PROJECT REPORT

ON

ANALYSIS OF FINANCIAL

STATEMENT OF

UTTARAKHAND POWER

CORPORATIN LIMITED

By:- Surender B.Pant

B.B.A 5 TH (FINANCE)

INTERNAL GUIDE EXTERNAL GUIDE

GRAPHIC ERA UNIVERSITY566/6, BELL ROAD, CLEMENTOWN

DECLARATION

I, SURENDER B.PANT, hereby declare that the project entitled

“ ANALYSIS OF FINANCIAL STATEMENT OF U.P.C.L” is my

original work, done by me. Now it is an asset of “UTTRANCHAL

POWER CORPORATION LTD. DEHRADUN”. All the rights for

using this project report lie with the company. Unauthorized copying,

hiring, broadcasting, or rental of this project without permission from the

organization will be considered illegal.

By:- Surender B.Pant

TO WHOMSOEVER IT MAY CONCERN

This is to certify that MR.SURENDER B.PANT of BBA

5THSem is a confide regular student of this institute for the

session 2009– 2011.

He has completed the project report titled “ANAYSIS OF

FINANCIAL STATEMENT OF U.P.C.L” under my

supervision, as a part of partial fulfillment for the award of BBA

Degree. His/ Her report is satisfactory and not copied from

anywhere to the best of my knowledge.

Date:

Signature Signature

Head of Department Project Supervisor

PREFACE

Modern business world is full of competition, uncertainty and exposed to

different types of risks. The complexity of managerial problems has led to the

development of various managerial tools, techniques and procedures useful for

the management in managing the business successful.

One of the essential features of modern business Management is planning and

control. There are a number of tools and devices which assist Management in

planning and controlling business operations. Budgeting is the most common,

useful and widely used standard device of planning and control.

In the present project an attempt has been made to study and understand

the costing and budgeting system in Uttarakhand Power Corporation Limited

(UPCL) and convert the theoretical practices into the practical working life.

ACKNOWLEDGEMENT

Presenting a summer Training project of this is an arduous task, demanding a lot of time. I

cannot in full measure reciprocate the kindness shown and contribution made by various

persons in this endeavor. I will remember all of them with gratitude.

My sincere thanks towards GRAPHIC ERA UNIVERSITY for giving me a chance to take

this project and for his valuable guidance, which helped me on all those points, which I

needed to include in, with full intensity.

I am extremely gratified to Mr. SACHIN RASTOGI AND Sr. Accounts officer, UPCL who

was extremely helpful in offering his professional expertise and bestowing me practical

knowledge in all spheres related to the whole organization working.

I am very grateful to my mentor Mr. PRADEED SINGAL For his significant support

extended for the successfully completion of the project as he support me all through the

project and devoted his precious time for me. I am really appreciative to this organization

and the employees of UPCL for full co-operation, support and motivation that helped me a

lot in completing my project here.

I am always beholden to my God, for always being with me and showing me the right way,

my family, for always doing favor to me and my friends and colleagues consistently helped

with encouragement, creative inputs and criticism throughout the project work, for always

lifting my sights to higher vision, raising my personality beyond normal limitation and for

realizing me my strengths and potential.

:-SURENDER B.PANT

SCENARIO OF POWER IN INDIA

Power development is the key to economic development. The power sector has

been receiving adequate priority ever since the process of planned

development began in 1950. Hydro-power and coal based thermal power have

been the main sources of generating electricity. Nuclear power development is

at slower pace, which was introduced, in late sixties. The concept of operating

power systems on a regional basis crossing the place, the power supply

industry has been under

Constant pressure to bridge the gap between supply and demand.

State of the Industry: Demand is expected to grow 6-7% over the medium

term. Capacity additions of around 50 GW are expected in the 11th Plan (60%

of government targets) Addressable of key issues such as fuel supply, land

availability, environmental clearances and equipment supply are key to

success.

.

Budget Impact: There were no major announcements impacting the sector.

The basic customs duty on project imports has been reduced from 7.5 to 5%.

However, the exemption on additional duty of 4% has been withdrawn for non

mega power projects. Thus, the overall impact of duty changes on power

sector project imports is neutral. The budgetary allocation for Accelerated

Power

Development and Reforms Programmed

(APDRP)

IT has been maintained at Rs 800crore in FY 08 – 09. The

government has proposed to set up a National Transmission and

Distribution Fund to address higher losses at the transmission and

distribution level and for the sector’s development as well. The

overall impact on the sector is neutral.

http://en.wikipedia.org/wiki/File:Electricalgrid.jpg

SOURCES OF POWER

Gap between demand and supply of power in India

This table shows that the average shortage of electricity in India

every year to be approximately between 7%-8%.

FORMATION OF UPCL

Distribution organization is responsible to distribute the power to

various consumers as per the load requirement. Therefore, the

power being generated is first transmitted through the power

transmission system through transmission and high rated capacity

power distribution transformers and as per the power generated, the

same is being allotted to distribution transformers, which is being

calculated, distributed and billed by the distribution wing. This is a

continuous process by the power department under the overall

responsibility of the Engineers, technicians and other staff

responsible in the department

Power Department

Government of India, Ministry of Power has passed a resolution. After passing

the same by the cabinet for breaking the Electricity Board s functioning in the

country into three parts namely Power generation, Power Distribution and

Power transmission headed by different CMDs for its smooth functioning and

better management and consumer services. The total control over the

electricity department has been vested to the Electricity Regulatory authority

and authorized and advised to State Government to take action for dividing

the electricity departments. In this direction, Govt. of India, Ministry of

energy has created a regulatory commission to monitor the situation within

the country. Accordingly, the state Government has divided the power

department in to three separate corporations. Three separate Chairman and

Managing directors head the individual corporations. The details are as

under: -

Chairman & Managing Director, Power Corporation is responsible for power

distribution and revenue collection against the energy sold and maintaining

the monthly accounts as received from the generation wing.

Chairman & managing Director, UJVNL is responsible for generation of electricity from different hydro-generation power stations and M.D, Power Transmission Corporation of Uttaranchal, is responsible for transmitting the power network to Distribution wing. The energy so received by the distribution organization is being distributed to various categories of consumers through Transmission & Distribution network.

The Distribution wing is responsible for billing and realization of revenue against the energy they received from the Generation/Transmission network.

ORGANIZATIONAL SETUP

The detailed organization chart of UPCL consists of following:-

Chairman : Sh. P. K. Sarangi

Full Time Directors:

Managing Director : Sh. J. M. Lal

Director (Finance) : Sh. T. Panda

Director (Operation) : Sh. J.M. Lal

Director (Project) : Sh. A.K. Johri

Director (HR) : Sh. Sharad Krishna

Company Secretary : Sh. H.P. Vyas

Registered Office:

The Registered office of UPCL is situated at Kanwali road, Dehradun. It has two Zonal Offices one at

Dehradun, named General Manager (Distribution) Garhwal Zone and other at Haldwani (Nanital) named

General Manager (Distribution) Kamuon Zone respectively.

Bankers:

1. Punjab National Bank

2. State Bank of India

3. Central Bank of India

4. Bank of Baroda

PERFORMANCE SERVICE:

(A) Financial performance & profitability in the second half of FY 2007-08

has registered considerable improvement:-

(i) Contribution of Revenue towards expenditure (including power

purchase costs) has improved from (-) Rs.192.90 Cr. To (-) Rs.

63.47 Cr.

(ii) Revenue Collections in second half of FY 2007-08 has increased to

Rs. 639 Cr. As compared to Rs. 441 Cr. In the first half of the

year.

(iii) With improvement in Revenue billing & collections, UPCL

endeavours to reverse the trend of ‘loss’ figures to ‘gain’ figures

by the end of first half of FY 2008-09.

(B) Average Collection on Input (per unit) has registered an increase of 0.12

paisa from Rs. 1.85 p/u to Rs. 1.97 p/u during second-half of FY 2007-08

against for corresponding figures of FY 2006-07.

(C) The billing and collection efficiency is sought to be improved thereby

reducing the AT&C losses to 24% by end December 2008. The 2007-08 second

half performance w.r.t. AT&C losses was 27.14% as compared to 44.61% for

the first half of the year and the aggregate for the year 2007-08 was 35.58%.

The target of 24% AT&C Losses by end 2008 is planned to be achieved by

improving billing efficiency to 80% and collection efficiency to 95%.

