ANNEXURE – A

“Working capital management”

A project report submitted in partial fulfillment of the requirements for the

degree of Master of Business Administration of DSMS BUSINESS

SCHOOL.DURGAPUR.

WEST BENGAL UNIVERSITY OF TECHNOLOGY.

KOLKATA.

By

Binayak Purkayastha

DSMS Business School

Durgapur

ANNEXTURE -B

Student’s Declaration

I hereby declare that the project report entitled “Working Capital

Management” submitted in partial fulfillment of the requirements for the

Degree of Masters of Business Administration In Finance to DSMS BUSINESS

SCHOOL, DURGAPUR.(West Bengal University of technology, West Bengal.

India,) is my original work and not submitted for the award of any other degree,

diploma, fellowship, or any other similar title or prizes.

Place: Durgapur (Binayak Purkayastha)

Date: Reg No.092510710014

Roll No.09251009021

ANNEXTURE - C

A project report

By

Binayak Purkayastha

On

“Working Capital Management”

Is approved and is acceptable in quality and form

(Internal Examiner) (External Examiner)

Name: Name:

Qualification: Qualification:

Designation: Designation:

ANNEXTURE-D

This is to certify that the project report entitled

“Working Capital Management”

Submitted in partial fulfillment of the requirements for the Degree

of

“Masters of Business Administration”

from

“DSMS Business School”

Binayak Purkayastha

Registration No. 092510710014.

Master of Business Administration (MBA)

Has worked under my supervision and guidance and that no part of this report

has been submitted for the awarded of any other degree, Diploma, Fellowship or

other similar titles or prizes and that the work has not been published in any

journal or Magazine.

Certified

Guide’s name:

Qualification:

ACKNOWLEDGEMENT

I take this opportunity to convey my sincere regards and deepest sense of gratitude to Mr. Satyajit Roy Chowdhary (Manager, Finance & Accounts Depatment, the Durgapur Projects Limited) and Mr. Anup Ghoshal (Astt. Manager, Welfare & Training, The Durgapur Projects Limited) for giving me an opportunity to do my fall training and project in his esteemed organization. Given my limited knowledge in Finance sector at the time of joining, this project would not have been a success without their able guidance and timely inputs.

I am also indebted to Mr. Partha Chatterjee (Faculty, Dsms Buiness School, Durgapur) who judged my academics interest and professional aptitude, provided me the most valuable guidance and rendered necessary help and coordination which ultimately yielded the most valuable opportunity for me to make this project a success.

ByBinayak Purkayastha

Roll no. - 09251009021

Department of MBA

Durgapur Society of Management Science

Certificate

This is to certify that this is a bona fide project report on

Working Capital Management of D.P.L (Durgapur Projects Limited)

Submitted by

Binayak Purkayastha

{Roll No: 04 / MBA (Finance)}

Prof. Dr.D.P.Samanta Prof .Partha Chatterjee

(Principal, DSMS Business School) (HOD, MBA Dept)

METHODOLOGY

Research is a diligent and systematic inquiry or investigation into a subject in order to discover or revise facts, theories, application etc. Methodology is the system of methods followed by popular discipline.I furnish below the research methodology used for the project assigned to me.

Company selected for my project:-

DURGAPUR PROJECTS LIMITEDADMINISTRATIVE BUILDINGDURGAPUR-713201

Nature of the business of the company:-

Production, Generation and Distribution of power in West Bengal.

The approaches that are followed to collect the database from the company are

Primary data and Secondary data.

1. Primary data

This primary data are collected directly through various

interview performed with different personnel within and

outside the organization.

2. Secondary data

This secondary data are being collected from the website of

the company. The various data are being collected for further

analysis required for the project are database of various

Budget Estimate, Balance Sheet , Profit and loss account and

accounting policies of the company.

EXECUTIVE SUMMARY

INTRODUCTION

Working capital management is concerned with the problem in attempting to manage the current assets,the current liabilities and the inter-relationship that exists between them.The term current assets refers to those assets which in ordinary course of business can be, or will be, turned into cash within one year without undergoing a diminution in value and ithout disrupting the operating firm.While Current liabilities were those liabilities which intended at their inception to be paid in ordinary course of business within a year, out of the current assets or earnings of the concern.

WORKING CAPITAL=CURRENT ASSETS-CURRENT LIABILITIES.

OBJECTIVE

The main objectives of this project to analyse the working capita of DPL and find out liquidity,profitability,solvency and activity ratio of different units of DPL from financial year 2004-2005 to 2008-2009.Liquidity is essential for smoothly conducting business activities. High liquidity provides flexibility to take advantage of changing market conditions.

With the help of profitability ratios we will measure management’s overall efficiency as shown by the returns generated on sales and investments.Solvency ratio measures the extent to which the borrowed funds support the firm’s assets. The numerator of this ratio includes all debt, short term as well as long term fund and the denominator of this ratio is the total of all assets.Proprietor’s ratio is the ratio between shareholders fund and total assets. This ratio shows the proportion of total assets of a business financed by shareholders fund. This ratio can be used to ascertain the solvency and financial stability of the firm in the long run. Higher the ratio higher the degree of security to the lenders.

DURGAPUR PROJECTS LTD.

(A Government of West Bengal Undertaking)

Regd. Office, Head Office

and WorksCalcutta Office

Administrative Building

Durgapur  -  713201

Fax (0343) - 282-3492

E-Mail :dpmis@dte.vsnl.net.in

1,Shakespeare Sarani (1st Floor)

Calcutta - 700 001

Fax (033) - 282 - 3492

E-Mail : dplcal@cal.vsnl.net.in

FORMATION:-

The Durgapur Projects Limited is a Government Company incorporated on

6th September, 1961, consisting of Coke Oven Batteries, Bye-products Plant, Gas

Grid Project, Thermal Power Plant and Water Works. It is under the

administrative control of the Department of Power, Government of West Bengal.

LOCATION:-

The Company’s Plants and Administrative Offices  are located  within 3 km  

from Durgapur Railway Station and 1 km from the G. T. Road.

BUSSINES:-

The Durgapur Projects Limited  is  the first undertaking of  the  State

Government  which has been engaged in  development of infrastructure  for 

Industries and  was given the stature of an ‘Industry for Industries’. It has helped

in development of various large, medium and small scale industries in and

around Durgapur and also at other places within the State.

