CHAPTER I

PROFILE OF COMPANY

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BRIEF HISTORY OF THE COMPANY

The company was established on 3.2.1976 as a Pvt. Ltd. Company under the name of
Bathinda Chemicals & Banspati Mills Pvt. Ltd. with Registers of companies Punjab, Himachal
Pradesh & Chandigarh, at Jalandhar. The company initially started solvent extraction with the
capacity of 40 TPD (tones per day) and started processing of Rice Bean.
In 1979, the capacity of the solvent was doubled to 80 TPD and a 12 TPD Hydrogenation
Plant was installed for producing oil which was financed by PSIDC.
In 1980, the company increased its capacity by installing refinery and oil mill from its own
sources and the capacity of solvent extraction plant was raised upto 100 TPD.
In 1985 the company changed to Bathinda Chemicals Pvt. Ltd. It was converted into a
seemed Public Ltd. Company on 2.1.1989.
The company further increased the capacity of solvent extraction from 100TPD to 150
TPD by raising term loan of Rs. 80 Lacs from PSIDC in the year 1990.
In Aug 1991, the company was sanctioned Rs. 120 Lacs from PSICD for installation of
fresh solvent extraction plant of 200 TPD and the capacity of Hydrogenation Plant was raised
from 12 TPD to 25 TPD.
With the delicensing of Vanaspati Ghee in New Industrial policy announced on 25.7.199,
the company stopped manufacturing hard oil and the Hydrogenation Plant of company was
modified. So as to facilitate the manufacturing of Vanaspati.

ACTIVITY
The company is mainly producing Vanaspati Ghee and Refined-edible oil for human
consumption the products of the company are being marketed in the packets of 15 kg, 5lt, 2lt,
1lt/kg and kg in the North and East (Indian State) the company is having a well knitted dealers
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networks for marketing products and having its sale depots situated in the states of U.P., Punjab,
Haryana, J&K, Rajasthan & H.P besides the union territory of New Delhi.
The company is marketing its products under the brand name of Rishi Shakti and star
vegetable oil and Murli refined oil and the same got a very good response from the different
sections of the consumers.

RAW MATERIAL
The raw materials of the company are Cotton Seeds, Mustard Seeds, Sun Flower Seeds,
Palm Oil, Soyabean Seeds, Paddy Rice Bean and Film Oil.

PROMOTERS AND THEIR BACKGROUND

BCL was promoted by Late Sh. Dwarka Dass Mittal whose is recently died and he was
matric pass and having business experience of about 40 years. He has been a director of De oiled
Solvent Industry Pvt. Ltd. Kotkapura in the early years of his career.
Regarding organization profile, the management pattern of BCL shows a high degree of
appreciation. Management believes in dignity of labor and increase the morale and confidence to
put the maximum efforts to achieve the objectives by coordinating all the operational functions of
the organization.

PROCESS OF MAKING OIL

Refined oil and Vanaspati Ghee is prepared from soyabean oil, palm oil, cotton seed oil,
rice oil etc. In all types of oil, mainly free fatty acid, color pigments, gums, waxes etc are present
as impurities which are removed during the manufacture of refined oil. The process of making oil
is completed in to different stages.
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1. CRUSHING OF SEEDS:When the seeds are crushed, oil of upto 40% is produced and a joint product around 59% to
82% is produced depending upon type of seeds losses during the process arise between 0.25% to
1.5% by product believes .25 to 1% are produced.

2. REFINING OF SEEDS:The dried oil which is free from all impurities is undergone operation in refinery plant. The
whole process description of making of oil is mainly divided in the three stages:-

a. Neutralization.
b. Bleaching.
c. Deodorization.
These stages help in removing the odoriferous matters and collectively these three stages
are called as pre-hydrogenation stage.

a) NEUTRALISATION:In the neutralizer vessel crude oil is heated upto 60 to 80 c. After adding caustic lye &
phosphoric acid, it is washed with water and is kept for 4 to 5 hours. Heavy particle i.e. crams get
settled under the oils is transferred for bleaching.

b) BLEACHING:The oil is pumped to the places which consist of mild steel vessel with dish ends provided with
heating coils, agitators & arrangement for evaluation the vessel is heated upto 120 to 140 degree

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centigrade through steam oil. After adding bleaching earth upto 2.5% to 3% it is settled upto 2
hours to remove odors present in this oil fit is pass for third stage.
c) DEODRAIZATION:The purpose of this operation is to eliminate objectionable odor and flower caused by volatile
constituents which can be removed by steam distillation. The oil is charged in the Deodorized
vessel & heated upto 250 c through vacuum FFA (free fatty acid) is removed. After this process
the oil is processed through the BAL filter system. This is the refined oil.

3. VANASPATI OIL:In the Vanaspati plant, the purpose of the process is the hydrogenation of oils. All the same
process of refining the oil are charged into the Auto clave vessel and many types of oils i.e.
mustard oil, palm oil, cotton seed oil, filli oil etc are mixed and are heated upto 170 degree
centigrade. Nickel catalyst is added in it and it is started with the gear box and motor system. After
sometime, the hydrogenation oil, now the oil has been converted into Vanaspati Ghee. After this
process the Vanaspati is filtered to the post bleacher. Bleaching earth upto 1% is added in it and
Vanaspati is filtered second time through the filter press then. The temperature of Vanaspati is
ready and is sent to the packing division

4. PACKING OF VANASPATI OIL:The Vanaspati is stored in the vessel that is called Choran and Vitamin Ad is added in it.
Then it is packed in the tins, canes and pouches and is stored in the storeroom for reducing the
temperature from 65 to 5 degree centigrade. Now the Vanaspati is ready for sale in the market.

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PURCHASE CONTROL
AN INTRODUCTION
The purchasing has wider meaning than mere buying. Purchasing is the most important function of
material management. A substantial part of enterprises finance is blocked in materials. Its function
is to produce materials, supplies, services machines and tools at the most favorable terms
consistent with maintaining the desired standard of quality.
Purchasing is the most important function of material management as the moment an order
is placed for the purchase of material a substantial part of the companys finance is
committed which affects cash flow position of the company.
Purchasing programmed should be framed so that the requirements are procured as and
when needed and at a reasonable price. Thus it size of a business concern permits, there
should be separate purchasing department and the responsibility for purchasing all types of
material should be entrusted to this department. Following are the basic objectives behind
establishing a separate purchasing department.
1.

To procure proper quality of material so that production goes on

uninterruptedly.

2.

To develop well supplies relationship which will ensure the best terms of supply of
material?

3.

To ensure the supply of material at the time it is needed by production department.

4.

Scheduling of purchase by keeping in view of short term and long term production
policies of the concern.

5.

The wastages of material due to spoilage, obsolescence, duplication etc. are kept at
minimum.

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PURCHASE PROCEDURE OF RAW MATERIAL

The raw material for production in BCL are seeds of different types like cotton seeds, mustard
seeds, soyabean seeds, sunflower seeds and raw oils like mustard oil, soyabean, cotton seed oil
and rice bean oil. The purchase of different seeds is done in their respective seasons. So
purchasing is whole year process that is why, a separate department raw material department has
been maintained which requires specific attention and control. This department ensures that the
seeds are procured at minimum cost, is of best quality and is supplied to the company as and when
needed with minimum wastage of time and efforts. In BCL, purchase is made through commission
agents. These are called arties who charge commission for their services. The steps followed for
procuring seeds are as under:-

1. BARGAINS FOR PURCHASE OF RAW MATERIAL:The purchase of R.M is made through authorized commission agents from parties directly through
telephone. Bargains are written for different type of purchase bargain contains quantities of
commodities to be purchased and their rates. It also contains whether it is F.O.R. or Ex mill
purchase. When the purchase of material is on F.O.R basis then all the expenses of purchase are
born by the seller upto the factory of BCL. When the purchase is on Ex-mill basis. Then the
expenses of purchase are born by the BCL from the place of purchase upto factory.

2. RECEIPT OF MATERIAL:When the season starts the seeds are arrived at the main gate of the factory through different types
of vehicles like tempos, trucks, trolleys etc. truck drivers note his truck number to the security
guard cat the main gate the security guard takes the vehicle in factory turn by turn on priority
basis.
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3. WEIGHTMENT OF MATERIAL:a)

Weightment in case of seeds:

When seeds through the vehicles are taken in the factory premises, their weightment is done at the
weightment bridge situated near the main gate gross weight is filled in the respective material
receipt and vehicle is sent to Godown for unloading of seeds. At the go downs truks are unloaded
by the labourers and vehicle is sent back to the weightment bridge for weighing the weight of
empty vehicle weightment is done and net weight is calculated by deducting weight of empty
vehicles from the gross weight. All this is done to determine the shortage in leans it of various
types of seeds. When the material is received at the gate 3 copies of material receipt are prepared.
Performa of material receipt is shown here. One copy of material receipt is kept at the gate as a
record, second is given to the driver of the vehicle and the third is attached with the bill and sent to
account department for payment.

b) Weightment in case of crude oil:

In case of crude oil also just oil tankers are weighted and gross weight is measured. Then oil of
tanker is unloaded and empty tankers are weighted and deducted from gross weight and net weight
of oil is determined.

4. PAYMENT:a) Payment of freight:

The accounts department is responsible for making payments of freight. Payment of freights is
made only when the vehicle is unloaded and material receipt is issued to them, payment of freights
is made on quantity basis. Payment is calculated on the material receipt at the fixed per metric ton.
Payment of shortage of material is deducted from the drivers. Where the amount of freight exceeds
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Rs. 20,000. A TDS is deducted at the rate prescribed at that time i.e. at the rate of 2% + surcharge.
Drivers may himself recover payment of shortage from the party.

b) Payment of seeds:
The accounts department is responsible for the payments of all types of material like seeds and oils.
Payment is made on the basis of terms and conditions made at the times of purchasing the material.
Purchases of seeds are made on 2 bases: one is at lump sum rate through the different commission
agents and the other is based on oil contents in the seed through the commission agents and directly
from the parties. In case of lump sum rate, payment of material is made on the basis of quantity
received in the factory multiply by the bargain rate. In case of purchase based on oil contents a
sample is sealed and a sample number is written on it. After that it is analyzed in laboratory and a
lab analysis report is issued by the laboratory Incharge lab analysis report shows the name of the
party, oil, date of analysis, tanker number date etc. All payments are made at the due dates. These
dates depend upon the market conditions prevailing on different states from where the material is
purchased. When the payment is made before the due date, an amount of cash discount is deducted
on the basis of days. For e.g. if due date is after 7 days then after deducting the cash discount, it can
be made with in 5 days all payments are made through demand drafts. Payment sheet is maintained
by the accounts department which keeps the record of payment due or paid.

c) Payment of crude oil:

In case of crude oil payment is made on the basis of FFA (gums) and Contents of co lour (FFAFatty free assets). In case FFA and contents of colour are more include oil, the oil is of poor
quality. And if FFA and contents of colour are less then crude oil is of better quality samples of oil
is received and these are sealed in small bottles. Then analysis is done in laboratory and a lab
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report is prepared and FFA and contents of colour are checked and payment is calculated on this
basis and is made on due date.