COMPANY PROFILE

Uttarakhand Power Corporation Limited (UPCL) is a company, primarily

engaged in the business of distribution and retail supply of electricity in the

state of Uttarakhand, which is purchased from Uttarakhand Jal Vidyut Nigam

Ltd. (UJVNL) & other Central Govt. Sector Power Generation utilities, etc.

and transmitted through grid system of Power Grid Corporation of India

Limited (PGCIL) and Power Transmission Corporation of Uttarakhand

Limited (PTCUL).

Uttarakhand Power Corporation Limited formerly Uttaranchal Power

Corporation Limited was incorporated under the Companies Act, 1956 on

February 12, 2001. Consequent upon unbundling of UP State Electricity

Board (UPSEB) and on formation of Uttarakhand State, the assets, liabilities

and undertakings of distribution and transmission business of Uttarakhand

were transferred from Uttar Pradesh Power Corporation Ltd. (UPPCL) and

vested with UPCL w.e.f. 9th November, 2001. Subsequently, in compliance of

the provisions of the Electricity Act, 2003, the assets, liabilities and

undertakings of transmission business of UPCL were transferred to the State

Government w.e.f. 1st June, 2004 and vested in a separate company, namely,

Power Transmission Corporation of Uttarakhand Ltd. (PTCUL) on the same

date.

At present, UPCL is having wide network of electrical distribution system

across Uttarakhand State and also engaged in the construction of 33/11KV

Sub Station.

UTTARANCHAL POWER SECTOR – AN

OVERVIEW 360 degree

Uttaranchal, the 27th State of India was created on 9th November 2000 as the

10th Himalayan State of the country blessed with the natural and mineral

resources in abundance and poised to be a 20000 MW HYDRO POWER HUB

of India in the future.

Uttarakhand Power Corporation Ltd (UPCL) – formerly Uttaranchal Power

Corporation Ltd was incorporated under the Companies Act, 1956 on

February 12, 2001 consequent upon the formation of the State of Uttaranchal.

UPCL has been entrusted to cater to the Transmission & Distribution Sectors

inherited after the de merger from UPPCL (erstwhile UPSEB) since 1st April

2001. The Electricity Act.2003 mandated the separation of Transmission

functions under Power Sector Reforms. On 1st June 2004, the Power

Transmission Corporation Limited (PTCUL) was formed to maintain &

operate 132 KV & above Transmission Lines substations in the State. Today

UPCL, the State Power Distribution Utility of  the Government of Uttaranchal

(GoU) caters to the Sub –Transmission & Distribution Secondary Substations

& Distribution Lines 66 KV & below in the State.

UPCL - the Frontline State Power Distribution Utility & service provider of

QUALITY & RELIABLE POWER SUPPLY to over 1.08 million consumers

of electricity spread over the 13 Districts of Uttarakhand i.e. Dehradun, Pauri,

Tehri, Haridwar, Pithoragarh, Almora, Nainital, Uttarkashi, Udhamsingh

Nagar, Rudraprayag, Chamoli, Bageshwar & Champawat. These electrical

consumers are categorized depending onto heir domestic, commercial,

agricultural and industrial loads. UPCL is also the first electrical utility in

India to initiate women empowerment by employing local women through Self

Help Groups, as franchisees, for meter reading, bill distribution and revenue

collection.

UPCL looks forward to a committed participation from a Team of

professionals always striving for performance excellence with new innovative

technologies to strengthen the Power Distribution Infrastructure of the

STATE in Seamless Integration with Generation & Transmission Utilities for

the Socio – economic development.. A comprehensive POWER

EVACUATION PLAN is underway with construction of new 33/11 KV

Substations in the State.

With the Revenue Cycle Management for the optimal Metering, Billing &

Collection (MBC) efficiency the record Revenue Realization is targeted during

2007-08. During 2008-09, the re-organization of the Organization Structure of

UPCL is aimed to provide better services to the Consumers of electricity

which is the priority over the dichotomy between POWER & ENERGY.

Vision:

To provide

Cost-effective, Good quality, 24X7 power supply and At competitive rates to all the customers of the state of Uttarakhand.

Mission:

Uttaranchal Power Corporation Ltd. was created on the 1st April 2001 after

the de-merger from UPPCL (erstwhile UPSEB) catering to the Transmission

& Distribution Infrastructure in the Uttaranchal has born on 9th November

2000 as the 27th State of India & 10th Himalayan State of the country. Since

then UPCL is engaged for improving the power supply of Uttaranchal State

with the following (MISSION) aims & objectives:

To achieve 100% Rural Electrification Infrastructure for

Electrification of Villages & Hamlets by March 2009 and Rural

Households by March 2012.

To provide 24x7 reliable, quality and un-interrupted supply to its

consumers. ? To provide POWER TO ALL on demand. To provide

POWER TO ALL on demand.

To strengthen the existing power network based on present advanced

technology with an objective to reduce T&D losses. To provide power

system network with minimal environmental impact.

To plan and provide strong power system to the state and its

consumers at an affordable cost.

To develop a professionally managed organization.

To generate additional revenue for the Corporation and State by

developing a strong, adequate, reliable and cohesive power network

based on most techno-economical aspects to contribute towards the

development and prosperity of the State.

To improve social status of the people.

To reduce poverty of the people.

To provide employment in the rural sections by providing reliable

supply.

To establish Consumer Care Centre, Central Call Centre etc. to

provide Quality Service to the Consumers.

To release Electricity Connection to the consumers under Talkal

Sewa within 24 hours for better service to them.

To contribute to the formation of a developed & progressive

Uttaranchal State.

Our Commitments:

We are a team of POWER DISTRIBUTION PROFESSIONALS in

pursuit of excellence committed to providing 24x7 hours of quality

power supply to our electricity Consumers.

We have set-up CONSUMER CARE CENTER at Parade Ground,

Dehradun for providing better services to the consumers.

We are in the implementation process of the ONLINE BILLING

SYSTEM in the Kumaon Zone.

We have a proposal for AUTOMATIC METER READING of

COMMERCIAL & INDUSTRIAL CONSUMERS using GSM

modems.

We have introduced a facility of payment of electricity bills by the

Consumers in Punjab National Bank and Post Offices in some of the

areas of Uttarakhand. Drop boxes are placed in almost all the

branches of the BANK PREMISES.

Quality of Power Supply:

Our performance standards are to provide quality power supply to our

electricity consumers who are regularly paying their electricity bills within the

stipulated dates as mentioned therein. The services shall only remain

suspended during force majeure conditions such as war, civil commotion, riot,

flood, cyclone, lightning, earthquake or other unforeseen circumstances such

as strike, lockout, fire affecting the Corporation and their activities.

We promise to act in response within 4 hours to a consumer's complaint

regarding higher/lower voltage and frequency of POWER SUPPLY beyond

the tolerance limit (as prescribed under Indian Electricity Rules) at the point

of COMMENCEMENT OF SUPPLY.

We promise to improve the QUALITY OF POWER SUPPLY within 15 days

of receiving the ORIGINAL COMPLAINT or furnish a written reply to the

electricity consumer intimating them the reason for poor quality of power

supply, if the same is beyond our control. We promise to respond within 180

days in respect of the complaint regarding low voltages arising due to

inadequacy in the DISTRIBUTION SYSTEM requiring UPGRADATION OF

DISTRIBUTION TRANSFORMERS (DTRs) AND ITS ASSOCIATED

LINES OR INSTALLATION OF LT CAPACITORS etc.

Electricity Billing Complaints:

We promise to acknowledge the consumer's complaint immediately if received in PERSON and within 7 working

days if the complaint is received by POST. We promise to respond to consumer’s complaint regarding electricity

bills within 3 days if no additional information is required to be collected. We promise to resolve within 15 days in

respect of the consumer’s complaint regarding electricity bills incase any additional information is to be collected

and the complaint is made within 7 days of receipt of electricity bill by the consumer. We promise to resolve the

consumer’s complaint regarding electricity bills within 21 days in all other cases.

BREAKDOWNS & FUSE OFF CALLS:

We promise to accede to request for REPLACEMENT OF FUSES within 4 working hours in CITIES

& TOWNS OF Uttarakhand.

We promise to accede to request for REPLACEMENT OF FUSES within 12 working hours in SUB-

URBAN & RURAL AREAS.

We promise to accede to request for replacement of fuses within 36 hours in HILLY TERRAIN

AREAS depending upon the area locations.

We promise to accede to request for replacement of fuses within 36 hours in HILLY TERRAIN

AREAS depending upon the area locations.

We promise to accede to request for attending to LINE BREAKDOWNS (incase of routine

breakdowns) within 6 working hours in CITIES & TOWNS as above.

