CCL

Preface

Coal has been and shall remain the prime source of

commercial energy in India. It meets nearly 60 % of the total

commercial energy requirement of our country. Since coal

India contributed almost 90 % of the coal produced in the

country it can be perceived to be the synonym of Indian coal

industry. India is currently the third largest coal producing

country in the world after China & U.S.A. The Coal India

has to play a significant role in shaping the destiny of

industries of the nation at large. We currently witness

changes that are sweeping economic & social life of our

country, as well as, that of the world. Products, services

and manufacturing goods or no longer limited to any national

boundary but are getting across to countries where they

find acceptance. The liberalization and the economic

reforms initiated in our country, in real earnest, since the mid

of 1991,are attempt to bring India in to the economic main

stream of global market. Performance for the

competence, if I may say so, is the key word for any

company or corporation. Undoubtedly these moves effect

our life, as well as our thinking.

History of Coal Industry in India

The mining industry in India is next to agriculture in terms

of resource generation and employment opportunity. Coal

mining occupies a major position, contributing nearly 60 %

of commercial energy requirement of India, followed

by iron-ore, limestone and bauxite.

Coal has traditionally been a vital input to the industrial

heritage of India nearly 200 year ago, in Ranigunj coal

field, about 120 miles west of Calcutta. Coal mining

gradually spread to other parts of India as the railway network

developed. By 1900, almost 80% of the country's coal

production of 6 million tons came from Jharia and

Raniganj coalfields. The principal consumer were the

Calcutta based industries & shipping bunkers & railways

operating from Calcutta. Imported coal from the United

Kingdom and South Africa was cheaper then the west coal.

The two world wars gave boost to Indian production as

imports from distant countries became uncertain. Production

rose to 22 million tons at the end of the First World War &

after suffering during the depression, climbed to 26 million

tons at the end of Second World War. There was severe

shortage of coal during the post war period. On 16th October in

1971, to deal with the declined situation, the government of

India took over the management of all mines producing

coking coal, & again on 30th January 1973 all mines

producing thermal coal. In 1975 the government

consolidated control over the coal industry by transferring

the ownership & management of all nationalized

coalmines to the newly established coal India limited

headquarter in Kolkata Coal India presently contributes

90% of the total coal production in India. It is the

largest public sector in terms of employment to the

tune of 636,000 people producing 250 million tons of

coal

per year. It operates through eight subsidiaries.

l. ECL-1975: eastern coalfield ltd, comprising of the

eastern division of CMAL with head quarter at

Burdwan.

2. BCCL-1975: Bharat Coking Coal Ltd. Comprising of

BCCL together with Sudanidin & Moonidih mines of

NCDC with head quarter at Dhanbad.

3. CCL-1975: central coalfield ltd, comprising of the

central division of CMAL/ NCDC with head quarter at

Ranchi.

4. NCL-1986: northern coal field ltd, with its

registered office at Israeli (M.P).

5. WCL-1975: western coalfield ltd, with its

registered office at Napery (Maharastra).

6. SECL-1986: southeastern coalfields ltd,

comprising of western division of CMAL with head quarter

at Nagpur.

7. CMPDIL-1975: central mining planning & design

institute ltd, with head quarter at Ranchi.

8. MCL-1992: Mahanadi coalfields ltd, with its

registered office at Sambalpur (Orrisa).

All the shares of above-mentioned subsidiaries are held

by the President of India through the holding company

of coal industries holds all the shares of above-

mentioned subsidiaries. Coal India currently operates 449

mines & 15 washeries spread over nine states to produce &

beneficent coal for meeting the demand of the consumers

all over the country. 4 major consuming sector i.e. power,

steel, railway & the organized industrial sector units of

varying size numbering about 2000 consume cement.

18% presently consume Seventy five percent of coal. The

balance 7% is consumed by a very large no. of consumers

viz brick kilns, domestic consumer etc through coal depots

& retail shops.

ORGANISATION STRUCTURE OF CIL

Coal India1975

Dankuni Coal

Complex

0.86 bill tes5 mines

NOTE:

[ ] Information () represents the total reserves of coal in

geographical jurisdiction of subsidiary companies.

** Includes reserves of IISCO.

* * * Includes reserves of TISCO & IISCO.

MANAGEMENT STRUCTURE OF COAL INDIA LTD.

