Richa project (1)

WORKING CAPITAL REQUIREMENT ASSESMENT FOR
STAGE-II KBUNL
A Training Report
Submitted in the partial fulfillment of the requirements for
the award of Degree of
MASTER OF BUSINESS ADMINISTRATION
BY
RICHA SINHA
ROLLNO : MBA/15040/13
Session : 2013-2015
DEPARTMENT OF MANAGEMENT
BIRlA INSTITUTE OF TECHNOLOGY
PATNA CAMPUS

Birla institute of technology Mesra , Patna Page 2
ACKNOWLEDGEMENT
Words are indeed in adequate to convey my deep sense of gratitude to all those who have
helped me in completing this summer project to the best of my ability . Being apart of
this project has certainly been a unique and a very productive experience on my part.
I am really thankful to Mr. Anupam Kumar ,Deputy Finance Manager for making all
kinds of arrangements to carry the project successfully and for guiding and helping me to
solve all kinds of quarries regarding the project work. His systematic way of working and
incomparable guidance has inspired the pace of the project to a great extent.
I would also like to thank my mentor and project – coordinator DR. Iftekhar Ahmed for
assigning me a project of such a great learning experience and acquainting me with real life
project financing and appraisal.
I am very grateful to DR JULEE BANERJEE (Training & Placement Officer), BIT
MESRA ,PATNA CAMPUS Who has given me the opportunity to do this project and
very thankful to all lecturers BIT PATNA for their useful guidance and advise.
This project would not have been successful without the help of DR S.L GUPTA
(Managing Director) of BIRLA INSTITUE OF TECHNOLOGY MESRA, PATNA
CAMPUS
RICHA SINHA

ABSTRACT
Working capital management refers to the administration of all aspects of current assets,
namely cash, marketable securities, debtors and stock (inventories) and current liabilities. The
financial manager must determine levels and composition of current assets. He must see that
right sources are tapped to finance current assets, and that current liabilities are paid in time.
He must see that right sources are tapped to finance current assets, and that current liabilities
are paid in time.
There are many aspects of working capital management, which make it an important function
of the financial manager:
• Time: working capital management requires much of the financial manager’s time.
• Investment: working capital represents a large portion of the total investments in assets.
• Significance: working capital management has great significance for all firms but it is very
critical for small firms.
• Growth: the need for working capital is directly related to the firm’s growth.
Investment in current assets represents a very significant portion of the total investment in
assets. Working capital management is critical for all firms. A small firm may not have much
investment in fixed assets, but it has to invest to in current assets. Small firms in India face a
severe problem of collecting their debtors.
Banks have their own policies to assess the working capital of the firm to finance them with
the shortage. Bank of Maharashtra adopts certain method for financing their customer’s
working capital requirements. There are certain recommendations from the committees for
the banks to finance the working capital needs of their clients.
It may, thus, be concluded that all precautions should be taken for the effective and efficient
management of working capital. The finance manager should pay regular attention to the
levels of current assets and the financing of current assets.

TABLE OF CONTENTS
Chapters Chapter Title Page. no
CHAPTER-1 INRTODUCTION
1.1) Purpose of study
1.2) Research methodology
1.3) Scope of the study
1.4) Data Sources
1.5) limitations
7
7
8
8
9
CHAPTER-2
POWER SECTOR
IN INDIA
2.1) Market sizes
2.2) Company profile
2.3) history of organization
2.3.1) Journey of NTPC
2.3.2) Growth & development of
NTPC
2.4) KBUNL at glance
11
13
16
17
19
21
CHAPTER-3
TRAINING 3.1) Training objective
3.2) trainee’s job profile
3.3) trainee’s contribution
3.4) learning outcome
27
CHAPTER-4 BUSINESS
ANALYSIS
4) Introduction to working capital
4.1) classification of working
capital
4.2) working capital cycle
4.2.1) working capital cycle in
KBUNL
4.3) working capital assessment
4.3.1) concept of margin
4.4)Tariff
4.5) practical aspect of Assessment
of working capital stage II
4.5.1) calculation
4.5.2) generation of electricity in
KBUNL
28
30
34
38
40
44
45
47
52
61
CHAPTER-5 DATA ANALYSIS
INTERPRETATION
5) Data Analysis
5.1) Interpretation
65
66
CHAPTER -6 SUGGESTION 6.1) SUGGESTION 66

INTRODUCTION
Any enterprise whether industrial, trading or other acquires two types of assets to
run its business as has already been emphasised time and again. It requires fixed
assets which are necessary for carrying on the production/business such as land and
buildings, plant and machinery, furniture and fixtures etc. For a going concern these
assets are of permanent nature and are not to be sold.
The other types of assets required for day to day working of a unit are known as
current assets which are floating in nature and keep changing during the course of
business. It is these 'current assets' which are generally referred to as 'working capital'.
We are by now already aware of the short-term nature of these assets which are
classified as current assets. It may be noted here that there may not be any fixed ratio
between the fixed assets and floating assets for different projects as their requirement
would differ depending upon the nature of project. Big industrial projects may require
substantial investment in fixed assets and also large investment for working capital.
The trading units may not require heavy investment in fixed assets while they may be
carrying huge stocks in trade. The service units may hardly require any working
capital and all investment may be blocked in creation of fixed assets.
A set financing pattern is evolved to meet the requirement of a unit for acquisition of
fixed assets and current assets. Fixed assets are to be financed by owned funds and
long-term liabilities raised by a unit while current assets are partly financed by long-
term liabilities and partly by current liabilities and other short- term loans arranged by
the unit from the bank.

1.1 PURPOSE OF STUDY:
Working capital refers to that part of the firm’s capital which is required for financing short-
term or current assets such as cash, marketable securities, debtors & inventories. Funds, thus,
invested in current assts keep revolving fast and are being constantly converted in to cash and
this cash flows out again in exchange for other current assets. The Purpose can be: -
 To find out all the requirement of coal, oil, cost , maintenance of spares, etc which can
be expenses in KBNUL.
 To find out the problem area which affect the credibility.
 How this working capital assessment is done is the striking feature of my topic.
1.2 RESEARCH METHODLOGY
To make a project-work successful following aspect is required:
1. A theoretical knowledge of the subject.
2. Selection of appropriate tools or methodology for successful implementation of
theoretical knowledge.
The following methodology are adopted by me :
 Data collection from KBUNL,Kanti.
 Discussion with senior officers of KBUNL

1.3 SCOPE OF THE STUDY:
This project is vital to me in a significant way. It does have some
Importance for the company too. These are as follows –
 Company study
 Tariff regulation
 Norms for working capital
 Assessment of working capital
1.4 DATA SOURCES:
The following sources have been sought for the preparation report:
 Secondary sources like previous years annual reports, CMA Data,
Reports on working capital for research, analysis and comparison .
 While doing this project, the data relating to working capital, cash
management, receivables management, inventory management and
short term financing was required.
.
 A detailed study on the actual working processes of the company is
also done through direct interaction with the employees .

.

1.5 LIMITATION:
Following are the limitations of the study:
1) The topic working capital management is itself a very vast topic yet very important also.
Due to time restraints it was not possible to study in depth in get knowledge what
practices are followed in KBUNL
2) Many facts and data are such that they are not to be disclosed because of the
confidential nature of the same.
3) Since the financial matters are sensitive in nature the same could not acquired easily.

