project report on atul
DESCRIPTION
The Impact of Currency Appreciating On the export business.TRANSCRIPT
Project ReportProject ReportOnOn
A member of Lalbhai Group
((Aromatics DivisionAromatics Division))
ONThe Impact of Currency AppreciatingOn the
export business(3rd SEMESTER), 2007-08
SUBMITED TO; SUBMITED BY ;
DR. R.S. SHAH SREEJITH M.NAIR
ROLLNO= 38
DIV= B
1
DECLARATION
I the undersigned, hereby declare that this dissertation titled
“SUMMER TRANING REPORT” is an original and bonafide work
carried out under the guidance of Director Dr. R. S. Shah of GRIMS
& submitted to Veer Narmad South Gujarat University, Surat.
The empirical findings in this report are based on the data collected
and have not been taken from any other reports.
This dissertation does not form any basis for other degree or diploma.
Place: Vapi (SREEJITH M. NAIR)
Date:
2
CERTIFICATEI hereby, certify that this project report entitled “Summer Training & Training Need Identification” submitted to Veer Narmad South Gujarat
University, Surat in Partial fulfillment of the requirement for the degree of
Master of Business Administration (M.B.A.) embodies the result of the
bonafied work carried out by SREEJITH M. NAIR.
I find the work complete and of sufficiently high standard to warrant its
presentation for the examination.
I further certified that work has been carried out under my guidance.
Date: 09 – 08 – 07
_____________________
Dr. R. S. Shah
(Director)
3
AcknowledgementAcknowledgement
I am very grateful to Mr. Ashutosh Jani, Mr. S. M. Bihani andI am very grateful to Mr. Ashutosh Jani, Mr. S. M. Bihani and
Atul Ltd. who have given me this great opportunity to explore theAtul Ltd. who have given me this great opportunity to explore the
subject “The Impact of Appreciating Indian Rupee Onsubject “The Impact of Appreciating Indian Rupee On
Company’s Profitability” in depth; by providing platformCompany’s Profitability” in depth; by providing platform
through this Summer Project.through this Summer Project.
I express my special gratitude to Mr. Dhaval shah, Mr. S. M.I express my special gratitude to Mr. Dhaval shah, Mr. S. M.
Bihani , Mr Mukeshbhai, Mrs Anjana and Mr Nikhil, who inspiteBihani , Mr Mukeshbhai, Mrs Anjana and Mr Nikhil, who inspite
of their pressing duties and responsibilities have shown genuineof their pressing duties and responsibilities have shown genuine
interest in providing necessary guidance regarding concept clarityinterest in providing necessary guidance regarding concept clarity
of the project and rendered support at all stages of the study.of the project and rendered support at all stages of the study.
They always assured me that with Atul Ltd. project would be aThey always assured me that with Atul Ltd. project would be a
good learning experience for future.good learning experience for future.
I would like to thanks respected Rofel institute of ManagementI would like to thanks respected Rofel institute of Management
studies Vapi for giving us this opportunity to gain some practicalstudies Vapi for giving us this opportunity to gain some practical
knowledge in the area in which we will be pursuing our career.knowledge in the area in which we will be pursuing our career.
Furthermore, I would also like to thanks respected Prof.PankajFurthermore, I would also like to thanks respected Prof.Pankaj
Patel, my Institute Guide who supported me a lot in this projectPatel, my Institute Guide who supported me a lot in this project
by advising me how to prepare the report.by advising me how to prepare the report.
Last but not the least; I thank the entire team at the Atul Ltd. forLast but not the least; I thank the entire team at the Atul Ltd. for
their excellent cooperation and priceless information they havetheir excellent cooperation and priceless information they have
always provided.always provided.
4
EXECUTIVE SUMMARYEXECUTIVE SUMMARY
The main goal of any company is to gain the maximum market share,The main goal of any company is to gain the maximum market share,
create a good brand-image and to create this the main effort has tocreate a good brand-image and to create this the main effort has to
come from the Marketing department and for this the Marketingcome from the Marketing department and for this the Marketing
personnel’s need to know what are the requirements of the customerspersonnel’s need to know what are the requirements of the customers
and has to market the product accordingly.and has to market the product accordingly.
The undertaken project of functional study has the main objective ofThe undertaken project of functional study has the main objective of
interpreting the various departmental functions undertaken in theinterpreting the various departmental functions undertaken in the
ATUL AROMATIC DIVISION , and to study the working of theseATUL AROMATIC DIVISION , and to study the working of these
department.department.
The specific project undertaken by me was to find out the impact thatThe specific project undertaken by me was to find out the impact that
the ATUL company is facing due to the major share of it salesthe ATUL company is facing due to the major share of it sales
revenue is through exports, so the impact is studied and I have tried torevenue is through exports, so the impact is studied and I have tried to
understand the risk and also tried to find out the instruments to reduceunderstand the risk and also tried to find out the instruments to reduce
the risk .the risk .
5
TABLE OF CONTENTS
SR. NO
TOPICS PAGE. NO
1.
PART - 1
GENERAL INFORMATION
MISSION VISION STATEMENT BOARD OF DIRECTORS OVERVIEW OF CHEMICAL
INDUSTRY BACKGROUND OF THE
COMPANY INFRASTRUCTURE OF ATUL AROMATIC DIVISION
BACKGROUND
12-3
4-8
8-1213-15
16-17
2. DEPARTMENTS: HUMAN RESOURCE
DEPARTMENT PRODUCTION
DEPARTMENT MARKETING
DEPARTMENT FINANCE DEPARTMENT QUALITY CONTROL
DEPARTMENT
18-35
36-4445-5253-56
57-60
3. PART – 2The Impact of Appreciating India Rupee on Company’s Export Business ;
EXPLANATION ON CURRENCY APPRECIATION
FACTORS INVOLVED
61-80
62
62-71
6
CHART OF CURRENCY APPRECIATION
EXCHANGE RATE EFFECT’S OF CURRENCY
APPRECIATION
SUGGESTIONS FOR COMPANY
LIMITAION
BIBLOGRAPHY
7273-75
76-78
79
80
80
7
A member of Lalbhai Group
Our MissionOur Mission
“We are a chemical company committed to creating wealth for“We are a chemical company committed to creating wealth for
all our stakeholders.all our stakeholders.
We will strive for leadership in our chosen products and marketsWe will strive for leadership in our chosen products and markets
by providing high quality products and services to our customers.by providing high quality products and services to our customers.
We will seek profitable growth by innovative application ofWe will seek profitable growth by innovative application of
science and technology.science and technology.
We will pursue excellence in all that we undertake and take stepsWe will pursue excellence in all that we undertake and take steps
to continuously improve.to continuously improve.
We will take responsible care of the environment around us andWe will take responsible care of the environment around us and
improve the quality of life in the communities we operate in.”improve the quality of life in the communities we operate in.”
8
Board of Directors
The Board of Directors of Atul Ltd consists of eminent industrialists and
professionals who’s Chairman is Arvind Lalbhai. Sunil S Lalbhai is the MD
& CEO, Samveg Lalbhai is the MD and Jagdish L Shah is the Executive
Director.
Board of DirectorsName Status Occupation Mr A N Lalbhai Non-executive
Chairman Chairman, Arvind Mills Ltd
Mr S S Lalbhai Managing Director & CEO
Mr J L Shah Executive Director
Mr N N Wadia Independent Non-executive Director
Chairman Bombay Dyeing & Manufacturing Co Ltd
Mr G S Patel Independent Non-executive Director
Former Chairman Unit Trust of India
Dr S S Baijal Independent Non-executive Director
Former Chairman & CEO ICI Companies in India
Mr B S Mehta Independent Non-executive Director
Partner Bansi S Mehta & Co
Mr H S Shah Independent Non-executive Director
Former Chairman & Managing Director Indian Petrochemicals Corporation Ltd
Mr S A Lalbhai Managing Director
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Mr S M Datta Independent Non-executive Director
Former Chairman Hindustan Lever Ltd
Mr K Aparajithan Independent Non-executive Director
Mr R A Shah (Alternate Director)
Independent Non-executive Director
Sr Partner of M/s Crawford Bayley & Co., Mumbai
10
Chemical Industry Outlook
The Indian Chemical Industry has grown at a CAGR of 8% during
the period from 2001 to 2005. The industry in India is fragmented
with few large companies. There are over 6,600 chemical
manufacturers & capacity utilization of Indian plants is lower at
70%, when compared to that of China and Japan where it is higher
at 85-90%.
The sector is a cyclical, capital-intensive where pricing power of the
players is under constant threat. Several bilateral Free Trade
Agreements (FTAs) with various ASEAN countries have been
concluded or are under negotiations. These are aimed at phasing
out trade barriers to create a regime of free trade and this may
increase the pricing pressure on the Indian Chemical Industry.
The bulk chemicals business segment continues to be cyclic in
nature. However, the automobile and electronic sectors are
witnessing growth and this affords an opportunity for the newer
intermediaries' business segment and Indian epoxy market is also
growing rapidly.
The key success factors pertaining to the industry are economies of
scale, product quality and reliability and development of new
products and application processes.
11
Chemicals Industry
The Indian Chemical Industry has grown at a CAGR of 8% during
the period from 2001 to 2005. The industry in India is fragmented
with few large companies. There are over 6,600 chemical
manufacturers & capacity utilisation of Indian plants is lower at
70%, when compared to that of Korea and Japan where it is higher
at 85-90%. Major international companies such as BASF, Dow
Chemical, Bayer and Du Pont have operations in India.
The sector is a cyclical, capital-intensive sector where pricing
power of the players is under constant threat. Several bilateral Free
Trade Agreements (FTAs) with various ASIAN countries have been
concluded or are under negotiations. These are aimed at phasing
out trade barriers to create a regime of free trade and this may
increase the pricing pressure on the Indian Chemical Industry.
The bulk chemicals business segment continues to be cyclic in
nature. However, the automobile and electronic sectors are
witnessing growth and this affords an opportunity for the newer
intermediaries' business segment and Indian epoxy market is also
growing rapidly.
12
Industry Analysis
The Chemical industry constitutes an important segment of the chemical
industry in India. The Indian Chemical industry is today totally self-
sufficient with a majority of its inputs manufactured locally. India is
currently producing all varieties of synthetic Chemicals and intermediates
and has a small presence in the natural Chemical. The subcontinent has
emerged as a global supplier of Chemicals and dye intermediates,
particularly for reactive, acid, vat and direct dyes. The market for
Chemical is dependent on textiles, in particular demand for polyester and
cotton determine the demand for certain types of Chemicals. The textile
industry is currently buoyant and the market is growing steadily. There is a
shift in the usage of polyester and polyester blended fabrics and as a
result demand for disperse dyes are at a peak.
