CCL

Preface Coal oal has bee been and sha shall rem remain the pri prime sour sourcce of  commercial energy in India. It meets nearly 60 % of the total commercial energy requirement of our country. Since coal India India contr contrib ibut uted ed almo almost st 90 % of the coal produced produced in the country it can be perceived to be the synonym of Indian coal industry. India is currently the third largest coal producing country in the world after China & U.S.A. The Coal India has has to play play a sign signif ific ican antt rol role in sha shaping ping the the dest destiiny of  industri industries es of the nation at large. large. We currentl currently y witn witnes esss changes changes that are sweeping economic & social life of our  country, as well as, that of the world. world. Produ Products cts,, service servicess and manufacturin ma nufacturing g goods or no longer limite limited d to any national national  boundary but are getting across to countries where they find acce accept ptan ance ce.. The The libe libera rali liza zati tion on and and the the econ econom omic ic reforms reforms initiated initiated in our country, in real earnest, since the mid of 1991 1991,a ,are re att attem empt pt to to bring bring India India in to to the the ec e conomic main s tr tr ea ea m

of

g lo lo ba ba l

m ar ar ke ke t. t.

Performance

for

the

compe ompete tenc nce, e, if I may say say so, so, is the key key word ord for any

company company or corpora corporatio tion. n. Undoubt Undoubtedl edly y these these moves moves effect effect our life, as well as our thinking.

History of Coal Industry in India The mining industry in India is next to agriculture in terms of resource generation and employment opportunity. Coal mining occupies a major position, contributing nearly 60 % of com comm merci rcial ene energy requi rement remen t of India, Indi a, followed follo wed  by iron ir on-o -ore re,, lime limest ston onee and and baux bauxit ite. e. Coal has traditionally been a vital input to the industrial heri herita tage ge of India India nearl nearly y 200 200 year year ago, ago, in Ranigun Ran igunjj coal field, about 120 miles west of Calcutta. Coal min mining gradually spread to other parts of India as the railway network  deve develloped oped.. By 1900 1900,, almo almost st 80% 80% of the the coun countr try' y'ss coal coal production of 6 mill millio ion n tons tons came came from from Jhar Jharia ia and and Raniganj coa coalfi lfields elds.. The The pri princi ncipal pal cons consum umeer were ere the the Calc Calcut utta ta based based indust industrie riess & shippi shipping ng bunkers bunkers & railwa railways ys operati operating ng from from Calcutta Calcutta.. Imported Imported coal from the Unit United ed Kingdom and South Africa was cheaper then the west coal. The two world world wars gave boost to Indi Indian an produ product ctio ion n as

imports from distant countries became uncertain. Production rose to 22 million tons at the end of the First World War & after suffering during the depression, climbed to 26 million tons tons at the the end end of Seco Second nd Worl World d Wa War. r. Ther Theree was was seve severe re shortage of coal during the post war period. On 16 th October October in 1971, to deal with the declined situation, the government of  India India took took over over the manag managem emen entt of all all mine miness prod produc uciing coking coal, & again on 30th Janu Januar ary y 1973 1973 all all mine miness producing

thermal

coal.

In

1975

the

government

consoli consolidat dated ed control control over over the coal industry by transferring the ownership & manag anageement ment of all all nat nationa ionallize ized coalmines coalmines to the newl newly y esta establ blis ishe hed d coal coal India India limi limite ted d headquarter headquarter in Kolka olkata ta Coal India In dia present pre sently ly contribu cont ributes tes 90% 90% of the total total coal produc producti tion on in India India.. It is the the largest largest public public sector sector in terms of employment employment to the tune tu ne

of 636, 636,00 000 0 peopl peoplee produ produci cing ng 250 250 mill millio ion n tons tons of 

coal  per year. It operates through eight subsidiaries.

l.

ECL-1 L-1975: 975: eas eastern coal oalfield ltd, comp ompris rising of the the

easte astern rn divi divisi sion on of CMAL CMAL with with hea head quar quarte terr at Burdwan. 2.

BCCLCCL-19 1975 75:: Bhara Bharatt Coki Coking ng Coal Coal Ltd. Ltd. Comp Compri rissing ing of 

BCCL together with Sudanidin Sudanid in & Moonidih mine miness of   NCDC with head quarter at Dhanbad. 3.

CCLCCL-19 1975 75:: cent centra rall coal coalfi fiel eld d ltd, td, comp compri risi sing ng of the the

cent centra rall divi divisi sion on of CMAL CMAL// NCDC NCDC with with head head quar quarte terr at Ranchi. 4.

NCL-1 CL-198 986: 6:

nor north ther ern n

coal coal

fie field ld

ltd ltd,,

with with

its its

with with

its its

registered office at Israeli (M.P). 5.

WCL-1 CL-197 975: 5:

west westeern

coal coalfi fieeld

ltd, ltd,

registered office at Napery (Maharastra). 6.

SECL-1986:

southeastern

coalfields

ltd ltd,

comprising of western division of CMAL with head quarter  at Nagpur. 7.

CMPD MPDIL-1 IL-19 975: central mining pla planning ning & desig sign

institute ltd, with head quarter at Ranchi. 8.

MCLMCL-19 1992 92:: Mahan ahanaadi coalf oalfie ield ldss ltd, ltd, with with its

registered office at Sambalpur (Orrisa).

All the shares shares of above-ment above-mentione ioned d subsidiari subsidiaries es are held  by the President of India through the holding company of coal indus dustrie ries hold olds all the shar hares of abovementioned subsidiaries. Coal India currently operates 449 mines & 15 washeries spread over nine states to produce &  benefi  beneficen centt coal coal for meetin meeting g the demand of the consumers all over the country. 4 major consuming sector i.e. power, steel steel,, railwa railway y & the organi organize zed d indu indust stria riall sect sector or units units of  varying siz size number numbering ing about about 2000 2000 consum consumee cement cement.. 18% presen presently tly consume consume Sevent Seventy y five five percen percentt of coal. coal. The  balance 7% is consumed by a very large no. of consumers viz brick kilns, domestic consumer etc through coal depots & retail shops.

