PROJECT REPORT ON COSTING AND BUDGETING AT UTTARAKHAND POWER CORPORATIN LIMITED DEHRADUN SUBMITTED FOR THE PARTIAL FULFILLMENT

OF MASTER OF BUSINESS ADMINISTRATION (FINANCE) (2009-2011) BY

ROOHI NAAZ

INTERNAL GUIDE

EXTERNAL GUIDE

GRAPHIC ERA UNIVERSITY 566/6,BELL ROAD,CLEMENTOWN DECLARATION

I, Lavi Jain, hereby declare that the project entitled Costing and Budgeting is my original work, done by me. Now it is an asset of UTTRANCHAL POWER CORPORATION LTD. DEHRADUN. All the rights for using this project report lie with the company. Unauthorized copying, hiring, broadcasting, or rental of this project without permission from the organization will be considered illegal.

ROOHI NAAZ BBA 5TH

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Miss ROOHI NAAZof BBA 5TH Sem is a bonafide regular student of this institute for the session 2009 2011. He has completed the project report titled COSTING AND BUDGETING under my supervision, as a part of partial fulfillment for the award of BBA Degree. His/ Her report is satisfactory and not copied from anywhere to the best of my knowledge.

Date:

Signature
Head of Department

Signature
Project Supervisor

PREFACE
Modern business world is full of competition, uncertainty and exposed to different types of risks. The complexity of managerial problems has led to the development of various managerial tools, techniques and procedures useful for the management in managing the business successful. One of the essential features of modern business Management is planning and control. There are a number of tools and devices which assist Management in planning and controlling business operations. Budgeting is the most common, useful and widely used standard device of planning and control. In the present project an attempt has been made to study and understand the costing and budgeting system in Uttarakhand Power Corporation Limited (UPCL) and convert the theoretical practices into the practical working life.

ACKNOWLEDGEMENT

Presenting a summer Training project of this is an arduous task, demanding a lot of time. I cannot in full measure reciprocate the kindness shown and contribution made by various persons in this endeavor. I will remember all of them with gratitude. My sincere thanks towards GRAPHIC ERA UNIVERSITYfor giving me a chance to take this project and for his valuable guidance, which helped me on all those points, which I needed to include in, with full intensity. I am extremely gratified to Mr. Amit Kansal, Sr. Accounts officer, UPCL who was extremely helpful in offering his professional expertise and bestowing me practical knowledge in all spheres related to the whole organization working. I am very grateful to my mentor Mr. for his significant support extended for the

successfully completion of the project as he support me all through the project and devoted his precious time for me. I am really appreciative to this organization and the employees of UPCL for full co-operation, support and motivation that helped me a lot in completing my project here. I am always beholden to my God, for always being with me and showing me the right way, my family, for always doing favor to me and my friends and colleagues consistently helped with encouragement, creative inputs and criticism throughout the project work, for always lifting my sights to higher vision, raising my personality beyond normal limitation and for realizing me my strengths and potential.

ROOHI NAAZ

SCENARIO OF POWER IN INDIA

Power development is the key to economic development. The power sector has been receiving adequate priority ever since the process of planned development began in 1950. Hydro-power and coal based thermal power have been the main sources of generating electricity. Nuclear power development is at slower pace, which was introduced, in late sixties. The concept of operating power systems on a regional basis crossing the place, the power supply industry has been under constant pressure to bridge the gap between supply and demand. State of the Industry: Demand is expected to grow 6-7% over the medium term. Capacity additions of around 50 GW are expected in the 11th Plan (60% of government targets) Addressable of key issues such as fuel supply, land availability, environmental clearances and equipment supply are key to success. . Budget Impact: There were no major announcements impacting the sector. The basic customs duty on project imports has been reduced from 7.5 to 5%. However, the exemption on additional duty of 4% has been withdrawn for non mega power projects. Thus, the overall impact of duty changes on power sector project imports is neutral. The budgetary allocation for Accelerated Power Development and Reforms Programme (APDRP) has been maintained at Rs 800 crore in FY 08 - 09 The government has proposed to set up a National Transmission and Distribution Fund to address higher losses at the transmission and distribution level and for the sectors development as well. The overall impact on the sector is neutral.

SOURCES OF POWER

Gap between demand and supply of power in India

This table shows that the average shortage of electricity in India every year to be approximately between 7%-8%.

FORMATION OF UPCL

Distribution organization is responsible to distribute the power to various consumers as per the load requirement. Therefore, the power being generated is first transmitted through the power transmission system through transmission and high rated capacity power distribution transformers and as per the power generated, the same is being allotted to distribution transformers, which is being calculated, distributed and billed by the distribution wing. This is a continuous process by the power department under the overall responsibility of the Engineers, technicians and other staff responsible in the department.

Power Department

Government of India, Ministry of Power has passed a resolution. After passing the same by the cabinet for breaking the Electricity Board s functioning in the country into three parts namely Power generation, Power Distribution and Power transmission headed by different CMDs for its smooth functioning and better management and consumer services. The total control over the electricity department has been vested to the Electricity Regulatory authority and authorized and advised to State Government to take action for dividing the electricity departments. In this direction, Govt. of India, Ministry of energy has created a regulatory commission to monitor the situation within the country. Accordingly, the state Government has divided the power department in to three separate corporations. Three separate Chairman and Managing directors head the individual corporations. The details are as under: -

1.

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

2.

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

ORGANIZATIONAL SETUP

The detailed organization chart of UPCL consists of following:-

Chairman

Sh. P. K. Sarangi

Full Time Directors:

Managing Director Director (Finance) Director (Operation) Director (Project) Director (HR) Company Secretary : : : : : : Sh. J. M. Lal Sh. T. Panda Sh. J.M. Lal Sh. A.K. Johri Sh. Sharad Krishna Sh. H.P. Vyas

Registered Office:
The Registered office of UPCL is situated at Kanwali road, Dehradun. It has two Zonal Offices one at Dehradun, named General Manager (Distribution) Garhwal Zone and other at Haldwani (Nanital) named General Manager (Distribution) Kamuon Zone respectively.

Bankers:

Punjab National Bank State Bank of India Central Bank of India Bank of Baroda

PERFORMANCE SERVICE:
(A) Financial performance & profitability in the second half of FY 2007-08 has registered considerable improvement:(i) Contribution of Revenue towards expenditure (including power purchase costs) has improved from (-) Rs.192.90 Cr. To (-) Rs. 63.47 Cr.

(ii)

Revenue Collections in second half of FY 2007-08 has increased to Rs. 639 Cr. As compared to Rs. 441 Cr. In the first half of the year.

(iii)

With improvement in Revenue billing & collections, UPCL endeavours to reverse the trend of loss figures to gain figures by the end of first half of FY 2008-09.

(B)

Average Collection on Input (per unit) has registered an increase of 0.12 paisa from Rs.

1.85 p/u to Rs. 1.97 p/u during second-half of FY 2007-08 against for corresponding figures of FY 2006-07.

(C)

The billing and collection efficiency is sought to be improved thereby reducing the

AT&C losses to 24% by end December 2008. The 2007-08 second half performance w.r.t. AT&C losses was 27.14% as compared to 44.61% for the first half of the year and the aggregate for the year 2007-08 was 35.58%. The target of 24% AT&C Losses by end 2008 is planned to be achieved by improving billing efficiency to 80% and collection efficiency to 95%.

