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INTRODUCTION
Sui Southern Gas Company (SSGC) is Pakistan's leading integrated gas company. The company is engaged in the business of transmission and distribution of natural gas besides construction of high pressure transmission and low pressure distribution systems. Sui Southern Gas Company (SSGC) is Pakistan's leading integrated gas Company. The company is engaged in the business of transmission and distribution of natural gas besides construction of high pressure transmission and low pressure distribution systems. SSGCL transmission system extends from Sui in Baluchistan to Karachi in Sindh comprising over 3,200 KM of high pressure pipeline ranging from 12 - 24" in diameter. The distribution activities covering over 1200 towns in the Sindh and Baluchistan are organized through its regional offices. An average of about 381,277 million cubic feet (MMCFD) gas was sold in 2008-2009 to over 1.9 million industrial, commercial and domestic consumers in these regions through a distribution network of over 29,832 Km. The company also owns and operates the only gas meter manufacturing plant in the country, having an annual production capacity of over 550,150 meters. The Company has an authorized capital of Rs. 10 billion of which Rs 6.7 billion is issued and fully paid up. The Government owns the majority of the shares which is presently over 70%. The Company is managed by an autonomous Board of Directors for policy guidelines and overall control. Presently, SSGC's Board comprises of 14 members. The Managing Director/Chief Executive is nominee of GOP and has been delegated with such powers by the Board of Directors as are necessary to effective conduct the business of the company.
ESTABLISHMENT:
The Company in its present shape was formed on March 30, 1989 following a series of mergers of three pioneering companies, namely Sui Gas Transmission Company Limited, Karachi Gas Company Limited and Indus Gas Company Limited. Sui Gas Transmission Company Limited was formed in 1954 with the primary responsibility of gas purification at the Sui field in Baluchistan and its transmission to the consumption centers at Karachi. Two distribution companies were established in 1955 and were responsible for the distribution of gas to consumers in Karachi and in other towns along the route of the transmission pipeline between Sui and Karachi. In 1985, these two distribution companies were merged to form Southern Gas Company Limited and later, in 1989, Southern Gas Company Limited and Sui Gas Transmission Company Limited were merged to form the Sui Southern Gas Company Limited. Today, half a century of professionalism and progress has made the SSGC one of the largest integrated natural gas transmission and distribution companies in
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Pakistan, serving the entire Southern region of the country, comprising the provinces of Sindh and Baluchistan.
CORE VALUES
Integrity:
Keep Company's Interest above self. Acts in ethical manner. Promote ethical business environment. Take effective actions if observers unethical behavior or situation. Seen & known to be honest. Lives within means. Intellectually honest.
Excellence:
Makes positive contribution towards the achievement of SSGC's Vision. Strives for Continuous improvement. Respond effectively to customer needs. Takes timely and Quality decisions.
Teamwork:
Builds strong relationships within across functions. Works well with all type of Peoples and corporate with others. Solicits and share ideas/best practice with others. Supports the achievements of Company/team goals. Contributes to team effectiveness using people's different skills and styles. Arrives at constructive solutions while maintaining Positive working relationships. Demonstrates sensitivity.
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Transparency:
Promotes open environment. Displays openness and consistency in applying policies & Procedures. Respects dissent and resolves conflicts fairly.
Creativity:
Comes up with new ideas. Encourages innovation. Promotes modified approaches. Convert Ideas into actions.
Responsibility to Stakeholders:
Stays abreast of change in operating environment that impacts our business (i.e. markets, competitors, Technology, customers, suppliers, employees, regulatory, political and public). Create solutions to make Customer needs. Develops colleagues and team members to improve their skills and performance. Ensure Optimum utilization of resources. Balances short term and long term priorities to maximize on results. Ensures compliance of law.
Organizational Structure
The Company is organized into six functional divisions -Transmission, Distribution, Commercial, Engineering Services, Management Services, and Finance. Each division is headed by a Senior General Manager assisted by a team of professional staff, with the exception of Finance, which is headed by the Deputy Managing Director. Policy matters relating to the natural gas sector are handled by the GOP. OGRA is responsible for regulation, pricing, revenue determination and compliance to service standards. The Board of Directors has the overall responsibility for the management and control over the Company. The management enjoys operational autonomy. The major portion of the work force consists of technically qualified and skilled personnel.
