Project ReportProject ReportOnOn

A member of Lalbhai Group

((Aromatics DivisionAromatics Division))

ONThe Impact of Currency AppreciatingOn the

export business(3rd SEMESTER), 2007-08

SUBMITED TO; SUBMITED BY ;

DR. R.S. SHAH SREEJITH M.NAIR

ROLLNO= 38

DIV= B

1

DECLARATION

I the undersigned, hereby declare that this dissertation titled

“SUMMER TRANING REPORT” is an original and bonafide work

carried out under the guidance of Director Dr. R. S. Shah of GRIMS

& submitted to Veer Narmad South Gujarat University, Surat.

The empirical findings in this report are based on the data collected

and have not been taken from any other reports.

This dissertation does not form any basis for other degree or diploma.

Place: Vapi (SREEJITH M. NAIR)

Date:

2

CERTIFICATEI hereby, certify that this project report entitled “Summer Training & Training Need Identification” submitted to Veer Narmad South Gujarat

University, Surat in Partial fulfillment of the requirement for the degree of

Master of Business Administration (M.B.A.) embodies the result of the

bonafied work carried out by SREEJITH M. NAIR.

I find the work complete and of sufficiently high standard to warrant its

presentation for the examination.

I further certified that work has been carried out under my guidance.

Date: 09 – 08 – 07

_____________________

Dr. R. S. Shah

(Director)

3

AcknowledgementAcknowledgement

I am very grateful to Mr. Ashutosh Jani, Mr. S. M. Bihani andI am very grateful to Mr. Ashutosh Jani, Mr. S. M. Bihani and

Atul Ltd. who have given me this great opportunity to explore theAtul Ltd. who have given me this great opportunity to explore the

subject “The Impact of Appreciating Indian Rupee Onsubject “The Impact of Appreciating Indian Rupee On

Company’s Profitability” in depth; by providing platformCompany’s Profitability” in depth; by providing platform

through this Summer Project.through this Summer Project.

I express my special gratitude to Mr. Dhaval shah, Mr. S. M.I express my special gratitude to Mr. Dhaval shah, Mr. S. M.

Bihani , Mr Mukeshbhai, Mrs Anjana and Mr Nikhil, who inspiteBihani , Mr Mukeshbhai, Mrs Anjana and Mr Nikhil, who inspite

of their pressing duties and responsibilities have shown genuineof their pressing duties and responsibilities have shown genuine

interest in providing necessary guidance regarding concept clarityinterest in providing necessary guidance regarding concept clarity

of the project and rendered support at all stages of the study.of the project and rendered support at all stages of the study.

They always assured me that with Atul Ltd. project would be aThey always assured me that with Atul Ltd. project would be a

good learning experience for future.good learning experience for future.

I would like to thanks respected Rofel institute of ManagementI would like to thanks respected Rofel institute of Management

studies Vapi for giving us this opportunity to gain some practicalstudies Vapi for giving us this opportunity to gain some practical

knowledge in the area in which we will be pursuing our career.knowledge in the area in which we will be pursuing our career.

Furthermore, I would also like to thanks respected Prof.PankajFurthermore, I would also like to thanks respected Prof.Pankaj

Patel, my Institute Guide who supported me a lot in this projectPatel, my Institute Guide who supported me a lot in this project

by advising me how to prepare the report.by advising me how to prepare the report.

Last but not the least; I thank the entire team at the Atul Ltd. forLast but not the least; I thank the entire team at the Atul Ltd. for

their excellent cooperation and priceless information they havetheir excellent cooperation and priceless information they have

always provided.always provided.

4

EXECUTIVE SUMMARYEXECUTIVE SUMMARY

The main goal of any company is to gain the maximum market share,The main goal of any company is to gain the maximum market share,

create a good brand-image and to create this the main effort has tocreate a good brand-image and to create this the main effort has to

come from the Marketing department and for this the Marketingcome from the Marketing department and for this the Marketing

personnel’s need to know what are the requirements of the customerspersonnel’s need to know what are the requirements of the customers

and has to market the product accordingly.and has to market the product accordingly.

The undertaken project of functional study has the main objective ofThe undertaken project of functional study has the main objective of

interpreting the various departmental functions undertaken in theinterpreting the various departmental functions undertaken in the

ATUL AROMATIC DIVISION , and to study the working of theseATUL AROMATIC DIVISION , and to study the working of these

department.department.

The specific project undertaken by me was to find out the impact thatThe specific project undertaken by me was to find out the impact that

the ATUL company is facing due to the major share of it salesthe ATUL company is facing due to the major share of it sales

revenue is through exports, so the impact is studied and I have tried torevenue is through exports, so the impact is studied and I have tried to

understand the risk and also tried to find out the instruments to reduceunderstand the risk and also tried to find out the instruments to reduce

the risk .the risk .

5

TABLE OF CONTENTS

SR. NO

TOPICS PAGE. NO

1.

PART - 1

GENERAL INFORMATION

MISSION VISION STATEMENT BOARD OF DIRECTORS OVERVIEW OF CHEMICAL

INDUSTRY BACKGROUND OF THE

COMPANY INFRASTRUCTURE OF ATUL AROMATIC DIVISION

BACKGROUND

12-3

4-8

8-1213-15

16-17

2. DEPARTMENTS: HUMAN RESOURCE

DEPARTMENT PRODUCTION

DEPARTMENT MARKETING

DEPARTMENT FINANCE DEPARTMENT QUALITY CONTROL

DEPARTMENT

18-35

36-4445-5253-56

57-60

3. PART – 2The Impact of Appreciating India Rupee on Company’s Export Business ;

EXPLANATION ON CURRENCY APPRECIATION

FACTORS INVOLVED

61-80

62

62-71

6

CHART OF CURRENCY APPRECIATION

EXCHANGE RATE EFFECT’S OF CURRENCY

APPRECIATION

SUGGESTIONS FOR COMPANY

LIMITAION

BIBLOGRAPHY

7273-75

76-78

79

80

80

7

A member of Lalbhai Group

Our MissionOur Mission

“We are a chemical company committed to creating wealth for“We are a chemical company committed to creating wealth for

all our stakeholders.all our stakeholders.

We will strive for leadership in our chosen products and marketsWe will strive for leadership in our chosen products and markets

by providing high quality products and services to our customers.by providing high quality products and services to our customers.

We will seek profitable growth by innovative application ofWe will seek profitable growth by innovative application of

science and technology.science and technology.

We will pursue excellence in all that we undertake and take stepsWe will pursue excellence in all that we undertake and take steps

to continuously improve.to continuously improve.

We will take responsible care of the environment around us andWe will take responsible care of the environment around us and

improve the quality of life in the communities we operate in.”improve the quality of life in the communities we operate in.”

8

Board of Directors

The Board of Directors of Atul Ltd consists of eminent industrialists and

professionals who’s Chairman is Arvind Lalbhai. Sunil S Lalbhai is the MD

& CEO, Samveg Lalbhai is the MD and Jagdish L Shah is the Executive

Director.

Board of DirectorsName Status Occupation Mr A N Lalbhai Non-executive

Chairman Chairman, Arvind Mills Ltd

Mr S S Lalbhai Managing Director & CEO

Mr J L Shah Executive Director

Mr N N Wadia Independent Non-executive Director

Chairman Bombay Dyeing & Manufacturing Co Ltd

Mr G S Patel Independent Non-executive Director

Former Chairman Unit Trust of India

Dr S S Baijal Independent Non-executive Director

Former Chairman & CEO ICI Companies in India

Mr B S Mehta Independent Non-executive Director

Partner Bansi S Mehta & Co

Mr H S Shah Independent Non-executive Director

Former Chairman & Managing Director Indian Petrochemicals Corporation Ltd

Mr S A Lalbhai Managing Director

9

Mr S M Datta Independent Non-executive Director

Former Chairman Hindustan Lever Ltd

Mr K Aparajithan Independent Non-executive Director

 

Mr R A Shah (Alternate Director)

Independent Non-executive Director

Sr Partner of M/s Crawford Bayley & Co., Mumbai

10

Chemical Industry Outlook

The Indian Chemical Industry has grown at a CAGR of 8% during

the period from 2001 to 2005. The industry in India is fragmented

with few large companies. There are over 6,600 chemical

manufacturers & capacity utilization of Indian plants is lower at

70%, when compared to that of China and Japan where it is higher

at 85-90%.

The sector is a cyclical, capital-intensive where pricing power of the

players is under constant threat. Several bilateral Free Trade

Agreements (FTAs) with various ASEAN countries have been

concluded or are under negotiations. These are aimed at phasing

out trade barriers to create a regime of free trade and this may

increase the pricing pressure on the Indian Chemical Industry.

The bulk chemicals business segment continues to be cyclic in

nature. However, the automobile and electronic sectors are

witnessing growth and this affords an opportunity for the newer

intermediaries' business segment and Indian epoxy market is also

growing rapidly.

The key success factors pertaining to the industry are economies of

scale, product quality and reliability and development of new

products and application processes.

11

Chemicals Industry

The Indian Chemical Industry has grown at a CAGR of 8% during

the period from 2001 to 2005. The industry in India is fragmented

with few large companies. There are over 6,600 chemical

manufacturers & capacity utilisation of Indian plants is lower at

70%, when compared to that of Korea and Japan where it is higher

at 85-90%. Major international companies such as BASF, Dow

Chemical, Bayer and Du Pont have operations in India.

The sector is a cyclical, capital-intensive sector where pricing

power of the players is under constant threat. Several bilateral Free

Trade Agreements (FTAs) with various ASIAN countries have been

concluded or are under negotiations. These are aimed at phasing

out trade barriers to create a regime of free trade and this may

increase the pricing pressure on the Indian Chemical Industry.

The bulk chemicals business segment continues to be cyclic in

nature. However, the automobile and electronic sectors are

witnessing growth and this affords an opportunity for the newer

intermediaries' business segment and Indian epoxy market is also

growing rapidly.

12

Industry Analysis

The Chemical industry constitutes an important segment of the chemical

industry in India. The Indian Chemical industry is today totally self-

sufficient with a majority of its inputs manufactured locally. India is

currently producing all varieties of synthetic Chemicals and intermediates

and has a small presence in the natural Chemical. The subcontinent has

emerged as a global supplier of Chemicals and dye intermediates,

particularly for reactive, acid, vat and direct dyes. The market for

Chemical is dependent on textiles, in particular demand for polyester and

cotton determine the demand for certain types of Chemicals. The textile

industry is currently buoyant and the market is growing steadily. There is a

shift in the usage of polyester and polyester blended fabrics and as a

result demand for disperse dyes are at a peak.

