LIST OF CONTENTS

EXECUTIVE SUMMARY
INTRODUCTION
INTODUCTION ABOUT THE TOPIC
HISTORY
MAIN HEADS OF ACCOUNTS

OBJECTIVES OF THE STUDY

RESEARCH METHODOLOGY
ACCOUNTING POLICIES
CAPITAL STRUCTURE
SOURCES AND APPLICATION FUNDS
DEPLOYMENT OF INCOME
ANALYSIS AND INTERPRETATION
GLOSSARY OF DVC
FINANCIAL STATEMENTS
KEY TERMS
CONCLUSION
RECOMMENDATIONS
BIBILIOGRAPHY

EXECUTIVE SUMMARY

The basic idea behind selection of this topic is mainly due to its nature and
importance in overall financial management of any organization.
One of the most important areas in the day to day management of the firm is the
management of working capital. Working capital management is the functional
area of finance that covers all the currents accounts of the firm. It is concerned
with management of the level of individual current assets as well as the
management of total working capital.

Primary function of financial management is not only procurement of fund but also
their effective use with the objective maximizing the owner wealth. The allocation
of funds therefore is an important function of financial management.

INTRODUCTION
DAMODAR VALLEYCORPORATION
The Damodar Valley Corporation was constituted by an enactment of the Central
Legislature (Act xiv of 1948). The Corporation came into existence on 7 th July
1948 and has been entrusted with execution of a comprehensive programme of
unified development of the Damodar Valley region in the states of West Bengal and
Bihar (now Jharkhand).
The main functions of the corporation are control of flood caused by the Damodar
and its tributaries, Promotion of Irrigation, Water Supply and Drainage, Generation
and Distribution of Electricity. Its subsidiary activities are promotion of
Navigation , Soil Conservation and Afforestation, promotion of Public Health ,
Agriculture , Industrial and Economic Development as well as General wellbeing
in the valley and its area of operation.

THE MISSION
2

DVC came into existence with the avowed mission to tame the turbulent Damodar
and control damages caused by the recurring and devastating floods in the valley.
Following the model of the TENNESE VALLEY CORPORATION, DVC
incorporated other activities to broaden the scope of its primary mission as follows:

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

To provide uninterrupted, affordable, quality, reliable and clean power to

millions of customers.
To contribute towards community development and nation building.
To promote a work culture that fosters individual growth, team spirit and
creativity to overcome challenges and attain goals.
To be a technology driven, efficient and financially sound organization.
To encourage ideas, talent and value systems.

However, in keeping with rapid industrialization in the Damodar valley area,

power generation, transmission and distribution gained priority for providing
electricity to the core industries like steel, coal, railways and other industries /
consumes directly and through respective State Electricity Boards. Other mandated
functions also received due importance as part of DVCs overall responsibilities
and commitment.

THE VISION
To establish DVC as one of the largest power majors of Eastern India while
discharging the responsibilities of its other objects adequately.

In order to achieve this goal against the backdrop of the competitive market
scenario in the power sector, the objectives of the corporation have been
redefined.

CORPORATE

OBJECTIVES

Generate more power at lowest possible cost by improving operational

efficiencies of the existing plants, rejuvenating old generating units through
comprehensive overhauling as well as by installing new generating plants.
Transmit, distribute and supply reliable and quality power at competitive
tariff.
Improve the financial health of the corporation by adoption of efficient
industrial, commercial and human resource management practices.
Ensure optimum utilization of available water resources through effective
and efficient management and harnessing the remaining potential of
Damodar basin to the extent possible.
Fortify measures for environmental protection at plant levels and to continue
with the activities of eco conservation in the valley area.
Strengthen socio economic development for the inhabitants of villages
neighboring major projects of DVC.

FINANCE DEPARTMENT
Finance is the most important department in every organization. It is always
interlinked with all other department in the organization for doing any work. It has
its relationship with administration, personnel, production, marketing and other. It
basically involves the acquisition of fund and use of these funds.
In the HRM section many activities are done like promotion, recruitment,
transfer, retirement, and other activities are required of fund and this requirements
are fulfill by finance department. Payment of wages and salaries are also paid by
finance department.
In production section many activities are done automatically. In that more
machinery, equipment and new technology are used, this all are very expensive.
The purchasing of all machinery and equipment are only possible by finance
department. Then finance is main part of production system.
In purchase department all materials are purchase and store system connected
with finance and account section. Finance is helpful to know the opening stock and
closing stock of material and preparation of B/S of material management. It
records material received, material issue and credit system.
In the safety, transportation, maintenance, fire, health, civil and training section
are also required finance for done its activities. Finance also related with labor
welfare activities. The funds are requiring for labor service and other facilities
provided to labor. That means in the DVC finance department is very important
which is linked with whole organization system.

A BRIEF HISTORY
It is well known to all of us that turbulent Damodar river flowing through
Jharkhand & West Bengal was once known as River of Sorrow. It is evident that
in between the period from the year 1823 to 1948, Damodar River caused at least
17 devastating floods. Every time, the country side was inundated, crops and cattle
were washed away and communication disrupted.
Damodar River originates from the Khamarpeth Hills in the Palamu District of
Chotanagpur Plateau near Tori (Jharkhand), runs for 540 kms and joins river
Ganges near Ulberia in West Bengal. It has a drainage area of 24,235 Sq. K.M of
which 17,514 Sq. K.M. constitute the UPPER VALLEY and the area below the
confluence is called the LOWER VALLEY.
Parts of Palamau , Ranchi , Hazaribagh , Giridih , koderma , Bokaro , Chatra ,
Jamtara , Santhal Parganas and Dhanbad Districts in Jharkhand and parts of
Purulia Districts in West Bengal comprise the Upper valley, while the lower valley
is located in the planes of West Bengal covering Burdwan, Bankura and Howrah
Dist.Barakar river originates in Chotanagpur Plateau near the border of Giridih
Dist.[Jharkhand] and Parulia Dist[W.B] and joins with Damodar river at Panchet.
Therefore, DVC was conceived with a primary purpose of Flood Control, to
harness the 540 K.M. long Damodar River taking Tennessee Valley Authority
[TVA] of the USA as model. DVC was created with the Government of West
Bengal, the Government of Bihar (now Jharkhand craved out of Bihar) and the
Government of India as the participating Government, through an Act of
Parliament and established on 7th July 1948.
To start with, DVC constructed four major water storage Reservoirs as TILAIYA
Dam and MAITHON Dam on the Barakar river , Panchet Dam on Damodar river
as well as Konar Dam on Konar river. However, it was immediately observed that
the silt inflow into the Reservoirs, due to the soil erosion was much higher than the
expected rate. Obviously this threatened the life of DVC Reservoirs. Therefore,
DVC set up the SOIL CONSERVATION DEPARTMENT in the year 1949 with
its Headquarter at Hazaribag to tackle the twin problems of Reservoir siltation and
land deterioration.

