A STUDY ON “BUDGET &BUDGETARY CONTROL” AT VISHAKAPATNAM STEEL PLANT (A report submitted to JNTU, Kakinada.) In Partial fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION By GANDI.MAHALAKSHMI NAIDU Under The Guidance Of CH.LEELA SRINIVAS Dy.Manager (F&A) RINL, VISAKHAPATNAM
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A STUDY ON“BUDGET &BUDGETARY CONTROL”
AT
VISHAKAPATNAM STEEL PLANT(A report submitted to JNTU, Kakinada.)
produces, among other by-products, pushkala a prime fertilizer based on
ammonium Sulphate. Besides a bio-chemical plant separately undertakes the
treatment of effluents.
2. Sinter Plant
STEEL
PRODUCTS
BY PRODUCTS
Angles Nut Coke Granulated Slag
Billets Coke Dust Lime Fines
Channels Coal Tar Ammonium Sulphate
Beams Anthracene oil
Squares HP Naphthalene
Flats Benzene
Rounds Toulene
RE-bars Zylene
Wire Rods Wash Oil
Iron ore fines, coke breeze, limestone and dolomite along with recycled
metallurgical wastes are converted into agglomerated mass at the Sinter Plant,
which forms 80 % of iron bearing charge in the Blast Furnace. The Sinter Plant
comprises of two sinter machines each having 312 square meters of grate area with a
total production capacity of 5.256 million tones per annum.
3. Blast Furnace
VSP has two Blast Furnaces with an effective volume of 3200cu.m. each ,
which are the largest in the country. Blast Furnace is charged with coke, iron ore,
sinter and fluxes such as lime stone from the top. Hot air at very high pressure is
blown from the bottom. The iron ore and sinter charged from the top gets reduced
to hot metal by the time it reaches the hearth. Metal is tapped from the hearth of the
furnace at regular intervals. Its novel circular cast house with four tap holes ensures
continuous tapping of hot metal. Each furnace produces about 5000 tones of molten
iron per day. The annual
Production capacity of these Blast Furnaces is 3.4 million tones of liquid iron. The
furnace is operating at about 125% of their capacity at present.
In addition to hot metal the gang material present in the iron ore and sinter
also comes out in the form of molten slag while tapping. This molten slag is
converted to granulated slag in the slag processing plant. Granulated BF slag is used
for cement making and various other construction purposes. The hot metal
produced is carried to steel melt shop for further processing. The surplus hot metal
is taken to Pig Casting machines and cast into pig iron. The pig iron is sold to
foundries and exported to various other countries. Some pig iron is consumed in
steel melt shop also as coolant.
4. Steel Melt Shop & Continuous Casting:
Three Top blown converters, each of 133 cum. Volume, produce a total of 2.7
million tones of liquid steel per annum. The hot metal from blast furnace is charged
into the converters from the top. Along with hot metal steel scrap (coolant), lime
(flux) and other additives for making special steel if required are also added.
Oxygen is blown from the top for about 50min by which time the hot metal gets
converted to steel. The liquid steel thus produced is casted in six-4 strand bloom
casters. A special feature in energy conservation is the collection of Converter gas to
be used as a fuel in the plant. The entire molten steel cast at the radial type
continuous casting machines result in significant energy conservation and better
quality steel. 100% Continuous casting on such a large scale has been conceived for
the first time in India.
5. Rolling Mills:
The cast blooms from continuous casting department are heated and rolled in
the three high speed and fully automated rolling mills namely Light & Medium
Merchant Mill, Wire Rod Mill and Medium Merchant & Structural Mill, to produce
various long products like Reinforcement bars, rounds, squares, flats, angles,
channels, billets, wire rods etc. Rolling Mills adopt stelmor cooling process to get
high quality products. VSP
enjoys very high reputation for the quality of their products both in the domestic
and export markets.
6. Thermal power plant and blower house:
VSP has a separate thermal power plant to meet substantial part of its power
requirement. The power plant also includes blower house for blowing hot air to the
blast furnaces. The power plant utilizes surplus coke oven and blast furnace gasses
for heating boilers. To meet the balance requirement of the boilers thermal coal is
procured. Thus the power plant helps in reducing cost of production of VSP.
Board of Directors:
BOARD OF DIRECTORS
CHAIRMAN-CUM-MANAGING
DIRECTOR
Sri.P.K. Bishnoi
DIRECTOR (PERSONNEL) Sri.Y.Manohar
DIRECTOR (COMMERCIAL) SriC.G.Patil
DIRECTOR (OPERATIONAL) Sri.P.K.Misra
DIRECTOR (FINANCE) Sri.K.S.Shankar
CVO Sri.S.Srinivasan
GOVT. DIRECTORS Sri.Aran Kumar Rath
G.Elias
AGM (CA) & COMPANY
SECRETARY
Sri.P. Mohan Rao
OFFICE
Administrative Building
Visakhapatnam Steel Plant,
Visakhapatnam-530 031.
