budgetry control gail-1.07.2010(neeraj)final
TRANSCRIPT
SUBMITTED TO: SUBMITTED BY: PROF.P.C.MISHRA NEERAJ MISHRADEAN ROLL.NO:0318321129 BLSIM, GHAZIABAD BLSIM, GHAZIABAD
1
SUMMER INTERNSHIPREPORT
BUDGETING PROCESS & CONTROL IN
GAIL (INDIA) LTD.
IN ASSOCIATION WITH
GAIL (INDIA) LTD (TOWARDS PARTIAL COMPLETION OF PGDM COURSE)
DECLARATION
I Neeraj Mishra student of Post Graduate Diploma in Managemnet from BLS Institute
Of Management Ghaziabad approved by AICTE hereby declare that I have
completed Summer Internship on
“Budgeting Process & Control in GAIL”
At
GAIL (India) Limited as Part of the Course Requirement.
I further declare that the information presented in this project is true and original to the
best of my knowledge.
NEERAJ MISHRA
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CERTIFICATE
This is to certify that the project entitled “Budgeting Process & Control In
GAIL (INDIA) LTD” submitted to BLS Institute of Management,
Ghaziabad for the partial fulfillment of the Post Graduate Diploma in
Management is a record of original work done by Mr. Neeraj Mishra
during the period of her study and was under my guidance.
This study was conducted during 2th June 2010 to 31th July 2010 at GAIL
(INDIA) LTD Noida as a Management Summer Trainee.
She had completed the project successfully and efficiently.
SUBMITTED TO:
Mr.Jitendra Sood
Sr.Manager(F&A)
Gail (India) ltd,noida
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INDEX
TOPIC NAME PAGE NO.
EXECUTIVE SUMMARY 10
COMPANY PROFILE 15
RESEARCH METHODOLOGY 36
INTRODUCTION TO BUDGETING AND BUDGETARY CONTROL 40
BUDGETING PROCESS IN GAIL 43
USE OF SAP IN BUDGETING PROCESS & CONTROL 65
FINDINGS AND ANALYSIS 92
CONCLUSION 94
GLOSSARY 96
BIBLIOGRAPHY 99
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CONTENTENTS
Part: 1
1. COMPANY PROFILE
Vision and Mission Of GAIL
Strategy
SWOT Analysis
Business Overview
Company Analysis
Business Portfolio
Joint Ventures & Associates
Subsidiary Companies
GAIL’s Unique Selling Points
Major Achievements of GAIL
Key Events
Part: 2
2. BUDGETING INTRODUCTION
Budget
Budgeting
Budgetary Control
3. BUDGETING PROCESS AND CONTROL IN GAIL (INDIA) LTD.
Objectives
Budget Preparation in Gail
Budgeting Process in Gail
Sources of Revenue
Application of Revenue generated from different Source
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4. USE OF SAP IN BUDGETING PROCESS & CONTROL
What is SAP?
Fund Management
Investment Management
Master Data
Budgeting
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LIST OF TABLES
TABLE NO. NAME OF TABLE PAGE NO.
TN-1.1 Segment Wise Performance of Gail India Ltd 49
TN-1.2 Expenditure made for Raw Materials 50
TN-1.3 Manufacturing,Transmission,administration, Selling, Distribution and Other expenses
52
TN-1.4 Summary of Financial Performance for Actual 2006-07 & 2007-08, RE for 2008-09 and BE for 2009-10
54
TN-1.5 Segment wise Financial Performance For Actual 2006-2007
56
TN-1.6 Segment wise Financial Performance For Actual 2007-2008
57
TN-1.7 Segment wise Financial Performance For RE 2008-2009
58
TN-1.8 Segment wise Financial Performance For BE 2009-2010
59
TN-1.9 I&EBR statement (RE 2008-2009 and BE 2009-2010) – Part I
61
TN-1.10 I&EBR statement (RE 2008-2009 and BE 2009-2010) – Part II
62
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LIST OF FIGURES
Figure No. Name of Figures Page No.
FG-1.1 Types of Budget 40
FG-1.2 Process of Budgetary Control System 42
FG-1.3 Revenue Budget 43
FG-1.4 Capital Expenditure Budget 44
FG-1.5 Budgeting Process in Gail 46
FG-1.6 Graphical Presentation of Summary of Financial Performance
55
FG-1.7 Organizational structure 68
FG-1.8 Fund Center Hierarchy 69
FG-1.9 Investment Cost Program: Planning 84
FG-1.10 Over Plan to Budget 85
FG-1.11 Takeover Plan to Budget 86
ACKNOWLEDGEMENT
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With the completion of my project entitled “Budgeting Process & Control in GAIL
(INDIA) LTD”, I would like to extend my sincere gratitude and thanks to Mr. Jitendra
Sood, Sr. Manager (F&A), whose support was very important in the completion of my
report and to give it the final shape.
I would also like to thank the entire staff of GAIL (INDIA) LTD, who helped me to
satisfy my queries in the completion of my project.
I would like to express my earnest gratitude to Prof. Dr.N.L.Ahuja for his superlative
guidance and unflinching support throughout the project work. No development would
have been feasible had it not been for their excellent supervision, constant
encouragement and careful perusal.
I would like to express my sincere thanks to Prof. Prena Jain for support in the
completion of the project successfully.
Last but not the least I would like to thanks my parents for always being my inspiration.
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NEERAJ MISHRA
EXECUTIVE SUMMARY
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GAIL (INDIA) LTD is one of the major players in Indian gas structure. Gas
transmission is one of the core businesses of GAIL. However the company’s strategy
for future is to look out for diversified growth viz hydrocarbons and petrochemicals, by
leveraging on its core competency of gas transmission. Thus to gain a dominant market
position keeping in view the unfolding demand and supply scenario, entry of new
competitors, and changing dynamics in the market place is expanding its activities
particularly in gas transmission business. For this very purpose GAIL has taken up the
task of adding 5000 km of new pipelines by year 2011 and expands 3 of its existing
pipelines at an estimated cost of Rs. 14500 crores.
GAIL (India) Ltd in the recent past has funded its projects through internally generated
funds like the DVPL project. However to take up such a large scale expansion policy
involving a cost of Rs.14500 crores GAIL needs to seek funds from the market.
The project will explain very clearly what a budget is, the need for budgeting and what
are the various types of budgets that are prepared in GAIL. It will also show the various
stages in the preparation of budgets wherein the processes of preparation, approval and
review will be studied.
This project is about the budgetary procedure and policies of GAIL. Budgeting is the
Company’s formal short term planning process for the acquisition and investment of
Capital. In the preparation of the Budgets, the principle of Zero Base Budgeting is
followed according to which expenditure is required to be justified after evaluation of
various alternatives and ranking them in order of importance by systematic analysis.
As GAIL (INDIA) LTD is one of the public sector unit thus budget is prepared after the
circular is received from concerned ministry i.e Ministry of Petroleum and Natural gas
(MoPNG). In GAIL (INDIA) LTD two different types of budgets are prepared Revenue
budget and Capital expenditure budget.
1. Revenue Budget: In revenue Budget the Income forecast to be prepared for
different segments such as Natural gas, LPG, Petrochemicals, Gailtel, E&P etc.
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2. Capital Expenditure Budget: is of two types, viz Plan capital expenditure and
Non plan capital expenditure.
a. Plan Schemes: Are those schemes which are required to be included in the
11th Five year plan documents for submission to Govt./ Planning commission
for approvals.
b. Non Plan schemes: Non Plan capital Expenditure plays a very important
role and is vital for constant up gradation of efficiency and productivity. Non
plan schemes generally cover capital investments on additional facilities like
buildings offsites, utilities, furniture, Vehicles etc. in units under operations.
While preparing budget in GAIL following steps are followed:
Receipt of Circular from Govt.
Issue of Circular to different Workstations/Various Department of Corporate
office.
Preparation of Budget by Workstations/ Various Department of Corporate
office.
Submission of Budget by each Workstation/each Department of Corporate
office.
Compilation of Budget by Corporate Planning
Preparation and Submission of final Budget to MoPNG/ Planning commission.
SAP is also one of the essential parts of budgeting process of GAIL (INDIA) LTD.
Different modules of SAP such as General Ledger, Accounts Payables, Accounts
Receivables, Bank Accounting, Asset Management and Project System etc. are used in
Budgeting Process.
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The two important modules of SAP used in Budgeting Process of Gail (India) Ltd are :
Fund Management (FM): Revenue budgetary control.
Investment Management (IM): Preparation of capital Budget & their Control.
Budgetary Control is the process of determining various budgeted figures for the
enterprise for the future period and then comparing the budgeted figures with the actual
performance for calculating variances. In GAIL, budgets is prepared, executed and
controlled at combination of Fund Center and Commitment items in case of Revenue
Budget and in case of capital budget, the budget is prepared and controlled at project or
internal order level.
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COMPANY PROFILE
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GAIL (Gas Authority INDIA Ltd), a premier company in natural gas industry. Having
incorporated in 1984 as a public limited company registered under COMPANIES ACT
1956. Starting the gas transmission in 1987, GAIL established itself as a monopoly
natural gas transmission and marketing company in India. It has grown organically over
the years by building a large network of gas trunk pipelines covering an area of around
7000km. apart from natural gas; GAIL has interest in the business of LPG,
Petrochemicals, and CNG. GAIL (India) is propagating a move towards usage of
cleaner fuels in industries. It has been responsible for creation of a network of green
energy corridors, LNG terminals, gas fields and gas sourcing points across borders. It
has diversified its wings into the field of new exploration and production of natural gas,
City gas distribution. GAIL is the only company in India which owns and operates
pipelines for LPG transmission which connects the western and southern and also
northern part of the country. From its inception GAIL has formed eight joint venture
companies for city gas in various parts of the country. It has established its presence in
overseas also like Egypt and Mainland China. GAIL feels proud to develop a sole
Petrochemical plant at Pata, the first in India and Northern India. GAIL today has
reached new milestones with its strategic diversification into Petrochemicals, Telecom
and Liquid Hydrocarbons besides gas infrastructure.
Company at a glance
Incorporated 16th August 1984Turnover (2008-09) Rs.23,776 croresNet worth(2008-09) Rs.2804 croresEmployees 3408Registered office 16 Bhikaji Cama Place, RK Puram, New
Delhi-110066Market share 79% market share in natural gas
transmission70% market share in natural gas marketing.