Coal India ltd is governed by a board of directors headed by a full time chairman-cum-managing director of the subsidiary companies & some other part time directors being nominated by the government of India are the members of coal India ltd board. Initially, there was no functional directors in coal India. The

NEC1975

Eastern Coalfields ltd 1975

Bharat Coking Coal

Ltd. 1973

Northarn Coalfields ltd

1975

South Eastern

Coalfields ltd1973

Central Coalfields ltd

1975

Central Coalfields ltd

1975

Central mine Planning & design

institute 1975

Western Coalfields ltd

1973

(36.63 bill tes)** 129 mines

(19.42 bill tes)*** 92 mines

(33.45 bill tes)*** 54 mines

(8.65 bill tes)*** 64 mines

(10.34 bill tes)*** 10 mines

(27. 36 bill tes)*** 73 mines

(8.65 bill tes)*** 22 mines

chairman of coal India ltd was to be assisted by the officer rank of adviser/general manager as departmental heads for dealing with corporate planning, research, development & operation etc. these officers were not to have any function so far as the subsidiary companies were concerned.But with the passage of time, considering the administrative conveniences some functional directors post has been created for the coal India ltd board. Presently, there are director (personal industrial relation), director (finance) & director (Technical) & the chairman coal India ltd as the whole time directors of the coal India Ltd board.

INTRODUCTION TO CENTRAL COAL FIELDS LIMITED.

The central coal fields limited is one of the subsidiaries of coal India limited registered under the company's act in the year 1975. the

mining & extraction of coal is entrusted to a public sector organization coal India limited. The company is divided into eight subsidiaries & central coalfields ltd is one of them.

The company presently known as CCL has a history of more than three decades. Pursuant to the industrial policy resolution of 1956, a company was formed by the name of m/s Hindustan collieries Pvt. Ltd. on 5th September 1956. shortly after then on 20 th September 1956 the name was changed to the national coal development corporation. The national coal development corporation limited was formed on 1.10.56 with 11 state railway collieries situated in Orissa & Madhya Pradesh.Like other industries & organization, the affair of CCL too is not settled by its owner (govt. of India) rather a professional team of management called board of directors appointed by the govt. of India to manage the affair of CCL. The CCL has a unique distinction as to the character of its mines & also the composition of its total work force. Some of the state collieries are very old at least one of which i.e. Garish has crossed century in the year 1961 .CCL with its head quarters in Ranchi, Bihar is the successor to the former govt. owned national coal development corporation (NCDC), CCL operates 54 mines having coal reserve of 33.45 billion tones & five coking coal washeries (one more is under construction) in the Chotanagpur region, but most of the production (88%) comes form surface mines.

The company is the major source of medium coking coal in India. The productivity of underground mines & many of the surface mines is low, but because of high priced coking coal, the company has been making marginal profits or losses. With the recent deregulation of coking coal price the profitability of the company is expected to improve.

All the mines & establishment of CCL at present situated in the district of Ranchi, Hazaribagh, Giridih, Bokaro & Palamau. CCL has fifteen areas headed by chief general /manager general manager with uniform organizational setup. The total manpower in the company as on 31.03.97 was 91,649.

MAIN OBJECTIVES OF CCL 1. (a) To carry on business of coal mining.

(b) Acquisition of coal mining.(c) To produce or otherwise engage generally in the

production, sale & disposal of coal &its by - product.

(d) Mining coal, manufacturing coke & other business.(e) Manufacturing, trading & other business.

2. Reorganization Reconstruction of coalmines taken over bygovt.3. Policy formulation & advisory function.4. To fiance replacement expenditure.5. To develop technical know- how.6.Exploration & prospecting.7.To manufacture & sell coal as a patent fuel.8.To carry on mining & quarrying coal & other by- productsincidental thereto.9.To act as traders of coal & coke &other by- product directly orthrough agents.10. To manufacture coke & other by- product of coal.11. To act as colliery &mine &proprietors coke manufacture in alltheir respective branches.

The main project objectives are to support the market-oriented reform India is undertaking in the coal sector & especially to provide financial & technical support to coal India's efforts to make it self commercially viable & self sustaining under pinning India's broad drive to achieve economic growth. The project also aims to increase domestic supplies of coal by financing investment in the most profitable 24 open cast mines of coal India for the power sector & other industries until imports & production form private investments can fill the emerging supply gap.

WORKING CAPITAL

INTRODUCTION

From the very beginning of human evolution everyone wants to make his life smooth. With the increase in complexity of life every individual is managing all thing cautiously to enjoy their rights. Only those people will be able to survive who are more perfect in managing their jobs.

A part from fixed assets, every concern needs a certain amount of money to run day-to-day business. Funds are needed to carry out business operations such as purchase of raw materiel, payment of wages & other day to run day expenses. In other words working capital refers to that part of the firm's capital that is required for financing current asset i.e.