Market Size and Major Players
The market size of the Indian Chemical industry is INR141 billion including
the exports of INR52 billion in 2004-05. The exports doubled from INR26
billion 2000-0'l to INR52 billion in 2004-05. By 2010, the exports are
expected to reach INR121 billion. India currently produces 130,000 tonnes
and 75% of the production is exported to 15 countries like: the USA,
Germany, Netherlands, Italy, UK, Spain, Turkey, Switzerland, Indonesia,
Korea, Hong Kong, Thailand, Singapore, Japan and Taiwan. The per
capita consumption in India is very low 50gm compared to the world
average of 400 gm. Textile, cotton and polyester consume more dye
compared to the other fabrics and in turn, the growth of disperse, direct
and reactive dyes is expected to increase due to the usage of these
intermediates in cotton and polyester. By 2010, the contribution of India in
the global Chemical market is expected to reach 8-10% with an increase
of 20% per annum. The major players in the organized sector are Atul
Products, Jaysynth Dyechem, Meghmani Organics, Colortex, Sudarshan
Chemicals, Colour Chem, Ciba Speciality, BASF, Clariant India, IDI and
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Metrochem. The Indian companies account for 6% of the world dye
production.
Competitive Advantages
• Labour: India has trained managerial & plant personnel with
entrepreneurship skills including five decades of experience in the
industry.
• Raw material: Though the cost of the raw materials is 50% of the
production cost, but the existence of all the raw materials is located in
proximity at plant locations like Maharashtra and Gujarat. An additional
cost-effective factor benefit is the reduction of import duties that would
decrease the raw material cost.
• 100% FDI permission and the matured chemical Engineering industry
that is attracting most of the MNCs with the benefit of producing low end
products
Opportunities
Constant technology up gradation to provide value added products:
Technology is the key to manufacturing and the Indian industry is
fragmented with very few players handling the organized sector that
is expected to grow.
Enhanced quality of products at reduced prices: The Indian
manufacturers have to concentrate on the quality of products at
competitive prices in order to compete with leading countries like
China, Japan, Indonesia and HongKong. The developed countries
production share in the market has reduced from 65% to 50% and
is expected to further reduce in the future. The adoption of
technology will increase the quality of products and production.
14
Improve economies of scale: Due to five decades of expertise in
the Chemicals industry, players operating in the field must adopt
economies of scale to compete with other countries.
1. Product and service differentiation
2. Develop world class Infrastructure
3. International trade procedures to be implemented
4. Build Indian brand image overseas
Developed countries are looking at outsourcing dyes from
developing countries due to more and more production facilities are
being shifted to Asian countries like India and China.
15
Background of the Company
Atul Limited, incorporated in the year 1947 by Mr. Kasturbhai Lalbhai in
technical collaboration with American Cyanamid of USA, is engaged in
manufacturing of Chemicals, agro chemicals, intermediates, polymers,
'Aromatics, Pharmaceuticals, bulk drugs and specialty chemicals. It is one
of the oldest chemical company in the country. The plant of AL is located
at Atul in an area of 1243 acres. At present, the company is manufacturing
more than 300 products which are mainly used in various industries viz.
agriculture, fragrance & flavours, tyre, textiles, paper, Pharmaceuticals,
aerospace, construction, paints etc. The Company has mainly six activities
viz. Agrochemicals, Aromatics, Bulk Chemicals & Intermediates, Colours,
Pharmaceuticals & Intermediates, and Polymers, functioning
independently as profit centers.
16
Business Model and Competitive Analysis
Atul Ltd. is a pioneer in the Chemicals industry and has over five decades
of experience in the chemicals industry, which has helped the company to
sustain itself through several business cycles. The Company has focused
on R&D in order to develop new products and applications and has
diversified its product portfolio away from Chemicals over the years.
Chemicals now contribute only 33% to the turnover of the company. The
company is now in the process of moving up the value chain in each of its
business lines.
The company has acquired technology for manufacturing phosgene-based
agrochemicals where the margins are high. It plans to focus on
formulations in agrochemicals where the margins are even better. It has
commenced manufacturing Chemicals with higher margins including vat,
reactive and disperse dyes. The Company has integrated facilities with in-
house generation of power, which enables it to reduce its cost of
production.
It has built its brand name through consistent quality of products, reliable
delivery schedules, good technical service support and post sales service.
It has set up a wide marketing network and has set up subsidiaries in
foreign countries in order to export to those countries. The company is
well placed in terms of technology as it has absorbed the technology from
the world leaders through its joint ventures.
17
Financial Analysis
The net sales of the company have grown at a CAGR of around 11 % over
the last three years, with exports growing at a CAGR of around 13% over
the same period. After a downturn in performance in 2003-04, the
company has shown consistency in its performance and is likely to
maintain the improvement trend in the coming years. The Company has
shown significant improvement in operating profit during FY06 mainly
driven by improved performance of Aromatics and Bulk Chemicals and
intermediates division mainly due to growth in volume and better
efficiencies. The performance of Polymers improved due to introduction of
value added products. However, the profitability of Agrochemicals and
Colours division showed decline mainly due to high costs and pressure on
selling prices respectively.
As per first 9 months financial for FY07, the operating margins of the
company are in line with the estimates as well as the industry average and
are likely to follow the same trend.
Risks and Mitigates
The Company is in the business of Chemicals. Prices of some of
these chemicals are cyclical and remain low for long periods. The
Company constantly keeps taking up improvement projects to
mitigate the impact of such movements in prices.
Exports, which constitute more than 50% of the company's turnover
has the inherent risk of fluctuations in the exchange rates.
Company is renegotiating with its overseas buyers based in Europe
for future sales to be billed in Euro instead of USD. The company is
also hedging its USD by cross currency swaps to reduce further
losses on account of Rupee appreciation.
18
Product Obsolescence The company has established a state-of-
the-art R&D center and is progressively increasing its R&D budget.
The company through product diversifications and increased
dependence on R&D proposes to mitigate the product
obsolescence risk. The company had already introduced various
new products in the market and is in the process of expanding the
capacities of those products and introducing some more
specialized products.
Management Analysis
The company is managed by a team of professionals headed by Mr. Sunil
S Lalbhai, who is the Managing Director & CEO of the company. Mr. Sunil
Lalbhai has been associated with the chemical industry for over two
decades and has guided the company through the structural changes that
the chemical industry has undergone during this period. The senior
management includes four Presidents holding professional degrees in
chemical engineering. They have been able to proactively change the
product mix of the company over years and have been able to sustain the
growth of the company during the lean periods that the chemical industry
has passed through during the last decade. The company has
successfully absorbed technical know-how through its various joint
ventures and has been able to carry on the respective businesses
profitably even after the overseas partners sold their stake to AL and have
exited these JVs.
The senior management has initiated a number of steps to improve
profitability. The company has started manufacturing Vat dyes, where the
margins are higher than the other types of dyes like azo and sulphur dyes.
The company introduced various new products viz. Resorcinol, DDS,
Dapsone, etc to reduce its dependence on the colours division which was
earlier major contributor to the turnover of the company.
19
Infrastructure at Atul
Atul Ltd has made significant contributions to the development of
infrastructure in Atul and nearby villages. The Company has already built
over 1000 houses, 2 schools, a medical centre, a sports complex, an open
air theatre and a community centre.
Atul Ltd is self-sufficient in its requirement of electricity achieved through
three state-of-the-art captive power plants. The Company is also in the
process of renewing its fifty year water agreement with the government of
Gujarat.
Captive Power Generation
Atul Complex is self sufficient in meeting continuous and uninterrupted
steam demand for all its chemical manufacturing processes and it also
meets more than 95% of electricity demand for its housing colonies. At
Atul Complex, there are three captive power plants consisting of coal/oil
fired boilers and turbo generator sets having capacity ranging from 2 MW
to 18 MW. Over and above this, diesel generator sets have been installed
so as to facilitate the start up from total black out. All boilers and power
20
generation sets have been designed to meet the stringent pollution norms
as fixed by Gujarat Pollution Control Board.
Effluent Treatment
The industrial effluent is fully treated in a well-designed state of art effluent
treatment plant. The industrial effluent is discharged through a 4 km
underground pipeline for ultimate disposal into the estuarine zone of river
Par. The domestic effluent is treated and disposed off in a Septic Tank /
Soak Pit system.
Development efforts to minimize the generation or to recycle / reuse the
effluent are a continuous process at Atul Limited. Only after exhausting all
these options, the wastewater is taken to Central Effluent Treatment Plant
(CETP). This CETP designed by Degremont (India) Ltd., has a capacity to
treat 20,000 m3/day.
Atul has developed a site for disposal of solid wastes by land filling. The
site was selected on the basis of a technical Environment Impact
Assessment (EIA) study done by National Productivity Council (NPC).
NPC also has given the detailed design of the site. On the basis of this
technical EIA and the design, site for TSDF was approved by the state
level committee and Gujarat Pollution Control Board.Snapshot of Facilities
The dimensions of the infrastructure facilities at Atul Ltd's manufacturing
sites at Atul and Ankleshwar are given below.
DescriptionUnits of
Measurement
Atul Site
Ankleshwar Site
Land Area Acres 1250 33
Effluent Drainage System Kilometres 65 GIDC drainage system
Effluent Treatment Plants Cubic Metres/Day
30000 2500
Incinerators Numbers 4 NIL
21
Captive Power Plant (installed capacity)
Megawatts 29 2.4
Electricity Consumption Million Units/Month
13 1
Steam Generation (installed capacity)
Metric Ton/hour
217 32
Water Storage Cubic Metres 2 millio
n
1450
Housing Houses 1100 36
Research & Development The primary thrust of Atul’s Research & Development efforts is to develop
products and processes that are efficient, safe and environmentally
friendly; and which cater to demands of global and domestic customers.
Process and product improvement are also key activities of the R&D
group. In order to respond quickly to market demands, every business unit
(Agrochemicals, Aromatics, Bulk Chemicals and Intermediates, Colors,
Pharmaceutical Intermediates, and Polymers) has its own Research &
Development team. The central Research & Development group provides
common facilities like pilot plant, certain analytical instruments, technical
library etc.
Our entire Research & Development team consists of Doctorates and
Graduates. We subscribe to several Indian and international journals and
magazines. We are well equipped with analytical instruments such as
HPTLC, GCMS, DSC, atomic absorption spectrophotometer, HPLC and
GC. We have established links with certain CSIR laboratories like IICT,
Hyderabad; NCL, Pune; and CSMCRI, Bhavnagar with the primary
purpose of technology transfer and sponsored research programmes.
