S/06StationResponsibility : O&M/ Commercial/ F&A

S.No


BECurrentyear

RECurrentyear

BENextyear

1 Average Gross Calorific value

Kcal/ lt

2 Specific oil consumption

Ml / kwh

3 Heat input (1*2)

Kcal/kwh


(4*2)KL

6 Price Rs/KL7 Value (5* 6) Rs/ lacs8 Cost per

Kcal [6/1]Ps


Ps /kwh

Note:• The information is to be prepared unit-wise and then consolidated


53

Water cost

The consumption of various types of water should be estimated by the O&E department based on the design norms and the budgeted generation. The consumption should be valued at the current prices including pollution cess (as applicable). The estimate for water should not include the cost of treatment, if any (these are to budgeted under the budget head of Chemicals consumption)

WATER COST A/S/07StationResponsibility : O&MS.No


BECurrentyear

RECurrentyear

BENextyear

1 Nature of input water

2 Total input quantity

000’ mts

3 Rate Rs./MCM4 Value

(2*3)Rs./lakhs

5 Pollution Cess

Rs./lakhs

6 Grand Total(4+5)

Rs./lakhs

Note :• The information is to be obtained cost centre-wise and then consolidated• The format is only indicative. Stations should provide the details as per the relevant agreements


54

O&M Expenses A/S/08Station --------------------Rs/Lakhs

Sl Description Ref format

Past Performance Current year Next year

1 2 3 BE RE BE1 Employee

CostSalaries & wagesOvertimeContribution to PF and other FundsMedical expOther Welfare ExpTotal A/S/8.1

2 Repairs &Maintenance

(i) Plant &MachineryOverhauls- Material cost- Contractor &others

A/S/8.2

Routine- Material cost- Contractor &others

A/S/8.2

Breakdown- Material cost- Contractor &others

A/S/8.2

Preventive- Material cost- Contractor &

A/S/8.2

55

OthersReliability- Material cost- Contractor &others

A/S/8.2

Exception- Material cost- Contractor &others

A/S/8.2

ii) Buildings- Material cost- Contractor &others

(iii) Township assets- Material cost- Contractor &others

(iv) Other Assets- Material cost- Contractor &othersTotal

3. Station/AdministrativeOverheadsChemicals A/S/8.4Other consumables

A/S/8.4

AdministrativeExpenses

A/S/8.5

R&R expensesEnergyConservationAsh UtilizationexpensesTotal (without CCexp

56

4 Share in CCexpensesGrand Total(withCC) expenses

Note:• The employee cost is to be included as per the manpower budget provided by HR• Repairs and maintenance cost is to be provided cost-centre / department wise andthen consolidated as per Form A/S/8.2• The consumption of chemicals ,is to be prepared cost centre wise and thenconsolidated• The detailed list of one-time expenses is to be enclosed


57

Employee’s budget

The employee’s budget should be prepared for all the categories of manpower covered under the RHQ offices and other offices covered by it (the basis as outlined for the station budget estimates should be adopted as applicable)

Employee cost budget

The employee budget should be prepared department wise. The budget should indicate the total manpower for each category (viz. Executives, supervisor and workmen) and the manpower cost.

Manpower numbers

The manpower numbers should be considered based on the existing manpower and also the likely changes (additions/deletions) during the period.

Manpower cost

The manpower cost should be budgeted under the following heads:

• Salaries and wages (including all allowances)• Overtime• Contribution to PF• Welfare expenses• Medical• LTC• Canteen• Grants to welfare organisations• Other expenses

Salaries and wages should be considered at the existing levels after adjusting for likely grade-wise additions/deletions and a provision for promotions and increments.

58

EMPLOYEE COST AS/8.1StationResponsibility : HR/ F&AS.No


BECurrentyear

RECurrentyear

BENextyear

A Manpower-Executives-Supervisors- Non-supervisors

Nos.

