Chapter – I INTRODUCTION

1.1 INTRODUCTION OF BHLIAI STEEL PLANT

Location : 40 kms west of Raipur, the capital city of Chhattisgarh State, along the Howrah- Mumbai railway line and the Great-Eastern highway, stands Bhilai Steel Plant (BSP).

Bhilai Steel Plant ; a symbol of Indo-Soviet techno-economic collaboration, is one of the first three integrated steel plants set up by Government of India to build up a sound base for the industrial growth of the country, The agreement for setting up the plant with a capacity of 1 MT of Ingot steel was signed between the Government of erstwhile U.S.S.R. and India on 2nd February, 1955, and only after a short period of 4 years, India entered the main stream of the steel producers with the commissioning of its first Blast Furnace on 4th February, 1959 by the then President of India, Dr Rajendra Prasad. Commissioning of all the units of 1 MT stage was completed in 1961. Since then Bhilai Steel Plant has never looked back and has steadily grown and modernized itself . A dream came true-the massive rocks from the virgin terrains of Rajhara were converted into valuable iron & steel.

In the initial phase the plant had to face many teething problems, mostly unknown to the workforce at the time, But by meticulous efforts and team-sprit, these problems were surmounted and the rated capacity production was achieved only within a year of integrated operation of the plant.

Thereafter, the plant was expanded to 2.5 MT capacity per year, and then to 4 MT of crude steel per year, with Soviet assistance. All the units of the plant have been laid out in sequential formation according to technological inter-relationship so as to ensure uninterrupted flow of in-process materials like Coke, Sinter, Molten Iron, Hot Ingots, as well as disposal of metallurgical wastages and slag etc., minimizing the length of various inter-plant communications, utilities and services.

1

1.2 Introduction of Sail

The Precursor SAIL traces its origin to the formative years of an emerging nation - India, after

independence the builders of modern India worked with a vision – to lay the infrastructure for rapid

industrialization of the country. The steel sector was to propel the economic growth. Hindustan Steel

Private Ltd. was set up on January 19, 1954. The President of India held the shares of the company on

behalf of the people of India.

Expanding Horizon (1959-1973)

Hindustan Steel Ltd. (HSL) was initially designed to manage only one plant that was coming up at

Rourkela. From BHILAI and Durgapur Steel Plants, the preliminary work was done by the Iron and

steel Ministry. From April 1957, the supervision and control of these two plants were also transferred

to Hindustan Steel. The registered office was originally in New Delhi. It moved to Calcutta in July

1956 and ultimately to Ranchi in December 1959.

The 1 MT phases of BHILAI and Rourkela steel Plant were completed by the end of the December

1961.The 1 MT phase of Durgapur Steel Plant was completed in January 1962 after commissioning of

the wheel and Axle plant. The crude steel production of HSL went up from, 158 MT (1959-60)

to 1.6 MT. the second phase of BHILAI Steel plant was completed in September 1967 after

commissioning of the Wire Rode Mill. The last unit of the 1.8 MT phase of Rourkela- the

Tandem Mill – was commissioned in February 1968’and the 1.6 MT stage of Durgapur Steel

Plant was completed in august 1969 after commissioning of the Furnace in SMS. Thus, with

the completion of the 205 MT stage at BHILAI, 1.8 MT at Rourkela and 1.6 MT at Durgapur,

the total crude steel production capacity of HSL was raised to 3.7 MT in 1968-69 and

subsequently to 4 MT in 1972-73.

2

1.3 CENTRAL MARKETING ORGANISATION

The ISO 9001:2000 certificate central marketing organization (CMO) is India’s

largest industrial marketing setup that markets carbon steel produced by their

four integrated steel plant of SAIL headquartered in Kolkata. It transacts

business warehouses equipped with mechanized handling systems, 11 customer

contact offices and 16 consignment agents. CMO’s domestic marketing effort is

supplemented by its ever-indenting network of authorized and rural dealer to

meet the demands of the smallest customers in the remotest corners of the

country.

3

1.4 ORGANISATION STRUCTURE OF SAIL

4

DIRECTOR (TECH)

DIRECTOR (PERSONNEL)

DIRECTOR (FINANCE

CHIEF VIGILANCE

EXECUTIVE DIRECTOR (OPRAN)

EXECUTIVE DIRECTOR (IA)

ED (TECH & LEGAL SERVICE)

ED (PROJECTS)

ED (CMMG)

ED. (CIG)

ED (CP)

CHAIRMAN

MD, BSP

MD, BSL

MD, RSP

M D, DSP

ED VISL

ED SSP

ED ASP

MAJOR UNITS

STEEL PLANTS

Bhilai Steel Plant (BSP) in Chhattisgarh

Durgapur Steel Plant (DSP) in West Bengal

Rourkela Steel Plants (RSP) in Orissa

Bokaro Steel Plant (BSL) in Jharkhand

SPECIAL STEEL PLANTS

Alloy Steel Plant (ASP) in West Bengal

Salem Steel Plant (SSP) in Tamil Nadu

Visvesvaraya Iron & Steel Plant (VISL) in Karnataka

SUBSIDARIES

Indian Iron & Steel Company Limited (IISCO) in West Bengal

Maharashtra Electros melt Limited (MEL) in Maharashtra

OTHER UNITS

SAIL Consultancy Division (SAILCON) at New Delhi

Central Marketing Organization (CMO) at Calcutta

Research and Development Center for iron and steel (RDCIS) at Ranchi

Center for Engineering and Technology (CET) at Ranchi

Management Training Institute (MTI) at Ranchi

Central Power Training Institute (CPTI) at Rourkela

SAIL Safety Organization (SSO) at Ranchi

5

Raw Material Division (RMD) in Calcutta

Environment Management Division (EMD) at Calcutta

Growth Division (GD) at Calcutta

Central Coal Supply Organization (CCSO) at Dhanbad

JOINT VENTURE

NTPC SAIL Power Company Pvt. Ltd.

Bokaro Power Supply Company Pvt. Ltd.

Bhilai Electric Supply Company Pvt. Ltd.

UEC SAIL Information Technology Ltd.

Metaljunction.com Private Ltd.

SAIL-Bansal Service Center Pvt. Ltd.

North Bengal Dolomite Ltd.