During 2004-05, the Research & Development team developed
approximately 70 processes and the Company commercialized ~ 40
processes. Close to 30 processes were improved with respect to raw
22
material and utility usage, batch cycle time and waste reduction. Several
new methods of analysis (Wet Chemistry, HPLC, GC) were developed.
Aromatic Division
Aromatics the erstwhile Gujarat Aromatics Ltd., a company under financial
stress, was taken over by AL in 1985 and was formed as aromatics
division of AL. It is one of the largest manufacturers of Cresols and their
derivatives in India. These products are used in the manufacture of
flavors, fragrances, cosmetics (sunscreen lotions), bulk drugs and
antioxidants. The Para-cresol capacity at AL is 10,000 tpa and the
company is planning to increase it to 15,000 tpa. The world requirement
for Para-cresols and its derivatives is 50,000 tpa and AL already has 20%
share of it. Aromatics Division is one of the world’s largest manufacturers
of Para anisic aldehyde, Para cresol and Para anisic alcohol, supplying its
products to diverse industries, including cosmetics, flavours and
fragrances, bulk drugs, dye intermediates; and plant and animal micro-
nutrients.
The Division's manufacturing site is located at Ankleshwar in Gujarat,
about 350 km north of Mumbai.
Aromatics has strengthened its global competitiveness through process
innovation and has developed new tools to gauge customers’ needs.
Through collaborations with universities and research institutes, the
Division gets access to new knowledge and technology constantly.
A brief summary of various products and their respective applications is as
follows:
23
Product. Group Applicationzp-Cresol, o-Cresol Antioxidants, Agrochemicals, Bulk drugs,
Resins
p-Cresidine Dye intermediatesp-Anisic aldehyde, p-Anisyl alcohol
Bulk drugs, Cosmetics
p-Anisyl acetate, p-Cresyl acetate
Electroplating
p-Cresyl methyl ether Flavour & Fragrances
p-Methoxyacetophenone
Manganese sulfate Agrochemicalsm, Animal feed
Manganese carbonate Ceramics
Sodium Sulfite Paper
24
25
Human Resource Department
In the modern world, it is not possible for an existence of any business
organization without personnel department. Personnel department works
like a “Heart in the body of organization.” It is the most important area of
any business organization. Personnel management is an art of getting
thing work done through other people. In any firm, we can find the priority
of personnel department. Personnel department is an internal part of an
organization. Personnel management generally deals with planning,
organization, directing and controlling the function of producing,
maintaining development and utilizing work force of the business
enterprise to help for achievement of the objectives.
The management of man is very important in any organization.
Management means to get work done through the people personnel
management totally covers this definition because enterprise runs by the
people as it is righting says that manage your men, men will manage your
work. Men are a heart of unit and make organization living. The success of
unit mainly depends on the personnel functioning in the organization.
It is very important branch of knowledge most of the progressive
organization having separate department appointing the expert as a
personnel manager. The success of any organization depends upon
workers and therefore it is considered as mind your men and men will the
other entire thing.
Obtaining involves such activities as recruitment selection, manpower,
planning while maintaining involves performance appraisal, employee’s
grievance, employees status factor with respect to wages, hours, working
conditions and relation among labour and manager.
26
Objectives
To manage the personnel effectively
To ensure motivated and committed workforce for the
organization
To maintain harmonious relation between the employee and the
organization
To provide effective services to other departments, etc.
To provide training & development to enhance promotional,
behavioral and human skills.
ORGANOGRAM OF PERSONAL DEPARTMENT
27
M.P.KULKARNI (V.P HR)
S.S. KOKLE (G.M) TRN & DEVLOP
MONISHA SINGH
(Performance appraisal )
SIR ASHITOSH(RECRUITMENT &
SELECTION)
SANJAY SONI(HR MANAGER AEROMATIC DIVISION)
JAYESH PATEL (ASST MNG HR)
Rakesh Chauhan(LAOUR WELFARE)
TIME KEEPING OFFICE (TKO)
ATUL LTD. Has a very effective time keeping system. The TKO is
situated at the main gate of the company and is responsible for
maintaining the Muster Roll ovary department and for every shift. The
TKO consists of three staff members, two for attendance recording and
one for special purpose.
The attendance recording system (ARS) is fully computerized, where each
permanent employee is given Punch Card, which needs to be punched
while. “In Coming and Out going” by each and every staff workers, staff
members and management members except the managing director. The
card is detailed with employee name, date of joining, employee number,
blood group and a code for punching. For the attendance of temporary
and trainee workers the company has attendance taking card which is
operated manually.
The special purpose activity includes record of PF, distribution of uniform,
shoes, etc. Superannuation, Gratulty and clearance form.
The TKO maintains various records like:
Level Record
Promotion Record
Registration & Recruitment Record
Overtime Record
Employee history Record
Absenteeism Record
Early Going and Late Coming Report
Positive/negative Report
28
All types of forms like advance Salary leave Travel Allowance,
Medical Loans etc.
Advantages of Attendance Recording System:
As the system is fully computerized, the chances of mistakes are less or
nil as compared to manual work. Serves as a basis of fixing wages and
salaries. High rate of absenteeism on the part of workers can be known at
the correct time and reported to concerned department.
HUMAN RESOURCE PLANNING: (HRP)
“Manpower planning is process of determining and ensuring that the
organization will have an adequate number of qualified personnel.”
THE COMPANY FOLLOWS TWO APPROCHES OF HRP
(1) Top Down Approach -
In case of Top Down Approach the Top Management makes the study of
Human Resource Planning mostly for the expansion of business. Over
here uncertainty for the business like retirement, old age, ill heath etc of
the employees are predicted before hand and planning regarding
manpower is done.
Such plans can be
-Short Term: for next 2 years
-Medium Term: between 2 to 5 year
-Long Term: more than 5 year’s
(2) Bottom Up Approach-
Over here the lower level people gives feedback to the top level. The
lower level discusses with the top level regarding the manpower plans and
the top level tries to fill up the vacancies. Both this method re used in
29
ATUL LTD, but the Bottom up Approach is given more importance than
the Top Down.
PERFORMANCE APPRAISAL
Performance appraisal is the process of evaluating the employee’s
performance on the jobs in the terms of the requirements of the job.
ATUL LTD goes for an effective performance Appraisal system, as this is
the time to remind that only hard work without achieving corresponding
results cannot improve the balance sheet of the company, nor can it
contribute towards the company’s
GUIDELINES suggested for the success of review meeting (meeting
conducted before performance appraisal Programme);
Fix the meeting in advance
Create a relaxed friendly atmosphere
Be prepared to listen, appraise also has a point of view
Avoid interruption and arguments; have patience
Keep contents of meeting Confidential
Do not promise any promotion, financial incentives or any rewards
The right framework to the whole process of appraisal is the corrective
implementation of Performance Management System (PMS) and the
Individual Development Meetings (IDM’s) the company uses both
traditional as well as the modern methods of Appraising.
30
1. TRADITIONAL METHOD
Forced distribution method
The rating provides by the Appraiser to the Appraise is based on the major
contribution and the appraiser. In the company, the baring is on the major
contribution and the quality of the same. The appraiser while rating the
same
The appraiser while rating uses the following rating criteria:
RATING INDICATORS In results do not meet the goals at all and are below acceptable standards
(Improvement needed)
S results fall slightly below basic goals, but not are in unacceptable
category, scope for higher (satisfactory) contribution
G results meet required achievements levels and on few occasions even
exceed them.
(Good) VG results fully meet and at several times exceed sets goals and
that appraise had
To counter difficulties in (very good) achieving the goals/actions
E In general, results consistently far exceed goals in spite of difficult
environmental factors, the (excellent) appraise always operates at high
performance level.
2) CRITICAL INCIDENTS
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The Company uses critical incidents Method where the workers
performance is appraised in terms of some events that occur in the
performance of the Rate’s job. But is missed out in the appraisal form.
The appraiser keeps a records and increments.
MANAGEMENT BY OBJECTIVE METHOD
For appraising the High Officials, the company uses the MBO technique.
Over here, the management first sets the overall objectives of the
company and later they communicate those goals to the Officials. Then a
good amount of Discussion takes place between the management and the
Officials regarding the Objective setup before and also the ways and
methods of measuring employees.
This discussion leads to adoption of either the received or the same or
completely changed objectives, with the will of both the parties. This is
Joint Goal Setting between the Manager and the Subordinate. Lastly, the
employees would try to achieve their objectives within the given period
and also feedback to the manger about their Goal Progress. This method
minimized the External control and maximizes Internal Motivation.
Performance Appraisal leads to,
1. Grade change.
2. Monetary reward and even.
3. Double increments.
TRAINING TO SECURITY STAFF
The Workers in the security & Fire Department are trained through Wet
and Dry Demonstration. Over here, Wet Training means training through
practical application by the Fire Officer. Where Dry demonstration is done
through verbal instruction without operating the equipment’s.
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The Security Departments Major Achievement in this company is that so
far no big accident has come up in the company’s history.
CANTEEN ADMINSTRATION
Labor Contractors are Private authorities who bring labor on temporary
basis. They are given a P.F. code and insurance Policy if they bring 9 or
below 9 employees. But license is needed for bringing more than 9
employees. If a contractor brings more than 9 employees without any
license, he would be charged penalty or terminated.
Even though the Contractor Administration 12% is contributed by the
employee and other12% by the Contractor which is reimbursed y the
company later. The Contractors are benefited as they get 25% of the
wage from the company as commission, from which 10% is profit and 15%
is the Labor liability.
GENERAL SERVICES
It includes:- 1. Postal Services 2. Ticket Reservation3. Reception etc 4. Courier Services.
COLONY MAINTENANCE
Housing Facility is given to all the permanent employees of the company
on the basis of their position in the organization. The rates of the Houses
are provided at a subsidized amount and the usually deducted from the
Salary of the employees. The Major Facilities in this Colony are
recreational facilities for families and library. Schools, parks etc for
children.
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INTERNAL CUSTORMER SATISFACTION
According to ATUL LTD employees are the first customer of the company,
and if they are satisfied, everything will go on the right path. If the
employees are not satisfied. It will adversely affect the productively.
Internal customers refer to the employees of the company. ATUL LTD
gives more emphasis on internal Customer Satisfaction. It is the First
Company in South Gujarat, who looks after this concept. The personnel
department gives a form to the employees for their feedback with respect
to,
1. Job Satisfaction
2. Working Condition
3. Housing Facilities
4. Wages & Salary (timing of payment)
5. Other Facilities like Parking, Canteen, Medical, Safely etc.
Form the above form, if the employees of the company are dissatisfied,
then the Personnel manager personally meets that particular employee
and discuss regarding the matter. If he finds that his point needs to be
taken into consideration, then further action may be taken.
