inventory management of ntpc
TRANSCRIPT
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A
Summer Training Report
On
“INVENTORY MANAGEMENT OF NTPC”
Submitted for partial fulfillment of requirement for the award of degree of
Master of Business Administration Of
MATS UNIVERSITY, RAIPUR (C.G.)
Session 2010-12
Guided by: - Submitted by:-Mrs. SHILPI GUPTA Mayank Singh Thakur
Head Professor M.B.A. 3rdSEM
Department of Management Roll No.
MU10MBA019MATS University
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CERTIFICATE BY COLLEGE
This is to certify that Mr. MAYANK SINGH THAKUR a bonafide student of MATS UNIVERSITY, Raipur (C.G.) studying in M.BA.3rdsemester has successfully completed his project entitled “INVENTORY MANAGEMENT OF NTPC, KORBA”
I wish him all success in every endeavor of life.
Mrs. Shilpi Gupta
Head Professor
Department of Management
MATS University
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CERTIFICATE OF INTERNAL GUIDE
This is to certify that the Project titled “INVENTORY MANAGMENT” of
N.T.P.C. Korba is a bonafide work carried out by …………………………..
a candidate for the award of Master of Business Administration of Punjab
Technical University , M.I.M.T Korba under my guidance and direction.
Signature of guide
Date: Name: MAYANK SINGH
THAKUR
Place: (Korba) Designation:
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ACKNOWLEDGEMENT
I would like to express my gratitude towards all those who gave me the
possibility to complete this project. I want to thank finance department NTPC Korba
for providing support for necessary research work and to use the departmental data.
Further I want to thank Deputy General Manager Finance of NTPC Korba,
MR.D.PHANIKUMAR and my placement head of college Mrs. Geetu Rathod who
permitted and encouraged me to go ahead with my project work. I express my
gratitude to the Sr. Manager (F) of NTPC Korba Mr. Anuj Kush for his kind support.
Especially I want to thank all my colleagues during this project for their support that
helped me a lot in my project work.
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DECLARATION
I MAYANK SINGH THAKUR student of MAT hereby declared that is report on
“INVENTORY MANAGEMENT OF NTPC” is the record of honestly work done by
me and also the record of authentic work carried out by me during the academic year
2011-2012 in NTPC
I asset that the statement made and conclusion drown are an outcome of the
project work further that to the of my knowledge and belief that the project report
does not contain any part of any work which has been submitted for the award of any
other degree/diploma/certificate in this institute or any other institute.
MAYANK SINGH THAKUR
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INDEX
S. NO CONTENTS PAGE NO.
1 COMAPANY PROFILE 09-21
2 HISTORY 22-25
3 OBJECTIVE OF THE STUDY 26
4 VISSION AND MISSION 27
5 ACCOUNT POLICIES 28-34
6 SWOT ANALYSIS 35-36
7 UNIQE ACHIVEMENT OF NTPC 37-45
8 BOARD OF DIRECTOR 46-56
9 UTILIZATION OF ASH 57-63
10 SUBSIDIARIES OF NTPC 64-89
11 BALANCE SHEET AND FINANCIAL RESULT 68-74
12 WAY FORWOARD 75-76
13 INVENTORY MANAGEMENT 77-88
14 CONCLUSSION AND SUGGESSION 89
15 BIBLIOGRAPHY 90
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VOCATIONAL INTERNALSHIP PROJECT
A Study on
INVENTORY MANAGEMENT
NTPC LIMITED
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POWERING MILLION SMILES
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Company Profile
India’s largest power utility, NTPC Ltd was set up in 1975 to accelerate power
development in India. Today NTPC is a diversified power major with presence in the
entire value chain of the power generation business. Apart from power generation,
which is the mainstay of the company, NTPC has already ventured into consultancy,
power trading, ash utilization and coal mining. NTPC ranked 317th in the ‘2009,
Forbes Global 2000’ ranking of the World’s biggest companies.
The total installed capacity of the company is 30, 144 MW (including JVs)
with 15 coal based and 7 gas based stations, located across the country. In addition,
under JVs, 3 stations are coal based & another station uses naphtha/LNG as fuel. By
2017, the power generation portfolio is expected to have a diversified fuel mix with
coal based capacity of around 53000 MW, 10000 MW through gas, 9000 MW
through Hydro generation, about 2000 MW from nuclear sources and around 1000
MW from Renewable Energy Sources (RES). NTPC has adopted a multi-pronged
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growth strategy which includes capacity addition through green field projects,
expansion of existing stations, joint ventures, subsidiaries and takeover of stations.
NTPC has been operating its plants at high efficiency levels. Although the company
has 18.79% of the total national capacity it contributes 28.60% of total power
generation due to its focus on high efficiency.
The table below shows that while the installed capacity has increased by 73.33% in the last twelve years the generation has increased by 101.39%.
`In October 2004, NTPC launched its Initial Public Offering (IPO) consisting
of 5.25% as fresh issue and 5.25% as offer for sale by Government of India. NTPC
thus became a listed company in November 2004 with the government holding 89.5%
of the equity share capital. The rest is held by Institutional Investors and the Public.
The issue was a resounding success.NTPC among the largest five companies in India
in terms of market capitalization.
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Installed Capacity
The generating capacity as well as plant performance or operational efficiency has
been continuously growing without break since its inception.
NTPC’s Installed Capacity and performance depicts the company’s outstanding
performance across a number of parameters.
NO. OF PLANTS CAPACITY (MW)
NTPC Owned
Coal 15 23,895
Gas/Liquid Fuel 7 3,955
Total 22 27,850
Owned By JVs
Coal & Gas 4 2,294
Total 26 30,144
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Regional Spread of Generating Facilities
REGION COAL GAS TOTAL
Northern 7,035 2,312 9,347
Western 6,360 1,293 7,653
Southern 3,600 350 3,950
Eastern 6,900 - 6,900
JVs 8,14 1,480 2,294
Total 24,709 5,435 30,144
Coal Based Power Stations
The coal based power station has been always the main stay of NTPC . It is one of the
biggest user of coal in India. The entire generation back bone of NTPC is based on its
coal fired stations. Following are the coal based stations of NTPC
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COAL BASED(Owned by
NTPC)STATE
COMMISSIONED
CAPACITY(MW)
1. Singrauli Uttar Pradesh 2,000
2. Korba Chattisgarh 2,600
3. Ramagundam Andhra Pradesh 2,600
4. Farakka West Bengal 1,600
5. Vindhyachal Madhya Pradesh 3,260
6. Rihand Uttar Pradesh 2,000
7. Kahalgaon Bihar 1,840
8. Dadri Uttar Pradesh 1,820
9. Talcher Kaniha Orissa 3,000
10. Unchahar Uttar Pradesh 1,050
11. Talcher Thermal Orissa 460
12. Simhadri Andhra Pradesh 1,000
13. Tanda Uttar Pradesh 440
14. Badarpur Delhi 705
15. Sipat-II Chattisgarh 1,000
Total 23,895
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Gas/Liquid Fuel Based Power Stations
With a combined gas based commissioned capacity of 3955 MW, NTPC
caters to the peeking demand for power.
GAS BASED
(Owned by NTPC)STATE
COMMISSIONED
CAPACITY(MW)
1. Anta Rajasthan 413
2. Auraiya Uttar Pradesh 652
3. Kawas Gujarat 645
4. Dadri Uttar Pradesh 830
5. Jhanor-Gandhar Gujarat 648
6.Rajiv Gandhi CCPP
KayamkulamKerala 350
7. Faridabad Haryana 430
Total 3,955
Gas Based Joint Ventures:
COAL BASED
(Owned by JVs)STATE
COMMISSIONED
CAPACITY
1. RGPPL Maharashtra 1480
Total 1480
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Hydro Based Power Projects (Under Implementation)
NTPC has increased thrust on hydro development for a balanced portfolio for long
term sustainability. The first step in this direction was taken by initiating investment
in Koldam Hydro Electric Power Project located on Satluj River in Bilaspur district of
Himachal Pradesh. Two other hydro projects under construction are Tapovan
Vishnugad and Loharinag Pala. On all these projects construction activities are in full
swing.
HYDRO BASED STATEAPPROVED
CAPACITY(MW)
1. Koldam (HEPP) Himachal Pradesh 800
2. Loharinag Pala (HEPP) Uttarakhand 600
3. Tapovan Vishnugad (HEPP) Uttarakhand 520
Total 1,920
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Performance Statistics
In terms of operations, NTPC has always been considerably above the national
average. The availability factor for coal based power stations has increased from
89.32% in 1998-99 to 92.47% in 2008-09, which compares favourably with
international standards. The PLF has increased from 76.6% in 1998-99 to 91.14%
during the year 2008-09.
The table below shows that while the installed capacity has increased by 56.58% in
the last ten years.
DESCRIPTION UNIT 1998-99 2008-09 % OF INCREASE
Installed Capacity MW 17,786 27,850 56.58
Generation MUs 1,09,505 2,06,939 88.98
Excluding JVs and Subsidiaries
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The table below shows the detailed operational performance of coal based stations
over the years.
OPERATIONAL PERFORMANCE OF COAL BASED NTPC STATIONS
Unit 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09
Generation BU 109.5 118.7 130.1 133.2 140.86 149.16 159.11 170.88 188.67 200.86 206.94
PLF % 76.60 80.39 81.80 81.11 83.57 84.40 87.51 87.54 89.43 92.24 91.14
Availability
Factor% 89.36 90.06 88.54 89.09 88.70 88.79 91.20 89.91 90.09 92.12 92.47
ORGANIZATIONAL STRUCTURE OF
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NTPC
Chairman & Managing Director (CMD)
Director Director Director Director Director Director Director(Project) (Operation) (Technical) (H.R.) (Commercial) (Finance) (Vigilance)
Executive Executive ExecutiveExecutiveDirector Director DirectorDirector(NR) (WR) (SR)(ER)
General Manager
Addl. General Manager
Dy. General Manager
Senior Manager
Manager
Deputy Manager
Senior Engineer
Engineer
Sr. Asst. Engineer
Asst. Engineer
Supervisor & Workmen
LEGEND
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ORGANISATIONAL STRUCTURE
O&M - Operation & Maintenance, O – Operation,
MM – Mechanical Maintenance, F – Finance,
EM – Electrical Maintenance, TS – Technical Services,
C&I - Control & Instrumentation, FM – Fuel Management,
M&CS – Materials & Contract Services, HR – Human Resources,
R&M – Renovation and Modernization, CMO – Chief Medical Officer,
FQA – Field Quality Assurance, MR – Management Representative,
R&R – Rehabilitation and Resettlement, TA – Township Administration,EMG – Environment Monitoring Group, MTP – Maintenance Planning,
ERECT/CONST – Erection/Construction, HOD - Head of Department.