We promise to accede to request for attending to LINE BREAKDOWNS (in case of routine

breakdowns) within 24 working hours in SUBURBAN & RURAL AREAS.

We promise to accede to request for attending to LINE BREAKDOWNS (in case of routine

breakdowns) within 48 hours in HILLY TERRAINS AREAS depending upon the area locations.

We promise to inform the consumer the likely time by which the power supply may be restored in case

of routine line breakdowns within 1 hour of receiving the complaint.

We promise to replace damaged DISTRIBUTION TRANSFORMERS within 24 hours in CITIES &

TOWNS.

We promise to replace damaged DISTRIBUTION TRANSFORMERS within 3 working days in SUB-

URBAN & RURAL AREAS.

We promise to set right LINE FAULTS and restore supply to STREET LIGHTS within 24 hours and

replace damaged or defective material within 7 days.

Area Maps:

ANNUAL REVENUE BUDGET FOR THE YEAR 2010-11

1. Review of Revenue performance of previous years

Energy purchase & Sale (MU)

The energy input for the FY 2008-09 at 7631.44 MU which was 13.36% higher than that of

FY 2007-08. Energy input for the FY 2009-10 was projected at 8065.00 MU considering

5.68% increase over energy input of FY 2008-09, out of whichj energy input during 2009-10

in 7591.33 till Feb. 2010.

Input during 2009-10 has been projected at 8552.96 MU considering 6.05% increase over

Energy input projection of FY 2009-10.

Year wise Energy Comparison

Table – I

Financial year 2008-09 2009-10 2010-11(Actual) (projected) (projected)

Energy Input (MU) 7631.44 8065.00 8552.96% Rise / FallOver last year +13.36% +5.68% +6.05%

Year wise projected energy input, billing & loss for the year 2009-10 vis-à-vis 2008-09 and projected for FY 2010-11 are as shown below at table – II

Table – II

Financial year 2008-09 2009-10 2010-11(Actual) (projected) (projected)

Biilling Input (MU) 5494 5968 6500Energy Input (MU) 7631 8065 8553AT&C Losses % 33.00% 27.50% 25.50%NB: The AT&C Losses for FY 2008-09 & 2009-10 has been shown as per the norms adopted by the Hon’ble UREC

2. Projection for Revenue Budget – FY 2010-11 Sales & Revenue

The projection of sale of energy for the year FY 2010-11 has been estimated on the category-wise sales based on the trends over the previous years. Three and specific consumption for the past 4 years as well as the loss to realistically forecast the demand for FY 2010-11.

NB: Revenue from sale of energy during the year 2010-11 has been projected as per the retail tariff decided by UREC. for FY 2009-10

The following is the category-wise projection of sale for FY 2010-11

CATEGORY DEMAND/ % REVENUE %SALE (MU) SALE (Rs. Crs) REVENUE

DOMESTIC 1322.00 20.35% 312.86 13.60%NONDOMESTIC 685.57 10.55% 300.08 13.05%HT/LT IndustryGovertmentIrrigation &PWW 3810.46 58.62% 1507.36 65.54%Balance other 124.87 1.92% 39.64 1.72%

TOTAL 6500.25 100% 2300.03 100%

Power Purchase Cost

The expenditure on power purchase cost for the FY 2010-11 at Rs. 2,271.82 Crores has been

projected on the basis of the Input Energy for the fY 2010-11 & actual power purchase bills

for the period Apr-09 to Jan – 10 which is Rs. 1658.03. The estimated power availability

from various firm various frim sources has been made on the basis of

Indicated availability by various generators, and

Past availability trends and other available information in the absence of specific indication

by some generators.

The cost estimate are based on relevant/respective tariff orders, recent bills, existing

arrangement, notification etc for various individual sources.

The details of merit order dispatch of power projected for FY 2010-11 is as below:

SOURCES PURCHASE (MU)UJVNL 4021.47NTPC 2286.15NHPC 363.02OTHER’S (NPC,THDC) 409.68IPPs AND UREADA 413.36

UI BANKING &PROCUREMENT 1059.29

TOTAL 8552.96

O&M EXPENSES

For O&M Expenses including employee cost, Administrative and General expenses and

Repairs and maintainance, expenses, bottom-up, approach has been followed by the

corruption wherein unit wise Revenue budgets from each Accounting unit in Garhwal and

Haldwani zones are called for. Those individual Revenue budgets of the units are then

complied zone-wise and the zone wise figures have been consolidated in the corporate

Revenue budget at UPCL head office after discussion with the unit heads, espically the

Revenue divisions and circles.

The detail for these expenses projected for FY 2010-11 are enumerated below:

(I) Employee Cost: the employee cost of Rs. 21,619 Lakhs for FY 2010-11 has

been estimated based on actual cost incurred during FY 2008-09 and during

FY 2009-10 till Sep 2010 and the anticipated rise. The basic salary of

employees in expected to increase on an average 3% p.a. the increase in D.A

has been considered on the basis of prevailing rates and expected increase

D.A. on half-yearly basis. Employer’s contribution towards pensions and

gratuity has been taken at 19.08% of Basic, grade pay and D.A. the annual

financial impact for the FY 2010-11 (30% Arrear from 01-01-2006 to 31-03-

2008) on account of 6th Pay Commission Revision has also been considered.

A marginal inflationary increase has been projected in other cost heads

pertaining to other allowances.

(II) Administrative and General (A&G) Expenses:

The A&G expenses taken in budget for FY 2010-11 at RS. 2,343 lakhs have been

estimated considering increase in number of sub-Divisions/Divisions/ Circles increase

in fuel cost, computerization and other revenue expenses over the actual expenses for

the FY 2008-09 and during FY 2009-10 till Sep. 2010 due to organic growth of

corporation and its consumer base.

UPCL has undertaken a number of focused initiatives and efficiency improvement

programs in the FY 2010-11 to be pursued systematic programs in the areas of

metering meter-reading billing and collection through adoption of new technologies

and tie-ups with various agencies to improve the Revnue cycle management functions.

The central High value consumer billing system and key consumer cell at corporate

office have been established and corporate commercial monitoring system has been

put in place. New collection improvement measures through setting up ATP machines

in towns on BOOM basis have been imitated in Dehradun and are further rolled out to

other circles and Towns. For all these consumer service improvement measures and

revenue improvement initiatives, financial provisions have been made in the Revenue

budget.

(III) Repair and Maintenance (R&M) Expenses:

The R&M expenses for the FY 2010-11 have been projected at RS. 4,963 Lakhs the rise in R&M

expenses on key distribution network assets i.e. plant and machinery lines and cable network

have been envaisaged at 14% over the previous years projected expenses. It is also submitted that

in view of the dilapidated state of the LT network the level of R&M expenses being projected are

essential to ensure quality power supply to consumer.

UPCL also is required to undertake some expenditure under the head “Internal system

improvement works” or “ Special R&M Expenditure” which involve works of following nature.

Re-conductoring / Strengthening of old and worn out 33 KV, 11KV,& L.T. Lines.

Augmentation of capacity of 33/11 KV, 11/0.4 KV, S/S.

Replacement of old Transformers and damaged poles.

Extension of 11 KV and LT lines and augmentation of 11/0.4 KV S/S & 33KV lines.

Replacement of single phase /2 phase LT lines into 3 phase LT lines.

Civil work i.e. R&M and modification /extensions of building, Roads, control rooms etc.

3. Deprecation:

Deprecation for the FY 2010-11 has been projected at Rs. 4,062 Lakhs on the value of fixed

assets considering by Hon’ble UERC in its Tariff order. The computation of depreciation has

been made on the basis and methodology adopted by the UREC in its last Tariff order.

4. Intrest and Finance charges

The estimation of interest and finance charges for the FY 2010-11 is Rs. 10,363 Lakhs and

has been calculated separately for various loans under different schemes.

The interest charges in context of Loans/ Liabilities i.e. GPF Liabilities CPSU’s dues and

power purchase dues, transferred to UPCL under the Transfer schemes have not been

calculated and projected for FY 2010-11, pending financial restructuring and final resolution

of these issues.

5. Provision for Bad and Doubtful Debts

A provision of Rs. 6,828 Lakhs at a conservative level of only 2.97% of the revenue billed

has been projected for the FY 2010-11 on finalization of the amount to be written –off, the

same shall be apportioned from the amount set aside as provision for Bad and Doubtful

Debts.

6. Financial Projection

The financial projection for the Annual Revenue Budget Estimated for the year 2010-11 is

enclosed at Annexure – I along with the relevant schedules attached thereto.

