65363743-anshul-mangal-kribhco-a-1802010147-mba-ib
TRANSCRIPT
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SUMMER TRAINING REPORT SUBMITTED TOWARDS THE PARTIAL
FULFILLMENT OF POST GRADUATE DEGREE IN INTERNATIONAL
BUSINESS
Feasibility Report for Revamping Of Captive Power & Steam
Generation Plant (SGPG) At Hazira
SUBMITTED BY:
(Name)Anshul Mangal MBA-IB (2010-2011)
Roll No. : A1802010147
INDUSTRY GUIDE FACULTY GUIDE
MR.K.C.GUPTA Ms. Deepmala Soni
C.M. (F&A)
AMITY INTERNATIONAL BUSINESS SCHOOL,
NOIDA
AMITY UNIVERSITY – UTTAR PRADESH
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CERTIFICATE OF ORIGIN
This is to certify that Ms./Mr.___________________, a student of Post Graduate
Degree in _____________________, Amity International Business School, Noida
has worked in the ____________________, under the able guidance and
supervision of Mr./Ms._________________________,
designation______________, Company___________________________.
The period for which he/ she was on training was for ______weeks, starting from
___________to _____________. This Summer Internship report has the requisite
standard for the partial fulfillment the Post Graduate Degree in International
Business. To the best of our knowledge no part of this report has been reproduced
from any other report and the contents are based on original research.
Signature Signature
(Ms. Deepmala Soni) (Anshul Mangal)
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ACKNOWLEDGEMENT
I express my sincere gratitude to my industry guide Mr. K.C. Gupta,
C.M. (F&A), KRIBHCO, for his able guidance, continuous support and
cooperation throughout my project, without which the present work
would not have been possible.
I would also like to thank the entire team of Finance Department
(KRIBHCO) especially Mr. S.K. Dewan, for the constant support and
help in the successful completion of my project.
Also, I am thankful to my faculty guide Ms. Deepmala Soni of my
institute, for her continued guidance and invaluable encouragement.
Signature
(Anshul Mangal)
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Table of Contents EXECUTIVE SUMMARY ...............................................................................................................4
Introduction ................................................................................................................................................... 6
Objectives .........................................................................................................................................6
Industry Profile ................................................................................................................................8
Introduction ............................................................................................................................................... 8
Major companies in Fertilizer Industry ................................................................................................... 13
Growth and Trends in Fertilizer Industry ............................................................................................... 16
Company Profile ............................................................................................................................. 20
KRIBHCO .............................................................................................................................................. 20
Organization Chart .................................................................................................................................. 21
Growth Trend and Financial Performance .............................................................................................. 23
Captive Power Plant ................................................................................................................... 30
Reflections on what has been learned during the training experience ............................................. 38
ANALYSIS ......................................................................................................................................... 49
Capital Budgeting Decisions ................................................................................................................... 49
Net Present Value ................................................................................................................................... 49
Debt-Service Coverage Ratio.................................................................................................................. 51
Conclusion ...................................................................................................................................... 56
Recommendation ............................................................................................................................ 57
Bibliography ................................................................................................................................... 58
Annexure-1 ................................................................................................................................................. 60
Annexure-2 ................................................................................................................................................. 62
Annexure-3 ................................................................................................................................................. 64
Case-study- Solar Photovoltaic Power plant ................................................................................... 73
Synopsis .......................................................................................................................................... 84
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EXECUTIVE SUMMARY
KRIBHCO (Krishak Bharati Cooperative Ltd.) is a Multi Cooperative Society which
manufactures, distributes and does the marketing of the Fertilizers. KRIBHCO has setup a
Fertilizer Complex to manufacture Urea, Ammonia & Bio-fertilizers at Hazira in the State of
Gujarat, on the bank of river Tapti, 15 Kms from Surat city on Surat – Hazira State Highway.
Thus, the Captive Power Plant has been installed for KRIBHCO Fertilizer complex. In other
words, the consistent fertilizer production needs uninterrupted, reliable Electrical Power & High
Pressure Steam for running the different equipments/ Exchangers/ vessels of the Fertilizer
complex. So, it basically a co-generation type Thermal Captive Power Plant.
Steam Generation Plant- It has three boilers producing high pressure steam. Each boiler is
designed to produce 275 t/hr of steam at 105 kg/cm2 absolute & 510 degree C. the high pressure
steam is required for steam turbine drives for Electric Power Generation, Pumps, Compressors of
Process Pants & for other heat exchangers. Boilers were supplied and commissioned by M/s
Foster Wheeler Power Product, UK limited. The project is divided into 2 cases where case has
been taken to ensure compatibility of selected models in such a way that augmentation from
Case-I to Case-II is ensured smoothly.
KRIBHCO Captive Power Plant
KRIBHCO has undertaken a major revamp project of Ammonia and Urea plant for capacity
enhancement. In this report the financial feasibility of the project is checked through various
alternatives in different cases through Capital Budgeting tools such as
1. Pay Back Period
2. Net Present value
3. Debt coverage Ratio
4. Internal Rate of Return
As well keeping other factors in mind for Case-1 of project which will be completed Oct-
2011such as
Alternative‟s Cost of
Project
Capacity
of Plant
Auxiliary
consumption
Alternative-1 3950 101Mw 1%
Alternative-2 4300 101Mw 1%
Alternative-3 3950 26.5Mw 0%
Alternative-4 4300 26.5Mw 0%
Alternative-5 3950 35Mw 0%
Alternative-6 4300 35Mw 0%
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Introduction
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Introduction
Objectives
Primary Objectives
To study the financial and investment viability of different alternatives for the revamp according
to capital budgeting decisions.
Secondary Objective
To follow the internship schedule and learn about different areas in finance department :-
MIS/Budget/FICC
Book/Taxation Section
Cash section
Investment / Trusts
Oman Section/ Finance Concurrence
Marketing Accounts
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Industry Profile
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Industry Profile
Fertilizer can be described as any substance, organic or inorganic, natural or artificial, which
supplies one or more of the chemical elements required for plant growth. According to experts
sixteen elements are identified as essential elements for plant growth, of which nine are needed
in larger quantities and seven elements are required in smaller quantities. Carbon, oxygen and
hydrogen are directly supplied by air and water and therefore not treated as nutrients by the
fertilizer industry.
Historical and Anticipated Annual Variation
In Regional Fertilizer Demand around the world between 2007/08 and
2010/11 (Mt nutrients)
Source: Heffer, IFA, June 2010
Introduction
The fertilizer industry presents one of the most energy intensive sectors within the Indian
economy and is therefore of particular interest in the context of both local and global
environmental discussions. Increases in productivity through the adoption of more efficient and
cleaner technologies in the manufacturing sector will be most effective in merging economic,
environmental, and social development objectives. A historical examination of productivity
growth in India‘s industries embedded into a broader analysis of structural composition and
policy changes will help identify potential future development strategies that lead towards a
more sustainable development path.
Issues of productivity growth and patterns of substitution in the fertilizer sector as well as in
other energy intensive industries in India have been discussed from various perspectives.
Historical estimates vary from indicating an improvement to a decline in the sector‘s
productivity. The variation depends mainly on the time period considered, the source of data, the
type of indices and econometric specifications used for reporting productivity growth. Regarding
patterns of substitution most analyses focus on inter-fuel substitution possibilities in the context
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of rising energy demand. Not much research has been conducted on patterns of substitution
among the primary and secondary input factors:
Capital, labor, energy and materials. However, analyzing the use and substitution possibilities of
these factors as well as identifying the main drivers of productivity growth among these and
other factors is of special importance for understanding technological and overall development of
an industry.
Indian Fertilizer Industry
Indian Fertilizer industry is one of the vital industries for the Indian economy, since it
manufacturers a very critical raw material for agriculture. The fertilizer industry especially the
ammonia urea plants are energy demanding in their operation. The main objective of the
fertilizer industry is to ensure the supply of primary and secondary nutrients in the required
quantities.
The fertilizer industry in India has performed a vital role in enabling the necessary increase in the
use of plant nutrients for achieving the objectives of self sufficiency in food grains production
and accelerated and continuous agricultural growth. The fertilizer industry which is one of the
most energy intensive sectors is very important from the context of environmental discussions.
Due importance to increasing productivity through the implementation of competent and
pollution free technologies in the manufacturing sector would be most desirable in combining
economic, environmental and social development objectives.
Sector -wise and Nutrient - wise Installed Capacity of Fertilizer
Manufacturing Units (as on 31.3.2009)
S.No Sector Capacity Percentage Share
( Lakh MT)
Nitrogen Phosphatic Nitrogen Phosphatic
1
Public
Sector 34.98 4.33 29 7.65
2
Cooperative
Sector 31.69 17.13 26.27 30.27
3
Private
Sector 53.94 35.13 44.73 62.08
Total 120.61 56.59 100 100
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Pre Liberalization
In India the per hectare consumption of fertilizer in 1950-51 was less than 1/4th of the global
average. Production was by and large in the purview of public sector and co operative sector.
In 1977 the government introduced the Retention Price Scheme (RPS) with the goals of
providing fertilizers to farmers at reasonable rates without affecting the profitability of the
manufacturers. Under this policy the government would pay the manufacturers, the difference
between the administered price (sale price) and the retention price (cost of production).
Over and above the retention price subsidy, the equated freight subsidy was introduced to enable
the manufacturers to cover the cost of transportation.
Post Liberalization
The policy of economic liberalization has its effect on the fertilizer industry too. The government
in a move aimed at reducing subsidy, decontrolled all the phosphatic and potassic fertilizers in
1992.This strained the ratio of fertilizer utilization. With this policy of liberalization, the
retention pricing scheme (RPS) which had been introduced in 1977, got confined only to urea.
Post liberalization, the government strategized a long term fertilizer policy to be completed in
three different phase, beginning in 2000-01 and ending in 2006-2007.
Phase 1: 2000-01 and 2001-02
Evaluate existing capacity.
Increase in urea prices from time to time.
Evaluate the possibility of a coal based expertise.
Promote joint ventures.
Finalize policy on fertilizer pricing and capacity enhancement.
Eliminate distribution controls on urea and augment concession scheme to bio fertilizers.
Phase II (2002-03-2003-04)
Finalize decision on feedback.
Long term strategy of increased capacity.
Decide on extent of protection to local industry.
Eliminate MRP and encourage productive investment.
Reorganize the association between the industry and farmers.
Judicious utilization of fertilizer and greater emphasis on eco friendly fertilizer.
Establish Fertilizer Policy Planning Board.
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Phase III (2004-05-2006-07)
Removal of MRP
Define government's role in decontrol setup and with respect to policy relating to LNG.
W T O Implications in India
The restriction on quantity of fertilizers to be imported has been eliminated from April 1,
2001.The proposed plan to establish a tariff rate quota (TRQ) for the import of urea has
been deferred.
The Government has planned to impose a higher tariff of 150-200 per cent on imported
urea in future. This would lead to increase in prices of imported urea and be detrimental
to the demand supply gap which is likely augment in future.
Future Trends in India
India's demand for fertilizers in 2007-08 was 26 MM tons, which went up to 29 MM tons
in 2008-09 against a supply of 20 MM tons in 2008-2009.
The demand for fertilizers in 2011-12 is forecasted to be around 35.5 MM tons.
More fertilizer projects are in the pipeline.
Gujarat is expected to play a leading role in fertilizer production.
Indian companies have penetrated the overseas market, signaling a new phase for the
industry.
South Asia (essentially Bangladesh, India and Pakistan) will become the world‘s leading
importing region, with expanding import demand through 2014 for urea and phosphate
products (DAP). It will rank as the world‘s second largest potash importing region, with
imports exceeding 5 Mt K2O in 2014 according to International Fertilizer Industry
Association Report.
