Working Capital Management at CCL

A REPORT OF SUMMER INTERNSHIP PROGRAM
ON
AT
RANCHI (HEAD QUARTER)
By
CHANDAN KUMAR
1208000868
In partial fulfillment for the award of degree of
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DEPARTMENT OF MANAGEMENT
SIKKIM MANIPAL UNIVERSITY
SUMMER TRAINING REPORT ON
Working capital management of central coal field limited

For
COAL INDIA LIMITED
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Under the supervision

Of
Mr. Ajay.Deep.Wadhwa
M.com, FICWA
Dy. Manager (Finance)
Submitted by:
CHANDAN KUMAR
Submitted to:
MD. SHAHZADA
IQBAL
Roll No-1208000868
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ACKNOWLEDGEMENT
In pursuit of a MBA program, Project is a critical component of the entire learning

experience that a B-School offers in terms of learning. CENTRAL COALFIELD
LIMITED has given me the opportunity to gain invaluable experience under the
guidance of Mr. AJAY DEEP WADHWA, (Dy. Manager Finance) DARBHANGA
HOUSE, Head-Quarter, CCL, Ranchi. Their continuous support and cooperation
along with their valuable in hand experience about the industry provided me
with the conceptual understanding and practical approach needed to work
efficiently for this project .
Last but not the least I would take the opportunity to owe my my sincere
gratitude to MD. SHAHZADA IQBALfor extending their support and guidance for
their intellectual stimulation and moral support throughout my project. I hope
this report will reflect my learning is as beneficial to the organization as it has
been to me.
CHANDAN KUMAR
ROLL NO-1208000868
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DECLARATION
I CHANDAN KUMAR student of Sikkim Manipal University 2012-2014 declare

that every part of the project report WORKING CAPITAL MANAGEMENT OF
CENTRAL COALFIELD LIMITED that I have submitted is original.
I was in regular contact with the nominated guide and contacted many times for
discussing the project.
Date of project submission:
Facultys Comments:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
_____________Signature of the Faculty guide
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Name: MD. SHAHZADA IQ

CHAPTER I
INTRODUCTION
CENTRAL COALFIELD LIMITED
C.C.L is a subsidiary company of Coal India limited under ministry of coal and mines govt. of
India
C.C.L is one of the 8 coal production subsidiaries of coal India limited under ministry of
coal and mines. Company is governed by a board of directors consisting of 5 full time directors
and 6 part time directors. Full time directors are responsible for specific functions of operation,
project & planning, finance and personnel. India is third largest country in the production of coal.
C.C.L means Central Coalfields Limited.
HISTORICAL BACKGROUND
Coal Mining first started in India in the year 1815. The private Railway Companies started
mining activities in the year 1850. The Railway Board Nationalized the coal mining in 1925. The
Railway collieries were transferred to the Coal Board in the year 1944.
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In 1774 Warren Hastings initiates commercial coal mining at Raniganj (West Bengal) in 18151820 First Shaft Mine opened at Raniganj 1835 Carr, Tagore & Company takes over the
Raniganj Coal Mines 1843 Bengal Coal Company takes over Raniganj Coal Mines and others; is
first Joint Stock Coal Company in India. Upto 1900 Minimal development; River transportation
used to transport coal to Calcutta ;railway lines at Calcutta leads to expansion of Coal Production
in Early 1900s, Capacity at 6 million tonnes per annum 1955-56 Focus on Coal Industry;
capacity up to 38.4 Million tonnes. In 1956 National Coal Development Corporation (NCDC)
formed to explore and expand coal mining in Public Sector. In 1972 Coking Coal Industry
Nationalized, Bharat Coking Coal Limited formed to manage operations of all Coking Coal
mines in Jharia Coalfield. In 1973 Non-coking coal was nationalized; Coal Mine Authority
Limited set up to manage these mines; NCDC operations bought under the ambit of CMAL. In
1975 Coal India Limited formed as holding Company with 5 subsidiaries viz. Bharat Coking
Coal Limited (BCCL), Central Coalfields Limited (CCL), Western Coalfields Limited
(WCL), Eastern Coalfields Limited (ECL) and Central Mine Planning and Design Institute
Limited (CMPDIL) in 1985.
Northern Coalfields Limited (NCL) and South Eastern Coalfields Limited (SECL) carved
out of CCL and WCL in 1992. Mahanadi Coalfields Limited (MCL) formed out of SECL to
manage the Talcher and IB Valley Coalfields in Orissa. In2007 Coal India & five of its
Subsidiaries, viz, NCL,SECL,MCL,WCL,CCL was accorded coveted "Mini Ratna" Status.
COAL INDIA LIMITED ( Date of incorporation)

Coal India Limited was formed as holding Company with 5 subsidiaries on 21.10.1975 (CIL
holds 100 % shares of its all subsidiaries companies). The company is incorporated under the
Companies Act, 1956 and is wholly owned by the Government of India (GOI). CIL is the single
largest coal producing company in the world and the largest corporate employer with manpower
of 397,138 (as on 1 April 2010). Operating through 81 mining areas CIL, is an apex company
with 7 wholly owned coal producing subsidiaries and 1 mine planning and consultancy company.
CILs mining activities are spread over 8 provincial states of India. Coal India has 477 mines of
which 277 are underground, 165 opencast and 34 mixed mines.
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It encompasses the whole gamut of identification of coal reserves, detailed exploration followed
by design and implementation and optimizing operations for coal extraction in its mines. The
producing companies are:1) Eastern Coalfields Limited
(ECL), Sanctoria, West Bengal
2) Bharat Coking Coal Limited
(BCCL), Dhanbad, Jharkhand
3) Central Coalfields Limited

4)
South
Eastern
Coalfields
(CCL), Ranchi, Jharkhand

Limited
(SECL),
Chattisgarh
5) Western Coalfields Limited
(WCL), Nagpur, Maharashtra
6) Northern Coalfields Limited
(NCL), Singrauli, Madhya Pradesh
7)
Mahanadi
Coalfields
Limtied
(MCL),
Sambalpur,
Orissa;
8) The consultancy company is Central Mine Planning and Design Institute Limited
(CMPDIL),Ranchi,Jharkhand.
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STRUCTURE OF CIL
western
coalsfield
limited
Nagpur
south
eastern
coalsfield
Bilaspur
northern
coalsfield ltd
Singrauli
eastern
coalsfield
ltd
Asansol
COAL
INDIA
LIMITED
bharat
coking coal
ltd
Dhanbad
central
coalfield ltd
Ranchi
mahanadi
coalfields
ltd
Sambalpur
cmpdi
Ranchi
HIGHLIGHTS OF C.C.L
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Central Coalfield Limited has been on the coal map the country as a public sector on October,
1956, under different names. In the beginning it was known as National Coal Development
Corporation, then Central Division of Coal mines Authority , and finally under its present
nomenclatures at Ranchi, Jharkhand. The Central Coalfield Limited is one of the subsidiaries of
coal India Limited registered under the Companys Act 1956 in the year 1975. The mining and
extraction of coal is entrusted to a public sector organization Coal India Limited. The Company
is divided into eight subsidiaries and Central Coalfield Limited is one of them. The company
presently known as CCL has a history of more than three decades. Pursuant to the Industrial
Policy Resolution of 1956, a company was formed by the names of M/S Hindustan Collieries
Private Limited, on 5 September, 1956. The name was changed to the National Coal
Development Corporation. The NCDC was formed on 01.10.1956 with 11 state railway
collieries in Orissa and Madhya Pradesh. Like other industries and organization, the affair of
CCL too is not settled by its owner (Govt. of India). Rather the professional team of management
called Board of Directors (BOD) is appointed by the Govt. of India to manage the affair of CCL.
It consists of chairman cum-Managing Director, four functional Directors in charge of
operations, personnel, finance and projects & planning. Besides part-time Directors as may be
appointed by the Govt. from time to time. At present CCL have 67 collieries and 7 washeries
under revenue production. Some of the state collieries are very old, at least one of which that in
Giridih has crossed century in the year 1961. It also has seven coal washeries , a coal oven plant ,
besides workshop and handling plants spread over in Hazaribagh ,Palamu , Dhanbad ,Ranchi,
Bokaro , Giridih, and Chatra district.
CCL is the major source of medium coking coal in India. CCLs other important
activities are beneficiation of medium coking coal for steel plants through its chain of coal
washeries and manufacture of soft coke for domestic kitchen. Most of the production (88%)
comes from surface mines. The productivity of underground mines and many of the surface
mines is low, but because of high priced of coking coal, the company has been making marginal
profit and losses with the recent deregulation of coking coal price the profitability of the
company is expected to improve. The command area of CCL companies 10 coalfields namely
Giridih, East Bokaro, West Bokaro, piparwar, Ramgarh-kaitha, North Karanpura, South
Karanpura, Auranga, Hutar, Daltongang and Giridih/ Jayanti. Chairman-cum-Managing
Directors is the full time executive of the company. The collieries and washeries have been
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grouped into 15 areas each headed by chief General Manager/General Manager. The coal
projects are headed by project officer.
C.C.L (Central Coalfield Limited) is a subsidiary unit of COAL INDIA LIMITED. C.C.L. has
been awarded as the miniratna company for its efficient functioning. C.C.L. headquarter is
situated in Darbhanga house which is in Ranchi near rajbhawan. C.C.L. is a leading provider
of coal in India. C.C.L provides coal to different power sectors and steel sectors in india. C.C.L
has shown profit in three consecutive years and achieved a different platform.
C.C.L. has played a major role in socio-economic growth of Jharkhand region. In 47
years of its existence it has virtually brought out development in many backward areas through
its mining activities, employment opportunities and reaching basic infrastructure to several
remote and inaccessible areas. CCL also strive to help in establishing Coal based industries in
this region and also to make coal as domestic fuel for homes with an objective of improving
forest cover.
CCL INFRASTRUCTURE
1. NUMBER OF MINES
C.C.L. currently has 63 mines of which 26 are underground and 37 are opencast mines.
2. WASHERIES CCL have 4 Coking Coal washeries and 3 Non Coking Coal Washeries.
Coking Coal washeries :-
Kathara, Sawang, Rajrappa, Kedla
Non Coking Coal washeries :-
Piparwar, Gidi, Kargali
3. WORKSHOPS -
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3-tier workshop infrastructure is in place for the Open cast Coal Mining Projects as briefed
below :1. Project / Unit workshop at every project for daily, periodic, scheduled maintenance
requirements, running breakdown maintenance and replacement of spares and subassemblies.
2. 3 Regional Repair Shops at Jarangdih, Tapin North and Dakra for a group of
Mines which cater for overhauling of sub-assemblies of HEMM, System repairs of
equipment and other major repairs beyond the scope of project / unit workshops.
3. A Central Workshop located at Barkakana with full infrastructural facilities to
refurbish equipments of various mines under planned capital repair, repair and
maintenance of major float assemblies like Engines, Transmissions, DC / AC
Motors and Generators of Shovels and Drills, manufacturing of shaft, bushes, gear
cutting, fabrication of steel structures, castings and tyre re-treading.
4. RAILWAY SIDINGS-
28 sidings from which coal is dispatched to various customers located all over India.
5. POWER SUPPLY
DVC is main source of power supply for CCL

There are 10 nos. 33kv/11Kv, 6.6 Kv Sub-stations in CCL (40MVA, 25 MVA, 20 MVA
and 10 MVA capacities).
Total connected demand is 119 MVA from DVC and CCL is also taking power from
BSEB where demand is 11MVA.
Rajrappa, Piparwar, N.K., Kathara, Kargali, Dhori, Hazaribagh and Kuju (through BSEB)
are getting power from DVC.
Average energy consumption is 575 million KWH.
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Power cost under control through energy conservation measures ( Capacitors ,

Rationalization of distribution systems etc.)
Adequate power supply availability is ensured for uninterrupted production.
6. ROADS
Approach Road - (Double lane road connecting highway to mine site, serving general
purpose which is of 250
kms length.)
Heavy duty coal transport Road - (Express highway to facilitate coal dispatch to
facilitate plants, rail head and consend. Total its 240 kms in length in which 140 kms is
operational and 100 kms is under-construction.)
Haulage Road - (Road for heavy earth moving machinery for mining purpose.
carriageway width up-to 45 Meters. Total surface HAUL road is of length 100 kms and
inside mine is 225 kms in length
7. MEDICAL
Two central hospitals at Ranchi and Nai Sarai equipped with all modern facilities for
testing, diagnosis and treatment.
Regional Hospitals at Kargali, Dhori, Katahara, Rajhara (Daltonganj), Dakra and Kedla.
Hospitals/dispensaries for immediate medical aid at each Project (Colliery).
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VISION AND MISSION OF CCL

Vision of CCL
"Committed to create eco-friendly mining"
Mission Of CCL
"To
become
World
class,
Innovative,
Competitive
&
Profitable
Coal Mining Operation to achieve Customer Satisfaction .
The Mission of CCL is to produce and market the planned quantity of coal and coal
products efficiently and economically with due regard to safety, conservation and quality.
The main thrust of CCL in the present context is to orient its operations towards market
requirements maintaining at the same time financial viability to meet the resource needs.
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BUSINESS OBJECTIVE OF CCL

Objectives Of CCL
Coal Mining through efficiently operated mines.
Besides fulfilling coal needs of the customer in terms of quantity, focus on quality, value
addition and beneficiation to the satisfaction of the customers.
Marketing of coal as main product.

Production :CCL annual production is about 48Mt. And its target is to achieve 50 Mt, in the FY
2010-11. The business of CCL is to mine Coal and sell it to the customers. The mining methods
adopted for various customer of CCL are as follow:
MINING METHODS
1. Opencast
Generally opencast mine of the company employs operating method with Shovel and
Dumper combination for mining.
In one of the mines namely Piparwar OcP, mobile in pit crushing and conveying
system with a pithead coal preparation plant has been commissioned.
2. Underground
Underground Mines of the Company employs intermediate technology with
LHD/SDL and conventional manual method for mining.
TECHNOLOGY
1. Opencast
Shovel-Dumper combination Mobile In pit Crushing & Conveying System
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2. Underground
Intermediate technology with Load Haul Dumpers and Side Discharge Loader
PROJECTS:The following projects have been taken up by C.C.L:
Magadh open coal.

Ashok expansion open coal.
North urimali open coal.
Karo open coal.
Konar open coal.
Amarpali open coal.
SAFETY ISSUES IN C.C.L :Safety of the man-power of C.C.L. comes under the top priorities of management. The work in
mines of C.C.L. is carried out as per the provision laid in the coal mines regulation1957 under
the mines act 1952 as per the permission and guidance of director general of mines safety.
C.C.L. has 3-tire system of safety committee. Unit, area and corporate level to review,
formulate and suggest safety measures for mines and mining processes. In addition to supply
personal protective equipments, free periodicals medical check-up is carried out to each worker
every five years. Safety fortnight is also organized every year and best area and best workmen
are rewarded to keep them aware related to safety issues in mines. There is an Emergency Cell
too in C.C.L. for dealing with emergency cases quickly and efficiently.
MAJOR PROJECTS TAKEN UP BY C.C.L.
Piparwar OCP
Ashoka Expansion OCP
Rajrappa OCP
Urimari OCP
Jharkhand OCP
Magadh OCP
Amrapali OCP
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SOME FUTURE PROJECTS

Karo expansion OCP
Konar OCP
N. Urimari OCP
Purnadih OCP
NOTE: OCP open coal project.
ACHIEVEMENTS OF C.C.L.
YEAR
WORKS ACCOMPLISHED
1815
Coal mining started in India.
1850
Private railways coal mining started by Railway board.
1925
First nationalization of of coal mining by railway.
1944
Railways collieries transferred to coal board under coal commissioner.
1956
National Coal Development Corporation Limited(N.C.D.C.) formed as the first public sector coal
company under central government with 11 states
railways collieries and annual production of 3.11 million tones.
1959
First coal washery at kargali setup.
1971
Nationalization of non-coking coal mines B.C.C.L formed
1973
Nationalization of non coking coal mines C.M.A.L

Formed and N.C.D.C become central division of C.M.A.L.
1975
Coal India Limited formed as holding company for

Coal. Entire Coal industry under public sector
Re-organized under CILS central Umbrella NCDC.
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YEAR
WORKS ACCOMPLISHED
1986
Reorganization of CCL, Singrauli and Talehar area
2005
11 Areas, 69 mines, 07 washeries, 1 central workshop, 5 regional workshops 3 of which are ISO9001 certified, Central hospital in Gandhi Nagar
is also ISO-9001 Certified.
2006
Recorded highest profit of Rs. 1165 crores in the

history of C.C.L. and for the first time paid Rs.
291.40 crores as dividend.
2007
Registered a profit of Rs. 1020 crores.
2008
2009
2010
receipt by our company of a composite score of 1.47 and rating as

Excellent.
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Administration hierarchy of C.C.L
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C.M.D.
MEMBER(B.O.D.)
DIRECTOR
PERSONNEL
DIRECTOR
OPERATION/
TECHNICAL
DIRECTOR
FINANCE
MAJOR COLLIERIES OF CCL

1. BARKASAYAL
2. ARGADA
3. NORTH KARANPUARA
4. RAJHARA
5. PIPARWAR
6. RAJRAPPA
7. KUJU
8. HAZARIBAG
9. BOKARO & KARGALI
10. DHORI
11. KATHARA
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CSR AND CCL