7. Revenue performance budget and monitoring

It is placed before the board that, the monthly and annual Revenue billing and collection

targets for each of the Divisions/ circles/ zones separately for category wise consumer has to

be fixed as and when Electricity tariff fixed by Hon’ble UERC for the financial year 2010-11

with performance monitoring system of Divisions at corporate level.

Statement showing analysis of variances in Revenue performance of zones against the

projected revenue budget for FY 2009-10 and zones – wise Revenue budgets targets for FY

2010-11 are enclosed at Annexure – II for kind perusal of the member of the board.

The board of Director is requested to approve the Annual Revenue Budget proposal for the

FY 2010-11.

(Managing Director)

ANNUAL REVENUE BUDGET ESTIMATE FOR 2010-11(FINANCIAL PROJECTION)

2009-10 2009-10 2010-11

ParticlesBUDGET ESTIMATE

ACTUALS(Apr09-Sep09)

BUDGET ESIMATES

Revenue from sale of power 2031.08 774.48 2300.04ssurchase / Rebates, Anciliary chargesGross Revenue (A) 2031.08 774.48 2300.04Power purchase cost (including Transmission 1889.86 998.45 2271.82charges) (B)Gross Marging (A-B) 141.22 -223.97 28.22Employee Cost (D) 199.53 96.4 216.19Administrative & General Expenses (E) 21.13 10.27 23.43Repair and maintanace Expenses (F) 43.59 21.62 49.63Total Expenses(net of capitalisation) (D+E+F) 264.25 128.29 289.25Net Contribution (H) = (C-G) -123.03 -352.26 -261.03interest and other finance Charges (I) 96.01 48 103.63Depreciation (J) 32.57 16.28 40.62Surplus/ (Deficit) (K) = (H-I-J) 57.56 -416.54 -405.28Provision for Bad and Doubtful Debts (L) 28.78 68.28net profit/ loss (M)

ANNUAL REVENUE BUDGET ESTIMATE FOR 2010-11PROJECTED CASH BUDGET ATATEMENTAmount in (Rs. In Crores)2009-10 2009-10 2010-11

ParticlesBUDGET ESTIMATE

ACTUALS(Apr09-Sep09)

BUDGET ESIMATES

Revenue collection from sale of power 1932.46 774.48 2254.71Misc. ReceiptsGross Revenue Receipts 1932.46 774.48 2254.71Power purchase cost (including transmission charges 1889.86 998.45 2271.82Gross Margin 42.6 -223.97 -17.11Employee cost 199.53 96.4 216.19Administrative and General expenses 21.13 10.27 23.43Repair and Maintanance 43.59 21.62 49.63total cash O&M Expenses 264.25 128.29 289.25Net Contribution -221.65 -352.26 -306.36Intrest and other Finance charges 96.01 48 103.63

INPUT (MUS)

SALE(MUS) BILLING

ASSE SMENT COLL OF

HIGH VALUE Govt. Arrear total Collection

AT&C Loss

EFFICIENCY (Rs/Cr) CURRENT Irrigation+ efficiency

ASSESMENT PWW including Arrear

4901 3962 75% 1266 94% 1147.1 41.72 48.22 1237.04 98% 26.40%

3652 2809 77% 1034 96% 970.85 23.43 23.39 1017.67 98% 24.30%

8553 6500 76% 2300 95% 2117.95 65.15 71.61 2254.71 98% 25.50%

CAPITAL STRUCTURE

The UPCL received Equity Share Capital amounting to Rs. 5 Crores from the government

of Uttarakhand during the year 2001-02. Allotment of shares against the same has been made. No

further Equity was added in 2007-08.

Interest payable on loans from Bank has been accounted for as and when debited by the

Bank. Interest received on fixed deposits with Bank and others has been accounted for on accrual

basis.

PROJECT PART 2.

CONTENTS1.Introduction of topic2.Methodology3.objective4.Data Analysis,Interpretation5.Conclusion6.Limitation7.Recommendation8.Bibliography Reference

INTRODUCTION

BUDGET:-

A budget is a quantitative expression of a plan of action relating to the forthcoming budget period. It represents a

written operational plan of management for the budget period. It is always expressed in terms of money and quantity.

It is the policy to be followed during the budget period for attainment of specified organizational objectives.

A budget is defined as follows:

“A financial and / or quantitative statement prepared and approved prior to a defined period to time, of the

policy to be pursued during that period for the purpose of attaining a given objective.”

Essentials of budget are as follows:

It is a financial or monetary and / or quantitative statement.

It is prepared for a specified period.

It is prepared prior to a defined period of time.

It is a plan of the policy to be pursued during the budget period.

It is prepared to attain the given objectives.

“A budget is a predetermined statement of management policy during a given period which provides a

standard for comparison with the results actually achieved.”

“A budget is a written plan covering projected activities of a firm for a defined time period.”

BUDGETING:-

Budgeting is a process of preparing budgets and further control aspects are involve in its procedure.

“Budgeting is a kind of future tense accounting in which the problems of future are met on paper before the

transactions actually occurs.”

“Budgeting is the preparation of comprehensive operating and financial plans for specific intervals of time.”

BUDGETARY CONTROL:-

“The term Budgetary Control is applied to a system of management accounting control by which all operations and

output are forecast ahead as far as possible and the actual results, when known, are compared with the budget

estimates.”

“Budgetary Control is a system which uses budgets as a means of planning and controlling all aspects of producing

and selling commodities or services.”

The essential features of Budgetary Control are as follows:-

Establish a budget or target of performance for each department or function of the organization.

Compare actual performance with the budget.

Ascertain the reasons for the difference between actual and budgeted performance.

To fix the responsibility of executives for not achieving budgeted figures.

Take suitable remedial action so that budgeted performance may be achieved.

Revise budgets if necessary.

OBJECTIVES OF BUDGETARY CONTROL:-

The main objectives of budgetary control may be summarized as follows:

To provide an organized procedure for planning. It provides a detailed plan of action for a business over a

definite period of time.

To coordinate all the activities of various departments of a business firm in such a manner that the maximum

profit will be achieved for the minimum use of resources.

To provide a means of determining the responsibility for all deviations from the plan (budget), and to

supply information on the basis of which necessary corrective action may be taken.

BASIC ESSENTIAL/REQUIREMENTS OF A SOUND BUDGETERY CONTROL

These are as follows:

A Clearly Defined Organization

An Adequate Accounting System

A Clearly Defined Policy

Preparation of Budgets by Responsible Executives

Logical Sequence in Budget Preparation

Cost of the System

Reasonably Attainable Goals

Budget Education

Constant Vigilance

Flexibility

Active Support of the top management

ADVANTAGES OF BUDGETING OR BUDGETARY CONTROL

It has following advantages:

It guides the management in planning and formulation of policies and enables them to think ahead.

Budgeting coordinates the activities of various departments and functions of the business.

It defines the objectives and policies of the undertakings as a whole.

It increases production efficiency, eliminates waste and controls the costs.

It aims at the maximization of profits through effective cost control, and the proper utilization of the

resources and existing facilities of the business.

It sets out plan of action and targets to be achieved by departments as well as by individuals.

So, everyone knows for what he is responsible and how should he do it. This develops team spirit.

Budgets act as a measure of efficiency of departments and persons working in the organization because

budgets provide a yardstick against which actual performance of departments and employees can be

compared.

A budget motivates executives to attain the given goals.

It provides basis for introducing incentive remuneration plans based on performance.

Functions of planning, coordination and control can be better performed with the help of the

budgetary control.

LIMITATIONS OF BUDGETING OR BUDGETARY CONTROL

The main limitations are as follows:

The Budget plan is based on estimates: Budgets are based on estimates and estimates are based mostly on

available facts and best managerial judgment.

Danger of rigidity: Budget programme should be continuously revised to adjust to the changes in business

conditions and management policies. Budgets will lose much of their usefulness if they acquire rigidity.

Budgeting is only a tool of management: Budgetary control implies the preparation of budgets and their

administration also. As such, a mere preparation of budgets does not mean that their execution is automatic.

Expensive technique: Besides the above limitations, it is also necessary to consider the cost associated

with the introduction of a comprehensive budgetary control programme.

CLASSIFICATION OF BUDGETS

A. Classification according to time:-

Long term budgets:

o These budgets are related to planning the operations of an organization for a period of 5 to 10

years. In fact, these budgets are concerned with planning of the operations of a firm over a

considerable long period of time.

Short term budgets:

o These budgets are designed for a period of 1or 2 years. These are usually prepared in physical as

well as in monetary units.