ACTIVITIES:-

1.  Generation of power and   its distribution  at 11KV  in  its licensed area at

Durgapur and transmission of surplus power to WBSEB.

2.  Production of   Metallurgical Coke of  Blast Furnace,  Foundries etc., Coke

Oven Gas as industrial fuel  and Crude Coal Tar available from its  Recovery

type  of Coke Oven Batteries.

3.  Treatment and distribution of water for drinking and industrial use.

INFRASTRUCTURE:-

Land1910 acres comprising 1060 acres for Plant and 850

acres   for Township.

Railway

Network

Separate Railway Exchange Yard (DCOP Siding)

with  Railway maintained Weighbridge  facility.

DPL THE EMERGENCE

Dr. Bidhan Chandra Roy was the chief architect of the Durgapur Project

Limited. His vision is visualized today.

A profit making west Bengal government enterprise DPL is justifiability

roaring in the ruhr of Bengal. With Dr.Roy’s personal initiative DPL was started

with a mere capital investment of Rs15 crore has now spread the wings with

more than 1500 crore.

The durgapur project limited was incorporated as private companion 6 th

september1961 and on 15th september1961 the company was took over by state

government. The company previously was managed by durgapur industrial

board constituted under government orders. The durgapur project limited has a

significant role in the nations economy turning the vast coal deposit of the

country into varied wealth for the nation. The formation of the company was

path breaking as the first determined entry of state enterprise in west Bengal into

the field of large scale industry.

Latter the company started its initiation in widely diversified enterprise

comprising coke oven plant, benzol recovery unit tar distillation, gas grid, power

plant, water works,township etc,units allinterlinked and interdependent in a basic

harmony of process.

COMPANY OVER-VIEW:-

Durgapur today assumes a significant position in the industrial map of West

Bengal. It has a whole gamut of manufacturing units - from steel to power

and from cement to mining machinery. In the growth and expansion of this

industrial base, Durgapur Projects Ltd, the multi-utility company, wholly

owned by the West Bengal Government, has been playing a pivotal role since

early 60s. DPL-set up in 1961-is primarily a power utility organization but it

has already made a mark in the market also as a manufacturer of world

standard coke for various metallurgical applications. It also produces coke

oven gas, which is being supplied to the neighboring district of Kolkata. It

produces another by-product, namely, crude coal tar. It's rich human

resources of 450 highly skilled engineers and professionals besides around

5000-trained work force. An 11-member Board of Directors acts as a

watchdog of the organization.

DPL today is a renovated and upgraded power utility. A total of six units of

different capacities have an aggregate 410-mega watt of installed capacity.

After fulfilling total requirement of its command area customers, DPL surplus

power goes to the West Bengal State Electricity Board (WBSEB). DPL is the

only power supplier within Durgapur.

One of the biggest advantages for DPL to serve its clients is its production

facilities being logistically linked with all the three major modes of

transportation- rail, road and sea. Besides, Kolkata and Haldia in the east,

ports like Vishakhapatnam, Chennai in the south and Mumbai in the west

also handle DPL products. Cutting across the states - from east to west and

south to north- DPL is also gearing up to spread its marketing wings abroad.

The proposed list of countries includes Sri Lanka, Bhutan, Dhaka and Qulin.

To ensure quality in every step of the product processing, DPL has a well

equipped laboratory having sophisticated and computerized instruments such

as GSR, CRI, Gas Chromatograph, Spectro photometer etc. Environment is a

key concern to the DPL authorities. The Environment laboratory is equipped

with bacteriological testing kits, ambient air quality testing instruments, stack

monitoring instruments, gas analyzers etc.

The sprawling township with adequate infrastructure facilities speaks for

DPL's concern for its most valuable resources-its employees. Besides

adequate accommodation facilities, the company runs a hospital and an

educational institution to take care of its employees.

BOARD OF DIRECTORS

CHAIRMAN- SHRI A.K.DUBEY.

MANAGING DIRECTOR- SHRI MRIGANKA MAZUMDAR.

DIRECTOR (T&D)- SHRI ALOK ROY CHOUDHURY.

DIRECTORS- SHRI B.K.MAZUMDAR. (I.A.S)

SHRI SUBRATA GUPTA. (I.A.S)

SHRI NILOTPAL ROY.

SHRI B.K.PAUL.

SHRI N.MANGUNATH PRASAD.(I.A.S)

SHRI U.N.BHADURI.(I.A.S)

SHRI R.P.SAMADDAR.(I.A.S)

SHRI S.MAHAPATRA.

REGISTERED OFFICE- ADMINISTRATIVE BUILDING

PO-DURGAPUR 713201

DIST-BURDWAN

WEST BENGAL

KOLKATA OFFICE- AIR CONDITION MARKET

1ST FLOOR

1, SHAKESPEARE SARANI

KOLKATA-700071

POWER PLANT

FIG:-1

The Company   is   generating   power from its   six power units with an

aggregate capacity of 395 M.W and   distributing    to   its    consumers   of    

various categories located in its command area at Durgapur and   the surplus 

power  is  transmitted  through the West   Bengal  State  Electricity   Board  

Grid. The Company ensures steady and uninterrupted supply of power to its

consumers.

Unit  

No.Year of commissioning Present Capacity Renovated Capacity

         I                      10.8.60             30 MW             30 MW

         II                       10.6.60             30 MW             30 MW

         III                       23.6.64             70 MW               77 MW

         IV                       29.6.64             70 MW             77 MW

          V                         4.7.66             77 MW             77 MW

         VI                         1.1.87           110 MW           110 MW

The Durgapur project limited also starts 7th unit of 300MW capacity. This is the

first 300 MW unit in the Eastern region and executed by Chinese company Dong

Fang Electric Corporation.

POWER SUPPLY-TRADE INFORMATION:-

Unlike many other places, a major incentive for any entrepreneur to set up

industrial units, to expand existing units in Durgapur is the steady and

uninterrupted availability of power. Durgapur Projects Ltd is the sole supplier of

power (at 11KV) within Durgapur. It offers an attractive power supply package

to industry:

To maintain the quality of the product, stable power supply is one of the most

important ingredients. The industrial units in Durgapur unlike many other

industrial zones in the country enjoy this inevitablepowersituation.