Organization Chart:
Chairman-cum-Managing Director
Department chart- Finance (Budget):
Co. Sec. CVOD(O)D(C)D(P)D(F)
GM (F&A) DGM (I/A)
ED(P&IR) AGM(Law)DGM(M&HS)
GM (TA)
GM (Per)
GM (IR)
DGM(Admn)
ED (MM)
GM(Sto.).)
GM(MM)
GM (Mktg)
ED(Proj) ED(W) GM(Mines)GM(IT)
GM(QATD) GM(Services) GM(Maint) GM(Steel) GM(IRM)
GM(Constn)GM(D&E)
(CorporateA/cs, Budget & cost)
(Budget and costing)
(Budget)
Major departments of VSP:
To carry out the major functions of Visakhapatnam steel plant following core
departments exist:
1) Marketing Department
2) Works Department
3) Materials Management Department
4) Finance and Accounts Department
5) Personal and Administration Department
6) Corporate strategic Management Department
7) Management services Department
8) Mines Department
Recent Trends:
ED(F&A)
DGM(F&A)
DCM(F&A)
DM(F&A)
JM(F&A)
VSP Becomes Minirathna Company:
Considering the Turn Around and the excellent physical and financial
performance in the last 4 years VSP has been awarded MINIRATHNA STATUS by
the GOI in the month of May 2006. This confers more DOP and AUTONOMY to
VSP Management in financial and policy matters. The BOD also will be
strengthened with more independent non-executive DIRECTORS.
VSP Expanding Its Capacity:
VSP has undertaken expansion of capacity from 3-million tone liquid steel to
6.3 million tone liquid steel at a cost of Rs.8692cr. Their entire expansion work is to
be completed within a period of 4 years from October 2006. The honorable Prime
Minister Of India has inaugurated the expansion project by laying foundation stone
on 20th May 2006. VSP will be producing special grade long products required for
automobile, railways and other special applications in the new mills which are going
to be installed. Further VSP will be producing Seamless tubes of 3 lakh tones which
are presently imported. The new products are value added products and likely to
contribute substantial profits to VSP in the years to come.
Joint Ventures:
VSP does not own any mines for extracting much required iron ore and low
ash metallurgical coal for its production. VSP depends on M/S.NATIONAL
MINERAL DEVELOPMENT CORPORATION for meeting its iron ore
requirements and import sources (Australia) for low ash metallurgical coal. These
sources have been increasing their prices disproportionately in recent times due to
very high demand because of capacity additions taking place in large scale. In order
to have raw material security and control over prices VSP has embarked upon
acquiring interest in coal mines and iron ore mines through joint ventures in India
and abroad. VSP has entered into MOU with M/S.NMDC for putting up sponge iron
plant in the State of Chattisgarh with an intention to own iron ore mines which are
available in plenty in this state. A number of teams have been visiting Australia,
USA and Canada scouting for joint venture interest in owning iron ore mines.
VSP Has Been Allotted Mining Rights In Mahal Coal Block:
GOI has allotted mining rites in Mahal Coal Block for VSP after continuous
persuasion relentless efforts. VSP has started exploratory work in Mahal coal block
to ascertain the feasibility and project cost for opening up a mining unit in this
place.
VSP Exploring Possibilities of Opening Up Foreign Branches:
Keeping in view the expansion of capacity and volatility of steel demand, VSP
is exploring possibility of opening up over sea branches in near by countries to
strengthen its presence in these places so that there will not be any difficulties in
marketing of its products in future.
Implementation of Addition Modification and Replacement:
In order to improve productivity, constantly upgrade the technology and
reduce the cost of production to become one of the worlds lowest cost producers VSP
is implementing number of AMR schemes on a continuous basis since last 5 years.
VSP is spending substantial amount of funds in the AMR schemes which are
yielding incremental benefits year after year.
Utilization of Renewable energy:
In order to meet its ever growing power requirement, to conserve the natural
resources and reduce the cost of energy VSP has taken up implementation of power
generation through renewable energy sources like wind, sunlight etc. A policy in this
regard has been unveiled on 29th May 2006 by the CMD of VSP.
Conservation of Water:
VSP has taken up a number of projects for conservation of precious water.
This is carried out in three methods.
Reduce the consumption of water in the process.
Treat the drainage and sewerage water and reuse where ever possible.
To construct check dams for diverting rainwater to underground.
Pollution Control:
In order to maintain a clean and green environment VSP is implementing a number
of pollution control projects inside the plant. Agro forestry program is also taken up
to maintain greenery and also to generate income from farm produce.
Production Plan 2008-2009: 000(Tonnes)
PRODUCT 2008-2009
Oven/Day(Nos) 275
Hot Metal 4030
Liquid Steel 3520
Pig Iron for Sale 393
Blooms for Sale/Stocks 83
Billets foredr Sale/Stock 60
Billets- Procured (-)72
Steel end Cuttings 17
Bar Products 900
Wire Rod Products 1075
MMSM Products 1085
Saleable Steel 3220
Demand - Availability Projection:
Demand- Availability of iron and steel in the country is projected by Ministry of
Steel annually.
