A STUDY ON

“FINANCIAL PERFORMANCE AND BUDGETING”

WITH REFERNCE TO

RASHTRIYA ISPAT NIGAM LIMITED, VISAKHAPATNAM

PROJECT REPORT

(A Report submitted in partial fulfillment of the requirements for Degree of Bachelor of

Business Administration (Finance) from
GVP SCHOOL OF MANAGRMENT STUDIES , RUSHIKONDA ,
VISAKHAPATNAM

Submitted by

M DHEERAJ VARMA Reg. no. 2017-1809234

BBA (Finance)

Under the guidance of

Sri K.V.Venugopal, AGM(F&A)

F&A Department-RINL-VSP

GVP SCHOOL OF MANAGEMENT STUDIES

RUSHIKONDA VISAKHAPATNAM

(2017 – 2020)
 DECLARATION OF THE STUDENT

I M Dheeraj Varma hereby declare that the Project work titled a study on “Financial
Performance and Budgeting” with reference to "RASHTRIYA ISPAT NIGAM
LIMITED,VISAKHAPATNAM" is the original work done by me and submitted to the
GVP School of management studies in Partial fulfillment of requirements for the award
of Bachelors of Business Administration in (Finance) is a record of Original work done
by me under the supervision of Sri.K.V.Venugopal, AGM(F&A) Finance Department
,RINL, Vizag Steel Plant.

Reg No:2017-1809234

(Signature of the student)

M DHEERAJ VARMA

Date: 28-05-19

ACKNOWLEDGEMENT
With great pleasure, I express my deep sense of gratitude to the management of “RASHTRIYA
ISPAT NIGAM LIMITED”, Visakhapatnam for giving me this very inspirational opportunity to
do my observation study in their reputed company to take this opportunity to express my deep and
profound gratitude to the people concerned who have helped me directly or indirectly in successful
completion of this project. SRI.O.R.M RAO, AGM (HRD), RINL – Who found the greatest
confidence in me which would always act as a motivator in my life.

I convey my sincere thanks to Mr. K.V.VENUGOPAL, AGM (F & A), RINL who has motivated
me with their valuable suggestion and helped throughout the project in permitting to perform
various tasks in this esteemed organization.

I would like to take the pleasure of this opportunity to express my heartful gratitude to my guide
PROF. V S M SRINIVAS RAO GARU Assistant professsor of finance, M V G R COLLEGE
OF ENGINEERING ,who took personal interest and gave valuable suggestions throughout my
fieldwork and completion of the Project.

(M Dheeraj Varma )
 CERTIFICATE

This is to certify that the project work entitled A STUDY ON “Financial Performance and
Budgeting” In RASHTRIYA ISPAT NIGAM LIMITED; VISAKAPATNAM is a bonafide work
of Mr. M DHEERAJ VARMA , Reg.No.2017-1809234, carried out in a partial fulfillment of
BBA of G V P SCHOOL OF MANAGEMENT STUDIES under my guidance. This project work
is original and not submitted earlier for the award of any degree/diploma or associate ship of any
other University/Institute.

Signature of Project Guide

Place: Visakhapatnam Sri K.V.VENU GOPAL
Date: AGM (F&A Dept.)
RINL-VSP
 PREFACE

This project report is a presentation of my effort to study the practice of Financial

Management in a public sector enterprise, with reference to Rashtriya Ispat Nigam Limited,
Vishakhapatnam. The report presents the practical approach in the subject of Financial
Management, mainly in the field of “FINANCIAL PERFORMANCE AND BUDGETING”
AT RINL IN VISHKHAPATNAM”. It intends to provide brief knowledge of various concepts,
Principles, approaches, considerations relevant to this field. The Project Report has undergone a
realistic survey of actual theory and practices in VSP although there may be much gap to be
bridged.

This report seeks to cover the topics of Financial Management, mainly focusing on the
aspects like Common Size Balance Sheet, Cash Flow Analysis, Fund Flow Analysis, Working
Capital Analysis, Ratio Analysis etc.

The report has been divided into five chapters and the arrangements of topics in various chapters
have been grouped according to the analysis of the subjects.
 TABLE OF CONTENTS

S.No Topic Page no.

Chapter-1
1.1 Introduction of the study 8
1.2 Need for the study 10
1.3 Objectives of the study 11
1.4 Methodology 12
1.5 Limitations of the study 14
Chapter-2
2.1 Industry profile 16
2.2 Company profile 26
Chapter-3
Theoretical framework of the
study
3.1 Financial Performance 52
3.2 Budget 59
Chapter-4
4 Data interpretation
4.1 Financial performance
4.2 Budgeting
Chapter-5
5 Analysis of the study 164
Chapter-6
6 Conclusion, Summary, 166
Findings, & Suggestions
7 BIBLIOGRAPHY 169
 CHAPTER-I
INTRODUCTION OF THE STUDY
1.1 Introduction
1.2 Need for study
1.3 Objectives of the study
1.4 Methodology
1.5 Limitations of the study

Steel is crucial to the development of any modern economy and is considered to be the backbone
of human civilization. The level of per capita consumption of steel is treated as an important index
of the level of socioeconomic development and living standards of the people in any country. Steel
industry was in the vanguard in the liberalization of the industrial sector and has made rapid strides
since then.Output has increased, the industry has moved up in the value chain and exports have
raised consequent to a greater integration with the global economy.
At the same time the domestic steel industry was facing new challenges. The demand too has not
improved to significant levels. The litmus of the steel industry will be to surmount these difficulties
and remain globally competitive.
Keeping in view the importance of steel, the integrated steel plants with foreign collaboration were
set up in the public sector in the post-independence era.
The growth of any organization depends on the overall performance such as production, marketing,
human resource and financial performance of the organization. The financial performance of the
organization reflects the strengths, weakness, opportunities and threats of the organization with
respect to profits earned, investments, sales realization, turnover, return on investment, and net
worth of capital.

Finance plays an important role in any organization. The dictionary meaning of finance is money
affairs or the art of managing or administrating the public money. Hence the name financial
management could be referred to as money management. the function of finance is not arranging
funds for the business organization but also includes planning, forecasting of cash flow, both
receipts and payments, raising the funds, allocation of funds and financial control.

Efficient management of financial resources and deliberate analysis financial results are
prerequisites for success of an enterprise. Financial statements are the basis for decision making
by the management and as well as all other outsiders who are interested in the affairs of the firm.

Financial management involves the management of finance function. It is concerned with the
planning, organizing, directing and controlling the financial activities of an enterprise. It deals
mainly with raising funds in the most economic and suitable manner.

Using these funds as profitability as possible; planning future operations and controlling current
performance and future developments through financial accounting, cost accounting, budgeting,
statistics and other means. It is continuously with achieving an adequate rate of return on
investment, as this is necessary for survival and the attracting of new capital.

The financial manager must see that funds are procured in a manner that the risk, cost and control
considerations are properly balanced in a given situation and there is optimum utilization of funds.
The financial manager estimates the total requirements of funds, both in short period and long
period. The financial manager assesses the financial position of the company through the working
out the return on capital, debut-equity ratio and cost of capital from each source etc..., And
comparison of the capital structure with that similar companies.

FINANCIAL PERFORMANCE ANALYSIS

Financial performance is the process of identifying the financial strengths and weaknesses of the
firm by properly establishing the relationship between the items of balance sheet and profit and
loss account. It also helps in short term and long term forecasting and growth can be identify with
the help of financial performance analysis. The dictionary meaning of analysis is to resolve or
separate a thing in to element or components parts for tracing their relation to the things as a whole
and to each other.the analysis of financial statement is a process of evaluating the relationship
between the component parts of financial statement to obtain a better understanding firm’s positon
and performance can be undertaken by management of the firm or by parties outside the namely,
owners, creditors, investors.

The analysis of financial statements represents three major steps:

 The first step involves the re-organisation of the entire financial data contained the financial
statements. therefore, the financial statements are broken down into individual components
and re grouped into few principle elements according to their resemblance and affinities. Thus
the balance sheet and profit and loss accounts are completely re casted and presented in the
condenses firm entirely different from their original shape. The second step is establishment
of significant relationship between the individual components of balance sheet and of profit
and loss account. This is done through the application tools of financial analysis like ratio
analysis , trend analysis, common size balance sheet and comparative balance sheet.
 Finally, the result obtain by means of application of financial tools is evaluated.
 In brief financial analysis is the process of selection, relation and evaluation of financial
statements. The tools of analysis are used for determining the investment value of the business,
credit rating and for testing efficiency of operation.

Thus financial analysis helps to highlight the facts and relationships concerning managerial
performance, corporate efficiency and financial strengths and weaknesses and credit
worthiness of the company.

1.2 NEED FOR THE STUDY:

There is a special role of every industry barring up on the need essentiality where everything has
to be done in accordance with standards that are regulated by the governments. The main aim of
any firm is to maximize the wealth of the profits. Which in turn depend on successful sales activity.
To generate sales, investment of sufficient funds in currents assets is required. The need of current
assets should be emphasized, as the sales don’t convert into cash immediately but involved a cycle
of operations, namely operating cycle.
Rashtriya Ispat Nigam limited is multi- product steel-manufacturing unit with varying cycle time
for each product. The capital required by each department in a large organization like RINL
depends on the product target for that year. To understand this, conceptual idea is not only
sufficient but also it needs a wide knowledge and understanding of the factors that are affecting
them. Especially Visakhapatnam steel plant has emerged from loss to profit making company.

Now, the study is all about analysing, how this has been possible for a company whose figures
were budgeted to negative show finally ended with high positively.
Here in this project an attempt is made by financial statement for knowing the financial
performance of the company.

1.3 OBJECTIVES OF THE STUDY:

The objective of the study is based upon the part of Financial Performance that is been
taken into consideration i.e. Financial Statements and Analysis. The Study predominantly
financial performance of RINL and budgeting.

Specific objectives:

 To study the financial position of the company

 To analyze the financial stability and overall performance RINL.
 To find out Financial Strengths and weaknesses of the firm
 To know the Liquidity Position of a firm
 To know the causes of changes in the Cash Position
 To analyze the trends as revealed by various financial statements
 To analyze the profitability and solvency position of the company.
 To compare the performances of the company at different time.
 How it uses its assets and position of working capital
 To study the changes in the asset, liabilities structure and results of operation activities of
the company during the period of the study.
 To know the ability of the firm to meet its current obligations
 To know the overall operation efficiency and performance of the firm To find out important
tools of Short-term, Long-term Financial Planning
 To find out foremost important Financial Decisions
 To know the detailed information about comparative and common size balance sheet

General objectives:

 The study is based upon the part of budgetary control that is been taken into
consideration i.e. system of management and accounting control s. The Study
predominantly of budgetary control RINL.
  To ensure planning for future by setting up various budgets according to the requirements
and expected performance of the enterprise and anticipated Performance of the enterprise.
 To co-ordinate the activities of different departments.
 To operate various cost centers and departments with efficiency and economy.
 Elimination of wastes and increase in profitability.
 To anticipate capital expenditures for future.
 Correction of deviations from the established standards.
 Fixation of responsibility of various individuals in the organization.

1.4 Research methodology:

Research means knowing about new things. Sometimes, it may refer to scientific and systematic
search pertinent information on specific topic. In fact Research is an art of scientific investigation.
According to Clifford Woody Research comprises of
“Define and redefining problem, formulating hypothesis or suggesting solution, Collecting,
Organising and Evaluating data
Making deduction and reaching conclusion and at last careful testing the conclusion to determine
weather they fit the formulating hypothesis readman and moray define research as a systematic
effort to gain new knowledge.
Research can be defined as the search of knowledge or any systematic investigation to establish
fact. The primary purpose for applied research (as opposed to basic research) is discovering
,interpreting and the development of methods and systems and for the advancement of human
knowledge on a wide variety of scientific matters of year world and the universe.
Research can used scientific method but need not do so research can also being set as a process
that is fallowed by the person to answer either his or her own quarries or somebody else quarries
about a particular object, person, subject etc.,
Data collection:
The data collections classified into two types they are
 Primary data
 Secondary data

Primary data:
Primary data is the data which is intended to be used by the researcher, the researcher collects the
data depending upon his requirements.
The data for study has been collected from the management of the company. The information
about the industry profile and company profile was gathered from HRD, VSP and the data about
the budget and budgetary control was gathered from Financial Department, VSP.

Secondary data
The secondary data is collected from information which is used by others. It is not direct
information. This information is already collected and analysis by other and that information is
used by others.
This is taken from the annual reports, websites, company journals, magazines and other sources of
information of steel plant.

The secondary data are collected from fallowing:

 Companies annual report
 Companies website
 Manual
 Inter office memos (IOM)
 Monthly working results
 Financial hand book
Data analysis:
The data analysis using the fallowing tools
 Comparative balance sheet
 Common size balance sheet
 Ratio analysis
 Trend analysis

1.5 LIMITATIONS OF THE STUDY

The major limitations which faced the researcher in the course of the study are:
 Time limitation which precludes the gathering of detailed information. Seven weeks time
is not sufficient to conduct the study and compile a report. So that time was a major
constraint.
 Long distance of the company site. It was difficult for the researcher to go to the site and
collect data throughout the weeks due transportation and other costs.
 The complexities and confidentiality of various operations and
  The analysis and interpretation are based secondary data contained in the published
annual reports of VSP for the study. So that reliability of secondary data is another
limitation.
 The study of financial performance can be only a means to know about the financial
conditions of the company and cannot show through picture of the activities of the
company.

Though the project is completed successfully with a few limitations

 Although every effort has been made to study the “Budgeting” in detail, in an organization
of VSP size, it is not possible to make an exhaustive study in a limited duration of seven
weeks.
 Apart from the above constraint, one serious limitation of the study is that it is not possible
to reveal some of the financial data owing to the policies and procedures laid down by VSP.
However the available data is analyzed with great effort to get an insight into Budgeting in
VSP.
 Analysis of sub topics is limited to some extensions.
 The study is carried basing on the information and documents provided by the Organization
and based on the interaction with the various employees of the respective departments.
 Budgeting process is very dynamic.
 Budget that were prepared are only based upon trend at the time preparation.
 Flexibility with in the budget is not possible.
CHAPTER-II
1. INDUSTRY PROFILE
2. COMPANY PROFILE
 2.1 INDUSTRY PROFILE
Steel sectors in India - an Overview

India was the world’s fifth major producer of crude steel in 2009 and is expected to become the
world’s second largest producer by 2016–2017. According to the Ministry of Steel, India
remains world's largest producer of direct reduced iron or sponge iron. The Indian steel sector
enjoys advantages of domestic availability of raw materials and cheap labour. Iron ore also exists
in abundant quantities. This provides major cost advantage to the domestic steel sector, with
companies like Tata Steel being one of the lowest cost producers in the world

Being a core sector, steel industry reflects the general economic growth of an economy in the
long term. Also, steel demand, being derived from other sectors like automobiles, consumer
durables and infrastructure, its fortune is dependent on the growth of these user industries.

While steel continues to have a stronghold in conventional sectors such as construction, housing
and ground transportation, special steels are increasingly used in engineering firms such as
power generation, petrochemicals and fertilizers. Indian steel industry is very contemporary with
state of the art steel mills. It has always strived for constant modernization and up-gradation of
older plants and higher energy efficiency levels.

84

82

80

78
finished steel…
76

74

72

70

68
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

Figure 1 Graph showing the total consumption finished steel production:

X axis represents the period in terms of years and Y axis represents Production of steel in
terms of million tonnes.
 Comparative analysis of steel Production:

The below shown graph is the comparative analysis of the total production of steel in the world
and India’s steel production and china’s steel production. The contribution of china in steel
production is more than half of the world’s steel production.

Year World China India

2012 1550 700 77.2
2013 1600 800 81.3
2014 1620 800 87.3
2015 1600 800 89.6
2016 1621 825 95.6
2017 1691 831 101.4

Figure 2 Graph showing the comparative steel production.

X axis represents Years and Y axis represents production in terms of million tonnes.
Note: The data available for 2017 steel production is cumulative till jan2017.

Comparitive analysis of steel production

1800
1600
1400
1200
1000
800
600
400
200
0
2012 2013 2014 2015 2016 2017

World China India

STRUCTURE OF THE INDIAN STEEL INDUSTRY-

Indian steel Industry can be divided into two main sectors public sector and private sector.
Further on the basis of routes of production, the Indian steel industry can be divided into two
types of producers: Integrated producers and Secondary producers.
Integrated producers convert iron ore into steel. There are three major integrated steel players in
India, namely Steel Authority of India Limited (SAIL), Bhushan steel,JSW,JSPL and
RASHTRIYA ISPAT NIGAM LIMITED (RINL).

Secondary producers are the mini steel plants (MSPs), which make steel by melting scrap or
sponge iron or a mixture of the two. ESSAR STEEL, ISPAT Industries and Lloyd’s steel are the
largest producers of steel through the secondary route.

Indian steel industry is more consolidated than the global steel industry the capacity share of the
top five Indian steel players stood at 60 percent of the total capacity (87.3 MTPA) in fiscal year
(FY) 2011 compared to less than 15 percent capacity share for the top five global steel players.
This has resulted in the large integrated producers having significant pricing power, forcing the
secondary producers to look at backward integration remain competitive.

Figure 4 Graph showing the capacity share of top 5 Indian steel players

More than 3,500 different varieties of steel are available in the steel sector of India. These can
however be classified into two broad categories of flat products and long products. Flat products
include plates and hot rolled sheets such as coils and sheets. Flat products are derived from slabs.
One of the main uses of steel plates is in ship building. Long products include bars, rods, wires,
ropes and piers. These are called long products due to their shapes. Long products are made from
billets and blooms. Long products are mostly used in housing and construction and also in rail
tracks.
New steel policy:

The Union Steel Minister Chaudhary Birender Singh said that the new policy will be announced
soon after the Cabinet clearance and the policy has many issues that have been pending for a long
period and to achieve the target of 300 million tonnes of production by 2030. He said that the
cabinet was preparing a note that to make the use of steel made in the country compulsory in
Government projects. He advised to the Visakhapatnam Steel plant that to take advantage of
demand for steel in several projects in the AMARAVATHI the new capital of ANDHRA
PRADESH. He praised the Rashtriya Ispat Nigam Ltd (Visakhapatnam steel plant) for completing
the expansion project and said the plant had a great advantage in having two ports in its vicinity.
The plant was moving towards achieving international standards of efficiency. He said the steel
industry in the country has been under the stress for the last three years due to trends in the
international markets and imports. "The import has been reduced by 26 per cent due to the anti-
dumping duty imposed by the Central government to save the Indian steel industry and the demand
for steel in the country is on the rise and the performance of the industry has been improved in the
last six months.

This table says that the target of 300tonnes throughout the country in the following years. In the
year 2016 they target is 122MT of capacity expansion. The target of 300MT to be achieved in
the year 2031 according to that every five years they have set an target to achieve 300MT. In the
financial year 2016 to 2021 they have a target of 25MT and at the end of that year the total
capacity should be 147MT and so on……
The major steel and related companies in India are:

STEEL INDUSTRIES:
1. Rashtriya Ispat Nigam Limited
2. Jindal
3. JSW
4. Tata steel
5. SAIL
SUPPLIERS:
1. NMDC
2. MOIL
3. Kudremukh iron ore ltd
CONSULTANCY:
1. MN Dastur & company
2. Mecon ltd
3. HSCL
TRADING:
1. MSTC
2. Metal junction
Though the production of steel in significant quantity started only after 1900, the growth
of steel industry can be conveniently studied by dividing the time in to pre and post independence
period.
PRE-INDEPENDENCE:

1830 Joshua Marshall Halting Came can be considered as a pioneer of

modern steel industry in India constructed the first manufacturing plant
at port move in Madras presidency. But it was a financial failure.

1874 James Erskine founded the Bengal iron works. It passed on to M/S
HOGNE Killer and to M/S Martin and co in 1885

1899 Jamshedji TATA initiated the scheme for integrated steel plant
(first in the country)

1906 Sakchi in Bihar was chosen as the site for the TATA iron and steel co
(TISCO)

1911 TISCO started production, initially 1000 tons of ingots / year and in 2
years it reached 5000 tons / year by 1939 it reached production of 15000
tons ingot steel per year.

1918 Initially Indian iron and steel co (IISCO) was founded and the Bengal
iron and steel co merged with it in 1926. To start with, IISCO restricted
it self for manufacturing of pig iron for export to UK and JAP AN. It
produced steel.

1940-50 Formation of the Mysore iron and steel Ltd. Presently known as
Visveswarayya Iron and Steel Ltd. (VISL) at Bhadravathi in Karnataka
 owing to the pioneering efforts of Sri. Visveswarayya. It started
manufacturing Ferro alloys and Sp. Steels.

POST-INDEPENDENCE:-
1951-56 - First Five Year Plan.

No new steel plant came up .The Hindustan steel Ltd. was born on 19th January, 1954 with
the decision of setting up three steel plants each with one million tone input steel per year in
at Rourkela, Bhilai and Durgapur; TISCO stated its expansion program.

1956-61 - Second Five Year Plan

A bold decision was taken up to increase the ingot steel output India to 6 Million tons per year &
production at Rourkela, Bhilai and Durgapur steel plant started.

1961-66 - Third Five Year Plan

During the third five year plan the three steel plants under HSL; TISCO & HSCO were expanded
as show. In January 1964 Bokaro steel plant came into existence.

1966-69 - Recession Period

The entire expansion program was actively executed during this period.

1969-74 -Fourth Five Year Plan

 Licenses were given for setting up of many mini steel plants and re-rolling mills.
 Govt. Of. India accepted setting up two more steel plants in south. One each at
Visakhapatnam and Hospet (Karnataka).
 SAIL was formed during this period on 24th January, 1973. The total installed capacity
from 6 integrated plants was 106 Mt.
1979 - Annual Plan

 The erstwhile Soviet Union agreed to help in setting up the Visakhapatnam steel plant.

1980-85 - Sixth Five Year Plan

  Work on Visakhapatnam steel plant was started with a big bang and top priority was
accorded to start the plant.
 Scheme for modernization of Bhilai steel plant, Rourkela, Durgapur, TISCO were
initiated.
1985-91 - Seventh Five Year Plan

 Expansion work of Bhilai and Bokaro steel plants completed.

 Progress on Visakhapatnam steel plant picked up and rationalized concept has been
introduced to commission the plant with 3.0Mt liquid steel capacity by 1990.

1991-96 - Eight Five Year plan

 Vishakhapatnam steel plant started its production modernization of other steel plants is
also duly envisaged.

1997-2002 - Ninth Five Year Plan

 Visakhapatnam steel plant had foreseen a 7% growth during the entire plan period.

2002-2007 - Tenth Five Year Plan

 Steel industry registers the growth of 9.9 % Visakhapatnam steel plant high regime
targets achieved the best of them.

2007-2012 - Eleventh Five Year Plan

Cost of schemes/project original approved by Government of India is Rs.9, 569.18 crores.

The global steel industry has witnessed several revolutionary changes during the last century.
The changes have been in the realms of both technology & business strategy. The ultimate object
of all these changes is to remain competitive and open global market.

2012-2017 -Twelfth five year plan

The 12th Plan sector target document says that with a GDP growth of around 9%, the steel
consumption is expected to grow 10.3%, translating into a need for an installed capacity addition
of 142.3 mt by 2017.

planning Commission was an advisory body, and so is Niti Ayog. But the key difference
between them is that while the former had powers to allocate funds to ministries and states; this
function will be now of finance ministry. Niti Ayog is essentially a think tank and a truly
advisory body.
While the planning commission formed Central Plans, Niti Ayog will not formulate them anymore. It
has been vested with the responsibility of evaluating the implementation of programmes. In this way,
while Niti Ayog retains the advisory and monitoring functions of the Planning commission, the
function of framing Plans and allocating funds for Plan assisted schemes has been taken away.

SECTOR PROSPECTS-

According to the Indian Ministry of Steel, the present per capita consumption of steel in the
country is only around 63 kg against the world average of 182 kg. So there is immense potential
for growth of the sector. The ministry also predicts that India is expected to become the second
largest producer of steel in the world by 2017-18, provided all requirements for fresh capacity
creation are met.

Opportunities exist for future growth of the sector due to reasons that include potentially huge
domestic demand for steel-intensive social and economic infrastructure resulting from all round
economic development and particularly because of anticipated growth in urbanization;
demographic conditions that favour Increasing demand for consumer durables; untapped rural
market and increasing interest of domestic and overseas producers in capacity creation to serve
the domestic and overseas markets.

The demand for longs is expected to increase by 19 million tons at a compound annual growth
rate of 9 percent and for flats by 16 million tons at a compound annual growth rate of 8 percent
between FY 2012 and FY 2017.This is relatively due to weak growth prospects of flats end user
industries such as automotive and consumer durables than those for longs
 120

100

80

60 Long
Flats
40

20

0
2011 2012 2013 2014 2015 2016 2017

Figure 5 Graph showing the finished steel demand: longs and flats

SWOT analysis of Indian steel industry:

Strengths:

 Abundance of iron ore and coal.

 3rd largest pool of technical manpower.
 Low cost and efficient labor force.
 Strong managerial capability.
 Strongly globalised industry and emerging global competitiveness.
 Modern new plants & modernized old plants.
 Strong DRI production base.
 Regionally dispersed merchant rolling mills.

Weakness:
 Low R & D investments.
 High cost of energy.
 Dependence on imports for steel manufacturing equipment’s & technology.
  Slow statutory clearances for development of mines.
 Lack of level playing field vis-à-vis others due to lack of captive iron ore & coking
coalmines.
 Due for Major capital repairs and modernization.
 Steep rise in Cost of production and fall in margins.
 High cost of servicing huge equity.
 Subdued international & sluggish domestic Markets.

Opportunities:

 Unexplored rural market.

 Export market penetration.
 Rapid urbanization.
 Increasing demand for consumer durables.
 Increasing interest of foreign steel producers in India.
 Huge demand potential in view of the projected growth.
 Encouraging signs due to huge infrastructure spend planned in 12th Five Year Plan.
 Projected growth in Steel consumption.
 Improved availability of Ports & logistics.
 Diversifying to new product mix like Axles and Transmission line towers etc.

Threats:

 Slow industrial growth.

 Threats of substitute.
 Technological change.
 Price sensitivity and demand volatility.
 Slow growth in infrastructure development.
 Stiff competition further compounded by capacity expansion by competitors and entry of
International players.
 Price cut by Competitors.
  Increasing raw material prices & shift of value chain towards raw materials.

II. COMPANY PROFILE

Rashtriya Ispat Nigam Limited is the corporate entity of Vishakhapatnam Steel Plant is a
Navaratna PSE under the ministry of Steel. It is popularly known as Vizag steel plant is the first
shore based integrated steel plant in the country and it’s known for its Quality Products and
customer Delight. A market leader in long steel products, it caters to the requirements of the
Construction, Manufacturing Automobile, General Engineering, and Fabrication Sectors.

The Government of India has decided to set up an integrated Steel Plant at Visakhapatnam to meet
the growing domestic needs of steel. Visakhapatnam Steel Plant was the effect of the persistent
demands and mass movements. It is another step towards increasing the country’s steel
production.

The decision of the Government to set up an integrated steel plant was laid down by the then Prime
Minister Smt. India Gandhi. The Prime Minister laid the foundation stone on 20th January 1971.

Unlike other integrated Steel Plants in India, Visakhapatnam Steel Plant is one of the most modern
steel plants in the country. The plant was dedicated to the nation on 1st August 1992 by the then
Prime Minister, Sri.P.V.NarasimhaRao.

Steel is such a versatile commodity that every object we seen in our day to day life have used steels
either directly or indirectly in its products. To mention a few, it is used for such a small items as
pins, needles etc. Steel comprises one of the most important inputs in all sectors of economy. The
economy of any nation depends on a strong base of iron and steel industry in that nation. Today
Steel occupies the foremost place amongst the materials. All the key discoveries the human genius
– for instance, steam engine, railway, means of communication and connection, automobile,
airplane and computers are in one way or other, fastened together with steel.

VSP is one of the most modern steel plants in India incorporating State-of-the-Art technology.
Following are some of the modern technologies adopted:
  7 meter tall Coke Oven Batteries with coke dry quenching.
 Biggest Blast Furnaces in the country
 Bell-less top charging system in Blast Furnace
 100% slag granulation at the BF Cast House
 Suppressed combustion- Ld gas recovery system
 100% continuous casting of liquid steel
 “Temporal” and “steamer” cooling process in LMMM &WRM respectively
 Extensive waste heat recovery systems and pollution control methods.

Production:
Production 2017-18 (estimated) Draft (2018-19) Mou – IMC (2018-
(‘000 tonnes)
19)
Hot metal 5132 6400 6200
Liquid steel 4972 6300 6100
Crude steel 4731 5985 5795
Pig iron 104 59 16
Sealable steel 4500 5675 5475
Finished steel 33571 32460.7 35436

PRODUCTS OF RINL
  SPECIAL STEELS: Special steel is generally considered a special chemical composition
(alloy), using a special production process, with special microstructure and properties of
steel to meet the special needs class.
In these special steel there are 3 sub products namely

 Wire Rod Coils

 MMSM Rounds & Billets
 LMMM Rounds & Billets
 PRODUCT MIX: It implies all the products offered by a firm for sale. It may consist of
one product or several allied products.
These are product mix of RINL

 Wire Rounds
 Rounds
 Reinforcement Bars

 PLAIN WIRE RODS IN COILS: Wire rods are manufactured in special steel grades also
for various applications like Cold heading. Tyre-bead, Cable armouring, Electrodes, Pre-
stressed Concrete wire etc. The size of Wire Rods is 5.5-20mm and end users are Wire
Drawing, Bright bars, Fasteners.

 EXPORT PRODUCTS:
List of products offered for export from VSP

 Wire Rods
 Hot rolled Rebars
 Equal Angles
 Channels
 Billets
 Beams
 Rounds
 Pig-Iron
  REBARS: In-built ability to resist loss of strength at higher temperature. Higher yield
strength, Ultimate tensile strength and higher percentage elongation when compared to
cold twisted bars of same grade. The size of Rebar is 8-36mm and end users are
Construction and Reinforcement.

 STRUCTURALS: It providing more flexibility to designer, fabricator and erector.

Tension free rolling ensures uniform dimensional tolerances. The size of Structural is 55-
200mm and end users are Construction and Fabrication.
In structural there are 3 sub products

 Angles
 Channels
 Beam

BY PRODUCTS:

They are many by-products for the company

Coke Fractions Ammonium Sulphate

Medium High Pitch Crude Coal Tar

Benzene Hot Pressed Naphthalene

Phenol Fractions Drained Naphthalene Oil

Toluene Light Solvent Oil

Anthracene Oil Coal Tar Wash oil

B F Slag Coal Tar Fuel

  FORGED ROUNDS: Forged metals tend to be harder, stronger and more durable than
cast forms or machined parts. The sizes of rounds are 16-80mm in Fasteners, Forging,
Railways, Construction and 20-45 mm in Straight and Coil form.

COMPETITORS OF RINL

1. JSW
2. Tata Steel Ltd
3. Jindal Steel Ltd
4. ESSAR Steel
5. SAIL
6. Electro Steel Ltd
7. Bhusan Steel Ltd

GEOGRAPHICAL MARKETS

1. Rourkela Steel Plant

2. Bhilai Steel Plant
3. Bokaro Steel Plant
4. Durgapur Steel Plant
5. Indian Iron and Steel Company (IISCO)
6. Tata Steel
The various market segment and its details for RINL products:
RINL operates in both domestic and international markets. In the international markets not only
help in realizing opportunity for export of products but also in maintaining its quality standards at
international level. RINL is in the long products segment of steel markets and produces and
supplies products like TMT bars, wire rods, rounds, structural, squares and semis.

Main Products of VSP:

STEEL PRODUCTS BY PRODUCTS

Angles Nut Coke Granulated Slag
Billets Coke Dust Lime Fines
Channels Coal Tar Ammonium Sulphate
Beams Heavy Crude Benzol Liquid Oxygen
MMSM Billets HP Naphthalene Liquid Nitrogen
Spring Steel Rounds Benzene Liquid Argon
Rounds Toluene D N Oil
Re-bars Light Solvent Oil Medium Hard Pitch
Wire Rods Non-Aromatics Liquid Pitch

Major Sources of Raw Materials:

Raw Materials Source

Iron Ore Lump & Fines Kirundul & Bacheli Mines of C’garh from NMDC
 BF Lime Stone Jaggayyapeta, AP – Captive
SMS Lime Stone Imported UAE
BF Dolomite Madharam , AP – Captive
SMS Dolomite Madharam , AP – captive
Manganese Ore Chipurupalli, AP – Captive
Boiler Coal Talcher,Bepaher, Orissa of MCL
Partly sourced from Singareni
Imported Coking Coal Australia, New Zealand&Mozambique (ICVL)
US Coal USA
Medium Coking Coal (MCC) Kedla/Swang/Rajarappa/Kathara

Iron ore Pellets KIOCL, MANGALORE & GPIL – RAIPUR

Customers of RINL Market segment wise:

Project Customers: Major Infrastructure developers of the country like Larsen Turbo Limited,
GMR, GVK, Gammon India, BG Shirke, Simplex Construction and others are our esteemed
customers.Industrial Users: TATA Motors, Maruti Suzuki, General Motors, Caterpillar, Wheels
India, Cummins, Meritor Troy, etc.

The combined capacity of various production units is given below:

Units Existing Expansion Total

Blast Furnace(hot metal) 5.000 2.500 7.500
Steel Melt Shop(liquid steel) 3.700 3.600 7.300
Wire Rods 0.850 0.600 1.450
Structural Products 0.850 0.700 1.550
Bar Mill 0.710 0.000 0.710
Special Bar Mill 0.000 0.750 0.750
Semis for sale 0.353 1.382 1.735
Saleable Steel 2.763 3.432 6.195

Product mix-
VSP will continue to produce long products in phase-I in view of brand image and to meet the
envisaged demand for long products. The following is the product mix proposed .

Wire Rods (plain) 5.5 mm to 20 mm in coils –medium and high carbon, case
hardening, coal heading quality,electro quality,sprig steel,
Bearing steel, free cutting steel etc.
Special Bars (plain) 16mm to 40mm-in coils and straight lengths-medium and
High carbon, case hardening, coal heading quality,electro
Quality, spring steel, bearing steel, free cutting steel etc.
Structurals plain and round re-bars,structurals and semi depending
On the market demand.
Semis Billets

Highlights of Expansion to 6.3 MT Liquid steel capacity/with modernization to 7.3 MT:-

1. Govt. of India approval ref: 6 (1) 2005-VSP dated 28th october2005.

2. Commencement Date: 28th October 2005.
3. Main units in Expansion
 Raw Material Handling plant
 One sinter plant (1*400sq.m.) 3.25Mt/Year
 One Blast furnace (BF-3800 CUM) 2.50Mt/Year Hot metal
 Calcining and Refactory material plant 2*500t/day
 One steel metal shop(SMS)
 Rolling Mills
Wire Rod Mill 600,000t/year
Special bar mill(in stage-II) 750,000t/year
Light structural mill(LSM)(in stage-II) 700,000t/year
Billets for sale 718380t/year
 Augmentation of existing TPP 1*67.5MW turbo- generator with TB

 Power Plant 2*60MW (BGTG) capacity with

all necessary facilities.

 Air Separation Plant 2*600t/day Oxygen

  Captives Mines Augmentation of capacities at Madharam,
Jaggayyapeta and Garbham
Mines.
4. Project Schedule 36 Months
i. For Stage-I Structural mill – 48 months
ii. For Stage-II Special Bar mill

Highlights of Expansion to 6.3MT Liquid Steel capacity:

 Revised(put up for
capital cost Approved approval)

Approved cost 8692 crores(Base:JUN'05) 12291 crores(Base:Feb'11)

Debt component 4346 crores 3769 crores
FE component 1477 crores 2134 crores
Pay Back period 5 years 2 months 6 years 2 months
IRR 23.04% 14.02%
Project cost(Net of cenvat) 8000 crores 11228 crores

Company vision, Mission & objectives are as follows:

VISION:

To be a continuously growing world class company we shall

 Harness our growth potential and sustain profitable growth.

 Deliver high quality and cost competitive products and be the first choice of customers.
 Create an inspiring work environment to unleash the creative energy of people.
 Achieve excellence in enterprise management
 Be respected corporate citizen, ensure clean and green environment and develop vibrant
communities around us.

MISSION:

To attain 20 Mt liquid steel capacity through technological up-gradation, operational efficiency

and expansion; augmentation of assured supply of raw materials; to produce steel at international
Standards of Cost & Quality; and to meet the aspirations of stakeholders

Objectives:

1. Achieve Gross Margin to Turnover ratio > 10%.

2. Achieve rated capacity of new & revamped units by 2017-18.

3. Capture markets for high-end value added products by focusing on sector specific
applications and customer needs.
 4. Achieve leadership in Energy consumption by achieving 5.6 Gcal/tcs by 2017-18.

5. Globalization of operations through acquisition of mines and setting up of

marketing network abroad.