COMPANY PROFILE

Uttarakhand Power Corporation Limited (UPCL) is a company, primarily engaged in the business of distribution and retail supply of electricity in the state of Uttarakhand, which is purchased from Uttarakhand Jal Vidyut Nigam Ltd. (UJVNL) & other Central Govt. Sector Power Generation utilities, etc. and transmitted through grid system of Power Grid Corporation of India Limited (PGCIL) and Power Transmission Corporation of Uttarakhand Limited (PTCUL). Uttarakhand Power Corporation Limited formerly Uttaranchal Power Corporation Limited was incorporated under the Companies Act, 1956 on February 12, 2001. Consequent upon unbundling of UP State Electricity Board (UPSEB) and on formation of Uttarakhand State, the assets, liabilities and undertakings of distribution and transmission business of Uttarakhand were transferred from Uttar Pradesh Power Corporation Ltd. (UPPCL) and vested with UPCL w.e.f. 9 th November, 2001. Subsequently, in compliance of the provisions of the Electricity Act, 2003, the assets, liabilities and undertakings of transmission business of UPCL were transferred to the State Government w.e.f. 1st June, 2004 and vested in a separate company, namely, Power Transmission Corporation of Uttarakhand Ltd. (PTCUL) on the same date. At present, UPCL is having wide network of electrical distribution system across Uttarakhand State and also engaged in the construction of 33/11KV Sub Station and LT/HT (11KV, 33KV, & 66KV) lines in order to maintain the steady and uninterrupted supply of power.

UTTARANCHAL POWER SECTOR AN OVERVIEW 360 degree

Uttaranchal, the 27th State of India was created on 9th November 2000 as the 10th Himalayan State of the country blessed with the natural and mineral resources in abundance and poised to be a 20000 MW HYDRO POWER HUB of India in the future. Uttarakhand Power Corporation Ltd (UPCL) formerly Uttaranchal Power Corporation Ltd was incorporated under the Companies Act, 1956 on February 12, 2001 consequent upon the formation of the State of Uttaranchal. UPCL has been entrusted to cater to the Transmission & Distribution Sectors inherited after the de merger from UPPCL (erstwhile UPSEB) since 1st April 2001. The Electricity Act.2003 mandated the separation of Transmission functions under Power Sector Reforms. On 1st June 2004, the Power Transmission Corporation Limited (PTCUL) was formed to maintain & operate 132 KV & above Transmission Lines & substations in the State. Today UPCL, the State Power Distribution Utility of the Government of Uttaranchal (GoU) caters to the Sub Transmission & Distribution Secondary Substations & Distribution Lines 66 KV & below in the State. UPCL - the Frontline State Power Distribution Utility & service provider of QUALITY & RELIABLE POWER SUPPLY to over 1.08 million consumers of electricity spread over the 13 Districts of Uttarakhand i.e Dehradun, Pauri, Tehri, Haridwar, Pithoragarh, Almora, Nainital, Uttarkashi, Udhamsingh Nagar, Rudraprayag, Chamoli, Bageshwar & Champawat. These electrical consumers are categorized depending ont heir domestic, commercial, agricultural and industrial loads. UPCL is also the first electrical utility in India to initiate women empowerment by employing local women through Self Help Groups, as franchisees, for meter reading, bill distribution and revenue collection. UPCL looks forward to a committed participation from a Team of professionals always striving for performance excellence with new innovative technologies to strengthen the Power Distribution Infrastructure of the STATE in Seamless Integration with Generation & Transmission Utilities for the Socio economic development.. A comprehensive POWER EVACUATION PLAN is underway with construction of new 33/11 KV Substations in the State.

With the Revenue Cycle Management for the optimal Metering, Billing & Collection (MBC) efficiency the record Revenue Realization is targeted during 2007-08. During 2008-09, the reorganization of the Organization Structure of UPCL is aimed to provide better services to the Consumers of electricity which is the priority over the dichotomy between POWER & ENERGY.

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

Mission:
Uttaranchal Power Corporation Ltd. was created on the 1st April 2001 after the de-merger from UPPCL (erstwhile UPSEB) catering to the Transmission & Distribution Infrastructure in the Uttaranchal has born on 9th November 2000 as the 27th State of India & 10th Himalayan State of the country. Since then UPCL is engaged for improving the power supply of Uttaranchal State with the following (MISSION) aims & objectives: To achieve 100% Rural Electrification Infrastructure for Electrification of Villages & Hamlets by March 2009 and Rural Households by March 2012.

To provide 24x7 reliable, quality and un-interrupted supply to its consumers. ? To provide POWER TO ALL on demand.

To provide POWER TO ALL on demand.

 To strengthen the existing power network based on present advanced technology with an objective to reduce T&D losses.

To provide power system network with minimal environmental impact.

To plan and provide strong power system to the state and its consumers at an affordable cost.

To develop a professionally managed organization.

To generate additional revenue for the Corporation and State by developing a strong, adequate, reliable and cohesive power network based on most techno-economical aspects to contribute towards the development and prosperity of the State.

To improve social status of the people.

To reduce poverty of the people.

To provide employment in the rural sections by providing reliable supply.

To establish Consumer Care Centre, Central Call Centre etc. to provide Quality Service to the Consumers.

 To release Electricity Connection to the consumers under Talkal Sewa within 24 hours for better service to them.

To contribute to the formation of a developed & progressive Uttaranchal State.

Our Commitments:
We are a team of POWER DISTRIBUTION PROFESSIONALS in pursuit of excellence committed to providing 24x7 hours of quality power supply to our electricity Consumers.

We have set-up CONSUMER CARE CENTER at Parade Ground, Dehradun for providing better services to the consumers..

We are in the implementation process of the ONLINE BILLING SYSTEM in the Kumaon Zone.

We have a proposal for AUTOMATIC METER READING of COMMERCIAL & INDUSTRIAL CONSUMERS using GSM modems.

We have introduced a facility of payment of electricity bills by the Consumers in Punjab National Bank and Post Offices in some of the areas of Uttarakhand. Drop boxes are placed in almost all the branches of the BANK PREMISES.

Quality of Power Supply:

Our performance standards are to provide quality power supply to our electricity consumers who are regularly paying their electricity bills within the stipulated dates as mentioned therein. The services shall only remain suspended during force majeure conditions such as war, civil commotion, riot, flood, cyclone, lightning, earthquake or other unforeseen circumstances such as strike, lockout, fire affecting the Corporation and their activities.

We promise to act in response within 4 hours to a consumer's complaint regarding higher/lower voltage and frequency of POWER SUPPLY beyond the tolerance limit (as prescribed under Indian Electricity Rules) at the point of COMMENCEMENT OF SUPPLY.

We promise to improve the QUALITY OF POWER SUPPLY within 15 days of receiving the ORIGINAL COMPLAINT or furnish a written reply to the electricity consumer intimating them the reason for poor quality of power supply, if the same is beyond our control. We promise to respond within 180 days in respect of the complaint regarding low voltages arising due to inadequacy in the DISTRIBUTION SYSTEM requiring UPGRADATION OF DISTRIBUTION TRANSFORMERS (DTRs) AND ITS ASSOCIATED LINES OR INSTALLATION OF LT CAPACITORS etc.

Electricity Billing Complaints:

We promise to acknowledge the consumer's complaint immediately if received in PERSON and within 7 working days if the complaint is received by POST. We promise to respond to consumers complaint regarding electricity bills within 3 days if no additional information is required to be collected. We promise to resolve within 15 days in respect of the consumers complaint regarding electricity bills incase any additional information is to be collected and the complaint is made within 7 days of receipt of electricity bill by the consumer. We promise to resolve the consumers complaint regarding electricity bills within 21 days in all other cases.

BREAKDOWNS & FUSE OFF CALLS:

We promise to accede to request for REPLACEMENT OF FUSES within 4 working hours in CITIES & TOWNS OF Uttarakhand.

We promise to accede to request for REPLACEMENT OF FUSES within 12 working hours in SUB-URBAN & RURAL AREAS.

We promise to accede to request for replacement of fuses within 36 hours in HILLY TERRAIN AREAS depending upon the area locations.

We promise to accede to request for replacement of fuses within 36 hours in HILLY TERRAIN AREAS depending upon the area locations.

 We promise to accede to request for attending to LINE BREAKDOWNS (incase of routine breakdowns) within 6 working hours in CITIES & TOWNS as above.

We promise to accede to request for attending to LINE BREAKDOWNS (in case of routine breakdowns) within 24 working hours in SUBURBAN & RURAL AREAS.

We promise to accede to request for attending to LINE BREAKDOWNS (in case of routine breakdowns) within 48 hours in HILLY TERRAINS AREAS depending upon the area locations.

We promise to inform the consumer the likely time by which the power supply may be restored in case of routine line breakdowns within 1 hour of receiving the complaint.

