A PROJECT REPORT ON Study of the Funds Analysis of the Food Corporation of India (FCI)

Done at:

Food Corporation of India, HQ

16-20, Barakhamba Lane, New Delhi- 110001

Submitted By: Name: - Shivam Dua Enrolment no: - 00421001909 Course: - BBA(CAM)

IDEAL INSTITUTE OF MANAGEMENT AND TECHNOLOGY

(Affiliated to G.G.S. Indraprastha University, Delhi)

ACKNOWLEDGEMENT
At the outset, I would kike to thank Food Carporation of India, HQ for giving me an opourtunity to successfully complete my summer internship in their esteemed organization. It has been a big learning experience for me and I would like to express my gratitude towards all the people who have guided and supported me in completing this project.

I would like to express my heartfelt gratitude to Mr. Jitendra Mendiratta , AGM Bills(Drawing & Distributing Officer) for his help, guidance and constructive criticism during the course of my training. I would also like to thank Mr. Sudhir Mahajan, manager(Accounts,CFS) for his constant support in completing this project.

Finally I would like to thank all officers of finance department who provided me with valuable information regarding various processes that take place in the overall functioning of finance in FCI

I would like to thank Mr.Mayank Gupta-Faculty guide, Ideal Institute Of Management and Technology (IIMT) for constant supervision, guidance and support.

Shivam Dua

CONTENTS

1. Company Profile:-

2. Objective of the Project:-

3. Introduction to Financial analysis:-

4. Significance of the Working Capital:-

5. Analysis of Working Capital:-

6. Conclusion and Suggestions:-

References

FOOD CORPORATION OF INDIA

A BREIF HISTORY

The Food Corporation of India was set up under the food Corporation Act 1964 and on 14th January,2009, FCI completed 45 years of its existence. FCI was set up to secure strategic position in food grains trade and implement the National Policy for Price Support operations, procurement, storage, inter-state movement and distribution operations, in short to operate the Central Pool. Today FCI is the country leader in food grains management and is fully focused on helping Farmers feed the country, better and more efficiently, today and tomorrow. Food constitutes the main requirement of every human being. In a sub-continent like India where millions of mouths depend to targeted Public Distribution System(TPDS) and other welfare schemes of Govt. of India, FCI, plays a leading role in making food grains available to the extent of 30 lakh tones during a month, to respective State Govts. For its distribution among beneficiaries. To procure, store, preserve and move such a huge quantity of stocks spreading over vast areas with its intricate network is, indeed, a nerve and back-jerking tasks.

To nurture the Green Revolution , the Government of india introduced the scheme of minimum assured price of foodgrains which are announced well before the commencemen t of the crop seasons, after taking into ac ount the cost of production /inter-crop price parity, market prices and other relevant factors.  The food Corporation of India alone with other Government agencies provide effective price. Assured for wheat, paddy and coarsegrains.  FCI and the State Govt. agencies in consultation with the concerned State Govts. Establish large number of purchase centres throughout the state to facilitate purchase of foodgrains  Centres are selected in such a manner that the farmers are not required to cover more than 10 kms. To bring their produce to the nearest purchase centres of major procuring states. Price support purchases are organized in more than 12,000 centers for wheat and also more than 12,000 centers for paddy every year in the immediate post-garvest season.  Such extensive and effective price support operations have resulted in sustaining the income of farmers over a period and in providing the required impetus for higher investment in agriculture for improved productivity.

 To name a few states about Rs.41,000 m illions fo paddy and 43000 millions for wheat in Punjab  And Rs.45,000 millions for levy rice in Andhra Pradesh is paid to the farmers/millers during wheat/rice procurement season  India today produces over 200 million tones of foodgrains as against a mere 50 million tons  In 1950.  In the last two decades, foodgrain procurement by Government agencies have witnessed a quantum jump from 4 million tones to over 25 million tones per annum.  Food grain are procured acc ording to the Government prescribed quality standards.  Each year, the Food Corporation purchases roughly 15-20% of Indias wheat production and 12-15%of its rice production.  This helps to meet the commitments of the Public Distribution System and for building pipeline and buffer stock.

RESEARCH METHODOLOGY

y Research Methodology is a systematically solve the research problem. It has many dimensions and research methods constitute a part of the research methodology. y Thus when we talk about research methodology, we do not only talk of the research methods but also consider the logic behind the methods. We use in context of our research study, so that research results are capable of being evaluated either by researcher himself or by others. y To effectively carry out in research, I would use the following research process, which consists of series of actions or steps.

Research comprises of the following steps:-

1. Formulating the research Problem. 2. Research design & Sample Design. 3. Analysis of data gathered 4. Data analysis comparison 5. Graphics and interpret

1 FORMULATING THE RESEARCH PROBLEM

This is the first step under which the problem is stated in general way and then ambiguities i.e. understanding and rephrasing the problem thoroughly and rephrasing the same into a meaningful terms from an analysis point of view. The research problem under the present project was to study data of various funds. For this research process was to be formulated and the execution of which would result in the desired data.