- Cash- Debtors- Inventories etc.

There are two concepts of working capital - gross & net workingcapital.Gross working capital - this refers to firm's investment in currentassets. Current assets include assets that can be converted into cash within an accounting year, in this particular firm it includes sundry debtor, cash & bank balance & work in progress.

The gross concept focuses on:(a) Optimum investment in current assets- investment in

current assets should be just adequate, neither less nor

more, excessive investment will lead to increase in idleinvestment i.e. reduced profitability. Inadequateinvestment will increase the risk.

(b) financing of current assets - whenever an increase in business activity arises there is a need to increase the working capital fund. And to reduce the loss this has to be done quickly. Similarly, if surplus fund arise they should not be allowed to remain idle, but should be invested in short-term securities. Thus the financial manager should have the knowledge of sources of working capital funds as well investment opportunities where idle funds can be temporarily invested.

Net working capital - this refers to the difference between current assets & expected to mature within the accounting year. This concept focuses on:

a. Liquidity position of the firm- current assets should be sufficiently higher than current liabilities. A negative working capital means negative liquidity position & it may be unsafe & unsound, excessive liquidity is also bad. It may arise due to mismanagement of current assets.

b. Extent to which working capital needs can be financed by permanent sources of funds — for every firm there is a fixed amount of net working capital which is more or less permanent therefore, a portion of working capital should be financed with the permanent sources of funds & such as owner's equity, debenture, long - term debt preference capital & retained earning. Management must therefore decide the extend to which current assets should be financed by equity capital or borrowed capital, hence, both gross & net working capital concepts are equally important for the efficient management of working capital.

NEED FOR WORKING CAPITAL

Working capital is needed to run the day-to-day business activities. Every firm aims at maximizing the wealth of the shareholders. A firm should earn sufficient return from its operation for the fulfillment of its requirement, earning a steady amount of profit needs successful sales activity. The firm has to invest enough funds in current assets for successful sales activities current assets are needed because sales cannot be transformed into cash instantaneously.

DETERMINANTS OF WORKING CAPITAL

A large number of factors determine the requirements of working capital of the firm. The factors have different requirements. Therefore, all the factors should be considered to determine the amount of working capital. These factors are as follows:

* Nature & size of business* Manufacturing cycle.* Business fluctuations.* Production policy.m Firm's credit policy.* Availability of credit.m Growth & expansion activities m Profit margin

* Operating efficiency* Government policyu Sources of resources

THE TOOLS & TECHNIQUES USED FOR MANAGEMENT OF WORKING CAPITAL IN CCL

A. Material budgeting & inventory control:

Inventory management is seen as a critical component of working capital management. These constitute the most important part of C.A. of the majority of companies in India. It is very essential to have proper control & management of inventory. The basic purpose of inventory management is to ensure availability of materials in sufficient quantity as & when required & also to minimize investment in inventories. Today on an average 60% of the C.A. are inventories. An undertaking neglecting the management of inventories will be jeopardizing its long-term profitability. The reduction in excessive inventories help to develop a favorable impact on company's profitability.

While preparing material budget, the following factors are taken into consideration:

1. Production target.2. Requirement of material to achieve above targeted

production based on past consumption pattern.3. Stock of material in hand, orders due in.

4. Buffer/safety stock required.

Once the quantum is assessed, two fundamental questions normally arise thereafter to maintain steady flow of material for production purpose. These are:1. How much to buy a time?2. When to buy this quantity?

In fact, it is the main objective of inventorycontrol to answer the above questions at economic

cost.There are four fundamental factors which governsanswer to these questions:

1 .Requirements2.Quantity in stock or on order3.Lead-time4.0bsolence

One of the most effective techniques for determination of quantity is called economic order quantity (E.O.Q). The basic objective is to economize on the total cost of purchase.

There are two major costs involved in the purchase:

1 .Purchasing cost or acquisition cost. 2.Inventory carrying cost

The E.O.Q. is that quantity at which the purchasing cost and inventory carrying cost are equal.

One of the primary tasks in inventory control is to determine stock level. There are various levels of stocks. The most important stock levels are:

1.Minimum stock level: This represents the minimum quantity of material, which must be maintained in hand at all times. The

following factors are taken into consideration for fixing this level.

(a) Lead time(b) Rate of requirement-ML minimum stock level is not

required to maintain if it is for specific job.

2.Re order level: It is the point at which fresh procurement action should be initiated.

Re-ordering level = Maximum consumption xMaximum period taken to get Material once it is initiated.