Business and industry have come into existence to promote social growth and social good.
Society and business are interdependent and business must take full account of social
expectations. And CCL strongly believes in social welfare. The company is a Miniratna category
1 Central PSU in the family of Coal India Limited. Once written off as a loss making CPSU the
company has made a spectacular turnaround about 4-5 years ago and has grown to strength.
CCL has played a catalytic role in the socio economic growth of the Jharkhand region. For the
last 5 decades of its existence, it has virtually brought about a metamorphosis in many backward
areas through its mining activities by creating employment opportunities and reaching basic
infrastructure to many remote and inaccessible areas. Its CSR can be categorized as follow:HOUSING FACILITY
Permanent - 59318
Temporary 6988
Total
- 66306
MEDICAL FACILITY
Hospitals 19
Dispensaries - 67
Beds 895
Doctors 340
EDUCATION FACILITY
DAV School fully financed- 7
Kendriya vidyalaya 3
Privately managed schools- 47
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CUSTOMERS
1. POWER SECTOR
1. State Electricity Boards (Uttar Pradesh, Punjab, Haryana and Jharkhand)
2.Delhi Vidyut Board
3. National Thermal Power Corporation (NTPC)
4. Damodar Valley Corporation (DVC)
5. Tenughat Vidyut Nigam Limited (TVNL), etc.
Major customers in power sectors are:
P.S.E.B
H.S.E.B
N.T.P.C
UPRVNL
J.S.E.B
T.V.N.L
D.V.C
2. STEEL SECTOR
1. Steel Authority of India Ltd (SAIL)
2. Indian Iron and Steel Co.
3. Rashtriya Ispat
Is
Nigam Limited (RINL), etc.
3.
CORE INDUSTRIES
1. Heavy Engineering Corporation (HEC
2 . Kalyanpur Cement Company
3. Association Cement Company (ACC)
4. Lemo Cement Company
5. Bihar Sponge Iron Limited (BSIL)
6. Tata Sponge Iron Limited(TSIL)
7. Indo Ashahi Glass Company (IAGO)
8. Indian Aluminium Company Limited
9. National Fertilizer Limited, etc.
4.
NON CORE
CORE INDUSTRIES
1. SSF Manufacturers
2. Sodium
um Silicate Manufacturers
3. Brick Manufacturers
4. Textile Manufacturers
5. Paper Manufacturers, etc.
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SOCIAL SIDE OF BUSINESS
CCL has played a catalytic role in the socio-economic growth of the Jharkhand region. For the
last 5 decades of its existence, it has virtually brought about a metamorphosis in many backward
areas through its mining activity by creating employment opportunities and reaching basic
infrastructure to many remote and inaccessible areas. Mining has turned out to be a main source
of earning for the State Exchequer of Jharkhand.
Major Contributor to Basic Infrastructure:
Spend over Rs. 1042 crores on social overhead onwards 1998.
Constructed over 160 kms. of heavy duty coal transportation roads, 300 kms of
approach road and equal length of colony roads, 6 major bridges on river
Damodar (2 under construction), 59455 permanent houses, 19 hospitals, besides
water supply schemes covering over a population of 5.02 lakhs.
Grant in aid & infrastructure facilities to 195 educational institutions.
Building permanent road link COAL TRUNK ROAD of about 196 kms length
linking its areas and various districts.
Major Employer:
62827 (as on 1.11.2006) directly employed (35% belonging to scheduled caste &
scheduled tribes).
Sources of indirect employment to over 2, 00, 000 people in loading,

transportation, civil construction, small industries, coke ovens, manufacturing
agencies, ancillaries etc.
Major Contributor to State Exchequer:
State central Exchequer have earned over Rs. 2811.56 crores of royalty and other
taxes from CCLs mining activities after formation of Jharkhand state. (2000-01
to 2005-06)
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Community Development
CCL has been contributing to community development and tribal welfare by augmenting
drinking water facilities, health care, education, rural and link roads, besides promoting trades
for self-employment opportunities in around 500 villages adjacent to its areas of operation.
Community Development Programme was initiated in 1981 and since then it has spent over Rs.
18 crores on these activities.
ENVIRONMENT
Eco-friendly mining techniques concept are being followed to keep our environment safe. CCL
is adopting concurrent reclamation for projects like Piparwar, Ashoka, KDH and Parej East OCP.
In other projects decoaled area is reclaimed through internal dumping and subsequently planted.
Plantation is also being done on external dumps. A green belt is also created around quarry,
CHPs etc. by planting rows of trees to arrest fugitive dust as well as the noise. In addition to this,
regular water spraying on haul roads by mobile water sprinklers are being done to suppress air
pollution. In some of the fields fixed water sprinkles are also provided. Company is providing
domestic gas to our workmen in lieu of coal to avoid air pollution. Not only this, regular
monitoring of ambient air and water, quality of each mines are being carried out to check
environment.
CCLs Coal Consumers
More than 20 thermal Power stations including those in Jharkhand.
Five Steel Plants.
Five Fertilizer Plants.
20 Cement Plants.
Around 600 Industrial units Large, Medium and Small Scale.
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Products
Raw Coal
Washed Non-Coking Coal
Washed Medium Coking Coal
Hard Coke
Coal Tar
MEANS OF TRANSPORT
The primary mode of transportation is Rail; CCL uses Rail as a medium to transport coal to its
customers. Since its customers are electricity boards, steel companies and other core and none
core industries, and also they are thousands of kilometers away from its mines, so therefore
Railway is the only way to transport coal to its customers.
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CHAPTER II
WORKING CAPITAL
Capital required for a business can be classified under two main categories via,
1)
Fixed Capital
2)
Working Capital
Every business needs funds for two purposes for its establishment and to carry out its day-
to-day operations. Long terms funds are required to create production facilities through purchase
of fixed assets such as p&m, land, building, furniture, etc. Investments in these assets represent
that part of firms capital which is blocked on permanent or fixed basis and is called fixed
capital. Funds are also needed for short-term purposes for the purchase of raw material, payment
of wages and other day to- day expenses etc.
These funds are known as working capital. In simple words, working capital refers to that part of
the firms capital which is required for financing short- term or current assets such as cash,
marketable securities, debtors & inventories. Funds, thus, invested in current assts keep
revolving fast and are being constantly converted in to cash and this cash flows out again in
exchange for other current assets. Hence, it is also known as revolving or circulating capital or
short term capital.
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital:
1.
Gross working capital
2.
Net working capital
The gross working capital is the capital invested in the total current assets of the enterprises
current assets are those assets which can convert in to cash within a short period normally one
accounting year.
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CONSTITUENTS OF CURRENT ASSETS

1)
Cash in hand and cash at bank
2)
Bills receivables
3)
Sundry debtors
4)
Short term loans and advances.
5)
Inventories of stock as:
a.
Raw material
b.
Work in process
c.
Stores and spares
d.
Finished goods
6. Temporary investment of surplus funds.

7. Prepaid expenses
8. Accrued incomes.
9. Marketable securities.
In a narrow sense, the term working capital refers to the net working. Net working capital is the
excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.
Net working capital can be positive or negative. When the current assets exceeds the current
liabilities are more than the current assets. Current liabilities are those liabilities, which are
intended to be paid in the ordinary course of business within a short period of normally one
accounting year out of the current assts or the income business.
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CONSTITUENTS OF CURRENT LIABILITIES

1.
Accrued or outstanding expenses.
2.
Short term loans, advances and deposits.
3.
Dividends payable.
4.
Bank overdraft.
5.
Provision for taxation , if it does not amt. to app. Of profit.
6.
Bills payable.
7.
Sundry creditors.
The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept of working capital. Both the concepts have their own merits.
The gross concept is sometimes preferred to the concept of working capital for the following
reasons:
1.
It enables the enterprise to provide correct amount of working capital at correct time.
2.
Every management is more interested in total current assets with which it has to operate
then the source from where it is made available.

3.
It take into consideration of the fact every increase in the funds of the enterprise would
increase its working capital.

4.
This concept is also useful in determining the rate of return on investments in working
capital. The net working capital concept, however, is also important for following reasons:
It is qualitative concept, which indicates the firms ability to meet to its operating expenses
and short-term liabilities. It indicates the margin of protection available to the short term
creditors.
It suggests the need of financing a part of working capital requirement out of the permanent
sources of funds.
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CLASSIFICATION OF WORKING CAPITAL
Kinds of
Working Capital
On the
On the
Basis of
basis of
Concept
time
Gross Working
Net Working
Variable
Fixed
Capital
Capital
Working
working
Capital
Capital
Special
Seasonal
Reserve
Regular
Working
Working
Working
Working
Capital
Capital
Capital
Capital
30 | P a g e
Working capital may be classified in to ways:

o
On the basis of concept.
On the basis of time.
On the basis of concept working capital can be classified as gross working capital and net
working capital. On the basis of time, working capital may be classified as:
Permanent or fixed working capital.
Temporary or variable working capital
PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has
to maintain a minimum level of raw material, work- in-process, finished goods and cash balance.
This minimum level of current assts is called permanent or fixed working capital as this part of
working is permanently blocked in current assets. As the business grow the requirements of
working capital also increases due to increase in current assets.
TEMPORARY OR VARIABLE WORKING CAPITAL
Temporary or variable working capital is the amount of working capital which is required to
meet the seasonal demands and some special exigencies. Variable working capital can further be
classified as seasonal working capital and special working capital. The capital required to meet
the seasonal need of the enterprise is called seasonal working capital. Special working capital is
that part of working capital which is required to meet special exigencies such as launching of
extensive marketing for conducting research, etc.
Temporary working capital differs from permanent working capital in the sense that is required
for short periods and cannot be permanently employed gainfully in the business.
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IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL

SOLVENCY OF THE BUSINESS: Adequate working capital helps in maintaining the
solvency of the business by providing uninterrupted of production.
Goodwill: Sufficient amount of working capital enables a firm to make prompt payments
and makes and maintain the goodwill.
Easy loans: Adequate working capital leads to high solvency and credit standing can
arrange loans from banks and other on easy and favorable terms.
Cash Discounts: Adequate working capital also enables a concern to avail cash discounts on
the purchases and hence reduces cost.
Regular Supply of Raw Material: Sufficient working capital ensures regular supply of raw
material and continuous production.
Regular Payment Of Salaries, Wages And Other Day TO Day Commitments: It leads to the
satisfaction of the employees and raises the morale of its employees, increases their efficiency,
reduces wastage and costs and enhances production and profits.
Exploitation Of Favorable Market Conditions: If a firm is having adequate working capital
then it can exploit the favorable market conditions such as purchasing its requirements in bulk
when the prices are lower and holdings its inventories for higher prices.
Ability To Face Crises: A concern can face the situation during the depression.
Quick And Regular Return On Investments: Sufficient working capital enables a concern to
pay quick and regular of dividends to its investors and gains confidence of the investors and can
raise more funds in future.
High Morale: Adequate working capital brings an environment of securities, confidence,
high morale which results in overall efficiency in a business.
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EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to run its business
operations. It should have neither redundant or excess working capital nor inadequate nor
shortages of working capital. Both excess as well as short working capital positions are bad for
any business. However, it is the inadequate working capital which is more dangerous from the
point of view of the firm.
DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL
1.
Excessive working capital means ideal funds which earn no profit for the firm and business
cannot earn the required rate of return on its investments.

2.
Redundant working capital leads to unnecessary purchasing and accumulation of
inventories.
3.
Excessive working capital implies excessive debtors and defective credit policy which
causes higher incidence of bad debts.

4.
It may reduce the overall efficiency of the business.
5.
If a firm is having excessive working capital then the relations with banks and other
financial institution may not be maintained.

6.
Due to lower rate of return on investments, the values of shares may also fall.
7.
The redundant working capital gives rise to speculative transactions
DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working capital arises due
to the time gap between production and realization of cash from sales. There is an operating
cycle involved in sales and realization of cash. There are time gaps in purchase of raw material
and production; production and sales; and realization of cash.
Thus working capital is needed for the following purposes:
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For the purpose of raw material, components and spares.
To pay wages and salaries
To incur day-to-day expenses and overload costs such as office expenses.
To meet the selling costs as packing, advertising, etc.
To provide credit facilities to the customer.
To maintain the inventories of the raw material, work-in-progress, stores and spares and
finished stock.
For studying the need of working capital in a business, one has to study the business under
varying circumstances such as a new concern requires a lot of funds to meet its initial
requirements such as promotion and formation etc. These expenses are called preliminary
expenses and are capitalized. The amount needed for working capital depends upon the size of
the company and ambitions of its promoters. Greater the size of the business unit, generally
larger will be the requirements of the working capital.
The requirement of the working capital goes on increasing with the growth and expensing of the
business till it gains maturity. At maturity the amount of working capital required is called
normal working capital.
There are others factors also influence the need of working capital in a business.
FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS

1. NATURE OF BUSINESS: The requirements of working is very limited in public utility
undertakings such as electricity, water supply and railways because they offer cash sale only and
supply services not products, and no funds are tied up in inventories and receivables. On the
other hand the trading and financial firms requires less investment in fixed assets but have to
invest large amt. of working capital along with fixed investments.
34 | P a g e
2. SIZE OF THE BUSINESS: Greater the size of the business, greater is the requirement of
working capital.
3. PRODUCTION POLICY: If the policy is to keep production steady by accumulating
inventories it will require higher working capital.
4. LENTH OF PRDUCTION CYCLE: The longer the manufacturing time the raw material and
other supplies have to be carried for a longer in the process with progressive increment of labor
and service costs before the final product is obtained. So working capital is directly proportional
to the length of the manufacturing process.
5. SEASONALS VARIATIONS: Generally, during the busy season, a firm requires larger
working capital than in slack season.
6. WORKING CAPITAL CYCLE: The speed with which the working cycle completes one
cycle determines the requirements of working capital. Longer the cycle larger is the requirement
of working capital.
FINISHED
DEBTORS
GOODS
WORK IN
CASH
PROGRESS
RAW
MATERIAL
7.
RATE OF STOCK TURNOVER: There is an inverse co-relationship between the question
of working capital and the velocity or speed with which the sales are affected. A firm having a
high rate of stock turnover will needs lower amt. of working capital as compared to a firm having
a low rate of turnover.
35 | P a g e
8.
CREDIT POLICY: A concern that purchases its requirements on credit and sales its product
/ services on cash requires lesser amt. of working capital and vice-versa.

9.
BUSINESS CYCLE: In period of boom, when the business is prosperous, there is need for
larger amt. of working capital due to rise in sales, rise in prices, optimistic expansion of business,
etc. On the contrary in time of depression, the business contracts, sales decline, difficulties are
faced in collection from debtor and the firm may have a large amt. of working capital.
10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we shall require large amt.
of working capital.
11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more earning
capacity than other due to quality of their products, monopoly conditions, etc. Such firms may
generate cash profits from operations and contribute to their working capital. The dividend
policy also affects the requirement of working capital. A firm maintaining a steady high rate of
cash dividend irrespective of its profits needs working capital than the firm that retains larger
part of its profits and does not pay so high rate of cash dividend.
12. PRICE LEVEL CHANGES: Changes in the price level also affect the working capital
requirements. Generally rise in prices leads to increase in working capital.
Others FACTORS: These are:
Operating efficiency.
Management ability.
Irregularities of supply.
Import policy.
Asset structure.
Importance of labor.
Banking facilities, etc.
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Working capital level changes due to following three basic reasons:1. Changes in level of sales or operating expenses- this include long term trend change,
cyclical change in economy and change in seasonality in sales activity.
2. Policy changes- this is initiated by management. The various policies may be
conservative policy, hedging policy and trade off policy.
3. Changes in technology- if a new technological development occur then it shortens the
operating cycle and hence it reduces the working capital requirement.
MANAGEMENT OF WORKING CAPITAL

