ACKNOWLEDGEMENT I want to express my sincerest regards to Mr D.

K Agarwal, for his able inputs, able guidance, encouragement, whole-hearted cooperation and constructive criticism throughout the duration of the project. Besides this, I would also like to thank the entire staff of the finance department for the help and support. At last, I also express thanks to my parents without whose love and moral support I would have been unable to finish my project on time.

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CONTENTS

PARTICULARS Acknowledgement Executive Summary Introduction Project Objective Actual Project Work Conclusions Bibliography

PAGE NO. 1 3 4 10 16 26 27

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EXECUTIVE SUMMARY I was appointed in the Finance Department of Indian Strategic Petroleum Reserves Limited and there I was working under Shri Deepchand and assisted him in all his works, I worked there for 45 days and it was a very good experience working with him. I came to know about what are the works that takes place in a Finance Department and how the entries take place. Overall it was a very good working environment.

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INTRODUCTION After the Indian Independence, the Oil Industry in India was a very small one in size and Oil was produced mainly from Assam and the total amount of Oil production was not more than 250,000 tonnes per year. This small amount of production made the oil experts from different countries predict the future of the oil industry as a dull one and also doubted India's ability to search for new oil reserves. But the Government of India declared the Oil industry in India as the core sector industry under the Industrial Policy Resolution bill in the year 1954, which helped the Oil Industry in India vastly. Oil exploration and production in India is done by companies like NOC or National Oil Corporation, ONGC or Oil and Natural Gas Corporation and OIL who are actually the oil companies in India that are owned by the government under the Industrial Policy Rule. The National Oil Corporation during the 1970s used to produce and supply more than 70 percent of the domestic need for the petroleum but by the end of this amount dropped to near about 35 percent. This was because the demand on the one hand was increasing at a good rate and the production was declining at a steady rate. Oil Industry in India during the year 20042005 fulfilled most of demand through importing oil from multiple oil producing countries. The Oil Industry in India itself produced nearly 35 million metric tons of Oil from the year 2001 to 2005. The Import that is done by the Oil Industry in India comes mostly from the Middle East Asia. The Oil that is produced by the Oil Industry in India provides more than 35 percent of the energy that is primarily consumed by the people of India. This amount is expected to grow further with both economic and overall growth in terms of production as well as percentage. The demand for oil is predicted to go higher and higher with every passing decade and is expected to reach an amount of nearly 250 million metric ton by the year 2024.

Some of the major companies in the Oil Industry in India are:

Oil India Ltd. Reliance industries

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Bharat Petroleum Corporation Limited Hindustan Petroleum

Role of Oil and Natural Gas Industry in India GDP

The Role of Oil and Natural Gas Industry in India GDP is very significant as it is one of the biggest contributors to both the Central and State treasuries.Role of Oil and Natural Gas Industry in India GDP-Highlights:

India is the 6th largest consumer of petroleum. By the year 2010 India is expectedto rank 4th in terms of consumption of energy. The contribution of the Indian Oil and Natural Gas Industry is nearly US$ 13.58 billion. All of the oil refineries in India, apart from two are operated by the states. The total refinery output in the period 2005-06 was 130.11 million tones. The growth rate of the refinery output was increased by 2.1 % in the year 2005-06. The crude oil output at the end of 2006-07 was 33.98 million tones. The growth rate of the crude oil output was increased by 5.6% in the year 2006-07. The production of natural gas in the year 2006-07 was 31.55 billion cubic meters. Indian petroleum demand depends highly on import of oil and natural gas. Around 70% of the demands are fed by the imports of oil and natural gas. The security pertaining to energy has become one of the primary concerns of the Central Government. Presently India is trying to grab a share of the oil and gas fields from Central Asia to Myanmar and Africa. The area of interest for the Indian Oil and Natural Gas Industry is to search for petroleum in both offshore and onshore blocks

Role of Oil and Natural Gas Industry in India GDP-World's refiner

The cost effective refining in India is attracting the attention of several international players. India is one of the most important markets for petroleum products and crude oil . The crude oil from Middle East is easily transported to India by means of the sea routes.

