RAJPROJECT1

SAIL : Rourkela Steel Plant
CHAPTER - 1
1
INTRODUCTION
‘Working capital Management’ means managing the current assets of a business

firm. Current assets are those assets, which can be converted into cash within a short period
of time i.e. one year. It is the outcome of a need for proper management of funds in a
business.
Funds can be involved for permanent purpose such as acquisition of fixed asset,
expansion and diversification of business, modernization of plant and machinery, research
and development etc. Funds are also required for temporary purpose such as day-to-day
activities of a business like purchase of raw materials, payment of salaries & wages, other
short-term expenses etc, which is known as Working Capital. It refers to the excess of current
assets over current liabilities and the inter relation that exits between them.
There is hardly a business enterprise that does not require working capital. As a
company’s primary objective is to increase the wealth of its shareholders, which depends on
the efficient management of funds, hence proper analysis and efficient management of funds
( both short-term and long-term ) is very important.
Working capital Management is a very sensitive area in the field of financial

management. It deals with the management of current assets i. e. deciding on the amount and
composition of current assets and various means of financing these assets. It is very often
noticed that profitable companies have succumbed due to inefficient management of working
capital or inadequate liquidity. Over emphasis on profitability forces them to ignored cash
outflow areas like wages, dividends, trade debtors that ultimately creates a cash run-out
situation. Hence, management of working capital not only means efficient utilization of funds
but also includes identification of important areas of cash inflow and cash outflow.
Therefore working capital management has become as one of the vital activities in a
business organization.
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OBJECTIVE OF THE STUDY
The following are the main objectives of this project study.
a) To study the present system of working capital in Rourkela Steel Plant.

b) To determine the working capital of RSP and work out the various ratios to
working capital.
c) To make an item-wise study of the various components of working capital with the
help of trend analysis and graph.
d) To suggest steps that should be taken to increase the efficiency in management of
working capital.
HYPOTHESIS
Working Capital Management means how to manage the current assets of the
organization effectively, efficiently and economically. Working Capital Management is
required in every business to run its day-to-day operation investment in any organization is
needed as finished goods can not be converted in to cash instantly and hence a company has
to invest funds for purchasing raw materials, payment of wages & salary and to maintain
stock of finished goods in order to meet the continuous demand of the customer. Excess
Working Capital Management results in unnecessary blocking of funds in inventories while
inadequate working capital may cause obstacles in the production cycle which may drive
away its customers. Hence, the management should maintain a proper amount of working
capital on a regular on account accurate estimation and proper judgment.
SCOPE
This is study of Working Capital Management with particular reference to RSP.

RSP was the first of the three steel plants taken up in the public sector engaged in production
of various types of steel plates, galvanizing plates and sheets, iron coils and pipes and
fertilizer as well as tar products.
A three year period is covered in the study, which extends from financial year 2003-
04 to 2005-2006. The study was restricted to different components of working capital like
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case management, inventory management, management of receivables and financing of

current assets. The analysis and interpretation was done on the availability of data.
METHODOLOGY
Data were collected from secondary sources. The sources for the secondary data for
the study are the balance sheet and their related schedules of the past three years financial
reports. These data have been analyzed with a view to arrive at conclusions regarding the
practice of different methods by the management for effective control of working capital.
The financial data were collected from various sources like:
i) Annual financial report of the company for three year period from 2003-2004 to
2005-06.
ii) Internal reports.
iii) Manual report regarding management decisions on different aspects of working
capital.
LIMITATION OF THE STUDY
The study at hand is an empirical one and hence we faced some difficulties mostly
in the area of data collection for analysis.
The study is limited to four financial years from 2003 -2006

performance of the Rourkela Steel Plant, Rourkela .
TOOLS & TECHNIQUES USED FOR THE STUDY
The following tools and technique of financial analysis were used to measure the
degree of efficiency in management of working capital.
i) Ratio Analysis
ii) Trend Analysis
iii) Percentage
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CHAPTER - 2
5
GLOBAL STEEL SCENARIO AND INDIAN STEEL

INDUSTRY
Introduction
Though the use of Iron and Steel by man were done 6000 years ago, but the modern
form of steel and iron industry come into being in the 19th Century only. In 1900 World
production of Steel was only 28.3 Million Tonnes. By 1992 this raises to 695MT. This
started declining till 1944 i.e. 723MT which picked up to 755.8 MT in 1995. The world steel
production in 2002 was around 900 MT.
Historical Background
It is believed that most of the iron used by ancient civilization of Babylon, Mexico,
Egypt, China, India, Greece and Rome might have been obtained by fragment of meteorites.
During those period bronze continued to be preferred for many tools and weapons. Origins of
the methods used by man for extracting Iron ores have suggested to be accidental.
In the beginning Iron was submitted by charcoal made from wood. Later coal was
discovered as a great source of heat. It was converted into coke which was found to be ideal
for smelting of Iron. Iron kept its dominant place for more than 200 years, after the Saugas
works was the first successful Iron works in America founded in 1946. With due course of
Industrial Revolution, Iron was used for rails for newly invested rail road trains. It was also
used to Armour the sides of the fighting ships. In the mid 19th century the new age of steel
began with the invention of the Bessemer process (1856) making steel available in large
quantities at reasonable cost.
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WORLD DEMAND AND SUPPLY
Year Gross Effective Crude Steel Operating

Capacity Capacity Production Rate
1990 979 841 770 78.6%
1995 998 807 752 75.4%
2000 1025 878 831 81.0%
2006(E) 1057 935 888 84.0%
 Capacity utilization has been 75% to 80% only.
 Consumption has growth at 3.4% in the past.
 In future likely to grow at 2.6%.
Year Gross Capacity Effective Capacity Steel Consumption
1999 (MT) 1026 869 787
2005(MT) 1057 935 888
2010(MT) 1131 1020 960
 Consumption has grown at 3.4% in the past. In future likely to grow at 2.6%.
 Global capacity to exceed demand by around 50Mt by 2005 and similar trend
expected to continue up to 2012.
WORLD STEEL SCENARIO
(MT)
7
1991 2001 2002 2003 2004

Global Steel 727 780 829 868 906
Consumption
China Steel 70 174 211 232 255
Consumption
India Steel 20 27 29.5 32.5 34

