Download - O&M Contract Management
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SUMMER INTERNSHIP REPORT
ON
Developing a Strategic Business Model of Operation &
Maintenance Contract Services for Thermal Power Plant
Study done at:
Thermax Limited,
Pune (MS)
Submitted By:
PRAVEEN THAKRE
ROLL NO. 63, II Year
MBA (POWER MANAGEMENT)
August-2011
Affiliated to:
MAHARSHI DAYANAND UNIVERSITY, ROHTAK (HARYANA)
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DECLARATION
I, Praveen Thakre, Roll no. 63, student of MBA (Power Management, 2010-2012) of Centre
for Advanced Management and Power Studies at National Power Training Institute,
Faridabad (Haryana), declare that the Summer Training Report entitled Developing a
Strategic Business Model of Operation & Maintenance Contract Services for Thermal
Power Plant is an original work and has not been submitted to any other institute for the
reward of any other degree.
A seminar presentation of the training report was made on..and the suggestions as
approved by the faculty were duly incorporated.
Dr. Rohit Verma Praveen Thakre
Project Incharge MBA (Power Mgmt)
NPTI Faridabad NPTI Faridabad
Counter Signed
Director/Principal of the Institute
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CERTIFICATE
This is to certify that Mr. Praveen Thakre student of MBA (Power Management), IX-Batch
(2010-12), of Centre for Advanced Management and Power Studies, at National Power
Training Institute, Faridabad (Haryana), has successfully undergone 8 weeks professional
summer training from 13th-June-2011 to 5
th-August-2011 at our Pune Head Office.
During the training he has worked on the project entitled Developing a Strategic Business
Model of Operation & Maintenance Contract Services for Thermal Power Plant.
He took keen interest in this assignment and also actively participated in development activities
related to other projects.
We wish him all the best in his future endeavour.
(Santosh Katkar)
Dy. Manager, O&M Group
Thermax India Ltd. Pune
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ACKNOWLEDGEMENT
Words shall never be able to pierce through the Gamuts of emotions that are suddenly exposed
during the routine of our life. They shall never be able, neither to describe the spirit with which we
worked together nor shall they ever be able to express the feeling I felt towards my guide
Mr. Santosh Katkar (Deputy Manager, O&M Group).
On the behalf of my MBA career, first of all, I am highly obliged to Mr. J.S.S. Rao, Principal
Director (CAMPS) NPTI, MR. D.M. Lokhande, Director (CAMPS) NPTI, Mrs. Manju
Maam, Deputy Director (CAMPS) NPTI, and Mrs. Indu Maheshwari, Deputy Director
(CAMPS) NPTI, who gave me the opportunity to do summer internship in a pioneer organization
like Thermax Ltd. I am also thankful to my internal guide Dr. Rohit Verma, Deputy Director
(CAMPS) NPTI, for his constant encouragement and valuable advice during the course of my
project.
I take the opportunity to thank Mr. Anurag Chincholkar (Assistant Manager, O&M Group);
Mr. S.K. Jit (Associate Manager, O&M Group); Mr. Aseem Barkule (Associate Manager, SPP
Group); Mr K.P. Narayanan (Sr. Executive, O&M Group) and all those who have been
instrumental in completion of my training and also sincere thanks to Mr. P.K. Das (HOD, O&M
Division, Thermax) for showing me the appropriate path to follow.
I am very much thankful to my Facultys Ms. Farida Khan, Senior Fellow (Economics),
Mr. K.P.S. Parmar, Mr. Amit Mishra and to all my seniors for their overall support and
guidance.
At last but not the least, I am also very much grateful to my PARENTS for their moral support as
this project was a struggle that was made much more difficult due to numerous reasons; some of
error corrections were beyond our control. Sometimes we were like rudderless boat without
knowing what to do next. It was then the timely guidance of that has seen us through all these
odds. We would be very grateful to then for their inspiration, encouragement and guidance in all
phases of the discretion.
PRAVEEN THAKRE
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ABBREVIATIONS
TL Thermax Limited
OEM Original Equipment Manufacturers
O&M Operation and Maintenance
CPP Captive Power Plants
IPP Independent Power Producers
SBU Strategic Business Unit
T&T Tools and Tackles
PO Purchase Order
OTF Order Transfer Form
EHS Environment, Health & Safety
FY Financial Year
SPP Small Power Plants
MPP Medium Power Plants
LPP Large Power Plants
BOP Balance of Plant
BTG Boiler, Turbine & Generator
AFBC Atmospheric Fluidized Bed Combustion
CFBC Circulating Fluidized Bed Combustion
PF Pulverized Fuel
LSTK Lump Sum Turn Key
EPC Engineering, Procurement & Construction
BOO Build, Own & Operate
OPEX Operation Expenditure
PAT Profit After Tax
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Ha Hectare
MoU Memorandum of Understanding
NOC No Objection Certificate
CAPEX Capital Expenditure
CAGR Compound Annual Growth Rate
SOP Standard of Performance
PF Provident Fund
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortisation
EPCOM Engineering, Procurement, Construction, Operation & Maintenance
PFC Power Finance Corporation
BHEL Bharat Heavy Electricals Limited
OHSAS Occupational Health and Safety Assessment System
MoEF Ministry of Environment and Forests
SPCB State Pollution Conservation Board
CRZ Central Regulation Zone
DPR Detailed Project Report
CWC Central Water Commission
AAI Airport Authority of India
BCG Boston Consulting Group
EIA Environmental Impact Assessment
IAA Impact Assessment Agency
EMP Environmental Management Plan
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TABLE OF CONTENTS
S. No. Topic Page No.
1 Executive Summary 9
2 About the Organisation 10
2.1 Thermaxs Profile 10
2.2 Business Areas 13
2.3 Joint Ventures and Strategic Alliances 13
2.4 Realizing The Vision 14
2.5 Power Division 15
2.6 Operation and Maintenance Group 16
2.7 Thermax Quality (EHS) Policy and Customer Focus 17
2.8 Firms SWOT Analysis 18
3 Project Objective 20
4 Significance of The Study 21
5 Introduction 22
6 Review of the Initial Base 23
6.1 Operation and Maintenance Business 23
6.2 Operation and Maintenance Experience 26
6.2.1 Current Revenues 26
6.2.2 Profit and Loss Calculations 27
6.2.3 Analysis of Variances 28
6.2.4 Learnings from the Operational Proceedings 29
6.3 Critical Assessment and Evaluation of Operation and
Maintenance Business (SWOT)
30
7 Conceptualization 32
7.1 Spend Analysis in Operation and Maintenance Contracts 32
8 Focus on the problem 33
8.1 Operation and Maintenance Contract Management 33
8.2 Sub Contract Scope 35
8.3 Various Regulations 36
8.4 Statutory Compliance at Site 37
8.5 Sub Contractor Selection 47
8.6 Sub Contractor Performance Rating Index 48
8.7 SOP for new site mobilisation - w.r.t. Compliance 50
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TABLE OF CONTENTS
9 Mandatory Clearances- Initial set-up of Thermal Power Plant 52
10 Research Methodology 57
10.1 Survey 57
10.2 Data Collection 59
10.3 Value Chain Analysis 59
11 Results and Discussion 60
11.1 Entrepreneurship Opportunity in Operation and
Maintenance Business
60
11.2 Suggestions and Recommendations 61
12 Limitations of the Study 62
13 References 63
13.1 Websites 63
13.2 Books and Journals 63
14 Annexure 64
14.1 Order Transfer Form (OTF) 64
14.2 Manpower Rate Comparison 65
14.3 Data for all Running Sites 66
14.4 Site wise Budgets 67
14.5 General & Administrative Breakup 68
14.6 Statutory Audit Checklist 69
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1. Executive Summary:
1.1. As a student of MBA Power management at CAMPS, National Power training Institute
(Faridabad), I worked as a summer trainee with Thermax Ltd. for a period of two
months from 13th
-June-2011 to 05th-Aug.-2011. During this tenure I was directly
involved in the live projects of Thermax.
1.2. As a part of my summer training I got the opportunity to work as a team member of
O&M group of Thermax due to which I was able to extract all the knowledge about
O&M Contract Management as well as the Spend Analysis of a SBU (O&M division).
This project is the outcome of excellent communication and interaction with higher
dignitaries as well as with vendors, contractors and engineers.
1.3. This report deals with the effective management of O&M contract through its different
phases viz. Mobilization, Stabilization etc, and shall be able to make you aware about
the different statutory compliance existing and cost reduction potential of a power
plant with upcoming and totally new financial valuation method called as Spend
Analysis.
1.4. This report says that the primary objective of every power plant owner is to get
constructed and to operate the plant as cost-effectively as possible to maximize profit.
This means that the owner has to minimize besides the investment costs for
construction the life cycle costs, which are influenced by different- factors. One of
them is the operation and maintenance cost incurrent in course of operation period of
the power plant.