Chairman and managing director Shri B.C. Tripathi
Source: Annual reports of the company
GAIL (INDIA) LIMITED PIPELINE NETWORK
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TUTICORIN
KOCHI
COIMBATORE
GAIL (INDIA) LIMITEDPIPELINE NETWORK
MANGALORE
GOA
BANGALORECHENNAI
HALDIA
KAKINADA
DABHOL
MUMBAI PUNE
DAHEJ
VIJAIPUR
HYDERABADVIZAG
JAGDISHPUR
KANJIRKKOD
KOTA PHULPUR
BHATINDA
KOLHAPUR
GADAG
GAYA
JAMNAGAR
HAZIRA
AURAIYA
BANGLADESH
NEPAL
DADRI
AIZAWL
IMPHAL
NANGAL
HVJ / DVPL / GREP NETWORK
DUPL / DPPL NETWORK
REGIONAL PIPELINES
DVPL/GREP UPGRADATION
CHAINSA – JHAJJAR –HISSAR PIPELINE
DADRI-BAWANA-NANGAL PIPELINE
JAGDISHPUR – HALDIA PIPELINE
DABHOL- BANGALORE PIPELINE
KOCHI-KANJIRRKOD-BANGALORE-MANGALORE PIPELINE
CENTRAL INDIA PIPELINE
RIL’s EWPL AND PROPOSED PIPLINES
DHOLPUR
BHUTANJAISALMER
CHAINSA
HISSARDELHI
PARADIP
BARODA
AHM’D
KG Basin Network
Cauvery Basin Network
GANDHAR
NAGPUR
RANCHIBHOPAL
JHABUA
KHERA BOKARO
DEWASPITAMPUR
AGRA
MALANPUR
JHAJJAR
JAIPUR
ANTA
AONLA
Assam & Tripura
VIJAYAWADA
KANDLA SAMAKHIALI
NORTH / SOUTH GUJARAT NETWORK
JABALPUR
BHILAI
RAMAGUNDAM
BETIAH
BARAUNIPATNA
KAYAMKULAM
Ludhiana
DURGAPUR
FEFIROZABAD
KASHIPUR
PANT NAGAR
VISION AND MISSION OF GAIL
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VISION
Be the Leading Company in Natural Gas and beyond, with Global Focus, Committed to
Customer Care, Value Creation for all Stakeholders and Environmental Responsibility.
MISSION
To accelerate and optimize the effective and economic use of Natural Gas and its
fractions to the benefit of national economy.
STRATEGY
The company aims to further expand its core business of Natural Gas Transmission &
Marketing, to capture larger share of the growing market. The company wishes to move
upstream to secure gas supplies for the core transmission business. Additionally,
investments in petrochemicals and city gas distribution are being planned to enhance
margins and increase sources of revenue. Further, the company is exploring and
investing in international opportunities with a strategic rationale of gaining international
presence.
MAJOR KEY PLAYERS IN INDIAN OIL & GAS SECTOR
Oil And Natural Gas Corporation (ONGC)
Gail (India) Limited
Hindustan Petroleum Company Ltd (HPCL)
Bharat Petroleum Corporation Ltd (BPCL)
Indian Oil Corporation (IOC)
Reliance India Limited (RIL
Gujarat State Petroleum Corporation Limited (GSPCL)
British Gas Limited
SWOT ANALYSIS
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STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
Sound financial position
Lack of upstream gas exposure
Potential for efficiency gains
Upcoming competitors like RIL
Controls gas transmission infrastructure
Limited financial or operational freedom
Transmission system expansion
Changes in national energy policy
Dominates gas processing
Cost & efficiency disadvantages
Petrochemicals capacity expansion
Competitors coming in this field have their own gas sources as well as pipeline network like RIL but GAIL doesn’t have it.
Growing international portfolio
Strong domestic energy demand growth
Share of LNG import projects
Major petrochemical portfolio
BUSINESS OVERVIEW
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GAIL (India) Ltd, a truly dominant gas major, has been turning out disciplined financial
performance with excellence in project management, service quality and customer
satisfaction. Building on with business strength, GAIL has set its future vision to be a
“Dominant company in Natural gas business, with a significant global presence,
integrated in energy and petrochemicals”.
COMPANY ANALYSIS
GAIL has ambition to be a highly efficient integrated gas company, with interest from
field development & production, through national transmission & imports, to
distribution & allied industries such as petrochemicals. These ambitions are not limited
to India, as GAIL is building a portfolio of international upstream & downstream gas
assets. It dominates domestic infrastructure & gas purchasing from domestic suppliers.
With huge potential for growth in Indian gas demand, GAIL should be able to deliver
sustained long term revenues & earnings appreciation.
BUSINESS PORTFOLIO
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GAS TRANSMISSION
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GAIL is the largest organization in India handling post-exploration activities relating to
transmission, processing, distribution and marketing of natural gas and its fractions and
by-products. The gas transmission is done through pipelines covering an area of 6000
km. The gas transmission during the year 2007-08 was 82.10 MMSCMD compared to
77.28 MMSCMD in the 2006-07 financial year.
LPG & Other Liquid HydroCarbons
GAIL today has seven LPG Plants two at Vijaipur and one at Vaghodia, and one each in
Lakwa (Assam) and Usar (Maharashtra), Auraiya (U.P.) and Gandhar (Gujarat)
producing over 1 million TPA of LPG and other liquid hydrocarbons. The LPG is sold
in bulk to LPG retailing companies and the other liquid hydrocarbon products are sold
to industries.
TELECOM
GAILTEL ,the telecom wing of GAIL has been operating commercially in the Indian
GAILTEL sector since June 2001,offers commercial telecom services to all the leading
telecom operators which include VODAFONE, BSNL, Airtel, Idea Cellular, Reliance
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Infocom, Tata Tele services, to name a few in the country. It is also responsible for
meeting the captive communication requirements of GAIL’s pipeline installations.
GAILTEL currently operates its telecom wing through fine optic fibre cables.
PETROCHEMICAL
GAIL’s foray into petrochemicals, with its state-of-the-art production facilities at Uttar
Pradesh Petrochemical Complex (UPPC), Pata marks it step towards integration of its
business, to fulfill its mission to be a global business organization. In this sector GAIL
has registered remarkable growth. Petrochemicals are a major area of GAIL's business
activity. GAIL has set up a world-scale Gas Cracker plant at Pata in Uttar Pradesh in
Northern India at an investment of Rs. 25 billion having a design capacity to produce
410,000 TPA of ethylene (Expandable to 500,000 TPA).The Plant was commissioned in
March 1999.
EXPLORATION & PRODUCTION
GAIL is currently participating in 32 exploration blocks, in Basins such as Mahanadi,
Mumbai, Cambay, Assam-Akaran, Tripura Fold Belt and Cauvery. GAIL has
partnership in these blocks with various companies such as ONGCL, GSPCL, OIL,
Hardy Exploration & Production, Petrogas, JOGPL, Daewoo, OVL, IOCL, Korea Gas
Corporation, Hallworthy, BPCL, HPCL and Silverwave. GAIL also has stake in 3
overseas blocks (A-1 and A-3 blocks in Myanmar and Block-56 in Oman).
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Apart from securing sources for Natural Gas, there were other compelling reasons for
GAIL to get into E&P:
• Integration in supply-chain
• Large gap in Gas demand and supply
• Global opportunity
• Balancing of Business portfolio
LNG (LIQUEFIED NATURAL GAS)
GAIL continued to have strong focus on securing gas supplies from international
markets. LNG & trans-national pipelines are the two prevalent modes of cross border
gas trade. On the trans-national pipeline front, GAIL has been pursuing three options
like: Iran-Pakistan-India (IPI) pipeline, Turkmenistan Afghanistan Pakistan-India
(TAPI) pipeline & Myanmar-India (MI) pipeline.
GAS RETAILING
GAIL has reached its end consumers by entering into retailing of natural gas in various
cities by way of Joint Venture. As of now have mainly different Joint Venture
companies such as MGL, IGL, PLL, BGL, TNGCL, GGL, MNGL, and AGL. It has
plans to spread this environment friendly fuel to other 22 cities across the country.
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JOINT VENTURES & ASSOCIATES
JOINT VENTURE COMPANIES
Mahanagar Gas Ltd (MGL)
MGL has set up 128 CNG stations catering to over 185000 vehicles spread over
Mumbai,Thane city & Mira-Bhayandar areas besides supplying PNG to domestic,
commercial & industrial consumers.GAIL holds a 49.75% stake in the company at
an investment of Rs.44.45 crores.
Indraprastha Gas Ltd (IGL)
IGL is supplying piped gas to domestic, commercial consumers & CNG to over
128000 vehicles through 146 CNG stations. GAIL holds 22.5% stake in the
company at an investment of Rs. 31.50 crores.
Petronet LNG Ltd (PLL) PLL was formed for setting up of LNG regasification facilities. GAIL holds
12.50% stake in the company at an investment of Rs. 98.75 crores.
Bhagyanagar Gas Ltd (BGL)BGL is currently operating 3 auto LPG stations in Hyderabad & 1 in Tirupati.GAIL
holds 22.5% stake in the company.
Tripura Natural Gas Corporation Ltd (TNGCL)TNGCL is currently supplying gas to domestic, commercial, industrial consumers in
Agartala city. GAIL holds 29% stake in the company.
Green Gas Ltd (GGL)
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GGL is currently operating 4 CNG stations in Lucknow & 1 in Agra.GAIL has
22.5% stake in the company.
Maharastra Natural Gas Ltd (MNGL)
MNGL is a joint venture of GAIL & Bharat Petroleum Corporation Limited & was
incorporated in January, 2006 for implementation of city gas. GAIL has a 22.5%
stake in the company.
Avantika Gas Limited(AGL)
AGL is a joint venture of GAIL & HPCL & was incorporated in June,2006 for
implementation of city gas projects in Madhya Pradesh. GAIL has a 22.5% stake in
the company.
China Gas Holding Ltd
The Group's principal activities are the trading of natural gas and petroleum.
Ratnagiri Gas and Power Private limited (RGPPL)
GAIL holds 28.33% stake in the company at an investment of Rs. 500 crores.
Gujarat State Electricity Generation Ltd
Shell Compressed Natural Gas
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SUBSIDIARY COMPANIES
GAIL Global (Singapore) Pvt. Limited
This is GAIL’s wholly owned subsidiary company. This company has been made profit
of Rs. 1.35 Crores in the year 2007-08.
Brahmaputra Cracker & Polymer Limited (BCPL)
GAIL has promoted a subsidiary named BCPL for producing 2,80000MT per year of
petrochemical products at Lepetkata, Assam. GAIL will have 70% equity share with Oil
India limited (OIL), Numaligarh Refinery Limited (NRL) &Govt. of India, each having
10% equity shares.
GAIL Gas Limited
GAIL has formed a wholly owned Subsidiary named GAIL Gas Limited for
implementing city gas projects and CNG corridors in the country. The subsidiary
company will act as a vehicle for bidding for lying of pipeline infrastructure in the
country.
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GAIL’s Unique Selling Points (USP)
• GAIL India ltd is committed to maintain highest industry standards of services
to the complete satisfaction of customers through observance of quality
management systems based on continual improvement.
• First competitive service provider in market.