3.Maximum stock level: It represents the maximum quantity of an item of material, which can be held in Stock at any time.

Maximum stock level = Re - ordering level+ Re - ordering quantity (Minimum consumption x

Minimum re- ordering period) 4. Danger level

This means a level at which normal issues of the material are stopped & issues are made only under specific instructions.

Danger level = Average consumption X Maximum re -

Order period for emergency purchases.

For monitoring & follow up action every business organization normally adopts the following techniques.

1.Perpetual stocktaking2.Periodical physical verification of inventory3.NL and PL reconciliation4.Selective inventory control technique such as:

(a) ABC analysis

The small number of high consumption value items are called A items, the medium consumption value items are B items; the large number of items whose annual consumption is very low is C items.

ABC analysis gives rise to selective inventory control in which maximum attention can be given to 'A' items, a fair amount to 'B' items and routine attention to 'C' items in order to get best return with least effort.

(b) H.M.L Analysis

Under this system, materials are classified with respect to the unit price i.e. High unit price, Medium unit price and low unit price. Objective of HML analysis is same as ABC analysis.

(c) V.E.D analysis

VED stands for Vital, Essential and Desirable. This type of classification is mostly applicable in case of spare parts.

For V items, a reasonably large quantum of stock is necessary, while for D items, no stock need to be kept.

(d) S.D.E Analysis

S.D.E stands for Scarce, Difficult to obtain and Easy to obtain items. Here, the criterion is the ease of purchase.

(e) G.O.L.F Analysis

GOLF stands for Government, Ordinary, Local and Foreign items. Here criterion is the source from which the material is obtained.

(f)F.S.N Analysis

FSN stands for fast moving, slow moving and non-moving. Here the criterion is the rate of issue from stores.

(g) S.O.S Analysis

SOS stands for Seasonal and Off-Seasonal nature of materials. Here the emphasis is on the periodicity of requirements.

(h) X.Y.Z Analysis

The X items are those whose inventory values are high, while Z items are those whose inventory value is low. This type of analysis is useful to identify items, which are extensively stocked. If such items are of high value efforts should be made to reduce them.

In conclusion, there is no simple rule to determine stock levelsor to determine the type of strategy to be employed forprocurement or stocking. As such, special treatments wouldhave to be worked out to overcome problems in respect of eachtype .

After detection of surplus non-moving and obsolete items, through above technique, actions are to be taken for its liquidation with an aim to minimize idle inventory holding as well as inventory carrying cost. Actions taken for its liquidations are:

(a) Offering to other units/area and to other subsidiarycompanies.

(b) Disposal through auction sale

Scrap is also normally disposed off through auction sale for minimizing inventory carrying cost and for earning revenue.

(B) Debtors Management in CCL

The main objective of debtor management is to keep the regular debtor's balance as minimum as possible. Sundry debtor's come in to existence when the customers are not able to pay the coal bills in full amount in time.In CCL coal sale is done either on credit or cash. Credit sale is done only to Govt. parties. It means the debtors of CCL consist only of Govt. parties. Govt. parties follow cash and credit system, which is according to the rules of CIL. According to this the payment has to be made by the customer within 24 hrs. of the presentation of the coal bills.

Sundry debtors of CCL can be divided into three parts: Power - This sector is the biggest consumer of coal. It can be divided into state electricity board which includes Bihar State Electricity board, Delhi Vidyut Nigam, Punjab State Electricity Board,U.P state electricity board etc.

Other than these are some other power production unit such as NTPC etc. who also buy coal in large quantity.

Steel - this sector is also one of the main consumers of coal. It can also be divided into two parts - steel plants owned by SAIL ,BSP ,RSP, BSL etc. and other steel plants like 11SCO. Others -This includes customer like

Fertilizer Corporation of India. Government Cement Plants. Railways (though its consumption of coal has decreased in recent years.) Defense (mainly for domestic purpose)

STEPS INVOLVED IN MAKING BILLS: -

1. Linkage committee - The committee decides upon the quantityof coal that is being supplied for next period. It consists ofrepresentatives of CIL, Railways and customers.

2. Dispatch of coal - The collieries dispatch the coal as per link.3. Issue of coal bill - The bills is issued to the consumer within

3 days of dispatch of coal. And the customers of coalcustomers are asked to pay within 48 hours of receiving thebill.

Formation of debtors - The amount, which the party is unable to pay, conies under debt. Debt is of types.

- Disputed- Undisputed.

Disputed - When there is difference in opinion about the quality. Quantity, penalty overloads or under load charge etc between CCI & the customer, the customer withheld the payment unto that extent. This is disputed debtUndisputed - this is simply the amount the customer is willing to pay but is unable to do so due to his financial condition.

