←SUMMER TRAINING

← ON

←Construction Budget
← OF

← NTPC LTD. (RIHAND NAGAR)

← “A Government of India Enterprise”

← UNDER COMPANY GUIDANCE OF

Mr. MAHESH KU.

Mr. S. RAY GHINGODE Mr. S.K.BHAGAT
Sr. Manager(Finance) Engg (Finance-IT) Dy. Manager (Finance)
←

← SUBMITTED BY-

← RAM SANDESH GUPTA

← (M.B.A)

← BHABHA ENGINEERING RESEARCH INSTITUTE

←
 A Project Report
On
Construction Budget

To,
2
The Coordinator,
Bhabha mgt. Research Institute
N.H-12 Jatkhedi
Bhopal

Respected Sir,

This is to certify that Mr. RAM SANDESH GUPTA, student of MBA-IV Sem. (BERI) has
completed his vocational training with us from 24 th May to 30th June, 2010. The project done
under my guidance has enabled the candidate-

(1) To study the management of finance department of NTPC RIHAND NAGAR

(2) Various functions of finance

(3) Construction Budget in particular

His performance and conduct during the training period has been good & satisfactory. We wish
him all the best in future.

Thanking you.

Regards,

Mr. Biswanath Shah

(DGM- Finance)

DECLARATION

3
 I hereby declare that the following project titled MANNUAL ON CONSTRUCTION OF
BUDGET is an authentic work done by me.
The project was undertaken as a part of course curriculum of MBA programme
BARKATULLAH UNIVERSITY, BHOPAL. This has not been submitted to any other
examination body earlier.

Ram Sandesh Gupta

MBA IVth sem.
BERI Bhopal

PREFACE

I am privileged to place before you my best possible efforts in the form of Training Report on “A Study
of MANUAL ON CONSTRUCTION BUDGET in NTPC Rihand”. The project was assigned to me by
4
Mr. SMARAJIT RAY, Sr. Manager (FIN), NTPC – RIHAND who was my guide during my summer
training at Rihand.

This project has been very inspiring and educative for me in gaining insight of FINANCE Function
(Books and budget) of NTPC, which is essential for construction of project.

In November 1975 NTPC was established under the Electricity (Supply) Act. 1948.

RIHAND SUPER THERMAL POWER PROJECT (RH STPP) is one of the 23 running projects of
power giant National Thermal Power Corporation ltd., one of the “NAVRATNAS”, in public sector, the
largest power utility in country contributing One Fourth of the total power generation.

NTPC Ltd. Has over a period of 29 years created various records on Operational Excellence and added
to an excellent organisation development.

This project has been undertaken as a part of my VOCATIONAL TRAINING in partial fulfillment of
the requirement of MBA. Iv sem. wish this would empower the relation between the two very important
groups i.e. Management & Employees.

ACKNOWLEDGEMENT

It has been an honor for me to have my VOCATIONAL TRAINING in NTPC – RIHAND. For
the same, I am indebted to Mr. B. Saha (D.G.M. Finance) for giving me an opportunity for
undergoing a month Vocational Training in NTPC.
5
I express my thanks to the Director Mr. S.V. SRIVASTAVA of BHABHA MGT. RESEARCH
INSTITUTE, BHOPAL for extending his support.

My deep sense of gratitude to Mr. S. Ray (Sr. Manager, finance & project coordinator)
Mr.Mahesh Ku. Ghindode (Engg.Finance-IT) and Mr.S.K.Bhagat (Dy. Manager F&A) for
their support and guidance. Thanks and appreciation to the helpful people at NTPC RIHAND
NAGAR for their support.

I am also thankful to Miss. Kamalini Shukla (Team member) for providing her contribution.
I sincerely acknowledge the cooperation from all the executives, supervisors and workmen of
NTPC – RIHAND to show their interest and tendered their valuable opinions and suggestions
which enriched my knowledge and helped me in the preparation of this Project Report.

Ram Sandesh Gupta

CONTENT

S.No PARTICULARS PAGE NO.

6
1 ABOUT NTPC- 10

Overview of organization 11

History 12

Vision, mission & core value 19

Project profile 21
(a)-installed capacity
(b)-regional spread of generating facilities
(c)-coal based power station
(d)-coal based JVs
(e)-gas/liq. Fuel based power station
(f)-gas based JVs
(g)-renewable& distributed generation

Performance highlights 26
(a)-capacity growth
(b)-operational performance
(c)-financial performance

Subsidiaries of ntpc 30

Joint ventures of ntpc 30

Department of ntpc 31

Corporate objectives 32

Ntpc top list of mou awards 33

Ntpc rihand 34
(a)-its sailent features
(b)-the project
(c)-performance stage i, ii, iii

7
 (d)-balance sheet
(e)-profit & loss a/c

2 FINANCE & ACCOUNTING (F & A) DEPT. 39

1-books & budget section
2-commercial section
3-work section
4-store bill section
5-establishment section
6-miscellaneous section
7-cash section
8-concurrence section
9-price store ledger section

3 MANNUAL ON CONSTRUCTION BUDGET 57

1-introduction & objectives
2-scop of capex budget
3-classification of capex budget
4-capex budget requirement
5-budget head
6-budget formats
7-process of capex budget
(a)-compilation of budget
(b)-finalisation of budget
(c)-monitering of budget
8-formulation & approval of capex budget
9-annual plan

8
 10-review of budget
11-reappropriation of budget provision
12-report on capital commitment
13-annual expenditure report
14-interface on the financial & cost system

4 SUGGESTION & FINDINGS 92

5 SWOT ANALYSIS OF NTPC 93

6 BIBLIOGRAPHY 94

9
 ABOUT NTPC
CHAPTER-I

About NTPC

NTPC, India's largest power company, was set up in

1975 to accelerate power development in India.
Today, it has emerged as an ‘Integrated Power
Major’, with a significant presence in the entire value
chain of power generation business.
NTPC ranked 317th in the ‘2009, Forbes Global
2000’ ranking of the World’s biggest companies. With
a current generating capacity of 30,144 MW, NTPC has
embarked on plans to become a 75,000 MW company
by 2017.

10
OVERVIEW OF ORGANISATION
India’s largest power company, NTPC was set up in 1975 to accelerate power development in
India. NTPC is emerging as a diversified power major with presence in the entire value chain
of the power generation business. Apart from power generation, which is the mainstay of the
company, NTPC has already ventured into consultancy, power trading, ash utilization and coal
mining. NTPC ranked 317th in the ‘2009, Forbes Global 2000’ ranking of the World’s biggest
companies.

The total installed capacity of the company is 30, 144 MW (including JVs) with 15 coal based
and 7 gas based stations, located across the country. In addition under JVs, 3 stations are coal
based & another station uses naptha /LNG as fuel. By 2017, the power generation portfolio is
expected to have a diversified fuel mix with coal based capacity of around 53000 MW, 10000
MW through gas, 9000 MW through Hydro generation, about 2000 MW from nuclear sources
and around 1000 MW from Renewable Energy Sources (RES). NTPC has adopted a multi-
pronged growth strategy which includes capacity addition through green field projects,
expansion of existing stations, joint ventures, subsidiaries and takeover of stations.
NTPC has been operating its plants at high efficiency levels. Although the company has
18.79% of the total national capacity it contributes 28.60% of total power generation due to its
focus on high efficiency.

HISTORY
NTPC has come a long way from the day when construction of its first pithead super thermal
power project at Singrauli in Uttar Pradesh commenced. Here is a retrospective which
chronicles NTPC’s achievements, year after year.

1975

• Incorporated on November 7

1976

• Shri D.V. Kapur took over on March 19 as the first Chairman & Managing Director of
NTPC
• On December 8, the Government of India cleared NTPC’s first pithead super thermal
power project at Singrauli in Uttar Pradesh
• The authorised share capital of the Company was Rs. 125 crore
11
1977

• NTPC acquired the first patch of land at Singrauli in September

• The first batch of executive trainees joined the Company
• The first major contract of Rs. 57.5 million was awarded for site leveling work at
Singrauli in June

1978

• Takeover of management of the Badarpur project

• Implementation of Korba and Ramagundam Projects cleared by the Government of
India in January and February respectively
• Late Shri Morarji Desai, the then Prime Minister of India, laid the foundation stone for
Ramagundam Project on November 14th
• Construction of the first transmission network Singrauli -Kobra -Kanpur of 400 KV
system started

1979

• Government of India approved the implementation of Farakka Project in March

• The authorised share capital of the Company rose from Rs.125 crore to Rs. 300 crore

1980

• Former Soviet Union offered to assist in setting up of power stations. Vidhayachal was
identified as the first project for such assistance
• The authorized share capital was raised from Rs. 300 crore to Rs. 800 crore in June

1981

• Dr. Shankar Dayal Sharma, the then President of India visited Singrauli in 1981 as
Chairman of the Estimate Committee of Parliament Members
• Farakka Super Thermal Power Project in West Bengal was the fourth among the first
series of four super thermal power projects taken up by NTPC. On December 29, late
Smt. Indra Gandhi, the then Prime Minister of India, laid the foundation stone for the
Project
• On December 25, the fifth and last unit of 210 MW at Badarpur Thermal Power Station
was synchronized by NTPC, marking the completion of the 720 MW project

1982
12
 • The first 200MW unit at Singrauli was commissioned
• The first direct foreign currency borrowing for NTPC- a consortium of foreign banks
led by Standard Chartered Merchant Bank extended a loan of GBP 298.41 million for
the Rihand project
• Power Management Institute, Delhi, a centre for education established.
• On November 12, Late Smt. Indira Gandhi, the then Prime Minister of India laid the
foundation stone for Vindhyachal Super Thermal Power Project in Madhya Pradesh

1983

• On March 1, the first 200 MW unit of Korba Super Thermal Power Project was
commissioned in a record time of 48 months after the placement of order for the main
plant equipment
• Another significant achievement was the supply of uninterrupted power from Badarpur
during Asian Games and Non-Aligned Meet held at Delhi in 1983
• Ramagundam became operational on November 26 by commissioning its first 200 MW
Unit
• In the very first year of its commercial operation, NTPC earned a profit of Rs. 4.51
crore in the financial year 1982-83

1984

• The transmission line based on HVDC (High Voltage Direct Current) technology,
commissioned for power transmission from Rihand to Delhi

1985

• This year marked the completion of a decade (1975-1985) of NTPC’s existence. NTPC
achieved a generating capacity of 2200 MW by commissioning 11 units of 200 MW
each at its various projects in the country
• In December ‘85, the Government of India approved the setting up of three gas-based
combined-cycle projects by NTPC at Kawas in Gujrat, Auraiya in Uttar Pradesh and
Anta in Rajasthan.
• Shri A.W. Clausen, World Bank President visited Singrauli

1986

• Synchronisation of its first 500 MW unit at Singrauli

• Became one of the first PSUs to issue bonds in the debt market

13
 • NTPC launched its maiden public issue of Bonds and raised a total of Rs. 163.37 crore.
This issue was over-subscribed by 63 percent

1987

• Crossed the 5000 MW installed capacity mark

• Korba also entered the 500 MW phase by synchronizing its first 500 MW unit on May
31st

1988

• Raised first syndicated Japanese loan of 30 billion JPY

• Rihand entered the Operational phase by commissioning its first 500 MW unit on
March 31
• The first 500 MW unit of Ramagundam was commissioned on June 26th

1989

• Consultancy division launched

• First unit (88 MW) of first gas based combined cycle power plant at Anta, Rajasthan
commissioned

1990

Total installed capacity crossed 10000 MW

1991

• Vindhyachal recorded completion of stage I activities by synchronising its sixth and last
210 MW unit in February
• The first unit of NCPP (Dadri) was commissioned on December 21st

1992

• Acquisition by the Company of Feroze Gandhi Unchahar Thermal Power Station

(2x210MW) from Uttar Pradesh Rajya Vidyut Utpadan Nigam of Uttar Pradesh
• Pursuant to legislation by the Parliament of India, the transmission systems owned by
the company was transferred to Power Grid Corporation of India Limited

1993

• For the first time, IBRD extended direct loan of USD 400 million under time slice
concept for its projects
14
1994

• Crossed 15000 MW of installed capacity

• Declared a dividend of Rs. 65 crore for the first time
• Jhanor-Gandhar (Gujarat) becomes the first thermal power station to have
commissioned an integrated Liquid Waste Treatment Plant (LWTP)

1995

• NTPC celebrated 20 years (1975-1995) of its existence. Various programmes were

organised to mark its twentieth anniversary
• A new logo was adopted
• On June 3rd, NTPC formally took over the 460 MW Talcher Thermal Power Station
from Orissa State Electricity Board
• On July 25th, the new campus of Power Management Institute (PMI) was inaugurated
by Shri N.K.P. Salve, Union Minister of Power

1996

• Continuous running of sixth unit (210 MW) of Ramagundam for 406 days for the first
time in India
• PLF of Talcher Thermal reached 43.7 % from 18.7 % at the time of takeover

1997

• Identified by the GoI as one of the Navratna public sector undertakings

Achieved 100 billion units generation in one year

1998

Commissioned the first Naphtha based plant at Kayamkulam with a capacity of 350
MW

1999

• Dadri Thermal Power Project, Uttar Pradesh adjudged the best in India with a PLF of
96.12%

Dadri, Uttar Pradesh certified with ISO-14001 on October 7th

15
2000

• Commenced construction of a first hydro-electric power project of 800MW capacity in

Himachal Pradesh

2001

• Main plant turnkey package of Rihand Stage-II (2x500MW) and Ramagundam Stage-
III (IX 500 MW) were awarded to BHEL in August

2002

• Three wholly owned subsidiaries of NTPC viz. NTPC Electric Supply Company
Limited, NTPC Hydro Limited and NTPC Vidyut Vyapar Nigam Limited incorporated
• Crossed the 20000 MW installed capacity mark

2003

• Raised funds through bonds (Series XIIIth & XIVth) for prepayment of high cost GOI
loans
• Main dam work of Koldam was awarded to Italian Thai Development in December

2004

• NTPC became a listed company

• Awarded contract for the first Super Critical Thermal Power Plant at Sipat NTPC’s
Feroze Gandhi Unchahar Thermal station achieved a record PLF of 87.43% in current
year, up from 18.02% in February’ 92 when it was taken over by NTPC LIC extended
credit facility of Rs.70 billion. Rs.40 billion was in the form of unsecured loans and
Rs.30 billion in the form of bonds
• NTPC made its debut issue of euro bonds amounting to USD 200 million in the
international market

2005

• NTPC received the International Project Management Award, 2005 for its Simhadri
project at the International Project Management Association World Congress. NTPC
became the only Asian Company to receive this award

16
 • NTPC was ranked as the Third ‘Great Place to work for in India’ for second time in
succession by a survey conducted by Grow Talent and Business World 2005.
• The Company’s name changed to NTPC Ltd.