2. PREPARING THE RESEARCH DESIGN

The function of research design is to provide for the collection of relevant evidences with minimal expenditure of efforts, time and money.

Research Design
y Type of research y Sample design

TYPE OF RESEARCH
y The type of research under present is an analytical research. In analytical research; we use tact's or information already available, and analyze these to make a critical evaluation of the material. Hence the same would be done. y In this project I had collected facts, data, and information.

SAMPLE DESIGN

A sample design is a definite plan determined before any data is actually collected for obtaining a sample. Researcher must select a sample design, which should be reliable and appropriate for his report.

3. OBSERVATIONAL DESIGN (COLLECTION OF DATA)

Observational design relates to the condition under which the observations are to be made. Observational design in respect to research. There are several ways of collecting the appropriate data, which differ considerably in context of money, time cost and other resources at the disposal of the researcher.

Data can be obtained from two important sources:

y Primary data y Secondary Data

Primary data
Primary data are the data that are collected afresh and for the first time. Thus happens to be in character. Primary data are collected by the following ways:-

a) b) c) d)

Observation Interview Schedule Questionnaire

Secondary Data
Secondary data are the data that are already collected and are only analyzed by different sources these sources are as follows:y Corporate magazine y Manuals of various companies y Books, journals, newspaper y Employment exchange The secondary data would be collected from financial statement, journal of national repute, books of national and international author as well as the annual report of the company. In addition to this internet access will make the study more effective and meaningful.

Vision 2020
y

y y y

To aggressively promote Decentralized Procurement by State Governments with special emphasis in nontraditional areas and commodities. To initiate procurement of non-MSP governed commodities on commercial principles. To ensure adequate buffer for meeting requirements under TPDS & Other Welfare Schemes. To dispose off surplus and un-storage worthy godowns and introduce concepts of mechanized handling in the conventional godowns. To undertake R&D for conversion of some of the existing capacity to bulk and cost effective utilization of existing bulk capacity. To optimize monthly movement programme with existing state of art of computerization within the country at various locations as per corporate policies and priorities. Modernization of Quality Control equipments and systems for food preservation in order to increase the shelf life of food grain.

To venture in the fields of Forward Trading and Exports of both surplus stocks of food grains in Central Pool and no-traditional commodities. To introduce state of art of financial management in order to reduce the dependency on the present banking system in the country. To initiate systems for settlement of storage loss and transit loss through insurance coverage and revised inventory mechanism. To develop efficiency in human resource management both in staff/officers and workers with changed circumstances in the work approach of P.S.U. s. To achieve state of art in computerized communication between different offices/ depots through out the country.

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OBJECTIVES

y y

y y

To provide farmers remunerative prices To make food grains available at reasonable prices, particularly to vulnerable section of the society To maintain buffer stocks as measure of Food Security To intervene in market for price stabilization

QUALITY POLICY

FCI, as the country?s nodal organization for implementing the National Food Policy, is committed to provide credible, customer focused services, for efficient and effective food security management in the country. Our focus shall be:

y Professional excellence in Management of food grain and other commodities y Service quality and stake holder orientation y Transparency and accountability in

transactions
y Optimum utilization of resources y Continual improvement of systems, processes and resources

QUALITY OBJECTIVES

y Fulfillment of all the targets set as per Govt. of India Food Policy from time to time. y Monitoring of Quality in all major transactions, processes leading to improved customer satisfaction level y Accountability for efficiency, responsiveness, performance and minimization of all losses & Wastes

y Need based up gradation of infrastructure and work environment y Need based enhancement of available knowledge & skills. y Transparency in decision making, effective communication leading to harmonious employee relations y Establishing, maintaining and improving ISO 9001:2000 based Quality Management Systems covering all areas of activity.

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Strength of FCI
Facilitator for food security y Provider of price & market assurance to the farmer y Ensuring steady food grain supplies to 5 Lakhs Fair Price Shops for PDS to cover 141 million APL / 67 million card holders. y Ensuring food for All other Welfare Schemes. Management Capability and Experience y Large pool of talent managing world's largest food grain operation on behalf of Govt. of India Enormity of Scale

y Countrywide network of offices & strategically located Food Storage Depots. y Operates in mandis/purchase centres located within 10 kms. proximity of farmers. y Undertakes purchases of 30 to 40 million tonnes annually making it the largest buyer in the world. Effective market intervention to stabilize prices State of the art experience on food grain preservation / Warehousing / Transportation Management y Maintains the health of millions of tonnes of food grain in storage. Quality acknowledge by International buyers. Excellent Storage Management. y Timely movement of food grains from procuring States to consuming States.

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Opportunities
y After nearly four decades of varied experience in food management, FCI can now play a wider role in being a food advisor to the Central/State Govts. y The Corporation can also play a more proactive role in the sphere of commercial ventures. y To diversify into non traditional commodities / activities.