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FINANCE DEPARTMENT
This year the budget for SSGC is announced Rs.6 billion
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FUTURE OUTLOOK
The Company is pursuing an ambitious five year development and expansion plan estimated at Rs 42.9 billion. Key objectives of the strategic plan for the next five years (2005-06 to 2009-10) are the following: Expansion of transmission network by 608 Kames from 2,942 km in 2005 to 3,550 km by 2010, enhancing capacity from 1,300 MMCFD in 2005 to 1,700 MMCFD by 2010. Expansion of distribution network and supply mains by 5,236 km from 25,764 km in 2005 to 31,000 km by 2010 connecting 600 new towns and villages in Sindh and Balochistan Enhancement of gas supply to power plants, industrial and commercial sectors including supply of gas to previously deprived areas in the domestic sector. Increase of the customer base from nearly 1.8 million to 2.2 million by adding 447,000 new customers to the Companys system. Consistent appreciation in shareholders value by increasing the companys asset base and significant improvement in productivity and efficiency. Focus on improved, friendly and efficient customer services under the vision of Service with a smile; Establishment of 16 fully automated (additional 8 in progress) on line customer facilitation centres; Multiple bill payment options and channels (ATM, Call Centres, ORIX POS, Internet, Drop Boxes, NADRA-Kiosk); Latest technology digital prepaid meters with improvement of call centres to include an online customer information system. Revamp the current business processes, to improve company efficiency and implement ERP, CIS, GIS and the best business policies for ISO 9000 certification; Increase surveillance and introduce an automated emergency response system (ERS) and SCADA for the security of company assets including the transmission and distribution networks; Improve the quality of human resource through career planning, training of employees and development of management; Implement environment management system, occupational health and safety system as required under Certification ISO 14001 and OHSAS 18001 standards; Set up Enterprise Information System (EIS) in all areas of business using state of the art technology to make SSGC the Most IT Enabled Company; Human resource development and empowerment of employees through career planning and continuous management/vocational training. ZARA ABDUL AZIZ Page 5
Sui Southern Gas Company limited Community support services and corporate communication initiatives to meet the national and social responsibilities, as a good corporate citizen.
DISTINGUISHING FEATURES
1. Developing Human Assets:
SSGC believes that satisfied employees provide Quality service. SSGC provides satisfaction of its employees and gives them adequate incentives to provide high quality work. Human Resource Development is one of the top priority areas at SSGC. The company undertakes several initiatives to ensure induction and training of professionals with the objective of ensuring high level of professionalism and productivity of its employees.
3. Edge in Technology:
Quest for excellence and cutting-edge technology has played a key role in SSGC expansion and strength. Above all, technology brings greater benefits to customers. For example, all SSGC meter reading is now carried out through hand-held computers - saving valuable time and minimizing errors. SSGC's computerized billing system prints bills through the online network in the entire franchise areas. Today, SSGC is set to become the most IT enabled Company in the country. Realizing the need for integration of IT into core business processes, the Information Technology Department is rendering strong support to SSGC. ZARA ABDUL AZIZ Page 6
Sui Southern Gas Company limited A key initiative of this department is the implementation of the Geographic Information System - a computer-based system that effectively provides forecasting data for further strategy development. Increasing the efficiency of business processes is another priority area for SSGC. Enterprise Resource Planning (ERP) software integrates all departments and functions on to a single computer network. Maintaining its technological edge, SSGC has signed a comprehensive enterprise agreement, with Microsoft - the only such agreement by a public sector utility company in Pakistan. Since the pipeline network forms the backbone of SSGC's operations, special steps have been taken towards ensuring maximum efficiency, such as PL Studio simulation software, which accurately simulates the large and complex pipeline network, driving higher performance, efficiency and financial viability of new projects.
4. Telecommunications:
Telecommunications plays a vital role in maintaining high operational efficiency at SSGC. Through the advanced microwave digital network, and with video conferencing facility, all SSGC offices and facilities remain connected 24 hours a day.
5. Promoting Safety:
SSGC is committed to the health and safety of its employees and preservation of the environment in its areas of operation. Its Health & Safety and Environment (HSE) management system ensures that the standards, processes and procedures needed to achieve safe operations are identified, implemented and maintained.