Consumption
Indian History
The ancient monuments like famous Iron pillar in New Delhi or the massive beams
used in the Sun Temple at Konark bear the history of usage of Iron and steel.
According to studies, Iron has been produced in India for over 3000 years.
Global Scenario
1990 770.1MT 1996 750.0MT 2000 847.0MT
1991 734.4MT 1997 795.0MT 2001 870.0MT
1992 722.7MT 1998 778.0MT 2002 900.0MT
1993 730.6MT 1999 785.0MT 2005 1100MT
As per world steel Dynamics (WSD) report, the trends are observed in the International
Steel Industry.
 Stable growth in the Steel demand.
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 E-Commerce development.
 Cost reduction efforts.
 Exchange rates swings.
 Greater pricing volatility.
 Growth in Global trade.
 Growth in E-commerce transactions will make Steel Mills even more customer
oriented.
UNITED STATES
Among the top Steel Producing countries of the World, the USA maintained its
position as the biggest Steel producer unit Steel early 70s.Then it was over taken by USSR.
Then by Japan and China. US production of raw steel declined by 7.9% in 1986, to the
second lowest annual total since 1946. The low point of the past 42 years was reached in the
recession year of 1982 the biggest steel producers till early 70s. Then it was over taken by
the USSR and later by Japan and China. Raw steel production capacity in 1977 was 160 MT,
which was the highest production. In 2002, USA produced 92.2 MT crude steel.
JAPAN
Japanese steel industries experienced high growth of steels in 1960 to 1973. In 1964
raw steel production increased to 40 million tones and Japan replaced West Germany as 3rd
largest steel producer. In 1970 Japan’s raw steel production was 93MT and in 1973 it was
119.3MT, which was the highest production. Some factors for the success of Japanese steel
industries.
a) The steel industries absorbed and assimilated what it learned from the west.
b) Made advanced technology flourish in the traditional environment of Japanese

management under the positive expansion of plant and equipment capacity.
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c) Vigorous Research and Development efforts.
The industry made efforts in three areas-
 Conservation of energy and raw materials.
 Improvement of yield, rationalization of production process and
manpower production.
 Meeting new demands of steel users.
The steel industry produced its energy consumption through-
 Dry quenching of coke.
 Reduction of blast furnace fuel rate.
 Electric power generation through utilization of blast furnace gas.
At present total employment in steel industry has come down.
WESTERN EUROPE
European Economic Community (EEC) exerts control over prices, production and
capacities of the steel plants in European Economic Community Countries. The present
structure of European Union consists of 15 countries known as EU-15. The EU-15 countries
produced 158.6 MT in 2002. The main focus of capital investment is on quality, cost and
productivity improvement.
THIRD WORLD
The third world has recorded a considerable increase in steel in Steel output during
the past decade .China 181.6 MT, Republic of Korea 45.4 MT, Brazil 29.8 MT, India 28.8
MT of steel production were the leading producers of Steel in 2002.
Leading Steel Producing Companies
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In 2002, largest 10 steel producing companies in the world were-
1. Arcelor (44MT).
2. LNM Group (34.2MT).
3. Nippon Steel (29.8MT).
4. POSCO (28.1MT).
5. Shanghai Boasteel (19.5MT).
6. Corus (16.8MT).
7. NKK (15.2MT).
8. Riva (15MT).
9. US Steel (14.4MT).
Indian Prospective
Development of iron and steel industry in India has been slow.India’s per capita
consumption of steel is the world with 29kg as compared to 132kg in China.
Year Demand Availability Surplus
2002-2003 29.03MT 34.00MT 5MT
Some leading steel producers in India are-
 Steel Authority of India (SAIL).
 Tata Iron and Steel Company (TISCO).
 Rashtriya Ispat Nigam Limited, Visakhapatnam (RINL).
 Essar Steel.
 Jindal Vijaynagar Steel (JVSL).
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RINL plant is the first shore based integrated steel plant set up in India. This plant
started its production in 1990 with a capacity of 3MT. TISCO after its modernization in 1980
increases its capacity to 3.05MT of crude steel.
Development of Electric are Furnace industry in India, plays an important role in

meeting steel requirements of the country. Growth of Electric in furnace is closely linked to
the development of sponge iron industry. Essar Steels, Lloyds Steel, Ispat Industries use
Electric arc furnace route for steel making. Policy of economic and industrial liberalization
bring many more shaft furnace sponge iron and Electric are Furance steel producers. Jindal
Vijaynagar Steels Ltd. at Bellary in Karnataka uses the most modern cast effective “corex” in
iron making.
Current Business Environment
Following changes are posing new challenges to India’s survival.
1. Price De-control
This system enables the steel companies to fix prices that were previously fixed by
Government or any agencies on the basis of market demand and supply.
2. Delicensing
It enables the Government to encourage private investors to invest money in the steel
sector, without going through completed licensing producer.delicensing enables
entrepreneurs to take advantage of upon general items (OGL) which required no license.
3. Import penetration
Liberalized import policy albus import of everything except few items.
4. Internal Competition
Growth of industries in the private sector leads to competition in the domestic market.
Liberalization of import control enables domestic industries to import raw materials, finished
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products and equipment sometimes at a much cheaper price. Which in turn enables them to
produce quality products and services to complete internationally.
5. Concept of Customers care
The growth and prosperity of a business depends on customer’s satisfaction, which

can be achieved through continuous improvement in quality, reduced price and prompt
delivery products and services.
Implication of the current Development to SAIL
a) Costs
The prices of products are directly related to the cost of production. Therefore if the
costs are high, the prices will be high in comparison to Indian Competitors.
b) Market share
• Delicensing squeezed the market share.
• Growth of private sector leads to facing challenges in terms of quality, reducing cost,
latest technology adoption.
• Present import policy increases the levels of capital investment and global business
experiences.
• Open Competition.
c) Internal Customers Satisfaction
External Customer can be satisfied only with the internal customers satisfy each other
and meet the requirements.The ICS model developed and followed in SAIL is to identify
the strength and weakness of function and takes steps to overcome the weakness.
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d) New Opportunities
Greater emphasis has to be given value added products and profit maximization.
Customers have to be educated that steel can substitute hydrocarbons and plastics and thus
can expand the market share.
e) Quality
It is what customers need, matching international standards. “SAIL needs to achieve

the ISO 9001:2000 Standard in every section of its business”.
f) Environment management
SAIL has adopted pollution control as one of the major areas to give better working
environment.
g) Value Added Products
It is needed to add value to the products in terms of better packaging, prompt delivery
schedule, efficient after sales service better tolerance of products. “Adding value will
increase Market share”
Increasing the Competency of Employees
Employees competence improves when managers take an interest in their

development.
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h) Competition to SAIL
During the period 1994-95 to 1997-98 new capacities worth 5.92MT att the cost of
Rs.11735 corers have been set up. The companies are-
 Lioyal Steel industries Ltd.
 JIndal Strips Ltd.
 Essar Gujrat.
 Malvika Steel Ltd.(Phase-I)
 Jindal Vijaynagar Steel Ltd.
 Jindal Iron & Steel Works at Raigarh, Chhatisgarh.
 Nilachal Ispat Nigam Ltd. With a capacity of 0.83MT has commissioned.
The total capacity comes to 6.75MT at a cost of Rs. 13115 Crores which is excluding
the additional capacity of TISCO of 2.15MT.
During the 4th quarter of 2002-03, the net profit of Rs.241 Cr, signaled the turnaround
of the company. The year 2003-04 also has started on a positive rate with SAIL registering a
net profit of Rs. 255 Cr. In 1st quarter and Rs. 760Cr.in 1st six months.
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CHAPTER - 3
16
SAIL : AN OVERVIEW
Formation of Hindustan Steel Limited
Initially steel administration was directly under a Ministry of the Central