TotalB Employee Cost

Salaries, Wages & allowances- Executives- Supervisors- Non-supervisorsOvertimeContribution to PF & OtherfundsWelfare expenses- Medical- LTC- Canteen- Grants to welfareorganizations- Others

Rs./lakhs

TotalNote:• The employee cost should be prepared department-wise and then consolidated


59

Repairs and maintenance

The Repairs and Maintenance (R&M) budget should deal with the total outlay for the budget period covering material cost, payment to contractors and other costs.

The respective O&M departments should prepare the R&M budget for each cost centre and sub cost centre for the following activities:

• Non discretionary

1. Overhaul

2. Breakdown

3. Preventive

4. Routine

• Discretionary

5. Reliability

6. Exceptional

60

OPERATING PARAMETERS MATRIX – REPAIRS & MAINTENANCE

A/S/8.2Station --------------------Cost Centre ---------------- Rs. LakhsSl Description Unit Past Performance Current year Next

yearYear 1

Year 2

Year 3

BE RE BE

Repairs & MaintenanceNon- DiscretionaryActivitiesOverhaul- Material- Contractor cost& othersPreventive- Material- Contractor cost& othersRoutine- Material- Contractor cost& othersBreak-down- Material- Contractor cost& othersDiscretionaryactivitiesReliability- Material- Contractor cost& others

61

Exceptional- Material- Contractor cost& othersTotal

Note:• This form is to consolidated from the details given in Form A/S/7.3• The details of one-time costs included in R&M costs above to be separately indicated


62

The R&M cost should be budgeted under the following heads:

I. Materials

Spares

Consumables

Lubricants

Tools and plants

II. Jobs

The R&M budget should be accumulated separately for the following category of fixed assets:

• Plant and machinery

• Buildings and other Assets

• Township

The budget estimates for the R&M expenditure should be based on the planned maintenance schedules. The proposal should also indicate the one-time / non-recurring expenses during the last year.

63

MAINTENANCE MATERIAL COST/ JOBS A/S/8.3StationResponsibility : O&MS.No

Description Unit ActualPreviousyear

BECurrentyear

RECurrentyear

BENextyear

A MaterialsSpares- Annual Overhaul- Preventive Maintenance- Routine Maintenance- Breakdown- Reliability- Exception

Rs./lakhs

Sub- total

2 Lubricants- Annual Overhaul- Preventive Maintenance- Routine Maintenance- Breakdown- Reliability- Exception

Rs./lakhs

Total

3 Tools & Plants- Annual Overhaul- Preventive Maintenance- Routine Maintenance- Breakdown

Rs./lakhs

64

- Reliability- Exception Consumables- Annual Overhaul- Preventive Maintenance- Routine Maintenance- Breakdown- Reliability- ExceptionOthers- Annual Overhaul-Preventive Maintenance- Routine Maintenance- Breakdown- Reliability- ExceptionTotal

B Maintenance Jobs- Annual Overhaul- Preventive Maintenance- Routine Maintenance- Breakdown- Reliability- Exception

Rs./lakhs

Total- Annual Overhaul- Preventive Maintenance- Routine Maintenance- Breakdown- Reliability- Exception

Rs./lakhs

65

Grand Total

Note:• The information is to be collected unit-wise department wise/ cost centre-wise and theirconsolidation• The information shall also be used for the Purchase Budget under the column ‘Consumption’


66

Chemicals consumption

The chemicals are required for treatment of water. The consumption would thus be based on the budget estimates of water consumption (as determined above). The Chemistry Department shall provide the chemical consumption budget. The valuation of the chemicals should be based on the current or contractual prices.

CHEMICAL COST A/S/8.4StationResponsibility : O&MS.No


BECurrentyear

RECurrentyear

BENextyear

1 Hydro chloric acid

Rs/LakhsQty

2 Sodium hydroxide

- do -

3 Non-Ferric Aluminum

- do -

4 Hydrazine -hydrate

- do -

5 Chlorine - do -6 Liquid

Ammonia- do -

7 Others - do -8910

TotalSource Manual of NTPC 4.22

67

ADMINISTRATIVE COST

Administrative cost includes the following expenses:

Travelling Expenses

Entertainment expenses etc.