2006

• On June, 1, the Badarpur Thermal Power Station with an installed capacity of 705 MW
was transferred to NTPC by the Government of India
• Another 740 MW was added through its Joint Venture, Ratnagiri Gas and Power
Private Limited, Dabhol. Thus taking installed capacity of the NTPC group to 27904
MW
• MOA with Govt. of Sri Lanka and Ceylon Electricity Board for development of 2 x 250
MW Coal based power project at Trincomalee in Sri Lanka

2007

• Ministry of Coal, Government of India granted in-principle approval for allocation of a

new coal block, namely, Chhati Bariatu South to NTPC, subject to the conditions
stipulated in the approval letter. The share of reserves was indicated as 354 million
tonnes
• 765 KV switchyard transmission system energised at Sipat, the largest in the country
• MOU signed between NTPC and Ministry of Energy, Federal Government of
Nigeria(FGN) for Energy cooperation
• Vindhyachal Super Thermal Power Project became the largest power station in the
country with an installed capacity of 3260 MW

2008

• NTPC allocated 0.5% of distributable profits annually for its R & D fund for
sustainable energy for development of green & clean technologies
Strategic forays into manufacturing by forming Joint Venture Companies with BHEL
and Bharat Forge
A Memorandum of Understanding was signed with Asian Development Bank, GE
Energy Financial Services, USA, Kyushu Electric Power Co. Inc., Japan and Brookfield
Renewable power Inc., Canada. To set up a Joint Venture Company for undertaking
renewable power generation under Public-Private- Partnership
• Joint Venture Company under the name “National Power Exchange Limited” was
incorporated on 11th December 2008 with NHPC Ltd., PFC Ltd., and TCS Ltd., to
operate Power Exchange at national level
• NTPC was ranked Number 1 in the 'Best Work places for Large Organisations' and
Number 8 overall for the year 2008 by Great Places to Work Institute's, India chapter in
collaboration with the Economic Times
17
2009

• 500 MW Unit VI of Sipat brought under commercial generation

• NTPC has achieved the highest ever single day generation of 655.22 MUs on 2nd
March, 2009 with highest ever single day coal based generation of 579.02 MUs

VISION, MISSION & CORE VALUES OF NTPC

VISION:

鄭 world class integrated power major

powering,
India 痴 growth,

With increasing global presence�

MISSION:

“Develop and provide reliable power,

related product and services, at competitive
price, integrating multiple energy sources
with innovative and eco-friendly 18
technologies and contribute to society.”
NTPC BY 2017…
Particulars Current Year 2011-12 2016-17

Installed capacity (MW) 31,704 ~ 50,000 ~ 75,000

Coal mining (production) -- 14 MTPA ~ 47 MTPA

Trading (units traded) 4.83 BU(2008-09) 10 BU 25 BU

Distribution (capacity) -- 1,000 MW 2,000 MW

CORE VALUES: Often known as BCOMIT

 Business Ethics
 Customer Focus
 Organizational & Professional Pride
 Mutual Respect & Trust
 Innovation & Speed
 Total Quality for Excellence

19
NTPC PROFILE

Type Public

Founded 1975

Headquart
Delhi, India
ers

Key peopl
R S Sharma, Chairman & Managing Director
e

Industry Electricity generation

Products Electricity

Rs. 46,504.47 crore (an increase of 11.28%) [2009-

Net sales
10]

Gross
Rs.49.478.86 (an increase of 9.29%) [2009-10]
revenue

Employee
24713 (31-03-2009)
s

Website http://www.ntpc.co.in/

Capital
70:30(debt: equity)
structure

20
PROJECT PROFILE

INSTALLED CAPACITY
Be it the generating capacity or plant performance or operational efficiency, NTPC’s Installed
Capacity and performance depicts the company’s outstanding performance across a number of
parameters.

NO. OF PLANTS CAPACITY (MW)

NTPC Owned
Coal 15 24,885
Gas/Liquid Fuel 7 3,955
Total 22 28,840
Owned By JVs
Coal & Gas 5 2,864
Total 27 31,704

REGIONAL SPREAD OF GENERATING FACILITIES

REGION COAL GAS TOTAL

Northern 7,525 2,312 9,837

Western 6,360 1,293 7,653

21
 Southern 3,600 350 3,950

Eastern 7,400 - 7,400

JVs 924 1,940 2,864

Total 25,809 5,895 31,704

COAL BASED POWER STATIONS

With 15 coal based power stations, NTPC is the largest thermal power generating company in
the country. The company has a coal based installed capacity of 24,885 MW.

COMMISSIONED
COAL BASED(Owned by NTPC) STATE
CAPACITY(MW)
1. Singrauli Uttar Pradesh 2,000

2. Korba Chhattisgarh 2,100

3. Ramagundam Andhra Pradesh 2,600

4. Farakka West Bengal 1,600

5. Vindhyachal Madhya Pradesh 3,260

6. Rihand Uttar Pradesh 2,000

7. Kahalgaon Bihar 2,340

8. NCTPP, Dadri Uttar Pradesh 1,330

9. Talcher Kaniha Orissa 3,000

10
Feroze Gandhi, Unchahar Uttar Pradesh 1,050
.

11
Talcher Thermal Orissa 460
.

12 Simhadri Andhra Pradesh 1,000

22
 .

13
Tanda Uttar Pradesh 440
.

14
Badarpur Delhi 705
.

15
Sipat-II Chhattisgarh 1,000
.

Total 24,885

COAL BASED JOINT VENTURES

COAL BASED COMMISSIONED

STATE
(Owned by JVs) CAPACITY
1. Durgapur West Bengal 120
2. Rourkela Orissa 120
3. Bhilai Chhattisgarh 574
4. Kanti Bihar 110
Total 924

GAS/LIQUID FUEL BASED POWER STATIONS

The details of NTPC gas based power stations is as follows:

GAS BASED
COMMISSIONED
STATE
CAPACITY(MW)
(Owned by NTPC)
1. Anta Rajasthan 413

2. Auraiya Uttar Pradesh 652

3. Kawas Gujarat 645

4. Dadri Uttar Pradesh 817

5. Jhanor-Gandhar Gujarat 648

23
 6. Rajiv Gandhi CCPP Kayamkulam Kerala 350

7. Faridabad Haryana 430

Total 3,955

GAS BASED JOINT VENTURES

COAL BASED COMMISSIONED

STATE
(Owned by JVs) CAPACITY
1. RGPPL Maharashtra 1940

Total 1940

RENEWABLE & DISTRIBUTED GENERATION:

Renewable Energy
Renewable energy (RE) is being perceived as an alternative source of energy for “Energy
Security” and subsequently “Energy Independence” by 2020. Renewable energy technologies
provide not only electricity but offer an environmentally clean and low noise source of power.

Objectives:
NTPC plans to broad base generation mix by evaluating conventional and non-conventional
sources of energy to ensure long run competitiveness and mitigate fuel risks.

Portfolio of Renewable Power

NTPC has also formulated its' business plan of capacity addition of about 1,000 MW thru
renewable resources.

Sl. No. RENEWABLE ENERGY SOURCES CAPACITY

1. Wind energy Farms 650 MW
2. Small Hydro Project 300 MW
3. Solar PV Power Project 5 MW
4. Solar Thermal 10 MW
5. Biomass Power Project 15 MW
6. Geothermal Power Project 30 MW
24
 Total 1,010 MW

Distributed Generation
India’s ambitious growth plans require inclusion of all sectors, especially the rural sector where
two third of our population lives. Such economic development cannot be achieved without
availability of energy and subsequently efficient energy management which is crucial for rural
development. As per census 2001, about 44% of the rural households do not have access to
electricity. Some of the villages are located in remote & inaccessible areas where it would be
either impossible or extremely expensive to extend the power transmission network.

Objective

• Implementation of distributed generation projects using locally available renewable

resources such as biomass, wind, solar, micro hydel, bio-fuel etc.
• Training & capacity building of local community to enable them to independently
manage, operate & maintain the plant • To ensure viability and long term sustainability
of DG projects.
• Integrated growth & development of rural areas by enhancing employment education,
income generation & livelihood opportunities.
• To ensure implementation of various technologies as demo/pilot project.

25
PERFORMANCE HIGHLIGHTS:2008-09 & Q1/10

CAPACITY GROWTH
Increase in commissioned capacities

 500 MW at Sipat-II
 500 MW at Bhilai Expansion (Q1/10)
 500 MW at Kahalgaon-II

Increase in commercial capacities

 1000 MW at Sipat –II

 1000 MW at Kahalgaon-II

Investment approved

 Project investment
• Rs. 121458 million for Rihand-III and Vindhyachal-IV

 R&M investment
• Rs. 4868 million for R&M of Auriaya GBPP
• Rs. 545 million for R&M of (Phase-I) extension works at Rihand (2X500 MW)
• Rs 673 million for R&M of Controls &Instrumentation System works at
Korba 3X500 MW.
26
 Capacity Growth Chart

35000

Production in MW
30000
25000
20000
15000
10000
5000
0

10
-8

-9

-0
-8

-9

-0

20
81

91

01
86

96

06

1/
19

19

19

20
19

20

Q
Financial year

Operational Performance
 10 Coal Based stations achieved over 90% PLF
 NCTPP achieved99.36%

NTPC constitute approximately 15% of

the total production capacity

26850

147966

All India NTPC

27
 100
90
80
70
60 All India PLF
50 NTPC PLF
40 NTPC AvF
30
20
10
0
2003- 2004- 2005- 2006- 2007- 2008-
04 05 06 07 08 09
Financial Year

PLF – Year and Quarter

2009 2008 Q 2010 Q 2009
Coal
Station 91.14% 92.24% 92.87% 92.19%
Gas Station 67.01% 68.14% 79.87% 67.20%

All India 77.19% 78.61% 77.75% 77.74%

 NTPC Contributed 31.41% increase in the country during the fiscal year 2008-09.
 During Q1-2009 generation contributed by NTPC to 48.15% of country’s addition in
generation.

 In Q1-2010, Gross generation of NTPC increases by 10% and ESO by 11% over
corresponding quarter.