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OFKORBA SUPER THERMAL POWER STATION
(KSTPS)
HISTORY OF NTPC
Station In-chargeGeneral Manager
Head of O&M HOD Finance HOD (HR) CMO Hospital
HOD (M&CS)
M.R. (ISO 14001)
HOD (Vigilance)
HOD (Safety)
HOD (EMG)
HOD (TA) HOD (R&R)HOD (ITS)
HOD (TRG/SIM)
Sec. Head (FQA)
HODMTP/O&E)
HOD(TRG)
HOD(R&M)
HOD(FM)
HOD(O)
HOD(C&I)
HOD(EM)
HOD(MM)
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Our Company was incorporated on November 7, 1975 under the Companies Act as a
private limited company under the name National Thermal Power Corporation Private
Limited, and the word 'Private' was deleted on September30, 1976 consequent upon
the notification issued by the Go I Exempting government companies from the use of
word 'private'. In their name. On September 30, 1985, our Company was converted
from a private limited company into a public limited company. Subsequently, the
name of our Company was changed to its present name NTPC Limited. And a fresh
certificate of incorporation was issued on October 28, 2005. The name of our
Company was changed to reflect the diversification of our business operations beyond
thermal power generation to include, among others, generation of power from hydro,
nuclear and renewable energy sources and undertaking coal mining and oil
exploration activities. For further information on our business including description of
our activities, services, market of each segment, our growth, technology, market,
managerial competence and capacity built-up, our standing with reference to our
prominent competitors, see Our Business and Industry Overview on pages 55 and 44,
respectively. For further information on our business including description of our
activities, services, market of each segment, our growth, technology, market,
managerial competence and capacity built-up, our standing with reference to our
prominent competitors, see Our Business and Industry Overview on pages 55 and 44,
respectively. Our Company is not operating under any injunction or restraining order.
In July 1976, the registered office of our Company was changed from Shram Shakti
Bhawan, New Delhi to Kailas Building, Kasturba Gandhi Marg, New delhi.
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Subsequently, in May 1979 the registered office of our Company was shifted to
NTPC Square, 62-63, Nehru Place, New Delhi and thereafter in October 1988 to its
present location for administrative and operational efficiency. Major events 1975 -
Incorporation of our Company 1978 - Takeover of management of the Badarpur
project 1982 - Commissioning of the first 200MW unit at Singrauli Center for
education at Power Management Institute, Delhi established First direct foreign
currency borrowing. A consortium of foreign banks led by Standard Chartered
Merchant Bank extends a loan of GBP 298.41 million for the Rihand project 1984 -
The transmission line based on High Voltage Direct Current (¡°HVDC¡±) technology,
commissioned for power transmission from
Rihand to Delhi Singrauli project received World Bank loan of US$ 150 million
through Go I 1986 - Synchronized first 500MW unit at Singrauli Our Company
became one of the first PSUs to issue bonds in the debt market 1987 - 5,000 MW
installed capacity mark crossed 1988 - First syndicated Japanese loan of 30 billion
JPY raised 1989 - Consultancy division of our Company launched First unit (88 MW)
of our Company’s first gas based combined cycle power plant at Anta, Rajasthan
commissioned 1990 - Total installed capacity of 10,000 MW reached 1992 - First
acquisition by our Company of Frozen Gandhi Unchahar Thermal Power Station
(2x210MW) from Uttar Pradesh Rajya Vidyut Utpadan Nigam of Uttar Pradesh The
transmission systems owned by our Company were transferred to Power Grid
Corporation of India Limited (¡°PGCIL¡±) pursuant to legislation by the Parliament of
India 1993 - IBRD extended direct loan of US0 million to our Company under time
slice concept for its projects 1994 - 15,000 MW of installed capacity achieved Maiden
declaration of dividend of Rs. 650 million Jhanor-Gandhar (Gujarat) becomes our first
thermal power station to have commissioned an integrated Liquid Waste Treatment
Plant 1997 - 'Navratna' status granted by the GoI100 billion units generation in one
year achieved A consortium of foreign banks led by Sumitomo Bank, Hong Kong
extends foreign currency loan of 5 billion Japanese Yen for the first time without Go I
guarantee 1998 - Commissioned the first Naphtha based plant at Kayamkulam with a
capacity of 350 MW 1999 - Our Company’s Dadri thermal power project, Uttar
Pradesh adjudged the best in India with a PLF of 96.12% Dadri thermal power
project, Uttar Pradesh certified with ISO 14001 2002 - Three wholly owned
subsidiaries, viz., NTPC Electric Supply Company Limited, NTPC Hydro Limited
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and NTPC Vidyut Vyapar Nigam Limited incorporated ESP [Electrostatic
precipitators) set up at Talcher power plant
20,000 MW installed capacity mark exceeded 2003 - Our Company undertook debt
re-structuring. Raised funds through bonds (Series XIII and XIV) Construction of first
hydro-electric power project of 800 MW capacity in Himachal Pradesh commenced
after the investment approval 2004 - The award of contract for the first Super Critical
Thermal Power Plant at Sipat Reached a total installed capacity of 22,249 MW with
the Talcher Unit V getting synchronized on May 13, 2004 Our Company’s Feroze
Gandhi Unchahar Thermal station achieves a record PLF of 87.43% in current year up
from 18.02% in February 92 when it was taken over by us LIC extends credit facility
for Rs. 70 billion. Rs. 40 billion is in the form of unsecured loans and Rs. 30 billion is
in the form of bonds Our Company makes its debut issue of euro bonds amounting to
USD 200 million in the international market First coal mining block allotted Listing
of our Equity Shares on the Stock Exchanges 2005 - Our Company received the
International Project Management Award 2005 for its Simhadri project at the
International Project Management Association World Congress. Oil block allocated
under NELP V Our Company adopted core values 'BCOMIT' (Business Ethics,
Customer Focus, Organizational Pride, Mutual Respect and Trust, Innovation and
Speed and Total Quality for Excellence) Our Company ranked as the Third Great
Place to work for in India for second time in succession by a survey conducted by
Grow Talent and Business World 2005 2006 - Badarpur Thermal Power Station
having an installed capacity of 705 MW transferred to our Company 2007 - MOC,
GOI granted in-principle approval for allocation of a
New coal block, Chatti-Bariatu (South) to our Company subject to the conditions
stipulated in the approval letter. The share of reserves is estimated to be 354 Million
Tones 2008- Our Company adjudged as the Star PSU – 2008 Board expanded by
appointment of five independent Directors India Power Award conferred on Centre
for Power Efficiency and
Environmental Protection 2009 Memorandum of understanding entered into with the
Nuclear
Power Corporation of India Limited (NPCIL) for development of nuclear power in
India 30,000 MW installed capacity mark crossed Long term fuel supply agreement
signed with Coal India Limited for supply of coal to our power stations for a period of
20 years Our Company acquired 44.6% of presently paid-up capital of Kerala and
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Transformers and Electricals Kerala Limited from Government of Kerala at a total
consideration of Rs. 313.4 million, subject to final price to be based on the valuation
of the assets of Kerala and Transformers and Electricals Kerala Limited. Kerala and
Transformers and Electricals Kerala Limited is engaged in manufacturing and repair
of heavy duty transformers International Gold Star Quality Award conferred on
Centre for Power Efficiency and Environmental Protection. -NTPC enters MOU with
Nuclear Power Corporation of India Ltd. (NPCIL) to work together for development
of Nuclear Power in India and for this purpose to form a Joint Venture Company for
setting up Nuclear Power Projects. - NTPC inks JV agreement with SAIL, RINL,
Coal India and NMDC.
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OBJECTIVE OF THE STUDY
(i) To ensure that the supply of raw material & finished goods will remain
continuous so that production process is not halted and demands of customers
are duly met.
(ii) To minimize carrying cost of inventory.
(iii) To keep investment in inventory at optimal level.
(iv)To reduce the losses of theft, obsolescence & wastage etc.
(v) To make arrangement for sale of slow moving items.
(vi)To minimize inventory ordering costs.
(vii) To keep inventory at sufficiently high level to perform production and sales
activities smoothly.
(viii) To minimize investment in inventory at minimum level to maximize
profitability
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VISSION AND MISSION OF NTPC:-
VISSION:-
The Vision
The vision of the company states the fundamental purpose of their existence via:“To be one of the world’s largest and best power utilities, powering India’sGrowth”
The values of the company provide the essential and enduring general guidingPrinciples in the way it conducts itself in realizing the vision throughCOMMIT.
•Customer Focus•Organizational Pride.mutual Respect and Truth•Initiative and Speed.total Quality
NTPC dreams of building a great company could be achieved through articulation of this core ideology by involving people in sharing this vision and core values and taking steps for actualization of the same
MISSION:-
THE MISSION
“Develop and provide reliable power, related products and services at competitive prices, integrating multiple energy sources with innovative and eco-friendly technologies and contribute to society.”
CORE VALUES:-Core Values – BCOMITBusiness EthicsCustomer FocusOrganizational & Professional PrideMutual Respect & TrustInnovation & SpeedTotal Quality for Excellence
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ACCOUNTING POLICIES
1. BASIS OF PREPARATION
The ® Financial statements are prepared on accrual basis of accounting under historical cost
convention in accordance with generally accepted accounting principles in India and the
relevant provisions of the Companies Act, 1956 including accounting standards noticed there
under.
2. USE OF ESTIMATES
The preparation of financial statements requires estimates and assumptions that affect the
reported amount of assets, liabilities, revenue and expenses during the reporting period.
Although such estimates and assumptions are made on a reasonable and prudent basis taking
into account all available information, actual results could differ from these estimates &
assumptions and such differences are recognized in the period in which the results are
crystallized.
3. GRANTS-IN-AID
3.1 Grants-in-aid received from the Central Government or other authorities towards
capital expenditure as well as consumers' contribution to capital works are treated
initially as capital reserve and subsequently adjusted as income in the same proportion
as the depreciation written off on the assets acquired out of the grants.
3.2 Where the ownership of the assets acquired out of the grants vests with the
government, the grants are adjusted in the carrying cost of such assets.
3.3 Grants from Government and other agencies towards revenue expenditure are
recognized over the period in which the related costs are incurred and are deducted
from the related expenses.
4. FIXED ASSETS
4.1 Fixed Assets are carried at historical cost less accumulated depreciation.
4.2 Expenditure on renovation and modernization of fixed assets resulting in
increased life and/or efficiency of an existing asset is added to the cost of related
assets.