DOCUMENTS TO BE USED FOR PURCHASE OF SEEDS

1) PURCHASE BOOK: - It is used for recording purchase of different seeds.
2) MATERIAL RECEIPT: - It is used for determining the net weight of seeds. It contains various
columns upgrading particulars and weight. In particulars vehicle no., Name of Supplier,
Commodity and Quantity are recorded. In weight total fare, packing and net weight are
recorded the Performa of material receipt is shown here 3 copies of material receipt are
prepared first is kept at the weight-ment Bridge. Second is attached with bill and sent to
Accounts Departments and third is sent to party.
3) LAB ANALYSIS REPORT: - Lab analysis report is used for recording the details of oil
contents checked in samples of seeds this report shows the Name of Party, Numbering of
Tankers, Date of Analysis etc. Specimen of the Lab analysis report used in BCL.

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PURCHASE PROCEDURE FOR THE ITEMS OF STORES

Stores refers to the direct and the indirect materials purchased for stock purpose to be issued to
different jobs, work order or departments as and when required for the purchase for the items of
stores the company BCL follow following procedure so that adequate quantities of stores has to be
maintained in the company to meet the emergency situation: Purchase Requisition or Indenting.
Inviting Quotations.
Purchase Order
Receipt and Inspection of Bill.
Checking and passing of bill for payment.

1) Purchase Requisition or Indenting: - A purchase requisition is a form used as a formal request

to the purchasing department to purchase material this form is prepared by the storekeeper for
regular stock materials and by the departmental lead for special material not stocked as regular
items. In BCL lead of department requiring specific item of spares make an indent and send it
to store purchase department. The purchase requisition is generally prepared in triplicate but in
BCL the indenting department prepares 4 copies of the same out of 4 copies 2 copies are sent
to the purchase department and 1 is sent to stores department and 1 is sent to stores department
and 1 is kept by the Head of Department himself the Performa of store department is shown
here. The indents contain the details about the item required. Quantity required, Date of
Purchase etc. Regular Purchase requisitions are prepared when the item of materials reach at
the ordering levels i.e. the levels at which the order for replenishment should be placed this is
done with a view to avoid the shortage of materials and make available uninterrupted supply of
materials to jobs or departments.
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2) Inviting Quotations: - A source of supply of materials must be selected after the receipt of the
purchase requisition. The purchase department usually maintains for every group of materials
a list of the suppliers names and addresses. Quotations may be invited from these suppliers by
issuing tenders to them. On receipt of the quotation from the suppliers, a comparative
statement of various quotations received should be prepared and the desirable suppliers should
be selected. In BCL, in case of purchase of item whose value is more than Rs. 5000/quotations are invited. If the value of material to be purchased is below Rs. 5000/- quotations,
then quotations are not invited, then the enquired are made simply made on telephone from the
supplier. While selecting the supplier to whom order is to be given for the purchase of
materials, the purchase department of BCL keep in mind (i) Manufacturing capacities (ii)
reliability of the suppliers (iii) financial condition of the supplier (iv) the management of the
supplying firm (v) the terms of delivery and payments etc. thus this concern select that
suppliers from whom material is purchased who is dependable and capable of supplying
material of uniform quality at right time and at reasonable prices.
3) Purchase Order: - After receiving the enquiries, the store department makes a comparison as
on rated and quality & issue the purchase order is the written authorization to the supplier to
supply the particular material. It is the evidence of the contract between the buyer and the
supplier that binds both the buyer and supplier to the terms under which the order is placed the
supplier bound to supply material according to the terms and conditions of the purchase order
and the purchase is required to accept delivery of and make payments for materials as agreed
upon. In BCL 3 copies of purchase order are made. First copy is sent to supplier, second copy
is attached with the bull and is sent to the Accounts Department and the third copy is kept in
stores for future reference. Thus in this concern follow up of orders ensures smooth purchase

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of materials and also safe guards against the closure of the factory due to the non-receipt of
materials. Performa of the purchase order in BCL is shown here.
4) Receipt And Inspection Of Material:- In BCL, the work of receiving the goods is entrusted to
the storekeeper when the material is received at the gates, entry is made at the main gate of the
concern and 3 copies of the Inward Gate Pass are issued. One copy is sent to stores and one is
retained at the gate then the head of department check the material regarding its quantity,
quality and physical condition. Only then the give his approval to the store purchase
department. In case the receives material is not according to the standard required then these
goods are rejected and sent back to the supplier. In such case three copies of Outward Gate
Pass are prepared. One is sent to the supplier One is kept at gate and one is kept in stores
specimen of outward and inward Gate Pass is shown here which contains S.No. Particulars,
Quantity and Remarks regarding that particular good or material. Thus, these documents
provide a complete record of the all material received and rejected.
5) Checking And Passing Of Bill For Payment: - When store purchase department receive the
approval from the Head of Departments submits the bill to Accounting Department along with
the order to check both the authenticity as well as the arithmetical accuracy the quantity and
price mentioned is checked as per order. Having thus verified the bills in all respects, the
accounts section certifies and passes the bill for the payment and on this basis the cashier make
the payment. Payment is made according to the terms agreed in any particulars order. While
making the local payment concern make the payment through cheques and payment outside
the city is made by the Demand Draft. So, this is the purchase procedure for the items of stores
which the BCL follow for the smooth functioning of the concern and to perform functions
effectively.

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CHAPTER II
OUTLINE OF THE STUDY

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RESEARCH METHODOLOGY
The whole research work can be described in following steps:

Recognition of information: - The very first step is the recognition of various types of
information, which is necessary for the study of budgetary control.

Collection of data:- In order to understand the present system of budgetary control, data from
various departments have been collected by conducting personal interviews.

Understanding of reports being prepared by the units:- For understanding the various types
of reports being sent to finance department by different sections/departments, personal
interviews have been conducted with the concerned persons with prior permission from
concerned departmental heads.

Study of Actual & Standard Budgets:- For better understanding, actual and standard budgets
of each department have been studied.

Calculation of Variances and reasons for them:- By comparing actual with standard
budgets, variances have been calculated and reasons for them have been stated.

Identification of strength & weakness of budgetary control:- Strength and weakness of the
budgetary control have been observed in the light of requirement of various types of
information and remedial action is taken by Management for adequacy & sufficiency of the
reports.

Suggestions:- Suggestions on the basis of budget analysis have been given for better
budgetary control.

SOURCES OF INFORMATION

Personal Interviews

Office Records

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Newspaper Clippings

Pamphlets

REPORT WRITING & PRESENTATION

Report Encompasses

Charts & Diagrams

OBJECTIVES OF THE STUDY: The main objectives of the study are as under.

To know about the need for Budgetary control system in the Company.

To be conversant with the Budgetary control system & various types of planning & control
measures adopted by the company.

To be familiar with the nature, types & purpose of budget to be submitted by the various
departments & get knowledge about them in a practical aspect.

To develop the understanding about responsibility as to why & by whom it is made.

To know about the different measures & ways to make budgetary control a successful
instrument for planning and control purpose.

To study & review the present budgetary control system in BCL, Bathinda for the purpose of
better understanding of system & making it more effective.

SCOPE OF THE STUDY

The study is conducted only at BCL, Bathinda Punjab for four weeks duration. The study of
budget is purely based on secondary data & all the information is available within the company
itself in the form of records which is based on the data collection for the year 2012-13. To get

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proper understanding of this concept, I have gone through

yearly revenue as well as capital

budget, quarterly budgets, management reporting (MR) to Corporate Office, monthly cost review
data, actual operating data against monthly/yearly data. Interviews have also been conducted with
employees of Finance & Accounts Department. Hence, the scope of the study is limited up to the
availability of official records & information provided by the employees.

LIMITATIONS OF THE STUDY

The major sources of data are the annual reports and annual budgets. As budgets are prepared
for the future period, figures may go under change due to prevailing circumstances.
Due to the policies of company, only screened information is provided by the Finance &
Accounts Department.
Period of four weeks to study concept of budgetary control in large organization like BCL, is
very limited.
Information already compiled by the company is the basis of the study & not the information
from the raw data/primary data.

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CHAPTER II
MEANING & CONCEPT
OF
BUDGETARY CONTROL

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BUDGET AND BUDGETING

INTRODUCTION
To run successfully every organization depends on certain management tools. The three
main functions of management are planning, operating and control. Planning relates to the future,
operating to the present and control to the past. Modern management wants that all operations
should be forecasted and as far as possible planned ones. For assisting the management in the
functions of planning and control, budgetary control is one of the techniques, which is generally
applied meaningfully by the management to attain the desired results.
In the context of budgetary control, the three common terms used are Budget, Budgeting
and Budgetary control.

BUDGET
A Budget is a detailed plan, expressed in quantitative terms, that specifies how resources
will be acquired and used during a specified period of time. A Budget is prepared to have effective
utilization of funds and for the realization of objectives as efficiently as possible.

DEFINITION
A budget is a pre-determined statement of management policy during a given
period which provides a standard for comparison with the result actually achieved .
- J.L. Brown & L.R. Howard

An estimate of future needs arranged according to an orderly basis, covering some

or all the activities of an enterprise for definite period of time.
- George R. Terry.
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ESSENTIALS OF A BUDGET

It is a plan expressed in monetary terms but it can also contain physical units.

It is prepared prior to a defined period of time during which it will operate.

It is related to a definite future period.

It is approved by the management for implementation.

It usually shows the planned income to be generated and expenditure incurred.

It also shows capital to be employed during the period.

It is prepared for the purpose of implementing the policy formulated by the management and
the objectives to be achieved during the period.

It is a financial statement, which is prepared before the start of the period for a defined period of
the policy of the Company to be pursued during the defined period. Thus, a budget fixes the target
in terms of rupees or quantities against which the actual performance is measured. A budget can,
therefore, be taken as a document, which is closely related to both the management function as
well as the accounting function of an organization.

BUDGETING
Budgeting refers to the mechanism of preparing budgets. The producers used to develop a budget
constitute a budgeting system. Budgeting system is the most widely used accounting system and
formal process of financial planning using estimated financial and accounting data.

DEFINITION
The entire process of preparing the budgets is known as budgeting.