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STRATEGIES
The company has moved beyond basic reengineering as it builds and reinforces culture change by creating performance opportunities, developing Human Resources and pursuing overall business excellence. The company identified successfully different layers of change that needed to be managed concurrently for large projects to be implemented on schedule and within budget. Within the induction of new, improved business process, an appreciable change in productivity was achieved. The company has taken the lead in integrating Change Management within its people, processes and technology. Optimizing market flexibility and maximizing return on investment from major change initiatives are key success factor for the company. The company has adopted an aggressive approach to empower the executives and to create awareness in the rank and file for changing the routine business processes with people-centric work methodology with focus on moving over to best business practices. The SSGC has pioneered efforts for deployment of a cost-conscious and performance-based culture and empowerment of the employees to provide for achievement and excellent at all levels. Expansion of distribution and transmission network for enhancement of gas supply to power plants, industries and commercial sector including supply of gas to previously deprived areas in the domestic sector. Customer satisfaction, innovation, quality services and promotion of service with a smile culture. Consistent appreciation in shareholders value by increasing the companys asset base and significant improvement in productivity and efficiency. Business Process Re-engineering (BPR), re-structuring of select departments and implementation of ERP to provide effective M.I.S for business operations and control. Enterprise Information System (EIS) and technology implementation in all areas of business to make and maintain SSGC the most IT enabled company. Human resource development and empowerment of employees through career planning and management / vocational training. Improvement in reliability and security system. ZARA ABDUL AZIZ Page 8
Sui Southern Gas Company limited Improvement in customer services through additional Customer Facilitation Centers, installation of pre-paid meters, and improved bill delivery. Community support services and environmental protection initiative to meet the national and social responsibilities as a good corporate citizen.
COMPANYS OBJECTIVE
The Company aims to supply natural gas wherever there is sufficient load to justify the cost of infrastructure. In many places the gas network is being expanded to meet economic and social requirements through active funding support from the Federal and Provincial governments. In 2003, the Company launched a comprehensive five-year gas network development and expansion: Plan to connect hundreds of small towns and villages in remote areas of Sindh and Balochistan, which currently are deprived of piped natural gas. Every year, the Company adds nearly 75,000 new customers (industrial, commercial & domestic) to its customer base and lays hundreds of kilometres. Transmission pipelines and distribution network and installs other facilities such as metering / billing stations in its system using its staff of technically qualified and skilled personnel.
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FINANACE DEPARTMENT
These are the following sections included in Finance Department: Cash & Budget section General Ledger Bid bond section GDS & GTPL Projects Bills section. Payroll section Insurance section Gas purchase section Funds section Cost and budget section Fixed assets & budget section
Areas of working:
1. Funds section 2. Treasury Function a. Revenue control b. Cash & Bank 3. Bills Payable a. Non-local order b. Local order 4. Fixed Assets & Capital Budget
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FUNDS SECTION
INVESTMENT: Since the company established, SSGC accumulated funds in billions and deposited in the banks for returns. Recently SSGC, because of recession, took out all the Funds which were deposited in the banks as the discount rate dropped down to more than 50% and invested all the funds in the Government of Pakistans Special Saving Certificates for 3 yrs at the return of 15.499% per annum and about Rs.200 million in Habib Bank Limited for 3 months at because at this time many staff members are getting retired and to make final settlements huge amount is required. On the next pg the rates are given of different saving schemes.
TYPES OF FUNDS: 1. 2. 3. 4. 5. 6. 7. 8. Executive staff provident fund Non-executive staff Provident fund Executive staff Gratuity fund Non-executive Gratuity staff Executive staff Pension fund Non-executive staff Pension fund Executive staff Benevolent fund Workers Profit Participation fund
The funds and loans are given only to the Executive and Non-Executive staffs of the company. Gratuity, Pension and Benevolent funds are given after the retirement and provident funds are used as loans. The contribution in these funds by the company is the indirect benefits to the employees which are added in the cost of the company. Funds are given on 4 conditions: 1. Termination 2. Retirement 3. Resignation 4. Expiry/Death The % which is contributed by the employees and the company are as follow: Gratuity fund: 8.5% of the basic salary fully contributed by the company which is added in the cost of the company. Pension fund: 20% of the basic salary fully contributed by the company added in the companys cost. ZARA ABDUL AZIZ Page 13
Sui Southern Gas Company limited Benevolent fund: 1.1% of the basic salary is contributed by the employee and rest by the company. Provident fund: 7.5% of the basic salary is contributed by the employee and the same amount is contributed by the company.