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

We promise to replace damaged DISTRIBUTION TRANSFORMERS within 3 working days in SUB-URBAN & RURAL AREAS.

We promise to set right LINE FAULTS and restore supply to STREET LIGHTS within 24 hours and replace damaged or defective material within 7 days.

Area Maps:

ANNUAL REVENUE BUDGET FOR THE YEAR 2010-11

1. Review of Revenue performance of previous years Energy purchase & Sale (MU) The energy input for the FY 2008-09 at 7631.44 MU which was 13.36% higher than that of FY 2007-08. Energy input for the FY 2009-10 was projected at 8065.00 MU considering 5.68% increase over energy input of FY 2008-09, out of whichj energy input during 2009-10 in 7591.33 till Feb. 2010. Input during 2009-10 has been projected at 8552.96 MU considering 6.05% increase over Energy input projection of FY 2009-10.

Year wise Energy Comparison Table I Financial year Energy Input (MU) % Rise / Fall Over last year 2008-09 (Actual) 7631.44 +13.36% 2009-10 (projected) 8065.00 +5.68% 2010-11 (projected) 8552.96 +6.05%

Year wise projected energy input, billing & loss for the year 2009-10 vis--vis 2008-09 and projected for FY 2010-11 are as shown below at table II Table II Financial year Biilling Input (MU) Energy Input (MU) AT&C Losses % 2008-09 (Actual) 5494 7631 33.00% 2009-10 (projected) 5968 8065 27.50% 2010-11 (projected) 6500 8553 25.50%

NB: The AT&C Losses for FY 2008-09 & 2009-10 has been shown as per the norms adopted by the Honble UREC 1. Projection for Revenue Budget FY 2010-11 Sales & Revenue The projection of sale of energy for the year FY 2010-11 has been estimated on the category-wise sales based on the trends over the previous years. Three and specific consumption for the past 4 years as well as the loss to realistically forecast the demand for FY 2010-11. NB: Revenue from sale of energy during the year 2010-11 has been projected as per the retail tariff decided by UREC. for FY 2009-10 The following is the category-wise projection of sale for FY 2010-11 CATEGORY DEMAND/ SALE (MU) DOMESTIC 1322.00 NON DOMESTIC 685.57 HT/LT Industry Govertment Irrigation &PWW 3810.46 Balance other 124.87 TOTAL % SALE 20.35% 10.55% 58.62% 1.92% REVENUE (Rs. Crs) 312.86 300.08 1507.36 39.64 2300.03 % REVENUE 13.60% 13.05% 65.54% 1.72% 100%

6500.25 100%

Power Purchase Cost The expenditure on power purchase cost for the FY 2010-11 at Rs. 2,271.82 Crores has been projected on the basis of the Input Energy for the fY 2010-11 & actual power purchase bills for the period Apr-09 to Jan 10 which is Rs. 1658.03. The estimated power availability from various firm various frim sources has been made on the basis of Indicated availability by various generators, and

Past availability trends and other available information in the absence of specific indication by some generators. The cost estimate are based on relevant/respective tariff orders, recent bills, existing arrangement, notification etc for various individual sources. The details of merit order dispatch of power projected for FY 2010-11 is as below: SOURCES UJVNL NTPC NHPC OTHERS (NPC,THDC) IPPs AND UREADA UI BANKING & PROCUREMENT TOTAL O&M EXPENSES For O&M Expenses including employee cost, Administrative and General expenses and Repairs and maintainance, expenses, bottom-up, approach has been followed by the corruption wherein unit wise Revenue budgets from each Accounting unit in Garhwal and Haldwani zones are called for. Those individual Revenue budgets of the units are then complied zone-wise and the zone wise figures have been consolidated in the corporate Revenue budget at UPCL head office after discussion with the unit heads, espically the Revenue divisions and circles. The detail for these expenses projected for FY 2010-11 are enumerated below: PURCHASE (MU) 4021.47 2286.15 363.02 409.68 413.36 1059.29 8552.96

(I)

Employee Cost: the employee cost of Rs. 21,619 Lakhs for FY 2010-11 has been estimated based on actual cost incurred during FY 2008-09 and during FY 2009-10 till Sep 2010 and the anticipated rise. The basic salary of employees in expected to increase on an average 3% p.a. the increase in D.A has been considered on the basis of prevailing rates and expected increase D.A. on half-yearly basis. Employers contribution towards pensions and gratuity has been taken at 19.08% of Basic, grade pay and D.A. the annual financial impact for the FY 2010-11 (30% Arrear from 01-01-2006 to 31-03-2008) on account of 6th Pay Commission Revision has also been considered. A marginal inflationary increase has been projected in other cost heads pertaining to other allowances.

(II)

Administrative and General (A&G) Expenses:

The A&G expenses taken in budget for FY 2010-11 at RS. 2,343 lakhs have been estimated considering increase in number of subDivisions/Divisions/ Circles increase in fuel cost, computerization and other revenue expenses over the actual expenses for the FY 2008-09 and during FY 2009-10 till Sep. 2010 due to organic growth of corporation and its consumer base. UPCL has undertaken a number of focused initiatives and efficiency improvement programs in the FY 2010-11 to be pursued systematic programs in the areas of metering meter-reading billing and collection through adoption of new technologies and tie-ups with various agencies to improve the Revnue cycle management functions. The central High value consumer billing system and key consumer cell at corporate office

have been established and corporate commercial monitoring system has been put in place. New collection improvement measures through setting up ATP machines in towns on BOOM basis have been imitated in Dehradun and are further rolled out to other circles and Towns. For all these consumer service improvement measures and revenue improvement initiatives, financial provisions have been made in the Revenue budget. (III) Repair and Maintenance (R&M) Expenses: The R&M expenses for the FY 2010-11 have been projected at RS. 4,963 Lakhs the rise in R&M expenses on key distribution network assets i.e. plant and machinery lines and cable network have been envaisaged at 14% over the previous years projected expenses. It is also submitted that in view of the dilapidated state of the LT network the level of R&M expenses being projected are essential to ensure quality power supply to consumer. UPCL also is required to undertake some expenditure under the head Internal system improvement works or Special R&M Expenditure which involve works of following nature. Re-conductoring / Strengthening of old and worn out 33 KV, 11KV,& L.T. Lines. Augmentation of capacity of 33/11 KV, 11/0.4 KV, S/S. Replacement of old Transformers and damaged poles. Extension of 11 KV and LT lines and augmentation of 11/0.4 KV S/S & 33KV lines. Replacement of single phase /2 phase LT lines into 3 phase LT lines.

 Civil work i.e. R&M and modification /extensions of building, Roads, control rooms etc. 2. Deprecation: Deprecation for the FY 2010-11 has been projected at Rs. 4,062 Lakhs on the value of fixed assets considering by Honble UERC in its Tariff order. The computation of depreciation has been made on the basis and methodology adopted by the UREC in its last Tariff order. 3. Intrest and Finance charges The estimation of interest and finance charges for the FY 2010-11 is Rs. 10,363 Lakhs and has been calculated separately for various loans under different schemes. The interest charges in context of Loans/ Liabilities i.e. GPF Liabilities CPSUs dues and power purchase dues, transferred to UPCL under the Transfer schemes have not been calculated and projected for FY 2010-11, pending financial restructuring and final resolution of these issues. 4. Provision for Bad and Doubtful Debts A provision of Rs. 6,828 Lakhs at a conservative level of only 2.97% of the revenue billed has been projected for the FY 2010-11 on finalization of the amount to be written off, the same shall be apportioned from the amount set aside as provision for Bad and Doubtful Debts. 5. Financial Projection The financial projection for the Annual Revenue Budget Estimated for the year 2010-11 is enclosed at Annexure I along with the relevant schedules attached thereto.

6. Revenue performance budget and monitoring It is placed before the board that, the monthly and annual Revenue billing and collection targets for each of the Divisions/ circles/ zones separately for category wise consumer has to be fixed as and when Electricity tariff fixed by Honble UERC for the financial year 2010-11 with performance monitoring system of Divisions at corporate level. Statement showing analysis of variances in Revenue performance of zones against the projected revenue budget for FY 2009-10 and zones wise Revenue budgets targets for FY 2010-11 are enclosed at Annexure II for kind perusal of the member of the board. The board of Director is requested to approve the Annual Revenue Budget proposal for the FY 2010-11.