Romelt –SAIL (India) Ltd.

Bharat refectories ltd. (process of merger)

6

1.5 OBJECTIVES

I have selected this topic entitled “Cash Management” for fulfilling these objectives

:-

(1) To find out that what system is followed for Cash management in Bhilai Steel

Plant.

(2) To find out that what Cash method is followed in Bhilai Steel Plant.

(3) To trace out weak points of existing Cash system.

(4) To find that how variances are calculated between actuals and budgeted figures.

(5) To find out more suitable Cash management techniques.

1.6 SCOPE OF CASH MANAGEMENT

Procedure of Cash starts from obtaining raw material to the finished products i.e.

From mines to plant.

We know that cost estimation, cost control and forecasting for future

expenses by budgeting are very important factors for making profit and capturing

market share. It includes cost of different activities done from acquiring raw materials

to manufacturing the final end product. It is the starting point from which the

operations start. It is the first & the most important elements of cost. So, the efficient

cost estimation and preparing budget can be done through these principles:-

Right Information

Right Data Processing

Right Time

Right Effort

Care should be taken

By using these five principles cost of production can be reduced effectively

and large amount can be made.

7

1.7 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research. Research

methodology just does not deal with research methods but also consider the logic

behind the methods. It may be understood as a science of studying how research is

done scientifically and systematically.

My research is mainly based on Diagnosis research method.DIAGNOSIS RESEARCH METHOD:- It is a method, which is concerned with

diagnosing the characteristic of a particular, individual of a group. It requires a clear

specification of whom, what, when, where, why and how aspects of research.

COLLECTION OF DATA

There are two types of data are collected :- Primary data

Secondary data

Primary data :- Primary data used in this research are- Source of raw materials,

products, sale of products, method and process used in “Cash

management system” in Bhilai Steel Plant.

The methods of collecting primary data are as follows:

(1) Direct personal investigation or direct personal interview method.

(2) Indirect oral investigation.

(3) Questionnaire to be filled by the informants or respondents.

(4) Information through local resources or correspondents.

Secondary data :- Secondary data used in this research are- Actuals figures of

turnover, profit, profit & loss accounts, budgeted figures,

photos of plant ,and bank account of Bhilai Steel Plant.

The methods of collecting Secondary data are as follows: -

(1)Publish sources- Semiofficial publication & International publication, Reports of

commissions and committees, Newspapers and journals,

Publication of individual research scholars.

(2) Unpublish Sources- Format of cost sheet & budget ,Fund Flow &Cash Flow.

(3) Previous reports done on the same topic.

8

Chapter – 2

ODYSSEY OF BSP

Bhilai Steel Plant, a unit of Steel Authority of India Ltd. - a public sector

undertaking was conceived under aegis of Indo-USSR Treaty in the 2nd Five

year plan. This was in accordance with erstwhile government policy for

strengthening economy and self reliance through development of core sector.

It was deliberately located in what was then regarded as a remote and

"backward" rural area, profits being secondary to employment in the planning

priorities of the time.

The plant is located at the central position of India, which is one of the major

iron belts of India, and it is about 40 kilometer from Raipur, capital of newly

born state Chhattisgarh.

BSP’s ORGANISATIONAL OBJECTIVES:

To encage customer satisfaction through:-

Improvement in productivity and product quality.

Skill enhancement of our people by competence commitment and culture-

building.

Production as per customer requirements.

QUALITY POLICY : Attending market leadership through enhancing

customer satisfaction.Achieving continual improvement in productivity, quality

and salability of our products.

9

ORGANISATIONAL STRUCTIRE OF BHILAI STEEL

PLANT

10

MANAGING DIRECTOR

ED(F&A)

GM(IT)

GM(M&SP)

GM(IA)

GM I/C(MINES)

DIR(M&HS)

ACVO

COC

ED (PROJECTS)

GM (PROJECTS)

GM (PP&E & BEDB)

GM I/C (SERVICES)

GM (SAFETY)

GM I/C (M&U) (REFR)

GM (P MILL & MILLS-LP)

GM(CO,CCD & SP,OHP)

GM I/C (PE,EN & STEEL)

GM (QUALITY)

GM (CCS)- SMS-II

ED (WORKS)

ED (P&A)

GM (TS)

GM (PERS)

GM (HRD)

GM (MS)

DGM (L & A)

ED (MM)

GM (MM)

Chapter – 3

Raw Material Procurement

The requirement of all principal raw materials excepting coal & Manganese ore

is met from the captive mines of plant the plant owns and manages the

mechanized and manual iron ore mines at Dalli-rajhara, situated about 95 km. to

the south and mechanized & manual lime stone mines at NANDINI about 25

km. to the north of the Plant. The plant also owns quarries at HIRRI situated

near BILASPUR for Dolomite. The main source of electricity is KORBA about

250 km. away. The Steel Plant has generating capacity of 86MW. Of power

through their plants to meet emergency loads in case of interruption in supply

from C.S.E.B.

Product Mix: Saleable Steel Production:

2010 (Estimated) FY: 2006-07

11

Chapter – 4

Finance and Accounts Department

Now a day’s finance function is one of the most critical and complicated work

for any organization and with excellent management can turn the way of the

organization and propelled organization toward prosperous. The work of

Accounts function is to keep every record of every Finance function. We can

say that Account is the supplement of Finance. The objective of Account and

Finance is to accomplish the obligation of Line department while doing its own

line function.

Organization structure of Finance and Accounts Department

12

ED(F&A)G.M

.(F&A)

D.G.M.(F&A) D.G.M.( F&A) CFM CFM CFM CFM

CASH, WAGES-I,WAGES-III A,INCENTIVE CELL,STORES, FIN.ESTIBLISHMENT,ADMINISTRATION & COORDINATION

CENTRAL A/Cs, MANAGEMENT A/C,ASSETS A/Cs, OPERATION BUDGET,COST A/Cs, ENERGYCELL,OPERATION A/Cs, PC, CC

MINES, ZONAL WAGES,WAGES COORDINATION

RAW MATERIALS A/Cs,FREIGHT & CLAIM, STOCK VERIFICATION,TOWNSHIP SERVICES,HOSPITAL A/Cs

PROJECT FINANCE,CAPITAL BUDGET,WORKS FINANCE,ZONAL A/Cs & WORKS,COMPLICATION

SALES, EXCISE, SALES TAX, FRT. OUTWARD

Chapter 5

Section of Finance and Accounts

MINES FINANCE

Payment accounting & finance concurrence at RAJAHARA, HIRRI

(BILASPUR) NANDANI to Co-ordinate the activities at, mines finance

Mines co-ordination section is also these at BHILAI.