INDUSTRIAL RELATIONS
Industrial relation continues to be harmonies with the company sharpening
its focus on productivity and discipline. The name of the single Trade
Union Prevailing in this company is the “Cibatul Kamghar sangh.” This
Union always gives constructive ideas to the management whenever they
need for. But sometimes they resist to ideas suggested by the Company
when they are against the worker interest.
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In this company it is generally observed that the problems and grievances
are solved through mutual understanding. There are no single day strike
observed in the Company since its first day.
WELFARE ACTIVITIES
Uniform & shoes, ATUL LTD provided to its employees every year. For
the fire and security department employees fire proof uniforms are given.
Company provides different types of Shoes to its workers and office staff,
for the protection of workers feet against hazardous and flammable
chemicals.
Traveling, In ATUL LTD, the transport and traveling section is working
under he personnel Department, The function of this department are as
under :-
Transport facilities like Rail & Air booking, Hotel Booking, Transport
Facility, Guest House Accommodation, Lunch and Dinner Arrangement for
the visitors and guest, Transportation of goods within the Factory
Premises, Emergency Transport facility in case of disaster or accident
either in the factory premises or in the colonies, It also includes Canteen
Administration, Medical Facility, Housing, Lockers etc as explained above.
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RECRUITMENT
“Recruitment is the process of searching for prospective employees and
stimulating them to apply for the job in the organization”.
COMPANY’S SOURCES OF RECRUITMENT
INTERNAL SOURCES
- Transfer.- Promotion.
EXTERNAL SOURCES
- Campus Recruitment.- Placement Consultant.- Employment Exchange.- Labor Contractors.- Advertising Agencies.
INTERNAL SOURCES
The Company gives more emphasis on the Internal Sources rather than
External. It believes in the policy of “First Preference to Existing
Employees”, so as to motivate the employees and reduce the cost. The
two sources of Internal Recruitment used by the company are -Transfer –
Transfer involves the shifting of an employee from one job to another, one
department to another or one shift to another.
TRANSFER POLICY
As the Company has two units ATUL LTD PPSITE and ATUL LTD at East,
so transfer is a good source of filling vacancies with employees from
overstaff units/departments/shifts to another. Promotions – The Company
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believes in promotion as the best source, but it is a bit rigid. It believes in
Merit basis promotion rather than seniority. But when the seniors are
really capable as compared to the new employee, the senior Employee is
given the first chance of promotion.
PROMOTION POLICY
The Company encourages automatic promotion at all the levels of the
Organization, but under certain circumstances. Whenever a particular
employee remains in a particular grade for a state period of time, he is
promoted to a job of higher grade. Promotion other than the grade
promotion takes place only when a higher level post is vacant. To fill up
the vacancies form within the Company as far as possible (only eligible
employees), on basis of Performance Appraisal System. In certain cases
when a particular employee has some outstanding skills which is required
for higher level post is to be promoted.
EXTERNAL SOURCES
Campus Recruitment
The main External Source of Recruitment for this company is through
Educational Institutions. According to them this source not only brings
new blood in the Organization, but also innovative ideas, technical
knowledge and fresh talents. The students are first taken as Management
trainees and later they are grouped into 4, according to their performance.
- Permanent at job - Extended Promotion.
- Probation - Terminated.
- Placement Consultants.
For Recruiting technical, Professional and Managerial Personnel, the
Company goes for Placement. Placement Consultant are privatized and
37
saves the Company’s time in receiving and screening of applications.
There are many Placement Consultants for this company. One of them is
SEARCH Consultant.
EMPLOYMENT EXCHANGE
Employment Exchange’s run by the Government is regarded as a good
source of recruitment for Unskilled and Skilled Operative jobs. The
company has compulsion to give notification of vacancies to this
exchange. Thus the Employment Exchange brings the Employer in
contact with the job seeker, but the Company need not compulsorily
provide that job to the employee, who is been sent by the Employment
Exchange.
LABOR CONTRACTOR
The company finds a Labor Contractor, who brings worker on temporary
basis. The norms and procedure regarding labor Contractor are to be
followed by the Contractor as mentioned in the Contract Administration.
(As above)
ADVERTISING AGENCY
When the Company is unable to get suitable Candidates from the above
Sources, it goes for Advertising Agency. The company gives last
preference to this source because it brings in flood of response and many
a times from quite unsuitable candidates.
NOTE: The pattern of Interview remains the same for all the employees,
but a slight change takes place depending upon the type of job. In case of
Higher Level Jobs, before giving the Appointment Letter the Interviewee is
taken to the Managing Director and if the Managing Director finds the
Candidate suitable, he is appointed or else is discarded. In case of
Technical Field, the Candidate is first interviewed by the personnel 38
Manager and later by the Concerned Department Head to check his
technical knowledge.
INDUCTION
After an employee is selected for this Company, he is induced by giving a
friendly welcome Induction is done according to the ISO 9001 policy. A
staff member form the Personnel Department or the personnel manager
himself takes the new employee to the Concerned department and
introduce him to his new environment (Rule and Regulations. Superiors,
Fellow Employees etc)
WAGE & SALARY STRUCTURE
Wages and salary system is also managed by this Department. The
Employees satisfaction is the top priority of the company, which is
reflected by the Healthy wage and Salary structure designed over here.
The company follows the Minimum Wage Rate Policy, fixed by the
Government. But in practical use they pay more than the rate fixed in the
above policy. It includes the following concepts.
Shifts and Working Hours – Timing at ATUL LTD (AEROMATIC
DIVISION) for General Shift is 8:00 hrs to 17:00 hrs on all working days.
Lunch time is from 12:00 to 13:00 hrs. There are no shifts for Management
Cadre. But as the Company goes for Round the Clock Production,
There are three other shifts for workers;
Leave Structure
Weekly off – In an Employee is at the Office, the Weekly Off is on
Sunday. If at Branch Office, the Weekly Off is on Saturday and Sunday.
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Paid Holiday – The Employee are entitled to 8 paid Holidays during the
Calendar Year, which the Management declares in the month of January.
Privilege leave – Privilege Leave is available @ 30 days per Calendar
Year which is credited @ 2.5 per month is credited after completion of one
month.
Sick Leave – 9 days sick leaves are available per annum and credited on
1 January every year. During the first year of Employment, however this
leave benefit will be available on pro-rata basis.
Accumulated Sick Leave can be encased at the time of retirement and
death only, which can be upto a maximum 72 days.
Casual Leave - 9 days Casual leave is available per annum and credited
on 1st Jan every Year. During the first year of Employment, however this
leave benefit will be available on pro-rate basis. Since casual leave
benefit cannot be carried to the next year, at the end of the Calendar Year
the outstanding Leave balance will automatically be encased and included
in the salary of the subsequent month.
Special Leave - the Managing director under exceptional circumstance
will have the discretion to grant any additional leave, termed as Special
Leave to Individual. Such Leave will normally believe without pay, unless it
is for the benefit of the company.
Other leaves – Maternity leave, leave after Resignation, Compensatory
leave, Unauthorized Absence etc.
Employee Turnover and Absenteeism Rate –
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The Employee Turnover Rate in ATUL LTD (Aeromatic division) is around
3%. The Absenteeism rate is around 2%. Most of the employees remain
absent because of some Social or Physical Reasons.
TRAINNING PROCESS:-
Types of Training
The company goes for house training for both external and internal
training. The company mostly prepares to go for off the job (external
training). In house training includes training by supervision, whereas
Lectures and Seminars are the part of External Training.
Training Policy : - 7 man days of training and development programme
of all the employee is compulsory
Training Process : - The Training Need Identification process is carried
out in October and November every year.
Training Calendar :- The Training Calendar is prepared at the end of
the year.
Nomination:- The names, training details and time schedules for each
and every employee is nominated by his immediate superior. Each
department head is very much familiar with the strength and weaknesses
of the Employee of his office department. As a result he is the best
person to suggest the names of trainee.
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Training Program:- Over here the planned training programs are
actually being implemented in the company
Feed back:- Feed back about the program is given by the Trainee to the
personal department by filling up Questionnaire which gives us the idea
whether the training program was excellent, good, average, satisfactory,
or poor.
Evaluation:- The concerned department head evaluates the
performance of the Trainees in terms of effective or not effective. The
Company Surveys into each and every department. The departmental
heads has to give details regarding increasing the jobs of each employee
and if needed they need to be trained regarding increasing productivity
and skill.
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43
44
INTRODUCTION Production is the creation of the goods & services. Major emphasis is on
the creation of goods. Manufacturing production is the systematic step-by-
step conversation of raw materials through creation of form utility in goods.
Producing goods is an interact & complex process Goods on the shelves,
ready to sell do not just happened they are the end results of much careful
thought & planning. The job of production management is to weave
together those factors (man, material, and machinery) for those sole
purposes of economical delivery of quality goods to customer.
Production management deals with decision-making Related to production
processes, so that resulting goods or services is produced according to
the expectations, in the amount end by the cost. Production management
is associated with two broad areas of activity, the design & control of the
product system”.
Thus in a broader sense production management concerned with co-
ordination of management men, material, method, machine & money in
manufacturing goods. In a narrow sense it means planning, scheduling &
controlling the flow of materials to a plant.
Where as in Atul Aeromatic division the production process is undertaken
very carefully as they produce chemicals which has to meet the exact
configuration which the customers need as the slightest variation in the
combination would bring a greater change in the final product which would
not match the standards of the customer requirements so the production
or the manufacturing process at Atul is undertaken with extra caution .
The production site of ATUL (Aeromatic division) is at GIDC Ankleshwar,
the plant work 24 hours in shift it has been employed with more than 250 45
workers totaling both the employees the permanent employees and also
the daily contract workers.
The major demand or the challenging market for ATUL (aeromatic
division) Is the forign market, From the total sale of aeromatc division atul
the 70% is from the export business., as the company enjoys monopoly
production in the India there are no competitiors in the domestic market
The major competitiors in the forign market are the manufacturers from
China , as they are able to produce the same product at cheaper rate
sometime s due to the various factors like Political influence, cost of raw
material , etc.
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PRODUCT PROFILE:-
Key Products
Name
Para Cresol 99%
Para Anisic Aldehyde
Para Anisyl Alcohol
Para Cresidine
Ortho Cresol
Para Cresyl Methyl Ether
Inorganics
Name
Manganese Sulphate Powder
Sodium Sulphite
Liquid Sulphur Dioxide
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Perfumery Grades
Name
Para Anisic Aldehyde
Para Anisyl Alcohol
Para Cresyl Methyl Ether
Para Cresol
PRODUCTION PROCESS :-
The ATUL (Aeromatic division) has to mainly offer in the market, the major
of use of the product are Aroma products, Drugs, Dyes intermediate,
Antioxidents, manufacturing of soaps etc.