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Preparation or formulation of business budgets involves careful studies of the conditions of the
business, the objectives of the management and the capacity of the business concern for attaining
those objectives. Thus, it can be said that budgeting involves the entire process of making business
plans.

Budgeting process involves the following steps:

To forecast sales indicating what quantity and quality of goods should be made available.

To determine management policy regarding range of products, stock levels, channels of

distribution, investments, etc.

To determine a production budget in accordance with the forecast & policies and to plan the
needs for materials, labour and services along with the costs involved.

To prepare financial estimates as regards cash requirements for planned operation and
investments.

To prepare a Master Budget combining and coordinating the individual budgets.

Budgeting system have five primary purposes1. PLANNING:The most obvious purpose of a budget is to qualify a plan of action. The budgeting process forces
the individuals who compromise as organization to plan ahead.

2. FACILITATING COMMUNICATION & COORDINATION:For any organization to be effective, each manager throughout
the plans made by the other managers.
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the organization must be aware of

3. ALLOCATING RESOURCES:Generally, organization resources are limited and budgets

provide one means of allocating

resources among competing uses.

4. CONTROLLING PROFITS & OPERATIONS:A budget is a plan, & plans are subject to change. Never the less, a budget serves as a useful
benchmark with which actual results can be compared.

5. EVALUATING PERFORMANCE & PROVIDING INCENTIVES:It is the managers essential tool to evaluate the performance of individuals, departments, divisions
or entire company & is also used to provide incentive for people to perform well.

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BUDGETARY CONTROL

Budgetary control is a system where by the budgets are used as a means of planning &
controlling costs. Budgeting lies down as to what is to be attained & how it is to be attained, while
control ensures that the objectives are realized & actual results do not deviate form the planned
course more than necessary. Budgetary control is applied to a system of management and
accounting control by which all operations & output are forecasted far ahead as possible & actual
results when known are compared with budget estimates.

DEFINITION
Budgetary Control is defined as the establishment of the budgets relating to the
responsibilities of executives to the requirements of the policy & the continuous comparison
of actual with budgeted result either to secure by individual action the objectives of that
policy or to provide a firm basis for its revision.
-CIMA, LONDON

Budgetary control system is a system of controlling cost which includes the preparation of
budgets, coordinating the departments and establishing responsibilities, comparing actual
performance with the budgeted and acting upon results to achieve maximum profitability.
- J.L. Brown & L.R. Howard.

It follows that a Budgetary Control System secures control over performances and related costs in
different parts of a business, (i) by establishing budgets, (ii) by comparing actual attainments
against the budgets, and (iii) taking corrective action and remedial measures or revision of the
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budgets, if necessary. The budgets put the plan in a concrete form and the follow-up action to see
that the plan is adhered to (i.e. the actuals do not exceed the budgets) completes the system of
control. In other words, while budgeting is the art of planning, budgetary control is the art of
adhering to the plan.

ESSENTIALS OF BUDGETARY CONTROL

Top management support is required.

Establishment of budget for each function and section of the organization.

The goals fixed in budgets should be clear & realistic.

There should be delegation of authority and responsibility in the organization.

Creation of different responsibility centers is necessary.

Continuous comparison of the actual performance with that of the budget.

There should be responsibility accounting system in the organization.

Full participation of all the departments & employees of the organization.

Taking suitable remedial action to achieve desired objective if there are variations.

Effective communication of budget to different departments is required.

Every employee of the organization must be conversant with the targets laid down in the
budgets.

Revision of budgets in the light of changed circumstances.

Rowland and William in their book entitled Budgeting for Management Control has written,
Budgetary control is the science of planning the budgets themselves and the utilization of budget
to effect an over all management tool for the business planning and control. Budgetary control
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results from the administration of the financial plan. An important characteristic of the budgetary
control is comparing actual performance with prior estimates or targets laid down in the budget to
make sure that actual performance is steering in the right direction and if any discrepancy/
deviation occurs then remedial action is taken at the appropriate time.

DIFFERENCE BETWEEN BUDGET, BUDGETING AND BUDGETARY CONTROL

Budgets are the individual objectives of the department, whereas budgeting may be said to be the
act of building budgets. Budgetary control embraces all this and in addition includes the scheme
of planning, the budgets themselves and the utilization of such budgets to effect an overall
management tool for the business planning and control.

OBJECTIVES OF BUDGETARY CONTROL

To plan the policy of a business for the coming period for achievement of the firms objectives
and its translation in to monetary and quantitative terms.

To determine the responsibility of each department and executive so that they are made
accountable for definite and precise results.

To co-ordinate the activities of the business so that each is a part of an integral total.

To provide for continuous comparison of actual and budget performance in terms of results
achieved and costs incurred so that cause for any inefficiency is immediately detected and
removed.

To control and direct each function so that best possible results may be obtained.

To provide for the revision of budgets for future in the light of experience gained.

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ADVANTAGES OF A BUDGETARY CONTROL SYSTEM

(i)

Budgetary control aims at maximization of profits through effective planning and control

of income & expenditure.

(ii)

It provides a clear definition of the objective and policies of the concerned and a tool for

subjecting these policies to periodical examination.

(iii)

This provides a basis for stable employment in the country, makes economic use of limited

resources of the nation and prevents wastage.

(iv)

This results in closer cooperation between the various branches and spheres of the

Organization.
(v)

This maximizes the effective utilization of men, material & resources.

(vi)

It highlights weak spots & inefficiencies. Efforts are concentrated only over a small

portion of the expenditure which is not in conformity with the norms. Reports are furnished under
the principles of management or control by exception.
(vii)

It provides a motivating force urging all concerned to work efficiently.

(viii)

It creates in the management the habit of thinking ahead- making careful study of the

problems in advance before taking decisions.

(ix)

It assists delegation of authority and is a powerful tool of responsibility accounting.

(x)

It supplies a basis for internal audit.

(xi)

It creates necessary conditions to suit setting of standard cost

PRELIMINARIES FOR THE ADOPTION OF A SYSTEM OF BUDETARY CONTROL

For the successful implementation of a system of budgetary control, certain pre-requisites are to be
fulfilled. These are summarized below:Page | 26

(i)

There should be an organization chart laying out in clear terms the responsibilities and

duties of each level of executives, and the delegation of authority to the various level.
(ii)

The objectives, plans & policies of the business should be defined in clear cut and

unambiguous terms. The areas to be covered by the budgetary system should be clearly laid
down.
(iii)

The output level for which budgets are fixed i.e. the budgeted output should be stated.

(iv)

The particular budget factor which will be the starting point of the preparation of the

various budgets should be indicated.

(v)

There should be an efficient system of accounting to record and provide data in line with

the budgetary control system.

(vi)

A Budget Committee should be set up for the establishment and efficient execution of the

plan.
(vii)

There should be a proper system of communication and reporting between the various

levels of management.
(viii)

There should be a charter of programme which is usually in the form of a budget manual

wherein all details regarding the plan and its procedure of operation are given. The manual will
also specify the length of the budget period.
(ix)

The budgets should primarily be proposed by those who are responsible for performance.

(x)

The budgets should be complete, continuous and realistic.

(xi)

There should be an assurance from the top management executives of cooperation and

acceptance of the budgetary system.

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TYPES OF BUDGETS
A. On the basis of time period.
B. On the basis of condition.
C. On the basis of activity levels.
D. On the basis of usage.

A.
1.

ON THE BASIS OF TIME PERIOD

Short Range Budgets:- These budgets cover a year, a quarter or a month. It covers those

activities, the trend in which is difficult to be foreseen over longer periods.

2.

Long Range Budgets :- These budgets cover period longer than a year.

3.

Rolling Budgets:- Rolling budgets are continually updated by periodically adding a new

incremental time period, such as quarter & dropping the period just completed. These budgets are
also called revolving budgets or continuous budgets.

B. ON THE BASIS OF CONDITION

1. Basic budget:- Established for use unaltered over a long period of time i.e. it does not take
into consideration current conditions.
2. Current Budget:-

Established for use over a short period of time and is related to current

conditions.

C. ON THE BASIS OF ACTIVITY LEVELS

1.

Fixed Budget:- It is drawn for one level of activity, one set of conditions and is simple

collection of costs. It is designed to remain unchanged irrespective of the volume of output or

turnover attained. It is a rigid budget with assumption of no change in budgeted level of activity.
Page | 28

2.

Flexible budget:- It is designed to give different budgeted costs for different levels of

activity. Its compilation requires the classification of all costs or expenses into fixed, variable and
semi-variable.

D.

ON THE BASIS OF USAGE

1. Master Budget: - A master budget, or profit plan, the principal output of a budgeting system,
is a comprehensive set of budget that ties together all phases of organizations operations. The
master budget is comprised of many separate budgets, or schedules, that are interdependent.
2. Operational Budget: - Operational budget relates to the planning of the activities or
operations of the enterprise. It encompasses a detailed plan for using the basic factors of
production- material, labour and overhead to produce a product or provide a service.
Operational budget is composed of two parts- a programme or activity budget and a
responsibility budget.

a) Programmed or activity budget:- The programmed budget focuses on activities rather

than persons, it exhibits the expected future in an impersonal manner. It is helpful in
ensuring balance among various operations or functions of an enterprise.

b) Responsibility Budget: - A responsibility budget specifies plans in terms of individual

responsibilities. The focus is on individuals. The basic purpose of this kind of budget is to
achieve control by comparing the actual performance of a responsible individual with the
expected performance.
3. Financial Budget: - These are also called proforma financial statements and show how the
organizations financial statements will appear at a specified time if operations processed
according to plan. The important components of financial budget are a budgeted income
statement, a budgeted balance sheet and a budgeted statement of cash flows.
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SOME IMPORTANT BUDGETS

Sales Budget
A sales budget is an estimate of expected sales during a budget period. A sales budget is known as
a nerve centre or backbone of the enterprise. The degree of accuracy with which sales are
estimated will determine the practicability of operating budgets. A sales budget is the starting point
on which other budgets are also based. The possible factors to be taken into account while
preparing a sales budget are discussed as follows:

Past sales figure:- The sales forecasts are based on past sales figures. The sales figures of a
number of years enable in the determination of trends of sales. The upward and downward
sales trends will be great use in fixing future sales. The actual past sales figures will be the
most reliable criterion on which sales budgets should be based. The expected seasonal
fluctuations. Potential demand and position of trade cycle will also be helpful in preparing
sales budgets.

Assessment and reports by salesman:- The salesman are the most approoriate persons for
estimating future demand. They are in touch with market and the customers. Their experience
will enable them to forecast sales figures more realistically. The sales manager should
cautiously scrutinize the figures of salesman so as to eliminate their bais. The attitude and
personal thinking of the salesman may tempt them to underestimate or overestimate sales
estimates. The sales manager gets an idea about the market situation from salesmans estimate.