Management of working capital is concerned with the problem that arises in attempting to
manage the current assets, current liabilities. The basic goal of working capital management is to
manage the current assets and current liabilities of a firm in such a way that a satisfactory level
of working capital is maintained, i.e. it is neither adequate nor excessive as both the situations
are bad for any firm. There should be no shortage of funds and also no working capital should be
ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its
probability, liquidity and structural health of the organization. So working capital management is
three dimensional in nature as
1.
It concerned with the formulation of policies with regard to profitability, liquidity and risk.
2.
It is concerned with the decision about the composition and level of current assets.
3.
It is concerned with the decision about the composition and level of current liabilities.
Decisions relating to working capital and short term financing are referred to as working
capital management. These involve managing the relationship between a firm's short term assets
and its short term liabilities. The goal of working capital management is to ensure that the firm is
able to continue its operation and that it has sufficient cash flow to satisfy both maturing shortterm debt and upcoming operational expenses.
37 | P a g e
For the purpose of working capital management , net working capital can be said to measure the
liquidity of the firm. In other words , the goal of working capital management is to manage the
current assets and liabilities in such a way that an acceptable level of net working capital is
maintained.
Management will use a combination of policies and techniques for the management of working
capital. These policies aim at managing the current assets(generally cash and cash equivalent,
inventories and debtors) and the short term financing, such that cash flows and returns are
acceptable.
Cash management. Identify the cash balance which allows for the business to meet day
to day expenses, but reduces cash holding costs.
Inventory management. Identify the level of inventory which allows for uninterrupted
production but reduces the investment in raw materials - and minimizes reordering costs and
hence
increases
cash
flow;
see Supply
chain
management; Just
In
Time (JIT); Economic order quantity (EOQ)
Debtors management. Identify the appropriate credit policy, i.e. credit terms which will
attract customers, such that any impact on cash flows and the cash conversion cycle will
be offset by increased revenue and hence Return on Capital (or vice versa).
Short term financing. Identify the appropriate source of financing, given the cash
conversion cycle: the inventory is ideally financed by credit granted by the supplier;
however, it may be necessary to utilize a bank loan (or overdraft), or to "convert debtors
to cash" through "factoring".
Implementing an effective working capital management system is an excellent way for many
companies to improve their earnings.
One of the most important decisions, involved in the management of working capital is how the
current assets will be financed. There are two sources to raise current assets
(i)
Short term sources i.e current liabilities
(ii)
Long term sources such as share capital, long term borrowing , retained earnings etc.
38 | P a g e
What proportion of current assets is financed by current liabilities and what proportion by long
term funds is determined by financing mix.
There are three basic approaches to determine an appropriate financing mix
a. Hedging approach also known as matching approach
b. Conservative approach
c. Trade- off between these two.
HEDGING APPROACH
It is a risk reducing investment strategy involving transaction of simultaneous but opposite
nature so that the effect of one is likely to counterbalance the effect of the other. It involves the
matching of maturities of debt with the maturities of financial needs.
For the purpose of financing current asset by this approach the current is classified into two
classes
a. Those which are required in a certain amount for a level of operation and do not vary
with time.
b. Those which fluctuate over time
The hedging approach suggest that long term funds should be used to finance the fixed portion of
current assets while the temporary requirement, that is, the seasonal variation over permanent
requirement should be appropriately financed with short term funds.
With this approach the short term financing requirement (current assets) would be just equal to
short term financing available ( current liabilities).
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CONSERVATIVE APPROACH
This approach suggest that estimated requirement of total funds should be met from long term
sources; the use of short term funds should be restricted to only emergency situation or when
there is unexpected outflow of funds.
The two approaches discussed above can be compared on the basis of cost consideration and risk
consideration.
TRADE-OFF APPROACH
The hedging approach is related with high profits as well as high risk while the conservative
approach is related with low profits and low risk. So the trade-off approach strikes a balance
between and provides a financial plan between the two extremes.
The exact trade-off between risk and profitability will differ from case to case depending on risk
perception of the decision maker. One possible trade off could be equal to the average of
minimum and maximum monthly requirements of funds during a given period of time. The level
of requirement may be financed through long term sources and for any additional financial needs
the short term funds may be used.
IMPORTANCE OF WORKING CAPITAL

Working capital is the measurement of the availability of liquid assets a company has to build its
business. Generally, companies that have a lot of working capital will be more successful since
they can expand and improve their operations. Companies without working capital may lack the
funds
necessary
for
growth.
Small businesses often use working capital to pay short-term obligations such as inventory or
advertising but it can also be utilized for long-term projects such as renovations or expansion.
These are elements in the business cycle that can quickly absorb cash. If working capital dips too
low, a business risks running out of cash. Even very profitable businesses can run into trouble if
they lose the ability to meet their short-term obligations. Business financing or small business
40 | P a g e
loans can be used as a fast cash option to cushion the periods when the flow is not ideal or
readily
available.
Cash flow is the businesses life blood and every owners primary task is to help keep it flowing
and to use the cash to generate profits. If a business is operating profitably, then it should, in
theory, generate a cash surplus. If it does not generate a surplus, the business could eventually
run out of cash and expire. The faster a business expands , the more cash it will need for working
capital. Proper management of working capital will generate cash and will help improve profits
and reduce risk.
Working capital represents the funds available with the company for day to day operations.
Working capital finances the cash conversion cycle. Company cannot survive with negative
working capital which represents that the company has no funds for day to day operations.
The importance of working capital can be summarized as follow:Adequate amount of working capital provides the following advantage to a business enterprise.
1. IMMEDIATE PAYMENT TO SUPPLIERS- it ensures regular supply and continuous
production and also develop good repo.
2. BENEFIT OF CASH DISCOUNT- by payment on time firm can avail the advantage of
cash discount which will reduce the cost of production and increase profitability of firm.
3. ADEQUATE DIVIDEND DISTRIBUTION- a firm can declare and distribute ample
dividend when there is sufficient profit and thus can create satisfaction among
shareholders and bring stability in the market value of share.
4. INCREASE IN GOODWILL AND DEBT CAPACITY- promptness to third party in
business creates goodwill and debt capacity of the concerned firm. It enables firm to raise
loan whenever needed without any difficulty.
5. EASY LOANS FROM BANK-A firm having adequate working capital and liquid assets
can arrange loans from banks on easy and favourable terms, as excess current asset over
current liabilities provides a good security for the unsecured loans.
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6. EXPLOITATION OF GOOD OPPORTUNITIES- A firm with adequate working capital

can exploit opportunities and can earn profit.
7. MEETING UNFORSSEN CONTINGENCIES- a firm can face small crises, financial
crises due to heavy losses etc.
8. INCREASED EFFICIENCY- Adequate working capital has psychological effect on the
directors and executive of the firm and motivates them to work vigorously.
9. INCREASED IN FIXED ASSETS PRODUCTIVITY- the fate of large scale investment
in fixed assets is often determined by a relatively small amount of current assets.
Essentially working capital is the answer to the question: "How much short term funding do you
need to operate this business?" Short term funding is important because, with long term funding
already in place, the business still needs short term funding to operate. Without the short term
funding, the business will go bankrupt.
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CHAPTER III
RESEACH METHODOLOGY
3.1) Introduction
Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying now research is done systematically. In that various steps,
those are generally adopted by a researcher in studying his problem along with the logic behind
them. It is important for research to know not only the research method but also know
methodology. The procedures by which researcher go about their work of describing,
explaining and predicting phenomenon are called methodology.
Methods comprise the procedures used for generating, collecting and evaluating data. All this
means that it is necessary for the researcher to design his methodology for his problem as the
same may differ from problem to problem.
Data collection is important step in any project and success of any project will be largely depend
upon now much accurate you will be able to collect and how much time, money and effort will
be required to collect that necessary data, this is also important step.
Data collection plays an important role in research work. Without proper data available for
analysis you cannot do the research work accurately.
3.2) Types of data collection

There are two types of data collection methods available.
1. Primary data collection
2. Secondary data collection
1) Primary data
The primary data is that data which is collected fresh or first hand, and for first time which is
original in nature. Primary data can collect through personal interview, questionnaire etc. to
support the secondary data.
43 | P a g e
2) Secondary data collection method

The secondary data are those which have already collected and stored. Secondary data easily get
those secondary data from records, journals, annual reports of the company etc. It will save the
time, money and efforts to collect the data. Secondary data also made available through trade
magazines, balance
sheets, books etc.
This project is based on primary data collected through personal interview of head of account
department, head of SQC department and other concerned staff member of finance department.
But primary data collection had limitations such as matter confidential information thus project
is based on secondary information collected through five years annual report of the company,
supported by various books and internet sides. The data collection was aimed at study of working
capital management of the company
Project is based on
1. Annual report of CCL 2009-10

2.Annual report of CCL 2010-11
3.3) OBJECTIVES OF THE STUDY

Study of the working capital management is important because unless the working capital is
managed effectively, monitored efficiently planed properly and reviewed periodically at regular
intervals to remove bottlenecks if any the company can not earn profits and increase its turnover.
With this primary objective of the study, the following further objectives are framed for a depth
analysis.
1. To study the working capital management of Central Coalfields Ltd.

2. To study the liquidity position through various working capital related ratios.
44 | P a g e
3. To study the working capital components such as debtors management, cash management,
Inventory position.
4. To estimate the working capital requirement of Central Coalfields Ltd
3.4) SCOPE & LIMITATIONS OF THE STUDY
Scope of the study
The scope of the study is identified after and during the study is conducted. The study of working
capital is based on tools like trend Analysis, Ratio Analysis, working capital leverage, operating
cycle etc. Further the study is based on last3 years Annual Reports of CCL. And even factors like
competitors analysis, industry analysis were not considered while preparing this project.
Limitations of the study
Following limitations were encountered while preparing this project:

1) Limited data:-
This project has completed with annual reports; it just constitutes one part of data collection i.e.
secondary. There were limitations for primary data collection because of confidentiality.
2) Limited period:-
This project is based on five year annual reports. Conclusions and recommendations are based on
such limited data. The trend of last three year may or may not reflect the real working capital
position of the company. Also being a public sectors it was to difficult to get access to various
data.
3) Limited area:-
Also it was difficult to collect the data regarding the competitors and their financial information.
Industry figures were also difficult to get.
45 | P a g e
CHAPTER IV
WORKING CAPITAL MANAGEMENT IN CCL

In CCL working capital management is done on three ingredients:
1. Cash management
2. Debtors management
3. Inventory management.
CASH MANAGEMENT IN CCL

Efficient cash management processes are pre-requisites to execute payments, collect receivables
and manage liquidity. Managing the channels of collections, payments and accounting
information efficiently becomes imperative with growth in business transaction volumes. This
includes enabling greater connectivity to internal corporate systems, expanding the scope of cash
management services to include full-cycle processes (i.e., from purchase order to
reconciliation) via ecommerce, or cash management services targeted at the needs of specific
customer segments.
Cash management is concerned with the managing of:
Cash flow Inside the firm and Out of the firm
Cash flow Within the firm &
Cash balances held by the firm at a point of time by financing deficit or investing surplus
funds.
46 | P a g e
Cash is money that is easily accessible either in the bank or in the business. Cash on hand or in
the bank is needed to pay suppliers, to pay the rent, and to meet the payroll. Profit is the amount
of money you expect to make if all customers paid on time and if your expenses were spread out
evenly over the time period being measured. However, it is not your day-to-day reality. Cash is
what you must have to keep the doors of your business open. Over time, a company's profits are
of little value if they are not accompanied by positive net cash flow. Cash flow is one of the
component in cash management.
Cash Flow refers to the flow of cash into and out of a business over a period of time. The
outflow of cash is measured by the money you pay every month to salaries, suppliers, and
creditors. The inflows are the cash you receive from customers, lenders, and investors. The basic
objective of cash flow statement is to inform about the cash inflows and cash outflows during the
year.
Positive Cash Flow
If the cash coming into the business is more than the cash going out of the business, the company
has a positive cash flow. A positive cash flow is very good and the only concern here is
managing the excess cash prudently.
Negative Cash Flow
If the cash going out of the business is more than the cash coming into the business, the company
has a negative cash flow. A negative cash flow can be caused by a number of problems that
result in a shortage of cash, such as too much or obsolete inventory, or poor collections on
accounts receivable. If the company doesn't have money in the bank or can't borrow additional
cash at this point, it may be in serious trouble.
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Cash
Collection
Business
Deficit
Operations
Surplus
Information
Borrow
And control
Cash
Invest
Payments
ACCOUNTING STANDARD 3-CASH FLOW STATEMENTS
AS-3 cash flow statements (revised 1997), issued by the council of ICAI, comes into effect in
respect of accounting periods commencing on or after 1-4-1997. This standard supersedes, AS-3
changes in financial position, issued in June 1981. This standard is mandatory in nature in
respect of accounting periods commencing on or after 1-4-2004 for the enterprises which fall in
any one or more of the categories of level I enterprises, at any time during the accounting period.
The enterprises which do not fall in any of the categories of level I, are encouraged, but are not
required, applying this standard.
+
An enterprise should prepare a cash flow statement and should present it for each period for
which financial statements are presented. The cash flow statement should report cash flows
48 | P a g e
during the period classified by operating, investing and financing activities. An enterprise should
report cash flows from operating activities using either:
a) The direct method, whereby major classes of gross cash receipts and gross cash
payments are disclosed; or
b)
The indirect method, whereby net profit or loss is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals

of past or future operating cash receipts or payments, and items of income or expense
associated with investing or financing cash flows.
. Hence the preparation of cash flow statement involves the following steps:
1. Computation of net increase or decrease in cash.
2. Calculation of net cash flow provided by operating activities.
3. Calculation of net cash flow from investing activities.
4. Calculation of net cash flows from financing activities.
5. Preparation of cash flow statement in approved format.
6. Reporting of significant non-cash transactions in a separate schedule to cash flow
statement.
A Cash Flow Statement is typically divided into three components so that you can see and
understand both the internal and external sources and uses of cash.
1. Operating Cash Flow (Internal) Operating cash flow, often referred to as working capital,
is the cash flow generated from internal operations. It is the cash generated from sales of
the product or service of your business. Because it is generated internally, it is under your
control.
2. investing cash flow (internal)Investing cash flow is generated internally from nonoperating activities. This component would include investments in plant and equipment
or other fixed assets, nonrecurring gains or losses, or other sources and uses of cash
outside of normal operations.
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3. Financing cash Flow (External)Financing cash flow is the cash to and from external
sources, such as lenders, investors and shareholders. A new loan, the repayment of a loan,
the issuance of stock and the payment of dividend are some of the activities that would be
included in this section of the cash flow statement.
Good cash management means:
Knowing when, where, and how your cash needs will occur,
Knowing what the best sources are for meeting additional cash needs; and,
Being prepared to meet these needs when they occur, by keeping good relationships with
bankers and other creditors.
The starting point for avoiding a cash crisis is to develop a cash flow projection. Smart business
owners know how to develop both short-term (weekly, monthly) cash flow projections to help
them manage daily cash, and long-term (annual, 3-5 year) cash flow projections to help them
develop the necessary capital strategy to meet their business needs. They also prepare and use
historical cash flow statements to gain an understanding about where all the money went.
Funds/cash plays a very vital role in every organization so does in CCL. It is important to
meet its day to day requirement of cash. It is directly controlled by the General Manager
of finance in CCL. The fund section is responsible for effective fund/cash management of
entire CCL.
There are many sources of funds from which CCL gets funds according to their
requirement. In CCL cash is mainly realized from sale of coal which is supplied to
various sectors that includes Power sector like
Jharkhand state electricity board (JSEB)
Punjab state electricity board (PSEB)
Haryana state electricity board (HSEB)
Delhi vidhut corporation (DVC)
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National thermal power corporation (NTPC)
Steel sector like
Steel authority of India limited (SAIL)
Vizag steel plant etc.
Other sector includes
Defence
Chemical industry etc.
It is discussed earlier that coal is sold in two ways: cash and credit. A major percentage of
total sales of coal are made to government parties on credit basis. Rest is sold to parties
on advance payment basis.
CCL is spread over in different district of Jharkhand there are 13 areas of CCL namely
Agarda
Barkakhana
Cs-cws
Kuju
Hazaribagh
Rajrappa
Giridih
Kathara
Bokaro & kargali
Dhori
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North khanpura area
Piprawar
Daltanganj
All the above areas send their requisition for capital & revenue expenditure on week to week
basis to CCL to Ranchi headquarter. The fund section make payment through bank on the basis
of this capital & revenue expenditure report send by 13 different areas i.e. fund are provided to
these areas on the basis of pending bill claims. The capital & revenue expenditure report must be
verified by two authorized person of CCL: -
Area manager of CCL.
Finance manager of CCL.
CCL mainly used cash flow projection and cash budget for cash planning and control.
Cash flow projection is also used to determine for optimum cash balance of CCL.
CCL has not faced any kind of liquidity crunch in past 5 years. This indicates that CCL
maintain a sufficient cash balance. However CCL has working capital demand limit with
SBI along with coal India ltd. (CIL) against hypothecation of current assets. If any
surplus arises in CCL then that is deposited in nationalized banks with varying period of
maturity of fixed deposit. Nationalized bank are decided by the board of directors of
CCL. Selection of bank is done on the basis of their net worth.
CCL follows accounting standard 3 to prepare cash flow which is explained earlier..
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METHOD USED BY CCL FOR PREPARING CASH FLOW STATEMENT
CCL used direct method for preparing cash flow statement. But this direct method does not
follow proper format. The direct method provides information which may be useful in estimating
the future cash flows and which is not available under indirect method. Therefore, direct method
is considered more appropriate than indirect method. Under the direct method information about
major classes of gross cash receipts and gross cash payments may be obtained either:
From the accounting records of the enterprise.
By adjusting sales, cost of sales (in the case of financial enterprise interest and similar
income and interest expense and similar charges) and other items in the statement of
Profit & Loss for:
1) Changes during the period in inventories and operating receivables and payables;
2) Other non-cash items and
3) Other items for which the cash effects are investing or financing cash flows.
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CENTRAL COALFIELDS LIMITED, RANCHI

Monthly cash flow statement (Fund)
(RS. In lakhs)
APRIL-12
PROGRESIVE
FUND
2012-2013
24471.27
24471.27
Sales-credit
16595.54
16595.54
Recd from Rd sales
30757.33
30757.33
Income Tax refund
0.00
0.00
Interest
65.20
65.20
COAL BLOCK
0.00
0.00
Rites
10429.27
10429.27
Gratuity Fund
953.88
953.88
Recd from Kolkata
7700.00
7700.00
Total receipts
66501.22
66501.22
OB+Receipts
90972.49
90972.49
Royalty
685.67
685.67
Royalty adv
0.00
0.00
Opening Balance
Receipts
PAYMENT
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CMPF/pension
6358.77
6358.77
Corporate Tax
0.00
0.00
FIXED DEPOSIT
0.00
0.00
Wealth Tax
0.00
0.00
Dividend Tax
0.00
0.00
Dividend
0.00
0.00
TDS
5040.59
5040.59
Service Tax
2.19
2.19
Clean energy cess
2203.03
2203.03
Sales Tax
238.09
238.09
J vat
537.10
537.10
Adv sales Tax
0.00
0.00
Adv j VAT
0.00
0.00
Cental excise duty
36.89
36.89
Misc
0.00
0.00
Area remit-revenue
34486.00
34486.00
Area remit-capital
808.00
808.00
Gratuity fund
22591.94
22591.94
Total payments
72988.27
72988.27
Closing balance
17984.22
17984.22
55 | P a g e
CENTRAL COALFIELDS LIMITED, RANCHI