Gratuity Fund
It is the fund which is paid on retirement, resignation and expiry but not on termination. There are different criteria for executive and non-executive staff for the computation of Gratuity Fund. They are as follows:
Executive staff:
Full Gratuity - 50 days Resignation 10 days Opt Pension against Gratuity- 20 days with condition of maximum 30 yrs of service. Example: Mr.ABC Yrs of service: 27 yrs 10 months 14 days. Its equals to 28 yrs because in executive 6 months are equal to 1 yr. Basic salary: Rs 76,050 per month CALCULATION: 1. Full Gratuity: Rs. 76,050* 50/30*28 yrs = Rs. 3,549,000/= 2. Resignation: Rs 76,050*10/30*28yrs = Rs. 709,800 3. Opt Pension: As per rule Commutation + Gratuity in lieu of Pension Gross pension = 1% of basic salary * yrs of services. GP: Rs.760.50*27.833yrs = Rs. 21,167/= Commutation= 50% of Gross pension*12*11.886(calculated) Rs. 10,583.5*12*11.886 = Rs. 1,509,546/= Net Pension Payable: 50% of Gross pension = Rs. 10,584/= P.M. Total Pension: Rs 1,509,546 + Rs 1,419,600 = Rs. 2,929,146.
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Benevolent Fund
It is only for Executive staff, given after retirement on monthly basis for 5 yrs. This fund is collected by the contribution of staffs 1.1% basic salary from the date of joining till the date of retirement. According to the ordinance, range of salary is provided upon which the amount of benevolent fund is given to the staffs. e.g. Salary Benevolent Fund Rs 15,000-20,000 Rs 2,000 Rs 20,001-25000 Rs 2,050.. Rs 90,001 & above Rs 5000 Case I: On Retirement: Every month the amount of benevolent fund is send to the staff through cheque and on every 1st January , the arrears is included along with the amount of benevolent fund. Calculation is as follows: Benevolent fund for January 09= Rs 2,000 Arrears = Rs2,000 Total payment for January= Rs.4,000 Rs.4,000 is given in the month of Jan and from Feb., only Rs 2,000 will be given
Case II: Before Retirement: It is possible on medical grounds then the fund is given for 5 yrs including the yrs left for retirement.
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Sui Southern Gas Company limited Example: Provident Fund Loan Mr.XYZ Basic salary: Rs.13986 @ 7.5% CONTRIBUTION STATUS Accounts A Rs. Opening Balance 9394 Date Earned 31-JUL-08 945 31-AUG-08 945 30-SEP-08 945 31-OCT-08 945 30-NOV-08 2466 31-DEC-08 1049 31-JAN-08 1049 28-FEB-08 1049 31-MAR-08 1049 TOTAL: 19836 TOTAL A&B 39672
B Rs. 9394 945 (salary in 2007) 945 945 945 2466 (increment + 1049 (incremental salary) 1049 1049 1049 19836
Mr.XYZ will receive Rs.39, 672 as a loan. If its refundable then Mr. XYZs 18 months basic salary will be deducted along with property papers so when the amount of loan is paid back, company will return the papers and 18 basic salary will be added back to his account. Ifs its non-refundable then it means Mr.XYZ has attained the age of 60.
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All these sections have separate section heads that are responsible for the activities of the people working in their section. These section heads report to Chief Manager (CM) Treasury Function who is responsible for the overall activities of the treasury function Department.
REVENUE CONTROL
As we all know that SSGC is a Transmission and Distribution company so its main revenue comes from the bills collection.99% of the revenue is from main business and 1% from bi-product. SSGC deals with 3 different types of customers: 1. Industrial: SSGC is doing an excellent job in fulfilling the gas needs of the industrial sector of our economy. The customers engaged in the process of creating value added finished products from industrial raw materials are called industrial customers. This category of customers includes the CNG stations, Ice factories, Cement factories, Pakistan steel, FFC Jordan Fertilizer. However, SSGC is striving hard to increase its customer base and to meet the everincreasing demands of its customers. The gas consumption of the industrial sector has been showing growth every year. More than 3000 industrial customers buy natural gas from SSGC. In the year 2008, SSGC have catered to almost new 374 industrial ZARA ABDUL AZIZ Page 17
Sui Southern Gas Company limited customers demands in Karachi. Many industrial consumers use natural gas for captive power generation as well as to meet their process needs. The processing fee for industrial consumers is Rs. 10,000. These processing charges are non-refundable but adjusted with the cost of the connection charges. WAPDA and KESC (Largest customer): KESC have 14 stations situated all in Karachi and WAPDA includes 4 different stations ( Jamshoro, Kotri , Sukkar and Quetta). SSGC charges interest on over dues to both of its industrial customer. These are the ones having largest debt to pay SSGC which have not been cleared for quite a long time and are increasing day by day.