Administrative cost A/S/ 8.5StationResponsibility : F&A/ P&ARs. Lakhs

S.No

Description ActualPreviousyear

BECurrentyear

RECurrentyear

BENextyear

Travelling ExpensesEntertainment expenses

Note:• The expenses should be budgeted as per the Chart of Accounts• The expenses should be obtained from the various departments• One time/ non-recurring expenses incurred/ proposed to be incurred for the previous year/ budget year should be separately detailed and enclosed


68

Depreciation

Depreciation should be calculated based on the capitalised values of the assets and the prescribed rates of depreciation. Depreciation should be calculated for the major groups of fixed assets as per the fixed asset schedule.

DEPRECIATION A/S/9StationResponsibility : F&A Rs. LakhsS.No

Description GrossBlock

Rate ofDepreciation

ActualPreviousyear

BECurrentyear

RECurrentyear

BENextyear

Total

Note:• The fixed assets should be as per the chart of accounts/ Schedule IV


69

Responsibility for budget preparation

The primary entity for the budget preparation at the station will be the individual departments/ cost centre. Each department should prepare the budget for the activities that they are responsible and accountable for including related areas of work. For example:• Mechanical maintenance department should prepare the budget for repairs and maintenance for the various cost centre/ sub-cost centre (such as Boiler, Ash Handling Plant, Coal Handling Plant, etc.)• HR department should prepare the employee related expenditure budgets (relating to salaries, LTC, medical, travel, training, etc), general administration expenditure (hire charges, security expenses, stationary, electricity, postage, guest house expenses, etc)• Town Administration department to prepare budgets for the relevant sub cost centre like horticulture, maintenance of residential quarters, roads, etc

The responsibility for coordinating the entire budget exercise at the stations is as follows: Maintenance Planning Section (MTP) and Operation and Efficiency

Section (O&E) –These sections are responsible for the co-ordination of the budget process of all O&M sections. They are to prepare the Operating parameters budget (physical budget) and also to examine / review the budget proposals made by the O&M sections.

F&A Department – The F&A department is responsible for coordinating the entire budget preparation exercise (including the budget preparation exercise by the non-O&M departments). Its responsibilities include:

Distribution of the budget circular to initiate the budgeting process Co-ordination with the O&E and MTP sections with respect to

preparation of the budgets for the O&M departments Interacting with the non-O&M departments for setting up the targets Compilation of the budgets prepared by the various departments and

presentation to the various committees for deliberation and approval Co-ordinate, compile and submit final budget along with monthly

phasing Communication of the final budget to the various departments

The budget proposal is to be formulated in two stages i.e.

• Initial Budget proposal

70

• Final Budget (as per the approved initial proposal)

The initial budget proposal should contain the following along with necessary justifications and explanations

Main documents• Summary of budget parameters

• Budgeted Balance Sheet

• Budgeted profit and loss account

• Budgeted cash flow statement – cash from operations

• Purchase Budget

• Physical targets for the year

• O&M expenses Budget

• R&R/ Energy conservation and Ash Utilization Budget

Supporting documents

• Calendar of planned outages• Cost centre wise details of O&M expenses (as applicable)

The initial budget proposal should be prepared for the yearly targets – the monthly phasing of the targets are to be provided in the final budget. The budgets should be revised by the stations based on the approved initial budget proposal. A copy of the finalised budget is to be submitted to the respective RHQ and to CC.

71

Budget Review Process

The budget for the station should be reviewed and finalised by the station (O&M) budget committee consisting of:

• General Manager (Station)

• O&M In-charge

• All Head of departments

The station budget committee has the following functions:

• To review the overall physical targets for budget preparation

• To review the budget proposals of the individual departments

• To decide priority of allocation of resources for the individual cost centre

The budget proposal as finalised by the Budget Committee should be forwarded through RHQ to CC for approvals.