Government. Hindustan steel was formed as a limited company, with president of India
owing the shares on behalf of the people of India.
The Hindustan Steel Limited was set up on January 19, 1954.
Growth of Hindustan Steel (1959-1973)
To start with, Hindustan Steel was designed to manage with only one plant that was
coming up at Rourkela. From April 1957, the supervision and control of the Bhilai and
Durgapur plants were also transferred to Hindustan Steel. The registered office was
originally in New Delhi, moved to Calcutta in July 1956 and ultimately shifted to Ranchi in
December 1959.
The 1MT phase of Bhilai and Rourkela Steel Plants were completed by the end of
December 1986. The 1MT phase of Durgapur was completed in January 1962 after
commissioning of wheel and axle plant. As a result, the crude steel production of HSLwent
up from 158 thousand tonnes (in 1959-60) to 1.6 MT (in 1961-62). 2.5 MT phase of Bhilai
was completed on 2nd September, 1967 after commissioning of wire Rod Mill. The last unit
of 1.8 MT phase of Rourkela was Tandem Mill commissioned on 17th February, 1968 and 1.6
MT phase of Durgapur was completed on 6th August 1969, after commissioning of furnace in
SMS. Thus with the completion of 2.5 MT stage in Bhilai, 1.8 MT in Rourkela and 1.6 MT
phase of Durgapur, the total crude steel output from HSL was raised to 3.7 MT in 1968-69
and 4 MT in 1972-73.
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Steel Authority of India limited
Formulation
The formation of steel Authority of India Limited was approved by the Government
in December 1972. The company was incorporated on January 24, 1978 SAIL was
restructured as an operating company.
Present Status
With a production capacity of 12 million tones (MT) of crude steel, Steel Authority of
India Limited (SAIL) is India’s largest and among the leading steel producers in the world.
MAJOR UNITS
A. Steel Plants
1. Bhilai Steel Plant (BSP) in Bhilai, Chhatisgarh

Annual production capacity - 3.153 MT of saleable steel.
Product mix - Rails
- Heavy structurals.
- Merchant products.
- Wire rods.
- Steel plates.
2. Rourkela Steel Plant (RSP) in Rourkela, Orissa.

Production capacity - 1.671 MT of saleable steel.
Production mix - Hot rolled plates and coils (HR plates & coils )
- Spiral – welded pipes (SW pipes).
- Cold rolled sheets and coils (CR sheets & coils )
- Galvanized plain and corrugated sheets. (GP & GC)
- Electric Resistant Weld pipes (ERW pipes)
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- Electrolytic tin plates.
3. Durgapur Steel Plant (DSP) in Durgapur, West Bengal.
Production capacity - 1.586 million tones of saleable steel.
Product mix - Merchant products Railway products like forted

wheels and axles.
4. Bokaro Steel Plant (BSL) in Bokaro, Jharkhand.
Production capacity - 3.78 million tones of saleable steel.
Product mix - Hot Rolled coils, plates and sheets.
- Cold Rolled coils and sheets.
- Galvanized plain and corrugated sheets.
A. Special Steel Plants
1. Alloy Steel Plant (ASP) in Durtapur, West Bengal.
Production capacity - 1.78 lakhs tones of saleable steel.
Product mix - Contrast rollers.

- Crane wheels.
- Springs.
- Gate bars.
- Hot saw blades.
- Stainless steel liner plate.
2. Salem Steel Plant (SSP) in Salem, Tamil Nadu
The plant has the capacity to roll 1,86,000 tonnes of hot rolled carbon and stainless
steel flat product and 70,000 tonnes of cold rolled stainless steel sheets and coils per annum.
Visvesvaraya Iron and Steel Plant (VISP) in Bhadravati, Karnataka.
Production Capacity - 205,000 tonnes of hot metal.
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- 103,000 tonnes of pig iron.
B. Subsidiaries
1. The Indian Iron and Steel Co. Ltd. in Burnpur, West Bengal.
Production capacity - 426,000 tonnes of saleable steel.
- 254,000 tonnes of pig iron.
Product mix - Coke.
- Pig iron.
- Light and heavy rails.
- Tor steel.
- TMT rebar.
2. Maharashtra Electrosmelt Ltd., in Chandrapur, Maharashtra.
Production capacity - 100,000 tonnes of ferroalloys.
D. Other Units
 SAIL Consultancy Division (SAILCON) situated at New Delhi.
 Raw Materials Division (RMD)
 Central Marketing Organization (CMO).
 Environmental Management Division (EMD).
 Growth Division (GD), situated at Kolkata.
 Research and Development for Iron and Steel (RDCIS).
 Centre for Engineering and Technology (CET).
 Management Training Institute (MTI).
 SAIL Safety Organization (SSO), situated in Ranchi, Jharkhand.
 Central Coal Supply Organization (CCSO), situated in Dhanbad, Jharkhand.
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ROURKELA STEEL PLANT A RESUME
INTRODUCTION
Rourkela Steel Plant is located at 413Km by rail from Kolkata on the Howrah –
Bombay main line in the state of Orissa. It is situated amidst picturesque surrounding with
hill and rivers on the North are the rivers are the river Koel and on the West are the river
Sankh. Both find their confluence in the river Brahmani. It is situated at altitude of 219 meter
from the area level with a summer temperature of 7 degree C (min) and with a yearly average
rainfall of 128.8 cm.
RSP was the first of the three steel plants taken up in the public sector. On December
31st 1953 an agreement was made between the Government of India and a consortium
consisting of Thyysen and Demag, Aktiengeselischaft, Duisburg to set up a steel plant of
initial capacity of 0.5 MT subsequently a supplementary agreement was signed in July1955
to set up a 1 MT plant. The coke oven Battery No. 1 was commissioned on 3 rd December
1958 and the first of the three Blast furnaces was commissioned on 3rd February 1959.
A major producer of diversified range of sophisticated steel products, RSP is an

integral part of the Steel Authority of India Limited (SAIL) and is among India few plants
producing 100% of the steel through the globally profuse continuous casting route since
1998. RSP is the only plant having Pipe Plants. The plant has recently undergone
modernization in two phases involving around Rs. 5000 crores. The modernization process of
RSP started in 1988. The phase – I of modernization completed in 1994 and phase – II
modernization completed in 1997-98.
After modernization the capacity got augmented to 2MTs of hot metal and 1.9MTs of
crude steel modernization units include-
 Ore bedding and Blending Plant.
 Sintering Plant –II
 Steel Melting Shop –II
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 Tonnage Oxygen Plant –II etc.
RSP is also producing defense and space quality plants through a special plate plant.
The plant produces a wide range of flat steel products like plates, hot and cold rolled coils
and steels, galvanized sheets, electrical steel sheets, electrolytic tin- plates and large diameter
Electric Resistance Welded (ERW) and Spiral Welded (SW) pipes. The plant was expanded
in the late sixties (1965-68) from 1.0MT to 1.8MT per annum ingot steel capacity new units
for producing Cold Rolled Non-grain Oriented sheets (CRNO sheets), has been
commissioned to meet the market needs.
Product Mix
 Plate Mill Plates.