Gaps in Availability are met mostly through imports.
Interface with consumers by way of Steel Consumer Council exists, which is
conducted on regular basis.
Interface helps in redressing availability problems, complaints related to quality.
Pricing & Distribution:
Price regulation of iron & steel was abolished on 16.1.1992. ~ Distribution
controls on iron & steel removed except 5 priority sectors, viz. Defence,
Railways, Small Scale Industries Corporations, Exporters of Engineering Goods
and I North Eastern region.
Allocation to priority sectors is made by Ministry of Steel.
Government has no control over prices of Iron & Steel.
Open market prices are generally on rise.
Price increases of late have taken place mostly in long products than flat
products.
Location: The plant is located on the coast of Bay of Bengal, 16Kms to the southwest
of the Vishakapatnam Port. It lies between the northern boundary of the national
highway No.5 from Chennai to Kolkata, and 7Kms to the southwest of Howrah Chennai
Railway line. The decision of Govt. of India to setup an integrated steel plant with an
annual capacity of 3 MT of liquid steel and 2.656 MT of saleable steel at vishakapatnam
in AP is yet another step towards the country’s steel production redefining steel imports
and removing the regional imbalances in the development.
CHAPTER – 4
BUDGET AND BUDGETARY
CONTROL
BUDGET:
Introduction
Definition
Need of budget
Essentials of budget
Advantages of budget
Limitation of budget
Types of budget
BUDGETARY CONTROL:
Nature of budgetary control
Objectives of budgetary control
Advantages of budgetary control
Limitation of budgetary control
Characteristics of good budgeting
Requisites for successful budgetary control system
Organization chart for budgetary control
Key factor
Difference between budget and budgetary control
BUDGET
Introduction:
Planning is the basic managerial function. It helps in determining the course of
action to be followed for achieving organizational goals. It is decision in advance,
what to do, how to do and who will do a particular task? Plans are framed to
achieve better results. Control is the process of checking whether the plans are being
adhered to or not, keeping a record of progress, comparing it with the plans, and
then taking corrective measures for future if there is any deviation. Every business
enterprise needs the use to control techniques for surveying in the highly
competitive and changing economic world. There are various control devices in use.
Budgets are the most important tool of profit planning and control. They also act as
an instrument of co-ordination.
Definition:
Budget is defined as a kind of future accounting in which problems of future are met
on the paper before transactions actually occur.
According to CIMA, Official Terminology, “A Budget is a financial and/or
quantitative statement prepared prior to a defined period of time, of the policy to be
pursed during that period for the purpose of attaining a give objective”.
According to Crown and Howard, “A budget is a predetermined statement of
management policy during a given period, which provided a standard for
comparison with the results actually achieved.”
Need of budget:
To forecast and to plan for the future to avoid losses and maximize profits i.e. to
help in planning.
To bring about coordination’s between different function of an enterprise i.e., to
help in co-ordination.
To control actual actions by ensuring that actual are in tune with target i.e., to
help in controlling.
Essentials of budget:
Budget is prepared on future course of action and is prepare in advance.
Budget is based on objectives to be achieved during a definite future period.
Budget is a tool for developing the co-operation, co-ordination and control
among employees.
Advantages of budget:
It formulates basic policies necessary to achieve organizational objectives.
It forces all levels of management to participate in the process of setting and
Fulfillment of targets.
It creates the feeling of co-operation and understanding between different
Departments of the business
It ensure optimum utilization of resources with a view to maximize returns.
It highlights upon the in efficiency in the business and thus helps the
Management to take remedial actions.
Types of budget:
The Budgets are usually classified according to their nature. The following are the
types of budgets, which are commonly used.
a) Classification According to Time:
1. Long-term budgets
2. Short-term budgets
3. Current budget
b) Classification on the basis of function:
1. Operation Budgets
2. Financial Budgets
3. Master Budgets
c) Classification on the basis of Flexibility:
1. Fixed budget
2. Flexible budget
d) Classification on the basis of nature of business:
1. Capital Expenditure
2. Revenue Expenditure
A) Classification According to Time: -
1) Long Term Budgets — The Budgets are prepared to depict long term planning of
the business. The period of long term budgets various between five to ten years. The
long term planning is done by the top-level management it is not generally known to
lower levels of management's. Long-term time budgets are prepared for some
sectors of the concern such as capital expenditure research and development. Long
term finances etc these budgets are useful for those industries where gestation
period is long i.e. machinery, electricity, and organization.
2) Short Term Budgets -These budgets are generally for one or five Years and are in
the form of monetary terms. The consumer’s goods industries like sugar, cotton,
textiles, etc. use short-term budget.
3) Current Budget — The Period of current budget is generally of one to twelve
months. The budgets relate to the current activities of the business. According to
I.C.W.A. London. "Current budget is a budget which is established for use over a
short period of time and is related to current conditions.