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OPERATIONAL NETWORK
FCI operates through a country-wide network with its Corporate Office in New Delhi, 5 Zonal Offices, 23 Regional Offices practically in all the State capitals, 165 District Offices(as on 01.10.2008) and 1470 depots (as on 01.01.2007)

Most of the Revenue Districts in the country are covered by FCI.

It has a manpower of 33,473 officers and staff /employees as on 31.03.2010 and about 53,646 regular food handling workers besides approximately one lakh food handling contract labourers being engaged by the Handling & Transport Contractors, as on 31.03.2010

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The general superintendence, direction and management of the affairs and business of the Corporation shall vest in a board of directors which exercise all such powers as may be exercised or done by the Corporation under this Act.

The board of directors, in discharging its functions, act on business principles having regard to the interest of the producer and consumer and shall guided by such instructions on questions of policy as may be given to it by the Central Government.

Distribution of Foodgrains
The national objective of growth with social justice and progressive improvements in the living standards of the population make it imperative to ensure that foodgrain is made available at reasonable prices. y Public Distribution of foodgrains has always been an integral part of India ?s overall food policy. It has been evolved to reach the urban as well as the rural population in order to protect the consumers from the fluctuating and escalating price syndrome. y Continuous availability of foodgrain is ensured through about 5 lakhs fair price shops spread throughout the country. y A steady availability of foodgrains at fixed prices is
Distribution through Fair Price shop

FPS in remote hill areas in HP

assured which is lower than actual costs due to Govt. policy of providing subsidy that absorbs a part of the economic cost. y The Govt. of India introduced a scheme called Targetted Public Distribution Scheme (TPDS) effective from June, 1997. The stocks are issued under this scheme in the following two categories:a) Below Poverty Line (BPL): Determination of the families under this category in various states is based on the recommendation of the Planning Commission. A fixed quantity of 35 Kg. foodgrains per family per month is issued under this category. The stocks are issued at highly subsidized Price of Rs.4.15 per Kg. of wheat and Rs. 5.65 per Kg. of rice. Antyodaya Anna Yojna - During the year 2000-2001 Govt. of India decided to release foodgrains under Antyodaya Anna Yojna. Under this scheme the poorest strata of population out of earlier identified BPL population is covered. Foodgrains are being provided to 2.5 crores poorest of the poor families out of the BPL families at highly subsidized rates of Rs.2/- per kg. of wheat and Rs.3/- per kg. of rice by FCI. This is the biggest food security scheme in the world. b) Above Poverty Line ( APL) ? Families which are not covered under BPL are placed under this category. The stocks are issued at Central Issue

Price of Rs. 6.10 per Kg. of wheat and Rs. 8.30 per Kg. of rice. Allotment/Offtake of Wheat/Rice The Central Issue Price (CIP):(Rate: Rs./Qtl.) Commodity Effective BPL From Families Wheat 01- 07415 2002 Rice 01- 07565 Common 2002 Rice 01- 07565 Grade-A 2002 APL AAY Families Families 610 200 795* 830 300 300

(*): Applicable to J&K, Himachal Pradesh, Sikkim, Uttaranchal and NE States. There are number of other welfare schemes of the Govt. of India : (a) Mid-Day-Meal-Scheme (MDM)- The Govt. of India have introduced MDM ? National Programme of Nutrition Support to Primary Education in Primary Schools w.e.f. 15.8.1995. Under the scheme every students upto 5th class of Govt. schools is entitled for 3 Kgs. of wheat/rice per month @ 100 Grams. Since October 2007 allocation of foodgrains have also been made for the students from 6th to 8th class in the educationally backward blocks and every student is entitled for 150 Grams of foodgrains per child per school day. The Scheme is partly run by Govt./Aided Schools/Local Bodies to serve free cooked / processed hot meal. FCI is supplying foodgrains free of cost to the State/UTs. This scheme is partly financed by Ministry of HRD.

(b) Wheat Based Nutrition Programme (WBNP) - A scheme run by Department of Women and Child Development, Ministry of Women & Child Development for providing nutritious food to children below 6 years of age and expectant/lactating women. Foodgrains supplied by FCI at BPL rates. (c)&(d) SC/ST/OBC Hostels & Welfare Institutions & HostelsThe Ministry of CAF&PD and the Ministry of Social justice & Empowerment coordinate to monitor of the Scheme for providing foodgrains to SC/ST/OBC Hostels. Hostels having students belonging to SC/ST/OBC categories are eligible to draw 15 Kgs. Foodgrains per resident per month. The Government of India decided that w.e.f. 2.11.2000 foodgrains (wheat/rice) will also be allotted to the state Governments at the rate of 5 Kg per head per month for indigent people living in Welfare Institutions, such as. Beggar Homes, Home for Nari Niketan etc. sponsored by the State Govts. and the concerned administration. Foodgrains are supplied by FCI at BPL rates. It may be clarified that from the year 2002-03, the MOCAF&PD has been making the requirement of the State/UT under the head "Welfare Institutions & Hostels" to meet the requirement of the State/UT for providing foodgrains to different type of welfare institutions. Since April 2005, the Ministry of CAF &PD has enhanced quota of allotment under this scheme to 5% of the monthly allotment made under BPL & AAY. Presently, the foodgrains is being allotted by MoCAF&Pd on the basis of average offtake during last three years under the scheme. (e) Annapurna Scheme- Indigent Senior Citizens of 65 years of age or above eligible for National Old Age Pension under NOAPS, but not getting pension can get 10 Kgs of foodgrains per month. FCI is issuing foodgrains under this scheme to State/UT Govts. at BPL rates. Under This scheme of Ministry of Social Justice & Empowerment, Indigent people living in Welfare institutions like Beggar Homes, Orphanages, Nari Niketans etc. are given 15 kgs of foodgrains per person per month. Foodgrains are supplied by FCI at BPL rates. Presently, the scheme is being run by the Ministry of CAF&PD.