Market Size and Major Players

The market size of the Indian Chemical industry is INR141 billion including

the exports of INR52 billion in 2004-05. The exports doubled from INR26

billion 2000-0'l to INR52 billion in 2004-05. By 2010, the exports are

expected to reach INR121 billion. India currently produces 130,000 tonnes

and 75% of the production is exported to 15 countries like: the USA,

Germany, Netherlands, Italy, UK, Spain, Turkey, Switzerland, Indonesia,

Korea, Hong Kong, Thailand, Singapore, Japan and Taiwan. The per

capita consumption in India is very low 50gm compared to the world

average of 400 gm. Textile, cotton and polyester consume more dye

compared to the other fabrics and in turn, the growth of disperse, direct

and reactive dyes is expected to increase due to the usage of these

intermediates in cotton and polyester. By 2010, the contribution of India in

the global Chemical market is expected to reach 8-10% with an increase

of 20% per annum. The major players in the organized sector are Atul

Products, Jaysynth Dyechem, Meghmani Organics, Colortex, Sudarshan

Chemicals, Colour Chem, Ciba Speciality, BASF, Clariant India, IDI and

13

Metrochem. The Indian companies account for 6% of the world dye

production.

Competitive Advantages

• Labour: India has trained managerial & plant personnel with

entrepreneurship skills including five decades of experience in the

industry.

• Raw material: Though the cost of the raw materials is 50% of the

production cost, but the existence of all the raw materials is located in

proximity at plant locations like Maharashtra and Gujarat. An additional

cost-effective factor benefit is the reduction of import duties that would

decrease the raw material cost.

• 100% FDI permission and the matured chemical Engineering industry

that is attracting most of the MNCs with the benefit of producing low end

products

Opportunities

Constant technology up gradation to provide value added products:

Technology is the key to manufacturing and the Indian industry is

fragmented with very few players handling the organized sector that

is expected to grow.

Enhanced quality of products at reduced prices: The Indian

manufacturers have to concentrate on the quality of products at

competitive prices in order to compete with leading countries like

China, Japan, Indonesia and HongKong. The developed countries

production share in the market has reduced from 65% to 50% and

is expected to further reduce in the future. The adoption of

technology will increase the quality of products and production.

14

Improve economies of scale: Due to five decades of expertise in

the Chemicals industry, players operating in the field must adopt

economies of scale to compete with other countries.

1. Product and service differentiation

2. Develop world class Infrastructure

3. International trade procedures to be implemented

4. Build Indian brand image overseas

Developed countries are looking at outsourcing dyes from

developing countries due to more and more production facilities are

being shifted to Asian countries like India and China.

15

Background of the Company

Atul Limited, incorporated in the year 1947 by Mr. Kasturbhai Lalbhai in

technical collaboration with American Cyanamid of USA, is engaged in

manufacturing of Chemicals, agro chemicals, intermediates, polymers,

'Aromatics, Pharmaceuticals, bulk drugs and specialty chemicals. It is one

of the oldest chemical company in the country. The plant of AL is located

at Atul in an area of 1243 acres. At present, the company is manufacturing

more than 300 products which are mainly used in various industries viz.

agriculture, fragrance & flavours, tyre, textiles, paper, Pharmaceuticals,

aerospace, construction, paints etc. The Company has mainly six activities

viz. Agrochemicals, Aromatics, Bulk Chemicals & Intermediates, Colours,

Pharmaceuticals & Intermediates, and Polymers, functioning

independently as profit centers.

16

Business Model and Competitive Analysis

Atul Ltd. is a pioneer in the Chemicals industry and has over five decades

of experience in the chemicals industry, which has helped the company to

sustain itself through several business cycles. The Company has focused

on R&D in order to develop new products and applications and has

diversified its product portfolio away from Chemicals over the years.

Chemicals now contribute only 33% to the turnover of the company. The

company is now in the process of moving up the value chain in each of its

business lines.

The company has acquired technology for manufacturing phosgene-based

agrochemicals where the margins are high. It plans to focus on

formulations in agrochemicals where the margins are even better. It has

commenced manufacturing Chemicals with higher margins including vat,

reactive and disperse dyes. The Company has integrated facilities with in-

house generation of power, which enables it to reduce its cost of

production.

It has built its brand name through consistent quality of products, reliable

delivery schedules, good technical service support and post sales service.

It has set up a wide marketing network and has set up subsidiaries in

foreign countries in order to export to those countries. The company is

well placed in terms of technology as it has absorbed the technology from

the world leaders through its joint ventures.

17

Financial Analysis

The net sales of the company have grown at a CAGR of around 11 % over

the last three years, with exports growing at a CAGR of around 13% over

the same period. After a downturn in performance in 2003-04, the

company has shown consistency in its performance and is likely to

maintain the improvement trend in the coming years. The Company has

shown significant improvement in operating profit during FY06 mainly

driven by improved performance of Aromatics and Bulk Chemicals and

intermediates division mainly due to growth in volume and better

efficiencies. The performance of Polymers improved due to introduction of

value added products. However, the profitability of Agrochemicals and

Colours division showed decline mainly due to high costs and pressure on

selling prices respectively.

As per first 9 months financial for FY07, the operating margins of the

company are in line with the estimates as well as the industry average and

are likely to follow the same trend.

Risks and Mitigates

The Company is in the business of Chemicals. Prices of some of

these chemicals are cyclical and remain low for long periods. The

Company constantly keeps taking up improvement projects to

mitigate the impact of such movements in prices.

Exports, which constitute more than 50% of the company's turnover

has the inherent risk of fluctuations in the exchange rates.

Company is renegotiating with its overseas buyers based in Europe

for future sales to be billed in Euro instead of USD. The company is

also hedging its USD by cross currency swaps to reduce further

losses on account of Rupee appreciation.

18

Product Obsolescence The company has established a state-of-

the-art R&D center and is progressively increasing its R&D budget.

The company through product diversifications and increased

dependence on R&D proposes to mitigate the product

obsolescence risk. The company had already introduced various

new products in the market and is in the process of expanding the

capacities of those products and introducing some more

specialized products.

Management Analysis

The company is managed by a team of professionals headed by Mr. Sunil

S Lalbhai, who is the Managing Director & CEO of the company. Mr. Sunil

Lalbhai has been associated with the chemical industry for over two

decades and has guided the company through the structural changes that

the chemical industry has undergone during this period. The senior

management includes four Presidents holding professional degrees in

chemical engineering. They have been able to proactively change the

product mix of the company over years and have been able to sustain the

growth of the company during the lean periods that the chemical industry

has passed through during the last decade. The company has

successfully absorbed technical know-how through its various joint

ventures and has been able to carry on the respective businesses

profitably even after the overseas partners sold their stake to AL and have

exited these JVs.

The senior management has initiated a number of steps to improve

profitability. The company has started manufacturing Vat dyes, where the

margins are higher than the other types of dyes like azo and sulphur dyes.

The company introduced various new products viz. Resorcinol, DDS,

Dapsone, etc to reduce its dependence on the colours division which was

earlier major contributor to the turnover of the company.

19

Infrastructure at Atul

Atul Ltd has made significant contributions to the development of

infrastructure in Atul and nearby villages. The Company has already built

over 1000 houses, 2 schools, a medical centre, a sports complex, an open

air theatre and a community centre.

Atul Ltd is self-sufficient in its requirement of electricity achieved through

three state-of-the-art captive power plants. The Company is also in the

process of renewing its fifty year water agreement with the government of

Gujarat.

Captive Power Generation

Atul Complex is self sufficient in meeting continuous and uninterrupted

steam demand for all its chemical manufacturing processes and it also

meets more than 95% of electricity demand for its housing colonies. At

Atul Complex, there are three captive power plants consisting of coal/oil

fired boilers and turbo generator sets having capacity ranging from 2 MW

to 18 MW. Over and above this, diesel generator sets have been installed

so as to facilitate the start up from total black out. All boilers and power

20

generation sets have been designed to meet the stringent pollution norms

as fixed by Gujarat Pollution Control Board.

Effluent Treatment

The industrial effluent is fully treated in a well-designed state of art effluent

treatment plant. The industrial effluent is discharged through a 4 km

underground pipeline for ultimate disposal into the estuarine zone of river

Par. The domestic effluent is treated and disposed off in a Septic Tank /

Soak Pit system.

Development efforts to minimize the generation or to recycle / reuse the

effluent are a continuous process at Atul Limited. Only after exhausting all

these options, the wastewater is taken to Central Effluent Treatment Plant

(CETP). This CETP designed by Degremont (India) Ltd., has a capacity to

treat 20,000 m3/day.

Atul has developed a site for disposal of solid wastes by land filling. The

site was selected on the basis of a technical Environment Impact

Assessment (EIA) study done by National Productivity Council (NPC).

NPC also has given the detailed design of the site. On the basis of this

technical EIA and the design, site for TSDF was approved by the state

level committee and Gujarat Pollution Control Board.Snapshot of Facilities

The dimensions of the infrastructure facilities at Atul Ltd's manufacturing

sites at Atul and Ankleshwar are given below.

DescriptionUnits of

Measurement

Atul Site

Ankleshwar Site

Land Area Acres 1250 33

Effluent Drainage System Kilometres 65 GIDC drainage system

Effluent Treatment Plants Cubic Metres/Day

30000 2500

Incinerators Numbers 4 NIL

21

Captive Power Plant (installed capacity)

Megawatts 29 2.4

Electricity Consumption Million Units/Month

13 1

Steam Generation (installed capacity)

Metric Ton/hour

217 32

Water Storage Cubic Metres 2 millio

n

1450

Housing Houses 1100 36

Research & Development The primary thrust of Atul’s Research & Development efforts is to develop

products and processes that are efficient, safe and environmentally

friendly; and which cater to demands of global and domestic customers.

Process and product improvement are also key activities of the R&D

group. In order to respond quickly to market demands, every business unit

(Agrochemicals, Aromatics, Bulk Chemicals and Intermediates, Colors,

Pharmaceutical Intermediates, and Polymers) has its own Research &

Development team. The central Research & Development group provides

common facilities like pilot plant, certain analytical instruments, technical

library etc.

Our entire Research & Development team consists of Doctorates and

Graduates. We subscribe to several Indian and international journals and

magazines. We are well equipped with analytical instruments such as

HPTLC, GCMS, DSC, atomic absorption spectrophotometer, HPLC and

GC. We have established links with certain CSIR laboratories like IICT,

Hyderabad; NCL, Pune; and CSMCRI, Bhavnagar with the primary

purpose of technology transfer and sponsored research programmes.

