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A Study report on Procurement in PSU’S At CTPS,Damodar Valley corporation Submitted in partial fulfillment of PGDM PGDM Batch : 2011-13 Submitted To : Submitted By : Prof. P. Chakravarti MukeshPrabhakar 1

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Page 1: Project Dvc

A Study report on Procurement in PSU’S

At CTPS,Damodar Valley corporation

Submitted in partial fulfillment of PGDM

PGDM Batch : 2011-13

Submitted To : Submitted By :

Prof. P. Chakravarti MukeshPrabhakar

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Declaration

Imukeshprabhakar hereby declare that the project titled procurement in PSU’s “is an original work carried out under the guidance of s. Prasad the report submitted is bonafide work of my own efforts and has not been submitted to any institute or

published before.

Signature of the student

(Name of the student)

Date :Place:

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Certificate from the organization

To whomsoever it may concern

This is to certify that MR. /Ms. ……………………………………….. Of PGDM has successfully completed summer training program for a period of ………….. Days/weeks with …………………………………………………… from …………….. To……………….

As per our assessment he/ she is hard working and his /her performance has been satisfactory/ good/ excellent during the training program.

We wish him/ her all the success for his /her future.

Signature

Name of concerned person

Designation

Date :

Place:

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Faculty guide certificate

I Prof.……………………………… certify Mr./Mrs. ……………..........................

That the work done and the training undertaken by him/her is genuine to the best of my

Knowledge and acceptable.

Signature:

Date :

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Acknowledgement

This project is a real outcome of my study. I have done a hard work on my project work and the research program on “PROCUREMENT IN PSU, S” for the fulfillment of PGDM from vishwavishwani school of business.

I acknowledge my gratefulness to MR. S. PRASAD under whose expert guidance and immense co-operation. It could be possible to study and submit a project report.

I also thankful to Dr.Pchakravarti for providing us valuable information that helps me during my project work.

………………………………………….

Signature of student

………………………………………….

Name of student

Date:

Place:

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INDEX

Chapter. No. Content page no

Chapter 1 Introduction 10-11

Chapter 2 Company Profile

(a) Evolution of dvc 13(b) Mission 14(c) Vision 14(d) Objectives 15(e) Organization structure 16(f) Chandrapura thermal power station 17(g) Infrastructure 18(h) dvc- power plants, dams and barrages 19-21(i) Transmission 22(j) DVC performance 23(k) Finance 24-27(l) Growth plans 28-31(m) Human resource development 32

Chapter 3 literature review

Procurement in PSU,s 34-46

Chapter 4. Research methodology 47- 50

Chapter 5 data analysis 52-53

Chapter 6. Findings 55Recommendations 55Conclusions 56

Bibliography Books / Articles referredWebsites referred

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Joining report

Date : ……………………….

…………………………………………………………, batch 2011-2013, a student of VishwaVishawani institute of system & management, boston house, Hyderabad-78 has been given the permission to do his/ her summer training programme at our organization for the period of ………………… to …………………………. Under the guidance of …………………………………………….

Name of the company……………………………………………………………………….

Address………………………………………………………………………………………..

Date of joining ………………………………………………………………………………..

Tel.no. ………………………………………………………………………………………….

Area assigned ……… (marketing/finance/hr)……………………………………………….

Topic of the project ……………………………………………………………………………

Name of the corporate guide

Signature

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Purpose of the study

Organization study is very important part of the management program. It gives the exposure to the hidden skills of the students.it also adds practical experience of the real world of the business. Summer project provides the information about how organization works in scare resources and achieve its determined goals and objectives.

It has helped me to understand organizational procurement in psu,s of the department.

Apart from the theoretical knowledge, practical experience of summer project played a major role in building the real corporate personality.

It was the great experience for me to be a part of DAMODAR VALLEY CORPORATION during the summer project.

Objective of the study

To learn the organizational procurement system.

To learn the organizational work in the field of power generation.

To study about the whole methods in the field of procurement

To study about the working of procurement in PSU’s.

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Chapter 1

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Introduction

Damodar valley corporation: - A brief history

The damodar valley corporation, popularly known as DVC, is the first multipurpose river valley project of independent India. The corporation came into being on July 7, 1948 by an act of the constituent assembly of India (act no. xiv of 1948).it is modeled on the Tennessee valley authority of the USA. Jawaharlal Nehru, prime minister of west Bengal and shri Krishna sinha, chief minister of Bihar, took personal interest to ensure early success of the project.

The initial focus of the DVC were flood control, irrigation, generation, transmission and distribution of electricity, eco-conservation and afforestation, as well as job creation for the socio- economic wellbeing of the people residing in and around areas affected by DVC projects. However, over the past few decades, power generation has gained priority. Other objectives if the DVC, however, remain part of its primary responsibilities. The dams in valley have a capacity to moderate peak flood of 650,000 to 250,000 ft3/s. DVC has created irrigation potential of 3640 sq.kms.

The first dam was built across the Barakar River, a tributary of the Damodar River at tilaiya 1953.the second one,konardam, was built across the Konar River, another tributary of the Damodar River at konar in 1955. Two dams across the rivers barakar and damodar were built at maithon in 1957 and panchat in 1959. Both the dams are some 8 km upstream of the confluence point of the rivers. These four major dams are controlled by DVC. Durgapur barrage was constructed downstream of the four dams in 1955, across the damodar river at Durgapur in 1955, with head regulators for canals on either side for feeding an extensive system of canals and distributaries.