4.3 Intangible assets are stated at their cost of acquisition less accumulated
amortization.
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4.4 Capital expenditure on assets not owned by the Company is re¯ ected as a distinct
item in Capital Work-in- Progress till the period of completion and thereafter in the
Fixed Assets.
4.5 Deposits, payments/liabilities made provisionally towards compensation,
rehabilitation and other expenses relatable to land in possession are treated as cost of
land.
4.6 In the case of assets put to use, where financial settlement of bills with contractors
is yet to be effected, capitalization is done on provisional basis subject to necessary
adjustment in the year of financial settlement.
4.7 Assets and systems common to more than one generating unit are capitalized on
the basis of engineering estimates/assessments.
5. CAPITAL WORK-IN-PROGRESS
5.1 In respect of supply-cum-erection contracts, the value of supplies received at site
and accepted is treated as
Capital Work-in-Progress.
5.2 Administration and general overhead expenses attributable to construction of
fixed assets incurred till they are ready for their intended use are identified and
allocated on a systematic basis to the cost of related assets.
5.3 Deposit works/cost plus contracts are accounted for on the basis of statements of
account received from the contractors.
5.4 Unsettled liability for price variation/exchange rate variation in case of contracts
are accounted for on estimated basis as per terms of the contracts.
6. OIL AND GAS EXPLORATION COSTS
6.1 The Company follows `Successful Efforts Method' for accounting of oil & gas exploration
activities.
6.2 Cost of surveys and prospecting activities conducted in search of oil and gas are
expensed off in the year in which these are incurred.
6.3 Acquisition and exploration costs are initially capitalized as `Exploratory Wells-
in-Progress' under Capital Work-in- Progress.
7. DEVELOPMENT OF COAL MINES
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Expenditure on exploration of new coal deposits is capitalized as `Development of
coal mines' under Capital Work-in- Progress till the mines project is brought to
revenue account.
8. FOREIGN CURRENCY TRANSACTIONS
8.1 Foreign currency transactions are initially recorded at the rates of exchange ruling
at the date of transaction.
8.2 At the balance sheet date, foreign currency monetary items are reported using the
closing rate. Non-monetary items denominated in foreign currency are reported at the
exchange rate ruling at the date of transaction.
8.3 Exchange differences (loss), arising from translation of foreign currency loans
relating to fixed assets/capital work-in-progress to the extent regarded as an
adjustment to interest cost are treated as borrowing cost.
8.4 Exchange differences arising from settlement / translation of foreign currency
loans (other than regarded as borrowing cost), deposits / liabilities relating to fixed
assets / capital work-in-progress in respect of transactions entered prior to 01.04.2004,
are adjusted in the carrying cost of related assets. Such exchange differences arising
from settlement / translation of long term foreign currency monetary items in respect
of transactions entered on or after 01.04.2004 are adjusted in the carrying cost of
related assets.
8.5 Other exchange differences are recognized as income or expense in the period in
which they arise.
9. BORROWING COSTS
Borrowing costs attributable to the fixed assets during construction/renovation and
modernization are capitalized. Such borrowing costs are apportioned on the average
balance of capital work-in-progress for the year. Other borrowing costs are recognized
as an expense in the period in which they are incurred.
10. INVESTMENTS
10.1 Current investments are valued at lower of cost and fair value determined on an
individual investment basis.
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10.2 Long term investments are carried at cost. Provision is made for diminution,
other than temporary, in the value of such investments.
10.3 Premium paid on long term investments is amortized over the period remaining
to maturity.
11. INVENTORIES
11.1 Inventories are valued at the lower of cost, determined on weighted average
basis, and net realizable value.
11.2 The diminution in the value of obsolete, unserviceable and surplus stores and
spares is ascertained on review and provided for.
12. PROFIT AND LOSS ACCOUNT
12.1 INCOME RECOGNITION
12.1.1 Sale of energy is accounted for based on tariff rates approved by the Central
Electricity Regulatory Commission (CERC) as modified by the orders of Appellate
Tribunal for Electricity to the extent applicable. In case of power stations where the
tariff rates are yet to be approved, provisional rates are adopted.
12.1.2 Advance against depreciation considered as deferred revenue in earlier years is
included in sales, to the extent depreciation recovered in tariff during the year is lower
than the corresponding depreciation charged.
12.1.3 Exchange differences on account of translation of foreign currency borrowings
recoverable from or payable to the beneficiaries in subsequent periods as per CERC
Tariff Regulations are accounted as `Deferred Foreign Currency Fluctuation
Asset/Liability'. The increase or decrease in depreciation or interest and finance
charges for the year due to the accounting of such exchange differences as per
accounting policy no. 8 is adjusted in sales.
12.1.4 Exchange differences arising from settlement / translation of monetary items
denominated in foreign currency (other than long term) to the extent recoverable from
or payable to the beneficiaries in subsequent periods as per CERC Tariff Regulations
are accounted as `Deferred Foreign Currency Fluctuation Asset/Liability' during
construction period and adjusted in the year in which the same becomes
recoverable/payable.
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12.1.5 The surcharge on late payment/overdue sundry debtors for sale of energy is
recognized when no significant uncertainty as to measurability or collectability exists.
12.1.6 Interest/surcharge recoverable on advances to suppliers as well as warranty
claims/liquidated damages wherever there is uncertainty of realization/acceptance are
not treated as accrued and are therefore accounted for on receipt/acceptance.
12.1.7 Income from consultancy services is accounted for on the basis of actual
progress/technical assessment of work executed, in line with the terms of respective
consultancy contracts. Claims for reimbursement of expenditure are recognized as
other income, as per the terms of consultancy service contracts.
12.1.8 Scrap other than steel scrap is accounted for as and when sold.
12.1.9 Insurance claims for loss of profit are accounted for in the year of acceptance.
Other insurance claims are accounted for based on certainty of realization.
12.2 EXPENDITURE
12.2.1 Depreciation is charged on straight line method at the rates specified in
Schedule XIV of the Companies Act, 1956 except for the following assets at the rates
mentioned below:
a) Kutcha Roads 47.50 47.50
b) Enabling works
- Residential buildings including their
internal electrification.
- Non-residential buildings including their
internal electrification,
water supply, sewerage & drainage works,
railway sidings,
aerodromes, helipads and airstrips
06.33 %
19.00 %
c) Personal computers and Laptops
including peripherals
19.00 %
d) Photocopiers and Fax Machines 19.00 %
e) Air conditioners, Water coolers and
Refrigerators
08.00 %
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12.2.2 Depreciation on additions to/deductions from fixed assets during the year is
charged on pro-rata basis from/up to the month in which the asset is available for
use/disposal.
12.2.3 Assets costing up to Rs.5000/- are fully depreciated in the year of acquisition.
12.2.4 Cost of software recognized as intangible asset, is amortized on straight line
method over a period of legal right to use or 3 years, whichever is earlier. Intangible
assets - Others are amortized on straight line method over the period of legal right to
use.
12.2.5 Where the cost of depreciable assets has undergone a change during the year
due to increase/decrease in long term liabilities on account of exchange fluctuation,
price adjustment, change in duties or similar factors, the unamortized balance of such
asset is charged prospectively over the residual life.
12.2.6 Where the life and/or efficiency of an asset is increased due to renovation and
modernization, the expenditure thereon along-with its unamortized depreciable
amount is charged prospectively over the revised useful life determined by technical
assessment.
12.2.7 Machinery spares which can be used only in connection with an item of plant
and machinery and their use is expected to be irregular, are capitalized and fully
depreciated over the residual useful life of the related plant and machinery.
12.2.8 Capital expenditure on assets not owned by the company is amortized over a
period of 4 years from the year in which the first unit of project concerned comes into
commercial operation and thereafter from the year in which the relevant asset
becomes available for use. However, such expenditure for community development in
case of stations under operation is charged off to revenue.
12.2.9 Leasehold lands other than acquired on perpetual leases are amortized over the
lease period.
Leasehold buildings are amortized over the lease period or 30 years, whichever is
lower. Leasehold land and buildings, whose lease periods are yet to be finalized, are
amortized over a period of 30 years.
12.2.10 Expenses on ex-gratia payments under voluntary retirement scheme, training
& recruitment and research and development are charged to revenue in the year
incurred.
12.2.11 Preliminary expenses on account of new projects incurred prior to approval of
feasibility report/techno economic clearance are charged to revenue.
34
12.2.12 Actuarial gains/losses in respect of `Employee Benefit Plans' are recognized
in the statement of Profit & Loss Account.
12.2.13 Net pre-commissioning income/expenditure is adjusted directly in the cost of
related assets and systems.
12.2.14 Prepaid expenses and prior period expenses/income of items of Rs.1, 00,000/-
and below are charged to natural heads of accounts.
12.2.15 Carpet coal is charged off to coal consumption. However, during pre-
commissioning period, carpet coal is retained in inventories and charged off to
consumption in the first year of commercial operation.
Transit and handling losses of coal as per norms are included in cost of coal.
13. FINANCE LEASES
13.1 Assets taken on lease are capitalized at fair value or net present value of the
minimum lease payments, whichever is lower.
13.2 Depreciation on the assets taken on lease is charged at the rate applicable to
similar type of fixed assets as per accounting policy no. 12.2.1. If the leased assets are
returnable to the lesser on the expiry of the lease period, depreciation is charged over
its useful life or lease period, whichever is shorter.
13.3 Lease payments are apportioned between the finance charges and outstanding
liability in respect of assets taken on lease.
14. PROVISIONS AND CONTINGENT LIABILITIES
A provision is recognized when the company has a present obligation as a result of a
past event and it is probable that an outflow of resources will be required to settle the
obligation and in respect of which a reliable estimate can be made. Provisions are
determined based on management estimate required to settle the obligation at the
balance sheet date and are not discounted to present value. Contingent liabilities are
disclosed on the basis of judgment of the management/independent experts. These are
reviewed at each balance sheet date and are adjusted to reflect the current
management estimate.
15. CASH FLOW STATEMENT Cash flow statement is prepared in
accordance with the indirect method prescribed in Accounting Standard (AS) 3 on
`Cash Flow Statements'.
35
SWOT ANALYSIS of NTPC LIMITED
1. STRENGTH OF NTPC LIMITED
The company has kept itself sufficient liquid fund to meet any kind of cash
requirement.
Efficient working capital of the plant.
Efficient and timely completion of projects.
A minimum risk factor.
Best integrated project management system.
Company with excellent records and high profit.
An early starter, more than 30 years experience in power sector.