 Hot rolled coils (HR coils).
 Hot Rolled Plates (HR plates).
 Electric Resistance Welded Pipes (ERW Pipes).
 Spiral Welded pipes (SW pipes).
 Cold Rolled Sheets and coils (CR Sheets & coils).
 Galvanised plain and corrugated sheets (GP & GC).
 Electrolytic Tin Plates.
 Silicon Steel Sheets.
 Coil Chemicals a) Tar Products- Coal Tar Pitch, Tar Oil.
Crude Tar Partially Distilled (CTPD).
b) Hot Pressed Naphthalene
c) Fertilizer - Ammonium Sulphate “RAJA”
Special Features of RSP
(A) It is the first plant in Asia to adopt LD process of Steel making.
(B) It is the only plant producing large diameter electric Resistance Welded/Spiral Welded
Pipes conforming to most rigid standards of API.
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(C) It is the first steel plant in India to adopt external desulphurization of hot metal by
calcium carbide injection process.
(D) It is only plant in SAIL producing cold Rolled Non Oriented (CRNO) Steel sheets for
use in the electrical industries with installed capacity of 73,000 Ton / yr.
(E) Rourkela is the first in vaccum degassing metalling. This system has been adopted
primarily for production of silicon steel for the cold rolled no-oriented sheets. The system
consists of vaccum are refining and vaccum oxygen refining units and a degassing facility.
(F) It is the first integrated steel plant of SAIL, which doped the cost effective and quality
centered continuous casting route to process 100% of steel produced.
(G) All the major production departments and some service departments certified to ISO
9001: 2000 QMS.
General Information
Raw Materials – RSP’s fully mechanized captive mines under Raw Material
Division (RMD), a unit of SAIL meet the bulk requirements of iron ore, Limestone,
Dolomite, Manganese, Quarzite and coal as raw materials of RSP.
a) Iron Ore - Captive mines at Barsuan, Kalta,Meghathatuburu, Kiriburu.

b) Limestone - BF Grade - Purnapani & Kuteshwar
- SMS Grade - Jaisalmer and Katni.
c) Dolomite - BF Grade – Biramitrapura and Sonakhan
SMS Grade – Bilha,Baroduar and Katni
d) Manganese - Purchased from Barajamdanand Koira.
e) Ferro Manganese- Maharashtra Electrosmelt Limited (MEL)
and Silicon Manganese.
f) Quarzite - Purchased from local areas.
g) Coal - Prime coking coal (PCC) and Medium coking coal (MCC)
from Indian sources.
- Important coking coal (ICC) Hard and Soft from Australia,
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Canada USA and China.
Main Plant Units

a) Coke Ovens - 3 Batteries of 70 ovens and 2 Batteries of 80 ovens each.
b) Blast Furnaces – 3 BFs of 1139M3 useful volume and 1 BF of 1658 M3
useful volume.
c) Steel Melting – 2 mixers of 1100T each, 2LDs of 8 lap 1 60/66
Tons/blow and 1 single strand slab caster of 0.305
MT of slabs per year.
d) Steel Melting Shop II - 2 mixers of 1300T each, 2LDs of 150 tons each and 2
single strand slab casters of 1.355 MT of slabs per year.
e) Sinter Plant I – 2 Sinter machines of 1.5 MT per year.
f) Sinter Plant II – 1 sinter machines of 1.57 MT per year.
g) Hot Strip Mill – 2 Pusher furnaces of 100 Ton/hr. each.
- 2 walking beam furnaces of 225 Ton/hr. each.
- 2 stand Roughing Mill and 4 hi 6 stand finishing Mill
with a capacity of 1.67 MT HR coils/year.
h) Plate Mill – 1 walking beam furnace of 100 Ton/hr.
- 3.1 meter wide and 4 hi Reversing Mill of 3,40,000 Tons
of plates per year.
i) Pipe Plant – ERW pipe plant of 75,000 Tons/yr with high frequency
wielding.
- SW pipe plant of 50,000 Tons/yr with double sub-merged
arc wielding.
j) Cold Rolling Mill – 2 Picking Lines.
- 1 cold Reversing Mill.
- 1 Five Stand Tandem Mill.
- Hood Annealing.
- Sheet Shearing Line.
- Continuous Galvanizing Line of 1,60,000 Tons/yr.
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k) Silicon Steel Mill - 4 Hi Reversing Mill of 73,000 Tons/yr. CRNO.

l) Captive Power Plant I - 5 units to produce 128 MW of power.
Township and Periphery
Rourkela Steel Plant has acquired about 28,000 acres of land from the state
Government of Orissa.
There are about 25,000 quarters of 14 categories spread over 18 sectors in the Steel
Township and in the Fertilizer Township.
For recreational facilities there is a well stacked library, a large air-conditioned

auditorium called the Civic Centre, several social homes and community centers.
There are 12 schools run by RSP both in English and Vernacular Medium for classes
ranging from STD-I to XII.
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CHAPTER - 4
26
MEANING OF WORKING CAPITAL
Capital required for a business can be classified under two main categories.
1. Fixed Capital.
2. Working Capital.
1. Fixed Capital: - The capital which is blocked on a permanent or fixed basis is called
Fixed Capital.
Example – Long Term Funds
2. Working Capital: - Funds which are needed for short term purpose for the purpose of
raw materials, payment of wages & other day to day expenses are knows as working
capital.
Working capital is defined as the excess of current assets over current liabilities.
Current Assets – Current

Liabilities
Current assets are those assets which can be converted into cash whithin the current
accounting period. They are cash or near cash resources. These include
• Cash & Bank Balance.

• Receivables.
• Inventory.
o Raw materials, stores & spares.

o Work-in-progress
o Finished good.
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• Prepaid exp
• Short Term Advances
• Temporary Investments.
Current liabilities are the debts of the firms that have to be paid during the current
accounting period or within a year.
• Creditors for goods purchased.