Efforts taken to decrease the debtors: -The undisputed amount is first handled. There is regional sales manager (RSM) of CIL in each major city who continuously persuade the debtors to pay back the amount. In extreme condition help of ministry is also taken. And even after the case is not solved at ministry level coal supply is stopped at that station. For the disputed amount meeting are arranged between CIL/CCL & the customer & problem is tried to be solved through bargain. If the disputes are not settled in the meetings, the ministry intervenes. The central govt. has appointed 4 umpires to settle the disputed outstanding. The decision of the umpires is final & binding on both parties.

(C) Management of Cash

Cash is an important current asset for the operation of the business.

The firm should keep sufficient cash neither more or less cash

shortage will dispute the firm's manufacturing operation while

excessive cash will simply remain idle without contributing any thing

towards the firm's profitability. Cash is the money, which the firm can

disburse immediately without any restriction. This includes cash,

currency, cheques held by firms & balances in its bank accounts.

Sources & uses of cash

The main source of cash in CCL is: -

(a) (i) Cash sale of coal

(ii) Credit sale of coal

(iii) Sale of washery coal

(iv) Middling coal sale

(v) Sale of slurry/rejects

(b) Miscellaneous receipt

(i) Sale of tender document

(ii) Sale of stores scrape

(iii Penalty / interest from

outsider

(Contractor/suppliers)

(iv) Interest from employees.

(c)Short term loan from banks

(d) Foreign loan

(e)Loan from CIL.

Uses of cash: -

(i) Salary perks etc.

(ii) Stores

(iii) Power

(iv) Payment to contractors

(v) Interest to - a) CIL

b) Banks

(vi) Refund of balance to CIL (vii)

Statutory payment

a) P.F

b) Sales Tax

a) I .Tax

Managing the cash: -

1. Cash sales - When the customer directly lifts the coal from

the augmented area then it is known as road, sale for this

type of sale the customer deposits money at road sale center

located in Ranchi. Hence for such type of sale the cash is

collected in road sale center.

2. Credit sale - the collection of draft/cash from the credit

parties is deposited at the sale office located in different

cities & major localities. Provision has been made to

transfer this money within 24 hrs. In CCL Calcutta office.

A part of this money can be used by CCL Calcutta office for uses such

as

(a) Payment for explosives

(b) Special expenditure of CCL, Calcutta office

(c) Interest payment of CIL Calcutta

The rest of the money is sent in current account of CCL Ranchi

(fund section) from Road, sale center & CCL Calcutta office.

3.The misc. receipt is collected in the area/unit or headquarter. The

money is used from the place where it is collected. Hence this

money doesn't move any where.

Cash budget is routinely prepared here which helps in

1 .Estimating cash requirement.

2.Planning short time financing.

3.Scheduling payments in connection with capital expenditure.

4.Planning purchase of material

5.Planning credit policy.

The principle method of short term cash, forecasting is the receipts

& payment method. The cash forecasting prepared under this

method shows the timing & magnitude of the expected cash

receipts & payment over the forecasted period. It includes all

expected receipts & payments irrespective of how they are

classified in accounts. Normally, the basis for cash budgeting are: -

1 .Revenue

budget

2.Capital budget

3.Statory dues

4.Outstanding

dues

5.Company policy for payment of personal &other advances. 6.Credit & collection policy as well as past trends etc.

For monitoring cash budget as well as cash & bank balance, thefollowing tools &techniques are normally adopted: -1 .Cash flow analysis & reporting - monthly/weekly/daily.2.Cash & bank balance reporting - monthly/weekly/daily.3.Periodic physical verification of cash & bank balance.4.Periodic reconciliation of bank statements with cashbook.5.Timely accounting of time - barred cheques.6. Adequate internal cheque system to avoid the possibility of cash

defalcation. T. Monthly & weekly cash indent along with list of pending bills.

OPERATING CYCLE Smooth running of a business cycle has several stages from procurement of raw materials to their conversion into finished products; inventory stock pilling & creating debtors on credit sale of such inventory, & liquidating the debts through realization over a period. An ideal business cycle leaves room for including factoring as a component for converting trade debts into cash & thus speeding up/shortening the business cycle. The term factoring is related to realization/liquidation of debts. It may be defined as an agreement between a firm (which has sold its goods / services on credit & owns debts) & a party (may be an individual or other wise) who is called a factor by which the factor buy the debts of receivable invoices of the firm under certain terms & conditions with the right to realize the debts in lieu of some agreed fee & / or commission.The firm has to invest enough funds in current Assets for the success of sales activity. Current Assets are required because sales do not convert into cash instantaneously. There is operating cycle involved in the conversion of sales into cash.