• Solutions to meet specific individual needs.
• Minimum MTTR, skilled maintenance teams at every 150 kms.
• Discounts offered on TRAI rates for highly competitive tariffs.
• Varied product feature.
• Quick service commencement and upgradable capacities.
• High quality, cost effective service.
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FINANCIAL PERFORMANCE
GAIL has registered a turnover of Rs 23,784.71 crore in the financial year 2008-09, a 32
% increase, as against the net sales of Rs 18,012.74 crore in the previous year.
Financials of the company (all figure in Rs. Crores)FINANCIALS 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09Gross sales 11,295.67 12927.07 14875.49 16545.85 18580.21 24292.24Profit after tax
1869.34 1953.91 2310.07 2386.67 2601.46 2803.70
Net worth 7410.7 8559.65 9874.81 11262.42 12842.38 14575.12
Source: Annual reports of the company
CAGR on financials
financials of the company
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2004-05 2005-06 2006-07 2007-08 2008-09Gross sales 14.44% 15.07% 11.23% 12.29% 30.74%Profit after tax
4.52% 18.23% 3.32% 9.00% 7.77%
Net worth 15.50% 15.36% 14.05% 14.03% 13.49%
Source: Annual reports of the company
The gross sales have continuously increased over the years. But at the same time profits
were positive when compared with the last year.
GAIL is planning to do take up extensive projects in the coming few years.
Reserves and surplus (all figure in Rs. Crores)
Source: Annual reports of the company Reserves and surplus
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YEAR RESERVE AND SURPLUS
CAGR
2003-04 6599.50 20.13%2004-05 7780.46 17.90%2005-06 9127.64 17.32%2006-07 10547.26 15.55%2007-08 12159.23 15.28%2008-09 13,501.15 11.03%
Source: Annual reports of the company
Looking at the amount of surplus funds available with GAIL, it has consistently shown
a double digit growth except in 2001-02 when it was negative.
Consumption and production of oil and gas
Source: Consumption & Production from Petroleum Planning & Analysis Cell, Ministry of Petroleum & Natural Gas, Govt. of India
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Over the last 4 years, consumption and production have grown at CAGRs of
3.58% and 6.53% respectively
Analysts 1say that with successful exploration in the country over the past half a decade,
crude oil production is expected to increase 26% over the next five years. Natural gas
production is likely to increase 41% over the same period.
According to petroleum ministry reports, India’s import of liquefied natural gas (LNG)
is projected to increase to 23.75 million metric tonne per annum (mmtpa) by the end of
the 11th Plan, 2012.
MAJOR ACHIEVEMENTS OF GAIL
Selected as the top Indian company in the Gas Processing, Transmission and
Marketing sector for the Dun & Bradstreet - American Express Corporate
Award 2006
GAIL's Dahej-Vijaipur Pipeline Project won the Silver Medal in Mega Projects
Category at the International Project Management Association Awards, 2006.
Received the Platts Global Industry Leadership Award 2005. Rated as one of the
Best Employers in India by Hewitt Associates in 2004.Global Platts Survey No.
1 Company among global gas utilities in terms of Return on Invested Capital
(2002-03).
1 Article titled “ New gas finds could turn India into a net exporter”- The financial express dated July 2008
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GAIL in recognition of its high standards of quality control initiatives has been
conferred with the “Quality Excellence Award 2007”.GAIL has been chosen as
a proud recipient of award in the “business result” category for its overall
impressive financial & market performance, dynamic system, social
responsibility results & excellent execution of quality management target. GAIL
has received the award on “Best Overall Performance Amongst Upstream Sector
Oil Companies” for gas conservation activities.
Received the national awards for excellence in Cost Management for three
Consecutive Years (2006, 2007 and 2008) from The Institute of Cost and Work
Accountants of India (ICWAI).
KEY EVENTS
1984: Gas Authority of India Limited incorporated
1987: Phase 1 of the Hazira Bijaipur Jagdishpur pipeline, inaugurated by hon’ble
MoPNG hri Brahm Dutt.
1988: Commissioning of HBJ pipeline phase 3 gas system for UP by hon’ble Prime
Minister of India Shri Rajiv Gandhi
1989: Foundation stone for Uttar Pradesh Petrochemical Plant was laid by Shri Rajiv
Gandhi, Hon’ble Prime Minister of India.
1991: 2800 km Hazira- Vijaipur- Jagdishpur pipeline becomes operational.
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1992: Phase 2 of LPG Vijaipur plant commissioned
1993: LPG project at Vaghodia commissioned
1994: Mahanagar Gas Limited incorporated to implement Bombay City Gas
Distribution project.
1997-98: Government of India grants Navratna status to GAIL.
1998-99: LPG plants at Usar and Lakwa commissioned.
1998-99: Indraprastha Gas Limited incorporated for Delhi and NCR City Gas
Distribution project.
1998-99: Uttar Pradesh Petrochemical Complex at Pata commissioned by Shri Atal
Bihari Vajpayee, Hon’ble Prime Minister of India
2000-01: Jamnagar- Loni LPG pipeline project, the world’s longest LPG pipeline
completed.
2003-04: GAIL secures participation in retail gas companie in Egypt.
2003-04: Platts declares GAIL as the first among Global Gas Utilities based on Return
on Invested Capital
2003-04: Significant gas find in the block A-1 in Myanmar and discovery of Oil and
Gas in the Cambay block.
2004-05: Commissioning of vizag- Secunderabad LPG pipeline.
2005-06: GAIL and Consortium partners awarded Block- 56 in Oman
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2006-07: GAIL’s Dahej- Dabhol pipeline commissioned.
2006-07: GAIL consortium wins 3 CBM blocks in 3rd round of bidding.
2007-08: GAIL forms 50:50 Joint Venture with China Gas Global Energy Holding.
2007-08: MOUs with RIL, ONGC for gas sourcing.
2007-08: Grant of Authorization from MOPNG (GoA) for five new Pipelines projects
in 2007-08.
2008-09: GAIL given gas marketing rights for the entire gas production from PMT
fields.
TRANSMISSION OF GAS FROM SOURCE TO
DESTINATION
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RESEARCH METHODOLOGY
RESEARCH OBJECTIVE
To understand Indian gas industry asses the contribution of Gail in
Industry.
To understand different types of budgets prepared in Gail (India) Ltd.
To determine estimated revenue expenditure and PAT for different
financial years.
To understand budgeting process in Gail.
To understand use of SAP in budgeting process of Gail.
Methods Of Data Collection
The present study is based on secondary published and unpublished data collected from
financial documents, annual reports of GAIL, PNGRB documents, MINISTRY of OIL
and PETROLEUM and NATURAL GAS etc. The study focuses on the budgeting
control and process in GAIL (India) and uses various statistical and financial tools and
advance tools of Microsoft Excel.
LIMITATIONS OF STUDY
Time Constraint
Eight weeks had been found to be inadequate to gather much information about
the financial operations of the company.
Unable to Extract Figures of Variances and some other Financial Data
This is because the management refused to extend such confidential data, as that
might create problem for the company in the future.
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Problem Of Availability Of Information
As Gail (India) Ltd. is one of the public sector unit thus some sort of
confidentiality is maintained in available information. There are different factors
which affect the budgeting process therefore it is not possible to calculate exact
estimated figures.
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INTRODUCTION TO TOPIC
Budget
Budget is a quantitative expression of a plan of action relating to forth coming Budget
period. It represent written operational pal of management for the Budget period. It is
always express in terms of money and Quantity. It is policy to be followed during the
Budget period for attainment of specified organizational Goals.
Budgeting
The process of preparation, Implementation and the operation of Budget is known as
Budgeting. Budgeting is the formulation of plans, for a given future period in numerical
terms. It is method of looking ahead and attempting to solve problems before they arise.
It requires that a business study and it evaluate its role in the economic environment
with the object of establishing and achieving stated goals for all levels of organization.
Types of Budget
41
Types of Budget
On the Basis of
Time
On the Basis of
Functions
On the basis of
Flexibility
Long Term
Budget
Short Term
Budget
Current Budget
Operating Budget
Financial budget
Master Budget
Fixed Budget
Flexible Budget
Figure: 1.1
1. Classification According to time
A. Long Term Budget: The Budget are prepare to depict long term planning of
business. The period of long term budget varies between 5 -10 Years.
B. Short Term Budget: These budgets are generally for 1 or 2 Years. And in the
form of Monetary term
C. Current Budget: The period of current budget is generally of months and
Weeks. These Budgets relate to the current activities of Business.
2. Classification on the basis of functions
A. Operating Budget: These budgets relate to the different activities of operations
of a firm such as sales budget, Production Budget etc.
B. Financial Budget: Financial Budget is concerned with cash Receipt and
Disbursement, working capital, Capital Expenditure, Financial Position and
results of business operations.
C. Master Budget: Various functional budgets are integrated into master budget.
This budget is prepared by the ultimate integration of separate functional
budgets.
3. Classification on the Basis of Flexibility
A. Static Or Fixed Budget: Fixed Budget is the budget which is design to remain
unchanged irrespective of the level of activity actually attained.
42
B. Flexible budget: Flexible budget is the budget which by recognizing the
difference between fixed, semi fixed and variable cost is designed to change in
relation to the level of activity.
BUDGETARY CONTROL
Budgetary Control is the process of determining various budgeted figures for the
enterprise for the future period and then comparing the budgeted figures with the actual
performance for calculating variances, if any.
Generally following steps are followed in the process of Budgetary
Control System:
43
Figure: 1.2
BUDGETING PROCESS & CONTROL IN GAIL INDIA LTD.
Objectives
Determining the different sources of revenue and estimating the changes occur
in the revenue of the future period of time.
Determining the amount of different types of Expenditure and estimating the
expenditure of future requirements.
Determining the future plans and strategy of the company.
44
Publishing the Budget
Measuring the Result
Comparison of Results with
Budget
Preparation of Budget
Correction of Unfavorable Variances
Reporting the Results
Determining the amount of PAT.
Determining the usefulness of SAP in Budgeting control and process.
Budget Preparation in Gail
Company prepares its Budget when Circular is received from Ministry of Petroleum and
natural gas and submits it to the Government in month of October.
Generally there are two types of budgets prepared in Gail
Figure: 1.3
Revenue Budget: In revenue Budget the Income forecast to be prepared for
different segments such as Natural gas, LPG, Petrochemicals, Gailtel, E&P etc.
Revenue Expenditure Budget: In Revenue expenditure budget the
expenditure forecast is to be made. It must be submitted in the prescribed format
while preparing revenue expenditure budget following points must be considered.
I. The revenue expenditure heads to be in the prescribed format.
II. The revenue expenditure needs to be compiled department wise for each work
center.
III. The salaries and wages expenditure to be provided by each work center as per
the current manpower.