 NTPC achieved highest ever PLF of 79.87% for gas station during Q1-2010

Financial Performance
Accelerated investment in CAPEX
 Highest ever capital of Rs 127bln expenditure Rs. during 2008-09
 45% higher than previous year’s Rs. 88 bln
 Total capital expenditure incurred by NTPC Group companies is Rs 152 bln
28
  Outlay for 2009-10 for NTPC’s capital schemes is Rs 177 bln
 For Group NTPC the outlay is around Rs. 245 bln, an increase of 62% over last year

Capital expenditure chart

2008-09

2007-08
Financial year
2006-07

2005-06

2004-05

0 50000 100000 150000

Rs. (in millions)

PARTICULARS 2008-09 2007-08 GOLY*

Total income 452 728 400 177 13%

Net Sales 419,238 370,501 13%

Other income 33,490 29,676 13%

Total Expenditure 359,133 297,628 21%

Fuel 271,107 220,202 23%

Depreciation 23,645 21,385 11%

Interest & finance 20,229 17,981 12%

charges
PBT 93,595 102,549 -9%

Tax 11,582 28,401 -59%

PAT 82,013 74,148 11%

Adjusted PAT 80,783 75,140 8%

*GOLY :Growth over last year

All figures are in Rs.(in millions)

29
SUBSIDIARIES OF NTPC

 NTPC Electric Supply Company Ltd. (NESCL)

 NTPC Vidyut Vyapar Nigam Ltd. (NVVN)
 NTPC Hydro Ltd. (NHL)
 Pipavav Power Development Co. Ltd. (PPDCL)
 Kanti Bijlee Utpadan Nigam Limited, (formerly known as Vaishali Power
Generating Company Limited)
 Bharatiya Rail Bijlee Company Limited (BRBCL)

30
JOINT VENTURE’S OF NTPC

 Aravali power company Pvt. Limited

 NTPC Tamil Nadu energy company limited
 Navinagar power generating company Pvt. Ltd
 Meja Urja nigam Pvt. Ltd
 NTPC –SAIL power company pvt. Limited
 Ratnagiri Gas and power pvt. Limited
 Utility Powertech limited
 NTPC-Alstom power services pvt. Limited
 National high power test laboratory Pvt. Ltd
 NTPC-BHEL Power project pvt. Limited
 BF-NTPC energy system limited
 Transformers and Electricals Kerala ltd
 International coal ventures Pvt. Ltd
31
  NTPC SCCL Global ventures Pvt. ltd
 National Power exchange limited

DEPARTMENTS OF NTPC

Business excellence EMD Finance

Hospital Operation
R&M Technical Services
Contracts and Materials EMG
HRD Information Technology
O&E Safety
Control and Instrumentation FES
HR-EDC Department MGR
P&S Chemistry
F&A Hindi section
MTP PR Cell

32
CORPORATE OBJECTIVE
 To add generation capacity within prescribed time and cost.
 To operate and maintain power stations at high availability ensuring minimum cost of
generation.
 To maintain the financial soundness of the financial operations in accordance with good
commercial utility practice to develop appropriate commercial policy leading to
remunerative tariffs and minimum receivables.
 To function as a responsible corporate citizen and discharge social responsibility, in
respect of environmental protection and rehabilitation.
 The corporate will strive to utilize the ash produced at its station to the maximum extent
possible through production of ash bricks, building materials etc.
 To adopt appropriate human resources development policy leading to creation of a team
of motivation and competent power professional.
 To introduce, assimilate and attain self-sufficiency in technology, acquire expertise its
utility management practice and to disseminate knowledge essentially as a contribution
to other constituents of the power sector in the country.
 To develop Research and Development for achieving improved plant reliability.
 To expand the consultancy operation and to participate in ventures abroad.

NTPC Top List of MOU Awards for Excellence in Performance

NTPC Limited, a Navaratna PSU has been ranked top awardee for MoU Award for Excellence
in Performance, instituted by Department of Public Enterprises, Govt. of India consecutively
for two years, 2004-05 and 2005-06 with 'Excellent' rating. Dr. Manmohan Singh, Hon'ble
Prime Minister of India presented the MoU Awards to Shri T. Sankaralingam, CMD, NTPC at
the Conference of Chief Executives of CPSEs held in New Delhi on 8th March, 2007.

NTPC has been achieving "Excellent" rating under the Memorandum of Understanding (MoU)
signed with Govt. of India for all the years since inception of the MoU system and has
sustained high level of operational and financial performance.

NTPC is fuelled with the vision to be a world class integrated power major, powering India's
growth with increasing global presence. It is India's largest power generation company with an
installed capacity of 26,404 MW, with 14 coal based, 7 gas based and 3 Joint Venture power
33
 stations and with 20% of all India's installed capacity contributes around 28% of country's
power generation. NTPC is poised to become a 75000 MW plus Company by 2017

AWARDS & ACCOLADES

 Unchahar station of NPTC received the coveted Asian Power Plant of the Year Award, 2006
for Efficiency, Environment, Operational Characteristics and Business Management.

 NTPC bags Seven National Awards for Meritorious Performance

 Ranked Top Awardee for MoU Award for Excellence in Performance by Govt. of
India.

 Ranked among top 10 Great Places to Work for in the country in the Business World
survey

 NTPC ranked no.1 in the category of Independent Power Producer under “TOP ASIAN
PERFORMANCE BY INDUSTRY” in 2007 Plants Top 250 Global Energy Company .

 Four NTPC has bagged the Peacock National Award for Corporate Social
Responsibility in Emerging Economies(Public Sector), 2007

 Won the SCOPE Meritorious Award for Best Practices in Human Resource
Management.

 PMI, NTPC has bagged the prestigious Golden Peacock National Training Award,
2006, for 4th year in succession.

 NTPC bagged SCOPE Meritorious Award for Good Corporate Governance for 2005-
06.

NTPC RIHAND

ITS SALIENT FEATURES

34
Location Bijpur,Distt:Sonebhadra(UP)

Installed Capacity 1000MW-Stage-I

1000MW Stage-II

Unit Size 4×500MW

Coal Source Amlori mines,Duddhi chua mines

Water Source Rihand reservoir

Chimney 224.5 Mtrs. For Stage-I

275 Mtrs. For Stage-II

Power Evacuation a) +/-500 KV HVDC bipolar line to Dadri & 400

KV single circuit AC line to Shaktinagar &
Kanpur and Delhi for Stage-I
b) 400KV double circuit AC line to Allahabad-
Mainpuri –Ballabhgarh,400KV S/C Dadri-
Panipat &400 KV S/C Patiala-Malerkotla
&400KV D/C in Agra (UPPCL)-(PGGCIL) for
Stage –II

Beneficiary States
U.P. ,Haryana ,Punjab ,Rajasthan ,J&K ,Himachal
Pradesh ,Chandigarh.

Approved Investment Rs.5839.37Crores

Units Commissioned UnitI-31.03.1988,Unit II-05.07.1989

THE PROJECTS
Known for its impeccable standards of production and productivity, hall-mark of NTPC, the
2000MW Rihand Super Thermal Power Project has taken further strides to become a trends –
setter in the various facets of power generation, environment management, rehabilitation&
resettlement, ash utilization, safety etc.

35
PERFORMANCE

STAGE I
The Unit-I & II of the first stage were declared commercial from January, 90 and January 91
respectively. During its operation, the many more accolades to its credit. This station has
registered more than 100%PLF on two consecutive months of February and March, 93. Earlier
the station has generated at more than 100%PLF during January & November, 92. The station
has achieved longest continuous run of 159 days.

Description 1999-00 2000-01 2001-02 2002-03 2003-04

Generation(MUs) 7607.083 7717.852 7674.45 7750.446 7956.263

PLF (%) 86.60 88.10 87.61 88.84 90.58

STAGE-II
Stage II is designed as a step to complete NTPC’s target of 75000 MW by 2017. Its production
capacity is 1000 MW.

STAGE-III
Stage III is under construction. It is supposed to start production by 2013. Construction work is
handed over to Simplex India Ltd.

Balance sheet as on 31st March 2010

As At
Particulars As At 31/03/2010 31/03/1009
source of funds Nil Nil
shareholders funds Nil Nil
share capital Nil Nil
4357428198
Reserve and surplus 51,862,623,885 7
36
 435742
sub Total (shareholders funds) 51862623885 8
231672099
Deferred Revenue 2161348412 4
Deferred Income from foreign currency
fluctuation 61128941 676882941
Loan funds Nil Nil
Secured loans Nil Nil
Unsecured loans Nil Nil
sub Total (Loan funds) Nil Nil
Deferred Tax liability (Net) Nil Nil
Less: Recoverable Nil Nil
Sub total (Differ. Tax liability) Nil Nil
Diff. Foreign currency fluctuation liability Nil Nil
Inter unit accounts -20614137792 -1371497237
3285291354
Total 33470963446 3
Application of funds Nil Nil
Fixed assets Nil Nil
5384097782
Gross block 53400198592 8
2648225516
less: Dep. 28180550189 3
2735872266
Net Block 25219643403 5
Capital WIP 3343626422 780076502
Construction stores & advances 4520738918 3037588263
3117638743
Sub total 33084013743 0
Investment Nil Nil
Deferred. Foreign currency fluctuation assets 47543000 685551000
Current asset, Loans & Advance. Nil Nil
Inventories 2770573485 2711577583
sundry Debtors Nil Nil
cash and bank balances 866463 3591702
Other current assets 19962192 18904770
Loans & advance. 749621934 597896452
Sub Total (CA, loans & advan.) 3541024074 3331970507
Less: current liab. & prov. Nil Nil
Liabilities 2828022697 1906484015
Provisions 373594674 434511379
Sub Total (CL & prov.) 3201617371 2340995394
Net current assets 339406703 990975113
Def. Expend. From foreign currency liab. Nil Nil
37
 3285291354
Total 33470963446 3

P/L Account for the year ended 31st March 2010:

Particulars For the yr. ended 31/03/2010

Income Nil
Sales(Gross) 30946570411
Less-electricity duty Nil
Sales(net) 30946570411
Energy internally consumed 16912292
Prov. Written back 2040807
other income 221863625
Total (Income) 31187387135
Expenditure Nil
Fuel 17148558626
Employee Remuneration & Benefit 979641781
Generation , Admt.& other exp. 1296548380
Depreciation 1647194977
Prov. 2737496
Interest & finance chg. 1377162510
CC exp. Chg to revenue 452794228
Less-unit exp. Trans. To CC Nil
Total(expenditure) 22904637998
Profit before tax, prior period adj. 828274937
Prior period income/exp.(Net0 -5592762
Extraordinary items Nil
Profit before tax 8288341899
Prov. For: Nil
Current Tax Nil
Deferred Tax Nil
Fringe benefit Tax Nil
Less Recoverable Nil
Deferred Tax Nil
Trans. To EDC/ Development of coal mines Nil
38
Prov. For Tax (Net) Nil
Prov. After Tax 8288341899
43574281986

Balance b/f
Write back from bonds Red. Reserves Nil
Write back from capital reserve Nil
Write back from foreign project reserves Nil
Balance available for appropriation 51862623885
Trans. To bond redemption reserves Nil
Transfer to foreign project. Reserve Nil
Trans. To capital reserve Nil
Trans, to general reserve Nil
Interim Dividend Nil
Proposed Dividend Nil
Tax on interim dividend Nil
Tax on proposed dividend Nil
Adjust. Of P/L of prev. yr. Nil
Balance carried to B/s Nil
Exp. During construction period (Net) 51862623885

39
 FINANCE &
ACCOUNTING (F & A)
DEPARTMENT

CHAPTER-II

SECTION: BOOKS AND BUDGET

[SOURCE: ASST. ACCOUNT OFFICER]
40
PURPOSE:
The main objective of this section is to prepare/ compile the capital budget of the project and
to obtain the approval from the corporate center. Annual accounts of the project and co-
ordination of the statutory audit government audit are compiled by this section.

MODE OF FUNCTIONING:
Expenditure is of two types, capital expenditure and revenue expenditure. Capital expenditure
is employed for the purpose of fixed assets which are used for construction $ maintenance of
the power plant and find place in the balance sheet.
Revenue expenditure are towards the payment of remuneration etc. to the employees, based
upon these two aspects budgets is prepared.
Types of Budget prepared are:

 Capital budget
 O&M budget
 R&R budget
 Environment budget
 MBOA budget [misc. bought out assets]
 Renovation and modernization

Out of these budgets capital budget and O&M budgets are also known as performance budget
because the emphasis is paid upon payment targets rather than on the financial targets. It is
compiled by keeping in mind the “feasibility and detailed project report”. Environment budgets
etc. are not a part of routine activity. They are prepared as a measure of social and natural
awareness. MBOA budget comprises item which are bought and are immediately used. All
these head constitutes the total value of code. Then PSL for coal receipt is made.
For Billing Variable Parameters are considered:

 Fixed charges recovered from SEB’s.

 Variable charges @ Rs34.29 / Kwh.
 FPVA, this is calculated as per this formula (10 x Ho).

PREPARATION OF MONTHLY COST SHEET

Information in quantitative as well as in financial or monthly terms about the operation of the
plant for a particular month. It shows:

41
  Generation
 Energy sent out
 Coal rate
 GCV of coal and oil
 Auxiliary consumption
 Cost of per unit of electricity
 Sale price of energy
 Profit per unit & total profit per month
 Variance analysis with respect of the purpose
Cost sheet is used by management for the purpose of efficiency and for
control purpose.

O&M AND MBOA BUDGET

In power plant revenue budget is known as O & M budget it is made for the purpose of
meeting the day requirement of the plant. In O & M budget first of all generation target is fixed
for the year and various cast components are worked out. For the year and various cost control
actual cost are analyzed with respect to budget on monthly basis and corrective actions are
taken.
MBO budget is prepared to moot the requirement of miscellaneous brought out assets
like: furniture $ fixtures, computers, hospital equipment’s etc.