Monthly cash flow statement (Fund)
PROGRESIVE
April 2012-2013
Opening Balance
24471.27
Cash flow from operating activities

Inflow
Realization from customers
16595.54
Recd from Rd sales
30757.33
Rites
10429.27
56 | P a g e
Recd from Kolkata
7700.00
Total Add operating balance
65482.14
OB + inflow
89953.41
Outflow
Royalty
685.67
CMPF/pension
6358.77
TDS
5040.59
Service Tax
2.19
Clean energy cess
2203.03
Sales Tax
238.09
J vat
537.10
Central excise duty
36.89
Area remit-revenue
34486.00
Area remit-capital
808.00
outflow amount
50396.33
B)cash flow from investing activities

increase in interest received
65.20
Increase in gratuity fund received
953.88
Decrease in gratuity fund payment
22591.94
B) Total investing activities
-21572.86
57 | P a g e
C)Cash flow from financing activities

Fixed deposit
00.00
c)total financing activities
00.00
Closing balance = (A-B-C)
17984.22
Working notes :( 89953.41-50396.33) =39557.08

A= 39557.08
B= -21572.86
C= 00.00
Closing balance= 39557.08-21572.86-00.00=17984.22.
Notes in crore
58 | P a g e
Suggestions for improvement
CCL has not faced any kind of liquidity crunch in past five years. This indicates that CCL
maintain a sufficient cash balance. However CCL has WCDL (working capital demand limit)
with SBI along with CIL against hypothecated of current assets.
If any surplus arises in CCL then this surplus fund is deposited with varying period of maturity
of fixed deposit. Listed bank are decided by the board of directors of CCL. They decided any
bank on the basis of net worth of that bank.
There is no bank loan in respect of CCL to fulfil their working capital need. This shows that
CCL has enough cash balance to fulfil its day to day requirement of cash.
CCI has taken a loan from World Bank to fulfil their fixed capital requirement.
However an attempt has been recast
CCL & AS 3
CCL is also following AS 3, but they follow Both Method (Direct as well as Indirect). As per
the cash flow statement for the month of March 2012, we can see that they are following direct
method and in that they mentioned their gross receipts and gross payment of cash only, and after
studying the Cash Flow Statement for the year ended 2010-12 we can observe that they are
following Direct Method for maintaining their Cash Flow Statement.
In all this we can see for their monthly transactions they maintain Direct method and for
the whole at the end of the year CCL prepare their Cash Flow Statement by Indirect Method.
59 | P a g e
In CCL there is positive cash inflow since last 5-6 years. So the only concern of CCL is to
manage excess of cash inflow over outflow.
It has been seen that when CCL was having negative cash inflow then it used to balance the
shortage of funds by:1. Cost cutting of expenditure.
2. Delay in payment of statutory bills.
3. Short term funding by taking loans from bank.
4. Investment by central coalfield limited (C.C.L)

According to the policy guidelines for the Investment/Deployment of Surplus Funds in
Appropriate Financial Instruments approved by CIL Board, it is clearly mentioned that The
department of public enterprise has permitted central PSU to invest in public sector mutual fund
only. The Chairman, CIL approved investment in 4 PSU mutual fund houses. They are:1) SBI
2) UTI
3) CANARA
4) LIC
As these fund houses are registered with and regulated by SEBI and GOI and wherein Govt
financial institution and public sector banks holds individually and collectively more than 50%
of equity shares.
60 | P a g e
MUTUAL FUNDS investment by C.C.L

Name of fund
1) SBI
Scheme
SBI Premier Liquid Fund Super Institutional
(IP) Plan
2) UTI
UTI Liquid Fund - Cash Plan - Institutional
3) Canara Robeco
Canara Robeco mutual fund super institutional

plan
4) LIC
LIC NOMURA Liquid Fund
Each mutual fund is given a basis point of 25 of total investment. If its over 25 point then a
watch of 10 days is there and with a formal procedure the company withdraw the money and
invest in other three funds whichever is giving good report.
Analysis:
SBI Premier Liquid Fund (SPLF) has been positioned for Institutional investors and large
Corporate Treasuries who desire to invest their short term cash surpluses for periods
ranging from overnight to a few days, while maintaining a high degree of liquidity. The
investments in the scheme would be made only in debt/ money market securities. SBI
Premier Liquid Fund (SPLF) would seek to generate returns with minimal volatility and
provide investors with a high degree of liquidity.
61 | P a g e
The UTI Liquid Cash Plan is positioned as a low-risk, low-volatility fund which aims at
offering reasonable returns to investors looking to park short-term surpluses. The fund
attaches importance to low credit risk, portfolio diversification and stability of returns.
Same above written benefits are provided by the canara robeco liquid fund and lic
nomura liquid funds.
Mutual fund investment is the safest and guaranteed return fund to be invested. So, the
coal India subsidiaries companies especially Central coalfield limited invest its surplus
money in 4 different mutual fund with a clear diversion of money equal in 4 parts so that
if they found out any loss in any single mutual fund then the money is withdrawn and
reinvested in other three equally or the one giving the larger profit.
All the mutual funds are of governmental type investment on SEBI guidelines.
There are various ways to utilize wisely the excess of cash like investment in mutual funds,
shares etc. but being a public sector unit it can only have a single choice which is fix deposit
according to policies framed by Indian government.
62 | P a g e
CCL does the fixed deposit by keeping in mind various factors

(i)
Quarter end payment of tax
(ii)
Requirement of money for advance payment
(iii)
Requirement according to forecasted demand
Accordingly the tenure of fixed deposit are decided. Mostly the fixed deposits are for 1 year or
so.
Uniform Deposit Policy for CIL and its Subsidiaries ANNEXURE-A

The salient features of the uniform deposit policy approved by CIL Board in its 235th meeting
held on 25 September 2007 and subsequent amendment in 249th meeting held on 10 April 2009
along with DPE guidelines received after approval of uniform deposit policy are as under:
1. As per existing RBI guidelines, PSUs are allowed to invest in any scheduled bank
incorporated in India having net-worth of Rs.100 crores and above and fulfilling the Capital
Adequacy Ratio (CAR) norm as prescribed by RBI (presently 9%). In order to have manageable
number of banks with sound financials to deal with, it has been decided that only such banks
having networth of Rs.1500 crores and above with CAR exceeding 10% be selected for
placing deposits.
In pursuance to the above, a list of 18 banks was identified initially for placement of deposits by
CIL and its subsidiaries.
Subsequently, IDBI Bank was included in the list taking the number of banks to 19. Further,
during October 2009, with the approval of the competent authority, Central Bank of India has
been disqualified for doing all future business especially placement of fixed deposit by CIL and
its Subsidiary Companies till further order. At present, there are 18 banks, which are eligible
to receive deposit from CIL and its Subsidiary Companies. A list of these banks is placed at
63 | P a g e
Annexure-1 (Revised as per Balance Sheet of 31.3.2009 of the banks). CIL and its
Subsidiaries shall place deposits with the banks from the said list.
2. The CIL Board, in order to balance the risk and return on the portfolios of CIL and its
subsidiaries, approved that the fixed deposit is to be placed with the banks offering highest rate
of interest within exposure limit of each bank. The methodology of calculating exposure limit is
described in Para-3. In a subsequent development, pursuant to the DPE guidelines, in order to
avoid undesirable competition amongst banks leading to arbitrary hikes in deposit rates, with
adverse consequences for the economy, the practice of inviting competitive bids for bulk
deposits was discontinued. Thus, at present, as per subsequent DPE guidelines, CIL and its
Subsidiaries shall place with banks at prevailing best available card rate subject to
exposure limit of each bank as described in Para-3.
3. Keeping in view the importance of net-worth, which determines the size and strength of banks,
Net-worth (Equity Capital plus Free Reserves) of banks meeting CAR requirements are
considered as criteria for determining the exposure limit of the bank.
Exposure limit of the banks at different range of net-worth for CIL and its each Subsidiary
were decided initially as follows:
Table
However, there shall be no cap on maximum limit for State Bank of India. In a later
development, the maximum exposure limit of individual private bank has been restricted to
10% of total cumulative deposit irrespective of net-worth. Moreover, overall exposure limit
in private banks will be restricted to 25% of the total deposit.
4. In respect of methodology of placement of deposit with the banks, the approvals of the CIL
Board are as under:
i) The subsidiaries should go for selection of one specific branch of a bank at a particular
location from the list of eighteen banks at Annexure-1. It is advised that the subsidiaries as well
as CIL shall go for opening current account at the branches of the banks eligible to accept
deposits. Subsidiaries shall go for placing deposit with the branches nominated by the respective
banks. Such lists have been forwarded by CIL to Subsidiaries from time to time. Further, DPE
64 | P a g e
in its guidelines dated 15.1.2008 and 11.4.2008 directed that PSEs should place their bulk
deposits with such banks with whom they have regular course of business.
ii) While selecting branches under Annexure-I, subsidiaries should give priority to those
branches which have the facilities of Real Time Gross Settlement (RTGS)/ Core Banking
Solution (CBS).
iii) The subsidiaries may adopt policies for depositing surpluses through its desk offices located
at Kolkata for better connectivity with the financial market besides its Command Areas.
5. In respect of methodology of placing deposits, it is emphasized that CIL and its subsidiaries
shall strictly adhere to theguidelines issued by the Dept. of Public Enterprise, GOI.Range of Networth Maximum exposure limit % of total cumulative deposit Private andNationalized Banks
1500-5000 10% 5001 and 10000 15% 10001 and above 20% guidelines issued by the Dept. of
Public Enterprise, GOI.
6. All the fund managers of CIL and its subsidiaries shall assess investible surplus funds on a
daily basis and ensure that no fund remains idle in the current account. In order to avoid loss of
interest, it is required to maintain CLTD A/c with the bank(s) where funds are lying. If the
CLTD arrangement is not there with a particular bank, the investible funds may be placed in
short-term deposits with the banks for 7-10 days with immediate effect. On maturity of such
short-term deposits placed from time to time,the said amount may be placed with the banks as
per the policy mentioned above subject to the exposure limit of the bank.
7. The Para 4 of OM dated 14.12.1994 issued by DPE, stipulates inter-alia, that decision for
investing short- term surplus funds upto one year maturity is to be taken by a designated group of
Directors from among the functional Directors that should include Chairman and Director
(Finance). Placing funds in CIL and its subsidiaries is a day-to-day operation, which is difficult
to be carried out in the manner suggested in the said guidelines. However, keeping the spirit of
the guideline and in order to ensure complete transparency, a Committee of at least two members
from Finance Division may be constituted comprising HOD of Finance, who shall chair the
proceedings with other member(s) of the rank of CFM (E8). The Committee shall have the
power to approve a deposit proposal put up by the officer(s) in charge of the treasury operations.
In case, treasury operations of the subsidiaries are carried out from Kolkata, such proposal
65 | P a g e
should, at the first instance be sent by FAX/ Email to the subsidiary (HQs) for approval by the
Committee. Since time is the essence in active treasury operation, such proposals should be
immediately taken up by the committee and decision communicated by FAX/ Email to the
Kolkata office.
8. Based on above suggested methodology, bank card rate for funds available for each case of
deposit is to be obtained from the selected branches of the listed banks. If any nominated branch
of a bank is not in a position to submit the card rate, the same shall be recorded in writing. The
officer(s) in charge of the treasury operation shall initiate a proposal along with the card rates
received from all the selected banks / branches in line with the guidelines detailed above. The
proposal shall suggest placement of fund among banks, which qualify to accept deposits as per
the policy, and thereafter placed before the committee for approval. The proposal shall be acted
upon its approval.
9. There shall be a system in place for submission of monthly report detailing the placements of
funds made during that particular month to the Director (Finance) and to the Chairman/CMD. A
quarterly report shall be furnished to the Board of Directors informing the annualized return on
the deposits placed during the last quarter.
10. All other guidelines contained in the approved Investment Policy of CIL, which have not
been expressly dealt herein as laid down in the Uniform Deposit Policy shall continue.
Debtors Management
The basic objectives of the debtors management are to optimize the return on investment on the
assets. Its main aim is to promote sales and profit until that point is reached where the return on
investment is further funding of debtors is less than the cost of funds raised to finance that
additional credit.
When a firm makes sale of goods and services and does not receive payment, it grants trade
credit and creates Debtors accounts, which would be collected in the future. These represent the
66 | P a g e
extension of credit on an open A/c by the firm to its customers, as the substantial amount is tied
up in trade debtors, it needs careful analysis and proper management.
Size of Investment in Debtors:
Investment in debtors A/c is a major part of their assets in most of business enterprises.
Debtors A/c is one of the major components of working capital. The financial executives
should pay due attention to the management of debtors, so that each rupee invested in
debtors may contribute to the net worth of the organization.
The Basic Problem of Debtors Management:
The basic problem of debtors management is the balancing of profitability & liquidity.
Soft credit terms attract sales and so the longer the time a company allows to pay to its
customers the greater the sales and higher the profits.
The longer the period of credit the greater the risk, the greater the level of debt and
greater the strain on the liquidity of the company.
PAYMENT ACCORDING TO FUEL SUPPLY AGREEMENT

The Purchaser shall make advance payment for a month in three (3)
installments for availing Coal supplies from the Seller first (1st) installment on the
first (1st) day of the month, second (2nd) installment on the eleventh (11th) day of the
month and the third (3rd) installment on the twenty first
(21st) day of the
month. Each of these payment installments shall cover the As Delivered Price of
Coal for the Coal quantities that is one- ninth (1/9th) of the QQ concerned. Further,
each of these installments shall take into account the weighted average of Contract
Prices of Grades based on actual supplies of immediately available previous month.
However, the third (3rd) installment shall also include the adjustment amount with
regard to the actual quantity of Coal delivered and the quality of Coal analysed vis-vis the advance payment made for the previous month.
67 | P a g e
Quarterly Quantity (QQ)
The Annual Contracted Quantities for the Year shall be divided into
Quarterly Quantities (QQ), expressed in tonnes, as follows:
Ist Quarter (Apr-Jun.)

IInd Quarter (Jul-Sep)
25% of ACQ
IIIrd Quarter (Oct-Dec)

IVth Quarter (Jan-Mar)
25% of ACQ
22% of ACQ
28% of ACQ
The Purchaser shall maintain with the Seller an Irrevocable Revolving Letter of
Credit (IRLC) issued by a bank acceptable to the Seller and in the format
acceptable to the Seller and fully conforming to the conditions for an amount
equivalent to As Delivered Price of Coal for the Coal quantities that is one-ninth (1/9th)
of the QQ concerned. The As Delivered Price of Coal in this context shall take into
account the highest of Contract Prices of Grades. The IRLC shall be maintained
throughout the term of this Agreement. The amount of IRLC shall be suitably changed
whenever there is a change in any component of the As Delivered Price of Coal. In
addition to the IRLC, the Purchaser shall pay advance amount equivalent to seven (7)
days Coal value by way of Demand Draft/ Bankers cheque/ Electronic Fund
Transfer (EFT).
All the payments shall be made through Demand Draft / Bankers cheque/
Electronic Fund Transfer payable at ([] to be stated by the Seller). In the event of
non-payment within the aforesaid stipulated period, the Purchaser shall be liable to
pay interest in accordance
Advance payment made by the Purchaser shall be non-interest bearing, and it

shall change in accordance with change in the As Delivered Price of Coal.
68 | P a g e
ANALYSIS:-
Fuel supply agreement is the newly most advanced tool for the coal India limited
subsidiaries to generate a cash surplus and to also help the companies to avoid the
debtors in the company.
Fuel supply agreement is designed in such a manner that it covers all the legal aspects of
the supplier and the buyer and put them in a mutual bond for the various types and
supply of the coal.
Fuel supply agreement contains all the relevant information about both sides covering
each and every aspect regarding the fuel and the interest of the buyer.
JSEB as the monopoly of the home state electricity generation and distribution company
of Jharkhand is the only company which is not agreed to abide by the rules and
regulation described in fuel supply agreement.
Salient features of the New Coal Distribution Policy (NCDP)
All project developers relating to the power, cement and steel sectors and consuming
more than 4,200 tonnes of coal per annum have to mandatorily enter into fuel supply
agreements (FSA) with the coal supplier (mostly Coal India and its subsidiaries)
versus the earlier system of linkages.
In view of the importance of the defence sector and railways, their total requirement to
be met at notified prices.
100% of the normative requirements of the power sector consumers with coal
linkages and that of the fertiliser sector consumers to be met through FSAs (since they
operate under a regulated price regime).
69 | P a g e
For all other consumers with coal requirement of more than 4,200 t per annum, 75% of
their normative requirement of coal to be provided under FSAs.
Non-core sector developers with coal requirements less than 4,200 tonnes per annum
to be given the option of either entering into FSAs or meeting their requirements
through agencies nominated by the state governments. About 8 mmtpa coal to be
made available to meet the requirements of the small and medium sector consumers.
Supply of coal through e-auctions to be made more systematic without the
governments involvement in the pricing of auctioned coal.