In 1978, the government of Bihar (that was before the formation of the state of Jharkhand) constructed the tenughat dam across the Damodar River outside the control of DVC. DVC proposes to construct a dam across the Barakar River at belpahari in Jharkhand state. There are hydro-electric power stations at tilayia, maithon and panchat, with total installed capacity of 144 MW.

The one at maithon was India’s first underground hydro-electric power station.

DVC operates thermal power stations at bokaro, chandrapura, Durgapur and Mejia, with the total derated capacity of 2745 MW. The power station at bokaro was biggest in the country when it was built in the fifties. DVC is expanding its thermal power capacity with the completion of its present plans by 2012 it would be generating

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more than 11000 MW of power. The forthcoming projects are ragunathpur TPS(4*600MW), andal TPS(2*500MW), koderma TPS(2*500MW), maithon RB TPS(2*525MW) and bokaro a TPS(1*600MW) and bokaro steel city TPS(3*250MW).

The total valley area covered by DVC activities is approximately 24,235sq. Kms. The upper valley consists of the districts of hazaribhag, koderma, giridih, chatra, dhanbad and bokaro, and some sections of palamu, Ranchi, lohardaga and dumka districts in the state of Jharkhand. The lower valley consists of the two districts of Bardhhaman Hugli, and some areas of the Howrah, bankura, and purulia districts in the state of west Bengal. DVC will produce 11000 MW of power by 2012.

Chairman and two part-time members, generally the secretary of the power dept., of the states of west Bengal the corporation has its head office at Kolkata, has a full time and Jharkhand representing their respective states.

DVC made unprecedented progress during 2000-2005 when its profit rose from around 100 crores to 1000 crores. major initiatives taken during these periods included NTPC driven root cause analysis and improvement plan, implementation of preventive maintenance of robust information technology infrastructure plan under guidance of high profile IITian MR. agarwal, programme for realization of dues from BSEB, tying up for JV with Tata ,harsh punishment to tainted and irresponsible employees and officers.

In-organic and un structured expansion plan after 2006 is putting the organization under pressure to cut its profit margins drastically to comply with statutory tariff norms.

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Chapter 2

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Company profile

a) Evolution: - formation

DVC, a legacy to the people of India, emerged as a culmination of attempts made over a whole century to control the wild and erratic Damodar River. The river spans over an area of 25,000 sq. kms covering the states of Bihar (now Jharkhand) & West Bengal. 

The Damodar Valley has been ravaged frequently by floods of varying intensities and the first of the major recorded flood dates back to 1730. Thereafter serious floods occurred at regular intervals, but it was the flood of 1943 that left the worst devastation in its wake. As a result, the Governor of Bengal appointed a Board of Inquiry headed by the Maharaja of Burdwan and the noted physicist Dr. MeghnadSaha as member. In their report, the Board suggested creation of an authority similar to the Tennessee Valley Authority (TVA) of United States of America. The Government of India then appointed Mr. W.L. Voorduin, a senior engineer of the TVA to make recommendations for comprehensive development of the valley. Accordingly, in August, 1944, Mr. Voorduin submitted his "Preliminary Memorandum on the Unified Development of the Damodar River"……………………………..

Mr. Voorduins "Preliminary Memorandum" suggested a multipurpose development plan designed for achieving flood control, irrigation, power generation and navigation in the Damodar Valley. Four consultants appointed by the Government of India examined it. They also approved the main technical features of Voorduins scheme and recommended early initiation of construction beginning with Tilaiya to be followed by Maithon................................................................................

By April 1947, full agreement was practically reached between the three Governments of Central, Bengal and Bihar on the implementation of the scheme and in March 1948, the Damodar Valley Corporation Act (Act No. XIV of 1948) was passed by the Central Legislature, requiring the three governments the Central Government and the State Governments of West Bengal and Bihar (now Jharkhand) to participate jointly for the purpose of building the Damodar Valley Corporation. The Corporation came into existence on 7th July, 1948 as the first multipurpose river valley project of independent India.

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b) Mission: -

The assigned mission of the Damodar Valley Corporation under Section 12 of the DVC Act, 1948:

o Flood controlo Promotion and operation of schemes for irrigation.o Water supply for industrial and domestic use.o Navigation and drainageo Generation, transmission and distribution of electrical energy.o Promotion of afforestation and control of soil erosion in valley area.o Promotion of public health, agriculture, industrial, economic and general

wellbeing in Damodar valley.

c)Vision: -

To foster integrated development of Damodar Valley Command Area and achieve par excellence in its multifaceted activities of control of floods, provision of irrigation, generation, transmission and distribution of electrical energy and also soil conservation, unified tourism, fisheries, socio-economic & health development of villages within a radius of 10 KM of its projects.

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d) Objectives: -

To realize DVC’s Mission, the following corporate objectives have been identified for persuasion:

Corporate Objectives:

Generate maximum on sustainable basis through implementation of best O&M practices.

Rejuvenate old generating units through refurbishment / replacement / comprehensive overhauling programme.