BUDGET CLASSIFICATION
Budget is prepared once in a year. Journal entries are made daily . The detailed information
regarding the expenditure is sent by each and every section of the project. For the purpose of
management information and control, monthly trial balance is drawn by the book diction and
the expenditure under various head is reported.
Based upon the approval of fund “operating estimates [B.E] & revised estimate [R.E]” is made.
The budget book also contains “operating parameter matrix” the estimate of each and every
item used in the maintenance of the plant.
The budget is compiled by book section, by taking into consideration the requirement of
various areas.
Finally compiled budget is sent to the corporate center for approval. Expenditure during the
year is monitored with respect to approved budget and no deviation is allowed. At the year-end
annual accounts are prepared and the balance sheet duly signed by statutory auditor is
submitted to corporate center.

42
 SECTION: COMMERCIAL
[SOURCE: Dy. MANAGER (F&A)]
PURPOSE
The main purpose of the section is:

43
 To make payments for fuel (coal & oil)
 Calculation of fuel price adjustment for energy billing
 Preparation of monthly cost sheet
 Preparation and monitoring of O&M budget and MBOA budget

DETAILS OF IMPORTANT FUNCTIONS:-

The coal is mainly received from the coal mines of Amlori, Dudhichua, Jayant, and located
nearby the station. The oil received from HSD, HFO, and LDO. Coal cost incised HSD also.
The payment is made basically for these two items only, and is made though SBI Shaktinagar.
The coal received is of three grades i.e. C,D,E. The checking is done by “chemistry
department”. And joint analysis report is sent to finance department. Based upon these reports
the payment is made.
The valuation is done by weight average method, the cost of coal also includes Silo /WW
[charge for mechanical loading = Rs10/-], + royalty + Sales tax.
Valuation of Coal Includes:

 Actual coal received

 Unloading charges
 Sampling charges
 Testing charges
 Value of adjustment
 Recollecting charges
 M.T.N. value
 HSD issued to Loco
 Transportation charges
 Other charges (stare removal charges)

Various statements that are prepared to streamline the balances are mentioned below:-

BANK RECEPT VOUCHERS [B.R.V.] It contains details regarding the fund

received from corporate as well as from

44
 parties and employees.

BANK PAYMENT VOUCHERS [B.P.V] It contains the details regarding the

payments made to the various parties by the
way of cheque / dd.

CASH RECEIPT VOUCHER [C.R.V.] It contains the details regarding the cash
received from the various parties, banks,
employees.

CASH PAYMENT VOUCHER[C.P.V.] It contains the details regarding payments

to be made in cash.

To reconcile the bank balances of various bank accounts, BANK RECONCILIATION

STATEMENTS are prepared every month. BANK GUARNTEES, received from various
suppliers / contractors, are also kept in cash section. Custody, release, extension and
encashment of bank guarantee is the responsibility of cash in charge.
NON CASH SECURITIES, such as TDR/FDR/NSC etc, received from suppliers and
contractors are kept in cash reaction and the custody release and encashment of documents is
the responsibility of the section in charge.

WORK SECTION
[SOURCE: ACCOUNT OFFICER]

45
CORE OBJECTIVE
The Objective is to make payment to the Contractor for Civil / O&M/ Miscellaneous jobs
carried out by Contractor and related accounting etc. All execution jobs payment is done by the
work section .It involves a following Process:

 Identification of job by the Indenter.

 Tender Approved - Guideline followed by CPWD.
 Contract Sale –
 Estimation of Job
 Concurrence of job
 Actual Contract sale
 Tender opening- minimum amount must be considered.
 LOA (Letter of Award) is issued to the contractor- contains different Clauses of
contract.
 2% of total contract value deposited to EMD- in the form of TDR

GCC – GENERAL CONDITION OF CONTRACT

It contains various advances which is paid to the contractor: -

 Moblisation, if contract value is more than 20, 00,000 lakhs is eligible for 4%
Mobilisation advance against Bank Guarantee with 12% interest per annum.
 Equipment advance: same as mobilisation
 Secured advance: Interest free advance against material brought.
 Time Extention: described in LOA .

SECTION: - STORE BILLS

[SOURCE:-ACCOUNT OFFICER]

46
 CORE OBJECTIVE
Procuring material on contractual basis and payment is made to suppliers against purchase
orders.

PROCEDURE
Purchase orders by suppliers are placed by purchase departments and the payments to suppliers
are made by store bills section. The mode of payment is done as mentioned in the P.O.
Generally there are three types of payments:

 Advance payment.
 Releasing payment on receipt of the material.
 Part advance and part after receipt of materials.

There are also different modes of payments. They are as follows:

 Payment through bank.

 Cash payment.
 Direct payment (This mode of payment are done by cheque).

In case of import payments are normally paid in a different way. There are four different mode
of payment:

Letter of credit (L.C.)

Telegraphic transfer.
International demand draft.
Collection against documents.

In case of Letter of Credit, the bank sends the documents and debits the specified amount from
the account.

The goods received are checked and if found as per the specification mentioned in the Purchase
Order then store dept. Prepare the SRV. If goods are not as per specification then it is rejected
and suppliers are asked to replace the goods. In case of damages as loss in transport then
insurance claim is lodged and gets compensated. The value of the purchased goods means the
total cost incurred to acquire the material. It takes into account all charges like transportation,
excise duty, sales tax, insurance, bank charges, etc.

In case of import goods the mode of payment and supply of goods is different. Here the SRV
includes:

 L.C. opening charges

47
 Cost of the material.
 Bank commission (Foreign + Indian)
 Air fright / ocean fright.
 Custom duty.
 Prot rent charges
 C & F charges
 Inland transportion.
 Entry tax @ 2% (applicable for materials valued more than 10 lakhs).

If there is delay in supply then liquidated damage (L.D.) is charged @0.5% per week as
mentioned in purchase order.

The rules regarding the purchase are found in general purchase conditions.

SECTION:-ESTABLISHMENT
[SOURCE: - ACCOUNT OFFICER]

CORE OBJECTIVE
48
 To make payments to the employees for various purpose i.e.

 Salary
 Provident fund
 Income tax
 Travel Allowance advance & claim
 Leave Travel Concession advance & claim
 Medical advance & claim
 Loan & advance
 Other remuneration paid by NTPC

The work of establishment section starts as soon as:

 The appointment letters of an employee reaches the establishment section.

 A payroll (master file) specified for the following entries is made:
• Name of the employee
• Employee number
• Designation
• Scale of pay
• Basic pay
• Data of increment
• PLC (last pay certificate)
• Recovery of loans and advance if taken.
The employee gets

D.A.:- 28.3% of basic pay

FCA: - 5% of basic pay

Variation in master file occurs in

Absentee treatment; the number of days duty is performed. (Source-time office P&A)
General incentive; when PLE is more than 80 %.(Source-industrial engg. Group)
Medical payment with OT charge in the case of worker.

MISCELLANEOUS SECTION
[SOURCE: Dy. MANAGER]

CORE OBJECTIVE

49
 The basis objective of this section is to make the various miscellaneous or petty payments of
employees as well as non employees of NTPC and the collection various receipt contents
following components:

 Bank Payment Voucher :

Includes the various payment made in cheque by the NTPC Companies during his
operation and daily routine as per agreement like payment of Schools, Cooperative,
Telephone Bills , ICH, Sahyog and any special occasion payment.

 Cash Payment voucher:

Include the various misc. or petty expenses payment made by cash incurred by NTPC
employees in companies expenditure.

 Bank Receipt Voucher (BRV) :

Include the various receipt of payment in respect of Rent collection: Schools, cooperative
Societies EWA, UTI COLTD, non NTPC residing in NTPC Township, shops etc.
Electricity collection: from the non NTPC electricity user, shops, etc.

 Cash Receipt Voucher:

Include various receipt in cash by the Parties like:

• Sahyadri guest house,

• Shivalik guest house,

• Receive from hospital by the outsiders patient.

• Cash receive in respect of Quarter rent and

• Electricity by the shopkeeper and other parties.

 Imprest Voucher:
Different types of advance given to different Employees in head in respect of expenditure
Incurred by them in the whole month.

 Purchase General Voucher:

This document is used to record the Misc. or petty items purchased by NTPC. It content
Following:

50
 • S.I. NO

• vendor code

• vendor name

• account name description

• Dr/ Cr.

CASH SECTION
[SOURCE: ACCOUNT OFFICER]

CORE OBJECTIVE
 To maintain the Cash and Bank book for RHSTPP.
51
  To maintain the requirement for receipt of fund when ever required to Corporate .
 To make the payment and receive the cash etc.

PROCEDURE
 Daily the cash book and bank book is generated to get the cash balance of various
banks.
 The amount required to meet the transaction are requisites to Corporate. The NTPC
[Corporate] transfers the fund as per the payment has to be made .The Requisite amount
is directly transfer to the subsequent banks.

BANK PAYMENT FOR

SBI (1) Coal

(2) Operational
UTI Civil construction

The details of payment are received from various sections of finance.

The cheques are prepared and signed as per “delegation of power ’’ the following is details of
Delegation of Power:
Amount Authority

5000& Below Any officer

1 Lacs & Below Any two officer

1 Lacs & 5 lacs Account officer& Dy. Manager

5 lacs & above Dy. Manager & above

Various Statements are prepared in this section:

 Bank Receipt Voucher (BRV): It includes various receipt of Cheque from different
parties and Corporate Fund.
 E- Payment Voucher (EPV): it’s a on line electronic payment by which various
payments are made.
 Cash Receipt Voucher
 Cash Payment Voucher

NOTE: Bank Reconciliation Statement is prepared every month.

52
Bank Guarantee: Received fro various suppliers Contractors are also kept in cash section
custody extension and encashment of bank guarantee is responsibility of cash in charge.
Non Cash Securities: TDR/ FDR / NSC

ERP: Enterprise Resource Planning (ERP) is an integrated set of applications that help and
automate a business, involving best practices there by improving the performance.

ERP incorporates all the elements of a business - finance, materials, maintenance, production,
projects and marketing activities into a unified system that operates more effectively and
efficiently.

SECTION: - CONCURRENCE
[SOURCE: - Dy. MANAGER (F&A)]

CORE OBJECTIVE
To examine the proposal from the financial point of view.

53
 FUNCTION
There are generally two types of proposals civil and Electrical work. The proposals below
Rs5000/- require no financial proposal is analyzed in terms of quality, quantity, time & price.
For any proposal to be carried out, three conditions are required.

 Acceptance of necessity:

For this purpose the detailed report depicting the necessity has to be prepared by the concerned
department.

 Administrative approval of cost estimate:

The detailed report depicting the cost involved in each and every item is prepared. The
projection costs are estimated by DSR (Delhi Schedule Rate) and DAR (Delhi Analysis Rate)
for electrical item SOR (Schedule of Rate) is concerned.

 Technical approval from competent authority:

This approval is granted according to delegation of power. After Undergoing all these steps
contract is awarded.

Generally three types of contracts are there:

 Open Tender

 Limited Tender

 Single Tender

BASIS OF TENDERING

• Work proposals over Rs15,00,000/- are awarded on open tender basis through paper
advertisements.
• Proposals below Rs15,00,000/- goes in limited tender. At least 4 contractors are asked
for and negotiation takes place.
• In case of urgency or for monopolistic jobs single tender are awarded.
• Tenders are evaluated on the basis of cost effectiveness and technical sufficiency.
• Over the ground level the variation is upon 20% and below the ground level the
variation is upto100%.
54
In case of shortage of fund the fund is diverted from the unworkable areas.

SECTION:- PRICE STORE LEDGER ( PSL)

[SOURCE: Dy. MANAGER]

CORE OBJECTIVE
To keep the record of inventory in term of Quantity and Value.

55
DESCRIPTION
The pricing of material issued is calculated on monthly average basis there are four
types of documents which facilitates the preparation of PSL.

 STORE RECEIPT VOUCHER (SRV):

It is prepared by the store bill section which is transferred to the PSL section. SRV
generally has following components:
• Vendor name

• carrier name

• Indenting department

• Item code

• Material description

• Unit of measurement

• Quality Supplied

• Quality rejected

• Quality accepted

• Quality Taken in

• Rate of the goods

• Net Value of the goods

 STORE ISSUE VOUCHER (SIV):

It is a document for issue of material from store to different indenter or user. The
store contains following components:

• Name of indenting department

• Item code

• Description about material

56
 • Unit measurement

• Quantity required

• Quantity issued

• Bin card Balance

The bin card balance shows the amount of the material lying on the store which helps in taking
purchase decision.

 MATERIAL RETURN NOTE (MRN):

This is a document which is used to records the material return by the contractor to the store. It
Contain the following components:

• Material code

• Material Description

• Unit Measurement

• Total quantity returned

• Quantity accepted

• Value

 MATERIAL TRANSFER NOTE (MTN):

This document is used to record the transfer of material from one project to another project. It
contains the following:
• Material code

• Description of material

• Total quantity

• Quantity indents

57
• Quantity issue

58
 Mannual on Construction
Budget

CHAPTER-III

INTRODUCTION

The budgeting process set out in this Manual is designed for Performance Budgeting of the
Capital Expenditure (CAPEX) for Project Construction activities of green field, ongoing and
expansion projects right from the identification of new sites till commissioning and including
capital addition works such as plant betterment construction and raising of ash dykes, ash
utilization schemes, Environment Action Plan Schemes, Energy
Conservation Schemes, Renovation and Modernization works and other facilities of stations in
operation, Miscellaneous bought out Assets, Investment in Joint Ventures, Research and
Development activities, etc.