Out of the total Damodar Valley area of 1.75 m.ha, soil erosion problem is
prevailing in around 1.147 m. ha area. A multiplicity of factors contributes to Soil
erosion and effective check is required to prevent soil erosion, so that the reservoirs
built for flood control do not get silted and flood control as well as irrigation
activities are carried out smoothly. The responsibility for soil erosion is not
attributable to DVCs own activities, but to the entire gamut of factors such as
deforestation, mining operations etc. which are contributed by other agencies.
Therefore, DVC identified its responsibility to ensure NATURAL RESOURCE
MANAGEMENT in the Valley area by virtue of the provisions of DVC Act, 1948.
This follows naturally from the responsibility entrusted to the DVC, with regard to
ownership and management of the water resources of the Damodar River.
Accordingly, in the pioneering endeavor of developing the Damodar Barakar
basin, a separate multi-disciplinary SOIL CONSERVATION DEPARTMENT
was established by DVC to develop the technical know how and devise the
technology, which could be disseminated and tried at the national level.
The need to view development in a holistic manner has reinforced DVCs firm
commitment to social responsibility, which remains an integral part of its overall
mission.

POWER GENERATION
The power generation history of DVC starts with the installation of one diesel
power station of 1.2 MW at Tilaiya in 1950. It was primarily meant for supplying
power for construction work of dam. It also provided surplus power up to 450 KW
for the electrification of Koderma Mica Mines and Hazaribagh town to meet the
urgent need for power. Similarly, one steam turbo generating station of 2.5MW
was installed at Kumardhubi for supplying power during construction of Maithon
Dam project in early 1951. From here also the surplus power up to 1MW was
supplied to the Chittaranjan Locomotive Works.
The primary consideration of setting up of DVC was control of floods. But the
multipurpose plan also included construction of a hydro electric power plant in
each of the reservoirs with a total generating capacity of 2,00,000 KW and a
thermal power station with an installed capacity of 1,50,000KW. All these schemes
8

Generation
target
Actual
generation
Achievement
(%)

2008-09
13648

2009-10
14663

2010-11
15100

2011-2012
14520

13779

14551

15122.53

14521.52

100.95

100.61

100.15

100.01

for power generation were included in the first phase of implementing DVC
Project.
When preparation of detailed estimates was taken up and the construction of dams
and hydro-electric power stations began at Tilaiya and Konar, the then technical
experts of DVC with the approval of the participating Governments and the
Planning Commission started work for extending the transmission system to meet
the urgent demand for power in areas bordering the Damodar Valley. Provisions
were made for 376 miles of 132 KW transmission lines and 85 miles of 33KV
transmission lines with 24 sub-stations. Subsequent development of Transmission
and Distribution system of DVC shows that with the increase of load, DVC power
system require expansion and refurbishment programme of transmission and
distribution system.

THERMAL POWER GENERATION

The significance of the provision for coal burning thermal power stations in a river
valley where the generation of cheap hydroelectricity has immense possibilities
were mainly for meeting the demand for power to the mines and industries in and
around Damodar valley. Besides this, the thermal power station could cope up with
the seasonal variation in the generating capacity of hydro-electric stations as the
Damodar is basically a monsoon river.
DVC being located in the biggest coal area reserve of the country has the
locational advantages both in terms of logistics and economy for preferring
thermal power generation in DVC system. Hydel and thermal generation have
9

further been supplemented by the construction of a gas turbine power station in

1989 to provide peaking power in the DVC systems

16000

14000

12000

10000
generation target

8000

actual target
achievement(%)

6000

4000

2000

0
2008-09

2009-10

2010-11

2011-12

HYDEL POWER GENERATION

10

Being a pioneer integrated river valley project with multipurpose objectives,

DVC had to face constantly challenges of the time and absorb new
technology to execute its project. During the phase between 1950 and 1960
i.e. within a span of ten years DVC completed Hydel Power Stations at
Tilaiya, Maithon, and Panchet dams along with Bokaro A thermal power
station. In the next two decades i.e. between 1961and 1980, six units of
Chandrapura Thermal PowerStation. During the post 1981 period, DVC
constructed 630 MW Bokaro BThermal Power Station, 82.5 MW Gas
Turbine Station at Maithon, one 210 MW unit at Durgapur Thermal Power
Station and one 40 MW Hydel Power Unit at Panchet. The Construction and
commissioning of all the three units of Mejia Thermal Power Station were
completed by the end of 1999. The fourth unit of this power station was
commissioned in February, 2005. The table below provides a detailed
breakup of the power generating stations of DVC.

2008-09
2009-10
2010-11
2011-2012

Generation target
300
320
400
320

11

Actual target
357
436
432.09
198.11

500
450
400
350
300
generation target

250

actual target
200
150
100
50
0
2008-09

2009-10

2010-11

12

2011-2012

18000
16000
14000
12000
10000

total system
thermal

8000

hydel

6000
4000
2000
0
2008-09

2009-10

2010-11

13

2011-12

PHYSICAL
PERFORMANCE

Generation of Electricity
Actual Generation(MU)
Plants

2009-10

2010-11

Thermal

14521.52

16263.9

Hydel

198.11

115.6

Overall

14719.63

16379.5

Other operating parameters of thermal generating units:

Thermal
Parameter

2009-2010

2010-2011

Plant Load Factor (%)

61.17

68.51

Specific Oil Consumption (ml/kwh)

2.66

1.74

Auxiliary Power Consumption (%)

10.68

10.72

14

RENOVATION & MODERNISATION

DVC started its Renovation & Modernization (R & M) Programme in 1987 in
order to meet stricter pollution control standards, enhance operational efficiency
and improve Plant Load Factor.
As part of its 10th plan activities DVC has planned for overall improvement of
performance through comprehensive R & M / LE (Life Extension) of its old hydel
and thermal power generating units based on Residual Life Assessment (RLA)
studies. This conforms to the policy of the Government of India on LE of old
power generation units by R & M with economical investment.
Ten thermal units in operation from last 25 to 51 years and four hydel units in
operation from 45 to 47 years have been taken up for RLA based R&M / LE work.
Renovation and Moderization (R&M) wing has been renamed as Operation
Services an Upgradation (OS&U) to look into the upgradation process / sytem for
improved and sustained generation of power in DVC power plants.
Major Activities of Operation Services and Up-gradation Operation Services
Regular monitoring of day-to-day power generation and associated O&M
problems.
Assistance to power stations for maximization of generation and availability with
approach towards zero forced outage.
Assistance for induction of improved maintenance management practices.
Formulate new maintenance strategies.
Generation and overhaul scheduling (Rolling Plan) and co-ordination with MOP,
CEA and other external agencies.
Develop and implement new initiatives.
Collate and review O&M. budgets and cost reduction initiatives.
Co-ordinate O&M monitoring and lend proactive assistance.
Co-ordinate of trip analysis/ lessons learnt / feedback recycle.
Develop and update system and ensure compliance.
Service support to power stations in terms of :
Monitoring overhaul quality and other repair jobs at outside works.
Expert assistance from OEM and other reputed agencies.
15

 Developing improvement initiatives.

Implementing improvement initiatives.
Spares and vendor development.
Finalization of purchase/works contracts requiring assistance headquarters.
Up-gradation
Technology up gradation in different areas of power stations, replacement of
obsolete equipment and modification in different areas such as boiler,
turbine and their auxiliaries, coal handing plant, ash handing plant, coal
mills, electrical systems.