BUDGETING AT THE RHQ LEVEL

The RHQs are responsible for budgeting for the expenses of RHQ and the other offices under their control. The budget estimates should be prepared in respect of the following:

• Employees cost

• Administration and general expenditure of RHQ

• Debtors and Rebates

The debtors and rebate budget estimates should be communicated to the respective stations for inclusion in the initial budget proposal.The RHQ should review the station-wise initial budget proposals and consolidate the budget estimates for the region as a whole i.e. the Regional Budget.

72

The Regional budget should be reviewed by the Executive Director (ED), RHQ and recommend the same for approval to CC.

The initial budget proposal (station wise) is to be reviewed with respect to the following key aspects:

• Budgeted physical parameters

• Budgeted O&M cost as compared to norms

• Budgeted return on capital employed as compared to norms

The budgeting activities at RHQ are to be coordinated by the F&A department, RHQ.

The RHQ should forward the following to CC:• Initial Budget proposal – Station wise

• Consolidated Regional budget

On approval of the budget by CC, the RHQ should communicate the approved initial budget proposal to the respective stations to prepare the final budget estimates.

BUDGETING AT THE CC LEVEL

The budgeting exercise at CC is to be coordinated by the F&A department – Commercial Section.

Budgeting process at CCCC is responsible for preparing the budget estimates in respect of the following:• Employees cost of CC

• Administration and general expenditure of CC

• Interest on working capital

• Other income, such as income on investments, etc

• Consultancy budget

73

The above budgets should be prepared simultaneously with the preparation of initial proposals by the stations.

However, the budget for interest on long- term debts and the allocation of the same should be carried out in the beginning of the financial year and communicated to the stations along with the budget circular.

The budget estimate for working capital should be based on the working capital as per the approved initial budget proposal and the same should be communicated to the stations for the necessary adjustment in the final proposal.

Review of the initial budget proposalsOn receipt of the initial budget proposals of the stations as recommended by the RegionalED, the F&A department at CC should compile the following for the company as a whole:• Balance Sheet• Profit and loss statement• Cash Flow Statement

The initial budget proposal of the stations along with the Balance Sheet, Profit and loss and cash flow statement for the company should be circulated to the following departments for their review and comments thereon:

• Corporate Planning

• Corporate Materials Management

• Corporate Operation Services (OS)

• Corporate Commercial

• Corporate Engineering

• Corporate HR

74

The comments of each of the above departments should be consolidated by the F&A Department.Commercial Section and presented to the Budget Committee, CC for their consideration.

The initial budget proposal as approved by the Corporate Budget Committee should be communicated to the RHQ.

Budget Committee

The budget committee at CC to have the following members:• Chairman and Managing Director

• All functional directors/ executive directors

Final Budget

The final budget (prepared on the basis of the approved initial budget proposal) giving the detailed budget estimates are to be received from the respective stations through the RHQ.This final budget to form the basis for monitoring the performance of the station.

INTERFACE WITH OTHER SYSTEMS

The O&M budget should be integrated with the financial accounting and costing system in the following manner:

Financial Accounting system

• Account codes• Reporting of actuals• Data base for the past performance

Costing system• Cost centre codes• Reporting of actuals• Database for past performance

75

BUDGET PERIOD AND TIME SCHEDULE

The budget should be prepared for the financial year. The process of preparation of the budget to start in the month of January and the final approved budget for the next financial year should be in place by the 31st of March.