Even the prospective investors can feel happy and comfortable while

considering new projects in Durgapur industrial belt as DPL has surplus

power and offers a number of incentives to set up units there.

DPL assures:

Continuous availability of power

Quick response for Electricity connection

Tariff concessions to all Industries (11 KV) link to Time-of-the Day

(ToD) metering.

Further incentives offered to new industries, industrial expansion projects

and

Rehabilitation of sick units as approved by the regulatory Commission.

Location and Capacity of three 132/11 KV Grid Sub-stations

"A" ZONE

Location At the factory premises of Hindustan Fertilizer

Capacity 20 MVA

Growth 31.5 MVA

Availability 40 MVA

Advantage ½ KM from G T Road and 3 KM from Durgapur

Railway Station

"B" ZONE

Location By the side of M/S MAMC

Capacity 63 MVA

Growth 31.5 MVA

Availability 40 MVA

Advantage 1 KM from G T Road and 4 KM from Durgapur

Railway Station

132 KV/ 11 KV B- Zone To be constructed

"C" ZONE

Location By the side of M/S Durgapur

Chemicals

Capacity 40 MVA

Growth Under process

Availability 20 MVA

Advantage 3 KM from G T Road and 3 KM from

Durgapur Railway Station

132 KV/ 11 KV C - Zone Under commissioning phase

TRANSMISSION & DISTRIBUTION:-      

The transmission and distribution system of DPL with jurisdiction of an area of

about 60 sq kilometers includes the following :-a) 132 KV  transmission line

measuring 19 circuit  kilometers served through three      sub-stations of 180

MVA capacity.

b) 11 KV transmission/distribution line measuring  393 circuit kilometers

c) LT distribution line network measuring 4250.5 circuit kilometers.

COKE

OVEN

FIG:-2

DPL's Coke Oven Complex is India's largest Merchant Cokery producing Coke

of global quality. 3  Number  4.5 mitre  tall  recovery type Coke Oven Batteries

with 100 oven of width 400 mm along with Coal Washery and Bye-products

Plant. Present Production capacity is 27,000 M.T. which can be increased to

40,000 M. T. with commissioning of 3rd Battery.

COKE:

The Coke Oven plant produces 0.5 million tones of Coke per annum. Coke

produced by DPL has already attained global standard. There are in all 100

ovens. Hard quality Coking coal  required for Coke Ovens  is sourced to  China

and for Soft Quality Coking Coal is  procured from  China and Australia.

Five types of coke are produced at DPL's Coke Ovens. They include Foundry

Grade (+80 mm); BF Grade (25-65 mm); Nut (15-25 mm); Pearl  (6-12 mm) and

Breeze (0-6 mm). While in Foundry and BF Grade the ash content is 12.5%,  in

Nut it is little higher at 12.8%.  In Pearl and Breeze types of Coke, the ash

content is 13.5 %. 

Description #1 #2 #3 #4 #5 Total

No of

Ovens

30 30 - - 40 100

Status Operational  Hot

Blank

Future

Rebuilding

Future

Rebuilding

Operational  

Height

(Mtrs)

4.5 4.5 - - 4.5  

Width

(mm)

400 400 - - 400  

Length

(mm)

13400 13400 - - 13430  

Eff.

Volume M3

21.74 21.74 - - 21.76  

Type Twin flue

Side jet gas

gun system

Twin

flue Side

jet gas

gun

System

- - Twin flue

underjet

heat

regenerative

 

Oven

Availability

100% 100% - - 100%  

FUEL GAS SUPPLY

DPL maintains a 170-kilometre-long gas grid for urban consumers. Its command

area for fuel gas supply ranges from Durgapur to Bally in Howrah district.

DPL's Fuel Gas Supply Capacity & Command Area

Description Coke Oven Gas Network

Capacity (NM3 /D) 200000

Heat Value (Gr) (Keal/NM3) 4500-5100

Distribution Gas Compressor, Gas Holder, Piping,

Metering etc.

Command Area Durgapur to Bally

Gas Grid (KM) 170

WATER WORKS

Originally

commissioned with a capacity of 6 MGD in 1960. The Water Works  was

expanded unto the capacity   41 MGD of water treatment plant for water

available  from Durgapur Barrage on   River  Damodar  of  DVC  for  use  in 

Company's Plant, Township  and  other  industries  and domestic consumers.

To supply industrial and drinking water to the residents of DPL township, the

company maintains its captive water storage facility. It has its own water

treatment plant. While water pumping capacity remains at 35 million gallon per

day (MGD), the water treatment capacity has been augmented by 6 MGD to 41

MGD.

Description Treatment Systems Total

1st Phase 2nd Phase

Pumping Capacity

(MGD)

35 - 35

Treatment Capacity

(MGD)

35 6 41

Type of Treatment Clariflocculator, filter &

chlorinator

Clariflocculator, filter &

chlorinator

 

Chemicals for

Treatment

Ferric Alum, Lime &

Chlorine

Ferric Alum, Lime &

Chlorine

 

Distribution Network Overhead Tank, Pumping

Station & Piping

Overhead Tank, Pumping

Station & Piping

 

PRODUCT QUALITY INFORMATION:

Durgapur Projects Limited's product list include two major product, namely,

Power and Coke and two by-products- Coke Oven Gas and crude Coal Tar. The

company also takes care of both industrial and drinking water requirements for

which it maintains its captive water storage and treatment facilities.

DPL also produces  crude coal tar having 2.5% Moisture and 1.16 Specific

Gravity.

It also produces fuel gas being supplied through a pipeline between  Durgapur

and Bally in Howrah district. To feed the industrial requirement , DPL maintains

comfortable reserve of industrial water. The drinking water requirement of the

resident of the DPL township is also met from captive resereves.