It is worthwhile to note that despite the introduction of the NCDP in October 2007, FSAs
were not signed until May 2009 due to a disagreement between Coal India and power
producers (mostly NTPC) over the minimum coal supply guarantee threshold (below which
Coal India is liable to pay penalties). Following several discussions among the
stakeholders, it was agreed in May 2009 with the signing of NTPCs FSA that Coal India
will guarantee at least 90% of the annual contracted quantity (ACQ) to the power projects
commissioned until Mar 2009 (ACQ is equal to 100% normative coal requirements and
mostly equivalent to about 90% PLF for the power project)
\
Debtors Management in CCL
Sales
CCL sale coal to its customer on cash bases: CCL sales 100% of its production for cash and rest
CASH SALE: -
CASH
DO
LIFT
Previously CCL uses both cash and credit sales

70 | P a g e
CREDIT SALE: -
DESPATCH
BILLING
PAYMENT
As we have seen most of the sales of CCL is on credit basis, therefore debtors management plays
very important role in CCL.
The main objective of debtor management is to keep the regular debtor's balance as minimum as
possible. Sundry debtor's come in to existence when the customers are not able to pay the coal
bills in full amount in time.
In CCL coal sale is done either on credit or cash. Credit sale is done only to Govt. parties. It
means the debtors of CCL consist only of Govt. parties. Govt. parties follow cash and credit
system, which is according to the rules of CIL. According to this the payment has to be made by
the customer within 24 hrs. of the presentation of the coal bills.
Sundry debtors of CCL can be divided into three parts: Power -This sector is the biggest
consumer of coal. It can be divided into state electricity board which includes Bihar State
Electricity board, Delhi Vidyut Nigam, Punjab State Electricity Board, U.P state electricity board
etc.
Other than these are some other power production unit such as
NTPC etc. who also buy coal in large quantity.
Steel - this sector is also one of the main consumers of coal. It can also be divided into two parts
- steel plants owned by SAIL ,BSP ,RSP, BSL etc. and other steel plants like 11SCO.Others This includes customer like
Fertilizer Corporation of India.
Government Cement Plants.
71 | P a g e
Railways (though its consumption of coal has decreased in recent years.)

Defense (mainly for domestic purpose)
BILLING PROCEDURE
The grade of coal of particular mine is decided by the central government. This is known as
declared grade and depends on the type of coal normally obtained from the mines.
Coal grade can be divided into two grades:
_
COAL GRADE
(a) Coking grade
SF I(15)
(b) non coking grade(grades are given below)

_
SF II(15 to 18)
W I(18 to 21)
W II(21 to 24)
W III(24 to 28)
W IV(28 to 35)
The table below sets forth the various gross calorific value (GCV) based bands of non coking
coal produced by us
Sl.
No
GCV Bands
(Kcal/Kg)
72 | P a g e
Exceeding 7000
Exceeding 6700 and not exceeding 7000
10
11
12
13
14
15
73 | P a g e
16
17
On the basis of grade decided billing is done.
STEPS INVOLVED IN MAKING BILLS:

1. Linkage committee - The committee decides upon the quantity
of coal that is being supplied for next period. It consists of
representatives of CIL, Railways and customers.
2.Dispatch of coal - The collieries dispatch the coal as per link.
3.Issue of coal bill - The bills is issued to the consumer within
3 days of dispatch of coal. And the customers of coal are asked to pay within 48 hours of
receiving the bill.
Formation of debtors - The amount, which the party is
unable to pay, comes under debt. Debt is of types.
- Disputed
- Undisputed.
74 | P a g e
Disputed - When there is difference in opinion about the quality, quantity, penalty overloads or
under load charge etc between CCl &the customer, the customer withheld the payment unto that
extent. This is disputed debt.
PROBLEMS FACED BY CCL IN DUES PAYMENT SYSTEM: 1. QUANTITY PROBLEM

2. QUALITY PROBLEM
(1) Quantity Problem
Quantity problem arises because of once coal is dispatched to the customers, they are not getting
proper quantity of coal which they have ordered of coal because of theftness of coal, they are
complain that the quantity of coal which is they have received is not in accurate quantity. So the
buyers of CCL are wanted to pay only that amount on quantity which is they have received. So
buyer of the CCL wanted to only in terms of coal which is they have actually received.
Moisture Problem
In moisture problems party claims that he receives moisture coal and after getting coal dry, the
weight of coal of get down. This also creates disputes in payment.
Stowing Problem
In stone problem party arguments that, there is a large amount of stones are presented in coal
which he receives. So he wanted to give payment after deducting the amount equal to the value
of stones he received in the total coal
.
75 | P a g e
(2) Quality problem:

The types and variety of coals has already been discussed, so when the grade of dispatched coal
doesnt match the grade of received coal then dispute arises regarding the payment, as the
customer want to pay according to the grade of received coal while CCL charges according to
dispatched coal.
Undisputed - this is simply the amount the customer is willing to pay
but is unable to do so due to his financial condition.
Coal Sale Outstanding as on 31th March2011:
Consumer
Amt(Rs.in crs)s
SAIL
263.99
RINL
80.81
IISCO
20.21
UPRVUNL
22.45
DVB
3.86
HPGCL
40.01
BTPP
43.41
DADRI
21.61
UNCHAHAR
26.63
RVUNL
0.86
NTPC
11.49
TANDA
13.60
76 | P a g e
BSEB
155.48
JSEB
267.24
DVC
94.25
TVNL
384.77
OTHERS
5.19
TOTAL
1461.94
CENTRAL COALFIELD LIMITED KOLKATA

CONSUMER WISE OUTSTANDING POSITION AS ON 31.05.2012
REPORT DATE 31.05.2012
CRORES
MAY 2012
CONS
UMER
SALE
REALISATI
ON
MA PROG
Y
MAY
12
PAY
MENT
PRO
G
CRE
DIT
NOT
E
PRO
G
OTH
ER
ADJ
UST
AS ON 31
.05 2012
TOT
AL
ADV
FRO
M
PAR
TY
206.
43
74.6
6
281.
09
0.00
0.00
139.81 67.12
65.94 8.72
0.00
205.25 75.84
SAIL
VIZAC
A
TOTA
L
STEEL
UPRU
VNL
DVB
PSPCL
HPGC
L
ADV
AS
ON
01.04
.12
FRO
M
PAR
TY
0.00
0.00
DUE
AS
ON
01.04
.12
FRO
M
PAR
TY
198.4
3
71.56
COAL BILL
0.00
RS IN
DISP
UTED
UNDIS
PUTED
MAY
PRO
G
MAY
BILL
47.32
15.52
84.64
37.92
40.2
5
0.00
76.64
34.82
0.00
0.00
0.00
0.00
269.9
9
62.84
122.5
6
40.2
5
111.46 0.00
0.00
0.00
3.51
9.27
20.32
22.71
0.00
0.00
1.12
0.00
0.00
1.12
0.00
31.67
0.00
0.22
0.00
0.00
15.96
0.00
50.22
0.00
52.48
0.00
0.00
0.00
0.00
0.22
0.00
0.00
0.00
0.00
0.00
0.22
-33.93
65.47
37.09
77.32
13.6
5
0.00
19.9
6
36.1
0
83.20
0.00
0.00
59.5
9
0.00
0.88
58.71
77 | P a g e
BTPP
0.00
UNCH
AHAR
RVUN
L
NTPC
K
GAON
NTPC
FKKA
NTPC
RIHAN
D
TAND
A
BSEB
0.00
3.83
32.67
115.1
7
139.3
7
68.99
0.00
0.86
0.00
0.00
50.0
0
93.1
1
21.6
8
0.00
0.00
0.73
0.00
0.00
0.00
0.00
0.00
0.00
0.73
0.00
0.00
0.73
0.00
5.87
5.85
11.53
4.02
6.04
0.00
0.00
9.36
0.00
0.00
9.36
0.00
1.16
0.00
0.00
0.00
0.00
0.00
0.00
1.16
0.00
0.00
1.16
0.00
34.93
18.31
37.66
51.25
0.00
0.00
0.00
21.34
0.00
0.00
0.00
0.00
0.00
0.00
0.00
155.48
JSEB
0.00
6.30
12.60
0.00
0.00
0.00
0.00
0.00
0.00
250.84
DVC
0.00
28.24
56.48
0.00
0.00
0.00
51.24
53.57
10.48
11.84
13.68
25.0
0
15.0
0
66.00
BOKA
RO
PSCL
ROSA
POWE
R
BAJAJ
POWE
R
TVNL
155.4
8
238.2
4
114.3
3
0.00
27.00
0.00
0.00
21.3
4
155.
48
250.
84
104.
81
0.00
0.00
0.00
23.0
0
0.00
23.80
0.00
-23.80
33.14
0.00
26.83
45.26
28.7
1
37.86
0.00
0.00
0.00
25.72
2.46
-28.18
16.57
0.00
9.04
14.76
6.09
16.18
0.00
0.00
0.00
19.99
0.00
-19.99
0.00
11.25
22.50
0.00
0.00
0.00
425.53
0.00
6.14
23.00
0.00
0.00
425.
53
0.00
0.00
15.77
25.0
0
23.0
0
50.00
HAJJA
R
POWE
R
453.0
3
0.00
33.63
0.00
-33.63
1201.
76
347.15 690.9
9
386.
25
703.65 0.00
0.00
DADRI 0.00
B
TOTA
L
POWE
R
109.6
3
115.8
0
8.30
74.07
60.43
77.00
0.00
0.00
153.
97
9.37
0.00
40.71
113.26
138.27 0.00
0.00
0.00
0.00
9.37
50.66
0.00
0.00
0.00
7.17
14.99
0.00
22.1
6
0.86
0.00
0.00
0.00
0.00
0.86
1215 .54
137.0
7
102.46 977.01
78 | P a g e
FERTI 0.00
7.82
LISER 19.41
CEME -4.54 0.00
0.00
NT
HEC
-1.93 0.00
0.00
PVT
0.00
95.52
PARTI 249.9
ES
0
C
0.00
103.34
TOTA 275.7
L
8
OTHE
RS
G
1471. 513.33
TOTA 385.4 75
L
1
(A+B+
C+)
AS ON 01.4.2012: 1086.34
15.64
21.51
0.00
0.00
0.00
1.18
13.4
5
0.00
25.28
-3.36
3.24
-28.52
0.00
0.00
0.00
0.00
0.00
-3.36
1.42
101.0
4
1.46
144.
61
2.51
0.00
234.73 0.00
0.00
0.00
0.00
0.00
-3.02
323.5
9
355.2
5
0.00
0.00
-3.02
-323.59
179.2
8
159.
52
258.75 0.00
0.00
0.00
3.24
-358.49
992.8
3
586.
02
1073.8 0.00
6
0.00
1497 .83
492.3
2
310.95 694.36
1086.34
MEASURES TAKEN TO REDUCE DISPUTE.

1. JOINT SAMPLING
In this there are representatives of CCL and the customers at the site of dispatch. The three
samples are made, one for CCL, one for customer and the third one for umpires which can be
used in case of disputes. At the point of reception of the consignment the same procedure is
followed and the two samples are matched and in case of no disputes the billing and payment is
done according to the samples grade and in case of disputes the third sample is sent to he
umpires. The umpires are ISM, CHRS, CERT.
2. THIRD PARTY SAMPLING
In this two samples are prepared at the point of dispatch and point of receipt of consignment.
One sample is for the supplier and other for third party agreed upon by both CCL and customer.
And on the basis of matching of samples billing is done.
79 | P a g e
METHODS OF DISPUTE SETTLEMENT
For settlement of dispute government appointed four Zonal umpires these are:
Eastern Umpire
Western Umpire
Northern Umpire
Southern Umpire
The matte related to that zone, the umpire of that zone listen both partys argument. After
analyzing the both partys argument, he gives the final decision which both parties must be
accepted.
After taking the decision, if party said that he is not able to pay the disputed amount at a time.
Then government imposed Securitization Scheme
Note the government of India has made some securitization scheme in terms to defaulter
of the parties in favor of CCL.
Salient feature of securitization scheme
1. It is tri-partite agreement among The president of India acting through joint secretary,
ministry of finance, government of India.The governor of state through finance secretary,
government of state, and The reserve bank of India through executive director, RBI. This
agreement shall remain in force.
2.This scheme has been introduced because SEB has large outstanding dues payable to
CPU and has requested go to permit their conversion in to long term bonds, to be issued by the
government in favor of the CPU. In respect to overdue of CPU, the following main point of the
scheme of securitization would be effective.
80 | P a g e
The cut-off for reckoning of outstanding payments in respect of the CPU shall be
All surcharge and interest payable by the SEB on the overdue of CPU shall be written
off to the extent of 60%
All amounts payable in accordance with the above shall be converted in to long term
loans to be the rapid by the state government over a period of 15 years in 20 equal 6
monthly installments.
The state government would issue bonds to him respective CPSU who will be free to
trade them in the market in a phased manner i.e. 10% of the bonds will be eligible for
trading in the secondary market every year.
To facilitate trading and redemption of the bonds, the total amount of loan would be the
divided in to 20 equal parts and each part will carry a fixed tenor with bullet redemption.
The first set of bonds would be redeemed on 1.10.2006
Dispute related to payments of dues shall be resolved in accordance with the due process
of law. As and when a dispute is settled, the amounts awarded shall be payable as if the
bonds has been issued as on 01.01.2001, with the exception that the rate of interest for
the period between 01.01.2001 and the actual date of securitization shall be 12% per
annum
3.
SEBs or their successor entities shall open and maintain irrevocable LCs that is equal to
105% of their average monthly billing for the preceding 12 months.
The requisite LC would be open no later than 01.03.2001 and failure to that shall attract
reductions in supplies.
81 | P a g e
SEBs shall be free to establish any other security mechanisms that are mutually
acceptable to the contracting parties.
SEBs that open LC s or establish mechanism by 30.06.2002, and operate them without
any default until 31.12.2002 shall be entitled to a cash incentive equal to 2% of the
nominal value the bonds.
The incentive will be paid on or before 31.01.2003.
INVENTORY MANAGEMENT
Inventory is a list for goods and materials, or those goods and materials themselves, held
available in stock by a business. It is also used for a list of the contents of a household and for a
list for testamentary purposes of the possessions of someone who has died. In accounting
inventory is considered an asset.
Inventory management is primarily about specifying the size and placement of stocked goods.
Inventory management is required at different locations within a facility or within multiple
locations of a supply network to protect the regular and planned course of production against the
random disturbance of running out of materials or goods. The scope of inventory management
also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset
management, inventory forecasting, inventory valuation, inventory visibility, future inventory
price forecasting, physical inventory, available physical space for inventory, quality
management, replenishment, returns and defective goods and demand forecasting. Balancing
these competing requirements leads to optimal inventory levels, which is an on-going process as
the business needs shift and react to the wider environment.
The reasons for keeping stock
82 | P a g e
There are three basic reasons for keeping an inventory:

1. Time - The time lags present in the supply chain, from supplier to user at every stage,
requires that you maintain certain amount of inventory to use in this "lead time".
2. Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand,
supply and movements of goods.
3. Economies of scale - Ideal condition of "one unit at a time at a place where user needs it,
when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk
buying, movement and storing brings in economies of scale, thus inventory.
All these stock reasons can apply to any owner or product stage.
Buffer stock is held in individual workstations against the possibility that the upstream
workstation may be a little delayed in long setup or change-over time. This stock is then used
while that change-over is happening.
Special terms used in dealing with inventory
Stock Keeping Unit (SKU) is a unique combination of all the components that are
assembled into the purchasable item. Therefore any change in the packaging or product is
a new SKU. This level of detailed specification assists in managing inventory.
Stock out means running out of the inventory of an SKU.
"New old stock" (sometimes abbreviated NOS) is a term used in business to refer to
merchandise being offered for sale which was manufactured long ago but that has never
been used. Such merchandise may not be produced any more, and the new old stock may
represent the only market source of a particular item at the present time.
While accountants often discuss inventory in terms of goods for sale, organizations manufacturers, service-providers and not-for-profits - also have inventories (fixtures, furniture,
supplies, ...) that they do not intend to sell. Manufacturers', distributors', and wholesalers'
inventory tends to cluster in warehouses. Retailers' inventory may exist in a warehouse or in
a shop or store accessible to customers. Inventories not intended for sale to customers or
83 | P a g e
to clients may be held in any premises an organization uses. Stock ties up cash and if
uncontrolled it will be impossible to know the actual level of stocks and therefore impossible to
control them.
While the reasons for holding stock are covered earlier, most manufacturing organizations
usually divide their "goods for sale" inventory into:
Raw materials - materials and components scheduled for use in making a product.
Work in process, WIP - materials and components that have begun their transformation to
finished goods.
Finished goods - goods ready for sale to customers.
Goods for resale - returned goods that are salable.
Unnecessary inventory adds enormously to the working capital tied up in the business as well as
the complexity of the supply chain. Reduction and elimination of these inventory 'wait' states is a
key concept in lean. Too big an inventory reduction too quickly can cause a business to be
anorexic. There are well proven processes and techniques to assist in inventory planning and
strategy, both at business overview and part number level. Many of the big MRP/and ERP
systems do not offer the necessary inventory planning tools within their integrated planning
applications.
Purpose of inventory proportionality
Inventory proportionality is the goal of demand driven inventory management. The primary
optimal outcome is to have the same number of days (or hours, etc.) worth of inventory on hand
across all products so that the time of run out of all products would be simultaneous. In such a
case, there is no "excess inventory", that is , inventory that would be left over of another product
when the first product runs out. Excess inventory is sub-optimal because the money spent to
obtain it could have been deployed better elsewhere, i.e. to the product that just ran out.
The secondary goal of inventory proportionality is inventory minimization. By integrating
accurate demand forecasting with inventory management, replenishment inventories can be
scheduled to arrive just in time to replenish the product destined to run out first, while at the
84 | P a g e
same time balancing out the inventory supply of all products to make their inventories more
proportional, and thereby closer to achieving the primary goal. Accurate demand forecasting also
allows the desired inventory proportions to be dynamic by determining expected sales out into
the future; this allows for inventory to be in proportion to expected short term sales or
consumption rather than to past averages, a much more accurate and optimal outcome.
Integrating demand forecasting with inventory management in this way also allows for the
prediction of the "can fit" point when inventory storage is limited on a per product basis.
Applications of proportionality of inventory management.
The technique of inventory proportionality is most appropriate for inventories that
remain unseen by the consumer. As opposed to "keep full" systems where a retail
consumer would like to see full shelves of the product they are buying so as not to think
they are buying something old, unwanted, or stale; and differentiated from the "trigger
point" systems where product is reordered when it hits a certain level; inventory
proportionality is used effectively by just-in-time manufacturing processes and retail
applications where the product is hidden from view
PURPOSE FOR HOLDNG INVENTORY