Availability of raw materials:- the availability of raw materials is an important factor in

preparing a sales budget. In some cases, raw material is a key factor. The quantum of raw
material available to the enterprise will enable the sales manager to anticipate sales figures.
Moreover the smooth supply of materials is necessary for achieving sales targets.

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Seasonal fluctuations:- The effect of seasonal fluctuations should also be considered while
preparing a sales budget. The demand of goods may be more on some periods while they may
be in less demand at other times. An effort should be made to reduce the seasonal effect by
giving discounts or other concessions during off seasons.

Availability of finances:- the availability of finances sometimes becomes a limiting factor.

The finances will be required for purchasing various inputs. The sales budget is prepared
alongwith the financial budget. The expansion of the sales effort will need additional capital
outlay. Financial aspect should be taken into consideration while preparing a sales budget.

Plant capacity:- The gods will be sold only when they are produced, the capacity fir
producing goods should be taken into account. On the other hand sales effort must ensure will
utilization of plant capacity.

PRODUCTION BUDGET
The production budget is prepared in relation to the sales budget. Whatever is to be sold should be
produced in time so that it is delivered to the customer. It is a forecast of the production for the
budget period. Production budget is prepared for the number of units to be produced and also for
the cost to be incurred on materials. Labour and factory overheads. Two important considerations
are involved in the preparation of production budget:
(a). What is to be produced?
(b). When is to be produced?

The preparation of the production budget involves the following stages:

1. Production Planning:- a proper production planning schedule is essential for preparing
production budget. The number of physical units to be produced is determined. The utilization
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of optimum plan capacity and avoidance of bottlenecks due to shortage of materials and
labour, Etc is considered while preaparing a production plan. Production Planning will ensure
a smmoth production schedule.

2. Consideration of Plant Capacity:- the number of units of different products to be produced

should be determined an the capacity which the plant will be able to work throughout the
budgeted period should be decided. One should not fix the capacity either too high or too low.
A normal plan capacity which will be a estimate should be budgeted.

3. Stock Quantity to be Held:- the quantity of finished goods to be carried forward should be
decided. This quantity will depend upon a number of factors like sales potential, storage
facility, available and cost of the stock. While fixing production target, the required closing
stock figure will be added to the estimated sales and opening stock figures will be deducted
from it. The work in progress will be taken into account while fixing a production target.

4. Considering Sales Budget:- the production budget is fixed with reference to sales budget. The
sales budget will provide a guideline for production planning. If both the budgets are not coordinated then there may arise problems of either selling the whole stock or of producing it. In
case the sales are not undertaken as per schedule then production should be reduced or viceversa.

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MATERIALS BUDGET
The material budget is concerned with determining the quantity of raw materials required for
production. The programme for purchasing raw material is adjusted according to the production
budget. The materials are purchased as per the requirements of production department. The
requirements of materials are determined product-wise. The rates of consumption of raw materials
are also determined. The number of units to be produced multiplied by the rate of consumption
will give the figure of raw materials required. The stocks of materials required in hand at any time
are added to the materials required for production. The raw material budget will serve the
following purposes:1. The Purchase Department will be able to plan the purchase of raw materials at different times.
2. It will enable the fixation of minimum stock level, maximum stock level and re-ordering level.
3. The raw material purchase budget will be determined.
4. The budgeted cost of raw material will be determined.

DIRECT LABOUR BUDGET

The labour required for production may be classified into direct and indirect labour. The labour
required for manufacturing the product is known as direct labour. The labour which cannot be
specified with production is called indirect labour. Though two budgets may be prepared, direct
and indirect labour, but from costing point of view only direct labour budget is prepared because
indirect labour is made a part of manufacturing overheads.

The labour contents of each item is determined in terms of grades of workers required as per
production budget. The labour time needed for each job, process and operation is determined with
the help of time nad motion study. The rates of pay including all allowances are multiplied by
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labour time for calculating labour cost. If labour incentives schemes are in operation then labour
rates should be suitably increased. If piece-rate systems for paying wages is in operation then
labour cost will be calculated by multilplying budgeted units by the labour rate per unit.

Labour budget is useful for anticipating labour time required for production. the personnel
department is also able to make arrangements for recruitment of workers.

MANFACTURING OVERHEADS COST BUDGET

The manufacturing overheads cost is that part of works cost which arises from indirect
labour. Indirect materials, overheads and other factory expenses. Manufacturing cost is excluding
from direct material and direct labour. Manufacturing overheads cost may be classified into fixed
cost, variable cost and semi-variable cost.
The fixed works overheads cost remains constant irrespective of output and it is estimated
on the basis of past experience. The variable works overhead cost is determined per unit of cost
and it is calculated by multiplying the rate per unit by the budgeted output. The semi-variable cost
increases with the increase in output but the rate per unit decreases with the increase in output.
While budgeting manufacturing overheads cost, management must consider the level of activity to
be attained in future so that the expenses are estimated accurately.

SELLING AND DISTRIBUTION OVERHEAD BUDGET

This budget includes all expenses relating to selling advertising and distribution of goods. These
expenses may be analysed according to products territories, salesmen .etc The fixed expenses
under this category may be estimated on the basis of past experience changes .variable selling and
distribution overheads will vary with the anticipated sales figures. The responsibility for preparing
Page | 34

this budget lies with the executives of sales departments. The volume of these expenses should be
in direct proportion

to expected sales figures. The future expectation, estimated by the

management .advertising policies, research programmes and nature of theses expenses will
influence the preparation a selling and distribution overhead budget.

CASH BUDGET
A cash budget is an estimate of cash receipts and disbursements during a future period of time .it
proceeds various other budgets like materials and research and development budget. The cash
budget is an analysis of flow of cash in a business over a future, short or long period of forecast of
expected cash intake and outlay

The cash receipts from various sources are anticipated. The estimated cash collections for sales,
debts, bills receivables, interests, dividends and other income and sale of investments and other
assets will be taken into account. The amounts to be spent on materials .payment to creditors and
meeting various sources from which Cash will be received and the channels in which payments
are to be made so that a consolidated cash position is determined. The cash budget should be coordinated with other activities of business. The functional budgets may be adjusted according to
the cash budget. The available funds should be fruitfully used and the concern should not suffer
for want of funds.

CAPITAL EXPENDITURE BUDGET

The budget lays down the amount of estimated expenditure to be incurred on fixed assets during
the budget period. As the amount involved in capital expenditure is usually high this requires
careful attention of the top management. The budget is based upon the annual forecasts of capital
Page | 35

expenditure of various divisions or departments. Each division or department of an organization

sends the annual forecast of capital expenditure of its own department to capital Expenditure
sanctions committee. The committee after considering the profitability of the capital expenditure
sanctions the expenditure and amount is incorporated in the budget.

MASTER BUDGET
The master budget is the summary of various functional budgeted. It is prepared by integrating
various budgets into one consolidated budget so as to represent the budgeted profit and loss
account and the budgeted balance sheet as at the end of the budget period.

In the words of Rowland and William H. Harr, the master budget is, a summary of the budget
schedules in capsule form made for the purpose of presenting in one report the highlights of the
budget forecast. The institute of Management Accountant, London, defines it as, the summary
budget incorporating its component functional budgets and which is finally approved, adopted
and employed .

The master budget is prepared by the budget officer and requires the approval of the Budget
committee before it is put into operation. This budget is used to co-ordinate of various functional
departments and also to serve as a control device.

The various steps involved in the preparation of this budgets include of (1) sales budget, as the
starting point; (2) production budget ; (3) cost of production ; (4) cash budget; and (5) the
projected income statement and the balance sheet.

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ZERO BASE BUDGETING (ZBB)

Zero base budgeting is the latest technique of budgeting and it has an use as a managerial Tool.
This technique was first used in America in 1962. The former president of America, jimmy carter
used this technique when he was the4 governor of Gorgia for controlling state expenditure.

As the name suggests it is starting from a scratch. The normal technique of to use previous years
cost levels as a base for preparing this years budget. This method carries previous year s
inefficiencies to the present year because we take year as a guide and decide what is to be done
this year when this much was the performance of the last year in zero base budgeting every year
is taken as a new year and previous year is not taken as a base the budget for likely future
activities are decided according to the present situation .In the words of peter A pyher, A
planning and budgeting process which requires each manager to justify his entire budget request in
detail from scratch (Hence zero base)and shifts the burden of proof to each manager to justify why
he should spend money at all. The approach requires that all Activities be analysed in decision
packages which are evaluated by systematic and ranked in order of importance.

In zero base budgeting a manager is to justify why he wants to spend .The preference of spending
on various activities will depend upon their justification and priority for spending will be drawn .it
will have to be proved that an activity is essential and the amounts asked for are really really
reasonable taking into account the volume of activity.

PROCESS OF OR STEPS OF INVOLVED IN ZBB

The following steps are involved in zero base budgeting:

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(1)The objective of budgeting should be deterimined. When the objective is clear, then efforts will
be made to achieve that objective. Different organizations may have different objectives. One
concern may try to reduce the expenditure on staff, another may try to discontinue one project in
preference to another. So the first step will decide about the object and other steps will be possible.

(2)The extent to which zero base budgeting is to be applied should be decided. Whether it should
be used for all operational areas or its should be applied in some areas only should be decided
beforehand.

(3)The next step in ZBB is developing of decision packages. A decision package is a document
that identifies a specific activity in such a manner that management can evaluate and rank it
against other activities competing for limited resources, and decide whether to approve or
disapprove it.

(4)Cost and benefit analysis should be undertaken. We should consider the cost involved and the
likely benefits to accrue. Only those projects should be taken first where benefit is more as
compared to the cost involved. Cost benefit analysis will help in fixing priority for various
projects on the basis of their utility or ranking of decision packages.

(5)The final step involved in zero-base budgeting is concerned with selecting, approving decision
packages and finalizing the budget.