COKE

Types Ash

(%)

VM

(%)

S (%) P (%) CSR CRI M40 M10

Foundry

grade(+80

mm)

12.5 0.8 0.5 0.025 65 24 85 6 to 7

BF grade(25-

65 mm)

12.5 0.8 0.5 0.03 65 22 86 6 to 7

Nut (15-25

mm)

12.8 0.9 0.55 0.03 - - - -

Pearl (6-12

mm)

13.5 1 0.6 0.032 - - - -

Breeze (0-6

mm)

13.5 1 0.6 0.032 - - - -

POWER

Power MU/Yr 2400

FUEL GAS

H2     55-58%

CH4 24-26%

Cn Hm 2.3-2.5%

CO 6-6.8%

CO2 3-4%

O2 0.4%

N2 3.0%

Gross CV (Kcal/NM3) 4500

TAR

Moist (%) 2.5

Specific Gravity 1.16

BI (%) 5.0

TI (%) 7

QI (%) 2.5

WATER

  Installation Capacity

(MGD)

Current Status (MGD)

Industrial Water 21 18

Drinking Water 14 12

PRODUCTION FACILITY

Durgapur Projects Limited's total power generation capacity after the recent

renovation and upgradation, today stands at 401 megawatt (MW). It is engaged

in all the three functional areas of a power utility -Generation, Transmission and

Distribution. It generates and distributes power in an uninterrupted mode at grid

frequency. It has a cluster of six generation units of different capacities. The

largest unit is of 110 MW capacity followed by three of 77 MW each and two of

30 MW each. Two boilers are of B&W, UK make, two of B&W, USA make.

The remaining two boilers are of Mitsubishi and ABL. Except one of BHEL

make, all other five generators are supplied by Siemens. The coal input for all

the six units taken together is 6669 tonnes per day. The power tariff it offers to

all its end users, is reasonably cheaper than many other power utilities in the

country. The growth in power in the DPL command area is around 20% per

annum, the current demand being around120MW which is about 30% of the

total power generation capacity of the utility. It meets local demand through its

captive transmission and distribution networks.

DPL's unit wise power plant capacity, Coal input and Availability

Description Unit I Unit II Unit III Unit IV Unit VUnit

VITotal

Capacity(MW) 30 30 77 77 77 110 401

Coal Input MT/D 504 504 1260 1260 1293 1848 6669

Boiler MakeB&W,

UK

B&W,

UK

B&W,

USA

B&W,

USAMitsubishi ABL  

Generator Make Siemens Siemens Siemens Siemens Siemens BHEL  

Availability (%) 100 100 100 100 100 100  

RENOVATION, MODERNISATION AND UPGRADATION OF

POWER UNITS :

The   Units 1 to 5 Power  Plant  are  being  totally  renovated   and  modernised 

with  a project cost of  Rs. 363 crores carried  out by  M/S  Powerplant

Improvement  Ltd (a joint   venture of Siemens  AG and  BHEL) to be

completed in plases by 31.3.3001. As a result the plant availability will be over

80% and PLF should  increase upto 63.5% and there shall be availability of 

substantial power without interruption.

QUALITY CONTROL AND ENVIRONMENT WING

Durgapur Projects Ltd continuously strives at not only maintaining but

improving the quality of its products further. Water, air and noise pollution is

controlled by sophisticated equipment and monitored closely. The process

control laboratories are fully equipped with sophisticated and computerized

equipments such CSR, CRI, Gas Chromatograph and Spectra Photometer.

The Environment Laboratory has state-of-the-art instruments such as

Bacteriological testing kits, Ambient air quality testing instruments, Stack

monitoring instrument, Gas analyzers, Noise meter and Noise Surrey Systems.

WELFARE ACTIVITIES:

Employees' welfare is one of the  key focus areas of the Durgapur Projects

Limited. Besides a sprawling township, it maintains a Hospital and School.

Afforestation is a regular programme being undertaken by the authorities.The

township, spreading over 850 acres of land , has all the required  facilities near

the river Damodar and Durgapur Barrage having more than 3500 residential

units, schools, market complex, clubs and public transport facilities. DPL meet

the water supply in the entire Durgapur by its water resources. Company also

take part in various social programme which get beneficial to the society. DPL

make good roads which is very essential for communication for both the

company itself and common people. Company contributed Rs.11,075,805 as

first installment and Rs.8.50 Lakhs as 2nd installment for improvement of

Dr.B.C.Roy Avenue and feder Road to DPL plant and township made by PWD.

HOSPITALS

DPL runs a 105-bed hospital, which has both indoor and outdoor patient

departments. The hospital is equipped with modern diagnostic facilities

including a Pathological Laboratory, X-Ray, ECG and Physiotherapy sections

and an Operation Theatre. The hospital has a number of Specialists associated

with different departments.

SPECIAL INCENTIVE FOR NEW INDUSTRIES :

The power tariff of DPL includes attraction for new industries based on Load

Factor, Power Factor, Payment through L/C etc.  Some new  residential  units

have been set up in Durgapur and are availing such incentives.

GROWTH OF POWER DEMAND :

There  has  been   inclusion  of  new  industrial consumers with a contract

demand of about 30 MVA  which is expected to  increase by another about 50

MVA in near future.

EDUCATIONAL FACILITIES

To extend educational facilities to the wards of the DPL employees, it

maintains two Boys' High schools and two Girls' High schools ( controlled by

the West Bengal govt.). Besides, it has four Junior Basic Schools , one Nursery

& KG School and two Hindi Primary schools.

AFFORESTATION PROGRAMME

Afforestation is an important aspect of DPL's social welfare activities. The

company has been undertaking forestation programme on regular basis.

Plantation is done in the vacant land within the plant premises, Hospital and in

the township as well.

POLLUTION CONTROL

Actions were taken to supplement the strength of the Electrostatic

Precipitators through Flue Gas Conditioning by Ammonia, installation of Semi-

pulse Control system etc. The company has taken various other measures also

for improving the quality of Environment. However, DPL paid towards pollution

cost a sum of Rs.1.00 lakhs to West Bengal Pollution Control Board on July

2006.

ENVIRONMENTAL ACTIVITIES :

The waste water of Power Plant is treated in Ash Pond for sedimentation of

pollutants whereas the coke oven waste   water containing  toxic chemicals is

treated by root zone oxidation system and clear water meeting the prescribed 

standard  is  discharged.  For   air  pollution  control  ESPs  have  been

installed/being upgraded to maintain prescribed norms

AWARDS :

DPL Power  Station has been given incentive award for reduced specific

secondary fuel consumption and auxiliary power consumption by the Ministry of

Power, Government of India on two occasions.