PARA CRESOL 99
Para cresol plant is the main plant in this division as it not only covers the
major part of their sales percentage compared to the other products The
capacity of the plant is 11000 Mt/tones and 900 Mt/tones also serves as
the major raw material for the other products like Para cresidine and which
is also used as the raw material for the production of Para Anisic
Aldehyde and Para Anisic Acid .
PARA ANISIC ALDEHYDE
The plant of PAA also have the latest technology of the plant of the
production process the capacity of the plant is 500 Mt/tones per month.
PARA ANISIC ACID
During the process of production of para anisic aldehyde during the
washing process the waste is extracted from PAA and when the waste is
treated by the distillatation process than the Para anisic acid is obtained
through the process.
PARA CRESIDINE
The plant present at Atul for PC has the capacity of 45 Mt. tones per
month, its geneally used for manufacturing of Dyes .
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ORTHO CRESOL
OC is generally obtained by the cresol mixture , by the process of
decolorizing of the orthophenol obtained through the floronation process
and the product obtained is ortho cresol .
MANGANESE SULPHATE POWDERSODIUM SULPHITELIQUID SULPHUR DIOXIDE
These are the bi products which are obtained while the production process
of the various chemicals stated above.
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THE PRODUCTION PROCESS CHART AS PER THE PROCESS THE PRODUCTS ARE AS FOLLOWS:-
PARA CRESOL 99 AND ORTHOCRESOL
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RAWMATERIAL TOLUENE,SO3,SO2,
ACETIC ACID
SULPHONATION BY CAUSTIC SODA
FUSION PROCESS
SEPRATION PROCESS
BI-PRODUCTSODIUM SULPHATE
ACIDFICATION
DISTILLATION
CRESOL MIXTURE SEPERATION
ORTHO CRESOL PARA CRESOL-99
BI-PRODUCTMAGNESIUM SULPHATE
PARA ANISIC ALDEHYDE & PARA ANISIC ACID
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RAW MATERIAL PARA CRESYL METHYL ETHER
METHILATION
OXIDATION
WASHING
BI –PRODUCT BY CAUSTIC WASH
AND BY DISTILATIONPURE PARA ANISIC ACID
DISTILATION PROCESS
PARA ANISIC ALDEHYDE
PARA CRESIDINE
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NITRATION
METIALATION
REDUCTION
DISTILATION
PARA CRESIDINE
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INTRODUCTION
The marketing has changed greater in the present day world. The
marketing has developed many activities to satisfy the needs wants of a
group of customers. Entering into 21st century. Marketing has become one
of the important criteria for a company product or services to sell in state,
national and international level. After world war 2nd, the development in the
field of science and technology, social and political, economical and other
relative regions have changed tremendously and brought new dimensions
in marketing. So as marketing gained momentum in the development of
new markets and new avenues of selling a wide range of goods and
services that has changed and development to meet the consumer need
at right time.
Marketing is a set of human activities directed, facilitating and
consummating exchange. It is change of products and the transaction is to
satisfy that human needs and wants. Human effort, Finance, Management
constitutes the primary sources in marketing. The marketing mix covering
products, price, promotion and distribution (place) strategies will be
implemented to accomplish the object of customer satisfaction and
profitability.
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FUNCTIONS
There are two types of function in sales and marketing department.
ROUTINE FUNCTION
- Receiving inquiry from the customer.
- Sending quotation to the customer.
- Receiving order from the customer.
- Concern production department for special requirement.
- Prepare schedule for the production department.
- This department has a job of preparing invoices, bank letter, side
draft, credit note, sales certificate etc.
- They consult the customer and ask about the ‘C’ from. If out side of
state.
- They keep in touch continuously with their sales representative or
argent.
- Dispatching goods to customer.
- Receiving payments and maintain payment details.
- They prepare advertisement about the product and give it into the
different business media.
- They send reminder to the customer.
SPECIFIC FUNCTION
This department gives suggestion to make improvement in systems to the
management whenever required. They perform personnel follow up to
production department for preparing order in time. They understand the
special requirement of the customers and try their level best to satisfy
them. They established personnel contacts with their customers as well as
agents. They always try to provide letter service to the customer.
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PRICEING
Price is the only element in the marketing mix that creates sale revenue,
the other elements are cost. Company is using the most commonly used
strategy and i.e. the skimming pricing strategy. The company is also using
differential price strategy that involves ago. Indifferenciating it’s price
arose different market segment. The company sets its price from the given
points.
- Selecting the pricing objective.
- Determining demand.
- Estimating cost.
- Analyzing competitions costs prices and offers.
- Selecting price method.
- Selecting the final price.
- Impact of global market.
MARKETING RESEARCH
In the worlds of Phillip Kotler “marketing research is a systematic problem
analysis model building feat finding for the purpose of improve decision
marking and control in the marketing of goods and services. As the
company is engaged in the Cheamical business it needs the market
research. They are using the produces, which covers the following
points.
- Problem formulation
- Data collection
- Marketing sample
- Data evaluation
- Interpreting data
- Report preparation
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The main object behind this is that it finds out for company. Where are his
customers? What they willing to pay for it? what is the Impact and use of
technology? They are researching leaps it’s use in reducing and
minimizing all marketing costs particularly selling advertising and
distribution cost.
DOCUMENTS
- Inquiry letter
- Quotation
- Order
- Schedule
- Transport receipt
- Invoice
- Bank letter
- ‘C’ form
- Side draft
- Payment Details
- Circular
- Advertisement
INQUIRY LETTER
The purpose of inquiry for buyer is to find out the cheapest and best
source of purchase of goods required. Inquiry contains products, name,
price, quality, quantity, discount rate, delivery period and other terms and
conditions. Inquiry received by this department is kept in inquiry register.
QUOTATION
The main purpose of the quotation is to give ideas to customer about the
under mentioned matters.
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- Mode and terms of payment.
- Place and time of delivery.
- Method of transport.
- Changes of sales tax, octroi, freight and insurance.
- Packing and forwarding changes.
Quotation signed by the proprietor in charge.
ORDER
Customer sends orders either through phone, fax, E-media or through
letter. Order received by this department is records in order register
There are three types of order:
- New order
- Repeated order
- Regular order
SCHEDULE
This department transfers information about the order to the production
department in schedule. They also indicate the time limit for the production
department. The manager of the company signs schedule.
TRANSPORT RECEIPT
The transport corporation prepares transport receipt. The two copy of this
receipt are prepared
(1) Consignee copy, which is, sends to the customer with goods.
(2) Consignor copy, which is kept in record of this department.
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INVOICE
Invoice is prepared at the time of dispatching of goods. This department
prepares three copies of invoice. Original copy is sent to the customer.
Second copy is for transport. Third is for excise records.
BANK LETTER
This department to the bank drafts bank letters. The mode of payment is
described in it. Transport receipt & invoice is attached with the bank letter.
“C” FORM
“C” Form is a government-approved form for registration of customers
firm. If customer has “C” Form he bound to pay 4% as a Sales tax & in
other situation he has to pay sales tax as per the product.
SIDE DRAFT
The sales & marketing department & sends prepare side draft to the
customer. After acceptance from customer, it is valid up to the mentioned
time. It means customer is bound to pay to bank after this time limit.
PAYMENT DETAILS
In payments details this is a record of incoming payment for particular time
period. In payment details customer’s name, mode of payment received,
amount of payment & customer’s account number are mentioned.
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CIRCULAR
Circular is mainly send to the customer for marketing purpose. Circular
contains the information about the new changes made by the company or
by the government.
ADVERTISEMENT
The main purpose of advertisement is providing information to the
customer & improves the sale. It gives the brief idea about the company &
product, which is very much helpful in competitive market. Advertisement
is published into the different media at the particular time limit.
COMMUNICATON
The marketing communication process has five major competent i.e.
sender, message, receiver, response and feedback. The sender is itself
the Hi-tech. Which sends message through advertisement. This
advertisement reaches the message to the receiver or audience about the
product by buying the Hi-tech. This is than feedback to the company.
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INTRODUCTION
Finance plays a major role in determining the position of a company. A
person not trained in finance management of a company may face N
number of problems which may affect the day to day functioning of his
company. A person not having knowledge of finance my not be able to the
exact suitable return on his investment, account and finance walk parallel
but as compare to account finance is a waste subject.
A person trained in Finance is able to take financial decision wisely and
quickly which gives better return on investment and have a better chance
to survive and compete. A business house must necessary keep a
systematic record of what happens from day to day, so that it can know
where it stands & where it will go in future. A systematic record of the daily
invents of a business leading to presentation of a complete financial
picture is known as accounting.
Financial account includes trading account, profit & loss account and
balance sheets. Trading account is a part of profit & loss account. It
indicates the earning capacity of the enterprise. Balance sheet indicates
financial position of the enterprise. In broad sense financial accounting
system refers to:
Recording of transaction in journal or its subsidiary books.
To post them ledger and data store in to computer.
To prepare final account.
The financial picture mostly have two parts, one showing how much profit
has been earn or loss suffered and other sowing assets & liabilities and a
proprietor’s interest in the firm. A firm constantly enters into transaction
with out siders. A transaction may be defined as an action & reaction
having monitory implication of one firm in relation to another firm.
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In other words accounting defined as, “The Art of recording, classifying &
summarizing in a manner and it terms of money transaction and events
which are, in part at least, of a financial character & interpreting the result
thereof”.
FUNCTIONFunctions of accounting department are as under:
ROUTINE FUNCTIONS
This department examines the challan in respect of payment. This
department handles the income tax and sales tax cases. This department
collects the vouchers from the various departments. They note the entries
in the sales return book on the basis of credit note & the entire of stock
register. This department makes casting and posting from sales return
register to ledger. They fill up the sales and income tax return per month.
They checked whether the income tax department has given a correct
order for payment of tax in advance. This department handles the all
transaction with bank. They prepare the daybook, ledger, trial balance,
manufacturing and profit & loss account and the final balance sheet.
SPECIFIC FUNCTION
This department submits monthly report to G.M. This department makes
necessary recommendation for change in system and in procedure to the
management. They ensure that the funds are raised economically and
used in the most efficient manner. Communicating the result. Accounting
is to communicate the result obtained from arranging of data to interested
parties like proprietors. Protecting proprietors of the business. Accounting
has to design such a system of accounting as will protect its assets from
an unjustified and unwanted use. Company said nothing write about its
finance company. So that I can’t write about finance department.