Capacity augmentation through extension and green field projects. Strengthening of the existing transmission and distribution network and

augmentation to match with the capacity addition. Transmit, distribute and supply reliable and quality power at competitive tariff. Improve the financial health of the Corporation by adoption of efficient

industrial, commercial and human resource management practices. Ensure optimum utilization of available water resources through effective and

efficient management and harnessing the remaining potential of Damodar basin.

Adopt measures for pollution abatement of Damodar River. Ensure environmental protection at plant level. Strengthen activities of eco-conservation in the valley area & to make

Damodar valley more Green. Unified socio-economic development for the inhabitants of villages

neighboring major projects of DVC. To pursue with development of tourism at Maithon, Panchet, Tilaiya and

Hazaribagh. Revival of Fish Farming in DVC reservoirs.

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Table 2.1

E.) organization structure

F) CTPS: - CHANDRAPURA THERMAL POWER STATION

Chandrapura Thermal Power Station is located at Bokaro district in the State of Jharkhand. It has an installed capacity of 390 MW. CTPS had the pride of being largest pulverized fuel fire power station of Asia and unit number one was the first reheat unit installed in India with highest steam parameters. Electrical switchyard of CTPS is a pride of DVC, being India’s biggest network.

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Details of CTPS Generating Units

Gen. Unit

Name of Manufacturers

Original capacity (MW)

Present capacity (MW)

Year of commissioning

Special features

Boiler TG

1 CE GE 140 130 Oct., 1964 Three stage turbine

Fly ash arrested by EP

CW system through CT pond

Reheat & re-impulse turbine

2 CE GE 140 130 May, 1965

3 CE GE 140 130 July, 1968

Table 2.2

Future Expansion 

Capacity addition of 2 x 250 MW is under execution.

g) Infrastructure: -

With the time DVC developed and expanded its infrastructure five thermal power station with a capacity of 2570 MW, three hydro-electric power station with a capacity of 144 MW and one gas turbine with a capacity of 82.50 MW contribute to a total installed capacity of 2796.60 MW .presently dvc has 60 sub stations and receiving stations more than 5500 circuits kms of transmission and distribution lines.DVC had also four dams, a barrage and a network of canals that play an

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effective role in water management. The construction of check dams, development of forests and farms and upland and wasteland treatment developed by DVC play a vital role in eco conservation.

H) DVC – power plants, dams and barrage

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Hydel Power PlantMaithonPanchetTilaiya

Thermal Power PlantBTPS (B) CTPSDTPSMTPS

DamKonarPanchetTilaiyaMaithon

GTMaithon

Page 19: Project Dvc

Table2.3

Fig 2.1

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DVC Plants

Power Plants

NameLocation Existing Capacity Commissioning

HYDEL

Tilaiya River- BarakarDist.-HazaribaghState- Jharkhand

4 MW(2X2 MW)

U-I Feb 53U-II July 53

Maithon River- BarakarDist.- BurdhamanState- West Bengal

63.2 MW(2X20+1X23.2 MW)

U-I Oct 57U-II Mar 58U-II Dec 58

Panchet River- DamodarDist.- DhanbadState -Jhankhand

80 MW(2X40 MW)

U-I Dec 59U-II Mar 91

Total Hydel . 147.2 MW

NameLocation Capacity Commissioning

THERMAL

Bokaro 'B' Dist- BokaroState- Jharkhand

630 MW(3X210 MW)

U-I Mar 86U-II Nov 90U-III Aug 93

Chandrapura Dist- BokaroState- Jharkhand

890 MW(3X130 + 2X250MW)

U-I Oct 64U-II May 65U-III July 68U-VII Nov 11U-VIII July 11

Durgapur Dist.- BarddhamanState- WestBengal

350 MW(1X140 MW)+(1X210 MW)

U-III Dec 66U-IV Sept 82

Mejia Dist.- BankuraState- WestBengal

1840 MW(4X210 +2X250 + 1X500MW)

U-I Mar 96U-II Mar 98U-III Sept 99U-IV Feb 05U-V Feb 08U-VI Sept 08U-VII Aug 11

Durgapur Steel Dist.- BarddhamanState-

500 MW(1X500 MW)

U-I May 12

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WestBengal

Total Thermal . 4210 MW

GRAND TOTAL

4377.2 MW

Table 2.4

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I) Transmission: -

Charged with the responsibilities of providing electricity, the vital input for industrial growth in the resource-rich Damodar Valley region, DVC over the last 60 years has developed a big and robust transmission network consisting of 132 KV and 220 KV grids. DVC grids operated in unison with the Eastern Regional grid through 132 KV and 220 KV Tie lines. All the power stations and Sub-stations of DVC are connected with the DVC grids. DVC power consumers are provided supply at 33 KV, 132 KV and 220 KV pressure.