59
Besides meeting the essential requirement of managerial control on capital cost and adherence
to time schedules, the performance budget also provides the basis for assessing the requirement
of funds for capital expenditure. It facilitates planning for mobilization and deployment of
funds from internal resources, domestic borrowings, external borrowings including loans/aids
from International Funding Agencies, Supplier credits and the Budgetary support from the
Government of India (GOI). Thus, the budgeting process enables an assessment of the
quarterly/ monthly/ year-wise Funds-Flow i.e. requirement and availability of funds during the
Annual Plan period and the long term corporate plan covering two or more (five year) plan
periods.
This manual envisages regular feed back to management to facilitate monitoring of the
performance of various capital works and utilization of funds thereof. The budget would
monitor the execution of the works as per approved estimates and schedules and thereby avoid
cost and time overruns.

OBJECTIVES
The main objectives of the performance budget include the following:

 To assess the requirement of funds in the long term (i.e. over a time
span of 15 years) as well on a short term basis (i.e. Monthly/Quarterly requirement) so
that mobilization of funds and its deployment for capital expenditure can be timely
planned prior to the commencement of physical activity and thereby ensure the
availability of funds at the most appropriate costs.

 To prepare annual budgets in such a manner that Managers at various levels in

the organization carry out periodical exercises to identify physical targets in respect of

60
 each work or responsibility centre and derive monthly targets or programmes and cash
flows to achieve the physical targets.

 To introduce and operate responsibility accounting by which Managers are

responsible for achievement of specified targets with the resources allocated for the
purpose.

 To bring about effective co-ordination of all activities of the organization and to

gear up to meet effectively the requirements of the projects.

 To achieve cost control to identify and account for cost overruns and to analyse
contributory factors into deviations and cost escalations, etc.

 To establish a close link between physical progress and monetary outlay and to
inculcate the culture of planning and target setting at grass-root level.

 To provide a basis for plan allocation and budgetary support by the Govt.

SCOPE OF CAPEX BUDGETS

The capital budget will cover the following schemes:

 Approved and ongoing Projects

Greenfield and expansion Projects that are approved by the GOI before the start of the
current five- year plan period and are under construction.

61
  New approved projects

The projects approved by the GOI during the course of the current fiveyear plan period.

 New Unapproved Projects

The projects for which preliminary expenditure related to site investigations,feasibility

studies, expenditure for obtaining clearances/permits and initial payments for development of
infrastructure and land for Projects have been taken up and are being posed for approval of
GOI.

 Commissioned Power Stations

All capital addition schemes for commissioned and existing power stations like
construction/ raising of Ash Dyke, installations of additional plant and systems, adding
facilities at township, administrative office, Environment action Plan schemes and Energy
conservation schemes, Ash utilisation, balancing equipments, etc.

 Power Stations under Renovation and Modernisation

Schemes of Renovation and Modernisation undertaken for NTPC’s own Stations as well as
stations taken over by NTPC.

 Investment in Joint Ventures

Proposals of investment in Joint Ventures

 Research & Development Budgets

Capital expenditure for establishment or construction of R&D Laboratories and facilities.

 Miscellaneous Bought Out Assets (MBOA) Budget

Construction Budget for MBOA items for operating stations (for projects under
construction MBOA budget forms a part of the capital budget as a non-DCO item)

 Survey and Investigation

These are studies which are essential for identification of site, preliminary survey and soil
investigation and other studies which are required for preparation of feasibility reports for
submission to CEA for approval.

62
 CLASSIFICATION OF CAPEX BUDGET OUTLAYS

According to the nature of expenditure, the budget outlays for Approved and Ongoing
Schemes, new approved Schemes and New Unapproved Schemes are classified as under:

 Direct Capital Outlay

This represents all costs directly identifiable with capital works and includes cost of land
(including rehabilitation and resettlement expenditure), infrastructure facilities, civil (including
material consumption), mechanical, electrical works, township, MGR, Construction Tools &
63
Plants and other construction facilities. The budget provision is to be made against each work
head listed below:

o System: Represents major components of the project. Composite contracts that

contain multiple systems have also to be categorized as separate systems to
facilitate monitoring of expenditure and progress in respect of such contracts.
For e.g. Construction Township with all infrastructure facilities is one system.

o Budget Head: Represents major classification of works in each system. Ex.

Residential Buildings, Service Buildings, Roads, Drains etc., in Township are
major classification of works.

o Work Head: Representing specific individual work. For e.g.. Out of

Residential Buildings, we may have classification of A, B, C, D type quarters.
Further under each type there may be multiple contracts.

 Commissioning Expenses

All direct expenses for running of individual units up to the date of commercial operation,
including fuel costs, startup power, chemicals and lubricants, consumption and anticipated sale
of energy during trial run are to be indicated under this head.

 Construction Materials

The stocks of construction material (or free issue material) are to shown in this Budget. All
purchases are initially to be shown under this Head. The consumption of materials should be
valued at budgeted cost for calculating the accretion/decretion and should be reflected in the
stock of Construction Stores. Any variance in material cost on account of the difference
between the issue price and contract price should be provided for in the DCO along with the
consumption cost.

 Technical Consultancy

64
Payment to technical consultants identifiable with various plant and systems such as MGR,
coal handling, C&I, Prime Consultants and Retainer Consultants are to be included in this
head. All incidental expenses payable to consultants based on contractual obligations and
statutory payments, if any payable in respect of foreign consultancy payments should also be
provided under this head.

 Training & Recruitment

The first part of this budget is to consist of expenses for training covering both in-house
development programmes and external training programmes for all employees. The
expenditure to be incurred for ‘Trainees’ on the rolls of the Company should also be reflected
in this Budget Head. The second part consists of expenses for recruitment such as
advertisement, interview expenses, TA to candidates etc.

 Incidental Expenditure During Construction

• Employee Cost
These comprise of salaries, DA, incentives, wages, allowances, contribution to PF and
other funds and welfare expenses such as LTC, medical reimbursement, canteen
subsidy etc. The provision for arrears of salary should be shown separately.

• Other Establishment Expenses (net of income)

These include the other expenses incidental to construction i.e. Repair and Maintenance
for buildings, construction equipment during construction, vehicle running expenses,
office rent, power charges payable to outside agencies, LC charges, cost of drawings,
travelling expenses, printing and stationery, communication expenses, advertisement
for tenders are major items falling in this category.

 Miscellaneous Bought out Assets(MBOA)

MBOA items include vehicles, furniture and fixtures, office and other equipment, hospital and
medical equipment, misc. assets of township, lab Manual on Construction Budget 7 equipment,
canteen equipments, miscellaneous tools, LAN/satcom, EPABX and loans to employees. In
case of loans to employees, the net fund requirement is to be projected. Necessary justification
for the items proposed in MBOA budget should be made and disclosed in the format.

 Borrowing Costs

65
Interest on loans and bonds, upfront fee, agency commission, guarantee commission,
commitment charges and any other charges/ fees and expenses payable towards raising of
loans, which are accrued/paid and to be capitalised during the construction period has to be
estimated and included in this budget.

 Working Capital Margin

The requirement of working capital comprising of inventory of fuel, spares, consumables,

operation and maintenance expenses and sundry debtors (as per the prescribed norms)
anticipated during budget period to the extent of 25% are to be considered in the budget.

 Accretion/Decretion to Net Current Assets

Apart from direct capital outlay and expenses, cash flows related to movement of current assets
and current liabilities (such as EMD, Cash Deposits, Tax Deduction at source, etc) should be
included in this budget.

 Capital expenditure not represented by assets

This includes capital expenditure on account of assets belonging to other agencies. For
example construction of approach roads, canal lining, shifting/re-routing of Transmission Lines
etc., on property belonging to local authorities/SEBs. These items should be included under the
respective budget heads in Direct Capital Outlay budget and these should also be presented
separately in the format for “capital expenditure not represented by assets” (Form No.C-12) to
facilitate identification and control of such works. The budget proposals for these items should
be within the overall provision in the approved cost estimate and should be supported by
specific approval of the competent authority with justifications.

 Rehabilitation & Resettlement (R&R) Expenditure and Community

Development Expenditure

This includes expenditure to be incurred towards R&R and community development expenses.
These items should be included under the respective budget heads in Direct Capital Outlay
budget and these should also be presented separately in the format for “Rehabilitation &
Resettlement Expenses” (Form No.C-13) to facilitate identification and Manual on
Construction Budget 8 control of such works. The budget proposals for these items should be
within the overall provision in the approved cost estimate and should be supported by specific
approval of the competent authority with justifications and cumulative commitments till date.

66
  Foreign exchange variation

CAPEX REQUIREMENTS OF (COMMISSIONED) STATIONS

According to the nature of expenditure, the capital expenditure requirements of Stations, which
are fully commissioned, are classified as under:

 Capital Additions Budget

Capital Budget in respect of plant betterment/balancing equipment such as environment

monitoring, retrofitting equipments, equipments for energy saving, ash utilisation, additional
facilities in township, office and service building, etc. should also be prepared for each of the
budget heads listed out in Appendix-IV. These budgets should be prepared in the formats
67
 prescribed for such items. Before inclusion of any item in these budgets, specific approval of the
competent authority as provided in DOP and regulatory agencies (as applicable) should be
obtained and reference of the same should be made in the budget.

 Renovation and Modernisation Budget

The capital expenditure towards Renovation and Modernisation should be prepared budget
head-wise in the respective forms. The approval of Board of Directors/CEA/CERC should
be obtained before seeking provision under this budget.

 MBOA

MBOA includes vehicles, furniture and fixtures, office and other equipment, hospital and
medical equipment, misc. assets of township, lab equipment, canteen equipments,
miscellaneous tools, LAN/satcom, EPABX and loans to employees figure in this budget. In
case of loans to employees, the net funds requirement should be projected. Necessary
justification for the items proposed in MBOA budget should be made and disclosed in the
format.
NOTE: All proposals covered under heading, CAPEX REQUIREMENTS OF
(COMMISSIONED) STATIONS, require specific approval of the Corporate Centre (as per
DOP). Budget provisions under these heads should be sought only after obtaining specific
administrative approval. Any commitment for incurring expenditure should be made only
when these proposals receive investment approval by the competent authority (as provided
for in DOP). A mere budget provision should not be construed as an approval to incur the
expenditure. In fact the budget provision may be included to facilitate investment approval
and thereafter to take up procurement activity, without having to wait upto the next budget
period.

BUDGET FOR CONSTRUCTION/SUPERVISION MANAGEMENT AND

OTHER CONTRACTS FUNDED BY OUTSIDE PARTIES
The activities included here will consist of Construction/Supervision Management of turnkey
projects undertaken by NTPC which are to be funded by clients. The budgets for such activities
are to be prepared in the formats as applicable to NTPC projects and are to be forwarded to the
clients after approval of the same by NTPC Management. Any income accruing from such
projects should be indicated separately.

INVESTMENT IN JOINT VENTURES

68
The investments in Joint Ventures by way of equity contribution are to be projected JV-wise.
All investments proposed should be supported by Approvals of Competent Authority.

CAPEX BUDGET HEADS

For uniform accounting, it is essential that costs be collected for each system of the
Project/Station though this may involve splitting up of payments against contracts which
relates to more than one system. Budget provisions are related to project estimates and net
works and monitoring of actual expenditure against budget provision has to be made from the
expenditure recorded in the books against the account heads. It is, therefore, essential that the
classification in net works, project estimates, budgets and accounts should be effected
uniformly system-wise, so as to plan, budget and build up costs for each system.

Performance Budget (physical progress vis-à-vis monetary outlays)

69
The packaging concept adopted for each Project normally forms a basis to arrive at the number
of contracts and composition of the works/systems in each contract. The capital expenditure
extends to more than one accounting period and involves substantial amounts. This necessitates
a review of the capital programme at regular intervals, which also helps in assessing the funds
requirement and the planning for mobilisation of funds thereof. Hence, physical progress for
various systems should be made available along with the time schedule to compile budgets.
The estimates of various works are to be integrated with networks and accordingly contracts
are to be drawn. However, different projects may have different packaging resulting in various
works or systems getting bundled to form a single contract (may be Turnkey Contract). In this
case, the tender cost estimates of each work containing details of the various works/systems
involved should form the basis for the first budget period which can be further improved upon
after award of the contract based on the billing break-up.