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BENEFITS OR ADVANTAGES OF ZERO BASE BUDGETING

ZBB is a revolutionary concept and is relatively a new management tool for planning and control
of activities. It involves people at all levels in the organization and promotes team spirit. The plans
and budgets based upon ZBB are much improved than those based upon traditional budgeting.
There are a number of benefits that arises from zero-base budgeting. Some of the important
advantages of ZBB are enumerated below:
(1) It enables management to allocate funds according to the jurisdiction of the programme.
The priority can be fixed for various activities and their implementation will be in the
same order.
(2) Zero-base budgeting improves efficiency of the management. Every manager will have to
justify the demand for resources. Only those activities will be undertaken which will have
justification and will be essential for the business.
(3) Zero-base budgeting will help in identifying economical and wasteful areas. Emphasis will
be given to economical activities and alternative courses of action will also be studied.
(4) The management will be able to make optimum use of resources. The expenditure will be
undertaken only when it will have justification. A list of priorities is prepared and costbenefit analysis will be the guiding principle in fixing the priority.
(5) Zero-base budgeting will be appropriate for those areas whose output is not related to
production. It becomes difficult to evaluate the performance of those sides which are not
directly related to production but undertake other activities. This technique will be helpful
in determining the utility of each and every activity of the business.
(6) Budgeting will be related to organizational goals. Something will not be allowed on the
plea that it was done in the past. Only those things will be allowed which will help in
realizing organistional goals.
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LIMITATIONS OF ZERO_BASE BUDGETING

Some of the important limitations of ZBB are as below:
(1) Computation of cost analysis, which is essential for ZBB, is not possible in respect of
non-financial matters.
(2) Difficulties in formulation and ranking of decision packages as every manager may not
have the necessary expertise.
(3) The system of zero-base budgeting has no scope to adjust for the changes and, thus,
flexible budgeting is not possible.
(4) It involves a lot of time and cost of operating ZBB is also very high.

ACTIVITY BASES BUDGETINNG (ABB)

In the traditional method of making budgets the previous years figure are taken as the base
and to it certain overages are added for increase in costs for the next period. This method is
followed particularly for indirect costs because it is very difficult to establish exact relationship
between the level of activities and the indirect costs. But it makes the budgets more of guestimates
than predetermined statement of management policy. Direct cost budgets, under conventional
budgeting, are more accurate because the relationship between inputs and outputs can be clearly
established. However, in the changing scenario where indirect costs outweigh the direct processing
costs in many a situations, one cannot be content with rough and ready methods of yesteryears in
dealing with the indirect costs. Activity Bases Budgeting (ABB), also called Activity Based Cost
Management (ABCM), helps in bridging this gap of knowledge by encouraging to make indirect
cost budgets more scientifically on the basis of level of activities rather than a guess work.
Activity based budgets can be prepared only if the organization has already completed Activity
Based Costing (ABC) identifying activities/factors which drive the costs.
Page | 40

CHAPTER III
BUDGETARY CONTROL
&
ITS APPLICATION IN BCL

Page | 41

BUDGETARY CONTROL IN BCL

The success of any organization depends on certain management tools. Budget/Budgetary control
is one of the tools, which is used meaningfully by the management to attain desired results. Budget
is a financial statement which is prepared before the start of period of the policy of the company to
be pursued during the defined period.

The exercise of budget formulation is done taking into account policy of the company regarding
manufacturing, marketing, maintenance of plant and machinery and allied objectives of the
company. While preparing the budget, it is not only the Companys policy which has been
considered but Government policies are also taken into account . In an industry like BCL, Govt.
Policy plays an important role as price mechanism, quality and distribution are governed under the
Control Order and essential Commodities Act.

Budgeting exercise is essential because it is an alternative to groping in dark. Further, budgetary

control compels the management to put its policy and objectives into action to take place in future.
Therefore, one has to be very cautious while drafting this document.

Budgeting is not merely a mathematical or statistical exercise but a management exercise wherein
the business prudence must have taken a front seat over mathematics. Budgetary Control System
is not entirely mechanistic so as to operate automatically once it is set in motion but it requires a
coordinated efforts and involvement of a number of persons belonging to the various sectors of the
concern. As such, success of such a system will largely depend upon the quality and ability of the
individuals who operates the system. The behavioural factors which should specifically be
looked into in this regard are as follows:Page | 42

Those who would be made responsible to achieve the budget should be fully associated with
the process of setting the budgets and no budgets should be imposed from the top.

Individual should be made responsible only for the costs they can control.

While real favourable variances are always to be commended, adverse variances should not
invariably be viewed as failures of the individuals concerned but as stepping stones towards
future successes.

The exercise of budgetary control is carried out in the Company since its inception and there is a
system in vogue to keep a check on the budget proposal. While preparing the Budget, the
executives departments ensure the following;

The budget estimates are prepared on realistic basis.

The objectives of the company have been kept in view while drawing the budget estimates.

It is ensured that the budget estimates are prepared taking each division as the cost-centre.

The forward escalation/de-escalation in prices is also kept in mind while preparing the budget
estimates.

Keeping in view the above factors, budget estimates for next year and revised budget estimates
with reference to original budget estimates for the current year alongwith actual for the preceding
two years are prepared during the month of

August/September every year. The impact of

increase/decrease in prices/costs are considered while preparing revised budget estimates and
budget estimates for next year. The system for budgetary control is applied in BCL in each field
of activities and the same are described as under:-

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1.

Revenue Budget: The control of revenue budget is the most important area for any

organization so as to maintain the profitability as per the budgeted expenditure. If utmost care is
taken at the time of formulating the budget, the company can achieve its desired goals of
optimizing the profit. To optimize the profit and minimize the expenditure, the control of
expenditure is basic necessity. The expenditure under Revenue Budget is divided as under:

Variable Cost/Expenditure

Fixed Cost/Expenditure

Variable Cost/Expenditure
Input Materials
Variable cost increases/decreases with the change of production. There is no control over increase
in prices of raw material i.e. LSHS/Furnace Oil, HDPE Bags, Power, Coal, Fuel Oil, Water,
Chemicals & Catalysts as these are determined by the outside forces. However, consumption of
these items in excess of fixed norms/budget is controllable. Though, the variable cost appears to
be variable with the change of volume but in real sense it is in the nature of fixed cost. For
example- if for production of one tonne of urea, 500 Kg. of LSHS is required, then for production
of two tonne of urea, one tonne of LSHS is needed. It means the ratio is same i.e the changes in
the same ratio.

The details of item-wise budget of above input materials at the level of 100% capacity i.e.
5,11,500 MT may be seen under PP-6 of Profit Plan. The analysis of the budgeted expenditure
vis--vis actual expenditure has been made under the Chapter-VI-Analysis of Budget.

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Production & Sales Budget

Since Production Budget is prepared at the level of 100% capacity utilization due to cap by the
Govt. of India, Sales Plan (quantity as well as value thereof) is also drawn at the level of
Production Plan. Sales Plan being regulated under Essential Commodities Act, hence control
thereof is not difficult as subsidy over ECA allocation is not disbursed by Govt. of India. Rather
they impose penalty for excess dispatches of urea over ECA allocation during the month.

Freight & Handling Charges

Based on last years actual expenditure on Freight & Handling Charges and increase/decrease
expected during the year keeping in view changes in railway freight/rates for diesel/petrol, revised
budget for current year & budget estimates for next year in respect of freight & handling charges
are drawn. Budgetary control against above revised estimates and budget estimates is made and
reasons for any excess expenditure is analyzed.

FIXED COST/EXPENDITURE
Salaries & Wages, Bonus & other benefits to Employees
While preparing the above budget, the impact of normal increase on account of basic pay, dearness
allowance, personal pay, special pay, contributory provident fund, leave encashment, gratuity and
other fringe benefits over last years actual is taken into account. Any addition / reduction in staff
is also considered while drawing the budget.

The control of expenditure is made against each element of above head and adverse variances, if
any, is looked into for taking further necessary action.

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Administrative Overhead
The above budget is prepared by Personnel & Administration Department based on likely
expenditure to be incurred during next year. Format under which information is required, is
supplied by Finance Department with the figure of actual of previous two years against which
projection is made under revised estimate as well as budget estimates.

The budgetary control of each element of expenses under the head Administrative Overhead is
exercised regularly and abnormal expenditure, if any, is reported to concerned department and
reason thereof is sought from the department. Any action wherever required is taken to minimize
the cost.

Factory Overhead
The information in respect of Factory Overhead is asked by the Finance Department from the
different executive departments. While asking the information, details of expenditure incurred
during the earlier two years are also provided so that executive department may make their
estimate more realistic for revised estimates of current year and budget estimates for next year.
Any changes, if required in the estimate based on information made available by Corporate Office
to finance department of unit are also considered.

The review of actual expenditure against budgeted expenditure under various heads of Factory
Overhead is made monthly and any excess expenditure over budgeted expenditure is reported to
concerned department for remedial action if there is no valid reasons for the same.

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Repairs & Maintenance Expenditure

Repairs & Maintenance expenditure constitutes the following heads of expenditure:

Value of spares The value of spares issued from main stores and are charged to
repairs & maintenance on the basis of issue voucher and adjusted for the spares lying at
the site at the end of the year. Value of used items returned to stores is also adjusted.

Departmental Repair- This constitutes free issue of material to contractors for repairs
and jobs get done departmentally.

Repair through Contractor - This includes the cost of material issued to contractor
on chargeable basis and expenditure on item rate and man power supply as per
contract.

Format for Repairs & Maintenance Budget

The relevant formats relating to above budget and pertaining to Electrical Department are enclosed
as the same have been covered under study. The Electrical Department have furnished their
requirement for procurement of spares under the format-VIII. While clearing the indents, Finance
Department ensure that necessary budget provision has been made and if there is no budget
provision, indents are returned to the executive department. If budget is available under other
head of same group and necessary re-appropriation is sought, the same is allowed after its
approval from the competent authority. However, the overall procurement is allowed within the
approved budget made for the same.

Under Format IV- Annual Rate Contracts which are executed by the contractor has been shown
under this format and budgetary control is exercised against approved ARC.

Page | 47

Under Format-III - Actual expenditure incurred against Format-VIII which relates to previous
years also in addition to current year is indicated under this format. The actual expenditure will
form Repairs & Maintenance expenditure, if the relevant spares are used in the plant. Similarly,
actual expenditure against Format-V towards Annual Rate Contract is also shown. These two
parts i.e. Format-III & V form the Repairs & Maintenance Budget of Electrical Department

and

shown under Summary i.e. Format-I. Format-II is details of summary Format-I. The booking of
expenditure against financial head is indicated under Format-XIII which reconciles with actual
expenditure under repairs & maintenance.

Working Capital Budget

Inventory

The control of inventory specially raw materials, packing materials and stores & spares is resorted
at unit level. While raising indents for all these items, the information in respect of consumption of
these items during the previous years, stock available in stores/material issued and available at
site, lead period for procurement of above items are provided in the indent. Based on these
information, the indents raised for specific unit /MT are cleared and if found necessary,
increase/decrease in quantity of indented material is cleared. By way of this method, necessary
budgetary control is exercised at initial stage. The control of inventory of finished goods is being
made by Marketing Department.