6. Setting up of Forged Wheet Plant for Raebareli and Operationalising Joint Venture
with Power Grid

7. Create a high performance and safe work culture by nurturing talent and developing
leaders.

8. To grow in harmony with the environment & communities around us.

Core values of RINL-VIZAG Steel:

IDEALS

 I Initiative: Have a self-propelled and proactive approach.

 D Decisiveness: Decide with speed and clarity.
 E Ethics: Be consistent with professional & moral values.
 A Accountability: Take responsibility for actions.
 L Leadership: Lead by example.
 S Speed: Demonstrate swiftness and efficiency in everything we do.

BOARD OF DIRECTORS
Board of Directors
Chairman cum Managing Director Sri P Madhusudan
Director (Personnel) Dr. K C Das
Director (Finance) Sri V V Venugopala Rao
Director (Commercial) Ray chaudhury
Director(Operations) Sri D N Rao
Director (Projects) Sri PC Mohapatra
GOVERNMENT DIRECTORS Ms. Bharathi S sihag
Smt.Urvilla khati
INDEPENDENT DIRECTORS Shri S.K. Srivastava
 Shri S.K. Mishra
Shri K.N. Padmanabhan
Shri Sunil gupta
COMPANY SECRETARY & Deepak Acharya
COMPLIANCE OFFICER
Main Administrative Building
Registered Office Visakhapatnam Steel Plant
Visakhapatnam 530031

Department chart- Finance (Budget):

DIRECTOR FINANCE (I/C)

GM (F&A)

DGM (F&A)

Sr. AGM (F&A)

AGM(F&A)

MANAGER (F&A)
 AWARDS WON BY VSP:

Purpose Year
Award

Star Performer Award 2015-16 by Engineering Exports For Exports Excellence 2017
Promotion Council, Ministry of Commerce, GoI

Corporate Vigilance Excellence Award by IPE For commendable work in 2017

preventive vigilance

Star Performer Award 2014-15 by Engineering Exports For Exports Excellence 2017
Promotion Council, Ministry of Commerce, GoI

Best Enterprise Award under Navratna category by For outstanding contribution for 2017
SCOPE – 1st prize the betterment of women
employees

Shram Vir Award and Shram Shree Award 2015 by For distinguished record of 2017
Ministry of Labour & Employment, GoI performance

Awards at INSSAN - for 'Excellence in Suggestion For excellence in performance of 2017

Scheme' the suggestion scheme and also for
excellence in organizational
performance

CA Business Leader Award to Shri P Madhusudan, For outstanding contribution to 2017

CMD RINL business

National e-Governance award For Innovative Use of ICT by 2017

Central Government PSUs

QCFI award for Best Public Sector organisation-2016 For innovation in operational 2016
efficiency and contributing
towards implementation of Quality
Circles

Best CEO award in Public Sector Category to Shri P Recognition during Convention in 2016
Madhusudan, CMD RINL Material Management NATCOM-
2016

Ispat Rajbhasha Shield for the year 2014-15 and 2015- For effective implementation of 2016
16 Official Language Hindi

Performance Award - 'Excellence' at the 5S National For implementation of 5S 2016

Conclave
Vishwakarma Rashtriya Puraskar (VRP) awards to 18 For implementation of Innovative 2016
employees by the Ministry of Labour and Employment, suggestions for higher efficiency,
GoI productivity & process
improvements

Rajbhasha Keerti Puraskar – 2nd Prize in Official For effective implementation of 2016
Language Implementation category Official Language Hindi

Rajbhasha Keerti Puraskar - 1st Prize to Sugandh in In- For publication of in-house 2016
house Magazine Publication category Magazine – Sugandh

CIO-100 Award by International Data Group For operational and strategic 2016
excellence in Information
Technology

Gold Medals to 3 QC teams and 2 Kaizen teams in For implementation of QC & 2016
ICQCC-2016 held at Bangkok Kaizen projects

PSE Excellence Award 2015 2nd prize for good Corporate 2016
Governance

IIIE Performance Excellence Award 2015 For outstanding contribution made 2016
towards excellence under
"Organization category"

National Vigilance Excellence Award 2016 by For "Practicing Preventive 2016

Vigilance Study Circle Vigilance"

Shram Awards by Ministry of Labour & Employment, 2 Shram Awards for distinguished 2016
GoI record of performance

Rajbhasha Shield 2015-16 by Town Official Language 1st prize For effective 2016
Implementation Committee (TOLIC) implementation of Official
Language

"Corporate Vigilance Excellence Award" by Institute of For promoting transparency in 2016

Public Enterprise procedures and awareness in
combating corruption

"Best Enterprise Award" under Maharatna & Navratna For outstanding contribution for 2016
category by SCOPE – 2nd prize the betterment of women
employees
Awards at INSSAN - for "Excellence in Suggestion For implementation of Suggestions 2016
Scheme"

MAN POWER:

Production plan :
Imports

• Iron & steel are freely importable as per the extant policy.
• Data on import of total finished steel (alloy/stainless + non alloy) is given below for last five
years and April-May 2017:

Indian steel industry : Imports (in million tonnes)

Category 201213 201314 201415 201516 201617* April-May

2017*

Total Finished Steel 7.93 5.45 9.32 11.71 7.23 1.06

(alloy/stainless + non alloy)
Source: Joint Plant Committee; *prov.

Exports

• Iron & steel are freely exportable.

• India emerged as a net exporter of total finished steel in 2016-17 (prov.)
• Data on export of total finished steel (alloy/stainless + non alloy) is given below for last five years
and April-May 2017:

Indian steel industry : Exports (in million tonnes)

Category 2012-13 201314 201415 201516 201617* April-
May
2017*
Total Finished Steel 5.37 5.99 5.59 4.08 8.24 1.38
(alloy/stainless + non alloy)
Source: Joint Plant Committee; *prov

JPC: updated in July 2017 3

Performance of production for past five years is given below:-

Hot
Year * Liquid steel Crude Steel Saleable Steel
metal

2011-2012 3778 3310 3128 2990

2012-2013 3814 3250 3071 2900

2013-2014 3769 3391 3201 3016

2014-2015 3780 3488 3297 3017

2015-2016 3975 3826 3460 3513 2011-12 to 2016-
17 are actual
2016-2017 4386 4176 3962 3847
production
2017-2018 5132 4972 4731 33303
(000’s tones)
2018-2019 6200 6100 5795 34200

2018-
2019(MOU) 6200 6100 5795 34200

Performance of production for past 7 years is

given 2011-2018
6000

5000

4000

3000

2000

1000

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Hot metal Liquid steel Crude Steel Saleable Steel

 Marketing Department displays their prices in www.vizagsteel.com and Prices for
representative steel products on 1st Jun'17:

Sl. Rs. per tonne

Item Grade
No. VZG LUD CNI MUM CAL
1Billet 125x125 mm IS 2830 36660 39430 37680 38300 39280
2Channel 200x75 mm IS2062 Gr.A 41780 44360 42730 43080 41490
3Rebar 8mm IS1786 Fe500D 46830 48690 46950 47600 46630
4Round 20.64 mm 55Si7 45220 45220 45220 45220 45220
5Round 40mm SAE1018 39510 42390 39760 41060 39760
6Wire rod 5.5mm HC 50 - HC 46300 49860 47280 48185 47570
85
7 Wire rod 7 mm PC115 45900 49460 46880 47785 47170
8 Wire rod 8 mm EQ 45020 48580 46000 46905 46290
9 Pig Iron LSB 30500
MARKETING IN RINL:

 RINL is marketing its products on its own. RINL is one of the competitive Players in the
domestic and international markets. It mostly export steel to Colombo, Korea, Bangladesh, &
African countries etc. RINL is now focusing on expanding and consolidating its markets in
these countries especially African Countries where basic infrastructure needs being put in place
by entering into long term tie ups with its clients.
 Company has launched Branding of its product on two trains which starts from Delhi and to
Vizag & Vizag to Delhi and they have been named as Vizag Steel Trains. Further it has also
appointed Miss P V Sindhu who is silver medallion in recent Olympics in Badminton as
Company’s Brand Ambassador.
 RINL has established an extensive dealer network to effectively service the growing demand
for Visakhapatnam Steel. In addition to this network of dealers and stockiest in high demand
areas, RINL, also has customer counseling cell fully equipped and manned by trained
personnel.
 The products are being sold through 27 branches / stockyards located all over India. Regional
Managers, Branch Managers, Dealers and Customers Meet at Headquarters and at Regional
Offices are conducted regularly to assess the market situation and to evolve suitable marketing
 strategies. New Branch has been opened at Vijayawada very adjacent to Amaravati which is
New Capital of Andhra Pradesh.
Commercial Performance (Crs.):

Year Sales Turnover Domestic Sales Exports

2010-2011 11517 11094 423
2011-2012 14462 14047 415
2012-2013 13553 12955 598
2013-2014 13487 12749 738
2014-2015 11673 10807 865
2015-2016 12171 9678 382
2016-2017 12317 11267 1050

Graph Showing Commercial performance:

Commercial Performance
16000
commercial performance

14000
12000
10000
8000
6000
4000 sales turnover
2000 Domestic turnover
0
exports

year
FINANCIAL PERFORMANCE (₹.Crs):

Year Gross Cash Net Profit

Margin Profit

2010-2011 1412 1247 658

2011-2012 1645 1454 751

2012-2013 1073 714 353

2013-2014 1159 820 367

2014-2015 809 373 62

2015-2016 -790 -1442 -1421

2016-2017 -790 -1442 -1250

Graph Showing Financial performance:

 Financial Performance
100%

50%
performance

0% Net profit
Cash Profit
-50% Gross Margin

-100%

year

RECENT TRENDS:
 National steel policy
 Union focus on union budget on steel industry
 Thrust on infrastructure and higher allocation to infrastructure sectors
 More emphasis on irrigation projects
 More focus on rural and urban housing.

Steel Guru
Indian steel consumption bound to grow – Dr Bhaskar Chatterjee of ISA
Dr Bhaskar Chatterjee Secretary General, Indian Steel Association wrote in Business Today that
there is no question in the minds of the international community that steel consumption is bound
to grow in India, for it is clear that the present generation already demands a better quality of life
and the next generation certainly will. This is because the level of consumption of steel is known
to be one of the key indices for measuring the quality of life.

After almost a decade of limping growth, the significant recovery of the global economy as well
as that of the Global Steel Industry in 2017 also points to a favourable outlook for the Indian steel
industry. While global production of crude steel at 1,691 million tonne noted a growth of 5.3% in
2017 over the previous year, the estimated steel consumption rose to 1,622 million tonne. The
latest Internal Monetary Fund projection has estimated the global economy is slated to grow at
3.9% in 2018, and India's GDP is to move up by 7.4% in 2018 as compared to 6.7% in the previous
year. The continued growth in GDP in India, in fact, indicates that major steel consuming segments
such as construction, real estate/housing, capital goods/machinery, consumer goods, automobiles
and energy sector shall benefit.

The housing and construction sector, where major chunk of steel is consumed, shall get a boost
with increase in per capita incomes and social sector schemes like Pradhan Mantri Awas Yojna-
Housing for All, Sardar Patel Urban Housing Mission, 100 Smart Cities Mission (by 2022),
Pradhan Mantri Gram Sadak Yojna, Urban Infrastructure Development Scheme for Small &
Medium Towns, National Heritage City Development and Augmentation Yojana, Bharatmala
project, 24x7 Power for All initiative (by 2019), Development of Industrial Corridors & National
Investment & Manufacturing Zones, 75,000 MW CleanEnergy initiative (by 2022) and many
others.

In a nutshell, with the increasing thrust on the "Make-in-India" vision by the Indian Government
under the leadership of Prime Minister Narendra Modi, the Indian steel industry itself will grow
and will be in a position to supply the required quantities and grades of steel much needed by the
end-users. This also given the fact that the per capita finished steel consumption remains at a
dismal 60 kgs, in contrast with the world average of around 220 kgs. The recently formed Global
Forum on Excess Steel Capacity has acknowledged India's capacity expansion of steel as a
function of growing consumption in the domestic market.

In spite of clear signals of recovery today, it is important to keep in mind challenges of the past
that plagued the industry. Over the past few years, the global steel industry has been reeling under
the pressure of overcapacities, especially on account of those existing in China. With the growth
in steel consumption slowing down in China in recent times, the Chinese steel producers have had
no option but to rely on exports. This in turn has had an impact on high growth centres of steel
consumption in "steel-non-mature" nations such as India. Additionally, depreciation of major
currencies has led to a spurt in export by several countries like Russia and Ukraine.

It was for these reasons that India saw an influx of imports beginning 2014-15 from several
countries, including China. The surge in imports impacted the sentiment of the domestic steel
market, with declining capacity utilisation rates of both the primary and secondary steel players.
Additionally, erosion of margins, coupled with sluggish demand growth, made the Indian steel
investors wary of returns on their investment. However, the Government of India came out
proactively to provide a level playing field to Indian companies through imposition
of anti-dumping and safeguard duties as well as minimum import prices, wherever injury to the
industry was noteworthy.

Given the recent imposition of tariffs by the United States as an outcome Section 232 investigation
of the Trade Expansion Act of 1962, the "steel-mature" countries like China, Japan, South Korea,
etc. will look at India with immense interest. The Indian Steel Association has continued to
highlight the long term distortions that such high level of cheap imports bring into the domestic
market. Under the new global circumstances that pervade the trade scenario, imposition of Quality
Control Order(s) is a step in the right direction by the Ministry of Steel to control imports of
seconds and defectives into India, which jeopardise the safety of the Indian end-consumer.
The Indian Steel Industry continues to grapple with uncertainties pertaining to the availability and
consistent supplies of raw materials i.e. both coal and iron ore still remain a challenge, with recent
closure of mines in Goa adding to the woes of the industry. Even though the marked shift from an
allocation process to an auction process of getting mining blocks has brought about considerable
transparency; issues pertaining to transport logistics from the mining areas need to be sorted out
to mitigate lag in evacuation of iron ore, coal and other minerals. Indian Steel Association has
identified that "handholding" from the various state governments in such matters is very essential
and has embarked upon bringing such issues to the attention of state government authorities,
beginning with Odisha. Additionally, the resolution process of debt ridden steel companies
currently underway at the NCLT shall necessitate a marked change in the structure of the industry.
In spite of the threat of imports, Indian steel enterprises invested hugely into modernisation and
expansion of their existing units as well as green-field plants to build a world class, cost
competitive, environment-friendly and socially responsible industry. This is in line with the
objectives of the National Steel Policy 2017 to increase the Per Capita Steel Consumption to 160
Kgs by 2030-31 from the current 60 kgs. This will necessitate a steel capacity of the tune of 300
MTPA from the current 128 MTPA. The Indian steel industry is fully geared for this, alongside
stressing on remaining competitive. This can be substantiated from the fact that as per the list of
'World Class Steel Makers in the World' released by World Steel Dynamics in June 2017, 36 steel
makers were classified as World Class Steel Makers out of more than 250 large steel makers in
the world.
Within the list of 36, six Steel Makers from India namely JSW Steel, SAIL, Tata Steel, JSPL,
RINL & Essar Steel qualified as World Class. The steel industry is capable of achieving much
more alongside contributing to public cause, as an increasingly enabling policy environment is
provided by the Government.
Source : Business Today

China steel nears lowest price in a month on demand worries:

Reuters reported that China’s steel prices fell to their lowest in nearly a month extending losses
into a third session on worries about weakening demand amid strong supply in the world’s top
producer of the material. Those concerns offset news that the country’s state planner will send out
eight inspection teams to check that shuttered excess capacity has not been restarted and that low-
grade steel is not being produced.
Benchmark Shanghai prices for rebar, a steel product mainly used in construction, dropped 1.1%
at CNY 3,573 (USD 560.38) a tonne. Earlier in the session, they hit their lowest since April 27 at
3,556 yuan. Investors have piled on bearish bets in recent days as analysts and traders have warned
of possible delays by mills on booking orders, stirring worries about consumption.
Daily crude steel output by major steel companies over May 1-10 reached 1.94 million tonnes,
higher than the previous peak of 1.91 million tonnes in late April, data from China’s Iron & Steel
Association showed on Monday. That was up nearly 8 percent from same period last year.
Steel inventory at steel mills also climbed in the same period, adding 1.17 million tonnes to 13.61
million tonnes, CISA data showed, suggesting lukewarm demand from downstream sectors. BMI
Research said in a note that “Steel consumption growth in China will slow over the coming quarters
as demand from the construction, infrastructure and autos sectors slows."
Waning downstream demand for steel will likely weigh on consumption of raw materials, analysts
said. Falling for a fifth straight session, iron ore futures for September delivery on the Dalian
Commodity Exchange touched 453 yuan a tonne, their lowest level in 5 weeks, before closing
down 2.6% at 456 yuan a tonne.
Spot steel prices dipped just 0.1 percent to 4,311.86 yuan a tonne on Monday, according to data
from Mysteel consultancy, as stable prices at major mills to some extent helped to lift market
sentiment.
Jiangsu Shagang Group, the No.1 privately owned steel producer by capacity, maintained its
factory prices for some rebar and wire products for May 20-31, it said in a statement on Monday.
On Monday, the U.S. Commerce Department slapped steep import duties on steel products,
mainly cold-rolled and corrosion resistant steel, from Vietnam that originated in China.
The most-traded hot-rolled coil futures, an upstream material of cold-rolled coil, went down 0.7%
to 3,762 yuan a tonne.

A manager at a Hebei-based steel trading company said that “It remains uncertain how big the
impact will be as it might be difficult for US policy to be fully implemented. But in the short term,
we may see oversupply in domestic market if exports to Vietnam experience resistance
 CHAPTER- III
THEORETICAL FRAMEWORK

1. FINANCIAL PERFORMANCE
2. BUDGETING
 1. FINANCIAL PERFORMANCE

INTRODUCTION TO FINANCIAL STATEMENTS:

Every business concern wants to know the various financial aspects for effective decision
making. The preparation of financial statement is required in order to achieve the objectives of the
firm as a whole. The term financial statement refers to an organized collection of data on the basis
of accounting principles and conventions to disclose its financial information.
DEFINITION:
According to John N.Myer “The financial statements provide a summary of the accounts
of a business enterprise, the balance sheet reflecting the assets, liabilities and capital as on a certain
date and the income statement showing the results of operations during a certain period”.
The financial statements are great significance to owners, managers and investors. The
basic financial statements are:
 The income statement (Trading, Profit and Loss Account)
 The balance sheet.
 A Statement of retained earning earring.
 A statement of changes in financial position.
The meaning and importance of the financial statements are as follows:

INCOME STATEMENT:
The term 'Income Statements' is also known as Trading, Profit and Loss Account. This is
the first stage of preparation of final accounts in accounting cycle. The purpose of preparing
Trading, Profit and Loss Accounts to ascertain the Net Profit or Net Loss of a business concern
during the accounting period.

BALANCE SHEET:
Balance Sheet may be defined as "a statement of financial position of any economic unit
disclosing as at a given moment of time its assets, at cost, depreciated cost, or other indicated
value, its liabilities and its ownership equities." In other words, it is a statement which indicates
the financial position or soundness of a business concern at a specific period of time. Balance Sheet
may also be described as a statement of source and application of funds because it represents the
source where the funds for the business were obtained and how the funds were utilized in the
business.

STATEMENT OF CHANGES IN FINANCIAL POSITION:

Income Statements and Balance sheet do not disclose the operational efficiency of the
concern. In order to measure the operational efficiency of the concern it is essential to identify the
movement of working capital or cash inflow or cash outflow of the business concern during the
particular period. To highlight the changes of financial position of a particular firm, the statement
is prepared may emphasize of the following aspects:

(a) Fund Flow Statement is prepared to know the changes in the firm's working capital.
(b) Cash Flow Statement is prepared to understand the changes in the firm's cash position.
(c) Statement of Changes in Financial Position is used for the changes in the firm's total
financial position.

NATURE OF FINANCIAL STATEMENTS:

Financial Statements are prepared on the basis of business transactions recorded in the
books of Original Entry or Subsidiary Books, Ledger, and Trial Balance. Recording the
transactions in the books of primary entry are to be supported by document proofs such as
Vouchers, Invoice Note etc. According to the American Institute of Certified Public Accountants,
"Financial Statement reflects a combination of recorded facts, accounting conventions and
personal judgments and conventions applied which affect them materially." It is therefore, nature
and accuracy of the data included in the financial statements which are influenced by the following
factors:
(1) Recorded Facts.
(2) Generally Accepted Accounting Principles.
(3) Personal Judgments.
(4) Accounting Conventions.
The following points explain the nature of financial statements:
1. Recorded Facts:
The term “Recorded Facts” refers to the data taken out from the accounting records. The
records are maintained on the basis of actual cost data. The figures of various accounts such as
cash in hand, cash at bank, bills receivables, sundry debtors, fixed assets are taken as per the figure
recorded in the accounting books. As the recorded facts are not based on replacement costs the
financial statements do not show current financial condition of the concern.
2. Accounting Conversations:
Certain accounting convertors are followed while preparing financial statements. The
conversation of valuating inventory at cost or market price, whichever is lower is followed. The
valuing of assets at cost less depreciation principle for balance sheet purposes statements
comparable, simple and realistic.
3. Postulates:
The accountants make certain assumption while making accounting records. One of these
assumptions is that the enterprise is treated as a going concern. The other alternative to this
postulate is that the concern is to be liquated the concern. So the assets are shows on a going
concern basis. Another important assumption is to presume that the value of money will remain in
the same in different periods.
4. Personal Judgments:
Even though certain standard accounting conversations are followed in preparing financial
statement but still personal judgment of the accountant plays an important part.

OBJECTIVES OF FINANCIAL STATEMENTS:

The following are the important objectives of financial statements:
(1) To provide adequate information about the source of finance and obligations of the finance
firm.
(2) To provide reliable information about the financial performance and financial soundness of the
concern.
(3) To provide sufficient information about results of operations of business over a period of time.
(4) To provide useful information about the financial conditions of the business and movement of
resources in and out of business.
(5) To provide necessary information to enable the users to evaluate the earning performance of
resources or managerial performance in forecasting the earning potentials of business.

CHARACTERISTICS OF FINANCIAL STATEMENTS:

The financial statements are prepared with a view to depict financial position of a concern.
The financial statements should be prepared in such a way that they are able to give a clear and
orderly picture of the concern. The ideal financial statement has the following characteristics:
1) Depict true financial position:
The information contained in the financial statements should be such that a true and
correct idea is taken about the financial position of the concern.
2) Attractive:
The financial statements should be prepared in such a way that important
information is underlined so that it attracts the eye of the reader.
3) Comparability:
The results of financial analysis should be comparable. The financial statements
should be presented in such a way that they can be compared to the previous year’s
statements. Previous year’s figures in the balance sheet.
4) Brief:
If possible, the financial statements must be prepared in brief. The reader will be
able to form as idea about the figures.

Importance of financial statements:

Financial statements contain a lot of useful and valuable information regarding profitability
financial position and future prospective of business concern. The utility of financial statement
to different parties may be summarized as follows:
 Management:
The financial statements are useful for assessing the efficiency of different
cost centers. The management is able to decide the course of action to be adopted
in future.
  Creditors:
The trade creditors are to be paid in a short period. The CRS will be
interested in current solvency of the concerns. The calculations of current ratio and
liquid ratio will enable the creditors to assess the current financial position of the
concerns in relation to their debts.
 Investors:
The investors include both short-term and long term investors. They are
interested in the security of the principal amounts of loan and regular payments by
the concern. The investors will not only analyze the parent financial position but
will also study the future prospects and expansion plans of the concern.
 Government:
The financial statements are used assess tax liability of business enterprises.
The government studies economic situation of the country from these statements.
These statements enable the government to find out whether business is following
various rules and regulations or not.
 Trade Associations:
These associations provide service and protection to the members. They
may analyze the financial statements for the purpose of providing facilities to these
members. They may develop standard ratios and design uniform system of
accounts.
 Stock Exchange:
The stock exchange deals in purchase and sale of securities of different
companies. The financial statements enable broker to judge the financial position
of different concerns. The fixation of prices for securities etc. is also based on the
statements.

LIMITATIONS OF FINANCIAL STATEMENTS:

1. Financial Statements are normally prepared on the basis of accounting principles,
conventions and past experiences. Therefore, they do not communicate much about
the profitability, solvency, stability, liquidity etc. of the undertakers to the users of
the statements.
 2. Financial Statements emphasize to disclose only monetary facts, i.e., quantitative
information and ignore qualitative information.
3. Financial Statements disclose only the historical information. It does not consider
changes in money value, fluctuations of price level etc. Thus, correct forecasting
for future is not possible.
4. Influences of personal judgments leads to opportunities for manipulation while
preparing of financial statements.
5. Information disclosed by financial statements based on accounting concepts and
conventions. It is unrealistic due to difference in terms and conditions and changes
in economic situations

BUDGET
Introduction:

Planning is the basic managerial function. It helps in determining the course of action to be followed
for achieving organizational goals. It is a decision in advance, what to do, how to do and who will do a
particular task? Plans are framed to achieve better results. Control is the process of checking whether
the plans are being adhered to or not, keeping a record of progress, comparing it with the plans, and
then taking corrective measures for future if there is any deviation. Every business enterprise needs the
use to control techniques for surveying in the highly competitive and changing economic world. There
are various control devices in use. Budgets are the most important tool of profit planning and control.
They also act as an instrument of co-ordination.

Budget is defined as “a plan quantified in monetary terms prepared and approved prior to
a defined period of time showing planned income to be generated and / or expenditure to be
incurred during that period and the capital to be employed to attain a given objective” (CIMA
technology). An analysis of the definition will bring out the following features of a budget:

1. It is a plan expressed in monetary terms. But it also contains physical units.

2. It is prepared prior to the period during which it will operate.
3. It is approved by the management for implementation.
4. It is related to a definite future period.
5. It indicates planned income and expenditure including capital expenditure during the
period.
 6. It is prepared for the purpose of implementing the policy formulated by the management,
and the objective to be achieved during the period

A budget may be expressed in relation to time, viz. short-term and long-term budget in
relation to functions, viz. production budget, sales budget, cash budget, capital budget etc., and in
relation to behaviour. Viz. fixed budget and flexible budget.

Definition:

Budget is defined as a kind of future accounting in which problems of future are met on the paper
before transactions actually occur. According to CIMA, Official Terminology, “A Budget is a
financial and/or quantitative statement prepared prior to a defined period of time, of the policy to
be pursed during that period for the purpose of attaining a give objective”.

According to Crown and Howard, “A budget is a predetermined statement of management policy

during a given period, which provided a standard for comparison with the results actually
achieved.”

Need of budget:

 To forecast and to plan for the future to avoid losses and maximize profits i.e. to help in
planning.
 To bring about coordination’s between different function of an enterprise i.e., to help in
co-ordination.
 To control actual actions by ensuring that actual are in tune with target i.e., to help in
controlling.
 Budgets are needed in the organisation to formulate future polices.
 Budgets also provide a tool of control to the management.

Objectives of budget :
 Optimal utilization of resources.
 Management by exception.
 Performance evaluation.
  Coordination.
 Assignment of responsibility.
 Compelled planning.
 Communication.

Features of budget :

 It is a financial and quantitative statement of a plan of action.

 It is always expressed in terms of money and or quantity.
 It is prepared prior to the implementation of the operational plan.
 It is based on pre-determined management policies
 It is prepared to achieve specific financial objectives
 It indicates the costs of revenues, capital to be employed, incremental effects on former
budgets, etc.

Types of budget:

The Budgets are usually classified according to their nature. The following are the types of
budgets, which are commonly used.

a) Classification According to Time:

1. Long-term budgets

2. Short-term budgets

3. Current budget

b) Classification on the basis of function:

1. Operation Budgets

2. Financial Budgets

3. Master Budgets
 c) Classification on the basis of Flexibility:

1. Fixed budget

2. Flexible budget

d) Classification on the basis of nature of business:

1. Capital Expenditure

2. Revenue Expenditure

A) Classification According to Time: -

1) Long Term Budgets — The Budgets are prepared to depict long term planning of the
business. The period of long term budgets various between five to ten years. The long term
planning is done by the top-level management it is not generally known to lower levels of
management's. Long-term time budgets are prepared for some sectors of the concern such as
capital expenditure research and development. Long term finances etc these budgets are useful
for those industries where gestation period is long i.e. machinery, electricity, and organization.

2) Short Term Budgets -These budgets are generally for one or five Years and are in the form
of monetary terms. The consumer’s goods industries like sugar, cotton, textiles, etc. use short-
term budget.

3) Current Budget — The Period of current budget is generally of one to twelve months. The
budgets relate to the current activities of the business. According to CIMA. London. "Current
budget is a budget which is established for use over a short period of time and is related to current
conditions.

B) Classification on the basis of function: -

1. Operating Budgets: These budgets relate to the different activities of operations of a firm.
The number of such budget up on the size and nature of business. The commonly used
operating budgets are;
A. Sales Budget- a sales budget is the most important and forms the basis on which all the
other budgets are built up. This budget is forecast of the quantities and values of sales to be
achieved in a budget period. Every effort should be made to ensure starting budget (sales being
the limiting factor ) on which all other budgets are built up. The sales manager should be made
directly responsible for preparation and execution of this budget.

B. Production Budget – It is the forecast of the total output of the entire organisation ,broken
down into estimates of output of each type of product with a scheduling of operations (by
weeks and months) to be performed and a forecast of the closing finished stock. This budget
may be expressed in quantitative (weight,units etc,) or financial (rupees) units or both. This
budget is prepared after taking into consideration the estimated opening stock and sales and
the desired closing stock of each product.

C. Production cost budget – This budget summarises the materials budget , labour budget
and factory overhead budget and may be expressed and analysed by departments and or
production. A production cost budget shows the estimated cost of carrying out the production
plans and programmes set out in the production budget .

D. Purchase Budget – This budget gives details of the purchases which must be made to meet
the needs of the business. It includes all items of purchase, such as, raw materials, indirect
materials and other equipments. However the purchase budget for raw materials is the most
important and the following factors are required to be considered in preparing this budget.

1. Opening and closing stock

2. Unfulfilled orders at the beginning of the budget period

3. Storage space, economic, buying quantity and financial resources.

E. Raw Material Budget

F. Labour Budget – The purpose of labour budget is to assist in the provision of the correct
number and types of employees for the project output. Onces the preliminary classification of
labour into its principal grades has been carried out, the labour requirements for each product
can be estimated.
(2) Financial Budget: - Financial Budget are concerned with cash receipts and disbursements,
working capital. Expenditure, financial position and result of business operations. The
commonly used financial budgets are:

a. Cash Budget

b. Working Capital Budget

c. Capital Expenditure Budget

d. Income Statement Budget

e. Statement of Retained Earnings Budget

f. Budget Balance sheet or position statement Budget

(3) Master Budget: - Various functional budgets are integrated into master budget. This
budget is prepared by the ultimate integration of separate function budgets. According to
I.C.W.A. London. "The master budget is the summary budget in corpora-ting its functional
budgets". Master budget is prepared by the budget officers remained with the top-level
management. This budget is used to co-ordinate the activities of various departments and also
to help as a control device.

Steps involved in master budget:

 Sales budget, as the initial step.

 Production budget
 Cost of production budget
 Cash budget and
 Projected income statement and the balance sheet.
 And finally the results of all these steps are presented in the form of master budget .

(c) Classification on the basis of Flexibility: -

(1) Fixed budget: - The fixed budgets are prepared for a given level of activity, the budget is
prepared before the beginning of the financial year, if the financial year starts in January then
 the budget will be prepared a month or two earlier, i.e. November or December. The charge in
expenditure arising out of the anticipated

changes will not be adjusted in the budget. There is a difference of about twelve months in the
budgeted and a actual figures. According to I.C.W.A. London, "Fixed budget is a which is
designed to remain unchanged irrespective of the level of activity actually attained".

(2) Flexible Budget: - A flexible budget consists of a series of budgets for

different level of activity. It therefore, various with the level of activity attained. A flexible
budget is prepared after taking into consideration unforeseen changes in the conditions of the
Business. A flexible budget is defined as a budget, which by recognizing the difference
between fixed, semi fixed and variable cost is designed to change in relation to the level of
activity.

(d)Classification of on the basis of nature of business: -

(1) Capital expenditure budget: - Budget which are related to the creation of
manufacturing facilities are knows as capital expenditure budgets

(2) Revenue expenditure budget: - Budget which are prepared for routine activities or
operations are called revenue budget

Performance budgeting:

It may be described as budgetary system where the input costs are related to the performance,

i.e., the end results. According to the carter, “Performance budgets use statements of missions,
goals and objectives to explain why the money is being spent. It is a way to allocate resources to
achieve specific objectives based on program goals and measured results “.

Features of Performance Budgeting:

 Classification into functions, activities or programmes.

 Specifying objectives of each programme.
  Establishing appropriate methods for the measurement of work.
 Setting work target for each programme.

Steps involved in implementation of Performance budgeting:

 Classification of activities
 Specification of Objectives
 Analysis of actives
 Establishing control norms
 Clear lines of authority and responsibility
 Evaluation

Zero based budgeting:

It is an alternative method of budgeting system which uses zero as the base. This technique requires
starting their budgeting from zero every year. It also requires justifying all the costs mentioned in
the budget, This type of budget seeks to review and justify its costs and functions every year.

Features of Zero based budgeting:

 Decision tools are used to identify activities in the budgeting

 These decision tools are assigned by priority ranks
 A direct relationship is established between decision tools and corporate objectives
 It is flexible technique and may be adjusted in accordance to the availability of resources

Steps involved in Zero based budgeting:

 Determining the objectives

 Extent of coverage
 Developing decision units
 Developing decision packages
 Preparation of budget
Advantages of budget:

 It formulates basic policies necessary to achieve organizational objectives.

 It forces all levels of management to participate in the process of setting and
o Fulfillment of targets.
 It creates the feeling of co-operation and understanding between different
o Departments of the business
 It ensures optimum utilization of resources with a view to maximize returns.
 It highlights upon the in efficiency in the business and thus helps the management to take
remedial action.

Limitations of budgeting :

 It can be difficult to motivate an apathetic workforce.

 The pressure in the budgeting system may result in inaccurate record keeping.
 Budgets are perceived by the workforce as pressure devices imposed by top management.
This can have an adverse effect on labour relations.

Elements of a successful budgeting plan :

 Top management support.

 Clear statement of objectives and goals.
 Realistic budgets
 Bases on correct data
 Budget manual.
 Budget committee.
 Comprehensive budgeting.
 Budget education.
 Solicit cooperation.
 Participative approach.
BUDGETARY CONTROL
 Introduction
 Nature of budgetary control
 Objectives of budgetary control
 Characteristics of good budgeting
 Requisites for successful budgetary control system
 Organization chart for budgetary control
 Key factor
 Essentials of budgetary control
 Steps in budgetary control system
 Advantages of budgetary control
 Limitation of budgetary control
 Difference between budget and budgetary control

BUDGETARY CONTROL

Introduction: -

Budget is formal plan of future course of action. When the budget is use to evaluate the actual
performance it is known as budgetary control.
Budgetary Control is the process of determining various budgeted figures for an organization for
the future period and then comparing the budgeted figures with actual figures for calculating
deviations and taking remedial measures to minimize deviations. It is a continuous process that
helps in planning and controlling costs.

Definition:

According to Howard and Brown, “Budgetary control is a system of controlling costs which
includes preparation of budgets, coordination of departments, comparison of actual performance
with budgeted performance and acting upon the results to achieve maximum profitability.”
“Budgetary control is the planning in advance of various functions of business so that the
business as whole can be controlled.

Nature of budgetary control

Budgetary control is the process of determining various budgeted figures for the
enterprise for the future period and then comparing the budgeted figures with the
actual performance for calculating variances, if any. First of all budgets are prepared and then
actual results are recorded. The comparison of budgeted and actual figures will enable the
management to find out description and take remedial measures at a proper time. The budgetary
control is a continuous process, which helps in planning and coordination. It provides a method of
control too.

According to J.A. Scott, "it is the system of management control and accounting in which all
operations are forecasted and so far as possible planned ahead, and the actual results compared
with forecasted and planned ones."

Objectives of budgetary of control:

 To ensure planning for future by setting up various budgets the requirements and expected
performance of the enterprise and anticipated Performance of the enterprise and anticipated
 To co-ordinate the activities of different departments
 To operate various cost centers and departments with efficiency and economy
 Elimination of wastes and increase in profitability
 To anticipate capital expenditures for future
 To Centralize the control system
 Correction of deviations from the established standards
 Fixation of responsibility of various individuals in the organization
 To help in systematic planning of protection and formulation of policies.
  To control direct and indirect expenses by limiting the chances of wastages.
 To control income and expenditure of production functions.
 To compare the pre-determined targets with the amount of actual expenses

Characteristics of good budgeting:

 A good Budgeting system should involve persons at different levels while preparing the budgets.
The subordinates should not feel any imposition of them.
 There should be a proper fixation of authority and responsibility. The delegation of authority should
be done in a proper way.
 The targets of the budgets should be realistic; if the targets are difficult to be achieved then they
will not ensure the persons concerned.
 A good system of accounting is also essential to move the budgetary successful.
 The budgeting system should have a whole-hearted support of the top management

Requisites for successful budgetary control system:

1. Clarifying Objectives:

The budgets are used to realize objectives of the business. The objectives must be clearly
spelt out so that budgets are properly prepared. In the absence of clear goals, the budgets will
also be unrealistic.