During 2004-05, the Research & Development team developed

approximately 70 processes and the Company commercialized ~ 40

processes. Close to 30 processes were improved with respect to raw

22

material and utility usage, batch cycle time and waste reduction. Several

new methods of analysis (Wet Chemistry, HPLC, GC) were developed.

Aromatic Division

Aromatics the erstwhile Gujarat Aromatics Ltd., a company under financial

stress, was taken over by AL in 1985 and was formed as aromatics

division of AL. It is one of the largest manufacturers of Cresols and their

derivatives in India. These products are used in the manufacture of

flavors, fragrances, cosmetics (sunscreen lotions), bulk drugs and

antioxidants. The Para-cresol capacity at AL is 10,000 tpa and the

company is planning to increase it to 15,000 tpa. The world requirement

for Para-cresols and its derivatives is 50,000 tpa and AL already has 20%

share of it. Aromatics Division is one of the world’s largest manufacturers

of Para anisic aldehyde, Para cresol and Para anisic alcohol, supplying its

products to diverse industries, including cosmetics, flavours and

fragrances, bulk drugs, dye intermediates; and plant and animal micro-

nutrients.

The Division's manufacturing site is located at Ankleshwar in Gujarat,

about 350 km north of Mumbai.

Aromatics has strengthened its global competitiveness through process

innovation and has developed new tools to gauge customers’ needs.

Through collaborations with universities and research institutes, the

Division gets access to new knowledge and technology constantly.

A brief summary of various products and their respective applications is as

follows:

23

Product. Group Applicationzp-Cresol, o-Cresol Antioxidants, Agrochemicals, Bulk drugs,

Resins

p-Cresidine Dye intermediatesp-Anisic aldehyde, p-Anisyl alcohol

Bulk drugs, Cosmetics

p-Anisyl acetate, p-Cresyl acetate

Electroplating

p-Cresyl methyl ether Flavour & Fragrances

p-Methoxyacetophenone

Manganese sulfate Agrochemicalsm, Animal feed

Manganese carbonate Ceramics

Sodium Sulfite Paper

24

25

Human Resource Department

In the modern world, it is not possible for an existence of any business

organization without personnel department. Personnel department works

like a “Heart in the body of organization.” It is the most important area of

any business organization. Personnel management is an art of getting

thing work done through other people. In any firm, we can find the priority

of personnel department. Personnel department is an internal part of an

organization. Personnel management generally deals with planning,

organization, directing and controlling the function of producing,

maintaining development and utilizing work force of the business

enterprise to help for achievement of the objectives.

The management of man is very important in any organization.

Management means to get work done through the people personnel

management totally covers this definition because enterprise runs by the

people as it is righting says that manage your men, men will manage your

work. Men are a heart of unit and make organization living. The success of

unit mainly depends on the personnel functioning in the organization.

It is very important branch of knowledge most of the progressive

organization having separate department appointing the expert as a

personnel manager. The success of any organization depends upon

workers and therefore it is considered as mind your men and men will the

other entire thing.

Obtaining involves such activities as recruitment selection, manpower,

planning while maintaining involves performance appraisal, employee’s

grievance, employees status factor with respect to wages, hours, working

conditions and relation among labour and manager.

26

Objectives

To manage the personnel effectively

To ensure motivated and committed workforce for the

organization

To maintain harmonious relation between the employee and the

organization

To provide effective services to other departments, etc.

To provide training & development to enhance promotional,

behavioral and human skills.

ORGANOGRAM OF PERSONAL DEPARTMENT

27

M.P.KULKARNI (V.P HR)

S.S. KOKLE (G.M) TRN & DEVLOP

MONISHA SINGH

(Performance appraisal )

SIR ASHITOSH(RECRUITMENT &

SELECTION)

SANJAY SONI(HR MANAGER AEROMATIC DIVISION)

JAYESH PATEL (ASST MNG HR)

Rakesh Chauhan(LAOUR WELFARE)

TIME KEEPING OFFICE (TKO)

ATUL LTD. Has a very effective time keeping system. The TKO is

situated at the main gate of the company and is responsible for

maintaining the Muster Roll ovary department and for every shift. The

TKO consists of three staff members, two for attendance recording and

one for special purpose.

The attendance recording system (ARS) is fully computerized, where each

permanent employee is given Punch Card, which needs to be punched

while. “In Coming and Out going” by each and every staff workers, staff

members and management members except the managing director. The

card is detailed with employee name, date of joining, employee number,

blood group and a code for punching. For the attendance of temporary

and trainee workers the company has attendance taking card which is

operated manually.

The special purpose activity includes record of PF, distribution of uniform,

shoes, etc. Superannuation, Gratulty and clearance form.

The TKO maintains various records like:

Level Record

Promotion Record

Registration & Recruitment Record

Overtime Record

Employee history Record

Absenteeism Record

Early Going and Late Coming Report

Positive/negative Report

28

All types of forms like advance Salary leave Travel Allowance,

Medical Loans etc.

Advantages of Attendance Recording System:

As the system is fully computerized, the chances of mistakes are less or

nil as compared to manual work. Serves as a basis of fixing wages and

salaries. High rate of absenteeism on the part of workers can be known at

the correct time and reported to concerned department.

HUMAN RESOURCE PLANNING: (HRP)

“Manpower planning is process of determining and ensuring that the

organization will have an adequate number of qualified personnel.”

THE COMPANY FOLLOWS TWO APPROCHES OF HRP

(1) Top Down Approach -

In case of Top Down Approach the Top Management makes the study of

Human Resource Planning mostly for the expansion of business. Over

here uncertainty for the business like retirement, old age, ill heath etc of

the employees are predicted before hand and planning regarding

manpower is done.

Such plans can be

-Short Term: for next 2 years

-Medium Term: between 2 to 5 year

-Long Term: more than 5 year’s

(2) Bottom Up Approach-

Over here the lower level people gives feedback to the top level. The

lower level discusses with the top level regarding the manpower plans and

the top level tries to fill up the vacancies. Both this method re used in

29

ATUL LTD, but the Bottom up Approach is given more importance than

the Top Down.

PERFORMANCE APPRAISAL

Performance appraisal is the process of evaluating the employee’s

performance on the jobs in the terms of the requirements of the job.

ATUL LTD goes for an effective performance Appraisal system, as this is

the time to remind that only hard work without achieving corresponding

results cannot improve the balance sheet of the company, nor can it

contribute towards the company’s

GUIDELINES suggested for the success of review meeting (meeting

conducted before performance appraisal Programme);

Fix the meeting in advance

Create a relaxed friendly atmosphere

Be prepared to listen, appraise also has a point of view

Avoid interruption and arguments; have patience

Keep contents of meeting Confidential

Do not promise any promotion, financial incentives or any rewards

The right framework to the whole process of appraisal is the corrective

implementation of Performance Management System (PMS) and the

Individual Development Meetings (IDM’s) the company uses both

traditional as well as the modern methods of Appraising.

30

1. TRADITIONAL METHOD

Forced distribution method

The rating provides by the Appraiser to the Appraise is based on the major

contribution and the appraiser. In the company, the baring is on the major

contribution and the quality of the same. The appraiser while rating the

same

The appraiser while rating uses the following rating criteria:

RATING INDICATORS In results do not meet the goals at all and are below acceptable standards

(Improvement needed)

S results fall slightly below basic goals, but not are in unacceptable

category, scope for higher (satisfactory) contribution

G results meet required achievements levels and on few occasions even

exceed them.

(Good) VG results fully meet and at several times exceed sets goals and

that appraise had

To counter difficulties in (very good) achieving the goals/actions

E In general, results consistently far exceed goals in spite of difficult

environmental factors, the (excellent) appraise always operates at high

performance level.

2) CRITICAL INCIDENTS

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The Company uses critical incidents Method where the workers

performance is appraised in terms of some events that occur in the

performance of the Rate’s job. But is missed out in the appraisal form.

The appraiser keeps a records and increments.

MANAGEMENT BY OBJECTIVE METHOD

For appraising the High Officials, the company uses the MBO technique.

Over here, the management first sets the overall objectives of the

company and later they communicate those goals to the Officials. Then a

good amount of Discussion takes place between the management and the

Officials regarding the Objective setup before and also the ways and

methods of measuring employees.

This discussion leads to adoption of either the received or the same or

completely changed objectives, with the will of both the parties. This is

Joint Goal Setting between the Manager and the Subordinate. Lastly, the

employees would try to achieve their objectives within the given period

and also feedback to the manger about their Goal Progress. This method

minimized the External control and maximizes Internal Motivation.

Performance Appraisal leads to,

1. Grade change.

2. Monetary reward and even.

3. Double increments.

TRAINING TO SECURITY STAFF

The Workers in the security & Fire Department are trained through Wet

and Dry Demonstration. Over here, Wet Training means training through

practical application by the Fire Officer. Where Dry demonstration is done

through verbal instruction without operating the equipment’s.

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The Security Departments Major Achievement in this company is that so

far no big accident has come up in the company’s history.

CANTEEN ADMINSTRATION

Labor Contractors are Private authorities who bring labor on temporary

basis. They are given a P.F. code and insurance Policy if they bring 9 or

below 9 employees. But license is needed for bringing more than 9

employees. If a contractor brings more than 9 employees without any

license, he would be charged penalty or terminated.

Even though the Contractor Administration 12% is contributed by the

employee and other12% by the Contractor which is reimbursed y the

company later. The Contractors are benefited as they get 25% of the

wage from the company as commission, from which 10% is profit and 15%

is the Labor liability.

GENERAL SERVICES

It includes:- 1. Postal Services 2. Ticket Reservation3. Reception etc 4. Courier Services.

COLONY MAINTENANCE

Housing Facility is given to all the permanent employees of the company

on the basis of their position in the organization. The rates of the Houses

are provided at a subsidized amount and the usually deducted from the

Salary of the employees. The Major Facilities in this Colony are

recreational facilities for families and library. Schools, parks etc for

children.

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INTERNAL CUSTORMER SATISFACTION

According to ATUL LTD employees are the first customer of the company,

and if they are satisfied, everything will go on the right path. If the

employees are not satisfied. It will adversely affect the productively.

Internal customers refer to the employees of the company. ATUL LTD

gives more emphasis on internal Customer Satisfaction. It is the First

Company in South Gujarat, who looks after this concept. The personnel

department gives a form to the employees for their feedback with respect

to,

1. Job Satisfaction

2. Working Condition

3. Housing Facilities

4. Wages & Salary (timing of payment)

5. Other Facilities like Parking, Canteen, Medical, Safely etc.

Form the above form, if the employees of the company are dissatisfied,

then the Personnel manager personally meets that particular employee

and discuss regarding the matter. If he finds that his point needs to be

taken into consideration, then further action may be taken.