ORGANISATION ORGANISATION STRUCTURE OF CIL

Coal India 1975

Dankuni Coal Complex

0.86 bill tes 5 mines

 NEC 1975

Eastern Coalfields ltd 1975 (36.63 bill tes)** 129 mines

 Northarn Coalfields ltd 1975

(10.34 bill tes)*** 10 mines

Central Coalfields ltd 1975

Bharat Coking Coal Ltd. 1973 (19.42 bill tes)*** 92 mines

Central Coalfields ltd 1975

(33.45 bill tes)*** 54 mines

South Eastern Coalfields ltd 1973

(8.65 bill tes)*** 64 mines

Central mine Planning & design institute 1975

(27. 36 bill tes)*** 73 mines

 NOTE:

[ ] Information () represents the total reserves of coal in geographical jurisdiction of subsidiary companies. ** ***

Includes reserves of IISCO. Includes reserves of TISCO & IISCO.

MANAGEMENT STRUCTURE OF COAL INDIA LTD.

Coal India ltd is governed by a board of directors headed by a full time time chai chairm rman an-c -cum um-ma -mana nagi ging ng dire direct ctor or of the the subs subsid idia iary ry companies & some other part time directors being nominated by the gove govern rnme ment nt of Indi Indiaa are are the the memb member erss of coal coal Indi Indiaa ltd ltd boar board. d. Initia Initiall lly, y, there there was was no funct function ional al direc director torss in coal coal India. India. The

Western Coalfields ltd 1973

(8.65 bill tes)*** 22 mines

chairman of coal India ltd was to be assisted by the officer rank of  advise adviser/g r/gene eneral ral manage managerr as departm department ental al heads heads for dealin dealing g with with corpor corporate ate planni planning, ng, research research,, develo developmen pmentt & operati operation on etc. etc. these these offic officers ers were were not not to have have any any func functi tion on so far far as the the subs subsid idia iary ry companies were concerned. But But with with the the pass passag agee of time time,, cons consid ider erin ing g the the admi admini nist stra rati tive ve conveniences conveniences some functional directors post has been created for the coal India ltd board. Presently, there are director (personal industrial relation), director (finance) & director (Technical) & the chairman coal India ltd as the whole time directors of the coal India Ltd board.

INTRODUCTION INTRODUCTION TO CENTRAL COAL FIELDS LIMITED.

The central coal fields limited is one of the subsidiaries of coal India limited registered under the company's act in the year 1975. the

min mining ing & extr extraactio ction n of coal coal is entr entrus uste ted d to a publi ublicc secto ector  r  organization coal India limited. The company is divided into eight subsidiaries & central coalfields ltd is one of them. The company presently known as CCL has a history of more than three decades. Pursuant to the industrial policy resolution of 1956, a company company was formed by the name of m/s Hindustan Hindustan collieries Pvt. th Ltd. on 5 September 1956. shortly after then on 20 th September  1956 1956 the the name name was was chan change ged d to the the nati nation onal al coal coal development development corporation. The national coal development corp corpor orat atio ion n limit limited ed was formed on 1.10.56 with 11 state railway collieries situated in Orissa & Madhya Pradesh. Like other industries & organization, the affair of CCL too is not settled by its owner (govt. of India) rather a professional team of  management called board of directors appointed by the govt. of  India to manage the affair of CCL. The CCL has a unique distinction distinction as to the character of its mines & also the composition of  its total work force. Some of the state collieries are very old at least one of which i.e. Garish has crossed century in the year 1961 .CCL with with its its head head quart quarters ers in Ranch Ranchi, i, Bihar Bihar is the the succe successo ssorr to the the former govt. owned national coal development corporation (NCDC), CCL operates 54 mines having coal reserve r eserve of 33.45 billion billion tones tones & five coking coal washeries (one more is under construction) in the Chotanagpur region, but most of the prod produc ucti tion on (88 (88%) %) come comess form surface mines.

The company is the major source of medium coking coal in India. India. The produc productiv tivity ity of underg undergrou round nd mines mines & many many of the the surface mines is low, but because of high priced coking coal, the company has been making marginal profits or losses. With the rece recent nt dereg deregul ulat atio ion n of coki coking ng coal coal price price the the prof profit itab abil ilit ity y of the the company is expected to improve. All the mines & establishment of CCL at present situated in the district of Ranchi, Hazaribagh, Giridih, Bokaro & Palamau. CCL has fifteen areas headed by chief general /manager general manager  with with unif unifor orm m orga organi niza zati tion onal al setu setup. p. The The tota totall manp manpow ower er in the the company as on 31.03.97 was 91,649.

MAIN OBJECTIVES OF CCL 1. (a) To carry on business of of coal mining. mining. (b) Acquisition Acquisition of of coal mining. mining. produc ucee or othe otherw rwis isee enga engage ge gene genera rall lly y in the the (c) To prod  production, sale & disposal of coal &its by - product. (d) Mining coal, coal, manufacturing manufacturing coke & other business. business. (e) Manufacturing, Manufacturing, trading trading & other other business. business. Reorga gani niza zati tion on Reco Recons nstr truc ucti tion on of coal coalmi mine ness take taken n over over by 2. Reor govt. 3. Policy Policy formulation formulation & advisory advisory function. function. 4. To fiance fiance replacement replacement expenditure. 5. To develop develop technical technical knowknow- how. 6. Exploratio Exploration n & prospecti prospecting. ng. 7. To manufacture manufacture & sell sell coal as as a patent patent fuel. 8. To carry carry on mining mining & quar quarryi rying ng coal coal & othe otherr byby- prod produc ucts ts incidental thereto. 9. To act as trader traderss of coal & coke coke &other &other by- product product direct directly ly or  through agents. 10. To manufacture manufacture coke coke & other byby- product product of coal. coal. 11. To act as colliery &mine &proprietors coke manufacture in all their respective branches. The main main projec projectt objec objectiv tives es are to suppo support rt the the market market-o -orie rient nted ed reform India is undertaking in the coal sector & especially to  provide financial & technical support to coal India's efforts to make it self commercially viable & self sustaining under pinning India's broad drive to achieve economic growth. The project also aims aims to incr increa ease se dome domest stic ic supp suppli lies es of coal coal by finan financi cing ng investment in the most profitable 24 open cast mines of coal India for  the power sector & other industries until imports & production form  private investments can fill the emerging supply gap.