2 POWER SECTOR IN INDIA
INTRODUCTION
Power or electricity is one of the most critical components of infrastructure, affecting
economic growth and wellbeing of nations. The existence and development of adequate
power infrastructure is essential for sustained growth of the Indian economy. With a
production of 1,006 terawatt hours (TWh), India is the fifth largest producer and
consumer of electricity in the world after US, China, Japan and Russia.
The Indian power sector is one of the most diversified in the world. Sources for power
generation range from commercial sources such as coal, lignite, natural gas, oil, hydro and
nuclear power to other viable non-conventional sources such as wind, solar, and agriculture
and domestic waste.

2.1 MARKET SIZE
Electricity production in India (excluding captive generation) stood at 911.6 TWh in FY
13, a 4 per cent growth over the previous fiscal. Over FY 07–13, electricity production
expanded at a compound annual growth rate (CAGR) of 5.5 per cent. The Planning
Commission’s 12th Plan projects that total domestic energy production would reach 669.6
million tonnes of oil equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–22.
As of October 2013, total thermal installed capacity stood at 156.5 gigawatt (GW), while
hydro and renewable energy installed capacity totaled 39.8 GW and 28.2 GW, respectively.
Nuclear energy capacity remained broadly constant from that in the previous year, at 4.8
GW.
Indian solar installations are forecast to be approximately 1,000 megawatt (MW) in 2014,
according to Mercom Capital Group, a global clean energy communications and consulting
firm
INVESTMENT
The investment climate is very positive in the power sector. The Working group on power for
formulation of the 12th Five Year Plan has estimated total fund requirement of Rs 1,372,580
crore (US$ 227.98 billion) for the power sector. The industry attracted foreign direct
investment (FDI) worth Rs 40,417.6 crore (US$ 6.72 billion) during April 2000 to January
2014.
The following are some of the major investments made into the Indian power sector:
 .BS Ltd has won several orders worth Rs 722 crore (US$ 119.95 million from
various power utilities. The orders are for turnkey engineering, procurement and
construction (EPC) contracts for 220 kilovolt (KV) and 132 KV transmission lines
and associated sub-stations in Madhya Pradesh.
 Jaiprakash Power Ventures Ltd (JPVL) has signed a deal with Abu Dhabi National
Energy Company PJSC (TAQA) for selling two hydropower projects in Himachal
Pradesh for Rs 10,500 crore (US$ 1.74 billion).
 Elecon Engineering Company Ltd has announced that its subsidiary Elecon EPC
Projects Ltd has been awarded an order worth Rs 246.78 crores (US$ 40.93 million)
by National Thermal Power Corporation Ltd (NTPC). The order is for supply of coal
handling plant package of Gadarwara Super Thermal Power Projects, Stage-I
(2x800MW), said Mr Prayasvin Patel, Chairman and Managing Director, Elecon
Engineering.

Hindustan Cleanenergy Ltd plans to set up a 20 megawatt (MW) solar farm in Uttar Pradesh (UP) and two
15 MW farms in Punjab at an investment of Rs 400 crore (US$ 66.33 million).
 ABB has won orders worth around US$ 56 million from Power Grid Corporation of
India Ltd to supply power transformers and shunt reactors for sub-stations being
built to support the country's ultrahigh voltage transmission grid development
Power sector in Indian --- Renewable energy, Wind energy, Solar
power
Electricity production in India
Electricity production in India (excluding captive generation) stood at 911.6 TWh in FY13.
Per-capita electricity consumption
Per capita consumption has grow n at a CAGR of 5.5 per cent betw een FY06 and FY13.

2.2COMPANY PROFILE:
VISSION:-
“TO BE THE WORLD’S LARGEST AND BEST POWER
PRODUCER, POWERING INDIA’S GROWTH”
CORE VALUES :- BECOMMITTED

MISSION:-
“DEVELOP AND PROVIDE RELIABLE POWER, RELATED PRODUCTS AND
SERVICES AT COMPETITIVE PRICES, INTEGRATING MULTIPLE ENERGY SOURCES
WITH INNOVATIVE AND ECO-FRIENDLY TECHNOLOGIES AND CONTRIBUTE
TO SOCIETY”
VISIO
CORPORATE OBJECTIVES:-
To realise the vision and mission, eight key corporate objectives have been
identified.
1. Business portfolio growth
2. Customer Focus
3. Agile Corporation
4. Performance leadership
5. Human resource Development
6. Financial Soundness
7. Sustainable Power Development
8. Research and development

NTPC GROUP
NTPC LIMITED
Subsidiaries Joint Venture
100% NTPC Electric supply
limited
100% NTPC Vidyut Vyapar
nigam ltd.
100%
NTPC Hydro ltd.
Kanti bijlee utpadan
Nigam ltd.65%
74% Bhartiya rail bijlee company
limited
50%
Utility power tech ltd
50% NTPC SAIL power
company PVT ltd
50% NTPC ALSTOM Power
Services PVT. ltd.
NTPC Tamil Nadu energy
company ltd.
Aravail power company
pvt. ltd
NTPC SCCL Global
venture pvt.ltd
Meja vrja Nigam pvt. ltd
NTPC BHEL power
project pvt.ltd
Nabinagar power
generating co. pvt ltd
BF – NTPC Energy
systemltd.
50%
50%
50%
50%
50%
50%
49%

2.3 HISTORY OF THE ORGANIZATION
The Company was incorporated on November 7, 1975 under the Companies Act as a private
limited company under the name "National Thermal Power Corporation Private Limited",
and the word 'Private' was deleted on September30, 1976 consequent upon the notification
issued by the GoI exempting government companies from the use of word 'private' in their
name. On September 30, 1985, the Company was converted from a private limited company
into a public limited company. Subsequently, the name of Company was changed to its
present name NTPC Limited and a fresh certificate of incorporation was issued on October
28, 2005. The name of Company was changed to reflect the diversification of business
operations beyond thermal power generation to include, among others, generation of power
from hydro, nuclear and renewable energy sources and undertaking coal mining and oil
exploration activities.
The Company is not operating under any injunction or restraining order.
In July 1976, the registered office of the Company was changed from Shram Shakti Bhawan,
New Delhi to Kailash Building, Kasturba Gandhi Marg, New Delhi. Subsequently, in May
1979 the registered office of the Company was shifted to NTPC Square, 62-63, Nehru Place,
New Delhi and thereafter in October 1988 to its present location for administrative and
operational efficiency.

2.3.1 JOURNEY OF NTPC:
NTPC was set up in 1975 with 100% ownership by the
Government of India .In the last 30 years ,NTPC has grown
into the largest power utility in India.
In the 1997, government of India ,granted NTPC status of
“NAVRATNA” being of the nine jewels of India , enhancing the
Power to the board of Directors.
NTPC become a listed company with majority government
Ownership of 89.5%.NTPC becomes the third largest by
Market capitalisation of listed companies.
The company rechristened as NTPC Limited in line with its
Changing business portfolio and transforms itself from a
Thermal power utility to an integrated power utility
National thermal power corporation is the largest power
Generation company in India. Forbes global 2000 for 2008
Ranked 411th in the world.
1975
1997
2004
2005
2008

NTPC has also set up plan to achive a target of 50,000 MW
Generation capacity.
NTPC has emparked on plan to become a 75,000 MW
Company by 2017.
NTPC is the largest power utility in India , accounting for about 20% of India’s installed
capacity.
A coal-fired Thermal Power Plant
2012
2017

2.3.2 GROWTH& DEVELOPMENT OF NTPC
The total installed capacity of the company is 41,184 MW (including JVs) with 16 coal based
and 7 gas based stations, located across the country. In addition under JVs, 7 stations are coal
based & another station uses naptha/LNG as fuel and 2 renewable energy projects. The
company has set a target to have an installed power generating capacity of 1,28,000 MW by
the year 2032. The capacity will have a diversified fuel mix comprising 56% coal, 16% Gas,
11% Nuclear and 17% Renewable Energy Sources(RES) including hydro. By 2032, non
fossil fuel based generation capacity shall make up nearly 28% of NTPC’s portfolio.
NTPC has been operating its plants at high efficiency levels. Although the company has
17.75% of the total national capacity, it contributes 27.40% of total power generation due to
its focus on high efficiency.