1. Proper Delegation of Authority and Responsibility:

2. Budget preparation and control is done at every level of management. Even though
budgets are finalized at top level but involvement of persons from lower, levels of
management are essential for their success. This necessities proper delegation of authority
and responsibility.

3. Proper Communication System:

 An effective system of communication is required for a successful budgetary control. The
flow of information regarding budgets should be quick so that these are implemented. The
upward communication will help in knowing the difficulties in implementation of budgets.

4. Budget Education:
The employees should be properly educated about the benefits at budgetary system. They
should be educated about their role in the success of this system. The employees may not
take budgetary control only as a control device but it should be used as a tool to improve
their efficiency.

5.Participation of all Employees:

Budgeting is done by every segment of the business. It will also require the active
participation and involvement of all employees. In practice the budgets are to be executed at
lower levels of Management. Those for whom the budgets are framed should be actively
associated with their preparation and execution. The employees, on the basis of their past
experience, may give more practical and useful suggestions.

6. Flexibility:-
Flexibility in budgets is required to make them suitable under changed circumstances –
Budgets are prepared for the future, which is always uncertain. Even though budgets are
prepared by considering the future possibilities but still some occurrences late on may
necessitate more appropriate and realistic.

Organization chart for budgetary control:

Managing Director

Chief Executive

Budget Committee

Budget Officers

Sales Productio Purchase Personne Developme Accounta

Manager n Manager l nt nt
Key factors:

The factor that sets a limit to the total activity is known as key factor which
influence budgets. It is also called limiting factor or governing factor principal budget factor.
For example, there may be a high demand for a particular product but due to non-availability
of the supply of raw materials, production may have to be destructed and this factor is known
as key factor.

The following are examples of key factor.

1. MATERIALS : I) Availability of supply

ii) Restriction imposed by licenses, quotas etc.,

2. LABOUR : I) General storage

ii) Shortage of skilled labor

3. SALES : I) Consumer demand

ii) Inadequate advertising and warehousing
facilities
Dearth of experience or successful
salesman;
iii)

4. PLANT : I) Limited capacity due to lack of capital;

ii) Limited capacity due to lack of space
iii) In sufficient capacity due to shortage of
supply;
iv) Bottleneck incretion key processes;

5. MANAGEMENT : I) Shortage of efficient electiveness;

ii) Insufficient capital

The key factor does not create any permanent problem in the business operations since it is
possible to solve any problem with proper management action in figure.
Essentials of Budgetary Control
(1)Organization Structure

(2) Budget Centers – It may be a department or a group of people in a department, who are
responsible for preparation of a budget.
(3) Budget Manual – It is a written document containing rules, regulation, policies and guidelines
for preparing budgets.
(4) Budget Officer (Coordinator) – The person responsible for scrutinizing, evaluating and
finalizing the budgets prepared by different functional heads.
(5) Budget period – Time period for which budget is prepared.
(6) Budget Committee – Group of people responsible for preparation and execution of budgets
(7) Determining Key Factor – Principle factor that influences all budgets
Steps in Budgetary Control System:

1. Preaparing the budget

2. Communicating the budget

3. Measuring the results

4. Comparing results and analysing deviations

5. Reporting the results and taking corrective decisions

6. Revising the budget

Advantages of budgetary control:

The budgetary control system helps in fixing the goals for the organisation as a whole and
concerted efforts are made for its achievements. It enables economies in the enterprise. Some of
the advantages of budgetary control are:
1. Maximization of profit: The budgetary control aims at the maximization of profits of the
enterprise. To achieve this aim, a proper planning and coordination of different functions
is undertaken. There is a proper control over various capital and revenue expenditures.
The resources are put to the best possible use.
2. Coordination: The working of different departments and sectors are properly coordinated
the budgets of different have a bearing on one another. The coordination of various
executives and subordinates is necessary for achieving budget targets.
3. Specific Aims: The plans, policies and goals are decided by the top management All
efforts are put together to reach the common goals of the organization. Every department
is given a target to be achieved. The efforts are directed towards achieving some specific
aims if there is no definite aim then the efforts will be wasted in pursuing different aims.
4. Toll for measuring performance: By providing targets to various department budgetary
control provides a tool for measuring managerial performance. The budgeted targets are
compared to actual results and deviations are determined. The performance of each
department is reported to the top management. This system enables the introduction of
management by exception.
5. Economy: The planning of Expenditure will be systematic and there will be economy is
spending. The finance will be put to optimum use. The benefits derived for the concern
will ultimately extend to industry and then to national economy. The national resources
will be used economically and wastage will be eliminated.
 6. Determining weaknesses: The deviations in budgeted and actual performances will
enable the determination of weak spots. Efforts are concentrated on those aspects where
performance is less than the stipulated.
7. Corrective Action: The Management will be able to take corrective measures whenever
there is a discrepancy in performance. The deviations will be regularly reported so that
necessary actions is taken at the earliest. In the absence of budgetary control system
deviations can be determined only at the end of the financial period.
8. Consciousness: It create budget consciousness among the employees. By fixing targets
for the employees, they are made conscious of their responsibility. Everybody knows what
he is expected to do and he continues with his work uninterrupted.
9. Reduces Cost: In the present day competitive world budgetary control has a significant
role to play. Every business man tries to reduce the cost of production for increasing sales.
He tries to have those combinations of products where profitability is more.
10. Introductions of Incentives Schemes: Budgetary control system also enables the
introduction of incentive schemes of remuneration. The comparison of budgeted and
actual performance will enable the use of such schemes.

Limitations of budgetary control:

Despite many good points of budgetary control there are some limitations of the system some of
the limitations are discussed as follows

1. Uncertain Future:
The budgets are prepared for the future period. Despite best estimates made for the future,
the predictions may not always come true. The future is always uncertain and the situation
which is presumed to prevail in future may change. The change in future conditions upsets
the budgets which have to be prepared on the basis of certain assumptions. The future
uncertainties reduce the utility of budgetary control system.
2. Budgetary revisions required:
Budgets are prepared on the assumptions that certain conditions will prevail because of
future uncertainties assumed conditions may not prevail necessitating the revision of
budgetary targets. The frequent revision of targets will reduce the value of budgets and
revisions involve huge expenditures too.

3. Discourages Efficient Persons:

 Under budgetary control system the targets are given to every person in the organization.
The common tendency of people is to achieve the targets only. There may be some efficient
persons who can exceed the targets but they will also feel contented by reaching the targets.
So, budget may serve as constraints on managerial initiatives.
4. Problem of Coordination:
The success of budgetary control depends upon the coordination among different
departments. The performance of one department affects the results of other departments.
To overcome the problem of coordination a budgetary officer is needed. Every concern
cannot afford at appoint a budgetary officer. The lack of coordination among different
departments results departments results in poor performance.
5. Conflict among different departments:
Budgetary control may lead to conflicts among functional departments. Every
departmental head worries for this department goals without thinking of business goal.
Every department tries to get maximum allocations of funds and this raises conflict among
different departments.
6. Depends upon support of Top Management:
Budgetary control system depends upon the support of top management. The management should be
enthusiastic for the success of this system and should given full support for it. If at any time there is a lack
of support from top management then this system will collapse.

Difference between budget and budgetary control:

 The budget is an act of planning whereas budgetary control is an act of controlling.

 The budget concerns itself with the future. Budgetary control, is however, concerned with
the present activities although it is prepared on the basis of data collected from the past
budget. But the activities that the budgetary control involves are not limited to that budget
only. It is also related to the questions as to how far the budget can effectively Utilized in
future.
 The budget fixes the target and budgetary control helps to arrive at that target.
 The actual performance is measured not by the budget by budgetary control.
 Budgets are business estimates for future period, budgeting is the process of preparing
these estimates while budgetary control is a system of achieving performance on the basis
of budgets.
 Budget and budgeting are the parts of planning whereas as budgetary control is linked with
co-ordination & control.

CHAPTER- 4
Data Collection For Preparation Of Financials For
The Following Plans:
1. Five-Year Plan
2. IEBR/Annual Plan
3. MOU
4. Annual Performance Plan
5. Sustainability Plan
4.1 financial performance:

Comparitive income statement for the years 2015-16 & 2016-17

31 st march 31 st march Increase or
P articulars 2016 decrease
%change
2017
Revenue from
10,266.04
operations 12,511.07 2,245.03 21.87
Other income 262.85 350.41
-87.56 -24.99
Total income
(I+II) 12,773.92 10,616.45 2,157.47 20.32
Expe ns e s
Cost of
6,939.65 4,136.86
materials 2,802.79 67.75
Changes in
inventory of -398.04 1,155.86 -1,553.90 -134.44
Excise duty
1,277.56 1,143.40 134.16 11.73
Employee
benefits 2,207.30 1,925.47 281.83 14.64

Finance costs 767.99 677.54 90.45 13.35

Depreciation
663.93
and 372.74 291.19 78.12
Other
3,009.98
expenses 2,903.06 106.92 3.68
Total expenses 12,314.91
14,468.37 2,153.46 17.49
P rofit/ (Loss) -1,813.34
-1,712.29 101.05 -5.57
Current tax
5.78 7.63 -1.85 -24.25
Deferred tax
-427.99 -97.01 -330.98 341.18
Total Tax
expense/ -420.8 -89.38 -331.42 370.80
P rofit/ (Loss) -1,291.49 -1,723.96
432.47 -25.09
Comparative Balance sheet of RINL-VSP for the years 2017,2016 & 2015
% Inc % Inc
F.Y 2016-17 F.Y2015-16 over F.Y 2016-17 F.Y2015-16 over
Particulars Particulars previous
(?Crs) (?Crs) previous (?Crs) (?Crs)
year year
NON-CURRENT LIABILITIES CURRENT ASSETS
Inventories
Financial Liabilites Semi Finished/
Finished goods
2343.94 1873.47 25
Borrowings 5841.71 3805.48 54 Raw materials 1734.96 1438.09 21
Other Financial Stores & Spares 687.95 499.04 38
Liabilties Total Inventories
42.90 13.56 216 4766.85 3810.60 25
Financial Assets
Trade Receivables
Provisions 964.06 853.59 13 Gross receivables 899.78 977.81 (8)
Deffered Tax Less: Provision for Trade
Liability (Net) 0.00 202.37 (100) receivables 20.98 21.03
Net Receivables 878.80 956.78 (8)
Other non current Cash & Bank balances 53.9 45.56 18
liabilities 7.71 7.15 8 Other Financial assets 276.26 (2)
282.21
NON-CURRENT ASSETS Other tax assets (net) 0.01 7.00 (100)
Financial Assets Other Cu rrent Assets 636.48 670.28 (5)
Total Current Assets 6612.30 5772.43 15
Investments 740.88 697.59 6 CURRENT LIABILITIES
Financial Liabilities
Loans 128.54 (17) Borrowings 8048.84 6585.64 22
Trade payables 1037.85 733.56 41
Other financial
assets
286.70 157.09 83 Other financial liabilities

3532.35 3128.98 13
Deffered Tax Assets Derivatives 54.17
138.38 155
(Net)
242.41 0.00 Provisions 137.59 102.51 34
Other current liabilities 544.86 488.67 11
Other Non-Current Total Current
Assets Liabilities &
158.02 116.14 36 Provisions 13439.87 11093.53 21
Financial overview:
 The Company registered sales turnover of ` 12,706 crores (including sale of trial run
production of ` 388.99 crores) with a growth of 4% in value over the previous year 2015-
16.
 The Net Sales Realisation during the year 2016-17 registered a growth of 5%. The
growth in realisations was not adequate to cover the increase in raw material prices and the
company incurred loss.
 Increase in raw material prices The Imported Coking Coal prices increased by more than
200% from about USD 90/t during Jun'16 to more than USD 300/t during Nov'16 one
of the reason that company incurred loss..
 However, with increased volumes and cost reduction initiatives, the loss in Gross Margin
could be reduced to ` 264 Cr from ` 659 Cr in the previous year.
 RINL Incurred a net loss of ` 1263.16 Crores compared to a net loss of ` 1603.72 Cr in
the previous year.

Expenditure for the financial year 2016-17 & 2015-16:

 The cost of material consumed including that for trial run production is ` 7,789.77 Cr
against ` 6,019.40 Cr. This works out to 29% increase.
 Higher depreciation is on account of capitalization of new units like SMS-II, WRM-II ,
SP-3 etc during the last year(2015-2016)
 Total inventories increased with 25% amounting to 956.25 crores in the year this clearly
depicts that company is expecting higher turnover.
 Higher consumption of stores and spares 38% increase we can clearly understand that the
production is increasing rapidly, manufacturing resources are exploited to the maximum
extent possible.
 Repairs and maintenance 54.07 crores were spent in order to maintain break down and
disturbances
Production performance:
 Improvement in Labour Productivity: With low incremental manpower for Expansion,
345 to 451 tonnes per man per day in 2017-18 also helped in lowering RINL’s input
costs.
 Maximization of captive power generation from Waste Energy: Captive power generation
capacity based on waste energy recovery has been enhanced
 All efforts are being made to stabilize and ramp up production from the units commissioned
and improve the operational efficiencies.
 The production from the new units was ramped up significantly with growth of 34%, 31%
and 43% achieved in BF-3, SMS-2 and WRM-2 respectively.

Interest and loans:

 Increase in interest expenditure is mainly on account of increase in working capital
requirements, capitalization
 Currently RINL major objective is to expand to 7.3mt on this account nearly 78% increase
in the loans is one of the reason for massive credit requirements.
 Due to Higher working capital requirements the more the credit is needed
 Market conditions are often volatile at the time of availing the credit interest rates might
be high, more the interest rates lesser the profitability.
Comparative income statements of VSP Ltd.
For the year 2014-15 & 2015-16

Particulars 2014-15 2015-16 Increase / Percentage

Decrease change
Income:
Gross sales 10400.15 10059.34 -341 -3.28
Internal consumption 25.86 35.60 +10 +38.46
Export benefits 6.16 37.96 +32 +533.33
Interest earned 67.20 88.76 +22 +32.84
Other revenue 189.09 258.92 +70 +37.04
Total Revenue 10688.46 10480.58 -117 -1.09
Expenditure:
Raw materials consumed 5184.87 4201.53 -983.34 -18.97
Depletion/Accretion to stock (820.19) 1149.72 +1969.91 +240.18
Employee’s remuneration and
benefits 1918.16 1923.20 +5 +0.26
Stores and spares consumed 548.34 595.31 +47 +8.58
Power and fuel 765.85 875.41 +109 +14.23
Repairs and maintenance 318.71 299.75 -19 -5.96
Freight outward 473.78 583.21 +109 +23.00
Other exp. and provisions 435.08 559.47 +125 +28.74
Interest / Wealth tax 434.78 650.70 +216 +49.66
Excise duty 1117.81 1143.40 +25.59 +2.29
Depreciation 270.63 346.81 +76 +28.04
Gross Expenditure 10683.82 12328.51 +1680.16 +15.78

57.33 59.94 +2.61 +4.55

 Less: Inter account
adjustments-raw material 10591.16 12268.71 +1677.55 +15.84
mining cost 98.02 (1788.00) +1886.02 +1924.12
Net Expenditure (5.33) (370.77) -365.44 +6856.28
Profit for the year
Prior Period Adjustments Net 103.35 -1417.23 -1520.58 -1471.29
Credit
Profit Before Tax 0.00 0.00 0.00 0.00
Provision for taxation- 40.97 3.41 -37.56 -91.68
Current tax 62.38 -1420.64 -1483.02 -2377.40
Deferred tax
Profit After Tax

INTERPRETATION:
The comparative income statement for the year 2014-15 and 2015-16 reveals that there is a
decrease in the total revenue of 1.09%, while the net expenditure showed an increase of 15.84%.
The profit after tax showed a very high decrease of 2377 .40%, which reveals that the company is
running in losses.
COMPARATIVE BALANCE SHEET OF VSP LTD FOR THE YEARS

2014-15 and 2015-16

PARTICULARS 2014-15 2015-16 INCREASE CHANGE

Rs in Crs Rs in Crs / IN %
DECREASE

ASSETS-
Current Assets (CA)
Cash & Bank balances 63.94 45.56 -18.38 -28.75
Sundry Debtors 1035.43 958.11 -77.32 -7.47
Inventories (Stock) 5179.51 3907.5 -1272.01 -24.56
Loans & Advances 3259.83 3440.21 +181.21 +5.56
Other Current Assets 98.75 147.79 +49.04 +49.66
Total Current Assets: 9637.46 8499.17 -1138.29 -11.81

Investments 362.53 642.59 +280.06 +77.25

Long term loans & advances 926.53 649.79 -276.74 -29.87
Other noncurrent assets 81.32 100.43 +19.11 +23.50

Fixed Assets (F.A)

Tangible assets-
Land 57.41 61.45 +4.04 +7.04
Railway Lines & Siblings 236.42 236.42 0 0
Roads, Bridges & Culverts 194.61 236.20 +41.59 +21.37
Buildings 1312.67 1412.61 +99.94 +7.61
Plant and Machinery 11143.38 17307.79 +6164.41 +55.32
Furniture & Fitting 25.71 26.53 +0.82 +3.19
Locomotives 0.00 0.00 0 0
Vehicles 17.03 21.88 +4.85 +28.48
Electrical Installations 747.01 792.85 +45.84 +6.14
Water Supply & Sewerage
Systems 607.31 751.45 +144.14 +23.73
Miscellaneous Assets 197.29 235.28 +37.99 +19.26
 Mining Lease Rights 5.83 5.83 0 0
Intangible assets 51.33 37.49 -13.84 -26.96
Total fixed assets:

TOTAL ASSETS ( CA+FA) 27860.13 28738.49 +878.36 +3.15

LIABILITIES-
Current Liabilities(C.L)
Short term borrowings 7444.89 6585.64 -859.25 -11.54
Trade payables 600.6 733.56 +132.96 +22.14
Short term provisions 34.61 0.00 -34.61 -100
Other current liabilities 6979.28 6328.91 -650.37 -9.32
Total Current Liabilities: 15059.38 13648.11 -1411.27 -9.37

Long Term Liabilities &

Provisions (LTP):
Long term borrowings 66.52 3805.48 +3738.96 +5620.81
Long term provisions 557.14 853.59 +296.45 +53.21
Deferred tax liabilities (net) 444.89 448.30 +3.41 +0.77
Other long term liabilities 138.27 109.81 -28.46 -20.58
Total Long Term Liabilities 806.82 5217.18 +4410.36 +546.63
& provisions:

Share capital & reserves

(CAP & RES):
Share capital 5189.85 4889.85 -300.00 -5.78
Reserves & surplus 6404.08 4983.35 -1420.73 -22.18
Total share capital & 11593.93 9873.2 -1720.73 -14.84
reserves:

TOTAL LIABILITIES 27860.13 28738.49 +878.36 +3.15

(CL+LTP+CAP&RES)

INTERPRETATION:

 The fixed assets for the period of 2014-15 is & 2015-16 is , which has been decreased by
  The total assets and total liabilities for the period of 2014-15 is 27860.13 & 2015-16 is
28738.49 which has been increased by 878.36
 The current liabilities for the period 2014-15 is 15059.38 & 2015-16 is 13648.11
 which has been decreased by 1411.27

Financial performance:
Financial Overview:

 Disruption of plant operations for several days in October 2014 and November 2014 due to super
cyclone Hudhud coupled with unfavourable market conditions.

 In 2nd half of the year severely impacted the finance However, company has been able to achieve
a Profit After Tax (PAT) of 62.38 Crs. with Turnover of 11675 Crs (including sale of trial run
production of 1274.51 Crs).

Business performance:

 The Company achieved 9% growth in Crude Steel production. However, the operations of the
company were severely impacted by Cyclone ‘Hudhud’ on 12th October, 2014.

 the company also had to bear the brunt of cheap imports from China which is facing demand
recession and Russia and Ukraine, where major currency devaluation remains export supportive.

 There was a considerable pressure on margins due to unfavorable market conditions characterized
by significant increase in cheaper imports pulling the prices down significantly.

 Company achieved a Turnover of 11,675 Crs and earned a Profit after Tax (PAT) of 62 Crs for
the FY 2014-15.

 During the 2nd Half of the year, earned a Profit After Tax of 230 Cr, which was 23% higher than
the PAT achieved in the 1st Half of 2013-14.

 The financials in the 2nd Half of the year were also impacted with cheaper imports from China.
The imports from China increased by 232% during the year.

 The increase in overall imports was 202% in Non-Flat category. As a result, the Net Sales
Realisations of the company dropped drastically during the period Jul’14 to Mar’15

Sales turnover

 The sales volume during the year was lower by 4.5 lakh tonnes. Though there was some marginal
growth in Sales Realisation of saleable steel during the 1st Half of the year, it drastically came
down in the 2nd Half.
  Due to Cyclone HudHud, the comissioning of Structural and Special bar mill also got delayed. As
a result, sale of Blooms affected the realisations and the bottom line.

Financing and interset:

 Several Treasury Management Initiatives were taken to reduce the interest outgo

 which include Short Term Loans through Commercial Papers at an average rate of 8.72%,

 Foreign Currency Borrowings (Buyer's Credit) at 8.83%

 substitution of high cost loans with low cost loans, resulting in savings during the year.

Borrowings:

 Major portion of Capex and additional working capital requirements were met through borrowings

Net Expenditure:

 The benefit of fall in imported coal prices was partially offset by rupee depretiation against US
Dollar by about 4.31%, besides imposition of Basic Customs Duty of 2.5% and increase of Clean
Energy Cess from 100/t to 200/t.

 Increase in Railway Freight besides affecting Raw Material costs also caused severe pressure on
the selling price as it could not be passed on to customers due to sluggish market conditions.

 Higher Employee benefits are mainly on account of Dearness Allowance (DA), promotions and
increments and NonExecutive wage revision.

 Increase in interest expenditure is mainly on account of increase in working capital due to sluggish
markets, redemption of Preference Share Capital to the tune of 550 Crs during the year and Capex
of 1623 Crs towards on-going expansion projects.

Factors affecting gross margin:

Raw materials:

 The amount of raw materials used from home country was around 3857.46 in 2015 the
consumption of raw materials increased with 282.7 crores compared to 2014

 The value of raw materials imported from other countrys were less compared to the 2014
  the excess availability of raw materials of Limestone, Dolomite and Manganese from Jaggayyapeta,
Madharam and Garbham mines of the Company was 344,357t, 502,795t and 14,538t respectively
one of the reason for lesser imports.

Net sales realization:

 The imports from China increased by 232% during the year.

 The increase in overall imports was 202% in Non-Flat category.
 As a result, the NetSales Realisations of the company dropped drastically during the period
Jul’14 to Mar’15
 there was some marginal growth in Sales Realisation of saleable steel during the 1st Half of
the year, it drastically came down in the 2nd Half Due to Cyclone HudHud.
Administrative expenses:

The amount of administration expenses increased on the account of increase in security expenses.

Stores & spares:

 Around 548 crores were spent on the account of stores and spares which is around 5.13 of
gross income

 There is 20%(94.92 crores) increase in consumption of stores and spares compared to

previous year as there is revamp in production after hud hud cyclone.

 There is 11.41% increase in the impots of stores and spares in the year 2015

Power & fuel:

 There is around 92.87 crores increase in the consumption of power and fuel in the year 2015.

 Around 766 crores were spend on power and fuel which is around 7.17% of gross income

 The amount expended on coal was around 438.89 crores in the year 2015

Inventories:

 The amount of inventories held were 5209.38 in 2015were high compared to previous year.

 There is 34 % increase in the amount of inventories held during 2014-15 which is not a healthy
indicator
  Inventories are valued at lower of cost and net realizable value.

Stock accretion:

 The stock accretion was around 820 crores

 Which is -7.67% of gross income

Other expenses:

 Other expenses include 14.04 Crores amount of expenditure on Corporate Social Responisbility
activities.

 There is around 4% increase in other expenses compared to 2013-14

 The amount of expenditure incurred on repairs and maintainenance is 82.22 crores more
compared to the previous year

 The amount of water charges 17.37 crores shows that the amount of water used increased over
5.48 crores compared to the previous year
Production performance:
 4% growth in Liquid Steel and Crude Steel with marginal growth in Hot Metal and Saleable Steel
production during the year.

 In technical parameters, improvement was registered in important parameters such as Labour

Productivity and Specific Water consumption by 2% & 5% respectively.

 New peak of 98.61% was achieved in Yield of Wire Rods against the previous best of 98.59%

Marketing performance:
 The Company faced several challenges with sluggish market conditions,

 cheaper imports,

 shortage in availability of rakes,

 power shortage and sand mining issues in the states of Andhra Pradesh & Telangana.

 Marketing operations also got impacted due to the Cyclone in Oct’14

Capex – Cash Flow:

An amount of 1623 Cr was invested under capex during the year, against a plan of 1535 Cr. The cumulative
investment under 6.3 Mtpa Expansion Project up to the year was 11,285 Cr against the revised estimated
cost of 12,291 Cr.
Initiatives taken on revenue maximization and cost reduction:

 Savings were maximised by chartering 15 cape size vessels against 10 last year and also chartering
Panamax vessels in place of Handimax vessels for Soft Coking Coal.

 Through Commercial Papers and Short Term Foreign Currency Loans, interest outgo was reduced.

Comparative income statements of RINL-VSP Ltd.

For the year 2013-14 & 2014-15

Particulars 2013-14 2014-15 Increase/ Percentage

decrease change
Income:
Gross sales 13364.17 10400.15 -964 -7.21
Export benefits 11.22 25.86 -5 -45.45
Internal consumption 56.09 6.16 -30 -53.57
Interest earned 180.05 67.20 -113 -62.77
Other revenue 126.94 189.09 +62 -48.82
Total Revenue 13738.47 10688.46 -3050 -22.20
Expenditure:
Raw materials consumed 7025.82 5184.87 -174 -2.43
Depletion/Accretion to stock
Semi-Finished/ Finished 18.65 (820.19) -838.84 -4498
goods
Employee’s remuneration & 1751.10 1918.16 +167 +9.54
benefits
Stores & spares consumed 556.98 548.34 -9 -1.615
Power and fuel 671.34 765.85 +95 +14.16
Repairs and maintenance 236.49 318.71 +82 +34.6
Freight outward 501.28 473.78 -27 -5.39
 Other exp. and provisions 475.36 435.08 -40 -8.42
Interest/ Wealth tax 338.12 434.78 +97 +28.7
Excise duty 1403.15 1117.81 -285.34 -20.34
Depreciation 271.48 270.63 0 0
Gross Expenditure 13249.77 10683.82 -2600.31 -19.63
Less: Inter account 58.57 57.33 -1.24 -2.117
adjustments-raw material
mining cost
Net Expenditure 13190.23 10591.16 -2599.07 -19.70
Profit for the year 547.27 98.02 -450.93 -82.32
Prior Period Adjustments Net (1.88) (5.33) -3.45 -183.51
Credit
Profit Before Tax 526.47 103.35 -454.38 -83.24
Provision for taxation
Current tax (7.10) 0.00 +7.10 +100
Deferred tax 189.80 40.97 -21.57 -11.36
Profit After Tax 366.45 62.38 -439.91 -121.12

INTERPRETATION:
The comparative income statement for the year 2013-14 and 2014-15 reveals that there is a
decrease in the total revenue of 22.20%, while the net expenditure also showed a decrease of
19.70%. The profit after tax showed a steep decrease of 121.12%, which reveals that the
company’s performance is not upto the mark.
 COMPARATIVE BALANCE SHEET OF VSP LTD FOR THE YEARS

2013-14 and 2014-15

PARTICULARS 2013-14 2014-15 INCREASE CHANGE
In Rs In Rs / IN %
DECREASE
ASSETS-
Current Assets (CA):
Cash & Bank balances 175.89 63.94 -111.95 -63.65
Sundry Debtors 803.65 1035.43 +231.78 +28.84
Inventories (Stock) 3863.04 5179.51 +1316.47 +34.08
Loans & Advances 3461.35 3259.83 -201.52 -5.82
Other Current Assets 96.73 98.75 +2.02 +2.09
Total Current Assets 8400.66 9637.46 +1236.8 +14.72

Investments 362.53 362.53 0.00 0

Long term loans & advances 616.05 926.53 +310.48 +50.40
Other noncurrent assets 60.23 81.32 +21.09 +35.02

Fixed Assets (F.A):

Tangible assets-
Land free hold 57.42 57.41 -0.01 -0.017
Railway Lines & Siblings 82.82 236.42 +153.6 +185.46
Roads, Bridges & Culverts 193.15 194.61 +1.46 +0.76
Buildings 1240.54 1312.67 +72.13 +5.81
Plant and Machinery 10465.11 11143.38 +678.27 +6.48
Furniture & Fitting 25.47 25.71 +0.24 +0.94
Locomotives 140.42 0 -140.42 -100.00
Vehicles 16.9 17.03 +0.13 +0.77
Electrical Installations 707.24 747.01 +39.77 +5.62
Water Supply & Sewerage 510.93 607.31 +96.38 +18.86
Systems
 Miscellaneous Assets
Mining Lease Rights 161.98 197.29 +35.36 +21.83
Intangible assets 5.83 5.83 0.00 0
Total fixed assets 2.75 51.33 +48.58 +1766.54
18420.66 13663.99 -4756.67 -25.82
TOTAL ASSETS ( CA+FA)
27860.13 24671.83 -3188.3 -11.44

LIABILITIES-
Current Liabilities(C.L)
Short term borrowings
Trade payables 3739.93 7444.89 +3704.96 +99.06
Short term provisions 829.93 600.6 -229.33 -27.63
Other current liabilities 157.65 34.61 -123.04 -78.05
Total Current Liabilities: 5484.05 6979.28 +1495.23 +27.26
10211.56 15059.38 +4847.82 +47.47
Long Term Liabilities &
Provisions (LTP):
Long term borrowings
Long term provisions 1203.53 66.52 -1137.01 -94.47
Deferred tax liabilities (net) 531.43 557.14 +25.71 +4.84
Other long term liabilities 419.01 444.89 +25.88 +6.18
Total Long Term Liabilities 165.56 138.27 -27.29 -16.48
& provisions
2319.53 1206.82 -1112.71 -47.97
Share capital & reserves
(CAP & RES):
Share capital
Reserves & surplus 5739.85 5189.85 -550.00 -9.58
Total share capital & 6400.89 6404.08 +3.19 +0.05
reserves 12140.74 11593.93 -546.81 -4.50

TOTAL LIABILITIES
(CL+LTP+CAP&RES) 24671.83 27860.13 +3188.3 +11.44

INTERPRETATION:
  The fixed assets for the period of 2013-14 is 18420.66 & 2014-15 is 14465.7, which has
been decreased by 4756.67
 The total assets and total liabilities for the period of 2013-14 is 24671.83& 2014-15 is
27860.13 which has been increased by 3188.3
 The current liabilities for the period 2013-14 is 10211.56 & 2013-14 is 15059.38 which
has been increased by 4847.82

Financial performance:

 Company has been able to achieve a Profit After Tax (PAT) of Rs.366.45 Crs, with
Turnover of Rs.13,489.46 Crs.
 The State of Andhra Pradesh and State of Telangana where RINL has highest market
share, got severely affected by acute power crisis forcing several industries to throttle /or
cut down production.
 Input costs especially basic raw materials like Iron ore and Ferro alloys along with
foreign exchange fluctuations also affected adversely the bottom-line growth.
 The initiatives taken by RINL collective could partially off set the adverse impact of the
above factors, mainly, through cost reduction measures like optimisation of Coal blend,
maximisation of captive generation of power and improvement in other operational areas
along with prudent fund management.

Company performance:
 In the year 2013-14, company has been able to achieve a Profit After Tax (PAT) of Rs.
366 Crs, with Turnover of Rs.13,489 Crs.

 The State of Andhra Pradesh, where RINL has the highest market share, got severely
affected by the acute power crisis forcing several industries to throttle production.

 The production got severely affected in October and the plant was forced to be operated
at 40 to 50% capacity level for several days, as the State Grid was disconnected from the
Plant captive power plant network for 3 days as part of the agitation on separate state,
Cyclone Phailin.
 Further, BF-1 has been shut down since 22nd Oct as part of Category-1 Capital Repairs.
 However, with timely initiatives taken by the Management, the production could be
stepped up and positive growth of 4% could be achieved in Crude Steel production by the
end of the year.
Business Performance:
 RINL excelled on all fronts in the year 2013-14, in the year 2013-14 securing “Excellent” rating
as per MOU with Government of India.

 A Turnover of 13,489 Crs., was achieved during the year despite a sluggish market. Company
earned Profit After Tax (PAT) of 366 Crs for the FY 2013-14 against 353 Crs of previous year.

 Lower growth in consumption of steel lead to lower sales realisation which in turn offset the
advantage of lower raw material prices during the year.

Performance Highlights:
 Sales of high end Value Added Steel amounted to 9% growth at 4.25 Lakh Tons

 Exports of Saleable Steel amounted to 95,400 t against 18,200 t in previous year

Expenditure:
 Higher depreciation is on account of full year depreciation for BF-3 capitalised in 2012-
13 and capitalisation of Boiler-6 and TG-5 during the year.
 Higher Employee benefits are mainly on account of higher Dearness Allowance (DA),
 promotions and increments and additional impact of finalization of wage revision for
Non-Executive employees during the year.
other revenues:
Lower interest income is due to depletion of Term Deposit during the year on account of the
following:
• Capex for an amount of Rs.1,512 crs
• Redemption of Preference Share capital amounting to Rs.606.97 crores as per the Redemption
Schedule.
• Dividend payment of Rs.102 Crs (Rs.44 Crs of Final Dividend for FY 2012-13 and Rs.58 Crs
Interim Dividend for FY 2013-14).

Factors affecting gross margin:

Raw materials:
 Input costs especially basic raw materials like Iron ore and Ferro alloys along with foreign
exchange fluctuations also affected adversely the bottom-line growth.
 raw materials for steel industry such as coking coal, non-coking coal and scrap are
subjected to zero or very low levels of custom duty.
 Raw Materials consumed 7026 Crs (51.14%) of gross expenditure
  Increasing raw material prices & shift of value chain towards raw materials.
 107.73 crores increase in the consumption of raw materials in the year 2014
Wages:
The amount of wages amounted to 213.73 increased compared to previous year.
The amount of employee benefits for the period of 2014 was around 119.28 these benefits were
increased to 18.51 crores compared to 2013
Net sales realization:
Lower growth in consumption of steel lead to lower sales realisation which in turn offset the
advantage of lower raw material prices during the year.
Administrative expenses:
There is increase in administrative expenses due to increase in the security expenses.
There is 0.9 crores increase in the administrative expenses in the year 2014
Power and fuel:
 40.39 crores increase in the consumption of power and fuel
 The amount of coal used is around 381.42 crores that is around 39.15 crores more compared
to previous year
 Power and Fuel is 671 Crs which is (4.88%) of gross income
Stores and spores:
 Stores & Spares consumed were 557 Crs during this period which is (4.05%) of gross
income.
 Stores & Spares 486.68 for the period of 2014 which is 5% increase compared to
previous year
 The consumption of stores and spares were around 556.98 for the period 2014
 Value of indigenous stores and spares cosumed were around 506.67 crores that is 23.57
crores increase over previous year.
 The value of imported stores and spares around 50.31 crores.
 The scale of operations in Central Stores Deptt. (CSD) is huge with 22,194 nos. receipts and
1,23,850 issues in 2013-14.
Inventory of Saleable Steel

 The year end inventory of saleable steel at 84 thousand tonnes works out to an inventory level of
10 days against the norm of 21 days.
  The Stock to sales ratio of 0.05, is the lowest amongst Main Producers.

 The amount of total inventories increased by 1%

 The inventories are 3863.04 crores in 2014
 Inventories are valued at lower of cost and net realizable value

R&D Expenditure:
 An amount of 50.27 Cr was spent in the year - a growth of 61% over CPLY.
 Thrust on R&D is given with a clear road map through activities aimed at process,
product and technology development with the number of Engineers / Scientists to
increase up to 100 and R&D outlay to increase up to 100 Cr by 2016-17 per annum
gradually.
Stock accretion:
 The amount of Stock Accretion is 19 Crs which is (0.14%) of gross income
 Stock accretion was around 19 crores during 2013-14
Capex – Cash Flow
 Against the Capex Plan of RINL 1500 Cr an amount of 1512 Cr was spent in the
financial year 2013-14.
 The cumulative expenditure towards 6.3 Mtpa Expansion Project was 10793 Cr upto
Mar’14 and cum. Exp. under 12th plan period is 2799 Cr.

Production performance:
Best Production & Technical Parameters
 Production of Crude Steel, Finished Steel and Saleable Steel registered a growth of 4%, 3% and
4% over CPLY respectively for the year 2013-14.