As we all know that huge fund is required to maintain a certain level of inventory, so the
question is if it is expensive to maintain inventory, why do firms hold inventories? A company
should maintain adequate stock of material for a continuous supply to the factory for an
uninterrupted production. Sometime it is not possible for the company to procure raw material
whenever it is needed. Also there exists uncertainty in procuring raw material in time in many
occasions. The procurement of material may be delayed because of such factors as, transport,
disruption, short supply, strike etc. Therefore, the firm should maintain sufficient stock of raw
materials at a given time to streamline production.
85 | P a g e
Measurement of inventories:
realizable value.
Inventories should be values at the lower of cost and net
The closing balances of inventories are calculated on the basis of market
value and production value

Whichever is less, e.g. market value of inventory is RS 900 per unit and production value @RS .
900/unit As the same if market value of inventory is RS 900 /unit and production value is RS.
350/unit, than the Closing balance of inventory will be valued @RS.350/unit.
Other factors which may neccessiate purchasing and holding of raw material inventories are
quantity discount and anticipate price increase. The firm may purchase large quantities of raw
material than needed for the desired production and sales levels to obtain quantity discount of
bulk purchasing. At times the firm would like to accumulate raw material in anticipation of price
rise.
Thus there are three general purposes for holding inventories:

Transaction motive
Precautionary motive
Speculative motive
1.
TRANSACTIONS MOTIVE : It emphasizes the need to maintain inventories

to facilitate smooth production and sales operation.
2.
PRECAUTIONARY MOTIVE : It necessitates holding of inventories to guard against the

risk of unpredictable change in demand and supply forces and factors.
3.
SPECULATIVE MOTIVE: It influences the decision to increase or deduce inventory level

to take advantage of price fluctuations.
86 | P a g e
OBJECTIVES OF INVENTORY MANAGEMENT

The objective of inventory management is to maintain sufficient inventory for the smooth
production and sales operations and to avoid excessive and inadequate levels of inventory. Some
other objectives are as below;
Ensure a continuous supply of raw material to facilitate uninterrupted production.
Maintained sufficient stock of raw material in period of short supply and anticipate
price changes.
Maintain sufficient finished goods inventory for smooth sales operation and
efficient customer service.
Minimize the carrying cost and time and
Control investment in inventories and keep it at an optimum level.
Accounting standard (AS)-2 (valuation of inventories)
Accounting standard-2 valuation of inventories is a measurement standard having for

reaching Implication on the financial statement. AS-2 is applicable to all enterprises,
irrespective of the
Size and nature of the business.
OBJECTIVES OF AS-2
The objective of this standard is to formulate the method of computation of cost of
inventories/
Stock, determine the value of closing stock/inventory at which the inventory is to be shown
in balance
87 | P a g e
Sheet till it is not sold and recognized as revenue. This statement deals with the determines
of Such value, including the ascertainment of cost of inventories and any write-down thereoff to net realizable value.
Definitions:
The following terms are used in this statement with the meanings specified:
Inventories are assets;
Held for sale in the ordinary course of business,
In the process of production for such sale; or
In the form of materials or supplies to be consumed in the production
Process or in the rendering of services.
AS-2 in CCL:On the comparison of AS-2 in CCL we know that the company is following the terms of AS2.The valuation of inventories on closing
balance is calculated on the basis of market value and production Value whichever is less
INVENTORY MANAGEMENT IN CCL

Inventory is a list for goods and materials, or those goods and materials themselves, held
available in stock by a business. It is also used for a list of the contents of a household and for a
list for testamentary purposes of the possessions of someone who has died. In accounting
inventory is considered an asset.
Inventory management is primarily about specifying the size and placement of stocked goods.
Inventory management is required at different locations within a facility or within multiple
locations of a supply network to protect the regular and planned course of production against the
random disturbance of running out of materials or goods. The scope of inventory management
also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset
management, inventory forecasting, inventory valuation, inventory visibility, future inventory
88 | P a g e
price forecasting, physical inventory, available physical space for inventory, quality
management, replenishment, returns and defective goods and demand forecasting. Balancing
these competing requirements leads to optimal inventory levels, which is an on-going process as
the business needs shift and react to the wider environment.
There are three basic reasons for keeping an inventory:
1.Time - The time lags present in the supply chain, from supplier to user at every stage,
requires that you maintain certain amount of inventory to use in this "lead time".
2.Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply
and movements of goods.
3.Economies of scale - Ideal condition of "one unit at a time at a place where user needs it,
when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying,
movement and storing brings in economies of scale, thus inventory.
All these stock reasons can apply to any owner or product stage.
Buffer stock is held in individual workstations against the possibility that the upstream
workstation may be a little delayed in long setup or change-over time. This stock is then used
while that change-over is happening.
Special terms used in dealing with inventory
Stock Keeping Unit (SKU) is a unique combination of all the components that are
assembled into the purchasable item. Therefore any change in the packaging or product is
a new SKU. This level of detailed specification assists in managing inventory.
Stock out means running out of the inventory of an SKU.
"New old stock" (sometimes abbreviated NOS) is a term used in business to refer to
merchandise being offered for sale which was manufactured long ago but that has never
been used. Such merchandise may not be produced any more, and the new old stock may
represent the only market source of a particular item at the present time.
89 | P a g e
While accountants often discuss inventory in terms of goods for sale, organizations manufacturers, service-providers and not-for-profits - also have inventories (fixtures, furniture,
supplies, ...) that they do not intend to sell. Manufacturers', distributors', and wholesalers'
inventory tends to cluster in warehouses. Retailers' inventory may exist in a warehouse or in
a shop or store accessible to customers. Inventories not intended for sale to customers or
to clients may be held in any premises an organization uses. Stock ties up cash and if
uncontrolled it will be impossible to know the actual level of stocks and therefore impossible to
control them.
While the reasons for holding stock are covered earlier, most manufacturing organizations
usually divide their "goods for sale" inventory into:
Raw materials - materials and components scheduled for use in making a product.
Work in process, WIP - materials and components that have begun their transformation to
finished goods.
Finished goods - goods ready for sale to customers.
Goods for resale - returned goods that are salable.
Unnecessary inventory adds enormously to the working capital tied up in the business as well as
the complexity of the supply chain. Reduction and elimination of these inventory 'wait' states is a
key concept in lean. Too big an inventory reduction too quickly can cause a business to be
anorexic. There are well proven processes and techniques to assist in inventory planning and
strategy, both at business overview and part number level. Many of the big MRP/and ERP
systems do not offer the necessary inventory planning tools within their integrated planning
applications.
Purpose of inventory proportionality
Inventory proportionality is the goal of demand driven inventory management. The primary
optimal outcome is to have the same number of days (or hours, etc.) worth of inventory on hand
across all products so that the time of run out of all products would be simultaneous. In such a
case, there is no "excess inventory", that is , inventory that would be left over of another product
90 | P a g e
when the first product runs out. Excess inventory is sub-optimal because the money spent to
obtain it could have been deployed better elsewhere, i.e. to the product that just ran out.
The secondary goal of inventory proportionality is inventory minimization. By integrating
accurate demand forecasting with inventory management, replenishment inventories can be
scheduled to arrive just in time to replenish the product destined to run out first, while at the
same time balancing out the inventory supply of all products to make their inventories more
proportional, and thereby closer to achieving the primary goal. Accurate demand forecasting also
allows the desired inventory proportions to be dynamic by determining expected sales out into
the future; this allows for inventory to be in proportion to expected short term sales or
consumption rather than to past averages, a much more accurate and optimal outcome.
Integrating demand forecasting with inventory management in this way also allows for the
prediction of the "can fit" point when inventory storage is limited on a per product basis.
Applications of proportionality of inventory management.
The technique of inventory proportionality is most appropriate for inventories that remain unseen
by the consumer. As opposed to "keep full" systems where a retail consumer would like to see
full shelves of the product they are buying so as not to think they are buying something old,
unwanted, or stale; and differentiated from the "trigger point" systems where product is
reordered when it hits a certain level; inventory proportionality is used effectively by just-in-time
manufacturing processes and retail applications where the product is hidden from view.
INVENTORY MANAGEMENT IN CCL

Inventory management of CCL is working directly under the Chief Material Manager (CMM).
He controls the inventory of CCL from head quarter of CCL, Ranchi.
In CCL the inventory includes:
1. Coal as on 31st march of the year end.
2. Spares and stores.
91 | P a g e
3. Finished goods and work in progress (undelivered goods)

4. Press
5. Medicine in central or regional hospitals.
Following diagram shows the structure of inventory department in CCL:-
Central Department
Unit Stores
Project Stores (Coal)
Spares
WIP, Press, Medicine.
MATERIAL BUDGET IN CCL

In CCL the department follow the hierarchical system of budget planning.
92 | P a g e
unit stores
collects material budget from
departments.
regional stores.
scrutinise budget and fill local tendors.
central stores. (Barkakhana)

its budget has to get approved by CCL
headquarters.
NOTE: Material budget has to be approved by CIL. A particular purchase rule has to be followed
according to purchase policy. Also a particular material coding has to be followed.
STOCK OF STORES AND SPEARS
This is consisting of HEMM(Heavy Earth Moving machine),

machine), E&T (eg. Transformer etc.),
Safety items, washeries spears and consumable spears like nut bolt etc.
This is the list of some important HEMM is given below: Major Equipme
Equipment.
93 | P a g e
HEMM Profit as on 1.4.2004

HEMM
CAPACITY
QUANTITY
25 M3
10 M3
14
HYDRAULIC 10-3.2 M
32
ELECT ROPE 4.6 5M3
51
BACKHOE
11
TOTAL
109
85 Tes
133
50 Tes
71
35 Tes
413
TOTAL
617
700 HP
410 HP
65
300 HP
115
TOTAL
183
250 mm
71
160 mm
76
100 mm
27
TOTAL
174
SHOVEL
DUMPER
DOZER
DRIL
94 | P a g e
UNDERGROUND
QUANTITY
LOAD HAUL DUMPER
11
SIDE DISCHARGE LOADER
19
STOCK OF COAL
It consists of:
1.
Raw coal
2.
Soft coke
3.
Hard coke
4.
Washed coal
5.
Middling/slurry
6.
Magnetite
7.
Coal tar and by-product
Presently CCL has:

7 washeries
4 medium coking coal washeries
95 | P a g e
3 non coking coal washeries

WORKSHOP JOB
Presently CCL has
1 Central workshop
5 regional workshop
The central w/s and 3 regional w/s are ISO 9001 certified.
PRESS
It contains all stationary items.
MEDICINE
Only the medicine of central hospital comes under this head.
INVENTORIES IN CCL:
PARTICULARS
1.Stock of Stores & Spares

Less: provision
Add: in transit/ under
inspection
Stock adjustment
2.Stock of coal:
a)Raw coal
Revenue mines
Capital mines
b)coke
Soft coke
Hard coke
As at
31.03.2011
(RS in
crore)
175.94
36.19
139.75
3.80
0.0
1084.33
0.00
As
at31.03.2010
(Rs in crore)
186.25
36.14
150.11
4.65
143.55
.02
154.78
1084.33
849.04
0.00
849.05
0.0072
0.64
0.01
0.63
0.65
c)Washery products
Washed coal
Middlings/Slurry
59.85
147.01
206.86
0.63
44.40
111.86
156.26
96 | P a g e
Magnetic
Coal tar & other byproducts
0 .02
0.44
0 .02
0.42
1292.30
1006.37
1292.30
1006.38
2.96
2.35
3.Workshop jobs:4. Press

Work in progress/finished
goods
0.81
1.32
5.Medicines (Central
Hospital)
Non-CIL Block
TOTAL:-
0.37
0.60
6.96
11.74
1446.95
1177.17
NOTE: RS IN crore
INVENTORIES MANAGEMENT TECHNIQUES

Various techniques commonly used for inventory control are listed below:
ABC technique
Stock level minimum, maximum and re-order level
Economic order quantity (EOQ)
Inventory turnover ratio to review slow and non moving material
Perpetual inventory system
Methods of pricing of material
97 | P a g e
ABC TECHNIQUE
ABC Technique is a value based system of material control. In this technique material are
analyzed according to their value so that costly and more valuable materials are given greater
attention and care. All items are classified according to their value ie, high, medium and low
values, which are known as A, B and C items respectively.
A items: High in value and low in quantity. These items engage 70% of funds and 10% of space
in the inventory.
B items: Medium in value and medium in quantity. These items engage 20% of funds and 20%
of space in the inventory.
C items: Low in value and high in quantity. These items engage only 10% of fund and 70% of
space in the inventory.
Thus the ratio between A, B and C is as follows:1. PRICE WISE 7:2:1
2. QUANTITY WISE 1:2:7
STOCK LEVELS
In order to check under stocking and over stocking most of the large companies
adopt a scientific approach of fixing stock levels.
These levels are:
Maximum level = Re order level + Re order quantity (Max. consumption*
Max. re-order period)
98 | P a g e
Minimum level = Re-order level-(Normal consumption* Maximum Re-order

period)
Re-order level=Maximum consumption* Maximum re-order period
Average stock level = (Maximum level + Minimum level)
Danger level = Normal consumption
Maximum re order period under
emergency condition.
ECONOMIC ORDER QUANTITY (EOQ)

Economic order quantity is that size of order which gives maximum economy in
purchasing any material and ultimate contribution towards maintaining the material at the
optimum level and at minimum cost. It is also called RE-ORDER QUANTITY.
EOQ= (2*O.C.*A.D./C.C)
Where,
O.C. = Ordering cost, the cost of placing an order.
A.D. = Annual demand, annual consumption of material in units.
C.C. = Carrying cost, this is the cost of holding the stock in storage.
99 | P a g e
INVENTORY TRUNOVER RATIO TO REVIEW SLOW AND NON-MOVING

MATERIAL
Inventory turnover ratio tells us how many times in a year stock are used up and
replaced. The greater the stock turnover, the more efficient is the stock policy.
Stock turnover ratio= Cost of material consumed during the period/ Average stock of
materials during the period
Stock turnover in terms of days= days of period / stock turnover rate
In order to detect the slow and non-moving materials, a standard stock turnover
rate should be computed for each item of material with the help of following formula:
Turnover rate of an item= Budgeted consumption/Average stock level
PERPETUAL INVENTORY SYSTEM

A perpetual inventory system is defined as The method of recording stores
balance after each receipt and issue to facilitate regular checking and obviate closing down for
stock taking.
METHOD OF PRICNING OF MATERIALS
Some important methods of pricing are as follows:
LIFO (Last in fast out)
FIFO (First in first out)
Simple Average Price
Weighted Average Price
100 | P a g e
VALUATION METHOD USED IN CCL

Earlier FIFO (first in first out) method was used in valuation but now Weighted Average Method
is used in CCL.
In CCL the difference between book stock and measured stock should not more than 5 i.e. Book
Stock- Measured Stock = 5
The inventory management followed in CCL follows ABC analysis method.
ABC analysis is based on Pareto Analysis, also known as the "80/20" rule. The 80/20 comes
from Pareto's finding that 20 percent of the populace possessed 80 percent of the wealth. From
an inventory perspective it can restated thusly: approximately 20 percent of all inventory items
represent 80 percent of inventory costs. Therefore, a firm can control 80 percent of its inventory
costs by monitoring and controlling 20 percent of its inventory. But, it has to be the correct 20
percent.
The top 20 percent of the firm's most costly items are termed "A" items (this should
approximately represent 80 percent of total inventory costs). Items that are extremely
inexpensive or have low demand are termed "C" items, with "B" items falling in between A and
C items. The percentages may vary with each firm, but B items usually represent about 30
percent of the total inventory items and 15 percent of the costs. C items generally constitute 50
percent of all inventory items but only around 5 percent of the costs.
By classifying each inventory item as an A, B or C the firm can determine the resources (time,
effort and money) to dedicate to each item. Usually this means that the firm monitors A items
very closely but can check on B and C items on a periodic basis (for example, monthly for B
items and quarterly for C items).
101 | P a g e
PURCHASING
Centralized purchase: centralized purchase is done through Headquarter.
Decentralized purchase: Decentralized purchase is done through Area.
Centralized
Process of order:
Requirement
First there is a requirement and then the mgr prepare a budget
Budgeting
After preparing the budget it is forwarded to the CIL Headquarter
Headquarter
After the budget ,it is analyzed by the management
Analysis
After the analysis the budget is accepted by the management
Approval by CIL
Approval budget funds are then sent to different area for distribution
Distribution
This is a process of procuring fund the CIL Head Office for the heavy machines and spares
and large
Amount of fund required.
This is not applied for minor inventory such as e.g. nut &bolt, bushed ,oil and lubricants.
102 | P a g e
DECENTERALIZED
PROCESS OF INVENTORY
Area manager
Area mgr is allotted with some amount of funds
Allotted quota
The allotted quota for pretty purchase in daily requirement
Small committee
A committee is formed to look after such petty expenses
Local purchases
Benefits of decentralized process:
1)
2)
3)
4)
5)
6)
Short process
Allotted process
No need of budget (time saving)
Easy availability
For local purchase
Fast moving part
Points should be considered on purchases of inventory
Right Quality
Right Quantity
Right Price
Right Time
Right Source
Mainly the purchase is done through Tender.
Advertisement Tender (over 10 lac)