In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5.25% as
fresh issue and 5.25% as offer for sale by Government of India. NTPC thus became a listed
company in November 2004 with the Government holding 89.5% of the equity share capital.
In February 2010, the Shareholding of Government of India was reduced from 89.5% to
84.5% through Further Public Offer. The rest is held by Institutional Investors and the Public.

2.4 KBUNL AT GLANCE
Introductions about KBUNL
Kanti Bijlee Utpadan Nigam Limited (KBUNL), was formed as a joint venture between
NTPC and Bihar State Electricity Board (BSEB) with an objective of taking over and
reviving the operation of Muzaffarpur Thermal Power Station (MTPS) Stage I (2X110 MW)
located in village Kanti, District Muzaffarpur, Bihar. NTPC holds 64.57% of equity in
KBUNL and balance 35.43% equity is held by BSEB. NTPC proposes to increase its equity
share in KBUNL to 65% in the near future.
MTPS Stage I had been shut down in October 2003. KBUNL after taking over the plant
successfully restored and re-synchronised one of the units of MTPS Stage I (“Unit II”) on
October 17, 2007 and the unit is currently under trial operation. Currently, Renovation and
Modernisation (R&M) of Unit I is under progress. Entire R&M Project costing Rs. 471.80 for
Unit I and II is being funded through Government of India grant under Backward Region
Grant Fund (BRGF). The R&M of Unit II will commence shortly. Both the units in Stage I
are expected to commence regular commercial operations by August 2012.

Bihar State Electricity Board
Bihar State Electricity Board (BSEB) was constituted under section 5 of the Electricity
Supply Act, 1948 vide Bihar Government's Notification No. 2884 - A/AI-121/57 dated 25th
March, 1958 with effect from 1st April, 1958. The Board was given the responsibility of
promoting coordinated development of generation, transmission and distribution of electricity
in Bihar in an efficient and economic manner.
.
The Proposed Project
The company proposes to implement an expansion project, Muzaffarpur Thermal Power
Project (MTPP) Stage II with a capacity of 390 MW (2 X 195 MW) (“the Project”). The
major project facilities are proposed to be located within the existing premises of MTPS.
KBUNL is in the process of acquiring the required additional land of about 372.27 acres for
ash dyke and ash pipe corridor.
The Project is being set up mainly for meeting the power demand of Bihar and surplus, if
any, would be sold to other customers in the Eastern Region as per the approved allocation by
GoI. KBUNL has entered into long-term Power Purchase Agreement with Bihar State
Electricity Board dated January 22, 2010 for sale of entire power generated from MTPS
Stage II at bus bar.
The project has obtained all the necessary clearances and approvals. The long-term coal
linkage with ECL of about 2.2 MTPA has been accorded in favour of the project by SLC
(LT) vide its meeting dated January 29, 2010. KBUNL has entered into two contracts for
Main Plant Package with BHEL on March 12, 2010. The company is in
the final stages of negotiations with the suppliers for the remaining packages.

2.4.1Brief Profile of the Company
Muzaffarpur Thermal Power Station (MTPS) comprising 2 units of 110 MW was set up in
1986 by BSEB with Unit I commencing operations in March 1985 and Unit II commencing
operations in March 1986. After operating the power station for more than 17 years, BSEB
suspended the operations in 2003 much before the usual useful life of 25 years in case of coal
based thermal power plants. It was also learnt that during the period when MTPS was
operational, the plant load factor (PLF) was below the normally acceptable levels with the
PLF declining sharply over the years to levels below 20% before the plant was totally shut
down in October 2003.
Government of Bihar , NTPC and BSEB entered into a Memorandum of Agreement on
December 26, 2005 to form a joint venture company between NTPC and BSEB with the
objective of taking over and reviving the operation of MTPS Stage I (2X110 MW) located at
village Kanti, District Muzaffarpur, Bihar. Subsequently, Vaishali Power Generating
Company Limited (VPGCL) was incorporated on September 6, 2006 with NTPC contributing
51% of equity and balance 49% contributed by BSEB. The company was renamed as Kanti
Bijlee Utpadan Nigam Limited (KBUNL) on April 10, 2008. At present, NTPC holds 64.57%
of equity and balance 35.43% is held by BSEB in KBUNL. NTPC proposes to increase its
equity share to 65% in the near future

.TABLE: Company Snapshot of KBUNL
Name
Kanti Bijlee Utpadan Nigam Limited (KBUNL)
Date of Incorporation
September 6, 2006
Date of Change of Name
April 10, 2008
Constitution
Limited Company
CIN
U40102DL2006GOI153167
Sector
Public
Industry
Power
Registered& Corporate
Office
Registered Office – KantiBijleeUtpadan Nigam Limited,
NTPC Bhawan, Core – 7, Scope Complex, 7 Industrial
Area, Lodhi Road.
Corporate Office – BSEB, Annexe-A, 2nd Floor, Bailey
Road, Patna
Projectsite Kanti Village, District Muzaffarpur, Bihar
CapitalStructure
Authorized and Issued Share Capital
Table 1: Capital Structure of KBUNL as on March 31, 2013

Particular Number of shares Amount
Authorised share capital
Equity share Rs 10/-each
1000,000,000 1000
Issued subscribed and paidup
capital
Equity share of Rs 10/- each
549463436 549.46
Shareholding Pattern
The shareholding pattern of KBUNL as on March 31, 2010 and the proposed share holding
approved at its board meeting held on May 11, 2010 is as given below.
Table 2: Shareholding Pattern of KBUNL as on March 31, 2014
shareholders Number of shares Shareholding(%)
Present proposed
NTPC Ltd. 357151233 65% 65.00%
BSEB 192312203 35% 35.00%
Grand Total 549463346 100% 100%

PresentBanking Arrangements:-
Present Banking Arrangements of KBUNL
BANK Facility Sectioned
limit
Outstanding as on
August 31,2010
SBI Patna, commercial
Branch
Cash credit 49.00 27.00
BSEB: 49-26%
2.4.2OBJECTIVE:
To take over Muzaffarpur Thermal Power station(2*110MW) ,a coal based power station at
kanti, for carrying our restoration, R&M and supplying power mainly to state of Bihar .
PROPOSED PROJECT STRUCTURE:-

PMC – Project Management Consultancy
PPA – Power Purchase Agreement
PTA – Power Transmission Agreement
SG – Steam Generator
TG – Turbine Generator
TRA – Trust & Retention Account
Civil WorksTG & SG Coal Handling Ash Handling Others
TRA
Project Cash Flows
Long Term
Coal Linkage
Project
Contracts
KBUNLKBUNL
PMC
35%
65%
NTPC Ltd.NTPC Ltd.
Bihar State
Electricity Board
Bihar State
Electricity Board
LendersLenders
Eastern Coalfields Ltd.Eastern Coalfields Ltd.
Debt
Equity
PPA/
PTA
Debt
Repayment
Eastern Railways/
East Central Railways
Eastern Railways/
Coal Transport
Civil WorksTG & SG Coal Handling Ash Handling Others
TRA
Project Cash Flows
Long Term
Coal Linkage
Project
Contracts
KBUNLKBUNL
PMC
35%
65%
NTPC Ltd.NTPC Ltd.
Bihar State
Electricity Board
Bihar State
Electricity Board
LendersLenders
Debt
Equity
PPA/
PTA
Debt
Repayment
Eastern Railways/
Eastern Railways/
Coal Transport
Civil WorksTG & SG Coal Handling Ash Handling OthersCivil WorksTG & SG Coal Handling Ash Handling OthersCivil WorksTG & SG Coal Handling Ash Handling Others
TRA
Project Cash Flows
Long Term
Coal Linkage
Project
Contracts
KBUNLKBUNL
PMC
35%
65%
NTPC Ltd.NTPC Ltd.
Bihar State
Electricity Board
Bihar State
Electricity Board
LendersLenders
Debt
Equity
PPA/
PTA
Debt
Repayment
Eastern Railways/
Eastern Railways/
Coal Transport
TRA
Project Cash Flows
Long Term
Coal Linkage
Project
Contracts
KBUNLKBUNL
PMC
35%
65%
NTPC Ltd.NTPC Ltd.
Bihar State
Electricity Board
Bihar State
Electricity Board
LendersLenders
Debt
Equity
PPA/
PTA
Debt
Repayment
Eastern Railways/
Eastern Railways/
Coal Transport