Current budgets:

o These budgets are designed for a very short period, say, a month or a quarter. These are essentially

short term budgets adjusted to current conditions or prevailing situations.

B. Classification according to function:-

Sales Budget:

o The sales budget is the most important functional budget. The forecasted quantities of sales and the

value of sales are presented in this budget. It is the starting point in preparing other functional

budgets i.e., it is the key stone of budget structure. It can be prepared showing sales under any one

or combination of the following headings:-

a) Product wise: If a company is producing more than one product, then estimate of sales of each product are

presented.

b) Territory wise: where the sales of each product in quantities and values are shown territory wise.

c) Customer wise: A concern may have different types of customers like government departments, foreign

companies and private companies. Therefore sales can be presented customer wise.

d) According to salesmen: Presenting sales according to salesmen may exhibit a relative view of sales

performance of different representatives.

e) Period wise: In order to determine trend, it may be necessary to present the sales according to month,

quarter or week.

Production budget :

o After preparing the sales budget, the production budget is prepared. It specifies the number of units

of each product that must be produced to satisfy the sales forecasts and to achieve the desired level

of closing finished goods inventory.

Materials budget :

o It is concerned with material needed for budgeted output. Material budget are of two types:-

a) Materials Requirement Budget: This budget helps in preparing purchase budget and in planning

purchases. It also enables fixation of stock levels of materials for inventory control.

b) Materials Purchase budget: Purchase budget is concerned with purchases for the budget period, i.e., the

purchase budget shows the purchase plan of an organization during the budget period.

Direct Labour Budget :

o The direct labour budget will ensure that the plan will make the required number of employees of

relevant grades and suitable skills available at the right times.

Selling and Distribution Overhead Budget:

o This budget shows all the forecasted expenses to be incurred on selling and distribution of finished

goods during the budget period.

Administration Overhead Budget:

o This budget represents the estimated expenditure of administration. Administrative expenses in an

organization will be incurred for the following activities:

a) Formulation of policies

b) Directing the organization

c) Controlling the operations of an organization etc.

Factory Overhead Budget :

o Factory overhead or manufacturing overhead budget shows the estimated manufacturing expenses

to be incurred during the budget period. Factory overhead, as we know, comprises indirect

materials, indirect labour, and indirect factory expenses. These items of overhead may be classified

into fixed, variable and semi variable category.

Research and Development Budget:

o Research has now become a continuous activity in many industries. The preparation of research

and developments budgets should be based on reasonably accurate estimates and should be

flexible.

Cash Budget :

o The cash budget is developed only after all the others functional budgets are prepared and, in fact,

this is the most important of all the functional budgets. This budget is also called the ‘Financial

Budget’.

C. Classification according to flexibility :-

On the basis of flexibility, the budgets can be classified into:

Fixed budget:

o It is defined as one, “which is designed to remain unchanged irrespective of the level of activity

attained.” The basic assumption of this budget is that there will not be any change in the budgeted

level of activity i.e., this budget is prepared on the assumption that output and sales can be

estimated with a fair degree of accuracy.

Flexible budget :

o It is defined as one, “which is designed to change in relation to the level of activity attained.” Since

for each level of activity there is a budget, flexible budgeting involves the construction of a

series of fixed budgets for different levels of activity.

BUDGET IN CONTEXT OF UPCL

There are two types of budget prepared by UPCL which are as under:

I. Revenue Budget

II. Capital Budget

Revenue budget :

o This budget is prepared with reference to decision regarding existing assets. Examples of this budget can be

repair and maintenance, employee salary, maintenance of office, administrative expenses, interest and

depreciation etc. Out of these expenses employee salary, administrative and general expenses, interest,

depreciation are of nature of fixed expenses and repair and maintenance are of nature of semi variable

expenses.

Capital Budget :

o This budget is prepared with reference to decision related to fixed assets or long term investments which

yield return over a period of time. The decision area referred to is known as capital budgeting.

The following guidelines shall be followed for preparation of the revenue budget:

Operations and Maintenance Expenses:

o All executing agency shall ensure that the estimates shall be prepared and approved by the

competent authorities. The estimates shall be prepared as per the enclosed guidelines and in

the enclosed formats. In case, any particular head of expenses is not applicable to any unit, it may

be ignored.

Employee Cost:

o The employee cost shall be budgeted for the existing employees as well as the manpower to be

deployed at the new substations as per the approved manpower structure. The Concerned

Executive Engineer/Dy. General Manager Shall ensures that the manpower costs of all the existing

and new Substations/lines are covered in the budget proposal of the unit. All the costs pertaining to

employees including company’s contribution towards pension, EPF, Gratuity, Bonus, LTA and

other terminal benefits shall be included while budgeting for employee costs.

Administrative and General Expenses:

o The Administrative expenses shall be budgeted for the existing substations/offices as well as for

the new substations/offices. This expenses mainly includes Rent, Rates & Taxes, Insurance,

Postage & Telegrams, Legal Charges, Audit fees, Technical fee, consultancy charges, vehicles

running & maintenance charges, conveyance, freight, watch & ward expenses, printing &

stationery expenses, advertisement etc.

Revenue and Other Income:

o The estimated revenue and other income shall be provided in format A of the Revenue Budget. It is

prepared on the basis of previous year energy purchases, forecast for consumption increased based

on new connections i.e. Domestic & Industrial which may be released in current year, season

impact on demand etc. Accordingly assumptions taken for energy purchases and Transmission,

Distribution and commercial losses and energy sold for the next year budgeted. Rates for energy

purchased for previous year and current year taken on the basis of ARR approved by Uttarakhand

Electricity Regulatory Commission.

The preparation of the Capital Budget:

Planning:

o Firstly planning is made for the projects which has to be started and are compulsory for

improvement in system to cover the increased demand.

Approval of Project:

o Based on the requirement, works approval has to be taken from Director (Operation) & Director

(Project).

Preparation of Estimates:

o The estimates shall be prepared as per the enclosed guidelines and in the enclosed format. The

executing agency shall ensure that all the direct and indirect costs shall be accounted for in the

estimates.

Projects Funded By Schemes:

o The budget for the projects funded by schemes like REC, NABARD, SIDCUL, ADB, PNGY,

MNP, Kutir Jyoti, APDRP etc. shall be provided in the enclosed formats. It shall be ensured that

proper planning shall be made before providing the budget estimates for 2008-09 and the

expenditure budgeted for shall be utilized effectively and efficiently in the same financial year, in

order to avoid payment of additional interest costs, in respect of unutilized costs to the financial

institutions. In case of costs escalation of the projects already approved by financial institutions,

the revised proposal along with the reasons for escalation shall be worked out and shall be

submitted separately.

Projects Funded By Deposit Schemes:

o New connections HT / LT released are covered under this head. Consumers who apply for new

connections shall deposit the amount which may incur on release of new connection. Consumer

will deposit all expenses incurred on new sub-station, new lines, poles etc.

System Improvement:

o Works which neither cover any schemes nor under deposit works but seems necessary for

continuous power supply and improvement in present system are beard by the UPCL itself through

their internal resources.

o The estimates shall be prepared as per the enclosed guidelines and in the enclosed format. The

executing agency shall ensure that all the direct and indirect costs shall be accounted for in the

estimates. It includes those works which are not covered under any schemes.

All capital work proposals must be supported with the following, otherwise it would not be possible to arrange

sources of financing for the same.

Administrative approval (Number and date in case of new projects)

Technical sanction (Estimate number and date for both new and old ones)

Estimated cost/Revised Estimate of the project (Funding component wise)

Expenditure incurred during the 1st six months of the current financial year (Funding component wise)

Physical status of the work and scheduled period of completion

Cost escalation, if any

GUIDELINES FOR PREPARATION OF BUDGETS

1. Preparation of Estimates : The estimates shall be prepared after considering the following inputs :

a) Direct Materials: These are the materials which are directly consumed in the final product and can

be identified separately in the project. For example Transformers in case of Substations, Conductors in case of Lines,

Cement in case of Civil Works, etc. These are those materials whose consumption directly varies with the projects.

b) Direct Labour: This includes the labour cost of the employees/contractual labourswho are directly

associated with the project. For example, the salaries of the JE’s/AE’s and other staff who are directly and only

looking after a particular project.

c) Direct Overheads: This includes the expenses which are directly incurred in the project. These expenses

though do not form a substantial part of project cost but they are incurred only for the project under execution. For

Example, vehicle rent and fuel etc. of the engineer who are directly involved in the execution of the project.

d) Indirect Material: These are the materials which are though consumed in the project. These materials

includes consumables, lubricants etc.

e) Indirect Labour: This includes the labour costs of the employees who are indirectly associated with

the execution of the projects. For Example salaries of staff working in the office of Executive Engineer/Dy.