Cash

Operating Cycle

The operating cycle of a manufacturing company involves three phases: -

1. Acquisition of resources such as raw material, labour,fuel etc.

2. Manufacturing of the product, which includes conversionof raw material in to work - in -progress in to finishedgoods.

3. Sale of the product either for cash or on credit. Creditsales are converted in to cash.

The length of operating cycle of a manufacturing company is the sum of:

Raw MaterialReceivables

Sales Work in Progresses

Finished Goods

1. Inventory conversion period &2. Book debts conversion period.1. Inventory conversion period: -

The inventory conversion period is the total time needed for producing & selling the product, it includes:

(a) Raw material conversion period.(b) Work in progress conversion period.(c) Finished good conversion period.

2.Book debts conversion period: -The book debts conversion period is the time required to collect outstanding amount from customers.The firm has to negotiated working capital from sources such as commercial banks. The negotiated source of working capital financing is called non-spontaneous sources. If net operating cycle of a firm increases, it means further need for negotiated working capital. The firm should maintain a sound working capital position. It should have adequate working capital to run its business operation. Both excessive as well as inadequate working capital position are dangerous from the firm's points of view. Paucity of working capital not only impairs firm's profitability but also result in production interruption &inefficiencies.

The firm's operating cycle (06) can be determined as inventory conversion period (ICP) plus book debts conversion period (BDCP)

OC = ICP +BDCPThe inventory conversion period (ICP) is the sum of raw material conversion period (RMCP) work in progress conversion period (WIPCP)& finished goods conversion period (FGCP).

ICP = RMCP + WIPCP + FGCP The raw material conversion period depend on:

(a) Raw material consumption per day(b) Raw material inventory

Raw material consumption per day is given by total raw material consumption divided by the number of days in a year (360). The raw material conversion period is obtained when raw inventory is divided by raw material consumption per day The following formulae can be used to calculate other inventory book debts & payables.

1 .RMCP = Raw material inventory / Raw material consumption 360

2. WIPCP = Work in process inventory - Cost of production 360

3.BDCP = Book debts - Credit Sales (at cost) 360

BALANCE SHEET OF CENTRAL COALFIELDS LTD.

For the year 31st March 1997 - 20021997 1998 1999 2000 2001 2002

Sources of funds Share holder's funds a. capital 94000.00 94000.00 94000.00 94000.00 94000.00 94000.00

b. Res. & surplus 20142.19 23181.16 29387.50 17491.31 17347.82 15795.50Loan funds a. secured 862.64 2153.56 1930.74 5784.03 5224.39 5447.80

b Unsecured 68612.06 121631.71 14000.40 153852.36

Application of funds

Fixed assets

a. net block 95254.58 107852.31 115880.32 135449.04 142336.27 146382^59

b. capital work in • 19630.55 31832.17 51633.51 52183.81 53966.33 55391.32

progress

investment 0.02 0.02 0.02 0.02 0.02 0.02

C.A Loan & Adv

a. inventories 54127.13 57859.61 59341.58 40176.00 35311.85 39750.8]

b. Debtors 32993.10 60406.26 70817.83 80135.28 76456.71 80458.65c. Cash & Bank Bal. 1525.61 3772.97 5793.39 4614.73 2806.69 4048.83

d. Loan & Adv. 20922.89 23012.88 11937.90 15478.56 17363.27 15913.89Current liabilities 52163.20 53160.93 59918.79 68934.19 86580.60 85938.25

t Net current assets 5740.53 91890.79 87971.9 71470.38 45357.92 54233.48Misc. Exp. to the Extent Not Written Off or Adjusted 10209.5 9391.14 9837.88 12024.45 21103.00 18725.15

Profit & Loss A/C of Central Coal Fields Ltd.

for the year Ending 31st March 97,98,99,2000,2001,2002 Amount in lac

PARTICULARS 1997 1998 1999 2000 2001 2002 ncome sales 90577.5 128123.9 142609.6 135466.9 142877.5 165086.63

Coal issued for

other purpose 39084.6 47939.94 52861.42 54197.97 57530.43 59011.87

Accretion/Decration in

stock 6030.16 5177.13 2273.11 -21729.9 -4074.07 2289.64

Other Receipts 16921.79 5142.42 10416.29 10865.7 12397.65 12014.41 Total Income 152614.1 186383.4 208160.4 178800.6 208731.5 238402.55