B) Classification on the basis of function: -
1. Operating Budgets: These budgets relate to the different activities of operations of
a firm. The number of such budget upon the size and nature of business. The
commonly used operating budgets are;
A. Sales Budget
B. Production Budget
C. Production cost Budget
D. Purchase Budget
E. Raw Material Budget
F. Labour Budget
(2) Financial Budget : - Financial Budget are concerned with cash receipts and
disbursements, working capital. Expenditure, financial position and result of
business operations. The commonly used financial budgets are:
a. Cash Budget
b. Working Capital Budget
c. Capital Expenditure Budget
d. Income Statement Budget
e. Statement of Retained Earnings Budget
f. Budget Balance sheet or position statement Budget
(3) Master Budget: - Various functional budgets are integrated into master budget.
This budget is prepared by the ultimate integration of separate function budgets.
According to I.C.W.A. London. "The master budget is the summary budget in
corpora-ting its functional budgets". Master budget is prepared by the budget
officers remained with the top-level management. This budget is used to co-ordinate
the activities of various departments and also to help as a control device.
(c) Classification on the basis of Flexibility:-
(1) Fixed budget: - The fixed budgets are prepared for a given level of activity, the
budget is prepared before the beginning of the financial year, if the financial year
starts in January then the budget will be prepared a month or two earlier, i.e.
November or December. The charge in expenditure arising out of the anticipated
changes will not be adjusted in the budget. There is a difference of about twelve
months in the budgeted and a actual figures. According to I.C.W.A. London, "Fixed
budget is a which is designed to remain unchanged irrespective of the level of
activity actually attained". Fixed budgets are suitable under static conditions. If
sales, expenses and costs can be forecasted with greater accuracy then this budget
can be advantageously used.
(2) Flexible Budget: - A flexible budget consists of a series of budgets for
different level of activity. It therefore, various with the level of activity attained. A
flexible budget is prepared after taking into consideration unforeseen changes in the
conditions of the Business. A flexible budget is defined as a budget, which by
recognizing the difference between fixed, semi fixed and variable cost is designed to
change in relation to the level of activity.
(d)Classification of on the basis of nature of business:-
(1)Capital expenditure budget:- Budget which are related to the creation of
manufacturing facilities are knows as capital expenditure budgets
(2)Revenue expenditure budget:- Budget which are prepared for routine activities or
operations are called revenue budget
BUDGETARY CONTROL
Introduction:-
Budget is formal plan of future course of action. When the budget is use to
evaluate the actual performance it is known as budgetary control.
“Budgetary control is the planning in advance of various functions of business so
that the business as whole can be controlled.”
Objectives of budgetary of control:
To control departmental activities.
To help in systematic planning of protection and formulation of policies.
To control direct and indirect expenses by limiting the chances of wastages.
To control income and expenditure of production functions.
To compare the pre-determined targets with the amount of actual expenses.
Advantages of budgetary control:
The budgetary control system has got some advantages of its own. Some of them
are:
It acts as yardstick with which actual are compared and necessary
corrections can be made so that it promotes efficiency and there by helps the
management for taking future courses of action.
Co-ordination is established among the different departments and
individuals through planning policy and control.
Limiting factors can be utilized properly by the application of this system.
Otherwise less important factors can pay the most significant role without,
however, utilizing the scarce sectors, which should have been used in view of
their importance. As a result, there may be loss instead of profit.
It provides saleable aids to the management by several managerial
functions and thus helps the management to adopt the future courses of action in
a scientific way.
The top management can exercise control over the various activities of the
business since each and every aspect of the business is reviewed.
Limitation of budgetary control:
The budgetary control systems are however not free from short coming which
are as follows;
This system proves useless in that firm where policies, processes, techniques, etc.,
are frequently changing since it does not take into account such changes.
It is very costly in case of small firm and serves no purpose in the event of
abnormal situations, such as strikes, lockouts etc.
There are many factors over which the management has no control but the
budgetary control depends on them. In that case, if its is prepared, it may be
inaccurate and fails to serve the purpose for which it is meant.
Characteristics of good budgeting:
A good Budgeting system should involve persons at different levels while
preparing the budgets. The subordinates should not feel any imposition of them.
There should be a proper fixation of authority and responsibility. The delegation
of authority should be done in a proper way.
The targets of the budgets should be realistic; if the targets are difficult to be
achieved then they will not ensure the persons concerned.
A good system of accounting is also essential to move the budgetary successful.
The budgeting system should have a whole-hearted support of the top
management.
Requisites for successful budgetary control system:
1. Clarifying Objectives:
The budgets are used to realize objectives of the business. The objectives must be
clearly spelt out so that budgets are properly prepared. In the absence of clear
goals, the budgets will also be unrealistic.
2. Proper Delegation of Authority and Responsibility:
Budget preparation and control is done at every level of management. Even
though budgets are finalized at top level but involvement of persons from lower,
levels of management are essential for their success. This necessitates proper
delegation of authority and responsibility.