3 TRAINING
3.1 Training objectives
To learn how much working capital will be required by company when new plant setup. what
will be the required amount of working captal for stage II.
3.2 Trainee’s job profile
My job is to visit the office . Discuss to my guide and other employees on related topic
(working capital management). Calculate how much electricity is generated for one day.
How much electricity will be generated for 2 months. What will be the required cost for
generating electricity. How much coal , LDO and O&M is required.
3.3 Trainee’s contribution
My contribution is to find out actual amount incurred for the working Capital required by the
Kanti thermal power in the year 2013-2014.I calculated the required amount for stage -11
195MW
3.4 Learnng outcome
I learn how to calculate required working capital for stage II 195MW Kanti bijlee utpadan
nigam limited. I calculated how much electricity generated for two months. How much raw
material required and what will be the cost.

4 INTRODUCTION TO WORKING CAPITAL:-
“Working Capital isthe Life-Blood and Controlling Nerve Centre of a
Business”
Working capital is commonly defined as the difference between current assets
And current liabilities. working capital is money available to a company for day to day
operation.
NET WORKING CAPITAL = CURRENT ASSEST – CURRENT LIABLITIES
Working capital Measures company efficiency, liquidity and overall health.
Working capital ratio = current assest/current liablity
It indicate a company has enough short term assest to cover its short term debt.
Anything below 1 indicates negative working capital . Anything over 2 indicates positive
working capital . working captital ratio should lie between 1.2 -2.0.
There are two major concepts of working capital:
WORKING CAPITAL
GROSS WORKING
CAPITAL
NET WORLING
CAPITAL

GROSS WORKING CAPITAL:-
It refers to firm's investment in current assets. Current assets are t he assets,
Which can be converted into cash within a financial year. The gross working
capital points to the need of arranging funds to finance current assets.
NET WORKING CAPITAL :-
It refers to the difference between current assets and current liabilities. Net
working capital can be positive or negative. A positive net working capital will arise
when current assets exceed current liabilities. And vice-versa for negative net
working capital. Net working capital is a qualitative concept. It indicates the
liquidity position of the firm and suggests the extent to which working capital
needs may be financed by permanent sources of funds. Net working capital also
covers the question of judicious mix of long-term and short-term funds for
financing current assets.

4.1CLASSIFICATION OF WORKING CAPITAL:-
Working capital can be classified as follows:-
a) On the basis of concept
b) On the basis of time
KINDS OF WORKING CAPITAL
ON THE BASIS OF
CONCEPT
ON THE BASIS OF
TIME
GROSS WORKING
CAPITAL
NET WORKING
CAPITAL
PERMANENT
WORKING
CAPITAL
TEMPRORY
WORKING
CAPITAL
REGULAR
WORKING
CAPITAL
RESERVE
WORKING
CAPITAL
SEASONAL
WORKING
CAPITAL
SPECIAL
WORKING
CAPITAL

Types of Working Capital Needs:
Another important aspect of working capital management is to analyze the
total working capital needs of the firm in order to find out the permanent and
temporary working capital. Working capital is required because of existence
of operating cycle. The lengthier the operating cycle, greater would be the
need for working capital. The operating cycle is a continuous process and
therefore, the working capital is needed constantly and regularly. However,
the magnitude and quantum of working capital required will not be same all
the times, rather it will fluctuate.
The need for current assets tends to shift over time. Some of these changes
Reflec t permanent changes in the firm as is the case when the inventory
and receivables increases as the firm grows and the sales become higher
and higher. Other changes are seasonal, as is the case with increased inventory
required for a particular festival season. Still others are random reflecting the
uncertainty associated with growth in sales due to firm's specific
or general economic factors.
The working capital needs can be bifurcated as:
Working capital
Permanent working
capital
Temporary working
capital

PERMANENT WORKING CAPITAL:
There is always a minimum level of working capital, which is continuously
Required by a firm in order to maintain its activities. Every firm must have a
minimum of cash, stock and other current assets, this minimum level of
current assets, which must be maintained by any firm all th e times, is known
as permanent working capital for that firm. This amount of working capital is
constantly and regularly required in the same way as fixed assets are
required. So, it may also be called fixed working capital
TEMPORARY
Or
Amount of working
PERMANENT
TIME
Source : (pandey I.m ,2013:p.653)
Temporary working capital:
Any amount over and above the permanent level of working capital is
temporary, fluctuating or variable working capital. The position of the
required working capital is needed to meet fluctuations in demand
consequent upon changes in production and sales as a result of seasonal

changes.
Temporary
Or
Permanent
amount of working
Time
Source;( pandey ,2013:p.653)
The permanent level is constant while the temporary working capital is
fluctuating increasing and decreasing in accordance with seasonal demands
as shown in the figure. In the case of an expanding firm, the permanent
working capital line may not be horizontal. This is because the demand for
permanent current assets might be increasing (or decreasing) to support a
rising level of activity. In that case line would be rising.

4.2Working capital cycle:-
The working capital cycle (WCC) is the amount of time it takes to turn the net current
assets and current liabilities into cash. The longer the cycle is, the longer a business is
tying up capital in its working capital without earning a return on it. Therefore, companies
strive to reduce its working capital cycle by collecting receivables quicker or sometimes
stretching accounts payable.
The day to day business operations of a concern of any nature and, size involves many
successive steps and final working results would depend on the effective combination of all
these steps. The steps in general may include.:
 Acquisition and storage of raw material and other stores and spares required for
manufacture of any product.
 Actual production process when the raw material is subjected to different processes to
bring it to final shape of finished goods.
 Storage of finished goods awaiting sales.
 Sales of finished goods and realisations of sale proceeds.

