my project updated

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UTTARAKHAND JAL VIDHYUT NIGAM Ltd. (UJVNL)

A PROJECT REPORT

ON WORKING CAPITAL

AT UJVNL, DEHRA DUN

Evaluated By Submitted By

Mr. V.K.NAINWAL & Mr. MADHUR RASTOGI MUKUL VERMA

Sr. F&AO, MBA 3rd Sem,

UJVNL, SGRRITS,

DEHRADUN DEHRADUN

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ACKNOWLEDGE MENT

The pleasure that follows the successful completion of an assignment would remain incomplete without a word of gratitude for the people without whose co-operation the achievement would have remained a distant dream. So I would like to intend my immense indebtness to all of them who have guided and motivated me through my research project. I sincerely thank to all for their valuable contribution without which this project report would have not reached its goal.

I do express my sincere gratitude to UTTARAKHAND JAL VIDYUT NIGAM (UJVNL) Ltd., Dehradun for giving me a wonderful and exciting opportunity to work in their esteemed organization.

My sincere thanks go to my supervisor Mr.V.K.Nainwal & Mr Madhur Rastogi, Senior F&AO, UJVNL under whose help and guidance I could successfully complete my project.

I feel myself indebted to all the employees of the UJVNL for giving me their full co-operation and help in the course of my work.

Date: MUKUL VERMA

Place: MBA 3rd Semester

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S. No. Title Page No.

1 Company Profile of UJVNL, Vision, Mission & Values.

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2 Objectives 53 Genesis 6

4 Brief History of UJVNL 7

5 Board of Directors & Top Management 86 Credentials 97 Power Projects in INDIA 108 Introduction of Hydro Power 119 Hydro Power Classification 12

10 Policy by UJVNL in constructing SHPs 1511 Different Power Projects by UJVNL 19-4612 Overview of Power Industry 47-5113 Power Sector SWOT Analysis 51-5314 Introduction of Working Capital 54-5515 Objectives & Research Methodology 5516 Types of working capital 56-5817 Principle of working capital 59-6018 Factors affecting working capital 60-6219 Sources of working capital 62-6320 Methods of working capital 64-6621 Components of working capital 67-6822 Balance Sheet Analysis 69-7223 Working Capital Analysis 73-7424 Conclusion 75

25 Bibliography 76

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COMPANY PROFILE

Uttarakhand is renowned for its scenic beauty and rivers. India's two major rivers viz. Ganga and Yamuna start their journey from here. Besides these two rivers, Uttarakhand has a large network of rivers and canal which provides an immense scope for hydropower energy. One of the first hydro-power station in India was commissioned at Galogi in 1907. More power stations were subsequently developed over a period of time.

12th February, 2001 - A new dawn in the Power Sector of Uttarakhand when UJVNL came into existence, with some promises to keep with the home state, to emerge as a Power Major and to make the state, so called "Urja Pradesh".

Uttarakhand has a very high potential which is yet to be developed and to give impetus to power sector, Uttarakhand Jal Vidyut Nigam Limited (UJVNL) was formed. UJVNL is a wholly owned Corporation of the Government of Uttarakhand set up for managing hydro power generation at existing power stations and development, promotions of new hydro projects with the purpose of harnessing, the known, and yet to be known, hydro power resources of the State.

Today, UJVNL operates hydropower plants ranging in capacity from 0.2 MW to 240 MW, totaling up to 1000 MW. Though the State is more or less sufficient in its energy generation to meet its own requirements, it is committed to develop its huge hydro power resources in an early and efficient manner for economic well-being and growth of the State and its people.

Vision

* To be an excellent & efficient organization on Strength of its Human Resources.* To be a significant player in the National Power Sector.* To induce adjacent infrastructure business that provides opportunities for growth.* To be the best corporate in Uttarakhand* To care for all.

Mission

*Contribution to improvement in the quality of life in Uttarakhand.

Values

*Creation of value for all stakeholders.*Result oriented with professional work culture.*Earn trust through fair business practices with all.*Growth balanced with environmental protection & enrichment.*Law abiding.

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Objectives

The main objects to be pursued by the Company for which it has been incorporated are as follows:-

To establish takeover, operate and maintain Hydroelectric generating stations including mini & micro hydro electric generating station and tie-lines, substations and main transmission lines connected therewith.

To carry on its activities within the State of Uttarakhand or elsewhere as may be found feasible.

To make arrangements with any Company, Authority, Government or other persons or institutions for the operation and maintenance of any generating station owned by it (including transmission lines and other works connected therewith) on such terms and conditions as may be agreed upon between it and the Company.

To take such measures as in the opinion of the Company, are calculated to advance the development of water power in the State of Uttarakhand and may carryout power and Hydro –metric survey work and cause to be made such maps, plans, sections and estimate as are necessary for any of the said purpose.

To carry out investigation and to prepare one or more schemes relating to the establishment or acquisition of generating stations, tie-lines, sub-stations and transmission lines for promoting the use of electricity within the State of Uttarakhand.

To operate and maintain in the most efficient and economical manner the generating stations, tie-lines, sub-stations and main transmission lines, owned by the Company.

To enter into agreement with any licensee licensed under the Indian Electricity Act, 1910 or any other Act, Law of Regulation in force for the time being, or as modified from time to time or with any person for use of any transmission line, distribution line or main transmission line of that licensee or person for such time and upon such terms as may be agreed.

To enter into arrangement on such terms as my be agreed upon, for the sale of electricity generated by it to the State Electricity Company constituted for Uttarakhand or for the sale of electricity generated by it to any other state, body, person by itself with the consent of such person or persons duly authorized or licensed under prevalent Laws and Regulations or on its own account.

To avail such rights, exercise such powers and functions and to perform such duties as are conferred upon or expected of the company under the provisions of such Laws, legislation and regulations as are in force from time to time.

To do such other acts and things as are authorized to be done under the Electricity (Supply) Act, 1948, or any other Act, Laws or regulations in force or amended from time to time.

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Genesis:

UPSEB Unbundled :UPSEB Transfer Scheme

14-01-2000

Uttarakhand State Created:UP Reorganisation Act

09-11-2000

UJVN Ltd formed :1956 Companies Act

12-02-2001

UJVN Ltd Commenced Operations :Corporate Office in 2500 Sq ft Rented House.

09-11-2001

UJVN Ltd : took possessions of assets: 29-11-2000

Had no Cash on : 09-11-2001

Borrowed and Paid all employee dues and streamlined employee benefit :

31-03-2002

Sense of a new belongingness instilled in the people of UJVN Ltd :

Nov 01- Mar 02

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Brief History of the UJVNL

The history of Uttarakhand Jal Vidyut Nigam Limited can be traced back to erstwhile U.P. State Electricity Board (In short UPSEB). The erstwhile U.P. State Electricity Board was trifurcated pursuant to enactment of U.P. Electricity Reforms Act, 1999. U.P. State Electricity Reforms Transfer Scheme, 2000 was promulgated for execution of the trifurcation of erstwhile UPSEB into U.P. Power Corporation Ltd. (In short UPPCL), U.P. Jal Vidyut Nigam Ltd. (In short UPJVNL) and U.P. Rajya Vidyut Utpadan Nigam Ltd... By operation of the aforesaid Scheme all the Hydro Electric Projects earlier owned and operated by UPSEB were transferred to UPJVNL (a Govt. Company existing prior to the said trifurcation) in addition to other projects owned and operated by the UPJVNL previously.

That UPJVNL was erstwhile known and setup as UP Alparthak Evam Laghu Jal Vidyut Nigam Limited, a Government Company which was incorporated in 1985 to own establish and operate small, mini and micro hydel projects. Later on the name of the company was changed to UP Laghu Jal Vidyut Nigam Limited and ultimately to UP Jal Vidyut Nigam Limited in 1996.

The State of U.P. was bifurcated by enforcement of U.P. Reorganization Act, 2000 (In short Reorganization Act) as a result thereof the State of Uttarakhand came into existence. The Govt. of India issued an order dated 05-11-01 u/s 63(4)(a) of the Reorganization Act whereby assets and liabilities between UPJVNL and UJVNL were divided. By operation of this order all the Hydro Power Assets of UPJVNL located in the State of Uttarakhand were transferred to UJVNL. Since then UJVNL is operating all these hydro power plants.