Cost reduction by outsourcing of O&M activities is one opportunity to meet
such requirements. Outsourcing Operation & Maintenance (O&M) of the power
station means optimum performance and utilisation of the power plant.
1.5. High availability, reliability & reduced risks: are the key objectives of a power plant
operator. Outsourcing the complete operations and maintenance of the plant to the
Original Equipment Manufacturer (OEM) can be the best solution for maximising the
performance of the power plant.
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2. About the Organisation:
2.1. Thermaxs Profile:
Thermax Limited-Exploring new opportunities for growth:
Thermax Limited is an engineering multinational headquartered in India with its
subsidiaries and offices spread over 25 locations in 13 countries across the globe.
Over the past three decades, Thermax Limited has established itself as a leading
equipment supplier in the energy & environment space. The company, which has so far
catered primarily to the captive power generation segment, is now looking to enter the
utility market. Thermax took the initial steps towards this by winning its first
equipment supply contract from an independent power producer in September 2009,
and is currently setting up a 3000 MW supercritical boiler manufacturing facility in
Maharashtra. The company also plans to expand its presence in the renewable segment
with a number of innovative projects in the pipeline.
Thermax Power-Where Experience meets Expertise:
The first to commission captive power projects and cogen systems on
EPC basis across a wide spectrum of industries like steel, sponge iron,
cement, textiles and chemicals.
Dedicated and well staffed functions exclusively for EPC.
Completed largest number of plants with high plant availability,
delivered on time.
Expertise in wide range of fuels including waste heat recovery solutions
especially for cement & steel.
Over ` 3500 crore worth (over 900MW) power projects on EPC basis
alone.
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Thermax Firsts-Leading the EPC revolution with Indias first:
EPC based power project on CFBC boiler, and combined cycle cogen
plant in captive segment.
Pioneered the EPC concept in mid-range for power.
Waste heat recovery project on EPC in Steel & Cement Industry.
Petcoke based power plant on EPC basis.
Gas/Naphtha fed EPC plant with zero liquid effluent discharge.
The unique distinction of completing CPP projects ahead of schedule and
winning series of bonuses.
Only experienced EPC Company offering O&M (EPCOM) contracts.
Performance Matrix-
In the Power Sector, Thermax has contracted over 60 turnkey projects aggregating over
1600 MW of capacity. In addition, the company has installed boilers aggregating over
4500 MW of capacity and baggasse-based boilers aggregating 1400 MW.
Thermaxs total order book stood at ` 57.94 billion in 2009-10, which was 62% higher
than the previous years order book of ` 35.57 billion. With this the companys order
backlog increased by about 86% to ` 56.81 billion as on March 31, 2011. By the end of
third quarter of 2010-11, Thermaxs total order backlog increased to ` 63.54 billion.
This comprised ` 52.95 billion and ` 10.59 billion from its energy and environment
solutions businesses respectively. The order backlog from its power division stood at `
27.4 billion as of December 2010.
The lower order book during 2009-10 was also reflected in the companys financials.
Thermaxs total income during the year declined marginally to ` 32.35 billion from `
33.35 billion in 2008-09. Profit after tax (PAT) declined significantly during the period
owing to a one-time expense of ` 1.15 billion towards a business settlement. During
the period 2005-10, the total income of the company increased at a compound annual
growth rate (CAGR) of about 21 per cent, while PAT grew by 3.5 per cent.
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The companys financials have improved in the current fiscal year. During the
December 2010 quarter, it posted an operating income of ` 12.41 billion, which was 66
per cent higher than the ` 7.48 billion registered during the corresponding quarter of
the preceding year. The companys profit before tax also increased to ` 1.47 billion in
the December 2010 quarter from ` 0.86 billion in the corresponding quarter of 2009.
Financial Performance (Rs. Billion) Financials 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
(April-
December)
Total Income 14.98 22.1 32.46 33.03 32.35 31.12
EBITDA 2.09 3.16 4.51 4.53 4.34 3.39
PAT 1.23 1.88 2.81 2.87 1.14 2.56
Investments 4.17 5.78 5.8 1.76 3.78 --
EBITDA: Earnings Before Interest, Taxes, Depreciation and
Amortisation
Source-Thermax
Limited
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2.2. Business Areas:
Thermax Limited-Improving your Business is our Business: Thermax offers products,
systems and solutions in energy and environment engineering to industrial and
commercial establishments around the world. Its business expertise covers:
Boilers and Heaters
Absorption Cooling
Waste and Water Solutions
Chemicals for Energy and Environment applications
Captive Power and Cogeneration Systems
Air Pollution and Purification
Power Plant Construction on Turnkey Basis
Power Plant Operation & Maintenance Services
Thermax brings to customers extensive experience in industrial applications, and
expertise through technology partnership and strategic alliances.
Operating from its headquarters in Pune, Maharashtra (Western India), Thermax has
built an international sales and service network spread over South East Asia, Middle
East, Africa, Russia, UK and the US. It has a fully fledged manufacturing setup that is
certified for ISO 9001:2000, ISO 14001 and safety management according to OHSAS
(ISO 18000).
2.3. Joint Ventures and Strategic Alliances:
Thermax has sourced cutting-edge technologies for its business operations through
joint ventures and alliances with world technology majors, like Babcock & Wilcox,
USA; Kawasaki Thermal Engineering Company, Japan; Eco Tech, Canada;
Honeywell, USA; Bloom Engineering, Germany; Balcke Durr, Germany; Struthers
Wells and Ozone Systems, USA.
Thermax has 5 manufacturing facilities including one in China. The company has also
developed a technology research and development facility, and has 120 patents, and 82
national and 16 international trademarks to its credit.
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2.4. Realizing the Vision:
Our Vision:
To be a globally respected high performance organization offering sustainable
solutions in energy and environment.
To become a leader in Operation and Maintenance of power plants, delivering
high value to the customers.
A commitment to excellence in what we do.
Our Mission:
We aspire to become a leading technology company with a global outlook
delivering world-class products and services to customers.
We exist to fulfil the needs of our customers best understood through an
enlightened partnership with him.
Our challenge is to continually expand and define new markets by expanding
the frontiers of research and engineering and customer applications in our
chosen field of business.
We seek dependable partnership with our suppliers to generate a strong
mutual interest in each others welfare.
We live by high value of integrity and excellence in management.
We strive to contribute substantially to the global priority areas of energy
conservation, environment protection and enrichment of society.
Our commitment is to create an organisation, which nurtures the talent and
enterprise of our people, helping them to grow and find fulfilment, in an open
culture.
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2.5. Power Division:
The Power Division of Thermax was set up in 1995 to address Indias burgeoning need
for Power. The division single mindedly focused, pioneered and popularized the EPC
(Engineering, Procurement and Construction) concept of setting power plants in mid-
segment.
The Power Division is divided into following groups:
1. SPP (Small Power Plants) < 12 MW
2. MPP (Medium Power Plant) 12-60 MW
3. LPP (Large Power Plant) > 60 MW
4. O&M (Operation and Maintenance) Group Up to any Size
It offers captive power systems including cogeneration. The power plants from
Thermax can utilize fuels like Coal, lignite, husk, and even agricultural waste (like
baggasse in Sugar Power plants) to generate inexpensive energy, thus reducing overall
energy costs up to 50%.
Backed by strong competencies in thermal engineering, energy management and its
close familiarity with a wide range of fuels, Thermax provides competitive power
solutions. The Thermax Power Division offers captive power and cogeneration
systems on EPC or LSTK basis.
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2.6. Operation and Maintenance Group:
O&M division was set up in the FY 2005 with the understanding of need arises
due to lack of knowledge to non-power players in operating the power plant.
It was felt that through O&M, Thermax can create a close and ongoing
relationship with the customer, and be the first to know the of additional
business opportunities from the existing customers.
The operating data collected from power plants would also provide a deeper
insight to improve the quality and reliability of power plants that will planned
for future.
The key objective is to keep the customers investment productive by
continuously optimizing their operations with an aim to enhance availability,
output, efficiency, plant life and hence indirectly creating a resource of revenue
stream for TL.
Being in a position to operate and maintain the power plants, and thus assuring
the customer of long term asset productivity.
Thermax offers special customer oriented single window features:
Dedicated team of Managers, Engineers & Experienced Technicians.
Routine, preventive and scheduled maintenance activities.
Periodic overhauling.
Complete plant management by Thermax professionals ensuring:
Measurement and Recording of operational data.
Monitoring of operating costs.
Spares management.
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Key customer benefits:
Improvement in overall efficiency.
Increased equipment availability.
Single source service provider for all products.
Data related to Key Performance Indicator ( KPI)
Co-ordination with statutory bodies like Boiler Inspectorate, PCB,
insurance etc.
2.7. Thermax Quality (EHS) Policy and Customer Focus:
Thermaxs quality policy starts and ends with the customer as a focal point:
understanding the customers requirements, designing optimal solutions to meet those
requirements, building systems and processes in place to ensure quality at every stage,
and achieving our commitments on delivery and service before & after sales.