One amongst the nine jewels of India called ‘Navratnas’.
Highly motivated and dedicated workers and officers.
Excellent growth prospect with significant additions, modifications and
replacements.
Employee friendly personnel policies.
Low project cost of NTPC LTD’s plant.
One of the listed companies on BSE & NSE.
36
2. WEAKNESSESS of NTPC LIMITED
Depleting raw materials.
Some of the pants of NTPC LTD has become old and need investment for
replacement or modifications.
3. OPPORTUNITIES for NTPC LIMITED
Demand and supply gap.
Upcoming hydro & nuclear sector.
Use opportunities in the consultancy services both abroad as well as in
India.
Growth in power sector.
4. THREATS in NTPC LIMITED
Varying price of raw materials makes working costly.
Huge competitions from SEB’s, Reliance Energy & TATA Power and
other private players in power industries.
Coming up of other sources of power generation and consumption.
Huge capital requirement for expansion, diversification, horizontal and
vertical integration.
37
UNIQE ACHIVEMENT’S OF NTPC
1. Top Liner Maharatna Award to NTPC
NTPC the largest Power Generation Company in India was awarded the Top Liner- The largest Maharatna Award for highest growth at 3rd DSIJ Awards Ceremony held in New Delhi. The Award was presented by Shri Sushilkumar Shinde, Union Minister of Power to Shri A. K. Ahuja, Executive Director (Corp. Planning), NTPC.
NTPC has been playing a major role in meeting the power needs of the country and contributing to its economic and social development. The company has been conferred with coveted “Maharatna” status by the government for its outstanding achievements over the years.
38
The evaluation for the award was done by KPMG who were the knowledge partners to DSIJ, based on Net Sales/Operating Profit/ Net Profit of the organizations.
2. SCOPE Excellence Award to Shri Arup Roy Choudhury, CMD, NTPC
Prime Minister Dr. Manmohan Singh presented the SCOPE Excellence Award Gold Trophy in individual category to Shri Arup Roy Choudhury, Chairman & Managing Director, NTPC Limited at the SCOPE Excellence Award function held in New Delhi today. He has been awarded for his outstanding contribution to the public sector.
39
Shri Roy Choudhury is a dynamic leader with proven abilities to achieve transformational changes in the sector. He seeks to position NTPC a Maharatna enterprise on course to become the largest and best power producer in the world. NTPC is the largest power generating company in India with an installed capacity of over 32694 MW operating 28 power stations across the country.
Illustrious career of Shri Arup Roy Choudhury spans over 32 years of outstanding contribution in the fields of engineering, general management, strategic management and business leadership. He is a Graduate in Civil Engineering from Birla Institute of Technology, Mesra and a Post-Graduate in Management and Systems from IIT-Delhi. A keen learner of the latest professional developments, he is currently pursuing a doctorate in ‘Select Study of Project Performance Metrics in Indian Construction Industry’ from IIT-Delhi.
Shri Arup Roy Choudhury has the distinction of becoming the youngest Chief Executive Officer of a Central Public Sector Enterprise (CPSE) at the age of 44 years when he joined as Chairman & Managing Director, National Buildings Construction Corporation Limited (NBCC) on April 03, 2001.
Shri Choudhury’s rich and varied contribution to the organizations he has worked with has been recognized by prestigious professional, academic and Government institutions, both national and international.
His vision, leadership and industriousness transformed NBCC, which was a sick company with negative net-worth and salary back-log in 2001, into a blue-chip enterprise having Schedule ‘A’ and ‘Miniratna’ status bestowed upon it by the Government of India.
As Chairman, Standing Conference of Public Enterprises (SCOPE), the apex body of central public sector enterprises (CPSEs), Shri Choudhury has been effectively leading policy advocacy for greater empowerment of these enterprises. He is also promoting the cause of greater professionalism, competitiveness, societal commitment, transparency and global-benchmarking among the CPSEs.
Shri Choudhury believes in growth and excellence through proactive approach and his dictum is “Sankalp Shuddha Hi Siddha” i.e. if your intentions are pure, you are bound to succeed. He has a strong commitment for the well-being of the society at large. His sharp focus on corporate governance and environmentally sustainable growth has been demonstrated in concrete actions and substantial benefits.
3. PSU Excellence Award for NTPC
Shri Arup Roy Choudhury, Chairman & Managing Director, NTPC Limited and Shri A.K. Singhal, Director (Finance) received the prestigious PSU Excellence Award 2010 at the Summit on India Public Sector Agenda@2015 held in New Delhi today. Shri Vilasrao Deshmukh, Union Minister of Heavy
40
Industries & Public Enterprises presented the award to NTPC in the Best Financial Performance category. PSU Excellence Awards were organized under the aegis of Department of Public Enterprises, Indian Chamber of Commerce and Deloitte.
NTPC is India’s largest power generation company with total installed capacity of over 32000 MW. The company has recently been conferred Maharatna status by the Govt. of India. NTPC posted profit after tax of Rs 8728 corer with net sales of Rs. 46322 corer and total income of Rs. 49246 corer for the year 2009-10. The strong balance-sheet of the company gives it an edge in terms of resourcefulness to pursue both organic and inorganic growth opportunities.
Shri Arup Roy Choudhury, Chairman & Managing Director, NTPC Limited and Shri A.K. Singhal, Director (Finance) receiving the prestigious PSU Excellence Award 2010, presented by Shri Vilasrao Deshmukh, Union Minister of Heavy Industries & Public Enterprises. PSU Excellence Awards were organized under the aegis of Department of Public Enterprises, Indian Chamber of Commerce and Deloitte.
4. Enertia Awards for NTPC Projects & Shri D K Jain, Director (Technical), NTPC Ltd receives award for Excellence in Nuclear, Thermal (Conventional Energy)
Shri D K Jain, Director (Technical), NTPC Ltd received the Enertia award from Shri Anil Razdan, Former Secretary Power, Govt of India in the power generation awards category for nuclear, thermal and conventional energy for Korba Super thermal power project and Simhadri Super thermal power project (jointly) at a function held in Mumbai.
He was also conferred with the special award in the individual awards category for his Excellence in Nuclear, Thermal (Conventional Energy). Shri
41
Jain received this award from Shri Suresh Prabhu, Former Union Minister of Power, Govt of India. He received the award for his yeomen contribution in design and execution of large power projects to India's Power sector for over the last 35 years.
The power projects of NTPC were awarded at the 4th Enertia Awards for their stellar performance in the thermal sector for their operations at a PLF of over 97% maintaining availability factor of over 94% in the financial year 2009-10
Enertia Awards are Prestigious and Pioneering Awards in Energy & Power Sector and the only awards for “Sustainable Development with Key focus on Hydropower, Green & Renewable Energy”.
Shri D K Jain, Director (Technical), NTPC Ltd receiving a special award in the individual awards category for Excellence which was presented to him by Shri Suresh Prabhu, Former Union Minister of Power, Govt of India at the 4th Enertia Award held at Mumbai. Shri Jain received the award for his yeomen contribution in design and execution of large power projects to India's Power sector for over the last 35 years.
42
Shri D K Jain, Director (Technical), NTPC Ltd received the Enertia award from Shri Anil Razdan, Former Secretary Power, Govt of India in the power generation awards category for nuclear, thermal and conventional energy for Korba Super thermal power project and Simhadri Super thermal power project (jointly) at a function held in Mumbai on 6th October 2010.
5. Vishwakarma Award for 12 NTPC Employees
Twelve NTPC employees from Ramagundam Ms. N. Sujathamma, G. Sureshkumar, KS Pradeep, Sl NoK Hari Babu, B Vijay Kumar, M. Thimma Reddy received the Pratham Shreni ( class A) and Mohd Ghouse , N. Sampath Kumar, Penchala Sathaiah,Syed Akhil Baba, D Venkata Raji Reddy and M Raji Reddy received the Dwitiya Shreni (class B) Vishwakarma Award of Government of India.
The awards were presented by Shri Mallikarjun Kharge, Union Minister of Labor and Employment in New Delhi recently.
NTPC projects Talc her Thermal, Farakka, Rihand, Auraiya have also received the National Safety Award for the year 2008.
43
6. Prime Minister’s Shram Award to NTPC’s Misri Lal Choudhary
Shri Misri Lal Choudhary of NTPC – Anta received the prestigious Prime Minister’s Shram Vir Award from Shri Mallikarjun Kharge, Union Minister for Labor and Employment today in New Delhi.
Shri M.L. Choudhary, Senior Technician with NTPC- Anta suggested a method of throttling the shaft seal air pressure by fabricating a reg valve assembly thus rectifying problem of lubricating oil ingress into steam turbine generator winding at Anta Gas Power Station of NTPC. The methodology provided the flexibility of controlling the shaft seal air pressure and arrest oil ingress without opening the generator end shield.
Shram Awards are given to every year to the workers of both public and private sectors in recognition of their outstanding contribution towards production and showing exemplary zeal and enthusiasm in discharge of their duties.
44
Shri Misri Lal Choudhary of NTPC – Anta receiving the prestigious Prime Minister’s Shram Vir Award from Shri Mallikarjun Kharge, Union Minister for Labor and Employment today in New Delhi. Shri M.L. Choudhary suggested a method of throttling the shaft seal air pressure by fabrication a reg valve assembly thus rectifying problem of lubricating oil ingress into steam turbine generator winding at Anta gas power station of NTPC. The methodology provided the flexibility of controlling the shaft seal air pressure and arrest oil ingress without opening the generator end shield.
7. The Best Performing CFO Award
Instituted by CNBC TV 18 Shri A. K. Singhal, Director(Finance), NTPC received the award from Honorable Union Minister for Corporate Affairs Shri Salman Khurshid in a CFO Awards function held at Mumbai on 17th November, 2009. Shri A. K. Singhal, Director(Finance), NTPC Ltd. Received the prestigious ‘The Best Performing CFO’ Award in the Infrastructure Sector at the CNBC TV 18 CFO Awards held in Mumbai. The evaluation for the award was done by an esteemed jury panel with Mr. J. J. Irani, Director, Tata sons as the Chairman of the jury. The Jury Members consisted of Mr. TV Mohandas Pai, Global HR Head – Infosys, Mr. Keki Mystery, MD-HDFC, Mr. R. S. Sharma, CMD, ONGC, Mr. Sanjiv Bajaj, Managing Director, Bajaj Fiserv Limited, Mr. Sanjay Nayar, CEO and Country Head, KKR and Mr. Ravi Sud, Sr. Vice President & Chief Finance Officer, Hero Honda.