Uttarakhand Jal Vidyut Nigam was formed on 9 Nov 2001 with it main motto of developing and harnessing the hydro potential of Uttarakhand State. The Nigam has 34 projects under operation with an aggregated capacity of more than 1400 MW and more than 14 projects are under different stages of implementation.

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Board of Directors

1. Shri Utpal Kumar SinghChairman & Secretary (Energy), GoU

7. Shri C.M. Vasudev Independent Director

2. Shri R.P. ThapliyalManaging Director

8. Shri S.C. SenIndependent Director

3. Shri Alok Kumar JainPrinicipal Secretary (Finance), GoUNon-Executive Director

9. Shri B.C.K. MISHRADirector (Operations)

4. Shri P.C SharmaPrinicipal Secretary (Ind. Dev.), GoU,Non-Executive Director

10. Shri Jayant KumarDirector(Finance)

5. Shri Nitesh Kumar JhaAdditional Secretary (Energy), GoU Non-Executive Director

11. Shri K.K. SinghDirector(Projects)

6. Dr. S. RameshIndependent Director

Top Management

1. Shri Utpal Kumar SinghChairman & Secretary (Energy), Gou

8. Shri ChaturvediGeneral Manager (Yamuna Valley)

2. Shri R.P. ThapliyalManaging Director

9. Shri Purshottam SinghGeneral Manager (Ganga Valley)

3. Shri B.C.K. MishraDirector (Operations)

10. Shri C P MadanGeneral Manager (Accounts)

4. Shri Jayant KumarDirector (Finance)

11. Shri S.K ChopraGeneral Manager (P & IR)

5. Shri K.K. SinghDirector(Projects)

12. Shri Arvind KumarGeneral Manager (I/c) (SHP)

6. Shri S.N. VermaExecutive Director (E & M)

13. Shri Arun SabharwalCompany Secretary

7. Shri Sandeep SinghalExecutive Director (Civil)

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Credentials

Largest pre-1910 plant located at Galogi, Uttarakhand (Dehradun-Mussoorie Road).

North India's first underground power house at Chibro.

India's first tandem operation of Chibro-Khodri Power Station.

India's first 220 KV two tier switchyard at Chibro Power station.

Trifurcation of H.R.T. (Partly) of Khodri Power Station due to Inter-Thrust Zone.

Replacement of runner chamber by N.S. Grout & Epoxy filling at Chilla Power Station for the first time in India.

2000 engineer-years of hydropower O & M experience.

International level Design & Research facilities at Irrigation Design Organization & Irrigation Research Institute at Roorkee.

Maneri Bhali-II- Power Station of 4 units of 76 MW with Francis turbines along with a 220 kV switchyard. Annual generation of 1566 GWh.

Generation Targets For The Year 2009-10 as Fixed By CEA

Generation (MU) Since Formation of UJVNL.

Generation (MU) - LHPs (00-01 to 08-09)

Generation (MU) - SHPs (00-01 to 08-09)

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Power projects in India

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Introduction of Hydro Power

Hydro power is a non- polluting, renewable source of energy .It is perhaps the oldest renewable energy technique .Hydro power represents the use of water resources towards inflation free energy due to absence of fuel cost with mature technology characterized by highest primer moving efficiency and spectacular electricity efficiency.

Small Hydro Projects are an important, appropriate and profitable that other energy supply options.

Uttarakhand Jal Vidyut Nigam limited is primarily responsible for the Small Hydro development in Uttarakhand & is nodal agency to speed up this development.

Formerly the small hydro projects were in Uttar Pradesh Laghu Jal Vidyut Nigam limited and thereafter transferred to UP Jal Vidyut Nigam but after formation of Uttarakhand these project came under UJVNL, since then UJVNL (Uttarakhand Jal Vidyut Nigam Limited) has shown serious interest in development of these projects.

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Hydro Power Classification

Hydro Power projects are generally classified in two parts ie. Small hydro projects and large hydro projects. In India hydro projects upto 25 MW are considered as small hydro Projects where above 25 MW are considered as large hydro projects

The small hydro projects are further classified as follows

Class Capacity in KW

Micro Hydro Upto 100

Micro Hydro 100-2000

Small Hydro 2000 to 25000

Performance and Development of SHPs in Uttarakhand:

Importance of SHPs

Small hydro power Projects (SHPs) are an important, appropriate and profitable than other energy supply options and is a part of the full menu of energy options to be considered in meeting the needs of rural people more so in the remote and isolated locations in the hilly terrain of the state of Uttarakhand. SHPs compare well with the alternative energy supply options and have an important niche in the range of decentralized energy supply options. This niche is tightly demonstrated defined by the availability of

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adequate small-scale resource and as sufficiently concentrated density of demand, consisting of a need combined with purchasing power, to take advantage of a centralized, albeit small, power plant. SHPs have a great social bearing as it can provide rural people with electricity and create a sense of belonging to the modern world besides providing energy that can assist in securing the livelihoods of marginalized people. The SHPs are financially sustainable under the following conditions:-

1. A high load factor2. A financially sustainable end-use.3. Costs are contained by good design and management.

There is a constraint in that costs of SHPs rise with the remoteness of the location but the cost of alternative options particularly diesel generator) may rise faster. SHPs in Uttarakhand in short will play an important role as growth engines for developing the economy of rural area which is isolated and remotely located. Uttarakhand has an estimated capacity of 1478 MW of SHP out of approximately estimated capacity of 20263 MW. The estimated capacity of small hydro projects of Uttarakhand is 7.3% of total estimated capacity of Hydro power in Uttarakhand and 10.23% of targeted contribution of Hydro in 10th Five Year Plan.

Uttarakhand Jal Vidyut Nigam Ltd. is primarily responsible for the development of Small Hydro power project in the state of Uttarakhand and is a nodal agency for the speedy development of the same.

In view of the above Government of Uttarakhand as well as Government of India are facilitating the development of small hydro projects in the state of Uttarakhand. The Small hydro projects have following distinct advantages:

a. Hydro power involves a clean process of power generation.

b. It is a renewable source of energy and contributes to the upliftment of the rural masses, especially projects located in remote and inaccessible areas.

c. It is the most cost effective option for power supply because it does not suffer from the limitation on account of fuel consumption.

d. Most small hydro projects in Uttarakhand are being developed in remote and backward areas where substantial support for economic development is actually needed.

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e. Small hydro power contributes in solving the low voltage problem in the remote hilly areas and helping reducing the losses in transmission and distribution.

f. In certain cases projects are helpful in providing drinking water and irrigation facilities.

g. It helps in promoting the local industries in remote areas.

h. The development of small hydro projects requires minimum rehabilitation and resettlement as well as environmental problems.

i. Small hydro projects help in generating self employment in remote areas of the state.

j. Small hydro power projects helps in providing stable electricity supply at remote areas where such facility by other source shall be much costlier and unreliable.

In Short we can say that SHP’s are

Simple to operate Non Polluting Minimum Maintenance Environment friendly Utilizes local resources Take less time in construction Can be used at places where grid is not possible. The viability can be improved by incorporating the benefits of Carbon Trading

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Policy of UJVNL in the construction of Small Hydro Power Plants

The SHP Plant wing of UJVNL was christened with the purpose of:

1. Improvement in civil design and relocation of project site.2. Design and maintenance of Electrical Equipments at Nigams’s level.3. Monitoring of Daily Generation.4. Operations of project by Nigam that were earlier operated by contractors. 5. Construction of new projects.6. Increasing generation by completing the incomplete project.7. Investigation & development of new projects.8. To avail the CDM benefits under the Kyoto Protocol to make SHP’s more viable.

UJVNL for early realization of the capacity in SHP would be focusing on the construction of the projects above 3 MW and accordingly the following policies has been adopted for the Implementation, operation & Maintenance of the SHP in the State:

1. Construction of small hydro projects of 3 MW and larger capacities in general.2. Dry Leasing of all power stations up to 500 KW capacities to private entrepreneurs for operation & maintenance.3. Operation of Power Stations by Nigam's staff.