45
Budget
Revenue Budget Capital Expenditure Budget
IV. The CSR (Corporate Social responsibility) budget to be shown separately under
other expenses as also depicted in the format.
Capital Expenditure Budget: Capital Budget may further be of two types.
Figure: 1.4
Plan Schemes: Are those schemes which are required to be included in the 11th
Five year plan documents for submission to Govt./ Planning commission for
approvals.
Non Plan Schemes: Non Plan capital Expenditure plays a very important role
and is vital for constant up gradation of efficiency and productivity. Non plan
schemes generally cover capital investments on additional facilities like
buildings offsites, utilities, furniture, Vehicles etc. In units under operations.
Budgeting Process in Gail
46
Capital Budget
Plan Capital expenditure
Non Plan Capital expenditure
Various Department of Corporate office after receiving the circular from
ministry of Petroleum and Natural gas for the preparation of Budget and send to
its different workstation from the corporate office of Gail.
Each Department of Corporate office prepares its separate budget.
Time limit is given to the each Department of Corporate office for the
preparation of budget normally it is a One Month.
Budget prepared by each Department of Corporate office is submitted to
corporate office of Gail.
In corporate office a separate department called as corporate planning (CP)
makes the compiling of all the budgets, submitted by different workstation.
Accordingly final budget is prepared and submitted to the concerned ministry in
the month of August.
Receipt of Circular From Govt.
Issue of Circular to different Workstations
Preparation of Budget by Workstations
47
Submission of Budget by each Workstation
Compilation of Budget by Corporate
Planning
Preparation and Submission of final Budget
Figure: 1.5
Budgeting Control
Budgetary Control is the process of determining various budgeted figures for the
enterprise for the future period and then comparing the budgeted figures with the actual
performance for calculating variances.
Sources of Revenue
48
Natural Gas (Trading & Transmission) : Company owns and operates
a network of over 7000Km. of Natural gas high pressure trunk pipeline. Its
supplies over 80 million cubic meter of natural gas per day as fuel to power
plants, feedstock for gas based fertilizers plants and to over 500 small, medium
and large industrial units to meet their energy and process requirements. Natural
gas continues to constitute the core Business of company. During the years
2007-08 gas sales have increased marginally 69.10 MMSCMD from 67.83
MMSCMD in the previous financial year.
LPG Transmission: Company is the only Company in India which owns
and operates pipelines for LPG transmission. It has a 1900 km LPG pipeline
network, 1300 km of which connects the Western and Northern parts of India
and 600 km of network is in the Southern part of the country. The LPG
transmission system has a capacity to transport 3.8 MMTPA of LPG. LPG
transmission throughput was 2.754 million MT in the year 2007-08.
Petrochemicals: Company owns and operates a gas based integrated
petrochemicals plant at PATA, Utter Pradesh with a capacity of producing 4,
10,000 TPA of polymers i.e. HDPE and LLDPE which has been enhanced by
1,00,000 TPA from the earlier capacity of 3,10,000 TPA. Company is currently
in the process of setting up a 2, 80,000 TPA Assam petrochemicals complex at
an investments of Rs. 5460.
LPG & Other Liquid Hydrocarbons: Company has 7 LPG plants in the
country. In the year 2007-08, total Liquid Hydrocarbon production was over
1.348 million MT which mainly included 1.043 million MT of LPG, 0.156
Million MT of Propane and 0.074 million MT of Pentane.
Tele communications: Leveraging on its pipeline network, Company has
built up an OFC network for leasing of bandwidth as a carriers’ carrier.
49
Company’s telecom business unit - `GAILTEL’ has approximately 13,000 km
network. During the year under review, GAILTEL achieved profit before tax of
Rs. 3 Crores.
Exploration and Production (E&P): Company’s strategy and towards
integration along the energy chain, E&P activities have gathered momentum
during the year. The gas discovery in blocks A-1 and A-3 in Myanmar is
maturing to development stage and various studies preliminary to finalization of
the development plan and its implementation are underway. Presently, Company
is involved in oil and gas exploration activities over acreage of 1.7 Lac sq. km.
Company now hold a participating interest between 10 to 80 per cent in 27 oil
and gas exploration blocks. Of these, 9 are on-land blocks and 18 are off-shore
blocks. In India, there are 24 blocks which are in Basins such as Mahanadi,
Bengal, Gujarat- Saurashtra, Mumbai, Cambay, Assam-Arakan and Cauvery.
Your Company has got stake in the A-1 and A-3 blocks in Myanmar and Block
No. 56 in Oman. A beginning has been made by Company in earning revenue
from E&P activities. One of the on-land block in Cambay basin started
commercial production from February 2008 and Rs. 6.90 Crores has been
generated as revenue during Feb-Mar’08.
Coal Bed Methane: Company has been participating interest in 3 Coal Bed
Methane blocks with an area of 1561 sq. km, 2 of which are in Chhattisgarh and
1 in Jharkhand. These blocks were awarded to GAIL consortium in CBM-III
bidding round.
Segment Wise Performance (Revenue)
(Rs. In Cr.)Particulars 2008-09 2007-08 2006-07 % Change
over 06-07
Transmission service
50
a) Natural Gas 1598 1513 1448 4
b) LPG Transmission 221 207 164 26
Gas Trading 348 207 181 14
Petrochemicals 1210 1255 951 32
LPG & OLHC 859 896 93 863
GailTel (5) 3 0.97 227
Unallocated (226) 22 -
PBT 4232 3855 2860 35
Table: 1.1
Application of Revenue Generated from Different
Sources
Revenue generated from different sources can be utilized to meet different requirements
of the company. The major portion of revenue generated i.e. 85% is utilized for the
51
purpose of Purchase of Raw materials, Power & Fuel. And remaining 15% is utilizing
for the purpose of other operating activities such as Salary, Depreciation etc.
Expenditure made for the purpose of consumption of Raw Materials and stores, Spares
and Components for the year 2007-08 amounting to RS. 1920.86 Crores.
Amount of expenditure made for the different purposes can be explained with the
following table:
Expenditure Made for Raw Materials
Particulars Year 07-08
Qty. Rs. In Cr.
Year 06-07
Qty. Rs. In Cr.
Raw Materials Consumed
a. Gas (MMSCM) 1167.25 1714.84 1176.00 1785.12
-Indigenous - - - -
-Imported - - - -
Sub Total - 1714.84 - 1785.12
ii.) Stores, spares and Components consumed-Indigenous - 90.04 - 88.09
-Important - 115.98 - 69.22
Sub Total - 206.02 - 157.31
Total - 1920.86 - 1942.43
Table: 1.2
Manufacturing Transmission, Administration, Selling, Distribution and Other Expenses
Expenditure made for other expenditure for the year ended March 2009 amounting to
Rs. Cr. which was Rs. 1202.12 Cr. In the Year ended March 2008.
52
Amount of expenditure made for the different purposes can be explained with the
following table:
Rs. In Cr.Particulars Year
Ended,March 2009
Year Ended,March 2008
Year Ended, March 2007
Employees remuneration and benefits
Salaries, Wages and Allowances 420.59 377.49 212.62
Contribution to Provident and other funds
68.32 17.47 21.43
Welfare expenses 87.76 75.05 68.41
Repairs and Maintenance
Plant and Machinery 77.95 85.41 55.55
Building 13.52 16.17 20.79
Others 23.99 22.23 19.63
Insurance 9.41 17.90 28.67
Communication Expenses 8.07 8.04 8.31
Printing and Stationery 2.68 2.63 2.76
Travelling Expenses 35.68 31.96 32.16
Books and Periodicals 0.57 1.15 0.81
Advertisement and Publicity 11.89 9.16 14.66
Payments to Auditors 0.40 0.45 0.36
Entertainment Expenses 0.11 0.45 0.18
Recruitment & Training Exp. 7.67 6.74 6.94
Vehicle hire & Running Exp. 14.09 14.68 14.54
Survey Expenses 165.55 87.65 35.24
Consultancy Charges 18.08 10.30 23.34
Data Processing Expenses 0.82 1.66 3.05
Donation 4.38 15.78 0.01
R & D Expenses - 0.01 0.05
Loss on sale/written Off of asset 43.74 12.32 (0.58)
Bad Debts/claims/advances/stores written off.
0.29 0.08 1.62
Drywell Expenses written off 199.53 284.59 241.88
53
RDD, advances,claims,deposits and obsolescence of stores and capital items
26.31 (2.65) (21.90)
Excise duty on stock (8.76) (3.94) 10.59
Expenses on Enabling Facilities 0.87 1.37 1.62
Selling and distribution expenses 7.79 3.11 8.42
Discounts on Sales 20.44 16.88 11.61
Commission on Sales 14.81 13.13 11.56
Security expenses 46.24 38.04 32.25
Oil & Gas Producing Expenses 5.20 0.75 -
Royalty on Crude Oil 3.20 0.89 -
Other Expenses 28.88 35.17 70.51
Total 1202.12 937.09
Table: 1.3
54
Actual & Budgeted Financial Performance
for the year 2006-07 to 2009-10:
Summary of Financial Performance for Actual 2006-2008 and BE for 2008-2010 In Rs. Crore
PARTICULARS 2006-07 (Actuals) 2007-08 (Actuals) 2008-09 (RE) 2009-10 (BE)
Revenue
Sales(incl. Stock and Exice Duty) 16,621.00 18,610.00 24,908.00 26,617.00
Internal Consumption of Gas 2716 2556 3148 3289
Other Income 545.00 556 530 411
Total sales 19,882.00 21,722.00 28,586.00 30,317.00
Expenditure
Purchase of Gas 11,883.00 12517 17965 19869
Raw Material Consumed 2069 1,976.00 2368 2405
Sub Total(a) 13,952.00 14,493.00 20,333.00 22,274.00
Stores and Spares 157 206 317 316
Repairs and Maintenance 96 124 301 360
Power,Water & Fuel 785 750 964 966
Salaries and Wages 293 470 715 650
Exice Duty 499 572 589 456
Others 556 602 900 717
Total Other Operating Expenses(b) 2386 2724 3786 3465
Total Expenditure(a+b) 16,338.00 17,217.00 24,119.00 25,739.00
PBDIT 3,544.00 4,505.00 4,467.00 4,578.00
55
Depreciation 575.00 571 595 678
Interest 107 80 74 70
PBT 2,862.00 3,854.00 3,798.00 3,830.00
Income Tax 473 1254 1343 1225
PAT 2,389.00 2,600.00 2,455.00 2,605.00
LPG and Kerosine Subsidy 1488 1314 1000 800
Table: 1.4
Graphical Presentation of PAT
56
2250
2300
2350
2400
2450
2500
2550
2600
2650
Profits
Year
Series1
Series1 2389 2600 2455 2605
2006-07Actuals 2007-08Actuals 2008-09 RE. 2009-10 BE
Figure: 1.6
SEGMENT WISE FINANCIAL PERFORMANCE FOR RE 2006- 2007
Rs In Cr.