It is our endeavour to create the culture of Total Quality where continuous
improvement of our people, our processes and our products becomes a way of life.
Customer Focus: The Company depends upon customers for its survival, and hence it
believes that everyone can contribute to customer satisfaction.
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2.8. Firms SWOT Analysis:
A scan of internal and external environment is an important part of strategic planning
process. Environmental factors internal to the firms usually can be classified as
strengths (S) or weakness (W) or opportunities (O) or threats (T). Such an analysis of
strategic environment is referred to as a SWOT Analysis.
The SWOT analysis provides information that is helpful in matching the firms
resources and capabilities to competitive environment in which it operates. As such it
is instrumental in strategic formulation and selection.
Strengths:
The major source of companys revenue and profit comes from project
divisions. The major divisions are Boilers & Heaters, Absorption
Cooling Division, Waste & Water Solutions, and Chemicals for
environment and energy applications, Captive Power and Cogeneration
Systems, and Air Pollution and Purification. They altogether contribute
60% to the company revenue.
The company has created niche in the market through its several brands
like hot water generation- Aquamatic & Aquatherm, coil type steam
boilers- Steamatic, Revotherm, and Revotherm plus, shell type
boilers- Shellmax, thermal oil/thermic fluid heaters- Deltatherm and
various solid fired boilers - Woodpac, Combipac, Multipac,
Multimax, Huskpac, Multitherm.
Thermax has a very rich technical expertise. The companys long
involvement in energy business has led to very deep understanding of
fuels. The Thermax offer to the industry on fuels: you name it, well
burn it.
Thermax has excellent management information system in the form of
dedicated intranet called THERMNET and E-mail system called
LOTUS. Thermax sales engineers can immediately load an order with
complete specification from any part of the world through Thermanet.
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Weaknesses:
The company requires steel as raw material. The steel prices have
shown a sharp increase, hence affecting the profit margin.
The company has to pay high compensation to retain talented engineers;
accountants, this can be seen from the balance sheet of the company.
Unavailability of strategic information on Thermax website, which
causes threat to communicate the brand name of Thermax among
seekers.
Opportunities:
Thermax Ltd. has established itself in energy solutions. Now its the
correct time to expand & diversify their business in Power Generation,
Transmission and Distribution.
The company should try to recruit multi-skilled technocrats. This would
reduce the redundancy level for the company.
Company can improve quality of operations, products and inventory
management by taking the help of expert consultants.
The manufacturing operations should try to standardize so that output
of the company can be improved.
Threats:
The profit margin of the company is under pressure. The other boiler
manufacturers are giving Thermax a stiff competition. This restricts the
company from increasing margin.
Some of the major orders which company failed to grab, directly point
towards the presence of another good competitor in the market.
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3. Project Objective:
The O&M division (a sub-group of Power Division) of Thermax Ltd had been facing some
problem with management of contracts, mobilisation of the plant and some other issues
related to the statutory compliance etc.
So as part of their live project at 20+ sites across India, I was awarded with the following
objectives to develop an appropriate Business Development Model or say Strategy by
matching steps with them, and hence in this way, I got the fantastic opportunity to explore
and utilize my MBA skills in this project. Here are the tasks:
To study about O&M Contract Mobilisation.
To construct a unique Mobilisation Master depicting streamlined process.
To prepare guidelines for action steps taken for mobilisation of New Site.
To construct Order Transfer Form (OTF), essential for proper flowing of
information when a new order comes.
To provide the platform for Sub-contractor selection and appraisal.
To review the Statutory Compliance of the sub-contractor.
To prepare Statutory Checklist for Auditing of plant site.
To construct a Financial Model of O&M division.
To prepare Spend Analysis in O&M Contracts.
To analyse Manpower Rate Comparison across various sites, right from the
Day 1 of Purchase Order (PO).
Mandatory Clearances to be taken for setting up of a Thermal Power Plant.
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4. Significance of the Study:
It is a very common saying that, To achieve a TOP position is very easy but difficult is to
maintain that position. Similarly to build a Power Plant is a one-time expenditure but to
run the Power Plant in a cost-effective manner for years of time is the major task.
Centuries after electricity was discovered, the power struggle across India continues
unabated. While capacity addition is taking place, a plethora of other critical issues have
raised their collective heads crying for attention. Among these is the burning issue of
What is the best way to build and run the power plant?
Now a days everyone needs power to survive. For any energy intensive company in non-
power business, in these days of severe crunch of trained manpower, retention of highly
experienced and dedicated team to set and run power project is a challenge not related to
core business, exposing the business to unwanted risk. Due to the high availability demand
and the life cycle cost reduction requirements of power plants, a permanent improvement
of the O&M services is requested.
Thermax is amongst top company and also one of the first to offer O&M services of power
plants in India. Currently they have 20+ live projects in hand for which there is
continuous development of O&M division is going on and its my fortune to be a part of
this developing organisation for my two months internship project.
The study mainly focuses on the O&M of thermal power plant and signifies the value of
contract management with detailed analysis of contract mobilisation w.r.t. the Statutory
Compliance and developing a core business opportunity in the relevant field.
The Biggest Significance of this study is that, now I am aware of:
Managing an O&M Contract.
How to mobilise resources for running a Power Plant.
All Statutory Compliance that need to be focused.
Auditing of any running site w.r.t. Compliance & Sub Contractor Performance.
Mobilisation Process to be followed on receiving a new contract.
Mandatory Clearances taken for setting up of a Power Plant.
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5. Introduction:
The Power sector in India is one of the fastest growing sectors in the world with a huge
capacity addition in last decade as well as planned for the next decade.
Power is one of the prime movers of economic development. The basic responsibility of
power industry is to provide electricity at economic cost, while ensuring reliability and
quality of supply.
India offers huge opportunity in the renovation and modernisation, upgrading and life
extension of old thermal and hydro electric plants. More than 2/3rd
of the installed capacity
consists of plants that are at least 10 years old.
The market for O&M is thus very big, especially in the fields of spare parts or renovation
and modernisation. It is estimated that the total O&M market is worth b/w $ 2-2.5 billion a
year.
In todays scenario the power plant owner move towards the EPCOM type contract of the
plant means the company which provides Engineering, Procurement & Construction
Contracts also provides Operation and Maintenance services.
The ultimate opportunity arises from non-power players requiring only power and thus
offload their O&M Services, so that they will focus on their core business.
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6. Review of the Initial base:
6.1. Operation and Maintenance Business:
An O&M type contracts represent long-term partnership agreements, it is important
that the owner and supplier maintain common goals and incentives throughout the life
of agreement.
Thermax ensures that an O&M agreement puts the responsibility of managing the
power plant into their hands freeing you to concentrate on your core business.
Outsourcing O&M of the Power Station means optimum performance and utilisation of
the power plant.
There are namely 3 phases of an O&M Contract:
Phase-in Period
Operational Period
Phase-out Period
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Responsibility in O&M Agreement:
Mobilisation of the complete O&M organisation
Management, O&M of the entire plant
Delivery of all Spare parts
Delivery of all Consumables
Other responsibilities include
Staffing the plant
Day to Day Management
Administration
Training
Dispatch
Power production
Maintenance Planning
Major Overhauls
Troubleshooting
Performance Reporting &
General Logistics
Performance guarantees on parameters such as
Availability
Production
Heat Rate
Lube Oil Consumption
Emissions
Advantages for the Power Plant Owner:
Competitive O&M Costs
Predictable lifetime cost forecast
Substantial Risk Mitigating
Performance guarantees ensure continuous optimisation of the plant
Sustained asset value through best practices for O&M
Maximum Return on Investment (ROI)
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Financial Benefits:
Spare parts optimization
Sustained reduction of OPEX in a very short period of time
Independent interface b/w OEM & Client will save time and money
Longer Asset life, leading to postponed decommissioning costs
HRM Benefits:
Flexibility
Increased Safety
Fewer Human Resource issues
Improved utilization of Clients own personnel resources
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6.2. Operation and Maintenance Experience:
6.2.1. Current Revenues:
AR as of End JUN 11
Rs Lacs
OC CODE CUSTOMER NAME 0-30 31-60 61-90 91-120 121-180 181-365 366-730 731 & Above TOTAL PROVISION TOTAL
DDM001 MADRAS CEMENTS LTD 37.88 0.10 0.05 0.00 38.04 38.04
DDM004 J K LAKSHMI CEMENT LTD 92.65 46.33 0.35 5.45 1.72 0.16 146.66 0.08 146.58
DDM006 J K CEMENT WORKS 72.34 0.00 0.00 72.34 72.34
DDM007 MADRAS CEMENTS LTD 81.61 1.25 1.13 2.36 0.00 0.00 86.35 86.35
DDM009 J K CEMENT WORKS 50.36 0.00 0.00 0.00 0.32 50.68 0.32 50.36
DDM010 DCW LTD 233.85 3.34 116.93 10.69 0.15 0.13 365.08 0.06 365.02
DDM011 CHEMPLAST SANMAR LTD 145.71 125.71 5.39 0.25 0.20 277.26 0.10 277.16
DDM012 SAURASHTRA CEMENTS LIMITED 98.03 45.71 8.22 0.00 151.97 151.97
DDM013 J K WHITE CEMENT WORKS 86.20 1.72 0.00 87.92 87.92
DDM014 SANGAM (INDIA) LIMITED 2.40 2.40 2.40
DDM015 HINDUSTAN ZINC LIMITED 135.12 3.41 0.52 8.03 3.31 0.90 151.29 0.90 150.39
DDM016 JAYKAYCEM LIMITED 114.07 63.45 0.00 0.76 0.00 0.00 178.28 178.28
DDM017 BHARAT OMAN REFINERIES LIMITED 158.96 44.30 9.31 212.57 212.57
DDM018 KAMAL SPONGE STEEL & POWER LTD 21.24 21.24 21.24 -
DDM022 URJANKUR SHREE DATTA POWER CO LTD 9.59 2.27 11.86 11.86
DDM023 MADRAS CEMENTS LTD 38.83 0.00 38.83 38.83
DDM024 ASR MULTIMETALS PRIVATE LIMITED 26.04 0.00 0.26 26.29 26.29
DDM025 SONA ALLOYS PRIVATE LIMITED 9.64 21.31 30.94 30.94
DDM028 KUDOS CHEMIE LTD 0.73 0.73 0.73
TOTAL 1391.61 21.31 333.59 123.23 52.61 5.43 21.73 1.23 1950.74 22.71 1928.03
DSO - Days 82
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6.2.2. Profit and Loss Calculations:
Source- MIS & Financial Modelling data Thermax Ltd.