2. Commercial: Commercial segment is also one of the important segments of SSGC customer Base. This category includes all establishments registered as commercial units with local authorities or dealing in consumer items for direct commercial sale like cafes, bakeries, milk shops, tea stalls, canteens, barbershops, laundries, places of entertainment like cinemas, clubs, theaters, and private office, clinics, maternity homes and other small businesses etc. The number of commercial consumers currently exceeds s 20,000 and the list is growing. In the year 2008-09, in Karachi only almost 144 new commercial customers have registered. 3. Domestic: A large portion of SSGC customer base comprises of Domestic customers. Nearly 98% of SSGC customers can be categorized as domestic users. These domestic customers include residential colonies, mosques, churches, temples, other religious places, and hostels attached thereto, Govt. and Semi-Govt. offices and hospitals, Govt. guesthouses, armed forces messes and universities, colleges, schools and private educational institutions, orphanages and other charitable institutions.
Keeping in mind, the SSGC motto 'Service with a Smile', the people at SSGC have always strive to provide un-matched and diverse services to customers through innovative and progressive ideas in line with best international practices. As a result, SSGC has nearly 1.94 million domestic customers in 6 major cities, over 100 smaller towns and 930 villages. Of these, nearly 1.40 million are located in Karachi and the reaming in the rest of the Sindh. Almost 686 new commercial customers have registered only in Karachi in the year 2008-09. The processing fees for domestic customers are Rs. 1000 and it is non-refundable. Recently Tandoor walas has also been added to the customers list as they are now treated separately. ORGA gives the rates for different customers to charge them accordingly. All customers have different duration to pay their bills and the dues are charged as prescribed by OGRA. It is collected from 3 different area. Karachi unit A Interior Sindh unit B Baluchistan Quetta unit
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Process:
a. Customer submits the bill in the bank. b. Bank employee stamps the bill which includes date of payment. c. Bank returns the bill and keep the STUB (a small receipt containing the customer number and the amount paid. It is attached to the bill). d. Bank records all the paid bills on daily basis on a sheet know as SCROLL SHEET which includes customer number and the amount paid. e. When all the bills collection is done on particular day; bank sum up all the collections and prepare a PAY ORDER. f. Pay order is then handed over to NIFT ( National Institutional Facilitation Technologies). SSGC have out sourced its collection process through NIFT. It collects all the document, process them, stub is scanned which reads the customer information automatically generated in the system. g. A pay order is maintained payable to SSGC of the amount accumulated by every bank branch and deposited in DIB (Dubai Islamic Bank) by NIFT where SSGC account is maintained. So automatically system Debits the Bank account and Credits the Customer Account. h. This section also deals with bank and customer queries.
Bank Queries
Sometimes queries may also occur in collection of bills payable or in updating customers accounts. Revenue control department is also responsible to deal with any customer query. Query may be of any kind. Most frequently the query that this department has to deal with is that, the bank has received the amount from a particular customer but due to some mishaps or cursory, amount has not been recorded in the scroll. So, in this case arrears are included in the rent month bill. The customer will go to customer facilitation service centers, or Head Office to solve his query. However SSGC has given a relaxation to banks in this case, to cut arrears and receive only current bills in case of any mistake by bank on presenting any prove by customers.
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Sui Southern Gas Company limited Sometimes, bank has received a smaller amount but has included in the scroll a large sum which is definitely a big issue to deal with. Sometimes memo adjustments are made to satisfy query of customers. All these types of queries are solved or deal by Revenue Control Department.Altough it is a very abstruse and obscure task to manage it, but this department does it very discreetly and prudently. Revenue Control Department also pays to bank the collection charge which varies from time to time. So, this department makes a yearly estimate of gas collection charges to cost department. Revenue control has also to pay to NIFT for processing charges. NIFT does processing of all the banks collections accept Habib Bank which does its processing itself.
RECONCILATION
Bank Reconciliation is an important function of cash and bank section. Through this section all the check and balance is maintained over the treasury function department. Bank Reconciliation section maintains a daily bank record in bank book or company book to check the huge difference which might arises due to some mishaps.SSGC deals with almost 38 banks. Each bank has maintained collection account of SSGC bank while Allied Bank ltd has maintained disbursement account as well. Reconciliation process is carried by tallying the bank book and the bank statement. If there any error occurs, then that particular kind of error is rectified through bank reconciliation statement. Basically four heads are included in reconciliation statement. Add: Amount Debited by bank but not yet accounted for Less: Amount Credited by bank but not yet accounted for Add: amount deposited but not yet credited by bank. Less: Cheques issued but not presented.