PARTICULARS GasLPG
&LHC Petro. LPG P/L Telecom E &P Unallocated Total
Sales 11,912.01 2,110.15 2,282.76 332.78 24.58 23.17 - 16.685.45Internal Consumption of Gas
in LPG/UPPC 2,450.10 2,450.10
in HBJ 282.86 282.86Sub Total Internal Consumption 2,732.96 2732.96
Accretion to stock
57
Other Income 10.00 10.49 0.62 313 334.1
Total sales 14,654.96 2,110.15 2,293.25 332.78 25.19 23.17 313 19,752.50
Expenditure
Purchase of Gas 12,161.73 12,161.73
Raw Material Consumed 1,403.69 567.26 1,970.95
Sub Total(a) 12,161.73 1,403.69 567.26 14132.68
Consumption of Stores and Spares 48.58 27.39 156.89 9.23 1.36 0.27 243.72
Repairs and Maintenance 98.04 19.34 44.23 32.12 1.93 22 217.66
Power,Water & Fuel 295.28 255.13 273.4 27.17 0.17 5.47 856.62
Insurance 15.26 4.51 10.11 2.31 0.03 30.56 62.78
Salaries 85.95 52.8 73.53 18.04 3.38 97.1 330.8Vechicle hire and running exp. 8.13 2.56 2.17 2.31 0.24 4.05 19.46
Communication 3.49 0.91 0.36 0.55 0.07 2.62 8
Travelling 10.65 3.12 5.53 3.23 0.15 20.77 43.45
Security 17.31 7.46 5.66 6.22 0.31 1.85 38.81
Horticulture 2.12 0.92 3.11 0.45 0 0.66 7.26
Others 77.23 20.51 55.1 9.18 9.12 163.27 131.44 465.85
Exice Duty 145.13 312.17 457.3Total Other Operating Expenses(b) 662.04 539.78 942.26 110.81 16.76 163.27 316.79 2751.71
Total Expenditure(a+b) 12,823.77 1,943.47 1,509.52 110.81 16.76 163.27 316.79 16,884.39
PBDIT 1,831.19 166.68 783.73 221.97 8.43-
140.10 -3.79 2,868.11
Depreciation 405.23 66.87 162.89 69.38 8.26 1.89 6.26 721.00
Interest 76.90998 10.49 26.67 114.17
PBT 1,349.05 89.32 620.84 125.92 0.17-
141.99 -10.05 2,032.94
Tax 659.95
PAT 1,349.05 89.32 620.84 125.92 0.17-
141.99 -10.05 1,372.99
58
Table: 1.5
59
SEGMENT WISE FINANCIAL PERFORMANCE FOR BE 2007-2008 Rs.In.Cr
PARTICULARS GasLPG
&LHC Petro.LPG P/L Telecom E &P Unallocated Total
Sales 12,135.78 3,316.14 2,615.00 330.29 30.35 21.35 - 18448.91
Internal Consumption of Gas
in LPG/UPPC 3,078.92 3,078.92
in HBJ 304.91 304.91
Sub Total Internal Consumption 3,383.83 3383.83
Accretion to stock
Other Income 11.88 0.91 272.86 285.65
Total sales 15,519.61 3,316.14 2,626.88 330.29 31.26 21.35 272.86 25,502.22
Expenditure
Purchase of Gas 12,932.43 12,932.43
Raw Material Consumed 1,613.81 667.67 2,281.48
Sub Total(a) 12,932.43 1,613.81 667.67 15213.91
Consumption of Stores and Spares 44.3 30.01 197.52 7.76 1.17 0.36 281.12
Repairs and Maintenance 185.96 15.5 60.33 37.96 1.8 17.38 318.93
Power,Water & Fuel 319.12 344.21 506.26 28.44 0.17 6.84 1205.04
Insurance 19.47 4.72 11.03 2.06 0.12 30.61 68.01
Salaries 91.58 56.25 78.34 18.25 3.6 147.87 395.89
Vechicle hire and running exp. 8.92 3.2 2.42 2.82 0.25 4.75 22.36
Communication 3.73 1.64 0.41 0.61 0.04 2.87 9.3
Travelling 11.07 3.63 5.98 3.96 0.06 27.39 52.09
Security 18.19 9.6 6 7.37 0.29 2.22 43.67
Horticulture 2.32 0.57 3.1 0.49 0 0.73 7.21
Others 85.32 35.42 64.5 9.99 8.05 144.96 143.34 491.58
Exice Duty 152.75 379.82 532.57
Total Other Operating Expenses(b) 789.98 657.5 1315.71 119.71 15.55 144.96 384.36 3427.77
Total Expenditure(a+b) 13,722.41 2,271.31 1,983.38 119.71 15.55 144.96 384.36 18,641.68
PBDIT 1,797.20 1,044.83 643.50 210.58 15.71-
123.61 -111.50 6,860.54
Depreciation 419.94 67.78 181.18 69.8 12.06 1.89 6.26 758.91
Interest 89.47 7.59 25.88 122.94
PBT 1,287.79 969.46 462.32 114.90 3.65-
125.50 -117.76 2,594.86
Tax 969.98
PAT 1,287.79 969.46 462.32 114.90 3.65-
125.50 -117.76 1,624.88
Table: 1.6
SEGMENT WISE FINANCIAL PERFORMANCE FOR BE 2008-09
Table: 1.7Cr.
60
Rs. In Cr.
PARTICULARS GasLPG
&LHC Petro.LPG P/L Telecom E &P Unallocated Total
Sales 13,144.00 1,465.00 2,817.00 345 32 22 - 17,825.00
Internal Consumption of Gas 0.00
in LPG/UPPC 2,423.00 2,423.00
in HBJ 375 375.00
Sub Total Internal Consumption 2,799.00 2,799.00
Accretion to stock
Other Income 9 532 541.00
Total sales 15,942.00 1,465.00 2,826.00 345.00 32.00 22.00 532.00 21,164.00
Expenditure
Purchase of Gas 12,829.00 12,829.00
Raw Material Consumed 1,164.00 696 1,860.00
Sub Total(a) 12,829.00 1,164.00 696 14689
Consumption of Stores and Spares 45 33 197 9 0 0 284
Repairs and Maintenance 132 45 44 23 5 20 269
Power,Water & Fuel 386 289 376 31 0 8 1090
Insurance 13 6 5 2 0 23 49
Salaries 107 63 89 31 3 167 460
Vechicle hire and running exp. 9 4 2 4 0 9 28
Communication 4 2 1 1 0 5 13
Travelling 9 5 5 3 0 50 72
Security 25 11 5 8 1 2 52
Horticulture 2 2 3 0 1 8
Others 55 27 70 8 11 280 231 682
Exice Duty 107 406 513
Total Other Operating Expenses(b) 787 594 1203 120 20 280 516 3520
Total Expenditure(a+b) 13,616.00 1,758.00 1,899.00 120.00 20.00 280.00 516.00 18,209.00
PBDIT 2,326.00 -293.00 927.00 225.00 12.00-
258.00 16.00 2,955.00
Depreciation 347.00 94 158 70 10 22 9 710.00
Interest 66 6 2 2 76.00
PBT 1,913.00 -393.00 767.00 153.00 2.00-
280.00 7.00 2,169.00
Tax 650
PAT 1,913.00 -393.00 767.00 153.00 2.00-
280.00 7.00 1,519.00
SEGMENT WISE FINANCIAL PERFORMANCE FOR BE 2009-2010 Rs. In.Cr
PARTICULARS GasLPG
&LHC Petro. LPG P/L Telecom E &P Unallocated Total
Sales(Including Exice Duty) 20,361.00 3,082.00 2,728.00 377 28 40 - 26,616.00
Internal Consumption of Gas 0.00
in LPG/UPPC 2,942.00 2,942.00
in HBJ 347 347.00
Sub Total Internal Consumption 3,289.00 3,289.00
Accretion to stock
Other Income 411 411.00
Total sales 23,650.00 3,082.00 2,728.00 377.00 28.00 40.00 411.00 30,316.00
Expenditure
Purchase of Gas 19,869.00 19,869.00
Raw Material Consumed 1,785.00 620 2,405.00
Sub Total(a) 19,869.00 1,785.00 620.00 22274
Consumption of Stores and Spares 47 36 224 8 1 0 316
Repairs and Maintenance 189 54 48 24 4 40 359
Power,Water & Fuel 329 296 297 36 0 8 966
Insurance 4 4 3 1 0 13 25
Salaries 164 91 130 40 2 223 650
Vechicle hire and running exp. 10 6 2 4 0 4 26
Communication 4 1 2 1 0 5 13
Travelling 9 5 6 3 0 21 44
Security 24 15 6 8 1 2 56
Horticulture 3 2 3 0 0 8
Others 17 26 42 4 6 295 155 545
Exice Duty 104 352 456
Total Other Operating Expenses(b) 800 640 1115 129 14 295 471 3464
Total Expenditure(a+b) 20,669.00 2,425.00 1,735.00 129.00 14.00 295.00 471.00 25,738.00
PBDIT 2,981.00 657.00 993.00 248.00 14.00 -255.00 -60.00 4,578.00
Depreciation 331.00 72.00 175.00 70.00 10.00 1.00 19.00 678.00
Interest 66 3 1 1 71
PBT 2,584.00 582.00 817.00 177.00 4.00 -256.00 -79.00 3,829.00
Tax 1225
PAT 2,584.00 582.00 817.00 177.00 4.00 -256.00 -79.00 2,604.00Table: 1.8
61
I&EBR Statement: Internal and External Budgeting resources statement is prepared
after the budget for different segments are prepared and compiled. This statement is
submitted to the ministry of petroleum & Natural gas in the month of October. This
statement helps in generation of source of finance i.e. whether funds can be generated
by loan or Government support. Thus I&EBR statement is essential part of Budgeting
process.
Sr. No.
PARTICULARS 2007-08Actuals
2008-09 BE 2008-09 RE. 2009-10 BE
1 Recipts
Gross Sales Or operating Income 21,136.63 20,622.82 28,056.90 29,905.57
Other Income 556.35 540.99 530.45 410.95
Total (1) 21,692.98 21,163.81 28,587.35 30,316.52
2 Operating Cost
Salaries and Wages 469.99 459.96 715.14 650
Maintaince Cost 329.86 553.49 617.82 676.09
Other Cost 16417.69 17,198.24 22515.88 24412.72
Total(2) 17,217.54 18,211.69 23,848.84 25,738.81
3 Depriciation and Write Offs
Depriciation 571.02 710.33 595.46 678.38
DEE/ Write Offs
Total (3) 571.02 710.33 595.46 678.38
4 Accretion(+)/ Decretion(-) of Stocks of Finished Products 29.88
5 Gross Profit Or Loss 3,934.30 2,241.79 4,143.05 3,899.33
6 Interest Payments TO
Centeral Govt.