RAW MATERIAL ACCOUNT

Payment account and reconciliation of major raw material including coal

(Excluding minor raw material which are part of stores)

FREIGHT &CLAIMS

Inward & outward freight payment and accounting there of including claims

with railways Also the insurance coverage and claims there under. Maintenance

of record also the important work of this section

PURCHESE CONCURRENCE

Financial concurrences of all purchase proposals after detailed examination of

various aspects

13

STORES BILLS

Payment of suppliers bills after detailed verification of all terms and condition.

Also payment of transport bills is released from hence.

STORES BILLS ACCOUNTING

Reconciliation of payment made to supplier by stores bills with material

receipts by stores and accounting there.

STORES ACCOUNTING

Valuation and accounting of all stores transaction including the custody stock

Receipt and accounting of proceeds forms disposal stores

IMPORT ACCOUNT

Payment accounting and licensing for all import (revenue & capital)

Including proper utilization of export incentives

CONTRACT CONCURRENCE

Financial concurrence of all contract proposals after detailed examination of

various aspects

14

OPERATION ACCOUNT

Payments, accounting &control of all payment related to contractual jobs in

operational area, contractual labor payments, payments under delegation of

power and all other miscellaneous payments

PROJECT FINANCE & ACCOUNT

Project evaluation, concurrences payment and accounting of all projects

including its proper capitalization

WAGES

Payment & accounting of salary, wages including TA bills LIC etc. After

deduction of taxes and other dues Timely remittance of statutory dues and filing

of returns

INCENTIVE CELL

Calculation of incentive payment for payment, through salary and involvement

in development of new incentive schemes

FINAL CLAIMS CELL

Payment and accounting of all separated employees Including SESBF payment

and EFBS payments

15

TOWNSHIP ACCOUNTING

Concurrence, payment and accounting of all cases related to township including

education & medical

MEDICAL ACCOUNTING

Realization of bills forms non-entitled patients, claims under medical for

treatment of ex-employees and day to day hospital concurrence & payment.

CONTIBUTORY PROVIDENT FUNDS (CPF)

Maintenance of member accounts loan processing & disbursement final

payment, FPS/EPS remittance and investment of funds.

SALES INVOICING

Invoicing of direct, sales and stock yards sales, including sales for by Products

and invoicing for inter-plant transfer

SALES ACCOUNTING

Accounting of transaction made by sales invoicing selection including clearance

of debits/credit, maintenance of debtor ledger and advance

16

STOCK LEDGER

Valuation and accounting of stock out plant, at stockyard, at export yard and in-

transit on quarterly bases

EXCISE

Payment and accounting of excise duty & service tax an ailment of CENVAT

credit, returns. Submission of returns and legal cases involved there in.

STOCK VARIFICATION

Physical verification and certification of stock of raw material and finished

products on periodical basis

CENTRAL ACCOUNT & ASSEST

Complication of accounting on quarterly basis, attending statutory audit

Resident Audit, Tax Audit and supplementary Audit Insuring compliance of

accounting guidelines accounting standard and other statutory compliance,

maintained of assets register.

OPERATION BUDGET

Preparation of annual budget based on APP and examination of proposals for

additional budgets/budget divisional.

17

COST ACCOUNTING

Ascertainment of cost for products at various stages cost of services, technology

economic evaluation, pricing cases and comparison NSR with cost for

management information.

MANAGEMENT ACCOUNTING

Preparation of daily profit report mid-month profit report LDM (Last Day

Massage) report and complication of other information as required by the

management from time to time

CO-ORDINATION AND ADMINISTRATION

Co-ordination and administration jobs within finance & Account department

18

Chapter 6 CASH SECTION

Introduction

BSP Cash management is handled by Senior Manager to take care of all

financial transactions at the Plant (BHILAI), Mines (RAJHARA, NANDINI,

HIRRI), and Resident offices at Delhi, Mumbai, Chennai and Kolkata.

Main function of Cash Section

Main function of Cash section is to interact with bankers, fund management,

check receipt and payment of, banks reconciliation, handle physical cash,

maintenance of record and MIS, keep contact with other Account sections and

C& IT(software and hardware group), reporting to corporate office regarding

Fund position.

19

Chapter 7 Fund Requirement

The Fund requirement is towards Salaries and Wages, Raw Material, Stores and

Spares for Repair and Maintenance, Power and Fuel (Energy), Freight (outward

and inward), Taxes (ED, CST/VAT), Mines Expenses, Project Expenses.

Cash/Fund management Section prepare Fund requirement statement by

interacting with various payment section and send requisition to CMG (Cash

Management Group), SAIL Corporate Office New Delhi by 25 th of every

month.

The requisition for the following month will be a detailed Report indicating the

requirement of plant, mines and resident offices and Bifurcating this

requirement into 1st half and 2nd half of the month. The requisition will also

highlights any variation from normal requirement with reason thereof.

For example: Additional raw material requirement for special product or

towards taxes (ED, CST/VAT) for higher level of dispatches is indicated. The

requisition will be Net Fund requirement i.e. Total expenses minus Local

collection.

20

,

21

All Finance & accounts Section

Resident offices Mines

Cash Section

Fund R

equirement

25th of every m

onth

CMG, SAIL

Fu

nd

confirm

ationF

un

d C

onfirm

ation

SBI corporate Accounts Group, New Delhi

SBI, commercial branch BHILAI

Allocation of BSP

Monthly Expenses element wise furnished or indicates below:

FUND REQUIREMENT FOR THE MONTH OF JUNE 2008

No. Particulars Amount (in Cr.) Payable on

1. OUTWARD RAILWAY FREIGHT 45-50

2. INWARD RAILWAY FREIGHT 20-22

3. EXICES DUTY 155-170 6th of every month

4. COMMERCIAL TAX and ENTRY TAX 40-45 10th of every month

5. RAW MATERIAL 70-90

6. SALARIES and WAGES 90-100

7. STORES and SPARES 90-100

8. POWER and FUELS 51-57 7th of every month

9. MINES EXPENSES 20

10. CAPITAL EXPENSES 50-75

11. OTHER EXPENSES 30-35

641-764

(-)EXPECTED LOCAL COLLECTIONS 80-100

NET FUND REQUIREMENT 561-664

NOTE: ……………………………………………………………………

……………………………………………………………………..