The Vertical Y-Axis represents the cost incurred in Lacs and the Horizontal X-Axis
represents the O&M sites.
The Profit margin showed by blue line indicates the profit for various sites maximum
up to ` 145 Lac and minimum tend towards loss up to ` 20 Lacs.
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6.2.3. Analysis of Variances:
FY 2010-11
JUN 11 YTDRs Lacs
PARTICULARSABP ACTUAL VARIANCE REMARKS
INVOICING 2114.00 2139.44 25.44 Invoicing Less than ABP
MATERIAL COST 380.52 343.52 37.00
% 18% 16%
ODC (Includes Provision for Doubtful debts) 466.79 552.95 -86.16 OVERRUN
DOE 540.00 459.80 80.20
GROSS MARGIN 726.69 783.17 56.48
GROSS MARGIN % 34% 37%
G&A 96.04 76.79 19.25
Other Income 0.00 -2.31 2.31
Depreciation & Interest 21.00 36.26 -15.26
PBT 609.65 672.43 62.78
PBT % 29% 31%
O&M Inventory as on End-June 11 (Gross) 548.75
O&M Inventory - Days 145
AR as on End June -11 ( Gross ) 1,950.74
DSO 83
Points for O&M Action:
Review AR & make necessary collection.
Review - Non Moving Inventory .
YTD - Year To Date
AR - Acount Receivables
ABP - Assumption Based Planning
ODC - Other Direct Costs
PBT - Profit Before Tax
G&A - General and Administration
DOE - Direct Operational Expenditure
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6.2.4. Learnings from the Operational Proceedings:
By the analysis of financial sheets and the Thermaxs annual report, it is clear that the
O&M Contract proves to be a profit making business because O&M service doesnt
depend on the market fluctuation; rather it depends on the plant size and years of
operation.
O&M division helps:
For Customers For Thermax Ltd.
Non-core (Power ) customers Add Revenue
Single Window Service Build on Expertise
HR / Recruitment Savings More Value added to Client
Turnkey Solution Risk Mitigation
To verify the Budget Vs Actual Thermax has prepared a chart showing the allocation of
cost depicting different scope of O&M.
Scope Cost Head % Manpower +
Services
Manpower +
Services +
Consumables
Manpower +
Services +
Chemicals +
Consumables
Manpower +
Services +
Spares +
Chemicals +
Consumables Labour % 30 28.5 26 22
Material % 1 4 9.5 18 Salary % 34 33.5 30.5 26 Total % 66 66 66 66
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6.3. Critical Assessment and Evaluation of O&M Business:
After being familiar with the actual work and our project responsibilities, now we are
able to evaluate the organizational business through management point of view. So
here we do the critical assessment by SWOT analysis:
Strengths:
To provide the full regulation for power plant is the biggest strength of
Thermax O&M Business.
To do the O&M of self EPC plants as well as those EPC which had not
done by Thermax and this proves that they are mature enough to provide
O&M to non-EPC plants also.
To use captive knowledge of existing manpower.
Expert in handling any type of Boilers.
Backend support from business vendors to engineering group for
efficient control and with OEM for in-house accessories, and Chemical
division for water treatment.
O&M of Thermax tries their best to mobilize the power plant within 45
days.
Thermaxs record book include:
a) Highest no. of projects finished in time.
b) Highest no. of repeat orders in category.
c) Highest no. of bullet bonuses earned.
Weaknesses:
Scarcity of experienced manpower.
Poaching of manpower.
Engineers moved out due to attraction towards more salary.
Burgeoning issue of labour laws.
Inadequate information of non-EPC contract.
Company has to pay high compensation to retain talented engineers.
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Like every giants there is a lack of proper approach and communication
hence bureaucratic culture exists.
Absence of adequate skilled support staff and lack of motivation due to
non-managerial approach
Opportunities:
BUILD OWN OPERATE(BOO)- (BOO) is a form of project financing,
wherein a private entity receives a concession from the private or public
sector to finance, design, construct, and operate a facility for a specified
period, often as long as 20 or 30 years. After the concession period ends,
ownership is transferred back to the granting entity.
MOTIVATION- To trained lower level employees to give them the
promotion and acts as the motivation factors for others employee.
Past performance on O&M will help Thermax to grab more projects.
Company can go ahead to improve quality of operations, products &
inventory management by taking the help of expert consultants.
Threats:
Increasing competition from foreign as well as Indian companies.
Poaching of manpower.
Migration is the key threat, not only at the bottom level but also at the
top level, as they leave the organization and become entrepreneur.
Another major factor is coal which is diminishing day-by-day; hence it
acts as a threat for surviving of small power plants.
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7. Conceptualization:
7.1. Spend Analysis in Operation and Maintenance Contracts:
Labour & Materials MCL 1 MCL 1 MCL 2 MCL 2 MCL 3 MCL 3 JKL 3X18 JKL 3X18 JKL WHRB JKL WHRB JKCW 22 JKCW 22 USDPCL USDPCL
Actual till
July
Projected
Aug+Sept
Actual till
July
Projected
Aug+Sept
Actual till
July
Projected
Aug+Sept
Actual
till July
Projected
Aug+Sept
Actual till
July
Projected
Aug+Sept
Actual
till July
Projected
Aug+Sept
Actual
till July
Projected
Aug+Sept
Regular Serv Provider Charges 28 14 32 16 28 14 36 18 20 9 21 15 22 16
Cost of Addnl. Services 21 11 41 4 4 2 26 15 1 1 1 35 2 2
Spare or Consumable cost
incurred34 9 33 15 23 10 31 30 0 0 21 55 9 9
Sub Total->> 83 34 106 35 55 26 93 63 21 10 43 105 33 27
Total->>
Labour & Materials DCW DCW CSL CSL JKM JKM SCL SCL HZL HZL JKWC JKWC BORL BORL
Actual till
July
Projected
Aug+Sept
Actual till
July
Projected
Aug+Sept
Actual till
July
Projected
Aug+Sept
Actual
till July
Projected
Aug+Sept
Actual till
July
Projected
Aug+Sept
Actual
till July
Projected
Aug+Sept
Actual
till July
Projected
Aug+Sept
Regular Serv Provider Charges 39 20 32 16 28 14 20 10 84 52 20 10 60 45
Cost of Addnl. Services 56 20 17 20 15 8 8 20 6 15 7 20 30 15
Spare or Consumable cost
incurred151 80 94 40 35 15 32 20 12 8 7 10 20 40
Sub Total->> 246 120 143 76 78 37 60 50 102 75 34 40 110 100
Total->>
Scope is M,C,S
Scope is M, C, only
Site - unstable/pre-commng.
Actual till
July
Projected
Aug+Sept
Projected
for
Q1+Q2
TOTAL->> 1207 798 2005
210
60
366 219 115 110 177 74
O&M - April - July 2011 YTD + projection of Aug and Sept (Rs. Lacs.)
117 141 81 156 31 148
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8. Focus on the Problem:
8.1. Operation and Maintenance Contract Management:
To survive in this competitive world, every organisation wants to enter into profit
making business where there is a continuous flow of earnings takes place. Talking
about the market uncertainty, when there is a downfall or recession going on, which
directly affects the companys profit and loss account; it is then necessary for the
company to avoid its capital expenditure (CAPEX) in order to remain safe in the
fluctuation period.