16

MAIN HEADS OF ACCOUNTS

All types of expenditure both Capital and Revenue as well as all income of the
Corporation are booked under the following Main Heads of Accounts:

HEAD 1 : POWER
HEAD 2 : IRRIGATION
HEAD 3 : FLOOD CONTROL
HEAD 4 : SUBSIDIARY ACTIVITIES
HEAD 5 : EXPENDITURE COMMON TO MAIN OBJECT ( MULTI
PURPOSE DAM)
HEAD 6 : GENERAL OVERHEAD ESTABLISHMENTS ( GENERAL
OVERHEAD CHARGES)

The Balance Sheet and Revenue Accounts (profit / loss Accounts) will exhibit the
financial position of the corporation under three main objects,namely,
IRRIGATION, POWER and FLOOD CONTROL. As such the expenditure and
income for any of the three main objects viz. IRRIGATION, POWER and FLOOD
CONTROL, are debitable to that object. The expenditure booked under Head 4 ,
Head 5 and Head 6 i.e. Subsidiary Activities , Multipurpose Dams and General
Overhead Establishments respectively is allocated to Head 1 i.e. Power , Head 2
i.e. Irrigation and Head 3 i.e. Flood Control.
All Capital and Revenue Expenditure under head 5 Multipurpose Dams will be
allocated in the following percentage:

17

MAIN OBJECTS

FLOOD CONTROL

IRRIGATION

POWER

Head 1

Head 2

TILAIYA DAM

34

KONAR DAM

22

39

MAITHON DAM

32

34

PANCHET DAM

44

Head 3
33

28

The expenditure of Head 4 i.e. Subsidiary Activities and Head 6 i.e. Establishment
Overheads are allocated to the three main objects in the ratio

120:35:12.

18

Projects / Divisions / Offices taken under each main

head of accounts are given below:
HEAD 1: POWER
ALL THERMAL POWER STATIONS
ALL HYDEL STATIONS
TRANSMISSION
&DISTRIBUTION
(CONSTRUCTION)
T.S.C
(including four divisions).
(a) T. S. C. I , Panchet
(b) T. S. C. II , Panchet
(c) T. S. C. III , Panchet
(d) T. S. C. IV , HAZARIBAGH
TRANSMISSION & DISTRIBUTION (OPERATION GOMD : GRID
OPERATION AND MAINTENANCE DEPARTMENT )
(Including five divisions).
(a) GOMD I , HOWRAH
(b) GOMD II , MAITHON
(c) GOMD III , JAMDHEDPUR
(d) GOMD IV , PUTKI
(e) GOMD V , HAZARIBAGH
GAS TURBINE
DIRECTION OFFICES :
(i)
Construction Wing ( PCEs office )
(ii) Operation Wing (Sr. C. E. ( O & M )
(iii) Liaison office
(iv) Training Institute , CTPS
(v) Commercial Engineers office including Survey and Utilization
Mining & Ropeway
Central Services :
(a) M.M.E.W
(b) C. M.F.S
(c) C.M.E.S
(d) Accounts Office ( C.S.O )
19

Tail Pool Dam , Panchet

Balpahari Dam and Hydro Electric Project
Central Electrical Stores , Maithon
Communication Division , Maithon
CRTL & CRTM , Maithon
Central Load Despatch System , Maithon
Staff Quartersfor Electricity Department.

HEAD 2: IRRIGATION
DURGAPUR BARRAGE AND CANALS
HEAD 3: FLOOD CONTROL
FLOOD WARNING STATION
FLOOD FORECASTING UNIT
HEAD 4: SUBSIDIARY ACTIVITIES
AFFORESTATION
SOIL CONSERVATION
(a) DIRECTOR OF SOIL CONSERVATIONS OFFICE
(b) EVALUATION SCHEME
(c) SOIL CONSERVATION ENGINEERING
(d) TRAINING SCHEME
(e) STRENGTHENING OF SOIL CONSERVTION
USE OF LAND
AGRICULTURAL DEVELOPMENT
(a) PANAGARH FARM
(b) FISHERIES
INDUSTRIAL DEVELOPMENT DEVELOPMENT OF TOURISM
(a) BOATS AND OTHER CHARGES
(b) DEER PARK AND BIRD SANCTUARY AT TILAIYA AND MAITHON
(c) CROCODILE PROJECT
EXPERIMENTAL AND RESEARCH STATION
PUBLIC HEALTH AND SANITATION
20

 ECONOMIC AND SSOCIAL STUDIES

SOCIO ECONOMIC DEVELOPMENT
(a)VILLAGE DEVELOPMENT
(b)SOCIAL OBLIGATION PROGRAMME
NAVIGATION
HEAD 5: MULTIPURPOSE DAMS:

CIVIL ENGINEERING DEPARTMENT , CIRCLE I , PANCHET

CIVIL ENGINEERING DEPARTMENT , CIRCLE II , MAITHON
TILAIYA DAM
HAZARIBAGH TILAIYA CIVIL SUB DIVISION
KONAR DAM
MAITHON DAM
PANCHET DAM

HEAD 6: GENERAL OVERHEAD ESTABLISHMENT:

CORPORATION EXPENSES
SECRETARYS OFFICE
BOARD OF CONSULTANTS
FINANCIAL ADVISORS OFFICE INCLUDING INTERNAL AUDIT
CHIEF ACCOUNTS OFFICERS OFFICE INCLUDING
(a) STORE AND STOCK VERIFICATION
(b) EMPLOYEES PROVIDENT FUND UNIT
(c) MANAGEMENT EXPENSES FOR MARKET LOAN
PERSONNEL BRANCH
(a) DIRECTOR OF PERSONNEL
(b) JOINT DIRECTOR OF PERSONNEL ( L / R ) , MAITHON
INFORMATION BRANCH
(a) CPRO S OFFICE
(b) PROS ESTABLISHMENT , MAITHON

CENTRAL MEDICAL ORGANISATION

(a) CMO S OFFICE
(b) CENTRAL PATHOLOGICAL LABORATORY , MAITHON
LAW DEPARTMENT
TRAINING PERSONNEL
21

CENTRAL EDUCATION ESTABLISHMENT

STATUTORY AUDIT OFFICE
STORES DEPOT CALCUTTA
TIMBER WORKSHOP
CONSTRUCTION PLANT DIVISION0
CIVIL ENGINEERS OFFICE ( C ) , MAITHON
PLANNING AND DESIGNING BRANCH
MATERIAL MANAGEMENT DEPARTMENT
(a) MATERIAL MANAGEMENT
(b) PURCHAE OFFICE
METEOROLOGICAL RAL , ALIPORE
M. T. SHOP , PANCHET
M. T. SHOP , MAITHON
DAMODAR DIVISION
RESERVOIR OPERATION CONTROL
(a) MANAGER , RESERVOIR OPERATION
(b) DIRECTOR , C.W.P.C
(c) NON AGRICULTURAL WATER SUPPLY
CENTRAL TESTING DIVISION , MAITHON
DISPOSAL WING , MAITHON
SEDIMENTATION SURVEY
(a) SCHEME SUBSIDISED BY G. O.I , MINISTRY OF ENERGY
(b) OTHER EXPENDITURE
HYDRAULIC DATA DIVISION
FLOOD WARNING COMMERCIAL SERVICES
(a) TENUGHAT DAM UNIT
(b) OTHER UNITS
CO OPERATIVE SOCIETIES
CHIEF SECURITY OFFICER , MAITHON

CURRENT MEMBERS OF THE BOARD OF DVC

The composition of the Members of the Board of the Corporation as on date
of Disclosure Document is as under:

22

OBJECTIVES OF THE STUDY

The project on financial analysis has been undertaken while keeping the following
objectives in consideration:
To learn and understand the capital financial position of the company
and its performance over the years with help of Working capital
management
23

 To learn and understand the capital structure, leveraging, financial position

of the company, its performance over the years.
To study various subsidiary activities undertaken by the company and
analyze its socio economic impact.
To highlight the key areas where action needs to be taken.