ACCOUNTING POLICIES OF COMPANY

1. BASIS OF ACCOUNTING:

The financial statements have been prepared ongoing concern concept under the

historical cost convention and in accordance with applicable accounting

standards.

2. REVENUE RECOGNITION:

a) Revenue from sale of Electricity and A.G.M.C (Annual Guaranteed

Minimum Charges) is recognized on the basis of bills raised for the energy

supplied to the consumers. The sales include fuel surcharge at the prevailing

Government approved rates.

b) Delay payment surcharge bills are raised only after receipt of overdue

bills.

c) Sales of Coke and by-products are accounted for on ex-works delivery

basis. The Company allows discount to customers on the basis of

predetermined / approved quantities lifted as fixed by the Management and the

amount is adjusted with gross sales. In some other cases agreements have been

executed for allowing performance bonus which has been recognized in the

accounts as expenses. The above practice has shown been discontinued with

effect from 09.08.2003:

d) Sales of Water (process and drinking) / Gas are accounted for on the basis of

bills raised for the quantum of water / gas supplied during the year.

e). Miscellaneous Income including sale of scrap, is recognized on delivery and /

or billing basis

f). Interest on bank deposits are recognized on accrual basis

g) Dividend received are accounted for on realization basis

h) Purchases are recognized at the point of transfer of goods! Lifted goods.

i) All items of expenses are considered on a accrual basis unless expressly stated

otherwise.

3. FIXED ASSETS & DEPRECIATION:

a) Land is valued at cost of acquisition and subsequent development thereon.

b) In the case of commissioned assets, where final settlement of bills itch

Contractors is yet to be effected, capitalization is made on the L1asis of

completion certificate issued by the competent officers subject to necessary

adjustment in the year of final settlement

c) To the extent that the funds are borrowed specifically for the purpose of

acquisition of qualifying asset, the amount of borrowing cost identified reduced

by any income on temporary investment of those borrowings is capitalized as

part of the cost of the qualifying asset. Capitalization of borrowing costs ceases

when substantially all the activities necessary for the preparation of the fixed

assets for its intended use are complete.

d) Fixed Assets other than Land and developments, acquired on or after 2nd

April, 1987 are depreciated on Straight Line Method at the rates prescribed in

Schedule-’XIV’ to the Companies Act, 1956 as amended other than those

mentioned in items (e) & (f) below.

e) Fixed Assets acquired prior to 2ndApril, 1987 are depreciated on Straight

Line Methods at the rates consistently followed under Sec.205 of Companies

Act, 1956.

f).The assets used at Power Plant are depreciated under Straight Line Method

(pro-rata basis) in accordance with the provisions of the Electricity Act, 2003, in

terms of relevant regulations published by the WBERC from time to time.

g) Cost of Meters is capitalized to the extent of Credit raised to the Consumers

for electricity in case of meters purchased by consumers.

4. CAPITAL WORK-IN-PROGRESS:

a) Transfer to Fixed Assets from Capital Work-in-Progress is made on the basis

of completion certificates issued by the competent officials.

b) Materials which are issued for construction works at sites are fully charged to

Capital Work-in- progress.

5. INVESTMENTS:

Long term investments in shares are reflected at carrying cost unless there is

diminution in value thereof otherwise than of a temporary nature.

6. INVENTORIES:

a) Stock of raw materials at lower of cost or net realizable value:

For the purpose of valuation of stock of coal FIFO method is applied. Cost

includes purchase price, freight and handling charges after adjustment of claims

lodged for grade variation, missing wagons, and for misdirected coal wagons at

estimated value.

b) Other Raw materials are valued on FIFO method.

c) Stock of finished goods:

i) Valuation is made at lower of cost or net realizable value.

ii) Stocks of Tar at net realizable value.

d) Imported stores in stock are valued at cost plus customs duty, landing and

clearing charges.

e) Closing Stock of Stores and Spare Parts etc. are valued at Weighted Average

Cost.Coal in ovens for processing Coke as at the end of the year is not taken into

consideration.

g) Respect of oil, the value of year end stock is derived after taking into

consideration the aggregate cost of opening stock and materials purchased

during the year and after adjustment of consumption and shortage.

h) Closing stocks of Coal, Coke, etc. are physically verified on Contour Survey

Method.

I) Stock of Printing & Stationery and Medicine are taken on the basis of year-

end physical verification at last purchase price.

7. LIABILITIES:

Liabilities for Purchases and other Expenses are considered in the accounts on

the basis of:

a) Goods Received Notes;

b) Receipts from the Warehousing Agencies;

c) Receipts of Certified Bills of contractors for goods or services as available;

d) Sanction of competent officials, as the case may be, received within 15th June

of the succeeding accounting year

e) Estimates in respect of security expenses, salaries to railway staff, misdirected

wagons etc.

8. CONSUMPTION OF STORES:

a) Consumption of Stores & Spares is considered on the basis of Stores Issue

Vouchers.

b) Chemicals consumed in Water Works are treated as Consumable Stores.

c) Loose tools are charged to Profit and Loss account on purchase.

9. CLAIMS OF THE COMPANY:

a) Claims with the Railways for missing/misdirected Wagons and those with

Transport contractors and suppliers are accounted for as and when the claims are

preferred.

b) Claims lodged with the Insurance and Customs Authorities are accounted for

on settlement/receipt basis.

10. RETIREMENT& EMPLOYEES’ BENEFIT:

Retirement liabilities are in the nature of defined contribution plan and defined

benefit plan.

DEFINED CONTRIBUTION PLAN:

Provident Fund and Employees’ Family Pension belong to this category where

the Enterprise has no other obligation to pay except for the annual contribution

made to concerned Trustees. These are accounted for in terms of accrual

concept.

DEFINED BENEFIT PLAN:

Gratuity and Leave Salary relate to this plan. Under such scheme, employees are

entitled to defined benefit which based on actuarial calculation under Projected

Unit Credit Method in due cognizance of various factors of uncertainties i.e.

death probability, inflationary consequences, premature retirement and other

unforeseen predicaments

11. PRIOR PERIOD ADJUSTMENT:

a) Adjustments which arise due to omissions and errors in booking income and

expenditure, non-adjustment of rebate in power bills, delay in raising/waiving

annual guarantee/surcharge bills etc., in the respective years are passed through

Prior Period Adjustment Account

b) Income & Expenditure of extra-ordinary nature are booked in the current year

as per pronouncement of the relevant accounting standard.