WORKING CAPITAL INTRODUCTION

From the very beginning of human evolution everyone wants to make his life smooth. With the increase in complexity of life every individual is managing all thing cautiously to enjoy their  rights. Only those people will be able to survive who are more  perfect in managing their jobs. A part from fixed assets, every concern needs a certain amount of  money to run day-to-day business. Funds are needed to carry out   business operations such as purchase of raw materiel, payment of  wages & other day to run day expenses. In other words working capital refers to that part of the firm's capital that is required for  financing current asset i.e. - Cash - Debtors - Inve Inven ntori tories es etc. There are two concepts of working capital - gross & net working capital. Gross working capital - this refers to firm's investment in current assets. Current assets include assets that can be converted into cash within an accounting year, in this particular firm it includes sundry debtor, cash & bank balance & work in progress.

The gross concept focuses on: (a)

Optimum investment investment in current assets- investment investment in current assets should be just adequate, neither less nor 

more, excessive investment will lead to increase in idle investment

i.e.

reduced

profitability.

Inadequate

investment will increase the risk. (b)

financing of current assets - whenever an increase in  business activity arises there is a need to increase the working capital fund. And to reduce the loss this has to   be done quickly. Similarly, if surplus fund arise they should not be allowed to remain idle, but should be invest invested ed in short-t short-term erm securi securitie ties. s. Thus Thus the financ financial ial manag manager er shou should ld have have the the know knowle ledg dgee of sour source cess of  working capital funds as well investment opportunities where idle funds can be temporarily invested.

  Net Net work workin ing g capi capita tall - this this refe refers rs to the the diff differ eren ence ce betw betwee een n current assets & expected to mature within the accounting year. This concept focuses on: a.

Liquid Liquidity ity positi position on of the firmfirm- curren currentt assets assets should should be suffic sufficien iently tly higher higher than current current liabilit liabilities ies..

A negati negative ve

working capital means negative liquidity position & it may  be unsafe & unsound, excessive liquidity is also bad. It may arise due to mismanagement of current assets.  b.

Extent to which working capital needs can be financed by  permanent sources of funds — for every firm there is a fixed amou amount nt of net net work workin ing g capi capita tall whic which h is more more or less less  permanent therefore, a portion of working capital should be financed with the permanent sources of funds & such as owne owner' r'ss equi equity ty,, debe debent nture ure,, long long - term term debt debt prefe prefere renc ncee capita capitall & retain retained ed earnin earning. g. Manage Managemen mentt must must therefo therefore re decide the extend to which current assets should be financed  by equity capital capital or borrowed borrowed capital, capital, hence, hence, both gross

&

net working capital concepts are equally important for the efficient management of working capital. capital.

NEED FOR WORKING CAPITAL

Working capital capital is needed to run the day-to-day business activities. activities . Every firm aims at maximizing the wealth of the shareholders. A firm firm shou should ld earn earn suffi suffici cien entt retur return n from from its its oper operat atio ion n for for the the fulfillm fulfillment ent of its requiremen requirement, t, earning a steady steady amount amount of profit profit needs successful sales activity. The firm has to invest enough funds in current assets for successful sales activities current assets are are need needed ed beca becaus usee sale saless cann cannot ot be trans ransfo form rmed ed into into cash cash instantaneously.

DETERMINANTS OF WORKING CAPITAL A large number of factors determine the requirements of  working capital of the firm. The factors have different requirements.

Therefore,

all

the

factors

should

be

consi consider dered ed to deter determin minee the the amoun amountt of worki working ng capita capital. l. These factors are as follows: * Natur Naturee & size size of of busi busine ness ss * Manu Manufa fact cturi uring ng cycl cycle. e. * Busi Busine ness ss fluct fluctua uati tion ons. s. * Prod Produc ucti tion on pol polic icy. y. m

Firm's credit policy.

* Avai Availa labi bili lity ty of of credi credit. t. m

Growth & expansion activities

m

Profit margin

* Oper Operat atin ing g effi effici cien ency cy * Gove Govern rnme ment nt pol polic icy y u

Sources of resources

THE TOOLS & TECHNIQUES USED FOR MANAGEMENT OF WORKING CAPITAL IN CCL A. Material budgeting & inventory control:

Inventory management is seen as a critical component of  working capital management. These constitute the most important part of C.A. of the majority of companies in India India.. It is very very essent essentia iall to have have prope properr control cont rol & manage managemen mentt of invent inventory ory.. The basic basic purp purpos osee of  inventor inventory y management management is to ensure ensure avai availa labi bilit lity y of  materials in sufficient quantity as & when required & also to minimize investment in inventories. Today on an average 60% of the C.A. are invent inventori ories. es. An u n de de rt rt a ki ki ng ng inventories

n eg eg le le ct ct in in g will

be

t he he

jeopardizing

management its

of  

long-term

 profitability. The reduction in excessive inventories help to

develop

a

favorable

impact

on

company's

 profitability.