(f) Sampoorna Gramin Rozgar Yojana- A scheme financially supported by Ministry of Rural Development in which foodgrains are supplied to the States/ UTs by FCI free of cost. (g) Special Component of Sampoorna Gramin Rozgar Yojna Under the Special component of the SGRY financed by Ministry of Rural Development for augmenting food security through additional wage employment during natural calamity. FCI release foodgrains free of cost to the State/UTs. Since 1st April 2008 no allotment of foodgrains has been made by the Govt. of India under SGRY. (h) Foodgrains to Adolescent Girls Pregnant and Lactating Mothers ( AGPLM). GOI introduced this Scheme w.e.f January , 2003 Under this scheme foodgrains is being supplied by FCI at BPL prices to the State/UT Govt. for Adolescent Girls, Pregnant and Lactating Mothers ( AGPLM). The identified under nourished woman/girl is provide 6 Kg. of foodgrains (wheat/rice)/month. The scheme is partly supported by Planning Commission. The scheme is being run by MoCAF&PD with the new name Nutritional Programme for Adolescent Girls (NPAG). (i) World Food Programme (WFP) - FCI is sparing stocks to WFP projects from the Central Pool stocks as and when required by them. FCI is working as 'FOOD BANK' for World Food Programme(WFP) projects in India . When India was deficit of foodgrains, WFP used to get stocks to meet the deficiency through import. (J) Emergency Feeding Programme - Under this scheme, Ministry of CAF & PD releases allocation of rice at BPL rates, for KBK Districts (Bolangir, Kalahandi, Koraput, Malakangiri, Nabarangpur, Naupada, Rayagada & Sonepur) of Orissa State on monthly basis. Under this scheme, rice @ 7.5 kg/beneficiary/month is issued for 2 lakh beneficiaries. This programme is being run by the Ministry of CAF&PD. (k) Grain Bank - This scheme provides Grants for establishment of village Grain Bank to prevent deaths of Schedule Tribes specially children in remote and backward tribal villages facing or likely to face

starvation and also to improve nutritional standards. The scheme provides funds for building storage facility, procurement of weights & measures and for the purchase of initial stock of one quintal of foodgrains of local variety for each family. The allocation of foodgrains was made by the GOI, Ministry of Tribal Affairs during the year 2002-2003. Under this scheme foodgrains are allotted to States at BPL rate. Since 2006-07 the scheme is being run by Ministry of CAF&PD. The cost of foodgrains as food component is being paid to FCI in advance at economic cost. State Govts. are lifting foodgrains free of cost from FCI. (l) National Food for Work Programme - this programme has been launched by the Prime Minister during November 2004 for providing foodgrains in identified 150 most backward districts of the country. The beneficiaries of this programme are labourers engaged by the State Govt. in development work. Foodgrains is given as part of wages under the scheme to the rural poor at the rate of 5 kg. per manday. More than 5 kg. foodgrains can be given to the labourers under this programme in exceptional cases subject to a minimum of 25% of wages to be paid in cash. Under this programme foodgrains ae issued to states/UTs free of cost. This scheme is mentored by Ministry of Rural Development. Since 2006-07 the scheme has withheld

Organizational structure



REQUIREMENT FOR TAKING SHORT TERM LOAN

Keeping in view the periodic increase rate of interest by the consortium of the Banks as well as to raise additional resouirces to meet the requirement of funds at the time to Peak procurement, the corporation is taking steps for availing alternative sources of finance through Short Term Loan to achieve the twin objective of reduction in interest cost and improving the liquidity.

As per stated above there are few ways to get the funds-like STL, BONDS, ect. Through this Project, we come to know, how to raise funds through short term loans. What is the procedure and The criteria and from whom they take the permission.