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Orgaonogram of Finance Department
64
President(Dr Hariharan)
GM Finance
Manager(Costing)
(S.M Behani)
Manager(Accounts)
(M.D. Gupta)
Raghu Desai(head accounts)
Antana Matha (data entry)
Chetan Joshi(data entry)
H .M .Shah (asst)
Ashok Modi(Asst)
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INTRODUCTION
The Quality Control department at ATUL (Aeromatic Division), is at
Ankleshwar production site where they have to check and certify the
various aspects in the chemical produced and also verify the chemicals
which are brought into the plant as the raw materials . Mr. V.K.Srivastav
(QC dept manager), Mr. Sharad Desai (asst manager), Mr. K.B.Prajapati
(chemist) these are some of the person who are responsible for the quality
check activity in Atul Aromatic division These process are done according
to the ISO standards which can be explained in steps as the Quality check
process are mainly done between these three process .
Raw material check:
All the raw material entering into the Aromatic plant are been checked
randomly from their lot sizes before they are allowed to be stored . The
raw materials checked are if according to the specification which are
required by the company then they allow them to enter the plant or let
them store it or else they are been send back to the suppliers.
In-process check :
As Aromatic plants should produce the chemicals in exact specification
required by the customers so before very lot is been produced their
contents are been checked before the next batch is been processed so
that their products can meet the exact requirement .
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Dispatch process:
The goods before they are been dispatch to the customers are been
verified once again that the dispatch goods are the same goods which are
meeting the requirement of the customers and are if checked ok then a
Certificate of Analysis is attached to the vouchers through which the
customers could know the goods are of exact specification as they
ordered.
Some of the experiments which is undertaken for the Quality check are , GAS COMOTOGRAPY SPECIFICATION its for purity, HYPER PERFORMANCE LIQUID COMOTOGRAPH, ULTRA VIOLET testing, LOVI BALL testing, weight balance , melting point etc.
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The Impact of Appreciating India Rupee on Company’s Export Business
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The Appreciation of Rupee’s value for international trade is a major
concern for the Atul limited (Aromatic Division), as the percentage of
export revenue is more than 50% in the total sales.
Rs in crores
Year2005 2006
Total sales 135.04 167.85
Export amount 78.35
App 60%
112.69
App 70%
What is Currency Appreciation?
Currency Appreciation means that the given currency has become more
value with respect to another currency. For example if the rupee
appreciates it means that rupee has become more valuable in relation to
dollar. In case of appreciation a "downward" movement takes place. Eg:
For instance if the rupee moves downwards from 50 per dollar to 40 per
dollar then rupee is said to appreciate.
FACTORS AFFECTING CURRENCY APPRECIATION:
-- EXIM POLICY.EXIM POLICY.
-- MERCANDISE TRADE BALANCE.MERCANDISE TRADE BALANCE.
-- FORIGN TRADE POLICY 2004-2009.FORIGN TRADE POLICY 2004-2009.
-- MONETARY POLICY.MONETARY POLICY.
- FORIGN INVESTMENT.- FORIGN INVESTMENT.
70
TT hese factors are explained in detail as follows :hese factors are explained in detail as follows :
1. EXIM POLICY :1. EXIM POLICY :
The principal objectives of this Policy are: To facilitate sustained growth in exports to attain a share of atleast 1% of
global merchandise trade. To stimulate sustained economic growth by
providing access to essential raw materials, intermediates, components,
consumables and capital goods required for augmenting production and
providing services. To enhance the technological strength and efficiency
of Indian agriculture, industry and services, thereby improving their
competitive strength while generating new employment opportunities, and
to encourage the attainment of internationally accepted standards of
quality. To provide consumers with good quality goods and services at
internationally competitive prices while at the same time creating a level
playing field for the domestic producers.
2. MERCANDISE TRADE BALANCE :2. MERCANDISE TRADE BALANCE :
Merchandise trade balance :
First, is trade in goods, i.e., the merchandise trade balance, which is a
very large negative number; we import much more than we export
Second, is the trade in services – software, ITES, travel & tourism – and
here we have a sizeable surplus.
Third, is remittance from Indians who live overseas, which generates an
enormous surplus.
Fourth, are dividend and interest payments, where we pay out more than
we receive.
71
3. FORIGN TRADE BALANCE:3. FORIGN TRADE BALANCE:
Highlights of forign trade policy for 2004-2009 are as follows:Highlights of forign trade policy for 2004-2009 are as follows:
3.1 REMOVAL OF EXPORT CESS3.1 REMOVAL OF EXPORT CESS
The Department of Commerce has taken a consistent stand from a policyThe Department of Commerce has taken a consistent stand from a policy
perspective that taxes and duties should not be exported. The cess leviedperspective that taxes and duties should not be exported. The cess levied
under the different Commodity Board Acts is a tax on exports, which is aunder the different Commodity Board Acts is a tax on exports, which is a
handicap and a major irritant to our exporters and erodes thehandicap and a major irritant to our exporters and erodes the
competitiveness of Indian agriculture exports. Department of Commercecompetitiveness of Indian agriculture exports. Department of Commerce
proposes to abolish cess on export of all agricultural and plantationproposes to abolish cess on export of all agricultural and plantation
commodities levied under various Commodity Board Acts.commodities levied under various Commodity Board Acts.
3.2 3.2 EXPORT PROMOTION CAPITAL GOODS SCHEMEEXPORT PROMOTION CAPITAL GOODS SCHEME
a. For providing a thrust to the Agricultural sector, concessional dutya. For providing a thrust to the Agricultural sector, concessional duty
imports made by agro units under the EPCG Scheme shall be allowed toimports made by agro units under the EPCG Scheme shall be allowed to
fulfill the export obligation over a longer period of time with a reducedfulfill the export obligation over a longer period of time with a reduced
export obligation i.e. 6 times the duty saved over a 12 year period insteadexport obligation i.e. 6 times the duty saved over a 12 year period instead
of the normal window of 8 times the duty saved in 8 years.of the normal window of 8 times the duty saved in 8 years.
b. To promote capacity expansion and quality up-gradation in the SSIb. To promote capacity expansion and quality up-gradation in the SSI
sector, import of capital goods at 5% Customs duty shall now be allowedsector, import of capital goods at 5% Customs duty shall now be allowed
subject to a fulfillment of an export obligation equivalent to 6 times thesubject to a fulfillment of an export obligation equivalent to 6 times the
duty saved on capital goods imported under the EPCG Scheme over aduty saved on capital goods imported under the EPCG Scheme over a
period of 8 years. (At present the export obligation under the EPCGperiod of 8 years. (At present the export obligation under the EPCG
Scheme is 8 times the duty saved and reducing the export obligation forScheme is 8 times the duty saved and reducing the export obligation for
small manufacturing units to 6 times shall provide an impetus to industriessmall manufacturing units to 6 times shall provide an impetus to industries
to modernise their plant and machinery which will enhance our overallto modernise their plant and machinery which will enhance our overall
export competitiveness in the medium term).export competitiveness in the medium term).
72
c. To create modern infrastructure in the retail sector, concessional dutyc. To create modern infrastructure in the retail sector, concessional duty
benefits under EPCG scheme shall be extended for import of capitalbenefits under EPCG scheme shall be extended for import of capital
goods required by retailers having a minimum covered shopping area ofgoods required by retailers having a minimum covered shopping area of
1000 sq metres. The retailer shall fulfill the export obligation under the1000 sq metres. The retailer shall fulfill the export obligation under the
Scheme from payments received against 'counter sales' in free foreignScheme from payments received against 'counter sales' in free foreign
exchange through banking channels as per RBI guidelines. exchange through banking channels as per RBI guidelines.
d. With a view to accelerate exports under the Scheme and to incentivised. With a view to accelerate exports under the Scheme and to incentivise
fast track companies, firms making 75 % or more of the exports under thefast track companies, firms making 75 % or more of the exports under the
EPCG Scheme (including average level of exports) in half or less than halfEPCG Scheme (including average level of exports) in half or less than half
the original export obligation period, shall be freed from the balance exportthe original export obligation period, shall be freed from the balance export
obligation. obligation.
e. Payment received in Rupees for the Port Handling services are countede. Payment received in Rupees for the Port Handling services are counted
for export obligation discharge under the EPCG Scheme. This facility isfor export obligation discharge under the EPCG Scheme. This facility is
now being extended to include minor ports including ICDs and Containernow being extended to include minor ports including ICDs and Container
Freight Stations (CFS) also. This will enable augmentation of the facilitiesFreight Stations (CFS) also. This will enable augmentation of the facilities
available at the secondary ports with modern equipment and therebyavailable at the secondary ports with modern equipment and thereby
reduce cargo handling turnaround time and related transaction costs.reduce cargo handling turnaround time and related transaction costs.
f. The present requirement of submitting an Installation Certificate forf. The present requirement of submitting an Installation Certificate for
machinery imported under EPCG Scheme will now not be required formachinery imported under EPCG Scheme will now not be required for
units which are not registered with Central Excise. In lieu of a Centralunits which are not registered with Central Excise. In lieu of a Central
Excise Certificate, a Chartered Engineer Certificate will now suffice. FirmsExcise Certificate, a Chartered Engineer Certificate will now suffice. Firms
importing spares under EPCG shall also be required to submit aimporting spares under EPCG shall also be required to submit a
Chartered Engineer certificate only instead of a certificate from CentralChartered Engineer certificate only instead of a certificate from Central
Excise authorities.Excise authorities.
g. The facility of clubbing of EPCG licences has been further liberalizedg. The facility of clubbing of EPCG licences has been further liberalized
and restrictive conditions relating to same licensing year and sameand restrictive conditions relating to same licensing year and same
products/services have been deleted. Henceforth, all EPCG licencesproducts/services have been deleted. Henceforth, all EPCG licences
issued under the same Customs Notification can be clubbed. This willissued under the same Customs Notification can be clubbed. This will
considerably reduce paperwork both for the exporter and the licensingconsiderably reduce paperwork both for the exporter and the licensing
authorities and lead to easier monitoring. authorities and lead to easier monitoring.
73
3.3 SERVICE EXPORTS 3.3 SERVICE EXPORTS
a. To enable the Service providers to upgrade the infrastructure in theira. To enable the Service providers to upgrade the infrastructure in their
associate companies, the goods imported under the 'Served from India'associate companies, the goods imported under the 'Served from India'
Scheme shall be transferable within the Group companies and managedScheme shall be transferable within the Group companies and managed
hotels subject to Actual User condition.hotels subject to Actual User condition.
b. At present, Hotels & Restaurants are required to submit a Charteredb. At present, Hotels & Restaurants are required to submit a Chartered
Accountant certificate that the entire duty benefits availed under theAccountant certificate that the entire duty benefits availed under the
'Served from India' Scheme have been passed on to the consumer. From'Served from India' Scheme have been passed on to the consumer. From
now on, only a declaration will be submitted by the Hotels & Restaurantsnow on, only a declaration will be submitted by the Hotels & Restaurants
that the duty benefits shall be passed on to the consumer and no CAthat the duty benefits shall be passed on to the consumer and no CA
certificate will be required to be submitted.certificate will be required to be submitted.