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Role of Oil and Natural Gas Industry in India GDP-Investments Abroad

India is one of the largest investors in oil fields located abroad. Most of the Government owned oil companies have share in the oil and gas fields in different places of the world such as Sudan, Egypt, Libya, Ivory. Coast, Vietnam, Myanmar, Russia, Iraq, Qatar, and Australia . India has 20 % share in Sakhalin-I oil project in Russia . The Oil and Natural Gas Corporation (ONGC) has entered into an agreement with ENI to acquire 20-25 % share of the Congo oil block.

Varieties of Crude Oil The petroleum industry often characterizes crude oils according to their geographical source, e.g., Alaska North Slope Crude. Oils from different geographical areas have unique properties; they can vary in consistency from a light volatile fluid to a semi-solid. The classification scheme provided below is more useful in a response scenario.

Class A: Light, Volatile Oils - These oils are highly fluid, often clear, spread rapidly on solid or water surfaces, have a strong odor, a high evaporation rate, and are usually flammable. They penetrate porous surfaces such as dirt and sand, and may be persistent in such a matrix. They do not tend to adhere to surfaces; flushing with water generally removes them. Class A oils may be highly toxic to humans, fish, and other biota. Most refined products and many of the highest quality light crudes can be included in this class. Class B: Non-Sticky Oils - These oils have a waxy or oily feel. Class B oils are less toxic and adhere more firmly to surfaces than Class A oils, although they can be removed from surfaces by vigorous flushing. As temperatures rise, their tendency to penetrate porous substrates increases and they can be persistent. Evaporation of volatiles may lead to a Class C or D residue. Medium to heavy paraffin-based oils fall into this class. Class C: Heavy, Sticky Oils - Class C oils are characteristically viscous, sticky or tarry, and brown or black. Flushing with water will not readily remove this material from surfaces, but the oil does not readily penetrate porous surfaces. The density of Class C oils may be near that of water and they often sink. Weathering or evaporation of volatiles may produce solid or tarry Class D oil. Toxicity is low, but wildlife can be smothered or drowned when contaminated. This class includes residual fuel oils and medium to heavy crudes. Class D: Nonfluid Oils - Class D oils are relatively non-toxic, do not penetrate porous substrates, and are usually black or dark brown in color. When heated, Class D oils may

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melt and coat surfaces making cleanup very difficult. Residual oils, heavy crude oils, some high paraffin oils, and some weathered oils fall into this class. These classifications are dynamic for spilled oils; weather conditions and water temperature greatly influence the behavior of oil and refined petroleum products in the environment. For example, as volatiles evaporate from a Class B oil, it may become a Class C oil. If a significant temperature drop occurs (e.g., at night), a Class C oil may solidify and resemble a Class D oil. Upon warming, the Class D oil may revert back to a Class C oil.

India in World Crude Oil Industry Petroleum and Natural Gas: The recent exploration and production activities in the country have led to a dramatic increase in the output of oil. The country currently produces 35 million tonnes of crude oil, two-thirds of which is from offshore areas, and imports another 27 million tonnes. Refinery production in terms of crude throughput of the existing refineries is about 54 million tones. Natural gas production has also increased substantially in recent years, with the country producing over 22,000 million cubic metres. Natural gas is rapidly becoming an important source of energy and feedstock for major industries. By the end of the Eighth Five-Year Plan, production was likely to reach 30 billion cubic metres.

Factors Influencing Crude Oil Markets

Shortage of oil supplies Taxation - When oil taxes are raised, end consumers often mistakenly blame the oil producers, but it is really their own governments that are responsible. Balance of demand and supply in the short term. Rate of investment in the longer term. Accidents. Bad weather. Increasing demand. Halting transport of oil from producers. Labour disputes.

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Crude Oil Units (average gravity)