While preparing material budget, the following factors are taken into consideration: 1. Produ Product ctio ion n target target.. 2. Requirement of material to achieve above targeted

 production based on past consumption pattern. 3. Stock Stock of of materi material al in in hand, hand, orders orders due in. 4. Buffe Buffer/s r/saf afet ety y stoc stock k requi required red.. Once Once the the quan quantu tum m is asses assesse sed, d, two two funda fundamen menta tall questio questions ns normally arise thereafter to maintain steady flow of material for production purpose. These are: 1. How much much to to buy buy a time? time? 2. When When to buy buy this this quan quantit tity? y? In fact, it is the main objective of inventory control to answer the above questions at economic

cost. There are four fundamental factors which governs answer to these questions: 1 .Requirements 2.Quantity in stock or on order  3.Lead-time 4.0bsolence One of the most most effect effective ive techni technique quess for deter determin minati ation on of  quantity is called economic order quantity (E.O.Q). The basic objective is to economize on the total cost of purchase. There are two major costs involved in the purchase:

1 .Pur .Purch chas asin ing g cost cost or acqu acquis isit itio ion n cost cost.. 2.Inven 2.Inventory tory carrying cost The E.O.Q. is that quantity quantity at which which the purch purchasi asing ng cost cost and inventory carrying cost are equal. One of the primary tasks in inventory control is to determine stoc stock k leve level. l. Ther Theree are are vari variou ouss leve levels ls of stoc stocks ks.. The The most most important stock levels are: 1.Minimum stock level: This represents the minimum quantity of material, which must be maintained in hand at all times. The

followi following ng facto factors rs are taken taken into into consid considera eratio tion n for fixing fixing this this level. (a)

Lead time

(b)

Rate Rate of requ requir irem emen entt-ML ML mini minimu mum m stoc stock k leve levell is not not required to maintain if it is for specific job.

2.Re 2.Re order order level: level: It is the point point at which which fresh fresh procurem procurement ent action should be initiated. Re-ordering level = Maximum consumption x Maximum period taken to get Material once it is initiated. 3.Maximum stock level: It represents the maximum quantity of an item of material, which can be held in Stock at any time.

Maximum stock level

=

Re - ordering level

+ Re - ordering quantity quantity (Minimum

consumption

Minimum re- ordering period) 4. Danger level

x

This means a level at which normal issues of the material are stopped & issues are made m ade only under specific instructions. Danger level

= Average consumption consumption X Maximum re Order period for emergency purchases.

For monito monitorin ring g & follow follow up action action every every busine business ss organiz organizati ation on normally adopts the following techniques. 1. Perpetu Perpetual al stockt stocktaki aking ng 2. Periodical physical verification verification of inventory inventory 3. NL and and PL reconciliatio reconciliation n 4. Selective Selective inventory inventory control control technique technique such as:

(a) ABC analysis

The small number of high consumption value items are called A items, the medium consumption value items are B items; the large number number of items items whose whose annual annual consumpt consumption ion is very very low is C items. ABC analysis gives rise to selective inventory control in which maximum attention attention can be given to 'A' items, a fair amount to 'B' items and routine attention to 'C' items in order to get best return with least effort.

(b) H.M.L Analysis

Under this system, materials are classified with respect to the unit  price  price i.e. i.e. High High unit unit price, price, Medium Medium unit unit price price and low unit unit price price.. Objective of HML analysis is same as ABC analysis. (c) (c) V.E.D V.E.D analys analysis is VED VED stan stands ds for for Vita Vital, l, Esse Essent ntia iall and and Desi Desira rabl ble. e. This This type type of  classification is mostly applicable in case of spare parts. For V items, a reasonably large quantum of stock is necessary, while for D items, no stock need to be kept. (d) (d) S.D. S.D.E E Anal Analys ysis is

S.D.E stands for Scarce, Difficult to obtain and Easy to obtain items. Here, the criterion is the ease of purchase. (e) G.O.L.F Analysis GOLF stands for Government, Ordinary, Local and Foreign items. Here criterion is the source from which the material is obtained. (f)F.S.N Analysis FSN stands for fast moving, slow moving and non-moving. Here the criterion is the rate of issue from stores.

(g) S.O.S Analysis

SOS stands for Seasonal and Off-Seasonal nature of materials. Here the emphasis is on the periodicity of requirements. (h) X.Y.Z Analysis The X items are those whose whose inventory values values are high, while while Z item itemss are are thos thosee whos whosee inve invent ntor ory y valu valuee is low. low. This This type type of  analys analysis is is useful useful to identi identify fy items, items, which which are extens extensive ively ly stocked. If such items are of high value efforts should be made to reduce them. In conclusion, there is no simple rule to determine stock levels or to dete determ rmin inee the the type type of stra strate tegy gy to be empl employ oyed ed for  for    proc procure urement ment or stocki stocking. ng. As such, such, specia speciall treatm treatment entss would would have to be worked out to overcome problems in respect of each type. Afte Afterr dete detect ctio ion n of surp surplu luss non-m non-mov ovin ing g and and obso obsole lete te items items,, thro throug ugh h abov abovee tech techni niqu que, e, acti action onss are to be take taken n for for its its liquidation with an aim to minimize idle inventory holding as well well as inve invent ntor ory y carr carryi ying ng cost cost.. Acti Action onss take taken n for for its its liquidations are:

(a)

(b) (b)

Offer Offerin ing g to othe otherr unit units/ s/are areaa and and to othe otherr subs subsid idia iary ry companies. Disp isposa osal th throu rough auct auctio ion n sal salee

Scrap is also normally disposed off through auction sale for  minimizing inventory carrying cost and for earning revenue.