3. Proper Communication System :
An effective system of communication is required for a successful budgetary
control. The flow of information regarding budgets should be quick so that these
are implemented. The upward communication will help in knowing the difficulties
in implementation of budgets.
4. Budget Education :
The employees should be properly educated about the benefits at budgetary
system. They should be educated about their role in the success of this system. The
employees may not take budgetary control only as a control device but it should be
used as a tool to improve their efficiency.
5. Participation of all Employees :-
Budgeting is done by every segment of the business. It will also require the active
participation and involvement of all employees. In practice the budgets are to be
executed at lower levels of Management. Those for whom the budgets are framed
should be actively associated with their preparation and execution. The employees,
on the basis of their past experience, may give more practical and useful
suggestions.
6. Flexibility :-
Flexibility in budgets is required to make them suitable under changed
circumstances – Budgets are prepared for the future, which is always uncertain.
Even though budgets are prepared by considering the future possibilities but still
some occurrences late on may necessitate more appropriate and realistic.
7. Motivation :
Budgets are to be implemented by human beings. Their successful
implementation will depend upon the interest shown be improve their working
so that budgeting is successful.
Budgets are to be implemented by human beings. Their successful
implementation will depend upon the interest shown be improve their working
so that budgeting is successful.
Organization chart for budgetary control:
Key factor:
The factor that sets a limit to the total activity is known as key factor which
influence budgets. It is also called limiting factor or governing factor principal
budget factor. For example, there may be a high demand for a particular product
but due to non-availability of the supply of raw materials, production may have to
be destructed and this factor is known as key factor. It is highly significant during
the budgeting for production or sales. Sometimes, there may be several key factors,
such as, labour capital, sales, etc. However the following are examples of key factor.
1. MATERIALS : I
ii)
Availability of supply
Restriction imposed by licenses,
quotas etc.,
2. LABOUR : I)
ii)
General storage
Shortage of skilled labor
3. SALES : I)
ii)
Consumer demand
Inadequate advertising and
Managing Director
Chief Executive
Budget Committee
Budget Officers
Sales Manager
Production Manager
Purchasing Manager
Personal Manager
Development Manager Accountant
iii)
warehousing facilities
Dearth of experience or
successful salesman;
4. PLANT : I)
ii)
iii)
iv)
Limited capacity due to lack of
capital;
Limited capacity due to lack of
space
In sufficient capacity due to
shortage of supply;
Bottleneck incretion key
processes;
5. MANAGEMENT : I)
ii)
Shortage of efficient executive
ness;
Insufficient capital
The key factor does not create any permanent problem in the business
operations since it is possible to solve any problem with proper management action
in figure.
Difference between budget and budgetary control:
The budget is an act of planning whereas budgetary control is an act of
controlling.
The budget concerns itself with the future. Budgetary control, is however,
concerned with the present activities although it is prepared on the basis of data
collected from the past budget. But the activities that the budgetary control
involves are not limited to that budget only. It is also related to the questions as
to how far the budget can effectively
Utilized in future
The budget fixes the target and budgetary control helps to arrive at that target.
The budget fixes the target and budgetary control to determine the variation
between the budget and the actual performance and analyze the reasons for the
variations. But this is not performed by budgets of course; they are extremely
useful at the time of preparing a revised budget.
The actual performance is measured not by the budget by budgetary control.
CHAPTER – 5
BUDGET AND BUDGETARY
CONTROL IN VSP
BUDGETARY PROCESS IN VIASAKHAPATNAM STEEL PLANT:
Every organization prepares budgets so that it can plan for its future and meet
any unforeseen contingencies and Visakhapatnam. Steel plant is no exception to this
rule. In many organizations, the budgetary process is taken up by any senior
executive of finance department. Since Visakhapatnam Steel Plant is a large
organization it has a separate budget section in the finance department, which takes
care of the budgetary process.
Objectives of preparing budget in Visakhapatnam Steel Plant:
The following are the objectives at preparing Budget in Visakhapatnam Steel
Plant:
To generate profits and formulate the policies to achieve the goal.
To perform integration and co-ordination among the various departments like
construction department, works department, raw material handling department,
finance department, etc.
To motivate the closely related departments and the persons for attaining the
desired goal.
To act as a guide to management decision so that management can know how
successfully the objectives being attained.
STEPS IN BUDGETARY CONTROL IN VISAKHAPATNAM STEEL
PLANT:
Before a well establishment budget comes into being, a number of things
have been done so that there is a strong foundation for budgetary some of them
are:
1. Preparation of organization chart :-
In Visakhapatnam Steel Plant, the C.M.D is the head of the organization.
The head of the departments (usually G.M. or D.G.M.) of each department at
Visakhapatnam Steel Plant prepare a budget for their department and put up to
C.M.D. Budget Section of Finance Department will consolidate the department
projection and prepare over all company budget which indicate the Company
projected Financial. The budgets after being approved by the C.M.D. are placed
before the Board of directors (which includes C.M.D.). It is the board of
directors, who approves the budget for Budget Period (usually coming financial
year).