Indian fertilizer industry has reached international levels of capacity utilization by adopting
various strategies for increasing the productions of fertilizers. These include the following:
fertilizer units.
fertilizers, especially urea.
resources of raw materials.
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In order to meet the demand for gas, which is one of the prime requirements for the production
of nitrogenous fertilizers, India has entered into joint ventures with foreign companies in a
number of countries. Joint ventures have also been established for the supply of phosphoric acid.
Indian fertilizer manufacturing companies has joined hands with companies in Senegal, Oman,
Jordan, Morocco, Egypt, Tunisia and other countries. It is, therefore, evident that the Indian
fertilizer industry has witnessed extensive growth and development in a short span of time. With
such extensive growth, it is not surprising that the India ranks among the leading fertilizer
manufacturing countries of the world.
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Major companies in Fertilizer Industry
The majority of the populace of India lives in rural areas and the foremost occupation in the
villages is agriculture. Developments pertaining to different industries are being made on a
massive scale to change the country's economy from an agrarian one to an industrial one. It is
extremely important for the fertilizer industry India to have development in terms of
technologically advanced manufacturing process and innovative new-age products. The first
fertilizer manufacturing unit in India was set up in the year 1906 at Ranipat in Chennai
In the present scenario, there are more than 57 large and 64 medium and small fertilizer
production units under the India fertilizer industry. The main products manufactured by the
fertilizer industry in India are phosphate based fertilizers, nitrogenous fertilizers, and complex
fertilizers. The fertilizer industry in India with its rapid growth is all set to make a long lasting
global impression.
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Fertilizer Association/Company Website Address
The Fertilizer Association of India www.fertindia.com
Public Sector
National Fertilizers Limited www.nationalfertilizers.com
Fertilizers and Chemicals Travancore
Ltd. www.fact.co.in
Rashtriya Chemicals & Fertilizers
Limited www.rcfltd.com
Madras Fertilizers Limited www.madrasfert.com
Paradeep Phosphates Limited www.paradeepphosphates.com
Pyrites, Phosphates & Chemicals
Limited www.ppclindia.com
Fertilizer Corporation of India Limited www.fertcorpindia.nic.in
Projects & Development India Limited www.pdil.nic.in
Cooperative Sector
Krishak Bharati Cooperative Limited www.KRIBHCO.net
Indian Farmers Fertilizer Cooperative
Ltd. www.iffco.nic.in
Private Sector
Gujarat State Fertilizer Company
Limited www.gsfclimited.com
Coromondel Fertilizers Limited www.cflindia.com
Shriram Fertilizers & Chemicals
Limited www.dscl.com
Zuari Industries Limited www.pdil.nic.in
Southern Petrochemicals Inds. Corpn.
Ltd. www.spicgroup.com
Mangalore Chemicals & Fertilizers
Limited www.mangalorechemicals.com
Gujarat Narmada Valley Fertilizers Co.
Ltd. http://gnvfc.guj.nic.in
Duncans Industries Limited www.duncansfertiliser.com
Deepak Fertilizers & Petrochemicals
Ltd. www.deepakgroup.com
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Indo-Gulf Fertilizers & Chemicals
Corpn. Ltd. www.indogulf.co.in
Godavari Fertilizers & Chemicals
Limited www.gfcl.com
Nagarjuna Fertilizers & Chemicals
Limited www.nagarjunagroup.com
Chambal Fertilizers & Chemicals
Limited www.zuari-chambal.com
Tata Chemicals Limited www.tata.com
Oswal Chemicals & Fertilizers Limited www.oswal.org
SSP Units
The Dharamsi Morarji Chemical
Company Limited www.dmcc.com
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Growth and Trends in Fertilizer Industry
Fertilizer usage around the World (Increase/Decrease)
The diagram below shows the increase in fertilizer usage around the world where South Asia
shows a considerable increase in usage of fertilizer with 54% increases in usage in India. This
shows with fertilizer usage growing faster in developing countries than developed countries.
In the above given figure we can see the supply trend of fertilizer around the world for more than
a decade, for the year 2009 it shows an increase in capacity to 250 MT nutrient and production
coming down less than 200 Mt nutrient.
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Future projection of Supply And Demand for Urea (WORLDWIDE)
It shows the world urea supply and demand balance, in the coming four years there is an
expected increase in supply as well demand though demand is much less than supply with the
gap increasing by years.
Percentage Share of Urea's Production in India
The below given data shows the share of various company in urea production with IFFCO
having the highest share at 20.5% while KRIBHCO maintaining a share of 8.4% for the year
2009-10 accordind to the source FAI.
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Projected urea production in India
SOURCE: Green Rating Project 2009; Centre for Science and Environment, New Delhi
The above given figure shows the expected or projected increase in urea production for next
thirty years which would also mean an opportunity for KRIBHCO to increase its market share
from 8.4%.
Energy Consumption and greenhouse gas emissions
Company Production (MT)
Specific energy Consumption (GJ/MT urea)
Feedstock mix(Natural
gas-Naphtha-Fuel oil)
Energy consumption
associated with
BAT(GJ/MT)
Deviation from BAT
Specific emissions
(MT CO2/ MT urea)
Tata Chemicals 1,070,308 21.6 96-4-0 21 3 0.48
Nagarjuna
Fertilizers and
Chemical Ltd.
1,354,490 23.5 74-26-0 21.8 8 0.67
IFFCO 3,963,000 24.7 93-7-0 21.1 17 0.64
KRIBHCO 1,714,502 24.8 100-0-0 20.9 19 0.54
RCF 1,832,334 27.4 75-25-0 21.7 26 0.74
CFCL 2,000,038 22.6 100-0-0 20.9 8 0.49
GNFC 670,290 24.8 29-0-71 28.3 15 1.36
NFL Vijaipur I 899,679 24.3 100-0-0 20.9 16 0.52 SOURCE: Green Rating Project 2009; Centre for Science and Environment, New Delhi
19.9
20.5
21
21.6
22.2
22.8
23.5
24.1
24.8
25.5
26.2
27
27.7
28.5
29.3
30.1
31
31.8
32.7
33.6
34.6
35.5
36.5
0
5
10
15
20
25
30
35
40
20
08
-09
20
09
-10
20
10
-11
20
11
-12
20
12
-13
20
13
-14
20
14
-15
20
15
-16
20
16
-17
20
17
-18
20
18
-19
20
19
-20
20
20
-21
20
21
-22
20
22
-23
20
23
-24
20
24
-25
20
25
-26
20
26
-27
20
27
-28
20
28
-29
20
29
-30
20
30
-31
Production (million MT/ annum)
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Company Profile (KRIBHCO)
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Company Profile
Location: A-10, Sector-01, Noida, Uttar Pradesh
KRIBHCO: Krishak Bharati Cooperative Ltd is a Cooperative Society registered under Multi-
State Cooperative Society Act 2002. It has more than 6500 cooperative societies as its members.
KRIBHCO has setup a Fertilizer Complex to manufacture Urea, Ammonia & Bio-
fertilizers at Hazira in the State of Gujarat, on the bank of river Tapti, 15 Kms from Surat
city on Surat – Hazira State Highway.
Late Smt. Indira Gandhi, former Prime
Minister of India laid the Foundation
Stone on February 5, 1982.
Hazira Fertilizer Complex has 2 Streams
of Ammonia Plant and 4 Streams of Urea
Plant. Annual re-assessed capacity for
Urea and Ammonia is 1.729 million MT
and 1.003 million MT respectively, the
total Project cost was Rs. 890 crores as against the estimated cost of Rs. 957 crores. This shows
a saving of Rs. 67 crores (approximately 7%) in Capital Cost of the Project.
The trial production commenced from November, 1985 and within a very short time of 3
months, the commercial production commenced from March 01, 1986. Since then, it has
excelled in performance in all areas of its operations.
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Bio-fertilizer plant of 100 MT per year capacity was commissioned at Hazira in August, 1995.
KRIBHCO has also completed the installation of an expansion of the Bio-Fertilizer plant with
an additional capacity of 150 MT and the same was commissioned in December, 1998.
Ten Seed Processing Plants are also in operation in various states.
Organization Chart
Kribhco
State Marketing
Offices (14)
Area Offices
(36)
Port Offices (2)
Seed production
unit (12)
Service Centres
(60)
Shri B.D.SINHA (Managing Director)
Shri S.Jaggia (Operations
Director)
Shri R. Kamra (Finance Director)
Shri N. Sambasiva Rao
(Marketing Director)
Shri A.K.GUPTA (Chief Vigilance
Officer)
Shri C.P. Singh (Executive Director
Technical)
Shri Amar Prasad
(Executive Director HR)
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Mission
To act as a catalyst to agricultural and rural development by selecting, financing and managing
projects that are both socially desirable and commercially profitable.
Vision
We want to be a world class organization that represents the farmer community and
maximizes returns to them through specialization in agricultural inputs and products and
other diversified businesses that maximize stakeholder value.
OBJECTIVES
To increase the urea installed capacity, maintaining its market share.
To ensure optimum utilisation of existing plant and machinery.
To diversify into other core sectors like power, LNG terminal / port, chemicals etc.
Market share of different sectors in the company
market
share
COOPERATIVE 2886807500
Govt. of India 1015000000
NCDC 50000000
In the above figure, it shows the share of different societies and sector in the KRIBHCO with
decrease Government share to 26% and increase in cooperative societies share to 73%, these
73%
26%
1%
market share
COOPERATIVE
Govt. of India
NCDC
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societies belongs from different states and region in country. The decrease in government share
is 26% from 48% before
Growth Trend and Financial Performance
Paid up capital: Rs. 390.66 Crore
Gross earning: Rs. 2863.66 Crore
Sales
Year Sales (Rs. In
Crore)
2000-2001 686.23
2001-2002 766.08
2002-2003 800.05
2003-2004 979.31
2004-2005 924.22
2005-2006 1,257.30
2006-2007 1,343.97
2007-2008 1,385.62
2008-2009 1,512.40
2009-2010 1,637.39
According to the 30th
annual report (2009-10) the sales has increased significantly from 686.23
Crore in 2000-2001 to 1,637.39 Crore in 2009-2010. This sale includes urea, ammonia, DAP and
MOP etc.
686.23 766.08 800.05
979.31 924.22
1,257.30
1,343.97 1,385.62
1,512.40 1,637.39
0
200
400
600
800
1000
1200
1400
1600
1800
Sales(Rs. In Crore)
Sales(Rs. In…
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Profit
Year PBT(Profit
Before Tax)
PAT(Profit After
Tax)
2000-2001 210.1 138.1
2001-2002 248.33 187.33
2002-2003 40.01 34.01
2003-2004 219.51 152.7
2004-2005 185.83 140.59
2005-2006 280.2 192.45
2006-2007 231.53 193.24
2007-2008 272.14 209.2
2008-2009 269.34 250.13
2009-2010 252.77 228.17
The Profit before Tax & Profit after Tax reflects the profit performance of the company before
and after the relevant taxes is paid. The main product urea is a controlled commodity by the
government. Thus, sometimes the subsidy availed does not meet with company‘s cost of
production inclusive of profit margin, company earns most of its profit from sale of other
commodities such as DAP & MOP.
210.1
248.33
40.01
219.51 185.83
280.2
231.53
272.14 269.34 252.77
138.1
187.33
34.01
152.7 140.59
192.45 193.24 209.2
250.13 228.17
0
50
100
150
200
250
300
PBT(Profit Before Tax)
PAT(Profit After Tax)
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Net Worth
Net worth is the amount by which assets exceed liabilities. Through the years the reserves in the
company has increased with decrease in equity of the company. The reserves are used to finance
the revamp project as well as investing in bank deposits etc.