12.MISCELLANEOUS EXPENDITURE TO THE EXTENT NOT

WRITTEN OFF OR ADJUSTED

Share Issue Expenditure is amortized over a period of 10(ten) years.

13. FOREIGN EXCHANGE:

a) The foreign currency transactions are accounted for at the equivalent rupee

realized/incurred as per advice from bankers.

b) The foreign currency transactions remaining unsettled at the year end are

translated at the rates prevailing at the end of the year and the difference is duly

adjusted.

c) Fixed assets acquired from overseas sources out of the proceeds of external

sources of fund (supplier or Bank of financial institution) is capitalized by

exchange loss or gain till the date of bringing the assets in use. Subsequent to

bring the assets schedule, impact of exchange fluctuation towards its financial

source of acquisition is directly charged to revenue.

14. SEGMENT INFORMATION:

a) The Company’s primary segments consist of activities of Power Generation,

Manufacture of Coke & By-products and Processing of Raw Water.

b) Inter-segment transfers are valued at rates approved by the Board of Directors.

c) The company also maintains common service and central workshop units for

which apportionment of common expenses and depreciation to the various

segments have been done at predetermined rates as approved by the management.

d) Unallocated interest on Govt. Loans are apportioned to various segments on the

basis of gross average fixed assets.

15. IMPAIRMENT OF ASSETS:

The test of impairment loss of various assets is done by comparison of carrying cost

of the assets of Cash Generating Units (CGU), with their recoverable value being

the higher of net selling price during assessed life span of the CGU and the

discounted cash flows of future generation and adjustment carried out accordingly,

as per requirement ofAS-28.

16. CONTINGENT LIABILITIES:

Under circumstances of any present obligation arising as a result of a past event

with a probable outflow of resources to settle the obligation for which a reliable

estimate can be made, provision is made in the accounts towards such obligation.

WORKING CAPITAL : Working Capital is more a measure of cash flow than a ratio. The result of this calculation must be a positive number. It is calculated as shown below:

Working Capital = Total Current Assets – Total Current Liabilities Loans are often tied to minimum working capital requirements.

WORKING CAPITAL OF THE DPL :

YEAR 2008-09 2007-08 2006-07 2005-06 2004-05

Current Assets - Current Liabilities

= WORKING CAPITAL

662,22,94,745

- 4103314796

= 2518979949

693,63,42,65

7 - 4594160022

= 2342182635

6449024771 –3584261565

=2864763206

5826460873 -2168359089

=3658101784

4063974040 -2433141198

=1630832842

WorkingCapital = (C.A.- C.L.)

25189799492342182635

2864763206

3658101784

1630832842

0500000000

100000000015000000002000000000

2500000000300000000035000000004000000000

2007-08 2006-07 2005-06 2004-05 2003-04

YEAR

WO

RK

ING

CA

PIT

AL

WORKING CAPITAL

COMMENT: -

Working capital in The D.P.Ltd shows remarkable variation since 2003-04 to 2007-08. During 2003-04 to 2004-05 working capital increases due to a great expectation of bright future from a new power unit (7th unit) as well as less realization from debtors. The expectation yielded some positive result in subsequent years. But due to negative market constraints as well as worldwide problem of depression, the organization failed to creep out the benefit of plant modernization and establishment of new power unit. It can also be mentioned that the organization still trying to revive the project by utilizing its working capital which is very prominent from the above figures of 2005-06 to2007-08.

CURRENT RATIO CURRENT RATIO OF COCK-OVEN GROUP OF PLANTS:

YEAR 2007-08 2006-07 2005-06 2004-05 2003-04

Current Assets . Current Liabilities

= Current Ratio

24,6994,746.53 30,25,97,545.52 =0.82

58,80,03,135.18 35,95,49,243.80

=1.63

677744176 485888107

= 1.39

971185030 481453979

= 2.02

689057186 741298503

= 0.93

*Ideal Ratio = 2:1

0.82

1.631.39

2.02

0.93

0

0.5

1

1.5

2

2.5

3

2007-08

2006-07

2005-06

2004-05

2003-04

YEAR

CU

RR

EN

T R

AT

IO

CURRENT RATIO

COMMENT: - According to conventional rule, ideal current ratio is 2:1 or more is considered satisfactory. In this type ratio is higher, the greater the ability of the company to meet the financial obligations. With analyzing five year data of cock-oven group of plants. From fig. it can be seen that in the year 2003-04 the firm’s current ratio is not satisfactory. But in the year 2004-05 firm maintained the ideal ratio 2:1 which a firm requires to maintain the financial stability between the current assets & current liabilities. In the year 2005-06 again it is declined but in

the year 2006-07 it gradually improved the current ratio. But in the year 2007-08 current ratio is very low according to ideal ratio i.e. not good sign for the firm. Comparing with other years it can be seen that one year ratio is declining while other year ratio is increasing. This means firm’s current ratio is volatile and shows poor liquidity position of the firm. Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit may occur huge loss and huge capital block.

ACID TEST RATIOACID TEST RATIO OF COCK-OVEN GROUP OF PLANTS:

YEAR 2007-08 2006-07 2005-06 2004-05 2003-04

Quick Assets . Current Liabilities

= Acid Test Ratio

3,07,87,302.20 30,25,97,545.52 = 0.10

18,57,79,465.50 35,95,49,243.80

= 0.52

357165934 485888106

= 0.74

674809749 481453979

= 1.40

502582019 741298503

= 0.68

*QUICK ASSETS = Current Assets – (Inventories + Prepaid Expences )*Ideal Ratio = 1:1

0.1

0.520.74

1.4

0.68

0

0.5

1

1.5

2

2007-08

2006-07

2005-06

2004-05

2003-04

YEAR

AC

ID T

ES

T R

AT

IO

ACID TEST RATIO

COMMENT: -According to conventional rule, the Quick ratio is 1:1 or more is considered to be satisfactory. Because the quick assets are equal to current liabilities then the firm can easily meet all current obligations. An asset is liquid if it can be converted into cash immediately without a loss in value. Inventories are considered to be less liquid. With analyzing five-year data of cock-oven group of plants. Here C.O.G.P. quick ratio is 0.68 in 2003-04 which shows poor

liquidity position of the firm and much amount of exposures in inventories. In 2004–05 ratios has increased to 1.40 compared to its previous year 2003-04 which shows sound liquidity position and less amount of exposures in inventories. It means that unit has increased their investment in the inventories but the ratio is not creating any threat for company. While in the years 2005-06, 2006-07 & 2007-08 it again decreased to 0.74, 0.52 & 0.10 respectively and they are very low according to ideal ratio i.e. not good sign for the firm and which shows poor liquidity position of the firm .Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit may occur huge loss and huge capital block.