• O/S Expenses i.e exp doe but not paid.
• Short Term borrowings.
• Advances receive against sales.
OBJECTIVES OF WORKING CAPITAL
The basic objective of Working Capital are as follows-:
 To optimize the investment in current assets and to reduce the level of current
liabilities.
 Working capital management helps the company to be in a position to meet its

current obligations.
 To maintain the inventories of raw materials, work-in-progress, stores and finished

goods.
 To incur day-to-day expenses and overhead cost.
CONCEPT OF WORKING CAPITAL
There are two concepts of Working capital.
1. Gross Working capital – It is the capital invested in total current assets.
2. Net Working Capital – It is the excess of current assets over current

liabilities.
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The gross working capital is a financial or going concern concept where as net
working capital is an accounting concept of working capital.
CLASSIFICATION OF WORKING CAPITAL
Working Capital
On the basic of concept On the basic of time
Gross Working Net Working Fixed working Temporary or

Capital Capital Capital variable working
Capital
Regular Working Reserve working

Capital Capital
Seasonal Working Capital Special Working Capital
PERMANENT WORKING CAPITAL
Permanent or Fixed working capital is the minimum amount which is required to

ensure effective utilization of fixed facilities and maintaining the circulation of current assets.
For example-: Every firm has to maintain a minimum level of raw materials, work-in-
progress, finished goods and cash balance.
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The minimum level of current assets is called permanent or fixed working capital as
this part of capital is permanently blocked in current assets.
TEMPORARY WORKING CAPITAL
Temporary or Variable working capital is the amount of working capital which is

required to meet the seasonal and some special exigencies. It is required for a short period of
time.
IMPORTANCE OF WORKING CAPITAL
Working capital is highly essential for the smooth running of the business. No
business can run successfully without an adequate amount of working capital. The main
advantages of maintaining adequate amount of working capital are-
 Solvency of the business-: Adequate working capital helps in maintaining

solvency of the business by providing uninterrupted flow of production.
 Goodwill-: Sufficient working capital helps in making prompt payments which

helps in maintaining goodwill.
 Easy loans-: A firm having adequate working capital can arrange loans from
banks.
 Cash discounts-: A concern having adequate working capital avail cash

discounts on purchases.
 Regular supply of raw material-: Sufficient working capital ensures regular

supply of raw material.
 Regular payment of salaries, wages and other day-to-day commitments-: This

helps to increase the morale of the employees and their efficiency.
30
 Ability to face crisis-: Adequate working capital enables a concern to face

business crisis in emergencies.
 High morale-: Sufficient working capital helps to create an environment of

security, confidence, high morale and creates overall efficiency in the business.
DISADVANTAGE OF WORKING CAPITAL
 Excessive working capital means idle funds which
• earn no profit for the business.

• leads to unnecessary purchasing and accumulation of inventories
causing more chances of theft, waste.
• reasults into inefficiency in the organization.
• implies excessive debtors and defective credit policy.
 A concern having inadequate working capital
• cannot pay its short-term liabilities and loses its reputation.

• trade discount is lost.
• cash discount are lost.
• market reputation is lost.
• creates inefficiency, increases cost and reduces profit.
NEED OF WORKING CAPITAL
The working capital is needed for
• For the purchase of raw materials and spares.

• To pay the wages and salary.
• To meet the selling costs as packing, advertising etc.
• To provide credit facility to the customer.
• To incur day-to-day expenses and overhead costs.
31
FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS
 Nature of business.
 Scale of business.
 Production policy.
 Manufacturing policy.
 Credit policy.
 Business cycle.
 Rate of growth of the business.
 Supply situation.
 Operating efficiency of performance.
SIGNIFICANCE OF WORKING CAPITAL MANAGEMENT
1. Principles of Risk Variation.

2. Principles of Cost of Capital.
3. Principles of Equity Position.
4. Principles of Maturity of Payment.
WORKING CAPITAL MANAGEMENT IN RSP
As the study is management of working capital management of RSP which induce

analysis of investment in different components of current assets like inventories, debtors,
cash bank etc. financial control taken by the company.
The total analysis was conducted on the following heads.
32
Analysis of overall efficiency in management of working capital in RSP.
i) Cash management.
ii) Inventory management.
iii) Management of receivables.
TREND ANALYSIS OF WORKING CAPITAL OF RSP
GROSS WORKING CAPITAL ( RUPEES IN CRORES )
Year Gross Working Capital Indices (in %)
2003-04 686.28 100
2004-05 727.10 105.9
2005-06 965.12 140.6
By analyzing the gross working capital trend by taking 2003-04 as a base year (100), it is
seen that it increases to 105.9% in the year 2004-05 and 140.6% in the year 2005-06. It
indicates that the level of current assets of the company is not maintained properly.
NET WORKING CAPITAL
Year C.A C.L Net W.C Indices
2003-04 686.28 1108.81 -422.53 100%
2004-05 727.10 1010.15 -283.05 66.98%
2005-06 965.12 1068.93 -103.81 24.56%
Net Working Capital = Current Assets – Current Liabilities
By analysis of Net Working Capital for three years it is seen that it is gradually
decreasing from the year 2003-04 to 2005-06.
33
Hence it shows that though the company is not able to meet its liabilities and the
company is not financially sound but the company is gradually reducing its liabilities from
the year 2003-04 to 2005-06.
Working Capital Ratios
Working Capital Ratios indicate the ability of a business concern in meeting its
current obligations as well as its efficiency in managing the Current Assets for generation of
sales. These ratios help to evaluate the efficiency with which the company manage and
utilize its Current Assets. The following three categories of ratios are used for efficient
management of Working Capital.
1. Efficiency Ratios.
2. Liquidity Ratios.
3. Structured Health Ratios.
1. Efficiency Ratios - :
i) Working Capital Ratio - :

Sales
Working Capital turnover ratio =
NetWorkingCapital
Year Sales Net Working Capital Ratio

(C.A – C.L.)
2003-04 3342.31 686.28 - 459.33 = 14.72

226.95
2004-05 4166.15 727.10 – 427.70 = 16.37

254.40
2005-06 3924.63 965.12 – 499.45 = 8.42

465.67
34
The ratio helps to measure the efficiency of the utilization of net Working Capital.
This ratio also helps the management to maintain the adequate level of Working Capital.
Working Capital Ratio of RSP has increased to 16.37 in the year 2004-05 then 14.72
in the year 2003-04 due to increase in sales. But it gradually decreases to 8.42 in the year
2005-06 due to decrease in sales.
ii) Inventory Turnover Ratio - :
Sales
Inventory turnover ratio =
Inventory
Year Sales Inventory Ratio
2003-04 3813.88 466.86 8.16
2004-05 4674.19 500.44 9.34
2005-06 4586.65 718.11 6.38
The Inventory Turnover shows the efficiency of Inventory Management or how

rapidly the inventory is turning into receivable through sales. A High Inventory Turnover
shows good investment management while a Low Inventory Turnover implies excessive
investment levels or slow moving inventory.
In RSP in the year 2004-05 the Inventory Turnover Ratio has increased which implies
good inventory management while in 2005-06 it decreases to 6.38 which is very less as
compared to the year 2003-04 & 2005-06 and indicates inefficient invert management.
35
iii) Current Assets Turnover Ratio