1st to 15th

RS/Crores

16th to 31st

RS/Crores

Total

RS/Crores

MUMBAI 2 0 2

KOLKATA 20 0 20

BILASPUR 45 0 45

RAJHARA 12 0 12

NANDINI 2 0 2

22

BHILAI 400 150 550

TOTAL 481 150 631

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Chapter – 8 CASH CREDIT

CMG of SAIL corporate office after receiving the fund requisition from various

Plants initially allocates fund for first 15 days. They will intimate the bankers of

SAIL (SBICAG New Delhi) to park allocation at respective banks where plants

operate their accounts. SBICAG will intimate respective branches of SBI to

allow the transactions of the plant on cash credit basis with the limit of

allocation.

FUND UTILISATION AND MONETERING

Cash Management Section every day prepares around 300 CHEQUE based on

the payment vouchers received from various sections like wages, raw materials,

and stores etc. Cash Management Section consists of CBCS (Central Bill

Clearing Section), CHEQUE preparation and dispatch group. Everyday

CHEQUE (approx 300) will be prepared for the payment voucher received up to

13:00 hrs and after signing CHEQUE are dispatched by 17:30 hrs on the same

day.

CBCS plays very important role as it deals with verification of payment

authority, level of authority and check the party name, bank a/c no. and amount

from with payment vouchers. They also verify the specimen signature of

payment authority and as a confirmation/ verification of all items are as per

24

payment vouchers they sign and put a seal. After this it will be forwarded to

check preparation group.

It is observed the entire working of Cash Management Section is system- based

(online working), which is known as VMS (Voucher Management System).

This was designed and developed by Software Group (C& IT of BSP). It is also

observed that at any stage no tampering of data is allowed by the system, which

ensures a very good controlled mechanism which is absolutely necessary for

high volume of payments both in number and value.

DISBURSEMENT OF FUNDS INTO VARIOUS ACTIVITIES

RAW MATERIAL

BSP is incurring Expenditure approx Rupees 60-80 Cr. every month towards

Raw Material purchases other than Coal. BSP purchases important Raw

Material from various public sectors, manganese from MOIL (Manganese Ore

(India) Ltd) and some important Ferro alloys from its subsidiary MEL

(Maharashtra Electros melt Ltd.), low-silica, limestone from RSMML

(Rajasthan State Mines & Mineral Ltd.), other than normal raw material

required for day-to-day working.

STORES and SPARES / REPAIRS and MAINTENANCE

BSP through its preventive maintenance schedules undertakes regular repairs

and maintenance for upkeep of plant and machinery which contributes for 100%

25

rated capacity of production in all its production units. For this purpose it

requires complex spares and other materials required for maintenance. Other

than plant and machinery, steel plant requires maintenance of its furnaces

located at various stages. The major expense of this maintenance involves

refractory linings, which avoids erosion of furnace shell/body taken place.

Refractory linings are made with costly refractory bricks and some bondage

materials, some of them from imported source.

POWER AND FUEL

BSP incurs around Rupees 50-60 cr. every month towards purchase of

Electricity from CSEB, its joint venture SAIL NTPC ltd, as its own generation

of Electricity is not sufficient for Plant Operations (sufficient only for Town

ship). These Payments are made on 7th of every month

EXCISE DUTY

BSP is contributing to National Exchequer towards Excise Duty to the extent of

2000-2400 Cr. per annum (150-170 Cr. per month). Excise Duty is payable

when the Goods/Steel Material are dispatched from the Plant, either on Direct

Sales or dispatches to its own stock yards all through the Country.

While calculating / assessing the net Excise Duty payable, Excise section of

BSP will deduct CENVAT amount towards the Excise Duty paid on its

Purchases to Suppliers.

26

For ex: if total Excise Duty payable on the dispatches is 200 Cr. and if 20 Cr. is

paid as excise element to vendors / suppliers on its purchases, BSP will only

remit 180 Cr. to central excise department.

BSP avails the facility extended by Government of India to make payment

through E-mode on 6th of every month which otherwise normally payable on

5th. By this BSP is saving a substantial sum towards Interest.

BSP is a Major Exporter of Steel products, for which no Excise is levy able.

However if there is any surplus out of its Export production , BSP is allowed to

divert this material to home market (Indian market) after clearance of central

Excise Authorities and after payment of applicable

CST/VAT

Every month BSP makes payment of Rupees 45-50 Cr. every month towards

CST, VAT, CT, ENTRY TAX etc. For this purpose indirect taxation of BSP

makes assessment of tax liability and makes payments through E-mode which is

payable on 10th of every month.

MISC PAYMENTS

BSP incurs approx Rupees 30-35 Cr. every month towards job works, repairs

and maintenance contracts for upkeep of plant and machinery, roads and

buildings in the work area. Also a substantial expenditure is towards for regular

maintenance of township, schools, and hospitals.

MINES

27

BSP is having its own mines at RAJHARA, NANDANI and HIRRI from where

it gets major raw material i.e., Iron ore (from RAJHARA HIRRI mines),

Limestone from NANDINI and Dolomite from HIRRI mines. At mines all

financial activities takes place, like payment towards salaries and wages, stores

and spares, power and fuel etc, which is taken care by respective account

sections and monitored from BHILAI.

FREIGHT OUTWARD

BSP is required to pay railway freight on its dispatches to SEC (Southeastern

Central) Railway. For this purpose railway employees are deployed at plant site

who will prepare railway receipt (RR) after weighing the material, by placing

the rake / wagons on weigh bridges. BSP incurs approx 45 Cr. every month for

which CHEQUE will be issued every day to railways based on the dispatched

material, which will be paid out of Bank account of HIRRI mines as SEC

Railway is situated at BILASPUR, nearer to HIRRI mines.