As stated above and keeping in view the market strategy now we shall focus on our
actual problem of contract management. In the recession period where nobody wants to
invest their money in the market, sometimes it may happen that many companies
wants to build their own power plant on EPC contract but they dont have adequate
amount to invest or say they are not able to invest in this period particularly, which is
indirectly a loss to Thermax.
In this condition if Thermax didnt have any EPC contract then how could they
survive, is a big Question Mark? Also it is said that, when you are not in touch with
your core field then your boon becomes your curse. Thermax is also one of the experts
in EPC field, and hence to remain in this field, Thermax put their step forward with a
clear & broad vision to initiate a unique O&M Division in the year 2006 and started
taking the O&M Contracts.
Operation & Maintenance Contract Management refers to the effective management of
contract to sustain in the field of Power Sector in terms of handling the whole plant and
its activities so that our knowledge and experience becomes the biggest hallmark
towards our giant mission and vision.
At present Thermax O&M Division has 20+ ongoing O&M contracts across India
helping them to understand the basic problem arising at different sites regarding coal
supply, unavailability of manpower, poaching of manpower due to unsuitability in
some parts of India, means North side people finds it difficult to adjust in South and
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vice-versa. This type of issues creates panic for the whole process of O&M of Power
Plants and hence to manage all these problems on-site as well as off-site is termed as
Contract Management.
Due to the rapid industrialization which is necessary for countrys economic
development, all companies need a huge amount of power and as per the present
scenario the cost of electricity is increasing at a continuous pace and expected to reach
at its climax within this decade. In order to meet the electricity demand, companies
move towards setting up their own Captive Power Plant (CPP) or become Independent
Power Producer (IPP), so that they are able to control their electricity cost and hence
able to save a handsome amount which they utilize for further development.
Throw a light on industries setting up CPP & IPP; we came to the conclusion that these
industries are those who doesnt have knowledge about the running of Power Plant e.g.
Industries like Cement, Textile, Steel, Chemicals, Sponge & Iron etc. or the industries
who want to offload their operation and maintenance of Power Plant on contract basis
to other experienced giants in this field. Now look at this particular point which
provided the clue and this is the actual reason why we (Thermax) came into picture and
started providing O&M services to Power Plant and emerged as one of the top O&M
Service provider.
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8.2. Sub Contract Scope:
After receiving the O&M contract of any Power Plant, Thermax soon started their
mobilization with all formal clearances and trying their level best to complete it within
the given time period of 45 days due to which they awarded many times.
O&M service refers to the complete understanding and working of Power Plant which
is further divided into lot of subcategories viz. Fuel Handling, Consumables, Waste
Management, Water Treatment, Ash Utilization, Spare Part Maintenance, Boiler
Accessories, BTG & BOP maintenance etc. All these activities are not possible for a
single contractor and here arises the scope for Sub Contract.
Sub Contract basically means to work under Contractor. The Sub Contractor is then
responsible for all minor works which are beyond the scope of main contractor or in
other words if the main contractor shows unwillingness to do some work then it gives
sub contract to the third party. It is correct in the sense that (taking Thermaxs
example) the giant firms are not interesting in hiring and recruiting the unskilled
workforce which are required to work at site as labour.
After analysing the appropriate problem of Contractor and Sub Contractor management
we can easily conclude that as EPC Contracts increases there is sudden jump in:
Industrialization
O&M Service Provider
Contract Management
Sub Contract scope
Jobs for unskilled workforce
Literacy level
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8.3. Various Regulations:
Apprentices Act
(Bombay) Labour Welfare Fund Act
(Bombay) Industrial Relations Act
(Bombay) Shops & Establishments Act
Building & Other Construction Workers Act, 1996 (with Mah. Rules, 2007)
Contract Labour Act (with Central and Mah. Rules)
Child Labour Act
Employers Guide to Labour Laws
Employees Provident Funds Act with Scheme
Employees State Insurance Act
Employment Exchange (Compulsory Notification of Vacancies)
Equal Remuneration Act
Factories Act (with Mah. Rules)
Industrial Disputes Act (with Central and Mah. Rules)
Industrial Employment (S.O.) Act
Maharashtra Mathadi, Hamal & Other Manual Workers (Regulation of
Employment & Welfare) Act, 1969
Maharashtra Pvt. Security Guards (Regulation of Employment & Welfare) Act,
1981
Maharashtra Workmens Minimum House-Rent Allowance Act & Rules
Maternity Benefit Act
Minimum Wages Act with Mah. Rules (with Notifications Fixing Revising
Minimum Rates of Wages in Mah. State for Schedule Employment)
M.R.T.U. & P.U.L.P. Act
Payment of Bonus Act
Payment of Gratuity Act with Mah. Rules
Payment of Wages Act with Mah. Rules
Private Security Agencies (Regulation), Act, 2005 with Mah. Rules, 2007
Sales Promotion Emp. Act
Trade Unions Act with Mah. Rules
Weekly Holidays Act
Workmens Compensation Act with Mah. Rules
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8.4. Statutory Compliance at Site:
Objectives:
In present global business competition, it is imperative to outsource certain
independent activities. Such outsourcing can be assigned to vendors / contractor at
our works as well as customer premises at site.
To safeguard the organization, vendors & customer from legal prosecution under
various applicable labour laws as well as other local laws.
To extend & ensure benefits to all contract labours as prescribed under labour laws
& other local laws at site.
To maintain optimum / highest level of statutory compliance at site at all times
operating following standard procedure and control mechanism.
Appointment / Selection of Contractor / Vendor:
Contractors / vendors who possess their own independent registration under
following acts & who will professionally strong in statutory compliance shall be
appointed as professional contractor / vendor at site.
1. Registration under Employees State Insurance Act 1948 (E.S.I.C Code)
2. Registration under Employees Provident Funds Act 1952 (P.F Code)
3. Workmen Compensation Insurance Policy under WC Act 1923 in case of
non ESIC coverage area.
4. Labour License under Contract Labour Act 1970 if applicable.
5. Labour License under B & O C W Act 1996 if applicable.
6. Registration under Labour Welfare Fund Act if applicable.
7. Firm / Business Registration with local authority (Shop Act).
8. Professional Tax
9. Income Tax (Pan No)
10. Service Tax Registration
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Thermax Ltd shall ensure followings while appointing the
contractor at site:
1. Agreement with contactors / vendors on 100/- Rs stamp Paper apart from
purchase order / work order etc
2. Indemnity bond to be taken from contactors / vendors on 100/- Rs stamp
paper
3. Strictly ensure appointment of supervisor by the contractor & to avoid direct
employee - employer relationships. The said supervisor will monitor day to
day activities of the contractor. Such supervisor may be one among the
contract labour also.
4. Ensure safety training to all contract labors.
5. To provide personal protective equipments to all contract labors.(PPE)
6. Strictly adhered all Labour laws which are applicable at site.
7. Undertaking from the contractors & his employees for observing safety
norms.
Contractors should ensure following before entering at site:
1. To keep bio- data cum application of all workmen with photo.
2. To keep age proof of all workmen / labors.
3. To issue identity card with photo to all labors.
4. To keep records of medical fitness of all labour
5. To issue appointment letter to all employees
6. To issue PF numbers to all labours / employees.
7. To obtain ESIC numbers for all labours / employees.
8. To appoint supervisor at each site.
9. To keep copies of all records at site at all times for Govt. Officer Inspection.
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Site Location:
1 Principal Employer is Customer
2 Contractor is Thermax Ltd
3 Sub-contractor - Contractor appointed by the Thermax Ltd
Applicability of the Act:
Principal Employer, who has directly & in-directly employed (employees of
contractors & sub-contractors) the persons in his factory premises are too be taken
in to consideration of applicability of the Act.
Contractor shall strictly ensure statutory compliance under following labour laws at
site.
SN Regular Labour Laws at Site
S
N
Silent Labors Laws at Site
1 The Contract Labour Act 1970
1 The Factories Act 1948
2 The Minimum Wages Act 1948
2 Labour Welfare Funds Act 1953
3 ESIC Act 1948
3 The Maternity benefit Act 1961
4 PF Act 1952
4 The Equal Remuneration Act 1976
5 The Payment of Wages Act 1936
5 The Industrial Disputes Act 1947
6 The Payment of Bonus Act, 1965
6 The Profession Tax
7 Workmen Compensation Act 1923
7 House Rent Allowance Act. In
Maharashtra state it is mandatory
8
Building & Other Construction
Workmen Act 1996 & Cess Act
1996
8
The Child Labour (Prohibition &
Regulation) Act 1986
9
The Interstate Migrant Workmen's
Act 1979
9
The Industrial Employment
(Standing Order) Act 1946
10 Other State Acts & Central / State
Rules if any.
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Very Important:
Every Act contains following three important aspects.