3.4 PACKAGE FOR MARINE SECTOR3.4 PACKAGE FOR MARINE SECTOR
a. Duty free import of specified specialized inputs/chemicals and flavoringa. Duty free import of specified specialized inputs/chemicals and flavoring
oils as per a defined list shall be allowed to the extent of 1% of FOB valueoils as per a defined list shall be allowed to the extent of 1% of FOB value
of preceding financial years export. Use of these special ingredients forof preceding financial years export. Use of these special ingredients for
seafood processing will enable us to achieve a higher value addition andseafood processing will enable us to achieve a higher value addition and
enter new export markets.enter new export markets.
b. To encourage the existing mechanized vessels and deep sea trawlersb. To encourage the existing mechanized vessels and deep sea trawlers
to adopt modern technology for scientific exploitation of our marineto adopt modern technology for scientific exploitation of our marine
resources in an eco-friendly manner and boost marine sector exports, it isresources in an eco-friendly manner and boost marine sector exports, it is
proposed to allow import of monofilament long line system for tuna fishingproposed to allow import of monofilament long line system for tuna fishing
at a concessional rate of duty. at a concessional rate of duty.
c. The present system of disposal of waste of perishable commodities likec. The present system of disposal of waste of perishable commodities like
seafood after inspection by a customs official is very cumbersome andseafood after inspection by a customs official is very cumbersome and
leads to development of unhygienic conditions. To overcome this, a self leads to development of unhygienic conditions. To overcome this, a self
74
removal procedure for clearance of waste shall be applicable, subject toremoval procedure for clearance of waste shall be applicable, subject to
prescribed wastage norms.prescribed wastage norms.
3.5 ADVANCE LICENSING SCHEME 3.5 ADVANCE LICENSING SCHEME
a. No safeguard and antidumping duty shall be levied on inputs undera. No safeguard and antidumping duty shall be levied on inputs under
Advance Licence for deemed export supplies made to ICB projects. WithAdvance Licence for deemed export supplies made to ICB projects. With
this different categories of Advance licences i.e. advance licence forthis different categories of Advance licences i.e. advance licence for
physical export, advance licence for intermediate supplies and advancephysical export, advance licence for intermediate supplies and advance
licence for deemed exports have been merged into a single category forlicence for deemed exports have been merged into a single category for
procedural facilitation and easier monitoring.procedural facilitation and easier monitoring.
b. The scope of Advance Licence for Annual requirement has beenb. The scope of Advance Licence for Annual requirement has been
extended to all categories of exporters having past export performance.extended to all categories of exporters having past export performance.
Earlier, the option was limited to Status Holders only. The earlier limit ofEarlier, the option was limited to Status Holders only. The earlier limit of
obtaining Advance Licence for Annual requirement has also beenobtaining Advance Licence for Annual requirement has also been
enhanced to 300% of FOB/FOR value of exports made in the previousenhanced to 300% of FOB/FOR value of exports made in the previous
year from 200%.year from 200%.
c. Clubbing of advance licences for export regularization purpose hasc. Clubbing of advance licences for export regularization purpose has
been allowed even for licences pertaining to 1992-97 period.been allowed even for licences pertaining to 1992-97 period.
d. Units registered under BIFR shall be allowed export obligationd. Units registered under BIFR shall be allowed export obligation
extension as per the rehabilitation package or a period upto five yearsextension as per the rehabilitation package or a period upto five years
reckoned from the date of issuance of the advance licence, whichever isreckoned from the date of issuance of the advance licence, whichever is
higher. higher.
e. Transfer of Duty Free material imported or procured under Advancee. Transfer of Duty Free material imported or procured under Advance
Licence from one unit of the company to another unit of the sameLicence from one unit of the company to another unit of the same
company to be allowed with prior intimation to the jurisdictional centralcompany to be allowed with prior intimation to the jurisdictional central
excise authority. Earlier prior permission of the jurisdictional central exciseexcise authority. Earlier prior permission of the jurisdictional central excise
authority was required. authority was required.
75
f. In cases the Bank Guarantee/LUT has been redeemed under thef. In cases the Bank Guarantee/LUT has been redeemed under the
Advance licence, the Licensee may be allowed to get duty free inputsAdvance licence, the Licensee may be allowed to get duty free inputs
processed from any manufacturer under actual user condition subject toprocessed from any manufacturer under actual user condition subject to
central excise procedures relating to job work. central excise procedures relating to job work.
g. Removal of requirement of ARO for taking supplies fromg. Removal of requirement of ARO for taking supplies from
EOU/EHTP/STP/BTP units and allowing direct debit of the advanceEOU/EHTP/STP/BTP units and allowing direct debit of the advance
licence by the Bond Officer of these units. A detailed procedure in thislicence by the Bond Officer of these units. A detailed procedure in this
regard shall be prescribed by the CBEC.regard shall be prescribed by the CBEC.
3.6 EXPORT ORIENTED UNITS3.6 EXPORT ORIENTED UNITS
a. Duty free spares up to 5% of the value of Capital Goods imported fora. Duty free spares up to 5% of the value of Capital Goods imported for
excavation purposes in the Granite sector will be allowed to be removed toexcavation purposes in the Granite sector will be allowed to be removed to
the quarries. the quarries.
b. The de-bonding procedure for EOUs has been simplified. A self-b. The de-bonding procedure for EOUs has been simplified. A self-
assessment procedure along with time bound disposal of applications ofassessment procedure along with time bound disposal of applications of
such exiting EOUs will be put in place. such exiting EOUs will be put in place.
c. Capital Goods will be allowed to be transferred or given on loan basis toc. Capital Goods will be allowed to be transferred or given on loan basis to
other units under intimation to both Excise and Developmentother units under intimation to both Excise and Development
Commissioner. Commissioner.
d. Transfer of samples to other EOUs on returnable basis within a periodd. Transfer of samples to other EOUs on returnable basis within a period
of 30 days to be allowed. of 30 days to be allowed.
e. EOUs to be permitted to claim IT exemption in respect of income one. EOUs to be permitted to claim IT exemption in respect of income on
export proceeds realised within a period of 12 months from date of export.export proceeds realised within a period of 12 months from date of export.
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4. MONETARY POLICY :4. MONETARY POLICY :
Monetary policy is the process by which the government, central bank, orMonetary policy is the process by which the government, central bank, or
monetary authority manages the money supply to achieve specific goals—monetary authority manages the money supply to achieve specific goals—
such as constraining inflation or deflation, maintaining an exchange rate,such as constraining inflation or deflation, maintaining an exchange rate,
achieving full employment or economic growth. (Usually the goal ofachieving full employment or economic growth. (Usually the goal of
monetary policy is to accommodate economic growth in an environment ofmonetary policy is to accommodate economic growth in an environment of
stable prices.) Monetary policy can involve changing certain interest rates,stable prices.) Monetary policy can involve changing certain interest rates,
either directly or indirectly through open market operations, setting reserveeither directly or indirectly through open market operations, setting reserve
requirements, acting as a last-resort lender (i.e. discount window lending),requirements, acting as a last-resort lender (i.e. discount window lending),
or trading in foreign exchange markets.or trading in foreign exchange markets.
Monetary policy is generally referred to as either being an expansionaryMonetary policy is generally referred to as either being an expansionary
policy, or a contractionary policy, where an expansionary policy increasespolicy, or a contractionary policy, where an expansionary policy increases
the total supply of money in the economy, and a contractionary policythe total supply of money in the economy, and a contractionary policy
decreases the total money supply. Expansionary policy is traditionallydecreases the total money supply. Expansionary policy is traditionally
used to combat unemployment in a recession by lowering interest rates,used to combat unemployment in a recession by lowering interest rates,
while contractionary policy has the goal of raising interest rates to combatwhile contractionary policy has the goal of raising interest rates to combat
inflation (or cool an otherwise overheated economy). Monetary policyinflation (or cool an otherwise overheated economy). Monetary policy
should be contrasted with fiscal policy, which refers to governmentshould be contrasted with fiscal policy, which refers to government
borrowing, spending and taxation. It is important for policymakers to makeborrowing, spending and taxation. It is important for policymakers to make
credible announcements regarding their monetary policies. If privatecredible announcements regarding their monetary policies. If private
agents (consumers and firms) believe that policymakers are committed toagents (consumers and firms) believe that policymakers are committed to
lowering inflation, they will anticipate future prices to be lower thanlowering inflation, they will anticipate future prices to be lower than
otherwise (how those expectations are formed is an entirely differentotherwise (how those expectations are formed is an entirely different
matter; compare for instance rational expectations with adaptivematter; compare for instance rational expectations with adaptive
expectations). If an employee expects prices to be high in the future, he orexpectations). If an employee expects prices to be high in the future, he or
she will draw up a wage contract with a high wage to match these prices.she will draw up a wage contract with a high wage to match these prices.
Hence, the expectation of lower wages is reflected in wage-settingHence, the expectation of lower wages is reflected in wage-setting
behaviour between employees and employers (lower wages since pricesbehaviour between employees and employers (lower wages since prices
are expected to be lower) and since wages are in fact lower there is noare expected to be lower) and since wages are in fact lower there is no
demand pull inflation because employees are receiving a smaller wagedemand pull inflation because employees are receiving a smaller wage
and there is no cost push inflation because employers are paying out lessand there is no cost push inflation because employers are paying out less
77
in wages. However, to achieve this low level of inflation, policymakersin wages. However, to achieve this low level of inflation, policymakers
must have credible announcements, that is, private agents must believemust have credible announcements, that is, private agents must believe
that these announcements will reflect actual future policy. If anthat these announcements will reflect actual future policy. If an
announcement about low-level inflation targets is made but not believedannouncement about low-level inflation targets is made but not believed
by private agents, wage-setting will anticipate high-level inflation and soby private agents, wage-setting will anticipate high-level inflation and so
wages will be higher and inflation will rise. A high wage will increase awages will be higher and inflation will rise. A high wage will increase a
consumer's demand (demand pull inflation) and a firm's costs (cost pushconsumer's demand (demand pull inflation) and a firm's costs (cost push
inflation), so inflation rises. Hence, if a policymaker's announcementsinflation), so inflation rises. Hence, if a policymaker's announcements
regarding monetary policy are not credible, policy will not have the desiredregarding monetary policy are not credible, policy will not have the desired
effect.effect.