(Managing Director)

ANNUAL REVENUE BUDGET ESTIMATE FOR 2010-11 (FINANCIAL PROJECTION) 2009-10 2009-10 2010-11 BUDGET ACTUALS(Apr09BUDGET ESTIMATE Sep09) ESIMATES 2031.08 774.48 2300.04 2031.08 1889.86 141.22 199.53 21.13 43.59 264.25 -123.03 96.01 32.57 57.56 774.48 998.45 -223.97 96.4 10.27 21.62 128.29 -352.26 48 16.28 -416.54 28.78 2300.04 2271.82 28.22 216.19 23.43 49.63 289.25 -261.03 103.63 40.62 -405.28 68.28

Particles Revenue from sale of power ssurchase / Rebates, Anciliary charges Gross Revenue (A) Power purchase cost (including Transmission charges) (B) Gross Marging (A-B) Employee Cost (D) Administrative & General Expenses (E) Repair and maintanace Expenses (F) Total Expenses(net of capitalisation) (D+E+F) Net Contribution (H) = (C-G) interest and other finance Charges (I) Depreciation (J) Surplus/ (Deficit) (K) = (H-I-J) Provision for Bad and Doubtful Debts (L) net profit/ loss (M)

ANNUAL REVENUE BUDGET ESTIMATE FOR 2010-11 PROJECTED CASH BUDGET ATATEMENT Amount in (Rs. In Crores) 2009-10 2009-10 2010-11 BUDGET ACTUALS(Apr09BUDGET Particles ESTIMATE Sep09) ESIMATES Revenue collection from sale of power 1932.46 774.48 2254.71 Misc. Receipts Gross Revenue Receipts 1932.46 774.48 2254.71 Power purchase cost (including transmission charges 1889.86 998.45 2271.82 Gross Margin 42.6 -223.97 -17.11 Employee cost 199.53 96.4 216.19 Administrative and General expenses 21.13 10.27 23.43 Repair and Maintanance 43.59 21.62 49.63 total cash O&M Expenses 264.25 128.29 289.25 Net Contribution -221.65 -352.26 -306.36 Intrest and other Finance charges 96.01 48 103.63

INPU T (MUS)

SALE (MUS)

BILLING EFFICIENCY

ASSE SMENT (Rs/Cr) 1266 1034 2300

HIGH COLL OF VALUE CURREN T ASSESMENT 94% 96% 95% 1147.1 970.85 2117.95

Govt. Irrigation+ PWW 41.72 23.43 65.15

Arrear

total

Collection

AT&C Loss

efficiency including Arrear 48.22 23.39 71.61 1237.04 1017.67 2254.71 98% 98% 98% 26.40% 24.30% 25.50%

4901 3652 8553

3962 2809 6500

75% 77% 76%

CAPITAL STRUCTURE

The UPCL received Equity Share Capital amounting to Rs. 5 Crores from the government of Uttarakhand during the year 2001-02. Allotment of shares against the same has been made. No further Equity was added in 2007-08. Interest payable on loans from Bank has been accounted for as and when debited by the Bank. Interest received on fixed deposits with Bank and others has been accounted for on accrual basis.

PROJECT PART 2.

CONTENTS 1.Introduction of topic 2.Methodology 3.objective 4.Data Analysis,Interpretation 5.Conclusion 6.Limitation 7.Recommendation 8.Bibliography Reference

INTRODUCTION
BUDGET:-

A budget is a quantitative expression of a plan of action relating to the forthcoming budget period. It represents a written operational plan of management for the budget period. It is always expressed in terms of money and quantity. It is the policy to be followed during the budget period for attainment of specified organizational objectives. A budget is defined as follows: A financial and / or quantitative statement prepared and approved prior to a defined period to time, of the policy to be pursued during that period for the purpose of attaining a given objective. Essentials of budget are as follows: It is a financial or monetary and / or quantitative statement. It is prepared for a specified period. It is prepared prior to a defined period of time. It is a plan of the policy to be pursued during the budget period. It is prepared to attain the given objectives.

A budget is a predetermined statement of management policy during a given period which provides a standard for comparison with the results actually achieved. A budget is a written plan covering projected activities of a firm for a defined time period.

BUDGETING:Budgeting is a process of preparing budgets and further control aspects are involve in its procedure. Budgeting is a kind of future tense accounting in which the problems of future are met on paper before the transactions actually occurs. Budgeting is the preparation of comprehensive operating and financial plans for specific intervals of time.

BUDGETARY CONTROL:-

The term Budgetary Control is applied to a system of management accounting control by which all operations and output are forecast ahead as far as possible and the actual results, when known, are compared with the budget estimates. Budgetary Control is a system which uses budgets as a means of planning and controlling all aspects of producing and selling commodities or services.

The essential features of Budgetary Control are as follows:-

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

Ascertain the reasons for the difference between actual and budgeted

performance.

 To fix the responsibility of executives for not achieving budgeted figures. Take suitable remedial action so that budgeted performance may be achieved. Revise budgets if necessary.

OBJECTIVES OF BUDGETARY CONTROL:The main objectives of budgetary control may be summarized as follows:

To provide an organized procedure for planning. It provides a detailed plan business over a definite period of time. To coordinate all the activities of various departments of a business firm in that the maximum profit will be achieved for the minimum use of resources.

of action for a

such a manner

To provide a means of determining the responsibility for all deviations from (budget), and to supply information on the basis of which necessary be taken.

the

plan

corrective action may

BASIC ESSENTIAL/REQUIREMENTS OF A SOUND BUDGETERY CONTROL

These are as follows:

A Clearly Defined Organization An Adequate Accounting System A Clearly Defined Policy Preparation of Budgets by Responsible Executives Logical Sequence in Budget Preparation Cost of the System Reasonably Attainable Goals Budget Education Constant Vigilance Flexibility Active Support of the top management

ADVANTAGES OF BUDGETING OR BUDGETARY CONTROL

It has following advantages:

It guides the management in planning and formulation of policies and enables them to think ahead. Budgeting coordinates the activities of various departments and functions of the business. It defines the objectives and policies of the undertakings as a whole. It increases production efficiency, eliminates waste and controls the costs. It aims at the maximization of profits through effective cost control, and the proper utilization of the resources and existing facilities of the business. It sets out plan of action and targets to be achieved by departments as well as by individuals. So, everyone knows for what he is responsible and how should he do it. This develops team spirit. Budgets act as a measure of efficiency of departments and persons working in the organization because budgets provide a yardstick against which actual performance of departments and employees can be compared. A budget motivates executives to attain the given goals. It provides basis for introducing incentive remuneration plans based on performance. Functions of planning, coordination and control can be better performed with the help of the budgetary control.

LIMITATIONS OF BUDGETING OR BUDGETARY CONTROL

The main limitations are as follows:

The Budget plan is based on estimates: Budgets are based on estimates and estimates are based mostly on available facts and best managerial judgment. Danger of rigidity: Budget programme should be continuously revised to adjust to the changes in business conditions and management policies. Budgets will lose much of their usefulness if they acquire rigidity. Budgeting is only a tool of management: Budgetary control implies the preparation of budgets and their administration also. As such, a mere preparation of budgets does not mean that their execution is automatic. Expensive technique: Besides the above limitations, it is also necessary to consider the cost associated with the introduction of a comprehensive budgetary control programme.

CLASSIFICATION OF BUDGETS

A.

Classification according to time:-

Long term budgets: o These budgets are related to planning the operations of an organization for a period of 5 to 10 years. In fact, these budgets are concerned with planning of the operations of a firm over a considerable long period of time.

Short term budgets: o These budgets are designed for a period of 1or 2 years. These are usually prepared in physical as well as in monetary units.

Current budgets: o These budgets are designed for a very short period, say, a month or a quarter. These are essentially short term budgets adjusted to current conditions or prevailing situations.