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Performance of SHPs: Integrated efforts by UJVNL have steadily increased the generation of SHP after 9.11.2001 and details are given below

Year 2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

07-08 2008-09 Up

to nov

Generation (in MU) 25.6494 30.1242 40.9361 36.3510 40.1692 46.2272 42.8374 42.2933 32.4304

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Future Plan of Capacity Addition : A total 86,600 kW capacity addition has been targeted as under:

Project District Capacity(KW) Year of Completion

1 Asiganga-I Uttarkashi 4500 2009-102 Asiganga-II Uttarkashi 4500 2010-11

3 Asiganga-III Uttarkashi 7300(under revision)

2010-11

4 Dunao Pauri Garhwal 1500 2009-105 Shobla-I Pithoragarh 8000 2010-116 Tankul Pithoragarh 12000 2010-117 Kaliganga-I Rudraprayag 4000 2009-108 Kaliganga-II Rudraprayag 6000 2010-119 Madhyamaheshwar Rudraprayag 10000 2009-1010 Kalidigad Uttarkashi 9000 2010-1111 Sonegad Uttarkashi 3000 2010-1112 Suringad II Pithoragarh 5000 2010-1113 Urgam II Chamoli 3800 2010-1114 Painagad Pithoragarh 4000 2010-1115 Pilangad II Uttarkashi 4000 2010-11

86,600 The Setting up of SHPs in the state of Uttarakhand would help in the overall development of the state especially in the remote areas in the hills. It is a known fact that supplying improved energy services to people for the first time is difficult, supplying such services profitably to very poor people who live far away from roads and the electricity grid poses a particularly difficult challenge. Nevertheless, the access to electricity in the remote areas would generate livelihood and the impact can be spread to marginalized people and then to social activities. UJVNL is in the process of proposing new SHPs for CDM for earning Emission Reduction credits which will generate additional revenue for SHPs and make them financially viable. "It is easier to make the profitable social, than to make the social profitable" and UJVNL is aware that in planning SHP investments it is important to consider the plant for securing livelihood at an early stage and then to see how the impact can be spread to masses and for social activities. UJVNL is endeavoring to set up the SHPs so as bring about development in the remote areas of Uttarakhand there by facilitating overall development of the state.

STRATEGY FOR FUTURE CAPACITY ADDITION:

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(a) Presently, UJVNL takes up the construction of the SHPs only after carrying out detailed survey(s), investigation(s) and engineering including cost optimization of various options. This requires collection of Hydrological and geological data besides synthesizing the same for arriving at a most economical engineering option. The entire work is outsourced to reputed agencies for timely completion besides maintaining the quality of work. Based on the past experience of the geology, metrology and the topography, safe designs have been adopted and where ever found necessary power channels have been replaced by tunnels.

(b) Some of the other improvements in the process of development of SHPs are that: -

I. Geological Surveys are being conducted in thorough manner so as to locate the power station at a safe place making it less prone to natural calamities.

II. Power Channels are more prone to land slides/cloud bursting etc; therefore the water conductor system is being changed to tunnel as per site specific conditions.

III. Machines of simple design are planned to be used for the power stations located in far off areas for their easy operation & maintenance.

IV. Staff posted at these power stations is being given proper training in the operation & maintenance so as to minimize the break down time.

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Different power projects operated by UJVNL

OPERATIONAL PLANTS

Project under Operation (1 to 25 MW)

S.No. Name of ProjectCapacity

(MW)

1. Kulagad 1.2

2. Badrinath II 1.25

3. Chhirkila 1.5

4. Kanchauti 2.0

5. Pilangad 2.25

6. Relagad 3.0

7. Urgam 3.0

8. Jummagad 1.2

9. Galogi 3.0

10. Mohamadpur 9.30

11. Pathri 20.4

Total 48.1 MW

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Galogi Power Plant (2x.5+2x1=3MW)

The Galogi Hydropower station is one of the oldest running power house in the country and therefore, a part of Indian national heritage. It is located on River Bhatta and Kiyarkurli near

Mussoorie about 22 km from Dehradun. It has 2 machines (Pelton) of 0.5 MW(800HP) each installed in 1907 & 2 machines of 1 MW(1600HP) each installed in 1933 manufactured by Boving & Co.,London.1MW units are marked as units 1&2 and the 0.5 MW ones as unit 3 &4. Power house building is surface type; Gross head available is 285m & Design Discharge 1.36 cumecs.

UJVNL proposes to carry out the M&U of the power station which is estimated to cost Rs. 12.28 crore. The major M&U works proposed are:-

• Refurbishment of existing generating units

• Replacement of penstock and associated civil works.

MNES, Government of India has revised its incentive schemes to take into account development of SHP projects up to 25 MW & commissioned seven years prior to the date of the request of the proposal submitted to the MNES.The existing equipment/works of Galogi SHP are in poor condition and need repair, retroffing and replacement are required so as to enable harnessing of the water power potential. The RMU of this project will contribute to

Utilization of water power potential and providing environ-friendly electricity to the nearby area.

Help meeting power requirement of the concerned power supply system.

Promoting tourism in the valley.

Preserving heritage related to early years of the last century.

The M&U works would increase the generation to 12 MU besides enhancing the life of plant and the works are expected to be completed by 2009-10.

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Year 2004-05 2005-06 2006-07 2007-08

2008-09

(Upto Nov-08)

Generation(MU) 3.61 3.40 3.23 3.68 2.17

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Mohammadpur Power Plant (3x3.1 MW)

The power station is located on the Upper Ganga Irrigation canal that takes off from the

Bhim goda Barrage near Haridwar at a distance of 49.5 km downstream of Pathri. The power plant was commissioned in the year 1952. The surface Power House comprising 3 units of 3.1 MW each with Kaplan turbines is located on the unlined irrigation canal and the water is utilized for the irrigation purpose in the command area of the canal. The Power Station's Design Energy is 26 MU with a design head of 5.79 m.

The Mohammadpur power station is a low head plant with a design discharge of 253 cum. The discharge in the canal is regulated by UP Irrigation Department depending upon the irrigation requirement in the command area of the Irrigation canal. UJVNL proposes to carry out the M&U of the power station which is estimated to cost Rs. 27.60 crore. The major M&U works proposed are: -

i) Provision of Micro-processor based Governors, Static excitation equipments, On-line monitoring equipment and replacement of Generator windings with F Class insulation.

ii) Modernization of Communication, Test & Control, Protection & Instrumentation, switchyard equipment, hydro mechanical equipment, Trash Rack cleaning equipment etc.

iii) Repair of existing civil structures.

iv) Improvements in the efficiency of generators and Turbines.

The generation post completion of M&U works would increase to 55 MU and the works are expected to be completed by 2010-11.

Year 2004-05 2005-06 2006-07 2007-08 2008-09

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(Upto Nov-08)

Generation(MU) 35.00 36.36 39.54 39.36 27.18

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Pathri Power Plant (3x6.8 MW)

The power station is located on the Upper Ganga Irrigation canal that takes off from the Bhim goda Barrage near Haridwar at a distance of 13 km downstream of Haridwar. The power plant was commissioned in the year 1955. The surface Power House comprising 3 units of 6.8 MW each with Kaplan turbines of 8400 HP output is located on the unlined irrigation canal and the water is utilized for the irrigation purpose in the command area of the canal. The Power Station's Design Energy is 80 MU with a design head of 9.75 m.

The Pathri power station is a low head plant with a design discharge of 253 cum. The discharge in the canal is regulated by UP Irrigation Department depending upon the irrigation requirement in the command area of the Irrigation canal.

UJVNL proposes to carry out the M&U of the power station which is estimated to cost Rs. 61.43 crore. The major M&U works proposed are:- i) Provision of Micro-processor based Governors, Static excitation equipments, On-line monitoring equipment and replacement of Generator windings with F Class insulation.


iii) Repair of existing civil structures.

iv) Improvements in the efficiency of generators and Turbines.

The generation after the completion of M&U works would increase to 135 MU and the works are expected to be completed by 2010-11.

Year 2004-05 2005-06 2006-072007-08

2008-09

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(Upto Nov-08)

Generation(MU) 102.52 98.60 91.55 95.10 61.71

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Project under operation (26 to 100 MW)

Sno Projects Installed Capacity

(MW)

1 Maneri Bhali Stage I 90.00

2 Dhalipur 51.00

3 Khatima 41.40

4 Dhakrani 33.75

5 Kulhal 30.00

Total 246.15

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Dhalipur Power Plant (3x17 MW)

The power station is located on the downstream of the Dhakrani Power House at a distance of 4km on the power channel which takes off from the Dakpathar Barrage. The power plant was commissioned in the year 1965. The surface Power House comprising 3 units of 17 MW each with Francis turbines of 24,000 HP output is located on the power channel and the water from the tail race flows into Asan river. The Power Station's Design Energy is 192 MU with a design head of 30.48 m.