Process of Reconciliation
The process of Reconciliation is quite intrusting. It is the process of checking the figure that appears in Bank statement and the figures appear in our collection. The difference that appear in between them called Outstanding, either that would be presented in credit in bank statement, debit in bank statement, credit in collection book or debit in collection book. And if differences appeared then that would be checked by going in whole process either the amount is shown would be presented through RV in our collection book or by payment vouchers. The amount that is presented in bank statement on debit side and that ZARA ABDUL AZIZ Page 20
Sui Southern Gas Company limited is not completely figured out by all commission charges those are charged by bank / branches or by other expenses, then there would be a need of payment vouchers that either that amount is being taken out by any other mean and if the amount appear on credit side in bank statement and does not appear in collection book then that must be point out by having a look at RVs.
FUND MANAGEMENT
Funds Transferred Inn
The collection at Quetta and Hyderabad from receiving bills and other payments made to SSGC has been received respectively by regions. After going through all process like reconciliation etc those amounts has been transferred out to the Head office. At Head office it is the responsibility of RCA to have a close look at those transferred funds and maintain them at Head office.
Management of Funds
As per mentioned that funds have been gotten from collection of gas bills and Quetta and Hyderabad unit transferred that amount. The management of funds is very important work and has to maintain / manage with very care. The funds those have been transferred to Head office, those funds have been kept in respective banks as per declared for transferred funds from higher management for obtaining maximum return, all the checking process over the banks has been carried out like credit / transferred inn amount should be checked from bank statement, all the charges including collection charges, bank credit interest rates and also fallow on the change in interest rates.
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NON-GAS REVENUE
Non-gas revenue is also important and fundamental department of Treasury functions. Non-gas revenue means income from other than sell of gas. SSGC earns a huge income from the sell of other materials and services. The four major sources of non-gas revenue are: Condensate sell Sell of gas to JJVL for extraction of LPG. Gas meters sell Pipeline rental income
1. Condensate Sell
Condensate sell means the sell of liquid oil which is mixed up with some type of natural gases. One of the most important field Badin gas field in Hyderabad. The gas which is extracted from Badin gas field contains some quantity of liquid oil,. Before transmission of gas, oil is separated from that gas.SSGC has installed separators for the separation of oil from the gas. After separating the oil from gas, that crude oil, on the directions of government is sold entirely to Attock Refinery ltd Attock Refinery LTD uses the crude oil in production of gas line.
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Selling Process
Meter plant has mainly two customers. One is SSGC LTD and other one is SNGPL LTD. Price for the sell of meters to the SNGC LTD is negotiated between the two parties. Meter Plant transfers meters at cost price to SSGC. Therefore, no profit no loss exists in the transaction of selling. SSGC LTD and SNGPL charge meter rent to domestic consumers. Hence, it becomes a huge source of income.
Transmission pipelines are used to transmit the gas from gas fields to another. While distribution pipelines are used to distribute the gas to different consumers.SSGC LTD has given on rent the four gas transmission pipelines to different companies. 1. 2. 3. 4. Pirkoh Gas Field Hasan Gas Field Zamzama Gas Field Bhit Gas Pipeline
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IMPORTS SECTION
Introduction
Import section is also a fundamental operation of treasury function. This department or section is mainly responsible to deal with all types of imports of SSGC LTD. import order is mainly comprised of chemicals, component parts, pipelines, fillings, screws, boltsetc.SSGCLTDmainlycarriesitsimportstransactionswithGermany, France, Belguim, China, and America.
Order Procedure
Those who needs material or any type of machinery sends an indent to procurement department for material requisition, this document indicates the quantity and quality of material for which the order is being placed for.
Invitation of Tenders
Upon receiving the indent, procurement department issues tender among public and then, quotations are received from various contractors. Then, the contract is given to that contractor which offers lowest bid.
Shipment of Order
After opening of L/C in favor of contractor, the goods are shipped by shipping agency too Karachi dockyard which issues bills of lading to the head of Material Management department that goods are being shipped as on the required order.
Clearance of Goods
Clearing agents cleans the goods on the port. A document known as bill of entry is prepared by clearing agent which includes custom duty, general sales tax, income tax, and federal excise duty etc.these al costs together re called landed cost. The clearing agent gets cleared all thee payment and order is shipped to store and all the necessary shipping documents are send to bank by the supplier.
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Pricing Process
Treasury function department on getting receiving statement carries on pricing procedure. Pricing of order is valued on the basis of its ratio cost.