DVC Transmission Lines in service at a Glance

State Transmission line length in CKm220 KV 132 KV

Jharkhand 798 2238West Bengal 536 1177TOTAL 1334 3415

Table 2.5

DVC Sub-stations in Service (Nos.) at a Glance

Substations in nos.State 220 KV 132 KVJharkhand 4 12West Bengal 6 21TOTAL 10 33

Table 2.6

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J)Dvc performance: -

Physical

Generation of Electricity

Actual Generation(MU)

Plants 2009-10 2010-11

Thermal 14521.52 16263.9

Hydel 198.11 115.6

Overall 14719.63 16379.5

Other operating parameters of thermal generating units:

Thermal

Parameter 2009-2010 2010-2011

Plant Load Factor (%) 61.17 68.51

Specific Oil Consumption (ml/kwh) 2.66 1.74

Auxiliary Power Consumption (%) 10.68 10.72

Table 2.7

k) Finance

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(YEAR 2008-2009)

OPERATIONAL RESULTSParticulars (Rs. in crore)

2008-09 2009-10 2010-11

A. Revenue Account - Power

1. Revenue income i) Sale of power

a. Firm Domestic Sale 4620 5137 4847

b. Firm Export Sale through PTC 310 338 802

c. Unscheduled Interchange 410 113 51

d. Sale of MTPS # 5 (up to 28.02.07)

56 34 80

e. Total [i (a)+i (b)+i (c)-i (d)] 5284 5554 5620

ii) Miscellaneous Income 370 329 135

iii) Extra-ordinary Income

iv) Total Income (i + ii + iii) 5654 5883 5755

2. Revenue Expenditure (Rs. in Crore)

i) Fuel 2277 2721 3162

ii) Purchase of Power 370 875 637

iii) O&M, Establishment Charges 616 700 792

iv) Overhead Charges 37 29 39

v) Total (i to iv) 3300 4325 4630

vi) Depreciation 320 351

vii) Interest 313 383 590

viii) Bad debt and Provision for Consumers O/S & Provisions for Others

76 18 10

3. Total Expenditure: [v+vi+vii+viii] 4009 5077 5568

4. Effects of Extra-ordinary Transactions & Past Year’s (Debit)/Credit

(590) (395) (221)

5. Power Surplus before Tax: [1(iv)-3+4]

1055 806 187

6. Deficit on Irrigation & Flood Control (73) (77) (86)

7. Income Tax 95 34 -

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8. Net Surplus after Tax:[5+6-7] 887 300 120

9. Gross Margin: [1(i)-v] 1984 1229 990

10.Current Year’s Profit on Power: [9+1(ii)-vi-vii-viii]

1645 806 187

Table 2.8

Sources & Utilization of Fund

Particulars 2008-09 2009-10 2010-11

(Rs. in crore)

%(Rs. in crore)

%(Rs. in crore)

%

SOURCESA. Members fund:(i) Loan capital

4004.22 12.63 4655 11.96 5020 11.34

(ii) Ploughed back power surplus

426.00 1.34 131 0.34 -34 -0.08

(iii) Retained interest

224.31 0.71 235 0.60 300 0.68

Total members fund (i+ii+iii)

4654.53 14.68 5020 12.90 5286 11.94

B. Borrowing from markets central loan and others

6452.61 20.35 11501 29.56 16337 36.91

C. Internal resources

13111.76 41.36 15614 40.12 16569 37.43

D. Capital Reserve 7484.40 23.61 6780 17.42 6075 13.72

TOTAL (A+B+C+D) 36357.83 100.00 38915 100.00 44267 100.00

UTILISATION

Gross fixed assets 22601.93 71.29 22904 58.86 23145 52.29

Capital work in progress

9101.37 28.71 16011 41.14 21122 47.71

TOTAL 36357.83 100.00 38915 100.00 44267 100.00

Table 2.9

NOTE:1. Loan capital contributed by the participating Governments to meet capital cost of

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the projects is however treated as DVC’s own resources.

2. Power surplus and retained interest ploughed back fund-awaiting transfer to capital head.

Capital Expenditure & Sources(Power)-Cumulative

(Up to) 2008-09

1. Capital Expenditure 31703.30

2. Sources

a. Central Government(i) Loan Capital

1374.07

(ii) Ploughed back power surplus 142.00

(iii) Retained Interest 78.25 1594.32

b. W.B. Government(i) Loan Capital

1284.21

(ii) ) Ploughed back power surplus 142.00

(iii) Retained Interest 69.34 1495.55

c. Bihar Government Loan Capital 1345.94

Ploughed back power surplus 142.00

Retained Interest 676.72 1564.66

d. Market Loan, Central Loan & Others

6452.61

e. Internal Resources 13111.76

f. Capital Reserve 7484.40

TOTAL 31703.30

Table 2.10

NOTE: Capital Reserve generate due to Revaluation of Assets.

Key Ratios

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Growth (%) 2008-09 2009-10 2010-11

i) Increase in Total Income 14.17 4.05 (2.18)

ii) Increase in Profit Before Tax (16.72) (50.97) (76.79)

iii) Increase in Debtors 49.07 33.69 36.01

iv) Increase in Inventory 25.50 17.31 6.91

2. Profitability (%)

i) Gross Margin/Sales 37.56 22.12 17.61

ii) Profit (PBT)/Sales 29.10 14.50 3.33

iii) Rate of Return (Post Tax-excluding extra ordinary income)

4.44 2.32 0.90

3. Solvency / Liquidity

i) Debt to Net Worth Ratio 0.39 0.62 0.85

ii) Current Ratio 1.36 1.89 2.51

iii) Quick Ratio 1.21 1.66 2.26

4. Turnover Ratio

i) Inventory Holding – Thermal (Monthly Consumption) Fuel

0.88 1.13 1.14

ii) Debtors Holding (Monthly Sales) 6.08 7.73 10.39

Table 2.11

* Figures within () indicate decrease.

l) Growth plans: -

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Generation projects

Fig 2.2

Capacity Addition Programme

Capacity Addition Status Upto May'2012

Sl. No.