All these steps put together form an operating cycle which can also be
represented diagramatically as under :
Realisation Cash Raw Material
Stores & Spares
Bills Receivable/Sundry Semi-Finished Goods
Debtors
Sales Finished Goods
We start from cash to buy raw material etc. and after completing all the steps end up with the
cash. The intervening period required for completion of this entire process is the 'Operating
Cycle'. The operating cycle may thus be defined as the intervening period from the time the
goods or services enter the business till their realisation in cash. The study of this operating
cycle is obviously very important as the actual requirement of the unit may be limited to the
funds required to complete an operating cycle and the simplest formula for the working
capital requirement may be represented as under:
Total working capital requirement = Total operating expenses during the year
Number of operating cycle in a year

Current Assets to Fixed Assets Ratio
 Conservative current assets policy - Higher CA/FA ratio implies greater
liquidity and lower risk. It means low return and risk.
 Aggressivecurrent assets policy –Lower CA/FA ratio means poor liquidity
and higher risk. And also indicate higher return and risk.
 Moderate current assets policy- It falls in the middle of conservative and
aggressive policy.
A conservative
Level of current B Average
assets
C aggressive
Fixed assets
Output
Diagramof alternate current policies
source: (pandey IM,2013 p.657)

LIQUIDTY VS PROFITABLITY
Minimum cost total cost
cost
cost of liquidity
cost of illiquidity
optimum level of level of current asset
current assets
source: (pandey IM,2013 p.659)
DIAGRAM OF COST TRADE OFF
There are two type of cost involved
 Cost of liquidity
 Cost of illiquidity
If the firm ‘s level of current assets is very high, it has excessive liquidity . its return
on assets will be low , as the firm tired up in idle cash and stocks earn nothing ,high
level of debtor reduce profitability . Thus, the cost of liquidity increases with the level
of current assets.
The cost of illiquidity is the cost of holding in sufficient current assets .the firm will
not in position to honour its obligation. It carries too little cash. This force the firm to
borrow high rates of interst. This will adversely affect credit worthiness of the firm.

In determining the optimum level of current assets ,the profitability solvency tangle by
minimizing total cost –cost of liquidity and cost of illiquidity. It is indicated in the figure that
the level of current assets the cost of liquidity increases while the cost of illiquidity decreases
and vice versa. The firm should maintain its current assets at the level where the sum of these
two costs is minimized . The minimum cost point indicates the optimum level of current
assets.
4.2.1 WORKING CAPITAL CYCLE IN KBUNL
power
sale
Debtor
cash
Coal +LDO
+Spares/Stores

DETERMINANTS OF WORKING CAPITAL :
1) NATURE OF BUSINESS:
The working capital requirement of a firm is closely related to the nature of its
business. A service firm, like an electricity undertaking or a transport corporation, which
has a short operating cycle an which sells predominantly on cash basis, has a modest
working capital requirement. Oh the other hand, a manufacturing concern. Like a
machine tools unit, which has a long operating cycle and which sells largely on
credit, has a very substantial working capital requirement.(pandey IM,2013 p.654)
.
2) MARKET AND DEMAND CONDITION:-
The working capital needs of a firm are related to its sales. Growing firms may need to
invest funds in fixed assest n order to sustain growing production and sales .Growing firm
need funds continuously . they use external sources as well as internal sources to meet
increasing needs of the firm. (pandey IM,2013 p.654)
3) TECHNOLOGY& MANUFACTURING POLICY:-
Manufacturing cycle for the inventory conversion comprises the purchase and use of raw
materials and the production of finished goods. Longer the manufacturing cycle larger will
be firms working capital requirement s. Manufacturing time span means a larger tie up of
funds in inventories. Thus, if there alternative technology of a product, the process with
shortest manufacturing cycle will be chosen. (pandey IM,2013 p.654)
4) CREDIT POLICY :-
The credit policy of the firm affect the working capital by influencing the level of debtors.
The credits terms to be granted to customers may depend upon the norms of the industry to
which firms belongs. But the firm has flexibility of shaping its credit policy. A liberal credit
policy. (pandey IM,2013 p.655)
5) OPERATION EFFICIENCY:-
The operation efficiency of the firm relates to the optimum utilisation of all its resources at its
minimum cost. The efficiency in controlling operating cost and utilising fixed and current
assets leads to operating efficiency. (pandey IM,2013 p.656)

4.3 WORKING CAPITAL ASSESMENT:-
Any enterprise whether industrial, trading or other acquires two types of assets
to run its business as has already been emphasised time and again.
Land, building, plant cash receivable, stocks,
& machinery etc... Bank, inventory etc...
FIXED ASSESTS -
Fixed assets which are necessary for carrying on the production/business such as land and
buildings, plant and machinery, furniture and fixtures etc. For a going concern these assets
are of permanent nature and are not to be sold.
CURRENT ASSEST-.
The other type of assest required for day to day working of a unit are known as current assets
which are floating in nature and keep changing during the course of business. It is these
'current assets' which are generally referred to as 'working capital'.
We are by now already aware of the short-term nature of these assets which are classified as
current assets. It may be noted here that there may not be any fixed ratio between the fixed
assets and floating assets for different projects as their requirement would differ depending
upon the nature of project.
ASSEST
FIXED ASSEST CURRENT
ASSEST

Big industrial projects may require substantial investment in fixed assets and also large
investment for working capital. The trading units may not require heavy investment in fixed
assets while they may be carrying huge stocks in trade. The service units may hardly require
any working capital and all investment may be blocked in creation of fixed assets.
A set financing pattern is evolved to meet the requirement of a unit for acquisition of fixed
assets and current assets. Fixed assets are to be financed by owned funds and long-term
liabilities raised by a unit while current assets are partly financed by long-term liabilities and
partly by current liabilities and other short-term loans arranged by the unit from the bank
Net Working Capital = Current Assets - Current Liabilities
(NWC) (GWC) (including bank borrowings)
This net working capital is also sometimes referred to as 'liquid surplus' with the firm
and has been margin available for working capital requirements of the unit. Financing
of working capital has been the exclusive domain of commercial banks while they
also grant term loans for creation of fixed assets either on their own or in consortium
with State level/All India financial institutions. The financial institutions are also now
considering sanction of working capital loans.
The current assets in the example given in the earlier paragraph are financed
asunder:
Current Assets = Current liabilities + Working capital limits from banks +
Margin from long - term liabilities

DIAGRAM 1:-This is the normal pattern of financing of current assets
The assessment of working capital may involve two aspects as under
• The level of current assets required to be held by any unit which is adequate for its
day to day functioning, and
• The mode of financing of these current assets.
LIABLITY ASSEST
CAPITAL
Fixed assets
Long term liablity
Margin NWC liquid
surplus
Current assets
Working capital
limits from banks
Current liabilities

It is evident from diagram 2 that current liabilities are more than current assets and a part of
short- term funds (current liabilities) have been diverted to finance fixed assets. Not only that
the unit is not able to provide any margin for working capital from its long- term sources, but
it is showing a net working capital deficit represented by the bracketed area in the diagram.
This situation may not be considered as satisfactory and the unit is experiencing liquidity
problems and has a current ratio of less than one. It may also be stated here that a large liquid
surplus may also not reveal a very encouraging position, as it would mean idle funds or a
lower turnover in working capital. It should, therefore, be the endeavour of every concern to
ensure optimum utilisation of all the resources at its command and have just adequate liquid
surplus
LIABLITY ASSEST
Capital
Fixed AssetsLong term liability
Working capital
deficit
Current liablity Current Assets

4.3.1 CONCEPT OF MARGIN:
Margin in relation to working capital has two concepts which need to be clearly
understood. The one concept of providing margin by way of liquid surplus i.e. from
long- term liabilities has already been explained. It must be clear by now that current
assets shall partly be financed by capital & long- term liabilities for any going
concern. This gains importance while fixing overall limits of working capital by the
bank.
The other concept of margin as applicable to working capital limits is related to the
value of security charged to the bank as cover for these limits. Financial
accommodation up to 100% of the value of goods would not be granted by the banks
and they would fix a certain margin on the value of security which must be provided
by the borrower and the balance amount will be financed by the bank. The percentage
of margin fixed on any security is dependent on its nature.