Sales
Current Assets Turnover Ratio = Current Assets
Year Sales Current Assets Ratio
2003-04 3813.88 686.28 5.55
2004-05 4674.19 727.10 6.42
2005-06 4586.65 965.12 4.75
This indicates the efficiency with which the current assets turn into sales. A higher
ratio implies move efficient use of funds. Thus a higher turnover rate indicates reduced
lock-up of funds in current assets. The current asset turnover ratio of RSP shows efficient
working capital in 2004-05.
j) LIQUIDITY RATIO OF RSP
 CURRENT RATIO
Current Assets, Loans& Advances

Current ratio =
Current Liabilities& P rovisions
Year CA, Loans & Adv. CL & Provisions Ratios
2003-04 686.28 1108.81 0.61
2004-05 727.10 1010.15 0.71
2005-06 965.12 1068.93 0.90
36
This ratio indicates the extent of the soundness of the current financial position at an
undertaking and the degree of safety provided to the creditors. A current ratio of 2:1 indicates
a highly solvent position.
In RSP the current asset ratio is not satisfactory and steps should be taken to improve it.
 QUICK RATIO
Quick Assets
Quick ratio =
Current Liabilities
Quick assets = Current assets – Inventories

Year Current Inventories Current Ratio
assets liabilities
2003-04 686.28 466.86 459.33 0.47
2004-05 727.10 500.44 472.70 0.47
2005-06 965.12 718.11 499.45 0.49
A quick ratio of 1:1 is considered to be a satisfactory financial condition. The quick

ratio position of RSP is not satisfactory which shows the quick assets are not sufficient. But it
is gradually improving.
3. STRUCTURAL HEALTH RATIO OF RSP
(i) Debtor turnover ratio

Sales
Debtor turnover ratio =
Debtor
Year Sales Debtors Ratio

2003-04 3813.88 8.57 445.02
2004-05 4674.19 12.44 375.73
2005-06 4586.65 14.60 314.15
37
The debtors turnover ratio indicates the number of times debtors turnover each year.
The higher the value of debtors turnover, the more efficient is the management of credit. In
2003-04 RSP shows better credit management.
ii) Debtors collection period

Debtor
Debtors collection period = x360
Sales
Year Debtors Sales Collection period

(in days)
2003-04 8.57 3813.88 0.80
2004-05 12.44 4674.19 0.95
2005-06 14.60 4586.65 1.45
Debtors collection period measures how long it takes to collect the amount from
debtors. The debtors collection period of RSP shows that RSP has been efficient in collecting
all debts.
38
CHAPTER - 5
39
CASH MANAGEMENT
Introduction
Cash is the important current assets and is the basic input needed to keep the business
running on a continuous basis. Thus the company should keep sufficient cash. The cash
includes cash in hand and cash in bank. All the businessmen wants cash but they are not
ready to hold it as cash in hand which is a non-earning asset.
Effective cash management involves an effort to minimize investment in cash without

affecting the liquidity of the organization. It is proper balancing between liquidity and
profitability.
CASH MANAGEMENT CYCLE
Business
Operation Cash
collection
Deficit Borrow
Surplus Invest
Information and
control Cash
payment
40
MOTIVES FOR HOLDING CASH
a) Transaction Motive
The transaction motive requires a company to hold cash to its business in the ordinary
course. The firm needs primarily to make payments for purchases, wages and salaries, other
operating expenses, taxes, dividends etc.
b) Precautionary Motive
The precautionary motive is the need to hold cash to meet contingencies in future or
un-predictable situation. The cash maintained for contingency needs is not productive or
remain ideal. However, such cash may be invested in short-period or low risk marketable
securities, which may provide cash as and when necessary.
c) Speculative Motive
The speculative motive relates to the holding of cash for investing in profit making
opportunities as and when they arise. The firm may also speculate on material’s price.
Thus the primary motive to hold cash and marketable securities are the transaction
and precautionary motive.
CASH MANAGEMENT
Management of cash involves three things-
1. Cash inflows and outflows.
2. Cash flows within the firm.
3. Cash balances held by the firm at a point of time.
Some facets cash dealt by cash management are-
CASH PLANNING
41
It is a technique to plan the use of cash. Cash planning may be done daily, weekly or
monthly basis. The period and frequency of cash planning generally depends upon the size
and policy of management of the firm. For larger firms business operations become complex,
hence planning becomes highly essential for its successful running.
CASH FORECASTS AND BUDGETING
A cash budget is summary statement of the firm’s expected cash inflows and outflows
over a projected time period. It is the most significant device to plan and control cash receipts
and payments. It give information on the timing and magnitude of expected cash flows and
cash balances over the projected period.
Both short-term and long-term forecasts can be made with the help of the two most
commonly used methods i.e.
(i) The receipt and disbursement method.
(ii) Adjusted net income method.
CASH REPORTS: TOOLS OF CONTROL
Cash report is an important tool of cash management, which provides a comparison of

actual development with forecast figures. It is very much helpful in reviewing cash forecasts
on continuous basis and thus exercising effective control in cash flows.
MANAGEMENT OF CASH FLOWS
After ascertaining the probable cash flows, efforts should be made to procure or
arrange the cash required for the smooth running of the organization.
Cash management will be successful only if the cash collection are accelerated and
cash disbursement are delayed. Some popular methods adopted organizations for cash flows
and retardation of cash flows are-
METHODS FOR ACCELERATING CASH INFLOWS
Prompt collection of cash from customers by prompt billing and mailing.
42
2. Quick conversion of payments into cash by prompt

presentation of cheques or drafts to bank.
3. Decentralizing collections by opening collection
centres at different places.
4. Adopting a lock box system under which a bank is
authorized to collect cheques directly from the post box of the company, set up for
the purpose.
METHODS FOR SLOWING DOWN OF CASH OUTFLOWS
(i) Making payments on due date/last date.