Others 79.58 75.68 74.19 69.77
Total(6) 79.58 75.68 74.19 69.77
7 Provision for Income Tax(Net) 1253.54 649.83 1342.72 1225.46
8 Divedent Payments To
Centeral Govt. 484.94 260.85 468.99 448
Others(Based on Current Level of Disinvestment) 360.71 194.03 348.85 333.23
Divident Tax 143.72 77.31 138.99 132.77
62
Total(8) 989.37 532.19 956.83 914
9Investment in Securities if Obligatory due to Statutaory or Other Req.
10 Retained Profits or Surplus carried Overto Part 2 1611.81 984.09 1769.3 1690.1
I&EBR statement (RE 2008-2009 and BE 2009-2010) - Part1 (Retained Profits and Surplus)
Rs. In Cr.
Table: 1.9
I&EBR statement (RE 2008-2009 and BE 2009-2010) - Part2 Generated I&EBR for Plan) Rs. In Cr.Sr. No. PARTICULARS 2007-
08Actuals2008-09
BE2008-09
RE.2009-10
BE
1 Retained surplus from part-1 1611.81 984.09 1769.3 1690.1
2 Add -Depriciation and write offs 571.02 710.33 595.46 678.38
3 Deduct
Total Loans repayment of which GOI
Others 71.98 65.75 71.58 65.74
Net Increasing in the Margins for Working capital Requirements -41.82 563.15 1025.02 1340.34
Total(3) 30.16 628.9 1096.6 1406.08
4Adjusted Internal Resources Available for Plan Scheme(1+2+2A-3) 2,152.67 1,065.51 1,268.16 962.40
5 Carry Forward surplus available from Previous Year 2,660.39 1,078.47 3,463.89 1,173.09
6 Total Internal Resources(4+5) 4813.06 2143.98 4732.05 2135.49
7 Total extra Budgetary Resources(Other Than From GOI)
Gross assistance From Financial Institutes for Plan Project
Gross assistance From Financial Institutes for Plan Project Foreign
Foreign Commercial browwings or Supplier Credits
Bonds and Debentures
Inter Corporate Tranfers
OIDB
Issue of Equity to public
Others - Financial Institution or Banks 3000 4500
Total (7) 3000 4500
8 Total Internal and External resources
Avilable for Financing Plan
Expenditure onProjects, Renewals, And Replacement(6+7) 4813.06 5143.98 4732.05 6635.49
63
9 Plan Capital Outlay 1349.17 3413.36 3558.96 5558
10Budgetary Support from Govt. For Plan Scheme(9-8) or Nill If 8 >9
External assistance through budget
Net Budgetary support
11 Carry Forward of Surplus for Next Year 3463.89 1730.62 1173.09 1077.48
Table 1.10
Notes
While Making Dividend Payments following points should be considered.
1 As 57.35 percent of Equity is held by Central Govt. thus payments must be made to
them.
2. While calculating dividend following formula is used.
30% of PAT or 20% of Equity which ever is higher is paid.
3. Dividend Tax is paid @16.95%.
4. RE: Revised Estimate
5. BE: Budgeted Estimate
64
65
Use of SAP in Budgeting Process & Control
What is SAP?
SAP is the leading enterprise and management package worldwide. Use of this package
makes it possible to track and manage, in real-time, sales, production, finance
accounting and human resources in an enterprise.
What makes SAP different?
Traditional computer information systems used by many businesses today have been
developed to accomplish some specific tasks and provide reports and analysis of events
that have already taken place. Examples are accounting general ledger systems.
Occasionally, some systems operate in a “real- time” mode that is, have up to date
information in them and can be used to actually control events. A typical company has
many separate systems to manage different processes like production, sales and
accounting. Each of these systems has its own database and seldom passes information
to other systems in a timely manner.
SAP takes a different approach. There is only one information system in an enterprise,
SAP. All application access common data. Real events in the business initiate
transactions. Accounting is done automatically by events in sales and production. Sales
can see when products can be delivered. Production schedules are driven by sales. The
whole system is designed to be real-time and not historical.
SAP structure embodies what considered the “best business practices”. A implementing
SAP adapts it operations to it to achieve its efficiencies and power. The motto of SAP is
“A better return on information”
The process of adapting procedure to the SAP model involves “business process re-
engineering” which is a logical analysis of the events and relationships in enterprises
operations.
Budget Preparation in SAP:
66
Fund Management
Investment Management
67
Fund Management
The fund management process in SAP (FI) covers the entire gamut of Budget
Management, its initiation, monitoring and control.
It enunciates the concept of responsibility areas by creating Fund Centers. This
enables the fixation of responsibility for Budget monitoring and control.
The plan estimates for the individual responsibility areas are prescribed in Funds
Management in the form of commitment Budget.
The task of funds management is:
o Safeguard the estimated values for revenue and expenditures recorded in
the financial budget.
o Identity impending shortage of funds or funds surpluses.
o Control payments in light of profitability and liquidity.
Features of Funds Management
Expense/ revenue of Budgeting
Procurement & Consumption Budget.
Monitoring (Availability Checks)
Analysis (variance)
Organizational Structure
68
Figure: 1.7
Funds Management- Budgeting
Budgeting – The approach to Budgeting will be a Bottom up Approach. Budgets
will be prepared at the Fund Center level, compiled at the Location level and
consolidated (for reporting purposes only) at the Corporate (GAIL) level.
Budget for Fund center/Commitment item combination: Budgets will be drawn
up for a combination of Fund Center and Commitment item
69
Financial Management Area-GAIL
5000
4000
3000
2000
6000etary Control is the process of determining various budgeted figures for the enterprise for the future period and then comparing the budgeted figures with the actual performance for calculating variances, if any.etary Control is the process of determining various budgeted figures for the enterprise for the future period and then comparing the budgeted figures with the actual performance for calculating variances, if any.
7000
7500
80001000
1000 Corporate Services2000 Gas Trading3000 Gas Transmission4000 E & P5000 Petrochemical6000 LPG and Other Liquid Hydrocarbons7000 GAILTel7500 City Gas8000 Power Sector
Fund Center Hierarchy
Figure:1.8
Maintaining Commitment Items
Before you can use Funds Management, you must create account assignment items. You can integrate them into a summarization hierarchy, by entering the higher level summarization item in the commitment item when you create it.
Account assignment items must have the same financial transactions and item categories as the summarization items above them.
In a separate step, the commitment items need to be updated in the G/L account masters.
Master Data
70
Profit Center/Cost Center Group/Fund
Centers
GAIL
Co. Code/Line of Business
Business Area
The topmost node in the Hierarchy
Node to ensure Budget reporting at Company Code Level
Node to ensure reporting at Business Area level
Creation of Fund Centers- Budget preparation and execution level.
Fund center: It represents the responsibility area and is generally kept in parity
with Cost Centers. These Fund Centers are then re-grouped in the form of a
Hierarchy. There can be only one Fund Center hierarchy in an FM area. Each
node (which represents a Fund Center will have a superior Fund Center except
in the case of the Topmost node.)
List of fund centres CITY_GAS City Gas
CO_DELHI Corporate Office- Delhi
CO_PS Corporate Office- Project Service
DEL_CORP Delhi Corporation
EXPLORATIO Exploration & Production (E&P)
GAIL GAIL (India) Limited
GAIL_TEL Gail Tel
GLOB_BUS Global Business
GTEL_MUMB GailTel – Mumbai
GTEL_NOI GailTel – Noida
GTEL_VAD GailTel – Vodadra
LPG_LHC LPG & Other Liquid Hydrocarbon
LPGP_GANDH LPG – Gandhar
LPGP_LAKWA LPG – Lakwa
LPGP_PATA LPG Pata
LPGP_VAGHD LPG Vaghodia
LPGP_VIJAI LPG Vijaypur
LPG_TRAN LPG Transmission
LPGTR_JLPL LPG Transmission-JLPL
LPGTR_VSPL LPG Transmission-VSPL
LPG_USAR LPG Usar
NGTD_AGR NG Trading Agra