1 US barrel = 42 US gallons 1 US barrel = 158.98 litres 1 tonne = 7.33 barrels 1 short ton = 6.65 barrels

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Indian Strategic Petroleum Reserve Limited (ISPRL) was incorporated on 16th June, 2004 as a Wholly Owned Subsidiary of Indian Oil Corporation Limited. Certificate of commencement of business was obtained from Registrar of Companies on 17.03.2006. The entire shareholding of the company was subsequently taken over by Oil Industry Development Board (OIDB) and its nominee on 9th May 2006. As on 31.03.2010, the authorized capital and Issued/Subscribed/Paid up capital of the company were Rs.1000 crores and 519.64 crores respectively (includes Rs.178.4 crores pending allotment). The main objective of the company, in terms of Memorandum and Articles of Association, is to carry on the business of storage, handling, treatment, carriage, transport, dispatch, supply, market research, advice, consultancy, service providers, brokers and agents, engineering, contractors, wharfingers, warehouseman, dealers of Oil and Oil products, gas and gas products, petroleum and petroleum products, fuels, spirits, chemicals of all types and kinds of the compounds, derivatives, mixtures, preparations and products thereof.To ensure energy security, the Government of India has decided to set up 5 million metric tones (MMT) strategic crude oil storages at three locations namely, Visakhapatnam, Mangalore and Padur (near Udupi). These strategic storages would be in addition to the existing storages of crude oil and petroleum products with the oil companies and would serve as a cushion in response to external supply disruptions. The construction of the proposed strategic storage facilities is being managed by Indian Strategic Petroleum Reserves Limited (ISPRL), a Special Purpose Vehicle, owned by Oil Industry Development Board (OIDB). The proposed storages would be in underground rock caverns near east and west coasts so that they are readily accessible to the refining sector. Underground rock caverns are considered the safest means of storing hydrocarbons. The estimated cost of the project is around Rs.2400 crore at September 2005 prices excluding the cost of crude oil for filling the caverns. ISPRL will have ownership and control of the crude oil inventories and will coordinate the release and replenishment of Crude Oil Stock during supply disruptions through an Empowered Committee to be constituted by the Government of India.

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PROJECT OBJECTIVE

The rate at which Indias dependence on crude oil import is rising and the way oil prices in international market is behaving it is apprehended that in all likelihood the subsidy burden in the next fiscal will be much higher than this time,so the main objective of this project is to understand that how exactly the accounts department of an oil storage organization keeps the financial records of all the transactions.I have also found out the working Capital of the company and the different accounting ratios of the company.

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ORGANISATIONAL STRUCTURE OF ISPRL

CHIEF EXECUTIVE OFFICER PS to CEO (Manish Verma)

HEAD FINANCE( CFO)

SECRETARY TO HEAD FINANCE

HEAD TECHNICAL( DGM)

SECRETARY TO HT TECHNICAL

HEAD(P&A) MANGER P&A

LOWER DIVISION CLERK SENIOR MANAGER

COMPANY SECRETARY & SENIOR ACCOUNTS OFFICER

CHIEF MANAGERS

MANAGERS

ACCOUNT MANAGER

ENGINEERS

SECRETARIAL ASSISTANT

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On the first week of the internship I was given a brief introduction of the company by the Chief Executive Officer Mr. D.K. Agarwal and then I was appointed under the accountant Shri Deepchand as an assistant to him. Shri Deepchand gave me a brief description of what exactly happens in the acounts department of Indian Strategic Petroleum Reserves Limited.He told me that first of all order is given by the engineers for the purchase of the material and then the materials are supplied,bills then come to the accounts department,scrutinized by the accountant.After that the vouchers are made and then it gets signed by the chief financial officer and it goes for payment.I studied some vouchers,how to make vouchers.Vouchers are of three types bank voucher,cash voucher, and general voucher,then I studied some contractor bills of Mangalore,Vishakhapatnam,Padur.Then, I studied the anuual report of the company for 2009-10. I was assigned a project by the Chief Financial Officer of ISPRL to make a project on the payment release summary it should include all the information about the payment method of all the contracts undertaken by ISPRL in Vishakhapatnam,Mangalore and Padur respectively.I,then began to collect information regarding all the documents and files that are required.First of all I studied the file of Vishakhapatnam which included all the information regarding the starting of the contract,estimated expenditure of the contract (all the information is given in the later part of the report). I learned about the main function of the finance department .Its main function is to make vouchers,scrutinize them properly and ultimately it is released for payment.All the payments are calculated in Tally.The number of employees involved in the finance department are three accountant,assistant accountant and the other is financial consultant.The function of the accountant is to make all the entries of the payment made.The function of the financial consultant is to examine the bills received from the contractors and putting them up for concurrence of the Chief Financial Officer and approval Chief Executive Officer and then to the Deputy General Manager.Then I began working on my project about the schedule of rates of the strategic storage of crude oil reserves in underground caverns at padur. I studied the file of opening bank account,in this file there was information regarding the payment system.The payment is mainly made by RTGS(Real Time Gross Payment System),it is a documented instruction to the bank made by ISPRL.Indian Strategic Petroleum Reserves Limited has the bank account with Corporation Bank.Therefore,whenever any payment is made by Isprl then it gives the instructions to Corporation Bank through RTGS ,the RTGS note contains all the information about the beneficiary like the name,account no.,amount to be transferred,on which date it is to be transferred etc.