(ii) Paying through drafts instead of cheques.
(iii) Centralization of payment.
(iv) Making use of flow of amount.
(v) Adjusting pay roll fund according to the needs of the organization.
CASH MANAGEMENT IN RSP
RSP has been trying to accumulate cash over last few years but still the financial
condition is not good at all. It is still going on loss. It has to accumulate more cash to gain
profit. Though it is facing losses for few last years but it has tried to accumulate cash through
effective cash management.
The main reasons for the ineffective cash management in RSP are-
 Non-identification of the requirements of funds at various units.
 Improper capital expenditure.
 Non standardized reporting system.
Control on cash flows
43
RSP a multi-crore organization, exercises a satisfactory though not good control over
its cash flow by adopting centralizing cash management system. All the informations are then
being reported to the corporate office of SAIL situated at Delhi.
The reporting system in RSP mainly includes
I. Forecasting of monthly cash flow.
II. Reporting of actual vis-a-vis forecasted cash flow on weekly basis.
III. Reporting of receipts and payments at different units on daily basis.
According to this the corporate office prepares a consolidated cash flow statement.
Trend analysis of cash proportion ratio of RSP
Cash proportion ratio
CashBalance
Cash proportion ratio =
Current Asset
Year Cash balance Current assets Ratio
2003-04 -108.83 686.28 -0.15
2004-05 1044.78 727.10 1.43
2005-06 496.51 965.12 0.51
From the above trend analysis it can noticed that the ratio of cash and bank balance
current assets fluctuates. The cash balance of RSP is highest in the year 2004-05, then the
ratio has decreased.
44
CHAPTER - 6
45
INVENTORY MANAGEMENT
Inventory constitute the most significant part of a large majority part of current assets
of a large majority of companies in India. An efficient management of inventory is essential
requirement for the success of the enterprise.
Classification of inventories
 Raw materials: It includes direct material used in the manufacture of a
product and it also includes the components, fuels etc. used in the manufacturing.
 Work-in-progress: It includes partly finished goods and materials sub-
assemblies etc. held between manufacturing stages. Stocks of work-in-progress
are in the process of production.
 Finished goods: The goods ready for sale or distribution will come under this
category.
Need to hold inventories
 Transaction motive emphasizes the need to maintain inventories to facilitate smooth

production and sales operation
 Precautionary motive necessitates holding inventories to guard against the risk

of unpredictable changes in demand and supply forces and other factors.
 Speculative motive influences the decisions to increase or reduce inventory

levels to make advantage of price fluctuation.
46
Objective of inventories management
 To minimize the delay in production through regular supply of raw materials,

storages, spares, tools and other equipment as and when required.
 To avoid unnecessary capital being locked of in inventory.
 To exercise economies in ordering and obtaining supplied and storage material.
Inventories determinants
In RSP the inventory determinants are
1. Load Period : It is the period between need and its fulfillment. During this
period, no inflow of material is done and the production is supplied by
existing inventory. Increase in lead time requires more inventory and decrease
in lead time decreases the inventory level. So lead period is the sum of time
taken for identifying the needs and placing order to supplier, procuring from
supplier, transport, receipt and inspection of material.
2. Cost of holding inventory : In order to avoid risk, the inventory management

should balance various costs like material cost, cost of ordering, cost of
holding and carrying the inventory, under stocking and over stocking.
3. Re-order Point : It is the time taken when the order should be placed. It
depends upon the assumption rate and the duration of lead period.
INVENTORY MANAGEMENT TECHNIQUES
Company having large inventories have the problem that management can not
give attention to all items. In RSP to avoid these, they follow mainly these type of methods-
 ABC (Always Better Control) – For raw material.
 VED ( Vital, Essential, Desirable) – for Spare parts.
47
 FNSD ( Fast moving , Non moving, Slow moving, Dead)
 EOQ (Economic Ordering Quantity)
 JIT ( Just In TIme)
ABC ANALYSIS
Here the importance of items depends on its value. The high valued items are
classified as ‘A’, less valued items as ‘C’ and in between them is ‘B’ . This is done in the
following steps-
• Classification of the items of inventories, determining expected use in units and price
per unit for each items.
• Determination of total value item.
• Ranking the items according to their values.
• Combination of items on the basis of their relative value to form three

categories i.e. A, B, C.
VED ANALYSIS
The demand for spare parts depends on the performance of equipments. The vital
spare parts adequately for adverse situation. Essential parts are stocked rather sparingly and
the desirable items are store on basing on lead time.
FNSD ANALYSIS
The items are classified basing on their consumption rate and helps the management
to take decisions about storing of different inventories.
ECONOMIC ORDERIN QUANTITY
Economic ordering quantity is an optimum quantity of materials to be ordered after

consideration of the following three categories of costs.
48
• Ordering cost are the costs which are associated with the purchasing or ordering of
materials.
• Carrying cost are the costs for holding the inventories.
• Stock-out cost are the costs associated with running out of costs.
The EOQ is the optimum size of order for a particular item of inventory
calculated at a point where the total inventory costs are at a minimum for that particular
stock item.
GRAFICAL DETERMINATION OF ECONOMIC ORDER QUANTITY
The
following formula is used in calculation of EOQ.
EOQ = 2AB / CS
Where,
49
A = Annual Consumption C = Cost per unit

B = Buying cost per order S = Storage and other inventory carrying Cost
JUST IN TIME INVENTORY MANAGEMENT
JIT focus upon the idea of producing in response to need rather than as a
consequence of plans and forecast. Instead of pushing inventory into the system in order to
make products, they turned the process round and used the pull from the market place or the
next operation as a way of making the system more directly responsive and eliminating
unnecessary wastes due to over production and so on. It attempts to minimize inventories
through small incremental reductions rather than prescribe particular technology or
methodology.
Inventory
Inventory Proportion Ratio =
Current Asset
Year Inventory Current Assets %
2003-04 466.86 686.28 68
2004-05 500.44 727.10 68
2005-06 718.11 965.12 74
The inventory proportion ratio of RSP is gradually increasing .
50
CHAPTER - 7
51
MANAGEMENT OF RECEIVABLES
To achieve growth in sales and to meet competition in the industry. A firm may
resort to credit sales. Receivables arise from the sale of good and services on credit basis.
Sales on credit depend upon the nature of business. To increase the sales volume, generally
the credit facility will be offered to the customer which result in investment in receivables to
maximize return on capital employed. The balance in receivable account is determined by the
number of customers, length of credit, amount of credit allowed to each customer etc.
Objective
 To maintain the optimum volume of sales.
 To control the cost of credit and keep it at minimum.
 To maintain the optimum level of investment in receivables.
 Keep down the average collection period.
Cost extending credit
 Capital cost includes the interest on capital blocked in the receivables balances.
52
 Administration cost associated with the credit decision making and controlling
of debtor balances, cost of keeping the records of credit sales, cost of collection
of payment from customers, opportunity cost of capital that can be employed
else where than in receivables management.
 Default cost are associated with the risk of default i.e. a certain portion of
receivables will never pay, and will become ‘bad debt’s which has to be written
off the profits of the firm.
CHAPTER - 8
53
FINDING AND SUGGESTIONS
After studying the components of the working capital management system of RSP, it
is found that the company has an ineffective policy. However the following suggestions are
made with the hope that implementation of these can add to the performance and efficiency
of the system followed at present.
 Rourkela steel plant should set planning standards for stock days,
debtor & creditor days.
 Install an understanding amongst the staff that working capital

management produces profit.
 Inventory management is a great concern for RSP especially stores &

spares. The purchase manager should take certain steps for proper
procurement of inventories.
 Keep stock level as low as possible, consistent without not running out
of stocks & not ordering stock in uneconomically small quantities. Just-in-
stock management is fine, as long as it is JIT and never fails to deliver on
time.
CONCLUSION
54
After a detailed and intensive study on the working capital management of RSP. I came
with the conclusion that RSP should adopt a more improve d techniques for managing its
working capital with an expectation.
CHAPTER - 9
55
BIBLIOGRAPHY
1) Annual Accounts of R.S.P.- 2003 – 04, 2004 – 05, 2005 – 06.