However, if policymakers believe that private agents anticipate lowHowever, if policymakers believe that private agents anticipate low
inflation, they have an incentive to adopt an expansionist monetary policyinflation, they have an incentive to adopt an expansionist monetary policy
(where the marginal benefit of increasing economic output outweighs the(where the marginal benefit of increasing economic output outweighs the
marginal cost of inflation). However, assuming private agents havemarginal cost of inflation). However, assuming private agents have
rational expectations, they know that policymakers have this incentive.rational expectations, they know that policymakers have this incentive.
Hence, private agents know that if they anticipate low inflation, anHence, private agents know that if they anticipate low inflation, an
expansionist policy will be adopted that causes a rise in inflation.expansionist policy will be adopted that causes a rise in inflation.
Therefore, (unless policymakers can make their announcement of lowTherefore, (unless policymakers can make their announcement of low
inflation credible), private agents expect high inflation. This anticipation isinflation credible), private agents expect high inflation. This anticipation is
fulfilled through adaptive expectation (wage-setting behaviour) and sofulfilled through adaptive expectation (wage-setting behaviour) and so
there is higher inflation (without the benefit of increased output). Hence,there is higher inflation (without the benefit of increased output). Hence,
unless credible announcements can be made, expansionary monetaryunless credible announcements can be made, expansionary monetary
policy will fail.policy will fail.
Announcements can be made credible in various ways. One is to establishAnnouncements can be made credible in various ways. One is to establish
an independent central bank with low inflation targets (but no outputan independent central bank with low inflation targets (but no output
targets). Hence, private agents know that inflation will be low because it istargets). Hence, private agents know that inflation will be low because it is
set by an independent body. Central banks can be given incentives toset by an independent body. Central banks can be given incentives to
meet their targets (for example, larger budgets, a wage bonus for the headmeet their targets (for example, larger budgets, a wage bonus for the head
of the bank) in order to increase their reputation and signal a strongof the bank) in order to increase their reputation and signal a strong
commitment to a policy goal. Reputation is an important element incommitment to a policy goal. Reputation is an important element in
monetary policy implementation. But the idea of reputation should not be monetary policy implementation. But the idea of reputation should not be
78
confused with commitment. While a central bank might have a favorableconfused with commitment. While a central bank might have a favorable
reputation due to good performance in conducting monetary policy, thereputation due to good performance in conducting monetary policy, the
same central bank might not have chosen any particular form ofsame central bank might not have chosen any particular form of
commitment (such as targeting a certain range for inflation). Reputationcommitment (such as targeting a certain range for inflation). Reputation
plays a crucial role in determining how much would markets believe theplays a crucial role in determining how much would markets believe the
announcement of a particular commitment to a policy goal but bothannouncement of a particular commitment to a policy goal but both
concepts should not be assimilated. Also, note that under rationalconcepts should not be assimilated. Also, note that under rational
expectations, it is not necessary for the policymaker to have establishedexpectations, it is not necessary for the policymaker to have established
its reputation through past policy its reputation through past policy
79
The Trend of Currency Appreciation Through aThe Trend of Currency Appreciation Through a
ChartChart ::
This graph shows that Indian currency is appreciated in these recent
years from 2001 at the exchange rate of 47.54 to the recent exchange
rate of 40.95 in 2007.
WHAT IS EXCHANGE RATE?
80
“ The exchange rate (also known as the foreign-exchange rate) is the rate
between two currency specifies how much one currency is worth in terms
of the other”.
Example:
1$ = 40.95 Rupees
1euro = 55.09 Rupees
1euro = 1.38 $
Fluctuations in exchange rates
A market based exchange rate will change whenever the values of either
of the two component currencies change. A currency will tend to become
more valuable whenever demand for it is greater than the available
supply. It will become less valuable whenever demand is less than
available supply (this does not mean people no longer want money, it just
means they prefer holding their wealth in some other form, possibly
another currency). Increased demand for a currency is due to either an
increased transaction demand for money, or an increased speculative
demand for money. The transaction demand for money is highly
correlated to the country's level of business activity, gross domestic
product (GDP), and employment levels. The more people there are out of
work, the less the public as a whole will spend on goods and services.
Central banks typically have little difficulty adjusting the available money
supply to accommodate changes in the demand for money due to
business transactions. The speculative demand for money is much harder
for a central bank to accommodate but they try to do this by adjusting
interest rates. An investor may choose to buy a currency if the return (that
is the interest rate) is high enough. The higher a country's interest rates,
the greater the demand for that currency. It has been argued that currency
speculation can undermine real economic growth, in particular since large
currency speculators may deliberately create downward pressure on a
currency in order to force that central bank to sell their currency to keep it
stable (once this happens, the speculator can buy the currency back from
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the bank at a lower price, close out their position, and thereby take a
profit).
TYPES OF EXCHANGE RATE:
Free or pegged:
If a currency is free-floating, its exchange rate is allowed to vary against
that of other currencies and is determined by the market forces of supply
and demand. Exchange rates for such currencies are likely to change
almost constantly as quoted on financial markets, mainly by banks, around
the world. A movable or adjustable peg system is a system of fixed
exchange rates, but with a provision for the devaluation of a currency. For
example, between 1994 and 2005, the Chinese yuan renminbi (CNY, ¥)
was pegged to the United States dollar at ¥8.2768 to $1. The Chinese
were not the only country to do this; from the end of World War II until
1970, Western European countries all maintained fixed exchange rates
with the US dollar based on the Bretton Woods system.
Nominal and Real Exchange Rates:
The nominal exchange rate is the rate at which an organization can
trade the currency of one country for the currency of another.
The real exchange rate (RER) is an important concept in economics,
though it is quite difficult to grasp concretely. It is defined by the
model: RER = e(P*/P), where 'e' is the exchange rate, as the number
of home currency units per foreign currency unit; where P is the price
level of the home country; and where P* is the foreign price level.
Unfortunately, this compact and simple model for RER calculations is only
a theoretical ideal. In practical usage, there are many foreign currencies
and price level values to take into consideration. Correspondingly, the
82
model calculations become increasingly more complex. Furthermore, the
model is based on purchasing power parity (PPP), which implies a
constant RER. The empirical determination of a constant RER value could
never be realised, due to limitations on data collection. PPP would imply
that the RER is the rate at which an organization can trade goods and
services of one economy (e.g. country) for those of another. For example,
if the price of a good increases 10% in the UK, and the Japanese currency
simultaneously appreciates 10% against the UK currency, then the price
of the good remains constant for someone in Japan. The people in the
UK, however, would still have to deal with the 10% increase in domestic
prices. It is also worth mentioning that government-enacted tariffs can
affect the actual rate of exchange, helping to reduce price pressures.
83
How does Indian rupee appreciation is affecting the export business of ATUL AROMATIC DIVISION in
two different ways ?
1. THE EXPORTER WOULD LOSS HIS COMPETITIVENESS IN FORIGN MARKET.
If this is the annual assumed sales of Aromatic division in the four major
products they deal in them, in this diagram the 4 products export sales are shown and the amount of dollors they have earned through this
sales are been showed.
84
CALCULATIONS:
When we convert the DOLLORS we got from the export sales of all the
product according to the previous year exchange rate,
AT 1$ = 44.89 INR
Then by adding the total sales we get
455099.75
+ 96067.08
+ 38488.65
+ 63529.92
-------------------
= 6,53,185.4 $
MULTIPLYING IT WITH THE EXCHANGE RATE WE GET;
=6,53,184.4$ * 44.89INR = 2,93,21,493 ----------------------(1)
NOW WHEN WE CALCULATE THE SAME AMOUNT OF SALES WITH
THE PRESENT EXCHANGE RATE BETWEEN DOLLLORS AND RUPEE
ASSUNMING THAT THE SALES WOULD NOT CHANGE THIS YEAR.
WE GET = 6,53,184.4$ * 40.95 INR (PRESENT EXCHANGE ) = 2,67,47,942 INR ---------------------------------------------------(2)
SO BY SUBTRACTING (1) & (2) WE GET
= 25,73,500 INR LOSS IN THE TRANSACTION
THIS IS THE IMPACT ON THE EXPORT SALES BY APPRECIATION OF RUPEE BY 3.91 INR
85
2. IMPACT OF RUPEE APPRECIATION ON DOMESTIC BUYERS.
Due to Rupee appreciation there has been a greater advantage to the
Domestic buyers of the product PARA CRESOL which is one of the main
product in which ATUL(AEROMATIC DIVISION) manufacture and deals .
The product PARA CRESOL also adds a greater share in companies
profits due to the rupee appreciation the imports have been more cheaper
or the domestic buyers for the same product
Last year the total IMPORTS of PARA CRESOL was around 601.66 metric tones at a cost of 53393.58$, The figure as we can see is more
than our exports of the same product though we are the monopoly
producers of PARA CRESOL in India, which is a great deal for our
Competitors.
86
SUGGESTION FOR THE COMPANIES RISK:
1. IF WE SEE THE OF PARA ANISIC ALDEHYDE IS 3889/-RS PRICE
PER KG. SO IF WHE CONVERT THE INDIAN RUPEE WITH THE
CURRENT EXHANGE RATE OF US DOLLORS AND EURO WE GET,
1KG = 3889 INR1KG = 70.59 EURO (AT RATE 55.09 NRI = 1 EURO)1 KG = 94.96 $ (AT RATE 40.95 INR = 1$)
BUT IF WE SALE IN EURO THAN ACCORDING TO THE EXCHANGE
RATE BETWEEN EURO AND US $, IS
EURO = 1.39 $SO 70.59 EURO IS ULTIMATELY 98.12 $
2. WHE COULD INCREASE THE RATE OF PRODUCT ACCORDINGLY
SO THAT THE LOSS CAN BE BALANCED TO REDUCE THE LOSS
WHE COULD INCRESASE THE PRICE OF THE PRODUCT
ACCORDINGLY SO DECREASE THE LOSSES.
87
LIMITATION
ITS NOT EASY TO CONVIENCE THE BUYER TO TRADE IN
EURO INSTEAD OF DOLLAR .
THE GOVERNMENT POLICY IS NOT IN FAVOUR FOR THE
EXPOTERS IN INDIA
RBI IS NOT ABLE TO CONTROL THE APPRECIATION AND IT
INCREASED MORE THAN 14 % IN RECENT YEARS.
BIBLOGRAPHY
MAGAZINES -
1. IBIT (TRADE INTELLIGENCE MAGAZINES)
BOOKS -
1. INTENATIONAL BUSINESS
- BY FRANSIC CHERULINUM.
WEBSITES -
1. WWW. RBI .ORG
2. WWW. FOREXRATE.COM
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