8. India Pride Awards – Energy and Power Category
Instituted by Dainik Bhaskar & DNA
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Shri A. K. Singhal, Director(Finance), NTPC received the award from Shri P. Chidambaram, Union Home Minister on 9th October, 2009 at the India Pride Awards function held in New Delhi. NTPC was awarded Gold trophy for excellence in Energy & Power Category.
9. Enertia Award 2010
The award was received by Shri D. K. Jain, Director (Technical) from Shri Anil Razdan, Former Se4cretary Power, GOI at a function held in Mumbai on 6-10-2010.
'NTPC's Korba STPS and Simhadri STPS jointly' have been declared Winners of the 4th Enertia Awards 2010 – India's Awards for Sustainable Energy & Power under "Category-I : Power Generation Awards – Nuclear, Thermal and Conventional Energy" for their superb performance in power sector as they recorded PLFs of 97.61% and 97.27% respectively for the year 2009-10. Similarly the availability factors were 95.46% for NTPC Korba and 94.38% for NTPC Simhadri in the same period making these two stations of NTPC the best performing Super Thermal Power Plants in the country for the period 2009-10.
10. SAFA Best Presented Accounts Awards 2008
South Asian Federation of Accountants 'Certificate of Merit' was conferred on 5thNovember, 2009 in Dhaka, Bangladesh. NTPC received the 'Certificate of Merit' for Best Presented Accounts and Corporate Governance Disclosures Awards 2008 in the category of Public Sector Entities from South Asian Federation of Accountants (An Apex Body of SAARC). SAFA is a Committee for Improvement in Transparency, Accountability and Governance.
11. CII-EXIM Excellence Award, 2010
NTPC has been awarded with the prestigious CII-EXIM Bank Award for improving business imperatives. In the year 2010, three stations namely Dadri, Korba and Anta bagged this award. Dadri station received "Significant Achievement" Award (a higher level Award) while Korba and Anta received "Strong Commitment to Excel" Award.
12. National Awards for Meritorious Performance
Ministry of Power The Gold Award was received by Shri R.S. Sharma, CMD, NTPC from Shri Sushil Kumar Shinde, Humble Union Minister of Power.
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NTPC's Six (6) Stations received the National Awards for Meritorious Performance in Power Sector for the year 2008-09. Simhadri (1000 MW) received the Gold, Korba (2100 MW) and Ramagundam (2600 MW) received the Silver and Vindhyachal (3260 MW), Rihand (2000 MW) and NCPP Dadri (840) received the bronze medal.
BOARD OF DIRECTOR’S:-
47
Shri Arup Roy Choudhury, Chairman & Managing Director
since September 01, 2010, has an illustrious career spanning
over 32 years of outstanding contribution in the fields of
engineering, general management, strategic management and
business leadership. He is a Graduate in Civil Engineering
from Birla Institute of Technology, Mesra and a Post-Graduate
in Management and Systems from IIT-Delhi. A keen learner of
the latest professional developments, he is currently pursuing a
doctorate in ‘Select Study of Project Performance Metrics in
Indian Construction Industry’ from IIT-Delhi.
Shri Choudhury brings to NTPC the dynamism of a leader with
proven abilities to achieve transformational changes. He seeks
to position the Maharatna enterprise on course to become the
largest and best power producer in the world.
Shri Choudhury has the distinction of becoming the youngest
Chief Executive Officer of a Central Public Sector Enterprise
(CPSE) at the age of 44 years when he joined as Chairman &
Managing Director, National Buildings Construction
Corporation Limited (NBCC) on April 03, 2001. Prior to that
he had worked in prominent public and private sector
companies since 1979, when he started his career.
Shri Choudhury’s rich and varied contribution of over 32 years
has been recognized by prestigious professional, academic and
Government institutions, both national and international.
His vision, leadership and industriousness transformed NBCC,
which was a sick company with negative net-worth and salary
back-log in 2001, into a blue-chip enterprise having Schedule
‘A’ and ‘Miniratna’ status bestowed upon it by the
Government of India. The stunning turnaround of the Company
brought about by him has enabled NBCC’s turnover grow
about 10 times and net-worth over 500 times during his tenure
48
of nine-and-a-half years at the helm. He pulled NBCC out of
the abyss and catapulted it into the distinguished league of
‘Top Ten CPSEs’. Under him, NBCC broadened its business
horizons. Its entry into power project development dovetails
very productively with his new role as CMD, NTPC.
As Chairman, Standing Conference of Public Enterprises
(SCOPE), the apex body of central public sector enterprises
(CPSEs), Shri Choudhury has been effectively leading policy
advocacy for greater empowerment of these enterprises. He is
also promoting the cause of greater professionalism,
competitiveness, societal commitment, transparency and
global-benchmarking among the CPSEs.
Shri Choudhury believes in growth and excellence through
proactive approach and his dictum is “Sankalp Shuddha Hi
Siddha” i.e. if your intentions are pure, you are bound to
succeed.
Shri Choudhury has a strong commitment for the well-being of
the society at large. His sharp focus on corporate governance
and environmentally sustainable growth has been demonstrated
in concrete actions and substantial benefits.
Shri A.K. Singhal, Director (Finance) since August 2005, a
Chartered Accountant, comes with rich experience of 29 years of
Corporate Finance Management. He is also a member of All India
Management Association (AIMA) and Institute of Internal Auditors
(IIA). Prior to joining NTPC in 2001, he was the Executive Director
(Finance) in National Fertilizers Limited (NFL) as head of Finance
& Accounts department. He held various managerial positions in
Krishak Bharati Cooperative Limited (KRIBHCO) and Engineering
Projects of India Limited (EPIL). As Finance Director on the Board
49
of NTPC, he is responsible for formulating financial strategies and
plans to enable the company in achieving its Vision. He gives
directions with respect to the entire gamut of Financial Management
of the organization including timely financial resource mobilization
at minimum possible cost from Domestic & Global sources
including equity issues, optimum utilization of funds, formulation of
company’s annual financial budget and undertaking budgetary
controls. He is also responsible for designing internal control
systems commensurate with the size of the organization and for
ensuring compliance of such systems. Being responsible for
compliances of Company Law and other statutory requirements, he
also gives direction to the Corporate Governance framework of the
company. After company became listed he has been acting as one of
the vital links between the shareholders of the company and the rest
of the Board. In recognition of his contribution, he was adjudged as
the Best CFO in the Public Sector category by the Committee for
Members in Industry (CMII) of ICAI for the year 2007-08.
Sh. I.J.Kapoor, Director (Commercial) since December’ 2008 is a
Graduate in Mechanical Engineering and Masters in Business
Administration (Marketing). He joined NTPC in 1978 as 3rd batch
Engineering Executive Trainee (EET) and is the first EET to be on
the Board of the Company. He has a rich and varied experience of
over 32 years in the areas of Commercial, Engineering, Contracts &
Materials Management, Project Management, Consultancy, Cost
Engineering, Station Engineering and Quality Assurance &
Inspection. Prior to his elevation as Director (Commercial), he was
Regional Executive Director (National Capital), NTPC, responsible
for management of ~ 3900 MW generating capacity, administering
more than ¼th of NTPC’s turn over along with project
implementation activities for 2x490 MW at Dadri Stage-II. As
Director (Commercial), he is responsible for formulation &
50
implementation of policies & strategies to ensure marketing of
NTPC’s entire electrical output, appropriate pricing from regulatory
authority and 100% & timely realization from customers, thereby
generate adequate internal resources for the company to meet the
future challenge of higher capacity addition. In addition, he is the
Director In- charge of Consultancy and Business Development
activities. He is also part time Chairman on the Board of Aravali
Power Company Private Ltd. (1500 MW) and National Power
Exchange Ltd. He is part time Director on the Board of PTC India
Ltd., Meja Urja Nigam Private Ltd. (1320 MW), NTPC- BHEL
Power Projects Private Ltd. and NTPC Vidyut Vyapar Nigam Ltd.
He is responsible for successful implementation of National Solar
Mission Phase-I. He is a Fellow of Institution of Engineers, India
and Senior Member, IEEE, USA.
Sri B.P. Singh (55 yrs), Director (Projects), is a Graduate in Mining
Engineering. He has rich and varied experience both in coal as well
as power sector. He started his career in 1974 in coal mining sector
firstly with Indian Iron & Steel Company and subsequently joined
Bharat Coking Coal Ltd. He joined NTPC Ltd. in 1981 and worked
in various capacities, at Corporate Centre and Power Projects, in the
areas of Fuel Management, Coal Mining & Coal Washery. He was
elevated as Executive Director (Coal Mining & Coal Washeries) in
2004. He played the pivotal role in formulation of NTPC’s overall
strategy for fuel security. He has been instrumental in acquisition
and development of fuel assets i.e. one Oil & Gas Exploration block
under NELP V in Arunachal Pradesh, six coal mining blocks across
various coalfields in the country besides two more blocks for joint
operation through a 50:50 JV with CIL. He is also the Chairman of
NTPC-SCCL Global Ventures Private Ltd. He joined the Board of
the Company as Director (Projects) in Aug, 2009. Besides
representing NTPC in various committees set up by Govt. of India
51
on Integrated Coal Policy, fuels for Power Generation, Pricing of
Coal, Techno-economics of using washed coal, etc. he has also been
part of various Govt. teams & missions like U.K. Trade Mission,
Indo–Australia Joint Working Group on Energy & Minerals, etc. He
is also a 'Senate Member' of Dr. BR Ambedkar National Institute of
Technology, Jalandhar, Expert Member’ on Research Council of
“Central Institute of Mining & Fuel Research (CIMFR)” and
represents NTPC as 'Member' in MGMI.
Shri D.K. Jain, has taken over the charge as Director (Technical) as
on 13th May 2010.
Shri D.K. Jain (58 years), is a graduate in Mechanical Engineering
from IIT, Kharagpur. He joined NTPC Limited in 1978. He has rich
and varied experience of over 35 years in design and execution of
large power plants. He has worked in various capacities in the areas
of renovation & modernisation, engineering and project execution.
He was actively involved in design and engineering of first pit-head
super thermal power station of NTPC at Singrauli. Before his
elevation as Director (Technical), he was Executive Director
(Engineering), responsible for identification of sites, taking up
feasibilities studies, design and detailed engineering of coal, gas and
hydro power projects. He also oversees the Mine Planning and
Design of NTPC’s Captive Coal Blocks.
Shri S. P. Singh(57 Years), Director(HR), is a Graduate in Electrical
Engineering from Madhav Institute of Technology & Science,
JIWAJI University , Gwalior (year 1973- 74) and completed his
schooling from the prestigious Colvin Taluqdar’s College, Lucknow.