FREIGHT INWARD

BSP resident office at Kolkata makes payment of Rupees 20 Cr. every month

approx to Railways towards the movement/dispatches of coal to plant

(BHILAI). Its resident office at Mumbai also incurs approx 2 Cr. towards the

dispatches of purchased/imported material by Road and Railway for plants

immediate requirement.

EXPANSION OF THE PROJECTS

28

BSP is going for a massive expansion (4 million tons to 7 million tons) to have

additional capacity with latest technology and to produce globally cost

competitive products which involves approx 11000-12000 Cr. This additional

capacity is likely to be completed within next 4 years.

As BSP is commissioned 50 years back it requires timely additions /

modification and replacements to its existing plant and machinery to achieve

100% rated capacity. It has to carry out major / capital repairs besides the

scheduled preventive maintenance. Capital repairs are executed under AMR

scheme (Addition, Modification and Replacements), these expenses will be

treated as deferred revenue expenditure i.e. booking of expenses in the accounts

will be spread to number of years based on expected life, limiting to each year

proportionately.

To explain, if a Capital repair involves 100 Cr. and expected life envisaged as

10 years, the expenditure for each year will be limited to 10 Cr, as total

expenditure will be spread to 10 years (to the number of years of its expected

life).

29

SALARIES

BSP is making salary payments of approximately 100 Cr. (net salary) per month

to its around 14000 employees. Payments will take place from 1st to 10th of

every month for salaries and other employee related payments (loans and

advances, LTC and TA etc) all through the month. This includes remittance to

Provident Fund Trust, LIC etc.

The Salaries payment of an Employee consists of Basic Pay, DA, Incentive and

other Allowances like Car/Scooter Allowances, Entertainment and Magazine

Allowance etc.

30

31

Raw material

Mines

Misc Payment

Outward freight

Freight Inward

Salaries CST/VAT/ET

Excise

Power & Fuel

CASH SECTION

45 CR

OR

E

150 to 170 CR

OR

E

30 to 35 CR

OR

E

60 to 80 CR

OR

E

18 to 20 CR

OR

ES

50 to 60 CR

OR

E

45 to 50 CR

OR

E

20 CR

OR

E

100 CR

OR

E

Chapter – 9

E- PAYMENT AND E- RECEIPT

E-Payment

With the advent of globalization that involves complex transactions, it requires

a change of banking- outlook to take care of immediate settlement of financial

transactions (payment/receipt). For this purpose RBI formulated electronic

mode for payments and receipts.

BSP is utilizing electronic-mode designed by SBI known as core

banking. At present BSP is paying salaries to its employees and to some parties

who are having their bank accounts with various branches of SBI. By this

process around 14000 employees and some parties, though they are located at

different places in India, are getting payments on the same day.

The process of payments with sources of generation of information/data is

depicted in the flow chart (as given below).

Benefits of E-Payment

Benefits of E-Payment can better explained when we understand the time

involvement in payment though CHEQUE which normally takes 6-7 days time

as it involves postal/courier time required for delivery to the party, submission

of the CHEQUE by the party at their bank and presenting the CHEQUE by their

banker for a clearance and finally crediting the parties account. This E-Payment

32

process not only benefits the party/receiver resulting in faster/immediate

realization of money, it also helps BSP for reconciliation of the cash book for

the payment made, as bank debits BSP account while crediting party’s account

simultaneously. It is very useful for the purpose of fund management, if

payments are effected in the banks statement on the same day, so that available

funds are known which can be prudently utilized.

Process of E- payment

We have observed when the payment order (voucher) is prepared and sent to

cash section by payment section, the same after checking and verification by

CBCS is accepted in the online system. After this data in the online VMS

system for payment is uploaded in the SBI site by payment section. After this

process the data of Payment Order/Voucher will be appearing in the form of E-

CHEQUE in SBI site. To have control it has been designed to allow

accessibility to SBI site to a very few officials who are designated as makers for

making/uploading the payment at payment section. Similarly a few officials

who are designated as Authorizers are authorized for payments. It has also been

observed the levels of authorizing are designed – up to 25 lakh to junior level

officers. Payments are affected only when second officer also authorizes for

payment electronically. To have future reference to know who are involved in

any process of payment the name of Maker, and the Authorizer-1, and

Authorizer-2 will be appearing in the electronic CHEQUE and same will be

stored in SBI site. As it is essential to check whether payment has been made to

33

the Party, this can be verified in the SBI site from the details attached to the E-

CHEQUE against column “Status”. It can be ensured that payment has been

properly effected if “status” is shown as “success”. On the other hand due to

any reason, like software/system failure, the payment gets failed /rejected in that

case “status” column will be indicated as “Failed” or “Rejected”. In such a

situation after taking up with the bank and after executing all controls once

again, the process for payment through E-Mode is made.

E-receipt

It is understood that some parties who are interested in purchase of rejected

steel products, scrap, coal chemicals etc, located in various parts of India, can

make remittance for the assessed value of the material by E-mode. For this

purpose they will approach their bankers for making payment electronically to

BSP by opting for NEFT/RTGS (National Electronic Fund Transfer/ Real Time

Gross Settlement). It is understood that RBI has designed for payment through

electronic mode/ Fund transfer, NEFT and RTGS. Under NEFT a party can

transfer fund from one place to another place for which charges will be NIL up

to 50000 and above 50000 nominal charges are levied.

RBI under NEFT allows fund transfers in batches with duration of 3 hours gap.

Under RTGS the fund transfer takes place on real time basis i.e. immediately on

individual transaction basis all through the day up to 15:30 hrs, whereas under

NEFT fund transfer takes place within/after 3 hrs, by clubbing all transactions

in a particular Batch time (as it involves Batch payment). The charges for RTGS

34

are also nominal at present (only Rs.25 per transaction irrespective of value of

fund transfer). The minimum fund transfer under RTGS is Rs one lakhs,

whereas there is ‘No’ minimum limit with NEFT.

Receipts-Auction Sales

BHILAI Steel Plant makes auction sales of its rejected material to various

customers in the country. Monthly 80-100 Cr. are realized out of the auction

sales of rejected steel materials and coal chemicals. For this purpose tenders are

issued in the newspapers to get more number of bids at higher rates. BSP also

opts for E-Mode auctions.