B. Classification according to function:-

Sales Budget: o The sales budget is the most important functional budget. The forecasted quantities of sales and the value of sales are presented in this budget. It is the starting point in preparing other functional budgets i.e., it is the key stone of budget structure. It can be prepared showing sales under any one or combination of the following headings:a) Product wise: If a company is producing more than one product, then estimate of sales of

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

territory wise.

c)

Customer wise: A concern may have different types of customers like government

departments, foreign companies and private companies. Therefore sales can be presented customer wise. d) According to salesmen: Presenting sales according to salesmen may exhibit a relative

view of sales performance of different representatives.

e)

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

according to month, quarter or week.

 Production budget: o After preparing the sales budget, the production budget is prepared. It specifies the number of units of each product that must be produced to satisfy the sales forecasts and to achieve the desired level of closing finished goods inventory.

Materials budget: o It is concerned with material needed for budgeted output. Material budget are of two types:a) Materials Requirement Budget: This budget helps in preparing purchase budget and in

planning purchases. It also enables fixation of stock levels of materials for inventory control. b) period. Materials Purchase budget: Purchase budget is concerned with purchases for the budget

period, i.e., the purchase budget shows the purchase plan of an organization during the budget

Direct Labour Budget: o The direct labour budget will ensure that the plan will make the required number of employees of relevant grades and suitable skills available at the right times.

Selling and Distribution Overhead Budget: o This budget shows all the forecasted expenses to be incurred on selling and distribution of finished goods during the budget period.

 Administration Overhead Budget: o This budget represents the estimated expenditure of administration.

Administrative expenses in an organization will be incurred for the following activities: a) b) c) Formulation of policies Directing the organization Controlling the operations of an organization etc.

Factory Overhead Budget: o Factory overhead or manufacturing overhead budget shows the estimated manufacturing expenses to be incurred during the budget period. Factory overhead, as we know, comprises indirect materials, indirect labour, and indirect factory expenses. These items of overhead may be classified into fixed, variable and semi variable category.

Research and Development Budget: o Research has now become a continuous activity in many industries. The preparation of research and developments budgets should be based on reasonably accurate estimates and should be flexible.

Cash Budget:

o The cash budget is developed only after all the others functional budgets are prepared and, in fact, this is the most important of all the functional budgets. This budget is also called the Financial Budget.

C.

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

Fixed budget: o It is defined as one, which is designed to remain unchanged irrespective of the level of activity attained. The basic assumption of this budget is that there will not be any change in the budgeted level of activity i.e., this budget is prepared on the assumption that output and sales can be estimated with a fair degree of accuracy.

Flexible budget: o It is defined as one, which is designed to change in relation to the level of activity attained. Since for each level of activity there is a budget, flexible budgeting involves the construction of a series of fixed budgets for different levels activity. of

BUDGET IN CONTEXT OF UPCL

There are two types of budget prepared by UPCL which are as under: I. Revenue Budget II. Capital Budget

Revenue budget: o This budget is prepared with reference to decision regarding existing assets. Examples of this budget can be repair and maintenance, employee salary, maintenance of office, administrative expenses, interest and depreciation etc. Out of these expenses employee salary, administrative and general expenses, interest, depreciation are of nature of fixed expenses and repair and maintenance are of nature of semi variable expenses.

Capital Budget: o This budget is prepared with reference to decision related to fixed assets or long term investments which yield return over a period of time. The decision area referred to is known as capital budgeting. The following guidelines shall be followed for preparation of the revenue budget: Operations and Maintenance Expenses: o All executing agency shall ensure that the estimates shall be prepared and approved by the competent authorities. The estimates shall be prepared as per the enclosed guidelines and in the enclosed formats. In case, any particular head of expenses is not applicable to any unit, it may be ignored.

 Employee Cost: o The employee cost shall be budgeted for the existing employees as well as the manpower to be deployed at the new substations as per the approved manpower structure. The Concerned Executive Engineer/Dy. General Manager Shall ensures that the manpower costs of all the existing and new Substations/lines are covered in the budget proposal of the unit. All the costs pertaining to employees including companys contribution towards pension, EPF, Gratuity, Bonus, LTA and other terminal benefits shall be included while budgeting for employee costs.

Administrative and General Expenses: o The Administrative expenses shall be budgeted for the existing substations/offices as well as for the new substations/offices. This expenses mainly includes Rent, Rates & Taxes, Insurance, Postage & Telegrams, Legal Charges, Audit fees, Technical fee, consultancy charges, vehicles running & maintenance charges, conveyance, freight, watch & ward expenses, printing & stationery expenses, advertisement etc.

Revenue and Other Income: o The estimated revenue and other income shall be provided in format A of the Revenue Budget. It is prepared on the basis of previous year energy purchases, forecast for consumption increased based on new connections i.e. Domestic & Industrial which may be released in current year, season impact on demand etc. Accordingly assumptions taken for energy purchases and Transmission, Distribution and commercial losses and energy sold for the next year budgeted. Rates for energy purchased for previous year and current year taken on the basis of ARR approved by Uttarakhand Electricity Regulatory Commission.

The preparation of the Capital Budget: Planning: o Firstly planning is made for the projects which has to be started and are compulsory for improvement in system to cover the increased demand.

Approval of Project: o Based on the requirement, works approval has to be taken from Director (Operation) & Director (Project).

Preparation of Estimates: o The estimates shall be prepared as per the enclosed guidelines and in the enclosed format. The executing agency shall ensure that all the direct and indirect costs shall be accounted for in the estimates.

Projects Funded By Schemes: o The budget for the projects funded by schemes like REC, NABARD, SIDCUL, ADB, PNGY, MNP, Kutir Jyoti, APDRP etc. shall be provided in the enclosed formats. It shall be ensured that proper planning shall be made before providing the budget estimates for 2008-09 and the expenditure budgeted for shall be utilized effectively and efficiently in the same financial year, in order to avoid payment of additional interest costs, in respect of unutilized costs to the financial institutions. In case of costs escalation of the projects already approved by financial institutions, the revised proposal along with the reasons for escalation shall be worked out and shall be submitted separately.

 Projects Funded By Deposit Schemes: o New connections HT / LT released are covered under this head. Consumers who apply for new connections shall deposit the amount which may incur on release of new connection. Consumer will deposit all expenses incurred on new sub-station, new lines, poles etc.

System Improvement: o Works which neither cover any schemes nor under deposit works but seems necessary for continuous power supply and improvement in present system are beard by the UPCL itself through their internal resources. o The estimates shall be prepared as per the enclosed guidelines and in the enclosed format. The executing agency shall ensure that all the direct and indirect costs shall be accounted for in the estimates. It includes those works which are not covered under any schemes.

All capital work proposals must be supported with the following, otherwise it would not be possible to arrange sources of financing for the same. Administrative approval (Number and date in case of new projects) Technical sanction (Estimate number and date for both new and old ones) Estimated cost/Revised Estimate of the project (Funding component wise) Expenditure incurred during the 1st six months of the current financial year (Funding component wise) Physical status of the work and scheduled period of completion Cost escalation, if any

GUIDELINES FOR PREPARATION OF BUDGETS

1.

Preparation of Estimates: The estimates shall be prepared after considering the

following inputs :

a)

Direct Materials: These are the materials which are directly consumed in the

final

product and can be identified separately in the project. For example Transformers in case of Substations, Conductors in case of Lines, Cement in case of Civil Works, etc. These are those materials whose consumption directly varies with the projects.

b)

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

directly associated with the project. For example, the salaries of the JEs/AEs and other staff who are directly and only looking after a particular project.

c)

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

These expenses though do not form a substantial part of project cost but they are incurred only for the project under execution. For Example, vehicle rent and fuel etc. of the engineer who are directly involved in the execution of the project.

d)

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

These materials includes consumables, lubricants etc.

e)

Indirect Labour: This includes the labour costs of the employees who are indirectly

associated with the execution of the projects. For Example salaries of staff working in the office of Executive Engineer/Dy. General Manager/General Manager/Corporate Office.

f)

Indirect Expenses: This includes the expenses which are indirect to the cost of the

project. It may include administrative expenses incurred on indirect employees. For Example, Office rent of Corporate Office employees etc.

g)

Interest during Construction (IDC): It is interest cost payable to the financial institutions project till its completion. From the date of of loan

which is incurred from the date of the start of the

start, we mean the date of start of the first activity related to the project. The first activity may be the date of route survey, date of estimation, date of approval of the estimates, sanction of the project, date of tender for procurement/contracts etc. In other words, we can say that, it is the date from which the inflow of funds starts for the project. In fact, the interest is payable from the date of drawl of funds from the financial institutions. IDC depends upon the time for the completion of the project and the period of drawl of funds from financial institutions.