Board of directors
Chairman-cum-managing Director
Budget Committee
(Comprising heads of department of various departments and senior officials of
finance department)
Organization chart for budgetary control in Visakhapatnam Steel Plant.
Establishing budget Centers :
A budget center is a section of the organization of an undertaking and is defined
as such from the point of view at budgetary control. Visakhapatnam Steel Plant
has a number of well is on the basis at collection of closely related works into one
budget center. There are as many as eighteen budget centers in Visakhapatnam
Steel Plant. The different budget centers and their functions are described below
briefly.
a) Corporate planning Department:
This department is headed by the General Manger (Corporate Planning) and is
responsible for drawing up the policy to be followed by the company.
b) Medical Department:
Headed by the chief medical officer, this department is responsible for
maintaining the health of the employees of the company and their department.
c) Marketing Department:
Headed by General Manager (Marketing) this department is responsible for
procuring orders for the company and selling the goods produced by
Visakhapatnam Steel Plant
d) Works Department :
Headed by Director (Operation), this is the life and flood of the company as this
department is responsible for manufacturing the various items.
e) Additional G.M. (Maintenance) Department :
Heads by additional General Manager, this department is entrusted with the
responsibility of maintaining the various machines and keeping the break down
to a minimum level.
f) Systems Department :
This department is responsible for maintaining the various computer facilities in
the company and improving the efficiency of production.
h) Ancillary Development Department:
Headed by General Manager (Ancillary Development) this department is
responsible for over seeing the development at ancillary industries in and around
the plant.
i) Town and administration Department:
Headed by the Chief Town Administrator, this department is responsible for
maintaining the Steel Plant Township and meeting its requirements.
j) Personnel department:
Headed by Director (Personnel), this department is responsible for maintaining
employee records.
k) Commercial Department:
Headed by Director (Commercial), this department is responsible for material
management in the company.
l) Project Division :
Headed by General Manager (Construction) this division is responsible for the
construction activity in the plant.
m) Human Resource Development:
This department is responsible for developing the skills of the employees by conducting various personality development programme.
n) Training Department:
This department is responsible for providing on the job training and off the job training for fresh recruits.
o) Finance Department:
Headed by Director (Finance) this department is responsible for per forming the
various financial activities at the company. It also prepares the pay rolls.
2. Budget Manual :
A budget manual is defined as a document which sets out the responsibilities of
the persons engaged in the routine of and the forms and records required for
budgetary control Visakhapatnam Steel Plant also has a well laid out budget
manual which enlists the responsibilities of different managers and Headed of
Department of various budget centers.
3. Budget Committee :
A budget committee is a group of executives at various major functions eg.
Managing director, Works Manager, Production Manager, Sales Manager,
Accountant etc., in Visakhapatnam Steel Plant, the budget committee consists of
the Board at Directors, Chairman-cum-Managing Director of Visakhapatnam
Steel Plant acts as the chairman of the committee.
4. Budget Period :
It refers to the period for which the budget is prepared and employed. There is
no fixed time for budget period. The length of the period depends on.
The nature of the production.
The native of the demand & supply of the product.
Extent of control.
5. Key Factor :
The factor, which sets a limit to the total activity, is known as the key factor due
to difficult and the high costs involved in the procurement of raw materials and
also due to less demand for the product.
Types Of Budgets Prepared By Visakhapatnam Steel Plant:
Visakhapatnam Steel Plant prepares two kindly of budgets
Capital Budget
Operation Budget
A) Capital Budget :
Capital Budget deals with the new schemes to be implemented during the
current year and also with the completion of schemes already implemented. It is
prepared and approved by Visakhapatnam Steel Plant and sent to ministry of
Finance to incorporate the projected capital expenditure in the over all Planned
expenditure of GOI.
The capital Budget consists of :
1. Continuing Schemes be divided into :
Land & Site Development
Civil Works
Structural Steel Works
Plant and Equipment
Repayment of Loans and credit
Additional/Modification and replacement schemes.
Research and development schemes.
2. New Schemes can be Divided into:
Expansion to 6.3MT Stage
Land acquisition for mines
COB-4
B) Operations Budgets :
This is the main budget prepared by Visakhapatnam Steel Plant. This budget
deals with the cash from operations of various items produced by the steel plant.
Operations budget is a short term budget and is prepared for a period of one
year. It is fixed budget there is periodic review of the budget to check whether
the actual figures match the budgeted figures. It may be as follows:
Step – I The Chairman-cum-Managing Director at Visakhapatnam Steel
Plant in consultation with the board at Directors decides the
production schedule for a particular year.
Step – II The production schedule as approved by to board of Directors is
then circulated to all departments.
Step – III The need of each of the 19 budget centers then presents the budget
for his center to CMD’s approval.
Step – IV After discussions with the head of each center with some
modification if necessary is approved.