CURRENT RATIO

CURRENT RATIO OF POWER PLANT:

YEAR 2007-08 2006-07 2005-06 2004-05 2003-04

Current Assets . Current Liabilities

= Current Ratio

234,70,51,744.53 356,81,95,876.63 =0.66

185,12,69,432.05 401,05,10,730.30

=0.46

3111677337 2691743632

= 1.16

3267849961 1219936211

= 2.68

2362173597 1232896593

= 1.92

*Ideal Ratio = 2:1

0.660.46

1.16

2.68

1.92

0

0.5

1

1.5

2

2.5

3

2007-08

2006-07

2005-06

2004-05

2003-04

YEAR

CU

RR

EN

T R

AT

IO

CURRENT RATIO

COMMENT: -According to conventional rule, ideal current ratio is 2:1 or more is considered satisfactory. In this type ratio is higher, the greater the ability of the company to meet the financial obligations. With analyzing five year data of Power Plant. In 2003-04 current ratio of Power Plant is 1.92 that is nearest to Ideal ratio for the company. Comparing with five year it can be seen that in the year 2004-05 the ratio is 2.68 which is higher than the ideal ratio 2:1 which a firm requires to maintain the financial stability between the current assets & current liabilities and it means that the company maintaining a sound liquidity position. In 2005-06 the company’s current ratio is 1.16 that means the company is lack behind of ideal ratio. But in the year 2006-07 & 2007-08 current ratio is very low according to ideal ratio that means the company in extra liabilities i.e. not good sign for the firm. Because in these years company’s refunded the Loans & Advances which the company took in the previous years for establishing a new unit of Power Plant. Much amount of exposures in inventories and Bank

balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit also may occur huge loss and huge capital block.

ACID TEST RATIO

ACID TEST RATIO OF POWER PLANT:YEAR 2007-08 2006-07 2005-06 2004-05 2003-04

Quick Assets . Current Liabilities

= Acid Test Ratio

167,36,84,831 3568195876.63

= 0.47

1391558571.36 4010510730.30

= 0.35

2689976081 2691743632

= 0.99

2988461342 1219936211

= 2.45

2132478607 1232896593

= 1.73

*QUICK ASSETS = Current Assets – (Inventories + Prepaid Expences )*Ideal Ratio = 1:1

0.47 0.35

0.99

2.45

1.73

0

0.5

1

1.5

2

2.5

3

2007-08

2006-07

2005-06

2004-05

2003-04

YEAR

AC

ID T

ES

T R

AT

IO

ACID TEST RATIO

COMMENT: -According to conventional rule, the Quick ratio is 1:1 or more is considered to be satisfactory. Because the quick assets are equal to current liabilities then the firm can easily meet all current obligations. An asset is liquid if it can be converted into cash immediately without a loss in value. Inventories are considered to be less liquid. With analyzing five year data of Power Plant. In the years 2003-04 & 2004-05 the acid test ratio is 1.73 & 2.45 this indicates that the firm was in sound liquidity position i.e. good for the company. In the year 2005-06 the firm maintains ideal ratio i.e. satisfactory for the firm. But in recent financial years 2006-07 & 2007-08 quick ratio are very low according to ideal ratio i.e. not good sign for the firm. Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit also may occur huge loss and huge capital block.

CURRENT RATIOCURRENT RATIO OF WATER WORKS:

YEAR 2007-08 2006-07 2005-06 2004-05 2003-04

Current Assets . Current Liabilities

= Current Ratio

19,74,20,395.27 1,21,02,856.66

= 16.31

17,75,45,126.601,22,87,858.35

= 14.45

179290675 34904869

= 5.14

215390565 28520102

= 7.55

170374847 22171697

= 7.68

*Ideal Ratio = 2:1

16.3114.45

5.147.55 7.68

0

5

10

15

20

2007-08

2006-07

2005-06

2004-05

2003-04

YEAR

CU

RR

EN

T R

AT

IO

CURRENT RATIO

COMMENT: -

According to conventional rule, ideal current ratio is 2:1 or more is considered satisfactory. In this type ratio is higher, the greater the ability of the company to meet the financial obligations. With analyzing five year data of Water Works. Here the main reason for high current ratio is that the industry itself requires a higher reserve of current assets for its various activities. Comparing with five year it can be seen that in the year 2005-06 the ratio is declining it means that the company going with aggressive policy that is good for the company. While in the recent financial years 2006-07 & 2007-08 it again gradually increased to 14.45 & 16.31 respectively i.e. not a good sign for this unit . Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit may occur huge loss due to unnecessary block of huge capital.

.

ACID TEST RATIO

ACID TEST RATIO OF WATER WORKS:

YEAR 2007-08 2006-07 2005-06 2004-05 2003-04Quick Assets . Current Liabilities

= Acid Test Ratio

193117321.73 12102856.66

= 15.96

170661455.73 12287858.35

= 13.89

171965919 34904869

= 4.93

209297449 28520102

= 7.34

186575449 29450247

= 6.34*QUICK ASSETS = Current Assets – (Inventories + Prepaid Expences)*Ideal Ratio = 1:1

15.9613.89

4.937.34 6.34

0

4

8

12

16

20

2007-08

2006-07

2005-06

2004-05

2003-04

YEAR

AC

ID T

ES

T R

AT

IO

ACID TEST RATIO

COMMENT: -

According to conventional rule, the Quick ratio is 1:1 or more is considered to be satisfactory. Because the quick assets are equal to current liabilities then the firm can easily meet all current obligations. An asset is liquid if it can be converted into cash immediately without a loss in value. Inventories are considered to be less liquid. With analyzing five year data of Water Works. Comparing with ideal ratio it can be seen that acid test ratios is very high it means that Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this unit is found in different respect. In near future this unit may occur huge loss due to unnecessary block of huge capital.