YEAR Equity Reserves Net Worth
31.03.2007 396.11 1891.41 2287.52
31.03.2008 396.08 1982.43 2378.51
31.03.2009 390.74 2158.68 2549.42
31.03.2010 390.67 2306.46 2697.13
0
500
1000
1500
2000
2500
3000
31.03.2007 31.03.2008 31.03.2009 31.03.2010
Equity 396.11 396.08 390.74 390.67
Reserves 1891.41 1982.43 2158.68 2306.46
Net Worth 2287.52 2378.51 2549.42 2697.13
Net Worth
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Sources of Income
Sources Of Income Rs. In Crore
Sales 1,637.38
Concession/Remuneration from Govt. of
India
959.69
Other Revenue 266.59
Projected Production and Sales of Ammonia and Urea (in KRIBHCO)
Production (Rs. In
lakhs) Sales (Rs. In lakhs)
YEAR Ammonia Urea Ammonia Urea
1110053 1780105 83901 1800242
2009-
10(actual)
1068400 1753000 55400 1753000 2010-11
1197300 2015000 32600 2015000 2011-12
1297000 2195000 28000 2195000 2012-13
1361850 2304750 29415 2304750 2013-14
In the above given table, we can see that ammonia and urea production and sales in Rupees.
The ammonia production is increasing with sales decreasing, this is because the ammonia is used
to also produce urea and through table we can see the urea sales is increasing with increase in it‘s
production. Thus, the additional ammonia produced is used in production of urea which leads to
decrease in sale of ammonia
57% 34%
9%
Rs. In Crore
Sales
Concession/Remuneration from Govt.of India
Other Revenue
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Production Performance
UREA & AMMONIA:
During the year 2008-09 KRIBHCO produced 17.43 lakh MT of Urea (8.02 lakh MT in terms of
nitrogen ―N‖) achieving capacity utilization of 100.8 % and 10.85 lakh MT of Ammonia
achieving capacity utilization of 108.1%.During the year 2009-10 up to November 2009, the
Society has produced 13.36 LMT of Urea (6.14 lakh MT in terms of nitrogen ―N‖) achieving
capacity utilization of 103 %. The expected production for the year 2009- 10 would be 17.82
lakh MT of Urea (8.20 lakh Mt in terms of nutrient ―N‖) of capacity utilization of 103%.
ARGON GAS:
During the year 2008-09 KRIBHCO produced 4245 thousand NM3 of Argon gas. During the
year 2009-10 up to November 2009, Society has produced 1726 thousand NM3 of Argon.
BIO-FERTILIZERS:
During the year 2008-09 KRIBHCO produced 865 MT of Bio-fertilizers. During the year 2009-
10 up to November 2009, Society has produced 679 MT of Bio-fertilizer.
Sales Performance:
TOTAL UREA :
In the year 2008-09, the Society sold 37.76 lakh MT of total Urea. This is the highest total
annual sales of Urea achieved by KRIBHCO since inception. During the year 2009-10 upto
November 2009, Society sold 23.59 lakh MT of total Urea.
OWN UREA :
In the year 2008-09 the Society has sold 18.11 lakh MT of own Urea. During the year 2009-10
upto November 2009, Society has sold 11.23 lakh MT of own Urea.
OMIFCO GRANULAR UREA:
During the year 2008-09 Society sold 10.77 lakh MT OMIFCO Granular Urea. During the year
2009-10 upto November 2009, Society has sold 6.27 lakh MT of OMIFCO Granular Urea.
KSFL UREA:
During the year 2008-09 Society has sold 8.88 lakh MT of KSFL Urea. During the year 2009-10
upto November 2009, Society has sold 6.09 lakh MT of KSFL Urea.
AMMONIA SALE :
During the year 2008-09 the Society has sold 0.79 lakh MT of surplus Ammonia.
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During the year 2009-10 upto November 2009, Society has sold 0.57 lakh MT of Ammonia.
ARGON SALE:
During the year 2008-09 the Society has sold 4215 thousand NM3 of Argon. During the year
2009-10 up to November 2009, Society has sold 1692 thousand NM3 of Argon.
BIO-FERTILIZERS SALE:
During the year 2008-09 the sale of Bio-fertilizer was 867MT. KRIBHCO has conducted several
promotional programmes on use and benefits of Bio-fertilizers.
During the year 2009-10 up to November 2009, Society has sold 655 MT of Bio-fertilizer.
SWOT ANALYSIS OF KRIBHCO
SWOT Analysis is a method for analyzing a business, its resources and its environment.
SWOT is commonly used as part of strategic planning and looks at:
Internal Strengths
Internal Weakness
Opportunities in external environment
Threats in the external environment
STRENGTH-:
Manpower that is experienced, professionally qualified.
Harmonizes industrial relation.
Proven technology and good product quality.
Consistently good performance and the availability of substantial reserve.
Wide spread marketing infrastructure.
A good corporate image.
WEAKNESSES-:
Delay in Diversification.
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OPPORTUNITIES-:
Growth prospect bright for the immediate future.
Liberal economic policies.
Scope for joint venture in abroad.
Prospects for diversifications.
Decontrol may lead to an increase in profits.
THREATS-:
Inadequate availability of raw material like natural gas.
Development of substitute product.
Environment and pollution control standard may become more stringent
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Captive Power Plant
Electric power generation is a state controlled subject. Of late, however, government has
liberalized captive power generation for the user industry for bridging the demand-supply gap.
The fact that private industries use captive power answers the question of financial viability.
With the „opening access‟ policy has also made third party power sale quite lucrative. The
CERC amended Section-9 letting the Captive power plants using 25% of its power to sell
electricity through open access system (without requiring license). Earlier CPP consumed 75%
power and sell residual power to grid only after obtaining special clearance from the
government.
KRIBHCO is a National level Cooperative- Society which is engaged in manufacturing and
marketing of urea since 1986. The company operates a mega fertilizer complex at Hazira in
Gujarat, India. The fertilizer complex comprised of two streams of Ammonia plants of
1520MT/day capacity each and four Urea streams of 1310 MT/day each. The complex also
comprised of related offsite facilities, captive Steam and power generation (SGPG) plant, silos
for storing urea, Railway siding etc. and is self sufficient in terms of power and other utilities.
The captive power plant is a power plant set up by any person to generate electricity primarily
for his own use and includes a power plant set up by any co-operative society or association of
persons for generating electricity primarily for use of members of such cooperative society or
association (Electricity Act, 2003).The captive power and steam generation plant (SGPG) of
Hazira complex comprised of three high pressure boilers and two Steam turbo Generators
installed with plant producing 24MW and 260 MT/h (65MW equivalent) HP steam for utilizing
0.7 MMSCMD gas.
Captive SGPG plant comprises of
3 HP Boilers of 275MT/h MCR capacity each
2 steam Turbo Generators of 15 MW each
Requirement in Fertilizer Complex
HP steam requirement (by Urea Plant) = 260 MT/h
Complex power requirement (including argon) = 24 MW
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The requirement was met by running 2 boilers at part loads to produce HP steam of about
390MT/h which were divided about 260 MT/h for urea plant for process use and 130 MT/h to
produce 24MW of power to meet power plant internal consumption.
The company decided for the Revamp of Ammonia and Urea plant to enhance the production
capacity, which is to be completed by Oct 2011. During the review meeting with MD on subject
matter GM (P), Sh. S. Jaggia put forward 2 scenarios on completion the revamp Project of
Ammonia and Urea Plant, which are as following:
A. Surplus steam of 70 MT/h will be produced in ammonia plant, leading steam production
requirement from SGPG plant to 190 MT/h from present 260 MT/h. Thus SGPG plant
shall be configured to provide 190 MT/h steam and 27 MW power to be utilized by the
fertilizer complex after revamp.
B. Alternatively, if a total power of 42 MW is made available to the fertilizer complex after
revamp( by April 2011 which was later extended to Oct 2011) a total of 150 MT/h steam
can be made available from ammonia plant by changing some of the complex from
present scheme of steam driven to motor drive system. In this case the HP steam
generation requirement from SGPG plant shall become only to 110 MT/h. thus, after
revamp project implementation requirement of power and steam to be generated from
SGPG plant including 3 MW requirement for Jetty, ICD‘s, Argon plant etc. shall be
HP steam= 11 MT/h
Complex power requirement = 45 MW
The MD decided that alternative (B) shall be more feasible and adopted with work starting
immediately to meet the deadline of the Revamp of Ammonia & Urea plant so that enhanced
power requirement is met for the fertilizer complex of 45 MW along with most optimum
configuration of power and steam generation to produce maximum power for third party sale.
Thus, the Revamp of Captive Power plant was decided.
In order to meet the enhanced power requirement and to optimize the use of present available gas
for generation of surplus power for third party sale, it was proposed to revamp the power plants
by installing new Gas Turbines and HRSG as being used in modern power plants for
considerable enhancement of efficiency
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According to recent data, the Ammonia and Urea Plant shall be completed by Oct 2011. On
completion of this revamp project, the requirement of high pressure steam and power of the
complex shall be changed to 174 MT/h and 37 MW respectively.
Consultant‟s Work
It was found prudent to divide the project into two phases for the consultancy work.
Phase -1.Accordingly, ITB was floated for selection of Engineering Consultant to carry
out the configuration study, recommend the most optimum configuration and carry out
Techno- Economic Study for augmentation the Captive Power Plant, power evacuation &
Grid connectivity and to work out options for sale of power for maximum returns keeping
in view of various policies of third party power sale from Captive power plants..
Phase-2.The next phase shall be appoint a Consultant for providing services of an
―Owner‘s Engineer‖ with responsible of preparation of DPR, specifications and tender
document for various EPC packages, issue of tenders, Bid evaluation and
recommendations for placing orders. In the last phase, a project Management Consultant
(PMC) shall be appointed who will provide services related to all aspects of project
Execution. This phase shall highest commercial implication.
For the phase-1 limited tender was issued and bids were called. The plant configuration
suggested by the consultant is based on two scenarios.
The Case-I is based under regulatory compliance by a CPP which permits a CPP to sell
power to third party only up to 49% of total generation will be limited to 72 MW with 37
MW in-house use and 35 MW for third party sale. The gas required in this case will be
about 0.7 MMSCMD. In this case one of the existing Service Boiler shall also be utilized
for generating steam to augment the steam generation from new HRSG for meeting the
shortfall for in-house requirement.
In Case-II, the maximum potential of power generation for third party sale has been
considered, utilizing total available gas of 1.0 MMSCMD. In this case the total power
generation shall be about 142MW with surplus available for sale of 105 MW. In case
total in-house steam shall be generated in new HRSG(S) to be installed. The existing
boiler shall become redundant in this case.
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Case POLICY TOTAL
POWER MW
CAPTIVE
Requirement
MW
Sale of surplus
power
Case -I @49% of
capacity of CPP
72 37 35
Case-II @75% OF
Capacity of CPP
123-142 37 86-105
Care has been taken to ensure compatibility of selected models in such a way that
augmentation from case 1 to case 2 is ensured smoothly
In this project we are going to study and analyze the Case-I. This case was divided into three
cases with two alternative each from which the analysis takes place. These three cases were
differentiated on the basis of sale of surplus power.
The CASE- 1 defined on the Standalone Absolute Basis i.e. total 101 MW power is produced,
with 1% internal consumption and rest being exported/ transferred to the KRIBHCO.
The CASE-2 was defined on the Net Increment Basis i.e. the increment over what KRIBHCO is
presently producing (24 MW power and 260 MT//h steam)and what is to be produced (72 MW
power and 174 MT/h) which comes out to be 26.5 MW, out of which 50% is sold to KRIBHCO
itself.