1 Central Act Applicable to whole India
2 Central
Rules
Applicable to concern state, those who are not having their
own state rules. All Central Govt. undertakings as well as
supported by Central Govt. are coming under said rules even
though they are operating in various states.
3 State Rules If the concern state is having its own state rules it is mandatory
to follow state rules including operating procedure like legal
fees, security deposits, legal forms / formats etc.
8.4.1. Compliance under Contract Labour Act 1970:
The said act is applicable to contractors, who are employing 20 or more workmen as
contract labour. (PI checks individual state applicability). Every Contractor to whom
the act applies must obtain licence in Form No. VI.
Procedure for obtaining license under Contract Labour Act 1970 (Central Rules)
1 Form IV Application in duplicate
2 Annexure Declaration by the Contractor
3 Form V To be obtain from Principal Employer
4 Security Deposit To be deposited in SBI through Govt. Challan.
5 License Fees To be deposited in SBI through Govt. Challan.
6 Form VI License issued by the Govt. Authority to the contractor
7 Form VII Application for renewal of license along with renewal fees
8 Power of
Attorney
If required for signing the documents
It is mandatory to keep copies of all statutory records in the 3 KM of radius of work
site.
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41
8.4.2. Compliance under Minimum Wages Act 1948:
It is mandatory to pay minimum wages applicable to customer location at site.
Each Sate Govt. is declaring minimum wages as per the category of the industries & as
per the applicable zones. Before paying minimum wages Pl take following details
from customer / principal employer.
1 Type of Industry To be check with customer
2 Under which zone the said
industry is coming
1 or 2 or 3 or 4 To be check with customer
3 Applicable minimum wages To take from customer as per below format
Skill Category Un Skilled Semi
Skilled
Skilled
Basic To check To check To check
Govt. DA / Special All To check To check To check
Total
HRA 5% of Basic + DA
If you are paying more than minimum wages, the amount over & above minimum
wages should be shown as Conveyance allowance, Washing allowance etc instead of
other allowance.
8.4.3. Compliance under Payment of Wages Act 1936:
It is mandatory to pay wages before 7th
of every month where the customer is
employing less than 1,000 persons (Direct & Indirect) & before 10th
of every month
where the customer is employing more than 1,000 persons (Direct & Indirect) When
the employment of any person is terminated, the wages earned by him must be paid
before the expiry of the second working day from the day of termination.
8.4.4. Compliance under ESIC Act 1948:
It is mandatory to cover each labour / employee from day one, those who are drawing
monthly wages / salary up to ` 15000/-.
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42
Key Benefits under ESIC Act 1948:
1 Sickness
benefits
2 Medical
benefits
3 Disablement
benefits
4 Funeral
Benefits
5 Accident
benefits
6 Maternity
benefits
7 Depends benefits
8.4.5. Compliance under PF Act 1952:
It is mandatory to cover all labours / workmen / employees under said act from day 1.
It is mandatory to deduct 12% PF on Basic + DA from Rs 0001 to ` 6500/- PM.
Employee can contribute PF deduction on entire Basic + DA Amt (above ` 6501/-) but
it is not binding on employer to contribute his share on or above ` 6501/-.
Key benefits under PF Act 1948
8.4.6. Compliance under Workmen Compensation Act 1923:
The said act is applicable to non ESIC coverage area.
The said act is also applicable to ESIC coverage where employees are getting monthly
wages more than ` 15000/- (out of preview of ESIC coverage).
In case of accident it is mandatory to pay following benefits under said act.
Key benefits under WC Act 1923:
1 Temporary disablement 3 Permanent Total disablement
2 Permanent Partial disablement 4 Death
1 Long life pension to nominees in case of death
2 One time EDLI benefit in case of death
2 Pension after completion of superannuation age
4 Non refundable loan for various reasons
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8.4.7. Compliance under Bonus Act 1965:
The bonus is payable as per financial accounting year from Apr to Mar. It is
mandatory to pay the 8.33% bonus to the labors / employees those who are drawing
wage (Basic + DA) up to Rs.10, 000/- per month and who has worked for minimum
period of 30 days in a accounting year. Bonus must be paid within a period of 8
months from the close of accounting year.
Procedure for calculation of bonus Under the said act wage ceiling for bonus
calculation is locked by Govt. An employee who draw a salary or wage (Basic +DA)
more than Rs.3500/- to Rs 10,000/- per month, bonus will be calculated on Rs 3500/-
only. In other words 8.33% bonus will be calculated only on Rs 3500/- PM even
though his wages (Basic + DA) are more than Rs 3500/- PM.
Labour /
employees is
getting monthly
wages (Basic +
DA) Rs 10500/-
Labour / employees
is getting monthly
wages (Basic + DA)
Rs 2800/- (below Rs
3500/-)
Labour /
employees is
getting monthly
wages (Basic +
DA) Rs 3500/-
Labour / employees
is getting monthly
wages (Basic + DA)
Rs 6500/- (above Rs
3500)
Not eligible for
bonus
2800 X 8.33% = Rs
233/-
3500 X 8.33% =
292/-
3500 X 8.33% =
292/-
8.4.8. Compliance Building & Other Construction Workers Act 1996:
The said act is applicable to every establishment which employs, or had employed 10
or more building workers in any building or other construction work. The said act is
mostly applicable to green field areas & upcoming factories those who are not
registered under the factory act 1948.
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8.4.9. Compliance Building & Construction Workers Cess Act 1996:
The said act is second part of the building & other construction workers act 1996.
Once registered under the said act, Cess Act is applicable automatically. Under the
said act we have to pay cess to Govt. Labour Office not exceeding 2% but not less
than 1% of the cost of construction incurred by the employer. (Excluding cost of land
& Compensation paid under WC Act 1923)
8.4.10. Compliance Inter State Migrant Act 1979:
Every establishment or contractor who employs or who employed five or more inter-
state migrant workmen (whether or not in addition to other workmen) on any day of
the preceding 12 months is required to take license / registration under the said act.
8.4.11. Report of Accident under Factory Act 1948:
It is mandatory on the principal employer as well as contractor to inform following
authorities immediately in case of fatal accident & with in 48 hrs in case of other
accident of Direct or In-direct employee. It is mandatory on each contractor to intimate
any type of accident to principal employer immediately.
Factory
Inspector
Nearest Police
Station
ESIC
Authority
Next kin or other
relatives.
Principal
Employer
8.4.12. Report of Accident under Building & Construction Workers
act 1996:
It is mandatory to inform following authorities immediately in case of fatal accident &
with in 48 hrs in case of other accident of Direct or In-direct employee.
Regional Labour
Commissioner
Nearest
Police St.
Districts
Magistrate
Next kin or
other relatives
Welfare
Board
Principal
Employer
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8.4.13. Site Closure Procedure:
As per the provisions of the respective Acts, Govt. Inspectors are checking party
ledgers along with supporting documents for verification of payment of PF / ESIC
dues on labour charges other than regular wage muster. If the payments of PF & ESIC
dues are not tally with labour charges, inspector will issue non compliance legal notice
along with dues, interest penalty & damages to the company.
By considering future legal liabilities under various acts as well as legal prosecution, it
is mandatory on each site In-charge as well as site contractor to complete following
site closing procedure. Pl ask contractor to submit followings:
Site commencement on Site completion on
Contractor Name Contractor Address
Site Name Site Location
Total period of site Number of employees
PF Code No ESIC Code No
Govt. Inspectors are asking following information along with supporting documents.
SN Month Total
Billing
Material Cost &
other cost etc.
Labour
Cost
Total PF
Paid
Total ESIC
Paid
1
2
Total
The above information will help us to define PF / ESIC liabilities on labour charges
otherwise the Govt. Inspectors will charge PF / ESIC on entire billing amount.
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46
Check List to be completed by Thermax Officials:
SN Particulars Y
e
s
N
o
NA
Remark
1 Has notice of completion of work given to Labour office
in form VI A. under Contract Labour Act 1970
2 Has contractor surrendered license to Govt. Auth in form
VI under Contract Labour Act 1970
3 Has contractor taken back security deposit from Govt.
auth after surrendering above license (form VI)
4 Has notice of completion of work given to Labour office
in form IV under B & O C W Act 1996
5 Has contractor surrendered license to Govt. Auth in form
II under B & O C W Act 1996
6 Has contractor taken back security deposit from Govt.
auth after surrendering above license (form II)
7 Has contractor paid 1% cess under B & O C W W Cess
Act 1996 to Govt. Auth
8 Are we holding 10% payment of total contract value of
the contractor against the statutory compliance
9 Has contractor submitted copies of all records from site
start to site end date (Muster Roll, Wage sheet, OT
Register etc)
10 Has contractor submitted copies of all PF records? Forms
2,5,10,12A,3A,6A, PF Challan (PF members list)
.11 Has contractor submitted copies of all ESIC records?
forms 1,3,5,7A, ESIC Challan (ESIC member list)
12 Has contractor properly / legally terminated service of his
employees
13 Has contractor taken receipt for payment of full & final
settlement of his employees?