2. TREATMENT OF THE ABOVE ITEMS IN ESTIMATES:

a)

Direct Materials: The direct materials shall be included in the estimate at their

latest

rates. The basis of the rates shall be average of the last three tenders or the last tender whichever is higher. If required, quotations, by way of enquiry may be taken in order to estimate the correct rates. Necessary provisions shall also be made in the rates of materials to account for inflation depending upon the earlier trends and present market values. The variation in rates due to time difference between preparation of estimates and placing of purchase order and time difference between placing of order and completion of project shall also be accounted for depending upon the past trends shall be accounted for on a justified basis. The concerned executive engineer and the DGM (projects) shall ensure that the executed rates do not exceed more than 5% of the estimated rates. Similarly, the quantities shall also be frozen at the time of estimates. If necessary, pre tender bids for survey, design may be awarded to finalize the final quantity for the preparation of

estimates. The concerned Executive Engineer and the DGM (projects) shall ensure that the executed quantity does not exceed more than 5% of the estimated quantity.

b)

Direct Labour: The Direct Labour includes the value of erection cost awarded to the

contractor. The erection cost shall be estimated on the following basis: 1. 2. The unit of erection to be decided in advance which shall form the basis of rates. The cost per unit shall be determined after considering the labour rates and time required to erect a particular unit. For example, if the unit rate is Cu.m, the rate per Cu.m. shall be labour rate multiplied by time required to erect one unit. The unit rate shall be supported by detailed calculations.

3.

Necessary provisions shall also be made to account for inflation due to increase in labour rates between the time of preparation of estimates and completion of the project.

4.

The quantities shall also be frozen at the time of estimates. If necessary, pre tender bids for survey, design may be awarded to finalize the final quantity for the preparation of estimates.

5.

The concerned Executive Engineer and the DGM (projects) shall ensure that the executed quantity and executed rates does not exceed more than 5% of the estimated quantities and estimated rates.

The salaries of the departmental employees who are directly supervising the projects shall be shown separately in the head Direct Labour in the estimates. If a particular employee is looking after more than one project then his salary shall be divided in all the projects in the ratio of the approved / estimated costs/ value of the projects. If the particular employee is also looking

after O&M activities his salary shall be first divided between O&M and projects on the basis of approved budgets for O&M and projects for the division and the amount of salary finally segregated for projects shall be divided between all the projects on the basis of approved/ estimated costs/ value of the projects. Necessary provisions shall be made for increase in salaries of the employees due to promotions / increments / increase in dearness allowance etc.

c)

Direct Overheads: The direct overheads are the expenses which are incurred specifically during the project. For example, survey costs, advertisement of tenders,

engaging a consultant, freight on materials if not included in the cost of materials, vehicle expenses, telephone expenses, etc of the employees directly supervising the project. The direct overheads shall be shown separately under the above head on nearest actual/ estimated basis. If the expenses are incurred for more than one project, it shall be distributed on all the projects in the ratio of approved / estimated costs/ value of the projects. Necessary provisions shall be made for increase in expenses due to inflation, increase in quantity etc. The concerned Executive Engineer and the DGM (projects) shall ensure that the executed expense does not exceed more than 5% of the estimated expenses. d) Indirect Material: The indirect materials shall be included in the estimates at their latest

rates. The basis of the rates shall be average of the last three tenders or the last tender whichever is higher. Necessary provisions shall also be made in the rates of materials to account for inflation depending due upon the earlier trends and present market values. The variation in rates to time difference between preparation of estimates and placing of purchase order and

time difference between placing of order and completion of project shall also be accounted for depending upon past trends on a justified basis. The concerned Executive Engineer and the DGM (projects) shall ensure that the executed rates does not exceed more than 5% of the estimated rates. Similarly, the quantities shall also be frozen at the time of estimates. If necessary, pre

tender bids for survey, design may be awarded to finalise the final quantity for the preparation of estimates. The concerned Executive Engineer and the DGM (projects) shall ensure that the executed quantity does not exceed more than 5% of the estimated quantity.

e)

Indirect Labour: The indirect labour includes the salaries of the employees not directly the execution of the project.

associated with the project but a part of their time is involved in

For example, the salary of Corporate Office Employees like employees involved in Finance, Procurement, Design, Salaries of Directors, employees in the office General Managers Office, Dy. General Managers Office, Executive Engineers office who are not directly supervising the projects. The concerned Executive Engineer shall ask for the information of indirect labour from all the higher offices and the higher offices shall provide the information regarding indirect labour to the concerned Executive Engineer. The basis of segregation of indirect labour cost shall be as follows: (1) A list of total no. of employees shall be prepared and the salary cost of each employee shall be mentioned against each employee. (2) It shall be identified as which employees are working under projects or O&M. If the salaries shall be allocated

employees are identified separately for O&M and projects, their accordingly. (3)

If the particular employee is also looking after both projects and O&M

activities

his

salary shall be first divided between O&M and projects on the O&M and projects for the divisions under the unit. (4)

basis of approved budgets for

The amount of salary finally segregated for projects shall be divided between all the

projects on the basis of approved/ estimated costs/ value of the projects. f) Indirect Overheads: Indirect Overheads shall be allocated in the ratio of the approved/ estimated costs/ value of the projects. The Concerned Executive Engineer shall ask for the information of indirect overheads from all the and the higher offices shall provide the information regarding concerned Executive Engineer. The procedure for same lines as of indirect labour. indirect higher offices to the overheads

allocation of indirect expenses shall be in the

g)

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

is required to be made in respect of requirement of funds for the project. The timeliness shall also be defined for the completion of the project. The rate of interest shall be prevailing market rate of

the lending institutions. Necessary provisions shall also be made for increase in the interest rates. Let us consider an example: Let the total cost of the project be Rs. 10.00 crores, duration of completion is 2 years, rate of interest be 10% and the draw downs be as follows: On the start of project After six months After one year Rs. 2.00 crores Rs. 4.00 crores Rs. 3.00 crores Rs. 1.00 crores

After one & half year -

The IDC shall be calculated as follows: Interest on Rs. 2.00 crores @ 10% for 2 years + Interest on Rs. 4.00 crores @ 10% for 1year 6 months + interest on Rs. 3.00 crores @ 10% for 1 year + Interest on Rs. 1.00 crore @ 10% for 6 months. Interest during construction shall be shown in the estimates separately. If required, assistance in this regard may be taken from Corporate Office.

ANNUAL CAPITAL BUDGET FOR THE YEAR 2008-09

Projections for Capital Budget for 2008-09:

1.

The projection for Capital Works for the year 2008-09 has been taken under followings Schemes / Heads: UPCLs Internal System Improvement Works State Plan (LT System Strengthening - Renovation & Up-gradation Works) State Plan (PTW / Nalkoop) State Plan (Providing Earthing in LT System) District Plan Deposit Works Rural Electrification (Rajeev Gandhi Grameen Vidyutikaran Yojna)

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

2.