2) Rourkela Steel Plant “Panorama”.
Books are as follows:
1) Financial Management.
I. M. Pandey.
2) Fundamentals of Cost and Management Accounting.
Dr. S. N. Maheswari.
3) Financial Management.
P. Chandra.
Internet Websites :
www.sail.co.in
www.metaljunction.com
www.steel.com.
56
57
A. 01. ROURKELA STEEL PLANT

Balance sheet as on 31st march, for four years.
(RS. IN CRORES)
2003-04 2004-05 2005-06

SOURCES OF FUNDS
LOAN FUNDS
Secured Loans 20.74 26.39 21.27
Unsecured Loans 26.41 15.76 5.36
47.15 42.15 26.63
Inter Unit Current Account 10671.93 10644.55 10102.12
10719.08 10686.7 10128.75
APPLICATION OF FUNDS
Fixed Assets
Gross Block 6122.88 6065.07 6303.26
Less Depreciation 2636.36 2830.14 3083.06
Net Block 3486.52 3234.93 3220.2
Capital Work-In-Progress 58.44 241.71 114.57
3544.96 3476.64 3334.77
C.A, Loans & advances
Inventories 466.86 500.44 718.11
Sundry Debtors 8.57 12.44 14.6
Cash & Bank Balances 6.45 15.75 17.22
Interest Receivable/Accrued 3.15 2.54 2.47
Loans & Advances
Subsidiary Companies 1.42 0 0
Others 199.83 195.93 212.72
686.28 727.10 965.12
Less: CL & Provisions
Current Liabilities 459.33 472.70 499.45
Provisions 649.48 537.45 569.48
1108.81 1010.15 1068.93
Net Current Assets - 422.53 -283.05 -103.81

Miscellaneous Expenditure
(to the extent not written off or
adjusted ) 53.47 43.4 26.27
Profit & Loss Account 4058.24 3013.46 2516.95
Inter Unit Current Account 3484.94 4436.25 4354.57
10719.08 10686.70 10128.75
58
A .02. Profit & Loss Account for the Year Ended 31st March, for Four Years.
(RS.IN CRORES)
2003-04 2004-05 2005-06
INCOME
Sales 3813.88 4674.19 4586.65
Less: Excise duty 471.57 508.04 662.02
3342.31 4166.15 3924.63
Finished products internally consumed 20.03 22.67 28.5
Interest earned 8.62 5.84 7.52
Other revenues 74.69 74.85 61.83
Provisions no longer required written
back 14.84 17.72 9.69
Stock transfer to other units 31.86 58.19 46.07
3492.35 4345.42 4078.24
EXPENDITURE
Depletion to stocks 197.77 39.97 -161.34
Raw materials consumed 1176.47 1277.30 1680.59
Employees remuneration & benefits 754.36 607.81 591.3
Stores & spares consumed 291.85 299.14 370.88
Power & fuel 318.32 296.53 302.14
Repairs & maintenance 27.68 34.85 56.1
Freight outward 101.39 102.71 131.62
Other expenses & provisions 167.06 164.02 153.21
Share of expenditure over income
Corporate office 31.26 33.6 31.4
CMO 34.05 28.25 36.69
CCSO 2.03 2.59 2.52
Interest & finance charges 257.76 151.33 112.23
Deprecation 273.78 275.52 288.27
TOTAL 3633.78 3313.62 3595.61
Less: transferred to inter account
adjustment 16.92 15 19.46
3616. 86 3298.62 3576.15
Profit/Loss for the year -124.51 1046.80 502.09
Adjustment pertaining to earlier years 15.68 -2.02 -5.58
Net profit/Loss for the year -108.83 1044.78 496.51

Balance brought forward from the
previous year -3949.41 -4058.24 -3013.46
Loss carried over to balance sheet - 4058.24 -3013.46 -2516.95
59

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SAIL : Rourkela Steel Plant

‘Working capital Management’ means managing the current assets of a business

Working capital Management is a very sensitive area in the field of financial

OBJECTIVE OF THE STUDY

The following are the main objectives of this project study.

a) To study the present system of working capital in Rourkela Steel Plant.

This is study of Working Capital Management with particular reference to RSP.

case management, inventory management, management of receivables and financing of

The financial data were collected from various sources like:

LIMITATION OF THE STUDY

The study is limited to four financial years from 2003 -2006

TOOLS & TECHNIQUES USED FOR THE STUDY

GLOBAL STEEL SCENARIO AND INDIAN STEEL

WORLD DEMAND AND SUPPLY

Year Gross Effective Crude Steel Operating

1990 979 841 770 78.6%

1995 998 807 752 75.4%

2000 1025 878 831 81.0%

2006(E) 1057 935 888 84.0%

 Capacity utilization has been 75% to 80% only.

 Consumption has growth at 3.4% in the past.

 In future likely to grow at 2.6%.

Year Gross Capacity Effective Capacity Steel Consumption

1999 (MT) 1026 869 787

2005(MT) 1057 935 888

2010(MT) 1131 1020 960

1991 2001 2002 2003 2004

India Steel 20 27 29.5 32.5 34

1990 770.1MT 1996 750.0MT 2000 847.0MT

1991 734.4MT 1997 795.0MT 2001 870.0MT

1992 722.7MT 1998 778.0MT 2002 900.0MT

1993 730.6MT 1999 785.0MT 2005 1100MT

 Stable growth in the Steel demand.

 Cost reduction efforts.

 Exchange rates swings.

 Greater pricing volatility.

 Growth in Global trade.

b) Made advanced technology flourish in the traditional environment of Japanese

c) Vigorous Research and Development efforts.

The industry made efforts in three areas-

 Conservation of energy and raw materials.

 Improvement of yield, rationalization of production process and

 Meeting new demands of steel users.

The steel industry produced its energy consumption through-

 Dry quenching of coke.

 Reduction of blast furnace fuel rate.

 Electric power generation through utilization of blast furnace gas.

At present total employment in steel industry has come down.

Leading Steel Producing Companies

In 2002, largest 10 steel producing companies in the world were-

2. LNM Group (34.2MT).

3. Nippon Steel (29.8MT).

5. Shanghai Boasteel (19.5MT).

Year Demand Availability Surplus

2002-2003 29.03MT 34.00MT 5MT

Some leading steel producers in India are-

 Steel Authority of India (SAIL).

 Tata Iron and Steel Company (TISCO).