General Manager/General Manager/Corporate Office.

f) Indirect Expenses: This includes the expenses which are indirect to the cost of the project. It may include

administrative expenses incurred on indirect employees. For Example, Office rent of Corporate Office employees

etc.

g) Interest during Construction (IDC): It is interest cost payable to the financial institutions which is incurred

from the date of the start of the project till its completion. From the date of start, we mean the date of start of the

first activity related to the project. The first activity may be the date of route survey, date of estimation, date of

approval of the estimates, sanction of loan of the project, date of tender for procurement/contracts etc. In other

words, we can say that, it is the date from which the inflow of funds starts for the project. In fact, the interest is

payable from the date of drawl of funds from the financial institutions. IDC depends upon the time for the

completion of the project and the period of drawl of funds from financial institutions.

2. TREATMENT OF THE ABOVE ITEMS IN ESTIMATES:

a) Direct Materials: The direct materials shall be included in the estimate at their latest rates. The basis

of the rates shall be average of the last three tenders or the last tender whichever is higher. If required, quotations, by

way of enquiry may be taken in order to estimate the correct rates. Necessary provisions shall also be made in the

rates of materials to account for inflation depending upon the earlier trends and present market values. The variation

in rates due to time difference between preparation of estimates and placing of purchase order and time difference

between placing of order and completion of project shall also be accounted for depending upon the past trends shall

be accounted for on a justified basis. The concerned executive engineer and the DGM (projects) shall ensure that the

executed rates do not exceed more than 5% of the estimated rates.

Similarly, the quantities shall also be frozen at the time of estimates. If necessary, pre tender bids for

survey, design may be awarded to finalize the final quantity for the preparation of estimates. The concerned

Executive Engineer and the DGM (projects) shall ensure that the executed quantity does not exceed more

than 5% of the estimated quantity.

b) Direct Labour: The Direct Labour includes the value of erection cost awarded to the contractor. The

erection cost shall be estimated on the following basis:

1. The unit of erection to be decided in advance which shall form the basis of rates.

2. The cost per unit shall be determined after considering the labour rates and time required to erect a

particular unit. For example, if the unit rate is Cu.m, the rate per Cu.m. shall be labour rate multiplied

by time required to erect one unit. The unit rate shall be supported by detailed calculations.

3. Necessary provisions shall also be made to account for inflation due to increase in labour rates between

the time of preparation of estimates and completion of the project.

4. The quantities shall also be frozen at the time of estimates. If necessary, pre tender bids for survey,

design may be awarded to finalize the final quantity for the preparation of estimates.

5. The concerned Executive Engineer and the DGM (projects) shall ensure that the executed quantity and

executed rates does not exceed more than 5% of the estimated quantities and estimated rates.

The salaries of the departmental employees who are directly supervising the projects shall be shown

separately in the head Direct Labour in the estimates. If a particular employee is looking after more than one project

then his salary shall be divided in all the projects in the ratio of the approved / estimated costs/ value of the projects.

If the particular employee is also looking after O&M activities his salary shall be first divided between O&M and

projects on the basis of approved budgets for O&M and projects for the division and the amount of salary finally

segregated for projects shall be divided between all the projects on the basis of approved/ estimated costs/ value of

the projects. Necessary provisions shall be made for increase in salaries of the employees due to promotions /

increments / increase in dearness allowance etc.

c) Direct Overheads: The direct overheads are the expenses which are incurred specifically during the

project. For example, survey costs, advertisement of tenders, engaging a consultant, freight on materials if not

included in the cost of materials, vehicle expenses, telephone expenses, etc of the employees directly

supervising the project. The direct overheads shall be shown separately under the above head on nearest actual/

estimated basis. If the expenses are incurred for more than one project, it shall be distributed on all the

projects in the ratio of approved / estimated costs/ value of the projects. Necessary provisions shall be made for

increase in expenses due to inflation, increase in quantity etc. The concerned Executive Engineer and the DGM

(projects) shall ensure that the executed expense does not exceed more than 5% of the estimated expenses.

d) Indirect Material: The indirect materials shall be included in the estimates at their latest rates. The basis of

the rates shall be average of the last three tenders or the last tender whichever is higher. Necessary provisions shall

also be made in the rates of materials to account for inflation depending upon the earlier trends and

present market values. The variation in rates due to time difference between preparation of estimates and

placing of purchase order and time difference between placing of order and completion of project shall also be

accounted for depending upon past trends on a justified basis. The concerned Executive Engineer and the DGM

(projects) shall ensure that the executed rates does not exceed more than 5% of the estimated rates.

Similarly, the quantities shall also be frozen at the time of estimates. If necessary, pre tender bids for

survey, design may be awarded to finalise the final quantity for the preparation of estimates. The concerned

Executive Engineer and the DGM (projects) shall ensure that the executed quantity does not exceed more

than 5% of the estimated quantity.

e) Indirect Labour: The indirect labour includes the salaries of the employees not directly associated with the

project but a part of their time is involved in the execution of the project.

For example, the salary of Corporate Office Employees like employees involved in Finance, Procurement, Design,

Salaries of Directors, employees in the office General Manager’s Office, Dy. General Manager’s Office,

Executive Engineer’s office who are not directly supervising the projects. The concerned Executive Engineer shall

ask for the information of indirect labour from all the higher offices and the higher offices shall provide the

information regarding indirect labour to the concerned Executive Engineer. The basis of segregation of indirect

labour cost shall be as follows:

(1) A list of total no. of employees shall be prepared and the salary cost of each employee shall be

mentioned against each employee.

(2) It shall be identified as which employees are working under projects or O&M. If the employees are

identified separately for O&M and projects, their salaries shall be allocated accordingly.

(3) If the particular employee is also looking after both projects and O&M activities his salary shall be first

divided between O&M and projects on the basis of approved budgets for O&M and projects for the divisions under

the unit.

(4) The amount of salary finally segregated for projects shall be divided between all the projects on the basis of

approved/ estimated costs/ value of the projects.

f) Indirect Overheads: Indirect Overheads shall be allocated in the ratio of the approved/ estimated costs/

value of the projects. The Concerned Executive Engineer shall ask for the information of indirect overheads

from all the higher offices and the higher offices shall provide the information regarding indirect overheads

to the concerned Executive Engineer. The procedure for allocation of indirect expenses shall be in the same

lines as of indirect labour.

g) Interest during Construction (IDC): In order to estimate IDC, the phasing of the project is required to be

made in respect of requirement of funds for the project. The timeliness shall also be defined for the completion of the

project. The rate of interest shall be prevailing market rate of

the lending institutions. Necessary provisions shall also be made for increase in the interest rates. Let us consider an

example:

Let the total cost of the project be Rs. 10.00 crores, duration of completion is 2 years, rate of interest be 10% and the

draw downs be as follows:

On the start of project - Rs. 2.00 crores

After six months - Rs. 4.00 crores

After one year - Rs. 3.00 crores

After one & half year - Rs. 1.00 crores

The IDC shall be calculated as follows:

Interest on Rs. 2.00 crores @ 10% for 2 years + Interest on Rs. 4.00 crores @ 10% for 1year 6 months + interest on

Rs. 3.00 crores @ 10% for 1 year + Interest on Rs. 1.00 crore @ 10% for 6 months.

Interest during construction shall be shown in the estimates separately. If required, assistance in this

regard may be taken from Corporate Office.

ANNUAL CAPITAL BUDGET FOR THE YEAR 2008-09

1. Projections for Capital Budget for 2008-09:

The projection for Capital Works for the year 2008-09 has been taken under followings Schemes / Heads:

UPCL’s Internal System Improvement Works

State Plan (LT System Strengthening - Renovation & Up-gradation Works)

State Plan (PTW / Nalkoop)

State Plan (Providing Earthing in LT System)

District Plan

Deposit Works

Rural Electrification (Rajeev Gandhi Grameen Vidyutikaran Yojna)

A Statement showing Scheme-wise details of Capital Budget is enclosed at Appendix-1.