14 Are we taking site closing undertaking on 100/- Rs stamp
paper from the contractor while closing the site for future
legal & other liabilities if any
15 Has contractor submitted receipt of bonus paid to his
employees (site start date to end date)
16 Has contractor submitted copies of PF settlement claims /
dues of his employees
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47
8.5. Sub Contractor Selection:
Statutory Compliance Audit - Check Point STATUS
SN Registration and Licence
1 Whether contractor is registered under Labour Contact Act, 1970?
2 Whether contractor has obtained a licence under the act?
3 Workmen employee should not exceed maximum no specified in the licence
4 Wages are payable to workmen as per Minimum Wages act, 1948
5 Licensee should submit a return to Inspector within 15 days of commencement
of contract work
6 Copy of the licence shall be prominently at the premises of work.
7 No female contract labour employed, before 6 a.m. and after 7 p.m.
8 Every licence shall be renewed after 12 months.
9 In case of immediate labour requirement at work place, principal employer
should apply for temporary registration or lecence to the registering authority.
Welfare and health care of contract labour
1 Facilities should be provided by the contractor like First-aid, Wholesome
drinking water, a sufficient number of toilets, washing facilities etc., within
seven days of the commencement of work.
2 If these facilities are not provided by the contractor, then principal employer
has to provide these facilities.
Registers and Records
1 The principal employer shall ensure the presence of his authorized
representative at the place and time of disbursement of wages by the contractor
to workman and it shall be the duty of the contractor to ensure the disbursement wages in the presence of such authorized representative.
2 The authorized representative of the principal employer shall record under his
signature a certificate at the end of the entries in the register of wages or the
1[Register of Wages-cum-Muster Roll as the case may be in following form:
Certified that the amount shown in column No---------- has been paid to the workmen concerned in my presence on -------- at --------- .
3 Register of contractors:-Every principal employer shall maintain in respect of
each registered establishment a register of contractors in Form XII.
4 Register of persons employed.-Every contractor shall maintain in respect of such registered establishment where he employs contract labour a register in
Form XIII.
5 Employment card.-(I) Every contractor shall issue an employment card in
Form XIV to each worker within three days of the employment of the worker.
6 (II) The card shall be maintained up to date and any change in the particulars
shall be entered therein.
7 Service certificate.-On termination of employment for any reason whatsoever
the contractor shall issue to the workman whose services have been terminated
a Service Certificate in Form XV.
8 Following registers and records to be maintained by the contractor under these
rules, namely:
9 Muster Roll
10 Register of wages
11 Register of deductions
12 Register of overtime
13 Register of advances
14 Register of fines
15 Wage slip
Sign by Site Incharge
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8.6. Sub Contractor Performance Rating Index:
Site Name:
Name of Contractor:
Performance Appraisal Period: Apr-Sept / Oct-Mar
(Pink Copy For HO, Yellow Copy For Subcontractor, White Copy For Site Records)
Sr.
No. Scaling Attributes Score
A-Man Power
1 Qualification of Manpower
2 Knowledge of Manpower about Operation (CHP, AHP, WTP)
3 Skills of Manpower in Mechanical Maintenance
4 Adherence to Safety Practices
5 Attendance of Manpower
6 Man Management & Control by Sub-Contractors Site Incharge
7 Fulfilment of extra Manpower in case of Exigency
8 Corrective Actions & Improvement done based on past feedback
9 Consistency in Performance
B-Tools, Tackles & PPEs
10 Tools and Tackles supplied as per list given in PO
11 Training to Manpower for safe use of Tools & Tackles
12 Supply of all PPEs
13 Replacement / maintenance of Tools & Tackles
C-Billing & Documentation
14 Correctness of Bills
15 Timely Submission of Bills
16 Bills submitted along with all mandatory documents, which are
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necessary for payments (Attendance, T&T List, PF, WCP / ESI)
D-Communication
17 Adequate communication facilities provided at their office
18 Communication Effectiveness
19 Timely response to communication from Thermax
E-Records
20 Proper record maintenance regarding attendance
21 Proper record maintenance as per all Statutory Laws
F-Other Issues
22 Ability of contractor to mobilize at another site anywhere in India
23 Capability of contractor to handle bigger size power plant contract
24 Training and development programs organized by Contractor
25 Suitability of this contractor for future contracts with Thermax
TOTAL SCORE
Instructions:
1. Every attribute has to be given its proper score as per the assessment of the Station Manager.
2. Every Attribute should be given score in the range of 0-4.
(0 = Very Poor, 1 = Poor, 2 = Satisfactory, 3 = Good, 4 = Very Good)
3. Contractor Performance Score shall be out of 100.
4. Yellow Copy should be formally handed over to Sub-Contractor.
Issued by:
Thermax Station Manager
Date:
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8.7. SOP for new Site Mobilisation w.r.t. Compliance:
Colour Legend used for Activity Number
Zero date to Mobilisation Target - 45 days
Zero Date to Stabilisation
Post Stabilisation or Review
Activity
Colour
Activity Milestone - Remarks and
Points for completion
Target in days Target Date Actual Date Scope
C = Client
T = Thermax
B = Both
Owner dept. -
SCM
Responsibility
assigned to
Activity-
Classification
Zero Date - Shall be communicated
by Marketing based on Receipt of
Advance or Contract or LOI or Notice
to Proceed - A formal letter from
Marketing / Commercial approved by
LV or PKD
25-Jul-11 Documentation
OC Creation - Data Entry into
System, Circulation of Budget
2 27-Jul-11 Thermax Documentation
OK from Commercial Dept.- Billing
and Shipping addresses for material
movement, Road permits need and
scope, taxation rules
2 27-Jul-11 Thermax Documentation
Labour license formalities for TL as
well as for the Manpower Contractor
30 24-Aug-11 Thermax Documentation
OPMS Circulation - O&M Philosophy,
Preventive, Periodic, Shutdown,
Breakdown etc,
90 23-Oct-11 Thermax Documentation
Making Spares lists and defining
scope - Typical terms used are
Capital Spares, Real Spares,
Consumable Spares, General Spares,
OEM Spares etc
60 23-Sep-11 Thermax TL to submit lists Documentation
Site Safety Compliance - Site Visit of
HO safety coordinator, Safety Manual,
Training, OHSAS, Posters etc
60 23-Sep-11 Thermax Documentation
OE visits - Based on As Built and PG
test reports, Focus on warranty and
guarantee claims, FOC spares etc,
here timing is important
25-Jul-11 Client Expert
Requirement
Site Transit House - Quarters from
client or Rented Facility, Bachelor
Hostel
15 09-Aug-11 Thermax Infrastructure
Site Office Setup - Building and
Furniture
30 24-Aug-11 Client Infrastructure
Site Office Setup - Computers and
Printer
30 24-Aug-11 Client Infrastructure
Depositing of Mobilization Advance
(Site Fund) to enable commencement
of Site Operations
7 01-Aug-11 Thermax Infrastructure
Site Communication Facilities - Email
facility, Internet Connection, CUG
mobiles
30 24-Aug-11 Both Infrastructure
Walkie Talkies - Decide quantity and
license formalities
20 14-Aug-11 Thermax Infrastructure
Site Canteen / Mess Facility 45 08-Sep-11 Thermax Infrastructure
Site Stores - for TL owned material 45 08-Sep-11 Client Infrastructure
Site Stores - for Client owned
material? Upkeep of the store?
Security of the store? Stocking?
Inventory Management?Inwarding?
45 08-Sep-11 Client Infrastructure
Chemical Lab - Building, Lab
Equipments, Lab ware
15 09-Aug-11 Client Infrastructure
Site ERP / EAM - Setup, training etc 90 23-Oct-11 Both Infrastructure
Manpower (TL) - Org structure,
Manpower plan, transfer, ID, Roles &
Responsibilities, Recruitment,
Interview, Appointment, Induction,
Deputation
45 08-Sep-11 Thermax Manpower
WTP Chemicals and Plan - Boiler
Water Chemicals / Cooling Water
Chemicals / RO Chemicals / Anion
Cation Resins
30 24-Aug-11 Client Material
PPE's - First Lot 25 19-Aug-11 Thermax Material
Consumables - First Lot of Lubricants
and Oils
25 19-Aug-11 Client Material
Consumables - First Lot of
Maintenance Consumables
25 19-Aug-11 Client Material
MOBILISATION MASTER FOR O&M SITE - KAMACHI SPONGE AND POWER CORP
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Consumables - First Lot of Fuses 60 23-Sep-11 Client Material
Consumables - First Lot of Bearings 60 23-Sep-11 Client Material
Consumables - First Lot of Gaskets 30 24-Aug-11 Client Material
Consumables - First Lot of CHP and
AHP Spares
60 23-Sep-11 Client Material
Mechanical Tools and Tackles -
Common Tools, Tools Boxes,
Contractor Tools TL Scope
20 14-Aug-11 Thermax Material
Electrical Lab - Test Equipments 20 14-Aug-11 Both Material
C&I Lab - Test Equipments 20 14-Aug-11 Both Material
Scaffolding 20 14-Aug-11 Client Material
Bed Material - Scope and
Management
20 14-Aug-11 Client Material
Master Spare Plan - Study of plant 90 23-Oct-11 Thermax Review
Site Taxi Facility 15 09-Aug-11 Thermax Service
Manpower Contractor - Define Scope
for Manpoweras well as T&T
30 24-Aug-11 Thermax Service
Coal/Fuel Yard Management - Earth
Moving Equipment, Stacker
Reclaimer, Yard Area etc
25-Jul-11 Client Service
Ash Disposal 25-Jul-11 Client Service
AMC Pest Control 30 24-Aug-11 Client Service
AMC - PV and Lifting Tackles Sling
testing - In case of new eqpt demand
copy of certificate else schedule
testing as per need.