The CASE-3 was defined on the Net Export Basis total power generated is 72 MW out of which
37 MW is for internal consumption and rest 35 MW is to be sold with nil variable cost. This case
was preferred by the company and consultant as the best option because of its technical
feasibility and as later analyzed physical feasibility providing the firm optimum solution. Thus,
it is further analyzed with two alternative available 5 and 6 in the Analysis chapter.
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Cost Analysis of Alternatives
KRIBHCO has undertaken a major revamp project of Ammonia & Urea plants for capacity
enhancement. The project is under implementation and shall be completed by Oct 2011.
KRIBHCO commissioned a consultant to carry out the configuration study, recommend the most
optimum configuration and carry out the configuration study, recommend the most optimum
configuration and carry out the PMC services for the Captive Power Plant. On completion of this
revamp project, 150MT/h surplus HP Steam shall be generated in the Ammonia plant, which will
be exported to Urea plants. Under this scenario HP steam requirement from the SGPG plant shall
reduce to 125MT/hr from present value of 260 MT/hr. The power requirement of the complex
however shall increase to 45MW from present requirement of 24MW.Thus the SGPG plant, after
revamp of fertilizer plant needs to produce 125MT/h HP steam and 45MW power in-house
consumption.
It has been understood this project is a capacity augmentation of existing Power plant. EIL has
undertaken configuration study for Captive Power Plant for Case-1 and Case-2 under which
alternate scenarios has been considered for each case. Cost estimates for all scenarios have been
worked out.
The basic assumptions made for working out the cost estimate are as under:
- Cost estimate is based on present day price level as of April-2010. No provision has been
made for any future exchange rate variation.
- It has been assumed that the project would be implemented on ‗HYBRID‘ mode of
execution
BASIS OF COST ESTIMATE
The basis of cost estimate is as under:-
- Cost estimate has been prepared based on best option among various options/
configuration available. These have been supplemented with in-house engineering inputs
for cost estimation.
- Cost estimate is based on cost information available from in-house cost database which is
a repository for storing cost data from ongoing jobs. In—house cost data has been has
been analyzed and adopted for estimation after incorporating specific project conditions.
Cost data has been updated to prevailing price level using relevant economic values.
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Plant & Machinery
Supply cost
The cost estimates have been prepared based on specification and in-house cost data for similar
type of equipment. Sourcing of equipment and material from foreign or indigenous suppliers has
been made as per in-house information on previous executed projects.
Cost estimate for Gas Turbine Generator (GTG) is based on budgetary quote from various
vendors and HRSG has been estimated based on in-house awarded cost data for similar items,
updated for required specifications and time escalations. Some of the major equipment like
Utility Boiler, STG, De-aerator, and BFW Pumps etc. already exist in the plant. No provision for
capacity augmentation for these equipments has been provided
Cost for supply of Piping & Electrical items are provided based on in-house generated MTO.
Cost for supply of Instrumentation (including DCS) has been made on factor basis. Cost
provision for spares has been made on factor basis as per in-house norms.
Lump sum cost provisions have been made for Chemicals.
Construction Costs
Costs provision towards erection of equipment, piping, electrical, and instruments, Civil &
structural works including Piling works, insulation & painting work have been made on fator
basis.
Statutory & Indirect Costs
Statutory & Indirect Costs
Ocean Freight 4.0% of FOB cost of imported equipment
Custom Duty 20.94% of CIF cost of imported equipment(5% Basic Customs Duty
+ 10.30% CVD+ 3% Education Cess + 4% Additional duty)
Port Handling 0.5% of FOB cost of imported equipment
Inland freight 2.0% of FOB cost of imported equipment and ex-works cost of
indigenously sourced equipment
Excise Duty 10.30% of ex-works cost of indigenously sourced equipment
Central Sales tax 2% of ex-works cost of indigenously sourced equipment including
excise duty
Work Contract Tax 4% on subcontracted works
Service Tax 4.12% on subcontracted works
Octroi / State Entry
Tax
Not Considered
Insurance 0.5% of total cost
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Design and Engineer Fees
Cost provision for Design & Engineering is based on factor basis.
Contingency
Provision for contingency has been made @ 3%.
EPCC Mark-UP
EPCC mark-up has been excluded from the cost estimate.
Exclusions
Following costs have been excluded from the cost estimate:-
- Exchange rate variations
- Road & buildings
- Construction Site Requirement
- Start-Up and Commissioning Expenses
- Forward Escalation
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Reflections on what has been learned during the training experience
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Reflections on what has been learned during the training experience
Finance Department
The finance department is divided into different section:-
MIS/BUDGET/FICC
Book/ Taxation Section
Cash Section
Investments/Trusts
Oman Section/ Finance Concurrence
Marketing Accounts
As a trainee we had to follow a schedule in which we had spend a considerable time in each
section learning about different areas in finance department of the company. It was full of
wonderful learning experience. The employees were knowledgeable about their field as well
patient and considerate towards the trainees. In this chapter the given section of the company will
be discussed of what they do, why they do and when they do.
I. MIS/Budget/FICC
I studied capital budget and revenue budget first in this section. While reading these files I was
asked to follow certain guidelines such as
- The file has to be read from back to front.
- The files had photocopy of each of its documents as well some of it in hindi.
The capital budget is a plan for raising large and long term sums for investments in plant &
machinery, over a period greater than the period considered under an operating budget.
Capital budget is the most crucial financial decision of firm. It relates to the section of assets
or investment proposal or course of action whose benefits are likely to be available in future
over the lifetime of the project. There is no income or loss in this budget.
There are 4 types of scheme for which capital budget is made under 3 head- Head office,
CMO AND Plant . These are as follows:-
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New Scheme
On -going Scheme
Dropped Scheme
Complete Scheme
Revenue budget is related to production cost related to the Hazira Plant situated at Surat,
Gujarat. The expenses of Head Office like remuneration, wages, salary, day to day expense
and similar expenses of market division.
a) procurement budget : Naphtha, Bags, Chemicals, Catalyst, Steel & cement
b) revenue budget: raw material, packing/bagging cost, power, water, salaries & wages,
freight, handling & transportation etc
c) advance budget : conveyance, house building, and computer advances
Management Information System (MIS) involve three primary resources: technology,
information, and people. The information gathers information through various sources and
uses the information for different purposes. MIS provides information support to decision
making in the organization. The collection of information is done through various sources
such as Central Marketing offices, Head offices, & other sites are processed and sent further
to the entire needy destinations. The MIS reports are prepared on the following basis
Monthly
quarterly
annually
MIS performs following function for F&A department
To generate reports (financial statements or inventory status reports).
To answer what-if questions asked by management.
To support decision making.
FICC- FERTILIZER INDUSTRY COORDINATION COMMITTEE
• In this I learned about different schemes by and subsidies provided by the FICC to the
company for the production urea. The urea is a main product and basic need for the
farmers; it is controlled commodity i.e. the price is regulated by the government. It is
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important to know that cost of production including the profit margin is higher than
regulated price. Thus, the government provides the subsidy to the company according to
the classification of the group company belongs to. The urea is a controlled product by
Govt. of India. Suppose,
Selling Price = Rs. 5,310
Cost of production= Rs. 8, 200 (inclusive 12% profit)
Subsidy (Rs. 2890)
Government Policy for Urea manufacturing Units:-
New Pricing Scheme (NPS)- Policy of stage III was effective from 1-10-2006 to 31-03-2010 but
this policy is still continuing and the new policy is under pipeline.
In NPS III policy there are six groups classified on the basis of input. There are thirty
Urea manufacturing units which is divided into six groups for calculate average cost.
Groups are classified on the basis of utilization level.
The Transportation cost of gas will be calculate and paid separately.
FICC department calculate quarterly cost of production which include comprise variable
cost and fixed cost. Cost of production change due to change in variable cost and fixed
cost. Both cost change on the basis of change in policy from time to time. This report has
to be calculated on quarterly basis which is called escalation claim. Escalation claim is
submitted quarterly basis for approval to government.
Government approved only those cost which they feel justified.
Difference between the approved cost and selling price is paid by government to
KRIBHCO which is known as subsidy.
The KRIBHCO suffer heavy losses on urea production because of under recoveries in
various account. But overall KRIBHCO is earning profits from other activities.
Policy related to Surplus Ammonia-
Ammonia used as raw material to produce urea. KRIBHCO is generating surplus ammonia due
to technical reasons and this surplus ammonia is used for sale purpose. In this respect
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government has notified a policy where the profit on sale of surplus ammonia is shared by the
government with the unit in the relation of 35:65 respectively.
II. Cash Section
In the cash section first I studied the file containing bank transaction of the cash available in the
company. In this I learned how the company operates on daily basis and handles general or
operating expenses. I also learned how the online banking made it easier for employees to carry
out the business transactions overseas or region from the comfortable office atmosphere. As
some of the transactions included payment and receipt of cash, the buyer‘s credit and the
overdraft, I learned how the company dealt with them with such efficiency of employee and the
comfort of online transactions.
In this department the administration expenses are also dealt with, I read around three work order
contracts. One of them about the staffing of security guards containing work compensation plan,
provident fund and pension plan available from them, other contract was M/s Otis about the lifts
to be installed in the head office. In the latter contact the labors working for the installation were
required to be compensated as well other plans such as pension funds to be taken care by the
company responsible for the installation, this clause is in most of the work order contracts with
an exception of security guards contract. I also studied the agreement for the installation of SAP
which be there for employees use by next year.
The department also handles the payroll of employees. This is carried out with the assistance of
existing information system which contains the entire general and job information of employees.
The company has divided the employees in different grades with different compensation plan
enjoying different kinds of benefits such as medi-claim, loans and advances. The salary is
calculated on basic salary+ Dearness Allowances where kind of tax is levied.
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III. Book/ Taxation Section
In this section of the finance department the annual report is prepared and taxes are taken care
off. Here, I learned that how taxes is a cost to company and how the company deals with this
cost.
The taxes incurred both in head office and plant site are calculated here.
Taxes
Direct Tax Indirect Tax
(Income Tax) (VAT, Sales Tax, Excise
Duty Tax etc.)
KRIBHCO pays 30% corporate tax in addition with 3% education cess which in total works out
to be 30.9% with no surcharge included as the KRIBHCO is a cooperative society. The company
no longer pays Fringe Benefit Tax which came up in year 2003 & was abolished by the year
2010.
The difference between KRIBHCO‘s calculated tax liability and the amount calculated by
Income Tax Department as tax liability is adjusted as ‗Deferred Tax Liability‘.
In KRIBHCO, there is software called ―Asset Expert Management System‖ developed by
Senesys technologies with help of which we calculate depreciation of all the fixed assets of
KRIBHCO. The company uses straight line method of depreciation for all assets below Rs. 5000
the 100% depreciation is calculated, keeping the value of asset as Re.1 in first year only. While
for assets above Rs.5000, regulation related to depreciation as per companies act is levied on.
In the section, the insurance of all fixed asset of the value above Rs. 5000 is done. Insurance o f
every employee and cash in hand in F&A of Rs.1, 50,000 is also being done. The insurance of
lift is also done and there are other kinds of contract being handled by HR department.
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IV. Investments/Trusts
In KRIBHCO the investment can be done by on the basis of CRISIL rating agency. KRIBHCO
did the investment with three types of bank
Cooperative Banks,
Private Banks
Public Banks.
In case company has surplus of money the company always give preference to the cooperative
banks because interest is exempted from the tax in cooperatives banks. KRIBHCO also make a
QCS (Quotation Comparative statement) on daily basis.
KRIBHCO takes 43 banks for comparative statement.
Main role to play by the investment section is to maintain the records of short term investment.
In case any investment is mature as on date they think that which bank is good for reinvestment
to increase interest income.
In any case company suffers from any deficit they apply for loan.