(B) Debtors Management in CCL The main main obje object ctiv ivee of debt debtor or manag manageme ement nt is to keep keep the the regu regula larr debt debtor or's 's bala balanc ncee as mini minimu mum m as poss possib ible le.. Sund Sundry ry debtor' debtor'ss come in to existenc existencee when when the custom cus tomer erss are ar e not able to pay the coal bills in full amount in time. In CCL coal sale is done either on credit or cash. Credit sale sale is done done only only to Govt Govt.. parti parties. es. It means means the debtor debtorss of  CCL consist only of Govt. parties. Govt. parties follow cash and credit system, which is acco accord rdin ing g to the rule ruless of CIL. CIL. Acco ccordin rding g to this the paym paymen entt has has to be made made by the the customer within 24 hrs. of the presentation of the coal bills. Sundry debtors debtors of CCL can be divided divided into three parts: Power This sector is the biggest consumer of coal. It can be divided into state state electri electricity city board board which which inc include ludess Bih Bihar Stat Statee Ele Electr ctrici icity board oard,, Delhi Vidyut Niga Nigam, m, Punj Punjab ab Stat Statee Electricity Board,U.P state electricity board etc. Other than these are some other power production unit such as  NTPC etc. who also buy coal in large quantity. Steel - this sector is also one of the main consumers of coal. It can also be divid divided ed into two two parts parts - steel steel plant plantss owne owned d by SAIL ,BSP ,RSP, BSL etc. and other steel plants like 11SCO. Others -This includes customer like Fertilizer Corporation of India. Government Cement Plants. • Railways (though its consumption of coal has decreased in recent years.) • Defense (mainly for domestic purpose) • •

STEPS INVOLVED IN MAKING BILLS: 1. Linkage committee - The committee decides upon the quantity

of coal coal that that is bein being g supp suppli lied ed for for next next peri period od.. It cons consis ists ts of  representatives of CIL, Railways and customers. 2. Dispatch Dispatch of coal coal - The collieri collieries es dispatch dispatch the the coal as per per link. 3. Issue of coal bill - The bills is issued to the consumer within 3 days of dispatch of coal. And the customers of coal custo customer merss are asked asked to pay pay withi within n 48 hours hours of receiv receivin ing g the the  bill. Formation of debtors - The amount, which the party is unable to pay, conies under debt. Debt is of types. - Disputed - Undisputed. Disputed - When there is difference in opinion about the quality. Quantity, penalty overloads or under load charge etc between CCI & the customer, the customer withheld the payment unto that extent. This is disputed debt Undisputed - this is simply the amount the customer is willing to pay  but is unable to do so due to his financial condition. Efforts taken to decrease the debtors: The The undis undispu puted ted amoun amountt is first first hand handled led.. There There is region regional al sales sales mana manage gerr (RSM (RSM)) of CIL CIL in each each majo majorr city city who who cont contin inuo uous usly ly pers persua uade de the the debt debtor orss to pay pay back back the the amou amount nt.. In extr extrem emee condition help of ministry is also taken. And even after the case is not solved at ministry level coal supply is stopped at that station. For the disp dispute uted d amoun amountt meeti meeting ng are arrang arranged ed betwe between en CIL/CC CIL/CCL L & the custome customerr & proble problem m is tried to be solved solved through through bargain bargain.. If the disputes are not settled in the meetings, the ministry inte interv rven enes es.. The The cent centra rall govt govt.. has has appo appoin inte ted d 4 umpi umpire ress to sett settle le the the disputed disputed outstanding. The decision decis ion of the umpires is final & binding binding on on both both  parties.

(C) Management of Cash Cash is an important current asset for the operation of the business. The The firm firm shou should ld keep keep suff suffic icie ient nt cash cash neit neithe herr more more or less less cash cash short shortag agee will will disp disput utee the the firm' firm'ss manu manufa fact ctur urin ing g oper operat atio ion n whil whilee excessive cash will simply remain idle without contributing any thing towards the firm's profitability. Cash is the money, which the firm can disbur disburse se immedia immediatel tely y without without any restrict restriction ion.. This include includess cash, cash, currenc currency, y, cheques cheques held held by firms firms & balanc balances es in its bank accoun accounts. ts. Sources & uses of cash The main source of cash in CCL is: (a)

(i)

Cash sale of coal

(ii)

Credit sale of coal

(iii)

Sale of washery coal

(iv)

Middling coal sale

(v) (b)

Sale of slurry/rejects

Miscellaneous receipt (i)

Sale of tender document

(ii)

Sale of stores scrape

(iii

Penalty

/

interest

outsider  (Contractor/suppliers) (iv)

Interest from employees.

from

(c) Short Short term term loan from from banks banks (d) Foreign Foreign loan loan (e) (e) Loan Loan from from CIL. CIL. Uses of cash: (i) Salary perks etc. (ii) Stores (iii) Power  (iv) Payment to contractors (v) Interest to - a) CIL  b) Banks (vi) Refund of balance to CIL (vii) Statutory payment a) P.F  b) Sale Saless Tax Tax c) I .Tax

Managing the cash: -

1. Cash sales - When the customer directly lifts the coal from

the augmented area then it is known as road, sale for this type of sale the customer deposits money at road sale center  located in Ranchi. Hence for such type of sale the cash is collected in road sale center.

2. Credit sale - the collection of draft/cash from the credit

 parties is deposited at the sale office located in different cities & major localities. Provision has been made to transfer this money within 24 hrs. In CCL Calcutta office. A part of this money can be used by CCL Calcutta office for uses such as

(a) Payment Payment for for explosiv explosives es (b) Special expenditure expenditure of CCL, CCL, Calcutta office office (c) Interest payment of CIL CIL Calcutta Calcutta The rest of the money is sent in current account of CCL Ranchi (fund section) from Road, sale center & CCL Calcutta office. 3.The misc. receipt is collected in the area/unit or headquarter. The money is used from the place where it is collected. Hence this money doesn't move any where. Cash budget is routinely prepared here which helps in 1 .Estimating cash requirement. 2.Planning short time financing. 3.Scheduling payments in connection with capital expenditure. 4.Planning purchase of material 5.Planning credit policy.

The principle method of short term cash, forecasting is the receipts & payment method. The cash forecasting prepared under this method shows the timing & magnitude of the expected cash receipts & payment over the forecasted period. It includes all

expected receipts & payments irrespective of how they are classified in accounts. Normally, the basis for cash budgeting are: 1 .Revenue  budget 2.Capital budget 3.Statory dues 4.Outstanding dues 5.Company policy for payment of personal &other advances. 6.Credit & collection policy as well as past trends etc.