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

A- UPCLs Internal System Improvement Works Capital works for an amount of Rs.63.91 Crores have been envisaged to be undertaken in FY 2008-09 under the above head. The details of major works under Internal System Improvement Works to strengthen the distribution network system, metering, commercial backbone, consumer database and civil works. A list major works envisaged under this head are as follows:

Name of Works i) Construction/Upgrading of 33/11 KV S/s ii) Construction/Upgrading of 33 KV Line iii) Construction/Upgrading of 11 KV Line

Estimated Cost Rs. Rs. Rs. 8.67 Crores 2.27 Crores 9.39 Crores

iv) Installation/Upgrading of DTRs v) Construction/Strengthening of LT Lines vi) Installation of Meters/Cubicles/AMRS vii) AB Conductors & Theft Prevention Measures viii) Consumer Service Centres x) Civil Works

Rs. 5.50 Crores Rs. 5.95 Crores Rs. 18.77 Crores Rs. 3.50 Crores Rs. 1.13 Crores Rs. 4.87 Crores

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

i) Equity Contribution from GOU ii) Internal accruals iii) Funding from State Government Total:-

Rs. 5.00 Crores Rs. 13.91 Crores Rs. 45.00 Crores Rs. 63.91Crores

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

As per GOUs Annual plan FY 2008-09, a provision of Rs.10.00 crores has been kept for UPCL as Loan in the State Budget for the above work. To take up different renovation and upgradation works in the LT distribution system, a project report amounting Rs. 1295.92 Crores has been prepared and submitted to GOUs for approval & funding from the State Government. Simultaneously, Circle-wise and work-wise Detailed Project Reports (DPRs) are under preparation for submission to the State Govt. and financial institutions.

C. State Plan (PTW / Nalkoop) As per GOUs Annual Plan 2008-09, an amount of Rs.5.00 Crores has been provided as Grant for the above work.

D. State Plan (Providing Earthing in LT System) As per GOUs Annual Plan 2008-09, an amount of Rs.10.50 Crores has been provided as Loan for the above work.

E. District Plan As per GOUs Annual Plan 2008-09, an amount of Rs. 10.65 Crores has been provided as Loan for the above work. (Details enclosed at Annex-B).

F. Deposit Works An amount of Rs.51.30 crores has been estimated for works under this head in the financial year 2008-09. The details of major deposit works envisaged in FY 2008-09 are as follows:

Name of Works (i) Construction / Upgradation of 33/11 KV S/s (ii) Construction of 33 KV O/H new Lines & Bays (iii) Construction of 11 KV Bays, Lines & System (iv) Installation of new 11/0.4 DTRs (v) LT System Strengthening

Estimated Cost Rs. 18.75 Crs Rs. 13.33 Crs Rs. Rs. Rs. 9.02 Crs 2.93 Crs 7.27 Crs

G. Rural Electrification (Rajeev Gandhi Grameen Vidyutikaran Yojna)

The REC-funded projects under the RGGVY Scheme, involving 13 districts of the State are under progress and financial progress of Rs.499.10 Crores has been achieved as of 31st March, 2008.

An amount of Rs.150.00 crores has been provided in the Capital Budget for FY 2008-09, out of which 90% shall be released from REC Limited under Central Government assistance as per the RGGVY Scheme and balance as Loan from the State Govt.

ANNUAL REVENUE BUDGET FOR THE YEAR 2009-10

1.

Review of Revenue Performance of previous years 1.1 Energy Purchase & Sale (MU)

The Energy Input for the FY 2008-09 at MU, is higher than that of FY 2007-08. Energy Input for the FY 2009-10 has been projected at MU considering % increase over Energy Input of FY 200809.

Year-wise Energy Comparison

Financial Year Energy Input (MU)

% Rise/Fall Over last year

Table-I 2007-08
(Actual)

2008-09
(Actual)

2009-10
(Projected)

6732.05
-

8194.60
+21.74%

13243.93
+16.38%

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

Year-wise Input / Billing and Distribution Loss %

Table-II Financial Year Billing (MU) Energy Input (MU) Dist. Loss % 2007-08 (Actual) 4736 6732 29.65% 2007-08 (Actual) 2008-09 (Projected)

2.

Projections for Revenue Budget - FY 2009-10 2.1 Sales & Revenue

The projection of Sale of energy for the FY 2009-10 has been estimated on the category-wise sales based on the trends over the previous years. Three key parameters - Number of Consumers, Contracted Load & Specific Consumption for the past 4 years as well as the loss reduction efforts for the current financial year have been used to realistically forecast the demand for FY2009-10.

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

CATEGORY EHT HT LT HIGH VALUE (>25 KW) GOVERNMENT IRRIGATION & PWW BALANCE LT TOTAL

DEMAND/ SALE (MU) 1930 840 219 313 2823 6125

% SALE 32% 14% 3% 5% 46% 100%

REVENUE (Rs. Crs) 710.24 309.12 80.10 92.33 696.68 1888.47

% REVENUE 38% 16% 4% 5% 37% 100%

2.2

Power Purchase Cost

The expenditure on power purchase cost for the FY 2009-10 at Rs.1,939 crore has been projected on the basis of the actual power purchase bills for the period Apr08 to Sep-08. The estimated power availability from various firm sources has been made on the basis of:

Indicated availability by various generators, and

Past availability trends and other available information in the absence of specific indication by some generators.

The cost estimates are based on relevant / respective tariff orders, recent bills, existing arrangements, notifications etc for various individual sources.

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

SOURCES UJVNL NTPC NHPC OTHERS-(NPC,THDC) IPPs AND UREDA UI & BANKING TOTAL

PURCHASE (MU) 3988 2241 481 394 308 991 8403

2.3

O & M EXPENSES

For O & M Expenses including Employee cost, Administrative & General Expenses and Repairs & Maintenance Expenses, bottom-up approach has been followed by the Corporation, wherein Unit-wise Revenue Budgets from each Accounting unit in Garhwal and Haldwani Zones are called for. Those individual Revenue Budgets of the Units are then compiled Zone-wise and then the Zone-

wise figures have been consolidated in the Corporate Revenue Budget at UPCL Head office, after discussion with the Unit Heads, especially the Revenue Divisions and Circles. The detail of these expenses projected for FY 2008-09 are enumerated below:

(I)

Employee Cost

The Employee Cost of Rs. 13,500 Lakhs for FY 2008-09 has been estimated based on actual cost incurred during FY 2007-08 and the anticipated rise. The basic salary of employees is expected to increase on an average 3.5% p.a. The increase in D.A. has been considered on the basis of prevailing rates and expected increase in DA on half-yearly basis. Employers contribution towards pension & gratuity has been taken at 19.08% of Basic, DP and DA. The annual financial impact of Rs. 20.00 Crs. for the FY 2008-09 (excluding the Arrear from 01-01-2006 to 31-032008) on account of 6th Pay Commission Revision has been considered only. A marginal inflationary increase has been projected in other cost heads pertaining to other allowances.

(II)

Administrative & General (A&G) Expenses

The A&G expenses taken in the budget for FY 2008-09 at Rs. 2,572 Lakhs have been estimated considering increase in number of SubDivisions / Divisions / Circles, increase in fuel cost, computerization and other revenue expenses over the actual expenses for the FY 2006-07 and FY 2007-08 due to organic growth of the Corporation and its consumer base.

UPCL has undertaken a number of focused initiatives and efficiency improvement programs in the FY 2008-09 to be pursued in future years also. The Corporation has embarked upon systematic programs in the areas of metering, meter-reading, billing and collection through adoption of new technologies and tie-ups with various agencies to improve the Revenue Cycle Management functions. The Central High Value Consumer Billing System and Key Consumer Cell at Corporate Office have been established and Corporate Commercial Monitoring system has been put in place. New Collection improvement measures through setting up ATP Machines in Towns on BOOM basis have been initiated in Dehradun and are further rolled out to other Circles and Towns. For all these consumer service improvement measures and revenue improvement initiatives, financial provisions have been made in the Revenue Budget.

(III)

Repair & Maintenance (R&M) Expenses

The R&M expenses for the FY 2008-09 have been projected at Rs. 6,592 Lakhs. The rise in R&M expenses on key distribution network assets i.e. Plant & Machinery, Lines and cable network have been envisaged at 17% over the previous years actual expenses. It is also submitted that in view of the dilapidated state of the LT network, the level of R&M expenses being projected are essential to ensure quality power supply to consumers.