Step – V After receiving all the budgets, the board of Directors formulates
the master budget for the particular year.
Step –VI The master budget is then circulated to all the department.
Step – VII The budget at each budget center and the master budget are
reviewed frequently, some times even daily, using a computerized
monitoring system in case Administrative Expenditure.
PROCESS FOR PREPRATION OF MONTHLY WORKING
RESULTS IN RINL(VSP):
Introduction:
Monthly working result (MWR) is management information Report (MIS) report
compiled by the budget section of the F&A Deptt.. Every month based on
information obtained from Production deptt, Mktg Deptt,cash section, raw
materials Account, General account, work accounts operation bills, pay section etc.
The compilation is done at gross level. It is rough estimation of monthly profit based
on monthly production and sales. These estimates are purely on volume basis and
not based on accounting transaction data.
Details of Data Collected: The following are details of data collected from
various Deptt/Section:
S.No Details of Data Deptt/Section1. Daily Flash Statement from by Product
Section-MktgBy Product sale Sections
2. Important Raw Materials Stock at Port T&S3. Interest on RM Credit Rate Variance Material A/cs Section4. Voucher data from operation bills accounts Operation bills A/cs5. Voucher data from general A/cs General A/cs6. Voucher data from works A/cs Works A/cs7. Voucher data from stores A/cs Stores A/cs8. Stores and Spares inventory from Stores A/cs Stores A/cs9. NSR from by products Section Sales(finance)10. Raw material Receipts Raw Material Deptt11. Power details from DNW DNW12. Production and Closing Balance of main
product PPM
13. Monthly Report from PPM PPM14. Region wise, Branch wise sales a statement Mktg15. Export sales and shipment plan Exports Sales Section16. Cost of production for the month Costing Section17. Interest Details From cash Section Cash Section18. Raw Material Prices (Imported) for the month T&S19. Dispatch money earned T&S20. Raw Material Prices Variance for the Month MM Deptt21. Fuel Rate for the Month MM Deptt22. NSR for the month and up to the month Branch Sales A/cs23. Wage Analysis Pay Section24. By Product Prices Mktg Deptt
The General Format of MWR:
S.No Particulars Previous Month Actuals
Current Month Up to Month
Sus. Plan Actual Sus. Plan
Actual
A Income 1 Gross Sales 2 Net Sales 3. Export Benefits 4 Sale of Power 5 Interest of Term Deposits 6. Miscellaneous income
Total (1 to 6)
B Expenditure 7 Stock accretion (-) decretion 8 Raw Material Consumptions 9 Stores & Consumables 10 Employees Remn. Benefits 11 Power, Fuel & Water 12 Repairs & Maintenance 13 Other Expenses
Total (7 to 12)C Gross Margin D Interest charges E Cash Profit F Depreciation & DRE written
off G Net Profit ( Before Tax) (E-
F)H Provision for income Tax
incl. FBT, Deferred Tax Provision for income Tax Provision for FBT Provision for Deferred Tax Liability
I Net Profit ( after tax) for the year (G-H)
J Addl. Income Tax Liability of the year 2003-04 & 2004-05
K Net Profit ( after tax) ( i-j)
Computation of Items in MWR:
(i) Gross Sales: This item is derived directly from the data fed from monthly
NSR report given by the Branch sales A/cs.
(ii) Net Sales: This item also derived from the Data fed from Monthly NSR
report given by the branch Sales A/cs
(iii) Export Benefits; This item is derived based on the Export benefits per ton
and Export Quantities given by Export Sales Section. (Export Benefit =
Export benefit per ton X Qty Exported)
(iv) Interest on Term Deposit: This item is derived directly from data given by
the cash Section.
(v) Interest Others: This item is estimated based on previous year actuals,
However current year actuals to be compared and necessary adjustments to
be incorporated.
(vi) Miscellaneous Income: This item is estimated based on previous year.
However current year actuals to be compared and necessary adjustments to
be incorporated.
(vii) Stock accretion /depletion; Excess production over sales Qty is accretion. If it
is other wise it is stock depletion. Accretion /depletion quantities are valued
at cost or NSR which ever is low.
(viii) Raw Material Consumption: Consumption quantites of various Raw material
are valued at weighted average prices of the same consumption quatities
includes handling loss, Transit losses, Moister loss etc. Consumption quatities
are obtained from PPM reports whereas raw material prices are as per MM
Deptt. Report.
(ix) Stores & Consumables; This item is derived based on stores JV details
obtained from stores accounts. And also from General accounts voucher
details.
(x) Empoyess Remn&Benefits: This item is derived based on Salary JV
generated by pay section and some items under this grouping are based on
estimates based on previous year actuals.
(xi) Power,Fuel &Water: This item is derived based on consumption quantites
given by DNW and PPM and pricing information given by MM deptt.
(xii) Repairs &Maintenance: This item is based on voucher data obtained from
General A/cs, Operation Bills, Works bills, Stores A/cs etc. Some are
estimated at previous year level.