The Dhalipur power station is a low head scheme located on power channel with a design discharge of 199.2 cum.The Plant has shown significant improvements in generation since 2000. The year 2004-05 was a draught year and more so for the Yamuna valley.


i) Provision of Micro-processor based Governors.

ii) Provision of Static excitation equipments and On-line monitoring equipment.

iii) Modernization of Communication, Test & Control, Protection & Instrumentation, switchyard equipment, hydro mechanical equipment etc.

iv) Desilting of Asan Barrage for storage.

v) Improvement in the efficiency of Generators and Turbines.

The M&U works after completion would increase the generation to 250 MU besides life extension of the plant. The works are expected to be completed by 2011-12.

Year 2004-05 2005-06 2006-07 2007-08 2008-09

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(Upto Nov-08)

Generation(MU) 185.33 236.14 214.28 210.70 192.29

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Khatima Power Plant (3x13.8 MW)

The power station is located on the downstream of the Banbasa Barrage over river Sharda at a distance of 1.6 km on the irrigation canal which takes off from the Barrage. The power plant was commissioned in the year 1956. The surface Power House comprising 3 units of 13.8 MW each with Kaplan turbines of 19200 HP output is located on the unlined irrigation canal and the water is utilized for the irrigation purpose in the command area of the canal. The Power Station's Design Energy is 160 MU with a design head of 17.98 m.

The Khatima power station is a low head plant with a design discharge of 269 cum. The discharge in the canal is regulated by Up Irrigation Department depending upon the irrigation requirement in the command area of the Irrigation canal and is also limited to the capacity of the escape channel downstream of the power house incase there is no demand.


i) Provision of Micro-processor based Governors, Static excitation equipments and On-line monitoring equipment.


iii) Repair of escape channel and tail race floor.

iv) Improvement in the efficiency of generators and Turbines.


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Year 2004-05 2005-06 2006-07 2007-08

2008-09

(Upto Nov-08)

Generation(MU) 183.28 164.99 154.03 155.43 108.02

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Dhakrani Power Plant (3x11.25 MW)

The Power Station is located on the downstream of the Dakpathar Barrage at a distance of 8 km on the power channel which takes off from the Barrage. The power plant wascommissioned in the year 1965. The surface Power House comprising 3 units of 11.25 MW each with Kaplan turbines of 14300 HP output is located on the power channel and the same water feeds the Dhalipur power plant on the downstream of this power plant on the same power channel. The Power Station's Design Energy is 169 MU with a design

head of 19.8m.

UJVNL proposes to carry out the M&U of the power station which is estimated to cost Rs. 70 crore. The major M&U works proposed are:-

i) Provision of Micro-processor based Governors.

ii) Provision of Static excitation equipments and On-line monitoring equipment.

iii) Provision of Trash Rack cleaning equipment at Dakpathar Barrage.

iv) Modernization of Communication, Test & Control, Protection & Instrumentation switchyard equipment, hydro mechanical equipment etc.

v) Desilting of Dakpathar Barrage for storage.

vi) Improvement in the efficiency of generators and Turbines.

The M&U works would increase the generation to 175 MU besides enhancing the life of plant and the works are expected to be completed by 2011-12.

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Year 2004-05 2005-06 2006-07 2007-08

2008-09

(Upto Nov-08)

Generation(MU) 125.87 164.62 147.47 148.93 125.79

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Kulhal Power Plant (3x10 MW)

The power station is located on the downstream of the Asan Barrage at a distance of 4.5 km on the power channel which takes off from the Asan Barrage. The power plant was commissioned in the year 1975. The surface Power House comprising 3 units of 10 MW each with Kaplan turbines is located on the power channel and the water from the tail race flows towards Khara power house in UP. The Power Station's Design Energy is 145 MU with a design head of 18 m.

The Kulhal power station is a low head scheme located on power channel with a design discharge of 198 cum. The improvements have been due to number of maintenance and safety initiatives under taken besides the repair of the under water parts. The long pending repair of the power channel between Asan Barrage and Kulhal power house were taken up in early 2005.


i) Provision of Micro-processor based Governors, Static excitation equipments and On-line monitoring equipment.

ii) Modernization of Communication, Test & Control, Protection & Instrumentation, switchyard equipment, hydro mechanical equipment etc.

iii) Desilting of Asan Barrage.

iv) Improvement in the efficiency of Generators and Turbines.


Year 2004-05 2005-06 2006-07 2007-08 2008-09

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(Upto Nov-08)

Generation(MU) 128.76 160.94 148.68 149.76 117.01

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Project under operation (Above100 MW)

S No. Projects Installed Capacity

(MW)

1 Chibro 240.00

2 Ramganga 198.00

3 Chilla 144.00

4 Khodri 120.00

5 Maneri Bhali Stage _II 304.00

Total 1006.00

37

Chibro Power Plant (4x60MW)

The Power Station is a Run-of-River scheme with an underground power plant. The underground power plant was the first station in the north India and was commissioned in the year 1975. The power station draws water from Ichari dam located on the river Tons, one of the major tributary of river Yamuna.

The Chibro power station is a unique engineering marvel in the country and was the first experience in carrying out tunneling in the Himalayan Thrust Zones, which is a challenge due to varied rock structure and strength and throws up unexpected challenges in the tunneling effort. The water from Ichari dam is fed into the power station through a 6.2 km long Head Race Tunnel (HRT)

and the power plant comprising 4 units of 60 MW each with Francis turbines of 84,000 HP output is housed in a rock cavern with the major challenge of maintaining fresh air and safety measures due to constraint in space. The Power Station's Design Energy is 750 MU with a design head of 110 m.

The power plant has shown significant improvements since 2000 and the generation has gone up in spite of restriction imposed by Irrigation Department on the discharge in the tunnel and low hydrology in the year 2004-05. There has been a restriction imposed by the Irrigation Department in limiting the discharge in the HRT to 200 Cumecs as against the earlier capacity of 225 Cumecs. The plants downtime has reduced and the availability has improved significantly.

The increase in the efficiency and availability has been possible due to the number of maintenance and safety measures under taken which were pending since long time. The APDP also provided funds for the modernization in a limited way mainly for installation of (i) Static Excitation System (ii) Microprocessor based governors and (iii) SF6 Breakers (iv) Major overhauling of Unit-2 (v) Modernization of Communication System (vi) Tandem control System

38

The major maintenance works undertaken in the plant that have been responsible for improved performance are:-

i) Repairing of MIV.ii) Monitoring of head loss.iii) Reduction in the Break down losses.


i) Modernization of Trash Rack cleaning equipment at Ichari dam.

ii) Modernisation of Communication, Test & Control, Protection & Instrumentation, fire Protection equipment, switchyard equipment, hydro mechanical equipment etc.

iii) Improvement in efficiencies of Turbines and generators. iv) Replacement of old 220kV oil filled cables with new XLPE cables

v) Replacement of Stators' cores

vi) Fire fighting system vii) Fresh Air Ventilation System

The M&U works would enhance the life of power plant by another 20-25 years besides improvement in efficiency of turbines and generators. The post M&U generation is expected to increase to 850 MU and the works are expected to be completed by 2011-12.

Year 2004-05 2005-06 2006-07 2007-08

2008-09

(Upto Nov-08)

Generation(MU) 637.90 804.94 756.17 755.08 724.19

40

Ramganga Power Plant (3X66 MW)

The power plant is a Reservoir based scheme on river Ramganga located near the famous Jim Corbet Park in district Pauri Garwhal and utilizes the water dammed up for irrigation purpose. The project was commissioned in 1975. The water in the irrigation channel is regulated by UP Irrigation and the generation is dependent on the rain in the catchment area as also on the drawal of water for irrigation purpose in the command area of the canal. The surface power house is located at the toe of the dam and houses 3 units of 66 MW each with Francis turbines of 92400 HP. The Power Station's Design Energy is 311 MU with a design head of 84.4 m.