4.4 TARIFF
The rate of electrical energy at which it is sold to the consumers is called tariff . The supply
companies invest money to generate, transmit and distribution of electrical energy, a tariff is
fixed .
The cost of generation depends upon the magnitude of energy consumed by the consumers
and his load conditions. Therefore, due consideration is given to different types of consumers
(e.g. domestic, commercial and industrial) while fixing a tariff .
OBJECTIVES OF TARIFF
The main objective of the tariff is to ensure the recovery of the total cost of generation and
distribution .Tariff should include the following items:
(1) Recovery of cost of electrical energy generated at the generating system.
(2) Recovery of cost on the capital investment in transmission and distribution system.
(3) Recovery of cost of operation, supplies and maintenance of equipment.
(4)Recovery of cost of metering equipment, billing and miscellaneous services .
(5) A marginal return (Profit) on the capital investment
MAIN FACTORS INVOLVED IN FIXING A TARIFF
(1) The tariff should ensure the recovery of the total cost of generation, transmission, and
distribution etc.
(2) The tariff should be simple, cheap and capable of easy explanation to consumers.
(3) The tariff should be attractive so that consumers are encouraged to make more extended
use of electrical energy.
(4) The tariff should be such that it would earn a reasonable profit.
(5) The tariff must be fair and the consumers should be charged according to what the energy
costs.

TYPES OF TARRIF
1) Simple Tariff : The tariff in which the rate per unit of energy is fixed, is called
simple tariff.
2) Flat rate Tariff: The tariff in which different types of consumers are charged
at different per unit rates is called flat rate tariff.
.
3) Block rate Tariff: The tariff in which first block of energy is charged at a
given rate and the succeeding blocks of energy are charged at progressively
reduced rates is called block rate tariff
4) Two part Tariff: The tariff in which electrical energy is charged on the basis
of maximum demand of the consumer and the units consumed by him is called
two- part tariff.
5) Maximum demand tariff: The tariff in which electrical energy is charged
on the basis of maximum demand of the consumer and the units consumed by him
is called maximum demand.
6) Powerfactortariff: The tariff in which power factor of the consumer’s
load is also taken into consideration while fixing it, is called power factor tariff.

4.5 PRACTICAL ASPECT OF ASSESMENT OF
WORKING CAPITAL STAGE- II
two-part tariff:
1) CapacityCharges (for recoveryof Annual Fixed Costs)
2) Energy Charges (for recoveryof Primary Fuel Costs)
Components of CapacityCharges/AnnualFixed Charge (AFC)
Components of AFC FY 2009-14
a. Return on Equity 15.50%
b. Interest on Loan Capital As per actual
c. Depreciation 5.28%
d. Interest on Working Capital Based on Normative Parameters
e. Operation & Maintenance
Costs
Based on Normative Parameters
f. Costof Secondary Oil Based on Normative Parameters
g. Special allowance in lieu of
R&M
Based on Plant life

The working capital for a thermal power station has following
components :
Components FY 2009-14
1. Coal Stock 1½ Months for Pit Head
2 Months for Non-Pit Head
2. Secondary Fuel Oil Stock 2 Months
3. Maintenance Spares 20% of O&M Costs – Coal Based
30% of O&M Costs – Gas Based
4. Sales Receivables 2 Months
5. O&M expenses 1 Month
(e) Operations & Maintenance Costs
The CERC has specified O&M Costs for thermal power stations on the normative parameters
(Rs. lakh/MW), depending on the class of the machine installed by the power station. The
normative O&M expenses allowed are:
Rs
Lakh/MW
200/210/250
MW
300/330/350
MW
500 MW 600 MW and
Above
2009-10 18.20 16.00 13.00 11.70
2010-11 19.24 16.92 13.75 12.37
2011-12 20.34 17.88 14.53 13.08
2012-13 21.51 18.91 15.36 13.82
2103-14 22.74 19.99 16.24 14.62

For thermal power stations with multiple units of the above sizes, the CERC has introduced
the concept of reduction factor, which will apply to units commissioned after April 2009. The
normative O&M expenses for the new units are determined by multiplying these factors with
the normative O&M expenses detailed above.
Unit
specification
Reduction
Factor
Reduction
Factor
200/210/250
MW
Additional 5th
&
6th Unit
0.9 Additional 7th
&
more Unit
0.85
300/330/350
MW
Additional 4th
&
5th Unit
0.9 Additional 6th
&
more Unit
0.85
500 MW and
Above
Additional 3rd
& 4th Unit
0.9 Additional 5th
&
above Unit
0.85
1EnergyCharges (for recoveryof Primary fuel costs)
Energy charges for thermal power stations are linked to the normative operational parameters
as specified by the regulator. The normative parameters include the following:

Normative OperationalParameters forCoalbased Thermal Power
Projects
Norms for Operations FY 2009-14
a Plant Availability Factor 85%
b Gross Station Heat Rate
For existing Stations
For existing Station 2500
500 MW and above 2425
SecondaryFuel Oil Consumption
Coal Based 1.0 ml/Kwh
Auxiliary Energy Consumption
200 MW Series 9.0%/8.5%
500 MW Series (Steam driven BFP) 6.5%/6.0%
500 MW Series (Power driven BFP) 9.0%/8.5%
. Incentives linked to Plant Availability rather than Plant Load Factor
CERC in its Tariff Regulation for FY 2009-14, has linked incentives for Generating Station
to the Plant Availability Factor (PAF) as opposed to Plant Load Factor (PLF) in its earlier
Regulations for the period FY 2004-09.
The incentives will be recoverable as a part of the AFC and will be computed on monthly
basis. The AFC inclusive of the incentive payable will be calculated as follows:
AFC (including incentive) = AFC x (Actual Plant Availability Factor/Normative Plant
Availability Factor)
Gross stationheat rate
The heat energy input in kCal required to generate one kWh of electrical energy at generator
terminals of a thermal generating station.
Conversionof MW into Million Units (MUs)

1 MW =1MW x 365days x 24hours x PLF x Availability Factor x 1000
1,0,00,000
Tariff determination exercise for a 500 MW Thermal PowerPlant
Given data:
s.no Particulars Normative Parameters
1. Capacity of Plant 500MW
2. Capital Cost 4Cr/MW
3. Debt Equity Ratio 70:30*
4. Return on Equity 15.5%*
5. Interest on Loan 10%
6. Working Capital (10% of Total
Capital)
200 Cr
7. Interest on working Capital 10%
8. Depreciation Rate 5.28%*
9. Operation and Maintenance cost 13 Lakh/MW*
10. Plant Load Factor(PLF) 80%
11. Plant Availability Factor 85%*
12. Specific Oil Consumption 10 ml/MW*
13. Price of Oil Rs. 10,000/Kl
14. Gross Calorific value of Oil 10,000 Kcal/Lit
15. Station Heat Rate 2,425 Kcal/Lit*
16. Costof Coal Rs. 1000 / Tonnes
17. Auxiliary Power Consumption 6.50%*
18. Plant Life (For thermal plant
based on Coal)
25 Years
19. Gross Calorific value of coal 4000 Kcal/Kg.