Budget heads
In order to implement budgeting as per these budget heads, the following steps have to be
taken:

 Budget heads should be adopted for preparation of networks and project estimates. The
budget provision is to be indicated against each contract after arranging the contracts
under the appropriate budget head and system group. In case a contract covers more
than one Budget Head, the detailed Billing Breakup should also contain the Budget
head to facilitate monitoring of performance against each contract. This would enable
the engineer-in-charge to budget against these items contract-wise and then show
allocation of budget to each system.

 The account heads in the Chart of Accounts have been linked with budget heads

 If there are any contracts not covered in the budget heads, budget provision for such
contracts should be shown against the appropriate system head by adding a code
number.

CAPEX BUDGET FORMATS

The budget estimates should be reported in the formats as prescribed in this respect. The
budget formats have been categorized in A – F series as detailed here:

 A Series - A1 and A2 indicates budget summary at Corporate Level and Project/Station

Level respectively.

 B Series - indicate the physical progress of Main equipment – total for all units and
unit-wise.

70
  C series - indicate Work head, Budget Head and System Head-wise total cost as
approved, as expected, actual expenditure up to end of previous year and up to Q1 in
current financial year, provisions in RE and BE, cumulative expenditure up to end of
next financial year besides the package summary sheet deals with the physical and
financial progress of high value contracts [contracts above Rs.50 lakhs ]

 D series - indicate Month wise phasing of RE

 E series - indicate Month wise phasing of BE

 F series - indicate Reconciliation of expenditure with Financial Accounts.

LIST OF BUDGET

Form no. Sub Form no. Description

A SUMMARY FORMS

A-1 NTPC Budget Summary

A-2 Project Budget Summary

A-3 Allocation of costs of service divisions

71
B PHYSICAL PROGRESS FORMS

B-1 Milestone Chart – Ongoing Projects

B-2 Physical Progress – Main Plant Equipment

C YEARLY TARGETS & COST ESTIMATES

FORMS

C-1.1 Budget Summary

C-1.2 DCO – System-wise Summary

C-2.1 DCO – Budget head-wise Summary of Capital Works

C-2.2 Package Summary Sheet (Civil Works)

C-2.3 Package Summary Sheet ( Mech. & Elec. Works)

C-3 Commissioning Expenses

C-4.1 Construction Materials – Summary

C-4.2 Construction Materials Budget Head-wise

Consumption

C-5 Technical Consultancy

C-6 Training & Recruitment Expenses

C-7.1 IEDC – Employee Cost

C-7.2 Manpower Budget

C-8 IEDC – Other Establishment Expenses

C-9 Miscellaneous Bought Out Assets

C-10 Borrowings Costs

C-11 Working Capital Margin

C-12 Capital Expenditure not represented by Assets

C-13 Rehabilitation & Resettlement Expenditure

C-14 Community Development Expenses

C-15 Capital Additions Budget for Works

72
 C-16 Capital Additions Budget for MBOAs

C-17 Preliminary Survey & Investigation

C-18 R&D Budget Summary

C-19 Joint Ventures Budget

C-20 Township & Social Overheads

D FORMS FOR REVISED ESTIMATES

(MONTHLY TARGETS)

D-1 Month-wise Stage Budget Summary

D-2 Direct Capital Outlay – Capital Works

D-3 DCO – Commissioning Expenses

D-4 DCO – Construction Materials

D-5 Technical Consultancy

D-6 Training & Recruitment

D-7 IEDC – Employee Cost

D-8 IEDC – Other Establishment Expenses

D-9 Miscellaneous Bought Out Assets

D-15 Capital Additions Budgets for works

D-17 Preliminary Survey & Investigation

D-18 R&D Budget

D-19 Joint Venture Budgets

E FORMS FOR BUDGET ESTIMATES

(MONTHLY / QUARTERLY TARGETS)

E-1 Month-wise Stage Budget Summary

E-2 Direct Capital Outlay – Capital Works

73
 E-3 DCO – Commissioning Expenses

E-4 DCO – Construction Materials

E-5 Technical Consultancy

E-6 Training & Recruitment

E-7 IEDC – Employee Cost

E-8 IEDC – Other Establishment Expenses

E-9 Miscellaneous Bought Out Assets

E-15 Capital Additions Budgets for works

E-17 Preliminary Survey & Investigation

E-18 R&D Budget

E-19 Joint Venture Budgets

PROCESS OF CAPEX BUDGETTING

COMPILATION OF BUDGETS
The process for compilation and approval of budgets is as follows:

 Revision of Budget Estimates of current financial year

 Preparation of Budget Estimates for the next financial year

The Budget Activity is to start with the issue of Budget Circular by Corporate Finance in the
month of June every year. Thereafter, Projects GMs are to issue internal circulars for
preparation and submission of budgets to Corporation Finance. The revision of Budget
Estimates of current financial year should take into account the changes in key factors that
have taken place after previous budget period, effect of budget utilisation of previous financial

74
year, changes in expected cost to completion (ECTC), expenditure incurred in the first quarter
of the current financial year, etc.
Projects should prepare budgets as per the guidelines issued from time to time with necessary
disclosures of physical and financial data as per the prescribed formats for various elements of
capital expenditure. Performance budgets after approval of the ED of the respective region
should be submitted to Corporate Finance. Corporate Finance is to then review the proposals,
which will involve various departments at CC and Project representatives. After the detailed
review and discussion the proposals are to be finalized for approvals. This process shall be
completed by end September so that the Annual Plan is compiled and approved by the
Corporate Budget Committee and is ready for submission to the GOI by the 15th of October.
Hence, all Projects should adhere to the time schedule given by Corporate Finance as per the
Budget Circular issued every year. Any delay/deficiency in submission of proposals by any
Project would effect the compilation and submission of the Annual Plan by the company. The
broad time schedule of the various budget activities is shown below:
S. Activity Form Responsibility Submission To Target date
no Ref.

Approved and on-going schemes

1 Furnishing actual expenditure to -F6.1 - Project Finance Corporate CS 20th June

all HOD’s upto -F6.2
Corporate Finance 5th July
- End of previous year -F1.1
toF1.5 Project P&S
- June in current year

2 Compilation of latest package -Corporate CS - Cost Engineering - 20th June

wise cost estimate (for awarded
works) - Project P&S

3 Finalisation and submission of - Cost - Site Finance 30th June

latest project cost Engineering
- Corporate Budget

4 Review of latest milestone charts -B1 - Site P&S - EIC’s/Site 30th June
and physical progress
- B2 - CMG/CC - DGM (CS)

5 Submission of data regarding -C2.1 - Corporate - Site P&S 15th July

Corporate contracts to Site P&S
-C2.2 -Contract Services

-C2.3

-D2

-E2

6 Submission of data regarding Site -C2.1 - All concerned - Site P&S 15th July
75
 contracts and erection payments -C2.2 Site Engineers
for equipment packages, progress through HOD’s
payments for Civil works, R&R -C2.3
and Community Development to
Project P&S -C13,

-C14

- D2,

-D13,

-D14

- E 2,

-E13,

-E14

7 Submission of Technical -C5 - Corporate EDP - Site P&S 15th July

Consultancy and Satellite &Communication
Communication Budget -D5
-Corporate
-E5 Engineering
-C2.3
/D2

/E2

8 Submission of Manpower Budget -C7.2 - Corporate HR - HOD HRSite/ 15th July

to HR Dept./Project/Region/CC (IE Dept) Hq/CC

9 Submission of Budget for IEDC. - - HODs at site - HOD – HR/Site 15th July
C8 /D8
MBOA requirements of the dept.
/E8

-C9

/D9

/E9

10 Submission of materials -C4.2 - All concerned - Site Materials 15th July

requirement to Materials Site Engineers
Department -D4.2 through HOD’s Department

-E4.2

11 Preparation of budget estimates -C15, - HODs (I/c) - Site P&S 15th July
for Commercial Station works
-C16
- MBOA

76
 - EAP -D15

- capital addition items -D16

- Energy Conservation -E15

- Ash Utilisation -E-16

- R&R budget

12 Submission of Training and - C6 - HR, CC/ - Corporate Budget 31st July

Recruitment Budget Region /Project
- E6 - Regional Budget

- Project Budget
Section

13 Submission of employees cost - C7.1 - HR Dept. CC, Corporate Budget 31st July
expenses budget Region & Project
- D7 level - Regional Budget

- E7 - Project Budget
Section

14 Cancellation and submission of -C8/ - HOD - Project Budget 31st July

total (EDC) MBOA Budget section
D8/ – HR/Site

E8

-C9/

D9/

E9

15 Submission of Commissioning -C 3 O&M (Planning) - - Project F&A 31st July

expenses Budget
-D3

-E3

16 Submission of WC requirements - C 11 - O&M (Planning) - Project Budget 31st July

Section

17 Submission of construction - C4.1 - HOD -Project Site(P&S) 31st July

Materials Budget to Project P&S
- D4.1 – Matls.

- E4.1

18 Compilation of project budget and -A2 - Site P&S - Project Budget 10th August
presentation to the Project Budget
Committee - C1.1 - Site F&A Committee

77
 -C 1.2

19 Approval of project budget by - GM / Project 11th August

GM –Project / Project Budget
Committee -Budget

Committee

20 Submission of project’s budget - A, B, - Project F&A / - Regional ED 12th August

proposal for the approval of C, D P&S
Regional
and E
ED

New Unapproved schemes

1 Submission of budget and write- - C 17 - Corporate - Corporate Engg. 31st August

up regarding new projects Planning
/ CC

2 Submission of budget for new - C 17 -Corporate - Site office 31st August

budget and budget for preliminary Engg/CC
S&I of identified projects - D 17 - RHQ
- Corporate
- E 17
Budget

Investments in JV

1 Submission of budget proposal for - C 19 - JV Cell - Corporate Budget 31st August

JV
- D 19

- E 19

CC and RHQ Budgets

1 Review and compilation of - A3 - Corporate 12 August

th

departmental budgets at RHQs, Budget

T&CC and Corporate Centre

2 Calculation and inclusion of - C 10 - Corporate - Corporate Budget 31st August

Borrowing Cost in respective Budget Committee
project Budget and Approval of - D 10
Corporate Centre, RHQ Budget
- E 10

Source Documents
78
The Corporate Plan and Master network (MNW) i.e. Level-1 (L1) schedules for the Projects
that are finalized in conjunction with the National Plan are the key factors for formulation of
the budgets and in turn the Annual Plan. Keeping in view the targets as per MNW (L1),
contracts are finalized along with Level-2 (L2) schedules, detailed terms of payment and
billing breakup. The L2 network indicates the major areas constituting each work, the physical
target and monthly phasing of physical targets. The L2 schedules that are drawn serves the base
for projection of financial outlays matching to physical activities. Payment terms of contract
read with the Billing Breakup indicate the cash flows required during the budget period. For
committed contracts, escalation to date should be based on actual payments for actual base
price and the future escalation factor is to be based on expected movement of respective
indices. Contract specific factor for computation of provisions for PVC, ERV are to be worked
and made available by Projects at the time of preparation of budget so that uniformly all the
EICs/contract coordinators take the same basis for making provision.
Where contracts for works are not awarded, the likely L2 schedules, terms of payment are
drawn by EICs/contract coordinators based on the experience of similar work done and the
budget provisions are to be made accordingly. The value of work/items of work is to be taken
as per pre-tender cost estimate/bids received/estimate in feasibility report or project report or
approved cost estimate as available. The price variation/escalations and exchange rate
variations as applicable should be provided for.
At the PRT meetings the actual and anticipated budget utilization is to reviewed and the status
to be reported thereon.

Furnishing of Expenditure Details

Project Finance has to provide Budget Head wise, contract wise and element wise expenditure
incurred up to end of previous year and up to Q1 of current financial year to various EIC and
Contracts Services which shall form the basis to ascertain the status of payments released and
to assess the likely payment in the budget period based on contract schedule and payment
terms. Project Finance should submit the expenditure incurred duly reconciled with the audited
financial accounts in the Performa F-6.1 and F-6.2. As the budget is prepared on cash flow
basis the contractors’ liabilities created such as Retention Money, Security Deposits should be
deducted from the capital works accounted and the Advances paid should be reflected as
expenditure. It should be ensured that the information in this respect is furnished within a
fortnight of finalization of accounts.
The actual expenditure indicated on a monthly basis budget head wise, contract wise and
element wise to EIC and such expenditure incurred up to June is to form the basis for
formulations of budget proposals.

Review of Budget at Project Level

The budget proposals prepared by EIC/Contract Services should be reviewed by Project
Budget Committee and then forwarded to the Corporate Centre for approvals. Budget
projections should be realistic and should reflect the action plan accurately. The revised
estimates should be used for small corrections and large variations from the budget estimates
79
should be avoided. The key factors that would be decisive in achieving the budget utilization
should be discussed and reported in the forwarding note for information of the authorities.