FINANCIAL FEATURES
Average Bank Borrowing during 2007-08 Rs. 27327 Crores (Consortium of 65 Banks as on 31.3.08) Commercial Borrowing (Bonds) Rate of Interest on Bank Borrowing w.e.f. 01.03.2008 Rate of Interest on Bonds Rs. 8605 Crores 10.15 % p.a. (Monthly Compounding) 7.31%p.a.(Annually Payable)

Equity Released for Plan Schemes and Working Capital (as on 31.03.08) Rs. Cr. Year Upto 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 First Quarter Second Quarter Third Quarter Fourth Quarter Total Total paid-up Capital Working Capital 1484.00 Nil Nil Nil Nil . Nil Nil Nil Nil Nil 1484.00 . Construction of Godowns 855.11 23.96 5.87 20.78 7.50 . Nil Nil 3.18 0.82 4.00 917.22 . IISFM Project Nil 15.50 39.14 15.00 Nil . Nil Nil 14.49 10.51 25.00 64.64 . Other Schemes 13.89 Nil Nil Nil Nil . Nil Nil Nil Nil Nil 13.89 . Total 2353.00 39.46 45.01 35.78 7.50 . Nil Nil 17.67 11.33 29.00 2509.75 .

Authorised Capital

3500.00

Economic Cost of Foodgrains of FCI Crop-Year Wise Economic Cost (Provisional)

(Rs./qtl.)

Year Rabi 2008 Kharif 2007

Wheat 1515 -

Rice (Grade A) 1716

Rice (Common) 1664

Accounting Year-Wise opening Stock adjusted weighted Economic Cost

(Rs./qtl.)

Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(Prov) 2007-08(RE) 2008-09(BE)

Status Audited Audited Audited Audited Un-audited Prov. Estimates Rev. Estimates Budget Estimates

Wheat 852.94 884.00 918.69 1019.01 1041.85 1214.39 1348.69 1458.83

Rice 1097.96 1165.03 1236.09 1303.59 1339.69 1411.60 1571.36 1698.90

Food Subsidy Released to FCI and Incurred by FCI (Rs. Cr.)

Food subsidy released to FCI Food Subsidy Incurred by FCI

 3

Year

Total

Against Earlier years . .

For the Year 16274.00 22673.72

Subsidy Incurred during the year 18005.00 25322.00 21587.00 20773.00 21344.00 24858.00 31817.00 .

Status of Accounts Audited Audited Audited Audited Un-Audited Prov.Estimates Rev.Estimates .

2001-02

16274.00

2002-03 22673.72

2003-04 23474.04 4545.86 18928.18 2004-05 23280.00 4090.39 19189.61 2005-06 2006-07 19871.00 473.32 19397.68 20786.21 1411.08 19375.13

2007-08 27759.68 5218.75 22540.93 2008-09 (Upto 5400.04 30/04/08) . 5400.04

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CASH FLOW (RABI)

1. INTRODUCTION The Food Corporation of India has been set up under an Act of Parliament primarily to: (a) Provide price support to farmers to ensure remunerative prices for their produce, (b) Make available foodgrains at reasonable price to consumers, particularly the vulnerable sections of the society and Maintain buffer stocks as a measure of food security not only to impart inter-seasonal stability but also to meet the emergent situations arising out of crops failure due to drought, floods, etc.

(c)

2. WORKING CAPITAL. To achieve the above objectives, the Corporation undertakes procurement, storage, movement and distribution of Central Pool stocks on a massive scale. The working capital required for these gigantic operations is provided by a consortium of banks constituted by RBI under the leadership of SBI. The quantum of working capital requirement for the ensuing Rabi foodgrains operations has been projected keeping in view the policies of the Govt. announced from time to time. The gross out flow of funds for this purpose is estimated at Rs.46400.15 crores against inflows of Rs.54509.76 crores during April, 2010 to September, 2010. The details are given in the following paragraphs.

 3

The Govt. of India has issued a single default guarantee of Rs.34495 crores (enhanced from Rs.33100 crores) to SBI w.e.f 07.05.2007 and valid up to 31.03.2008, the validity of the guarantee was subsequently extended upto 31.03.2012 vide Govt. of Indias letter No. 54/2007/SC-II dated 23.02.2010 covering the entire food credit of the Corporation. The State Bank of India authorizes the monthly drawing power of the Corporation equivalent to value of stock. For borrowing beyond the value of stock SBI levies penal interest @0.5% on the amount of excess borrowing. 3. CURRENT CASH CREDIT UTILISATION: The monthly Credit limit/ drawing power used to be authorized to the Food Corporation of India by the Reserve Bank of India upto April, 2005. Thereafter RBI stopped authorizing the credit limit, subsequently the Reserve Bank of India vide letter dated 2.09.05 has informed that henceforth State bank of India will take care of the credit requirements of the Corporation. Thereafter the State Bank of India started authorizing monthly Credit limit/ drawing power of the Corporation based on the value of stock. The drawing power was fixed by SBI at Rs.17966.91 crores for the month of February, 2010. The Cash Credit Utilization at the end of March, 2010 is estimated at Rs.24616.61 crores.

4.