 Production exceeded 100% capacity for the 13th consecutive year, achieving capacity utilization
of 112%, 117% & 112% in Crude Steel, Finished Steel and Saleable Steel production from
existing units.

 The production of value added steel products stood at 23.57 lakhs during the period registered a
growth of 6% over CPLY which is about 78% of saleable steel.

 The overall captive power generation increased by 4% over the previous year, with generation of
26.8 MW through waste heat recovery.
Marketing performance:
• During 2013-14, growth was registered in sales of saleable steel, by-products and exports
• The sales turnover has been lower primarily due to decline in realizations in sluggish market
condition.

Cost Control Measures:

 Improvement in Techno Economic Parameters like Better Yields of Liquid Steel, LD
Gas, Gross Coke, Ammonium Sulphate, Lower Power & Heat Consumption in Coke
Ovens, Blast Furnace, CRMP, MMSM and TPP, Reduction of Off-grade Heats and
Reduction in Railway Demurrages resulted in additional savings of Rs.79 Crs in 2013-14.
 Recycling of Metallurgical Wastes, Tar / Benzol Sludge, LD Slag, Used refractories,
CRMP Returns, Copper scrap, CRMP Bag Filter Dust, lime fines, lime Briquetting,
Reclaimed Spares, Reclaimed Oil, Maintenance Scrap resulted in savings of Rs.162 Cr.
 Substitution of materials by cheaper alternatives like Nut Coke in place of BF Coke in
Blast Furnace resulted in savings of Rs.47 Cr.
 Comparative income statements of VSP Ltd.
For the year 2012-13 & 2013-14

Particulars 2012-13 2013-14 Increase/d Percentage

ecrease change
Income
Gross sales 13463.10 13364.17 -99 -0.74
Export benefits 21.79 11.22 -11 -50
Internal consumption 80.39 56.09 -24 -30
Interest earned 233.33 180.05 -53 -22.75
Other revenue 222.09 126.94 -95 -42.80
Total 14020.70 13738.47 -368 -2.62
Expenditure:
Raw materials consumed 8098.66 7025.82 -1072.84 -13.25
Depletion/Accretion to stock (303.74) 18.65 +322.39 -106.14
Semi-Finished/ Finished goods
Employee’s remuneration & 1469.07 1751.10 +282 +19.20
benefits
Stores & spares consumed 529.88 556.98 +27 +5.09
Power and fuel 630.95 671.34 +40 +6.34
Repairs and maintenance 204.43 236.49 +33 +16.18
Freight outward 415.09 501.28 +86 +20.72
Excise duty 1454.59 475.36 -51.44 -3.54
Other exp. and provisions 516.40 338.12 -41 -7.95
Interest/ Wealth tax 359.25 1403.15 -21 -5.85
Depreciation 186.88 271.48 +84 -44.92
Gross Expenditure 13561.46 13249.77 -311.89 -2.30
Less: Inter account adjustments- 52.17 58.57 +6.4 +12.27
raw material mining cost
Net Expenditure 13508.34 13190.23 -318.29 -2.36
Profit for the year 511.41 547.27 -49.71 -9.35
 Prior Period Adjustments Net (15.06) (1.88) +13.18 +87.52
Credit
Profit Before Tax 526.47 526.47 -36.53 -7.07
Provision for taxation
Current tax 5.41 (7.10) -12.51 -231.24
Deferred tax 189.80 189.80 -21.57 -11.36
Profit After Tax 352.83 366.45 -2.45 -0.76

INTERPRETATION:

The comparative income statement for the year 2012-13 and 2013-14 reveals that there is a
decrease in the total revenue of 2.62%, while the net expenditure also showed a decreasing pattern
with 2.36%. The profit after tax showed a very slight decrease of 0.76%, which reveals that the
company’s performance needs to get better.

Comparative balance sheet of vsp ltd for the years 2012-13 & 2013-14
 2012-13 2013-14 Increase/ Increase/
Particulars Rs. In Crs. Rs. In Crs. Decrease Decrease
Rs. In Crs. Percentage
ASSETS
Current Assets: (C.A)
Cash & Bank Balance 1625.02 175.89 +1449.13 +18.00
Sundry Debtors 1009.65 803.65 + 206.00 -18.13
Inventories (Stock) 3828.68 3863.04 -34.36 -76.91
Loans & Advances 3417.75 3461.35 -43.60 -68.79
Other Current Assets 96.73 96.73 00.00 00.00
Total Current Assets: 9977.83 8400.66 1577.17 -145.83

Miscellaneous Assets 157.45 161.98 -4.53 -2.88

Deferred revenue expenditure 51.54 60.91 +9.37 +18.18
Investments 897.44 614.80 -282.64 -31.49

Fixed Assets:(F.A)
Land free hold 57.45 55.77 +0.03 +0.05
Railway Lines & Siblings 60.29 82.82 -22.53 -27.2
Roads, Bridges & Culverts 161.24 193.15 -31.91 -19.79
Buildings 1224.38 1240.54 -16.16 -1.32
Plant and Machinery 9671.44 10465.11 -793.67 -8.21
Furniture & Fitting 23.76 25.47 -1.71 -7.2
Locomotives 138.84 140.42 -1.58 -1.14
Vehicles 13.16 16.90 -3.74 -28.42
Electrical Installations 642.11 707.24 -65.13 -10.14
Water Supply & Sewerage 424.66 510.93 -86.27 -20.32
Systems
Miscellaneous Assets 157.45 161.98 -4.53 -2.88
Mining Lease Rights 5.83 5.83 0 0
Total Fixed Assets 13568.26 15433.48 +1865.22 +13.75

TOTAL ASSETS 24652.52 24671.83 +19.31 +0.078

(C.A+F.A)
INTERPRETATION:

 The fixed assets for the period of 2013-14 is 15433.48 & 2012-13 is 13568.26 which has
been increased by 1865.22.
 The total assets for the period of 2013-14 is 24671.83& 2012-13 is 24652.52 which has
been increased by +19.31
 The liabilities for the period 2013-14 is 24671.83 & 2012-13 is 24652.52 which has been
increased by 19.31

Financial performance:
 Company has earned Profit after Tax (PAT) of 353 Cr for the FY 2012-13 as against the
previous year PAT 751 Cr.
 Lower consum ption of long products and sluggish market conditions affected sales volume
during last 8 to 10 months of the year resulting decrease in turnover by 6% as compared to
the previous year. Increase in power charges and price of Iron ore, one of the basic raw
materials, have further impacted the bottom line.
 Expenditure on capex programs and redemption of Preference Share capital of 1380.50
Cr during the year have put strain on cash reserves leading to drop in interest income and
increase in interest costs. However, treasury management initiatives have helped to contain
the interest cost during the year.

 The Board of Directors of the Company has recommended a dividend of 10 % on PAT to

Equity shareholders and a dividend of 7 % on preference share capital for the year.
 The dividend payment for the year to Equity shareholders (as on AGM date) is 35.28 Cr
and Cr to preference shareholders (as on AGM date) representing a total dividend payout
of 35.86 0/0 of PAT.
Company's performance :

 In the year 2012-13, your company has been able to achieve a Profit after tax (PAT) of 353
Cr, with Tu rnover of 13553 Cr.
 Andhra Pradesh where RINL has highest market share, got severally affected by acute
power crisis forcing several industries to throttle or cut down production. Competition in
the Bars & Rods market increased due to higher production in this category from other
major competitors without corresponding increase in consumption.
Other Revenues:

 The average term deposits during the period have declined as they were used to meet the
payment obligations for the on-going Expansion which resulted in decrease of Interest
earned on Term deposits by 7% over previous year.

 The investment made in Eastern Investments India Limited (EIL) during the previous year
has yielded a lower dividend of 0.13 Cr for the F.Y 2012-13 as the mines of OMDC
remained in operative due to continued delay in clearance of the Mining lease

Expenditure:

During the year, the Company has repaid an amount 1380.50 Cr. on account of redemption of
Preference Share Capital. With the depleting term deposits for meeting payment obligations of
Expansion Units, the Finance Cost has increased due to increased Borrowings.

Borrowings:

During the year, RINL has been sanctioned a Corporate loan facility of 2650 Cr by SBI for
making capital payments. Company has opted for long term loan for capital payments and short
term loan for working capital requirements.

Production performance:
The production has surpassed the rated capacity for the 12th consecutive year. The newly
commissioned units are getting synchronized with existing units.

Marketing performance:

 RINL's Sales Turnover of 13,553 Cr against 12,650 Cr. of MOU Target (Existing Units),
a fulfilment of 107%.
 Pig Iron sales stood at 4.91 Lakh Tonnes in 2012-13 compared to 4.25 Lakh Tonnes in
2011-12, registering a growth of 15%.
 Iron and Steel Exports grew by 55% in Volume (2.62 Lakh Tonnes) and 44% in Value (V
598 Cr.) in 2012-13 over 2011-12.
 By exporting 2.44 lakh tonnes of Pig Iron, RINL became the largest exporter of Pig Iron
from India with a share of 59%. India's export of Pig Iron in 2012-13 has been 4.14 lakh
tonnes.
  Sales of Branded Products (TM T Bars) stood at14.03 lakh tonnes, against 13.27 lakh
tonnes in 2011-12 representing a growth of 6%.

Sales performance as per MOU:

 VSP achieved a sales turnover of? 13553 Cr in 2012-13 against Target of 12650 Cr from
existing units representing fulfilment of 107%
 During 2012-13, total Iron & Steel Sales volume stood at 32.93 lakh tonnes against target
of 30.85 lakh tonnes from Existing Units representing with a fulfilment of 107%
 Saleable Steel sales volume of 28.02 lakh tonnes was achieved against target of 28.50 lakh
tonnes from Existing Units, representing fulfillment of 98%.

 VSP achieved By Product sales value of 530 Cr against a target of Z 530 Cr representing
fulfilment of 100%.
 Pig Iron Sales Volume of 491 lakh tonnes (Including Expansion) has been registered
against target of 235 lakh ton nes representing fulfilment of 209%.

 Export value of Pig Iron of 543 Cr has been achieved against target of 314 Cr representing
fulfilment of 173%.
 During 2012-13, sale of Iron & Steel products stood at 32.93 lakh ton nes against 35.39
lakh tonnes during 2011-12, bringing down the inventory of saleable steel to 10 days level.
 Sales of Value Added Steel constitute 79% of the total saleable steel sold for the year 2012-
13

Cost Control Measures:

 A Saving of about 268 Cr was achieved during the year by improvement in Techno
Economic & Quality parameters, recovery of waste materials and recycling.
 Emphasis on Standardization, improvement in processes, technological up-gradation and
innovative maintenance has resulted in improvement of techno-economic parameters,
conservation of Water, Power & Energy.
CASH FLOW STATEMENT:
Cash is a vital element of any business entity, as it plays a crucial role through out the entire life
time of a business enterprise.

"Cash flow statement" may be defined as a statement, which depicts the changes in financial
position of a business organization due to "inflows" and "outflows" of cash .Analysis of such
"inflows" and "out flows" is necessitated for short range business activities.

ADVANTAGES:
 Facilitates measurement
 Useful in bringing to the fore front the business enterprise's status
 helpful in assessing the changes in cash position
 initiative preventive measures
 Identification of Discretionary cash flows.

DISADVANTAGES::
 cash transactions non are over looked
 not a suitable for an income statement
 limited use
 historical in nature
 ignoring the" Accrual Concept"

ACTIVITIES UNDER CASH FLOW STATEMENT:

 OPERATING ACTIVITIES
(Direct method and indirect method)
 INVESTING ACTIVITIES
 FINANCING ACTIVITIES
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2017 Rs in Crs

31st March 31st March 31st March

2017 for the 2016 for the 2015 for the
PARTICULARS year ended year ended year ended

A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit / (Loss) Before taxation (1682.58) (1417.23) 103.35
Add / (Less) adjustments for:
Depreciation 637.91 (23.76) 262.47
Interest and finance charges 766.98 651.38 435.99
Provisions 136.41 200.00 36.24
Unrealised foreign exchange (Gain) / Loss (6.07) 4.28 (13.26)
Profit / Loss on sale of fixed assets (0.52) (0.16) (0.46)
Interest income (0.28) (0.29) (0.27)
Dividend income (0.15) 0.00 (0.01)

Operating profit before working capital changes (148.3) (585.76) 824.05

Adjustments for
(increase) / decrease in inventories (935.94) 1272.01 (1316.47)
(increase) / decrease in trade receivables 77.9 77.32 (231.78)
(increase) / decrease in loans and advances (914.84) 72.09 (31.06)
(increase) / decrease in other non-current assets (15.990 (19.11) (21.09)
(increase) / decrease in other current assets (23.28) (35.51) 14.39
Increase / (decrease) in liabilities 687.45 206.42 651.24
Cash generated from operations (480) 987.46 (110.72)
Income tax paid 44.57 85.25 (71.35)
Net cash from / (used in) operating activities (435.43) 1072.71 (182.07)

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (2400.13) (1634.42) (2061.71)
Proceeds from / (purchase of) investments (43.04) (95.90) (236.26)
Dividend received 0.15 0.03 0.01
Proceeds from sale of fixed assets 0.65 0.40 0.78
Interest received 0.28 0.29 0.27
Net cash from / (used in) investing activities (2442.09) (1729.63) (2296.91)

C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from / (repayment of) long-term loans 2351.23 2599.64 2.31
Proceeds from / (repayment of) short-term loans 1463.2 (859.25) 3704.96
Proceeds from Prime Ministers Award Funds 0.56 0.60 0.54
Proceeds from / (repayment of) share capital 0 (300.00) (550.00)
Interest and finance charges (929.13) (802.45) (719.82)
Dividend paid 0 0.00 (60.00)
Dividend tax paid 0 0.00 (10.96)
Net cash from / (used in) financing activities 2885.86 638.54 2367.03

NET INCREASE / (DECREASE) IN CASH AND CASH (18.38) (111.95)

EQUIVALENTS [A+B+C] 8.34
Opening balance of cash and cash equivalents 45.56 63.94 175.89
Closing balance of cash and cash equivalents 53.9 45.56 63.94
 Current assets
31.03.17 31.03.16 31.03.15 31.03.14 31.03.13 31.03.12

Inventories 4766.85 3810.60 5179.51 3863.04 3828.60 3403.11

Trade Recievazbles 878.80 956.78 1035.43 803.65 1009.65 427.15

Cash&Banks 53,9 45.56 63.94 175.89 1625.02 2068.34

other current assets 636.48 670.28 98.75 96.73 96.73 226.97

TOTAL 6612.30 5772.43 9637.46 8400.66 9977.75 8492.11

Current liabilities
31.03.17 31.03.16 31.03.15 31.03.14 31.03.13 31.03.12

Short term Barrowings 8048.84 6585.64 7444.89 3739.93 3658.44 2575.14

Trade Payables 1037.85 733.56 600.60 829.93 737.94 390.19

Other Current Liabilities 544.86 488.67 6979.28 5484.05 5615.19 3645.84

Short term Provisions 137.59 102.51 34.61 157.65 173.10 610.44

TOTAL 13439.87 11093.53 15059.4 10211.6 10185 7221.61

CURRENT RATIO:
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Current 8492.11 9977.75 8400.66 9637.46 5772.43 6612.30

ASSETS

Current 7221.61 10184.67 10211.56 15059.38 11093.53 13439.87

Liabilities

Current Ratio 1.17 0.97 0.82 0.63 0.52 0.49

Interpretation:
In the year 2010-11 to 2015-16, it clearly shows the negative working capital. A declining working
capital over a longer time period could also be a red flag that warrants further analysis. It means
that the business currently is unable to meet its short-term liabilities with its current assets. In
2015-16 all short term debts are converted into long term debts , therefore there is an increase in
working capital in this year 2015-16. Current Ratio which is quite good in 2010-11 and is
maintaining till 2012-13 but sharply gone down in 2015-16 to 0.52 there by it shows that Company
is fund the working capital needs through loans and not generating any surplus which is very
alarming one and company should liquidate finished steel stocks and also keep the minimum raw
material inventory to improve the current ratio.

SHARE HOLDER'S EQUITY

31.03.17 31.03.16 31.03.15 31.03.14 31.03.13 31.03.12
Share Capital 4889.85 4889.85 5189.85 5739.85 6346.82 7727.32
Reserves and Surplus 3679.81 4983.35 6404.08 6400.89 6130.5 5931.97
TOTAL 8569.66 9873.2 11593.93 12140.74 12477.32 13659.29

Share Capital & resrves and surplus

31.03.17 31.03.16 31.03.15 31.03.14 31.03.13 31.03.12

Following some Ratios which apper in P/L , balance sheet and Working capital :

WORKING CAPITAL:
Cash required for conducting the business i.e purchase of raw material and conversion there off
into finished goods. On a daily basis is termed as working capital (WCC).

The essentials of working capital are :

 Inventory
 Debtors
 Creditors
 Working capital also referred as revolving capital, circulating capital, short term
capital.

Working capital with graphical representation:

31.03.17 31.03.16 31.03.15 31.03.14 31.03.13
PARTICULARS

A CURRENT ASSETS
Inventories 4766.85 3810.60 5179.51 3863.04 3828.60
Trade Receivables 878.80 956.78 1035.43 803.65 1009.65
Cash & Bank balances 53.9 45.56 63.94 175.89 1625.02
Other Current assets 636.48 670.28 98.75 96.73 96.73
Sub-total A 6612.30 5772.43 8499.17 8400.66 9977.75
B CURRENT LIABILITIES
Short term borrowings 8048.84 6585.64 7444.89 3739.93 3658.44
trade payables 1037.85 733.56 600.60 829.93 737.94
Other current liabilities 544.86 488.67 6979.28 5484.05 5615.19
Short term provisions 137.59 102.51 34.61 157.65 173.10
Sub-Total B 13439.87 11093.53 13648.11 10211.55 10184.67
C WORKING CAPITAL (A-B) -6827.57 -5321.1 -5148.94 -1810.89 -3624.67
D Increase / Decrease of
Working Capital over Previous -1506.47 -172.16 -333.04 1453.78 4895.17
Year
 working capital
0
31.03.13 31.03.14 31.03.15 31.03.16 31.03.17
-1000

-2000

-3000

-4000

-5000

-6000

-7000

-8000

Increase/decrease in working capital

6000

5000

4000

3000

2000

1000

0
31.03.13 31.03.14 31.03.15 31.03.16 31.03.17
-1000

-2000

Interpretation:
In the year 2010-17, it clearly shows the negative working capital. A declining working capital
over a longer time period could also be a red flag that warrants further analysis. It means that the
business currently is unable to meet its short-term liabilities with its current assets. In 2015-16 all
short term debts are converted into long term debts, therefore there is an increase in working capital
in this year. Current Ratio which is quite good in 2010-11 and is maintaining till 2012-13 but
sharply gone down in 2015-16 to 0.62 there by it shows that Company is fund the working capital
needs through loans and not generating any surplus which is very alarming one and company
should liquidate finished steel stocks and also keep the minimum raw material inventory to
improve the current ratio.

Capital employed:

“Capital Employed =Fixed Assets +Working Capital”

PARTICULARS 31.03.17 31.03.16 31.03.15 31.03.14 31.03.13

A CURRENT ASSETS
Inventories 4766.85 3907.5 5179.51 3863.04 3828.6
Trade Receivables 878.80 958.11 1035.43 803.65 1009.65
Cash & Bank balances 53.90 45.56 63.94 175.89 1625.02
Short term Loans and 3408.93 3440.21 3259.83 3461.35 3417.75
Advances
Other Current assets 636.48 147.79 98.75 96.73 96.73
Sub-total A 9338.77 8499.17 9637.46 8400.66 9977.75
B CURRENT LIABILITIES
Short term borrowings 8048.84 6585.64 7444.89 3739.93 3658.44
trade payables 1026.94 733.56 600.6 829.93 737.94
Other current liabilities 6771.98 6328.91 6979.28 5484.05 5615.19
Short term provisions 13.99 0 34.61 157.65 173.1
Sub-Total B 15861.75 13648.11 15059.38 10211.56 10184.67
C WORKING CAPITAL (A-B) -6522.98 -5148.94 -5421.92 -1810.9 -203.92
D Increase / Decrease of -1374.04 272.98 -3611.02 -1603.98 -1477.42
Working Capital over
Previous Year
CAPITAL EMPLOYED = 15605.4 15090.4 12800.8 14460.3 14470.9
FIXED
ASSETS+WORKING
CAPITAL
 31.03.17 31.03.16 31.03.15 31.03.14 31.03.13
PARTICULARS

A Total ASSETS 28865.91 25844.51 25631.75 24671.83 24652.52

B CURRENT LIABILITIES
a) financial liabilities
1. borrowings 8048.84 6585.64 744.89 3739.93 3658.44
2.trade payables 1037.85 733.56 600.60 829.93 737.94
3.Other financial liabilities 3532.35 3128.98 4254.97
4. derivatives 138.38 54.17 31.42
b) provisions B 137.59 102.51 198.93 157.65 173.10
c) other current liabilities 544.86 488.67 576.80 5484.05 5615.19
Total current liabilities 13439.87 11093.53 13107.61 10211.56 10184.67
CAPITAL EMPLOYED = total 15426.04 14750.98 12524.14 14460.27 14467.85
assets – current liabilities

Debt & Equity Profile of RINL for the last six years are given below :

PARTICULARS 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

Debt
Short-term Debt 3831.54 3897.58 7479.5 6585.64 8048.84

Long -term Debt 1656.29 1734.96 623.66 4659.07 6805.77

Total (A) 5487.83 5632.54 8103.16 11244.71 14854.61

Equity
Equity Shares 4889.85 4889.85 4889.85 4889.85 4889.85

Preference Shares 850 1456.97 2837.15 2937.47 3110

Reserves& 6400.89 6130.50 5931.97 5401.90 3748.36

Surplus
 Total (B) 12228.85 12477.32 13658.97 13229.22 11748.21
Debt equity ratio 0.196 0.861 1.667 2.125 1.264

Interpretation:

In the beginning of the year 2010-11 Debit to Equity is 0.035 it went upto 2.125 which is very
alarming and it shows that company financial position has been detoriated.

Company has faced two very bad years i.e 2014-15 & 2015-16. Due to Hudhud Cyclone the
company has suffered damages to the tune of Rs 350 Crs to its production Units and also its
production units were stand still for more than 5 days and normal production could be achieved
only in the 1st Quarter of 2015-16. Further, the Company expansion mills which were to be ready
were also have to be shifted to 2015-16 – 2nd Quarter. In addition, Steel Market has shown
downward starting from November 2015 onwards and it continued downward trend till the end of
March 2016. The Company has to repay its Redemption of Preference Share Capital to
Government of India to the tune of Rs 1381 Crs and also to spend on its ongoing Capital
Expenditure Schemes. Due to which Debt has increased from 0.035 to 1.667.

In the year 2015-16, Due to cheap imports and sluggish market conditions, the company has not
earned even Gross Margin even to meet its operational expenditure and has to take short term debt
to continue the operations. Due to this Debt to Equity has risen sharply from 1.667 to 2.125.
Further Company has also taken measures by converting some loans from short term to Long Term
Loan of a longer duration.
4.2 budget

FIVE YEAR PLAN:

I. Five Year Plans:

First Five Year Plan (1951-56)

No new steel plant came up. The Hindustan steel Ltd. was born on 19th January, 1954 with the
decision of setting up three steel plants each with one million tone input steel per year in at
Rourkela, Bhilai and Durgapur; TATA STEEL stated its expansion programme.

Second Five Year Plan (1956-61)

A bold decision was taken up to increase the ingot steel output India to 6 Million tons per year &
production at Rourkela, Bhillai and Durgapur steel plant started.

Third Five Year Plan(1961-66)

During the third five year plan the three steel plants under HSL; TATA STEEL & HSCO were
expanded as show. In January 1964 Bokhara steel plant came into existence.

1966-69 - Recession Period

The entire expansion program was actively executed during this period.

Fourth Five Year Plan (1969-74)

 Licenses were given for setting up of many mini steel plants and re-rolling mills.
 Govt. Of. India accepted setting up two more steel plants in south. One each at
Visakhapatnam and Hospet (Karnataka).
 SAIL was formed during this period on 24th January, 1973. The total installed capacity
from 6 integrated plants was 106 Mt.
Fifth Five Year Plan (1974-79)
The erstwhile Soviet Union agreed to help in setting up the Visakhapatnam steel plant.
Sixth Five Year Plan (1980-85)

 Work on Visakhapatnam steel plant was started with a big bang and top priority was
accorded to start the plant.
 Scheme for modernization of Bhilai steel plant, Rourkela, Durgapur, TATA STEEL were
initiated.
Seventh Five Year Plan (1985-90)
 Expansion work of Bhilai and Bokaro steel plants completed.
 Progress on Visakhapatnam steel plant picked up and rationalized concept has been
introduced to commission the plant with 3.0Mt liquid steel capacity by 1990.
 1989-91 was a period of economic instability in India and hence no five-year plan was
implemented between 1990-92, there were only annual plans.
Eight Five Year plan (1992-97)

Visakhapatnam steel plant started its production modernization of other steel plants is also duly
envisaged.

Ninth Five Year Plan (1997-2002)

Visakhapatnam steel plant had foreseen a 7% growth during the entire plan period.

Tenth Five Year Plan (2002-2007)

Steel industry registers the growth of 9.9 % Visakhapatnam steel plant high regime targets
achieved the best of them.

Eleventh Five Year Plan (2007-2012)

For the 11th Five Year Plan (2007-12), the Planning Commission has approved total outlay of Rs
45607.08 crore (i.e. Internal and Extra Budgetary Resources [I&EBR] of Rs 45390.08 crore and
Gross Budgetary Support [GBS] of Rs 217 crore).

12th Five Year Plan (2013-2017)

Infrastructure investment is aimed to increase from about 8.0% of GDP in the base year (2011-12)
of the Plan to about 10.0% of GDP in 2016-17. The total
Investment in infrastructure is aimed to be over 45 lakh Cr. or Rs 1 trillion during the Twelfth Plan
period, double the investment of 11th Plan.

These investments in infrastructure augur well for steel demand. The demand is projected to grow
at a healthy rate of 10.3% in the 12th Plan Period.

 12thFive-year Strategy Challenges:

Based on an intensive process within the Commission, the following "Twelve Strategy
Challenges" have been identified to initiate the consultations. The "strategy challenges" refer to
some core areas that require new approaches to produce the desired results.

 Enhancing the Capacity for Growth

Today, India can sustain a GDP growth of 8 percent a year. Increasing this to 9 or 10 percent
will need more mobilization of investment resources; better allocation of these resources
through more efficient capital markets; higher investment in infrastructure through both public
and PPP routes; and more efficient use of public resources.

Enhancing Skills and Faster Generation of Employment

It is believed that India's economic growth is not generating enough jobs or livelihood
opportunities. At the same time, many sectors face manpower shortages. To address both,
we need to improve our education and training systems; create efficient and accessible labour
markets for all skill categories; and encourage the faster growth of small and micro
enterprises.

Managing the Environment

Environmental and ecological degradation has serious global and local implications,
especially for the most vulnerable citizens of our country. How can we encourage responsible
behaviour, without compromising on our developmental needs?

 Markets for Efficiency and Inclusion

Open, integrated, and well-regulated markets for land, labour, and capital and for goods and
services are essential for growth, inclusion, and sustainability. We have many sectors were
 markets are non-existent or incomplete, especially those which are dominated by public
provisioning. How do we create or improve markets in all sectors?

 De-centralization, Empowerment and Information

Greater and more informed participation of all citizens in decision-making, enforcing

accountability, exercising their rights and entitlements; and determining the course of their
lives is central to faster growth, inclusion, and sustainability. How can we best promote the
capabilities of all Indians, especially the most disadvantaged, to achieve this end?

 Technology and Innovation

Technological and organizational innovation is the key to higher productivity and

competitiveness. How can we encourage and incentivize innovation and their diffusion in
academia and government as well as in enterprises of all sizes?

 Securing the Energy Future for India

Faster and more inclusive growth will require a rapid increase in energy consumption. Since
we have limited domestic resources, how can we meet this need equitably and affordably
without compromising on our environment?

 Accelerated Development of Transport Infrastructure

Our inadequate transport infrastructure results in lower efficiency and productivity; higher
transaction costs; and insufficient access to our large national market. How can we create an
efficient and widespread multi-modal transport network?

 Rural Transformation and Sustained Growth of Agriculture

Rural India suffers from poor infrastructure and inadequate amenities. Low agricultural
growth perpetuates food and nutritional insecurities, which also reduces rural incomes. How
 can we encourage and support our villages in improving their living and livelihood
conditions in innovative ways?

 Managing Urbanization

Most of our metros and cities are under severe stress with inadequate social and physical
infrastructure coupled with worsening pollution. Migration pressures are likely to increase.
How do we make our cities more loveable? What can we do today to ensure that smaller
cities and towns are not similarly overwhelmed tomorrow?

 Improved Access to Quality Education

Educational and training facilities have been increasing rapidly. However, access,
affordability, and quality remain serious concerns. Employability is also an issue. How can
we improve the quality and the utility of our education, while ensuring equity and
affordability?

 Better Preventive and Curative Health Care

India's health indicators are not improving as fast as other socio-economic indicators. Good
healthcare is perceived to be either unavailable or unaffordable. How can we improve
healthcare conditions, both curative and preventive, especially relating to women and
children?

 Plan outlay for the 12th Five Year Plan (2012-2017)

The 12th Five Year Plan (2012-17), the Planning Commission has approved total outlay of Rs
91174.64 crores (i.e. Internal and Extra Budgetary Resources (I&EBR) of Rs 90974.64 crores
and Gross Budgetary Support (GBS) of Rs 200.00 crores.

The IEBR is calculated based on the data collected at page No and as per the Format designed as
above for the finance

also and submission of 12th Plan in the format designed by the Planning Commission forwarded
by Ministry of Steel.
12th Plan scheme wise details are given bellow:

XII th PLAN APPROVED & ACTUAL OUTLAY

( ₹ Crores)

Total 12th Approved total XIIth

plan
Estimated
Name of the Scheme /Project Project Original 12-13 13-14 14-15 15-16 16-17 12-13 to
Costs Approved RE RE RE BE RE 16-17

Expansion to 6.3 Mt LS 12291.00 2934.00 710.00 600.00 470.00 250 200 2412.84
Coke Oven Battery-IV (Phase I) 380.00 - 2.00 3.00 1.00 - - 4.52
Coke Oven Battery-IV (Phase II) 355.00 176.00 50.00 35.00 30.00 20 5.00 120.12
Coke Oven Battery-V (Including by Product Plant) 2858.00 235.00 2.00 2.00 25.00 50 130.00 380.35
Air Separation Plant (ASU 4) 170.00 15.00 26.00 5.00 2.00 - - 23.44
Pulverized Coal Injection 133.00 38.00 8.00 8.00 15.00 6 2.00 22.73
330 TPH (6th) Boiler with Aux 350.00 87.00 20.00 20.00 25.00 20 2.00 50.63
67.5 MW- TG5 power evacuation system 344.00 57.00 15.00 15.00 20.00 20 2.00 82.85
Strengthening of 220 KV System of AP Transco 105.00 17.00 10.00 5.00 5.00 18 - 0.31
Augmentation of 220 KV power system 58.00 45.00 20.00 15.00 15.00 3.00 2.00 42.14
Facilities for Iron Ore Storage 377.00 310.00 50.00 50.00 34.00 25.00 20.00 220.44
Augmentation of water storage facilities 220.00 215.00 2.00 1.00 - 5.00 50.00 11.07
3rd Converter and 4th Caster 975.00 970.00 2.00 2.00 100.00 200 200 472.53
Power Plant- II 677.00 677.00 50.00 150.00 220.00 40 30 577.03
TB-5 280.00 - - 1.00 25.00 90 75 116.81
BF-1 & BF-2 category 1 repair 1662.00 1658.00 100.00 406.00 200.00 200 175 1338.32
Sinter plant productivity enhancements 343.00 333.00 1.00 2.00 1.00 100 100 166.99
SMS convertor revamp 404.00 170.00 5.00 25.00 140.00 120 75 388.53
20.6 MW waste Heat Recovery Project 123.00 133.00 40.00 10.00 25.00 - - 81.11
Axle Plant/ Forged Wheel Plant 1577.00 - 2.00 20.00 75.00 65 31 43.01
Acquisition of Iron Ore Mines & Coal Mines/ 500.00 100.00 1.00 3.00 30.00 20 2 45.30
ICVL 2600.00 1708.00 3.00 5.00 1.00 - 2 1.12
SLTM/Rebar mill 20000.00 610.00 - 1 0.00
Expansion to 11 mts 5.00 3 0.00
Revamping of LMMM walking beam furnace 5.00 10 2.22
Central storage yard 10.00 3 0.00
Railway signaling for expansion 2 0.00
Revamping &modernization of CCD in SMS 1 2 0.00
Desalination plant 30 22.88
Solar power plant 15 17.51
KBR rectification works 1 0.39
Twin LHF 625.00 125.00 100.00 60.00 75.00 125 515.23
AMR Schemes 70.00 14.00 15.00 15.00 50.00 50 159.76
R&D - 2.00 2.00 1.00 5.00 5 0.00
Feasibility report
11183.00 1260.00 1500 1535 1402 1350 7320.18
Total -12th plan
ANNUAL PLANS/IEBR:
 Formulation of annual plans is submitted based on the formats and guidelines from time to
from Ministry of Steel & Ministry of Finance.
 Annual Plan Targets from 2012-13 to 2015-16 are tabled below:

Years Plan Actuals %

2012-13 1260 1287.43 102.17
2013-14 1500 1512.06 100.84
2014-15 1535 1623.11 105.74
2015-16 1402 1491.63 106.39
2016-17 1350 1405.95 104.14

 It is monitored monthly, quarterly and yearly by the management, audit committee, board
of directors and Ministry of steel.
STATEMENT-I
ESTIMATES OF INTERNAL &EXTERNAL BUDGETARY RESOURCES (IEBR) FOR 12TH FIVE YEAR
PLAN (2012-13 TO 2018-19) AND PERFORMANCE IN 11TH FIVE YEAR PLAN.

