Costing and Budgeting

7/30/2019 Costing and Budgeting

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PROJECT REPORT

ON

COSTING AND BUDGETING

AT

UTTARAKHAND POWER CORPORATIN LIMITED

DEHRADUN

SUBMITTED FOR THE PARTIAL FULFILLMENT OF

MASTER OF BUSINESS ADMINISTRATION

(FINANCE)

(2009-2011)

BY

ROOHI NAAZ

INTERNAL GUIDE EXTERNAL GUIDE

GRAPHIC ERA UNIVERSITY

566/6,BELL ROAD,CLEMENTOWNDECLARATION

I, Lavi Jain, hereby declare that the project entitled Costing and Budgetingis 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.


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ROOHI NAAZ

BBA 5TH


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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.


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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 UNIVERSITYfor 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. Amit Kansal, 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 mentorMr. 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.

ROOHI NAAZ


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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 Programme (APDRP) has been maintained at Rs 800

crore 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 sectors development as well. The overall impact on the sector is neutral .


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


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SOURCES OF POWER


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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.


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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: -

1. 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.

2. 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.


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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:


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Punjab National Bank

State Bank of India

Central Bank of IndiaBank 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.


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(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%.


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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. 9 th

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 and LT/HT (11KV, 33KV, &

66KV) lines in order to maintain the steady and uninterrupted supply of power.


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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 ont 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.


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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.
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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.


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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.


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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.


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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 theORIGINAL 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.


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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

consumers 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 consumers

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 consumers 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.


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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.


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Area Maps:


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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 / Fall

Over last year +13.36% +5.68% +6.05%

Year wise projected energy input, billing & loss for the year 2009-10 vis--vis2008-09 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 6500

Energy Input (MU) 7631 8065 8553AT&C Losses % 33.00% 27.50% 25.50%


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NB: The AT&C Losses for FY 2008-09 & 2009-10 has been shown as per the

norms adopted by the Honble UREC

1. Projection for Revenue Budget FY 2010-11Sales & 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%

NON

DOMESTIC 685.57 10.55% 300.08 13.05%

HT/LT Industry

Govertment

Irrigation &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. 2,271.82Crores 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


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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 4021.47

NTPC 2286.15

NHPC 363.02

OTHERS (NPC,THDC) 409.68

IPPs 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:


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(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. Employers 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 6 th 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


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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.


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

control rooms etc.

2. Deprecation:

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

value of fixed assets considering by Honble 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.

3. 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 CPSUs

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.

4. 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 theamount to be written off, the same shall be apportioned from the amount set

aside as provision for Bad and Doubtful Debts.

5. 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.


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6. 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

Honble 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)


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INPUT

(MUS)SALE(MUS) BILLING

ASSESMENT COLL OF

HIGHVALUE Govt. Arrear total Collection

AT&CLoss

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%


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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.


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PROJECT PART 2.

CONTENTS

1.Introduction of topic2.Methodology

3.objective

4.Data Analysis,Interpretation

5.Conclusion

6.Limitation

7.Recommendation

8.Bibliography Reference


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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.


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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.


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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.


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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


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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.


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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.


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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.


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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.


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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 :


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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.


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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.


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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

companys 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.


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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.


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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


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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 JEs/AEs 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.


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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 differencebetween 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


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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


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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.


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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 Managers Office,

Dy. General Managers Office, Executive Engineers 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.


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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.


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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:

UPCLs Internal System Improvement Works

State Plan (LTSystem 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- UPCLs Internal System Improvement Works

Capital works for an amount of Rs.63.91Crores 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


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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 Croresii) 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 GOUs 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 GOUs 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 GOUs 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 GOUs Annual Plan 2008-09, an amount of Rs .10.50 Crores has been provided as Loan for theabove work.


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E. District Plan

As per GOUs 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.


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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-I

Financial 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--vis 2007-08 and projected

for FY 2009-10 are as shown below at Table II.


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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:


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- 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:

SOURCESPURCHASE

(MU)

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-


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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.Employers 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 6th 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


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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.


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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 Honble 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, CPSUs dues and

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


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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.


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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


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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.


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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-:


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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.


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CLASSIFICATION OF SECONDARY DATA

Source Category Medium Databaseformat

internal

external

Book &

periodical

Government

publication

Non govt.

association

directories

Industry

expert

Special

collection

Hard copy

Local area

online

internet

reference

source

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.


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Research Design

ExploratoryResearch

Design

ConclusiveResearch

Design

Descriptive

Research

Casual

Research

RESEARCH DESIGN: CLASSIFICATION

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.


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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.


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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 thats why its cost of production is high. The working capital management of

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


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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.


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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)


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Costing and Budgeting

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Transcript of Costing and Budgeting