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Process of crude oil extraction

Locating the oil field

Geologists use seismic surveys to search for geological structures that may form oil reservoirs. The "classic" method includes making an underground explosion nearby and observing the seismic response that provides information about the geological structures under the ground. However, "passive" methods that extract information from naturally-occurring seismic waves are also known.Other instruments such as gravimeters and magnetometers are also sometimes used in the search for petroleum. Extracting crude oil normally starts with drilling wells into the underground reservoir. When an oil well has been tapped, a geologist (known on the rig as the "mudlogger") will note its presence. Such a "mudlogger" is known to be sitting on the rig. Historically, in the USA, some oil fields existed where the oil rose naturally to the surface, but most of these fields have long since been used up, except in certain places in Alaska. Often many wells (called multilateral wells) are drilled into the same reservoir, to ensure that the extraction rate will be economically viable. Also, some wells (secondary wells) may be used to pump water, steam, acids or various gas mixtures into the reservoir to raise or maintain the reservoir pressure, and so maintain an economic extraction rate. Drilling

The oil well is created by drilling a hole into the earth with an oil rig. A steel pipe (casing) is placed in the hole, to provide structural integrity to the newly drilled wellbore. Holes are then made in the base of the well to enable oil to pass into the bore. Finally a collection of valves called a "Christmas Tree" is fitted to the top, the valves regulating pressures and controlling flows. Oil extraction and recovery Primary recovery During the primary recovery stage, reservoir drive comes from a number of natural mechanisms. These include: natural water displacing oil downward into the well, expansion of the natural gas at the top of the reservoir, expansion of gas initially dissolved in the crude oil, and gravity drainage resulting from the movement of oil within the reservoir from the upper to the lower parts where the wells are located. Recovery factor during the primary recovery stage is typically 5-15%.While the underground pressure in the oil reservoir is sufficient to force the oil to the surface, all that is necessary is to place a complex arrangement of valves on the well head to connect the well to a pipeline network for storage and processing.

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Secondary recovery Over the lifetime of the well the pressure will fall, and at some point there will be insufficient underground pressure to force the oil to the surface. After natural reservoir drive diminishes, secondary recovery methods are applied. They rely on the supply of external energy into the reservoir in the form of injecting fluids to increase reservoir pressure, hence replacing or increasing the natural reservoir drive with an artificial drive. Sometimes pumps, such as beam pumps and electrical submersible pumps (ESPs), are used to bring the oil to the surface. Other secondary recovery techniques increase the reservoir's pressure by water injection, natural gas reinjection and gas lift, which injects air, carbon dioxide or some other gas into the bottom of an active well, reducing the overall density of fluid in the wellbore. Typical recovery factor from water-flood operations is about 30%, depending on the properties of oil and the characteristics of the reservoir rock. On average, the recovery factor after primary and secondary oil recovery operations is between 35 and 45%. Tertiary recovery Tertiary, or enhanced oil recovery methods increase the mobility of the oil in order to increase extraction.Thermally enhanced oil recovery methods (TEOR) are tertiary recovery techniques that heat the oil, thus reducing its viscosity and making it easier to extract. Steam injection is the most common form of TEOR, and is often done with a cogeneration plant. In this type of cogeneration plant, a gas turbine is used to generate electricity and the waste heat is used to produce steam, which is then injected into the reservoir. This form of recovery is used extensively to increase oil extraction in the San Joaquin Valley, which has very heavy oil, yet accounts for 10% of the United States' oil extraction. In-situ burning is another form of TEOR, but instead of steam, some of the oil is burned to heat the surrounding oil.Occasionally, surfactants (detergents) are injected to alter the surface tension between the water and oil in the reservoir, mobilizing oil which would otherwise remain in the reservoir as residual oil.Another method to reduce viscosity is carbon dioxide flooding.Tertiary recovery allows another 5% to 15% of the reservoir's oil to be recovered.Tertiary recovery begins when secondary oil recovery isn't enough to continue adequate extraction, but only when the oil can still be extracted profitably. This depends on the cost of the extraction method and the current price of crude oil. When prices are high, previously unprofitable wells are brought back into use and when they are low, extraction is curtailed.Microbial treatments is another tertiary recovery method. Special blends of the microbes are used to treat and break down the hydrocarbon chain in oil thus making the oil easy to recover as well as being more economic versus other conventional methods. In some states, such as Texas, there are tax incentives for using these microbes in what is called a secondary tertiary recovery. Very few companies supply these, however companies like Bio Tech, Inc. have proven very successful in waterfloods across Texas.