Sundry Debtors

Sundry Debtors consist of two parts namely (i) subsidy to be received from Govt. of India (ii)
consumers price to be realized by Marketing Department of BCL.

Page | 48

BCL has no control over subsidy to be received from Govt. of India. If funds are available,
reimbursement of subsidy claim is made within 45 days.

So far realization of consumers price it depends upon policy of the Company during busy and off
season. In case of private dealers, advance is received but incase of financial institutions, credit
period is also allowed depending upon marketing forces prevailing during the period. However,
strict monitory control for realization of outstanding amount is made by Marketing Department.

Loans & Advances

Loans & advances to employees towards conveyance advance, house building advance, house
hold advance and other misc. advances and also advances to contractors and suppliers are made
strictly as per Companys policies and same is recovered through salary/ contractors/suppliers bill.

Cash & Bank Balances

Bathinda Unit has been allowed to avail cash credit limit of Rs.1 Crore and within this limit
account is maintained. Main cash credit limit is maintained at Corporate level and they judicially
utilize cash credit as per requirement of the company.

2.

Capital Budget

The information regarding requirement of capital schemes/items is asked by the Budget Section of
Finance Department from each department. After detailed discussion within the department, the
capital schemes/items are forwarded to Budget Section. After receipt of schemes/items from all
departments, the same are compiled. Department-wise detailed discussions are held for inclusion
of schemes or otherwise under the chairmanship of Chief General Manager. The list of all
Page | 49

schemes duly recommended for inclusion by CGM is prepared by Budget Section. Detailed
justifications of each scheme which are being included are also furnished.

The recommended schemes/items are thereafter forwarded to Corporate Office for scrutiny and
examination by technical as well as finance wing of Corporate Office. After their examination,
the same is put up to Director(Technical)/Director(Finance) and Chairman & Managing Director
of the Company. Keeping in view the fund availability, capital schemes/items are approved to the
extent of approval sought by Corporate Office from Administrative Ministry. While examining
and approving the schemes, schemes are either dropped, provisions get reduced, further detailed
justifications desired or the same are approved. Schemes duly approved by the C&MD of the
Company are conveyed to unit.

Indents against approved schemes are raised by the concerned department and the same are
administratively approved by the CGM and concurred in by the Budget Section. Thereafter,
enquires are floated and purchase orders are issued keeping in view Purchase Manual and
Delegation of Powers if the same are within the provision made for the particular capital
schemes/items. In case purchase order is being placed for higher amount as compared to budgeted
allocation, the difference amount being re-appropriated from saving of other heads of approved
capital scheme duly approved by the CGM. In this way, in no case capital expenditure is more as
compared to budget allocation. The budgetary control is exercised by Budget Section of Finance
Department.

Page | 50

CHAPTER V
FORMULATION OF
BUDGET
&
VARIANCES W.R.T.
BUDGET

Page | 51

Formulation of Budget
While formulating the budget, following assumptions have been made:

Production & sales quantity have been assumed as 5,11,500 MT each based on approval
received from Corporate Office.

Consumption norms have been adopted, duly approved by competent authority and shown
under PP-19.

Latest prices of input materials have been considered while preparing the revised budget
estimates for 2012-13 & budget estimates for 2012-13.

Closing stock of finished goods as on 31.3.2003 and 31.3.2004 has been taken the same as was
on 31.3.2002(actual).

Discount and freight per MT has been considered based on last years actual and marginal
increase & shown under PP-7.

Keeping in view the actual of 2013-14 and also actual expenditure incurred till August, 2002,
budget in respect of salaries & wages, administrative, factory and social overhead has been
prepared.

Provisions for repairs & maintenance expenditure have been made based on actual expenditure
incurred till August, 2002. During the year 2012-13, more provision has been made due to
major replacement of equipments planned during shut-down.

The provision for allocation of interest on Long Term Loans, Short Term Loans, CO expenses
and Marketing Fixed Cost for the year 2012-13 (RE) and 2012-13(BE) has been considered as
intimated by Corporate Office.

Being chemical plant, 330 stream days have been assumed for smooth running of the plant and
rest of the days are meant for maintenance of the normal/breakdown of the plant & machinery.

Page | 52

Based on above assumptions, Revenue Budget has been prepared and placed below. The Master
Profit Plan of Revenue Budget may be seen at PP-1.

Variances w.r.t. Budget

Variances with reference to following budget have been worked out and placed at the end after
Revenue Budget i.e. (RE 2012-13) & (BE 2012-13).

Actual of 2013-14 with actual of 2012-13

Actual of 2012-13 with original budget of 2012-13
Actual of 2012-13 with revised budget of 2012-13
After perusal of the variances under various sub-head, it is noted that variances have been
classified under following main head:

Increase/ decrease in profit due to change in sales price.

Valuation of opening and closing stock. due to increase/decrease in the rate.

Higher rebates/ discounts.

Increase/decrease in consumption of input materials.

Increase/decrease in profit due to change in price of input material.

Increase/decrease in profit due to higher/lower production.

Increase/decrease in fixed overheads.

Past period subsidy.

Misc. Income and other Industrial Products.

Page | 53

Page | 54

CHAPTER VI
ANALYSIS OF BUDGET

Page | 55

ANALYSIS OF BUDGET
After formulation of budget and approval thereof, reporting of actual expenditure against
the budgeted allocation is made. A monthly Cost Review Meeting is held to review the actual
reasons for excess expenditure as compared to budgeted allocation. Cost Review Data for the
month and up to the month of March, 2003 is placed below.

The cost review data is circulated to GM(O&M), All DGMs & All HODs before the
meeting is held on scheduled date & time under the chairmanship of CGM. Analysis of actual
consumption of input material is made not only for the month but up to the month with reference
to standard cost. Similarly, monthly actual expenditure is also analyzed with reference to not only
actual of earlier years but with original budget & internal budget of the reporting year and up to
the month of reporting also. After detailed discussions with the concerned departments, reasons
are recorded and remedial actions are suggested.

However, minutes recorded for higher

consumption/ expenditure have not been provided to me.

The recorded minutes of Cost Review Meeting is forwarded to Corporate Office for
perusal of C&MD. Similar exercise is made by all Units of the BCL. Thereafter, a comprehensive
statement is prepared by Budget Section of Corporate Office for placing the same before all
Directors, Units Heads, Executive Directors, GMs at Corporate level in the monthly Performance
Review Meeting which is held under the chairmanship of C&MD. Units head explains the
reasons for higher consumption/ expenditure to all members present in the Meeting. Guidelines
are issued by Corporate Office for those areas where abnormal expenses/consumption can be
minimized or avoided by adopting suggestive measures.

Follow-up action is also taken in the

next Cost Review Meeting/monthly Performance Review Meeting.

Page | 56

BATHINDA CHEMICALS LIMITED BATHINDA

ELECTRICAL DEPARTMENT
Revenue Budget 2013-14
ID NO.

D
C

Page | 57

Departmental Budget
Contracts Budget

2013-14

2010-11

Format-I
2012-13

(Rs/Lacs)

(Rs/Lacs)

(Rs/Lacs)

(Rs/Lacs)

170.20
75.20

236.57
90.00

130.00
72.00

133.65
118.00

2013-14

FORMAT-III (SUMMARY)
ELECTRICAL DEPARTMENT BCL BATHINDA
Revenue Budget 2013-14
Sr. No. Description

2010-11

2012-13

2013-14

(Rs. In lacs)

(Rs. In lacs)

Rs. In Lacs

MRS spares

10.5

10.50

16.50

Lighting

12.45

11.40

10.75

L&T Spares

15.85

15.85

8.50

Jyoti spares

3.5

2.55

5.00

Winding wires

7.65

7.65

6.75

A/C Plant Spares

6.25

6.25

7.75

Telephone Spares

2.72

2.72

2.35

Cables

13.4

14.50

17.75

Motors & spares

11.2

11.20

8.00

10

Siemens Switchgear spares

2.00

1.80

11

O/H Crane/Blower Spares

3.2

3.70

1.35

12

Transformer spares & Oil

2.95

2.95

2.30

13

Battery & Chargerspares

3.5

3.50

3.00

14

Relays & Meters

5.1

5.10

4.25

15

Submersible Pump spares

2.1

2.10

3.75

16

MOV spares

2.55

2.55

0.75

17

Insulating Material

3.6

3.60

3.50

18

Miscellaneous

17

14.20

6.50

169.72

157.47

133.65

TOTAL

Page | 58

Page | 59

Electrical Department BCL Bathinda

Revenue Budget 2013-14(Rs/Lacs)
Plant equipment and item wise details
Item

Qty.

Format-III

Value Rs. Remarks

MRS SPARES
Switch yard spares

Lot

16.50
1.75

Lighting Arresters and Surge

Lot

1.75

Lot
25KL
2 Nos.
Lot

1.00
8.00
3.00
1.00
10.75
5.00
0.75
0.25

Routine replacement against break down &

maintenance.

Counter
Transformer spares
Transformer oil for MRS
Motor Mechanism for Isolators
Misc. spares
LIGHTING
Lamps of different ratings
Chokes of different ratings
Starters/Igniters/Capacitors
Light fitting
a) Domestic Light fitting
b)Industrial/ Street Light fitting
c)Flame proof light fitting
Lighting accessories
Misc. spares/Consumables
L&T SPARES
Control/Power Contactors &
their spares
Thermal over load relays
Switch fuse units and their
spares
ACB& its spares
Panel/Chasis spares
Fuses & fuse fittings
Miscellaneous spares
JYOTI SPARES
Panel Spares
MOCB/VC/VCB spares
Miscellaneous spares
MOTOR WINDING WIRES/

Page | 60

Lot
Lot
Lot
Lot
Lot
20 No.
Lot
Lot
Lot

0.25
1.50
1.50
1.00
0.50
8.50
2.00

Replacement of oil

For general lighting in plant & township area

Routine replacement against wear & tear/ break

down.

Lot
Lot

1.25
1.50

Lot
Lot
Lot
Lot

1.25
0.50
1.50
0.50
5.00
1.00
3.50
0.50
6.75

Lot
Lot
Diff. items

replacement against wear & tear/break down.

WORKSHOP SPARES
Winding wires

Lot

3.50

Reconditioning of Motors against failures/ break

down

PTFE insulated copper cables

Jumbo spares
Heater & Geyser spares
Welding Machine Spares
Miscellaneous spares
A/C PLANT SPARES
Compressors & its spares

Lot
Lot
Lot
Lot
Lot
Lot

1.00
0.50
0.35
0.50
0.90
7.75
5.50

Routine replacement against wear & tear/break

down.