For monitoring cash budget as well as cash & bank balance, the following tools &techniques are normally adopted: 1 .Cash flow analysis & reporting - monthly/weekly/daily. 2.Cash & bank balance reporting - monthly/weekly/daily. 3.Periodic physical verification of cash & bank balance. 4.Periodic reconciliation of bank statements with cashbook. 5.Timely accounting of time - barred cheques. 6. Adequate internal cheque system to avoid the possibility of cash defalcation. T. Monthly & weekly cash indent along with list of   pending bills.

OPERATING CYCLE Smoo Smooth th runn runnin ing g of a busi busine ness ss cycl cyclee has has seve severa rall stag stages es from from   procu procurem remen entt of raw materi materials als to thei theirr conv convers ersio ion n into into finis finishe hed d  products; inventory stock pilling & creating debtors on credit sale of  such inventory, & liquidating the debts through realization over a  period. An ideal business cycle leaves room for including factoring as a component for converting trade debts into cash & thus speeding up/shortening the business cycle. The term factoring is related to realization/liquidation of debts. It may be defined as an agreement  between a firm (which has sold sol d its goods / services services on credit credit & owns debts) & a party (may be an individual or other wise) who is called a factor by which the factor buy the debts of receivable invoices of the firm under under certa certain in terms terms & cond condit itio ions ns with with the the righ rightt to realize the debts in lieu of some agreed fee & / or commission. The firm has to invest enough funds in current Assets for the success of sales activity. Current Assets are required because sales do not convert into cash instantaneously. There is operating cycle involved in the conversion of sales into cash.

Cash

Receivable

Raw Material

Sales

Work in Progresses Finished Goods

Operating Cycle

The operating cycle of a manufacturing company involves three phases: 1. Acquisit Acquisition ion of resources resources such as raw materia material, l, labour, labour, fuel etc. 2. Manufacturing of the product, which includes conversion

of raw material in to work - in -progress in to finished goods. 3. Sale of the product either for cash or on credit. Credit

sales are converted in to cash. The length of operating cycle of a manufacturing company is the sum of: of:

1. Inventor Inventory y conve conversion rsion period period & 2. Book debts debts conversi conversion on period. period. 1. Inventory conversion period: The inventory conversion period is the total time needed for   producing & selling the product, it includes: (a) Raw material material conversi conversion on period. period. (b) Work in progress progress conversion conversion period. period. (c) Finished Finished good good conversion conversion period. period. 2.Book debts conversion period: The book debts conversion period is the time required to collect outstanding amount from customers. The firm has to negotiated working capital from sources such as comme commerci rcial al banks. banks. The negoti negotiate ated d source source of worki working ng capita capitall financing is called non-spontaneous sources. If net operating cycle of a firm increases, it means further need for negotiated working capital. The firm should maintain a sound working capital position. It should have adequate working capital to run its  business operation. Both excessive as well as inadequate working capital position are dangerous from the firm's points of view. Paucity of working capital not only impairs firm's profitability  but also result in production interruption &inefficiencies.

The firm's operating cycle (06) can be determined as inventory conv convers ersio ion n perio period d (ICP) (ICP) plus plus book book debt debtss conv convers ersio ion n perio period d (BDCP) OC = ICP +BDCP The inventory conversion period (ICP) is the sum of raw material conver conversio sion n period period (RMCP) (RMCP) work work in progre progress ss conver conversio sion n period period (WIPCP)& finished goods conversion period (FGCP). ICP = RMCP + WIPCP + FGCP The raw material conversion period depend on: (a) (a) Raw Raw mate materi rial al cons consum umpt ptio ion n per per day day (b) (b) Raw mater ateria iall inv invento ntory

Raw material consumption per day is given by total raw material consumption divided by the number of days in a year (360). The raw material conversion period is obtained when raw inventory is divided by raw material consumption per day The following formulae can be used to calculate other inventory book debts &  payables. 1 .RMCP = Raw material inventory / Raw material consumption 360 2. WIPCP = Work in process inventory - Cost of production 360 3.BDCP = Book debts - Credit Sales (at cost) 360

BALANCE SHEET OF CENTRAL COALFIELDS LTD. For the year 31st March 1997 - 2002 1997 Sources of funds Share holder's funds a. capital  b. Res. & surplus Loan funds a. secured

1998

1999

2000

2001

2002

94000.00

94000.00

94000.00

94000.00

94000.00

94000.00

20142.19

23181.16

29387.50

17491.31

17347.82

15795.50

862.64

2153.56

1930.74

5784.03

5224.39

5447.80

 b Unsecured

68612.06

121631.71

14000.40

153852.36

95254.58

107852.31

115880.32

135449.04

142336.27

146382^59

• 19630.55

31832.17

51633.51

52183.81

53966.33

55391.32

0.02

0.02

0.02

0.02

0.02

0.02

a. inventories

54127.13

57859.61

59341.58

40176.00

35311.85

39750.8]

 b. Debtors c. Cash & Bank Bal.