Project Unit Capacity(MW)

Status

Project implementation by DVC own

1 MTPS Extension Unit#5 250 MW COD declared on 29.02.2008

2 MTPS Extension Unit#6 250 MW COD declared on 24.09.2008

3 CTPS Extension Unit#7 250 MW COD declared on 02.11.2011

4 CTPS Extension Unit#8 250 MW COD declared on 15.07.2011

5 Mejia TPS Unit#7 500 MW COD declared on 02.08.2011

6 Mejia TPS Unit#8 500 MW Full load achieved on 26.03.2011

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7 Koderma TPS Unit#1 500 MW Full load achieved on 20.07.2011

8 Koderma TPS Unit#2 500 MW Under Construction

9 Durgapur Steel TPS Unit#1 500 MW COD declared on 15.05.2012

10 Durgapur Steel TPS Unit#2 500 MW Full load achieved on 23.03.2012

11 RaghunathpurPh-I TPS Unit#1 600 MW Under Construction

12 RaghunathpurPh-I TPS Unit#2 600 MW Under Construction

13 Bokaro-A TPS Unit#1 500 MW Under Construction

Project implementation through Joint Venture

1 Maithon RB TPS [by MPL, JV of DVC & TPC]

Unit#1 525 MW COD declared on Sept'2011

Unit#2 525 MW Full load achieved on May'2012

Table 2.12

Anticipated transmission system

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Graph 2.1

Growth plans

Plan period year Energy requirement(MU)

Peak demand(MW)

10th plan 2002-2003 9307.20 1758

2003-2004 9635.00 1819

2004-2005 10018.08 1892

2005-2006 13588.80 1986

2006-2007 14155.00 2145

Plan period year Energy requirement(MU)

Peak demand(MW)

11th plan 2007-2008 15146.00 2340

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2008-2009 15903.00 2574

2009-2010 17334.00 2857

2010-2011 18200.00 3085

2011-2012 19135.00 3333

Table 2.13

m) Human resource management: -

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The most significant factor contributing to the success of DVC so long is its human resources. Since inception, DVC is a major source of providing employment to a large number of individuals in various disciplines like engineering, technical, accounts & finance, general categories & skilled / unskilled local people. DVC is proud to have succeeded in motivating the workforce and bringing the best out of them.

As on 31st March 2006 DVC’s total employee strength stands at 11169. The focus of human resource development in the Damodar Valley Corporation has been changing in tune with the rapidly changing external environment.

Man: MW Ratio

The overall Man: MW ratio in the year 2005-06 was 3.76 as against 3.8 in the year 2004-05.

The GroupWise number of employees over the last 5 years depicted in the following table:

YEAR Category of EmployeesGroup ‘A’ Group ‘B’ Group ‘C&D’ Total

2001-02 1625 6337 4783 127452002-03 1591 6046 4460 120972003-04 1636 5869 4226 117312004-05 1780 5621 3983 113842005-06 1770 5591 3808 11169

Table 2.14

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Chapter 3

Literature review

Procurement in public sector unit’s: -

a) Definition and meaning of procurement

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Procurement is the acquisition of goods or services. It is favorable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location . Corporations and public bodies often define processes intended to promote fair and open competition for their business while minimizing exposure to fraud and collusion.

Almost all purchasing decisions include factors such as delivery and handling, marginal benefit, and price fluctuations. Procurement generally involves making buying decisions under conditions of scarcity. If good data is available, it is good practice to make use of economic analysis methods such as cost-benefit analysis or cost-utility analysis.

b) Objectives: -

1. To ensure procurement of right quantity, right quality of Material from right source at right price and at right place and time, keeping transparency in contractual process.

2. To keep pace with the changed scenario under the dynamic marketConditions, liberalized economy, new technology/process/product andMaintenance schedule.

3. To maintain proper co-ordination amongst contractors/suppliers/service providers and Indenting Departments.

4. To prepare vendors profile as well as updating of vendor list depending upon the performance of the vendor and explore new entries in the field.

5. To bring out economy and efficiency in implementation of thePurchase/project/works contract within given time schedule.

6. To create competitive environment by providing opportunity to all qualified eligible bidders to participate in the tendering process.

7. To encourage the development of local vendors/agencies and domestic manufacturing industries.

8. To explore import substitute without compromising quality and price.

c) Types of procurement and its features: -

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Direct procurement and indirect procurement

TYPES

Direct procurement

Indirect procurement

Raw material and production goods

Maintenance, repair, and operating supplies

Capital goods and services

FEATURES

Quantity Large Low Low

Frequency

High Relatively high Low

ValueIndustry specific

Low High

Nature Operational Tactical Strategic

ExamplesCrude oil in petroleum industry

Lubricants, spare parts

Crude oil storage facilities

Table 4.1

Based on the consumption purposes of the acquired goods and services, procurement activities are often split into two distinct categories. The first category being direct, production-related procurement and the second being indirect, non-production-related procurement.

Direct procurement occurs in manufacturing settings only. It encompasses all items

that are part of finished products, such as raw material, components and parts. Direct procurement, which is the focus in supply chain management, directly affects the production process of manufacturing firms. In contrast, indirectprocurement activities concern “operating resources” that a company purchases to enable its operations. It comprises a wide variety of goods and services, from standardized low value items like office supplies and machine lubricants to complex and costly products and services like heavy equipment and consulting services.