The Ramganga power station is a medium head scheme with a design discharge of 285 cum. The project has unique challenges in operation due to restriction imposed on the release of water in the water conductor system by UP irrigation which is dependent on the demand of water in the command area of the canal based on the irrigation requirement. The generation in the plant takes place after the monsoon season when the

demand for irrigation picks up.The generation from the plant is dependent on the drawal of water for irrigation in the downstream of the plant and rainfall in the catchment area.

The repair of the downstream channel is with UP- Irrigation Department. UJVNL has taken up the repairs of the under water parts of the plant.

UJVNL proposes to carry out the M&U of the power station which is estimated to cost Rs. 36.95 crore. The major M&U works proposed are: -

i) Provision of Micro-processor based Governors, Static excitation equipments, On-line monitoring equipment and Replacement of Generator winding with F Class insulation.

ii) Modernization of Communication, Test & Control, Protection & Instrumentation, switchyard equipment, hydro mechanical equipment, etc.

iii) Repair of civil structures and MIV

IV) Improvement in the efficiency of Generators and Turbines


41

Year 2004-05 2005-06 2006-07 2007-08

2008-09

(Upto Nov-08)

Generation(MU) 211.88 333.29 154.17 279.06 118.66

42

Chilla Power Plant (4x36MW)

The power station is a Run-of-River scheme on river Ganga located upstream of the holy city of Hardwar and was commissioned in 1980-1981.There are 4 Kaplan vertical shaft turbines, Maximum operating head 32.5m Annual generation of the present design is about 725 MU which may increase to about 1076 MU due to the enhanced hydrological regulation in upper basins owing to commissioning of Tehri Project as well as upgrading works per current modern practice. For these reasons the time is being considered appropriate to undertake upgrading works so as to ensure the secure and reliable operation of the power station for the next 20-25 years.

UJVNL proposes to carry out the M&U of the power station which is estimated to cost Rs. 250.00 crore. The objective of the M&U program is to rehabilitate and upgrade the project to ensure dependable future generation and increase the station output to the highest economic level, keeping in view the following: i) Rehabilitate and modernize the Chilla power station.

ii) Increase the Plant output, preferably by increasing the unit discharge and output.

iii) Provide hydraulic equipment that will be more resistant against erosion.

iv) Provide new turbine runner with an improved cavitations behavior. v) Provide automatic trash rack cleaning machine.


Year 2004-05 2005-06 2006-07 2007-08 2008-09

43

(Upto Nov-08)

Generation(MU) 745.78 659.23 740.51 825.97 563.62

44

Khodri Power Plant (4x30MW)

The Power Station is located on the downstream of the Chibro Power station and was commissioned in the year 1984. The power station draws water through a 6 km long and 7.5 diameter tunnel directly from the collection gallery of the Chibro power station. The surface Power House comprising 4 units of 30 MW each with Francis turbines of 43,600 HP output is located on the banks of Yamuna and the outlet of the water from the power station is in river Yamuna upstream of the Dakpathar Barrage. The Power Station's Design Energy is 345 MU

with a design head of 57.9 m.

The operation of Chibro power station and the Khodri power station is another engineering marvel. The tandem control scheme between Chibro and Khodri Power Stations is in operation since January, 1984 and is the first of its kind in the country which optimizes the utilization of water for generation besides maintaining the safety of both the plants in case of outages.

The plants downtime has reduced and the availability has improved significantly. The improvements have been possible due to the number of maintenance and safety measures under taken which were pending since a long time. The APDP also provided funds for the modernization in a limited way mainly for installation of

(i) Static Excitation System(ii) Dry Type Auxiliary Transformers and(iii) SF6 Breakers.

The major maintenance works undertaken in the plant that has been responsible for improved performance are:-

i) Repair of underwater parts.ii) Epoxy Textolite wedges and packers were provided in the stator punching.iii) Replacement of old governors with Micro-processor based Governors

UJVNL proposes to carry out the M&U of the power station which is estimated to cost Rs. 120.00 crore. The major M&U works proposed are: -

i) Provision of On-line monitoring equipment.ii) Digital display of parameters in control room.iii) Modernization of Communication, Test & Control, Protection, Instrumentation and fire protection of generatorsiv) Improvement in the efficiency of generators and Turbines. v) Fire fighting system

45

The M&U works besides enhancing the life of plant by another 25 years would also increase the generation to 400 MU. The works are expected to be completed by 2011-12.

Year 2004-05 2005-06 2006-07 2007-08

2008-09

(Upto Nov-08)

Generation(MU) 305.14 378.82 356.18 354.66 325.21

46

Maneri Bhali Stage-II (4x76 MW)

Maneri Bhali Hydroelectric Project Stage-II envisaged the utilization of the 285 m drop available in river Bhagirathi between the tail waters of Tiloth Power Station (Maneri Bhali Stage-I Project) and the head waters of Tehri Dam. The diversion structure is situated near the township of Uttarkashi at about 152 km from Rishikesh, the nearest railhead, and is designed to divert 142 cumecs of water into a head race tunnel of diameter 6.0 m and length 16 km to generate 1566 Million Units of electricity annually through a power house of 4x76 MW at Dharasu. This project has been commissioned in 2008 & is the second power project of UJVNL on river Bhagirathi.

River Bhagirathi a major tributary to River Ganga originates from Gangotri in the glacial Himalayas and meets river Alaknanda at Deoprayag to form Ganga which ultimately meets the ocean in the Bay of Bengal.

SOME RECORDS IN THE NAME OF MB-II:

Largest unit and plant capacity (4X76 MW) in UJVNL. Highest head (285 m gross) amongst the large power stations in UJVNL. Longest water conductor system (16 km. dia 6.0 m HRT) and highest surge tank

(172m) in UJVNL. Sedimentation chamber designed to allow smallest size of silt particle (below 150

microns) in to the water conductor system. HVOF coating on turbine underwater parts being provided for preventing erosion, for

the first time in the region. First power station in UJVNL to use single-phase generator transformer. First power station to use cyclonic strainers in cooling water system. First power station to use Nitrogen based fire protection system for main

transformers in the region to use this system.

47

Year 2007-08

2008-09

(Upto Nov-08)

Generation(MU)

77.02 853.99

48

POWER INDUSTRY

Overview

Power is a critical component of any economy’s infrastructure and without

its development, economic growth is severely hindered if not made impossible. It is an essential requirement of all facets of human life and is recognized as one of the basic human needs.

An economy’s growth, development, ability to handle global competition is

all dependent on the availability, reliability and quality of the power sector. The demand for power is growing exponentially and the scope of growth of this sector is immense.

Global and Indian economy have decelerated, but power is one of the few

commodities in short supply in India. So, despite the sluggishness in production and demand for manufactured products, India remains power hungry, both in terms of normal and peak power demand. Power is derived from various sources in India. These include thermal power, hydropower or hydroelectricity, solar power, biogas energy, wind power etc. The distribution of the power generated is undertaken by Rural Electrification Corporation for electricity power supply.

As per the Constitution of India the power sector is mentioned in the Concurrent List and is under the purview of the Centre and the states. This

sector is dominated primarily by Public Sector Undertakings. The state and Central Government account for 58% and 32% of the generation capacity respectively while the private sector accounts for a mere 10%. A major part of the transmission and distribution factors are handled by the state utilities. The private sector is slowly making its presence felt in the power sector in distribution and is making a foray into transmission. Power sectorhad been funded mainly through budgetary support and external borrowings were opened to private sector in 1991.

Key players currently operating in the Indian power sector are National

Thermal Power Corporation Limited, Nuclear Power Corporation of India Limited, North Eastern Electric Power Corporation Limited, Power Grid Corporation of India, Tata Power, etc.

50

Some Facts

More than 64% of India’s total installed capacity is contributed by thermal power.

Significant jump in unit size and steam parameters will result in higher efficiencies and better economics for the Indian power sector.

Western region accounts for largest share (30.09%) of the installed power in India followed by Southern region with 27.76%.

Unbalanced growth remains the cause of concern for the Indian power sector. Only about 56% of households have access to electricity, with the rural access being 44% and urban access about 82%.

Southern region remains the dominant region in renewable energy source accounting for more than 57% of the total renewable energy installed capacity.