CURRENT RATIOCurrent Ratio of DPL:

YEAR2007-08 2006-07 2005-06 2004-05 2003-04

Current Assets Current Liabilities

= CURRENT RATIO

662,22,94,745 4103314796

= 1.61

693,63,42,657 4594160022

= 1.51

6449024771 3584261565

= 1.80

5826460873 2168359089

= 2.69

4063974040 2433141198

= 1.67*Ideal ratio= 2:1

1.61 1.511.8

2.69

1.67

0

0.5

1

1.5

2

2.5

3

2007-08

2006-07

2005-06

2004-05

2003-04

YEAR

CU

RR

EN

T R

AT

IO

CURRENT RATIO

COMMENT :-According to conventional rule, ideal current ratio is 2:1 or more is considered satisfactory. In this type ratio is higher, the greater the ability of the company to meet the financial obligations. With analyzing five year data of DPL .In 2003-04 current ratio of DPL is 1.67 that is below to the Ideal ratio for the company. Comparing with five year it can be seen that in the year 2004-05 the ratio is 2.69 which is higher than the ideal ratio 2:1 which a firm requires to maintain the financial stability between the current assets & current liabilities and it means that the company maintaining a sound liquidity position. In 2005-06 the company’s current ratio is declining it means that the company going with aggressive policy that is good for the company. In the year 2006-07 current ratio is 1.51 that means the company is lack behind of ideal ratio that means the company in extra liabilities i.e. not good sign for the firm. Because in these years company’s paid the Loan & Advances for which they took in the previous years for establishing a new Power Plant. But in 2007-08 it gradually improved the current ratio i.e. good sign for the firm. But comparisons’ with other years it can be seen that the one year ratio is declining and other year ratio is increasing. It means that the firm maintaining the ratio according to its requirement. This mean firm’s current ratio is volatile. In these years company’s refunded the Loans & Advances which the company took in the previous years for establishing a new unit of Power Plant. Much amount of exposures in inventories and Bank balance are found. Operational

Inefficiency in this project as a whole is found in different respect. In near future this unit may occur huge loss due to unnecessary block of huge capital.

ACID TEST RATIO

Acid Test ratio of DPL :YEAR 2007-08 2006-07 2005-06 2004-05 2003-04

Current Assets Current Liabilities

= Quick ratio

1897589455 4103314796

=0.46

1747999493 4594160022

=0.38

3219107934 3219107934

= 1

3872568540 2168359089

= 1.78

2821636075 2433141198

=1.16*QUICK ASSETS = Current Assets – (Inventories + Prepaid Expences)*Ideal Ratio = 1:1

1.38 1.31

1

1.78

1.16

0

0.5

1

1.5

2

2007-08 2006-07 2005-06 2004-05 2003-04

YEAR

AC

ID T

ES

T R

AT

IO

ACID TEST RATIO

COMMENT :-According to conventional rule, the Quick ratio is 1:1 or more is considered to be satisfactory. Because the quick assets are equal to current liabilities then the firm can easily meet all current obligations. An asset is liquid if it can be converted into cash immediately without a loss in value. Inventories are considered to be less liquid. With analyzing five year data of DPL. In the years 2003-04 & 2004-05 the acid test ratio is 1.16 & .1.78 which is higher than the ideal ratio 1:1 which a firm requires to maintain the financial stability between the Quick assets & Current liabilities and it means that the company maintaining a sound liquidity position and less amount of exposures in inventories. In 2005-06 the company’s quick ratio is declining it means that the company going with aggressive policy that is good for the company. In the year 2005-06 the firm maintains ideal ratio i.e. satisfactory for the firm. While in the recent financial years 2006-07 & 2007-08 it again gradually increased to 1.31 & 1.38 respectively Comparing with ideal ratio it can be seen that acid test ratios is very high it

means that Much amount of exposures in inventories and Bank balance are found. Operational Inefficiency in this project as a whole is found in different respect. In near future this unit may occur huge loss due to unnecessary block of huge capital. Because in these years company’s refunded the Loans & Advances which the company took in the previous years for establishing a new unit of Power Plant.

CONCLUSION

Analyzing the above all facts and figures it can be said that the current ratio and also acid test ratio shows the company’s unstable position in respects of the working capital. At initial stage it depicts a picture showing that company can maintain a healthy situation. But in next phase of analysis it is found that the variation from year to year in respects of working capital may jeopardize its production as well as operational activity. Low demand of coke in open market may affect the operational efficiency of the coke producing unit . At the same time low generation in power producing unit with higher utilization of working capital may affect the power unit adversely. Both the adverse effect may certainly affect the water producing unit as a part of the total project at the same time. So the project as a whole may suffer a great loss due to the above reasons as analyzed in the former segment of this report.

Bibliography

The following books/sources are being referred during completion

of the project.

Financial data procedure by Mr. Satyajit Roy-Choudhury (Manager, Finance & Accounts Department, The Durgapur Projects Limited.) And Mr. Anup Ghoshal ( Asstt Manager, Welfare & Training, The Durgapur Projects Limited )

Financial Management- I.M.Pandey.

Financial Management & Policy-James C.Van Horne.

Working Capital Management-V.K.Bhalla.

Working Capital Management-Hrishikesh Bhattacharya.

Annual Accounts of the DPL.

Official Website of the DPL

Research Guide: Mr. Satyajit Roy Choudhury

RECOMMENDATION

Durgapur Project Limited (DPL) is one of the important industry in the progress

of WEST BENGAL. It is a state government concern.

I fell myself very fortunate to be a part of this concern through the project. After

going through the whole process of the company as well as the Working capital

management my opinion for DPL is that-

1. DPL should make a steady emphasis on gross profit& net profit.

Profitability ratio of DPL is needed to improve.

2. The components of current assets and liabilities should be

monitored for maintaining sound liquidity position.

3. An efficient inventory management system should be adopted by

introducing techniques like ABC analysis so that the inventory level

remains as per with the proper industrial standard.

4. As DPL increasing its capacity of producing power it also require

to increase the manpower so there could be made utmost utilization

of resources.

5. The liquidity position can appropriately be improved and a consistency in doing so can be maintained by introducing an efficient working capital management system.