32993.10 1525.61

60406.26 3772.97

70817.83 5793.39

80135.28 4614.73

76456.71 2806.69

80458.65 4048.83

d. Loan & Adv. Current liabilities

20922.89 52163.20

23012.88 53160.93

11937.90 59918.79

15478.56 68934.19

17363.27 86580.60

15913.89 85938.25

 Net current assets Misc. Exp. to the

5740.53

71470.38

45357.92

54233.48

12024.45

21103.00

18725.15

Application of funds Fixed assets a. net block   b. capital work in  progress investment C.A Loan & Adv

t 

Extent Not Written Off or Adjusted

91890.79

10209.5

87971.9

9391.14

9837.88

Profit & Loss A/C of Central Coal Fields Ltd. for the year Ending 31st March 97,98,99,2000,2001,2002 PARTICULARS

1998

1999

2000

2001

2002

Coal issued for 

90577.5 39084.6

128123.9 47939.94

142609.6 52861.42

135466.9 54197.97

142877.5 57530.43

165086.63 59011.87

other purpose Accretion/Decration Accretion/Decration in

6030.16

5177.13

2273.11

-21729.9

-4074.07

2289.64

ncome sales

stock 

1997

Amount in lac

Other Receipts

16921.79

5142.42

10416.29

10865.7

12397.65

12014.41

Total Income

152614.1

186383.4

208160.4

178800.6

208731.5

238402.55

38596.11

48056.29

53518.12

51757.97

55146.35

57690.31

44606.01

51309.24

55123.24

63082.87

76189.02

79056.64

16534.25 5173.1

19082.28 6545.97

22968.91 8777.46

23009.79 9047.99

25218.65 10080.63

25626.31 10777.2

Repair 

2248.74

2579,29

6442.82

6906.27

7440.12

7406.41

Contractual Expenses

5284.14

5797.21

11052.15

12052.71

12927.14

14656.75

Social Overhead

6253.06

6435.82

7056.77

7219.1

8569.36

9287.7

Other Expenses

6782.65

7399.93

5021.48

7607.89

4993.08

7056.73

7819.87

10740.53

9232.93

" 6065.7 9 11253.06 11253.06

9110.4

Expenditure Coal issued for Other  Purpose Employees' Remuneration Benefits Consumption of Stores Spare Parts . Power & Fuel

interest Finace charge Depreciation

211.58

60.3 13994.9

105.55

0

15277.96

15639.87

-629.63

-268.41

8893.7

10257.18

12326.56

2079.4

1180.7

-345.5

-2065.2

3182.1

9488.2

6512.64

-454

Previsions Jet Expenditure

925.8 141738.

1966.3 180839.

3295.9 201195.

-2413.6 189778.

558.8 209959.

860.75 236847.16

 Net Profit/Loss

10875.4

5544.3

7965.3

-10978.

-1227.6

1555.39

498.4

1388.7

-1758.9

-918.0

1084.1

-3107.71

10377.0

4155.

6206.3

-11896.

-143.4

.1552.32

919.

9142.5

290

3525

Over burden removal Adjust Contribution to/from , Coal Price

-17170.

Regulation account

Add(less) Prior period Adjust  Net Profit/Loss Add investment Allowance written book  Add/Less balance Carry forward from  previous years

11493.6

1116.6

3038.9

10165.0

7411.3

10167.88

1116.6

3038.9

10165.0

7411.3

10167.

12140.5

Balance transferred to B/ S

WORKING CAPITAL ANALYSIS USING RATIO

There are different methods to determine the working capital needs. The most most comm commo on appr appro oach ach in proje roject ctin ing g in the the working capital requ requir irem emen ents ts is to use use rati ratio o deve develo lope ped d on the the basis basis of prior prior year's year's experie experience nce that that relates relates invento inventory ry & rece receiv ivab able le to cost cost of sale sales. s. The The second approach is calculation by percentage of sales. Requirement is calculated calculated by perc percen enta tage ge of proj projec ecte ted d sale sales. s. The thir third d appro approac ach h to fixed capital investment therefore is projected as percentage of fixed capital investment. Ratio analysis is the principle tool of financial statement anal analys ysis is.. It is is extremely useful for a firm to be able to meet its obligation as they become due. In financial financial analysis analysis ratio is used used as benc benchm hmark ark for evalu evaluat atin ing g the the financ financial ial position position & performa performance nce of a firm. firm. The ratio ratio analysi analysiss involve involvess comparison for a useful interpretation of the financial statements. A single ratio itself does not indicate favorable or unfavorable unfavorable cond condit itio ions ns.. It should be compared with some standards of comparison may consists of: (A) Post Post ratio ratio:: the rati ratios os calcu calculat lated ed from from the the post-f post-fina inanc ncial ial statements of the same firm. Projected Ratios: Ratios developed using the projected or  (B)  preformed financial statement of the same firm. Competitor's Ratios: Ratios of some selected firm's (C) especially the most progressive & successful competitor  at the same time. (D) Indust Industry ry Ratio Ratios: s: The The ratios ratios of of the indu industr stry y to whic which h group group the firm belongs. The easiest way to calculate the performance of the firm is to compare its current ratios with the past ratios. When financial ratio over for a period of  time time is comp compar ared ed then then it is know known n as the the time time series series analy analysis sis.. It gives gives an indi indica cati tion on of chan change ge & reflec reflects ts whether the firm's financial performance performan ce has ha s impr im prov oved ed,, deteriora deteriorated ted or or remained remained const constant ant over over time. time.

ANALYSIS OF THE FUND FLOW STATEMENTS OF C.C.L Fund flow statement of 1996-97 Sources of funds: Rs.in Rs. in Lakhs Lakhs 54,310.57 (a) Addition to borrowed funds 9,371.97 (b) addition to cumulative deprecation 3,038.97 (c) addition to reserve 1,116.66 (d) decrease in accumulated loss decrease se in expendi expenditur turee capital capitalize ized d ______ _________81 ___818.4 8.41 1___  (e) decrea Total funds inflow during the year 68,656.58 Utilisation of Funds : (f) addition to gross block 21,969.70 (g) addition to capital W.l.P. 12,201.62 (h) increase in working capital 34,485.26 Total fond Utilised during the year / 68.656.58 Fund flow statement of 1997-98 Sources of funds: Rs.in Rs. in lakhs lak hs 18,150.78 (a) addition to borrowed funds 18,578.99 (b) addition to cumulative depreciation 3,918.88 (c) decrease in working capital Total inflow of funds during the year 40,648.74 Utilisation of funds: 27,469.78 (d) addition to the gross block 12,732.22 (e) addition to capital W.l.P. 446.74 (f) increase in miscellaneous exp. Total utilisation of funds during the year 40,648.74