Selection criteria of bank- 1. Physical location (nearby) 2. Facilities
KRIBHCO use RTGS (real time gross statement) to transfer big fund, to save the time.
There are three types of trust under KRIBHCO as follows:-
KRIBHCO Employee provident fund Trust.
KRIBHCO Employee Benevolent Fund Trust.
KRIBHCO Employee Gratuity Fund Trust.
Benevolent fund trust is two types-
Death Insurance.
After Retirement Medical Insurance.
Constitution of Fund-
The trust can be created without executing any registered trust deed and shall be irrevocable with
the constant of all the beneficiaries and no money belongs to the fund is hand off to the Board of
trustees shall recoverable by the KRIBHCO.
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Control of the Fund-
The Board of trustees shall have control of the fund and shall delegated power of trustees or
official of KRIBHCO for performance of various functions on its behalf under the rule. The
Board shall be also decided all disputes which may arise under the rule. The obligation of
KRIBHCO and the decision of the majority for the trustees shall be binding on all the parties
concerned.
Membership of Fund-
Every employee in KRIBHCO and other excluded employee shall be entitled and required to
become a member of the fund from the date joining.
Every Employee and becoming a member of KRIBHCO shall remain and continued to be a
member. He shall be drawing his Provident Fund.
Contribution of Provident Fund-
Every member is entitled and required to contribute 12% of his Basic Pay &DA .Such
Contribution of each member will be deducted by KRIBHCO for the member pay and will be
paid to the fund within 15 days of making such deduction. The collected fund of the Provident
Fund, KRIBHCO has to invest this fund to earn interest income. The interest income is exempted
from the tax.
Employees‟ Pension Scheme 1995
Eligibility- All the subscribers of Provident Fund contributing to ―the employee family pension‖
and all new entrants to the EPF scheme 1985 from 16/11/1995 onwards automatically become
eligible to join the pension scheme.
Contribution by the members-
Every member shall subscribe to one fund every month, a sum equal to 12% of his basic
pay.
KRIBHCO shall be entitled to deduct from the emolument of the member.
No subscription shall be recovered from employee when he will absent from the duty.
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Employer contribution to the fund-
The contribution shall be calculate don the basis of basic pay and dearness allowance and
retaining allowance it actually drawn on the whole month basis whether paid on weekly,
fortnightly or monthly basis.
Objective of the Scheme-
The main objective is to provide social welfare medical assistance to the employees.
The employees who minimum five year continuous service in KRIBHCO are eligible for this
scheme.
Contribution-
KRIBHCO employees shall be required to pay contribution of Rs.50/- per month up to the
date of retirement.
KRIBHCO will contribute Rs.50/- per month to the employees for the Medical claim
scheme.
Gratuity-
Calculations of Gratuity are as follows-Wages* No. of years of services*15 days/26
V. Oman Section
Omifco Fertilizers Complex, Sur Industrial Estate, Oman
Project Completion 2005
Production Capacity Urea-1.65mt/yr, Ammoina-250000t/yr
Project Cost $968m
Lump Sum Turnkey Snamprogetti/Technip-Coflexip
Contract Equipment Supply Larson & Toubro
Process Automation Yokogawa Blue Star
Oman Indian Fertilizers Company (Omifco), an India-Oman Joint venture company, invested
$968m to build 1.65mt/yr of urea and 35,0000t/yr of surplus ammonia capacity. The facilities are
located at The Sur Industrial Estates, 150 Km South of Muscat, Oman. The foundation stone-
laying ceremony took place on 1 October 2003.The entire complex was commissioned and
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production started in may 2005. The fertiliser‘s complex was officially inaugurated in January
2006.
OMIFCO financing-
Shareholders in Omifco are Oman Oil Company-50%, Krishak Bharati Cooperative Limited
(KRIBHCO)-25%, and Indian Farmers Fertilisers Cooperative (IFFCO)-25%. The plant is
operated and maintained by Omifco.
The funding requirements were met with $320m of equity and $648m of debt. The project
financing was also supplemented by Italian and French credit export agencies. The lenders
included BNP Paribas, ANZ Investment Bank and Arab Banking Corporation.
Technology-
The ammonia output is based on Haldor Topsoe technology. The unit also includes a CO2
removal technology licensed by Giammarco Vetrocoke. The urea units use Snamprogetti
technology.
Critical equipment-
Fabrication and supply of all critical equipment such as ammonia converters, reformed gas waste
heat boiler systems, secondary reformers, ammonia separators and CO2 absorbers and
regenerators.
Off take agreements-
A urea off-take agreement was established between the Government of India and Omifco. At the
same time an ammonia off-take agreement was set up between Omifco , Indian Farmers
Fertilizers Cooperative (IFFCO)and KRIBHCO. The project location is at Muscat. India's
Government believes that the urea off take agreement will provide the country with a reliable
and long term source of urea. The KRIBHCO and IFFCO maintain a 50-50% share of production
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with GOI in Oman Project. The sales fee of US $3.5 per MT is still maintained by GOI even if
the share of production is not available.
Supply of feedstock-
A gas supply agreement was established between the Government of the Sultanate of Oman and
Omifco. Under the terms of the agreement the Government of Oman will supply gas to the
project for 15 years at a fixed price for the first ten years and then at a pre-agreed escalation for
the remaining years. The gas is sourced from the Oman LNG plant located in Sur, Oman.
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ANALYSIS
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ANALYSIS
Capital Budgeting Decisions
Alternative‟s Cost of
Project(in
Rs. Million
Lakhs )
Sale Of
Surplus
Auxiliary
consumption
Alternative-5 3950 35Mw 0%
Alternative-6 4300 35Mw 0%
Case Alternative‟s Cost of
Project(in
Rs.
Million
Lakhs )
NPV* Equity
IRR*
PBP* IRR* Sale of
SURPLUS
Case 3 Alternative-5 3950 7125.13 81% 3.4 43.87%
35Mw
Alternative-6 4300 7070.57 75% 3.8 39.95%
Case Alternative‟s Sale of
Surplus
Power Minimum
DSCR
Maximum
DSCR
Average
DSCR
Case 3 Alternative-5 35Mw
2.63 3.97 3.15
Alternative-6 2.46 3.66 2.92
*(Check Annexure-1 for the calculation)
Net Present Value
The difference between the present value of cash inflows and the present value of cash outflows.
NPV is used in capital budgeting to analyze the profitability of an investment or project.
NPV analysis is sensitive to the reliability of future cash inflows that an investment or project
will yield.
Formula:
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In this project Ms Excel is used as a tool for calculating NPV for all six alternatives at 12%
interest. Following are the cases and calculated NPV.
Case Alternative‟s Cost of
Project
NPV
Case 3 Alternative-5 3950 7125.13
Alternative-6 4300 7070.57
If the NPV of a prospective project is positive, it should be accepted. However, if NPV is
negative, the project should probably be rejected because cash flows will also be negative.
Net Present Value of case is most favorable at Rs.7125.13 (alternatrive-5). Thus, the company
should go for Case-3. It is calculated for 25 years
Internal Rate of Return
The discount rate often used in capital budgeting that makes the net present value of all cash
flows from a particular project equal to zero. Generally speaking, the higher a project's internal
rate of return, the more desirable it is to undertake the project.
As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all
other factors are equal among the various projects, the project with the highest IRR would
probably be considered the best and undertaken first.
Case Alternative‟s IRR
Case 3 Alternative-5 43.87%
Alternative-6 39.95%
I have used Ms- Excel to calculate Internal Rate of Interest (IRR) at 10%. Assuming all other
factors are equal among the various cases, the case with the highest IRR would probably be
considered the best and undertaken first. In this case at alternative-5 with 43.87% this is quite
higher than other alternatives. It is calculated for 25 years.
Equity IRR
Equity IRR assumes the use debt for the project, so the inflows are the cash flows required minus
any debt that was raised for the project. The outflows are cash flows from the project minus any
51 | P a g e
interest and debt repayments. Hence, equity IRR is essentially the "leveraged" version of project
IRR.
Case Alternative‟s Equity IRR
Case 3 Alternative-5 81%
Alternative-6 75%
I have calculated Equity IRR with help of Ms-Excel at 10%. Equity IRR is the cash flow return
to equity shareholders after debt repayments. In the given cases, the case at alternative-5 with
81% equity IRR. It is calculated for over 25 years.
Payback Period
The length of time required to recover the cost of an investment.
Calculated as:
Case Alternative‟s PBP (in
years)
Case3 Alternative-5 3.4
Alternative-6 3.8
The short length of time is preferable. In this I calculated payback period within. As we can see
the case (alternate-5) at 3.4 years is the shortest time in which initial investment can be
recovered.
Debt-Service Coverage Ratio
In corporate finance, it is the amount of cash flow available to meet annual interest and principal
payments on debt, including sinking fund payments.
In general, it is calculated by:
52 | P a g e
Case Alternative‟s Sale of
Surplus Minimum
DSCR
Maximum
DSCR
Average
DSCR
Case Alternative-5 35Mw
2.63 3.97 3.15
Alternative-6 2.46 3.66 2.92
A DSCR of less than 1 would mean a negative cash flow. A DSCR of less than 1, say .95, would
mean that there is only enough net operating income to cover 95% of annual debt
payments. According to the calculated DSCR with help of Ms- Excel Case-3 alternative 5
provides the highest DSCR at minimum DSCR at 2.63 and maximum DSCR at 3.97. It is
calculated for around 25 years.
Sensitivity Analysis
A technique used to determine how different values of an independent variable will impact a
particular dependent variable under a given set of assumptions. This technique is used
within specific boundaries that will depend on one or more input variables, such as the effect that
changes in interest rates will have on a bond's price.
Sensitivity analysis is a way to predict the outcome of a decision if a situation turns out to be
different compared to the key prediction(s).
Case Alternative‟s Cost of
Project(in
Rs.
Million
Lakhs )
NPV Equity
IRR
PBP IRR
Case 3 Alternative-5 3950 7125.13 81% 3.4 43.87%
Alternative-6 4300 7070.57 75% 3.8 39.95%
Sensitivity analysis- 10% increase in cost of project
Alternatives NPV IRR PBP
Alternate-5 7,063.56 39.49% 3.8 yrs
Alternate-6 7,003.54 35.86% 4.2 yrs
Sensitivity analysis- 10% decrease in cost of project
Alternatives NPV IRR PBP
Alternate-5 7,186.70 49.16% 3.1 yrs
Alternate-6 7,137.60 44.86% 3.4 yrs
53 | P a g e
“The analysis is done for Case-I for which EIL is responsible to prepare feasibility report as
well provide with necessary solution.”
The Captive Power Plant has been installed for KRIBHCO Fertilizer complex. In other words,
the consistent fertilizer production needs uninterrupted, reliable Electrical Power & High
Pressure Steam for running the different equipments/ Exchangers/ vessels of the Fertilizer
complex. So, it basically a co-generation Thermal Captive Power Plant.
KRIBHCO commissioned Engineers India Limited, New Delhi vide their LOI dated 25th
Feb
2010 to carry out the configuration study, recommend the most optimum configuration and to
prepare a Techno- Economic for Feasibility Report for augmenting the existing Captive Power
plant.
According to financial statements prepared and investment appraisal done by the company itself.
The company is taking three cases with different capacity of plant divided into standalone
absolute basis, net increment of power basis, and net export of power basis. In these cases, two
alternatives are provided to each with different cost of project.
Through the assistance of capital budgeting decisions and its tools the company prepares its
investment decision as we look through different cases. All the three cases were analyzed, with
later selecting Case-3 for analysis to get the optimum solution.
Case Alternative‟s Cost of
Project(in
Rs.