UPCL also is required to undertake some expenditure under the head Internal System Improvement Works or Special R&M Expenditure which involve works of following nature:

Re-conductoring / Strengthening of old and worn out 33KV, 11 KV & L.T. Lines. Augmentation of capacity of 33/11KV, 11/0.4 KV S/S. Replacement of Old Transformers and damaged poles. Extension of 11 KV & LT lines & augmentation of 11/0.4 KV S/S & 33KV lines. Conversion of single phase/2 phase LT lines into 3 phase LT lines. Civil works, i.e. R&M and modification/extension of Buildings, Roads, Control rooms, etc.

3.

Depreciation

Depreciation for the FY 2008-09 has been projected at Rs. 5,352 Lakhs on the value of Fixed Assets, considered by Honble UERC in its Tariff Order. The computation of depreciation has been made on the basis and the methodology adopted by the UERC in its last Tariff Order.

4.

Interest & Finance Charges The estimation of interest and finance charges for the FY 2008-09 is Rs. 6,922 Lakhs and has been calculated separately for various loans under different schemes.

The interest charges in context of Loans/Liabilities i.e. GPF Liabilities, CPSUs dues and power purchase dues, transferred to UPCL under the Transfer Scheme have not been

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

5.

Provision for Bad & Doubtful Debts A provision of Rs. 4,721 Lakhs at a conservative level of only 2.5% of the revenue billed has been projected for the FY 2008-09. On finalization of the amount to be written-off, the same shall be apportioned from the amount set aside as Provision for Bad & Doubtful Debts.

6.

Financial Projections The Financial Projections for the Annual Revenue Budget Estimates for the year 2008-09 is enclosed at along with the relevant Schedules attached there.

7. Revenue Performance Budget & Monitoring:

It is placed before the Board that, the monthly and annual Revenue Billing and Collection Targets have already been fixed for each of the Divisions/ Circles/ Zones separately for High Value consumers, Govt. consumers and balance LT consumers, with LT performance monitoring system of Divisions at Corporate level. Statements showing analysis of variances in Revenue Performances of Zones against the approved Revenue Budget for FY 2007-08 and the Zone-wise Revenue Budget Targets for FY 2008-09 are enclosed for kind perusal of the members of the Board.

RESEARCH METHODOLOGY

MEANING OF RESEARCH: Research in common parlance refers to a search for knowledge. One can also define research as a scientific & systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. The Advanced learner's Dictionary of current English lays down the meaning of research as a 'careful investigation as inquiry especially through search for new facts in any branch of knowledge. Redman & Mory define research as a 'systematized effort to gain new knowledge. Some people consider research as a movement, a movement from the know to the unknown. It is actually a voyage of discovery. We all possess the vital instinct of inquisitiveness for, when the unknown comforts us, we wonder & our inquisitiveness makes probe & attain full & fuller understanding of the unknown. This inquisitiveness is the mother of all knowledge & the method which man employs for obtaining the knowledge of whatever the unknown can be termed as research. Research is an academic activity & as such the term should be used in a technical sense. According to Clifford woody research comprises defining & redefining problems, formulating hypothesis or suggested solutions, collecting, organizing & evaluation data, making deductions & reaching conclusions, and at last carefully testing the conclusions to determine whether they fit

the formulating hypothesis. D. Slesings & M. Stephenson in the encyclopedia of social sciences define research as "the manipulation of things, concept or symbol for the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the practice of an art". Research is, thus, an original contribution to the existing stock of knowledge making for its advancement. It is the pursuit of truth with the help of study, observation, comparison & experiment. In short, the search for knowledge through objective & systematic method of finding solution to a problem is research. The systematic approach concerning generalization & the formulation of a theory is also research. As such the term 'research' refers to the systematic method consisting of enunciating the problems, formulating a hypothesis, collecting the facts of data, analyzing the facts & reaching certain conclusion either in the form of solutions towards the concerned problem or in certain generalizations for some the theoretical formulation.

SOURCES OF DATA: The task of data collection being after a research problem has been defined & research design checked out. While deciding about the method of data collection to be used for the study, the researcher should keep in mind two types of data i.e.: 1. Primary Data 2. Secondary Data. Primary Data Primary data is one which is collected by the investigator himself for the purpose of a specific inquiry or study Primary data are collected afresh and for first time. Such data is original in character and is generated by surveys conducted by individuals or research institutions.

 Secondary Data Secondary Data when an investigator uses the data which has already collected by others such data is called secondary data. This data is primary data for the agency that collects it and becomes secondary data for someone else who uses this for his own purposes. This can be obtain from journals, reports, govt. publication, publication of professional and research organizations and so on.

METHODS OF DATA COLLECTION Method of collecting primary data Observation method Interview method Schedules Questionnaires Observation method-: The observation method is used to study relating to behavioral sciences. Ex.-: Super Market. Interview method-: The interview method of collecting of data involves presentation of oral stimuli and reply in terms of oral response. It can be used through personal interviews and if possible, through telephone interview. Schedules method-: Schedule may be defined as a Performa that contains a set of questions which are asked and filled by interviewer in a face to face situation with another. Questionnaires method-:

In this method questionnaire is fulfilled by individual meet or sent (usually by post & email) to the persons concerned with a request to answer the questions and return to questionnaire. Types of Questions-: Background question Multiple choice or closed-end question Intensity question Free response or open-end question

Collection of Secondary Data Data which is collected at first hand either by the researcher or a particular person especially for purpose of the study is known as primary data. Primary data become secondary data to another person for further study upon the topic. Example-: internet search engine Google. Available data on this always be the primary data but when we use to search any topic related to our study called secondary data.

CLASSIFICATION OF SECONDARY DATA

Source internal external Category Book & periodical Government publication Non govt. association directories Industry expert Special collection Medium Hard copy Local area online internet Database format reference source

RESEARCH DESIGN:A research design is a framework or blueprint for conducting the marketing research project. It details the procedures necessary for obtaining the information needed to structure and/or solve marketing research problems.

RESEARCH DESIGN: CLASSIFICATION

Research Design Exploratory Research Design Descriptive Research Conclusive Research Design Casual Research

The present project Budgeting in UPCL was studied on the basis of annual reports, records and circulars of UPCL for last years. The data used in this project is secondary data which is collected from concerned authorities.

Methodology adopted: I have studied and understood the requirement of Budgeting for the Organization. The existing procedure of Budgeting System that is running in UPCL is studied in and

understood. For this purpose existing manuals, annual reports, circulars were studied by gathering information from person concerned through informal interview.

INFERENCES

The difference between Budgetary Estimate and actual figures in due to following reasons: Political Reasons: When there is a political interference and due to that public is influenced then in these conditions UPCL people does not work and set budgetary estimates are not fulfilled. Geographical Conditions: Due to geographical conditions like icefall, rainfall, cyclone, earthquake it is uneasy to do work in these conditions as provisions made in the budget estimate. Difficulty in getting clearance: More than 50% of Uttarakhand is under forest region for which permission is taken from Central Government to establish lines and Substations. Global Concern: If basic material price rises then there is problem of cost escalation.

CONCLUSION

The financial position of U.P.C.L. is not good, in order to have good financial position it should incur only unavoidance expenses. Like it should convert its loan to equity share capital so that no provision is made for interest. The accounting system of U.P.C.L. is based on UPSEB rules and it also follows Companies Act, 1956. The costing system of U.P.C.L. is also not efficient as they do not have any money to conduct business operations so they borrow loan. Due to that they have to pay interest thats why its cost of production is high. The working capital management of U.P.C.L. is also negative.

RECOMMENDATIONS

On the basis of my understanding I think that budgeting in UPCL is managed in a prudent way but in order to improve its performance there should be a performance based activity wise budgeting because from this type of performance based budgeting information of different activity of each department is easily collected.

LIMITATIONS

Errors while making calculations are likely to creep in.

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

applicability and accuracy.

Due to time constraint the project suffered serious limitations.

BIBLIOGRAPHY

1. 2. 3. 4. 5. 6.

Management Accounting Management Accounting Research Methodology Budget Manual Budget Monitoring System Annual Reports (2004-2010)

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K. G. Gupta Dr. A. K. Garg C. R. Kothari UPCL UPCL UPCL