INDUSTRIAL RELATIONS

Industrial relation continues to be harmonies with the company sharpening

its focus on productivity and discipline. The name of the single Trade

Union Prevailing in this company is the “Cibatul Kamghar sangh.” This

Union always gives constructive ideas to the management whenever they

need for. But sometimes they resist to ideas suggested by the Company

when they are against the worker interest.

34

In this company it is generally observed that the problems and grievances

are solved through mutual understanding. There are no single day strike

observed in the Company since its first day.

WELFARE ACTIVITIES

Uniform & shoes, ATUL LTD provided to its employees every year. For

the fire and security department employees fire proof uniforms are given.

Company provides different types of Shoes to its workers and office staff,

for the protection of workers feet against hazardous and flammable

chemicals.

Traveling, In ATUL LTD, the transport and traveling section is working

under he personnel Department, The function of this department are as

under :-

Transport facilities like Rail & Air booking, Hotel Booking, Transport

Facility, Guest House Accommodation, Lunch and Dinner Arrangement for

the visitors and guest, Transportation of goods within the Factory

Premises, Emergency Transport facility in case of disaster or accident

either in the factory premises or in the colonies, It also includes Canteen

Administration, Medical Facility, Housing, Lockers etc as explained above.

35

RECRUITMENT

“Recruitment is the process of searching for prospective employees and

stimulating them to apply for the job in the organization”.

COMPANY’S SOURCES OF RECRUITMENT

INTERNAL SOURCES

- Transfer.- Promotion.

EXTERNAL SOURCES

- Campus Recruitment.- Placement Consultant.- Employment Exchange.- Labor Contractors.- Advertising Agencies.

INTERNAL SOURCES

The Company gives more emphasis on the Internal Sources rather than

External. It believes in the policy of “First Preference to Existing

Employees”, so as to motivate the employees and reduce the cost. The

two sources of Internal Recruitment used by the company are -Transfer –

Transfer involves the shifting of an employee from one job to another, one

department to another or one shift to another.

TRANSFER POLICY

As the Company has two units ATUL LTD PPSITE and ATUL LTD at East,

so transfer is a good source of filling vacancies with employees from

overstaff units/departments/shifts to another. Promotions – The Company

36

believes in promotion as the best source, but it is a bit rigid. It believes in

Merit basis promotion rather than seniority. But when the seniors are

really capable as compared to the new employee, the senior Employee is

given the first chance of promotion.

PROMOTION POLICY

The Company encourages automatic promotion at all the levels of the

Organization, but under certain circumstances. Whenever a particular

employee remains in a particular grade for a state period of time, he is

promoted to a job of higher grade. Promotion other than the grade

promotion takes place only when a higher level post is vacant. To fill up

the vacancies form within the Company as far as possible (only eligible

employees), on basis of Performance Appraisal System. In certain cases

when a particular employee has some outstanding skills which is required

for higher level post is to be promoted.

EXTERNAL SOURCES

Campus Recruitment

The main External Source of Recruitment for this company is through

Educational Institutions. According to them this source not only brings

new blood in the Organization, but also innovative ideas, technical

knowledge and fresh talents. The students are first taken as Management

trainees and later they are grouped into 4, according to their performance.

- Permanent at job - Extended Promotion.

- Probation - Terminated.

- Placement Consultants.

For Recruiting technical, Professional and Managerial Personnel, the

Company goes for Placement. Placement Consultant are privatized and

37

saves the Company’s time in receiving and screening of applications.

There are many Placement Consultants for this company. One of them is

SEARCH Consultant.

EMPLOYMENT EXCHANGE

Employment Exchange’s run by the Government is regarded as a good

source of recruitment for Unskilled and Skilled Operative jobs. The

company has compulsion to give notification of vacancies to this

exchange. Thus the Employment Exchange brings the Employer in

contact with the job seeker, but the Company need not compulsorily

provide that job to the employee, who is been sent by the Employment

Exchange.

LABOR CONTRACTOR

The company finds a Labor Contractor, who brings worker on temporary

basis. The norms and procedure regarding labor Contractor are to be

followed by the Contractor as mentioned in the Contract Administration.

(As above)

ADVERTISING AGENCY

When the Company is unable to get suitable Candidates from the above

Sources, it goes for Advertising Agency. The company gives last

preference to this source because it brings in flood of response and many

a times from quite unsuitable candidates.

NOTE: The pattern of Interview remains the same for all the employees,

but a slight change takes place depending upon the type of job. In case of

Higher Level Jobs, before giving the Appointment Letter the Interviewee is

taken to the Managing Director and if the Managing Director finds the

Candidate suitable, he is appointed or else is discarded. In case of

Technical Field, the Candidate is first interviewed by the personnel 38

Manager and later by the Concerned Department Head to check his

technical knowledge.

INDUCTION

After an employee is selected for this Company, he is induced by giving a

friendly welcome Induction is done according to the ISO 9001 policy. A

staff member form the Personnel Department or the personnel manager

himself takes the new employee to the Concerned department and

introduce him to his new environment (Rule and Regulations. Superiors,

Fellow Employees etc)

WAGE & SALARY STRUCTURE

Wages and salary system is also managed by this Department. The

Employees satisfaction is the top priority of the company, which is

reflected by the Healthy wage and Salary structure designed over here.

The company follows the Minimum Wage Rate Policy, fixed by the

Government. But in practical use they pay more than the rate fixed in the

above policy. It includes the following concepts.

Shifts and Working Hours – Timing at ATUL LTD (AEROMATIC

DIVISION) for General Shift is 8:00 hrs to 17:00 hrs on all working days.

Lunch time is from 12:00 to 13:00 hrs. There are no shifts for Management

Cadre. But as the Company goes for Round the Clock Production,

There are three other shifts for workers;

Leave Structure

Weekly off – In an Employee is at the Office, the Weekly Off is on

Sunday. If at Branch Office, the Weekly Off is on Saturday and Sunday.

39

Paid Holiday – The Employee are entitled to 8 paid Holidays during the

Calendar Year, which the Management declares in the month of January.

Privilege leave – Privilege Leave is available @ 30 days per Calendar

Year which is credited @ 2.5 per month is credited after completion of one

month.

Sick Leave – 9 days sick leaves are available per annum and credited on

1 January every year. During the first year of Employment, however this

leave benefit will be available on pro-rata basis.

Accumulated Sick Leave can be encased at the time of retirement and

death only, which can be upto a maximum 72 days.

Casual Leave - 9 days Casual leave is available per annum and credited

on 1st Jan every Year. During the first year of Employment, however this

leave benefit will be available on pro-rate basis. Since casual leave

benefit cannot be carried to the next year, at the end of the Calendar Year

the outstanding Leave balance will automatically be encased and included

in the salary of the subsequent month.

Special Leave - the Managing director under exceptional circumstance

will have the discretion to grant any additional leave, termed as Special

Leave to Individual. Such Leave will normally believe without pay, unless it

is for the benefit of the company.

Other leaves – Maternity leave, leave after Resignation, Compensatory

leave, Unauthorized Absence etc.

Employee Turnover and Absenteeism Rate –

40

The Employee Turnover Rate in ATUL LTD (Aeromatic division) is around

3%. The Absenteeism rate is around 2%. Most of the employees remain

absent because of some Social or Physical Reasons.

TRAINNING PROCESS:-

Types of Training

The company goes for house training for both external and internal

training. The company mostly prepares to go for off the job (external

training). In house training includes training by supervision, whereas

Lectures and Seminars are the part of External Training.

Training Policy : - 7 man days of training and development programme

of all the employee is compulsory

Training Process : - The Training Need Identification process is carried

out in October and November every year.

Training Calendar :- The Training Calendar is prepared at the end of

the year.

Nomination:- The names, training details and time schedules for each

and every employee is nominated by his immediate superior. Each

department head is very much familiar with the strength and weaknesses

of the Employee of his office department. As a result he is the best

person to suggest the names of trainee.

41

Training Program:- Over here the planned training programs are

actually being implemented in the company

Feed back:- Feed back about the program is given by the Trainee to the

personal department by filling up Questionnaire which gives us the idea

whether the training program was excellent, good, average, satisfactory,

or poor.

Evaluation:- The concerned department head evaluates the

performance of the Trainees in terms of effective or not effective. The

Company Surveys into each and every department. The departmental

heads has to give details regarding increasing the jobs of each employee

and if needed they need to be trained regarding increasing productivity

and skill.

42

43

44

INTRODUCTION Production is the creation of the goods & services. Major emphasis is on

the creation of goods. Manufacturing production is the systematic step-by-

step conversation of raw materials through creation of form utility in goods.

Producing goods is an interact & complex process Goods on the shelves,

ready to sell do not just happened they are the end results of much careful

thought & planning. The job of production management is to weave

together those factors (man, material, and machinery) for those sole

purposes of economical delivery of quality goods to customer.

Production management deals with decision-making Related to production

processes, so that resulting goods or services is produced according to

the expectations, in the amount end by the cost. Production management

is associated with two broad areas of activity, the design & control of the

product system”.

Thus in a broader sense production management concerned with co-

ordination of management men, material, method, machine & money in

manufacturing goods. In a narrow sense it means planning, scheduling &

controlling the flow of materials to a plant.

Where as in Atul Aeromatic division the production process is undertaken

very carefully as they produce chemicals which has to meet the exact

configuration which the customers need as the slightest variation in the

combination would bring a greater change in the final product which would

not match the standards of the customer requirements so the production

or the manufacturing process at Atul is undertaken with extra caution .

The production site of ATUL (Aeromatic division) is at GIDC Ankleshwar,

the plant work 24 hours in shift it has been employed with more than 250 45

workers totaling both the employees the permanent employees and also

the daily contract workers.

The major demand or the challenging market for ATUL (aeromatic

division) Is the forign market, From the total sale of aeromatc division atul

the 70% is from the export business., as the company enjoys monopoly

production in the India there are no competitiors in the domestic market

The major competitiors in the forign market are the manufacturers from

China , as they are able to produce the same product at cheaper rate

sometime s due to the various factors like Political influence, cost of raw

material , etc.

46

PRODUCT PROFILE:-

Key Products

Name

Para Cresol 99%

Para Anisic Aldehyde

Para Anisyl Alcohol

Para Cresidine

Ortho Cresol

Para Cresyl Methyl Ether

Inorganics

Name

Manganese Sulphate Powder

Sodium Sulphite

Liquid Sulphur Dioxide

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Perfumery Grades

Name

Para Anisic Aldehyde

Para Anisyl Alcohol

Para Cresyl Methyl Ether

Para Cresol

PRODUCTION PROCESS :-

The ATUL (Aeromatic division) has to mainly offer in the market, the major

of use of the product are Aroma products, Drugs, Dyes intermediate,

Antioxidents, manufacturing of soaps etc.