The highest bidders after due approval are asked to deposit for collecting the

material auction. These materials are auctioned in lots. Before collecting the

material the successful bidders have to deposit entire money for value of the

material. The bidders may submit their deposit in the form of DDs or directly

deposit in BSP bank account or they can send money by E-Mode from their

bank to the bank account of BSP.

35

CHAPTER -10 Processing of DDs

When the Parties submit the DDs to Marketing department these will be sent to

sales account section and simultaneously the marketing department issue the

delivery orders. Sales account after accounting forward the DDs to cash section

by means of bank receipt voucher along with pay-in-slip, which indicates all the

details of bank drafts. Cash section after receipt of DDs will enter the details in

the system so that when the drafts are credited in BSP account, bank

reconciliation of drafts is taken care of by the system. After entering details of

DDs in the system every day, a consolidated Daily Deposit Statement is

generated, which indicates each DD number and amount with other details.

This will be sent to bank along with DDs. It is observed the bank credits all the

DDs payable at BHILAI on the same day and if there are any outstanding DD/

CHEQUE these will be credited on the following day or within a reasonable

time.

A key code for the reconciliation of records/transactions at sales account, cash

section, is D (Deposit) Number, which is generated by system in pay-in-slip,

receipt voucher and daily deposit statement. Subsequently for the same

transactions, for the purpose of reconciliation, bank indicates “D’ number in the

bank statement when credit is made.

36

DEPOSIT DETAILSSTATEMENT FROM

Printed on DATEACCPTDATE ACCPTNO SEC VRNO DNO AMOUNT BANK

1615

1616

1617

1617

1618

1618

1619

1620

1620

1621

1621

1622

1622

1623

1624

1624

1624

1625

1626

1627

38

38

38

38

38

38

38

21

21

52

52

52

52

52

52

52

52

51

51

68

478

480

482

482

484

484

485

274

274

268

268

269

269

270

271

271

271

63

64

109

38 is sales, 21 misc.,52 township, 51 medical, 68 projects

37

BANK RECONCILATION FORMAT

BSPF & A

BANK RECEIPT VOUCHER(GENERAL)

O & MFin/281

Received From C Vr.NoDateCheq No.Sc Code 052

S Vr.NoDate

Division Code

0027317/07/2008

Code

Account Head

REVRECVRBLE-OUTSORS-RENT

ParticularRENT COLLECTION

Received Rs.(in words)

A/C code

Resp Cd

TOTAL

Debit

TOTAL

Credit

AMOUNT

Mode of Receipt : As per list enclosed

Signature Verified

Produced By officer-in-charges Supervisor Officer Cash Section

Received:No: Date: Received the sum of Rs. Rupees

Checked By Officer-in-charges Date:

38

Process of Direct Deposit:

Bidders have an option to make payments/deposits for the auction money by

directly depositing in BSP bank account or by transferring the amount from

their account to BSP bank account. In such a situation when the money is

credited to BSP account SBI Commercial Bank sector-1, will send intimation as

an acknowledgment of receipt of money from the party to BSP marketing

department They will issue credit advice (in triplicate) to the party. One copy of

which will be handed over to marketing department by the party. After this

marketing department will issue delivery order to the parties and forwards the

CA (credit advice) to sales account for accounting the sales account will send

the CA along with bank receipt voucher indicating the details of instrument

number, date; party name and amount etc. to cash section after accounting.

After receipt of the bank receipt voucher and CA, cash section will confirm the

receipt of money by verifying from the particular date of bank statement.

39

Received From DateCheq No.Sc CodeMas No.

052510105

Division Code

1

Account Head

MAINT.P&MFOR I.T.D. from CONTR.

STATE BANK OF INDIA,BHILAI

Received Rs.(in words)

A/C code

6769900

4050101

Resp Cd

0179100000

00000

Debit

1000000

TOTAL

Credit

2000000

80000000

Mode of Receipt : As per list enclosed

Signature Verified

Produced By officer-in-charges Supervisor Officer Cash Section

Received:No: Date: Received the sum of Rs. Rupees

Checked By Officer-in-charges Date:

40

41

Party/Bidder of auction sales

SBI, COMMERCIAL

MARKETING DEPT

CREDIT ADVICECREDIT ADVICE

CR

ED

IT

AD

VIC

E

AN

D B

RV

SALES ACCOUNT

CREDIT ADVICE AND BRV

CASH SECTION

Process of E-receipt:

With the introduction of E-banking all customers are facilitated to get receipt or

to make payments instantly or on the same day by means of Core-Banking.

Many of the BSP bidders/parties from various parts of the country are opting for

E-mode payments. In such a situation the banker of the party will transmit the

money to the bank account of BSP by NEFT or RTGS mode. SBI, Commercial

Bank BHILAI after receipt of money by electronic mode and after verifying that

the BSP account is credited with the amount, issue a CA to the party (in

triplicate). The process of E-receipt is also same as that of direct deposit in BSP

account.

42

Party Party Party

SBI, COMMERCIAL BANK, BHILAI

Direct d

eposit B

hilai

Fu

nd

transfer th

rough

RT

GS

/ NE

FT

Direct d

eposit R

aipu

r

CR

ED

IT A

DV

ICE

CR

ED

IT A

DV

ICE

CR

ED

IT A

DV

ICE

CHEQUES detail

It is observed that CHEQUE prepared by BSP not only gives the details of Party

name, Bank details and Amount, it is incorporated with the following

information so that CHEQUE is delivered on the following day.

Details Purpose

Section Voucher number and

Date

As it is essential to furnish the information of

the status of the payments to the parties who

are enquiring over phone from all parts of

India, a system has been developed by which

when section voucher number is fed all

details including Cheques number, amount,

Status of payment (whether payment has

been debited to BSP a/c) are known. We

have observed that details of the payment can

only be known through the particular section

voucher number, as cash section is making

payments on the basis of vouchers from

various sections (5-6 sections). Section

number is essential as there will be many

vouchers (4-5 vouchers) with the same

43

number (Cash section might have received

with Voucher No.100 from wages, raw

materials, stores, medical etc).