Shri Singh joined NTPC in 1984 and worked for more than 25 years
in Engineering Department, looking after various functions of Plant
Engineering related Quality Assurance & Inspection, Project Layout
52
engineering, Project Engineering etc. He served as ED (Corporate
Contacts & Materials) and Chief Executive officer, of NTPC Electric
Supply Company (A wholly owned subsidiary of NTPC) and lastly
as ED (I/C) Human Resources during his tenure in NTPC. He started
his career in BHEL in 1975 as Engineer Trainee and worked for 9
years at BHEL, Hardwar in the Turbogenerator Design Department.
Shri N.N.Misra (55 years), Director (Operations), graduated in
Electrical Engineering with Honors from Regional Engineering
College, Rourkela in the year 1977. Shri Misra joined NTPC in
1977 as Executive Trainee (2nd Batch). He has an experience of 33
years in NTPC out of which 28 years were in the Design Department
looking after the various functions of Electrical Design and Project
Engineering beginning with the first Project of NTPC. He is actively
associated with BIS and represents NTPC in Electro Technical
Divisional Council of BIS. Shri Misra represents India in CIGRE
(International Conference on Large High Voltage Electric System)
for High Voltage Equipment and has contributed in many Study
Committees and Working Groups of CIGRE. Shri Misra was
involved in selecting and successfully implementing the first 765 KV
Sub-Station of India at Sipat. He has a rich and varied experience
having worked as Executive Director of the National Capital Region,
Executive Director looking after Corporate Contracts & Materials,
Executive Director looking after Human Resources and lastly
Executive Director looking after Operation Services. Shri Misra also
represents NTPC as Part-time Director in a number of Joint Ventures
of NTPC.
53
Shri P.K. Sengupta is B. Com and FICWA. He has held the
position of Director (Finance) in Eastern Coalfields Limited,
Director (Finance) in Coal India Limited prior to becoming
Chairman & Managing Director of Coal India Limited in January
1995. He has held directorship in Steel Authority of India and
Neyveli Lignite Corporation as non-official part-time Director. He
has expertise in the area of Financial Management and General
Administration. He has been on the Board of the Company with
effect from August 26, 2008 as a non-official part - time director.
Shri M.N. Buch is M.A. (History) from Delhi University, M. Phil
(Public Administration) from Indian Institute of Public
Administration, Punjab University, PG Diploma holder in Port
Management and Administration from University College, London
and an Indian Administrative Officer of Gujarat Cadre, 1964 batch.
He has held various posts in Gujarat Government. He had held the
position of Joint Secretary to the Government of India in Department
of Banking, Ministry of Finance, Additional Secretary to the
Ministry of Labour, GOI, Director- General, Sports Authority of
India prior to becoming Member of Public Enterprises Selection
Board, GOI. He has been also on the Board of various public sector
banks. He has wide experience in both Development and Regulatory
Administration at the Central, State and District levels. He has been
on the Board of the Company with effect from August 26, 2008 as a
non-official part - time director.
Shri Shanti Narain is B.Sc (Hons. in Physics) and M.Sc.
(Mathematics) from Delhi University and has pursued Management
Development Programme at British Transport Staff College, UK.
He has held various posts in Railways prior to becoming Member
(Traffic), Railway Board. He has key expertise in strategic
54
management of transport systems with special focus on Railways,
involving planning, marketing, customer relations, monitoring and
control of operational and commercial activities and development
of transport infrastructure. He has been on the Board of the
Company with effect from August 26, 2008 as a non-official part -
time director.
Shri K. Dharmarajan, a retired IAS officer, has served as faculty
and resource person at the IIFT, NIUA, TERI and University of
Pennsylvania (USA). He was the Chairman at Expert Committee
for Property Tax Reforms, Delhi and is well known in the areas of
institutional development, administration, international trade &
commerce, energy and poverty. He has been on the Board of the
Company with effect from August 26, 2008 as a non-official part -
time director.
Dr. M. Govinda Rao is Director, National Institute of Public
Finance and Policy, New Delhi. He is also a Member, Economic
Advisory Council to the Prime Minister. His past positions include
Director, Institute for Social and Economic Change, Bangalore and
Fellow, Research School of Pacific and Asian Studies, Australian
National University, Canberra, Australia. He has played a number
of advisory roles in various Expert Committees. He has published
12 books and monographs on various aspects of Public Finance
besides technical articles in a number of journals. He has been on
the Board of the Company with effect from August 26, 2008 as a
non-official part - time director.
55
Shri Adesh Jain is a Bachelor of Science in Mathematics and an
Electrical Engineer from the Indian Institute of Science,
Bangalore. He has done his MS in Control Systems at Carleton
University, Ottawa. He has over 40 years of experience in project
oriented work beginning with two state-of-the-art projects in early
1970’s in USA. In 1973, he returned to India to help the country
embark upon major computerization program. He has also served
as the Head of IT and Project Management Services in BHEL. In
1992, he started the Centre for Excellence in Project Management.
He has been conferred with 6 major awards in India, including the
“Gem of India” award. He is author of the book “New
Dimensions in Project Management”. He has been on the Board
of the Company with effect from January 30, 2009 as a non-
official part - time director.
Shri Santosh Nautiyal is a Post Graduate in Political Science and
Public Administration. He belonged to Indian Administrative
Services (Orissa 1968) and retired in July 2006 as Chairman (in the
rank of Secretary to the Govt. of India,) National Highway
Authority of India. He has held various positions like Additional
Secretary, Government of India in Department of Consumer
Affairs, Principal Secretary of Government of Orrisa, Joint
Secretary in Ministry of Steel and Managing Director in Industrial
Promotion and Investment Corporation of Orrisa Ltd. He also
served as Chairman of Food Corporation of India and after
retirement was appointed as Chairman of the National Shipping
Board constituted by the Central Government. He has been on the
Board of the Company with effect from January 30, 2009 as a non-
official part - time director.
56
Shri Kanwal Nath, is M.Sc. in Physics, and holds PG Diploma in
Development Finance from the University of Birmingham, UK. He
has over 37 years of experience in Indian Audit and Accounts
service. He retired as Dy. Comptroller & Auditor General in
February 2007. He has also held position of Joint Secretary &
Financial Adviser (JS & FA) in Ministry of Water Resources and
additional charge of JS & FA, Ministry of Power. He has wide
experience in the Audit of Organizations in Power,
Telecommunication and Railway Sector. He has been on the Board
of the Company with effect from January 30, 2009 as a non-official
part - time director.
Shri Arun Kumar Sanwalka is M.Sc (Engg) from UK, I. Mech.
(E), UK. and AMIE (India) – Mech. & Prod. He has held various
positions in Indian Railways and retired from the position of General
Manager, Northeast Frontier Railway after 38 years of service. He
has wide expertise in the areas of General Management &
Administration, Transport planning, Project management and
coordination. He has also handled several projects for establishing
large production, maintenance and repair facilities of Indian
Railways. He also held the position of Executive Director (Motive
Power), RDSO for several years. He has been on the Board of the
Company with effect from January 30, 2009 as a non-official part -
time director.
Shri I.C.P. Keshari, is a Government nominee Director. He
graduated with a Master of Arts degree from Delhi University and
holds Junior Research Fellowship of UGC for Master of Philosophy.
Shri Keshari is an Indian Administrative Services officer of Madhya
Pradesh cadre. He is currently Joint Secretary in the Ministry of
Power. Prior to this, Shri Keshari was in the Ministry of Commerce
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& Industry and has also held various administrative posts in the State
of Madhya Pradesh and Chattisgarh. Shri Keshari appointed as a
Director on Board in May, 2009.
Shri Rakesh Jain, born in 1957, is a Government nominee Director
in our Company. He holds Masters Degree in Physics from Delhi
University. He is an officer of Indian Audit & Accounts Service
(1981). He is currently the Joint Secretary & Financial Adviser (JS
& FA) in the Ministry of Power and also holds additional charge of
the post of JS & FA of the Ministry of Labor & Employment. He has
held various important positions such as Director General (Accounts,
Entitlement, Complaints & Information System); Principal Director
(Report States) – Office of Comptroller & Auditor General of India;
Accountant General (AG)(Audit), Rajasthan; AG(AE-II) Madhya
Pradesh; Principal Director (Commercial Audit), Ranchi and
Principal Director of Audit, Embassy of India, Washington, USA.
Shri T. Venkatesh,(48 years) has done his Post Graduation in
Mechanical Engineering and is an Indian Administrative Service
officer of 1988 batch of U.P. Cadre. Prior to his assignment as Jt.
Secy. (DOPT) in the Ministry of Personnel & Public Grievances &
Pension, he held various administrative posts including DM
(Bareilly), Commissioner (Gorakhpur) and Secretary (PWD) in the
state of Uttar Pradesh. He is looking after the work of Chief
Vigilance Officer of our company since October, 2009.
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UTILIZATION OF ASH
Nearly 75% of India's total power generation capacity is thermal, of which coal-based
power generation is nearly 90%, and diesel, wind, gas and steam adding to about
10%. High ash content in the range of 30 to 50% in Indian coals is the major cause of
large voluminous quantities of coal ash. India's dependence on coal as a major source
of energy had been of prime importance in the past and shall continue in this
millennium, and therefore fly ash management would remain an important area of
national concern. At present nearly 100 million tones of fly ash is being generated
annually in India and more than 65000 acres of land is presently occupied by ash
ponds.
It is estimated that by 2004 AD the ash generation will increase to 125 million tons
per annum, which means that it will require nearly 100000 acres of valuable land for
storage and disposal of ash by following the conventional methods, which in turn
shall necessitate acquiring new ash disposal areas, sites involving displacement and
hence rehabilitation problems.
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There are 11 major thermal power plants in Chhattisgarh State which produces fly ash
to the tune of about 26880 metric tons per day i.e. nearly 9.7 million tones of fly ash
annually, out of which the four major thermal power plants in Korba district alone
generates about 24000 metric tons per day or 8.7 million tones of fly ash annually.
This is nearly 90 % of the total ash generated in the state and about 8.7% of the total
ash generated in the country.