NGTD_AUR NG Trading- Aurangabad
NGTD_GUJ NG Trading-Gujrat
NGTD_HAZ NG Trading-Hazaria
71
NGTD_HAZ(NHVJ) NG Trading – Non HVJ, Hazira
NG_TD_HVJ NG Trading – HVJ
NGTD_JHAB NG Trading – Jhabua
NGTD_KHERA NG Trading – Khera
NGTD_LAK NG Trading-Lakwa
NGTD_MUM NG Trading-Mumbai
NG_TD_NHVJ NG Trading – Non HVJ
NGTD_NOI NG Trading-Noida
NGTD_PON NG Trading – Pondichery
NGTD_RAJ NG Trading-Rajsthan
NGTD_VAD NG Trading – Vadodra
NGTD_VAG NG Trading – Vaghodia
NGTD_VIJ NG Trading – Vijaipur
NGTR_AGRA NG Transmission- Agra
NGTR_AUR NG Transmission-Auria
NG_TRDG NG Trading
NGTR_GUJ NG Transmission-Gujrat
NGTR_HAZ NG Transmission-Hazira
NGTR_HAZ(NHVJ) NG Transmission-Non HVZ
NGTR_HVJ NG Transmission-HVJ
NGTR_JHAB NG Transmission-Jhabua
NGTR_KHER NG Transmission-Khera
NGTR_LAK NG Transmission-Lakwa
NGTR_MUM NG Transmission-Mumbai
NGTR_NHVJ NG Transmission-Non HVJ
NGTR_NOI NG Transmission-Noida
NGTR_PON NG Transmission-Pondichery
NGTR_RAJ NG Transmission-Rajasthan
NGTR_VAD NG Transmission- Vadodra
NGTR_VAGH NG Transmission- Vaghodia
NGTR_VIJ NG Transmission-Vijaypur
PETRO_CHEM Petrochemical
PETRO_PATA Petrochemical Pata
72
PETRO_TRAD Petrochemical Trading
POWER_SECT Petrochemical Sector
TRNG_JAIPUR NGTrading-Jaipur
TRNG_NOIDA NGTrading-Noida
W1010 CORPORATE SERVICES
W1011 HR SERVICES- NEW DELHI
W1012 BD SERVICES- NEW DELHI
W1013 MARKETING SERVICES - NEW DELHI
W1020 TRAINING SERVICES - GTI NOIDA
W1021 TRAINING SERVICES - GTI JAIPUR
W1030 GLOBAL BUSINESS
W1050 PROJECT SERVICES
W1100 MKTG SERV – CZF
W1101 MKTG SERV - ZO – AHMEDABAD
W1102 MKTG SERV - ZO – BANGALORE
W1103 MKTG SERV - ZO – BHOPAL
W1104 MKTG SERV - ZO – CHANDIGARH
W1105 MKTG SERV - ZO – CHENNAI
W1106 MKTG SERV - ZO - NEW DELHI
W1107 MKTG SERV - ZO – HYDERABAD
W1108 MKTG SERV - ZO – JAIPUR
W1109 MKTG SERV - ZO – KOLKATA
W1110 MKTG SERV - ZO – LUCKNOW
W1111 MKTG SERV - ZO – MUMBAI
W2010 NG Trading - HVJ – Vijaipur
W2011 NG Trading - HVJ – Hazira
W2012 NG Trading - HVJ – Vaghodia
W2014 NG Trading - HVJ – Auraiya
W2015 NG Trading - HVJ – Agra
W2016 NG Trading - HVJ – Noida
W2018 NG Trading - HVJ – Vadodara
W2019 NG Trading - HVJ – Jhabua
73
W2020 NG Trading - HVJ – Khera
W2110 NG TRADING-GUJRAT(NON- HVJ)
W2120 NG TRADING - MUMBAI REGION
W2130 NG TRADING - KG BASIN
W2140 NG TRADING - CAUVERY BASIN
W2150 NG TRADING – ASSAM
W2160 NG TRADING – TRIPURA
W3010 NG Transmission – Vijaipur
W3011 NG Transmission – Hazira
W3012 NG Transmission – Vaghodia
W3013 NG Transmission – Jhabua
W3014 NG Transmission – Khera
W3016 NG Transmission – Auraiya
W3017 NG Transmission – Agra
W3018 NG Transmission – Noida
W3020 NG Transmission – Vadodara
W3110 NGTRANSMISSION-GUJRAT(NON-HVJ)
W3120 NG TRANSMISSION- MUMBAI REGION
W3130 NG TRANSMISSION - KG BASIN
W3140 NG TRANSMISSION -CAUVERY BASIN
W3150 NG TRANSMISSION – ASSAM
W3160 NG TRANSMISSION – TRIPURA
W3810 LPG TRANSMISSION – JLPL
W3830 LPG TRANSMISSION – VSPL
W4001 MAHANADI OS ONGC MS-OSN-97/3
W4002 BENGAL OS GAZPRM NEC-OSN-97/1
W4003 GUJRAT DW ONGC GS-DWN-2000/2
W4004 MUMBAI DW ONGC MB-DWN-2000/2
W4005 E & P MAHNADI OS ONGC MN-OSN-2000/2
W4006 CAMBAY OL GSPL CB-ONN-2000/1
W4007 MAHANADI OL OIL MN-ONN-2000/1
W4008 CAUVERY OL ENPRO CY-ONN-02/1
74
W4009 TRIPURA OL ENPRO AA-ONN-02/1
W4010 CAUVERY OS HARDY CY-OS/2
W4011 BENGAL OS DAEWOO A-1 MYANMAR
W4012 KONKAN OS ONGC KK-DWN-2000/2
W4013 CB-ONN-2003/2 CAMBAY ONLAND
W4014 AN-DWN-2003/2 ANDMAN-NICO OFF
W4015 A-3 MYANMAR OFFSHORE
W4016 AA-ONN-2003/1 ASSAM -ARAKAN ON
W4017 BLOCK 56 OMAN OILEX
W4018 CY-DWN-2004/1
W4019 CY-DWN-2004/2
W4020 CY-DWN-2004/3
W4021 CY-DWN-2004/4
W4022 CY-PR-DWN-2004/1
W4023 CY-PR-DWN-2004/2
W4024 KG-DWN-2004/1
W4025 KG-DWN-2004/2
W4026 KG-DWN-2004/3
W4027 KG-DWN-2004/5
W4028 KG-DWN-2004/6
W4029 RJ-ONN-2004/1
W4030 KG-ONN-2004/2
W4031 MB-OSN-2004/1
W4032 MB-OSN-2004/2
W4033 RM-CBM-2005/III
W4034 TR-CBM-2005/III
W4035 MR-CBM-2005/III
W4036 BLOCK AD-7, MYANMAR
W4037 CY-ONN-2005/1- NELP VII
W5010 PETROCHEMICAL- PATA
W5090 PETROCHEMICAL TRADING
W6010 LPG – VAGHODIA
75
W6020 LPG – VIJAIPUR
W6030 LPG – PATA
W6040 LPG – GANDHAR
W6050 LPG – USAR
W6060 LPG – LAKWA
W6090 LPG&LIQUID HYDROCARBON TRADING
W7010 GAILTEL - NOIDA - IP2
W7011 GAILTEL - NOIDA – ISP
W7012 GAILTEL - NOIDA - IP1
W7020 GAILTEL - VADODRA - IP2
W7021 GAILTEL - VADODRA – ISP
W7022 GAILTEL - VADODRA - IP1
W7030 GAILTEL - MUMBAI - IP2
W7031 GAILTEL - MUMBAI – ISP
W7032 GAILTEL - MUMBAI - IP1
W7510 CITY GAS DISTRIBUTION
W8010 POWER SECTOR
ZO_AHMD Zonal-Ahmadabad
ZO_BANG Zonal- Bangalore
ZO_BHOP Zonal- Bhopal
ZO_CHAND Zonal- Chandigarh
ZO_CHENN Zonal- Chennai
ZO_CZF Zonal-Central Zone Finance
ZO_DELH Zonal- Delhi
ZO_HYD Zonal – Hyderabad
ZO_JAIP Zonal- Jaipur
ZO_KOLK Zonal- Kolkata
ZO_LUCK Zonal- Lucknow
ZO_MUMB Zonal- Mumbai
76
Commitment item: It represents the Head of Revenue/Expenditure for which a Budget
is prepared, executed and controlled. eg: Type of expense (Expense on materials,
personnel etc.)
List of commitment items
CC_BOOKS Books & Periodicals
CC_CONSULT Consultancy Charge
77
CC_CSR_EXP C S R EXPENSES
CC_DONATIO Donations
CC_DP_EXP Data Processing Exp.
CC_ENABLING_EXP Enabling Expenses
CC_ENTMENT Entertainment Exp.
CC_HORTEXP Horticulture Expense
CC_OTH_EXP Other Expenses
CC_PRNTG Printing & Stationer
CC_RM_OFF R&M-Bldg-Office
CC_RM_OTH Repair &Maint – Othe
CC_RMPMELE R&M-P&M-Electrical
CC_RMPMINS R&M - P&M- Instrumen
CC_RMPMMEC R&M-P&M-Mechanical
CC_RMPMOT R&M - P&M- Others
CC_RMPMPL R&M - P&M- Pipeline
CC_RMPMTEL R&M - P&M- Telecom
CC_RM_RES R&M-Buildings-Res
CC_SECURIT Security Expenses
CC_SURVEY Survey Expenses
CC_VEHHIRE Vehicle Hiring Expen
CN_ADTFEE Audit Fee
CN_ADT_PKT Audit-Out of Pkt Exp
CN_BANDCON Bandwidth consumpn.
CN_COMMUN Communication Exp
CN_CPFCON CPF Contribution
CN_EXDUTY Excise Duty Paid
CN_FUEL Fuel Charges
CN_INC_TEL Income from TELCOM
CN_INSURAN Insurance Expenses
CN_LFEETEL Licence fee _Telecom
CN_MGM_ADT Management Audit
CN_MKTMLNG Market. margin -L NG
78
CN_MKTMNG
Mktg margin – NG
CN_P/LONEXCHANGE Profit/Loss on Excha
CN_POWER Power Charges
CN_PR_EXP Advt. & Publicity
CN_RATETX Rates & Taxes
CN_R&DEXP R&D Expenses
CN_RECT Recruitment Expenses
CN_RENTOFF Rent Office Accomodn
CN_RENTOTH Rent- Others
CN_RENTRES Rent- Res. Accomodn.
CN_RMCONS Consumption of NG
CN_ROUNDINGOFF Rounding Off Exp.
CN_SALARY Salaries & Wages
CN_SALECNG Sale of CNG
CN_SALELNG Sale of LNG
CN_SALELPG Sale of LPG
CN_SALENG Sale of Natural Gas
CN_SALEPET Sale of Petrochem
CN_S&DEXP S & D Expenses
CN_S&SCATL Cons. Chem &Catalyst
CN_S&S_ELE S&S Electrical
CN_S&S_GTL Stores Spare-Gailtel
CN_S&S_INS Stores & Spare-Instr
CN_S&S_MEC Stores & Spare-Mech
CN_S&S_OTH Stores & Spare Other
CN_S&SPACK Packing Material
CN_S&S_PL Stores & Spare- P L
CN_S&S_TEL S&S Telecome
CN_TRANLNG Trans charges-LNG
CN_TRANLPG Trans charges LPG
CN_TRAN_NG Trans charges-NG
79
CN_TRAVEL Travelling Expenses
CN_TRNG Training Expenses
CN_TXADT Tax Audit Fee
CN_WATER Water Charges
CN_WELFARE Welfare Expenses
LN_CAR_ADV Motor Car Advance
LN_FUR_ADV Furniture Advance
LN_HB_ADV House Building Advan
LN_OTH_ADV Other Advances
LN_PC_ADV PC Advance
LN_SCOADV Scooter Advance
OA_BANK BANK ACCOUNT-Statist
OA_BSHEET Bal.sheet item-Asset
OL_BSHEET Bal.sheet item-Liab.
OP_ADJ_AC Adj. accounts(Statis
OP_CNG_STK INVENTORY OF CNG
OP_COGMF Cost of goods manufd
OP_COGS Cost of goods sold
OP_DEPN Deprn on F.Asset
OP_DVDND OP_DIVIDEND
OP_DVNDREC Dividend
OP_EXP_INC Export Incentives
OP_FCCHGS OP_FINANCE CHARGES
OP_I_CBAND Int consm-bandwidth
OP_INCOPOL Int cons Polymer
OP_INTCONG Int. cons. N Gas
OP_INT_LN Interest on loans
OP_INTORDER Material price diff.
OP_INTRECD Int on bonds etc.
OP_MISCINC Misc. Income
OP_PRDIFF Material price diff.
OP_PRPD_EX Prior period expense
80
OP_STK INVENTORY ACCOUNTS
OP_STKCNG Change in StockCNG
OP_STKLNG Change in StockRLNG
OP_STKLPG Change in StockLPG
OP_STKNG Change in StockLPG
OP_STKPETR Stock change Polymer
OP_TX_PROV Provn for taxation
PC_SS_CHEM Proc. Chem& Catalyst
PC_SS_ELE Proc. S&S Electrical
PC_SS_GTEL Proc.S&S GTEL
PC_SS_INS Proc. S&S Inst.