4.5.1Calculations:
Fixed CostComponent calculations
(1) Return on equity
Capital cost/MW= Rs. 4 Cr
Capital cost for 500 MW = 500 x 4= Rs. 2,000 Cr.
Normative Debt/Equity Ratio= 70:30
Equity = 30/100 X 2000 = Rs. 600 Cr.
Debt =70/100 X 2000 = Rs. 1, 400 Cr.
RoE = 15.5% of Equity
15.5/100 x 600 = Rs. 93 Cr.
(2)Interest on Loan
10% of Debt=10 /100 x 1400 =Rs. 140 Cr.
(3)Interest on Working capital
10% of Working capital (Rs. 200 Cr.)
10/100 x 200 = Rs. 20 Cr.
(4)Depreciation
5.28% of Capital cost= 5.28/100 x 2000= Rs. 105.6 Cr.
(5) O & M Cost
Normative O&M Cost: Rs. 13 Lakhs/MW
For 500MW = 0.13 x 500= Rs. 65 Cr.
Hence, Totalfixed cost= (1)+(2)+(3)+(4)+(5)
Rs. (93 + 140 + 20 + 105.6 + 65) = Rs. 423.6 Cr. = Rs. 423.6 x 107
500 MW = 500 x 365 x 24 x 80 x 85 x 1000
106
= 2978.4 Million Units (MUs)
= 2978.4 x 106
=423.6 x 107 / 2978.4 x 106
=Rs. 1.42 / kWh

Variable CostComponent calculations
Calculation of variable costper unit:-
(1)Specific Oil consumption = 1 ml/kWh=1 x 10-3 l/kWh
(2) Costof Specific Oil consumption = Specific Oil consumption x Cost of Oil/litre
= Rs 1 x 10-3 x lit x 10000 = Rs. 0.01 / kWh
kWh x lit
(3) Heat contribution of oil:
= Gross calorific value of Oil x Specific Oil consumption
= 10,000 x KCal/litre x 1 x 10-3 litre/kWh = 10 Kcal/kWh
(4)Station Heat Rate
= Heat contribution of Oil + Heat contribution of Coal
Therefore, Heat contribution of Coal = Station Heat Rate – Heat contribution of Oil
= 2425-10 = 2415 Kcal/kWh
(5) Specific Coalconsumption
= Heat contribution of coal
Gross calorific value of coal
= 2415/4000 = 0.60 Kg/KWh
(6) Costof Specific Coalconsumption
Specification Coal consumption x Cost of Coal
= 0.60 Kg. x 1000 Rs.
kWh x Tonnes
0.60 Kg. x 1000 Rs. = 0.60 Rs/KWh
kWh x 1000 Kg.
Hence, TotalVariable Costper Unit:
= Cost of Specific Oil consumption + Cost of Specific Coal consumption
= Rs. (0.01 + 0.60) / kWh = Rs. 0.61 /kWh
Nominal Tariff calculation:
Nominal Tariff = (Total Fixed Cost / Unit) + (Total variable cost (Ex-bus)/Unit)
= Rs (1.42 + 0.65)/Unit = Rs. 2.07/Unit

Annexure 1 – Key Assumptions Underlying Financial Projections
1. Timeline for Project - Unit wise
PARTICULARS UNIT 1 UNIT 2
Capacity (MW) 195 195
Notice to Proceed April 1, 2013 April 1, 2013
No. of Months of
Construction 28 31
COD April 30, 2014 June 30, 2014
End of Life of Unit April 30, 2039 January 31, 2040
1Assumptions for Technical Parameters
Assumption for plant operation parameters
Plant Capacity in MW 390
Availability 85%
Design Heat Rate 2300.00 kcal/ kWh
Allowed margin 6.5%
Station Heat Rate
2449.50 kcal/ kWh
Auxiliary Consumption 9%
Gross Calorific Value of
Coal 3500 kCal/kg
Gross Calorific Value of Oil 10 kCal/ml
3 Assumptions for P&L
Assumption for revenues
Tariff Assumptions
Power tariff in accordance with the extant CERC (Terms and Condition for
determination of tariff) Regulations.

Assumptions for Coal
Landed Coal price Rs.3537/ tonne
Escalation for Coal 4%
Base year for expenditure FY 2013
Assumptions for Secondary Oil
Secondary oil consumption 1 ml/ Kwh
Oil price Rs.69994/ KL
Escalation for Secondary Oil 4%
Base for Escalation of expenditure FY 2011
Assumptions for O&M
O&M Expenses Rs. 0.1924 crore/MW
O&M Expense annual Escalation 5.72%
Base for escalation of expenditure FY 2011
Assumptions for Working Capital
Primary Fuel Stock 60 days
Receivables 60 days
Fuel oil stock 60 days
O&M expenses 30 days
Maintenance Spares 20% of O&M Exp
Margin Money on Working Capital Requirement 25 %
Interest on Bank Finance 12.25%
Assumptions for Income Tax
Income Tax 30 %
MAT 18 %
Surcharge on Tax 7.50%
Education Cess 3 %
Assumptions for Means of finance
Rupee Term Loan
Debt : Equity 70:30
Upfront Equity 25%

Rupee Term Loan
Interest rate on RTL 12.15%
Upfront Fees 0.50%
In KBUNL( Kanti Bijlee Utpadan Nigam Ltd.), Kanti. The
material which is used to generate the electricity are:
1.Coal :
KBUNL is power generating company in which coal is the primary fuel. The requirement of
coal is important. Coal required for generating the electricity throughout the year will be
caculated s per the above parameters. For calculating the requirement of coal in a year, we
have to find as:
2 AVERAGE CALORIFIC VALUE
3 HEAT INPUT – COAL ( STATIONHEAT RATE)
4 SPECIFIC CONSTRAINT
5 GENERATION
6 CONSUMPTION
7 PRICE
8 VALUE (5*6)

FUEL CONSUMPTION – COAL
s.
no
Description unit Unit
2001-
11
comm
2011-
12
unit2
2011-
12unit
1&2
2012-
13
unit 1
2012-
13 unit
2
2013-
14
unit1
2103-
14 unit
2
2013
-
14un
it
1&2
1 Average
calorific value
KCAL/KG 3442 3600 3448 3448 3448 3448 3448
2 Heat INPUT –
GROSS
STATION
HEAT INPUT -
COAL
(Station heat
Rate –Oil heat
Rate)
KCAL/KWH
KCAL/KWH
3300 3300
3243
3150
3102
3150
3102
3100
3057
3100
3057
3100
3057
3 Specific
constraint
KG/KWH 0.96 0.9008 0.8996 0.8996 0.8866 0.8866 0.88
66
4 Generation MU 120.17 578.16 481.80 481.80 31.68 854.1 866
5 Consumption MT 115210 520794 433446 43344
6
28089 757287 7853
76
6 Price Rs/MT 2838 3778 3537 3537 3537 2607 3537
7 Value(5*6) RS/Crore 3270 1965.6
0
15330.9
9
15330.
99
993.51 1942 2777
8.76
Ps/KWH 2.72 3.40 3.18 3.18 3.14 2.31 3.14
2358.00 331.17
397 29.221949
2755.00 360.39191
2314.8968
4629.7937

FUEL CONSUMPTION - COAL
The second important material which is used in KBNUL to generate the electricity is LDO
(Light Diesel Oil) also known as Secondary Fuel . For calculating the requirement of LDO in
a year. We have to find the following
1.Average Calarific Value
2 Specific oil cons
3Heat Input –Gross(1*2)
4 Generation
5 Consumption
6 price
7 value(5*6)
8 Cost per kwh(8*3)
In that way the other things will also find that is operation &maintenance. That is also
calculate the operation & maintenance section. In this section we find out the :
Employee Cost
Salaries & wages
Overtime
Contribution to PF and other
Funds
Medical exp
Other Welfare Exp
Repairs & Maintenance
Plant & Machinery
Overhauls
Routine
Buildings - Plant & Town
Ship
Chemicals
Water charges & Cess
Other consumables
Administrative Expenses