National Tender
Global Tender
Limited Tender (less than 10 lac)
Single Tender (specific brand)
103 | P a g e
Rate contract
Committee purchase
Area local purchase
Process of tender
There are basically two sides of every tender at CCL.
Technical Bid: technical bid includes all the technical aspect of purchase,
E.g.-size, shape, quality, quantity, etc.
Financial Bid:- financial bid includes the cost of purchase
Purchasing can be done at centralized level or area wise or local purchases.
Local purchases are financed by project officers. All items are divided into centralized and
decentralized items; centralized items cant be purchased at local or area level. For HEMM
(Heavy Earth Moving Machine) a separate budget is made and for the rest of items a different
budget is made. Indents are sending from every region regarding materials required to purchase
to the Ranchi head office and on the base of which purchase order is made. CCL also issues
tenders to invite application from different suppliers.Most of the purchasing is done on credit
while local purchasing is done on cash basis.
PURCHASE PROCEDURE
2. Material requisite document have to be prepared.
3. Sources of material has to be identified.
4. Various types of tenders have to be processed which are as follow
a. Global tenders- these are filled for the materials which are available from
various sources at national or international level. The material requirement
is advertised and then the tenders quoting the best option is selected.
b. Local tenders- these are advertised for materials and equipment which are
provided by various vendors but at local or regional level.
104 | P a g e
c. Limited tenders- these are prepared for machines and equipments which
charges less than 10 lakhs.
d. Single tenders- it is prepared for the equipments which require special
sanction.
Other types of contracts involved in purchase are as follow:1. RATE CONTRACT- In this a contract is agreed upon for equipments and
materials at fixed rate for a fixed period of time mainly for 1 or 2 year. In CCL the
fixed duration is mainly for 6 months. This contract is prepared with the help of
tenders.
2. DEPO AGREEMENT- It is also a type of rate contract but in this the original
manufacturer of equipment is contacted and informed to be ready with particular
rate of particular component at particular. This agreement has to be agreed upon
by board of directors.
WASTE/UNSUSED MATERIALS
CCL use to send notice to all subsidiary companies of CIL about the unused material so that who
so ever require the material can take it from CCL.
ASSETS VERIFICATION
Verification is done by Audit Process i.e. Physical verification method is used in CCL. In CCL
the difference between book stock and measured stock should not more then 5.i.e. Book StockMeasured Stock = 5.
SWOT ANALYSIS
STRENGTH
1. Monopoly in market regarding its product i.e coal which is a requirement of many
industries
2. Good customer relation with minimum effort requirement
3. No advertisement required
105 | P a g e
4. Self financing of working capital

5. Profit since last five years
6. Efficient management of working capital
7. Application of advanced techniques of mining
8. New methods to settle disputes
WEAKNESS
1. Malpractices followed by officials appointed for quality verification in disputes settlement
2. Have to supply products to customers like JSEB in spite of their large dues as they have to
operate in that state.
3. Being a central government owned company have to follow rules set up by government as
in case of use of surplus funds that it has to deposit in selected banks
4. A long procedure have to be followed for any change to be brought in company
5. Failure to restrict disputed debts regarding quality and quantity due to theft during
transportation and stowing problem as discussed in report
6. Improper utilization of surplus cash for profit of firm
7. Short term relation with vendors which is less profitable for firm
OPPURTUNITY
1. New ways of profitable disposal of surplus funds as per guidelines discussed in 197
meeting of CIL
2. Range of new customers
3. It is a subsidiary of largest coal producing company in world so has to face negligible
competition
4. Being a government owned company it enjoys various subsidies and other helps.
5. Issue of 10% share as IPO brought a public owned company characteristic to this company
which will be profitable for both public and company
6. Disputed debts settlement by new securitization scheme
7. THREATS
1. Theft problem during transportation
2. Disputed dues
106 | P a g e
3. Obligation to supply to customers like JSEB

4. Decreasing number of mines and coal reserve
5. Less developed methods of coal mining and quality inspection method
than other
countries
6. Lack of advanced methods of inventory management.
OPERATIONAL STATISTICS
Year ending 31st mar
1.(a)production of raw
coal:
Underground
Opencast
Total
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
1.27
46.25
47.52
1.47
45.61
47.08
1.56
41.68
43.24
1.83
42.32
44.75
1.96
39.36
41.32
2.31
38.20
40.51
2.66
34.73
37.39
2.75
34.58
37.33
2.76
34.22
36.98
2.74
31.07
33.81
(b) Overburden removal

:( million cu mts.)
2.off take raw
coal(million tones)
Steel
Power
Cement
Fertilizer
Colliery consumption
Others
Total
62.52
56.05
55.63
55.22
45.90
49.97
46.68
48.10
46.64
46.41
4.95
30.76
0.22
0.94
0.01
9.50
46.38
4.31
28.89
0.08
0.83
0.01
9.79
43.91
4.37
29.80
0.05
0.88
0.02
8.55
43.67
4.14
29.25
0.07
0.59
0.02
7.53
41.60
4.85
25.29
0.05
0.75
0.04
7.12
38.10
5.49
27.29
0.05
0.60
0.06
5.37
38.86
5.82
25.35
0.05
0.60
0.09
3.98
35.89
5.44
26.35
0.07
0.90
0.19
3.15
36.10
5.10
27.13
0.00
0.93
0.22
3.42
36.80
4.80
24.59
0.01
1.02
0.25
2.60
33.27
3.average manpower
53171
5530
5
57681
6020
9
62905
65536
68335
71100
7366
4
76405
893.72
851.2
8
749.65
733.2
8
656.86 618.14
547.16 525.04 502.0

1
442.51
0.35
0.36
0.36
0.39
0.40
0.43
0.47
0.47
0.44
5.24
3.66
4.65
3.27
4.65
3.22
4.66
3.22
4.02
2.81
4.12
2.75
3.75
2.51
3.75
2.48
3.23
2.13
4.productivity
(a)avg per man per yr
(tones)
(b)output per man shift
i.
Underground(ton 0.34
es)
ii. Opencast(tones) 5.45
iii. Overall(tones)
3.88
5.information as per cost
report:
107 | P a g e
i.
ii.
iii.
Earning per man 1615.93

shift
Avg cost of
844.65
production of net
saleable coal
Avg sale value
1072.82
of production of
net saleable coal
1445.
82
802.0
7
1616.4
3
914.03
1099.
19
696.7
0
868.48 781.13
1021.
59
977.45
868.9
7
807.04 798.25
630.71 600
774.22 659.51 605.8

7
644.03 608.20 571.2
9
584.02
768.30 667.41 632.4

6
594.88
According to operational statistics sheet of CCL, it is producing more raw coal from opencast
since 2002 to till 2011. Because in year 2002 CCL produced 31.07 million tones and till 2011 it
has produced 46.25 million tonnes from opencast. It means, from opencast production of raw
coal has increased by 48.86% which is good indication for company. In opencast production
CCL has to bear less expense.
But when we see the production of raw coal from underground mines it has been decreasing
since 2004 till 2011. In 2004 it had produced 2.75 million tonnes raw coal and till 2011 it has
produced only 1.27 million tonnes raw coal which is decreased by 98.73% in production from
underground mines. But still CCL has been producing raw coal from both mines in increasing
order by 40.55%. In 2002, CCL has produced 33.81 million tonnes and now CCL is producing
47.52 million tonnes raw coal from both opencast and underground mines.
In CCL, average manpower is decreasing since 2002 to till 2011 for producing coal. In 2002
CCL had 76405 average manpower but now it has 53171 average manpower which is working
for producing raw coal from both mines. CCL has reduced the manpower by 30.41%.There is
one another reason for decreasing manpower because CCL is giving more preference to opencast
mines for producing coal than underground mines. And in opencast mines machines are used for
producing the coal.
108 | P a g e
609.83
Balance sheet of CCL

As at 31st March, 2012
(Rs.in Cr)
A
1
PARTICULAR
EQUITY AND LIABLITIES
Shareholders Fund
a)Share capital
b)Reserve &Surplus
c)Money Received against share Warrents
Sub- total shareholder fund
Non-current liabilities
a)long term borrowing
b)other long term liabilities
c)long term provisions
Sub-total non current liabilities
Current liabilities
a)trade payable
b)other current liabilities
c)short term provision
Sub-total current liabilities
Total-EQUITY AND LIABLITIES:
ASSESTS:
Non-current assests:
a)fixed Assest
b)non-current investment
c)Deferred tax Assets (net)
d)long term loan& advance
Sub-Total Non-current Assests
Current assest:
Current investment
Inventories
As at 31.03.2012
As at31.03.2011
940.00
2497.38
0.00
3437.38
940.00
2098.01
0.00
3038.01
87.54
3.26
2121.88
2212.68
90.91
1.12
1878.90
1970.93
74.39
2575.06
2369.59
5019.04
59.88
1848.24
2066.20
3974.32
10669.10
8983.26
1746.99
28.27
502.51
171.16
2448.93
1794.42
37.70
493.16
17.10
2342.38
9.42
1531.88
9.42
1446.99
109 | P a g e
Trade&receivables
Cash & Cash equivalent
Short term loans & advances
Other current Assests
Sub-total current Assests
Total Assests
1078.66
3986.20
1247.13
366.88
8220.17
10669.10
941.64
2582.77
1097.95
562.11
6640.88
8983.26
WORKING CAPITAL ANALYSIS
Working capital level

The consideration of the level investment in current assets should avoid two danger points
excessive and inadequate investment in current assets. Investment in current assets should be
just adequate, not more or less, to the need of the business firms. Excessive investment in
current assets should be avoided because it impairs the firm s profitability, as idle investment
earns nothing. On the other hand inadequate amount of working capital can be threatened
solvency of the firms because of it s inability to meet it s current obligation. It should be realized
that the working capital need of the firms may be fluctuating with changing business activity. This
may cause excess or shortage of working capital frequently. The management should be prompt
to initiate an action and correct imbalance
Size of working capital :
PARTICULARS
Current Assets
:
Inventories :
A) Inventories of
coal, coke etc.
B) Inventories of
stores
&
spares etc.
C) Other
inventories
Sundry debtors
Cash & Bank balances
Loans & advances
2008
2009
2010
(Rs. In crore)
2011
2012
858.03
806.26
1006.37
1292.31
1379.68
129.47
141.99
154.78
143.57
147.25
3.26
19.80
16.00
11.11
4.95
541.30
1115.46
2236.95
745.26
1815.88
2740.92
512.44
2607.00
1369.80
941.64
2582.77
1677.16
1078.66
3986.20
1785.17
Current 4884.47
6270.13
5666.43
6648.56
8381.91
Current
Liabilities :
Current liabilities & 4713.91
6218.54
5316.79
3974.32
5019.04
TOTAL
Assets
110 | P a g e
provisions
Current 4713.91
TOTAL
Liabilties
NET Working Capital

(A-B)
170.56
6218.54
5316.79
3974.32
5019.04
51.59
349.64
2674.24
3362.87
Working capital trend analysis

In working capital analysis the direction at changes over a period of time is of crucial importance.
Working capital is one of the important fields of management. It is therefore very essential for an
analyst to make a study about the trend and direction of working capital over a period of time.
Such analysis enables as to study the upward and downward trend in current assets and
current liabilities and it s effect on the working capital position.
In the words of S.P. Gupta The term trend is very commonly used in day-to-day conversion
trend, also called secular or long term need is the basic tendency of population, sales, income,
current assets, and current liabilities to grow or decline over a period of time
Working Capital Size:
PARTICULARS
2008
NET
Working 170.56
Capital
(A-B)
100
WC indices
2009
51.59
2010
349.64
2011
2674.24
2012
3362.87
30.247
204.995
1567.917
1971.663
WC indices
2500
1971.663
2000
1567.917
1500
WC indices
1000
500
100
30.247
2008
2009
204.995
0
2010
2011
2012
Observations
It was observed that in the CCL the year 2009 Net worth capital decreased by 69.76% due to
111 | P a g e
the old policies and regulations followed previously. In the year 2009. The fall in working
capital is a clear indication that the company is utilizing its short term resources with efficiency.
In the year 2010, the net working capital increased to Rs. 349.64 cr from Rs. 51.59 cr .It shows
that management is using long term funds to short term requirements.
As we see the data of 2011 & 2012 we see a tremendously increase in the ratio of the CCl. This is
due to the full functioning of the new coal development policy and the fuel supply agreement in
the recent years.
Composition of current assets

Analysis of current assets components enable one to examine in which components the
working capital fund has locked. A large tie up of funds in inventories affects the
profitability of the business or the major portion of current assets is made up cash alone, the
profitability will be decreased because cash is non earning assets.
Axis Title
Chart Title
4500
4000
3500
3000
2500
2000
1500
1000
500
0
inventories
sundry debtors
cash & bank balances
loans & advances
2008
2009
2010
2011
2012
Observations
We see a cash surplus in the year 2009 with a constant increase but in the year 2010 there was no
change and the graph was a straight line but again after 2011-12 there was a inclined growth in
the company surplus due to the agreements & policies. Inventory seems to be normal growth in
the five years. Debtors also seems to be normal as there is no such policy. Loans and advances
seems to decrease after the year 2010 as there is no need due to the generated surplus.
Current liabilities size:
PARTICULARS
2008
Current Liabilities :
Current liabilities & 4713.91
provisions
TOTAL
Current 4713.91
2009
2010
2011
2012
6218.54
5316.79
3974.32
5019.04
6218.54
5316.79
3974.32
5019.04
112 | P a g e
Liabilties
Current
indices
Liabilties 100
131.918
112.789
84.310
106.472
C.L. Indices
131.918
140
120
112.789
106.472
100
100
84.31
80
C.L. Indices
60
40
20
0
2008
2009
2010
2011
2012
Observations
Current liabilities show continues growth each year because company creates the credit in
the market by good transaction. . As a current liability increase in the year 2009 by 32%
it reduce the working capital size in the same year. In the year 2010, the current liabilities
decreased by around 15% which leads to increase working capital. But company enjoyed over
creditors which may include indirect cost of credit terms.
Working capital ratio analysis:
Liquidity ratio:
Current ratio:: This ratio shows the relationship between current assets and current liabilities of
a company. It is an important measure of analyzing the firm's ability to pay off its current
obligations out of its short-term
term resources. The higher the CR, the higher is the amount available
per rupee of current obligations and accordingly, the higher is the feeling of safety and security.
The rule of thumb about the CR is 2:1.
1. Current ratio = Current assets / Current liabilities
113 | P a g e
Particulars
Current Assets
Current
Liabilties
Current ratio
2008
4884.87
4713.91
2009
6270.18
6218.54
2010
4466.39
5316.79
2011
6640.88
3974.32
2012
8220.17
5019.04
1.036
1.008
.840
1.670
1.637
current ratio
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
current ratio
2008
2009
2010
2011
2012
1.036
1.008
0.84
1.67
1.637
Observation:
The current ratio in CCL registered a fluctuating trend during the period 2008
2008-2012. It varied
between 1.04 in 2008 and 1.64 in the year 2012. On an average, the CR in CCL was 1.34 during
the period 2008- 2012.
As a conventional rule, a current ratio of 2:1
2:1 or more considered satisfactory. The central
coalfields limited (ccl) has a current ratio less than 2:1 every year, during the period 2008
2008-2012.
Therefore, it may be interpreted to be insufficient liquid.
Quick ratio:: The quick or acid test ratio takes

takes into consideration the difference in the liquidity of
the components of current assets .it represents the ratio between CA, and the total CL.This ratio
is yet another widely used parameter of judging the short-term
short term repaying ability of a firm in the
near future.
2. Quick ratio: ( current asset inventory)/ current liability
Current Assets
Current
Liabilties
2008
4884.91
2009
6270.13
2010
4489.24
2011
5193.89
2012
6688.29
4713.91
6218.54
5316.79
3974.32
5019.04
114 | P a g e
Quick ratio
.826
.853
.844
1.307
1.333
Quick ratio
1.4
1.2
1
0.8
Quick ratio
0.6
0.4
0.2
0
2008
2009
2010
2011
2012
Observation:
The rule of thumb about QR is1:1. It is evident from above table that the QR also shows the
fluctuating trend during the period 2008-2012
2008 2012 and ranged between 0.826 in the year 2008 and
1.333 in the year 2012. On an average the QR in CCL was 1.080 during the
the period of 2008
2008-2012,
i.e. quick assets are 1.080 times of current liabilities. It clearly indicates that the liquidity
Position of the company is good during this period. From 2012, companys QR shows better than
previous years. This shows company is now strengthen their liquidity position.
Absolute liquid ratio