24

RESEARCH METHODOLOGY
Research is a scientific and systematic search for pertinent information on a
specific topic. It is a way to systematically solve the research problems. I did the
above project to study the financial statement analysis through financial ratios of
DAMODAR VALLEY CORPORATION. This type of analysis helps the
management for future planning for the growth of the organization. Through these
ratios, the management is able to know the financial soundness other
organization.
The methodology of the present study involves the analysis of' available
literature i.e. the monthly and the annual report of' DAMODAR VALLEY
CORPORATION and the examination of' the books of accounts last two previous
years i.e. 2004-05 and 2005-06.

RESEARCH DESIGN
A research design is the arrangement of condition for collection and analysis of
data in a manner that aims to combine relevance to thee research purpose with
economy in procedure.
Thus, research design is a conceptual structure within which research is
conducted. It constitutes the blue print for the collection, measurement and
analysis of data.
For the purpose of this research, only secondary data have beenused since the
audited statements published are the best available authentic source.
The primary data may not be appropriate and may be misleading. The research is
explanatory in nature.

25

DATA COLLECTION
Two types of data has been collected for the research
(a) Primary data
(b) Secondary data
Primary data are those, which are collected afresh and for the first time. So it is
original in character. Whereas secondary data are those which have already been
collected by someone else and which have already been passed through the
statistical process.
Secondary data are collected through journals, newspaper and electronic media
i.e. Internet websites. The main important sources of secondary data are

Balance Sheet of 2011 and 2012

Yearly annual report ofDVC
Company's Websites

26

LIMITATIONS OF THE STUDY

We cannot do comparisons with other companies unless and until we
have the data of other companies on the same subject.
Only the printed data about the company will be available and not the
backend details.
Future plans of the company will not be disclosed to the trainees.
Lastly, due to shortage of time it is not possible to cover all the factors
and details regarding the subject of study.
The latest financial data could not be reported as the companys websites
have not been updated.

27

ACCOUNTING POLICIES
DEPRECIATION
DVC is following the straight line method of depreciation on 90 % costs of the
assets keeping 10 % as residual value. Depreciation schedules are calculated and
prepared by the Central Accounts Office, Calcutta, for the purpose of charging the
amounts of depreciation in the Revenue Accounts (profit / loss/a/cs) by creating
Depreciation Reserve.
The assets of Dams & Barrage and canals relating to Irrigation and Flood control
were depreciated at 0.1 % i .e. 1 / 10th of 1% and those of Dams and Spillways
relating to power were depreciated at 1 % . The assets including above of the other
projects are depreciated at the rates (according to the life of assets) approved by the
Govt. of India in consultation with the C.A.G. (Comptroller and Auditor General of
India). In the Balance Sheet of the Corporation the amount of depreciation Reserve
is exhibited in the Liability side of the Balance Sheet Keeping the gross value of
Assets in the Asset side. No separate investment in respect of Depreciation Reserve
(Fund) has been made and the entire amount remains invested in business of the
Corporation as internal resources. For the purpose of Income Tax Returns, the
reducing Balance Method of Depreciation is applied.
Depreciation is charged on Straight line Method with 10% residual value as
approved by the GOI Gazette Notification.
Depreciation on Fixed Assets is charged in the Accounts in the following
year in which the Assets become available for use.

INVENTORIES
Inventories are valued at cost on weighted average basis.

28

 INTEREST
Interest on Market loan is charged to the Revenue A / c and no portion of it is to
be capitalized. Interest on Capital provided by the participating Govts. Is also
charged to the Revenue A / c. Some portion of interest on Capital has been
capitalized. Interest is mainly accounted for the following:
Interest on Capital provided by the participating Governments
Interest on Market Loans
Interest on Cash Credit
Interest on other loans
FIXED ASSETS

Fixed Assets are shown at historical cost.

Capital Expenditure on assets are booked in Capital Works in Progress till
the period of completion or put to use and thereafter in the Fixed Assets
Assets and Systems common to more than one generating units are
capitalized on the basis of engineering assessment.
SINKING FUNDS
As advised by the Govt. of India, the Corporation has created a Sinking Fund
for redemption of the market borrowings and is contributing annually to this
fund so that money becomes available at each loan period to repay the loan.
No separate investment has been made in this respect and the entire amount
remains invested in the business of the Corporation as internal resources.
Interest @ 7% on the accumulated balance of fund is credited to this fund.
After the repayment of each Market loan on maturity an equivalent amount is
transferred to General Reserve from the Sinking Fund.
Sinking Fund has been created for redemption of bonds. Every year
proportionate annuity is provided to Sinking Fund so that the money will be
available, at the end of each loan period, for repayment.
GENERAL RESERVE
29

As per the guidelines and with the approval of the Govt. of India and Auditor
General, 55 % of the Power surplus is apportioned to General Reserve.

WORKING ACCOUNTS
Mining of Bermo Mine, Ropeway Transport system at BTPS, MMEW (Major
Maintenance and Emergency Workshop) and CMFS (Central Mechanical and
Fabricating Shop) under C.S.O (Central Service Organization) at Maithon fall
under the category of Working Accounts. Workshops are catering services to other
projects / formations for which A. T. Ds are raised to the beneficiary projects and
any balance amount of workshop accounts are exhibited as Current Asset in the
Asset side of the Balance Sheet.

FOREIGN CURRENCY
Foreign Currency transactions are initially recorded at the Exchange Rate ruling on
the date of transaction. Foreign Currency loans are reported with reference to the
exchange rates ruling at the year end and the difference resulting in such
transaction as well as due to payment / discharge of liabilities in foreign currency
related to Fixed Assets / Work in Progress is adjusted in their carrying cost and that
related to Current Assets is recognized as Revenue / Expenditure during the year.

EXTENSION AND IMPROVEMENT ( INFRA STRUCTURAL

DEVELOPMENT )

30

After the construction of projects including Building, Power House, Plant and
Machineries, Roads pertaining to Capital Project, the works are transferred from
Construction Work in progress to Fixed Assets in operation, so after the
completion of projects, the projects are declared operative from certain date. The
expenditure incurred for Capital expenditure such as extension and construction
of building , purchase of furniture , construction of road , purchase of equipment
and vehicles etc. after the declaration of operation of project is booked under
Extension and Improvement. This capital expenditure is quite separate from that of
main books.