Fund flow statement 1998-99

Sources Of Funds (a) Addition to commutative Deprecation (b) Decrease in working capital (c) Addition to Borrowed Funds

Total inflows of the funds during the year

Utilisation of funds: (a) Addition to gross block (b) Increase in miscellaneous exp. (c) Loss in operation Total utilization of the fund during the year

Rs.in Lacks 14,291.22 16,501.5 16,501.53 3 17,700.25 48,493.00

34,410.24 2,186.57 11,896.19 11,896.19 48,493.00

Fund flow statement 1999-2000 SOURCES OF FUNDS (Rs.i (Rs.in n crore croress ) (a) (a) Funds for operation operation profit / Loss (-) - 1.43 1.43 For the year  Add: depreciation 146.86 145.43 (b) Decrease in working capital 248.61 Total 394.04 APPLICATION OF FUNDS (A) Additions to fixed Assets & CWIP (B) Additions to capitalized expenditure to the extent not written off  (C) De Decrease in borrowings • Total

(Rs.in crores) 233.56 90.79 69.69 394.04

Fund flow statement 2000-01 SOURCES OF FUNDS (Rs.in (Rs.in crores) crores) (A) (A) funds funds for operatio operation n profit profit / Loss (-) -15.52 -15.52 for the year  Add: depreciation 87.03 71.51 (B) Decrease in Miscellaneous 23.78 expenditure to the extent not written off  (C) increase in borrowings 135.21 Total 230.50 APPLICATION APPLICATION OF FUNDS (Rs. In crores) cror es) 141.75 (A) Addition to fixed Assets & CWIP 88.75 (B) increase in working capital Total 230.50 Observations: Observations : If we compare the above fund flow statement we find that compared to 1996 -97, 1997 -98 & 1998 - 99 there has been decrease in working capital. We also find that borrowed funds have also decreased drastically in above above years. years. The reason for this may be scarcity scarcity of long terms funds in 1996 -97,1997 -97,1997 - 98 & 1998 - 99. As a matter of fact in 1996 -97,1997 -97,1997 -98 - 98

& 1998 - 99 current liabilities have increased. But this increase is not due to short terms funds but certain provisions & delay in payments. So, it seems seems that that to counter counter the paucity paucity of borrowed funds current liabilities have been increased thus decreas decreasing ing the working working capital capital over the year. year. The decrease in working capital has become the source of funds.

Sundry Debtors : -

Sundry Debtors vis - a - vis sales in the last five year ending 31 march 1997 - 2000 are as follow

Year  C o n sideredG oo oo d

C o n s i d e r e d T ota l

s t

Sales

% D e b to r s

31.03.97

708.18

Doubtful 105.08 ,

31.03.98

801.35

80.19

881.54

1701,97

51.8

31.03.99

764.57

83.86

848.43

1806.74

46.96

31.03.00

804.59

87.35

891.94

2035.18

43.83

813.26

1764.92

46.08

,

300000 250000 200000 Series1 150000

Series2

100000 50000 0 1

2

3

4

5

Net Profit

7000 6000 5000 4000 3000

Series1

2000

Series2

1000 0 -1000 -2000 -3000

1

2

3

4

5

CONCLUSION AND SUGGESTION Coal production in most of the C.C.L collieries is not satisfactory & not achieving their target, it is not possible to full fill the demand of consumer, about 80% of the total production pr oduction of coal evacuated evacuated from open-cast mine & these mines are equipped equipped with modern technology but not efficiently utilized except in Piparwar area, where modern technology has been established with the collaboration of Australia. This type of collaboration is also needed in other areas also for achieving production target. target. The main main constr constrain aints ts are under under utiliz utilizati ation on of mine mine equipm equipmene enents nts,, land acquisitions, excess manpower in few of the area, power failure & shortage of  imported spare parts for the heavy earth removing machines coal quality not to the declared grade is also vital point. CCL manage managemen mentt cannot cannot reduce the manpow manpower er to the required required level level due the interference of trade unions. This surplus manpower can be utilized gainfully by  pulling them in jobs which is now being carried by contractors.

Few sugges suggestio tions ns are append appended ed below below for improv improveme ement nt in produc productio tion n &  productivity.

(1) (2)

(3) (3) (4) (4) (5)

Proper manpower planning, teamwork, timely supply critical HEMM spares parts. Having long-term objectives and policies and confidences in attaining the goals. Stea Steady dy imp impro rove veme ment nt of of qual qualit ity y and and redu reduct ctio ion n of cos cost. t. Cons Consta tant nt incre increas asee of prod produc ucti tivi vity ty of of labou labourr and cap capit ital al.. Drawing effective land use plans and implement in  phased manner.

of 

(6)

(7) (8) (8) (9)

Saving in expenditure in respect of trade discount, collection charge, interest on working capital if any etc. Savin Saving g in in amou amount nt of bad debts debts to the the orga organi nizat zatio ion n. Addit dditio iona nall inc incom omee gener enerat ated ed by incr increa easi sing ng the the spe speed of  the business cycle of the company. Activity and performance of the factor should be   per perio iodi dica call lly y revi revieewed wed agai agains nstt targ target et fixe fixed d for for colle ollecctio tion etc and by analyzing 'debtors' balance as compared.

As pointed out earlier, factoring is not limited to sale of invoices (debts) by the firm. Various other valuable services could be obtained from the factor  as it is the factor which bridge the gap between debts and cash and helps a firm run its business cycle smoothly factoring, therefore needs to be seen as an important part of the solution to financing of trade debts. In coal industry it has been observed that the price of coal increases almost every year. Where as the increase in current assets are affected by rate of  inflation. If the percentage increase in case of both sales and current assets is not same, then the ratios will not give correct picture. I am confident that CCL will over come its deficiencies and achieve its goal in coming years.