Million
Lakhs )
Capacity
of Plant
Case-Net
export basis
Alternative-5 3950 35Mw
Alternative-6 4300
If you look up at the write-up provided by company in annexure-2 as well as at the capital
budgeting decisions you‘ll understand the company chose the Case- Net export basis at Case-I
of the project which is to be completed by Oct-2011. In the net export basis comprises of concept
where we look at it from only power point of view. Total power generated is 72 MW out of
which 37 is our own internal requirement. Thus 35 MW is being sold with nil variable cost. The
projected IRR, NPV and payback period is quite impressive. The annexure- 3 contains all the
financial statements related to alternative 5 which seems optimum solution.
Case Alternative‟s Cost of
Project(in
Rs.
Million
Lakhs )
NPV Equity
IRR
PBP IRR Sale of
surplus
power
Case 3 Alternative-5 3950 7125.13 81% 3.4 43.87% 35Mw
Alternative-6 4300 7070.57 75% 3.8 39.95%
54 | P a g e
As well due the technical configuration where in Case-1(standalone absolute basis) utilizes it
1% for internal consumption and rest being exported/ transferred to KRIBHCO, whereas in
Case-2 (Net Increment basis) in which 50% of differential will be transferred to KRIBHCO
and balance 50% being sold outside with nil variable cost and in Case-3 from total power
generated 72MW, the 35MW is sold with nil variable cost after meeting internal requirement
of 37 MW. This is also one of the factors contributing in such vast difference in the NPV,
IRR as well other tools.
55 | P a g e
Conclusion & Recommendation’s
56 | P a g e
Conclusion
KRIBHCO is a National level Cooperative- Society which is engaged in manufacturing and
marketing of urea since 1986. The company operates a mega fertilizer complex at Hazira in
Gujarat, India. It includes two of two streams of Ammonia plants of 1520MT/day capacity each
and four Urea streams of 1310 MT/day each. The company decided on major revamp of the
Ammonia and urea plant to enhance the production. Due to enhancement of the production it was
found out extra power would be needed. Hence, the company decided the revamp of captive
power plant. Captive power plants are those power plants which use power generated for its own
consumption or that of the owner of plant to maintain a continuous supply.
The company has divided the whole Captive Power Plant (CPP) Revamp project in two phases.
This report was study of the first phase which is yet not completed. The Phase –I includes
Engineers India Ltd which had to carry out the configuration study, recommend the most
optimum configuration and carry out Techno- Economic Study for augmentation the Captive
Power Plant, power evacuation & Grid connectivity and to work out options for sale of power for
maximum returns keeping in view of various policies of third party power sale from Captive
power plants. EIL has carried out financial feasibility study with techno feasibility through
investment appraisal and capital budgeting decisions. According to investment appraisal, the
case-3 (NET EXPORT Basis) alternat-5 is the most feasible solution with surplus power of 35
MW for sale and 37 MW for internal Consumption.
Also the electricity board has liberalized captive power generation for the user industry for
bridging the demand-supply gap. With the „opening access‟ policy it has also made third party
power sale quite lucrative. The CERC amended Section-9 letting the Captive power plants using
25% of its power to sell electricity through open access system (without requiring license). This
benefits the company in long way as according to analysis the chosen case-3 and alternate-5
follows the net export basis approach which allows company to sell surplus power.
57 | P a g e
Recommendation
Through the years company‘s reserves have increased in comparison of decrease in
equity. This increase can be due to the investment in the revamp of urea & ammonia
plant to enhance production. The company is also investing in bank deposits at which its
earning certain rate of return.
- The company can also give a thought to Solar PV Power plants as through the years
the efficiency in cost reduction and power generation has increased also such project
shows the company in great light over social responsibility.
The company with changing global environment is stepping up the global ladder. In
Oman, the company is in joint venture (OMIFCO) for urea production. The company also
attended the BRICS which recognizes cooperative societies among the member countries
Brazil, Russian Federation, India, China and South Africa which benefits company in
sharing knowledge, technology and information. The company can use this opportunity
to invest in different economies and utilize resources of said economies.
The company can use Modified Internal Rate of Return. The modified internal rate of
return takes into account the rate of investment of the cash flows that are not negative. It
makes precise assumptions about these when functioning in the context of corporate
finance.
The profitability index is a technique of capital budgeting. This holds the relationship
between the investment and a proposed project's payoff. The profitability index is also
sometimes called as value investment ratio or profit investment ratio. Profitability index
is used to rank various projects. With other capital budgeting techniques it can help in
guiding the decision making process.
58 | P a g e
Bibliography
Financial Management I.M. Pandey
http://www.faidelhi.org/
30th
Annual report KRIBHCO
Annual Report (2009-2010) Ministry of Chemical and Fertilizers
Feasibility Report for Revamping Of Captive Power & Steam Generation Plant (SGPG)
At Hazira – Engineers India Ltd.
59 | P a g e
Annexure
60 | P a g e
Annexure-1
Alternate-5 ANNEXURE-1-I
Description Cash flow for IRR and NPV
0 -
1 -
2 -1,185.00
Year-1 902.6
Year-2 947.6
Year-3 996.7
Year-4 1,049.30
Year-5 1,104.90
Year-6 1,163.20
Year-7 1,223.80
Year-8 1,286.50
Year-9 1,350.90
Year-10 1,417.00
Year-11 1,761.00
Year-12 2,088.10
Year-13 2,277.80
Year-14 2,307.10
Year-15 2,323.90
Year-16 2,348.60
Year-17 2,381.00
Year-18 2,413.30
Year-19 2,445.50
Year-20 2,477.60
Year-21 2,509.60
Year-22 2,541.40
Year-23 2,573.10
Year-24 2,604.70
Year-25 2,636.20
Year-26 395
Equity IRR Equity NPV
48% 4,190.45
MiINR
61 | P a g e
Alternate-6 ANNEXURE-1-II
Description Cashflow for IRR and NPV
0 -
1 -
2 -1,290.00
Year-1 879.7
Year-2 925.7
Year-3 976.2
Year-4 1,030.40
Year-5 1,088.00
Year-6 1,148.50
Year-7 1,211.50
Year-8 1,276.70
Year-9 1,344.00
Year-10 1,413.00
Year-11 1,784.50
Year-12 2,137.60
Year-13 2,341.30
Year-14 2,370.30
Year-15 2,385.30
Year-16 2,409.70
Year-17 2,442.10
Year-18 2,474.40
Year-19 2,506.60
Year-20 2,538.70
Year-21 2,570.70
Year-22 2,602.50
Year-23 2,634.20
Year-24 2,665.80
Year-25 2,697.30
Year-26 430
Equity
IRR
Equity NPV
74% 7,070.57 MiINR
62 | P a g e
Annexure-2
Financial Analysis on “Incremental Basis” (over Present operating conditions)
Case-1
On Standalone absolute basis (101 MW)
(72MW + 116/4 MW)
Total in terms of Power =101 MW
This 101 MW is generated through new setup of GT and HRSG
Case-2
Net increment of power Basis (26.5 MW)
Present case i) Power = 24 Mw
ii) Steam = 260 MT/h
Proposed i) Power =72 Mw
ii) Steam = 174MT/h
Differentials Power = 72-24 = 48 Mw
Steam = 174-260 = 86 MT/h (equivalent to 21.5 MW Power)
Net in terms of Power (48-21.5): 26.5 MW
Out of this 50% will be transferred to KRIBHCO @ Rs. 5.80/Unit and balance 50%
exported to grid @ Rs.4.50/unit
Case-3
Net Export of Power Basis (35MW)
Total Generated: 72MW
Internal Consumption: 37MW
Net Power Available: 35 MW
Power export after meeting internal requirement
Going in for Captive Power Plant (CPP) project makes complete sense from whatever point of
view, whether we look at it from:-
a) Standalone absolute basis i.e. total 101MW power is produced, with 1% internal
consumption and rest being exported/transferred to KRIBHCO. The project IRR of __%
and payback period of __years with capital cost of Rs____ Crore. The project IRR of
___% and payback period of ___years with capital cost of Rs____ Crore.
63 | P a g e
b) Net increment of power basis i.e. the increment over what we were presently producing
(24 MW power and 260 MT/h steam) and what we are proposed to produce (72 MW
power and 174 MT/h) which comes out to be 26.5 MW, out of which 50 % is sold to
KRIBHCO and rest being sold outside and with nil variable cost. The project IRR of __%
and Payback period __years with capital cost of Rs___ Crore. The Project IRR of __%
and payback period of __years with capital cost of Rs____ Crore.
c) Net export of power basis i.e. we look at it from only power point of view. Total power
generated is 72 MW out of which 37 is our own internal requirement. Thus 35 MW is
being sold with nil variable cost. The Project IRR OF __% and payback period of __years
with capital cost of Rs___ Crore.