Accounting Entries
The entries for this whole procedure are interpreted as following. 1. When cost of import order is incurred: Import (control) Bank XXX XXX
Accounting Entries
Revenue job/Capital job Stock XXX XXX
The whole process of financial side of imports starts and ends on this department. SSGC LTD has given the particular bank a Debit Authority to pay and clear all the dues.
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LOAN SECTION
Most of the organizations borrow loan from different banks to meet their capital expenditures and working capital requirements. SSGC LTD is also involved in the activity of borrowing loans from high profiled bank organizations. Loans are offered by banks in two categories. 1. Short term borrowings. 2. Long term borrowings.
Classification of Loans
Banks in two classes mainly classify loan. One is a conventional loan, means with interest. SSGC LTD has to pay a certain rate of interest on conventional loans, which are decided after negotiations are held between the two parties. Most probably SSGC LTD has to pay 25% on principal amount. The other kind of loans is Islamic loans which doesnt basically include any interest. In this case SSGC LTD sells its anyone of the asset to a particular bank and receives money against it. At the same time, SSGC LTD purchases the same asset from that bank. But now, the bank will sell it back to the SSGC at some higher rate. So this higher rate, which has been received by bank against that particular asset, is the profit, which is retained by the bank.
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Receiving Of Quotations
SSGC LTD receives different quotations from all the banks which have been given offer. Evaluation committee is settled down to decide which offer, bid or quotation should be selected. Evaluation committee consists of auditors and finance members.
Selection of Bids
SSGC LTD chooses or borrows loan from that bank which offers lowest interest and, then negotiations are held between two parties. After negotiations a certain rate of interest is fixed, and SSGC LTD has to pay that particular rate of interest on its principal amount.
Mandate Letter
The loan sanctioning bank sends an agreement to SSGC LTD which includes different types of sub-agreements. SSGC LTD examines and observes all the clauses of different agreements thoroughly, and sends a mandate letter to that particular bank. Mandate Letter is a type of letter which is issued by SSGC LTD to that particular bank for accepting their deal on different clauses.
KIBOR
Benchmark is basically learned as KIBOR by State Bank of Pakistan. It was introduced in 2005.KIBOR is a fixed amount of interest which cant be negotiate. Total amount of interest which is paid by SSGC includes KIBOR rate and interest rate. KIBOR rate changes upon agreement, means that if loan is borrowed for one year and State Bank has applied 3 months KIBOR, then after 3 months KIBOR rate changes while interest rate remains the same throughout the year. State Year Bank of Pakistan also regulates prudential regulations regarding different policies.
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Calculation of IRR
Loan section department calculates IRR to know all the hidden charges being charged by the bank from SSGC LTD.SSGC LTD also calculates IRR by all cash flows. Cash flows includes annual charges, out of pocket expenses, legal charges, arrangements charges if the loan is syndicated, and the last are financial charges.
Cash Section
This section involves the processing of cash receipts from contractor, employee and executives and payments to employees/executives and suppliers against cash payments vouchers. The record is kept of all receipts and payments on daily basis in newly implemented Oracles Accounts Payable and account receivable modules. Furthermore, the income tax is deducted against gross amount payable to petty suppliers and, record is kept up to date of all cash receipts and cash payments. Daily, cash balance report is generated and is tallied with the balance in the strong room. A strong coordination is kept with the internal and external audits in their audits and with other departments of company and, the necessary information about cash payments and receipts is provided.
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Bank Section
In this section, the processing of bank receipts from contractors, suppliers, employees and executives is done and payments are made to employees/executives, contractors, suppliers and other against bank payment vouchers. It also issues cheques, pay order, demand draft and bank draft on request. Daily data feeding of all payments and receipts on a newly implemented Oracle AP &, AR modules is done. The issuance of remittances, cash for daily disbursements also come under the responsibilities of this section. It also deals effectively with banks and foreign exchange and, plays an indispensable role in the maintenance of strong room, disbursement bank accounts reconciliation, depositing of cheques, pay orders in SSGC A/Cs and, orderings Banks stationeries of bank rolls, cheque books. It facilitates internal and external audits and keeps an updated record of all bank receipts, bank payments and returned cheques. It generates MIS reports when required and orders cash from bank for daily uses. An effective management of fund is done under the supervision of this department.
CASH SECTION
The cash section individually is performing its duties in a very effective manner. Due to its frail and delicate nature of work, company is compelled to hire diligent, hardworking, trained, experienced and self motivated workers and executives. The current executives and employees are performing their incumbents in the fullest possible way as inculcated by their high officials.