The budget estimates should be prepared in respect of the following:• Revised estimates for the next financial year

• Budget estimates for the year thereafter

76

The time frame to be followed for the budgeting process is as under:

Time frame ActivityActivity Time frame

Station RHQ CCIssue of Budget Circular 1st week of

JanuaryCommencement of the budget exercise

1st week of January

Formulation of initial budget proposal

By 1st week of February

Review of initial budget proposal by the Station Budget Committee and submission toRHQ

By 10th ofFebruary

Compilation of Regional Budget By 15th ofFebruary

Review of regional budget by ED, RHQ and submission to CCCompilation of budgeted Balance sheet, Profit and Loss Account and Cash Flow Statement

By 25th ofFebruary

Circulation of initial budget proposal and budgeted Balance sheet, Profit and Loss Account and Cash Flow Statement to thevarious departments

By last dayof February

Consolidation of comments of various departments

By 1st weekof March

Review of the initial budget proposal and discussions with the stations

By 3rdweek ofMarch

Presentation of budget to Corporate Budget Committee and approval thereon

By the 25thof March

Intimation of approved budget to RHQ

By 31stMarch

Preparation of Final Budget and forwarding toRHQ and CC

By 30th April


BUDGET MONITORING SYSTEM77

The expenditure against budgets should be monitored in the following manner:

• Monitoring prior to incurring an expenditure (pre-control)

• Monitoring after the expenditure has been incurred, based on the actual performance (post-control)

Pre-control

Pre-control should be carried out in the following manner:• Review of proposals by the departmental officials (as per the delegation of powers) prior to sanctioning any expenditure w.r.t. availability of budget• Review of proposals by the Finance Concurrence Department

Post-control

The post control exercise would consist of review of the periodic reports on the actual performance against budgets.The monthly/quarterly performance should be reviewed at the following levels:

• Monthly Operations Review meetings at stations – to review the physical targets against the budget estimates

• Monthly Budget Review meetings – to review the actual expenditure and working capital as against the budget estimates for the period

• Review by the ED, Region– review of the physical and financial performance

• Review at CC - review of the physical and financial performance

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The periodic reports should provide the following:

Monthly reports

• Actual vs. budget estimates and the standards for the month

• Actual vs. budget till date and standards

Quarterly reports

• Expected performance for the balance period (at quarter-end)

The respective departments should indicate the reasons for any variances in the physical and financial performance. The actions required to achieve the budgets or to control the variances should be discussed and agreed in the respective review meetings. The minutes of the review meetings should be documented and enclosed with the MIS reports to be submitted to CC.

Variance analysis report:-

Variance analysis report analyze the variances during the month in :-Cost

Profit

Capacity variance

Efficiency variance

And any other variances

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VARIANCE ANALYSIS REPORTForm No : FPR/ 03Station---------------------Responsibility : F&A/ O&M

S. No Nature of Variance Key Amount of Variance

Upto this month

Upto previousmonth

1 Budgeted Profit/Loss2 Capacity Variance3 Standard Profit/loss4 Efficiency Variance5 Actual Profit/LossANALYSIS OF EFFICIENCY VARIANCE

1 Coal/Gas/Naptha Usage

SP (SQ-AQ)

2 HFO Usage SP SP (SQ-AQ)3 LDO Usage SP SP (SQ-AQ)4 Coal price AQ (SP-AP)5 HFO price AQ (SP-AP)6 LDO price AQ (SP-AP)7 Gas/Naptha price AQ (SP-AP)8 Expenses SE-AE9 Aux.Consumption

(sales)ST (SESO-AESO)

10 Tariff AESO (ST-AT)

TOTAL AUX. CONSUMPTION VARIANCE1 Cost Variance2 Profit VarianceNote: The adverse variances should be shown in brackets


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SWOT Analysis of NTPC

STRENGTHS

Poised to become a 3000 MW plus company by end of Xth plans i.e. 2007.

High credibility due to transparency in dealings. Impressive growth rote in capacity addition, unmatched in the power

sector of India. An excellent record of project implementation by commissioning most of

the units on or ahead of schedule. Achieved new performance benchmarks in operational & efficiency

parameters.

WEAKNESS

Delays in declaration of commercial operation of some of its units. Large inventory of high value, none/ slow moving spares has been

accumulated over the year. Delays in contract closing after completion of projects. The state owned monopolistic nature of power industry with inadequate

on service to customers. Vary large receivables from State Electricity Board. Low return on investment

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OPPORTUNITIES

There is a huge gap in the electric power availability and demand. In order to fill this gap, capacity addition would be required per annum during the X & XI five year plans.