2. Scheme-wise / Head-wise Projection of Capital Works:

A- UPCL’s Internal System Improvement Works

Capital works for an amount of Rs.63.91 Crores have been envisaged to be undertaken in FY 2008-09 under the above head. The

details of major works under Internal System Improvement Works to strengthen the distribution network system, metering,

commercial backbone, consumer database and civil works. A list major works envisaged under this head are as follows:

Name of Works Estimated Cost

i) Construction/Upgrading of 33/11 KV S/s Rs. 8.67 Crores

ii) Construction/Upgrading of 33 KV Line Rs. 2.27 Crores

iii) Construction/Upgrading of 11 KV Line Rs. 9.39 Crores

iv) Installation/Upgrading of DTRs Rs. 5.50 Crores

v) Construction/Strengthening of LT Lines Rs. 5.95 Crores

vi) Installation of Meters/Cubicles/AMRS Rs. 18.77 Crores

vii) AB Conductors & Theft Prevention Measures Rs. 3.50 Crores

viii) Consumer Service Centres Rs. 1.13 Crores

x) Civil Works Rs. 4.87 Crores

Funding for carrying out the above works is proposed as follows:

i) Equity Contribution from GOU Rs. 5.00 Crores

ii) Internal accruals Rs. 13.91 Crores

iii) Funding from State Government Rs. 45.00 Crores

Total:- Rs. 63.91Crores

B. State Plan (LT System Strengthening-Renovation & Up-gradation Works)

As per GOU’s Annual plan FY 2008-09, a provision of Rs.10.00 crores has been kept for UPCL as Loan in the State Budget for

the above work.

To take up different renovation and upgradation works in the LT distribution system, a project report amounting Rs. 1295.92

Crores has been prepared and submitted to GOU’s for approval & funding from the State Government. Simultaneously, Circle-

wise and work-wise Detailed Project Reports (DPRs) are under preparation for submission to the State Govt. and financial

institutions.

C. State Plan (PTW / Nalkoop)

As per GOU’s Annual Plan 2008-09, an amount of Rs.5.00 Crores has been provided as Grant for the above work.

D. State Plan (Providing Earthing in LT System)

As per GOU’s Annual Plan 2008-09, an amount of Rs.10.50 Crores has been provided as Loan for the above work.

E. District Plan

As per GOU’s Annual Plan 2008-09, an amount of Rs. 10.65 Crores has been provided as Loan for the above work. (Details

enclosed at Annex-B).

F. Deposit Works

An amount of Rs.51.30 crores has been estimated for works under this head in the financial year 2008-09. The details of major

deposit works envisaged in FY 2008-09 are as follows:

Name of Works Estimated Cost

(i) Construction / Upgradation of 33/11 KV S/s Rs. 18.75 Crs

(ii) Construction of 33 KV O/H new Lines & Bays Rs. 13.33 Crs

(iii) Construction of 11 KV Bays, Lines & System Rs. 9.02 Crs

(iv) Installation of new 11/0.4 DTRs Rs. 2.93 Crs

(v) LT System Strengthening Rs. 7.27 Crs

G. Rural Electrification (Rajeev Gandhi Grameen Vidyutikaran Yojna)

The REC-funded projects under the RGGVY Scheme, involving 13 districts of the State are under progress and financial progress

of Rs.499.10 Crores has been achieved as of 31st March, 2008.

An amount of Rs.150.00 crores has been provided in the Capital Budget for FY 2008-09, out of which 90% shall be released

from REC Limited under Central Government assistance as per the RGGVY Scheme and balance as Loan from the State Govt.

ANNUAL REVENUE BUDGET FOR THE YEAR 2009-10

1. Review of Revenue Performance of previous years

1.1 Energy Purchase & Sale (MU)

The Energy Input for the FY 2008-09 at MU, is higher than that of FY 2007-08. Energy Input for the FY 2009-10

has been projected at MU considering % increase over Energy Input of FY 2008-09.

Year-wise Energy Comparison

Table-IFinancial Year 2007-08 2008-09 2009-10

(Actual) (Actual) (Projected)

Energy Input (MU) 6732.05 8194.60 13243.93

% Rise/Fall Over last year - +21.74% +16.38%

Year-wise Energy Input, Billing & Loss for the year 2008-09 vis-à-vis 2007-08 and projected for FY 2009-10 are as shown below at Table – II.

Year-wise Input / Billing and Distribution Loss %

Table-II

Financial Year 2007-08 2007-08 2008-09 (Actual) (Actual) (Projected)

Billing (MU) 4736

Energy Input (MU) 6732

Dist. Loss % 29.65%

2. Projections for Revenue Budget - FY 2009-10

2.1 Sales & Revenue

The projection of Sale of energy for the FY 2009-10 has been estimated on the category-wise sales

based on the trends over the previous years. Three key parameters - Number of Consumers,

Contracted Load & Specific Consumption for the past 4 years as well as the loss reduction efforts

for the current financial year have been used to realistically forecast the demand for FY2009-10.

The following is the category-wise demand/ sale projected for FY 2009-10:

2.2 Power Purchase Cost

The expenditure on power purchase cost for the FY 2009-10 at Rs.1,939 crore has been projected on

the basis of the actual power purchase bills for the period Apr-08 to Sep-08. The estimated power

availability from various firm sources has been made on the basis of:

- Indicated availability by various generators, and

- Past availability trends and other available information in the absence of specific

indication by some generators.

The cost estimates are based on relevant / respective tariff orders, recent bills, existing

arrangements, notifications etc for various individual sources.

The details of merit order dispatch of power projected for FY 2009-10 is as below:

SOURCES PURCHASE (MU)

CATEGORYDEMAND/ SALE

(MU) %SALE

REVENUE (Rs. Crs)

%REVENUE

EHT 1930 32% 710.24 38%

HT 840 14% 309.12 16%

LT HIGH VALUE (>25 KW) 219 3% 80.10 4%

GOVERNMENT IRRIGATION & PWW

313 5% 92.33 5%

BALANCE LT 2823 46% 696.68 37%

TOTAL 6125 100% 1888.47 100%

UJVNL 3988

NTPC 2241

NHPC 481

OTHERS-(NPC,THDC) 394

IPPs AND UREDA 308

UI & BANKING 991

TOTAL 8403

2.3 O & M EXPENSES

For O & M Expenses including Employee cost, Administrative & General Expenses and Repairs &

Maintenance Expenses, bottom-up approach has been followed by the Corporation, wherein

Unit-wise Revenue Budgets from each Accounting unit in Garhwal and Haldwani Zones are called

for. Those individual Revenue Budgets of the Units are then compiled Zone-wise and then the

Zone-wise figures have been consolidated in the Corporate Revenue Budget at UPCL Head office,

after discussion with the Unit Heads, especially the Revenue Divisions and Circles.

The detail of these expenses projected for FY 2008-09 are enumerated below:

(I) Employee Cost

The Employee Cost of Rs. 13,500 Lakhs for FY 2008-09 has been estimated based on

actual cost incurred during FY 2007-08 and the anticipated rise. The basic salary of

employees is expected to increase on an average 3.5% p.a. The increase in D.A. has been

considered on the basis of prevailing rates and expected increase in DA on half-yearly

basis. Employer’s contribution towards pension & gratuity has been taken at 19.08% of

Basic, DP and DA. The annual financial impact of Rs. 20.00 Crs. for the FY 2008-09

(excluding the Arrear from 01-01-2006 to 31-03-2008) on account of 6 th Pay Commission

Revision has been considered only.

A marginal inflationary increase has been projected in other cost heads pertaining to other

allowances.

(II) Administrative & General (A&G) Expenses

The A&G expenses taken in the budget for FY 2008-09 at Rs. 2,572 Lakhs have been

estimated considering increase in number of Sub-Divisions / Divisions / Circles, increase

in fuel cost, computerization and other revenue expenses over the actual expenses for the

FY 2006-07 and FY 2007-08 due to organic growth of the Corporation and its consumer

base.

UPCL has undertaken a number of focused initiatives and efficiency improvement

programs in the FY 2008-09 to be pursued in future years also. The Corporation has

embarked upon systematic programs in the areas

of metering, meter-reading, billing and collection through adoption of new technologies

and tie-ups with various agencies to improve the Revenue Cycle Management functions.

The Central High Value Consumer Billing System and Key Consumer Cell at Corporate

Office have been established and Corporate Commercial Monitoring system has been put

in place. New Collection improvement measures through setting up ATP

Machines in Towns on BOOM basis have been initiated in Dehradun and are further

rolled out to other Circles and Towns. For all these consumer service improvement

measures and revenue improvement initiatives, financial provisions have been made in

the Revenue Budget.

(III) Repair & Maintenance (R&M) Expenses

The R&M expenses for the FY 2008-09 have been projected at Rs. 6,592 Lakhs. The rise

in R&M expenses on key distribution network assets i.e. Plant & Machinery, Lines and

cable network have been envisaged at 17% over the previous years’ actual expenses. It is

also submitted that in view of the dilapidated state of the LT network, the level of R&M

expenses being projected are essential to ensure quality power supply to consumers.