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d) Procurement steps: -

Procurement life cycle in modern businesses usually consists of eight steps:

Information gathering: If the potential customer does not already have an established relationship with sales/ marketing functions of suppliers of needed products and services (P/S), it is necessary to search for suppliers who can satisfy the requirements.

Supplier contact: When one or more suitable suppliers have been identified, requests for quotation, requests for proposals, requests for information or requests for tender may be advertised, or direct contact may be made with the suppliers.

Background review: References for product/service quality are consulted, and any requirements for follow-up services including installation, maintenance, and warranty are investigated. Samples of the P/S being considered may be examined or trials undertaken.

Negotiation: Negotiations are undertaken, and price, availability, and customization possibilities are established. Delivery schedules are negotiated, and a contract to acquire the P/S is completed.

Fulfillment: Supplier preparation, expediting, shipment, delivery, and payment for the P/S are completed, based on contract terms. Installation and training may also be included.

Consumption, maintenance, and disposal: During this phase, the company evaluates the performance of the P/S and any accompanying service support, as they are consumed.

Renewal: When the P/S has been consumed or disposed of, the contract expires, or the product or service is to be re-ordered, company experience with the P/S is reviewed. If the P/S is to be re-ordered, the company determines

whether to consider other suppliers or to continue with the same supplier.

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Additional Step - Tender Notification: Some institutions choose to use a notification service in order to raise the competition for the chosen opportunity. These systems can either be direct from their e-tendering software, or as a re-packaged notification from an external notification company.

(e) Working of procurement in psu’s

As I have done my project at CTPS, DVC which is one of industry in the field of the power generation. So they required purchase of direct machinery which is used in

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the production and as well as they also required indirect services according to demand.

So I am going too discussed about the procurement in CTPS: DVC and some of the examples relating to it.

The process are as follows: -

There are two section s which deals in the process of procurement

1. User section

2. finance section

3. Purchase section

Now, we discussed each of them:

1. User section in this we prepare a demand note regarding the procurement.

(a) Back up sheet: first of all ,we prepare the backup sheet in which the details of the previous purchases viz rate, quantity, consumption pattern are given.

(b) Quantity to be procured: here quantity of the materials are decided that in which amount it should be procured.

2. Finance section: in this section , the commercial term and conditions are fixed.

Now the technical and commercial term and condition s are incorporated .and finally the NIT ( notice inviting tender) is floated

3. Purchase section: in this section the administrative approval is taken.

After that , mode of tendering is selected

NOTE: in the indirect procurement ,wedidn,t prepare backup sheet and remaining all are same.

Now we discuss about the tender:

Tender

Tender" means an invitation to offer for an item/items or work. All Public Sector purchases/Contracts in India, over a certain value has to be publicly notified through

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Tender Notices which are advertised through All India Newspapers, Trade Journals, Departmental Publications and Notice Boards, and now on Internet. An estimated Rs.300 billion (US$ 6.6 billions) worth of equipment and services are procured annually through All India Tenders.

Types of tender

Broadly, there are three types of Tenders: Limited Tendering, Open Tendering, and Single Tendering

Limited Tendering:

This involves issuing Tender to few selected tenderers only.

Open Tendering

This means that the Tender is open to any supplier who can quote for the materials as per requirements. This is usually done by publishing the Tender Notice in Newspapers/Trade journals/Internet and other bulletins.

Single Tendering:

Single Tendering means sending the Tender to one particular party. Normally, it is either for an item where there is only one supplier or for an item where the purchaser has developed confidence in one supplier only and would just like to verify the current price, delivery etc. Single Tenders are also sent for items of proprietary nature.

Tender documents: -

Type of Item/Work enquired for

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Name and Address of the Tender Authority The Tender Enquiry reference Number/Date The cost and the last date for collection of Bid Document Earnest Money Deposit – This deposit is refunded to unsuccessful

Tenderers Due Date/Time – The last Date/Time for submission of Tender papers Opening Date – The date, time and venue of opening of the sealed Tenders

in presence of representatives of Tenderers Pre-qualification of Tenderers – The criteria/qualifications that will be

considered before issuing Tender Documents to a Tenderer. Estimated cost of Item/Work – Mentioned in selected Tenders Any other Instructions/Information

Collection of Bid Documents/Tender Papers:

Interested parties, to collect / Purchase the Tender / Bid Documents on payment / free of cost, as the case may be. Every Tender quotation has to be accompanied by the Tender Documents.

Submission of Offers:

The Quotation has to be submitted along with all other Documents as stipulated by the Tender Authority in the Tender Notice.

Attending Tender opening:

Representative of the Tenderers are allowed to attend Tender opening. The activity during Tender opening is to list down the names and addresses of the Tenderers, note down all the rates/freight charges/taxes etc. and details of whether - EMD paid, Tender Document purchased, any Tender quotation is rejected, if so for what reasons. The comparative statement of all the rates offered and other terms like freight forwarding, quality assurance, Taxes, identifying the Lowest (L1, L2, L3) Offers etc. When the Order will be issued and to which parties/Party.

Periodic updates and Post-Tender status :

The concerned parties regularly follow up and ensure that the Purchase/Work Order is issued.