India has installed power generation capacity of 1,41,079.84 MW as on January 31, 2008, which is about 100 times the installed capacity of 1362 MW in the year 1947. Power generation has showcased a robust growth rate which is steadily improving year after year.

There has been significant improvement in the growth in actual generation over the last few years. As compared to annual growth rate of about 3.1% at the end of 9th Plan and initial years of 10th Plan, the growth in generation during 2006-07 and 2007-08 was of the order of 7.3% and 6.33% respectively.

With the country’s power requirement expected to touch 8,00,000 MW by 2031-32, India would need an investment of ` 6,00,000 crore. This investment is possible only by attracting foreign direct investment and public-private participation in the power sector,

At present, the energy shortage in the country was estimated at 10% and it touches 13% during peak seasons. There are states, where the energy shortage is 25%.

This is a serious impediment in the way of industrial development and economic process. We need a crash project for capacity building and need to eliminate power shortage by 2012.

51

Outlook

Over 78,000 MW of new generation capacity is planned in the next five years. A corresponding investment is required in Transmission and Distribution networks. Power costs need to be reduced from the current high of 8-10 cents/unit by a combination of lower AT & C losses, increased generation efficiencies and added low-cost generating capacity.

Among the top issues facing power and utility companies in 2009 is the continued trend toward rising input costs (e.g., coal, natural gas) and increased construction risks, as the sector seeks to build out new infrastructure (both generation and transmission) to meet demand in environmentally responsible ways. When it comes to the fuel source, companies are experienced at managing price volatility. However, the credit crisis has created significant cash flow challenges for the hedging programs of many companies.

Some power and utility companies looking to address the dual challenges of rising costs and tight credit markets are exploring construction strategies that embrace multiple potential power sources (coal, gas, nuclear, alternative energies), but which offer flexibility to change.

52

As per data released by Central Electricity Authority, New Delhi the total installed capacity in India is 159398.49 MW along with captive installed capacity of 19509 MW which are connect to National Grid system as on 31th March, 2010.

Thermal Nuclear Hydro RES Total Captive0

20000

40000

60000

80000

100000

120000

140000

160000

180000

102704

4560

36863

15521

159648

19509

Total Installed Capacity

53

The targeted capacity addition during 11th plan for various installed capacity sector is as under:

Type/Sector Central State Private State Total

Thermal 24840 11552 23301 59693

Hydro 8654 3491 3482 15627

Nuclear 3380 0 0 3380

Total 36874 15043 26783 78700

India is hurrying up to enhance its installed capacity to meet out the power demand in the country. Even in this kind of scenario the power shortage is taking its toll on consumer’s consumptions as well as Industrial growth. The power shortage in various regions will show the precarious condition of gap between power generation and consumption.

Region Power shortage

Energy Shortage (MU) Peak power Shortage (MW)

Northern -29,570 -11.6 -5,720 -15.4

Western -35,401 -13.7 -7,023 -17.7

Southern -14,032 -6.4 -3,129 -9.7

Eastern -3,910 -4.4 -836 -6.3

North-Eastern -1,036 -11.1 -315 -17.9

This power shortage is only going to increase in term of energy as well as peak power demand and supply.

54

POWER SECTOR SWOT ANALYSIS

Strengths

India has the fifth largest electricity generation capacity in the world Transmission & Distribution network of 6.6 million circuit km - the

third largest in the world

Potential for growth in this sector (demand exceeding supply) Increasing focus on renewable sources of energy Government presence in the sector (encouraging entry of foreign

players) No barriers to entry

Weaknesses

Large demand-supply gap: All India average energy shortfall of 9% and peak demand shortfall of 14%

Lack of exposure of entrepreneurs to handle international contracts Inexperience of SEBs to handle changing market environment in

addition to their weak financial condition Unavailability of fuel and unwillingness of fuel suppliers to enter into

bankable contracts Lack of necessary infrastructure to transport and store fuel, high cost

risk involved in transporting fuel

Opportunities

uge population base Opportunities in Generation Ultra Mega Power Plants (UMPP) – 9 projects of 4000 MW each. Coal based plants at pithead or coastal locations which are untapped. Hydel power potential of 150,000 MW is untapped as assessed by the

Government of India. Renovation, modernization, up-rating and life extension of old

thermal and hydro power plants.

Threats

Competition to domestic players from foreign Pvt. players as 100% FDI

55

permitted by government in Generation, Transmission & Distribution Not a lucrative option for investors (ROE) Rise in price of raw materials Tariffs are distorted and do not cover cost

56

MICHAEL PORTERS 5 FORCE MODEL FOR POWER

Supply:

Many projects have been planned but due to slow regulatory processes, especially in the distribution segment, the supply is far lesser than demand. Currently, India needs to double its generation capacity in the next 7 to 10 years to meet the potential demand.

Demand:

The long-term average demand growth rate is 6% to 7% per annum and is expected to grow at faster rate in the future.

Barriers to entry:

Barriers to entry are high, especially in the transmission and distribution segments, which are largely state monopolies. Also, entering the power generation business requires heavy investment initially. The other barriers are fuel linkages, payment guarantees from state governments that buy power and retail distribution license.

Bargaining power of suppliers:

Not very high as government controls tariff structure. However, this may change in the future.

Bargaining power of customers:

Bargaining power of retail customers is low, as power is in short supply. However government is a big buyer and payment by government can be erratic, as has been seen in the past.

Competition:

Not high currently. The Electricity Act 2003 aims to encourage investments, thereby increasing competition.

57

IntroductionOf Working Capital

Meaning: Working capital could be defined as the portion of assets used in current operations. The

movements of the funds from capital to income and profits and back to working capital are one

of the most important characteristics of the business. This cyclical operation is concerned with

utilization of the funds with the hope that will return with an additional amount called income.

If the operations of the company are to run smoothly, a proper relationship between fixed

capital and current capital has to maintain.

Sufficiently liquidity is important and must be achieved and maintained to provide that

funds to pay off obligation as they arise.

The adequacy of cash and other current assets together with their efficient handling,

virtually determine the survival o demise of the company. A businessman should be able to

judge the accurate requirement of working capital and should be quick enough to raise the

enquired funds to finance he working capital needs.

Working capital is also called as net current assets, “it is the excess of current assets over

current liabilities.” All organization has to carry working capital. It is important from the point of

view of both liquidity and profitability. Poor management of working capital means that funds

that unnecessarily tied up in idle assets hence educing liquidity and also reducing ability to

invest in productive assets such as plant and machinery. so affecting profitability.

58

The term working capital refers to current assets, which may be defined as:

i) Those which are convertible into cash or equivalents with the period of one year and

ii) Those which are required to meet day to day operations,

The fixed as well as current assets, both requires investment of ‘Funds’. So the management

of working capital and fixed assets apparently seem to involve it type of consideration but it is

no so. The management of working capital involve different concept and methodology than the

techniques used in fixed assets management.

Objective behind the Study Of Working Capital & Research

Methodology

Working capital management is very important in modern business. The analysis of working

capital is also very useful for short-term management of funds. The following are objective of

study:

1) To make Items wise analysis of the elements or component of working capital to identify

the items responsible for change in working capital.

2) To calculate working capital for Two Years.

59

Scope & Limitation of the Study

1. The Study is limited to Two Years projected performance of the Company.

2. The data used in this study have been given by commercial Manager. As per the

requirement and necessary some data are grouped and sub grouped.

Data & Methodology of the Study:

The data of UJVNL for the two years used in this study have been taken from company.

Editing, classification and tabulation of the financial data, which are collected from the above-

mentioned sources, have been done as per the requirement of the study.

60

Net Working CapitalGross Working Capital

Permanent Working capital

Temporary Working Capital

Types of Working Capital

Balance Sheet Working Capital

Cash Working Capital

Negative Working Capital

Types of working capital

The type, kinds of a thing are depending upon the different utilization of working capital. It prominently

works in the direction of performing different functions in different situation and in the context of divergent

variables. So following are some important types of working capital.

.

1) Net Working Capital:

Term Net working capital can be define in two way

i) It is the difference between current assets and current liabilities.

ii) Amount left for operational requirement.

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2) Gross Working Capital:

Gross working capital means the total current assets.