CAPITAL STRUCTURE

31

In

terms of Section 30 of DVC Act, 1948, the entire capital requirement of the
Corporation is to be provided by the participating Governments. Total capital
provided by the participating government till 1968 1969 amounted to Rs. 214.72
crore. There has been no contribution by the participating governments after 1968
1969. Thereafter, no capital was provided by the participating member
governments by way of direct contribution. With transfer of ploughed back share
of profit and interest on capital accounts, the capital balance has increased to Rs.
2611.15 crore as on 31st march, 2006, which has been utilized to partly meet the
capital expenditure of the corporation in terms of provision of Section 30 of the
DVC Act, 1948. Of the total capital contribution of approx. Rs 3,313Crore for the
FY 2007-08, Rs 3,184 (i.e. 96.11% of the capital contribution) is for power related
activities.
DVC board is represented by members of the three participating Member
Governments, who approve the transfer of plough back of profit and retained
interest to the respective capital accounts of the three governments. The annual
reports are also sent for approval by the respective State and Central Legislatures
through the respective participating member governments.
The summarized position of members fund, considering ploughed back fund is
given in the following table:

WB
GOVT.

BIHAR GOVT. (NOW

JHARKHAND)

TOTAL

ITEM

CENTRAL
GOVT.

LOAN CAPITAL

1133.43

1072.45

1106.74

3312.62

POWER SURPLUS
PLOUGHED BACK

176.24

176.24

176.24

528.72

RETAINED INTEREST

64.41

35.51

62.96

162.88

TOTAL MEMBERS
FUND

1374.08

1284.2

1345.94

4004.22

32

1345.94

CENTRAL GOVT
(1374.08)

1374.08

WEST BENGAL
GOVT(1284.2)

1284.2

JHARKHAND
GOVT(1345.94)

SOURCES AND APPLICATION OF FUNDS

The following graphs indicate the sources and application of funds
of the Corporation for the last four financial years ending 201112.

33

25000
3312.62
20000

15000

13486.44

Paid up capital
Reserves & surplus

2611.15

10000
2036.68
5000

1662.79

4669.53

3834.68

3024.09

1738.39

1266.07

Borrowings

3765.34

6055.07

0
2004-05
2008-09

2005-06

2009-10

2006-07

2010-11

2007-08
2011-12

SOURCES OF FUND

The increase in paid up capital is due to transfer of share of surplus and

retained interest on capital of the participating Governments to capital
account.
The reserve and surplus account has substantially increased mainly due to
transfer of revaluation gain of fixed assets.
The increase in borrowings over the subsequent years is due to increase in
loan taken from various financial institutions like PFC (Power Finance
Corporation) and provision of additional liability towards pension and
gratuity fund.

34

APPLICATIONS OF FUND
25000

20000

16510.5

15000

Net current assets

Investments

10000

5000

3998.2

3223.13
1550.33
1179.49
2004-05

3891.85

3179.91
2888.76
722.79

2008-09

Fixed assetsinvestments

5766.33

2005-06

2009-10

2451.78

2099.78
2006-07

2010-11

2007-08
2011-12

The increase in fixed assets is mainly due to gain on revaluation of fixed

assets, capitalization of MTPS extension project and construction work in
progress in CTPS project.
The increase in investments over the previous years is mainly due to
investment of Provident and Pension fund in specified securities.
The increase in net current assets over the subsequent years is mainly due to
increase in sundry debtors on energy charges.

DEPLOYMENT OF INCOME
35

PARTICULARS

Generation
Overhead & Share of Subsidiary
object
Purchase of Power
Depreciation
Interest
Bad Debt
Rebate on sale of power
Income Tax
Past years adjustment
Savings
INCOME

Rs.IN
CRORE
( 2010
11)
3810

%AG
E

%AGE

66.2

Rs.IN
CRORE
( 2011
12)
4831

288

3.82

177

3.1

827
604
864
84
14
850
(840)

11
8.03
11.48
1.13
0.19
0.00
11.30
(11.1
6)
100.
00

637
338
590
10
5
221
(34)

11.1
5.9
10.3
0.2
0.1
3.8
(0.6)

5755

100.00

7523

GENERATION
( 41.45% )
OVERHEAD & SHARE OF
SUBSIDIARY OBJECT
13%
(2.89% )
41%
0% 24%
2%
PURCHASE
OF POWER
3%
0%)
( 6.40%
4%
6%
4% ( 4.38%
DEPRECIATION
)
INTEREST ( 4.14% )

YEAR 2011 - 12

WORKING CAPITAL MANAGEMENT

36

64.22

INTRODUCTION
Working capital management is concerned with the problems arise in attempting to image
the current assets, the current liabilities and the inter relationship that exist between them.
The term current assets refers to those assets which in ordinary course of business can be,
or, will be, turned in to cash within one year without undergoing a diminution in value and
without disrupting the operation of the firm. The major current assets are cash, marketable
securities, account receivable and inventory. Current liabilities were those liabilities which
intended at there inception to be paid in ordinary course of business, within a year, out of
the current assets or earnings of the concern.
The basic current liabilities are account payable, bill payable, bank over-draft, and
outstanding expenses.
The goal of working capital management is to manage the firms current assets and current
liabilities in such a way that the satisfactorily level of working capital is mentioned. The
current should be large enough to cover its current liabilities in order to ensure a
reasonable margin of safety.
Definition According to Guttmann & DougallExcess of current assets over current liabilities
According to Park & GladsonThe excess of current assets of business (i.e. cash, accounts receivables,
inventories) over current item owned to employees and others (such as salaries &
wages payable, accounts payable, tax owned to government).

Working capital cycle involves conversions and rotation of various constituents/

components of the working capital. Initially cash is converted into
raw materials.
Subsequently, with the usage of fixed assets resulting in value additions, the
37

raw materials get converted into work in process and then into finished goods.
When sold on credit, the finished goods assume the form of debtors who give
the business cash on due date. Thus cash assumes its original form again at
the end of one such working capital cycle but in the course it passes through
various other forms of current assets too. This is how various components of
current assets keep on changing their forms due to value addition. As a result,
they rotate and business operations continue. Thus, the working capital cycle
involves rotation of various constituents of the working capital.
While managing the working capital, two characteristics of current assets
should be kept in mind viz. (i) short life span, and (ii) swift transformation
into other form of current asset. Each constituent of current asset has
comparatively
very short life span. Investment remains in a particular form of current
asset for a short period. The life span of current assets depends upon the
time required in the activities of procurement; production, sales and collection
and degree of synchronisation among them. A very short life span of current
assets results into swift transformation into other form of current assets
for a running business. These characteristics have certain implications:
i. Decision regarding management of the working capital has to be
taken frequently and on a repeat basis.
ii. The various components of the working capital are closely related
and mismanagement of any one component adversely affects the
other components too.
iii. The difference between the present value and the book value of
profit is not significant.
The working capital has the following components, which are in several
forms of current assets:

CASH CONVERSION CYCLE :

38

 Stock of Cash
Stock of Raw Material
Stock of Finished Goods
Value of Debtors
Miscellaneous current assets like short term investment loans
& Advances.