64 | P a g e
Annexure-3 (Case 5)
ANNEXURE-3-I
Profitability Analysis ALTERNATIVE-I (incremental)
Description Unit Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10
2012-13 2012-14 2012-15 2012-16 2012-17 2012-18 2012-19 2012-20 2012-21 2012-22
Plant Capacity MW 35 35 35 35 35 35 35 35 35 35
No. Of Hours in Year Hours 8760 8760 8760 8760 8760 8760 8760 8760 8760 8760
Plant Load Factor % 91% 91% 91% 91% 91% 91% 91% 91% 91% 91%
Total Generation Mi Units 279.006 279.006 279.006 279.006 279.006 279.006 279.006 279.006 279.006 279.006
Auxiliary Consumption (of Generation) % 0 0 0 0 0 0 0 0 0 0
Auxiliary Consumption Mi.Units 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Net Delivered Energy Mi. Units 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01
Cost Of Electricity
INR/kWh
r 2.39 2.29 2.20 2.11 2.02 1.92 1.83 1.74 1.65 1.56
Sale Price (export) INR 6.60 6.60 6.60 6.60 6.60 6.60 6.60 6.60 6.60 6.60
Revenue From Generation
Net Revenue From Sale of Electricity Mi. INR
1,841.44
1,841.44
1,841.44
1,841.44
1,841.44
1,841.44
1,841.44
1,841.44
1,841.44
1,841.44
Cost Of Generation
Operating Expenses
Fuel Cost (Gas) Mi. INR
-
-
-
-
-
-
-
-
-
-
Operation & Maintenance Expenses Mi. INR
57.89
59.63
61.42
63.26
65.16
67.11
69.12
71.20
73.33
75.53
Gross Profit (PBDIT) Mi. INR
1,783.55
1,781.81
1,780.02
1,778.18
1,776.28
1,774.33
1,772.32
1,770.24
1,768.11
1,765.91
Depreciation Mi. INR
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
Profit Before Interest & Tax(PBIT) Mi. INR
1,475.45
1,473.71
1,471.92
1,470.08
1,468.18
1,466.23
1,464.22
1,462.14
1,460.01
1,457.81
Interest
Interest On Indian Debt Mi. INR
65 | P a g e
Profitability Analysis ALTERNATIVE-I (incremental)
Description Unit Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10
276.50 248.85 221.20 193.55 165.90 138.25 110.60 82.95 55.30 27.65
Interest On working Capital Mi. INR
23.38
23.39
23.40
23.41
23.43
23.44
23.45
23.46
23.48
23.49
PBT Mi. INR
1,175.57
1,201.47
1,227.32
1,253.12
1,278.86
1,304.54
1,330.17
1,355.73
1,381.23
1,406.67
Tax Mi. INR
304.61
343.20
377.32
407.63
434.71
459.03
481.01
500.98
519.25
536.07
Profit After Tax Mi.INR
870.96
858.28
850.01
845.49
844.15
845.51
849.16
854.75
861.98
870.60
Cummulative Profit After Tax MiINR
870.96
1,729.24
2,579.24
3,424.73
4,268.88
5,114.39
5,963.54
6,818.29
7,680.27
8,550.87
Cash Profit Mi. INR
1,179.06
1,166.38
1,158.11
1,153.59
1,152.25
1,153.61
1,157.26
1,162.85
1,170.08
1,178.70
Commulative Cash Profit 3950
1,179.06
2,345.44
3,503.54
4,657.13
5,809.38
6,962.99
8,120.24
9,283.09
10,453.1
7
PROJECT IRR (10 YEARS) 43.9%
PAYBACK PERIOD 3.5
Tax Calculation
PBT MiINR
1,175.57
1,201.47
1,227.32
1,253.12
1,278.86
1,304.54
1,330.17
1,355.73
1,381.23
1,406.67
Previous Loss MiINR
-
-
-
-
-
-
-
-
-
-
Net Taxable Income MiINR
1,175.57
1,201.47
1,227.32
1,253.12
1,278.86
1,304.54
1,330.17
1,355.73
1,381.23
1,406.67
MAT MiINR
239.75
245.03
250.30
255.56
260.81
266.05
271.27
276.49
281.69
286.88
Corporate Tax Computation
Book Depreciation MiINR
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
Cumulative Depreciation MiINR
308.10
616.20
924.30
1,232.40
1,540.50
1,848.60
2,156.70
2,464.80
2,772.90
3,081.00
Profit Before Tax MiINR
1,175.57
1,201.47
1,227.32
1,253.12
1,278.86
1,304.54
1,330.17
1,355.73
1,381.23
1,406.67
66 | P a g e
Profitability Analysis ALTERNATIVE-I (incremental)
Description Unit Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10
Depreciatin as per Companies Act MiINR
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
Profit Before Tax & Depreciation MiINR
1,483.67
1,509.57
1,535.42
1,561.22
1,586.96
1,612.64
1,638.27
1,663.83
1,689.33
1,714.77
Depreciation as per IT Act MiINR
587.50
499.88
425.34
361.95
308.02
262.14
223.12
189.92
161.67
137.63
Profit/Loss as per IT MiINR
896.17
1,009.70
1,110.08
1,199.27
1,278.94
1,350.50
1,415.15
1,473.91
1,527.66
1,577.13
Cumulative Profit/ Loss
MiINR
896.17
1,905.87
3,015.95
4,215.22
5,494.16
6,844.65
8,259.80
9,733.71
11,261.3
8
12,838.5
1
TAX Applicability as per Tax Holidays MiINR 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Applicable tax MiINR
304.61
343.20
377.32
407.63
434.71
459.03
481.01
500.98
519.25
536.07
Applicable Tax Liability MiINR
304.61
343.20
377.32
407.63
434.71
459.03
481.01
500.98
519.25
536.07
67 | P a g e
Balance Sheet ANNEXURE-3-II
Description
End of
Construction
Period Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10
Liabilities
Promoters Equity 1,185.00
1,185.00
1,185.00
1,185.00
1,185.00
1,185.00
1,185.00
1,185.00
1,185.00
1,185.00
1,185.00
Reserve & Surplus
26.13
51.88
77.38
102.74
128.07
153.43
178.91
204.55
230.41
256.53
Term Loan
-Indian 2,765.00
2,488.50
2,212.00
1,935.50
1,659.00
1,382.50
1,106.00
829.50
553.00
276.50
-
-Foreign -
-
-
-
-
-
-
-
-
-
-
Bank Borrwing for Working
Capital -
233.80
233.91
234.02
234.13
234.25
234.37
234.50
234.63
234.76
234.90
Dividend
722.11
711.59
704.74
700.99
699.88
701.01
704.03
708.67
714.66
721.81
Dividend Tax
122.72
120.94
119.77
119.13
118.94
119.14
119.65
120.44
121.46
122.67
Total Liabilities 3,950.00
4,778.26
4,515.31
4,256.40
4,001.00
3,748.64
3,498.95
3,251.59
3,006.28
2,762.79
2,520.91
Assets
Gross Block 3,950.00
3,950.00
3,641.90
3,333.80
3,025.70
2,717.60
2,409.50
2,101.40
1,793.30
1,485.20
1,177.10
Less: Depreciation -
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
Net Block 3,950.00
3,641.90
3,333.80
3,025.70
2,717.60
2,409.50
2,101.40
1,793.30
1,485.20
1,177.10
869.00
Curent Assets -
233.80
233.91
234.02
234.13
234.25
234.37
234.50
234.63
234.76
234.90
Cash & Bank Balance -
902.56
947.60
996.68
1,049.26
1,104.89
1,163.17
1,223.79
1,286.45
1,350.93
1,417.01
Preliminary Expenses -
-
-
-
-
-
-
-
-
-
-
Total Assets 3,950.00
4,778.26
4,515.31
4,256.40
4,001.00
3,748.64
3,498.95
3,251.59
3,006.28
2,762.79
2,520.91
68 | P a g e
Working Capital Calculation
ANNEXURE-3-III
Description Unit Value Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9
Year-
10
Receivable
Mi.
INR
2
months
306.91
306.91
306.91
306.91
306.91
306.91
306.91
306.91
306.91
306.91
Gas Stock
Mi.
INR
1
month
-
-
-
-
-
-
-
-
-
-
O & M Expenses
Mi.
INR
1
month
4.82
4.97
5.12
5.27
5.43
5.59
5.76
5.93
6.11
6.29
Total Working Capital
Mi.
INR
311.7
311.9
312.0
312.2
312.3
312.5
312.7
312.8
313.0
313.2
Margin Money Required MiINR
77.93
77.97
78.01
78.04
78.08
78.12
78.17
78.21
78.25
78.30
Increase/(Decrease) in Margin Money MiINR
77.93
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.05
Working Capital Loan
Mi.
INR
233.80
233.91
234.02
234.13
234.25
234.37
234.50
234.63
234.76
234.90
Increase/(Decrease) in working capital loan
Mi.
INR
233.80
0.11
0.11
0.12
0.12
0.12
0.13
0.13
0.13
0.14
Interest On working capital
Mi.
INR
23.38
23.39
23.40
23.41
23.43
23.44
23.45
23.46
23.48
23.49
69 | P a g e
Plant Data
ANNEXURE-3-IV
Description Unit Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9
Year-
10
2012-13 2012-14 2012-15 2012-16
2012-
17
2012-
18 2012-19
2012-
20
2012-
21
2012-
22
Hours in Year Hours 8760 8760 8760 8760 8760 8760 8760 8760 8760 8760
Cost of INR per US$ INR 45.00 45.00 45.00 45.00 45.00 45.00 45.00 45.00 45.00 45.00
Plant Capacity MW 35 35 35 35 35 35 35 35 35 35
Auxiliary Consumptions % 0 0 0 0 0 0 0 0 0 0
PLF % 91% 91% 91% 91% 91% 91% 91% 91% 91% 91%
Station Heat Rate Kcal/Kwhr 0 0 0 0 0 0 0 0 0 0
Specific Consumption NM3/Kwhr 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Electricity Generated
Mi
Unit/Annum 279.006 279.006 279.006 279.006 279.006 279.006 279.006 279.006 279.006 279.006
Auxiliary Consumptions
Mi
Unit/Annum 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Net Delivered Energy
Mi
Unit/Annum 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01
Tariff INR/unit 2.39 2.29 2.20 2.11 2.02 1.92 1.83 1.74 1.65 1.56
Fuel Cost INR/mKCal 2765.59 2765.59 2765.59 2765.59 2765.59 2765.59 2765.59 2765.59 2765.59 2765.59
Fuel Consumption - Natural
Gas Mi. NM3 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
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ANNEXURE-3-V
Tariff Calculation
Description Unit Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10
Plant Capacity MW 35 35 35 35 35 35 35 35 35 35
Auxiliary Consumptions % 0 0 0 0 0 0 0 0 0 0
PLF % 91.32 91.32 91.32 91.32 91.32 91.32 91.32 91.32 91.32 91.32
Total Electricity Generated
Mi
Unit/Annum 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01
Auxiliary Consumptions
Mi
Unit/Annum 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Net Delivered Energy
Mi
Unit/Annum 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01 279.01
Fixed Cost
O&M Expenses Mi INR
57.89
59.63
61.42
63.26
65.16
67.11
69.12
71.20
73.33
75.53
Interest on Indian Debt Mi.INR
276.50
248.85
221.20
193.55
165.90
138.25
110.60
82.95
55.30
27.65
Depreciation Mi INR
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
308.10
Interest on Working Capital Mi INR
23.38
23.39
23.40
23.41
23.43
23.44
23.45
23.46
23.48
23.49
Return on Equity Mi INR
-
-
-
-
-
-
-
-
-
-
Taxes MiINR
-
-
-
-
-
-
-
-
-
-
Total Fixed Cost Mi INR
665.87
639.97
614.12
588.32
562.58
536.90
511.27
485.71
460.21
434.77
Fixed Charges Rs./kWhr
2.39
2.29
2.20
2.11
2.02
1.92
1.83
1.74
1.65
1.56
Variable Cost
Fuel Cost - Natural Gas Mi. INR
-
-
-
-
-
-
-
-
-
-
Total Fuel(Variable) Cost Mi INR
71 | P a g e
Tariff Calculation
Description Unit Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10
- - - - - - - - - -
Variable Charges Rs. / Kwhr
-
-
-
-
-
-
-
-
-
-
Total Cost MiINR
665.9
640.0
614.1
588.3
562.6
536.9
511.3
485.7
460.2
434.8
Total Tariff Rs. / kWhr
2.39
2.29
2.20
2.11
2.02
1.92
1.83
1.74
1.65
1.56
Levelised Total Tariff for 25
Years Rs/ kWh
1.66
Levelised Total Tariff for 12
Years Rs/ kWh
1.98
Levelised Fuel Cost for 25 years Rs/ kWh
-
Leveised Fuel Cost for 12 Years Rs/ kWh
-
Levelised Fixed Cost for 25 years Rs/ kWh
1.66
Levelised Fixed Cost for 12 years Rs/ kWh
1.98
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CASE STUDY
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Case-study- Solar Photovoltaic Power plant
The captive power plant is a power plant set up by any person to generate electricity
primarily for his own use and includes a power plant set up by any co-operative society or
association of persons for generating electricity primarily for use of members of such
cooperative society or association (Electricity Act, 2003).
Industrial sector is one of the largest consumers of electrical energy in India. However, a
number of industries are now increasingly relying on their own generation (captive and
cogeneration) rather than on grid supply, primarily for the following reasons:
Non-availability of adequate grid supply
Poor quality and reliability of grid supply
High tariff as a result of heavy cross-subsidization
Frequent unavailability of power from the grid is a critical problem faced by Indian industries,
and with the Indian industry growing at a hectic pace, this deficit is even more harmful.
According to a recent study carried out by the Manufacturers' Association for Information
Technology (MAIT) and US-based power distribution solutions provider Emerson Network
Power, India Inc lost Rs 43,205 crores (about $10 billion) in 2008-09 due to power outages. The
revenue loss due to power failure grew at an average of 11.9% in the past five years.
Many large companies have resorted to having their own captive power plants. At present, there
are about 2,759 industrial units using captive generation power plants (both renewable and non-
renewable) with a capacity of 1 MW and above. Many smaller businesses and commercial
institutions rely to a large extent on diesel for backup power. To the latter and to some extent to
the former, solar PV based power production could be an attractive option. This report will help
you set up a captive solar PV power plant for your business or company
SWOT Analysis for the Indian Solar PV Industry
Strengths
A high growth industry with significant future potential.
Sunlight is available in sufficient quantities in many regions.
Technology proven, with low operation and maintenance costs, and scalable.
Availability of soft loans and government incentives for growth and expansion
74 | P a g e
Weakness
Solar PV systems have high capital costs.