The total power generation capacity from the four major coal based thermal power
plants situated at Korba is 3650 MW. They are namely -
1. Korba Super Thermal Power station, NTPC Ltd. Jamnipali, Korba - 2100
MW
2. Balco Captive Power Plant, Pragati Nagar, Korba - 270 MW
3. Korba Thermal Power Station, C.G State Electricity Board (East), Korba
- 440 MW
4. Hasdeo Thermal Power Station, C.G State Electricity Board (West),
Korba - 840 MW
Presently fly ash produced by these plants are stored and disposed off in ash dykes by
following the conventional method of ash slurry system consuming about 704.907
hectares of valuable land. Safe disposal and effective utilization of such voluminous
quantity of fly ash is of immediate concern and strict compliance of the provisions
laid down by the Ministry of Environment of Forest, Govt. of India vide its
notification dated 14 Sept 1999 for utilization of fly ash generated from the coal based
thermal power plants has to be imperatively carried out.
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Fly Ash Utilization Information Centre, Korba
The Regional Officer, Chhattisgarh Environment Conservation Board,
HIG - 21, 22, Maharana Pratap Nagar (Extension),
Near Ghantaghar Chowk, Korba District-Korba.
To ensure maximum and realistic utilization of fly ash a marathon meeting of TPPs,
Govt. Works Departments, S.E.C.L, brick manufacturers and builders was held by
collector, Korba on dated 24/12/2002 and reviewed again on 11/01/2003. The power
plants were directed to submit a detailed action plan consisting of diversified
utilization of fly ash in various potential sectors such as - road, embankment, brick,
block, tile manufacturing and back filling, stowing of mines and reclamation of low
lying and waste land areas for agriculture.
The first step towards this was laid down by commencement of an information centre
on fly ash utilization at the Regional Office of Chhattisgarh Environment
Conservation Board, Korba. This is an earnest step taken towards providing relevant
information on fly ash utilization not only to the entrepreneurs but also to the common
people of Korba.
Workshop on Fly Ash Utilization
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A national level two-day workshop on "Fly Ash Utilization" was organized by the
District administration in association with Chhattisgarh Environment Conservation
Board on 29th and 30th of January 2003. Dr. P. Raghavan, Principal Secretary,
Industry Commerce and Mining, Govt. of Chhattisgarh was the chief guest for the
workshop and was presided over by Shri Vivek Dhand, Secretary, Environment and
Urban Administration and Development Chairman, C.G Environment Conservation
Board, Raipur. Dr. Vimal Kumar, Mission Director, Fly Ash Mission, New Delhi and
Advisor (Fly Ash) Department of Science and Technology, Govt. of India was the
guest of honor.
Other participants of this Workshop were eminent Scientists from the recognized
institutes of the country engaged in the field of fly ash utilization such as
Central Road research Institute, New Delhi
Central Mining Research Institute, Dhanbad
Regional Research Laboratory, Bhopal,
Fly Ash Mission, New Delhi,
ECO Environmental Consultancy Group, Vadodara and Gujarat
Indian School of Mines, Dhanbad
Fly Ash utilization Division, NTPC
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Fly Ash utilization Division, NTPC, New Delhi presented their technical papers with
case studies regarding utilization of fly ash in various sectors. The workshop
culminated with site visit which included sites of potential ash consumption i.e. brick
making reclamation of low lying area near Risda Ash Dyke, Back filling in the SECL
Gevra Open Cast Mines
The workshop proved successful in sensitizing people and heads of industries and
various Govt. and private sectors towards safe and effective fly ash utilization in and
around Korba district.
Fly Ash Utilization by Thermal power Plants and Other Sectors in Korba
Pursuant to the directives of District Administration, Power plant management are
now diversifying their operations in low lying areas, abandoned mines, major road/
embankment works, agriculture etc. where fly ash can be utilized in large quantity. A
series of concerted activities have taken place since December 2002 in the form of a
peoples movement towards sensitizing the producers of fly ash that time has now
come to convert this so-called wasteful material into resourceful material.
1. Fly Ash Brick Making
Six mechanized fly ash brick manufacturing units at Korba are producing about 60000
bricks per day. In addition to this, two mechanized fly ash brick manufacturing units
have been set up by private entrepreneurs also at Korba, the total production being
about 30000 bricks/day. Apart from this about 23 entrepreneurs have registered in
DTIC proposals for establishing ash brick units.
To give impetus to ash brick manufacturing, District Mining Officer, who is also the
Nodal Officer for fly ash utilization, is ensuring strict compliance of certain vital
instructions issued in connection with conventional brick making by MOEF i.e.
mixing a minimum of 25% fly ash with clay and fixed chimney in place of moving
kilns.
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2. Reclamation of Low Lying Areas
Reclamation of low lying areas with pond ash has been identified by C.G State
Electricity Board, Korba (East), near Risdi Ash Bund for a total of about 13 hectares,
which will consume nearly 462000 MT of pond ash. Another low lying area of
approximately 7.39 hectares of revenue land near village Dumarmuda, Tehsil
Katghora has been identified by C.G State Electricity Board, Korba (West), which
will consumed nearly 500000 MT of pond ash from Lotlota ash dyke
Balco has identified a low lying area of about 2.2 hectares of land for construction of
coal handling plant near Balco Captive Power Plant at village Kendaikhar.
3. Road Making
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Balco is utilizing pond ash/bottom ash for construction/widening of approximately 82
km. Long Urga - Hati road which is proposed to consume nearly 10000 MT pond ash
and bottom ash.
RES has constructed two rural roads using fly ash in village Ajgarbahar area.
4. Mine Stowing
NTPC, Korba is in the process of utilizing fly ash for stowing of Balgi underground
mine of SECL at Korba area after obtaining technical feasibility and sample testing
report from CMRI, Dhanbad. This mine stowing activity shall consume about
3000000 MT of fly ash.
5. Other Activities
The Regional office of C.G Environment Conservation Board at Korba, which is the
first of its kind in the state, conducts meetings, seminars and workshops on fly ash
utilization and this office has been instrumental in providing necessary information
regarding diversified and environment friendly effective utilization of fly ash.
In order to achieve the target of 100% fly ash utilization in the forthcoming years all
the thermal power plants, Govt. Works Departments and SECL Management of
Korba, Kushmunda and Gevra area have been asked for maximum utilization of fly
ash in all construction activities as an integral part of their projects.
The district Administration, Korba has also taken serious note of pollution caused
during transportation of fly ash. To control this menace, the administration has
instructed all TPPs and cement manufacturers to deploy closed tankers for bulk and
pollution free transportation. Two such tankers have been deployed by NTPC, Korba.
Similarly administration has taken earnest steps to control fugitive emission from ash
dyke areas and has deployed shift wise personnel under strict vigilance to ensure
continuous water sprinkling in ash dyke. The District Administration has also
evolved a well orchestrated effort in creating mass awareness by floating populist
slogans amongst to the public, the media and entrepreneurs viz.
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Subsidiaries of NTPC
NTPC Electric Supply Company Ltd. (NESCL)
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The company was formed on August 21, 2002. It is a wholly owned subsidiary
company of NTPC with the objective of making a foray into the business of
distribution and supply of electrical energy, as a sequel to reforms initiated in the
power sector.
NTPC Vidyut Vyapar Nigam Ltd. (NVVN)
The company was formed on November 1, 2002, as a wholly owned subsidiary
company of NTPC. The company’s objective is to undertake sale and purchase of
electric power, to effectively utilize installed capacity and thus enable reduction in the
cost of power. NVVN
NTPC Hydro Ltd. (NHL)
The company was formed on December 12, 2002, as a wholly owned subsidiary
company of NTPC with an objective to develop small and medium hydroelectric
power projects of up to 250 MW. More>>
Pipavav Power Development Co. Ltd. (PPDCL)
A memorandum of understanding was signed between NTPC, Gujarat Power
Corporation Limited (GPCL) and Gujarat Electricity Board (GEB) in 2004 for
development of a 1000 MW thermal power project at Pipavav in Gujarat by forming a
new joint venture company between NTPC and GPCL with 50:50 equity
participation. Pursuant to the decision of Gujarat Government, NTPC Ltd. has
dissociated itself from this company. PPDCL is under winding up.
Kanti Bijlee Utpadan Nigam Limited, (formerly known as Vaishali Power
Generating Company Limited)
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To take over Muzaffarpur Thermal Power Station (2*110MW), a subsidiary company
named ‘Vaishali Power Generating Company Limited (VPGCL)’ was incorporated on
September 6, 2006 with NTPC contributing 51% of equity and balance equity was
contributed by Bihar State Electricity Board. This company was formed to renovate
the existing unit and run the plant. The second unit has been successfully re-
synchronized on October 17, 2007 after 4 years of being idle. Renovation and
modernization of the first unit is under progress. The company was rechristened as
‘Kanti Bijlee Utpadan Nigam Limited’ on April 10, 2008.
Bharatiya Rail Bijlee Company Limited (BRBCL)
A subsidiary of NTPC under the name of ‘Bharatiya Rail Bijlee Company Limited’
was incorporated on November 22, 2007 with 74:26 equity contribution from NTPC
and Ministry of Railways, Govt. of India respectively for setting up of four units of
250 MW each of coal based power plant at Nabinagar, Bihar. Investment approval of
the project was accorded in January, 2008.
IMPORTANCE OF NTPC IN CHHATISGARH
Chhattisgarh to get 2,000 Mw from upcoming NTPC project
Kolkata/ Raipur: The National Thermal Power Corporation (NTPC) will give 2,000-
Mw of power to Chhattisgarh at a nominal price from its proposed 4,000-Mw power
project in Raigarh district.
The state government and the largest power producer of the country inked an
agreement yesterday to this effect. Under the deal, NTPC will sell 2000-Mw of power
to Chhattisgarh government at Rs 2.50 per unit from its 4,000-Mw Lara power
project.
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The project, with have super critical technology, will have eight units of 800-Mw
each.
The project is scheduled to be completed and commissioned in the 12th five-year-plan
by 2017. States and Union territories of the Western region will be the beneficiaries.
NTPC had signed a Memorandum of Understanding (MOU) with the Chhattisgarh on
July 12, 2009 for the Lara power project in the coal-rich pocket of Raigarh district,
about 300 km north-east of Raipur.
The company has already been allotted a coal mine in the area.
The development of the mine is in progress.
As per the MOU, the NTPC will sell 50 per cent of power generated in the Lara
project to the state. The condition to get half of the power produced in the project was
put by the government in return for land and water it would give for the construction
of the plant.
The agreement to sell 2,000 Mw power from the project to the state was finally sealed
yesterday.
Raipur, Jan 2 (IANS) The second 500 MW stage-II unit of the state-owned National
Thermal Power Corp’s (NTPC) Sipat project in Chhattisgarh has begun commercial
production, a company official said Friday. The approved capacity of Sipat Super
Thermal Power Project, located some 140 km from here in Bilaspur district, is 2,980
MW.