Route number For delivering CHEQUE quickly/ on the

following day as the volume of CHEQUE are

more than 300 per day, system generates

location wise delivery reports so that

CHEQUE can be segregated and handed

over to courier. It is observed that the entire

areas of BHILAI and DURG are designated

with different route numbers (10-12). The

system picks up the route number based upon

the bank branch location as given in the

payment order and Voucher.

For Outstation CHEQUE a separate report

will be generated by the System so that all

such CHEQUE are sent to postal authorities.

Bank reconciliation

Background:

44

It is understood that CHEQUE of all parties, those who have opted for payment

through local banks, are sent directly to their respective banks, instead of

sending to their address. This leads to time saving involved in delivery to party

and then presenting to bank by the party. It is observed that a CHEQUE number

is generated by the system when a CHEQUE is printed. Other details like party

name, account number bank details and amount etc are not get generated at cash

section and the same are as per pay order/ voucher date. It is understood for the

purpose of control and security, for party details and bank details/ account

number, a different agency prepares build up a master data based on the

declaration given by the party and certification by their bank. All party details,

bank details are picked up for preparation of payment voucher and for

CHEQUE preparation from the master database. Amount of payment is fed in

the system by the payment section after checking the bill. For the CHEQUE

preparation, amount is picked up from the database of payment section. Details

furnished below:

DEPOSIT DETAILSSTATEMENT FROM 17-07-2008 to 17-07-2008

Printed on 18-jul-2008ACCPTDATE ACCPTNO SEC VRNO DNO AMOUNT CNT BANK

45

17-JUL-2008 16151616161716171618161816191620162016211621162216221623162416241624162516261627

3838383838383821215252525252525252515168

4784804824824844844852742742682682692692702712712716364109

439904399143992

Details in the CHEQUE Source/ System

- CHEQUE No. Generated at cash section

-Amount From payment section data base

-Party details As per payment voucher and master data

-Account No As per payment voucher and master data

-Bank details As per payment voucher and master data

46

CHEQUE dispatch

After preparation of CHEQUE and signature CHEQUE dispatch section with

the help takes out two reports from the VMS/system-

Bank wise dispatch system and proof of delivery in triplicate

BANK WISE DISPATCH SYSTEM

The bank wise cash dispatch system incorporates all the CHEQUE of a

particular branch of a bank furnishing the details of CHEQUE No. and date,

party name and account No. and amount

For ex: All the CHEQUE that were prepared on a particular date in respect of

SBI civic centre will be indicated in the bank dispatch statement of SBI civic

centre along with the total No. of CHEQUE dispatch and its value . Like this all

the 300 CHEQUE prepared in a day are segregated and sent along with the

covering daily dispatch statement of all the banks. These will be put in a

separate cover on the face of which bank address is written further to avoid

damage of the CHEQUE each cover put in a polythene cover.

PROOF OF DELIVERY

As it is essential to get the acknowledgement of a bank as to confirmation of

receipt of CHEQUE from BSP a consolidate statement of all CHEQUE

segregating into each branch / bank is taken out from the system. Each bank is

indicated with CHEQUE No. and amount that are sent to that bank or branch,

47

CHAPTER – 11 Process of Bank reconciliation

BSP is having a facility of Core banking with SBI and through this Daily bank

statement of all transactions can be downloaded. The bank statements are

provided with transaction date, validity date, and description of transaction,

CHEQUE reference number, debit, credit and balance. Each statement is

indicated with CHEQUE number, Amount, description and all receipt is

indicated with D/number, Amount and details of each receipt. The downloading

facility and access to SBI site is given to only a few officers of cash section and

this facility is not extended to payment/ other finance sections for the purpose of

control and security. For the purpose of bank reconciliation, cash section is

having a different working module. Every day when bank statement is

downloaded from SBI Site the same is transferred to BSP bank reconciliation

system. The steps involved are:

1. Details of CHEQUE for payments prepared by CHEQUE section at thend

of the day get transferred to BRS system (Bank Reconciliation Statement

system), where outstanding CHEQUE of previous days also stored.

2. Details of DDs as accepted by receipt section and sent to bank, get

transferred to BRS where unrealized DD details of previous days will also be

available/ stored.

48

3. Details of transactions (payment and receipts), other debits and credits as

downloaded from the SBI transferred in the morning everyday to BRS

system.

4. When the BRS System is activated the CHEQUE paid by bank gets

reconciled with particular CHEQUE (CHEQUE number is the ‘Key’). These

will be deleted from the outstanding list and all these details get transferred

to a separate database “Reconciled CHEQUE”. It facilitates that at anytime

details of CHEQUE paid can be downloaded from this database.

5. The CHEQUE not paid for the day along with those not paid for previous

days/ months get stored and available in “Outstanding Database” of BRS.

6. When BRS is activated the DDs against which receipts affected in Bank

statement and transferred to BRS, gets reconciled with particular DDs stored

in BRS. This will be deleted from the list of DD sent for collection from

BRS and get transferred to a Database “Realized” where it will be added to

the list of DDs realized in previous days/ months.

7. The unrealized DDs for a particular day gets stored/ available in BRS (till

they are realized) along with unrealized DDs, if any, of previous period.

8. Bank Statement provides other debits made by bank (other than BSP

CHEQUE) for transactions involving LC (Letter of Credit), BG (Bank

Guarantee), and other Bank Charges. These details as downloaded from bank

statement everyday are transferred to BRS.

49

9. Cash Section (BRS group) intimates to respective payment section about the

debits made by bank directly on day-to-day basis, then payment section will

verify the genesis of the transaction and confirm the amount involved with

the details from the documents received by them directly from the bank. To

confirm this payment section prepares payment adjustment voucher (PAV)

and sends it to cash section. After receipt of PAV, BRS group of cash

section, after accepting it, incorporates the same in the BRS.

10.All transactions of other debits for which PAV received and loaded into BRS

gets reconciled with particular bank debits and gets transferred to a separate

database “Reconciled other Debits” for LC/ BG which will be added to

reconciled transaction of earlier period.

11.The details/ data of direct bank debits for which PAV not received from the

sections will remain/ stored in BRS as unlinked debits (LC/ BG).

12.Similar process takes place as explained above for BG, charges also.

13.Bank directly debits BSP a/c for the charges it takes for various transactions.