PARA CRESOL 99

Para cresol plant is the main plant in this division as it not only covers the

major part of their sales percentage compared to the other products The

capacity of the plant is 11000 Mt/tones and 900 Mt/tones also serves as

the major raw material for the other products like Para cresidine and which

is also used as the raw material for the production of Para Anisic

Aldehyde and Para Anisic Acid .

PARA ANISIC ALDEHYDE

The plant of PAA also have the latest technology of the plant of the

production process the capacity of the plant is 500 Mt/tones per month.

PARA ANISIC ACID

During the process of production of para anisic aldehyde during the

washing process the waste is extracted from PAA and when the waste is

treated by the distillatation process than the Para anisic acid is obtained

through the process.

PARA CRESIDINE

The plant present at Atul for PC has the capacity of 45 Mt. tones per

month, its geneally used for manufacturing of Dyes .

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ORTHO CRESOL

OC is generally obtained by the cresol mixture , by the process of

decolorizing of the orthophenol obtained through the floronation process

and the product obtained is ortho cresol .

MANGANESE SULPHATE POWDERSODIUM SULPHITELIQUID SULPHUR DIOXIDE

These are the bi products which are obtained while the production process

of the various chemicals stated above.

49

THE PRODUCTION PROCESS CHART AS PER THE PROCESS THE PRODUCTS ARE AS FOLLOWS:-

PARA CRESOL 99 AND ORTHOCRESOL

50

RAWMATERIAL TOLUENE,SO3,SO2,

ACETIC ACID

SULPHONATION BY CAUSTIC SODA

FUSION PROCESS

SEPRATION PROCESS

BI-PRODUCTSODIUM SULPHATE

ACIDFICATION

DISTILLATION

CRESOL MIXTURE SEPERATION

ORTHO CRESOL PARA CRESOL-99

BI-PRODUCTMAGNESIUM SULPHATE

PARA ANISIC ALDEHYDE & PARA ANISIC ACID

51

RAW MATERIAL PARA CRESYL METHYL ETHER

METHILATION

OXIDATION

WASHING

BI –PRODUCT BY CAUSTIC WASH

AND BY DISTILATIONPURE PARA ANISIC ACID

DISTILATION PROCESS

PARA ANISIC ALDEHYDE

PARA CRESIDINE

52

NITRATION

METIALATION

REDUCTION

DISTILATION

PARA CRESIDINE

53

INTRODUCTION

The marketing has changed greater in the present day world. The

marketing has developed many activities to satisfy the needs wants of a

group of customers. Entering into 21st century. Marketing has become one

of the important criteria for a company product or services to sell in state,

national and international level. After world war 2nd, the development in the

field of science and technology, social and political, economical and other

relative regions have changed tremendously and brought new dimensions

in marketing. So as marketing gained momentum in the development of

new markets and new avenues of selling a wide range of goods and

services that has changed and development to meet the consumer need

at right time.

Marketing is a set of human activities directed, facilitating and

consummating exchange. It is change of products and the transaction is to

satisfy that human needs and wants. Human effort, Finance, Management

constitutes the primary sources in marketing. The marketing mix covering

products, price, promotion and distribution (place) strategies will be

implemented to accomplish the object of customer satisfaction and

profitability.

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FUNCTIONS

There are two types of function in sales and marketing department.

ROUTINE FUNCTION

- Receiving inquiry from the customer.

- Sending quotation to the customer.

- Receiving order from the customer.

- Concern production department for special requirement.

- Prepare schedule for the production department.

- This department has a job of preparing invoices, bank letter, side

draft, credit note, sales certificate etc.

- They consult the customer and ask about the ‘C’ from. If out side of

state.

- They keep in touch continuously with their sales representative or

argent.

- Dispatching goods to customer.

- Receiving payments and maintain payment details.

- They prepare advertisement about the product and give it into the

different business media.

- They send reminder to the customer.

SPECIFIC FUNCTION

This department gives suggestion to make improvement in systems to the

management whenever required. They perform personnel follow up to

production department for preparing order in time. They understand the

special requirement of the customers and try their level best to satisfy

them. They established personnel contacts with their customers as well as

agents. They always try to provide letter service to the customer.

55

PRICEING

Price is the only element in the marketing mix that creates sale revenue,

the other elements are cost. Company is using the most commonly used

strategy and i.e. the skimming pricing strategy. The company is also using

differential price strategy that involves ago. Indifferenciating it’s price

arose different market segment. The company sets its price from the given

points.

- Selecting the pricing objective.

- Determining demand.

- Estimating cost.

- Analyzing competitions costs prices and offers.

- Selecting price method.

- Selecting the final price.

- Impact of global market.

MARKETING RESEARCH

In the worlds of Phillip Kotler “marketing research is a systematic problem

analysis model building feat finding for the purpose of improve decision

marking and control in the marketing of goods and services. As the

company is engaged in the Cheamical business it needs the market

research. They are using the produces, which covers the following

points.

- Problem formulation

- Data collection

- Marketing sample

- Data evaluation

- Interpreting data

- Report preparation

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The main object behind this is that it finds out for company. Where are his

customers? What they willing to pay for it? what is the Impact and use of

technology? They are researching leaps it’s use in reducing and

minimizing all marketing costs particularly selling advertising and

distribution cost.

DOCUMENTS

- Inquiry letter

- Quotation

- Order

- Schedule

- Transport receipt

- Invoice

- Bank letter

- ‘C’ form

- Side draft

- Payment Details

- Circular

- Advertisement

INQUIRY LETTER

The purpose of inquiry for buyer is to find out the cheapest and best

source of purchase of goods required. Inquiry contains products, name,

price, quality, quantity, discount rate, delivery period and other terms and

conditions. Inquiry received by this department is kept in inquiry register.

QUOTATION

The main purpose of the quotation is to give ideas to customer about the

under mentioned matters.

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- Mode and terms of payment.

- Place and time of delivery.

- Method of transport.

- Changes of sales tax, octroi, freight and insurance.

- Packing and forwarding changes.

Quotation signed by the proprietor in charge.

ORDER

Customer sends orders either through phone, fax, E-media or through

letter. Order received by this department is records in order register

There are three types of order:

- New order

- Repeated order

- Regular order

SCHEDULE

This department transfers information about the order to the production

department in schedule. They also indicate the time limit for the production

department. The manager of the company signs schedule.

TRANSPORT RECEIPT

The transport corporation prepares transport receipt. The two copy of this

receipt are prepared

(1) Consignee copy, which is, sends to the customer with goods.

(2) Consignor copy, which is kept in record of this department.

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INVOICE

Invoice is prepared at the time of dispatching of goods. This department

prepares three copies of invoice. Original copy is sent to the customer.

Second copy is for transport. Third is for excise records.

BANK LETTER

This department to the bank drafts bank letters. The mode of payment is

described in it. Transport receipt & invoice is attached with the bank letter.

“C” FORM

“C” Form is a government-approved form for registration of customers

firm. If customer has “C” Form he bound to pay 4% as a Sales tax & in

other situation he has to pay sales tax as per the product.

SIDE DRAFT

The sales & marketing department & sends prepare side draft to the

customer. After acceptance from customer, it is valid up to the mentioned

time. It means customer is bound to pay to bank after this time limit.

PAYMENT DETAILS

In payments details this is a record of incoming payment for particular time

period. In payment details customer’s name, mode of payment received,

amount of payment & customer’s account number are mentioned.

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CIRCULAR

Circular is mainly send to the customer for marketing purpose. Circular

contains the information about the new changes made by the company or

by the government.

ADVERTISEMENT

The main purpose of advertisement is providing information to the

customer & improves the sale. It gives the brief idea about the company &

product, which is very much helpful in competitive market. Advertisement

is published into the different media at the particular time limit.

COMMUNICATON

The marketing communication process has five major competent i.e.

sender, message, receiver, response and feedback. The sender is itself

the Hi-tech. Which sends message through advertisement. This

advertisement reaches the message to the receiver or audience about the

product by buying the Hi-tech. This is than feedback to the company.

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61

INTRODUCTION

Finance plays a major role in determining the position of a company. A

person not trained in finance management of a company may face N

number of problems which may affect the day to day functioning of his

company. A person not having knowledge of finance my not be able to the

exact suitable return on his investment, account and finance walk parallel

but as compare to account finance is a waste subject.

A person trained in Finance is able to take financial decision wisely and

quickly which gives better return on investment and have a better chance

to survive and compete. A business house must necessary keep a

systematic record of what happens from day to day, so that it can know

where it stands & where it will go in future. A systematic record of the daily

invents of a business leading to presentation of a complete financial

picture is known as accounting.

Financial account includes trading account, profit & loss account and

balance sheets. Trading account is a part of profit & loss account. It

indicates the earning capacity of the enterprise. Balance sheet indicates

financial position of the enterprise. In broad sense financial accounting

system refers to:

Recording of transaction in journal or its subsidiary books.

To post them ledger and data store in to computer.

To prepare final account.

The financial picture mostly have two parts, one showing how much profit

has been earn or loss suffered and other sowing assets & liabilities and a

proprietor’s interest in the firm. A firm constantly enters into transaction

with out siders. A transaction may be defined as an action & reaction

having monitory implication of one firm in relation to another firm.

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In other words accounting defined as, “The Art of recording, classifying &

summarizing in a manner and it terms of money transaction and events

which are, in part at least, of a financial character & interpreting the result

thereof”.

FUNCTIONFunctions of accounting department are as under:

ROUTINE FUNCTIONS

This department examines the challan in respect of payment. This

department handles the income tax and sales tax cases. This department

collects the vouchers from the various departments. They note the entries

in the sales return book on the basis of credit note & the entire of stock

register. This department makes casting and posting from sales return

register to ledger. They fill up the sales and income tax return per month.

They checked whether the income tax department has given a correct

order for payment of tax in advance. This department handles the all

transaction with bank. They prepare the daybook, ledger, trial balance,

manufacturing and profit & loss account and the final balance sheet.

SPECIFIC FUNCTION

This department submits monthly report to G.M. This department makes

necessary recommendation for change in system and in procedure to the

management. They ensure that the funds are raised economically and

used in the most efficient manner. Communicating the result. Accounting

is to communicate the result obtained from arranging of data to interested

parties like proprietors. Protecting proprietors of the business. Accounting

has to design such a system of accounting as will protect its assets from

an unjustified and unwanted use. Company said nothing write about its

finance company. So that I can’t write about finance department.