39

IMPORTANCE OF WORKING CAPITAL MANAGEMENT

Management of working capital is very much important for the success of the business.
It has been emphasized that a business should maintain sound working capital position
and also that there should not be an excessive level of investment in the working capital
components. As pointed out by Ralph Kennedy Stewart MC Muller, the inadequacy or
mis-management of working capital is one of few leading causes of business failure.
Current assets, in fact, account for a very large position of the total investment of the
firm
NEED FOR WORKING CAPITAL MANAGEMENT
The need for working capital gross or current assets cannot be over emphasized. As
already observed, the objective of financial decision making is to maximize the
shareholders wealth. To achieve this, it is necessary to generate sufficient profits
can be earned will naturally depend upon the magnitude of the sales among
other things but sales cannot convert into cash. There is a need for working
capital in the form of current assets to deal with the problem arising out of lack of
immediate realization of cash against goods sold. Therefore sufficient working capital
is necessary to sustain sales activity. Technically this is refers to operating or cash
cycle. If the company has certain amount of cash, it will be required for
purchasing the raw material may be available on credit basis. Then the company
has to spend some amount for labour and factory overhead to convert the raw
material in work in progress, and ultimately finished goods. These finished
goods convert in to sales on credit basis in the form of sundry debtors. Sundry
debtors are converting into cash after expiry of credit period. Thus some amount
of cash is blocked in raw materials, WIP, finished goods, and sundry debtors and day
to day cash requirements. However some part of current assets may be financed
by the current liabilities also. The amount required to be invested in this current
assets is always higher than the funds available from current liabilities. This is the
precise reason why the needs for working capital arise.

GROSS AND NET WORKING CAPITAL

40

There are two concepts of working capital management

Gross working capital
Net working capital
1. Gross working capital
Gross working capital refers to the firm s investment I current assets.
Current assets are the assets which can be convert in to cash within year includes
cash, short term securities, debtors, bills receivable and inventory
2. Net working capital
Net working capital refers to the difference between current assets and
current liabilities. Current liabilities are those claims of outsiders which are
expected to mature for payment within an accounting year and include
creditors, bills payable and outstanding expenses. Net working capital can be
positive or negative.
Efficient working capital management requires that firms should operate with
some amount of net working capital, the exact amount varying from firm to firm
and depending, among other things; on the nature of industries.net working
capital is necessary because the cash outflows and inflows do not coincide. The
cash outflows resulting from payment of current liabilities are relatively
predictable. The cash inflow are however difficult to predict.
The concept of working capital was, first evolved by Karl Marx. Marx used the
term .variable capital means outlays for payrolls advanced to workers before the
completion of work. He compared this with constant capital which according to
him is nothing but, dead labour. This ,variable capital is nothing wage fund
which remains blocked in terms of financial management, in work in process
along with other operating expenses until it is released through sale of finished
goods. Although Marx did not, mentioned that workers also gave credit to
the firm by accepting periodical payment of wages .

TYPES OF WORKING CAPITAL.

41

The operating cycle creates the need for current assets (working capital).
However the need does not come to an end after the cycle is completed to
explain this continuing need of current assets a destination should be drawn
between permanent and temporary working capital.
1) Permanent working capital
The need for current assets arises, because of the cash cycle. To carry on business
certain minimum level of working capital is necessary on continues and
uninterrupted basis. For all practical purpose, this requirement will have to be me
permanent as with other fixed assets. This requirement refers to as permanent or
fixed working capital
2) Temporary working capital
Any amount over and above the permanent level of working capital is temporary,
fluctuating or variable, working capital. This portion of the required working
capital is needed to meet fluctuation in demand consequent upon changes in
production and sales as result of seasonal changes.

DETERMINANTS OF WORKING CAPITAL

42

The amount of working capital is depends upon a following factors

1. Nature of business
Some businesses are such, due to their very nature, that their requirement of
fixed capital is more rather than working capital. These businesses sell services
and not the commodities and that too on cash basis. As such, no founds are
blocked in piling inventories and also no funds are blocked in receivables. E.g.
public utility services like railways, infrastructure oriented project etc. there
requirement of working capital is less. On the other hand, there are some
businesses like trading activity, where requirement of fixed capital is less
but more money is blocked in inventories and debtors.
2. Length of production cycle
In some business like machine tools industry, the time gap between the
acquisition of raw material till the end of final production of finished
products itself is quite high. As such amount may be blocked either in raw material
or work in progress or finished goods or even in debtors. Naturally there need of
working capital is high.
3. Size and growth of business
In very small company the working capital requirement is quit high due to high
overhead, higher buying and selling cost etc. As such medium size business
positively has edge over the small companies. But if the business start growing
after certain limit, the working capital requirements may adversely affect by the
increasing size.
4. Business/ Trade cycle
If the company is the operating in the time of boom, the working capital
requirement may be more as the company may like to buy more raw
material, may increase the production and sales to take the benefit of
favorable market, due to increase in the sales, there may more and more amount
of funds blocked in stock and debtors etc. similarly in the case of depressions also,
working capital may be high as the sales terms of value and quantity may be
43

reducing, there may be unnecessary piling up of stack without getting sold, the
receivable may not be recovered in time etc.
5. Terms of purchase and sales
Some time due to competition or custom, it may be necessary for the company to
extend more and more credit to customers, as result which more and more
amount is locked up in debtors or bills receivables which increase the working
capital requirement. On the other hand, in the case of purchase, if the credit
is offered by suppliers of goods and services, a part of working capital requirement
may be financed by them, but it is necessary to purchase on cash basis, the
working capital requirement will be higher.
6. Profitability
The profitability of the business may be vary in each and every individual case,
which is in turn its depend on numerous factors, but high profitability will
positively reduce the strain on working capital requirement of the company,
because the profits to the extend that they earned in cash may be used to meet the
working capital requirement of the company.
7. Operating efficiency
If the business is carried on more efficiently, it can operate in profits which may
reduce the strain on working capital; it may ensure proper utilization of existing
resources by eliminating the waste and improved coordination etc.

SOURCES OF WORKING CAPITAL

44

The current assets which are used in running daily operation of a business is
called working capital. Working Capital may be classified as Fixed working capital
and Variable working capital. Both types of working capital help in running firms
daily operation. Fixed working capital should be financed from long-term sources
& variable working capital from short term source. So variable from the following
sources are as financed:
1. Short term Bank Loan (STBC):--It is a big source of w. cap. Usually
firms finance through STBL to meet the need of variable WC and need in
excess of FWC. Commercial banks give bank O/D, cash credit etc.
2. Non Bank short term loan: Relatives, Bankers, Govt. Institute are the non
bank S.T. Loan
3. Internal Source: One of the main sources w. Cap for a firm in Internal
sources. This is also called Self-financing.
4. Long Term Sources (LTS): Sometimes W. Cap is financed through LTS.
Usually fixed working capital are share, debenture LT loan etc.
5. Money Lenders: When firms cant finance short-term need of w.cap from
anywhere, they take loan form moneylenders.
6. Trade Credit: When firms purchase on credit & pay the money according to
credit term, it is called Trade Credit. Normally Trade credit is used as a source
of variable W. Cap.
7. Selling out Excess of Fixed asset: If any fixed asset is considered as extra
than need, then that idle fixed asset is sold for working capital.
8. Other than the above sources, firms finances their working capital though
paying debts in late (as much as possible) & Accrual etc.
9. Collect money/Receivable in the earliest time, pay as late as possible.