PROCUREMENT/ TAKEOVER OF WHEAT 4.1 The table below shows market arrivals and procurement of wheat for Central Pool including under de-centralized system during the last five years. Qty. Lakh Tonnes YEAR MARKET PROCUREM ARRIVA ENT FOR

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LS QTY. 2004181 20052006200720082009158 137 154 244 269

Rabi 05 Rabi 06 Rabi 07 Rabi 08 Rabi 09 Rabi 10 6.

CENTRAL POOL QTY. 168 148 92 111 227 254

REVENUE EXPENSES: Revenue expenses for the six month period have been assumed at Rs5304 crores based on the FCI's budget estimate for 2010-2011. INTEREST ON BANK BORROWINGS: The interest provision for food credit has been considered at current rate of 10.25% at monthly rest. FOOD SUBSIDY: The food subsidy to the extent of Rs26000.00 crores is estimated as receivable during the first six months' period of the financial year 2010-11.An advance of Rs.10,000/- crores ,as per comments of Ministry of Finance , at an average interest rate for 364 days T Bills could be provided from 2010-11 and adjustment during the financial year itself against the provisions made in the Budget 2010-11 for Food subsidy.

7.

9.

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10.

STOCK: 10.1 The estimated value of stocks at acquisition cost as on 1st April 2010 vis-a-vis actual as on 1st April'2009 is as under :Qty. In Lakh Tonnes Value: Rs.Crores As on As on 1.4.2010 1.4.2009 Qty. Value Qty. Value Wheat 66.27 7714.76 75.31 9347.78 Rice 134.1 20099.3 154.4 25715.37 2 6 3 Total 200. 27814. 229.7 35063.15 39 12 4 GROSS OUTFLOW: The estimated fund requirement for foodgrains operations from 01.04.2009 to 30.09.2009 is as follows:Total For Quarter ending 4/201 (Rs. Crores) 0 April-10 July 10 to to to June- Sept.10 9/201 10 0 I) For purchase of 19994. 14927.57 5067.13 Wheat including 70 takeover from State Agencies. II) For procurement 10948. 6953.08 3995.73 of Levy Rice including 81 Paddy and CMR takeover from State Agencies. III) For meeting the 5304.0 2652.00 2652.00 revenue expenses 0

13.

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other than the bank interest IV) Interest on bank 858.16 borrowing V) Interest on Bonds 70.11

463.64

394.52

70.11 45.00 3900.00

0.00 45.00 3000.00

VI)Interest on short 90.00 term loan VII)Repayment of 6900.0 short term loan 0

VIII) Carryover 1257.8 Charges of Wheat 7 IX)Repayment of 976.50 Bonds Total 46400. 15

465.81 976.50 30453.71

792.06 0.00 15946.44

 3

SHIVAM DUA

14. GROSS INFLOW: Particulars Total AprilSept.2010 Rs. Crores For ending April 2010June 2010 5785.26 13000.00 Quarter

July 2010 Sept.2010

Sale of Food grain Subsidy from GOI AnnexureVII Addl. Subsidy from GOI Receipts from STL Total

11609.76 26000.00

5824.50 13000.00

10000.00

10000.00

0.00

6900.00 54509.76

3900.00 32685.26

3000.00 21824.50

15. NET FUND FLOW: 15.1 The bank overdraft is estimated at Rs.24616.61 crores as on 31st March 2010 after adding interest for the month ending March 2010. Monthwise estimated fund flow during the period ending six months April/September 2010 is given below:

CCash Credit Month at the /Year beginning of the month R Rs. Crore Apr, 10 NMay,1 24616.61 12452.61

RReceipts Drawing during the s During month the Month RRs.Crore R Rs.Crore 14566.83 9089.47 126730.83 6106.75

Month end projected cash credit utilization Rs.Crore 12452.61 18559.37

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SHIVAM DUA

0 18559.37 DJun, 10 ,JJul, 10 22385.06 AAug,1 0 Sep,1 0 12337.92 14600.12 6797.42 5898.10 5322.85 4725.49 3825.69 15945.23 3060.66 2818.61 22385.06 12337.92 14600.12 16507.00

15.2 Summary Cash Flow forecast for the period from 1st April, 2010 to 30th September 2010 is given in Annexure-VII. 16. CASH CREDIT LIMITS REQUIRED:

As per the estimates given in foregoing paras the operating cash credit limit required from April 2010 onward would be as under:Rs.Crores CC Limit proposed 12452.61 18559.37 22385.06 12337.92 14600.12 16507.00

Month 4/2010 5/2010 6/2010 7/2010 8/2010 9/2010

The cash credit limits indicated above may be considered by the State Bank of India for sanction for Rabi, 2009 subject to usual review on monthly basis.

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SHIVAM DUA

CASH FLOW (KHARIF)

1.

INTRODUCTION: The Food Corporation of India has been set up under an Act of Parliament primarily:a. to provide price support to farmers so that they get remunerative prices for their produce, to make available foodgrains at reasonable price to consumers, particularly to the vulnerable sections of the Society and, to maintain buffer stocks as a measure of food security not only to impart inter seasonal stability but also to meet the emergent situations arising out of crops failure due to drought, floods, etc.

b.

c.