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Orgaonogram of Finance Department

64

President(Dr Hariharan)

GM Finance

Manager(Costing)

(S.M Behani)

Manager(Accounts)

(M.D. Gupta)

Raghu Desai(head accounts)

Antana Matha (data entry)

Chetan Joshi(data entry)

H .M .Shah (asst)

Ashok Modi(Asst)

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INTRODUCTION

The Quality Control department at ATUL (Aeromatic Division), is at

Ankleshwar production site where they have to check and certify the

various aspects in the chemical produced and also verify the chemicals

which are brought into the plant as the raw materials . Mr. V.K.Srivastav

(QC dept manager), Mr. Sharad Desai (asst manager), Mr. K.B.Prajapati

(chemist) these are some of the person who are responsible for the quality

check activity in Atul Aromatic division These process are done according

to the ISO standards which can be explained in steps as the Quality check

process are mainly done between these three process .

Raw material check:

All the raw material entering into the Aromatic plant are been checked

randomly from their lot sizes before they are allowed to be stored . The

raw materials checked are if according to the specification which are

required by the company then they allow them to enter the plant or let

them store it or else they are been send back to the suppliers.

In-process check :

As Aromatic plants should produce the chemicals in exact specification

required by the customers so before very lot is been produced their

contents are been checked before the next batch is been processed so

that their products can meet the exact requirement .

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Dispatch process:

The goods before they are been dispatch to the customers are been

verified once again that the dispatch goods are the same goods which are

meeting the requirement of the customers and are if checked ok then a

Certificate of Analysis is attached to the vouchers through which the

customers could know the goods are of exact specification as they

ordered.

Some of the experiments which is undertaken for the Quality check are , GAS COMOTOGRAPY SPECIFICATION its for purity, HYPER PERFORMANCE LIQUID COMOTOGRAPH, ULTRA VIOLET testing, LOVI BALL testing, weight balance , melting point etc.

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68

The Impact of Appreciating India Rupee on Company’s Export Business

69

The Appreciation of Rupee’s value for international trade is a major

concern for the Atul limited (Aromatic Division), as the percentage of

export revenue is more than 50% in the total sales.

Rs in crores

Year2005 2006

Total sales 135.04 167.85

Export amount 78.35

App 60%

112.69

App 70%

What is Currency Appreciation?

Currency Appreciation means that the given currency has become more

value with respect to another currency. For example if the rupee

appreciates it means that rupee has become more valuable in relation to

dollar. In case of appreciation a "downward" movement takes place. Eg:

For instance if the rupee moves downwards from 50 per dollar to 40 per

dollar then rupee is said to appreciate.

FACTORS AFFECTING CURRENCY APPRECIATION:

-- EXIM POLICY.EXIM POLICY.

-- MERCANDISE TRADE BALANCE.MERCANDISE TRADE BALANCE.

-- FORIGN TRADE POLICY 2004-2009.FORIGN TRADE POLICY 2004-2009.

-- MONETARY POLICY.MONETARY POLICY.

- FORIGN INVESTMENT.- FORIGN INVESTMENT.

70

TT hese factors are explained in detail as follows :hese factors are explained in detail as follows :

1. EXIM POLICY :1. EXIM POLICY :

The principal objectives of this Policy are: To facilitate sustained growth in exports to attain a share of atleast 1% of

global merchandise trade. To stimulate sustained economic growth by

providing access to essential raw materials, intermediates, components,

consumables and capital goods required for augmenting production and

providing services. To enhance the technological strength and efficiency

of Indian agriculture, industry and services, thereby improving their

competitive strength while generating new employment opportunities, and

to encourage the attainment of internationally accepted standards of

quality. To provide consumers with good quality goods and services at

internationally competitive prices while at the same time creating a level

playing field for the domestic producers.

2. MERCANDISE TRADE BALANCE :2. MERCANDISE TRADE BALANCE :

Merchandise trade balance :

First, is trade in goods, i.e., the merchandise trade balance, which is a

very large negative number; we import much more than we export

Second, is the trade in services – software, ITES, travel & tourism – and

here we have a sizeable surplus.

Third, is remittance from Indians who live overseas, which generates an

enormous surplus.

Fourth, are dividend and interest payments, where we pay out more than

we receive.

71

3. FORIGN TRADE BALANCE:3. FORIGN TRADE BALANCE:

Highlights of forign trade policy for 2004-2009 are as follows:Highlights of forign trade policy for 2004-2009 are as follows:

3.1 REMOVAL OF EXPORT CESS3.1 REMOVAL OF EXPORT CESS

The Department of Commerce has taken a consistent stand from a policyThe Department of Commerce has taken a consistent stand from a policy

perspective that taxes and duties should not be exported. The cess leviedperspective that taxes and duties should not be exported. The cess levied

under the different Commodity Board Acts is a tax on exports, which is aunder the different Commodity Board Acts is a tax on exports, which is a

handicap and a major irritant to our exporters and erodes thehandicap and a major irritant to our exporters and erodes the

competitiveness of Indian agriculture exports. Department of Commercecompetitiveness of Indian agriculture exports. Department of Commerce

proposes to abolish cess on export of all agricultural and plantationproposes to abolish cess on export of all agricultural and plantation

commodities levied under various Commodity Board Acts.commodities levied under various Commodity Board Acts.

3.2 3.2 EXPORT PROMOTION CAPITAL GOODS SCHEMEEXPORT PROMOTION CAPITAL GOODS SCHEME

a. For providing a thrust to the Agricultural sector, concessional dutya. For providing a thrust to the Agricultural sector, concessional duty

imports made by agro units under the EPCG Scheme shall be allowed toimports made by agro units under the EPCG Scheme shall be allowed to

fulfill the export obligation over a longer period of time with a reducedfulfill the export obligation over a longer period of time with a reduced

export obligation i.e. 6 times the duty saved over a 12 year period insteadexport obligation i.e. 6 times the duty saved over a 12 year period instead

of the normal window of 8 times the duty saved in 8 years.of the normal window of 8 times the duty saved in 8 years.

b. To promote capacity expansion and quality up-gradation in the SSIb. To promote capacity expansion and quality up-gradation in the SSI

sector, import of capital goods at 5% Customs duty shall now be allowedsector, import of capital goods at 5% Customs duty shall now be allowed

subject to a fulfillment of an export obligation equivalent to 6 times thesubject to a fulfillment of an export obligation equivalent to 6 times the

duty saved on capital goods imported under the EPCG Scheme over aduty saved on capital goods imported under the EPCG Scheme over a

period of 8 years. (At present the export obligation under the EPCGperiod of 8 years. (At present the export obligation under the EPCG

Scheme is 8 times the duty saved and reducing the export obligation forScheme is 8 times the duty saved and reducing the export obligation for

small manufacturing units to 6 times shall provide an impetus to industriessmall manufacturing units to 6 times shall provide an impetus to industries

to modernise their plant and machinery which will enhance our overallto modernise their plant and machinery which will enhance our overall

export competitiveness in the medium term).export competitiveness in the medium term).

72

c. To create modern infrastructure in the retail sector, concessional dutyc. To create modern infrastructure in the retail sector, concessional duty

benefits under EPCG scheme shall be extended for import of capitalbenefits under EPCG scheme shall be extended for import of capital

goods required by retailers having a minimum covered shopping area ofgoods required by retailers having a minimum covered shopping area of

1000 sq metres. The retailer shall fulfill the export obligation under the1000 sq metres. The retailer shall fulfill the export obligation under the

Scheme from payments received against 'counter sales' in free foreignScheme from payments received against 'counter sales' in free foreign

exchange through banking channels as per RBI guidelines. exchange through banking channels as per RBI guidelines.

d. With a view to accelerate exports under the Scheme and to incentivised. With a view to accelerate exports under the Scheme and to incentivise

fast track companies, firms making 75 % or more of the exports under thefast track companies, firms making 75 % or more of the exports under the

EPCG Scheme (including average level of exports) in half or less than halfEPCG Scheme (including average level of exports) in half or less than half

the original export obligation period, shall be freed from the balance exportthe original export obligation period, shall be freed from the balance export

obligation. obligation.

e. Payment received in Rupees for the Port Handling services are countede. Payment received in Rupees for the Port Handling services are counted

for export obligation discharge under the EPCG Scheme. This facility isfor export obligation discharge under the EPCG Scheme. This facility is

now being extended to include minor ports including ICDs and Containernow being extended to include minor ports including ICDs and Container

Freight Stations (CFS) also. This will enable augmentation of the facilitiesFreight Stations (CFS) also. This will enable augmentation of the facilities

available at the secondary ports with modern equipment and therebyavailable at the secondary ports with modern equipment and thereby

reduce cargo handling turnaround time and related transaction costs.reduce cargo handling turnaround time and related transaction costs.

f. The present requirement of submitting an Installation Certificate forf. The present requirement of submitting an Installation Certificate for

machinery imported under EPCG Scheme will now not be required formachinery imported under EPCG Scheme will now not be required for

units which are not registered with Central Excise. In lieu of a Centralunits which are not registered with Central Excise. In lieu of a Central

Excise Certificate, a Chartered Engineer Certificate will now suffice. FirmsExcise Certificate, a Chartered Engineer Certificate will now suffice. Firms

importing spares under EPCG shall also be required to submit aimporting spares under EPCG shall also be required to submit a

Chartered Engineer certificate only instead of a certificate from CentralChartered Engineer certificate only instead of a certificate from Central

Excise authorities.Excise authorities.

g. The facility of clubbing of EPCG licences has been further liberalizedg. The facility of clubbing of EPCG licences has been further liberalized

and restrictive conditions relating to same licensing year and sameand restrictive conditions relating to same licensing year and same

products/services have been deleted. Henceforth, all EPCG licencesproducts/services have been deleted. Henceforth, all EPCG licences

issued under the same Customs Notification can be clubbed. This willissued under the same Customs Notification can be clubbed. This will

considerably reduce paperwork both for the exporter and the licensingconsiderably reduce paperwork both for the exporter and the licensing

authorities and lead to easier monitoring. authorities and lead to easier monitoring.

73

3.3 SERVICE EXPORTS 3.3 SERVICE EXPORTS

a. To enable the Service providers to upgrade the infrastructure in theira. To enable the Service providers to upgrade the infrastructure in their

associate companies, the goods imported under the 'Served from India'associate companies, the goods imported under the 'Served from India'

Scheme shall be transferable within the Group companies and managedScheme shall be transferable within the Group companies and managed

hotels subject to Actual User condition.hotels subject to Actual User condition.

b. At present, Hotels & Restaurants are required to submit a Charteredb. At present, Hotels & Restaurants are required to submit a Chartered

Accountant certificate that the entire duty benefits availed under theAccountant certificate that the entire duty benefits availed under the

'Served from India' Scheme have been passed on to the consumer. From'Served from India' Scheme have been passed on to the consumer. From

now on, only a declaration will be submitted by the Hotels & Restaurantsnow on, only a declaration will be submitted by the Hotels & Restaurants

that the duty benefits shall be passed on to the consumer and no CAthat the duty benefits shall be passed on to the consumer and no CA

certificate will be required to be submitted.certificate will be required to be submitted.