PC_SS_MEC Proc. S&S Mechanical
PC_SS_OTH Proc. S&S Others
PC_SS_PACK Proc. Pack. Material
PC_SS_PL Proc.S&S _Pipeline
PC_SS_TEL Proc. S&S Telecom
PN_PURLNG PURCHASE OF LNG
PN_PURNG PURCHASE OF NG
PN_PURPOL Purchase of Polymers
SCC_RM_BLD R&M – Buildings
SCC_RM_PM R&M-Plant & Machiner
SCN_ADTEXP Audit Expenses
SCN_EMPEXP Employee cost
SCN_MKTMGN Marketing Margin
SCN_PFW Power, water,fuel
SCN_PURCH Purchases
SCN_RATETX Rates & Taxes
SCN_RECTTR Recct & Training
SCN_RENT Rent
SCN_SALE Sales
SCN_SS_CON Stores & Spare- Cons
SCN_TRANCH Transmission Charges
SOP_INTCON Internal Consumption
81
SOP_OTHINC Other Income
SOP_STKNG Change in Stock
SPC_PR_S&S Proc.-Stores& Spares
Type of Budgeting
Both Procurement and Consumption Budgets are supported. Though
Procurement Budget is not a Standard Functionality, this feature is being
provided through Warehouse Fund Centers.
Budget values will be checked at the time of raising a Purchase Requisition for
unassigned PR/items to be taken to inventory.
This check will be against the Procurement Budget.
At the time of Goods issue or in case of assigned PR/PO, the availability check
will be against the Consumption Budget.
82
Differential/incremental values at the time of PO/GR/IR will also be checked
against the procurement or consumption Budget as the case may be.
Budget Availability check on Advances
There will not be any Budget availability check at the time of sanctioning of
Advances.
The availability check will only happen at the time of actual Disbursement and
the check will be against the consumption Budget.
Investment Management
Budgeting process for non Plan Expenditure
A new approval year for budgeting will be open by C&SP. All old projects and
internal orders will be carried forward or closed – as the case may be.
Any proposal for capital items is called planned before it is approved, after
approval it is called budget.
Annual RE and BE will be fed in the system item wise at each location.
Changes in plan value for RE/BE is possible at each level.
83
After all the locations plans are finalized and approved at the corporate level,
these are entered in the SAP as budget.
Site creates internal order or project for each of the budgeted item.
84
Investment Cost Program: Planning
Figure:1.9
85
Appr. Request AR02
Plan
GAIL Non PlanPlan Budget Distrib.
Gujarat Region HVJ Mumbai Region
VAGHODIA VIJAIPUR AURAIYA
Appr. Request AR01
Plan
200200 150150250250
8080
400400500500
15001500
Roll-upRoll-up600600
15001500
Appr. Request AR03
Plan 7070 50508080
Investment Cost Program: Budgeting top-down
Figure:1.10
86
Order OR03
Total InvestmentsPlan Budget Distrib.
Gujarat Region HVJ Mumbai Region
VAGHODIA VIJAIPUR AURAIYA
Plan Budget Allotted
Plan Budget Distrib.AllottedProject PR02
WBS PR2.1 WBS PR2.2
Appr.Request AR01
Plan
200200 150150250250
7070 8080 5050
600600 400400500500
15001500 1500
1500
Budget values are
Budget values are
distributed down within
distributed down within
the Investment Hierarchy.
the Investment Hierarchy.
15001500
500500 600600 400400600600
250250 200200 150150130130
8080 5050
2060
80
Takeover Plan to Budget
Figure:1.11
87
Capital Investment Program
GAIL_NPL
plan150
0
HVJ600
plannn
Mumbai400
Gujarat500
manualtakeover
GAIL_NPL
budget150
0
HVJ600
budget
Mumbai400
Gujarat500
Investment Management
Project or internal audit cost control is done by SAP against the budget value of
the project or internal order.
This is done through
Error Messages: Here the user is disallowed from doing a transaction.
This will happen after 100% budget is utilized.
Warnings Messages: Which allowed a user to do the transaction after a
warning? This will happen after 90% budget is utilized.
In projects, budget is also checked as per each WBS aliment on overall business.
SAP checks actual cost of the project.
Budgeting
Budget checks in SAP during Purchases:
Budget checks are first done based on the estimate entered by the user for the
materials during purchases requisition.
The budget checks are again done during the creation of purchases orders. In
case the PO value results in the projects budget being exceeded, the transaction
will be disallowed by SAP.
The delivery date specified in the purchases order will govern the date in SAP
reporting for commitment.
During Goods receipts, cost is booked on to the project and this cost can be seen
in reports.
If materials are transferred from any other location or project, cost is booked on
to the project to which these materials are transferred and budget is consumed.
88
The cost booked on the project includes freight and all types of taxes except for
excise- in case where CENVAT benefit is available.
In SAP where CENVAT benefit is available on excise, this will not book cost on
the project and hence will not consume any budget.
Payment is done to supplier (called Vendor in SAP) based on invoice
verification. At the time of invoice verification, actual cost is updated, which
consume the budget accordingly.
This invoice verification may be done before or after the Goods receipts in SAP.
Budget checks in SAP during Work Orders
Work orders are called service purchase orders in SAP.
Budget check is first done based on the estimate entered by the user for the SOR
during purchase requisition.
The budget check is again done during the creation of service purchase orders.
In case the PO value results in the project budget being exceeded, the transaction
will be disallowed by SAP.
Entry of RA bill into SAP is called service entry sheet. At this point, actual cost
is booked on to the project.
This cost can be seen in Sap record.
The cost booked on the project includes taxes.
Invoice verification is done in SAP based on the service entry sheet.
Payment is made to contractors (called Vendors in SAP) based on the invoice
verification.
Cost Booked without purchase orders:
There may be cases in projects where costs are to be booked without references
to any purchases order(e.g. Land acquisition)
These will be booked in FI module and will be appear in the projects cost
reports.
Such cost will also consume the project budget.
89
Original Budgeting:
Original Budget for program (IM32)
Consolidated budget for the program position.
Original budget distribution to measure (IM52)
Budget at the level of each measure (project, internal audits)
Budget Updates:
Budget Supplement
Program Budget Plan- IMCCP1
Non plan- IM30
Measure Budget
Plan – IMCCP3
Non plan- IM52
Budget return:
Measure Budget
Plan –IMCCP3
Non plan-IM52
Program Budget
Plan – IMCCP1
Non plan –IM38
Budget updates process – Scenarios
90
New investments for current year (RE)
Change budget values for continuing measures (RE)
New investments for the next fiscal year and onwards (BE)
Continuing investments in next fiscal year and onwards (BE)
91
DATA ANALYSIS AND FINDINGS
DATA ANALYSIS:
92
For Budgetary process and control Gail(India) Ltd takes in to consideration circular
issued by the Ministry of petroleum and natural gas and accordingly I&EBR(Internal
and External budgeting resources) statement submitted to the concerned Ministry in the
month of August. Different types of expenditures revenues are also taken in to
consideration according to the Companies Act 1956.
FINDINGS
From the study of the project entitled “Budgeting Process and Control in Gail (India)
Ltd.”Following points are understood:
Gail (India) Ltd is one of the key players in Indian gas industry.
PAT(profit after tax) of Gail shows a fluctuating trend as in the year 2007-08
& 2009-10 it shows increasing trend where as in the year 2006-07 & 2008-09.
Budgeting process of Gail (India) Ltd involve complexities as different steps are
involved in it
Too much time is involved in budgeting process of Gail(India)Limited
93
CONCLUSION
With the project entitled Budgetary Process and Control, in GAIL (India) Ltd., we can
conclude that Budgeting is one of the essential processes in any Organization whether it
94
is Public Sector Unit or Private concern. As with the help of Budgeting we can calculate
estimated expenditure Revenues and Profit for the future period of time. Thus
preparation of both type of the budget (Revenue and Capital Budget) is essential part of
Business & appropriately prepared & Control by using strong tool i.e. Fund
Management & Investment Management of SAP in Gail (India) Ltd..
95
GLOSSARY
BIS: Business Information System
BSE: Bombay Stock Exchange
CAGR: Compounded Annual Growth Rate
96
CAPEX: Capital Expenditure
CBM: Coal Bed Metahne
CNG: Compressed Natural Gas
CPI: Consumer Price Index.
CSR: Corporate Social Responsibility
DGH: Director General Hydro Carbon
DVPL: Dahej-Vijaipur Pipeline
E&P: Exploration and Production
EBIDTA: Earnings Before Interest, Depreciation,Tax And Amortization
ED: Excise Duty
EPS: Earnings Per Share
ERP: Enterprise Resource Planning
ESA: External safety units
GAIL: GAS Authority of India Ltd.
GDP: Gross Domestic Product
GOA: Grant of authorization
GPU: Gas Processing Units
GTI: Gail Training Institute
HDPE: High Density Polyethelyene
HSE: Health Safety Environment
HVJ: Hazira Vijaipur Jagdishpur
JLPL: Jamnagar-Loni Pipeline
JVCs: Joint Venture Companies
LLDPE: Linear Low Density Polyethelyene
LNG: Liquefied Natural Gas
LPG: Liquefied Petroleum Gas
MBTU: Million British Thermal Unit
MMSCMD: Metric Million Standard Cubic Meters Per Day
MMT: Metric Million Tone
MMTPA: Metric Million Tone Per Annum
MOP&NG: Ministry Of Petroleum And Natural Gas
MOU: Memorandum Of Understanding
97
MTs: Metric Tonnes
MW: Mega Watts
NELP: New Exploration And Licensing Policy
NSE: National Stock Exchange
O&M: Operation And Maintenance
OLHC: Other Liquid Hydro Carbon
PAT: Profit After Tax
PBIDTA: Profit Before Interest, Tax, Depreciation And Amortization
PBIT: Profit Before Interest And Tax
PBT: Profit Before Tax
PNG: Piped Natural Gas
PNGRB: Petroleum and Natural Gas Regulatory Board
PSU: Public Sector Unit
QC: Quality Circle
ROCE: Return On Capital Employed
ROIC: Return On Invested Capital
RONW: Return On Net Worth
SBPS: Special Boiling Point Solvent
SCADA: Supervisory Control And Data Acquisition
TPA: Tones Per Annum
TQM: Total Quality Management
VSPL: Vizag-Secundrabad Pipeline
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BIBLIOGRAPHY Books & Magazines
Internal Data
Annual Reports-6 Years
Gail India Limited Financial And Strategic Analysis Review
External Data
Guidelines For Laying Petroleum Product Pipelines, Ministry of
petroleum And Natural Gas, Government of India, New Delhi
Oil And Gas Update India-Business Market Reports
Petroleum And Natural Gas Regulatory Board
The Financial Express
The Hindu Business Line
The Infrastructure Sector Report In India
Weekender
Web Sites
Internal Data
www.Gailonline.in
External Data
www.About.com
www.Freemba.com
www.Google.com
www.Investorword.com
www.makemyproject.com
www.marketresearchreports.com
www.Ntpc.net
www.Sarkaritel.com
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