Owing to high capital costs, the business needs external incentives to be economically
feasible, thus increasing dependence on governmental policies.
The capital intensive nature of the business might favor larger businesses over smaller
ones.
The distributed and intermittent nature of solar energy makes it difficult for utilities to
rely on solar PV for their base load.
Threats
Technology innovation is high, so there are risks of obsolescence.
Off-peak seasons reduce cash flow.
Industry is new, so finding skilled workforce could be a problem.
Opportunities
Opportunities exist all along the solar PV business value chain, not just for power plants.
Entirely new opportunities could open up as the there is high innovation in technology
and the technology could prove to be a disruptive business, especially with reductions in
costs in future.
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Status of Solar PV Technology in India
About 40 companies are actively engaged in manufacturing solar cells and panels, and many
more companies produce end products such as solar lanterns, street lamps etc. The production in
the country during 2009-10 is estimated to be about 230 MWp of solar cells and 325 MWp of PV
modules.3 Nearly 90% of the solar modules manufactured in India use crystalline silicon C-Si
technology, while only 10% of the solar modules are manufactured using thin film technology.
Trends in Production of Solar PV Cells and Modules (MWp) in India
As of end 2009, the cumulative production of solar PV cells in India has been about 800 MW. Of this total, only a small portion has been used in applications within India, while the rest have been exported. Of the total amount of solar cells cumulatively used in India, the following are the areas in which they have been applied
Application of Solar PV Cells (MW) in India – Sector wise
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Future Potential
Most experts agree that the solar PV market worldwide as well as in India will continue
accelerating significantly for the foreseeable future. The global PV market is estimated to be 2.5
times its current size by 2014, based on a slowest growth scenario, while a ‗production led‘ fast
growth scenario would see annual industry revenues approach $100 billion by 2014.
Currently, the Indian Solar PV manufacturing sector is export-led, and is much larger than the
country's total installed capacity. The manufacturing capacity of solar PV modules is further
expected to grow at a rate of 20 to 25 percent up to 2015 from about 1000 MWp as of 2009,
according to Frost & Sullivan.
In addition, the National Solar Mission‘s target to achieve 20 GW by 2022, of which 50% will be
solar PV, and its plan to produce modules and cells domestically increases the need for
significant increases in module production capacity. Many states in India are also devising their
own, ambitious policies for solar PV power generation, with Gujarat being the most prominent
among the states.
Thus, there exists a huge manufacturing opportunity not only for the export market but also to
fulfill the NSM and state targets.
Similarly, India‘s off-grid market has huge potential, especially in the areas such as rural
electrification, power irrigation pump sets, back-up power generation for the expanding network
of cellular towers across the country, captive power generation, urban applications and highway
lighting etc.
In addition to the government's initiatives such as Feed-in-Tariffs/Generation Based Incentive
(GBI) as part of the NSM, the incentives under the semiconductor policy, and other expected
incentives for the industry make the long-term prospects for this industry much brighter.
77 | P a g e
These targets and plans have potential to attract a variety of businesses in India, belonging to
diverse segments - manufacturing, installation, operation and maintenance, training engineering,
procurement & construction (EPC) businesses, and more. The rest of this report provides more
insights on the opportunities for these diverse segments.
Capital Cost
Solar PV has one of the highest capital costs of all renewable energy sources, but it has relatively
low operational costs, owing to the low maintenance and repair needs.
For a solar PV power plant, the approximate capital cost per MW is approximately Rs. 16 crores
– the precise cost depends on scale. This includes the cost of panels, the balance of systems, the
cost of land and other support infrastructures.
Break-Up for the Capital Expenses per MW
Component Amount
(in Rs crores)
% of Total
Solar panel arrays 8 50
Inverter 2 12.5
Balance of System 2 12.5
Installation 1.6 10
Others
(Infrastructure,
Margins)
2.4 15
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Capital Costs for Solar Photovoltaic Systems by Scale
The following table provides the approximate capital costs for solar PV power (2010)
Capital Cost for Solar PV in 2010
Capacity (MW) Capex (Rs Crores/MW)
1-5 16
5-10 15
10-50 14.5
50-100 14
Investment in Solar PV in India
Until the end of 2009, Wind energy had held the attention of investors in India because it was
considered a proven investment. This segment is now considered comparatively mature and
many have started looking at other areas. Many investors see India‘s potential in tapping solar
energy as even greater than wind, given that its sunny days are around 93% of the year and can
be more easily distributed.
According to a UNEP report, total investment in clean energy excluding large hydro power in
India grew 12% to $4.1 billion in 2008.
The largest portion of new investment in India went to the wind sector, growing 17% --
from $2.2 billion to $2.6.
Thanks to a supportive policy environment, solar investment grew from $18 million in
2007 to $347 million in 2008, most of which went to setting up module and cell
manufacturing facilities.
Both equity-based and debt-based investments into solar PV power plants in India are expected
to accelerate dramatically in 2010 owing to the National Solar Mission and similar thrusts
provided by the state governments for solar PV investments.
Some prominent examples of investments into solar PV that have taken place until Mar 2010 are
provided below
1. Azure Power
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2. Moser Baer Photovoltaic (for solar PV cell production)
3. Titan Solar
4. KPCL
5. Clover Solar
Financial Institutions That Fund Renewable Energy Projects in India
Some of the financial institutions that fund renewable energy projects in India are given below:
ADB
IFC
Proparco
DBS
IL&FS
Rabobank
DEG
IREDA
SBI
ICICI Bank
PFC
SBI Caps
IDFC Yes Bank
VC/PE Investment in India in Solar PV
Equity-based finance infusions are increasingly becoming common in renewable energy, though
in terms of overall amounts invested, project financing investments are significantly higher than
equity-based investments.
There are two primary equity-based investment possibilities:
Venture Capital
Private Equity
80 | P a g e
For medium and large capital requirements (upwards of $100 million), private equity is the most
optimal route, as venture capital companies try to invest relatively smaller amounts.
On the other hand, private equity companies consider investments only where the capital
requirements are medium or large; as a result, for smaller capital requirements (especially for
those that are less than Rs. 25 crores), venture capital is the most optimal option.
Private equity companies look for growth opportunities in relatively established companies with
steady revenue streams, and usually are more hesitant to invest in completely new technologies
and potentially high-risk ventures. Investing in solar PV power plants could fit in their portfolio
owing to the fact a long power purchase agreement with a government-backed entity assures
them of a stable revenue flow.
Venture capital companies look for innovative (and hence more risky) but high return investment
opportunities. As a result, few, if any venture capital companies invest in solar PV power plants,
where the potential upside is limited. Venture capital companies could be more interested in
financing innovative products and/or technologies in the solar PV value chain that have a high
―upside‖ potential.
Incentives Available
The following guidelines were issued in mid-June, 2010. The guidelines are for both solar PV
and solar thermal based energy.
Summary of JNNSM Guidelines for off-grid (captive, Rooftop etc.) solar systems:
The National Solar Mission aims to provide an enabling environment for solar
technology penetration in India.
For financial assistance, the government has declared that in projects availing this
scheme, in the debt and equity mixture, the promoters‘ equity contribution must be at
least 20%.
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Incentives announced:
Regional Potential for Solar Power
This section provides irradiation in various districts of the top 3 states for solar energy in India,
namely Gujarat, Rajasthan and Madhya Pradesh.
Gujarat
The top 5 districts with the best solar irradiation in Gujarat are given below.
Sl. No District Average annual
radiation
(kWh/m2/day)
1 Patan 5.44
2 Mehsana 5.41
3 Banaskantha 5.38
4 Porbandar 5.32
5 Amreli 5.31
Current PV Solar Energy Scenario
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PV constitutes a miniscule part in India‘s installed power generation capacity with grid
connected solar PV generation at a mere 17.82 MW as of Dec 2010. PV installations in India
today almost entirely comprise small capacity applications. They are most visibly seen in
lighting applications (street lighting, and home lightning systems) in the cities and towns, and in
small electrification systems and solar lanterns in rural areas. PV is also being deployed to a
small degree in powering water pump sets.
No. Sources / Systems Cumulative
Achievements
(31.10.2010) in MW
I. Power From Renewable
A. Grid-interactive renewable power
1 Wind Power 12906.73
2 Small Hydro Power 2850.25
3 Biomass Power (Agro-
wastes/Residues).
979.1
4 Bagasse Cogeneration 1494.53
5 Waste to Power 72.46
6 Solar Power 17.82
Sub Total (A) 18320.89
B. Off-grid/Distributed Renewable power(including Captive/CHP plants)
7 Biomass Power/Cogen.
(Non-Bagasse)
267.08
8 Biomass Gasifiers 128.16
9 U&I Waste-to-Energy 60.78
10 Rural Waste-to-Energy 0.45
11 Solar PV Power Plants
and Street
Lights(>1kW)
2.39
12 Aero-generators/Hybrid
systems
1.07
Sub Total (B) 459.93
Total (A+B) 18780.82
II Remote Village
Electrification
(Villages/Hamlets
provided with
electricity/lighting
system
5329/1538
III Decentralized Energy Systems
13 Family Type Biogas
Plants (in lakh)
42.77
14 SPV Street Lighting
System (in nos.)
1,21,634
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15 SPV Home Lighting
System (in nos.)
6,19,428
16 SPV Lanterns (in nos.) 8,13,380
17 SPV Pumps (in nos.) 7495
18 SPV Water Heating-
collector area (in
million.sq.m)
3.53
19 Solar Cookers (in lakh) 6.64
20 Wind Pumps (in nos.). 1352 MW = Megawatt; kWp = Kilowatt peak; Sq.m = Square metre Source: MNRE (as on Dec 2010)
Conclusion
Solar PV power production represents the most prominent opportunity segment. But while the
grid connected power production is in the limelight most times, attractive opportunities are
emerging for entrepreneurs in the off-grid segment as well
Some emerging models in solar power production could considerably reduce the risk of
adoption and be a win-win for all parties involved.
Significant opportunities exist beyond power production, in which companies in all
sectors – manufacturing, trading and services – could play a role.
Opportunities along the solar PV value chain exist for all sizes of businesses – small,
medium and large.
Specific industries that could benefit from these diverse opportunities include electrical,
chemical, software, construction/EPC service providers with equipment installation and
maintenance capabilities, and engineering and design firms.
It is imperative that the Indian entrepreneur analyzes these opportunities before making an
investment into the fast growing solar PV industry in India and with the decreasing capital cost
and low operational cost due to low repair and maintenance charges the Solar Photovoltaic
power plant seems a feasible solution in future especially with National Solar Incentives.
84 | P a g e
Synopsis
KRIBHCO
‖ Feasibility Report for
Revamping Of Captive Power
& Steam Generation Plant
(SGPG) At Hazira” Student‘s Name: Anshul Mangal
Industry Guide: Mr. K.C. Gupta
Faculty Guide: Ms. Deepmala Soni
The objective was to study the financial and investment
viability of different alternatives for the revamp according
to capital budgeting decisions.
The company decided on major revamp of the Ammonia
and urea plant to enhance the production. Due to
enhancement of the production it was found out extra
power would be needed.
The electricity board has liberalized captive power
generation for the user industry for bridging the demand-
supply gap. With the „opening access‟ policy it has also
made third party power sale quite lucrative. Thus company
is going for revamp of Captive power plant
According to investment appraisal, the case-3 (NET
EXPORT Basis) alternat-5 is the most feasible solution
with surplus power of 35 MW for sale and 37 MW for
internal Consumption.
The industry guide Mr. K.C. Gupta and his subordinate
Mr. S.K. Dewan were quite helpful and supportive to the
study. They provided us all the necessary information and
helped us to be comfortable and understand the workings
of the project as well the department
.