3.4 PACKAGE FOR MARINE SECTOR3.4 PACKAGE FOR MARINE SECTOR

a. Duty free import of specified specialized inputs/chemicals and flavoringa. Duty free import of specified specialized inputs/chemicals and flavoring

oils as per a defined list shall be allowed to the extent of 1% of FOB valueoils as per a defined list shall be allowed to the extent of 1% of FOB value

of preceding financial years export. Use of these special ingredients forof preceding financial years export. Use of these special ingredients for

seafood processing will enable us to achieve a higher value addition andseafood processing will enable us to achieve a higher value addition and

enter new export markets.enter new export markets.

b. To encourage the existing mechanized vessels and deep sea trawlersb. To encourage the existing mechanized vessels and deep sea trawlers

to adopt modern technology for scientific exploitation of our marineto adopt modern technology for scientific exploitation of our marine

resources in an eco-friendly manner and boost marine sector exports, it isresources in an eco-friendly manner and boost marine sector exports, it is

proposed to allow import of monofilament long line system for tuna fishingproposed to allow import of monofilament long line system for tuna fishing

at a concessional rate of duty. at a concessional rate of duty.

c. The present system of disposal of waste of perishable commodities likec. The present system of disposal of waste of perishable commodities like

seafood after inspection by a customs official is very cumbersome andseafood after inspection by a customs official is very cumbersome and

leads to development of unhygienic conditions. To overcome this, a self leads to development of unhygienic conditions. To overcome this, a self

74

removal procedure for clearance of waste shall be applicable, subject toremoval procedure for clearance of waste shall be applicable, subject to

prescribed wastage norms.prescribed wastage norms.

3.5 ADVANCE LICENSING SCHEME 3.5 ADVANCE LICENSING SCHEME

a. No safeguard and antidumping duty shall be levied on inputs undera. No safeguard and antidumping duty shall be levied on inputs under

Advance Licence for deemed export supplies made to ICB projects. WithAdvance Licence for deemed export supplies made to ICB projects. With

this different categories of Advance licences i.e. advance licence forthis different categories of Advance licences i.e. advance licence for

physical export, advance licence for intermediate supplies and advancephysical export, advance licence for intermediate supplies and advance

licence for deemed exports have been merged into a single category forlicence for deemed exports have been merged into a single category for

procedural facilitation and easier monitoring.procedural facilitation and easier monitoring.

b. The scope of Advance Licence for Annual requirement has beenb. The scope of Advance Licence for Annual requirement has been

extended to all categories of exporters having past export performance.extended to all categories of exporters having past export performance.

Earlier, the option was limited to Status Holders only. The earlier limit ofEarlier, the option was limited to Status Holders only. The earlier limit of

obtaining Advance Licence for Annual requirement has also beenobtaining Advance Licence for Annual requirement has also been

enhanced to 300% of FOB/FOR value of exports made in the previousenhanced to 300% of FOB/FOR value of exports made in the previous

year from 200%.year from 200%.

c. Clubbing of advance licences for export regularization purpose hasc. Clubbing of advance licences for export regularization purpose has

been allowed even for licences pertaining to 1992-97 period.been allowed even for licences pertaining to 1992-97 period.

d. Units registered under BIFR shall be allowed export obligationd. Units registered under BIFR shall be allowed export obligation

extension as per the rehabilitation package or a period upto five yearsextension as per the rehabilitation package or a period upto five years

reckoned from the date of issuance of the advance licence, whichever isreckoned from the date of issuance of the advance licence, whichever is

higher. higher.

e. Transfer of Duty Free material imported or procured under Advancee. Transfer of Duty Free material imported or procured under Advance

Licence from one unit of the company to another unit of the sameLicence from one unit of the company to another unit of the same

company to be allowed with prior intimation to the jurisdictional centralcompany to be allowed with prior intimation to the jurisdictional central

excise authority. Earlier prior permission of the jurisdictional central exciseexcise authority. Earlier prior permission of the jurisdictional central excise

authority was required. authority was required.

75

f. In cases the Bank Guarantee/LUT has been redeemed under thef. In cases the Bank Guarantee/LUT has been redeemed under the

Advance licence, the Licensee may be allowed to get duty free inputsAdvance licence, the Licensee may be allowed to get duty free inputs

processed from any manufacturer under actual user condition subject toprocessed from any manufacturer under actual user condition subject to

central excise procedures relating to job work. central excise procedures relating to job work.

g. Removal of requirement of ARO for taking supplies fromg. Removal of requirement of ARO for taking supplies from

EOU/EHTP/STP/BTP units and allowing direct debit of the advanceEOU/EHTP/STP/BTP units and allowing direct debit of the advance

licence by the Bond Officer of these units. A detailed procedure in thislicence by the Bond Officer of these units. A detailed procedure in this

regard shall be prescribed by the CBEC.regard shall be prescribed by the CBEC.

3.6 EXPORT ORIENTED UNITS3.6 EXPORT ORIENTED UNITS

a. Duty free spares up to 5% of the value of Capital Goods imported fora. Duty free spares up to 5% of the value of Capital Goods imported for

excavation purposes in the Granite sector will be allowed to be removed toexcavation purposes in the Granite sector will be allowed to be removed to

the quarries. the quarries.

b. The de-bonding procedure for EOUs has been simplified. A self-b. The de-bonding procedure for EOUs has been simplified. A self-

assessment procedure along with time bound disposal of applications ofassessment procedure along with time bound disposal of applications of

such exiting EOUs will be put in place. such exiting EOUs will be put in place.

c. Capital Goods will be allowed to be transferred or given on loan basis toc. Capital Goods will be allowed to be transferred or given on loan basis to

other units under intimation to both Excise and Developmentother units under intimation to both Excise and Development

Commissioner. Commissioner.

d. Transfer of samples to other EOUs on returnable basis within a periodd. Transfer of samples to other EOUs on returnable basis within a period

of 30 days to be allowed. of 30 days to be allowed.

e. EOUs to be permitted to claim IT exemption in respect of income one. EOUs to be permitted to claim IT exemption in respect of income on

export proceeds realised within a period of 12 months from date of export.export proceeds realised within a period of 12 months from date of export.

76

4. MONETARY POLICY :4. MONETARY POLICY :

Monetary policy is the process by which the government, central bank, orMonetary policy is the process by which the government, central bank, or

monetary authority manages the money supply to achieve specific goals—monetary authority manages the money supply to achieve specific goals—

such as constraining inflation or deflation, maintaining an exchange rate,such as constraining inflation or deflation, maintaining an exchange rate,

achieving full employment or economic growth. (Usually the goal ofachieving full employment or economic growth. (Usually the goal of

monetary policy is to accommodate economic growth in an environment ofmonetary policy is to accommodate economic growth in an environment of

stable prices.) Monetary policy can involve changing certain interest rates,stable prices.) Monetary policy can involve changing certain interest rates,

either directly or indirectly through open market operations, setting reserveeither directly or indirectly through open market operations, setting reserve

requirements, acting as a last-resort lender (i.e. discount window lending),requirements, acting as a last-resort lender (i.e. discount window lending),

or trading in foreign exchange markets.or trading in foreign exchange markets.

Monetary policy is generally referred to as either being an expansionaryMonetary policy is generally referred to as either being an expansionary

policy, or a contractionary policy, where an expansionary policy increasespolicy, or a contractionary policy, where an expansionary policy increases

the total supply of money in the economy, and a contractionary policythe total supply of money in the economy, and a contractionary policy

decreases the total money supply. Expansionary policy is traditionallydecreases the total money supply. Expansionary policy is traditionally

used to combat unemployment in a recession by lowering interest rates,used to combat unemployment in a recession by lowering interest rates,

while contractionary policy has the goal of raising interest rates to combatwhile contractionary policy has the goal of raising interest rates to combat

inflation (or cool an otherwise overheated economy). Monetary policyinflation (or cool an otherwise overheated economy). Monetary policy

should be contrasted with fiscal policy, which refers to governmentshould be contrasted with fiscal policy, which refers to government

borrowing, spending and taxation. It is important for policymakers to makeborrowing, spending and taxation. It is important for policymakers to make

credible announcements regarding their monetary policies. If privatecredible announcements regarding their monetary policies. If private

agents (consumers and firms) believe that policymakers are committed toagents (consumers and firms) believe that policymakers are committed to

lowering inflation, they will anticipate future prices to be lower thanlowering inflation, they will anticipate future prices to be lower than

otherwise (how those expectations are formed is an entirely differentotherwise (how those expectations are formed is an entirely different

matter; compare for instance rational expectations with adaptivematter; compare for instance rational expectations with adaptive

expectations). If an employee expects prices to be high in the future, he orexpectations). If an employee expects prices to be high in the future, he or

she will draw up a wage contract with a high wage to match these prices.she will draw up a wage contract with a high wage to match these prices.

Hence, the expectation of lower wages is reflected in wage-settingHence, the expectation of lower wages is reflected in wage-setting

behaviour between employees and employers (lower wages since pricesbehaviour between employees and employers (lower wages since prices

are expected to be lower) and since wages are in fact lower there is noare expected to be lower) and since wages are in fact lower there is no

demand pull inflation because employees are receiving a smaller wagedemand pull inflation because employees are receiving a smaller wage

and there is no cost push inflation because employers are paying out lessand there is no cost push inflation because employers are paying out less

77

in wages. However, to achieve this low level of inflation, policymakersin wages. However, to achieve this low level of inflation, policymakers

must have credible announcements, that is, private agents must believemust have credible announcements, that is, private agents must believe

that these announcements will reflect actual future policy. If anthat these announcements will reflect actual future policy. If an

announcement about low-level inflation targets is made but not believedannouncement about low-level inflation targets is made but not believed

by private agents, wage-setting will anticipate high-level inflation and soby private agents, wage-setting will anticipate high-level inflation and so

wages will be higher and inflation will rise. A high wage will increase awages will be higher and inflation will rise. A high wage will increase a

consumer's demand (demand pull inflation) and a firm's costs (cost pushconsumer's demand (demand pull inflation) and a firm's costs (cost push

inflation), so inflation rises. Hence, if a policymaker's announcementsinflation), so inflation rises. Hence, if a policymaker's announcements

regarding monetary policy are not credible, policy will not have the desiredregarding monetary policy are not credible, policy will not have the desired

effect.effect.