2017-
SI.NO. Parameter 2017-18 (BE) 18(RE)
1 Carry over surplus from previous year 0 53.90
2 Add: Retained Profit -1435.49 -1344.53
3 Add: Depreciation/provisions 685.64 784.77
4 Add: Receipts from sale of investments 0.00 0
5 Deduct adjustments 749.85 505.86
6 Total Internal resources 0 0
7 Bonds/Debentures 0 0
8 ECB/Supplies Credit 0 0
9 Others 1550.00 1550.00
10 Total I&EBR 1550.00 1550.00
11 Plan Outlay 1550.00 1550.00
12 Net Budgetary Support
Equity 0 0
Loan 0 0
Total 0 0
13 Carry forward surplus to next year 0 0
STATEMENT- I

Estimation of IEBR for 12th five year plan and Performance in 11th five
Year
2014-
15(Actual) 2015- 2016-
Expenditu 16(Act) 17(Act)
Sl. No. Description re Actual Acutal
1 Receipts Rs. In crores
i) Gross sales/ Operating income 9282.34 8915.94 11039.76
ii) Other income 288.31 452.62 361.71
iii) Total(1) 9570.65 9368.56 11401.47

2 Operating cost
i) Salaries & Wages 1918.16 1881.87 2163.83
ii) Other costs 7663.97 6996.42 9899.07
iii) Total(2) 9582.13 8878.3 12062.91

3 Depreciation and Write-offs

i) Depreciation 270.63 365.66 658.86
ii) DRE/Write-off
iii) Total(3) 270.63 365.66 658.86
Accretion(+) or Decretion(-) of
4 stock of finished products 820.19 -1149.72 397.54

5 Gross profit/Loss (1-2-3-4) 538.08 -1025.12 -922.75

6 Interest Payments to:-

i) Central Government 0 0 0
ii) Others 434.73 676.7 767.74
iii) Total(6) 434.73 676.7 767.74
7 Provision for Income tax 40.97 -98.1 -427.34

8 a) Divident payments 25.35 0 0

b) Tax on Dividend 5.07 0 0
Investments in securities if
obligatory due to statutory or
9 other requiements 28.77 45.29 36

Retained profits/surplus
10 carried over (5-6-7-8-9) 3.1 -1649.01 -1299.16

PAT 62.38 -1603.72 -1263.16

PART-II Generated Internal and Extra Budgetary Resources for Plan
Rs ‘Crs

SL.NO. YEAR
Description
2014-15 2015-16 (Act) 2016-17(RE)
Actual exp. actual proposed

(1) (2) (6) (7) (8)

1 Retained surplus from Part-I 3.19 -1649.01 -1299.16
2 Add: Depreciation, DRE & Deferred tax 306.88 365.66 658.86
310.07 -1283.34 -640.30
3 Deduct
i) Total loan repayment of which 0.00 0.00 0.00
(to Govt of India): 0.00 0.00 0.00

ii) Net increase in the margin

for working capital requirement -2052.48 -781.37 -750.11
iii) Non-plan capital requirement
(break up of major items like 303.70 528.52 1003.44
replacement, repair and maintenance
need to be indicated)
iv) Others, if any (please specify) 0.00 0.00 0.00
a Redemption preference share capital- govt. 550.00 0.00 0.00
b Investments 0.00 95.90 43.29

v) Total (3) -1198.78 -156.95 296.62

4 Adjusted internal resources

available for Plan schemes (1+2-3) 1508.85 -1126.39 -936.92
5 Carry forward surplus available
from previous year 175.88 63.93 45.55
6 Total internal resources (4+5) 1684.73 -1062.46 -891.37
7 Extra Budgetary Resources
(Other than from GOI)
i) Gross assistance from Financial 2.31 2599.64 2351.23
institutions for Plan Project
ii) Foreign commercial borrowings/ 0.00 0.00 0.00
Suppliers credit 0.00 0.00 0.00
iii) Bonds/Debentures issued during the year
iv) Inter corporate transfers:
v) Receipts from other funds i.e.,
(a) OIDB
(b) SDF
(c) Others
vi) Issue of equity to public
vii) Other sources of EBR
(a) commercial paper from banks
(b) Cenvat relief on expansion 0.00 0.00 0.00
8 Total internal and extra resources available for financing plan
expenditure (6+7) 1687.04 1537.18 1459.86

9 Plan outlay (according to printed budget doc.) 1623.11 1491.63 1405.95

10 i) Budgetary support from

Govt. for Plan schemes 0.00 0.00 0.00
(9-8) or NIL if 8 is greater than 9
ii) External assistance through budget 0.00 0.00 0.00

iii) External assistance direct 0.00 0.00 0.00

iv) Net Budgetary Support (i-ii) 0.00 0.00 0.00
Statement-II
Ministry/Dept.- MINISTRY OF STEEL
Name of the company- Rashtriya Ispat Nigam limited

BUDGET ESTIMATES - 2018-19 (Rs. Crores)

Sl.No. Name of the Internal Bonds/ ECB/Suppliers Others Total Total Total
PSE. Resources Debentures Credit IEBR Budgetary Plan
support Outlay

1 Rashtriya Ispat 0.00 0.00 0.00 1400.00 1400.00 0.00 1400.00

Nigam Limited

Total 0.00 0.00 0.00 1400.00 14000.00 0.00 1400.00

REVISED ESTIMATES- 2017-18 (Rs. Crores)

Sl.No. Name of the Internal Bonds/ ECB/Suppliers Others Total Total Total
PSE. Resources Debentures Credit IEBR Budgetary plan outlay
support

1 Rashtriya Ispat 0.00 0.00 0.00 1550.00 1550.00 0.00 1550.00

Nigam Limited

Total 0.00 0.00 0.00 1550.00 1350.00 0.00 1550.00

ACTUALS -2016-17 (Rs. Crores)

Sl.No. Name of the Internal Bonds/ ECB/Suppliers Others Total Total Total Plan
PSE. Resources Debentures Credit IEBR Budgetary Outlay
support

1 Rashtriya Ispat 0.00 0.00 0.00 1405.95. 1405.95 0.00 1405.95

Nigam
Limited

Total 0.00 0.00 0.00 1405.95 1405.95 0.00 1405.95

Details of Capex &IEBR Expenditure Plan for 2018-19 quarter wise break up

Name of the section/PSU: Rashtriya Ispat Nigam Limited

Name of the Section/PSU : Rashtriya Ispat Nigam Limited

Details of Capex & IEBR Expenditure Plan for 2018-19 Quarterwise Break-up
Quarterly Targets for the FY 2018-19
SL.No Name of the Scheme IEBR Q1 Q2 Q3 Q4 Total
1 Expansion - 6.3 MTPA 150 37 37 37 39 150
2 Coke oven Battery-4 (Ph.1) 5 1 1 1 2 5
3 Coke oven Battery-4 (Ph.2) 5 2 1 1 1 5
4 PCI (BF1 & BF2) 5 2 1 1 1 5
5 330 tph Boiler-6 5 1 1 2 1 5
6 67.5 MW Power Plant 5 1 1 1 2 5
7 220 kv Augmentation 2 0 0 1 1 2
8 Augmentation of Iron ore storage 15 3 3 4 5 15
9 3rd Converter & 4th Caster 130 31 30 33 36 130
10 Power Plant-2 10 1 4 3 2 10
11 Cat-I capital repairs of BF-1&2 100 22 23 24 28 97
12 SP productivity enhancement 100 24 25 25 26 100
13 SMS revamping 3 0 1 1 1 3
14 Coke oven Battery-5 210 44 52 53 61 210
15 Turbo blower-5 50 14 15 10 11 50
16 Augmentation of water storage (KBR-2) 100 28 26 26 20 100
17 Central Despatch Yard 50 13 13 13 11 50
18 Railway signalling 5 0 1 1 3 5
19 Wheel Plant 200 50 49 55 46 200
20 Axle Plant 2 0 1 0 1 2
21 Solar Power Plant 3 0 1 1 1 3
22 Revaming of walking beam furnace LMMM 5 0 1 1 2 4
23 Feasibility reports 2 0 0 1 1 2
24 KBR-1 Modification works 10 1 2 3 4 10
25 Twin LHF(SMS-2) 25 7 6 6 6 25
26 Rebar mill 30 5 6 10 9 30
27 CCD Revamping & Modernisation 5 0 1 2 2 5
28 De Salination Plant/Underground water schemes 2 0 0 1 1 2
29 HP Nitrogen Compressor 10 2 2 2 4 10
30 110 MVA, 220/33KV Transformer LBSS6 (SMS2) 5 1 1 1 2 5
31 Replacement of 2 Nos of Turbo Blowers 20 7 5 2 6 20
32 Charging Crane & Slag Yard Crane in SMS-2 10 2 2 1 5 10
Acquisiton of Iron Ore Mines & Coal Mines & 2 1 1 1 5
5
33 including Investment through JVs
34 11.0 / 12.0 Mtpa Expansion 1 0 0 0 1 1
35 AMR 70 7 15 20 28 70
36 R&D 30 3 6 6 15 30
TOTAL - RINL - (I) 1244 289 304 319 328 1240
 sanctioned and to be sanctioned projects & expenditure till 31.3.2018
Approved/
Name of the Actual Exp. till
SL No Estimated Balance IEBR 2017-18 Cum Scheme
Scheme M ar'2017
Cost Expenditure
1 6.3MtpaExpansion 12,291

11895.04 395.96 100.00 188.38 12083.42

2 Coke oven Battery-4 735 658.47 76.99 12.00
(Ph.1) & (Ph.2)

2.61 661.08
3 PCI (BF1 & BF2) 133 111.04 21.96 10.00
0.01 111.05
4 330 tph Boiler-6 350 292.13 57.87 10.00
2.80 294.93
5 67.5 MW Power 344 329.69 14.31 5.00
Plant
1.89 331.58
6 144 114.02 30.08 4.00
220 kv Augmentation
& Strengthening
2.46 116.48
7 Augmentation of Iron 450 410.98 39.02 20.00
ore storage 10.68 421.66
8 Augmentation of 466 11.40 454.45 60.00
water storage - KBR-
2 112.60 124.00
9 3rd Converter & 4th 975 472.54 502.46 150.00
Caster 223.40 695.94
10 Power Plant-2 677 578.15 98.85 30.00 9.93 588.08
11 Coke oven Battery-5 2,853 380.35 2472.65 250.00 447.10 827.45
12 Forged Wheel Plant 1,683 40.47 1642.38 200.00 235.63 276.10
13 Cat-I capital repairs 1,663 1346.50 316.50 100.00
of BF-1 & 2 37.51 1384.01
14 SP productivity 488 167.91 320.09 50.00
enhancement 69.19 237.10
15 SMS revamping 404 388.53 15.47 20.00 23.68 412.21
16 Turbo blower-5 281 116.81 163.71 50.00 41.82 158.63
17 Revamping of LMMM 199 0.00 199.00 50.00
walking beam
Furnace 0.28 0.28
18 Central Despatch 321 2.22 318.78 50.00
Yard 35.58 37.80
19 Railway Signalling 62 0.00 62.00 10.00 16.53 16.53
20 Twin LHF (SMS 2) 109 0.39 108.61 10.00 17.65 18.04
21 Revamping and Modernisation640of CCD in SMS1 0.00 639.75 10.00 0.79 0.79
22 KBR-1 Rectification 59 17.51 41.81 25.00
Works 33.26 50.77
23 Solar Power Plant 35 22.88 11.86 5.00 6.68 29.56
24 Rebar Mill 431 - 431.00 10.00 0.65 0.65
25 HP Nitrogen Compressor 42 - 41.50 10.00 0.68 0.68
26 110 MVA 220/33KV 18 - 17.50 5.00 0.00 0.00
27 33 in SMS-2
Charging Crane & Slag Yard Crane - 33.00 15.00 0.00 0.00
28 760
De Salination Plant/Underground water schemes - 760.00 5.00 0.00 0.00
29 Acquisition of Mines 500 - 500.00 25.00 2.18 2.18
30 Feasibility Report 10 - 10.00 5.00 0.36 0.36
31 Rebuilding of COB-1 944 - 944.22 - 3.14 3.14
 Ref.No.BGT-5(1)/2017 dated 05.05.2017

Details of CAPEX & IEBR expenditure for the month of Mar-2018

IEBR CAPEX

during the month

during the month

Cumulative up to

Cumulative up to
Target for the

Target for the

expenditure

expenditure
Cash &

BE 17-18*
the month

the month
month **
BE 17-18

Name of month Borrowin

Actual

Actual
Bank
the PSU gs
Balance

RINL, VSP 1550 173.00 0.00 1583.84 1581 0.00 0.00 0.00 13.49 16680.98
* As PER DPE Capex Target is Rs 1581 Crs i.e w.r.t Excellent target of of MoU 2017-18
** Since Excellent Target is 2% above of IEBR target for monthly CAPEX calculated accordingly.
MOU PLANS
RAW MATERIAL CONSUMPTION/PROCUREMENT BUDGET (QTY & value)
Raw Material Consumption Tonnage & value
MOU: 2018-19

Raw material consumption 2018-19 as per Mou

Sl.No. Particulars Qty Price Amount
'000 tonne ` `crore
1 BF Coke 320.314 23090.15 739.61
2 Coke Breeze 19.000 13854.09 26.32
2 Imported Coking Coal 2924.000 13695.16 4004.46
3 Medium Coking Coal 449.000 10626.87 477.15
4 Soft Coking Coal 1125.000 11026.55 1240.49
5 Pulverized Coal 631.000 8644.18 545.45
6 Iron Ore Lumps 4257.821 4518.84 1924.04
7 Iron Ore Fines 5092.000 4276.48 2177.59
8 CLO 245.827 4764.84 117.13
9 Pellets 103.804 6990.00 72.56
10 BF limestone 633.000 1994.21 126.23
11 BF dolomite 740.768 2013.61 149.16
12 Manganese Ore Lump 4.820 4685.25 2.26
13 Manganese Ore Fines 17.783 11862.82 21.10
14 Sand own mines 71.500 1169.89 8.36
15 Quartzite 13.020 984.65 1.28
16 SMS limestone (Imported) 1300.728 1336.46 173.84
17 SMS dolomite 460.807 2013.61 92.79
18 Billets 29372.86
19 Liquid Oxygen 73.000 14589.00 106.50
20 Ferro Manganese 1.563 108673.10 16.99
21 Ferro Silicon 10.882 87417.00 95.13
22 Silico Manganese 80.975 65890.00 533.55
23 Ferro Chrome 1.761 84889.00 14.95
24 Ferro Phosphorus 14850.00
25 Copper 0.160 337263.41 5.38
26 Ferro Venadium 0.181 852495.00 15.47
27 Synthetic Slag (Rate from Stores A/cs) 9.072 20929.10 18.99
28 Fe-B 173825.00
29 Aluminium 10.224 154865.70 158.33
30 Petroleum coke 13.466 27694.00 37.29
31 Sea Water Magnesia 6.500 47451.06 30.84
32 Si-Ca Wire (Rate from Stores A/cs) 1.374 126590.00 17.39

Total 12950.62
 Fe-alloy procurement tonnage
MOU : 2018-19
Fe alloys total 95363
Si-Mn 80975
Fe-Si 10882
Fe-Mn 1563
Fe-Cr 1761
Cu Scrap 160
Fe-P 0
Fe-V 181
Fe-Ti 0
Ca-Fe 0
Al total 10224
Petro Coke 13466
Caustic Magnesite 0
Fe-B 0
synthetic slag 9072
Operation budget for the year 2018 -19
particulars Amount
Consump -Oil and lubs 11000000
CONSUMPTION OF STORES AND SPARES 26825000
R&M Plant &Mach 10000000
R&M Earth Mvng Equip 11800000
R&M-Oth Plant Equip 3508000
R&M -Buildings 2500000
R&M - Roads bridges 4973650
R&M - computers 450000
R&M -Others 11902000
R&M - Vehicles-service 3400000
R&M - Aircondi Equip 225000
R&M -Elec instlns 4650000
R&M - Water suply sys 3500000
Handling chgs -Mines 5000000
Testing and sampling chg 3500000
Vehicles / Eqpt Hiring 5100000
TOTAL 108333650
sales budget
GROSS SALES - MoU 2017-18
Particulars Qty GSR Amount
'000 tonne ` `crore
Pig Iron:
Direct 35.000 26556 92.95
Export 25.000 23280 58.20
Total 60.000 25191 151.15
Blooms:

Stockyard- Value Added 10.000 34625 34.62

CC Billets:
Direct -MS 100.000 30470 304.70
Domestic Total 207.000 32850 680.00
Export 150.000 33367 500.51
Total 357.000 33067 1180.51
Billets:
Export
Total 30.000 37898 113.69
Bar Products:
Stockyard -MS 618.000 37791 2335.49
Total 850.000 37651 3200.33
Special Bar Mill
Products:
Stockyard -MS 200.000 36478 729.55
Domestic Total 600.000 36725 2203.48
Export
Total 600.000 36725 2203.48
Stockyard -MS 621.000 38153 2369.32
Total 1000.000 37121 3712.14
Wire Rod II :

Stockyard- Value Added 270.000 42766 1154.69

Domestic Total 500.000 40863 2043.15
MMSM Products:

Stockyard- Value Added 212.000 40860 866.23

Domestic Total 800.000 36964 2957.152
Structural Mill
Products
Domestic Total 490.000 37917 1857.910
Domestic 5015.000 37535 18823.66
MS 4070.000 36348 14793.48
Total 5475.000 37334 20440.13
Iron & Saleable Steel
Total (1)+ (11) 5535.000 37202 20591.28
By-products Total 342.96
Grand Total of Gross
Sales - Domestic 5050.000 19259.56
Grand Total of Gross
Sales - Export 485.000 1674.67
Gross Sales including
By Products 5535.000 20934.24
 GROSS SALES - BYPRODUCTS

Particulars Qty Price

'000 tonne `crore
Nut.Coke 18789

Coke Dust 66.962 6332

Coke
Breeze 11273
Ammoniu
m
Sulphate 51.000 3936
Crude Tar 17.600 22366
Med.Hard
Pitch 26.420 27281
Anthracen
e Oil 32000
Hp
Naphthale
ne 2.250 40736
DNO 1.050 22529
Phenol 1.200 20095
Benzene 10.740 42578
Toulene 2.050 44600
Xylene

Light
Solvent Oil 1.260 44772
Sol 110 /
Non -
Aeromatic
s 0.680 34030
Granulate
d Slag 2872.000 220
Liquid
Oxygen 6141
Liquid
Argon 0.400 5866
Liquid
Nitrogen 18.000 4157
Cal.
Carbide
Sludge 800
CI Scrap
Interest:
INTEREST & FINANCE CHARGES
`crore
Loan Interest
Sl.No. particulars Amount
1 Working Capital Limits
(Cash Credit
+ Supplieres
credit) 840.000 840.00

CAPEX
2 Loans Interest 360.000 360.00

Grand Total 1200.00

 MEMORANDUM OF UNDERSTANDING

BETWEEN

RASHTRIYA ISPAT NIGAM LIMITED

AND

MINISTRY OF STEEL

2018-19

Rashtriya Ispat Nigam Limited (RINL) and Ministry of Steel (MoS) agree to enter into
Memorandum of Understanding (MOU) for the year 2018-19.

The MOU contains the following annexures in accordance with MoU Guidelines for 2017-18 and
onwards issued by Department of Public Enterprises (DPE):

Annexure I : Brief about RINL

Annexure II : Performance Evaluation Parameters and Targets (Part-A and Part-B)

Annexure III : Trend Analysis (Part-A and Part-B)

 Brief about CPSE

1. Name of the CPSE RASHTRIYA ISPAT NIGAM LIMITED

2. Status (Please tick): As per DPE guidelines Sick/ Incipient Sick / weak/ none
3. Reasons of Sickness, if applicable Not applicable
4. Whether registered with BIFR, If yes, No
details

5. Schedule of the CPSE (Please tick) A/B/C/D/ none

6. Purpose for which CPSE has been setup The main purpose is to do business in the
and the main business now Iron and Steel Manufacturing Industry.

7. Number and Name of subsidiary Appendix-1

companies along with amount invested and
share in its profit during last five years.
8. Number and Name of Joint Venture Appendix-2
companies along with amount invested and
share in its profit during last five years
9. Details of revival plan approved earlier Nil
MOU 2018-19 FINANCIALS
2018-19 2017-18
2017-18 2018-19
PARTICULARS MOU accounts
estimated MOU-IMC
draft 11.5.2018
PRODUCTION 4500
1 5675.00 5675 5475.00
QUANTITY (000'T)
ICC-FOB 185.00 206.53 16011.00 180.00

NSR 32216 33303 32216 35203

Exchange rt 65.00 64.50 65.00 66.00

Sales quantity 5675.00 4486.31 4486.31 5475.00

Gross sales including trail

20127.52 16633.71 16618.40 20934.24
run(crores)

1.Pig iron 146.20 236.76 233.76 151.15

19640.6 13687.93
2.saleable steel 13652.34 20440.13
8
3.By-products,scrap etc 340.64 549.22 573.57 342.96

GROSS SALES (EXCL

I 20127.52 14473.93 14459.67 20934.24
TRAIL RUN)- I

excise duty (II) 0.00 262.80 262.80 0.00

Handling (a) 328.34 90.25 116.94 321.50

Freight (b) 1031.14 433.59 577.36 845.88

II NET SALES- II 18768.04 1386.29 13502.57 19766.86
Export benefits 68.50 82.94 84.10 65.76

Internal consumption 0.00 18.57 29.59 0.00

Interest other than
63.92 56.48 79.20 72.00
deposits
Misc. Income 120.08 115.98 186.04 120.00
III TOTAL INCOME- III 19020.54 13981.67 13913.41 20024.63
EXPENDITURE
Stock accretion(-)/
72.98 10.41 -188.04 -2.29
discretion
13030.5
Raw materials 8559.97 8600.84 12950.62
5
 Stores, spares and
750.00 680.91 642.36 800.00
consumables

employee remuneration 2600.00 2339.80 2343.60 2530.00

power, fuel and water 1408.53 1167.81 1157.57 1436.08

repair and maintenance 525.00 515.27 568.64 550.00

other expenses 500.00 515.27 568.64 550.00

TOTAL
IV 18937.05 13727.80 13581.25 18789.41
EXPENDITURE(IV)

GROSS
V 83.49 253.87 332.16 1235.22
MARGIN=(V)=(III-IV)

VI INTEREST (VI) 1260.00 882.62 930.61 1200.00

CASH
VII -1176.51 -628.75 -598.45 35.22
PROFIT=(VII)=(V-VI)

VIII DEPRECIATION(VIII) 1029.90 753.11 776.85 991.60

NET PROFIT(BEFORE
IX -2206.41 -1381.85 -1375.30 -956.38
TAX) (IX=VII-VIII)

X INCOME TAX 0.00 -523.97 -544.10 -298.39

NET PROFIT(AFTER
XI -2206.41 -857.88 -1372.25 -657.99
TAX) (XI=IX-X)

Annexure III
Part-A (Trend Analysis)

Targe
2017-18
t
S 2012- 2013- 2014- 2015- 2016-
Financial Performance Criteria Unit v/s Actual
l 13 14 15 16 17 Estimate
Actua upto
d
l Sep-17
1356 1343 1043 1016 1241
Revenue from Operations -Gross 5819 14596
5 1 2 3 9
Rs.
Actua 1211 1202 1114
1 crore 9314 9020 5556 14333
Revenue from Operations -Net l 1 8 1
1371 1414 1074 1069 1125
MoU 6569 14307
2 1 0 7 0
2 a. Profit before Tax 526 549 103 -1702 -1690 -874 -1382
 b. Other Incomes 455 307 256 348 260 102 172
d. Prior Period Items Rs. -15 -2 -5 - - - -
crore Actua
e. Operating Profit/ Loss 56 240 -158 -2050 -1951 -975 -1554
l
(a-b+/-c+/-d)
MoU 255 -21 223 77 -1922 -1071 -1619
a. PAT 353 366 62 -1604 -1263 -726 -858
1247 1214 1159
b. Net Worth at year end Rs. 9914 8651 7828 7712
7 1 4
crore
1306 1230 1186 1075
c. Average Net worth 9282 8239 8141
8 9 7 4
Actua - -
2.70 2.97 0.52 -8.85 -10.54
d. PAT/ Net Worth (Avg.) l 14.92 13.61
3 %
-
MoU 2.40 0.80 2.48 0.96 - -18.84
18.65
Rs.
e. Paid-up Share Capital 6347 5740 5190 4890 4890 4890 4890
crore
f. GoI share % 100 100 100 100 100 100 100
Rs.
g. Reserves and surplus 6131 6401 6404 5024 3761 2938 2822
crore
1205 1178 1107 1309
4 Total Expenses 9473 6531 15887
Rs. 5 8 0 2
crore 1256 1233 1140
5 Total Incomes 9571 9369 5658 14506
6 5 1
6 Total expenses/ Total Incomes % 96 96 99 118 115 115 109.53
Detail of other incomes
a. Interest 233 180 67 89 66 22 56
7 b. Dividend Rs. 0.13 0.11 0.01 0.00 0.15 0.09 0.09
c. Other Incomes crore 222 127 189 259 194 80 116
d. Total 455 307 256 348 260 102 172
a. Cash and Bank Balance and
1625 176 64 46 54 53 80
equivalent
d. Total (a+b+c) 1625 176 64 46 54 53 80
Rs.
8 e. Cash credit 597 819 2220 2353 3971 4388 4153
crore
f. Short-Term Borrowings 3062 2921 5225 4232 4078 4509 5059
g. Balance in Current account 5 55 3 15 9 23 20.51
Dividend paid/ declared for the Rs.
9 127 93 25 - - - -
year, excluding Dividend Tax crore

Annexure III
Part-B (Trend Analysis)
Target 2017-18
Sl. 2012- 2013- 2014- 2015- 2016- Actual
Performance Criteria Unit v/s upto
No. 13 14 15 16 17 Estimated
Actual Sep-
17
Installed Capacity in respect
1 Mt 2.66 3.22 5.27 4.81 4.97 2.72 5.57
of Saleable Steel
Capacity Utilisation in Actual 2.90 3.02 3.02 3.51 3.85 1.96 4.50
2 Mt
respect of Saleable Steel MoU 3.47 3.47 4.15 4.00 4.32 1.98 4.80
 Contribution of Saleable
3 % 73 89 92 94 94 94 94
Steel product in sales.
New orders received during Actual
4 the year * Rs. Cr.
MoU
Exports as a percentage of % Actual 4.57 5.58 4.04 4.14 8.77 10.89 11.46
5
Revenue from operations MoU 4.61 3.41 8.82 10.64 9.07 8.58 8.54
Development or Revenue Actual
6 from new products or
product with new features * MoU
Production efficiency Actual 2.23 2.36 2.19 2.64 3.10 1.61 3.70
7 parameter- Specific Water cum/tCS
Consumption MoU 1.87 2.08 - - 2.70 - -
Completion of milestone of Actual
8 clients orders/ agreements
without time overrun * % MoU
R&D, Innovation, Actual
9 Technology up-gradation
parameter * MoU
Actual
10 Market share* %
MoU
Actual 1287 1512 1623 1492 1406 658 1550
11 CAPEX Rs. Cr.
MoU 1200 1000 1535 1402 1350 643 1550
CAPEX contracts/ projects
running/ completed without Actual - - - - 91 92 92
%
12 time/ cost overrun to total
value of CAPEX MoU - - - - 90 90 90

Inventory of finished goods

13 Rs. Cr. 2084 2065 3130 1873 2344 3017 2332
and work in progress

Inventory of finished goods Actual 63 63 123 76 77 99 59

Days
14 and work in progress to
RO(Net) MoU - - - - 66 68 63

Inventory of finished goods

15 Rs. Cr, Actual
of more than one year *

Inventory of finished goods Actual

%
16 of more than one year as a
percentage of RO * MoU
Rs. Actual 1010 804 1035 958 879 805 996
17 Trade Receivables (net) crore
MoU 331 800 1555 1235 1100 912 912

Actual 27 22 36 35 26 25 25
Trade Receivables (Net) as No of
18 number of days of Revenue Days
from Operations (Gross) MoU - - - - 32 23 21

Part-B (Trend Analysis)…continued

Target 2017-18
Sl. 2012- 2013- 2014- 2015- 2016-
Performance Criteria Unit v/s Actual
No. 13 14 15 16 17 Est.
Actual upto
 Sep-
17

Claims against the Company

not acknowledged as debt
raised by*:
Central Government
19 409 438 407 423 438 438 422
Departments
State Governments/ Local Rs.
crore 2185 2351 2112 1387 1440 1440 1502
Authorities
CPSEs 25 31 75 79 6 6 6
Others 554 739 1020 979 1084 1084 1068
Total Actual 3173 3559 3614 2869 2968 2968 2998
MoU - - - - - - -
Loans disbursed/ Total Funds Actual
Available * MoU
20
Overdue loans/ Total loans Actual
21
(Net)* MoU
Actual
22 NPA/ Total loans (Net)*
MoU

Cost of raising funds as Actual

23 compared to similarly rated
CPSEs/ entities* MoU

Return (share of profit/loss) Actual

%
24 on Investment in Joint
Ventures* MoU

Other specific result-oriented Actual 70 68 71 69 75 32 72

parameters :
25 Registration of new MSE
Nos.
Vendors/Start-up MoU - - - - - - -
Entrepreneurs with GST No.

*Explanation for criteria not proposed as parameters in Annexure-2 and trends of the same in Annexure-3 in MoU 2018-19
brought out at Appendix-3.
 Appendix-1

Number and Name of subsidiary companies along with amount invested and share in its
profit during last five years.

Eastern Investments Limited

Based on Consolidated P&L of M/S EIL:
Total
Amount Invested
Year Name of Subsidiary Share (Rs
Cumulative (Rs Crores)*
Cr)
2012-13 M/s Eastern Investments Limited 361.02 -1.94
2013-14 M/s Eastern Investments Limited 361.02 -6.33
2014-15 M/s Eastern Investments Limited 361.02 -11.37
2015-16 M/s Eastern Investments Limited 361.02 -2.77
2016-17 M/s Eastern Investments Limited 361.02 -5.27
* Rs 361.02 Crores was invested by RINL in M/s Eastern Investments limited during FY 2010-11

Appendix-2

Number and Name of Joint Venture companies along with amount invested and share in its
profit during last five years

1. M/s International Coal Ventures PRIVATE

LIMITED
Amount Invested Share in Profits
Year Name of Joint venture
Cumulative (Rs .Cr) (Rs. Cr)
International Coal Ventures PRIVATE
2012-13 4.3 0.00
LIMITED
International Coal Ventures PRIVATE
2013-14 4.3 0.00
LIMITED
International Coal Ventures PRIVATE
2014-15 240.56 -61.82
LIMITED
International Coal Ventures PRIVATE
2015-16 336.36 -201.94
LIMITED
International Coal Ventures PRIVATE
2016-17 376.35 -17.83
LIMITED
2. M/s RINMOIL FERRO ALLOYS PRIVATE
LIMITED
Amount Invested Share in Profits
Year Name of Joint venture
Cumulative (Rs .Cr) (Rs. Cr)#
RINMOIL FERRO ALLOYS PRIVATE
2012-13 0.10 0.00
LIMITED
RINMOIL FERRO ALLOYS PRIVATE
2013-14 0.10 0.00
LIMITED
RINMOIL FERRO ALLOYS PRIVATE
2014-15 0.10 0.00
LIMITED
 RINMOIL FERRO ALLOYS PRIVATE
2015-16 0.10 0.00
LIMITED
RINMOIL FERRO ALLOYS PRIVATE
2016-17 0.10 -0.03
LIMITED

3. M/s RINL POWERGRID TLT PRIVATE

LIMITED (RPTPL)
Amount Invested Share in Profits
Year Name of Joint venture
Cumulative (Rs .Cr) (Rs. Cr)#
RINL POWERGRID TLT PRIVATE
2012-13 0.00 0.00
LIMITED
RINL POWERGRID TLT PRIVATE
2013-14 0.00 0.00
LIMITED
RINL POWERGRID TLT PRIVATE
2014-15 0.00 0.00
LIMITED
RINL POWERGRID TLT PRIVATE
2015-16 0.10 0.00
LIMITED
RINL POWERGRID TLT PRIVATE
2016-17 3.40 0.00
LIMITED
Consolidated Joint Ventures
Amount Invested Total Share
Year Name of Joint venture
Cumulative (Rs .Cr) (Rs. Cr)#
2012-13 M/S ICVL, RINMOIL & RPTPL 4.40 0.00
2013-14 M/S ICVL, RINMOIL & RPTPL 4.40 0.00
2014-15 M/S ICVL, RINMOIL & RPTPL 240.66 -61.82
2015-16 M/S ICVL, RINMOIL & RPTPL 336.56 -201.94
2016-17 M/S ICVL, RINMOIL & RPTPL 379.85 -17.86
# RINMOIL & RPTPL has not started commercial
operations
 Appendix-3

Explanation for criteria from Annexure-II, Part –B not proposed as parameters for MoU
2018-19

Criteria
Sl. No Remarks
(Annexure-II, Part –B)
1 New orders Received during the year Business Model is not order based
Development or Revenue from new Current Focus is on Stabilisation and ramping up of
2
products or product with new features production from new/revamped units.

Completion of milestone of clients orders/

3 Business Model is not order based.
agreements without time overrun

Current Focus is on adoption and harnessing of New

R&D, Innovation, Technology up-gradation
4 Technologies as part of expansion and
parameter
modernisation.

No independent/authentic mechanism available for

reporting market share where more than 70% of the
5 Increase in Market share
market space is controlled by secondary players. JPC
Data available only w.r.t. Production.

Reduction in Inventory of more than one

6 Not applicable
year old to Revenue from operations (Net)

Return (share of profit/loss) on Investment

7 JVs not yet operational
in JV
EIL, OMDC & BSLC have been exempted from
Milestones with respect to subsidiary
8 signing of MoU for 2018-19. However, target for
CPSEs not signing MoUs separately
BSLC included in MoU of RINL.
Parameters pertaining to milestones of
9 Not applicable
Revival
MOU Guidelines for the Year 2018-19 and onwards
1. Memorandum of Understanding (MoU):
MoU is a negotiated agreement and contract between the Administrative Ministry/
Department/ Holding CPSE i.e. majority shareholder and the Management of the Central
public Sector Enterprise (CPSE) on selected parameters having targets decided normally
before the start of a new financial year and results evaluated after the end of the year to
measure the performance. For carrying out this exercise, CPSEs would provide brief in
format at Annex-I and trend analysis in Annex-III.

2. Purpose of MoU:
The purpose of the MoU is to measure the performance of the management of the CPSEs
on key selected parameters against the targets agreed upon so as to improve the critical
performance indicators of the organization.

3. Scope:
All CPSEs (Holding as well as Subsidiaries) are required to Sign MoUs. The Apex/Holding
companies will sign MoUs with their administrative Ministries/ Departments, while the
Subsidiary companies will sign MoUs with their respective Apex/ Holding companies.

4. Exemption from MoU:

High powered committee in its meeting held on 8th March 2017 had confirmed / approved
exemption to following a CPSEs from signing of MOU :-
1. India infrastructure finance Co.ltd., and its subsidiaries.

4.2 Following CPSEs may be exempted from MoU system by the Inter-Ministerial Committee
(IMC):

i) CPSEs under liquidation where Liquidator has already been appointed. However
administrative ministry would provide the list of such CPSEs to DPE along-with brief write-up.

ii) CPSE which is not in operation or having no employees or on any other ground on the
recommendation of administrative Ministry.
 5. Parameters: CPSEs work in various sectors under different conditions. in View of this,
the following guidelines are laid down: -
5.1 There would be uniform parameters for measuring financial performances such as revenue
from operations, operating profit and return on investment (e.g. ratio of PAT/Net-worth). This
would be applicable to all CPSEs, except CPSEs which are dependent on government grant or
performing functions of distribution of grant etc. e.g. Biotechnology industry Research Assistance
Council (BIRAC). Hence, 3 financial parameters have been prescribed for all CPSEs with total
weightage of 50% except for CPSEs like BIRAC. The mandatory parameters are at Annex-ll
(Part-A).

5.2 For the remaining 50% weightage, a menu of parameters has been suggested for selection
depending on the sector in which the CPSE is operating. Separate Format has been given for
Finance Sector at Annex-ll (Part-C) and another Format for the remaining operating CPSEs at
Annex-ll (Part-B). The parameters most appropriate and relevant for measuring performance shall
be suggested by the Pre-Negotiation Committee (PNC) to the inter-Ministerial Committee (IMC)
In all the cases IMC shall take appropriate decision on the suggestions made by PNC.

5.3 Chairman. IMC is authorized to modify the parameters or weightages of parameters in

sector specific cases. If justified.

5.4 For CPSEs under closure/ under construction/ under reconstruction, parameters have not
been prescribed leaving it to the PNC to suggest the most appropriate parameters and targets for
IMC to take decisions. For such CPSEs, the emphasis should he to suggest parameters and for
targets for starting commercial operations as early as possible. For CPSEs under closure, the
targets would be for ensuring time bound closure. Format for such CPSEs is at Annex - IV

5.5 Definition and explanatory notes on the suggested the parameters are given in Annex-V
6. MoU Ranking :
i. With a view to distinguish ‘excellent performance’ from ‘poor
performance’, five different performance ratings have been fixed in the
MoU. i.e., ‘Excellent’, ‘Very Good’. ‘ Good’, ‘Fair’ and ‘Poor’.
ii. Apart from rating of CPSEs, MoU performance of all MoU signing CPSEs,
there will be category-wise ranking of CPSEs (Maharatna, Navaratna,
Miniratna, others) and sector-wise ranking of CPSEs (Mining, Power,
Petroleum, Finance, consultancy etc.) only for the purposes of
acknowledging where they stand in their respective category/sector.

7. MoU Targets:
i. Targets fixed should be realistic, growth oriented and aspirational. Generally target
for Excellent should not be lower than best achieved in last 5 years and Very Good
should not be lower than the expected achievement of the current year (year
immediately preceding the year for which targets are being fixed) unless there are
specific reasons to fix lower targets and are duly supported by the administrative
ministry/ department.
ii. Once MoUs are signed, any revision of targets would not be permissible. MoU
targets are unconditional and non-provisional.

8. Pre-negotiation Committee (PNC):The role of the Pre-negotiation Committee (earlier

known as Standing Committee on MoU) would be to assist IMC in determining the most
appropriate and relevant parameters for measuring improvement in performance and for
fixing targets. Meetings of the Pre-negotiation Committee would be held in each case
before the meetings of IMC to look at the trends. Discuss, negotiate and recommend MoU
parameters and targets. The composition of Pre-negotiation Committee would remain the
some of erstwhile Standing Committee.
9. lnter-Ministerial Committee IMC : MoU targets would be decided by the IMC. There is
no change in the composition of the Committee. Any change in the composition of the
committee would be done with the approval of Cabinet Secretary.

10. Time-lines for submission of MoU: The draft MoU with all documents/Annexures should
be submitted to administrative Ministry/Department in respect of all CPSEs and their
subsidiaries by 21stNovember of each year for the forthcoming year. The draft MoU after
the approval of administrative Ministry/Department should be sent to DPE by
5thDecember of each year for the forthcoming year with all documents/Annexures. A copy
of draft MoU may also be sent to IMC Members other than DPE. Secretary, DPE may
extend these dates if there is delay in issue of guidelines.

11. Enclosures with Draft MoU:CPSEs should send the Draft MoU in the relevant format
along with all the annexures prescribed and documents mentioned below.

i. MoU as per Annex l, Annex ll (Part-A and Part-B or Part-C). and Annex III (Part-
A and Part-B) duly filled in for CPSEs in operation and Annex (I & IV) for CPSEs
under closure/under construction/reconstruction enclosed with these Guidelines.
ii. Copy of latest Annual Report.
iii. Latest quarterly/half-yearly results.
iv. Copy of the latest Annual Plan and Annual Budget.
v. Copy of Corporate plan.
vi. Minutes of the IMC meeting of previous year.