Negotiation:

If for some reason, the party is not able to comply with the terms of the Order, an amendment to the Order needs to be issued. The order may not necessarily be

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placed on L1 since, various other criteria like past performance of the party, urgency of the requirement etc. are also considered before decision is taken. In some cases orders are divided between two or three parties. At times L2 is asked to work/supply at L1 rates. In these situations, negotiation plays an important role especially in cases where multiple technology, high value Items/Work are involved.

Lastly, after fulfillment of tendering process award of contract is given to the eligible party. If after tendering no result is outcome than re-tendering is done.

Example: -

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(1) Procurement of material – (purchase proposal)

Tender for single two part tendering are invited on behalf of CTPS,unit 7&8,DVC, for supply of hydrazine hydrate securely packed for destination basis ,CTPS, chandrapura, bokaro on door delivery basis.

Sub- supply of hydrazine hydrate for CTPS,unit 7&8,DVC

Earnest money – nil

Cost of tender paper – nil

E-procurement portal – www.tenderwizard.com/dvc

Last date for downloading of tender documents – 13/3/2012 up to 15.00hrs

Last date of on line submission of tender document –13/3/2012 up to 15.30 hrs.

Tender opening date and time – 13/3/2012 after 16.00 hrs.

Tender duly filled in should be as per defined in details in GCC( general conditions of contract) which is available in www.dvc,gov.in/gcc-2009 with NIT for subject supply.

In sending your quotation you will be deemed to have undrrstood and accepted all the terms and conditions stated in the enquiry. DVC reserves the rights to cancel and quotation in part or full and to reduce or increase the quantity of supply without assigning any reason thereof.

Please may send your query to:

The superintending engineer (tech.)

Unit 7&8, CTPS

Ambedkarbhawan

p.o. - chandrapura

dist. - bokaro (Jharkhand) pin- 828403

Or may contact through e-mail

[email protected]

Or telefax – 06549-242428Tenderer’s authorized representative may be present at the time of opening .the quotation should be submitted by online at earliest. The firm’s name and offer no. with date must be maintained clearly.

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Offer validity – 120 days from opening

S.no. description quantity required

1. Hydrazine hydrate(80%) confirming 3 MT

To is. 12086-1987 and reaffirming 1997

Duly packed in manufacturer’s original

200 kg drum

Orders placed by the corporation are subject to the special term and conditions as follows and also will be guided by GCC available in the www.dvc.gov.in/gcc-2009.pdf .

However if any term and conditions maintained in special terms and conditions are similar with that of gcc, then the former should prevail.

NOTE: during tendering process following should be documented

Estimate for mechanical seal (demand) Checklist for purchase proposal Certificate of oem/oes

(a) manufacturer’s /vender’s name(b) Description of articles(c) Control code no.(d) indigenous/imported item(e) if imported ,name of the Indian agent, if any(f) Indent no with date(g) Estimated value(h) Basis of estimate

Approval for invitation and opening of tender Enquiry for procurement

(a) To the party involved(b) Details about the party that how many order received by the company in previous 5 years and delivered or not.(c) The company is registered or not(d) The company is paying taxes duly or not.

Quotation done by the party If the quotation is according g to the orderer then it is duly signed by

authorized higher person .if necessary or if any change in the price negotiation .orderer call for negotiation according to the approval from higher authority.

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Finally the purchase order is placed

(2) Procurement for maintenance:- (work proposal)

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Annual rate contract for the maintenance of telephone lines in DVC Colony and power house.

Sub – annual rate contract for the maintenance of telephone lines in different areas of DVC colony and power house including telephone connections and stringing of telephone cable on as and required basis.

Vide.no. ct/ce/t-es-11(w)/66

Dated 1/7/2011 will be expire on 30/6/2012

The AMC is meant for maintaining about 700 nos of telephones lines in different areas of DVC colony and power house.

As it is felt necessary to finalize a fresh ARC in boq format before expiry of running AMC .so that continuity of such essential services remains maintained

100 new connections have been provided after enhancement of exchange capacity for the DVC officials posted in unit 7&8 construction

Main contractor – m/s BHEL and other sub-contractors and also in new power house area.

Contract – 1 year

Estimated amount for proposed ARC – Rs 4, 68,779

Necessary budget provision has been proposed in BE 2012-13 under chargeable revenue head of E.S.2, CTPS.

NOTE: Same steps are followed in this as done in the purchase proposal during tendering.

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Chapter 4

RESEARCH METHODOLOGY

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Research definition:

“Research is careful inquiry or examination to discover new information and

relationship and to expand and to verify exiting knowledge,”

Research always starts with questions or a problem. Its purpose is to find answer to

questions through the application of the scientific method. It is a systematic and

intensive study directed towards a more complete knowledge of the subject studies.

Research design

“Research design is the plan, structure and strategy of investigation

conceived so as to obtain answer to research question and to control variance.”

- BY KERLINGER

From definition it is evident that research design is more or less a blueprint of

research. At the outset may be noted that there are several ways of studying and

tackling a problem. There is no signal perfect design.

The research design can be classified in to true broad categories:

Exploratory

Descriptive

Casual

Exploratory research is focus on the discovery of ideas.

Exploratory research is carried out to define problems and developed

hypothesis to test later. An exploratory study is generally based on the secondary

data that are reading available. It does not have to change his focus of direction,

depending on the

availability of new ideas and relationship among variables.