2.

WORKING CAPITAL:

To achieve these objectives, the Corporation undertakes procurement, storage, movement and distribution of foodgrains on a massive scale. The requirement of working capital for these gigantic operations is met by the consortium of banks led by SBI under the directions of the Reserve Bank of India. The quantum of working capital requirement for the ensuing Kharif foodgrains operations has been projected keeping in view the policies of the Government announced from time to time. The gross outflow of funds for this purpose is estimated at Rs.56169 crores against inflows of Rs.32854 crores during October, 2009 to March, 2010. The Govt. of India has issued a single default guarantee of Rs.34495 crores (enhanced from Rs.33100 crore) to SBI w.e.f. 07.05.2007 and valid up to 31.03.10 covering the entire food credit of the Corporation.
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The State Bank of India is however still fixing the drawing power of the Corporation equivalent to value of stock , which is resulting in charging of penal interest on drawing in excess of stock value inspite of the full security being available in the form of Govt. guarantee. 3. CURRENT CASH CREDIT UTILISATION: The Cash Credit limit authorized to the Food Corporation of India by the Reserve Bank of India was Rs.30348 crores (up to April, 2005). The Reserve Bank of India vide its letter dated 2.09.05 has informed that henceforth State bank of India will take care of the credit requirements of the Corporation. Accordingly, the State Bank of India has authorized the Cash Credit Limit of Rs.18972.40 crores for the month of August, 2009.The actual Cash Credit Utilization at the end of August, 2009 at Rs.16902.75 crores

7. REVENUE EXPENSES: The revenue expenses for the six months period have been projected at Rs.3972.00 crores. 8. INTEREST: The interest on bank borrowings has been considered at 10.25% up to the value of projected stock to be held by the Corporation for the period Oct. 09 to March, 10. 9. OFFTAKE: The issue of Wheat and Rice has been projected at 63.91 lakh tonnes and 109.93 lakh tonnes respectively during the period Oct. 09 to March 2010.

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10. FOOD SUBSIDY: The Food Subsidy to the extent of Rs.17719 crores receivable during the next six months period has been considered.

11. STOCKS: a. The stock with FCI as on 31.3.2010 and the value thereof at average acquisition cost is estimated as Under: Qty. Lakh Tonnes Rate Rs. per Qtls. Amount Rs. Crore Commodity Wheat Rice Total Qty. 96.13 185.8 0 281.9 3 Rate Amount 1237.6 11897.0 0 5 1640.3 18410.4 8 2 30307.4 7

b. The month end stock levels of wheat and rice from October, 2008 to September, 2009 and the expected stock level during the period from 1.10.2009 to 31.3.2010

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14.GROSS OUTFLOW: The estimated gross fund requirement for food grains operations from 1.10.2009 to 31.3.2010 will be as follows :Amount Rs. Crore Sl. No. Particulars Total Oct. 2009 March 2010 7164.00 30178.00 Quarter ending Dec. 2009 3682.00 10498.00 Quarter ending March 2010 3482.00 19680.00

1. 2.

Takeover of wheat Procurement of Rice (including Paddy, Levy and Custom Milled Rice) For meeting revenue expenses other than Bank Interest Carry over charges on Wheat Re-Payment of Short Term Loan Repayment of Bonds Interest on Bank Borrowings Interest payable on Bonds

3.

3972.00

1986.00

1986.00

521.00

196.00

325.00

9450.00

6450.00

3000.00

6 7.

3100.00 1090.00

0.00 361.00

3100.00 729.00

559.00

272.00

287.00
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Interest payable on Short Term Loan TOTAL

135.00

90.00

45.00

56169.00

23535.00

32634.00

15. GROSS INFLOW: Amount Rs. Crore Sl.N o. Particulars Total 1.10.200 9 to 31.3.201 0 9135.00 17719.00 6000.00 Quarter ending December 2009 4177.00 12327.00 3000.00 Quarter ending March 2010 4958.00 5392.00 3000.00

1. 2. 3.

Sale of Food grains Subsidy from Govt. of India Receipt from Short Term Loan TOTAL

32854.00

19504.00

13350.00

16. NET FUND FLOW: The Bank borrowing is Rs.15741 crores as on 1.10.2009 (after adding interest for the month ending Sept., 2009). Monthwise estimate of fund flow during the period October, 2009 to March, 2010 is given below :Amount Rs. Crore

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Month

Cash Credit at Drawin the beginning gs during the month 15741 10660 13967 19770 23200 33084 6629 5673 11231 11462 12505 8669

Receip ts during the month 11710 2366 5428 8032 2621 2697

Month end cash credit

Oct. 2009 Nov. 2009 Dec. 2009 Jan. 2010 Feb. 2010 Mar. 2010

10660 13967 19770 23200 33084 39056

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17. CASH CREDIT LIMIT REQUIRED: As per estimate given in the foregoing paragraphs, the cash credit limit required from October, 2009 onward would be as under : Amount Rs. Crore Month Oct. 2009 Nov. 2009 Dec. 2009 Jan. 2010 Feb. 2010 Mar. 2010 CC Limit 10660 13967 19770 23200 33084 39056

CONCLUSION AND RECOMMENDATION

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Financial analysis is analysis of financial statements of and enterprise. Financial statement reorganized collection of data according to logical and constituent accounting procedures. How ever financial statements in their traditional from giving historical data and information are of little us to these who use them to draw certain conclusion.