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“The second 500 MW units in the stage-II began commercial production from
Thursday.The first 500 MW unit was commissioned in June 2008,” the official said.
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AUDIT REPORT’S
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75
76
77
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Inventory
Fuel cost for one month and reasonable fuel stocks as actually maintained but
limited to fifteen days for pit head stations and thirty days for non pit-head
stations, corresponding to the "Target Availability";
Sixty days stock of secondary fuel oil, corresponding to the "Target
Availability";
Maintenance spares at actual subject to a maximum of one percent of the capital cost but not exceeding one year's requirements less value of one fifth of initial spares already capitalized for first five years;
INVENTORY MANAGEMENT
Introduction:
Inventories are stock of the product a company is manufacturing for sale and
components.
a. Raw-Materials: - Are those basic inputs that are converted into finished
products through the manufacturing process. Raw-materials inventories are
those units, which have been purchased and stored for future production.
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b. Work-In-Process inventories are semi-manufactured products. The represent
products that need more work before they become finished products for sale.
c. Finished Goods inventories are those completely manufactured products,
which are ready for sale. Stocks of raw-materials and work-in-process
facilitate production which stock of finished goods is required for smooth
marketing operations. These inventories serve as a link between production
and consumption of goods.
d. Stores and spares are also maintained by some firms. This includes office and
plant cleaning materials like soaps, brooms, oil, fuel, light, bulbs etc. These
materials do not directly enter in production. But are necessary for production
process.
Need to hold inventory
The question of managing inventories arises only when the company holds
inventories. Maintaining inventories involves tying up of the company's funds and
incurrence of storage and handling cost. Though it is expensive to maintain
inventories, the company needs to hold inventories.
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There are three general motives for holding inventories.
Transaction Motive : - Emphasizes the need to maintain inventories to
facilitate smooth production and sales operations.
Precautionary motive : - Necessitates holding of inventories to guard against
the risk of unpredictable changes in demand and supply forces and other factors.
Speculative motive: - Influences the decision to increase or reduce inventory
levels to take advantages of price influences.
A company should maintain adequate stock of materials for a continuous supply to
the factory for the uninterrupted production. It is not possible for a company to
procure raw materials whenever it is needed. A time lag exists between demand for
materials and its supply. Also there exists uncertainty in procuring raw materials in
time on many occasions. The procurement of materials may be delayed because of
such factors as strike, transport disruption or short supply. Therefore, the firm should
maintain sufficient stock of raw materials at a given time to stream line production.
Objective of Inventory Management
In the context of inventory management the firm is faced with the problem of meeting
two conflicting needs
To maintain a large size of inventory for sufficient and smooth production
and sales operations.
To maintain a minimum investment in inventories to maximize profitability.
Both excessive and inadequate inventories are not desirable. These are two dangerous
points within which the firm should operate. The objective of inventory management
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should be to determine and maintain optimum level of inventory investment. The
optimum level of inventory will lie between the two danger points of excessive and
inadequate inventories.
The firm should always avoid a situation of over investment or under investment in
inventories. The major dangerous of over investment are
Unnecessary tie-up of the firms funds losses of profit
Excessive carrying cost
Risk of quality
The aim of inventory management thus should be to avoid excessive and inadequate
levels of inventories and to maintain sufficient inventory for smooth production and
sales operations. Efforts should be made to place an order at the right time with the
right source to acquire the right quantity at the right price and quality. An effective
inventory management should
Ensure a continuous supply of raw materials to facilitate uninterrupted
production.
Maintain sufficient stock of raw materials in periods of short supply and
anticipate price changes
Maintain sufficient finished goods inventory for smooth sales operations
and efficient customer service
Minimize the carrying cost and time.
Control investment in inventories and keep it at an optimum level.
Inventory management techniques
In managing inventories the firm objective should be in consonance with the
shareholders' wealth maximization principle. To achieve this firm should determine
the optimum level of inventory. Efficiently controlled inventories make the firm
flexible. Inefficient inventory control results in unbalanced inventory and
inflexibility-the firm ma sometimes run out of stock and sometimes may pileup
unnecessary stocks. This increases level of investment and makes the firm
unprofitable.
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To manage inventories efficiency, answers should be sought to the following two
questions.
1) How much should be ordered?
2) When should it be ordered?
The first question how much to order, relates to the problem of determining economic
order quantity (EOQ), and is answered with an analysis of costs of manufacturing
certain level of inventories. The second question when to order arise because of
determining the reorder point.
Economic Order Quantity (EOQ)
One of the major inventory problems to be resolved is how many inventories should
be added when inventory is replenished. If the firm is buying raw materials it has to
decide lots in which it has to be purchased on each replenishment. If the firm is
planning a production run, the issue is how much production to schedule or how much
to make. These problems are called order quantity problems and the task of the firm is
to determine the optimum or economic order quantity (or economic lot size)
determining an optimum inventory level involves two types of costs.
1) Ordering cost
2) Carrying cost
The economic order quantity is that inventory level which minimizes the total of
ordering and carrying costs.
Ordering cost
The term ordering cost is used in case of raw materials (or supplies) and includes the
entire cost of acquiring raw materials. The include costs incurred in following
activities. Requisitioning purchase ordering, transporting, receiving, inspecting and
storing (store placement).
Carrying cost
Cost incurred for maintaining a given level of inventory is called carrying cost. They
include storage, taxes, insurances, deterioration and obsolescence.
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Reorder Point (ROP)
The problem how much to order is solved determining the economic order quantity
yet the answer should the sought to the second problem, when to order this is a
problem of determining the reorder point is that inventory level at which an order
should be placed to replenished the inventory. To determine the reorder point under
certainty, we should know
a) Lead time
b) Average usage
c) Economic order quantity
Lead time is the time normally taken is replenishing inventory after the order has been
placed by certainty we mean the usage and lead time do not fluctuate under such a
situation ROP is simply that inventory level which will be maintained for
consumption during the lead time. i.e.,
Reorder point (under certainty) =lead time X Average usage
Re-order Point (under certainty) = Lead time X Average usage.
The national power corporation korba management all the unit and corporate level
every month reviews inventory. All the functional head are called for minutes and the
inventory holdings are discussed in detail at the meeting every month ntpc purchases
the material when the customer places the order, since the product of are tailor-made
to customer’s requirements. After purchasing the raw materials, which is mostly, still
will be stocked at one place all other procured against production orders are stored.
Depending up on the requirement in various production departments the raw material
is sent to the respective departments or production shops. When the order is placed for
raw material certain raw material is in transit, such raw material is called as raw
material in transit. Example –Raw material on overseas. The raw material can be
transfer from unit to another unit or from one department to another is called transfer-
in –transits. It is nothing but to the transfer of raw material among the inter firm units
of national thermal power corporation korba..
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The raw material, which is production process, is called work-in process. The work in
process becomes finished goods inventory. The finished should not be kept for a
longer time. They should be sold off to clear off the entire inventory. However,
finished goods inventory is not there for Annapurna Ear canal Limited, since
production is mainly done on customer order and specifications. The raw material is
purchased and the whole process is repeated again which we call it as inventory cycle.
Inventory turnover Ratio:-
Inventory turnover ratio indicates the efficiency of the firm in producing and selling
its products. It is calculated by dividing the cost of goods sold by the average
inventory. The average inventory is the average of open and closing balance of
inventory.
Inventory turnover Ratio= Cost of Goods Sold / Average Inventory
Inferences: the sales of goods have been increasing per year but the average inventory
has been going down. From the above table it can inferred that the proportion cost of
goods sold to average stock it is increased to 9.38times in the year2005 and again
decreased 5.9 times in the year 2007and again increased 9 times in the year 2008.
Inventory holding period:-
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Inventory holding period is the reciprocal of inventory turnover ratio.
This can be measure in terms of number of days.
Inventory holding period=
Average inventory x365days
Cost of goods of sold
Graph
Inferences: the cost of inventory is increasing whereas the holding period of inventory
is also increasing which decreasing its rs. cost.
From the above table it can infer that the proportion of average inventory to cost of
goods sold had 39 days in 2005. In the year 2007 it can be increased that is 62 days
and again decries.
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Inventory Management Programmed Overview and Objective Inventory management
plays a strategic role in the supply chain management of power stations and
accomplishment of the business objectives, including cost efficiency and working
capital optimization. The inventory management professional should have a
comprehensive understanding of the inventory systems and processes that will enable
successful balancing of availability of material with demand, and tracking of spares
throughout the supply chain.
The program aims at imparting necessary knowledge and skills to participants for
managing power station inventory and warehouse.
At the end of the programmer, the participants shall be able to:
State and apply organization policies and guidelines in inventory management
Analyze the critical issues and challenges in inventory management
Increase warehouse efficiency of power stations.
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Apply the tools and techniques that will enhance operational efficiency, optimize
inventory carrying cost.
Formulate and implement preservation plan for large value inventory
Analyze the cases of high value inventory damage due to warehousing problems
Identify the best practices and bench marks within /out side NTPC regarding
inventory optimization and warehousing solutions
Enhance compliance in ware house management
Profile
The coverage includes a series of class room sessions, case discussions and
experience sharing of issues and experience:
System & processes of material planning and inventory control in power station
Company policies and strategies in inventory management
Inventory optimization process in uncertain business environment
ERP interface and process automation for BI and Analytics
Modern tools for simulation and Technology application like RFID in inventory
tracking
E-procurement experience sharing
VMI, LTSA models for procurement and case studies
Vendor development experience of other utilities/PSU and case discussions
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Issues in inventory management of NTPC power stations and future strategy
Latest trends and innovations in procurement, logistics and warehouse management
Issues in preservation and storage of spares Functional interfaces and compliance
issues in warehouse management Preventive vigilance aspects in warehouse
management.
Material Management
Over 24249 MW of operational plant capacity developed in house has given NTPC
the experience in Handling plant & machinery, spares and consumables from various
countries in the world to remote destinations.
Services covered under Materials Management include the following:
Optimal logistics and transportation strategies
Review and Risk Coverage Requirement
Integrated Inventory Management system, and interlink ages with O&M system
Optimal Inventory Policy
Development of Material management system & its computerization
Scrap disposal management
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Experience as Consultant in Material Management:-
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CONCLUSION & SUGGESTIONS:-
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BIBLIOGRAPHY
1. NTPC Website (ntpc.co.in).
2. House Journal of K.S.T.P.P.
3. Company Information (NTPC).
4. Financial Management (V.K Shrivastav.)
5. Annual Report of N.T.P.C.
6. Guideline for closing of accounts (K.S.T.P.S)
7. Other Information’s (www.google.com) .