(xiii) Other Expenses: This item is based on estimated contractual rates for scrap
processing quantities and some are on the basis of estimations at previous
year actual level.
(xiv) Adjustments: All the above items are subjective to revision or
adjustments based on realities and likely provision that may arise.
FINANCIAL TARGTS(MOU) Vs. ACTUALS
YearGross Sales Net sales Gross Margin Interest Cash Profit
Export Benefits 0.00 72.49 74.69 55.29Miscellaneous Income
174.33 50.84 4.00 54.29
Sale of Power 0.00 56.46 81.04 42.70Total Income 2750.51 3048.88 3061.80 3395.10ExpenditureRaw Material 1375.02 1443.68 1532.18 1602.10Stores, Spares & Consummates
Export Benefits 47.02 78.17 97.54 78.90Miscellaneous Income
25.00 40.98 30.00 53.93
Sale of Power 56.25 26.43 9.13 9.02Total Income 3772.75 4085.20 4079.73 5330.87ExpenditureRaw Material 1926.71 1805.65 1985.75 2050.43Stores, Spares 300.00 322.82 328.00 347.73Employees Remuneration
Export Benefits 85.07 11.30 0.00 24.43Miscellaneous Income
99.02 266.29 217.55 423.01
Sale of Power 10.46 9.10 0.00 8.44Total Income 4770.34 7584.17 7874.75 7388.30ExpenditureRaw Material 2043.70 3019.64 3884.78 3584.62Stores, Spares &Consummates
Export Benefits 19.50 12.179 14.48 14.48Miscellaneous Income
558.52 609.91 35.00 35.00
Sale of Power 21.04 19.44 0 0Total Income 7918.32 8259.139 8909.99 9080.23ExpenditureRaw Material 3998.34 3889.04 4116.33 4280.82Stores, Spares &Consummates
Export Benefits 0.00 72.49 72.49 72.49Miscellaneous Income
174.33 50.84 123.49 123.49
Sale of Power 0.00 56.46 56.46 56.46Total Income 2750.51 3048.88 298.37 298.37ExpenditureRaw Material 1375.02 1443.68 68.66 68.66Stores, Spares & Consummates
265.26 278.69 13.43 13.43
Employees Remuneration
302.83 407.65 104.82 104.82
Repair & Maintenance
223.99 192.03 31.96 31.96
Power, Fuel & Water
66.00 60.29 5.71 5.71
Other Expenses 153.23 163.13 9.90 9.90Total Expenditure
Sale of Power 81.04 42.70 38.34 38.34Total Income 3061.80 3395.10 333.30 333.30ExpenditureRaw Material 1532.18 1602.10 69.92 69.92Stores, Spares & Consummates
Sale of Power 56.25 26.43 29.82 29.82Total Income 3772.75 4085.20 312.45 312.45ExpenditureRaw Material 1926.71 1805.65 121.06 121.06Stores, Spares & Consummates
Export Benefits 97.54 78.90 18.64 18.64Miscellaneous Income
30.00 53.93 23.93 23.93
Sale of Power 9.13 9.02 0.11 0.11Total Income 4079.73 5330.87 1251.14 1251.14 ExpenditureRaw Material 1985.75 2050.43 64.68 64.68Stores, Spares & Consummates
328.00 347.73 19.73 19.73
Employees Remuneration
428.78 481.15 52.37 52.37
Repair & Maintenance
93.00 84.48 8.52 8.52
Power, Fuel & Water
195.17 220.04 24.87 24.87
Other Expenses 198.21 209.05 10.84 10.84Total Expenditure
Export Benefits 85.07 11.30 73.77 73.77Miscellaneous Income
99.02 266.29 167.27 167.27
Sale of Power 10.46 9.10 -1.36 1.36Total Income 4770.34 7584.17 2813.83 2813.83ExpenditureRaw Material 2043.70 3019.64 975.94 975.94Stores, Spares & Consummates
353.06 310.40 42.66 42.66
Employees Remuneration
465.67 480.58 14.91 14.91
Repair & Maintenance
99.00 89.33 9.67 9.67
Power, Fuel & Water
311.56 224.22 87.34 87.34
Other Expenses 192.34 189.00 3.34 3.34Total Expenditure
Sale of Power 0.00 8.44 8.44 8.44Total Income 7874.75 7388.30 486.45 486.45ExpenditureRaw Material 3884.78 3584.62 300.16 300.16Stores, Spares & Consummates
Sale of Power 21.04 19.44 -1.6 1.6Total Income 7918.32 8259.139 340.819 340.819ExpenditureRaw Material 3998.34 3889.04 109.3 109.3Stores, Spares & Consummates
460.06 357.27 102.79 102.79
Employees Remuneration
633.55 746.940 -113.39 113.39
Repair & Maintenance
137 109.70 27.3 27.3
Power, Fuel & Water
322.68 257.650 65.03 65.03
Other Expenses 266.07 243.580 22.49 22.49Total Expenditure