Every day morning when bank statement is loaded into BRS system bank

charges gets stored in a separate database called “BC” (Bank charges). BRS

group of cash section will CHEQUE the bank charges in detail and pass

PAV only to the extent of correct charges (cash section takes up with bank

on daily basis for withdrawing the debits not accepted by BSP). The bank

charges for which PAV passed gets reconciled in BRS and transferred to a

separate database “BC” and added to the list of earlier period.

50

14. The unaccepted bank charges will be lying in BRS for a particular day along

with earlier period charges till withdrawn by bank, (bank gives credit in bank

statement at a later date).

BRS group of cash section

After receiving the details from resident offices BDC (Bombay, Delhi, Chennai)

prepares BRS along with BHILAI cash section will get these statement audited

by internal audit, statutory audit.

51

CHAPTER - 12

REVERSE AUCTIONS

E Sourcing conducted by mjunction has helped rationalize the clients’

procurement costs, reduce procurement process times and have lower inventory.

The sourcing business unit focuses on delivering value to corporate in the

Metals and Minerals sector and in verticals of Logistics, Packaging and Steel

Buys.

The operation stages are as follows:

Sourcing Strategy Process: understanding the spends of client (buyer)

organizations

Supplier Discovery Process: supplier and price discovery

Sourcing Execution Process: sourcing negotiations

Performance Analysis and Measurement Process: supplier performance

analysis post contract.

Mjunction also extends supplier and price discovery with online negotiations for

client (buyer) organizations who are interested in the above, having done the

other activities themselves. This basic form of e Sourcing constitutes of an e

Reverse Auctions (eRA) – an online, real-time dynamic auction between a

buying organization and a group of pre-qualified suppliers who compete against

each other to win the order to supply goods or services that have clearly defined

specifications for design, quantity, quality, delivery, and related terms and

conditions. These suppliers compete by bidding against each other online over

the Internet using specialized software by submitting successively lower priced

bids during a scheduled time period. This time period is usually only about an

52

hour, but multiple, brief extensions are usually allowed if bidders are still active

at the end of the initial time period.

FORWARD AUCTION

Prior to the advent of mjunction, the secondary steel supply chain was mired in

red-tapism, lack of transparency and inconvenience. Secondary steel used to be

sold on “as-is-where-is” basis, with the consideration that the manufacturing

area and yard has to be cleared as fast as possible to keep the production going.

The cumbersome manual selling activity in itself was time consuming and

sporadic with long turnaround times which meant carrying high inventory and

logistical problems. The producers were trying their best to address the vast and

geographically dispersed market which is largely fragmented and largely

transactional in nature.

The fall-out was sales of secondary steel to a select group of buyers, which

resulted in dependence on intermediaries, lack of transparency and lower price

realizations.

Mjunction not only offered the steel companies the opportunity to cut costs, but

also to increase revenues and enhance margins. Increased reach enabled

companies to discover new buyers for their products, and increased discovery of

new buyers over the internet had a significant impact by increasing realizations

considerably. Mjunction has brought about marked improvements in steel

Supply Chain Management through:

1. Efficiency in processes:

a. Reduction in time: The entire cycle time of selling materials is eSelling leads

to disintermediation, which allows direct end users reduced by the speed and

efficiency with which on-line an equal opportunity to compete with larger big

buyer’s competitive bidding events can be created and managed. With

53

(traders/distributors) this enables end users to buy material at eAuctions, which

cut down on communication and response time lower prices than they used to

do from traders, whilst ensuring considerably, manual processes like tendering,

scrutiny and that the client organization earns higher realizations. Negotiations

are not needed any more.

b. Reduction in inventory at steel plants: The long turnaround time involved in

the off-line selling process led to a huge inventory pile- Bidding on the Internet

allows all the participants to watch the bids up at the factories. With the

introduction of e-Auction, the placed by the other bidders and to respond in a

real time, dynamic inventory was reduced significantly as auctions could now

be held fashion. The bidders directly place the bids and there cannot be any

more frequently. Moreover, in off-line selling, little strategy is loss in transit.

Online auctions capture and record all bids placed by followed with regard to

product categories or lot sizes.

E-Auction changed all this by strategizing and streamlining the entire auction

process through the following steps:

The inventory of the steel plant is first analyzed and categorized into

product types.

The auction strategy is planned to suit each product type based on the

current market scenario.

The ideal auction type, for instance, English No-ties, Yankee, Dynamic

Sealed Bid or Multiple Winners for the particular product category is then

decided.

c. Reduction in cost and increase in revenues: mjunction's e-Auction based

transactional e-Sales model brings about a significant reduction in overhead,

and manpower and transaction costs. Through the price discovery mechanism,

e-Auctions enable better price realizations resulting in increased revenue.

54

2. Increased Reach opportunistic pricing

Mjunction’s online eSales enables reaching out to wider cross- buyers across

the country. Through automation, large quantities of material are broken up into

smaller more marketable lots, ensuring wider participation, especially from end

users. Moreover, the eAuction mechanism truly discovers markets which are

short in material and are prepared to pay a higher price.

3. Lower costs to buyers through disintermediation

ESelling leads to disintermediation, which allows direct end users an equal

opportunity to compete with larger big buyers (traders/distributors). This

enables end users to buy material at lower prices than they used to do from

traders, whilst ensuring that the client organization earns higher realizations.

4. Transparency across the Supply Chain

Bidding on the Internet allows all the participants to watch the bids placed by

the other bidders and to respond in a real time, dynamic held fashion. The

bidders directly place the bids and there cannot be any loss in transit. Online

auctions capture and record all bids placed by the bidders and a complete audit

trail and bid history is available to you as opposed to a physical auction.

The process also pre-empts cartelization to a great extent through confidentiality

of the bidders participating. Their names, location etc are not visible to the other

bidders. The increase transparency has increased the confidence level among

customers which has led to a higher degree of competitiveness.

Mjunction sells a wide range of products through online forward auctions in the

following markets -- Mandi Gobindgarh, Ludhiana, NCR, Kanpur, Raipur,

Bhilai, Mumbai, Gujarat, Bangalore, Chennai, Coimbatore, Hyderabad, Orissa,

West Bengal and Guwahati.

55