Condenser for AC plant

Desert Cooler/Portable AC
spares
Miscellaneous spares
TELEPHONE SPARES
Telephone Instruments

1 No.
Lot

0.70
0.55

Lot

1.00
2.35
0.75

50 No

Regular replacement of spares/ replacement of

instruments

Spares for Telephone Sets

Telephone DBs
Miscellaneous spares
CABLES
Copper cables for domestic

Lot
Lot
Lot
Lot

0.50
0.50
0.60
17.75
0.50

wiring
Copper cables for panel wiring
Copper cables upto 10 Sq mm

Lot
Lot

0.25
2.00

size
1.1 KV rating Aluminium cables
3.3 KV rating Aluminium cables
11 KV rating Aluminium cables
Trailing cables
Telephone cables
Cable accessories
Cable jointing kits
Miscellaneous

Lot
Lot
Lot
Lot
Lot
Lot
Lot
Lot

5.00
2.00
2.00
0.75
3.00
0.50
1.00
0.75

spares/Consumables
MOTORS AND SPARES
End shield /Terminal Boxes etc.
Bearing special

Lot
Lot

8.00
6.00
0.50

Page | 61

Require to meet break down/regular

consumption

Replacement against wear & tear/break down

Miscellaneous spares
SIEMENS SPARES
Contactors and its spares

Lot
Lot

1.50
1.80
0.95

Against regular consumption for maintaining the

equipments

Over load Relays

Miscellaneous spares
O/H CRANE & BLOWER
SPARES
Over head crane spares
S/S Blowers spares
TRANSFORMERS SPARES
Transformer oil
Transformers spare
Cork sheets of diff. .sizes
Silica gel
Miscellaneous spares
BATTERY AND CHARGERS
SPARES
Jumbo battery
Spare for Hirect Battery charger
Miscellaneous spares
RELAYS AND METERS
CTMM/ MOTPRO Relay

Lot
Lot

0.25
0.60
1.35

Lot
Lot

0.60
0.75
2.30
0.70
0.75
0.25
0.10
0.50
3.00

Regular spares

2.00
0.60
0.40
4.25
2.00

Replacing old sets/regular consumable spares.

2000L
Lot
Lot
Lot
Lot

3 Nos.
Lot
Lot
1 No

Routine maintenance spares

Replacing old defective meters & consumable

spares.

Chasis for various Relays

Various

0.50

Meter for Panels

items
Various

0.50

Energy Meters

items
Various

0.50

Miscellaneous spares

items
Various

0.75

items
SUBMERSIBLE PUMP
SPARES
Submersible pumps spares
Miscellaneous spares
MOV AND SPARES
Spares for Ammonia Panel MOV
Page | 62

3.75
Lot
Lot
4 Nos.

2.75
1.00
0.75
0.25

Regular consumption

Miscellaneous spares
INSULATING MATERIALS
Different types of tapes
Insulating varnish & thinner
Insulation Paper
PVC Adhesive tape
Miscellaneous spares
MISC. ELECTRICAL ITEMS
Bakelite/ Porcelain fuse

Lot

0.50
3.50
1.50
0.65
0.50
0.35
0.50
6.50
0.25

assembly
HRC fuses (NS/TIA/TIS/D type

Lot

0.75

etc.)
MCBs/Metal clad/Indl. plug &

Lot

0.75

sockets etc.
Switches, Sockets, Holders etc.
Special application Industrial

Lot
Lot

1.00
0.50

cleaners
Hardwares & Polythene Sheet
Superior quality markene cloth
Extension Boards/24 v

Lot
Lot
Lot

0.75
0.20
0.25

Transformers
Fire Alarm System Spares
Miscellanous

Lot
Lot

1.50
0.55

spares/consumables
TOTAL

Page | 63

Lot
Lot
Lot
Lot
Lot
Lot

133.65

Regular Consumables

Misc. domestic/Industrial general consumables.

ELECTRICAL DEPARTMENT, BCL BATHINDA.

Maintenance Contracts & ARC

FORMAT -IV

Revenue Budget-2013-14
Unit: BCL Bathinda.

Rs.Lacs

ARC

35.00

Central Air Conditioning of Plants

6.00

Maintenance of Telephone Exchanges

2.60

Maintenance of OTIS lifts in Urea & CPP

1.40

Operation & Maintenance of Sewage Pump House

4.50

Painting of Elect. Equipments

5.00

Misc. Repair jobs & Contracts

9.60

Cable Trench Cleaning

2.10

Maintenance of Fire Alarm System

1.75

10

Replacement of TG Exciter

1.00

11

Testing of transformer oil

1.50

12

Overhauling of TG In CPP

10.00

13

Rewinding of Motors, Ceiling Fans etc.

1.75

14

Replacement of Oil of 132/11KV T/F in MRS

4.00

15

Dehumidification of CPP Control Room

4.00

16

Overhauling/Servicing of Jyoti Make MOCB/VCB/VC

2.00

17

Overhauling & Servicing of VFD's

0.80

18

Repair/ Rewinding of TG Exciter Rotor

15.00

19

Repair/ Rewinding of TG Exciter Stator

10.00

TOTAL

118.00

Page | 64

Page | 65

ELECTRICAL DEPARTMENT
Revenue Budget-2013-14
Unit: BCL Bathinda.
Sr. Contracts
No.
01 ARC for Misc. Electrical Jobs
02 Central AC Plants.
03 Mtc. of Telephone Exchanges
04 Mtc. of OTIS Lifts in Urea & CPP
05 Operation & Maintenance. of Sewage Pp.

Raw Water

Cooling Water

Contracts Estimated Expenditure

Department:
DM Water

Sulph.Rec.

Eff. Treat

W/S EM

Format -V
ELECTRICAL
Loco (TS) GE TOTAL

00.75
00.00
00.20
00.00
00.00

00.50
00.00
00.20
00.00
00.00

01.50
00.00
00.20
00.00
00.00

00.50
00.00
00.20
00.00
00.00

00.50
00.00
00.20
00.00
04.50

09.50
00.00
00.20
00.00
00.00

00.00
00.00
00.00
00.00
00.00

etc.
00.00
00.00
00.25
00.00
00.00

Hs.
Painting of Electrical Eqpts.
Misc. repairs jobs & Contracts
Cable trench cleaning.
Maintenance of Fire Alarm System
Replacement of TG Exciter
Testing of Transformer Oil
Overhauling of TG in CPP
Rewinding of Motors, Ceiling Fans etc.
Replacement of Oil of 132/11 KV T/F in

00.10
00.00
00.20
00.00
00.00
00.10
00.00
00.05
00.00

00.50
00.00
00.10
00.00
00.00
00.00
00.00
00.10
00.00

00.50
00.00
00.15
00.25
00.00
00.20
00.00
00.10
00.00

00.10
00.00
00.00
00.10
00.00
00.00
00.00
00.05
00.00

00.10
00.00
00.00
00.10
00.00
00.00
00.00
00.10
00.00

00.50
01.10
00.15
00.10
00.00
00.00
00.00
00.55
00.00

00.00
00.00
00.00
00.00
00.00
00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.00
00.00
00.00
00.00
00.00
00.00

05.00
09.60
02.10
01.75
01.00
01.50
10.00
01.75
04.00

MRS
15 Dehumidification of CPP Control Room
16 O/H & Servicing of Jyoti Make

00.00
00.25

00.00
00.00

00.00
00.00

00.00
00.00

00.00
00.00

00.00
00.00

00.00
00.00

00.00
00.00

04.00
02.00

06
07
08
09
10
11
12
13
14

MOCB/VCB/VC
Page | 66

35.00
06.00
02.60
01.40
04.50

17 Overhauling & Servicing of VFD's

18 Repair/ Rewinding of TG Exciter Rotor
19 Repair/ Rewinding of TG Exciter Stator
TOTAL

Page | 67

00.00
00.00
00.00
01.65

00.00
00.00
00.00
01.40

00.00
00.00
00.00
02.90

00.00
00.00
00.00
00.95

00.00
00.00
00.00
05.50

00.00
00.00
00.00
12.10

00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.25

00.80
15.00
10.00
118.00

Page | 68

FORMAT -VIII (SUMMARY)

ELECTRICAL DEPARTMENT BCL BATHINDA
Procurement Budget For The Year 2013-14
Description

Page | 69

(Rs. In lacs.)

MRS spares

16.70

Lighting

11.25

L&T Spares

12.20

Jyoti spares

04.55

Winding wires

08.90

A/C Plant Spares

13.00

Telephone Spares

02.70

Cables

27.75

Motors & spares

11.00

Siemens Switchgear spares

01.80

O/H Crane / Blower / Fire alarm system

01.35

Transformer spares & Oil

02.25

Battery & Chargerspares

03.00

Relays & Meters

04.50

Submersible Pump spares

04.00

MOV spares

00.75

Insulating Material

03.90

Miscellaneous

06.45

Total

159.05

Page | 70

Electrical Department, BCL Bathinda.

PROCUREMENT BUDGET 2013-14
ITEMS

Qty.

MRS SPARES
i. Switch yard spares
Lot
ii. Lighting Arresters and Surge Counter
Lot
iii Transformer Spares
Lot
iv. Transformer Oil
27 KL
v. Misc. spares
Lot
LIGHTING
i. Lamps of different ratings
Lot
ii. Chokes of different ratings
Lot
iii. Starters/Igniters/Capacitors
Lot
iv. Light fitting
a) Domestic Light fitting
Lot
b)Industrial/ Street Light fitting
Lot
c)Flame proof light fitting
Lot
v. Lighting accessories
Lot
vi. Misc.spares/Consumables
Lot
L&T SPARES
i. Control/Power Contactors & spares
Lot
ii. Thermal over load relays
40 Nos.
iii Switch fuse units and spares
Lot
iv. ACB spares
Lot
v. Panel/Chasis spares
Lot
Lot
vi. Fuses & fuse fittings
vii. Miscellaneous spares
Lot
JYOTI SPARES
i. Panel Spares
Lot
ii. MOCB/ VCB spares
Lot
WINDING WIRES & W/SHOP SPARES
i. Winding wires
Lot
ii. PTFE insulated copper cables
Lot
iii. Jumbo spares
Lot
iv. Heater & Geyser spares
Lot
Page | 71

Format-VIII
PO's to be placed in 2012-13
Cost

16.70
2.50
2.00
3.00
8.70
0.50
11.25
5.50
0.75
0.25
0.25
1.50
1.50
1.00
0.50
12.20
2.95
1.00
2.70
1.90
1.00
1.90
0.75
4.55
1.00
3.55
8.90
4.50
1.25
0.60
0.30

Payment during the

Year (Rs.Lacs)
2012-13 2013-14
12.50
4.20
0.75
1.75
0.25
1.75
2.50
0.50
0.70
8.00
0.00
0.50
9.20
2.05
0.50
5.00
0.25
0.50
0.10
0.15
0.00
0.10
0.15
0.50
1.00
0.30
1.20
0.30
0.70
0.00
0.50
8.85
3.35
0.60
2.35
0.25
0.75
0.70
2.00
0.65
1.25
0.25
0.75
0.65
1.25
0.25
0.50
3.40
1.15
0.30
0.70
0.85
2.70
6.80
2.10
1.00
3.50
0.50
0.75
0.10
0.50
0.10
0.20

v.
vi.