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The Government of India has implemented NELP, by which 100 Per cent FDI is permitted for small and medium sized oil fields through competitive bidding. The refining sector is open to public-private partnerships (PPP) as well as only private investments. In case of an Indian private company, FDI of 100 per cent is permitted. 100 per cent FDI is allowed for petroleum products and pipeline sector as well as natural gas/LNG pipeline, for infrastructure related to marketing of petroleum products, market study of formulation and investment financing. For trading and marketing, minimum 26 per cent equity is recovered over five years.

In one of the biggest FDI into the oil and gas sector, BP will be paying US$ 7.2 billion for a 30 per cent stake in 23 oil and gas blocks of Reliance Industries Ltd (RIL). The amount will be paid to RIL, for the interests it would acquire in the 23 production sharing contracts. Future performance payments up to US$ 1.8 billion could be paid based on exploration success resulting in development of commercial discoveries. The two will also enter into a 50:50 joint venture (JV) for sourcing and marketing of gas. These payments and the combined investment could amount to US$ 20 billion.

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ACTUAL PROJECT WORK During my training period I was exposed to the following areas handled by finance:

1.

Budgeting

The finance department prepares the budget or what is the estimated cost of the project, the estimated date of completion and how will it be implemented, whether the amount that is estimated is correct or not. Funds are limited so we have to prioritize activities. The project which will generate more revenue we have to allocate more funds to them.

2.

Concurrence for award of tenders

A fair and equal opportunity is provided to capable vendors for bidding of contract. Bidders are qualified based on predetermined technical and commercial criteria. Technical bidders are given more importance than others as they have more knowledge about the technical details. Works are awarded to the lowest qualified bidder. This work is done by Mrs. V.Sudha, CS &DM (Fin.)

3.

Payment for physical work completed

Physical work is the amount of work done at the sites. The payment shall be made on stage wise completion of individual item/work on pro rata monthly running account bills. The running account bills are scrutinized, approved and then the vouchers are made by Shri Deep Chand and ultimately it is released for payment. This payment shall be based on the joint measurements after deduction of necessary dues such as income tax, other recoveries payable by contractor to the owner in accordance with various provisions made in the bidding document.

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4.

Finalisation of Accounts

The main job of the accountant is to prepare the balance sheet,Profit and Loss Account,Cash Flow and Fund flow Statement.He also makes payment to the parties and deals with all the tax related matters.This task is done by Vikash Sharma.

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BALANCE SHEET AS AT MARCH 31,2010

SCHEDULE A.SOURCES OF FUNDS 1.Shareholders Fund Share Capital Total B.APLLICATION OF FUNDS 1.Fixed Assets Gross Block Less:Depriciation Net Block Preoperative Expenses(Pending Allocation)

Amount in rupees Amount in rupees as at 31.03.2010 as at 31.03.2009

10,000,000 10,000,000

10,000,000 10,00,000

11,991,406 11,991,406

3,724,124 3,724,124

2.Current Assets,Loans And Advances Cash and Bank Balance Other Current Assets Loans and Advances

596,048 14,145 1,487,700 2,097,893

8,589,653 58,109 1,487,700 10,135,502

Less:Current Liabilities & Provisions Current Liabilities Provision For Income Tax Provision of FBT Net Current Assets 3.Miscellaneous Expenditure (To the extent not written off) Preliminary Expenses Total 4,288,685 837 5,977 4,295,499 (2,197,606) 4,063,723 2,10 4,065,826 6,069,676