However, if policymakers believe that private agents anticipate lowHowever, if policymakers believe that private agents anticipate low

inflation, they have an incentive to adopt an expansionist monetary policyinflation, they have an incentive to adopt an expansionist monetary policy

(where the marginal benefit of increasing economic output outweighs the(where the marginal benefit of increasing economic output outweighs the

marginal cost of inflation). However, assuming private agents havemarginal cost of inflation). However, assuming private agents have

rational expectations, they know that policymakers have this incentive.rational expectations, they know that policymakers have this incentive.

Hence, private agents know that if they anticipate low inflation, anHence, private agents know that if they anticipate low inflation, an

expansionist policy will be adopted that causes a rise in inflation.expansionist policy will be adopted that causes a rise in inflation.

Therefore, (unless policymakers can make their announcement of lowTherefore, (unless policymakers can make their announcement of low

inflation credible), private agents expect high inflation. This anticipation isinflation credible), private agents expect high inflation. This anticipation is

fulfilled through adaptive expectation (wage-setting behaviour) and sofulfilled through adaptive expectation (wage-setting behaviour) and so

there is higher inflation (without the benefit of increased output). Hence,there is higher inflation (without the benefit of increased output). Hence,

unless credible announcements can be made, expansionary monetaryunless credible announcements can be made, expansionary monetary

policy will fail.policy will fail.

Announcements can be made credible in various ways. One is to establishAnnouncements can be made credible in various ways. One is to establish

an independent central bank with low inflation targets (but no outputan independent central bank with low inflation targets (but no output

targets). Hence, private agents know that inflation will be low because it istargets). Hence, private agents know that inflation will be low because it is

set by an independent body. Central banks can be given incentives toset by an independent body. Central banks can be given incentives to

meet their targets (for example, larger budgets, a wage bonus for the headmeet their targets (for example, larger budgets, a wage bonus for the head

of the bank) in order to increase their reputation and signal a strongof the bank) in order to increase their reputation and signal a strong

commitment to a policy goal. Reputation is an important element incommitment to a policy goal. Reputation is an important element in

monetary policy implementation. But the idea of reputation should not be monetary policy implementation. But the idea of reputation should not be

78

confused with commitment. While a central bank might have a favorableconfused with commitment. While a central bank might have a favorable

reputation due to good performance in conducting monetary policy, thereputation due to good performance in conducting monetary policy, the

same central bank might not have chosen any particular form ofsame central bank might not have chosen any particular form of

commitment (such as targeting a certain range for inflation). Reputationcommitment (such as targeting a certain range for inflation). Reputation

plays a crucial role in determining how much would markets believe theplays a crucial role in determining how much would markets believe the

announcement of a particular commitment to a policy goal but bothannouncement of a particular commitment to a policy goal but both

concepts should not be assimilated. Also, note that under rationalconcepts should not be assimilated. Also, note that under rational

expectations, it is not necessary for the policymaker to have establishedexpectations, it is not necessary for the policymaker to have established

its reputation through past policy its reputation through past policy

79

The Trend of Currency Appreciation Through aThe Trend of Currency Appreciation Through a

ChartChart ::

This graph shows that Indian currency is appreciated in these recent

years from 2001 at the exchange rate of 47.54 to the recent exchange

rate of 40.95 in 2007.

WHAT IS EXCHANGE RATE?

80

“ The exchange rate (also known as the foreign-exchange rate) is the rate

between two currency specifies how much one currency is worth in terms

of the other”.

Example:

1$ = 40.95 Rupees

1euro = 55.09 Rupees

1euro = 1.38 $

Fluctuations in exchange rates

A market based exchange rate will change whenever the values of either

of the two component currencies change. A currency will tend to become

more valuable whenever demand for it is greater than the available

supply. It will become less valuable whenever demand is less than

available supply (this does not mean people no longer want money, it just

means they prefer holding their wealth in some other form, possibly

another currency). Increased demand for a currency is due to either an

increased transaction demand for money, or an increased speculative

demand for money. The transaction demand for money is highly

correlated to the country's level of business activity, gross domestic

product (GDP), and employment levels. The more people there are out of

work, the less the public as a whole will spend on goods and services.

Central banks typically have little difficulty adjusting the available money

supply to accommodate changes in the demand for money due to

business transactions. The speculative demand for money is much harder

for a central bank to accommodate but they try to do this by adjusting

interest rates. An investor may choose to buy a currency if the return (that

is the interest rate) is high enough. The higher a country's interest rates,

the greater the demand for that currency. It has been argued that currency

speculation can undermine real economic growth, in particular since large

currency speculators may deliberately create downward pressure on a

currency in order to force that central bank to sell their currency to keep it

stable (once this happens, the speculator can buy the currency back from

81

the bank at a lower price, close out their position, and thereby take a

profit).

TYPES OF EXCHANGE RATE:

Free or pegged:

If a currency is free-floating, its exchange rate is allowed to vary against

that of other currencies and is determined by the market forces of supply

and demand. Exchange rates for such currencies are likely to change

almost constantly as quoted on financial markets, mainly by banks, around

the world. A movable or adjustable peg system is a system of fixed

exchange rates, but with a provision for the devaluation of a currency. For

example, between 1994 and 2005, the Chinese yuan renminbi (CNY, ¥)

was pegged to the United States dollar at ¥8.2768 to $1. The Chinese

were not the only country to do this; from the end of World War II until

1970, Western European countries all maintained fixed exchange rates

with the US dollar based on the Bretton Woods system.

Nominal and Real Exchange Rates:

The nominal exchange rate is the rate at which an organization can

trade the currency of one country for the currency of another.

The real exchange rate (RER) is an important concept in economics,

though it is quite difficult to grasp concretely. It is defined by the

model: RER = e(P*/P), where 'e' is the exchange rate, as the number

of home currency units per foreign currency unit; where P is the price

level of the home country; and where P* is the foreign price level.

Unfortunately, this compact and simple model for RER calculations is only

a theoretical ideal. In practical usage, there are many foreign currencies

and price level values to take into consideration. Correspondingly, the

82

model calculations become increasingly more complex. Furthermore, the

model is based on purchasing power parity (PPP), which implies a

constant RER. The empirical determination of a constant RER value could

never be realised, due to limitations on data collection. PPP would imply

that the RER is the rate at which an organization can trade goods and

services of one economy (e.g. country) for those of another. For example,

if the price of a good increases 10% in the UK, and the Japanese currency

simultaneously appreciates 10% against the UK currency, then the price

of the good remains constant for someone in Japan. The people in the

UK, however, would still have to deal with the 10% increase in domestic

prices. It is also worth mentioning that government-enacted tariffs can

affect the actual rate of exchange, helping to reduce price pressures.

83

How does Indian rupee appreciation is affecting the export business of ATUL AROMATIC DIVISION in

two different ways ?

1. THE EXPORTER WOULD LOSS HIS COMPETITIVENESS IN FORIGN MARKET.

If this is the annual assumed sales of Aromatic division in the four major

products they deal in them, in this diagram the 4 products export sales are shown and the amount of dollors they have earned through this

sales are been showed.

84

CALCULATIONS:

When we convert the DOLLORS we got from the export sales of all the

product according to the previous year exchange rate,

AT 1$ = 44.89 INR

Then by adding the total sales we get

455099.75

+ 96067.08

+ 38488.65

+ 63529.92

-------------------

= 6,53,185.4 $

MULTIPLYING IT WITH THE EXCHANGE RATE WE GET;

=6,53,184.4$ * 44.89INR = 2,93,21,493 ----------------------(1)

NOW WHEN WE CALCULATE THE SAME AMOUNT OF SALES WITH

THE PRESENT EXCHANGE RATE BETWEEN DOLLLORS AND RUPEE

ASSUNMING THAT THE SALES WOULD NOT CHANGE THIS YEAR.

WE GET = 6,53,184.4$ * 40.95 INR (PRESENT EXCHANGE ) = 2,67,47,942 INR ---------------------------------------------------(2)

SO BY SUBTRACTING (1) & (2) WE GET

= 25,73,500 INR LOSS IN THE TRANSACTION

THIS IS THE IMPACT ON THE EXPORT SALES BY APPRECIATION OF RUPEE BY 3.91 INR

85

2. IMPACT OF RUPEE APPRECIATION ON DOMESTIC BUYERS.

Due to Rupee appreciation there has been a greater advantage to the

Domestic buyers of the product PARA CRESOL which is one of the main

product in which ATUL(AEROMATIC DIVISION) manufacture and deals .

The product PARA CRESOL also adds a greater share in companies

profits due to the rupee appreciation the imports have been more cheaper

or the domestic buyers for the same product

Last year the total IMPORTS of PARA CRESOL was around 601.66 metric tones at a cost of 53393.58$, The figure as we can see is more

than our exports of the same product though we are the monopoly

producers of PARA CRESOL in India, which is a great deal for our

Competitors.

86

SUGGESTION FOR THE COMPANIES RISK:

1. IF WE SEE THE OF PARA ANISIC ALDEHYDE IS 3889/-RS PRICE

PER KG. SO IF WHE CONVERT THE INDIAN RUPEE WITH THE

CURRENT EXHANGE RATE OF US DOLLORS AND EURO WE GET,

1KG = 3889 INR1KG = 70.59 EURO (AT RATE 55.09 NRI = 1 EURO)1 KG = 94.96 $ (AT RATE 40.95 INR = 1$)

BUT IF WE SALE IN EURO THAN ACCORDING TO THE EXCHANGE

RATE BETWEEN EURO AND US $, IS

EURO = 1.39 $SO 70.59 EURO IS ULTIMATELY 98.12 $

2. WHE COULD INCREASE THE RATE OF PRODUCT ACCORDINGLY

SO THAT THE LOSS CAN BE BALANCED TO REDUCE THE LOSS

WHE COULD INCRESASE THE PRICE OF THE PRODUCT

ACCORDINGLY SO DECREASE THE LOSSES.

87

LIMITATION

ITS NOT EASY TO CONVIENCE THE BUYER TO TRADE IN

EURO INSTEAD OF DOLLAR .

THE GOVERNMENT POLICY IS NOT IN FAVOUR FOR THE

EXPOTERS IN INDIA

RBI IS NOT ABLE TO CONTROL THE APPRECIATION AND IT

INCREASED MORE THAN 14 % IN RECENT YEARS.

BIBLOGRAPHY

MAGAZINES -

1. IBIT (TRADE INTELLIGENCE MAGAZINES)

BOOKS -

1. INTENATIONAL BUSINESS

- BY FRANSIC CHERULINUM.

WEBSITES -

1. WWW. RBI .ORG

2. WWW. FOREXRATE.COM

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