12. MoU Signing Process: MoU based on the parameters, targets and weightage
recommended by IMC without any deviation shall be signed between CMD/ MD of CPSE
and Secretary of administrative Ministry/ Department in case of holding/ independent
CPSEs and between CEO/ MD of subsidiary company and CMD/ MD of holding CPSE in
case of subsidiary by 31st March (i.e. before start of financial year in respect of which
targets are fixed) or within 21 days from issue of IMC meeting minutes, whichever is later.
 In case, deviation is detected. IMC minutes Would prevail and performance of the CPSE
will be downgraded to the next lower rating.

13. MoU Evaluation: Evaluation of MoU of the CPSE is done alter the end of the year on the
basis of actual achievements vis-a-vis the MoU targets. CPSES (Holding as well as
Subsidiaries) are required to submit performance evaluation reports on the basis of audited
accounts to Department of Public Enterprises after approval of the Board of CPSE and
through the administrative Ministries/Departments on or before 30th September (in
respect of immediately preceding year) or any other date communicated by DPE.
Figures and information in the MoU achievement which are not verifiable from audited
accounts annual report would be relied on the basis of certification by way of resolution of
the Board given separately for each parameter.

If at the time of evaluation, it is observed that any CPSE may have under-pitch their
projected performance for the year concerned to have soft targets fixed. DPE/ IMC may
call the CMD of such CPSE to clarify the matter for enabling the IMC to evaluate the
performance and assign marks and rating based on justification given by the CMD.

14. MoU Score and Rating: MoU score is an aggregate of score on all parameters with respect
to performance vis-a-vis the targets.

14.1 The system of rating of CPSEs on the basis of MoU Aggregate Score is as follows:

Aggregated score Rating

90<Score<100 Excellent
70<Score<90 Very good
50<Score<70 Good
33<Score<50 Fair
0<Score <33 Poor
 14.2 Score and rating as per para 14.1 would be subject to fulfilling following criteria
failing which aggregate MoU score would be reduced by 1 mark for each instance of non
compliance subject to maximum of 5 marks and the rating would be modified accordingly:

i. Compliance of Provisions of The Companies Act, 2013 or the relevant Act under
which they have been regulated (To the extent compliances are within the ambit of
CPSEs).
ii. In case of listed CPSEs, compliance of provisions of Listing Agreement (To the
extent compliances are within the ambit of CPSEs)
iii. Compliance of DPE Guidelines having financial implications.
iv. No adverse observations by CAG on Annual Accounts pointing out
misappropriation of funds of any amount or Over/ under statement of profit/ loss
(surplus! deficit)/ assets/ liabilities amounting to 5% of Revenue from Operation.
v. Holding of AGM without seeking extension of time.
vi. Submission of Draft MoU/ MoU evaluation through administrative ministry/
department to DPE by proscribed date,
vii. Signing of MoUl as prescribed without deviation from minutes of the IMC meeting.
viii. Compliance of Public Procurement Policy for Micro and Small Enterprises issued
by M/o Micro Small and Medium Enterprises.
ix. Compliance of DPE guidelines on allocation of CSR fund by CPSEs for Swachh
Bharat activities.
x. Compliance of DPE guidelines on Digital India.
xi. Compliance of DPE guidelines on any policy (other than mentioned in ii and iii
above), issued from time to time, and prescribed specifically in this regard.

14.3 Compliance of each of additional eligibility criteria to be confirmed/ certified by board of

Directors by way of resolution.

15. CPSEs not signing of MoU or not submitting MoU evaluation: The CPSEs who do
not submit draft MoU/ Mou evaluation through their administrative Ministry /Departments
 within a stipulated time of the prescribed date will be rated as “ poor”.Stipulated time would
decided by Secretary, DPE(presently stipulated time is 6 months vide OM no M-
03/0017/2016-DPE (MoU) dated 14-07-2017). The prescribed dates are given in para 10
and 13 of the guidelines.

16. Approval of Score and Rating: DPE would carry out the evaluation of the performance
based on the MoU received through the administrative ministries/ department. The results
of MoU score and rating of CPSEs would be submitted to the IMC. IMC may scrutinize
the evaluation and wherever it is felt necessary, modify the score and rating. The score and
the ratings of the CPSEs would be submitted to chairman of the HPC for approval. Score
and rating would be final after it is approved by the chairman of the HPC.

Mandatory parameters:

S.no Financial performance criteria Unit Weightage

1 TURN OVER revenue from operations Rs Crore 10

2 OPERATING PROFIT/LOSS % 20
3 RETURN ON INVESTMENT:
Loss making CPSEs having accumulated % 20
losses
Reduction in total expenses as a percentage of
Total income as compared to previous year
TOTAL % 50

Other Parameters:
 s.no Performance criteria unit weightage

1 Exports as a percentage of revenue from % 0-10

operations
2 CAPEX (Rs Crores) - 0-10
3 Inventory of finished goods and working % 0-10
progress to revenue from operations
4 Reduction in inventory of more than 1 year old % 0-10
to revenue from operations (net)
5 Trade receivables (net) as no.of days of revenue days 0-10
from operations (gross)
6 Reduction in claims against the company not % 0-10
acknowledged as debt
7 Return (share of profit/loss) on investment in JV % 0-10

*Other parameters -Annex-II(part c): Not applicable to RINL as RINL being a manufacturing
company

Annex V

Definition and Explanatory notes for Targets

The terms used should be same as defined in Schedule lll or elsewhere in The Companies Act,
2013 applicable Ind AS/ Accounting Standards unless otherwise specified. All financial figures
are to be taken on the basis of Audited Annual Accounts or Annual Report. For section 8
CPSEs preparing Income & Expenditure statement profit/loss would mean surplus/deficit. The
terms used in Annex-ll are lso explained as under:-

A. Annex-2 (Part-A):

1. Revenue from Operations:

This would be taken as given in audited Annual Accounts of the CPSE Target for turnover
may be fixed net of excise duty, service tax, GST, etc., whether shown as reduction from
Revenue from Operations or under the head Expenditure. As per schedule lll. to respect of a
company other than finance company revenue from operations consist of (a)Sale of
products;(b)Sale of services; (c) Other operating revenues. In respect of a Finance company,
revenue from operations shall include revenue from (a) Interest income; and (b) Other income
from financial services.
If the price of product is regulated by statutory authorities/ international
transparent mechanism, adjustment in revenue from operations may be allowed for variation
in price, i.e., where target is fixed with the condition that adjustment in variation of price/ input
 cost (e.g., natural gas as a pass through in case of fertilizer) would be allowed due to regulatory
regime, etc., the target would be adjusted according to the variation in price at the time of
evaluation. For this purpose, first physical target would be decided and then financial target
would be arrived at after applying applicable prices so that there is no ambiguity at the time of
evaluation.

2. Operating Profit/Surplus or Reduction on Operating Loss/Deficit:

It would mean Profit before Tax/ Surplus excluding other incomes, and not taking into account
Extraordinary and Exceptional items. Section 8 CPSEs, preparing income and Expenditure
Statement in place of Profit and loss Account, profit/ loss would mean surplus/ deficit. The
purpose of this is to capture profit from operations; This would be worked out from figures
given in audited Annual Accounts, Extraordinary and Exceptional Items, prior period items
may be excluded. If shown separately in audited Annual Accounts. There would be no
adjustment in target due to changes in exchange rate, regulatory prices of raw material or
finished goods or due to any other reason since target would be fixed as a ratio of Operating
profit to revenue from operations. With the change in price, there would be change in
denominator along with change in numerator, hence ratio becomes price neutral to a large
extent.
In case of loss making CPSEs, reduction in loss should be target since target cannot be fixed
for loss. This reduction would be in the year under reference with reduction to loss for the
previous year. For excellent grade target for reduction in loss should be l00% or target for
profit in absolute terms.

3. PAT/ Net Worth or Shareholders Fund:

Profit earning CPSEs with no accumulated losses. ratio would he Profit after Tax (PAT)/ Net
Worth. PAT would be taken from audited Annual Accounts there would be no adjustment due
to changes in exchange rate, regulatory prices of raw material or finished goods. Net-worth
would have the same meaning as defined in Section 2(57) of the Companies Act, 20l3, i.e.
Aggregate value of the paid up share capital and all reserves created out of profits and securities
premium account, after deducting the aggregate value of accumulated losses, deferred
expenditure and miscellaneous expenditure not written off, as per the Audited Balance Sheet,
but does not include reserves created out of revaluation of assets, write-back of depreciation
and amalgamation. This ratio gives return on Investment or shareholders fund. However, if
there is extraordinary item of substantial value, the same would be considered at the time of
evaluation. Loss making CPSEs or CPSEs having accumulated losses parameter would be
reduction in Total Expenses as a percentage of Total Income as compared to previous year. It
may be ensured that target for excellent would be reduction to the extent to bring net loss to at
least rem. Similarly for CPSEs with first year of operation, target may be Total Expenses as a
percentage of Total income with excellent target of 100 or less.

B. Annex-II (Part-B):
1. Capacity Utilization:
Capacity utilization used to be a part of Notes to Accounts in case of manufacturing companies
till recently. Reference may be made to earlier Annual Accounts while introducing target under
this parameter. The purpose of this target is to reflect performance of CPSEs in physical/
quantitative terms which lead to quantification of goods and services. Reference to capacity
utilization may be with reference to installed capacity or rated capacity wherever available.
The target may be given either as a percentage of installed capacity or rated capacity or
production/ generation/ transmission in absolute terms.

2. New orders received during the year:

This may be a parameter mainly for CPSEs in Consultancy or Construction Sector. Only new
orders received during the year would be taken.

3. Export as a percentage of Revenue from Operations:

This parameter may be taken in respect of CPSEs having potential for export. The target may
be to increase export income. Export would include sale of goods and sale of services.

4. Development or Revenue from new products or product with new features:

This parameter may be taken where CPSE is engaged in innovative work or has the capacity
to develop new products. The intention of this parameter is to encourage development of new
products/ features and also to encourage their commercialization.

5. Production Efficiency parameter:

Any sector specific result oriented measurable parameter leading to physical efficiency in
production over previous year may be taken, eg., reduction in specific energy consumption,
reduction in raw material input per unit of production, etc
.
6. Completion of milestones of client's orders agreement without time overrun:
This would be a compulsory parameter CPSEs manufacturing on the basis of orders received
from clients and Consultancy Organizations where delay leads to levy of Penalty. The target
for excellent level would be 100%.

7. R&D, innovation, technological upgradation:

Commercialization of R&D achievement, innovation or technological Upgradation leading lo
efficiency in operations, or reduction in cost may be taken under this heading.
8. Increase in market share:
This parameter may be taken whore transparent system or measuring market share is available.

9. CAPEX:
Capital Expenditure (CAPEX) means any expenditure incurred towards acquisition/addition
of fixed assets i.e. on completion, it would form part of fixed assets. CAPEX may be for
expansion. modernization or diversification. This has to be considered on accrual basis and not
on cash basis. CAPEX may be decided on the basis of viable projects available for expansion,
modernization or diversification, cash and bank balance or parked funds, net-worth,
borrowings, etc. CAPEX may be with own funds or by borrowings by leveraging nor-worth or
may be by way of budgetary support. CAPEX would be compulsory target for CPSEs
having adequate funds or borrowing capacity and have viable business opportunities for
expansion, modernization or diversification. in case of manufacturing CPSEs not taking
CAPEX as one of the parameters, justification need to be given duly supported by the
administrative Ministry. There may be some projects for expansion, modernization,
diversification having project completion period of more than one year. In such cases, detail
of the project e.g. total cost, year-wise amount to be incurred, Schedule completion date,
amount to be spent, milestone to be achieved during the year, source of funding (own/
borrowed/ budgetary support) etc. need to be given for each project separately.

10. Percentages of value of CAPEX contracts/ projects running/ completed during the year
Without time/ cost overrun to total value of CAPEX contracts running/ completed during the
year: This would be a compulsory target for CPSEs which have taken target for CAPEX. This
would be worked out in respect of all ongoing projects for value above RS.150 crore.
Information would be given where more was time and/ or cost over-run. CPSE would submit
list of all projects which are in progress and/ or 10 top projects at the time of target setting.
Time/ cost overrun of projects under monitoring of Mo SPI should be captured from
OCMS system maintained by them. CPSEs are to ensure that details of oil projects of
over Rs. 150 crore are entered in OCMS system of MoSPI and/ or has to submit details
of 10 top projects. it may be ensured than parameter of monitoring time and cost overrun of
projects for numerator and denominator would be referring to same set of projects.

11. Number of days of Inventory of finished goods and Work-in-progress to Sale of Prodects
(wherever applicable).
This parameter is compulsory to all CPSEs having inventory of finished goods and work in
progress of more than 15 days except the CPSEs which have been mandated to have minimum
stock by the Government of India/ administrative Ministries/ Departments. The figures would
be taken from audited Annual Accounts for inventory of finished goods, work in progress and
sale of products. It is to be noted that inventory of raw material, stores and spares, loose tools
 and others (if any) shall be excluded and goods in transit shall be included under the relevant
sub head work in progress or finished good as applicable.

12. Reduction in inventory of more than one year old as a percentage of Revenue from
Operations:
This would be a parameter for trading CPSEs. These CPSES need to liquidate their stock as
early as possible.

13. Number Trade Receivables as of days of Revenue from Operations (Gross):

This parameter is compulsory to all CPSES having trade receivables of more than 15 days. The
figures of trade receivable, revenue from operations would be taken from audited Annual
Accounts. Trade receivables would include all trade receivables wherever shown in the
Balance Sheet except deferred trade receivables.

14. Reduction in Claims against the Company not acknowledged as debt:

This would be taken on the basis of figures given in Notes to Accounts to the Balance Sheet
under the heading ‘Contingent Liabilities‘. Evaluation would be done for reduction in claims
from the opening balance (closing balance of previous year). Efforts should be made to bring
claims by the CPSEs to Nil and substantial reduction in respect of claims raised by others.
This may be bifurcated into Claims raised by:
Central Government Departments; State Government Departments or Local Bodies; CPSE‘s;
Others
15. Return (share of profit/ loss) in Joint Ventures:
This would be a compulsory parameter for CPSEs having investment (after written off) in Joint
Ventures. Share of profit/ loss would be as per actual profit and loss (PAT) in the Joint Venture
Company.

16. Milestones with respect to subsidiary CPSEs not signing MoU separately:
This would be a compulsory parameter for CPSEs having subsidiaries and not signing MoU.
The parameter would depend on the nature of the CPSE.

17. Parameters pertaining to milestones of Revival:

Where revival/ restructuring of the CPSE has been approved by the competent authority and
revival plan is under implementation, in such cases, milestones for revival may be taken as
target to ensure timely implementation of revival plan of the CPSE.

18. Any other sector specific result-oriented measurable parameter:

 Under this head, sector specific result-oriented measurable parameter may be taken.
Parameters which are process oriented e.g. parameters related to training, HR etc. may not be
taken. The minimum weightage of the parameters may be kept as 3 so that it may be given
adequate consideration by the CPSE

Major assumptions

2017-18 2017-18 2018-19

MOU Draft likely PNC Actuals MWR Drat Mou
Parameter likely
Production ('000
Tonnes)
Hot Metal 5600 5200 5150 5132 6400 6200
Liquid Steel 5350 5000 5000 4972 6300 6100
Crude oil 5059 4737 4755 4731 5985 5795
Pig Iron 196 150 102 104 59 60
Sinter 7850 7000 6928 6860 8600 8350
Gross Coke 2469 2875 2844 2848 2501 2501
LMMM 800 840 848 855 850 850
SPECIAL BAR 400 400 368 367 675 600
MILL
WRM-1 965 965 1000 1003 1000 1000
WRM-2 575 570 514 519 600 600
MMSM 920 920 887 884 950 950
STRUCTURAL 300 300 257 256 630 550
MILL
SEMIS- Blooms- 70 42 54 60 142 38
I for sale
SEMIS- Blooms- 703 450 506 539 798 857
II for sale
Billet for sale 67 13 17 18 30 30
Saleable Steel 4800 4500 4450 4500 5675 5475
Sal steel 4100 3800 3903 3954 5675 5475
production –
excluding
trailrun
Exports sales 450 490 496 524 510 460
quantity
NSR (Rs/PMT)
Pig Iron 20936 24126 23355 23571 24588 23757
Saleable Steel 32000 32000 33283 33303 32216 34200
Semis 28727 29854 30282 30582 29501 31604
Finished steel 32628 32271 33713 33571 32461 34419
Exchange Rte. 65.50 64.85 64.57 64.50 65.00 66.00
(Rs/$)
FINALISATION OF MOU 2018-19 IN LINE WITH INTER –MINISTERIAL COMMITTEE
(IMC) MEETING DISCUSSIONS HELD ON 18-4-2018
1) During the IMC meeting at Ref.(b), a target of 30% reduction was recommended for the parameter
“Reduction in Operating Loss/Deficit over previous year”.
However, it is to submit that there is very little scope for reduction in operating losses as there would be an
increase of Rs.654 cr. (40% increase) in interest and depreciation in 2018-19 due to capitalization of new
units and higher working capital requirement at higher scale of operations.
It would be necessary to request DPE for rationalization of target for Reduction in Operating Loss/Deficit
over previous year to more realistic levels of 5% in the case of RINL which is equivalent to EBIDTA of
~Rs.1000 crs. i.e, around 300% increase from latest estimates for FY 2017-18.
2) As per 6-v of Ref.(a) above, one efficiency parameter in production area needs to be included in the
MOU with a weightage of 3%. In this regard, parameter of “Improvement in Specific Water Consumption
over previous year” is proposed as brought out next.

MoU Targets Improve

Particulars Marks 2017-18 Best in 5 yrs
Ex V.G. Good Fair Poor ment %
%
Improvem
ent in
Specific
water 3 2.40* 2.32* 4 3 2 1 0.5 3
consumpti
on over
previous
years

*Figures in Absolute terms

3) Additionally, as per Ref.(b) above IMC assigned a new parameter- “Registration of Vendors in MSME
Sector” with a weightage of 3% to be included in MOU 2018-19, targets for the same is proposed as
below.

MoU Targets Improve

Particulars Marks 2017-18 Best in 5 yrs
Ex V.G. Good Fair Poor ment %
Registratio
n of
3 72 75 50 48 46 44 42
vendors in
MSME
4) Also, the financial estimates for FY 2017-18 with respect to the various parameters as included in the
Ref.(a), have undergone change as indicated below.

As
Latest
recorded
Parameters Unit Estimatio
in PNC
n
Minutes
Revenue from Operations Rs. Cr 14300 14333
Operating Loss Rs. Cr -2097 -1554
Total Expenditure / Total Income % 133.24 109.53
Inventory of finished goods and work in
56 59
progress to Revenut from Operations Days

Annexure- I ::

PERFORMANCE EVALUATION FOR 2018-19

MOU 2018-19 FINANCIALS

2017-18 2017-18
Mou 2018-19 2017-18 accounts 2018-19
PARTICULARS MOU
draft (actuals) 11.5.201 MOU-PNC
8
PRODUCTION 4800.00 4500
1 5675.00 5675 5475.00
QUANTITY (000'T)
ICC-FOB 160.00 185.00 206.53 16011.00 180.00

NSR 32000.00 32216 33303 32216 35203

Exchange rt 65.50 65.00 64.50 65.00 66.00

Sales quantity 4600.00 5675.00 4486.31 4486.31 5475.00

18307.48
Gross sales including
20127.52 16633.71 16618.40 20934.24
trail run(crores)

1.Pig iron 455.31 146.20 236.76 233.76 151.15

14854.08 19640.6 13687.93
2.saleable steel 13652.34 20440.13
8
3.By-products,scrap 537.17 549.22
340.64 573.57 342.96
etc
 GROSS SALES 15846.56
I (EXCL TRAIL RUN)- 20127.52 14473.93 14459.67 20934.24
I
excise duty (II) 1590.28 0.00 262.80 262.80 0.00

Handling (a) 109.09 328.34 90.25 116.94 321.50

Freight (b) 621.39 1031.14 433.59 577.36 845.88

II NET SALES- II 13525.80 18768.04 1386.29 13502.57 19766.86
Export benefits 50.57 68.50 82.94 84.10 65.76

Internal consumption 0.00 0.00 18.57 29.59 0.00

Interest other than 63.92
63.92 56.48 79.20 72.00
deposits
Misc. Income 120.08 120.08 115.98 186.04 120.00
TOTAL INCOME- 13760.37
III 19020.54 13981.67 13913.41 20024.63
III
EXPENDITURE
Stock accretion(-)/ -164.36
72.98 10.41 -188.04 -2.29
discretion
8473.91 13030.5
Raw materials 8559.97 8600.84 12950.62
5
Stores, spares and 700.00
750.00 680.91 642.36 800.00
consumables
employee 2450.00
2600.00 2339.80 2343.60 2530.00
remuneration
1396.18
power, fuel and water 1408.53 1167.81 1157.57 1436.08

repair and 370.00

525.00 515.27 568.64 550.00
maintenance
other expenses 464.00 500.00 515.27 568.64 550.00
TOTAL 13690.22
IV 18937.05 13727.80 13581.25 18789.41
EXPENDITURE(IV)
GROSS 70.19
V MARGIN=(V)=(III- 83.49 253.87 332.16 1235.22
IV)
VI INTEREST (VI) 820.00 1260.00 882.62 930.61 1200.00
CASH -749.85
VII PROFIT=(VII)=(V- -1176.51 -628.75 -598.45 35.22
VI)
DEPRECIATION(V 685.64
VIII 1029.90 753.11 776.85 991.60
III)
 NET -1435.48
IX PROFIT(BEFORE -2206.41 -1381.85 -1375.30 -956.38
TAX) (IX=VII-VIII)

X INCOME TAX 0.00 0.00 -523.97 -544.10 -298.39

NET -1435.48
XI PROFIT(AFTER -2206.41 -857.88 -1372.25 -657.99
TAX) (XI=IX-X)
 Raw material consumption 2018-19 as per Mou
Sl.No. Particulars Qty Price Amount
'000 tonne ` `crore
1 BF Coke 320.314 23090.15 739.61
2 Coke Breeze 19.000 13854.09 26.32
2 Imported Coking Coal 2924.000 13695.16 4004.46
3 Medium Coking Coal 449.000 10626.87 477.15
4 Soft Coking Coal 1125.000 11026.55 1240.49
5 Pulverized Coal 631.000 8644.18 545.45
6 Iron Ore Lumps 4257.821 4518.84 1924.04
7 Iron Ore Fines 5092.000 4276.48 2177.59
8 CLO 245.827 4764.84 117.13
9 Pellets 103.804 6990.00 72.56
10 BF limestone 633.000 1994.21 126.23
11 BF dolomite 740.768 2013.61 149.16
12 Manganese Ore Lump 4.820 4685.25 2.26
13 Manganese Ore Fines 17.783 11862.82 21.10
14 Sand own mines 71.500 1169.89 8.36
15 Quartzite 13.020 984.65 1.28
16 SMS limestone (Imported) 1300.728 1336.46 173.84
17 SMS dolomite 460.807 2013.61 92.79
18 Billets 29372.86
19 Liquid Oxygen 73.000 14589.00 106.50
20 Ferro Manganese 1.563 108673.10 16.99
21 Ferro Silicon 10.882 87417.00 95.13
22 Silico Manganese 80.975 65890.00 533.55
23 Ferro Chrome 1.761 84889.00 14.95
24 Ferro Phosphorus 14850.00
25 Copper 0.160 337263.41 5.38
26 Ferro Venadium 0.181 852495.00 15.47
27 Synthetic Slag (Rate from Stores A/cs) 9.072 20929.10 18.99
28 Fe-B 173825.00
29 Aluminium 10.224 154865.70 158.33
30 Petroleum coke 13.466 27694.00 37.29
31 Sea Water Magnesia 6.500 47451.06 30.84
32 Si-Ca Wire (Rate from Stores A/cs) 1.374 126590.00 17.39

Total 12950.62
ANNUAL PERFORMANCE PLAN
Preamble:
This note seeks approval of Board of Directors for Annual Budget for the year 2017-
18, which consists of Capital Budget, Operations Revenue Budget & other
allocations.
Revenue budget

2017-18 2018-19 2017-18 2017-18 2018-19

PARTICUL 2017-18 2017-18 -
(Draft MOU- (PNC Accounts MOU-
ARS MoU Estimated 11.05.2018
Likely) Draft likely) IMC

Production 4500.00 4450 4500 5675

4800.00 5675.00
Qty (000 T) 5475.00
ICC - FOB 160.00 185.00
190.68 200.96 206.53 16011.00 180.00
NSR 32000.00 32216
32000 33283 33303 32216 35203
Exchange rt 65.50 65.00
64.85 64.57 64.50 65.00 66.00
Sales Quantiy 4600.00 5675.00
4502 4500.73 4486.31 4486.31 5475.00
Gross Sales
18307.48 16500.00 20127.52 16694.39 16633.71 16618.40
incl. Trial Run -
( ` Crs)
20934.24

1.Pig Iron 455.31 368.20 146.20 226.77 236.78 233.76 151.15

2.Saleable 13117.26 13700.66 13687.93 13652.34
Steel 14854.08 19640.68 20440.13
3.By-
Products,Scra 537.17 603.76 340.64 572.78 549.22 573.57 342.96
I. Gross Sales
(excl 15846.56 14089.21 20127.52 14500.21 14473.93 14459.67 20934.24

Excise Duty -
(II) 1590.28 262.80 0.00 262.80 262.80 262.80 0.00
Handling
(a) 109.09 112.30 328.34 94.83 90.25 116.94 321.50

Freight (b) 621.39 606.73 1031.14 462.86 433.59 577.36 845.88

II Net Sales -
II 13525.80 13107.38 18768.04 13679.72 13687.29 13502.57 19766.86
Export
Benefits 50.57 57.17 68.50 80.94 82.94 84.10 65.76
Internal
Consumptio 0.00 12.60 0.00 18.57 18.57 29.59 0.00
Other
Operating 0.00 9.37 0.00 20.41 20.41 31.91 0.00
Interest
other than 63.92 45.59 63.92 47.83 56.48 79.20 72.00
Misc.
Income 120.08 169.44 120.08 124.63 115.98 186.04 120.00
III. Total
Income - III 13760.37 13401.55 19020.54 13972.09 13981.67 13913.41 20024.63
 Expenditure
Stock Accretion(-
)/Decretion -164.36 207.90 72.98 163.23 10.41 -188.04 -2.29

Raw Materials 8473.91 8203.41 13030.55 8586.79 8559.97 8600.84 12950.62

Stores,Spares &
Consumables 700.00 572.57 750.00 640.01 680.01 642.36 800.00
Employee
Remunerartion 2450.00 2305.07 2600.00 2339.80 2339.80 2343.60 2530.00

Power,Fuel & Water 1396.18 1217.19 1408.53 1197.42 1167.81 1157.57 1436.08

Repair & Maintenance 370.00 444.15 525.00 454.53 454.53 456.28 525.00

Other Expenses 464.50 519.82 550.00 515.27 515.27 568.64 550.00

IV
Total Expenditure (IV) 13690.22 13470.12 18937.05 13897.05 13727.80 13581.25 18789.41
V Gross Margin =(V)= (III-
IV) 70.15 -68.57 83.49 75.05 253.87 332.16 1235.22
VI
Interest VI 820.00 1028.51 1260.00 888.02 882.62 930.61 1200.00
VII Cash Profit =(VII)=(V-
VI) -749.85 -1097.08 -1176.51 -812.97 -628.75 -598.45 35.22
VIII
Depreciation - VIII 784.88 754.84 776.85 991.60
685.64 1029.90 753.11
IX Net Profit (before Tax)
(IX=(VII-VIII) -1435.48 -1881.96 -2206.41 -1567.81 -1381.85 -1375.30 -956.38

Current Tax 0.00 0.00

Deferred Tax Liability
(Net) 0.00 0.00

Exceptional Item -533.97 541.05

PBT after Exceptional
Items -1033.84 -1916.35
X
Income Tax - X 0.00 -537.42 0.00 -523.97 -523.97 -544.10 -298.39
XI Net Profit (after Tax)-
(XI =(IX-X) -1435.48 -1344.54 -2206.41 -1043.84 -857.88 -1372.25 -657.99
Capital Budget:
A Consolidated Annual Capital Budget for (i) Capital Expenditure schemes (other than AMR), (ii)
AMR schemes (iii) R&D Expenditure and (iv) Investment in JVs 0f 1663 crores for the year 201-
18 indicating scheme wise total cost, cumulative expenditure and estimated cash flow for the next
three years is proposed for approval of the board. Summary of which is given here under:

(Crs)
Details Approved/ Cum. Indicative Cash Outflows* Total
Estimated Exp.till
2017-18 2018-19 2019-20
Cost Feb
2017

Sanctioned/
Committed
-Capex schemes 27918 17618 11244 1310 1545 4099
-AMR Schemes 821 444 189 92 40 321

To be
Sanctioned/
committed
-Capex 325 - 5 100 175 280
schemes*
-AMR Schemes 418 - 89 155 72 316

R&D - - 50 125 150 325

Expenditure

Investment in 1420 381 85 92 100 277

Joint venture’s

Total 1663 1873 2082 5618

Details of the capital budget proposed for the year 2017-18 is enclosed at annexure 2 (total capital
budget).
The AMR scheme propsed to be commited in 2017-18 has been criticaly reviewed and brought
down from 141 schemes of r s534.76 crores to 76 schemes of 368.36 crores.
Further the cash flows under sanctioned capex and AMR schemes has been minimized by deffering
the implementation. The major schemes proposed to be defferd include revamp of LMMM
walking beam furnance and revamping of CDD in SMS-1.

Commitment Budget for AMR Schemes:

As per the delegation of powers approved by the Board in its 277th Meeting held on 24/01/14, in case of
AMR Schemes , Annual Commitment Budget along with Cash Flow is to be put up to Board with proposed
list is Schemes. As indicated at Para -3.0 above, a Commitment Budget of ₹ 418 Cr is proposed for the year
2017-18. The list of schemes proposed to be committed during the year is given at annexure 3(A&B)
The list given at annexure III(B) is for the AMR scheme covered under clause NO.1.2 of the AMR
procedure , which are for (I) replacement of obsolete system / equipment, (ii) upgradation of systems e.g.,
analogue to digital, relay to PLC
iii) systems / equipment as necessitated as per statuary requirements like pollution control
iv) proposals up to rupees rs 10 lakhs
v) systems / equipment’s which outlived their lives Contingency budget of rs 50 crores proposed for AMR
schemes.

Other Capital Budget:

In addition to above, Other Capital Budget of 100Crs is proposed for the year 2017-18 to meet the
requirement on account of Insurance Spares/Tools, Special Repairs of Capital nature, purchase
/construction of Office Buildings/ stock yards, Boundary walls for VSP precincts, Furniture & office
equipment, CISF Capital Ex., etc.

Other Allocation:
Vehicle Advance: An amount of ₹ 26Crs is proposed towards recoverable interest bearing. Vehicle
advances to eligible employees as per Company rules.
Interest Subsidy: Interest Subsidy ₹40 Crs towards Interest Subsidy included in Employee remuneration
is proposed for the house building loans given to employees through banking channels.
CSR Budget:

Ministry of Corporate Affairs w.e.f 01.04.2014 notified Companies (Corporate Social Responsibility
Policy) Rules, 2014. The notification prescribes CSR Expenditure of 2% of Average Net Profit of the
Company for last three financial Years. Considering losses for the year 2015-2016 there may not be any
requirement to provide for any budget towards CSR for the year 2017-2018. However, to continue the
present ongoing CSR activities $ committed CSR Schemes, a Budget of 8 Crs is proposed for the year, in
addition to carry forward budget from the previous years 2016-17, for consideration of the Board.
Indicative cash outflows

approved Total
Name of the /estimate est.exp.till three
sl.no schemes d cost feb 2018 2018-19 2019-20 2020-21 years

A)
sanctioned
schemes

1 expansion-6.3mtpa 12291 12073.15 150 60 16 226

coke oven battery-
24 735.46 661.08 10 5 0 15
3 ASU4 170 149.31 5 2 0 7
4 PCI (BF1 &BF2) 133 111.05 5 2 0 7
5 330 tph boiler-6 350 294.93 5 20 10 35
67.5 MW
6 powerplant 344 331.58 5 5 2 12
220kv
7 strengthening 86 63.64 0 0 0 0
220kv
8 augumentation 58.1 52.84 2 3 0 5
augumentation of
9 iron ore storage 450 421.66 15 10 3 28
third converter &
10 4th caster 975 692.94 130 120 50 300
CAPEX TOTAL (A) 27551.46 18974.48 1277 2289 2266 5832
B)addition,modificatio
ns and repairs
schemes (AMR)

AMR-On going
1 schemes 730.87 332.84 40 49.78 37.1 126.88
AMR-cl .1.2 on
2 going schemes 272.93 111.12 30 21.12 5.3 56.41

AMR TOTAL (B) 1003.8 443.96 70 70.9 42.4 183.29

C)To be
sanctioned
replacement of
turbain and
1 blower 175 0 20 100 50 170
revamping of
2 esp's 4 boilers 150 0 0 50 80 130
850 TPD high
purity oxygen
3 plant 265 0 57 118 90 265
11.0/12.0 mtpa
4 expansion 1 2 2 5
CAPEX TOTAL
C(1) 590 0 78 270 222 570
AMR cl. 1.2 new
1 schemes 181.86 5 86.56 32.21 123.77
AMR - new
2 schemes 238.66 5 70.51 34.33 109.84
AMR -
3 contingency 50 20 20 10 50
AMR TOTAL C
(2) 470.52 30 177 76.54 283.61

TOTAL C (1+2) 1060.52 0 108 447 298.54 853.61

D)R&D 30 50 60 140
TOTAL CAPEX
A+B+C+D 1485 2856.96 2666.94 7008.9
Capex plan for three years

Indicative Cah outflow

Detail Approve Cum.
d / Et. Exp. Till Total three
Cot feb' 2018 2018-19 2019-20 2020-21 years

sanctioned schemes 28555 19418 1347 2360 2308 6025

Schemes to be
santioned 1061 108 447 299 854
R&D 30 50 60 140
JVs 1435 380 53 65 83 201
Total 31051 19798 1538 2922 2750 7210
Administrative budget:
Budget estimates for Administrative Expenditure for capital and revenue for the year 2017-18 are
to be compiled. For smooth budget projections, with the help of ERP, a separate module has been
developed under SAP-FM (Funds Management) so as to facilitate all authorized Fund Center users
to fill-in the projections online under a Transaction Code XXXXXX in SAP along with
reasons/justifications for hike in projections or new requirement. Documentation of transaction
codes on projections is enclosed which is self-explanatory and user-friendly.
1. Budget section vide its lOM Dated 16-01-2018 requested all the departments to project the
requirement of administrative Budget for the year 2018-19 online taking approval of the
concerned HOD and furnish hard copy of report of projections along with approval to
Finance Budget Section by F & A Department

2. In line with the above, budget projections for 2017-18 made by the departments on line
and on receipt of hard copies, the same has been verified and compiled. Considering
various aspects, the following budget allocations are being proposed under three major
heads:
1) Capital
2) Revenue
3) Indenting Budget

₹.in crores
Major Head Budget Proposed Allocation in
projections for allocation for 2017- 2016-17 (for
2017-18 18 Ref)
received
(A) Capital 141.59 45.69 51.96
(B) Revenue (Total) 462.69 344.04 335.08
(i) Administrative Rev. Exp. 371.61 293.22 281.97
(Excl. R&M and stores
&spares)
(ii) R&M 84.52 #46.80 #48.36
(iii)Stores & spares 6.56 #4.02 #4.75
(C) Indenting 32.73 27.04 46.14
#These amounts towards non-works fund centres will be deducted from the approved operations
budget and accordingly budget will be allocated to works department under these heads.
A. Capital Budget:
The details of overall commitment item wise (Annex1 ) and also fund centre wise & commitment
item wise (Annex 2) summarize capital budget projections & proposed allocation there of are
placed in the file from c1 to c5.
Even though Capital Budget was allotted to all fund centres during the year 2017-18 consumption
under the same with the regard to the allotment is not much due to financial crunch & austerity
measures how ever since budget is to the allocated for 2018-19 the following methodology has
been applied for allotment of capital budget after discussing with sum of the major departments
based on the justifications furnished by the departments along with the projections.
a) To avoid number of proposals of small amounts towards re-appropriation of
budget/additional budget, budget allocations have been proposed at 100% for projections up
to Rs. 2 lakhs.
b) In all other cases allocations has been rationalized based on the value of projections,
consumption pattern, projections/justifications furnished by the Departments to keep the
overall Capital Budget at same level of 2016-17.