The pace of the reforms & restructuring of SEB’s is likely to pick up. This along with creation of regulatory commission at the center & states to regulates tariffs, will improve the financial health of SEB’s & hence their paying capacity.

The govt. support & encouragement to public sector for new capacity addition & management of receivables.

The favorable balance of payment position & reduction in customs duty has made import of coal viable for coastal stations.

The emerging IPPs provide a tremendous opportunity for NTPC to expand its consultancy business both in the domestic & in the international market in the areas of EPS & O&M contract.

Huge potential for R&M as large number of old units are in the operation throughout the country.

Power finance corporation (PFC) providing funds for R&M of old stations.

Positive response of govt. to import LNG. Clean & proven fuel.. Cheaper fuel options compared to liquid fuels. NTPC can set up integrated projects consisting of coal mining / setting up

LNG terminal, generation & the associated transmission system.

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THREATS

IPPs are entering into legally enforceable fuel purchase agreements with the suppliers & are likely to get preference over NTPC in getting fuel supplies.

Lack of commercial approach in SEBs has result in deterioration of their financial health & paying capacity.

Stringent environment regulations, resettlement & rehabilitation issue project clearance procedure etc. are likely to pose threats to growth.

Competition for good Greenfield sites may emerge in view of entry of IPPs.

Competition from other reputed national & international companies in similar business.

Due to poor financial health of SEB, they may not have funds for R&M activities & would insist for financial support from the executor of R&M schemes.

Indian coal has poor washing characteristics. Large investment. Foreign exchange outflow is committed for long period.

Currency fluctuation.

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CONCLUSION

After the detailed study of budgeting procedure in NTPC anta researcher concludes it in two aspects:-

1. Points in support

2. Points in opposition

Points in support:-

1. This budgeting procedure is very helpful in managerial functions such as planning, controlling, coordinating, motivating &most important in controlling.

2. All types of costs are estimated & analyzed in NTPC therefore cost control & reduction is possible.

3. In NTPC all budgeting actuals are compared with budgeted standards & deviations are searched.

4. Clear cut functions & objectives are determined for each department through budgeting; therefore optimum utilization of business resources is possible.

5. In NTPC every department head make budget very sincerely & regularly.6. NTPC is a public sector undertaking but still it earns profit more than Rs.

5000 cr. It is possible only due to regular evaluation of budget standards with actual performance.

7. NTPC have fixed Performa’s for every type of budget so no problem is encountered.

8. NTPC mention clearly the persons which are responsible for budgeting so no confusion is create during preparation of budgets.

9. NTPC’s budget review process and monitoring system is very strong so there are no chances for mistakes.

10.NTPC have a fixed budgeting period & time schedule for a financial year so no chances for delay in budget preparation.

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Points in opposition

1. There is lack of proper training for preparation of budgets.

2. Proper coordination is requiring between different departments regarding data & information.

3. The budget preparation process is very much time consuming & very costly.

4. Workers participation is ignored in decision making.

5. Budget preparation process is very complicated.

6. In NTPC Zero Based Budgeting is used which is not applicable in present scenario.

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SUGGESTIONS

1. The budget formulators of NTPC don’t have proper information &knowledge for preparing budgets therefore top management has to appoint a guide to proper guidance.

2. Different departments have to provide appropriate & right data to the budget formulators so that they can prepare accurate budget.

3. NTPC’s budget preparation process is very much time consuming so efforts are to reduce the time.

4. Worker’s participation is also an important feature in budget preparation therefore the management should give chance them for help of budget formulators.

5. The budget should be flexible so that required changes can be made easily.-

6. Cooperation of different departments is required so that targets can be achieved.

7. In all situations zero base budgeting will not success so take bases like past experience.

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budgeting contrl in ntpc

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