3) Permanent Working Capital:

It is the minimum amount of the current assets, which are needs to conduct the business even during the

dullest season of the year. This amount varies from year to year depending upon the growth of a company and

stage of the business cycle in which it operates. It is the amount of funds required to produce the goods and

services, which are necessary to satisfy demand at a particular point.

It represents the current assets, which are required on a continuing basis over the year. It is maintain as the

medium to carry on operation at any time. Permanent working capital has following features:

i) It is classified on the basis of the time factor.

ii) Its size increase with the growth of the business.

iii) It constantly shifted from one assets o another and continues to remain in the business process.

4) Temporary Working Capital:

It represents the additional assets, which are required at different times during the operating year.

Seasonal working capital is the additional amount of current assets particularly cash, receivables, and

inventory which is required during the more active business seasons of the year. It is the temporary investment

in the current assets and possesses the following features:

a) It is not always gainfully employed, though is May also shift from one asset to

another as permanent working capital does.

b) It is particularly suited to business of seasonal on cyclical nature.

5) Balance Sheet Working Capital:

The balance sheet working capital is one, which is calculated from the items appearing in the balance

sheet. Gross working capital, which is represented by the excess of current assets over current liabilities, is

example of the balance sheet working capital.

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6) Cash Working Capital:

It is one, which is calculated from the items appearing in he Profit and Loss Account. It

shows the real flow of money or value at a particular time and considered to be most realistic

approach in working capital management. It is the basic of he operation cycle concept, which

has assumed a great importance in financial management in recent year. The reason is that

the cash working capital indicates he adequacy of he cash flow which is an essential pre

requisite of a business.

7) Negative Working Capital:

It emerges when current liabilities exceeds current assets, such a situation is absolutely theoretical and

occurs when a firm is nearing a crisis of some magnitude.

63

Principles of Working Capital Management:There are some principles of sound working capital management policy. They are as

follows:

1) Principle of Risk Variation:

Risk here refers to inability of a firm to meet its obligation when they become due for payment. Large

investment in current assets with less dependence on a short term borrowing increase liquidity, reduces

dependence on short term borrowing increases liquidity, reduces risk.

On the other hand less investment in current assets and greater dependence on debt increase the risk,

reduces liquidity and increases profitability. In other word these is a definite inverse relationship between he degree

of risk and profitability.

A conservative management prefers to minimize risk by maintaining a higher level of current assets or working

capital while a liberal management should be to establish a suitable trade off between profitability and risk.

2) Principle of Cost of Capital:

The various sources of rising of working capital finance have different cost of capital and the degree of risk

involved. Generally higher the risk lower is the cost and lower the risk higher is the cost. A sound working capital

management should always try to achieve a proper balance between these two.

3) Principle of Equity position:

According this principle, the amount of working capital invested in each component should be adequately

justified by a firm’s equity position. Every rupee invested in the current assets should contribute to he net worth of

he firm.

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4) Principle of Maturity of Payment:

This principle is concerned with planning he sources of finance for working capital. According to this

principle, a firm should make every efforts o related maturity of payment to its flow of internally generated funds.

Maturity pattern of various current obligations is an impotent factor in risk assumptions and risk assessment.

Factors determining working capital

1) Nature or character of Business:

The working capital requirement of a firm basically depends upon he nature of its business. Public utility

undertaking like Electricity, Water Supply, and Railways need very limited working capital because they offer cash

sales only and supply services, not products and as such no funds are tied up in inventories and receivables.

On the other hand trading and financial firms require less investment in fixed assets but they have to invest large

amount in current assets like inventories, receivables and cash. So they need large amount of working capital.

2) Production cycle:

Another factor, which has a bearing on the quantum of working capital, is the production cycle. The term

‘production or manufacturing cycle’ refers to the time involved in the manufacturing of goods. It covers the time

span between the procurement of raw material and the completion of the manufacturing process leading to the

production of finished goods.

In other words, there is sometime gap before raw material becomes finished goods. To sustain such

activities that need for working capital is obvious. The longer time span (production cycle) the large will be the tied

up funds and therefore, larger is working capital need and vise versa.

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3) Production Policy:

In certain industry the demand is subject to wide fluctuations due to seasonal variations. The requirement

of working capital in such case, depend upon the production policy. The production can be either kept steady by

accumulating inventories during slack period with a view to meet high demand during peak season of the

production could be curtailed during the slack season and increased during the peak season. If policy is to keep

production steady by accumulating inventories it will require higher working capital.

4) Credit Policy:

The credit terms granted to customers have a bearing in the magnitude of working capital by determining

the level of book debts. The credit sales result in higher book debs. Higher book debts mean more working capital.

On the other hand, if liberal credit terms are available from the supplies of goods trade needs less working capital.

The working capital requirement of a business are thus, affected by term of purchase and sale, and the ole

given to credit by a company in its dealing with creditors and debtors.

5) Growth and Expansion:

The working capital requirement of concern increase with the growth and expansion of its business

activities. Although, It is difficult to determine the relationship between the growth in the volume of business and

the growth in the working capital of a business, yet it may be concluded that for normal rate of expansion in the

volume of business. We may have retained profits to provide for me working capital but in fast growing concern,

we shall require lager amount of working capital.

6) Seasonal Variation:

In certain industry raw material is no available throughout the year. They have to buy raw material in bulk

during the season to ensure uninterrupted flow and process them during the entire year. So a huge amount is

blocked in form of row material during the peak season, which gives more requirements for working capital and

less requirement during the slack season.

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7) Earning Capacity:

Some firm have more earning capacity than others due to quality of the products, monopoly condition etc.

Such firms with high earning capacity may generate cash profits from operations and contribute to their working

capital.

8) Dividend Policy:

The dividend policy of a concern influence on the requirement of the working capital. A firm that maintains

a steady high rate of cash dividend irrespective of its profits level needs more working capital than the firm that

retains large part of its profits and does not pay at high rate of cash dividend.

9) Other Factors:

Certain other factors such as operating efficiency, management ability, irregularities in supply, import

policy, assets structure, importance of labour, banking facilities etc, also influence the requirement of working

capital.

Sources of Working CapitalMainly there are two sources of working capital:

i. Permanent or Fixed working capital

ii. Temporary or variables working capital

In any concern, a part of the working capital investments are as investment in fixed assets. This is so

because there is always a minimum level of current assets, which are copiously required by the enterprise to carry

out its day-to-day business operation and this minimum, cannot be expected to reduce at any time. This minimum

level of current assets need long term working capital, which is permanently blocked.

67

Sources of Working Capital

Long term SourcesSharesDebenturesPublic Deposits Ploughing back of ProfitsLoans from Financial institution

Short Term sources

Commercial BanksIndigenous BanksTrade CreditorsInstallment CreditAdvancesAccount receivableCreditAccrued ExpensesDiffered IncomeCommercial Paper

Similarly, some amount of working capital may be required to meet the seasonal demands and some special

exigencies such as rise in prices, strikes, etc. this gives rise to short term working capital which is required for day to

day transaction also.

The fixed proportion of working capital should be generally financed from the fixed capital sources while the

temporary or variable working capital equipment may be met from the short term sources of capital.

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Receivables

Finished Goods

Raw Material Work In Process

Cash

Methods of Calculation of Required Working Capital

The methods of calculation of required working capital are as follows:

Working Capital Cycle:

The working capital cycle is also known as operating cycle. It refers to the duration between the firm’s

payment of cash for raw material, entering into production and inflow of cash from debtors and realization of

receivables. Simply speaking, operating cycle is the duration between the outflow of cash and inflow of cash

and this may be evidenced from the following working capital cycle.

The above and network diagram may offer a clear picture of a complete working capital i.e. it is a cash

phenomenon. In the diagram, raw material, stock refers to material only. In work in process, components involve

are raw material, wages, and overhead more specifically manufacturing overheads. Finished stock consists

69

components of material, wages and overheads inclusive of factory, office and administration and selling and

distribution. Debtors include material, wages, overheads and profits. Credit involves for the components of raw

material, etc. something a contingency margin is also given while estimating the working capital requirement.

The operating cycle consists of him following events, which continues throughout his life of a firm

remaining engaged in commercial activities.