Financial appraisal is scientific evaluation of profitability and financial strength of any business concern. Financial appraisal techniques include ration analysis common size analysis trend analysis, fund flow analysis etc. these techniques may be applied in the financial appraisal of any entity and FCI Ltd.. Is no exception to it.

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PROFITABILITY

The measurement of profitability is a tool of overall measurement of efficiency an overall study profitability of FCI has been Dade in relation to sales operating assets capital employed and its net worth. By analysis the working result i.e. Profit and loss account of FCI. It was found that the net profit before interest and tax of the FCI is showing increasing trends. This is very good for FCI. The increase in the profits is nearly 24% more then previous year the reason is good sales growth between years. For this following suggestion should be considered. y Proper cost control is required and cost control technique should be adopted for it. y Operating expenses, admn. Expenses should be specially considered to be reduced. y Inventory is the biggest items of balance sheet that must have demanded a large amount of maintaining cost. So efficient inventory management should be done. Inventory should be reduced extent that would help to recover blocking money in inventory. y The service staff should be given proper training and better environment for work. y Proper advertisement and sales promotion is required. y Dairy has to pay large fix interest charged. Hence long term borrowing should be reduced so that the earning are satisfactorily earmarked with them.

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Working capital

y In the year 2006-2007 the growth in working capital was 43.33%As compare to the year 2005-2006 similarly working capital in the year 2007-2008 has grown to 100.03% as compared to the working capital in the year 2005-2006. The management should follow the same trend in near future too so to have considerable appreciation in working capital every year.

y The Current Ratio for the year 2007-2008 has taken the Value of 2.01:1, which is very satisfactory and as per the standard required (2:1).The current ratio of 2.01:1 indicates, that for every Rs 1 of current liability the company Rs 2 of current assets, which indicates more liquidity and hence more amount of working capital. The company need to further enhance the value of ratio.

Quick ratio for the year 2008-09 is above the ideal standard (1:1). It is 1.04:1, which indicates that for every Re1 of current liability the company has Rs 1.04 of current assets, hence the company is in sound position in terms of working capital position. It would be better for the company if in near future it could further enhance the value of the ratio

Absolute quick ratio for the years right from 2005 up to 2008 are close to the standard. For year 2007-08, the ratio is well above the standard (0.5:1), which indicates the healthy picture of the company in terms of availability of working
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capital (quick assets) in order to meet current liabilities. The same position should be sustained in near future too.

As compared to year 2005-2006, in the year 2006-07, the inventory turnover increased to 8.19 times. Similarly, in the year 2007-08 it increased to 8.59 times, which indicates that the times taken in converting raw material into finished product and finally selling it got reduced considerably and hence indicates quick release of working capital. In near future it would be more profitable for the company, if the value of ratio gets increased to 11- 14%.

In spite of an increase in Net Working Capital, the Working capital turnover ratio of FCI got reduced to 10.8 times in the year 2006- 2007, as compared to the year 2005-07. Similarly, in the year 2007-08, the working capital turnover ratio further reduced to 8.8 times as compared to 13.24 times in the year 2005-06. The reduction in working capital turnover ratio is on account of massive growth in net working capital as compared to a slight growth in the sales of the company. The value of ratio could be better in near future , if the growth in sales matches with the growth in net working capital.

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LIMITITATIONS

Following were some o the limitations faced during the training, in completely understanding the various processes & operations:

1. Insufficient information supplied by the corporation. 2. Conservativeness of the corporation. 3. Godowns & other storage locations are far away from the Head-Quarter, making it difficult to collect all the necessary information regarding actual procurement & storage status. 4. The staff of the department of finance was due to work overload, too busy to spend enough time, in helping in the preparation of the project. 5. In the corporation, there is top-level secrecy in matters concerned with investment.

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REFRENCES

 I.M.Pandey, (1978), financial management, Ninth addition, UBS Publication New

Delhi.

 Van Horn,(2002),Financial Management and Policy,12th edition, Publisher Dorling

Kindersley India ltd.

 Horne Wwachonicz, J.R.Bhaduri (2005), Fundamentals and Financial management,

12th edition, Pearson publisher.

 MY Khan, P.K.Jain (1981), Financial Management,5th edition, Publisher Mc graw

hill companies.

 Financial statement for the year ended 2007-08 as obtained from FCI  Annual-Report 2006-07 of FCI  Study module on financial management

 Financial dailies.
 Economic Times  Business Standard

 Business Magazines
 Business India


Business World

 Internet Portals:  www.fciweb.nic.in

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 www.wikipedia.com

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