Although, the budget allocation is proposed pruning it to Rs. 45.69 Crs, the additional capital
budget requirements of the major Departments ERP, General Stores, Town Administration,
Mines, IT, Marketing & Plant Departments etc., during the year beyond the allotment, can be
considered on case to case basis out of Rs.150 Crs.(including capital insurance spares and special
repairs of capital nature, etc.) i.e., other capital budget has been proposed for approval of board
in the annual Budget 2018-19
Commitment description of payment budget allocation proposed Previous year
item fund center 2018-19 for 2018-19 2017-18
Gross block -
CI200190 Miscelleneous 76750000 22800000 16910875
CI206100 Capital items 236587000 47317400 56605831
Gross block -
CI200190 Miscelleneous 5600000 1120000 830485
CI200140 Gross block - 7355000 3677500 8850000
Gross block -roads
CI200130 bridges and 150000000 30000000 16929807
Gross block -
CI200190 miscelleneous 156000000 31200000 33030700
Gross block -
CI200190 miscelleneous 83877000 43291500 43291500
Gross block-
CI200310 computer 68538000 24858000 24858000
Canteen
CI200540EW equipment-others 1482000 741000 0
Gross block -
CI200190 miscelleneous 10000000 2000000 14130000
Gross block -
CI200540 buildings -SF 50000000 10000000 100000
Items for
CI200590EJ opthlomology 5000000 1000000 2320000
Items for
CI200590EM rediology 5000000 1000000 1250000
CI200590EP Items for gynaec 7775000 1555000 2634000
Elec installations -
CI200580EC others -SF 4100000 2050000 0
Gross block -
electrical
CI200580 installations-SF 66490000 9973500 142000
CI206100 Capital items 50000000 8000000 8000000
Gross block -
CI200140 buildings 91100000 27330000 62496767
Gross block-
CI200190 miscelleneous 411937504 171559253 153318984
Gross block-
computer
CI200310 software 69928000 25670500 49115162
CI206100 Capital items 352112922 86979322 103563776
GRAND TOTAL 1415899380 456945929 519641815
B. Administrative Revenue, R&M and Stores & Spares:
The details of overall commitment item wise Revenue budget projections & proposed allocations
thereof (annex 3) and also fund centre & commitment wise revenue budget excluding R&M
,stores& spares (Annex 4) repaid and maintenance budget (annex5),stores and spares budget
(annex 6) are placed in the file from c6-c19.
The following methodology has been applied for proposed allocation of Revenue Budget:
a) To avoid no. of proposals for small amounts towards re-appropriation of budget/additional
budget, budget allocations have been proposed 100% for projections up to Rs.2lakhs.

b) In respect of Fund Centers of Director’s & CVO, budget projections furnished has been
considered in full.

c) For other cases, budget allocation has been proposed based on the nature of the commitment
item like fixed or variable nature, Statutory in nature, consumption/likely consumption in
2016-17,Budget Allocations in 2017-18 and also based on the justifications given by the
Departments along with their projections for 2018-19 etc.

d) The allocations proposed for 2018-19 are made in the line with the methodology followed
in the previous year for allocations 2017-18

The increase in allocations over 2017-18 is mainly due to allocations towards recruitment
expenses (HR), survey and investigation expenses , environment protection measure expense ,
professional and technical consultation,(mines).
Revenue (excl. R&M ,S&S) Payment Budget Projections and Allotment Proposed thereof for 2018-19
Commitment Description of Payment Allocation proposed Previous year 2017-
item commitment items budget 2018-19 for 2018-19 18
VPN Services and
CI433350 3000000 2400000 2400000
bandwidth charges
Awards and rewards-
CI439003 2000312 1700000 1700000
Employees
CI439002 Training expenses 25000000 10000000 8719718.64
Technical consultancy
CI431010 220000000 100000000 100000000
expenses- Others
CI432030 Rate and taxes - others 60000000 50000000 50000000
CI433252 Inland Travel - Employees 45000000 36000000 40000000
CI439085 Safety Expenses 20000000 18000000 14540381
CI433222 Foreign travel-directors 3000000 3000000 3000000
Sitting fees-Independent
CI439016 3200000 3200000 2700000
Directors
Technical consultancy
CI431010 75374000 40962910 41462910
expenses- Others
CI431410 Advertisement- tenders 100000000 100000000 90000000
CI431460 Advertisement- Publicity 120000000 108000000 137000000
Canteen Subsidy- Contract
CI404653 166248000 132998400 122527890.4
bills
CI439001 Recruitment expenses 74714060 59771248 72478687
CI439011 Expenses on schools 176611000 158949900 120000000
CI432230 Legal charges 30000000 24000000 22000000
CI431110 Security expenses- CISF 869400000 869400000 869400000
CI433280 Taxi hire charges 165000000 1650000000 158021516.7
Expenditure on
CI439051 91200000 72960000 47979002
Aforestration
Payment Corporate
CI404661 250000000 200000000 198744277
Hospitals
GRAND TOTAL 3716160189 2932212259 2819683436
 Repairs and maintanance payment Budget Projections and allotment proposed there of for 2018-19
Commitment Description of Payment budget Allocation Previous year
item commitment item 2018-19 proposed for 2018- 2017-18
CI407435 R&M - Computers 84479000 26269837 30352642
R&M - Roads Bridges and
CI407410 19150000 9575000 10223000
Culverts
CI407210 R&M- Buildings 142500000 114000000 132062081
R&M- Roads Bridges and
CI407410 121000000 48400000 45158064
Culverts
CI407440 R&M- Others 137115000 123403500 110407156
CI407210 R&M- Buildings 15000000 400000 270000
CI407210 R&M- Buildings 11224000 10400000 9155551
R&M- Railway lines and
CI407460 2600000 1310000 1145376
sidings
GRAND TOTAL 845193967 467966592 483597059

Stores and Spares payment Budget Projections and allotment proposed there of for
Description of Allocation
Commitment Payment Previous year
commitment proposed for 2018-
item budget 2018-19 2017-18
item 19
CI405051 Consumption-stores and41460010
spares 29240376 29240376
CI405051 Consumption-stores and spares
4000000 1220000 1530000
CI405051 Consumption-stores and spares
3000000 2100000 1961908
CI405051 Consumption-stores and10850000
spares 2712500 9400000
GRAND TOTAL 65573410 40184092 47471456
C. Indenting Budget (Non-works Fund Centre’s):
In the present SAP System, Indenting Budget is required to be given to Non-Works Fund Centres
to facilitate raising Purchase Requisition(PR)/ Purchase Order(PO) and Goods Receipt Note(GRN)
at Stores for procurement of items through MM Route. This involves cash outflow at the time of
raising GARN at stores. Consumption against these items will be through the budget proposed to
be allotted as at 2(B) above. The following methodology has been proposed for allocation of
indenting Budget:
a) To avoid no. of proposals for small amounts towards re-appropriation of budget/additional
budget allocations have been proposed 100% for projections up to Rs.2lakhs.
b) In case of items like Liveries, non-monetary awards(medallion) and medicines which are
accounted under Employee benefits and no budgetary control under ERP during
consumption, full indenting budget is being proposed in line with the projections received
from departments.
c) For other cases, allocations have been proposed considering consumption pattern,
allocation for 2017-18,projections/justifications furnished by the departments for 2018-19.

Allocation
Description of Payment budget Previous year
Commitment item proposed for 2018-
commitment item 2018-19 2017-18
19
CI238408 Inventory-spares-stores and 39360010
spares 39360010 60237041
CI238302 invenory-oprsupl-non monetary2404540
awards 2404540 2953443
CI238312 inventory-oprsupl-office equipment
10000000 5000000 17219400
CI238501 inventory-medicines 135500000 135500000 279561143
CI238408 Inventory-spares-stores and 51200000
spares 25600000 3731498
grand total 327319711 270419711 461406667

The details of fund centers wise and commitment item wise indent budget projections and
proposed allocations were of (Annex 7) .

3.the following summarized position of administrative budget 2018-19, proposed for

approval of CMD
A)capital budget: rs 45.69 crores
B)revenue budget: rs 334.04 crores
C)Indenting budget :RS 27.04 crores
Every Year RINL Finance & Accounts Budget Section gives IOM for Budgetary projections
from all the Departments and copy of communication and screen opened for feeding
budgetary projections in ERP are given below:
VISAKHAPATNAM STEEL PLANT
VISAKHAPATNAM
INTER OFFICE CORRESPONDANCE

From : Asst General To Sri «Name_of_HOD»

Manager (F&A)
«Designation»
Max No: 22198
«Deptt»
«Fund_Center»
«Remarks»

VSP/FIN/01/Y-6/2017-18/ Dt :13.01.2017

Sub: Administrative Expenditure (Revenue Capital) Budget 2017-18.

Budget estimates for Administrative Expenditure for capital and revenue for the year 2017-18 are
to be compiled. For smooth budget projections, with the help of ERP, a separate module has been
developed under SAP-FM (Funds Management) so as to facilitate all authorized Fund Centres
users to fill-in the projections online under Transaction Code ZFMBP01 in SAP along with
reasons/justifications for hike in projections or new requirement. Documentation of transaction
codes on projections is enclosed which is self-explanatory and user friendly. Users are requested
to freeze projections on-line after taking approval from the competent authority.

For easy understanding, guidelines along with FAQ’s on SAP-FM/ budget projections and
also the document on T Code for projections are uploaded in the intranet portal under
Budget Section of Finance Dept. [Finance>F&A Sections >Budget]. Hence, all SAP-FM users
are requested to go through the same before projecting the budget for the year 2017-18. List
of Fund Centres and Commitment items are also being uploaded in Intranet portal.
In case of Works/Marketing/Mines, the individual FC shall forward their projections to the
respective NODAL agency for consolidating/assimilating the budget projections of that group of
FCs and obtain approval of ED(W) in case of Works and HOD not below the rank of E-8for others.
The nodal FC shall upload the consolidated projections online and also forward the same along
with approval to Budget Section of F&A Dept. Similarly, all other independent FCs shall upload
projections online and also forward the same to Budget Section of F&A Dept. along with the
approval of HOD not below the rank of E-8.

On receipt of hard copy of report of budget projections [i.e., after freezing in SAP-FM] along with
approval from all Nodal FCs/ Independent FCs, Finance Budget Section will process for approval.

In addition to the above the following may also be looked into:

Estimates for Centralized Commitment Items shall be projected by the Fund Centres with whom
it is centralized. Individual Fund Centres should not project the requirement on-line for centralized
Commitment Items. However, such requirements shall be sent (offline) to the centralized fund
centres for consolidation and projection on-line by Centralized Fund Centres. While projecting for
Inland Travelling budget, the total projections should be bifurcated into (a) Air-Tickets and (b)
Others. The air-ticket part shall be forwarded (offline) to Gen. Admn. (GA). Budget for travelling
(other than air-ticket portion) shall be projected by individual FC’s (online). In case of Foreign
Travel Expenditure on Tours for Business Development & Training, the Departments may project
their requirements offline directly to GA as Budget check in ERP by default is with GA Dept-FC
F660109.
List of Budget heads which are centralized are given below:

Sl.N Account Budget Head Dept. Dept. Code

o code

1. CI200190 Gross Block IT dept. F570014

Computer
2. CI433330 General Admn(GA) F660109
Telephone
3. CI433280 General Admn F660109
Expenditure
4. CI433242 GA(Business tour & F660109
Taxi Hire Charges
Training)
5. CI432230 F660105
Foreign Travel
Legal Affairs
6. CI439080 F660108
Legal Expenses
Hospitality(FH&
7. CI439031 F660106,F650900
Entertainment GH)
& F600015
8. CI439242 Expenses
HRD/ CSM/ MS
& F660109
Seminar//Work
General Admn
CI433252 Shops F660109
& General Admn
Air-tickets (Inland) F660109
9.
CI433271 General Admn
Air-tickets F600015
CI439096 (Foreign) MS
Air tickets-
others/guests
Non-Monetary
Awards
Keeping in view the above and the present critical financial position of the company, Budget
Projections for Revenue & Capital may kindly be made in the most realistic basis and to be
furnished positively on or before28.01.2017. In case of any clarifications on projections users
may approach Budget Section on Max No. 22179/21131 / 22198 and [email protected].
ZFMBP01: Budget projections by user department
a) User should select year (2017) and fund centre and press enter.

b) Commitment wise - Payment budget allotted and Payment budget consumed (for 2016) are
displayed
.
c) User can enter Projection amount and remarks, in case of increase from previous year, if
any.

d) Save by clicking save button on in the ribbon at the top of the screen. Do not freeze
immediately. (intermediately/periodic saving is also possible)

e) ZFMBP04: Insertion of new Commitment Item – (if required)

- User should select year (2017) and fund centre and press enter.
- Insert new commitment item and save.
- After insertion, new commitment item can be seen in Projection entry screen i.e.,
ZFMBP01: Budget projections by user department and projection can be entered
there.
f) Report can be generated after clicking Report button.

g) Projections should be freeze only after taking due approvals as per IOM, by clicking freeze
button.
 h) Report generated after freezing should be sent to Budget section along with approval.

i) Budget may be projected in CI206100 if procurement is expected through Stores. Other cases
shall be projected in CI200--- series based on the nature of the asset. For these other cases,
budget projections may be given at Gross Block level for a given CI series, instead of sub-
category level. For instance, budget may be projected in CI200190 for GB Misc Assets instead
projecting of CI200190EA, CI200190EG, CI200190EK etc so as to minimise the transer
related issues/allotment asset key etc.

SUSTAINABILITY PLAN

1. INTRODUCTION
Sustainability Plan 2016-17 comprises of Annual Business Plan (ABP) for 2016-17 and roll-on
plan up to 2020-21 with broad action plans and initiatives beyond the annual timeframe addressing
various aspects related to capacity enhancement, productivity improvement, market development
and initiatives related to HR, CSR, Energy, Environment etc. The scope of the plan thus extends
beyond the factors contributing to profitability and includes aspects that are important for long
term sustainability of the company.
Approach for Sustainability Plan 2016-17:
The process of development of Sustainability Plan 2016-17 was steered by the Apex Committee comprising
of all functional Directors. Apex Committee guided in formulation of MoU targets for 2016-17. Upon
finalization of the same, further guidance was obtained from CMD for setting MoU Excellent targets as
part of Annual Business Plan. Accordingly, CMD and Directors reviewed the plan and potential presented
by the major departments for finalizing the Sustainability Plan targets. Thereafter, strategy workshops were
conducted under the guidance of ED(Works)I/c to work out the detailed actions plans in order to achieve
the targeted levels.

Sustainability and capex plan:

Sus. Plan and CAPEX plans are the internal plans of the company which is monitored only
by the company and is not presented to the ministry of steel. The financials of the sus. plan
and CAPEX plan are revised by the company.

The planned capex is for doubling its capacity from the earlier 3.6 MTPA to 6.3 MTPA. Debt will
be either bank funded or raised through issuance of five-year bonds.
The Vizag-based firm has not yet finalized the ways to raise funds, but it will most likely choose between
two methods that include taking loans from banks and issuing bonds with a minimum tenure of 5 years.
RINL is currently in the process of raising its steel-manufacturing capacity from 3.6 mtpa to 6.3 mtpa at its
Vizag facility with an investment of ₹ 12,500 crores. The company has however, already spent more than
₹9,000 crores for the purpose. Meanwhile, the company is also planning to invest additional 7,000 crores
towards modernization of its existing plant that could further raise its capacity to 7.3 mtpa.

Sustainable plans (2018-2019) financials

2017-18 2018-19
Particulars
Actuals Sustainable plan

Production quantity
1 5675 5475.00
(000'T)
ICC-FOB 16011.00 180.00

NSR 32216 35203

Exchange rt 65.00 66.00

Sales quantity 4486.31 5475.00

Gross sales including

16618.40 20934.24
trail run(crores)

1.Pig iron 233.76 151.15

2.saleable steel 13652.34 20440.13

3.By-products,scrap
573.57 342.96
etc
Gross sales (excl trail
I 14459.67 20934.24
run)- I

excise duty (II) 262.80 0.00

Handling (a) 116.94 321.50

Freight (b) 577.36 845.88

II Net sales- ii 13502.57 19766.86
Export benefits 84.10 65.76

Internal consumption 29.59 0.00

Interest other than
79.20 72.00
deposits
Misc. Income 186.04 120.00
III Total income- iii 13913.41 20024.63
Expenditure
Stock accretion(-)/
-188.04 -2.29
discretion
 Raw materials 8600.84 12950.62
Stores, spares and
642.36 800.00
consumables
employee
2343.60 2530.00
remuneration

power, fuel and water 1157.57 1436.08

repair and
568.64 550.00
maintenance
other expenses 568.64 550.00
TOTAL
IV 13581.25 18789.41
EXPENDITURE(IV)
GROSS
V MARGIN=(V)=(III- 332.16 1235.22
IV)
VI INTEREST (VI) 930.61 1200.00
CASH
VII PROFIT=(VII)=(V- -598.45 35.22
VI)
DEPRECIATION(V
VIII 776.85 991.60
III)
NET
IX PROFIT(BEFORE -1375.30 -956.38
TAX) (IX=VII-VIII)

X INCOME TAX -544.10 -298.39

NET
XI PROFIT(AFTER -1372.25 -657.99
TAX) (XI=IX-X)
Raw material cost:
Basic assumptions related to steel and raw material prices considered in the plan are as given below:

Raw material consumption 2018-19 as per Mou

Sl.No. Particulars Qty Price Amount
'000 tonne ` `crore
1 BF Coke 320.314 23090.15 739.61
2 Coke Breeze 19.000 13854.09 26.32
2 Imported Coking Coal 2924.000 13695.16 4004.46
3 Medium Coking Coal 449.000 10626.87 477.15
4 Soft Coking Coal 1125.000 11026.55 1240.49
5 Pulverized Coal 631.000 8644.18 545.45
6 Iron Ore Lumps 4257.821 4518.84 1924.04
7 Iron Ore Fines 5092.000 4276.48 2177.59
8 CLO 245.827 4764.84 117.13
9 Pellets 103.804 6990.00 72.56
10 BF limestone 633.000 1994.21 126.23
11 BF dolomite 740.768 2013.61 149.16
12 Manganese Ore Lump 4.820 4685.25 2.26
13 Manganese Ore Fines 17.783 11862.82 21.10
14 Sand own mines 71.500 1169.89 8.36
15 Quartzite 13.020 984.65 1.28
16 SMS limestone (Imported) 1300.728 1336.46 173.84
17 SMS dolomite 460.807 2013.61 92.79
18 Billets 29372.86
19 Liquid Oxygen 73.000 14589.00 106.50
20 Ferro Manganese 1.563 108673.10 16.99
21 Ferro Silicon 10.882 87417.00 95.13
22 Silico Manganese 80.975 65890.00 533.55
23 Ferro Chrome 1.761 84889.00 14.95
24 Ferro Phosphorus 14850.00
25 Copper 0.160 337263.41 5.38
26 Ferro Venadium 0.181 852495.00 15.47
27 Synthetic Slag (Rate from Stores A/cs) 9.072 20929.10 18.99
28 Fe-B 173825.00
29 Aluminium 10.224 154865.70 158.33
30 Petroleum coke 13.466 27694.00 37.29
31 Sea Water Magnesia 6.500 47451.06 30.84
32 Si-Ca Wire (Rate from Stores A/cs) 1.374 126590.00 17.39

Total 12950.62
Profit & Loss Statement

2017-18 2017-18 2018-19

PARTICULARS
(actuals) (Targets)
(Targets)
PRODUCTION 4800.00 4500
1 5475.00
QUANTITY (000'T)
ICC-FOB 160.00 206.53 180.00

NSR 32000.00 33303 35203

Exchange rt 65.50 64.50 66.00

Sales quantity 4600.00 4486.31 5475.00

18307.48
Gross sales including
16633.71 20934.24
trail run(crores)

1.Pig iron 455.31 236.76 151.15

2.saleable steel 14854.08 13687.93 20440.13

537.17 549.22
3.By-products,scrap etc 342.96

GROSS SALES (EXCL 15846.56

I 14473.93 20934.24
TRAIL RUN)- I

excise duty (II) 1590.28 262.80 0.00

Handling (a) 109.09 90.25 321.50

Freight (b) 621.39 433.59 845.88

II NET SALES- II 13525.80 1386.29 19766.86
Export benefits 50.57 82.94 65.76

Internal consumption 0.00 18.57 0.00

Interest other than 63.92
56.48 72.00
deposits
Misc. Income 120.08 115.98 120.00
III TOTAL INCOME- III 13760.37 13981.67 20024.63
EXPENDITURE
Stock accretion(-)/ -164.36
10.41 -2.29
discretion
 Raw materials 8473.91 8559.97 12950.62
Stores, spares and 700.00
680.91 800.00
consumables
2450.00
employee remuneration 2339.80 2530.00

1396.18
power, fuel and water 1167.81 1436.08

370.00
repair and maintenance 515.27 550.00

other expenses 464.00 515.27 550.00

TOTAL 13690.22
IV 13727.80 18789.41
EXPENDITURE(IV)
GROSS 70.19
V MARGIN=(V)=(III- 253.87 1235.22
IV)
VI INTEREST (VI) 820.00 882.62 1200.00
-749.85
CASH
VII -628.75 35.22
PROFIT=(VII)=(V-VI)

DEPRECIATION(VIII 685.64
VIII 753.11 991.60
)
NET -1435.48
IX PROFIT(BEFORE -1381.85 -956.38
TAX) (IX=VII-VIII)
X INCOME TAX 0.00 -523.97 -298.39
-1435.48
NET PROFIT(AFTER
XI -857.88 -657.99
TAX) (XI=IX-X)
Major assumptions 2016-17:
Basic assumptions related to steel and raw material prices considered in the plan are as given below:

Major Assumptions
Parameter 2016-17 2017-18
Production('000 Tonnes) Actuals Assumptions
Hot Metal 4386 5600
Liquid Steel 4176 5350
Crude Steel 3962 5059
Pig Iron 150 196
Sinter 6984 7850
Gross Coke 2755 2469
LMMM 833 800
SPECIAL BAR BILL 157 400
WRM 1 1000 965
WRM 2 395 575
MMSM 759 920
STRUCTURAL MILL 70 300
SEMIS - Blooms-I for sale 53 70
SEMIS - Blooms-II for sale 552 703
Billet for sale 27 67
Saleable Steel Production 3847 4800
Saleable Steel Production-Exl
Trial run 3620 4100
Exports Sales Qty (incl Pig
Iron) 460 810
Exports Value (in Crs) 1051 2576
NSR (Rs/PMT)
Pig Iron 19581 23751
Saleable Steel 27350 33000
Semis 23062 29955
Finished Steel 28247 33584
Exchange Rt(Rs/$) 67.45 69.00
Raw material requirements:

Material 2016-17 2017-18 2018-19 2019-20 2020-21

ICC/USC 3178 3102 3169 3196 3216

ICC(Soft) 1074 1049 1071 1080 1087

MCC 223 218 222 224 226

BC(Ind) 2002 2225 2225 2225 2225

BC(Imp) 215 268 268 368 268

Pulverised Coal 326 507 800 1071 1188

BF Coke 400 1017 1119 1033 942

I/O Fines 4323 4674 5117 5813 6191

I/O Lumps 3274 4094 4871 5365 5350

CLO 87 149 0 0 175

Pellets 348 402 339 440 379

BF Lime Stone 491 530 576 656 698

BF Dolomite 620 691 788 869 912

SMS Lime Stone 829 904 1028 1211 1211

SMS Dolomite 325 354 403 474 474

Manganese Lump 5.4 6.2 7 7.8 8.1

Manganese Fines 14.8 16.5 18.8 20.8 21.8

Sand/QTZ Fines 52.1 57.6 65.1 71.8 75.4

Quartzite Lump 11.3 13.1 14.7 16.4 17

Assumptions:
Ovens/day 333 325 332 334 337

DCC/(t/oven) 32.24 32.24 32.24 32.24 32.24

Blend-ICC/USC:ISC:MCC 71:24:05 71:24:05 71:24:05 71:24:05 71:24:05

Hot metal prod. 5200 6000 6750 7500 7800

PCI(kg/thm) 54.8 74 103.7 125 133.3

% Sinter in burden 70.5 68 69 68.5 69.1

% Pellets in burden 4 4 3 3.5 2.9

% Ore in burden 25.5 28 28 28 28

Sinter (kg/thm) 1128 1088 1104 1096 1106

Ore(kg/thm) 416 457 457 457 457

Pellets(kg/thm) 64 64 48 56 46

Gross ore(kg/thm) 437 480 480 480 480

Gross ore required 2273 2880 3240 3587 3744

Sized ore preparation potential 2190 2738 3577 3587 3577

Billets procurement 0 318 344 0 0

Liquid steel 5000 5400 6200 7300 7300

CHAPTER- IV

DATA ANALYSIS AND

INTERPRETATION
ANALYSIS AND INTERPRETATIONS OF FINANCIAL STATEMENTS:
Presentation of financial statements is the important part of accounting process so as to provide
more meaningful information to enable the owners, investors, creditors or users of financial
statements to evaluate the operational efficiency of the concern during the particular period. More
useful information is required from the financial statements to make the purposeful decisions about
the profitability and financial soundness of the concern. In order to fulfill the needs of the above,
it is essential to consider analysis and interpretation of financial statements.

Meaning of Analysis and Interpretations:

The term "Analysis" refers to rearrangement of the data given in the financial statements. In other
words, simplification of data by methodical classification of the data is given in the financial
statements.
The term "interpretation" refers to "explaining the meaning and significance of the data so
simplified."
Both analysis and interpretations are closely connected and inter related. They are complementary
to each other. Therefore presentation of information becomes more purposeful and meaningful-
both analysis and interpretations are to be considered.
Metcalf and Tigard have defined financial statement analysis and interpretations as a process of
evaluating the relationship between component parts of a financial statement to obtain a better
understanding of a firm's position and performance.
The facts and figures in the financial statements can be transformed into meaningful and useful
figures through a process called "Analysis and Interpretations."
In other words, financial statement analysis and interpretation refer to the process of establishing
the meaningful relationship between the items of the two financial statements with the objective
of identifying the financial and operational strengths and weaknesses.
TYPES OF ANALYSIS AND INTERPRETATIONS:
The analysis and interpretation of financial statements can be classified into
various categories depending upon:
I. The Materials Used
II. Modus Operandi (Methods of Operations to be followed)
 I. On the basis of Materials Used:
(a) External Analysis.
(b) Internal Analysis.

II. On the basis of Modus Operandi:

(a) Vertical Analysis.
(b) Horizontal Analysis.

I. On the Basis of Materials Used:

On the basis of materials used the analysis and interpretations of financial statements may
be classified into
(a) External Analysis and
(b) Internal Analysis.

(a) External Analysis:

This analysis meant for the outsiders of the business firm. Outsiders may be investors,
creditors, suppliers, government agencies, shareholders etc. These external people have to rely
only on these published financial statements for important decision making. This analysis serves
only a limited purpose due to non-availability of detailed information.
(b) Internal Analysis:
Internal analysis performed by the persons who are internal to the organization. These
internal people have access to the books of accounts and other information related to the business.
Such analysis can be done for the purpose of assisting managerial personnel to take corrective
action and appropriate decisions.

II. On the basis of Modus Operandi:

On the basis of Modus operandi, the analysis and interpretation of financial statements may
be classified into:
(a) Horizontal Analysis and
 (b) Vertical Analysis.

(a) Horizontal Analysis: Horizontal analysis is also termed as Dynamic Analysis. Under this type
of analysis, comparison of the trend of each item in the financial statements over the number of
years are reviewed or analyzed. This type of comparison helps to identify the trend in various
indicators of performance. In this type of analysis, current year figures are compared with base
year for figures are presented horizontally over a number of columns.
(b) Vertical Analysis: Vertical Analysis is also termed as Static Analysis. Under this type of
analysis, a number of ratios are used for measuring the meaningful quantitative relationship
between the items of financial statements during the particular period. This type of analysis is
useful in comparing the performance, efficiency and profitability of several companies in the same
group or divisions in the same company.

REARRANGEMENT OF INCOME STATEMENTS:

Financial statements should be rearranged for proper analysis and interpretations of these
statements. It enables to measure the performance of operational efficiency and profitability of
a concern during particular period. The items of operating revenues, non-operating revenues,
operating expenses and non operating expenses are rearranged into different heads and sub-
heads.

INCOME STATEMENT EQUATIONS:

 From the above rearrangement of operating statements, the following accounting equations
may be given:
Net sales = Cost of Sales + Operating Expenses + Non Operating expenses
Gross Profit = Net Sales - Cost of Goods Sold
Operating Expenses = Office and Administrative Expenses + Selling and distribution
expenses
Operating Expenses = Gross Profit - Net Operating Profit
Sales - Net Operating Profit = Cost of Sales + Operating Expenses
Net Operating Profit = Gross Profit - Operating Expenses
Net Profit Before Interest and Tax = Net Operating Profit – Non Operating expenses
Sales = Cost of Sales + Operating Expenses + Non Operating Expenses
Net Profit = Net Sales - (Cost of Sales + Operating Expenses + Non-Operating
expenses)

Rearrangement of Balance Sheet:

Balance sheet is a statement consisting of assets and liabilities which reflected the financial
soundness of a concern at a given date. In order to judge the financial position of a concern, it is
also necessary to rearrange the balance sheet in a proper set of form. For analysis and
interpretation, the figures in Balance Sheet are rearranged in a Vertical Form.

BALANCE SHEET EQUATIONS:

From the above Balance Sheet the following accounting equations may be drawn:
 Liquid Assets = Current Assets - Stock and Prepaid Expenses
Net Working Capital = Current Assets - Current Liabilities
Current Assets = Net Working Capital - Current Liabilities
Capital Employed = Net Working Capital + Fixed Assets
= (Current Assets - Current Liabilities) + Fixed Assets
= Total Assets - Current Liabilities
Shareholders' Net Worth = Company's Net Assets - Shareholders' Net Worth
Equity Shareholders' Net Worth = Total Tangible Net Worth - Preference Share Capital

METHODS OR TOOLS OF ANALYSIS AND INTERPRETATIONS:

The following are the various techniques can be adopted for the analysis and interpretations
of financial statements.
(1) Comparative Financial Statements.
(2) Common Size Statements.
(3) Trend Analysis.
(4) Ratio Analysis.
(5) Fund Flow Analysis.
(6) Cash Flow Analysis.

(1) COMPARATIVE FINANCIAL STATEMENTS:

Under this form of comparative financial statements both the comparative Profit and Loss
Account and comparative Balance sheet are covered. Such comparative statements are prepared
not only to the comparison of the various figures of two or more periods but also the relationship
between various elements embodied in profit and loss account and balance sheet. It enables to
measure operational efficiency and financial soundness of the concern for analysis and
interpretations. The following information may be shown in the comparative statements:
(a) Figures are presented in the comparative statements side by side for two or more years.
(b) Absolute data in money value.
(c) Increase or Decrease between the absolute figures in money value.
(d) Changes or trend in various figures in terms of percentage.
COMPARATIVE INCOME STATEMENTS:
The income statement (profit or loss A/c) gives the results of the operations during a
definite period. It reveals the profit carried or loss incurred by the cancers. The comparative study
if income statement for more than 1 year may enable us to know the program of the concern. First
two columns gibe figures of various items for two years. The third and fourth column used to show
increase or decrease in figures in absolute adopted in preparing comparative balance sheet.
 In first step, find out the changes in absolute figures i.e.., increase or decrease should be
calculated.
 In second step percentage of change should be calculated with the help of following
formula:

change in amount
Percentage of change = ∗ 100
base year amount

COMPARATIVE BALANCE SHEET:

The balance sheet prepared on a particular date reveals the financial position of the
concern on the date to study the trends of business over a period of time comparative balance
sheet reveals the cause for changes in the financial position comparative balance sheet reveals
the cause for changes in the financial position of amount of various truncations. The
comparative studies throw light on financial policies adopted by management.
The comparative balance sheet consists of two columns for the original data. A third
column used to show increase or decrease in various items. A south column containing the
percentage of increase or decrease may be added.

(2) COMMON SIZE STATEMENTS:

Common Size Statements generally involve income statement and balance sheet. Income
statement and Balance sheet becomes “common size” when their amounts (dollars or rupees) are
expressed in terms of percentage. A common base figure determines the structure of the common
size statement and allocates the percentage of that figure to each item which is present on the
document. The common size statement does not reflect the exact figures for each item, but a
percentage. The figures are shown as percentage of total assets, total liabilities and sales. The total
assets are taken as 100 and different assets are expressed as percentage of total. Similarly various
liabilities are taken as a part of total liabilities. These statements are also known as component
percentage or 100 statements because every individual item is stated as a percentage of the total
100 short comings in comparative statements and trend percentage where changes in item could
not be compared with the total have been converted up.

The common size statements may be prepared in the following way:

 The total assets or liabilities are taken as100.
 The individual assets are expressed as a percentage of total assets i.e.., 100 and different
liabilities are calculated in relation to that liability.

COMMON SIZE INCOME STATEMENT:

The items in income statement can be shown as percentage of sales to show the relation
of each item of sales. A significant relationship can be established between items of income
statement and volume of sales. The increase in sales will certainly increases selling expression
and volume of sales. The increase in sales will certainly increases selling expresses and not
administrative or financial expenses. In case the volume of sales increase to a considerable
extent, administrative and financial expenses may go up. In case the sales are declining, the
selling expenses should be reduced at once.
So, a relationship is established between sales and other in income statement and this
relationship is helpful in evaluating operational activities of the enterprises.

COMMON SIZE BALANCE SHEET:

Statement in which balance sheet items are expressed as the ratio of each asset to total
assets and the ratio of each liability is expressed as a ratio of total liabilities is called common
size balance sheet. The comparison of figures in different periods is not useful becomes total
figure may be affected by a number of factors. It is not possible to establish standard norms for
various assets. The trends of year to year may not be studied and even they may not give proper
results.
Analysis and the Interpretation of Financial Statements:
 Financial statements are indicators of the two significant factors:
 Profitability
 Financial soundness
Analysis and Interpretation of Financial Statements therefore refer to such a treatment of the
information contained in the income statement and balance sheet so as to afford full diagnosis of
the profitability and financial soundness of the business.

(3) TREND ANALYSIS:

Trend Analysis is one of the important technique which is used for analysis and
interpretations of financial statements. While applying this method, it is necessary to select a
period for a number of years in order to ascertain the percentage relationship of various items in
the financial statements comparing with the items in base year. When a trend is to be determined
by applying this method, earliest year or first year is taken as the base year. The related items in
the base year are taken as 100 and based on this trend percentage of corresponding figures of
financial statements in the other years are concluded. This analysis is useful in framing suitable
policies and forecasting in future also.

(4) FUND FLOW ANALYSIS:

Fund Flow Analysis is one of the important methods for analysis and interpretations of
financial statements. This is the statement which acts as a supplementary statement to the profit
and loss account and balance sheet. Fund Flow Analysis helps to determine the changes in
financial position on working capital basis and on cash basis. It also reveals the information
about the sources of funds and has been utilized or employed during particular period.

(5) CASH FLOW ANALYSIS:

A Cash Flow Statement is a statement which shows inflows and outflows of cash and cash
equivalents of an enterprise during a particular period. It provides information about cash flows,
associated with the period’s operations and also about the entity’s investing and financing
activities during the period. In cash flow statement cash from the operations are calculated after
adjusting the increases and decreases in current assets and liabilities. In funds flow statement
such changes in current items are adjusted in the changes of working capital.
(6) RATIO ANALYSIS:
Ratio Analysis is one of the important techniques which is used to measure the
establishment of relationship between the two interrelated accounting figures in financial
statements. This analysis helps to Management for decision making. Ratio Analysis is an
effective tool which is used to ascertain the liquidity and operational efficiency of the concern.
(7) COST VOLUME PROFIT ANALYSIS: Cost volume profit analysis is an important
tool of profit planning. It studies the relationship between cost, volume of production, sales and
profit. It is not strictly a technique used for analysis of financial statements. However, it is an
important tool for the management for decision making. Since the data is provided both cost and
financial records. It tells the volume of account of variation in output, selling price and cost and
finally, the quantity to be produced and sold to reach the target profit Level.

DATA ANALYSIS AND INTERPRETATION:

Organizations are purposive creations. They are created in order to achieve particular task, which
individuals cannot accomplish on their own. When organizations are created the huge task of the
organization is also sub divided into smaller tasks, which can be handled, effectively be an
individual or a group of individuals. This in other words is called as activity analysis. Usually this
leads to departmentalization of organization .to carry out these activities, people are required to
take timely decisions in light to present objectives.
There are various tools to analyze the performance of an organization of which some
important aspects are considered in this project. They are:
 Comparative statement analysis.
 Comparative size statement analysis
Comparative statement analysis:
Comparative statements show the financial condition of business at a given point of time.
The elements of financial position are shown in comparative form so as to give an idea of financial
of two or more periods is as known in comparative statements. Comparative statements not only
shows the absolute figures and exhibits changes in absolute figures of a company but also gives
absolute data in terms of percentages and change in percentages. It includes:
 Comparative income statement
 Comparative balance statement
COMPARATIVE INCOME STATEMENT:
This statement is prepared to study the changes in various incomes and expenses
between two periods on a specific date. It helps the management to know the profitability position
and reasons behind fluctuations in incomes and expenses.
For the above purpose, we have taken into consideration of the five year accounts viz.,
2012-2017

BUDGETARY CONTROL IN VSP

BUDGETARY PROCESS IN VISAKHAPATNAM STEEL PLANT:
Every organization prepares budgets so that it can plan for its future and meet any unforeseen
contingencies and Visakhapatnam. Steel plant is no exception to this rule. In many organizations, the
budgetary process is taken up by any senior executive of finance department. Since Visakhapatnam Steel
Plant is a large organization it has a separate budget section in the finance department, which takes care of
the budgetary process.