CHANGES IN WORKING CAPITAL

45

There are so many reasons to changes in working capital as follow

1. Changes in sales and operating expenses:The changes in sales and operating expenses may be due to three reasons
1. There may be long run trend of change e.g. The price of row material say oil
may constantly raise necessity the holding of large inventory.
2. Cyclical changes in economy dealing to ups and downs in business
activity will influence the level of working capital both permanent and temporary.
3. Changes in seasonality in sales activities
4. Policy changes:The second major case of changes in the level of working capital is because of
policy changes initiated by management. The term current assets policy may be
defined as the relationship between current assets and sales volume.
5. Technology changes:The third major point if changes in working capital are changes in
technology because changes in technology to install that technology in our
business more working capital is required.
A change in operating expenses rise or full will have similar effects
on the
levels of working following working capital statement is prepared on the
base of balance sheet of last two year

DISADVANTAGES OF INADEQUATE WORKING

CAPITAL:
46

If a firms level of working capital is very less or inadequate, then the firm has to
face many problem s like the following:
1) The business may be closed due to inadequate working capital
2) Fixed assets cannot be utilized properly, even firm may face problem
in repair and maintenance.
3) Firm may lose attractive cash discount given by sellers due to lack of
working capital.
4) Planning may not be implemented and the goal of profit is not
achieved.
5) Growth of the firm is hampered; as a result, firm cannot take
profitable project.
6) Liquidity is hampered due to inadequate capital.
7) Firms goodwill is reduced if the firm cannot pay its short-term
liabilities.
8) Firm may be failure in dividend payment. As a result, dividend policy
may be badly affected.
9) Firms daily operation may be happened.

Disadvantage of Excessive Working Capital:

47

Excess working capital is not also desirable. The disadvantages of keeping

excessive working capital are as follows:-1. Inventory may be stocked unnecessarily and theft, spoilage etc increased
( ) and profit reduced ( ).
2. Balance is not available between liquidity and profitability.
3. It indicates defective credit policy.

Trade-Off between Profitability and Risk

In evaluating a firms net working capital, an important consideration is the
trade off between profitability and risk.
The term risk is defined as the possibility that a firm will become technically
insolvent so that it will not be able to meet its obligation when they become due for
payment.
Net Working Capital, as measure of liquidity, is not only very useful for comparing
the performance of different firms, but it is also quite useful for internal control.

In evaluating the profitability risk trade off, there are three assumptions:1. We are dealing with manufacturing him.
2. Current assets are less profitable than fixed assets.
3. Short-term are less expensive than long term funds.

Working Capital Ratios (liquidity)

48

 The liquidity position of a business refers to its ability to pay its debts i.e.
does it have enough cash to pay the bills?
The balance sheet of a business provides a snapshot of the working capital
position at a particular point in time
There are two key ratios that can be calculated to provide a guide to the liquidity
position of a business
Current ratio
Acid test (quick) ratio

Current Ratio:-

Calculation

Current Assets

Formula

Current

Liabilities

Particulars

2009-10

2010-11

Current Assets.

5771

7261

Current Liabilities.

3380

3808

Current Ratio

1.70

1.90

The company has sufficient liquidity to meet its short term maturity
obligations. It shows it good credit worthiness and creditors confidence.

49

Acid Test (Quick) Ratio

Calculation

Current Assets (less Stocks)

Formula

Current

Particulars

2009-10

Liabilities
2010-11

Current Assets.

5107

6551

Current Liabilities.

3380

3808

Acid Test(Quick)
Ratio

1.51

1.72

(Ref: - B/S)

The company has sufficient funds to cover all its immediate long term
obligations. It represents that the company is prospering.

50

Limitations of Liquidity Ratios

Liquidity ratios should be used with care

Balance sheet values at a particular moment in time may not be typical

Balances used for a seasonal business will not represent
average values

Ratios can be subject to window dressing or manipulation (e.g. a big push

to get customers to pay outstanding balances by the yearend

Ratios concern the past (historic) not the future

Working capital management is very much about ensuring the business has
sufficient cash in the future

Ways To Improve Liquidity

51

Option

Pitfalls

Reduce the stock holding period

for

May result in production delays or shortages if

demand

finished goods and raw materials increases unexpectedly

Improve the efficiency of the
production
process (e.g. shorten by using
better

Costly to reorganise production but may be worth

it in the
mediumterm

production methods)
Reduce the credit period offered
to trade
debtors and chase amounts due
more

May upset customers or cause them to reduce the

amount
they buy

aggressively
Extend the time taken to pay
creditors

A dangerous option suppliers may refuse to supply

or may
charge interest if their payment terms are exceeded

Use invoice discounting or debt

factoring

A good way to obtain cash quickly but usually

costly (e.g.
factoring firm charges a high commission on debts
to obtain cash from trade debtors paid)

Sale and leaseback of assets

Another good way of releasing cash from fixed

assets but
leaves the business with higher costs and payment
obligations

The Working Capital Cycle

Not all businesses have the same need to invest in
52

working capital

Much depends on
(1) The nature of the production process (i.e. what and how something is
being produced), and
(2) The way in which the product is distributed to customers

The working capital cycle is:

The period of time between the point at which cash is first spent on the
production of a product and the final collection of cash from a
customer

Working Capital Cycle Illustration

Raw Materials ordered
from suppliers and put
into stock awaiting
production. Cash is
used up to finance
stocks (by53paying the
suppliers)

Finally the product

starts to generate cash
as customers pay the
amounts they owe.
Then the whole process
starts again

More cash is used to

finance the production
process employ staff,
run the factory and
other support
operations

More cash is used up to

store finished products and
distribute them to the
intended markets. Trade
customers are allowed to
buy now and pay later so
debtors increase

HEADS OPERATIVE IN DVC, HAZARIBAGH

HEAD 1 POWER
Its respective units are:
GOMD V GRID OPERATION AND MAINTENANCE DIVISION
TSC IV TRANSMISSION SYSTEM CONSTRUCTION
HEAD 4 SUBSIDIARY ACTIVITIES i. e. SOIL CONSERVATION
54

DEPARTMENT, HAZARIBAGH
Its respective units are:

AFFORESTATION ( EAST / WEST )

CULTIVATION RESERVOIR AREA
DIRECTOR OFFICE
IBCH : CIRCUIT HOUSE
EXTENSION
SOIL ENGINEERING
SOIL TESTING LABORATORY
TRAINING

HEAD 6 GENERAL OVERHEAD EXPENSES.