Avg. Stock of Raw Material

1) Raw Material Holding Period =Avg. Cost of Consumption per day

Avg. Stock of Work in Process

2) Work in Process Holding Period = Avg. Cost of Production per day

Avg. Stock of Finished Goods

3) Finished Goods Holding Period = Avg. Cost of Goods Sold per day

Avg. Book Debt

4) Receivables Collection Period = Avg. Credit Sales per day

Avg. Trade Creditors

5) Creditors Collection Period = Avg. Credit Purchased per day

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In the form of a simple equation working capital cycle or operating cycle can be represented as bellow:

O = R+W+F+D-C

Where,

O = Operating Cycle (In Days)

R = Raw Materials Holding Period

W = Work in Process Holding Period

F = Finished Goods Holding Period

D = Receivables Collection Period

C = Creditors Collection Period.

Working Capital Required = Total Operating Cost

Number of Operating Cycle

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Components of Working Capital:

Current Assets:

i) Stock of Raw Material (for…month consumption)

ii) Work In Process (for…Month)a) Raw Materialsb) Direct Labourc) Overheads

iii) Stock of Finished Goods (for…month sales)

iv) Sundry Debtors or Receivables (for…month sales)

v) Payments in Advance (if any)

vi) Balance of Cash (required to meet day-to-day Expenses)

vii) Any Other (if any)

Less: Current Liabilities:

i) Creditors (for…month purchase of raw materials)

ii) Outstanding Expenses (for month)

iii) Others (if any)

Working Capital (CA – CL)

Amount

------

------

------

------

------

------

------

------

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Add: Provision/ Margin for contingencies

Net Working Capital Required

------

------

73

Balance sheet analysis

Sources of funds

2007-08 2008-090%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

6598.16 7123.56

8491.56 7627.56

13910.3699999999 13732.13

Unsecured LoansReserve & SurplusShare Capital

Shareholders Fund

1) Shareholders’ FundsShareholders’ funds include the equity share capital & reserves & surplus. UJVNL sources major of their funds from the both Shareholder funds & unsecured loans. The shareholders funds contributed around 50% of total funds in 2008-09.The share capital have been constant for the past 2 years, whereas R&S contributed around 30% of the total funds in 2008-09.There has been a continuous increase in R&S over the past 2 years. The R&S has increased to 11% from 2008-09 as compared to 2007-08.The reason for increase in the year 2008-09 was that the company had earned significant profits during the year.

2) Unsecured loans

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The unsecured loans comprise of the short term loans taken from the banks, NCD’S, ECB’S & other loans. The composition of the unsecured loan to total sources was constant through the year i.e. 50% in 2007-08 & 50% in 2008-09(approx).

Applications of funds

2007-08 2008-090%

10%20%30%40%50%60%70%80%90%

100%

21225.14 19421.9399999999

3605.374098.15

4143.68 5718.63

25.94 235.31

Misc. Expenses Net Currents Assets Work in Progress Fixed Assets

1) Fixed AssetsFixed assets include tangible assets & intangible assets. Tangible assets include Land & Building, Plant & Machinery, vehicles etc, whereas intangible assets include technological licenses & computer software. The fixed asset as a percentage of total assets was 45% in 2008-09 and 55% in 2007-08.Plant and Machinery, Land (sites) were sold out in the year 2008-09 and as a result the fixed assets drop at the rate of 8.5% as compared to the last year. Net current assets grew at the rate of 13.67% in the year 2008-09 as compared to the year 2007-08.

2) Net Current AssetsNet current Assets are the working Capital of the company. It includes the current assets & current liabilities. Working capital is required for day to day

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operations of the company. Net Current assets are 40% of total assets in 2008-09 and 30% in 2007-08. The net current assets have been increasing over the past 2 years on account of new plant and machinery acquired by UJVNL.

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Profit & Loss Analysis

2007-08 2008-090%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

272.489999999999

172.14

2.31

3.36

22.66

54.75

143.17226.89

Profit before Tax Prov for Income tax Prov for Fringe benefit tax

Net Profit After Tax

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Sales:Particular 2008-09 2007-08Power Sales Rs. 5739.27 Rs. 2789.94% Change Over the previous year

105.71% 19.54%

The Power sales of the UJVNL were Rs. 2789.94 Cr in 2007-08 and it has increased to Rs. 5739.27 Cr in the year 2008-09. There was more than 105% rise in the sales of the Power generated in 2008-09 whereas there was a rise of 19.54% in 2007-08. The reason for the huge increase in the Power sales in 2008-09 was on account of higher demand for power, huge CAPEX plans and better charges as compared to 2007-08. Also 300MW power plant was commissioned in the Year 2007-08. The Power segment is in the growing stage as the EBIDTA margins are also increasing but there was slight fall in 2008-09 because the consumption was lower as compared to the previous year. The Power segment contributionto the overall EBIT margins has been increasing from the past years.

Other Income:

Particulars 2008-09 2007-08

Other income 224.25 169.56

Total income 5936.52 2953.40

Growth (%) 32.25% 8.47%

% of total income 3.76% 5.74%

The other income consists of income received for investments made, dividend received, interest received profit on sale of securities. In 2008-09, Other Income at Rs. 224.25 Cr was higher by 32.25% over the 2007-08 largely due to provision been written back , dividend income from investments and profits made on sale of investments. The other income contributes around 3.76% of the total income of the UJVNL over the past year.

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Working capital analysis:Particulars Amount (2008-09) Amount(2007-08)Current Assets: Inter Unit Balances 217980471 217690989 Stock stores & spares 178928156 66991328 Sundry Debtors 3220626993 2381047220 Cash & Bank Balances 3905684507 3587159529 Loans and Advances

Amount recoverable in cash or in kind 552533853 264442654Advance income tax 472537115 472537115Tax Deducted at source recoverable 99713743 74681695Others 380761149 359636131Interest Accrued on FDR's with banks 78888962 52407309 Total CA 9107654949 7476593970 Current Liabilities & Provisions: UPSEB Period Liabilities 166184425 166184425 Sundry Creditors 2936843765 3021978997 Provision for on AGSP Subsidy 61217327 Provision for Fringe Benefit Tax 10172539 6836252 Liability for 6th pay commission arrear payment 214604884

Total CL 3389022940 3194999674 Working capital (Total CA - Total CL) 5718632009 4281594296

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2008-09 2007-080%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

9107.66 3389.02

7476.6

3194.99

5718.63

4287.59

Working CapitalTotal CLTotal CA

Interpretation:

The working capital is required for day to day operations of the company. UJVNL finances its working capital by taking loans for power segments. In the FY09 the working capital requirement for the power business has increased due to various projects being implemented. Working capital comprises of current assets & current liabilities.Particulars 2008-09 2007-08 2006-07Total CurrentAssetsAs in the above table most of the current assets comprises of sundry debtors & cash balances which was 20% of total current assets which increased to 2% in 2008-09.There was increase in the cash & bank balance, loans & advances to 29% because the company was using the same for their expansion.There was an increase in cash and bank balance for the year 2008-09 increased to 9% as compared to the year 2007-08. The reason behind this rise was Fixed Deposits which includes unutilized.The liability towards creditors of the company has decreased by 3% due to decrease in supplies. The provisions have increased by 944% due to increase in Provision for on AGSP Subsidy and Provision for Fringe Benefit Tax.

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CONCLUSIONIt is universally accepted that Indian economy is growing at a very high rate presently and the demand for steel is also showing an upward trend. Efforts to make this sector more eco-friendly will meet success only if competent authorities take up the developmental jobs in proper spirit.

Existing power business, a gold mine: The 300 MW power plant commissioned last year has already recovered half the cash equivalent of its CAPEX.

Power expansion: India’s power deficit is likely to continue but in order to attain the government of India’s goal of “affordable power for all by 2012.” Government is fully trying to make manufacturing, production, trading, of Power cheap. As it can be see that the power share of profit was approx 50% of the consolidated profit for the year 2009. We recommend increasing the share of power manufacturing as the over heads are low and also the profit percentage is high.

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BIBLOGRAPHY

UJVNL final report 2007-2008 & 2008-2009. www.uttarakhandjalvidyut.com www.managementparadise.com www.google.co.in www.a2zmba.com

Sahani sir’s teachings.

http://www.a2zmba.com/

http://www.google.co.in/

http://www.managementparadise.com/

http://www.uttarakhandjalvidyut.com/

my project updated

Documents

Transcript of my project updated