Energy Conservation
Station/ Admin. Overheads
O&M Expenses
Station KBUNL Rs/Lakhs
Sl Description Current year Next
year
ACTUAL BE RE BE
2010-11 2011-
12
2011-12 2012-13
2013-14 2014-
1 Employee Cost
Salaries & wages 1861.36 0.00 2047.50 3.25
Overtime 0.00 0.00 0.00 0.00
Contribution to PF and other
Funds
151.54 0.00 167.00 184.00
Medical exp 36.56 0.00 39.00 42.00
Other Welfare Exp 120.03 0.00 133.00 145.00
Total 2169.49 0.00 2386.50 374.25 992.20
2 Repairs & Maintenance
(i) Plant & Machinery
Overhauls
- Material cost
- Contractor & others
Routine
- Material cost 54.41 0.00 425.00 42.50 800.00
- Contractor & others 405.17 0.00 515.00 103.00 950.00
(ii) Buildings - Plant & Town
Ship
- Material cost 59.24 0.00 13.50 3.38 850.00
- Contractor & others 17.77 0.00 150.50 37.63 1200.00
10 Total 536.59 0.00 1104.00 186.50 3800.00
11 Station/ Admin. Overheads
12 Chemicals 2.66 2.93 5.85 40.00
13 Water charges & Cess 0.00 0.00
14 Other consumables
15 Administrative Expenses 1120.41 0.00 1232.00 200.00 774.00
17 Energy Conservation 0.00 0.00
18 Station/ Admin. Overheads 1123.07 0.00 1234.93 205.85 814.00

19 Total O&M Exp 3829.15 0.00 4725.42 766.60 5606.20
LESssS TRANSFER TO EDC 2281.28 904.62
Grand Total 1547.87 0.00 3820.80 766.60

4.5.2Generation of electricity in kbunl:-
One day generation= 195*24*10^3kwh
One year generation =195*24*365*10^3kwh
=1708200*10^3kwh
Availability factor = 80%
Auxiliary power consumption (APC) --- Internal generation of power by
machine
availability factor = 1708200000*80% Kwh
=1708200000*80÷100
= 1366560000 Kwh
=13665660 *10^3MU
=1366.56 MU
Energy Sent Out (ESO) -The final production =13%
= 13665*10^3*13%
= 1366650000*
13
100
= 177652800MU
NET Generation = 1366560000MU-177652800MU
= 188907200MU
= 1188.91 MU

COMPUTE COALCONSUMPTIONFOR 2 months in 195MW plant
= Power plant wattage * coal unit /Hr*HR/yr
= 195 * (per unit heat required /coal heat value)24*365
= 195 * (SHR/GCV) *24 *365
= 195*
2450
3447.54
* 24*365
= 195* 0.71065*24*365
= 12,13,93233MT
= 71.57 MT
COST OF COAL Unit1 Unit2
Unit(1+2)
Sp. coal consumption Kg/Kwh 0.71 0.71
Generation MU 1366.56 1366.56 2733.12
Total coal consumption MT 1213932 121392 2427864
Price of coal Rs/MT 3537.41 3537.41
Coal costfor 1 year Rs. crore 429.417 429.417 858.835
Coal costfor 2 months Rs. crore 71.57 71.57 143.14
COST OF OIL
Unit1 Unit2 Unit(1+2)
SP. Coal consumption Ml/kwh 1 1
Generation MU 1366.56 1366.56 2733.12
Total oil consumption KL 1366.56 1366.56 2733.12
Price of oil Rs/KL 61494.23 61494.23
Costof oil 1 year Rs. Crore 84.0355 84.0355 168.071
Costof oil for 2 months RS. Crore 1.40 1.40 2.80

Costof O&M EXPENSES
Unit 1 Unit 2 Unit(1+2)
O&M expenses Lakh/MW 24.04 24.04 48.08
Installed capacity MW 195 195 390
O&M for expenses for 1 year RS. Crore 46.878 46.878 93.756
O&M expenses for 1 month Rs. Crore 3.91 3.91 7.82
Costof MAINTENANCE SPARES Unit 1 Unit 2 Unit(1+2)
O& M Expenses RS. crore 46.878 46.878 93.756
Maintenances spares (20%Of
O&M Expenses)
Rs. crore 9.38 9.38 8.75
RECEIVABLES Unit 1 Unit2 Unit(1+2)
Net generation. MU 1188.91 1188.91
Energy charges RS/ Kwh 2.751215 2.751215
Total energy charges Rs. crore 327.098 327.098 654.189
Fixed charge per unit Rs/Kwh 2.866 2.866
Total fixed charges Rs. crore 340.74 340.74 681.483
Receivable for 1 year RS. crore 667.838 667.838 1335.672
Receivable for 2 months Rs. crore 111.306 111.306 222.612
TOTAL RS. crore 197.566 197.566 395.132
Gross calorific value coal 3447.54
SHR 2450
Heat Input Coal 2440
SP. consumption coal 0.71065

Working capital assessment:
Working capital assessment = current assets + current liability
= Rs 386.552 crore + Rs13.29 crore
= Rs 395.132 crore
AS done in KBNUL , the requirement of working capital 75%financed by
bank and remaining 25% financed by KBNUL
Therefore,
BY BANK = Rs 395.132 cr. * 75%
=Rs 296.349 cr.
BY KBUNL = RS 395.132 cr.* 25%
= Rs 98.783cr.
Working capital = Current assets – current liabilities
Net Working capital = Gross operating cycle – Creditor deferral period
Gross operating cycle = Inventory conversion period (ICP) + Debtor
Conversion period(DCP)
GOC = Coal + oil + DCP (receivable)
= Rs (143.14+2.80+222.612)
= Rs 368.552 crore
Current liability = Creditor deferral period
= RS (7.82+8.37)
= RS 13.29 crore

Net Working capital = GOC-CDP
= RS (368.552-13.29)crore
= Rs 355.262crore
5 DATA ANALYSIS
1) The trade receivable period is 2 months and as per standard practice the same is
realized by the company also.
2) By lowering/controlling the expenses like O&M working capital requirement can be
reduced.
3) A higher efficiency in coal /oil consumption can also reduce the overall working
capital requirement.
4) As per the data provided by company 75% of Working capital requirement is made
through bank. Company should explore the option for higher margins from banks.
5) By providing incentive schemes for debtor (for timely realization) working capital
cycle period can be reduced.

5.1 INTERPRETATION
1) KBUNL is in power sector and governed by CERC regulations for tariff and other
working parameters.
2) Working capital calculation has been done on the basis of parameters allowed by CERC
3) The limit of drawing power from bank is decided by level of stocks and book debt. A
proper realization of debt and maintenance of inventory can fetch higher limits.
6 SUGESTION
Company should go for FSA(fuel supply agreement ) to coal companies
which can provide higher grade coal i.e Ato C.
 Company is under expansion and coal requirement will increase. It should go for
own coal allotment from GOI.
 Stage 2 of the KBNUL has been set up with best of the technology available in the
country. Company should go for optimum utilization of the same.
 Due to proximity of both the stages company can reduce the cost by proper logistic
arrangement.
 .Water intake arrangement for stage 2 can be used for stage 1also. It will reduce the
cost for stage 1.
 Company has still ample land available in its premises. It can go for setting up of
further new units.
 Currently in India 660 MW & 800 MU plants are coming. KBUNL should try to set
up new units in this range.

7 BIBLIOGRAPHY
http://www.ntpc.co.in
http://www.ntpc.co.in/annualreports/2012-13/NTPC-AR-2012-13.pdf
http://www.rushabhinfosoft.com/webpages/BHTML/CH-15.HTM
http://www.investopedia.com/
/http://en.wikipedia.org/wiki/Kanti_Thermal_Power_Station
http://www.scribd.com/
http: / /www.investinganswers.com/
http://www.brighthubengineering.com/
http://en.wikipedia.org/
http://www.eia.gov/tools/faqs/faq.cfm?id=667&t=6
https://www.scribd.com/doc/33369999/Summer-Training-Project-report-on-
PANDEY, I M (2013) Principle of working capital Management ,vikas
publishing housing pvt ,New Delhi Pp 653 ,654-656 .657-659,648

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