Objectives of preparing budget in Visakhapatnam Steel Plant:

The following are the objectives at preparing Budget in Visakhapatnam Steel Plant:

 To generate profits and formulate the policies to achieve the goal.

 To perform integration and co-ordination among the various departments like construction
department, works department, raw material handling department, finance department, etc.
 To motivate the closely related departments and the persons for attaining the desired goal.
 To act as a guide to management decision so that management can know how successfully the
objectives being attained.

STEPS IN BUDGETARY CONTROL IN VISAKHAPATNAM STEEL PLANT:

Before a well establishment budget comes into being, a number of things have been done
so that there is a strong foundation for budgetary some of them are:

1. Preparation of organization chart :-

In Visakhapatnam Steel Plant, the Chairman-cum-Managing Director (CMD) is the head
of the organization. The head of the departments (usually G.M. or D.G.M.) of each department at
Visakhapatnam Steel Plant prepare a budget for their department and put up to

C.M.D. Budget Section of Finance Department will consolidate the department projection and
prepare over all company budget which indicate the Company projected Financial. The budgets
after being approved by the C.M.D. are placed before the Board of directors (which includes
C.M.D.). It is the board of directors, who approves the budget for Budget Period (usually coming
financial year).

Board of directors
 Chairman-cum-managing Director

Budget Committee

(Comprising heads of department of various departments and senior officials of finance

department)

Establishing budget Centres:

A budget centre is a section of the organization of an undertaking and is defined as such
from the point of view at budgetary control. Visakhapatnam Steel Plant has a number of well is
on the basis at collection of closely related works into one budget centre.

a) Corporate Strategic Management Dept.:

This department is headed by the General Manger (CSM) and is responsible for drawing
up the policy to be followed by the company.

b) Medical Department:

Headed by the chief medical officer, this department is responsible for maintaining the
health of the employees of the company and their department.

c) Marketing Department:

Headed by General Manager (Marketing) this department is responsible for procuring

orders for the company and selling the goods produced by Visakhapatnam Steel Plant

d) Works Department:
Headed by Director (Operation), this is the life and flood of the company as this department
is responsible for manufacturing the various items.

e) G.M. (Maintenance) Department :

 Heads by General Manager, this department is entrusted with the responsibility of
maintaining the various machines and keeping the break down to a minimum level.

f) Information Technology Department :

This department is responsible for maintaining the various computer facilities in the
company and improving the efficiency of production.

h) Ancillary Development Department:

Headed by General Manager (Ancillary Development) this department is responsible for

overseeing the development at ancillary industries in and around the plant.

i) Town and Administration Department:

Headed by the Chief Town Administrator, this department is responsible for maintaining
the Steel Plant town ship and meeting its requirements.

j) Personnel Department:

Headed by Director (Personnel), this department is responsible for maintaining employee

records.

k) Commercial Department:

Headed by Director (Commercial), this department is responsible for material management

in the company.

i) Project Division:

Headed by Director (Operation) this division is responsible for the construction activity in
the plant.

m) Human Resource Development:

This department is responsible for developing the skills of the employees by conducting
various personality development programmer

n) Training Department:

This department is responsible for providing on the job training and off the job training for
fresh recruits.

o) Finance Department:
 Headed by Director (Finance) this department is responsible for per forming the various
financial activities at the company. It also prepares the pay rolls.

Budget Manual:
A budget manual is defined as a document which sets out the responsibilities of the persons
engaged in the routine of and the forms and records required for budgetary control
Visakhapatnam Steel Plant also has a well laid out budget manual which enlists the
responsibilities of different managers and Headed of Department of various budget centres.

Budget Committee:
A budget committee is a group of executives at various major functions eg. Managing
director, Works Manager, Production Manager, Sales Manager, Accountant etc., in
Visakhapatnam Steel Plant, the budget committee consists of the Board at Directors,
Chairman-cum-Managing Director of Visakhapatnam Steel Plant acts as the chairman of
the committee.

Budget Period:
It refers to the period for which the budget is prepared and employed. There is no fixed
time for budget period. The length of the period depends on.

 The nature of the production.

 The native of the demand & supply of the product.

Key Factor:
The factor, which sets a limit to the total activity, is known as the key factor due to difficult
and the high costs involved in the procurement of raw materials and also due to less demand
for the product.

Types of Budgets Prepared By Visakhapatnam Steel Plant:

Visakhapatnam Steel Plant prepares two kindly of budgets

 Capital Budget
 Operation Budget
 A) Capital Budget :
Capital Budget deals with the new schemes to be implemented during the current year and
also with the completion of schemes already implemented. It is prepared and approved by
Visakhapatnam Steel Plant and sent to ministry of Finance to incorporate the projected
capital expenditure in the overall planned expenditure of GOI.

The Capital Budget consists of:

1. Continuing Schemes be divided into :

 Land & Site Development
 Civil Works
 Structural Steel Works
 Plant and Equipment
 Repayment of Loans and credit
 Additional/Modification and replacement schemes.
 Research and development schemes.

2. New Schemes can be Divided into:

 Expansion to 6.3MT Stage
 Land acquisition for mines
 COB-4

Capital Budget consists of 12th Plan & as well as Annual Plan and also expenditure involves
other than Plan Expenditure which is covered in the Administrative Budget of the Company.

Generally Plans of the Company viz., MOU, SUS Plan & Annual Performance are prepared by
Visakhapatnam Steel Plant. This budget deals with the cash from operations of various items
produced by the steel plant. Operations budget is a short term budget and is prepared for a
period of one year. It is fixed budget there is periodic review of the budget to check whether
the actual figures match the budgeted figures. It may be as follows:
Step – I The Chairman-cum-Managing Director at Visakhapatnam Steel Plant in
consultation with the board at Directors decides the production schedule for
a particular year.
 Step – II The production schedule as approved by to board of Directors is then
circulated to all departments.

Step – III The need of each of the 36 budget centres then presents the budget for his
centre to CMD’s approval.

Step – IV After discussions with the head of each centre with some modification if
necessary is approved.

Step – V After receiving all the budgets, the board of Directors formulates the master
budget for the particular year.

Step –VI The master budget is then circulated to all the department.

Step – VII The budget at each budget centre and the master budget are reviewed frequently,
sometimes even daily, using a computerized monitoring system in case
Administrative Expenditure.

PROCESS FOR PREPRATION OF MONTHLY ESTIMATED WORKING

RESULTS (MWR) IN RINL(VSP):

Introduction:

Monthly Working Result (MWR) is Management Information Report (MIS) report compiled by
the budget section of the F&A Department.. Every month based on information obtained from Production
Department, Marketing Department, Corporate Treasury section, Raw Materials Account, General
Account, Work accounts, Operation bills, Pay section etc. The compilation is done at gross level. It is rough
estimation of monthly profit based on monthly production and sales. These estimates are purely on volume
basis and not based on accounting transaction data.
Details of Data Collected:

The following are details of data collected from various Dept./Section

S.No Details of Data Depts./Section

1. Daily Flash Statement from by Product Section-Marketing By Product sale Sections
2. Important Raw Materials Stock at Port T&S

3. Interest on RM Credit Rate Variance Material A/c Section

4. Operation bills A/c’s

Voucher data from operation bills accounts

5. Voucher data from general A/c’s General A/c’s

6. Voucher data from works A/c’s Works A/c’s

7. Voucher data from stores A/c’s Stores A/c’s

8. Stores and Spares inventory from Stores A/c’s Stores A/c’s

9. NSR from by-products Section Sales(finance)

10. Raw material Receipts Raw Material Dept

11. Power details from DNW DNW

12. Production and Closing Balance of main product PPM

13. Monthly Report from PPM PPM

14. Region wise, Branch wise sales a statement Mktg

15. Export sales and shipment plan Exports Sales Section

16. Cost of production for the month Costing Section

17. Interest Details from Corporate Treasury Section Corporate Treasury Section
18. Raw Material Prices (Imported) for the month Transport & Shipping

19. Dispatch money earned Transport & Shipping

20. Raw Material Prices Variance for the Month MM Dept

21. Fuel Rate for the Month MM Dept

22. NSR for the month and up to the month Branch Sales A/c’s
23. Wage Analysis Pay Section
24. By Product Prices Mktg Dept
Computation of Items in MWR:
(i) Gross Sales: This item is derived directly from the data fed from monthly NSR report given
by the Branch sales A/cs.
(ii) Net Sales: This item also derived from the Data fed from Monthly NSR report given by the
branch Sales A/c
(iii) Export Benefits; This item is derived based on the Export benefits per ton and Export
Quantities given by Export Sales Section. (Export Benefit = Export benefit per ton X Qty
Exported)
(iv) Interest on Term Deposit: This item is derived directly from data given by the Corporate
Treasury Section.

(v) Interest Others: This item is estimated based on previous year actual, however current year
actual to be compared and necessary adjustments to be incorporated. Once Quarterly Accounts
are completed Interest Others is reviewed.

(vi) Miscellaneous Income: This item is estimated based on previous year. However current year
actual to be compared and necessary adjustments to be incorporated. Once Quarterly Accounts
are completed Interest Others is reviewed.

(vii) Stock accretion /depletion; Excess production over sales Qty is accretion. If it is otherwise it
is stock depletion. Accretion /depletion quantities are valued at cost or NSR whichever is low.

(viii) Raw Material Consumption: Consumption quantities of various Raw materials are valued at
weighted average prices of the same consumption quantities includes Handling loss, Transit
losses, Moisture loss etc.

(ix) Stores & Consumables; This item is derived based on stores JV details obtained from stores
accounts. And also from General accounts voucher details.
(x) Employees Remuneration & Benefits: This item is derived based on the last year Salary
Expenditure and expected increments, promotions and further actual valuation liabilities.
Initially MoU/Sus Plan Salary figure divided by 12 months will be considered and later on once
quarterly accounts are completed this head is adjusted accordingly.

(xi) Power, Fuel &Water: Boiler Coal & Imported Boiler Coal & Medium Coking Coal consumed
in TPP, Furnace Oil & HSD consumed in TPP, FMD and other areas also will be furnished by
Production, Planning & Monitoring Dept. (PPM). Power Bill will be furnished by DNW
Department. Rates of Furnace Oil & High-Speed Diesel will be collected from Material
Management Department(MM).

(xii) Repairs & Maintenance: This item is based on voucher data obtained from General Accounts,
Operation Bills, Works bills, Stores Accounts etc. Some are estimated at previous year level.
Once Quarterly Accounts are completed Interest Others is reviewed.

(xiii) Other Expenses: This item is based on estimated contractual rates for scrap processing
quantities and some are on the basis of estimations at previous year actual level. Once Quarterly
Accounts are completed Interest Others is reviewed.

(xiv) Interest Charges: Estimated interest charged by bankers for the months other than the Buyers
Credit will be submitted by the Corporate Treasury on monthly basis along with loans position.
Raw Material Accounts Section provides Interest charges for the month on the Buyers Credit
loans availed by the company. In addition to the above, Interest on account of loans on
capitalized units is considered on estimated basis when the unit is capitalized.

(xv) Depreciation: Depreciation will be calculated considering the regular depreciation and also
annualized depreciation on capitalization units for the year and will be divided with one month.
As per new ERP SAP Module in place Actual Depreciation accounted is available once costing
process is completed and depreciation is adjusted accordingly in the next month.
(xvi) Income Tax: Calculation of Income Tax is based on the Income Tax Act and in case of Profit
and in case of loss either no Income Tax will come or credit on account of loss (deferred Tax
Credit) is considered based on the Taxation Section guidance.
 3. Adjustments: All the above items are subjective to revision or adjustments based on
realities and likely provision that may arise.

The General Format of MWR:

S.No Particulars Previous Current Month Up to Month

Month
Actuals
Sus. Plan Actual Sus. Actual
Plan
A Income
1 Gross Sales
2 Net Sales
3. Export Benefits
4 Sale of Power
5 Interest of Term Deposits
6. Miscellaneous income
Total (1 to 6)
B Expenditure
7 Stock accretion (-) decretion
8 Raw Material Consumptions
9 Stores & Consumables
10 Employees Remn. Benefits
11 Power, Fuel & Water
12 Repairs & Maintenance
13 Other Expenses
Total (7 to 12)
C Gross Margin
D Interest charges
E Cash Profit
F Depreciation & DRE written off
G Net Profit ( Before Tax) (E-F)

H Provision for income Tax incl.

FBT, Deferred Tax
Provision for income Tax

Provision for FBT

Provision for Deferred Tax

Liability
I Net Profit (after tax) for the year
(G-H)
J Addl. Income Tax Liability of the
year 2003-04 & 2004-05
K Net Profit (after tax) ( i-j)
Monitoring & Control of Different Plans of the Company:

12th Plan & Annual Plan:

Regularly monitored by the Board of Directors, Ministry of Steel, Planning Commission and
monthly, quarterly & annual reviews are undertaken by the Board, Audit Committee, MoS. Periodical
reports on monthly and as required by the Ministry from time to time are submitted.

12th Five Year Plan:

The 12th Plan envisages massive investments to the tune of 1 trillion dollars (Refer Table in page no– 19)
in the infrastructure sector which augurs well for expansion of the base of steel consumption in the
economy. On a rough estimate, it may lead to a demand of approximately 40 million tonnes per annum
during 2012-13 to 2016-17. It is also likely to raise the intensity of steel consumption in the country
measured in terms of steel consumption per unit of the GDP.

As against a target of Rs 11183 Crs and company achieved Rs 7320.18 Crs and % fulfilment is

65.46%. The Company could not fulfil the 12th Plan targeted Plan of Expenditure due to the following

reasons:

1, Changes in design of 6.3 Expansion Plan

Steel Sector Net Realizations have come down drastically as planned in 12th Plan

Unfortunate accident in SMS-2 Pressure Turbine Station and Hud Hud Cyclone in October 2014 has

resulted in delay of 6.3 Expansion from 2012-13 to 2016-17

Dumping of Steel from China, Japan, Korea & Other erstwhile USSR Countries resulted in poor realizations

and company has to resort to higher borrowings even for their working capital requirements.

In 2016-17 also continued weak market conditions despite taking corrective and anti-dumping measures by

the Government of India which has not given much relief to the Long Steel Players like RINL.

However, the Company could achieve Annual Plan targets for the 12th Five Year Plan and the details has

been given in Annual Plan Chapter

Annual plan:

 Formulation of annual plan is submitted as designed by the ministry of steel.

 Annual plan is prepared based on the circular given by the ministry of steel.
 It is monitored monthly, quarterly and yearly by the management, audit committee, board of
directors and Ministry of steel
 Rashtriya Ispat Nigam Limited-Visakhapatnam Steel Plant has finalised and submitted its annual
plan for 2011-12 on 29-12-2012with a sales target of Rs.15000.47 crore.
 Against an actual production of three million tonne of saleable steel in 2010-11 the MoU (signed
with Ministry of Steel) target for 2011-12 is 3.4 million tonne with a growth rate of 13 per cent.
 To offset partially the impact of abnormal rise in prices of major raw materials, particularly coking
coal and iron ore, cost reduction of over Rs. 150 crore is targeted. Supply of flux materials from
captive mines is also being enhanced to take care of increased production.
 The sales strategy will lay emphasis on value added steel.
 The data for annual plan is collected through IEBR(internal and external budget resources)for the
preparation of financials for annual plan.
 The annual plan document is submitted to ministry of steel and there after the plan will be submitted
to ministry of finance by ministry of steel.

MOU: 2016-17 & 2017-18

Major products: 2016-17 2017-18
(tonnes) (tonnes)
Ovens / day (no’s) 332 333
Gross sinter 6800 7850
Hot metal 5000 5600
Pig iron - total production 155 196
- internal consumption 0 0
- for sale 155 196
- to stock 0 0
Liquid steel 5350
CC Blooms - Total 4800 2779
- for LMMM 2612 1928
- for MMSM 1948 741
- cuttings for SMS 550 40
- Sale 63 70
- to stock 51 0
SMS 2 Blooms/Rounds - Total 0.00 2280
- for WRM-II 1930 599
- for MMSM 417 214
- for Special Bar Mill 425 426
- for Structural Mill 156 326
- for Sale (incl CC Billet) 107 12
- to stock Procurement 825 703
Billets - Total 0.000 0.000
- for Bar Mill 1890 1870
- for WRM 878 821
- for MMSM 990 982
- for Sale 0 0
- to stock/(-) procurement 22 67
Steel end cuttings for sale 0.00 0.00
LMMM products 0 0
WRM-I products 860 800
WMR-II products 975 965
MMSM products 400 575
Special Bar Mills products 940 920
Structural Mill products 150 400
Saleable steel 100 300
4324 4800

4324 4800
MOU, Annual Performance Plan & Sustainability Plan

I. Monthly Variance consists of Price & Volume report with reference to Actual with each
plan is submitted and reviewed. Monthly review meetings are conducted to know the
performance of the Company and corrective measures are initiated by the Management.
II. Monthly Capex reports are being sent to Ministry of Steel, DPE and in turn they turn submit
to Nitiayog which has replaced the Planning Commission to monitor the Capital
Expenditure Targets.
III. Every Monthly CMD reviews monthly performance on MoU for the month and up to the
month during such reviews all Directors and top management persons will also be present
and and any for any month under performance in respective areas, CMD directs them to
take necessary action to fulfillment of targets with reference to actual as well.
IV. Quarterly accounts are compiled and are compared with MOU, APP & Sus Plan and are
reviewed by the Committee of Directors, Audit Committee, Board of Directors, AS& FA
of Ministry of Steel and Minister of Steel as well.
V. Outcome Budget document is prepared by the Ministry of Steel on different parameters of
the Company and releases Outcome Budget to the Ministry of Finance for inclusion of the
document in the Financial Budget document for the year when Finance Budget is presented
by the Finance Minister.
VI. Yearly reviews of Accounts with reference to MOU parameters are evaluated based on the
following format and on evaluation Company score is finalized based on the actual
performance.
VII. Yearly review of Annual Plan & 12th Plan Status is also done by the Ministry of Steel and
other related departments of the Government.

Control in Administrative Budget:

After implementation of ERP- SAP in RINL from 01.05.2014 Budget posting and control will be exercised
in Fund Management Module of ERP-SAP System. System checks Budget at every stage i.e. either for
making payment, rising purchase requisition, rising purchase order, issue of material, payment to suppliers,
payment to contractor and for tour bills and most of the expenditure is checked at system level. In case
Budget is not available, system throw message stating that no budget is available and unless and until budget
is not posted, transaction in SAP in any module will not be allowed to do unless budget is provided. As
regards Investment Management, Project wise Budget approved will be posted in IM Module and after
wards Project Department creates WBS Elements for different works/different vendors. Once Project cost
fed in Invest Program exceeds, system does not allow to create any further WBS elements or to create
PO/Job code in ERP.

VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2012-13

(Rs In Crores)

Budgeted Plan Financials and actual financials as per accounts and variance with Plan for 2012-
13

Particulars Budget Actual Variance Favourable Adverse

Income
Gross Sales 15,000.47 13,552.93 1,447.54 1,447.54

Net Sales 13,329.62 11,588.59 1,741.03 1,741.03

Stock Discretion 26.77 257.49 230.72 230.72

Export Benefits 15.79 21.79 6.00 6.00

Miscellaneous Income 78.71 222.09 143.38 143.38

Sale of Power 0.00 0.00 0.00 0.00

Interest on Deposits 53.58 233.33 179.75 179.75

Total Income 13,504.47 12,323.29 1,181.18 1,181.18

Expenditure
Raw Material 8,617.72 8,121.91 495.81 495.81
 Stores, Spares & Consummates 650.00 525.13 124.87 124.87

Employees Remuneration 1,680.00 1,469.07 210.93 210.93

Repair & Maintenance 285.00 642.70 357.70 357.70

Power, Fuel & Water 576.94 204.43 372.51 372.51

Other Expenses 419.46 287.45 132.01 132.01

Total Expenditure 12,229.12 11,250.69 978.43 978.43

Gross Margin (net) 1,275.35 1,072.60 202.75 202.75

Interest 293.26 359.25 65.99 65.99

Cash Profit 982.09 713.35 268.74 268.74

Depreciation & DRE 595.03 186.88 408.15 408.15

Net Profit 387.06 526.47 139.41 139.41

VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2013-14

(Rs In Crores)

Variance Between Budget and Actual for the year 2013-14 (in Crs)
Particulars Budget Actual Variance Favourable Adverse

Income
Gross Sales 15751.22 13364.17 2387.05 2387.05

Net Sales 13684.39 11371.48 2312.91 2312.91

Stock Discretion -18.29 29.99 -48.26 48.26

Export Benefits 13.45 11.22 2.23 2.23

Miscellaneous Income 78.71 126.94 -48.23 48.23

Sale of Power 0.00 0.00 0.00

Interest 91.20 180.04 -88.84 88.84

 Total Income 13849.46 11719.67 -2129.79 185.33 2315.14

Expenditure
Raw Material 8904.43 6967.25 1937.18 1937.18

Stores, Spares & Consumables 665.00 552.09 112.91 112.91

Employees Remuneration 1820.00 1750.22 69.78 69.78

Repair & Maintenance 235.00 236.50 -1.50 1.50

Power, Fuel & Water 700.14 690.31 9.83 9.83

Other Expenses 423.61 364.56 59.05 59.05

Total Expenditure 12748.18 10560.93 2187.25 2188.75 1.50

Gross Margin (net) 1101.28 1158.75 -57.47 57.47

Interest 425.86 338.12 87.74 87.74

Cash Profit 675.42 820.63 -145.21 145.21

Depreciation & DRE 526.96 271.48 255.48 255.48

Net Profit 148.46 549.15 400.70 400.70

VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2014-15

(Rs In Crores)

Variance Between Budget and Actual for the year 2014-15 (in Crs)

Particulars Budget Actual Variance Favourable Adverse

Income
Gross Sales 18102.28 11674.66 6427.62 6427.62

Net Sales 15532.17 9913.89 5618.28 6374.66

Stock Discretion -283.85 1422.74 -1706.59 1706.59

 Export Benefits 17.28 13.07 4.21 4.21

Miscellaneous Income 73.61 189.09 -115.49 115.48

Sale of Power 0.00 0.00 0.00

Interest on Deposits 146.14 67.20 78.94 89.73

Total Income 15485.36 11605.99 3879.37 2589.23 6468.60

Expenditure
Raw Material 9743.23 6924.88 2818.35 2818.35
Stores, Spares &
Consummates 684.82 548.34 136.48 136.48

Employees Remuneration 1932.85 1918.16 14.69 14.69

Repair & Maintenance 288.40 318.71 54.07 54.07

Power, Fuel & Water 861.05 806.98 -30.31 30.31

Other Expenses 402. 280.21 122.04 122.04

Total Expenditure 13912.60 10797.28 3115.32 3145.63 30.31

Gross Margin (net) 1572.76 808.71 764.05 764.05

Interest 580.00 434.73 145.27 145.27

Cash Profit 992.75 373.98 618.77 618.77

Depreciation & DRE 550.00 270.63 279.37 279.37

Net Profit 442.76 103.35 339.41 339.41

VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2015-16

(Rs in Crores)
Variance Between Budget and Actual for the year 2015-16 (in Crs)
Particulars Budget Actual Variance Favourable Adverse

Income
Gross Sales 17861.96 10059.34 7802.62 7802.62

Net Sales 15158.88 8321.09 6837.79 6837.79

Stock Discretion 110.85 -1217.71 1328.56 1328.56

Export Benefits 26.12 37.96 -11.84 11.84

Miscellaneous Income 54.16 258.92 -204.76 204.76

Sale of Power 0.00 0.00 0.00 0.00

Interest 36.80 88.76 -51.96 51.96

Total Income 15386.81 7489.02 7897.79 268.56 8166.35

Expenditure
Raw Material 9568.05 4141.59 5426.46 5426.46

Stores, Spares & Consummates 650.00 595.31 54.69 54.69

Employees Remuneration 2200.00 1923.20 276.80 276.80

Repair & Maintenance 350.00 299.75 50.25 50.25

Power, Fuel & Water 895.11 921.20 -26.09 26.09

Other Expenses 433.21 398.46 34.75 34.75

Total Expenditure 14096.37 8279.51 5816.86 5842.95 26.09

Gross Margin (net) 1290.45 -790.49 2080.94 2080.94

Interest 454.17 650.70 -196.53 196.53

Cash Profit 836.28 -1441.19 2277.47 2277.47

Depreciation & DRE 668.00 346.81 321.19 321.19

Net Profit 168.28 -1417.23 1585.51 1585.51

VARIANCE BETWEEN BUDGET AND ACTUALS FOR THE YEAR 2016-17
(Rs. In Crores)
Particulars Budget Actual Variance Favourable Adverse

Income
Gross Sales 126462.91 8678.32 3784.59 3784.59

Net Sales 10280.18 7162.38 3117.8 3117.8

Stock accretion 25.53 0 25.53 25.53

Export Benefits 22.50 15.95 6.55 6.55

Miscellaneous Income 65.70 49.5 16.2 16.2

Sale of Power 0.00

Int on others 53.4 40.23 13.17 13.17

Total Income 10395.830 7268.06 3127.77 3127.77

Expenditure
Raw Material 6161.31 4527.38 1633.93 1633.93

Stores, Spares & 786 578.87 207.13 207.13

Consummates

Employees 2150 1555.86 594.14 594.14

Remuneration

Repair & Maintenance 411 294.81 116.19 116.19

Power, Fuel & Water 903 680.42 222.58 222.58

Stock depletion 0 188.38 188.38

Other Expenses 440.41 319.81 120.6 120.6

Total Expenditure 10851.72 7768.80 3082.92 3082.92

Gross Margin (net) -455.92 -519.09 63.17 63.17

Interest 754 557.08 196.92 196.92

Cash Profit -1209.92 -1057.82 -152.1 152.1

Depreciation & DRE 593.10 438.91 154.1 154.1

Net Profit -1803.02 -1496.74 -306.28 306.28

BUDGET Process control in RINL – ERP SAP System:
1. Budget Entry:
Approved Budget values are uploaded into the system, by Budget Section of F&A in the
respective FC & CIs.
a. Budget Supplement:
Approved additional Budgets are uploaded into the system, by Budget Section.
b. Budget Transfer/Re-appropriation:
Budget transfer is enabled to the user Funds Centers:
i. within the set of Indenting Budget CIs,
(i) within the set of Consumption Budget CIS; and
(ii) within these of Contracts Budget CIs, as follows:
 Budget Transfer (within the same funds center) from one CI to another CI of
the same group, are to be done by the respective Funds Centers.
 Budget Transfer from one FC to another FC of the same group of FCs
(same CI) shall be done by the respective nodal FC/Department level
FC.
 Budget Transfer from one FC to another FC of the same group of FCs,
from one CI to another CI of the same group is to be done by the
respective nodal FC/Dept. level FC.
Other budget transfers in respect of CIs other than Indenting, Consumption &
Contracts, i.e., Re-appropriation of Budget, is done by Budget Section based on
the required approval.
c. Budget Carryover:
Committed budget is carried over to subsequent years if the transaction is not
completed in the same year. CB of open PRs, open POs, and open GRs is carried to
subsequent year. However, PB is not carried over to subsequent years except in the
rare case of GR done but Invoice processing is not completed in the same year.
Open PR (PO yet to be created): CB alone is carried over
Open PO (GR/SES yet to be done either fully/partially): CB alone is carried over
Open GR/SES (related Invoice processing is yet to be done): Both CB & PB is
carried over.
Parked PR/Parked PO/Parked GR/Parked SES : No budget (neither CB nor
PB) is carried over.
 Important Note: Parked Documents cannot be carried over to subsequent
years. Therefore, all users shall close all parked documents at the year-end.
d. Budget Return:
Sometimes it may be required to return the budget during the year like shifting a
contract from FM to WBS in which case, the budget is returned in FC/CI and the same
amount will be uploaded in the respective WBS by the respective agency. This activity
of return of budget is done by Budget Section based on approval.

CHAPTER – 6
Analysis of the Study
ANALYSIS OF STUDY:
SWOT:

I. STRENGTHS
II. WEAKNESSES
III. OPPORTUNITIES
IV. THREATS
STRENGTHS , WEAKNESSES, OPPORTUNITIES AND THREATS::(SWOT)
The few strengths and weakness of the company (not an exhaustive list) are placed below:

SWOT analysis:
Strengths
 Shore based location

 Well established marketing and customer network in India

 Availability of Land

 Image as quality producer.

 Committed manpower

 Strong environmental and Social commitments

Weaknesses
 Lack of Captive Mines for Iron Ore and Coking Coal.

 Single Location Company and only Long Products, exposed to cyclic markets.

 High Equity base

 Lack of investible surplus

Opportunities:
 Restructuring initiatives of Govt. of India

 Product diversification
  Export of products to developing Economies

 Availability of new facilities

 Enhanced production potential

 Secondary metallurgy for High End Value Added Steels

Threats:
 Increased competition.

 Sluggish market conditions

 Volatility in supply and prices of coking coal

 Single iron ore supplier.

 Predominant secondary sector in long products.

 Declining margins due to increasing cost of production

 Oversupply in India due slowdown in other economies

 CHAPTER 7
Conclusion, Summary,

Findings & Suggestions

Conclusion, Summary, Findings& Suggestions:

1. Company’s Profits fallen down drastically from Rs 750 Crs to 352 Crs and further to Rs 62
Crs in 2014-15 and gone to losses of Rs 1603.72 Crs during 2015-16 due to very adverse
market conditions and cheap imports from China, Russia, Japan & Korea & other countries.
Weak & sluggish market conditions continued in 2016-17 and losses incurred were 1263.16
crores. Also despite the Government has taken certain remedial measures to revive the steel
industry. However, it has not benefited RINL much especially in Long Products. Due to higher
capacities in China and other countries dumping of Finished Steel and Scrap and semi-finished
steel especially from China, Korea, Japan & Ukraine & Malaysia & other countries at a cost
lesser than our cost of production of Indian Steel Industries. Further China has also given
Export Benefits to the tune of 10 to 15% of to make them steel products competitive them to
export.

2.All Steel Companies in India and especially as RINL also has to resort to sell their products
lesser than their costs and realization of Saleable Ton per ton has fallen from Rs 34087 (2014-
15) to Rs 25831 (2015-16) their realization dropped by 24%. NSR for Saleable Steel achieved
for 2015-16 of Rs 25831 which is lowest ever NSR in the last nine years. However,
Government of India has taken anti-dumping measures on Steel only in the last Quarter of
 2015-16 due to this initivatives taken by goi drasstically realisation of saleable steel had rised
to 32,000 per ton durinng the period 2017-18.

3. Capitalisation of New Expansion Units of SMS-II, Sinter Plant II, WRM – II in 2015-16 has
resulted in higher depreciation which has led the company into losses. Interest Costs has risen
sharply during 2015-16 compared to 2014-15 to higher loans.

4. Company could not complete its 6.3 Expansion Project as scheduled in 2012-13 due to
unfortunate accident taken place in SMS-II which has resulted delay in completion of 6.3 Mtpa
project and even in 2016-17 some of the mills like Special Bar Mill & Structural Mills are yet to
be geared up for increasing production. Due to non-commissioning of downstream units from
2012-13, the company has to resort to sell semis instead finished goods for which realization has
effected profitability from 2011-12 to 2012-13 & till 2014-15
.
5.Though the Company have disaster plans in case of emergencies but same count not be not
executed when Hud Hud Cyclone which hit Visakhapatnam and RINL heavily by which Company
all units were standstill for more than 5 days and production units took more than 6 months to
reach their regular capacity. Due to Hud Hud Cyclone also new units of SBM & STM which were
verge of commissioning were also delayed by more than 1 ½ Years which has also effected the
profitability. The impact on account of Hud Hud Cyclone is more than Rs 350 Crs. Even though
the market was good in 2014-15 but it has not capitalized the benefits by selling more volumes.

6. The Company has started this 6.3 Expansion Project and most of its cost has met from internal
resources which were earned earlier and was giving decent interest income to the company,
however later on from 2012-13 for the weak market conditions, the company has to start borrowing
not only to meet the balance completion cost of 6.3 Mtpa and also undertaken number of projects
which will the capacity to 7.3 Mtpa. Due to which once a debt free company now having loans of
more than Rs 15,486 Crs as on 31.05.2017 Crs and may reach Rs 11,945 Crs by end of this month
i.e. May 31st of 2017.
 7. Even though Company has spent more than Rs 10,000 Crs for several projects, the projects
have not started giving any substantial results in the form of savings and most of the projects
undertaken in 7.3 MTpa are yet to be commissioned/ ramped up.

Findings:

1. Due to logistics issues and non availability of rails and congestion in railway tracks
material movement badly hits the production schedule. RINL logistics costs are very
less compared to other companies and even for rationalizing both export and import
due to shore based location.

2. Volatility in raw material prices, increased competition, sluggishness in steel market,

delay in completion of modernization projects and lower production than planned
levels from new units are some of the risks that the company faces during RINL- VSP
does not have a captive mine due to this the raw materialsprices are vulnerable

3. Proximity to Gangavaram Port has helped more in import of Cargoes by the Company
which has reduced the costs of the Company. This Port can handle cape vessels with a
capacity of 130000 to 150000 MT which results in less freight compared to lesser
capacity vessels taken at Visakhapatnam Port Trust and is in advantageous position
when compared to peers like TATA, SAIL & JSW.

4. Excess amount of loans are taken on the account of expansion, due to this reason huge
amounts are paid towards the repayment of loans and interest rates.

5. RINL invested heavily on 6.3 MTPA and 7.3 MTPA . Despite all major capacity
programmes completed production levels required are not achieved.

6. RINL-VSP could sustain only because of market pick up, sustainability is due to NSR
improvements, Even though MOU targets are so high but none of the years of
production target were fulfilled by RINL thereby company could not reduced the
product because their fixed cost are high this is the main reason for incurring losses

7. RINL-VSP Very weak in project implementation that causes damage to company’s

potential, 8 new research projects were taken up in the year and 11 projects of previous
year continued.
 8. 6.3 MT stage approved in june 2005 with cost of 869 crore which was drastically
increased to 12291 crore in 2011 this is due to time over run and cost over run.
 Broad reasons for cost over run :
1. Non availability of fund on time
2. Price escalation
3. Enhanced currency exchanged rate
4. Revision in taxes and duties
5. Change in ocean freight
 Broad reasons for time over run:
1. Inadequate fund flow and it delay
2. Midway revision of project concept
3. Dislocation of soviet equipment supplier
4. Delay in suppliers made by major PSU
5. Delay in providing water by AP government.
9. Due to project delays desired IRR have not been achieved in 6.3 MT project. Instead
of positive IRR, negative IRR returns for the investment made by the company.

10. Rationalizing of manpower i.e. transfer from one department to another department ,
Despite implementation of ERP in 2014 the manpower should be reduced but it could
not give the better results & the man power remained same

Suggestions:

If we can observe the overall management performance of the Visakhapatnam steel plant, we find
some favorable & adverse impacts on the organizations profitability. Therefore I would like to
recommend some suggestions, which may useful to maximize the profits.

1. RINL should focus more on project implementation very seriously and any time when any
project is taken up mile stone should be freezed very well in advance, rather than changing
design, equipment and parameter required and subsequent changes should be avoided.

2. All other projects should have been started are yet to be taken up should be completed in
time along without cost over run to get the benefits to the company based on the projects
Detailed Projected Report and should get IRR as envisaged in the respective DPRs.
3. Proper logistics are made available so meeting of material immediate requirement of plant
can be met such a limestone and iron ore. These things can be brought by conveyor, for
that separate conveyor should establish so that material can reach in time and also brought
by sea route from orissa .

4. The Company should focus on coastal transport to reduce the freight costs on the market
locations which are located far away from the Steel Plant.

5. Company has abundant land which should be utilized optimally by establishing Solar
Power Plants where the costs of Solar Panel and interest costs have come done compared
to earlier two to three years levels which will reduce the dependency of power from
APEDCL. Since the Solar Power cost is lesser than generation as well as imported power
costs.
6. Presently imports are being handled from Gangavaram Port but exports not being handled
from GPL despite being reduced logistic costs. The company should take immediate steps
to start exports from Gangavaram Port itself.
7. The Company should focus more on Raw Material front by regularly pursuing the
State/Central Governments for allocation of Iron Ore Mines and should be developed at
the earliest to reduce the Raw Material Cost.
8. Steel market is a dynamic and the company should train their marketing & production
Departments to adjust to the market environment with greater flexibility.
 BIBLIOGRAPHY:

a) Books

I.M.PANDEY: Financial Management

M.Y.KHAN& JAIN: Financial Management

b) Hand book of Visakhapatnam Steel Plant

2015-2016

c) Web sites
URL: http://www.vizagsteel.com
URL: http://www.steel.nic.in