206,200 10,000,000

206,200 10,000,000

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I studied the Balance sheet of the company and calculated the working capiltal of the company and then found out some ratios. Concepts of Working Capital The firms investment in current assets is called Gross Working capital. The assets which can be converted into cash within an accounting year and includes cash, short-term securities, debtors (account receivables or book debts), bill receivable and stock (inventory) are called current assets. Net working capital on the other hand is the difference between current assets and current liabilities. In current liabilities, the claim of outsiders are expected to mature for payment within an accounting year and include creditors (accounts payable), bills payable and outstanding expenses. Focusing on management of Current Assets Two objectives if gross working capital is that how to optimize investments in current assets and how it should be financed. The working capital needs of the firm is fluctuating due to the changing business activity, hence it is necessary to do investment in current assets in such a way that there is no excessive or inadequate investment in current assets. Inadequate amount of current assets cannot meet the current obligations of the firm whereas on the other hand excessive amount of current assets should be impaired as its reduces firms profitability as idle investments earns nothing. Focusing on Liquidity Management It is the duty of management to decide the extent as to which current assets should be financed with equity capital and/or borrowed capital. This is so because in every firm there exists a minimum amount of working capital which is permanent.It is necessary to determine the amount of working capital for each firm as there is no specific rule as to how current assets should be financed. For the efficient management of working capital both gross and net concepts of working capital are equally important. Current assets should be used to productive uses as it involves cost of funds. Besides this, a judicious mix of long and short term finances should be invested in current assets. 2009 Working capital=Current Assets-Current Liabilities =10,135,502-4,065,826 =6,069,676

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2010 Working capital=Current Assets-Current Liabilities =2,097,893-4,288,685 =(2,190,792) Change in working Capital=6,069,676-(2,190,792) =8,260,468 So,we can understand that the change in working Capital is Rs.8,260,468 Current Ratio: This ratio is also named as the working capital ratio.Generally Cash and Bank balance,Sundry Debtors,Stocks,Advance Payments,Bills Of Exchange,Temporary Loans and Advances etc. which are easily convertible into cash,are taken as the total of the current assets.The liabilities which are payable or may fall due within the accounting year,are taken as the current liabilities.This ratio reflects the financial stability of the enterprise.The standard of the normal ratio is generally taken to be 2:1,i.e.,for every Re.1 of the current liabilities,there should be Rs.2 of the current assets.Actually this ratio reveals the firms ability to meet its current liabilities.Any ratio which is smaller than 2 is considered to be a dangerous sign for the management.This will mean over trading.If the ratio is greater than 2,then it will mean undertrading or unemployed or unutilized resources which is also a very bad sign.

2009 2010 Liquid Ratio:

2.49:1 0.48:1

This ratio is considered as subsidiary to the current ratio as this ratio also reveals the actual financial stability of the concern to pay of fits immediate impending liabilities.The normal of the standard ratio in this case is 1:1.This means that for every Re.1 of the current liabilities,there should be Re.1 of the current liabilities,there should be Re.1 of the current assets.This ratio is also used for testing the solvency of the enterprise. 2009 2010 1.51:1 1.2:1

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Gross Profit Margin: Firms profitability in relation to sales is called gross profit margin (or simply gross margin ratio). Thus gross margin ratio for the year 2008-2009 and 2009-2010 is as follows: 2010 2009 39.8% 40 %

Net profit margin: When operating expenses, interest and taxes are subtracted from the gross profit, we obtain net profit margin. By dividing profit after taxes from sales we get net profit margin.Thus net profit margin for the year 2008-2009 and 2009-2010 is as follows:

2010 2009

15% 16%

Return on Investment (ROI): By dividing PAT by investment is the conventional method of calculating return on investment ROI. It is conceptually unsound to use PAT for calculation of ROI as PAT represents residue income of shareholders and investment represents a pool of funds supplied by shareholders. It will be more prudent to calculate ROI before the tax measure as taxes are not controllable by management and firms opportunities for availing taxes incentives differ. Thus for measuring ROI we can use return on total assets(ROTA). ROTA= EBIT/Total Assets The ROTA for the year 2008-2009 and 2009-2010 are as follows: 2010 2009 Return on total assets .82 or 82% .88 or 88%

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Average daily operating expenses: Cost of goods sold+Selling, administrative expenses and general expenses less depreciation (and other non-cash expenditures)/number of days in a year (say 360) 2010 2009 172 113