Welding Machine Spares

Lot
Miscellaneous spares
Lot
A/C PLANT SPARES
i. Compressors & its spares
Lot
ii. Desert Cooler/Portable AC spares
Lot
iii. Condenser for AC Plant
1 No.
iv. A/C 7.5 Te Package Units
2 Nos.
Lot
v. Miscellaneous spares
TELEPHONE SPARES
i. Telephone Instruments
100 Nos.
ii. Spares for Telephone Sets
Lot
iii. Telephone DBs
Lot
iv. Misc. Spares
Lot
CABLES & ACCESSORIES
i. Copper cables for domestic wiring
Lot
ii. Copper Cables for panel wiring
Lot
iii. Copper cables upto 10 sq.mm size
Lot
iv. 1.1 KV rating Aluminium Cables
Lot
v. 3.3 KV rating Aluminium Cables
Lot
vi. 11 KV rating Aluminium Cables
Lot
vii. Trailing cables
Lot
viii. Telephone cables
Lot
ix. Cable accessories
Lot
x. Cable jointing kits
Lot
xi. Miscellaneous spares/Consumables
Lot
MOTORS AND SPARES
i. End shield /Terminal Boxes etc.
Lot
ii. Bearing special
Lot
Lot
iii. Miscellaneous spares
SIEMENS SPARES
i. Contactors and its spares
Lot
ii. Over load Relays
Lot
iii. Miscellaneous spares
Lot
O/H CRANE & BLOWER SPARES
i. Over head crane spares
Lot
ii. S/S Blowers spares
Lot
TRANSFORMERS SPARES
i. Transformers spare
Lot
ii. Cork sheets of diff. .sizes
Lot
iii. Silica gel
Lot
Page | 72

0.50
1.75
13.00
6.30
0.50
0.70
4.00
1.50
2.70
1.00
0.50
0.60
0.60
27.75
0.50
0.25
2.00
5.00
2.00
12.00
0.75
3.00
0.50
1.00
0.75
11.00
7.00
0.50
3.50
1.80
0.95
0.25
0.60
1.35
0.60
0.75
2.25
1.00
0.50
0.10

0.35
1.50
11.10
5.00
0.40
0.70
4.00
1.00
2.05
0.75
0.40
0.40
0.50
21.30
0.15
0.15
1.50
0.75
1.75
12.00
0.60
2.50
0.40
1.00
0.50
7.90
5.00
0.40
2.50
1.25
0.70
0.15
0.40
1.05
0.45
0.60
1.70
0.75
0.40
0.10

0.15
0.25
1.90
1.30
0.10
0.00
0.00
0.50
0.65
0.25
0.10
0.20
0.10
6.45
0.35
0.10
0.50
4.25
0.25
0.00
0.15
0.50
0.10
0.00
0.25
3.10
2.00
0.10
1.00
0.55
0.25
0.10
0.20
0.30
0.15
0.15
0.55
0.25
0.10
0.00

iv.

Miscellaneous spares
Lot
BATTERY AND CHARGER SPARES
i. Jumbo battery
3 No
ii. Spare for Hirect Battery charger
Lot
iii. Miscellaneous spares
Lot
RELAYS AND METERS
i. CTMM/MOTPRO Relay
2No
ii. Chasis for various Relays
Lot
iii. Meter for Panels
Lot
iv. Energy Meters
Lot
v. Miscellaneous spares
Lot
SUBMERSIBLE PUMP SPARES
i. Submersible pumps spares
Lot
ii. Miscellaneous spares
Lot
MOV AND SPARES
i. Spares for Ammonia Panel MOV
4 Nos.
ii. Miscellaneous spares
Lot
INSULATING MATERIALS
i. Different types of tapes
Lot
ii. Insulating varnish & thinner
Lot
iii. Miscellaneous spares
Lot
MISC. ELECTRICAL ITEMS
i. Bakelite/ Porcelain fuse assembly
Lot
ii. HRC fuses (NS/TIA/TIS/D type etc.)
Lot
iii. MCBs/Metal clad/Indl. plug & sockets
Lot
iv. Switches, Sockets, Holders etc.
Lot
v. Special application Industrial cleaners
Lot
vi. Hardwares & Polythene Sheet
Lot
vii. Superior quality markene cloth
Lot
viii. Extension Boards/24 Volts T/F
Lot
ix. Miscellaneous spares/Consumables
Lot
Lot
x. Fire Alarm System Spares
TOTAL:

Page | 73

0.65
3.00
2.00
0.60
0.40
4.50
2.00
0.60
0.60
0.50
0.80
4.00
3.00
1.00
0.75
0.50
0.25
3.90
2.50
0.70
0.70

0.45
2.85
2.00
0.45
0.40
3.35
1.50
0.50
0.40
0.35
0.60
3.00
2.00
1.00
0.65
0.40
0.25
3.10

6.45
0.25
0.75
0.75
1.00
0.50
0.75
0.20
0.25
0.50
1.50

2.00
0.60
0.50
4.90
0.20
0.50
0.50
0.75
0.50
0.55
0.20
0.25
0.45
1.00

159.05

122.40

0.20
0.15
0.00
0.15
0.00
1.15
0.50
0.10
0.20
0.15
0.20
1.00
1.00
0.00
0.10
0.10
0.00
0.80
0.50
0.10
0.20
1.55
0.05
0.25
0.25
0.25
0.00
0.20
0.00
0.00
0.05
0.50
36.65

ELECTRICAL DEPARTMENT BCL BATHINDA

Revenue Budget 2013-14

FORMAT-XIII

Financial Head & Cost Centrewise Expenditure

Unit

BCL
BATHINDA
Plant

Rs.Lakhs
ID Code

Fin.

Cost 2011-12 2013-14 2012-13 2011-12

Head Centre
Departmental Budget
Electrical
W/Shop
Electrical

Workshop
Factory

D-E-W
D-E-W

570/017
570/001

905
905

35.01
0.00

42.55
0.00

8.00
0.00

15.25
0.00

Township

D-E-W
D-E

570/001

905

8.21
170.20

5.10
236.57

4.25
130.00

6.15
133.65

Workshop
Factory

C-E-W
C-E-F

571/017
571/001

905
905

0.44
34.68

0.50
39.43

0.40
27.90

7.85

Township

C-E-T
C-E

571/001

905

6.80
75.20

7.75
90.00

4.50
72.00

4.50
118.00

Installation
Sub-Total
Contracts.
Electrical
W/Shop
Electrical
Installation
Sub-Total

Page | 74

CHAPTER VII
RECOMMENDATIONS
&
CONCLUSIONS

RECOMMENDATIONS
It has been observed that some of the expenditure and consumption of input material are on
higher sidewhich should be arrested. In brief, following suggestions are given for perusal of the
Management and taking necessary action:

The consumption of methanol is more as compared to Panipat Unit being the sister unit of
BCL.

Page | 75

The consumption of coal is more as compared to standard norms.

Steam per tonne of Ammonia is more as compared to standard cost.

Coal consumption in CPP is more as compared to standard norm.

From the earlier years data and also for the current years expenditure on repairs &
maintenance, it is concluded that more expenditure is being incurred on repairs & maintenance
of the plant and machinery.

The expenditure on entertainment expenses is more as compared to earlier years actual as well
as current years original budget and internal budget.

Unavoidable expenditure may also be either minimized or occurance of such situation be

plugged.

Avoidable expenditure may be curtailed.

For proper management of cash planning, monthly/ weekly cash budget should also be
prepared.

Inter-firm comparison of urea producing unit should also be made.

Page | 76

CONCLUSION

The fixation of retention price and ECA allocation are made by Govt. of India. BCL have to
sell the product specially urea within the allocated States and quantity earmarked for the same.
Though, Bathinda Unit falls in the State of Punjab where maximum use of urea is made yet
allocation from other urea producing unit outside the Punjab is made for supply of same in the
State. There is no choice for BCL to sell urea within the vicinity of plant.

The payment of monthly subsidy bill in respect of urea and freight is released late by the
Government and consequently the burden of interest due to late receipt of subsidy amount falls
on the Company as interest on cash credit to the extent of amount not received is paid by the
Company. Similar position is for all urea producing units in the country.

The quarterly escalation claim in respect of input materials is also settled abnormally late.

The consumption of feed stock per tonne of urea is less as compared to norm fixed by
Government/Company.

There is cap on production also. Subsidy in excess of ECA allocation is not allowed. Even
penalty is levied if dispatches are made in excess of ECA allocation.

Other norms for consumption of input material and chemicals & catalysts are within the
standard fixed for the same.

No overtime is allowed i.e. budget for overtime is zero.

The KV No.2 situated in township on which subsidy to the extent of Rs.50 lakhs was being
incurred, has now been closed to effect economy.

Expenditure on medical facility shall be less during 2013-14as entitlement for reimbursement
of medical expenses has been rationalized.

Page | 77

Expenditure on demurrage is being monitored closely and there is substantial reduction during
2013-14 and 2012-13.

Ash handling expenses during 2013-14will be less by about Rs.45 lakhs due to substantial
reduction in per M3 rate.

Road transportation charges are comparatively lower as compared to other units of BCL.

Electricity & water charges are being recovered from the employees on commercial rates.

The stock of spares at the end of March, 2003 is less as compared to earlier years. The
Company has planned to reduce inventory by 5% each year.

Page | 78

BIBLIOGRAPHY
1. Hilton Ronald W: Managerial Accounting, International Edition, McGraw Hill, INC., New
York.
2. Lal Jawahar: Cost Accounting, Second Edition-1996, Tata McGraw Hill Publishing Company
Ltd., New Delhi.
3. Pandey I.M: Financial Management, Seventh Revised Edition, Reprinted-1998, Vikas
Publishing House Pvt Ltd., New Delhi.
4. Prasad N.K: Principals & Practice of Cost Accounting, Book Syndicate Pvt. Ltd., Calcutta.
5. Annual Reports of BCL: 1999-2000, 2011-12 & 2013-14
6. Annual Report of BCL Bathinda: 2012-13
7. Budgets of BCL Bathinda for the year 2012-13(RE) & 2013-14(BE).

Page | 79