Pre-Budget Approvals and Sanctions

The Budget Proposals in case of approved and ongoing projects should be as per the approved
cost estimates including revisions, if any, thereof. The capital expenditure for proposals such as
Renovation and Modernization schemes, Capital Additions, MBOA, Environment protection
schemes, Ash Utilization Schemes, R&R Schemes, Hospital facilities, school facilities to be
incurred for commissioned projects shall have an in principle clearance/approvals as the case
may be by Corporate Finance before such proposals are taken into Budget Estimates. Similarly,
budget provisions for new unapproved projects should be in accordance with the advance
expenditure approved by the Board/GOI as the case maybe. The proposals in such cases should
be for the amounts and as per the terms and conditions already approved.
The proposals should always confirm to the Approved Cost Estimates and in case where the
cost of completion is expected to vary action should be initiated for necessary approvals of the
competent authority as per Delegation of Powers / guidelines on the subject.

Phasing of Outlays
The outlays proposed should be phased with adequate care and should match the physical
progress projected through out the year. As the financial outlays are linked with physical
performance, matching outlays should be projected corresponding to the physical performance.
The phasing of outlay should be done with utmost care since it facilitates resource planning at
corporate level and release of funds from time to time.

Responsibility-wise Budget Preparation and Review

The preparation of Budgets should be initiated at the grass root level and EIC wise
documentation of the budget estimates should be done in addition to the Budget compilation in
Budget Formats. The Direct Capital Outlay is to be identified EIC wise/HOD wise and should
be accordingly monitored and reviewed at the projects.

FINALISATION OF BUDGETS
Project Finance in association with project Planning & Systems (P&S)coordinate and compile
Budget Proposals at the project level and submit the same for approvals of the Project Budget
Committee and forward to Corporate Centre after taking approval of the Executive Director of
the Regions concerned.
The Regional EDs should review the proposals forwarded by Site, ensure the reasonability of
projection made, assess the performance key factors projected and forward the proposals with
their recommendations to Corporate Finance.

80
Corporate Finance should arrange a review of the proposals by various departments at the
Corporate Centre such as Corporate Monitoring Group,
Corporate Contracts, Corporate Planning, Cost Engineering and Corporate Finance. Budget
meetings should be held involving all the above departments at CC and the concerned site
attended by the GM of Projects and thereafter the proposals should be finalized.
The finalized proposals are to be compiled into the Annual Plan by the Corporate Budget
Section and placed for approval of the Corporate Budget Committee. The approved proposals
are thereafter to be submitted for the approval of the CEA/MOP/Planning Commission in the
requisite formats by the Corporate Budget Section.
The approved proposals are then to be adopted by the Board and intimated to the Projects and
other departments concerned at CC for monitoring.

MONITORING OF BUDGETS
A review of the budget utilization should be done regularly at least once a month at the Project
level chaired by the respective Chairman of Budget Committee. Exception reports on the
budget utilization should be made out and the necessary remedial actions are to be initiated to
ensure physical performance and in turn financial utilization in accordance with the budget.
Monthly Expenditure Reports as per Format Nos.F-1.1 to F-1.5 are to be submitted by Projects
to Corporate Finance by the 5th of every month. The expenditure reported should be reconciled
with the funds/debits received and funds utilization statement is also to be enclosed along with
the Expenditure Report as per Format No.F-2. The Corporate Budget Section should report the
monthly budget utilization to the GOI based on the funds/debits to projects and the expenditure
reported by the projects.

FORMULATION AND APPROVAL OF CAPEX BUDGET

The salient features of the Budget exercise are as under:

 Site Finance of all the projects are to furnish the budget head-wise actual expenditure
upto the end of the previous year reconciled with the Balance Sheet in Format No.F-6.2
and the actual expenditure upto the end of June of the current year in Format No.F-1.1
to F-1.5 to departments concerned responsible for formulation of budgets. This is the
81
 starting point for formulation of budget and Site Finance of all projects, Regional
Finance and Corporate Finance should ensure that the above information is made
available to the concerned agencies by 20th June and 5th July respectively.

 Corporate Contracts Services should furnish the data regarding initial/mobilization

advances, equipment supply and other payments against ‘A’ contracts and payments
against Technical Consultancy on Format No.C-2 & 5, D-2 & 5 and E-2 & 5 to Site
P&S Department by 15th July. Site P&S Department in consultation with EIC and Site
F&A should review the same and thereafter Site F&A should consolidate the above
information and forward the same to Project Budget Committee of Projects/Stations by
10th August.

 The Training and Recruitment Expenses (IEDC), Employee Cost (IEDC), Other
Expenses, MBOA budgets are to be prepared by the HR Department in consultation
with the Finance Department and after taking the requirements from other departments.

 Heads of Departments are responsible for control and co-ordination of the Capital
Outlay Budget of Contract Co-ordinators/Engineers-in-charge within the Department
and also for preparation of budget for establishment expenses/MBOA within their
control.

 Budget proposals of the Generation Projects/Stations are to be finalised by the Project

Budget Committee consisting of:

• GM (Project) - Chairman
• HOD (F&A) - Member
• HOD (P&S) - Member
• In-charge Budget Section of F&A - Secretary

Budget proposals of Regional Headquarters are to be finalised by the ED of the region in

consultation with the HODs.
Budget proposals of the Corporate Divisions are to be finalised by the ED (Fin.) in consultation
with HODs.
The budgets in respect of Projects/Stations duly approved by the respective Budget
Committees are to be submitted to the Regional Headquarters by the 12th August in Formats-A,
B & C and reviewed by concerned EDs.
After review of all the Budgets in a region by the concerned ED, the same are forwarded to
Corporate Budget. Corporate Budget in turn should carry out a detailed review of each Project
Proposal, scheme-wise, in association with the Project representatives, Corporate Monitoring
Group, Cost Engineering, Corporate Contracts, Corporate Planning and International Finance
and forward the proposals along with those of Corporate Division to Corporate Budget
Committee by 25th September, which consists of:
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  CMD – Chairman

 Director (Fin.) - Member

 Director (Proj.) - Member

 ED (Corporate Contracts) - Member

 ED (Finance) - Member

 ED (CP) - Member

 HOD (Budget) – Secretary

Regional EDs may also be included in the Committee as members by rotation.

In the light of the recommendations of the Corporate Budget Committee, the changes, if any,
are to be communicated by the Corporate Budget to the respective divisions. The concerned
units/regions after incorporating the changes are to submit 5 copies of the final budget
proposals (along with the soft copy) to the Corporate Budget in Formats-A to E by 31st
August. After receiving the final budget proposal, the Corporate Budget Group should
consolidate the budget for the Company and submit to the GOI by 30th September.
The Head of Finance and Accounts in the region will be responsible for coordination of the
compilation and approval of the project/station Budgets in respect of concerned region, viz.,
Performance Budget of Generation Projects, Stations, Establishment Budget of the Region.
However, at project level, the budgets in respect of projects will be compiled and got approved
from Project Budget Committee by HOD (F) of the concerned Project in association with HOD
(P&S) of Project. The budget in respect of Corporate Divisions will be compiled by Corporate
Budget. The process of Budget formation can be represented in the form of a flow chart as
under:

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84
REVIEW OF CAPEX BUDGETS

MONTHLY REPORTING OF EXPENDITURE

The actual performance against the budget estimates would be reviewed and reported on a
periodic basis as per the procedure described below:

 Each project/unit should compile the total expenditure (including Non-DCO items)
incurred during the month and intimate the same to the Corporate Budget by a report
furnishing budget head wise expenditure (in respect of DCO items) as against the
phased budget and an analysis of the variances to the Corporate Budget with copy to
ED (Region) and copies to the Corporate Contracts and Corporate CMG in case of on-
going projects by the 7th of the following month (Form Nos. F-1.1 to F-1.5, F2 )
 The above report should be followed by a responsibility-wise report i.e. EIC-wise/
Department-wise at Site and Corporate Contracts furnishing budget head-wise
expenditure for both DCO and Non-DCO items by 7th of the following month in Form
Nos.F-3 and F-3.1

 The total expenditure incurred shall be consolidated at CC, project wise and then
forwarded to the GoI by the 10th of the following month in the given format :

PROJECTS RE FOR THE YEAR ACTUAL EXPENDITURE

(UPTO REPORTING MONTH)

COMPLETED PROJECTS

ON GOING SCHEMES

NEW PROJECTS

R&M SCHEMES

MISC. SCHEMES

GRAND TOTAL

The actual expenditure is to be reported on cash basis after accounting for consumption of
construction material and duly adjusting accretions/ decretions of construction material. The
expenditure should be reconciled with the balance as appearing in the cash / bank book after
considering the inter unit advices received/ sent during the month (Form No.F-2 )

85
Since the expenditure is to be reported on cash basis, it would be necessary to make
adjustments for advances paid and the liabilities created, if any, for bills paid during the
reporting period. The expenditure on cash basis is to be worked out as under:
Gross Expenditure as accounted in the CWIP account for a Work Head/Budget Head
Less: Advance Adjusted
Less: Liability withheld

The process of preparing and reporting the actual expenditure incurred during the month
provided below.

S.No. Activity Person Frequency Remarks

responsible

1. Generate a report on the total -F&A Dept. By the 3rd

expenditure incurred during the of the
month- responsibility centre wise –Site following
against the budget estimates for month
the month and reconcile the same
with the following:
• Cash and bank balances
(opening and closing)
• Funds received during the period
• Inter unit advices received / sent
during the month
• Details of payments released at
CC/other units for which IU
Advices are not yet received
Forward the expenditure
statement and reconciliation to the
competent authority for review
Forward the (responsibility centre
wise) reports to the respective
responsibility centers (engineers)
to review the same and analyze
the variances, if any

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2. Review and finalize the Competent Same day
expenditure statement Authority

3. Review the expenditure report and Concerned By the 5th of

provide reasons for variances with Responsibility the
the budget estimates, if any and Centre following
forward the same to F&A Dept. month

4. In case of significant variations F&A/ P&S By the 6th

with the budget estimates, hold Site of the
discussions with the concerned following
engineers and analyze the reasons month
for the variations (highlight the
post award variations, if any) and
identify the follow up action for
achieving the performance

5. Prepare the system-wise report of -F&A By the 7th of A copy of

actual expenditure incurred, the the the monthly
budget estimates for the same, - Site following expenditure
variances with the budget month report
estimates and reasons for the should also
variances and after approval of be
the GM, Project forward to the forwarded
Budget Group, CC to
Corporate
Monitoring
Group
(CMG) and
Corporate
Contracts
for all on
going
projects
and
wherever
R&M
schemes
are taken
up by the
R&M
Department
at
Corporate
Centre

Review and consolidation at CC

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6. Consolidate the -Budget By the 10th
expenditure reports for the Group of the
company. Obtain approval following
of the competent authority - CC month
and forward the same to
the Government

7. Review the system-wise -Budget By the end

expenditure report, Group of the
variance analysis and the following
reasons provided by the - CC month
projects in respect of the
same.
Hold discussions/ obtain
clarifications from the
Project/ officials if required
in respect of significant
variances
Forward the project-wise
exception reports to the
competent authority for
approvals

RE-APPROPRIATION OF CAPEX BUDGET ESTIMATES

Re-appropriation of funds may be effected by the project Budget

88
  Committee within the budget allocation subject to the following:

• All re-appropriations should be for those items of expenditure, which are

provided in approved cost estimates/as per company policies and guidelines.

• In case of IEDC – A category expenses, which are to be controlled in view of

austerity measures, no enhancement of the following budget provisions shall be
effected without the prior approval of D (F) / CMD

 2-In case of any re-appropriation of budgets in respect of new unapproved budget the
necessary approvals from the CMD/ Board should be obtained.

 3-The HOD of the concerned department requiring re-appropriation provision should

propose the re-appropriation and Site P&S Department shall co-ordinate for
approval/forwarding for approval of the same by the Project Budget Committee. The
decision of re-appropriation of Project Budget Committee shall be communicated to
Corporate Budget by Site F&A Department.

ANNUAL EXPENDITURE REPORT

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The following reports are required to be submitted by the Projects to the Corporate Centre
annually:

 Reconciliation of total expenditure as reported with the total funds received by the
projects for construction activities.

 Linking of expenditure incurred by unit Budget Head-wise with Balance Sheet.

Summary statement linking Major Budget Systems such as D.C.O., Commissioning
Expenses etc., with Balance Sheet schedules such as Fixed Assets, CWIP etc. The
detailed work head / budget head wise expenditure should be worked out matching to
the total cumulative expenditure arrived as per format. The statement should also
indicate the actual expenditure for the previous year and the variations with reference to
RE of the previous year.

INTERFACE WITH FINANCIAL AND COST ACCOUNTING

SYSTEMS
The budgeting system should be interfaced with the financial and cost accounting systems as
follows:

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  Linking with the Chart of accounts: In order to capture the actual expenditure as per the
books of account with the budget estimates, it is necessary to link the construction
budget heads with the account codes as provided in the Chart of accounts. The linking
of the system/ budget heads with the account codes has been provided in above heads.
 Linkage with the LOA/ Work order: Every work order/ contract issued should be
allotted a budget code, Work Order Number and EIC reference. As soon as any work
order is received in F&A, the aforesaid details should be initiated.