Coverage Ratio: Due to static in nature debt equity ratio fails to meet an individual firms ability to meet interest (and other fixed -charges) obligations hence the interest coverage ratio or time interest earned is used to test the firms debt serving capacity. (a) Interest coverage ratio= EBIT/Interest 2010 52.35 2009 38.34 (b) Fixed charges coverage ratio: Interest coverage ratios limitation is that it doesnot include repayment of loan, thus Fixed charges coverage is used for this purpose. 2010 36.46 2009 28.99

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LIMITS OF AUTHORITY OF FINANCE

ITEMS Authorisation to sign promissory notes for borrowings Investment of surplus funds Opening,operation and closing of Bank accounts Fixed deposits with Banks/purchase of Govt. securities as security deposit and their encashment and short terms deposit Banking arrangements for collection,payroll,disbursements,encashments and discounting facilities Issue of stop payment instructions to Bank for cheques Lodging of specimen signature with Banks and modification thereof for operation of bank accounts Statutory payments viz. income tax etc. Approval of the Budget estimates and revised estimates Re-appropriation of funds -Upto 10% -Beyond 10%

APPROVING AUTHORITY Board Committee Board CEO

Head Finance

Authorised signatories Head Finance

Head Finance Board

CEO Board

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AUCTION PROCESS

The Auction takes place through tendering and one of them is open tendering or through press tenders. The Eligible criteria is that the value of successfully completed single work order/contract during preceding seven years of similar works shall not be less than 60% of estimated value of work. The Financial criteria is that the annual turnover of the bidder shall be more than 125% of the annualized estimated value of work in any one of the preceeding three years.However,for works having scheduled completion period of less than 12 months,annualisation of estimated value for calculation of Annual Turnover shall not be done.Net worth of the bidder for the latest financial year shall be positive.Bidder shall not be under liquidation,court receivership or similar proceedings.

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SUGGESTIONS

According to me some improvements should be done.They are as follows :

Internal audit should be done. The billing procedure should be shortened and payment should be made fast. Prepare proper register of bill details and fixed assets. The manual recording should be done. An investigation of current assets is necessary as the firms current asset ratio in the year 2010 consists of doubtful and slow paying debtors or slow moving and absolute stock of goods. Hence the low Current Ratio of ISPRL should not be taken into account that it doesnot have quality assets

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CONCLUSION

Since oil price increases began in 2004,the oil industry has earned profits.These profits might have resulted from other factors in addition to the increased price of oil.A key factor is increased profitability might be the tightness in the U.S gasoline market,a factor related to the lack of enough refinery capacity to meet U.S. demand for petroleum products.If oil and petroleum product prices are to decrease,supply will likely have to increase relative to demand.Expanded supply results from investments in the various stages stages of the oil industry production process,from exploration and development of new oil fields to increased refinery capacity.If the underlying economic parameters and the regulatory environment are not encouraging,investment might not be undertaken.Historically volatile prices and profit levels coupled with a tight regulatory environment contribute to industry uncertainity. Other legitimate uses for earned profits incude paying higher dividends and retiring outstanding shares,acquiring assets through merger and acquisition,and investing in new product areas.These uses of profit may benefit shareholders and strategically position the firm in the global market,but they do less to expand the supply of oil and products on the market and thereby reduce the prices for consumers.As a result of significant time lags that tend to occur in the oil industry,it may be too soon to know wheather or not investments in the industry,if taken,will result in the increased supply of oil and petroleum products needed to reduce prices and consumers cost. Fitch Ratings said, in a just published report, that the outlook for India's oil and gas industry is stable for 2011. This is based on the agency's expectation that ties between the government and its majority-owned oil companies will not weaken. India's state-owned oil companies dominate the sector, and Fitch links their ratings with that of the sovereign because of the sector's strategic importance and the evidence of tangible financial support. Consequently, these companies' stable outlooks reflect that of the sovereign. The government marginally increased the prices of cooking fuels -- liquefied petroleum gas (LPG, domestic use) and kerosene (public distribution system) in 2010. However, these continue to be subsidised, and Fitch believes that these will remain at levels set by policy requirements, rather than at market prices even in 2011. Consequently, under-recoveries -- which result when tariffs are insufficient to cover costs -- will remain high for these fuels.

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BIBLIOGRAPHY

6th Annual Report of ISPRL(2009-10) Limits of Authority Engineers India Limited Report Websites: www.isprlindia.com www.maps of india.com www.ibtimes.com Books Financial Statement Analysis by Dr.Anjan Bhattacharya

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