Expenditure

38596.11 48056.29 53518.12 51757.97 55146.35 57690.31

Coal issued for Other

Purpose Employees' Remune-

ration Benefits 44606.01 51309.24 55123.24 63082.87 76189.02 79056.64

Consumption of Stores

Spare Parts . 16534.25 19082.28 22968.91 23009.79 25218.65 25626.31Power & Fuel 5173.1 6545.97 8777.46 9047.99 10080.63 10777.2

Repair 2248.74 2579,29 6442.82 6906.27 7440.12 7406.41

Contractual Expenses 5284.14 5797.21 11052.15 12052.71 12927.14 14656.75

Social Overhead 6253.06 6435.82 7056.77 7219.1 8569.36 9287.7

Other Expenses 6782.65 7399.93 5021.48 7607.89 4993.08 7056.73

interest 7819.87 10740.53 9232.93 " 6065.79 11253.06 9110.4

Finace charge 211.58 60.3 105.55 0

Depreciation 8893.7 10257.18 12326.56 13994.9 15277.96 15639.87

Over burden removal

Adjust 2079.4 1180.7 -345.5 -2065.2 -629.63 -268.41

Contribution to/from ,

Coal Price 3182.1 9488.2 6512.64 -454 -17170. Regulation account

Previsions 925.8 1966.3 3295.9 -2413.6 558.8 860.75Jet Expenditure 141738. 180839. 201195. 189778. 209959. 236847.16

Net Profit/Loss 10875.4 5544.3 7965.3 -10978. -1227.6 1555.39

Add(less) Prior period

Adjust498.4 1388.7 -1758.9 -918.0 1084.1 -3107.71

Net Profit/Loss 10377.0 4155. 6206.3 -11896. -143.4 .1552.32

Add investment Allowance

written book 919. 9142.5 290 3525

Add/Less balance

Carry forward from

previous years 11493.6 1116.6 3038.9 10165.0 7411.3 10167.88 Balance transferred to

B/S 1116.6 3038.9 10165.0 7411.3 10167. 12140.5

WORKING CAPITAL ANALYSIS USING RATIO

There are different methods to determine the working capital needs. The most common approach in projecting in the working capital requirements is to use ratio developed on the basis of prior year's experience that relates inventory & receivable to cost of sales. The second approach is calculation by percentage of sales. Requirement is calculated by percentage of projected sales. The third approach to fixed capital investment therefore is projected as percentage of fixed capital investment.Ratio analysis is the principle tool of financial statement analysis. It is extremely useful for a firm to be able to meet its obligation as they become due. In financial analysis ratio is used as benchmark for evaluating the financial position & performance of a firm. The ratio analysis involves comparison for a useful interpretation of the financial statements. A single ratio itself does not indicate favorable or unfavorable conditions. It should be compared with some standards of comparison may consists of:(A) Post ratio: the ratios calculated from the post-financial

statements of the same firm.(B)Projected Ratios: Ratios developed using the projected or

preformed financial statement of the same firm.(C)Competitor's Ratios: Ratios of some selected firm's

especially the most progressive & successful competitorat the same time.

(D) Industry Ratios: The ratios of the industry to which groupthe firm belongs.

The easiest way to calculate the performance of the firm is to compare its current ratios with the past ratios. When financial ratio over for a period of time is compared then it is known as the time series analysis. It gives an indication of change & reflects whether the firm's financial performance has improved, deteriorated or remained constant over time.

ANALYSIS OF THE FUND FLOW STATEMENTS OF C.C.L

Fund flow statement of 1996-97 Sources of funds: Rs.in Lakhs (a) Addition to borrowed funds 54,310.57(b) addition to cumulative deprecation 9,371.97(c) addition to reserve 3,038.97(d) decrease in accumulated loss 1,116.66(e) decrease in expenditure capitalized _________818.41 ___ Total funds inflow during the year 68,656.58Utilisation of Funds :(f) addition to gross block 21,969.70(g) addition to capital W.l.P. 12,201.62(h) increase in working capital 34,485.26Total fond Utilised during the year / 68.656.58

Fund flow statement of 1997-98 Sources of funds: Rs.in lakhs (a) addition to borrowed funds 18,150.78(b)addition to cumulative depreciation 18,578.99(c) decrease in working capital 3,918.88Total inflow of funds during the year 40,648.74Utilisation of funds: (d)addition to the gross block 27,469.78(e) addition to capital W.l.P. 12,732.22(f) increase in miscellaneous exp. 446.74Total utilisation of funds during the year 40,648.74