30 24-Aug-11 Both Service
AMC - DCS and PLC systems 120 22-Nov-11 Client Service
AMC - Compressors 120 22-Nov-11 Client Service
AMC - AC Systems 120 22-Nov-11 Client Service
Testing and reviewing equipment
performance (Pre commissioning
onwards)
Both Taking Over
Collecting Technical Documents of the
plant eg O&M manuals, EPC contract
documents - Focus on "As Built",
Receive a list of drawings from
customer, Receive a list of O&M
manuals, Collect and verify drawings
and manuals from the customer / EPC
contractor.
90 23-Oct-11 Both Taking Over
Collecting PG test reports of the full
plant or sub systems, also compiling
test certificates etc - This is important
for baseline data. Atleast one copy of
all the commissioning protocols shall
be taken from customer or EPC
contractor if we do not witness /
certify. Incase we are taking over
running plant then only operating
protocols can be verified.Witnessing
and certifying commissioning
protocols
25-Jul-11 Both Taking Over
Making Base Line study of Rotating
machines and critical equipments -
Vibration analysis, oil check, capacity
checks, coal quality
60 23-Sep-11 Thermax Taking Over
Making punch point list from operation
and maintenance point of view -
Before Synchronisation and to be
closed out before stabilsation of the
plant
Thermax Taking over
Making punch point list from safety
point of view - Before Synchronisation
and to be closed out before
stabilsation of the plant
Thermax Taking over
Stock verification of spares inventory -
This is required in case we take over
a running plant
Thermax Taking over
Above information to be classified
into:
1. Manpower 2. Materials 3. Facilities 4.Coordinatio
n Reviews
5. OEM Service
/ Third Party
Expertise
6. Taking Over
Type of Sites / Clients 1. TL EPC 2. EPC by
others
3. Spilt Jobs 4. Running
Units
5. Overseas
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9. Mandatory Clearances Initial set-up of Thermal Power Plant:
9.1. Industrial Entrepreneur Memorandum acknowledgement given by
Ministry of Commerce and Industry.
9.2. Memorandum of Understanding (MoU) to be signed with State
Government.
9.3. Land Acquisition for Power Plant, Ash Dyke, Dam Site, Colony, Coal
Handling, Cross Country Pipeline, Coal Conveyor etc. which comprises of
following types of land:
i) Government Land
ii) Private Land
iii) Forest land
i) Government Land:
a) Identify the land coming under project site
b) Meet the Patwari of that Village on which particular land is coming & then
prepare KHASRA map indicating various location of the land.
c) List the name of owners coming under that particular area based on Khasra
Mapping.
d) Obtain the No Objection Certificate (NOC) from Local Gram Panchayat.
e) With all the above mentioned information i.e. Khasra Map, List of Land
Owners, NOC from Gram Panchayat, Land Diversion application if forest
or agricultural land is coming under construction.
f) With all the information cited above:- Local Govt. issue Section 4
Notification stating that so & so govt. land is to be acquired by the Project
Owner and if any one of the land owner having any sort of objection can
write to them within 30 days of issue of notification. If any objection is
received with the time frame specified by the govt. than the issue shall be
discussed and resolved through public hearing.
g) Based on the evaluation cost of land required by the Owner (Non-Forest &
Non-Agricultural) and application fee for diversion of forest or agricultural
land, Govt. decides the total amount to be paid by the land user and request
to deposit the actual cost to the govt.
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h) Once the applicable fees is paid, govt. issues Section 6 stating the given
land is acquired by the ultimate user and issues payment cheques to various
land owners who had sell their land.
i) Once section 6 is issued, the land is presumed to be under custody of the
Owner.
ii) Private Land:
a) Acquisition of private land is similar to the acquisition of govt. land and
initial three steps of Govt. land viz. a, b, & c is same for Private also.
b) Further, after preparation of list of land owners, direct dealing with the land
owner with negotiations can be performed to purchase the land.
c) Once the desired land is purchased, than the same shall be communicated to
the local govt. for their information and records.
iii) Forest Land:
a) Diversion of forest is necessary and permission from regional MoEF is
required if the land is
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b) Ministry of Environment & Forests (MoEF): For MoEF clearance following
procedures has to be done:
1) PHASE-I Screening: Submit the application for site clearance to MoEF.
If the site clearance is not granted than search for alternative site and
again submit the application for site clearance.
2) The site clearances provided by MoEF have certain conditions, if the site
selected meets all the conditions than proceed for Environmental
Clearance Phase-II (Citing, EIA report preparation, public hearing etc).
3) PHASE-II:
Step-1: Base line data collection
Step-2: EIA report preparation and other approvals including
Central Regulation Zone (CRZ) for coastal area.
If diversion of forest 5 Ha apply to
Central MoEF clearance.
If use of ground water is involved than a hydrological
report is to be submitted along with EC application.
Obtain approvals for Electricity, Water Supply (Ground
Water Board or Irrigation Dept. or Municipal Corporation
etc.) and Explosives Storage / Hazardous substances (if
applicable).
Finalize Application and Environmental Appraisal
Questionnaire.
Step-3:
A public hearing required.
Submit requisite no. of copies of executive summary.
Submit 1 copy of EIA, air and water consent application
Form-1 and Form-13.
Advertise and conduct public hearing by SPCB.
Obtain details of public hearing.
Obtain NOC from SPCB.
The above mentioned Step-3 involves approx 60 days.
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4) PHASE-III:
Step-1:
Submission of Documents (EIA-20 copies, EMP, NOC,
Public Hearing details, DPR) to MoEF.
Step-2:
Review by IAA.
If IAA feels that the data provided is sufficient then, the
expert committee will submit their assessment over the
report and application.
Step-3:
Expert committee will submit their recommendation to
IAA.
Step-4:
If the project is accepted than MoEF clearance is granted
for 5 years, however, if the case is rejected than it (case) is
closed. Reconsideration may be considered in some cases.
Step-5:
Step 1 to 3 requires approx 90 days and Step-4 requires
approx 30 days.
9.5. Water Drawl Permission:
Drawl from Perennial River: Approval from State Govt. in which
river is falling. Data such as Water feasibility Report, Gauge
Discharge and Index MAP indicating the location of Power
Plant, River Pump House etc. to be submitted to Principal
Secretary, Water Resource Department for State clearance.
If, more than one state is involved in drawl of water from the
river then in such case permission from Central Water
Commission (CWC) is required.
If construction of Dam is required, Const. of Dam Permission,
Water Drawl Permission, Royalties to be paid etc.
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9.6. Fuel Linkage Clearance:
If coal is to brought from outside agency i.e. no captive coal mine
is allocated than permission for coal linkage is required, which
involves following procedures:
Permission for railway sidings in case rail transportation is
required from the nearest railway line.
Way of right for railway sidings.
Three party agreement etc.
Allotment of coal blocks as per the requirement from Coal
Ministry, Govt. of India.
Coal Mining Plan is to be prepared and approved from State
Govt.
9.7. Civil Aviation Clearance:
For construction of any sky rise building including chimney from Airport Authority
of India (AAI).
9.8. Permission from State Govt. for Construction Power.
9.9. Permission from State Govt. for Construction Water.
9.10. Permission for use of Explosive.
9.11. Consent to establish from the State Environmental Board for setting up
the thermal power plant.
9.12. Consent to Operate & Maintain from the State Environmental Board for
setting up the Power Plant.
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10. Research Methodology:
10.1. Survey:
O&M Services at a site can be sustained over the long term only by satisfying
the customer and ensuring the running of power plant in a reliable and efficient
manner.
Customer is King for us and it is a well known fact that customers demand and
needs varies according to the situation. Hence to understand and walk with
customer priority is Thermaxs sole responsibility. Keeping this in view, we
classify the customers into different groups to aware you about their nature,
which are as follows:
1) EPC (TL) Customer:
O&M contract entered into with an ongoing project of TL EPC. Now EPC
groups within TL are:
Small Power Plant (60 MW)
In LPP segment usually cust