Descriptive studies are undertaken in many circumstances.

Descriptive studies can be complex, determining a high degree of scientific

skill on the part of the researcher.

Casual research helps in determined cause and effect relationship. Between two or

more variables.

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The present study seeks to find out the consumers attitude towards buying of

bike. The study also aims at findings out the drawbacks of the marketing set up of

mint newspaper So this makes the study a descriptive one.

Sources of Data

The sources of data collection methods are as follows.

1) Primary data:-

The primary data is that which details we collect first time from the market and

also used first time in the research. We also say that the information is first time in

the research decision

.

2) Secondary data:-

Secondary data are those data which are already collected by someone for

some purpose and are available for the present study; secondary data are already

collected by the company’s records and other library’s books. When the secondary

data are sufficient, the researcher has to be satisfied with the primary sources of

data.

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Chapter 5

Data analysis

Capital structure

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IntermsofSection30oftheAct,entirecapital requirementoftheCorporationwastobemetbytheparticipatingGovernments. Till1968-69theparticipatingGovernmentshadprovidedanamountof214.72croreonlyascapital.From1969-70onwards, the participatingGovernmentsdidnotcontributeanycapital.Consequently,thecapitalrequirementswerepartiallymetby withholdinginterestonCapitaLandsurplusonpowerpayabletotheparticipating Governments.Ason31March2010,4654.55 croreshownInth

ecapitalaccountIncluded4347.401croretransferredtocapitalaccount(power)ofthe participating Governmentsbywayofploughbackoftheaccumulated powersurplusandfromaccumulatedinterestpayabletotheparticipating Governments.However,formal app rova l from1986-87for t h e s e t r a n s f e r s was pending(March2010).

Thedistributionof capital outlayandthecontributionofthe

threeparticipatingGovernmentsincludingploughbackofthe

accumulatedpowersurplusandinterestpayableoncapitalson31March2010aswell

asthefinancingpatternofthedeficit aregiveninthefollowingGraphs(1and2):

Graph1

Capitaloutlaytowardsmain objects

(power, irrigationandfloodcontrol)

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Financial Position

.Sourcesandapplicationoffunds

Graph2and3indicatethesourcesandapplicationoffunds oftheCorporationforthelastthreefinancial yearsending2009-10.

Graph 2

Source of fund

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Graph 3

Application of fund

Theincreaseinpaidupcapitalwasdueto transferofsharesofsurplusof426.01crore, retainedinterestof196.67crore oncapital oftheparticipatingGovernmentstocapitalaccountandcapitalexpenditureof27.65croremadebyWestBengal Government, fromtheyear2003·04to2007·08,transferredtotheCapital AccountofGovernmentofWestBengalTheIncrease In borrowingsIncludingProvidentFund&PensionFundwasmainlydue10drawlofProjectloanoff4701.84croretakenfrom PowerFinance CorporationandotherFinancial Institutionsforongoingcapacityadditionprojectsandprovisionofadditional liabilityoff428croretowardspensionandgratuityfundduringtheyear2009-10.

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2007-GI 2008-GB 2009-10

CapitalEmployed(fIncrore)3

Financial ratios

Thecapitalemployedhaddecreasedduetodecreaseinnetfixedassetsandincreaseincurrentliabilities.Networth anddebtequityratiohad, however, increasedduetoincreaseinpaidupcapital anddecreaseinreserve. Steep increaseinDebt anddecreaseinReservesindicatesthe deterioratingfinancialhealthoftheCorporation.

Working capital

2007-GI 2008-GB 2009-10

a)CurrentAssets

b)Currentliabilities

c)WorkingCapital(a-b)

5814.68

3828.90

1985.78

5179.84

3815.51

1364.33

5664.28

3963.57

1700.71

TheWorkingCapital fortheyear2009-10hadincreasedby24.66percentcomparedtopreviousyearmainlyduetoincrease inCurrentAssets,LoansandAdvances.

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Chapter 6

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Findings

The power of talking decisions is centralized at the higher authority i.e. Kolkata (headquarter of DVC).

There is healthy competition among the tenderers in the procurement process.

There is a scope of development of the party involved in the procurement.

Due to procurement ,they keep pace with the changed scenario under the dynamic market Conditions, liberalized economy, new technology/process/product andMaintenance schedule.

Recommendations

As I done my project on title procurement in psu, s at CTPS, DVC. It is one of the power generation company. So i want to say that it plays major role in the development of respective areas. They should work regularly and effectively in their field. And there is a healthy completion in the procurement but it’s a lengthy process.so there should be a different department for this.

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Conclusions

DVC plays a major role in the production of electricity and they also helps in the flood control and irrigation facility in the respective areas.

It is a mass responsibility of society, administrator and stable people to stand them in row of common man.

I learnt that DVC has a well-defined policy about both wage & salary administration and finance. Company strictly confirms to all the provisions and government policies and all the statuarycompliances. Its adopted policies and schemes really work for the officers, staff and worker and provide the benefits that work as a booster for them and make them more responsible and effective. If the satisfaction level of the employees is increased then DVC will get more benefited in production.

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Bibliography

DVC NEWS Corporate office

Bokaro at a glance DVC publication

Bokaro darpan

Website- www.dvc.gov.in

www.wikipedia.org

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