Even though debtors and bills receivables are considered as more liquid then inventories, it
cannot be converted in to cash immediately or in time. Therefore while calculation of aabsolute
liquid ratio only the absolute liquid assets as like cash in hand cash at bank, short term
marketable securities are taken in to consideration to measure the ability of the company
in meeting short term financial obligation.
obligation. It calculates by absolute assets dividing by current
liabilities.
Absolute liquid ratio : absolute liquid assets / current liabilities
Absolute liquid ratio:
Particulars
Absolute
Liquid Assets
Current
Liabilties
Absolute
2008
1115.46
2009
1815.88
2010
2607.00
2011
2582.77
2012
3986.20
4713.91
6218.54
5316.79
3974.32
5019.04
115 | P a g e
0.237
liquid ratio
0.292
0.490
0.650
0.794

0.9
0.8
0.794
0.7
0.65
0.6
0.5
0.49
0.4
0.3
0.292
0.237
0.2
0.1
0
2008
2009
2010
2011
2012
Observation
Absolute liquid ratio indicates the availability of cash with company is sufficient because
company also has other current assets to support current liabilities of the company. every
year from 2008-2012,
2012, shows that the companys absolute
absolute liquid ratio has increased .The year
2010&2012, shows the highest increase ,this is because of company carry more cash balance, as
a cash balance is ideal assets company has to take control on such availability of funds
which affect on
n cost of the funds.
Efficiency ratio :
Working capital turnover ratio :

It signifies that for an amount of sales, a relative amount of working capital is needed. If any
increase in sales contemplated working capital should be adequate and thus this ratio helps
management to maintain the adequate level of working capital. The ratio measures the
efficiency with which the working capital is being used by a firm. It may thus compute net
working capital turnover by dividing sales
sale by working capital.
3. Working capital turnover ratio = sales / net working capital
Particulars
2008
2009
2010
2011
2012
Sales
4362.94
5210.88
5488.22
6041.70
7326.33
Net W.C.
171.00
51.59
349.64
2666.56
3201.13
W.C.Turnover
25.514
101.005
15.696
2.265
2.889
116 | P a g e
w.c.turnover
120
101.005
100
80
60
w.c.turnover
40
25.514
20
15.696
2.889
2.265
0
2008
2009
2010
2011
2012
Observations
High working capital ratio indicates the capability of the organization to achieve maximum
sales with the minimum investment in working capital. In the year 2009 the ratio was around
101 times, it indicates that the capability of the company to achieve maximum sales with the
minimum investment in working capital. Companys working capital ratio shows mostly
increasing trend , except for the year 2010, i.e. 15.69 times this is because of ex
excess of cash
balance in current assets which occurred due to encashment of deposits.
Inventory turnover ratio
Inventory turnover ratio indicates the efficiency of the firm in producing and selling its
products. This ratio focuses lightt on the inventory control policy adopted by a concern. This ratio
shows the relationship between the cost of goods sold or sales during a particular year and
inventories kept by a concern during that year. Higher ITR shows higher efficiency of the
management and vice versa. It is calculated by dividing the cost of goods sold by average
inventory:
4. Inventory turnover ratio: cost of goods sold / avg. inventory
Particulars
2009
2010
2011
2012
Cost of goods 3327.69

sold
4447.08
3955.17
4181.48
6570.06
Average
inventory
902.40
979.61
2145.2
1312.07
1489.44
3.687
4.539
1.843
3.186
Inventory
Turnover
2008
117 | P a g e
4.411
5
4
4.539
4.411
3.687
3.186
3
1.843
2
1
0
2008
2009
Inventory
turnover
2010
2011
2012
Observations
It is evident from above that the Inventory Turnover of CCL shows a fluctuating trend during
2008-2012. The average of this ratio during the period of 2008-2012
2008 2012 was 4.049 times. It can also
be observed from above table that this ratio started improving after reaching at the lowest (2.79)
in the year2010 this ratio increase to 3.19 times in 2011 It is thus, clear that the manage
management
tried to control its inventory levels to a great extent during that period. Again in 2012, the
companys inventory turnover ratio increase to 1.23 times.
Debtors turnover ratio:

This ratio throws light on the credit and collection policy pursued by a concern. Debtors are
convertible into cash over short period and therefore, are included current assets.DTR is an
important tool of analyzing the efficiency of liquidity, working capital management of a
company. The liquidity position of a company depends
depends on the quality of debtors to a great extent.
It measures the rapidity or the slowness of their collectability.
5. Receivable turnover ratio : gross sales / avg. Accounts receivable
Particulars
2008
2009
2010
2011
2012
Gross sales
5060.54
5978.37
6291.92
7083.13
7873.83
Avg. Debtors
506.74
643.28
628.85
727.04
1010.15
118 | P a g e
Receivable
Turnover
9.986
9.294
10.005
9.742
7.795
12
10
8
6
9.986
9.294
10.005
9.742
7.795
4
2
0
2008
2009
2010
2011
2012
receivable turnover
Observation:
The high Debtors Turnover Ratio implies the prompt payments made by debtors and vice versa.It
can be seen from above table that the DTR also recorded a fluctuating trend during 2008
2008-2012 in
CCL. It was highest in the year 2010 and lowest in the year 2012.On an average, the DTR in
CCL was 8.89 during the period 2008-2012.The
2008
DTR in CCL was much higher
her most of the years
under study. It signifies speedy of collection efforts and efficient credit policy followed by the
CCL. It indicates good working capital management policy.
Current assets turnover ratio
Current assets turnover ratio is calculate to know the firms efficiency of utilizing the
current assets current assets includes the assets like inventories, sundry debtors, bills
receivable, cash in hand or bank, marketable securities,
securities, prepaid expenses and short term
loans and advances. This ratio includes the efficiency with which current assets turn into
sales. A higher ratio implies a more efficient use of funds thus high turnover ratio indicate to
reduced
d the lock up of funds in current assets. An analysis of this ratio over a period of
time reflects working capital management of a firm
Current asset turnover= Sales/ current assets
Particulars
2008
2009
2010
2011
2012
Sales
4362.94
5210.89
5488.23
6041.70
7326.33
119 | P a g e
Current Assets
4884.91
6270.13
5666.43
6640.88
8220.17
Current
Assets
Turnover
.893
.831
.969
.909
.891
Current asset turnover

1
0.95
0.969
0.9
0.85
0.909
0.893
0.891
Current asset turnover
0.831
0.8
0.75
2008
2009
2010
2011
2012
Observation
It was observed that current assets turnover ratio fluctuating trend over the period of time.
Turnover ratio was 0.893 in the year 2008 and decrease to 0.831,0.891 in the year 2009
,2012 respectively. In the year 2010, company increased
increased its sales, thus current assets turnover
ratio increased to 0.97 times from 0.83 times in the year 2009. Since last two financial year CCL
is
Receivables Management
Receivables or debtors are the one of the most important parts of the current assets which is
created if the company sells the finished goods to the customer but not receive the cash for
the same immediately. Trade credit arises when firm sells its products and services on
credit and does not receive cash immediately. It is essential marketing tool, acting as bridge for
the movement of goods through production and distribution stages to customers. Trade credit
creates receivables
ceivables or book debts which the firm is expected to collect in the near future. The
receivables include three characteristics
1) It involve element of risk which should be carefully analysis.
2) It is based on economic value. To the buyer, the economic value in goods or services passes
immediately at the time of sale, while seller expects an equivalent value to be received later
on
3) It implies futurity. The cash payment for goods or serves received by the buyer will be made
by him in a future period
Size of Receivables of CCL:
PARTICULARS
Sundry debtors
2008
541.31
2009
745.26
2010
512.44
2011
941.64
2012
1078.66
120 | P a g e
100
Indices
137.67
94.67
173.96
199.27
sundry debtors
250
200
199.27
173.93
150
137.27
100
sundry debtors
100
94.67
50
0
2008
2009
2010
2011
2012
Average collection period

The average collection period measures the quality of debtors since it indicate the speed of their
collection. The shorter the average collection period, the better the quality of the debtors
since a short collection period implies the prompt
prompt payment by debtors. The average collection
period should be compared against the firm s credit terms and policy judges its credit and
collection efficiency. The collection period ratio thus helps an analyst in two respects.
1. In determining
g the collectability of debtors and thus, the efficiency of collection efforts.
2. In ascertaining the firm s comparative strength and advantages related to its credit policy and
performance.
The debtor s turnover ratio can be transformed in to the number of days of holding of
debtors.
Avg. collection period:
Particulars
2008
2009
2010
2011
2012
Gross sales
5060.54
5978.37
6291.92
7083.13
7873.83
Avg. Debtors
506.74
643.28
628.85
727.04
1010.15
Receivable
Turnover
9.986
9.294
10.005
9.742
7.795
Avg.
Collection
37
39
36
37
121 | P a g e
47
period (days)
Avg. Collection period

50
40
30
20
10
0
Avg. Collection period
2008
2009
2010
2011
2012
37
39
36
37
47
Observations
The size of receivables are changing every year it indicates that the company was allowing more
or less credit year to year, the company gives highest credit in year 2012,i.e. 1078.66 CR.
Average collection period are increasing to present situation, CCL average collection period has
been increasing after2010 this is not good sign for the company the year 2012 it was 47 days. It
indicates not good effective collection policy follows by CCL till date DEC 2011 .
CHAPTER VI
SUGGESTIONS
For cash management
The firm must always maintain a certain balance for the purpose of safety. Sometime
very heavy demands may suddenly be placed on the firm and unless the firm is able to
meet those demands quickly, it may be difficult for the firm to carry on the work. It is
therefore necessary as a precaution to maintain a certain amount of cash balance.
Each month there must be a regular and full bank reconciliation statement explaining
exactly why the balances as per cash book and the bank differ. Any cheque not collected
for long should be investigated.
Firm should try to prepare the invoice documents immediately after the dispatch of goods
and should mail them to the clients at the earliest.
122 | P a g e
Collection can be accelerated by reducing the lag between the time a customer pays the
bill and the cheque is collected and the funds made available or the firm use.
The firm should ensure that there is proper demarcation between the duties of the
individuals who receive cash and those who record the receipt of cash so that
misappropriation of cash is prevented.
The firm is having surplus cash since last 4 -5 years but is only managing it through
uniform deposits in selected banks which is not very profitable so company should invest
it surplus funds as per the guidelines provided in 197 meeting of CCL.
For inventory management
Better coordination among various department namely purchase, marketing and finance
will help in achieving greater efficiency in inventory management.
Procedures for disposing obsolete and surplus inventories must be simplified.
CCL should set benchmark with global competitors and use ideas like JIT to improve
inventory management.
It should develop long term relationship with vendors. This would help in improving
quality & quantity of inventory.
The firm should try to strike a trade off between the ordering and carrying cost of
inventories so that the minimized and the profitability is maximized.
For debtors management
There must be proper mutual understanding between the supplier (CCL) and its customer
regarding credit period & timely payment. Periodic bilateral meeting should be held to
settle down the dispute between and creditors.
There must be proper negotiation for the quality and price of coal so as to minimize the
disputes amount. Umpires must be appointed to settle down the disputes regarding
quality, quantity and price and their judgment must be considered as final.
Top management should set proper standard and practices of debtors management so that
proper action should be taken in order to collect the old outstanding dues.The firm should
be careful about choosing the right kind of collection policy as too stringent a collection
policy will decrease of bad debts losses and the average collection period but it might
adversely affect the company relationship with the client.
123 | P a g e
Securitization scheme should be started for all the states so as to clear the outstanding
dues through long term bounds. (it has already been started in states in like U.P. and
Haryana.)
FINDINGS
CCL supplies coal to different parties with the help of standing linkage committee which
has its head office in Kolkata. The job of SLC is to decide which colliery would supply
coal to which party, on which date & by how much quantity. Thus, with the help of this
system mines supply coal to different parties.
It parties do not clear their disputes, then CCL black list those parties for certain period.
A black listed company cannot supply good to any subsidiary company of coal India
limited (CIL).
CCL used to supply coal to BSEB (Bihar State Electricity Board) but supply of coal has
been stopped for last few years due to delay in payments by BSEB .
If goods are damaged during the guarantee period, then CCL is not responsible for the
payment to the supplier because that party would no longer considered as a creditors.
If any equipment or machinery fails to meet the quality standard then CCL rejects the
goods & does not make payment. If the supplier does not take away their goods from
CCL compound within one month then CCL charges ground rent charge at a certain rate
which is a source of miscellaneous income for CCL.
Any delay in the delivery of goods by the supplier results in reduction in payment amount
which is 5% per week. The reduction is limited to 10% but in worst cases it may reach
up to 15%.
CCL mainly follow cash flow projection and budget for cash planning & control. Cash
flow projection is also used to determine the optimum cash balance of CCL.
CCL has not faced any kind of liquidity crunch in last 5 years. This indicates that CCL
maintains a sufficient cash balance.
There is no bank loan in respect of CCL to fulfill its working capital needs this shows
that CCL has enough cash balance to fulfill its day to day requirements of cash.
CCL had taken a loan from the World Bank to fulfill its fixed capital requirements.
124 | P a g e
Being a PSU the customer of CCL are decided beforehand and therefore any competition
among customer regarding better price is avoided which reduces the margin of profit for
CCL.
Recently CIL did the disinvestment of 10% of companys share and hence the firm is not
completely government owned now.
CONCLUSION
Central Coalfields Limited, one of the subsidiaries of coal India limited is a Miniratna
organizations of coal India limited.
During the tenure of my project regarding the subject matter at C.C.L. I have come to appreciate
the fact that it is a well-managed organization. In term of working capital management, in the
field of coal mining. The organization has great potential to run the coal mines in an effective
manner. All the employees of the organization are very supportive and the organization has high
level of financial skills to meet the interest of its creditors and employees.
But they need do some amendments in term of its depository policy, since they deposit the
access amount or they make their investments, mainly in form of Fixed Deposit into the banks,
so the return on their investments is comparatively less than other companies.
Finally I conclude that being a government organization CCLs performance has been pretty
satisfactory and within no time it will achieve great heights.
125 | P a g e
CHAPTER VII
ANNEXURE
7.1 Bibliography
Websites:
www.coalindia.in
www.ccl.gov.in
www.google.com
www.wikipedia.com
www.workingcapitalmanagement.com
Reference:
1. I. M. Pandey - Financial Management Vikas Publishing House Pvt. Ltd. - Ninth
Edition 2006
2. M.Y. Khan and P.K. Jain, Financial management Vikas Publishing house ltd., New
Delhi.
3. K.V. Smith- management of Working Capital- Mc-Grow-Hill New York
4. Satish Inamdar- Principles of Financial Management-Everest Publishing House
126 | P a g e
5. Annual reports of CCL.
127 | P a g e

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A REPORT OF SUMMER INTERNSHIP PROGRAM

RANCHI (HEAD QUARTER)

In partial fulfillment for the award of degree of

SUMMER TRAINING REPORT ON

Working capital management of central coal field limited

COAL INDIA LIMITED

Under the supervision

In pursuit of a MBA program, Project is a critical component of the entire learning

I CHANDAN KUMAR student of Sikkim Manipal University 2012-2014 declare

Date of project submission:

Name: MD. SHAHZADA IQ

COAL INDIA LIMITED ( Date of incorporation)

(ECL), Sanctoria, West Bengal

2) Bharat Coking Coal Limited

(BCCL), Dhanbad, Jharkhand

3) Central Coalfields Limited

(CCL), Ranchi, Jharkhand

5) Western Coalfields Limited

(WCL), Nagpur, Maharashtra

6) Northern Coalfields Limited

(NCL), Singrauli, Madhya Pradesh

Coking Coal washeries :-

Kathara, Sawang, Rajrappa, Kedla

Non Coking Coal washeries :-

Piparwar, Gidi, Kargali

DVC is main source of power supply for CCL

Average energy consumption is 575 million KWH.

Power cost under control through energy conservation measures ( Capacitors ,

Adequate power supply availability is ensured for uninterrupted production.

Hospitals/dispensaries for immediate medical aid at each Project (Colliery).

VISION AND MISSION OF CCL

Coal Mining Operation to achieve Customer Satisfaction .

BUSINESS OBJECTIVE OF CCL

Coal Mining through efficiently operated mines.

Marketing of coal as main product.

Magadh open coal.

SOME FUTURE PROJECTS

Coal mining started in India.

Private railways coal mining started by Railway board.

First nationalization of of coal mining by railway.

Railways collieries transferred to coal board under coal commissioner.

First coal washery at kargali setup.

Nationalization of non-coking coal mines B.C.C.L formed

Nationalization of non coking coal mines C.M.A.L

Coal India Limited formed as holding company for

Reorganization of CCL, Singrauli and Talehar area

Recorded highest profit of Rs. 1165 crores in the

Registered a profit of Rs. 1020 crores.

Registered a profit of Rs. 1035 crores.

Registered a profit of Rs. 738 crores.

receipt by our company of a composite score of 1.47 and rating as

Administration hierarchy of C.C.L

MAJOR COLLIERIES OF CCL

CSR AND CCL

SOCIAL SIDE OF BUSINESS

Spend over Rs. 1042 crores on social overhead onwards 1998.

Grant in aid & infrastructure facilities to 195 educational institutions.

Sources of indirect employment to over 2, 00, 000 people in loading,

Major Contributor to State Exchequer:

More than 20 thermal Power stations including those in Jharkhand.

Five Steel Plants.

Five Fertilizer Plants.

Around 600 Industrial units Large, Medium and Small Scale.

Washed Non-Coking Coal