Fund flow statement 1998-99

Sources Of Funds Rs.in Lacks

(a) Addition to commutative Deprecation 14,291.22(b) Decrease in working capital 16,501.53(c) Addition to Borrowed Funds 17,700.25Total inflows of the funds during the year 48,493.00

Utilisation of funds:(a) Addition to gross block 34,410.24(b) Increase in miscellaneous exp. 2,186.57(c) Loss in operation 11,896.19Total utilization of the fund during the year 48,493.00

Fund flow statement 1999-2000SOURCES OF FUNDS (Rs.in crores )

(a) Funds for operation profit / Loss (-) - 1.43For the yearAdd: depreciation 146.86 145.43

(b) Decrease in working capital 248.61Total 394.04

APPLICATION OF FUNDS (Rs.in crores)(A) Additions to fixed Assets & CWIP 233.56(B) Additions to capitalized expenditure 90.79

to the extent not written off(C) Decrease in borrowings • 69.69Total 394.04

Fund flow statement 2000-01SOURCES OF FUNDS (Rs.in crores)

(A) funds for operation profit / Loss (-) -15.52for the yearAdd: depreciation 87.03 71.51

(B) Decrease in Miscellaneous 23.78expenditure to the extent notwritten off

(C) increase in borrowings 135.21Total 230.50

APPLICATION OF FUNDS (Rs. In crores)(A)Addition to fixed Assets & CWIP 141.75

(B)increase in working capital 88.75Total 230.50

Observations :If we compare the above fund flow statement we find that compared to 1996 -97, 1997 -98 & 1998 - 99 there has been decrease in working capital. We also find that borrowed funds have also decreased drastically in above years. The reason for this may be scarcity of long terms funds in 1996 -97,1997 - 98 & 1998 - 99. As a matter of fact in 1996 -97,1997 -98 & 1998 - 99 current liabilities have increased. But this increase is not due to short terms funds but certain provisions & delay in payments. So, it seems that to counter the paucity of borrowed funds current liabilities have been increased thus decreasing the working capital over the year. The decrease in working capital has become the source of funds.

Sundry Debtors : -

Sundry Debtors vis - a - vis sales in the last five year ending 31 march 1997 - 2000 are as follow

st

Year Considered Good Considered Doubtful

Total Sales % Debtors

31.03.97 708.18 105.08 , 813.26 1764.92 46.08

31.03.98 801.35 80.19 881.54 1701,97 51.8

31.03.99 764.57 83.86 848.43 1806.74 46.96 ,

31.03.00 804.59 87.35 891.94 2035.18 43.83

Net Profit

CONCLUSION AND SUGGESTION

Coal production in most of the C.C.L collieries is not satisfactory & not achieving their target, it is not possible to full fill the demand of consumer, about 80% of the total production of coal evacuated from open-cast mine & these mines are equipped with modern technology but not efficiently utilized except in Piparwar area, where modern technology has been established with the collaboration of Australia. This type of collaboration is also needed in other areas also for achieving production target. The main constraints are under utilization of mine equipmenents, land acquisitions, excess manpower in few of the area, power failure & shortage of imported spare parts for the heavy earth removing machines coal quality not to the declared grade is also vital point.CCL management cannot reduce the manpower to the required level due the interference of trade unions. This surplus manpower can be utilized gainfully by pulling them in jobs which is now being carried by contractors.

Few suggestions are appended below for improvement in production & productivity.

(1) Proper manpower planning, teamwork, timely supply ofcritical HEMM spares parts.

(2) Having long-term objectives and policies andconfidences in attaining the goals.

(3) Steady improvement of quality and reduction of cost.(4) Constant increase of productivity of labour and capital.(5) Drawing effective land use plans and implement in

phased manner.

(6) Saving in expenditure in respect of trade discount,collection charge, interest on working capital if any etc.

(7) Saving in amount of bad debts to the organization .(8) Additional income generated by increasing the speed of

the business cycle of the company.(9) Activity and performance of the factor should be

periodically reviewed against target fixed for collectionetc and by analyzing 'debtors' balance as compared.

As pointed out earlier, factoring is not limited to sale of invoices (debts) by the firm. Various other valuable services could be obtained from the factor as it is the factor which bridge the gap between debts and cash and helps a firm run its business cycle smoothly factoring, therefore needs to be seen as an important part of the solution to financing of trade debts.

In coal industry it has been observed that the price of coal increases almost every year. Where as the increase in current assets are affected by rate of inflation. If the percentage increase in case of both sales and current assets is not same, then the ratios will not give correct picture. I am confident that CCL will over come its deficiencies and achieve its goal in coming years.