Its respective units are:

DRLA DIRECTOR REHABILITATION AND LAND ACQUISITION

MEDICAL
ACCOUNTS OFFICE
VIGILANCE

GLOSSARY OF TECHNICAL TERMS USED IN

DVC
INSTALLED CAPACITY: Maximum capacity as per design of the machine.
INSTALLED CAPACITY ( DERATED ): Maximum capacity based on actual
regular generation possible.
BASE LOAD CAPACITY : Capacity of the Boiler and turbine matching with other
auxiliary plants.
MW : Megawatt which means one million watts as a measure of electrical power
generated by power stations.
55

MKWH : Million Kilowatt Hours means 10,00,000 Kilowatt hours ( When 1000
Watts of electrical power is utilized for one hour, the quantum of energy of energy
recorded is 1KW hour which is the unit of energy).
PLF : Plant Load Factor (PLF) is percentage of actual generation to the generation
possible at Installed / Derated capacity.
Man MW ratio : Manpower deployed for 1MW of capacity.
TRANSFORMER :A static equipment used for stepping up or stepping down
voltage in transmission and distribution of capacity.
PLANNED MAINTENANCE : As per Indian Boiler Act , Boiler is to be overhauled
once in a year and as per recommendation of the Kulkarni Committee Turbo
generator set is to be overhauled once in 3 to 5 years depending on the run of the unit.
FORCED OUTAGE : Forced outage means shutdown of the plant for different
reasons including the circumstances arising out of non adherence to the Planned
Maintenance Schedule.
AUXILIARY CONSUMPTION : Power consumed within the premises of the
generating units.
TRANSMISSION LOSS : Quantum of power loss in transmitting and distributing
power from the generating stations to the consumers.

FINANCIAL RESULT
Key Operational Financial Parameters of DVC for the Last 3 Audited Years.
The balance sheet of DVC can be considered to be healthy with a net worth
(capital contribution + reserves less Intangible assets) of Rs.16,266 Crore. Key
financials for the past 3 years are summarised below-

56

KEY RATIOS (Power)

57

 Financial results of the Corporation for financial year 2011-12 are audit by
the Comptroller & Auditor General of India (CAG), which is pending
approval of the Parliament.
The Debtors holding is mainly on account of power supply to Jharkhand
State (JSEB), which is recoverable through Central Plan allocation under the
Tripartite Agreement of the Securitisation Scheme of the GOI.
Past Years liabilities have been discharged from Internal Resources released
by availing full borrowings at normative levels and therefore, have not been
considered in calculation of DSCR, which is based on current years profit
only.

58

CASH FLOW STATEMENT

59

KEY TERMS
Working capital

Funds required by the business to pay for the daytoday operation of the business

Working capital

The period of time between the point at which cash is first spent on the production of a

cycle

product and the final collection of cash from a customer

Current assets

Assets of the business held in cash form (e.g. at the bank) or that that can quickly be
turned into cash

Current liabilities

Money owed by a business which will need to be paid in the next 12 months

Liquidity

The ability of a business to pay what it owes as those amounts become due. A
business
that does not have enough cash is described as illiquid

Current ratio

Measure of liquidity based on data from the balance sheet. Calculated as current
assets
divided by current liabilities

Acid test ratio

Another liquidity ratio better suited to assess businesses that have a low stock
turnover

Overtrading

When a business takes on too many obligations without having the finance to pay for
them

60

CONCLUSION
The final chart of activities and rate of scaling up has been arrived at based on
detailed assessment of the capabilities of the organization in carrying out the same
in an efficient and timely manner. The expansion plan has been charted out by
collecting detailed data and plans from the DVC staff members who are actually
responsible for implementing the same programmes at the grass root level, which
then have been cross checked by the technical consultants.
The study reflects Damodar Valley Corporations (DVC)
business strengths that are derived from the dominant
market position that it enjoys in the Damodar Valley region,
the liberal tariff norms under the DVC Act, its pithead plants
that result in low cost of generation and a customer base
The analysis reflects the companys favorable financial
profile, which is characterized by low gearing, healthy
coverage ratios, stable operating margins and surplus
liquidity through short-term deposits.
DVC has projected an aggressive, largely debt-funded
capacity addition programme under the tenth Five Year Plan,
which would vitiate its current financial profile. DVC has also
engaged the National Thermal Power Corporation (NTPC) for
supervising the progress of its renovation and modernization
(R&M) projects.
Even after accounting for its plants low operating efficiency,
DVCs tariffs are competitive compared to other central
sector generators and the SEBs primarily because of its
depreciated generating assets, low transmission and
distribution (T&D) losses and favorable consumer mix (which
excludes subsidized agricultural and domestic consumers).
DVCs entire transmission and distribution infrastructure is at
a high voltage, which results in low T&D losses. Thus, even
with its generating inefficiencies, the corporation is able to
charge competitive tariffs from its consumers.
61

 Healthy financial position: DVCs monopoly status in the

valley ensures a stable operating income. Moreover, DVC
benefits from having its generation facilities located at the
coal pithead, low T&D losses and its ability to pass through
all fixed costs. This has helped the corporation to earn stable
and healthy operating margins.
The function of soil conservation through promotion of afforestation and
control of soil erosion in the damodar valley and promotion of public health
and agriculture, industrial, economic and general well-being of the residents
of damodar valley are statutory mandates for dvc under section 12 of the
Dvc act. Thus, DVC has to carry out the same for overall development of the
damodar valley as envisaged by the DVC Act.
There has been a widening of the economic gap among certain sections of
the population and thus the requirements of such activities by DVC are all
the more important. DVC is one of the lowest cost power producers due to
reduction in cost of production and thus the additional cost required for the
subsidiary activities would not lead to any tariff shocks to consumers.
The expansion plans as outlined in this report is achievable by DVC given
their present knowledge base of the valley region. They have adequate
experienced man power to execute the same and the financial resources to
meet the funding requirements comfortably.

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RECOMMENDATIONS
DVC is poised in a very advantageous position to implement the soil conservation,
afforestation and SIP programmes due to its huge knowledge and database of the
valley that it has accumulated during its operations in the valley over the last five
decades. The cumulative economic benefits that would trickle down to the
community at large in the command area of DVC would be multiple times the
expenses incurred for delivering the same. DVC could well act as an extension of
the government in a sense that it can supplement many of the govt initiatives and
efforts, as many of its programmes are in principle in line to state developmental
efforts.
However for better and smoother performance and also to generate adequate
feedback for its activities for fine tuning, DVC should also undertake the
following:
Conduct a rapid economic and social assessment of the command area,
either using its own data collected over the operational period of DVC or by
employing external social surveyors and thus obtain the baseline data against
which to monitor the progress and outcome of the various schemes.
DVC should conduct regular performance review of the various schemes
under implementation. This can be done in multiple manners like taking
feedback from beneficiaries as to what they perceive of the programmes ,
would they like it to continue or not, any modification are required in the
programmes or not , or through appointing external auditors on selective
basis who are well experienced in social audits to conduct reviews of the
programmes.
Based on the periodic reviews about the efficacy and outcome, DVC should
be able to scale up or scale down the activities accordingly.

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 DVC can consider alternative organization structures for implementation of

the programmes, if it wants to speed up the implementation. It can choose
from a centralized or a decentralized approach, or can also consider
contracting some works to reputed outside agencies.
DVC can recover the expenses it incurs on these activities of natural
resource conservation and social integration based on the estimated costs
and truing up of actual expenditure can be done at regular intervals.

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BIBLIOGRAPHY
BOOKS: Financial Management
- I.M.Pandey
Financial Management
- P. Chandraa
Annual Reports of DVC

WEBSITES:www.dvc.gov.in
www.google.com
www.moneycontrol.com
www.businessworld.in
www.wikipedia.org
www.scribd.com
www.managementparadise.com

NEWSPAPERS: Economic Times

Financial Express

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