 Linkage with pay type: For preparation of contract payments terms-wise budget
estimates for D.C.O. items, the payments are to be reported under various pay types, as
defined in the forms. In order to capture actual outlay, pay type should be mentioned in
the voucher at the time of bill passing and payment
 Vouchers: Keeping in view the above, to capture the actual expenditure against the
budget estimates, all vouchers should contain the following:
• Budget code – consisting of systems head, budget head and the work order
number as per the budget estimates

• Pay type to reflect the payment type as estimated for each project

• Work order reference to reflect the reference of the EIC.

FINDINGS
It has been found that following are the reasons for difference between budgeted estimate (BE)
and actual expenditure (AE):

 NTPC, being a public sector, the decision making process is very complicated and thus
time taking. Any decision involves many authentic persons/committee.
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  Organization does’nt has its own database for the estimation of work/material and its
price thus it is comparatively tough to prepare a good estimates for budget

 NTPC, being a govt. organization has to go by natural justice & provide equal
opportunity to all the suppliers. Due to which it is difficult to predict time involved in
such processes, which is a very important factor influencing budget estimate.

 Some factors are unpredictable while making estimation of budget:

• Poor infrastructure of roadways due to which it takes long time for material to
reach Project Station

• Poor whether also hampers work related to construction.

(SWOT ANAYSIS OF NTPC)

STRENGTHS:

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 NTPC’s biggest strength is its size. As one of Asia’s largest utilities, it can, in future,
procure coal and other fuels in the international market at a very competitive price. Well-
trained manpower ensures that station plant load factor are high.

WEAKNSSES:
Huge working capital requirement due to its exposure to cash starved State
Electricity Boards. Slow decision making process might come in the way of the
company taking advantage of available opportunities.

OPPORTUNITIES:
India has an energy shortage of 9.2% and peaking shortage of 18.3%. The
country’s per capita consumption is 350 KWH annually against the global average
of 2000KWH. Canada consumes more than 18000KWH per capita annually. This
factor should ensure that NTPC’s station at the full capacity in the foreseeable
future.

THREATS:
Due to high receivable position the World Bank and other multinational agency
funding might not be viable in the future. Commercial bank financing would come
with stringent riders, which NTPC in the present scenario cannot meet.(This was
the case of 5 yrs before. But in Present Scenario Private Players are coming in big
way like Lanco 10000MW,TataPower,Reliance Energy due to private players
pressure will be for improved efficiency – Low Cost and Quality Power.

BIBLIOGRAPHY

 Mannuals of NTPC

 5th Analysis & Investors meet Report

93
  http://www.moneycontrol.com/company-facts/ntpc/history/NTPC

 http://energybusiness.in/ntpc-maharatna-status/

 http://www.ntpc.co.in

Rihand Samachar (2008-09) & (2009-10)

NTPC NEWS, the home magazine of NTPC (2008-09) & (2009-10)

Annual reports of Rihand Super Thermal Power Project, NTPC

PROJECT SYNOPSIS
Name of Student: ______________________ Roll No:_________________________

Project Undertaken___________________________________________________________

duration ____________________________________________________________________

Name of Organization & Address: ______________________________________________

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____________________________________________________________________________

Nature of Project _____________________________________________________________

Project Description:-
TOPIC- CAPEX BUDGET

INTRODUCTION

The budgeting process( under study) is designed for Performance Budgeting of the Capital Expenditure
(CAPEX) for Project Construction activities of green field, ongoing and expansion projects right from
the identification of new sites till commissioning and including capital addition works such as plant
betterment construction and raising of ash dykes, ash utilization schemes, Environment Action Plan
Schemes, Energy Conservation Schemes, Renovation and Modernization works and other facilities of
stations in operation, Miscellaneous bought out Assets, Investment in Joint Ventures, Research and
Development activities, etc.

OBJECTIVES

The main objectives of capital expenditure or construction of budget included the following:
(i) To assess the requirement of funds in the long term (i.e. over a time span of 15 years) as well on a
short term basis (i.e. Monthly/Quarterly requirement) so that mobilization of funds and its deployment
for capital expenditure can be timely planned prior to the commencement of physical activity and
thereby ensure the availability of funds at the most appropriate costs.

(ii) To prepare annual budgets in such a manner that Managers at various levels in the organization
carry out periodical exercises to identify physical targets in respect of each work or responsibility centre
and derive monthly targets or programmes and cash flows to achieve the physical targets.

(iii) To introduce and operate responsibility accounting by which Managers are responsible for
achievement of specified targets with the resources allocated for the purpose.

(iv) To bring about effective co-ordination of all activities of the organization

(v) To establish a close link between physical progress and monetary outlay
(vi) To provide a basis for plan allocation and budgetary support by the Govt.
SCOPE OF PROJECT

The capital budget will cover the following schemes:

(i) Approved and ongoing Projects
Greenfield and expansion Projects that are approved by the GOI before the start of the current five- year
plan period and are under construction.

(ii) New approved projects

The projects approved by the GOI during the course of the current five year plan period.

(iii) New Unapproved Projects

95
The projects for which preliminary expenditure related to site investigations, feasibility studies,
expenditure for obtaining clearances/permits and initial payments for development of infrastructure and
land for Projects have been taken up and are being posed for approval of GOI.

(iv) Commissioned Power Stations

All capital addition schemes for commissioned and existing power stations like construction/ raising of
Ash Dyke, installations of additional plant and systems, adding facilities at township, administrative
office, Environment action Plan schemes and Energy conservation schemes, Ash utilization, balancing
equipments, etc.

(v) Power Stations under Renovation and Modernization

Schemes of Renovation and Modernization undertaken for NTPC’s own Stations as well as stations
taken over by NTPC.

(vi) Investment in Joint Ventures

Proposals of investment in Joint Ventures

(vii) Research & Development Budgets

Capital expenditure for establishment or construction of R&D Laboratories and facilities.

(viii) Miscellaneous Bought Out Assets (MBOA) Budget

Construction Budget for MBOA items for operating stations (for projects under construction MBOA
budget forms a part of the capital budget as a non-DCO item)

(ix) Survey and Investigation

These are studies which are essential for identification of site, preliminary survey and soil investigation
and other studies which are required for preparation of feasibility reports for submission to CEA for
approval.

LITERATURE REVIEW

(i) Review of Budget at Project Level

The budget proposals prepared by EIC/Contract Services should be reviewed by Project Budget
Committee and then forwarded to the Corporate Centre for approvals. Budget projections should be
realistic and should reflect the action plan accurately. The revised estimates should be used for small
corrections and large variations from the budget estimates should be avoided. The key factors that
would be decisive in achieving the budget utilization should be discussed and reported in the
forwarding note for information of the authorities.

(ii) Pre-Budget Approvals and Sanctions

96
The Budget Proposals in case of approved and ongoing projects should be as per the approved cost
estimates including revisions, if any, thereof. The capital expenditure for proposals such as Renovation
and Modernization schemes, Capital Additions, MBOA, Environment protection schemes, Ash
Utilization Schemes, R&R Schemes, Hospital facilities, school facilities to be incurred for
commissioned projects shall have an in principle clearance/approvals as the case may be by Corporate
Finance before such proposals are taken into Budget Estimates. Similarly, budget provisions for new
unapproved projects should be in accordance with the advance expenditure approved by the Board/GOI
as the case maybe. The proposals in such cases should be for the amounts and as per the terms and
conditions already approved.

The proposals should always confirm to the Approved Cost Estimates and in case where the cost of
completion is expected to vary action should be initiated for necessary approvals of the competent
authority as per Delegation of Powers / guidelines on the subject.

(iii) Phasing of Outlays

The outlays proposed should be phased with adequate care and should match the physical progress
projected throughout the year. As the financial outlays are linked with physical performance, matching
outlays should be projected corresponding to the physical performance. The phasing of outlay should be
done with utmost care since it facilitates resource planning at corporate level and release of funds from
time to time.

(iv) Responsibility-wise Budget Preparation and Review

The preparation of Budgets should be initiated at the grass root level and EIC wise documentation of
the budget estimates should be done in addition to the Budget compilation in Budget Formats. The
Direct Capital Outlay is to be identified EIC wise/HOD wise and should be accordingly monitored and
reviewed at the projects.

METHOD USED TO ANALYZE DATA

According to the nature of expenditure, the budget outlays for Approved and
Ongoing Schemes, new approved Schemes and New Unapproved Schemes are classified as under:

(i) Direct Capital Outlay

This represents all costs directly identifiable with capital works and
includes cost of land (including rehabilitation and resettlement expenditure), infrastructure facilities,
civil (including material consumption), mechanical, electrical works, township, MGR, Construction
Tools & Plants and other construction facilities. The budget provision is to be made against each work
head listed below:

97
a) System: Represents major components of the project. Composite contracts that contain multiple
systems have also to be categorized as separate systems to facilitate monitoring of expenditure and
progress in respect of such contracts. For e.g. Construction Township with all infrastructure facilities is
one system.

b) Budget Head: Represents major classification of works in each system. Ex. Residential Buildings,
Service Buildings, Roads, Drains etc., in Township are major classification of works.

c) Work Head: Representing specific individual work. For e.g.. Out of Residential Buildings, we may
have classification of A, B, C, D type quarters. Further under each type there may be multiple contracts.

(ii) Commissioning Expenses

All direct expenses for running of individual units up to the date of commercial operation, including
fuel costs, startup power, chemicals and lubricants, consumption and anticipated sale of energy during
trial run are to be indicated under this head.

(iii) Construction Materials

The stocks of construction material (or free issue material) are shown in this Budget. All purchases are
initially to be shown under this Head. The consumption of materials should be valued at budgeted cost
for calculating the accretion/discretion and should be reflected in the stock of Construction Stores. Any
variance in material cost on account of the difference between the issue price and contract price should
be provided for in the DCO along with the consumption cost.

(iv) Technical Consultancy

Payment to technical consultants identifiable with various plant and systems such as MGR, coal
handling, C&I, Prime Consultants and Retainer Consultants are to be included in this head. All
incidental expenses payable to consultants based on contractual obligations and statutory payments, if
any payable in respect of foreign consultancy payments should also be provided under this head.

(v) Training & Recruitment\

The first part of this budget is to consist of expenses for training covering both in-house development
programmes and external training programmes for all employees. The expenditure to be incurred for
‘Trainees’ on the rolls of the Company should also be reflected in this Budget Head. The second part
consists of expenses for recruitment such as advertisement, interview expenses, TA to candidates etc.

(vi) Incidental Expenditure During Construction

• Employee Cost
These comprise of salaries, DA, incentives, wages, allowances, contribution to PF and other funds and
welfare expenses such as LTC, medical reimbursement, canteen subsidy etc. The provision for arrears
of salary should be shown separately.

• Other Establishment Expenses (net of income)

These include the other expenses incidental to construction i.e. Repair and Maintenance for buildings,
construction equipment during construction, vehicle running expenses, office rent, power charges
payable to outside agencies, LC charges, cost of drawings, travelling expenses, printing and stationery,
communication expenses, advertisement for tenders are major items falling in this category.

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(vii) Miscellaneous Bought out Assets(MBOA)
MBOA items include vehicles, furniture and fixtures, office and other equipment, hospital and medical
equipment, misc. assets of township, lab Manual on Construction Budget 7 equipment, canteen
equipments, miscellaneous tools, LAN /Satcom, and loans to employees. In case of loans to employees,
the net fund requirement is to be projected. Necessary justification for the items proposed in MBOA
budget should be made and disclosed in the format.

(viii) Borrowing Costs

Interest on loans and bonds, upfront fee, agency commission, guarantee commission, commitment
charges and any other charges/ fees and expenses payable towards raising of loans, which are
accrued/paid and to be capitalized during the construction period has to be estimated and included in
this budget.

(ix) Working Capital Margin

The requirement of working capital comprising of inventory of fuel, spares, consumables, operation and
maintenance expenses and sundry debtors (as per the prescribed norms) anticipated during budget
period to the extent of 25% are to be considered in the budget.

(x) Accretion/Discretion to Net Current Assets

Apart from direct capital outlay and expenses, cash flows related to movement of current assets and
current liabilities (such as EMD, Cash
Deposits, Tax Deduction at source, etc) should be included in this budget.

LIMITATION

It has been found that following are the reasons for difference between budgeted estimate (BE) and
actual expenditure (AE):
 NTPC, being a public sector, the decision making process is very complicated and thus time
taking. Any decision involves many authentic persons/committee.
 Organization does’nt has its own database for the estimation of work/material and its price thus
it is comparatively tough to prepare a good estimates for budget
 NTPC, being a govt. organization has to go by natural justice & provide equal opportunity to all
the suppliers. Due to which it is difficult to predict time involved in such processes, which is a
very important factor influencing budget estimate.
 Some factors are unpredictable while making estimation of budget:

99
 • Poor infrastructure of roadways due to which it takes long time for material to reach
Project Station
• Poor whether also hampers work related to construction.

_________________ Date:
Signature of student

_________________
(Signature of project Incharge)

Date:

100