UPCL also is required to undertake some expenditure under the head “Internal System

Improvement Works” or “Special R&M Expenditure” which involve works of following

nature:

Re-conductoring / Strengthening of old and worn out 33KV, 11 KV & L.T.

Lines.

Augmentation of capacity of 33/11KV, 11/0.4 KV S/S.

Replacement of Old Transformers and damaged poles.

Extension of 11 KV & LT lines & augmentation of 11/0.4 KV S/S & 33KV

lines.

Conversion of single phase/2 phase LT lines into 3 phase LT lines.

Civil works, i.e. R&M and modification/extension of Buildings, Roads, Control

rooms, etc.

3. Depreciation

Depreciation for the FY 2008-09 has been projected at Rs. 5,352 Lakhs on the value of Fixed Assets,

considered by Hon’ble UERC in its Tariff Order. The computation of depreciation has been made on the

basis and the methodology adopted by the UERC in its last Tariff Order.

4. Interest & Finance Charges

The estimation of interest and finance charges for the FY 2008-09 is Rs. 6,922 Lakhs and has been

calculated separately for various loans under different schemes.

The interest charges in context of Loans/Liabilities i.e. GPF Liabilities, CPSU’s dues and power purchase

dues, transferred to UPCL under the Transfer Scheme have not been

Calculated and projected for FY 2008-09, pending financial restructuring and final resolution of these

issues.

5. Provision for Bad & Doubtful Debts

A provision of Rs. 4,721 Lakhs at a conservative level of only 2.5% of the revenue billed has been projected

for the FY 2008-09. On finalization of the amount to be written-off, the same shall be apportioned from the

amount set aside as Provision for Bad & Doubtful Debts.

6. Financial Projections

The Financial Projections for the Annual Revenue Budget Estimates for the year 2008-09 is enclosed at

along with the relevant Schedules attached there.

7. Revenue Performance Budget & Monitoring:

It is placed before the Board that, the monthly and annual Revenue Billing and Collection Targets have

already been fixed for each of the Divisions/ Circles/ Zones separately for High Value consumers, Govt.

consumers and balance LT consumers, with LT performance monitoring system of Divisions at Corporate

level.

Statements showing analysis of variances in Revenue Performances of Zones against the approved Revenue

Budget for FY 2007-08 and the Zone-wise Revenue Budget Targets for FY 2008-09 are enclosed for kind

perusal of the members of the Board.

RESEARCH METHODOLOGY

MEANING OF RESEARCH:

Research in common parlance refers to a search for knowledge. One can also define research as a scientific &

systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation.

The Advanced learner's Dictionary of current English lays down the meaning of research as a 'careful investigation

as inquiry especially through search for new facts in any branch of knowledge.’ Redman & Mory define research as

a 'systematized effort to gain new knowledge.’ Some people consider research as a movement, a movement from the

know to the unknown. It is actually a voyage of discovery. We all possess the vital instinct of inquisitiveness for,

when the unknown comforts us, we wonder & our inquisitiveness makes probe & attain full & fuller understanding

of the unknown. This inquisitiveness is the mother of all knowledge & the method which man employs for obtaining

the knowledge of whatever the unknown can be termed as research.

Research is an academic activity & as such the term should be used in a technical sense. According to Clifford

woody research comprises defining & redefining problems, formulating hypothesis or suggested solutions,

collecting, organizing & evaluation data, making deductions & reaching conclusions, and at last carefully testing the

conclusions to determine whether they fit the formulating hypothesis. D. Slesings & M. Stephenson in the

encyclopedia of social sciences define research as "the manipulation of things, concept or symbol for the purpose of

generalizing to extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the

practice of an art". Research is, thus, an original contribution to the existing stock of knowledge making for its

advancement. It is the pursuit of truth with the help of study, observation, comparison & experiment. In short, the

search for knowledge through objective & systematic method of finding solution to a problem is research. The

systematic approach concerning generalization & the formulation of a theory is also research. As such the term

'research' refers to the systematic method consisting of enunciating the problems, formulating a hypothesis,

collecting the facts of data, analyzing the facts & reaching certain conclusion either in

the form of solutions towards the concerned problem or in certain generalizations for some the theoretical

formulation.

SOURCES OF DATA:

The task of data collection being after a research problem has been defined & research design checked out. While

deciding about the method of data collection to be used for the study, the researcher should keep in mind two types

of data i.e.:

1. Primary Data

2. Secondary Data.

Primary Data

Primary data is one which is collected by the investigator himself for the purpose of a specific inquiry or

study

Primary data are collected afresh and for first time.

Such data is original in character and is generated by surveys conducted by individuals or research

institutions.

Secondary Data

Secondary Data when an investigator uses the data which has already collected by others such data is called

secondary data.

This data is primary data for the agency that collects it and becomes secondary data for someone else who

uses this for his own purposes.

This can be obtain from journals, reports, govt. publication, publication of professional and research

organizations and so on.

METHODS OF DATA COLLECTION

Method of collecting primary data

Observation method

Interview method

Schedules

Questionnaires

Observation method-: The observation method is used to study relating to behavioral sciences. Ex.-:

Super Market.

Interview method-: The interview method of collecting of data involves presentation of oral stimuli and

reply in terms of oral response. It can be used through personal interviews and if possible, through

telephone interview.

Schedules method-: Schedule may be defined as a Performa that contains a set of questions which are

asked and filled by interviewer in a face to face situation with another.

Questionnaires method-:

In this method questionnaire is fulfilled by individual meet or sent (usually by post & email) to the persons

concerned with a request to answer the questions and return to questionnaire.

Types of Questions-:

Background question

Multiple choice or closed-end question

Intensity question

Free response or open-end question

Collection of Secondary Data

Data which is collected at first hand either by the researcher or a particular person especially for purpose of

the study is known as primary data. Primary data become secondary data to another person for further study

upon the topic.

Example-: internet search engine Google. Available data on this always be the primary data but when we

use to search any topic related to our study called secondary data.

RESEARCH DESIGN:-

A research design is a framework or blueprint for conducting the marketing research project. It details the

procedures necessary for obtaining the information needed to structure and/or solve marketing research

problems.

The present project “Budgeting in UPCL” was studied on the basis of annual reports, records and circulars

of UPCL for last years. The data used in this project is secondary data which is collected from concerned

authorities.

Methodology adopted:

I have studied and understood the requirement of Budgeting for the Organization.

The existing procedure of Budgeting System that is running in UPCL is studied in and understood. For this

purpose existing manuals, annual reports, circulars were studied by gathering information from person concerned

through informal interview.

INFERENCES

The difference between Budgetary Estimate and actual figures in due to following reasons:

Political Reasons:

When there is a political interference and due to that public is influenced then in these conditions UPCL

people does not work and set budgetary estimates are not fulfilled.

Geographical Conditions:

Due to geographical conditions like icefall, rainfall, cyclone, earthquake it is uneasy to do work in these

conditions as provisions made in the budget estimate.

Difficulty in getting clearance:

More than 50% of Uttarakhand is under forest region for which permission is taken from Central

Government to establish lines and Substations.

Global Concern:

If basic material price rises then there is problem of cost escalation.

CONCLUSION

The financial position of U.P.C.L. is not good, in order to have good financial position it should incur only

unavoidance expenses. Like it should convert its loan to equity share capital so that no provision is made for interest.

The accounting system of U.P.C.L. is based on UPSEB rules and it also follows Companies Act, 1956. The costing

system of U.P.C.L. is also not efficient as they do not have any money to conduct business operations so they borrow

loan. Due to that they have to pay interest that’s why its cost of production is high. The working capital management

of U.P.C.L. is also negative.

RECOMMENDATIONS

On the basis of my understanding I think that budgeting in UPCL is managed in a prudent way but in order to

improve its performance there should be a performance based activity wise budgeting because from this type of

performance based budgeting information of different activity of each department is easily collected.

LIMITATIONS

Errors while making calculations are likely to creep in.

Entire calculations are based on secondary data which has limitations with regards to applicability and

accuracy.

Due to time constraint the project suffered serious limitations.

BIBLIOGRAPHY

1. Management Accounting : K. G. Gupta

2. Management Accounting : Dr. A. K. Garg

3. Research Methodology : C. R. Kothari

4. Budget Manual : UPCL

5. Budget Monitoring System : UPCL

6. Annual Reports : UPCL

(2004-2010)