DISBURSEMENTS
The cash section also deals in payments to different parties on daily basis. It has to pay up to certain amount to contractors and also to staff members for different purposes. Thats why it is involved in drawing cash from strong room up to a particular limit being approved by head of department. Disbursement is done through different bank accounts, its summary is attached.
Nature of Disbursements
The nature of disbursements, which the cash section is involved on daily basis, includes a number of categories. They have to make payments regularly to different parties to which they deal with. They make staff advances to number of employees according to their requirements and, they are required to pay by 15thof the next month. Along with staff advances they give conveyance allowance, employee LFA, and advances wages as well. Cash payment section is also responsible to pay for material/stationery purchase, medical bills and payments to petty suppliers for fulfilling SSGC requirements on time.
Payment to suppliers
The cash section is also responsible for making payments to various suppliers for providing various goods and services as per requirements of SSGC . These payments are duly verified and checked.
Sui Southern Gas Company limited income tax on the rates as are prescribed by central board of revenue on different types of payments. The rates are changed from time to time.
Staff advances
The cash section also deals in making payments or advances to staff. The advances to staff are made in the same way as other payments are made by cash section. Cash section disburses to the employees a particular sum of amount according to their requirement. These all advances are recorded and maintained by cash department in the register named staff advances. all the staff members are directed by high authorities to repay that particular amount up to the 15th of the next month. If they fail to do so, then that amount is deducted from the salaries of particular employees of the next month.
Imprest
Apart from all these activities, cash section also make petty payments to all regional offices and HQ of SSGS.This is termed as imprest by cash &bank section which is authorized to make payments to all the locations of SSGC up to a particular limit. In this way they also keep their separate reconciliations of imprest statement.
BANK SECTION
Introduction
Bank section is a key part of treasury function department, which deals with the processing, and payments of bank receipts against bank payment vouchers. It also issues cheques, pay order, demand draft and bank draft on request and, keeps an up to date record of all payments and receipts on a newly implemented Oracle AP &, AR modules. The issuance of remittances, cash for daily disbursements and dealing with banks and foreign exchange is the duty of this department. An indispensable role is played in the maintenance of strong room, disbursement bank accounts reconciliation, depositing of cheques, pay orders in SSGC A/Cs and, orderings Banks stationeries of bank rolls, cheque books. It facilitates internal and external audits and keeps a record of all bank receipts, bank payments and returned cheques.it generates MIS reports when required and orders cash from bank for daily uses. An effective management of fund is done under the supervision of this department.
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The process
These cheques are verified. For example the date is verified whether it is valid and correct and that the cheques are in favors of SSGCL.the branch name is also mentioned and a receipt is issued.
Record keeping
After the receipt vouchers are printed the original copy is available for dispatch. The carbon copy is kept in record for future reference.
Extreme cases
Sometimes, in adverse cases. The cheques received by the section from the other departments are time barred. In this situation, these cheques are sent back to the section from where it was received and request is made for validation.
Answering enquiries
A number of enquiries are attended here regarding the confirmation of the deposition of cheques. The very first reference is the BRV (Bank Receipt Voucher) number. It is printed on the receipt voucher and manually written on the cheques.
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Sui Southern Gas Company limited To find out the receipt voucher number, the unit obtains services of the processing unit. The processing unit can search the receipt voucher number against the amount of cheque received through computer software.
On the receipt voucher, the name of the deposition bank and date is written. The unit then finds the deposit slip of the concerned bank on the particular date to verify whether it was deposited or not.
Reconciliation
The reconciliation unit is responsible to ensure that all the transactions in the Bank Book appear in the Bank Statement. This is done by reconciliation of bank statement with the bankbook print outside. Any disparity is then reconciled through this unit by approaching banks. This section checks the huge differences that might arises. For example a summary is attached along with its source to know how it looks like:
JVs Preparation:
The unit is also responsible to prepare any JV for adjusting entry on account of any mistake committed while punching. It keeps a proper record of all JVs passed by the Bank section for future reference.
Funds Transfer:
This unit also prepares Bank Payments and Receipt vouchers for transfers of funds from one bank to another.
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Trouble shooting
This unit also facilitates to recover payments in case of misplaced cheques etc, under the supervision of the Central control Unit.
Special Duties
Performance of special assignment as and when assigned by section head or department heads. LO & NLO Payments Apart from all these responsibilities, bank section has also to make payments against LO & NLO payment vouchers. LO payment is made in parts or installments over a short period of time, but the time period is fixed for which partial payment should be made. After that period vendors receive late delivery charges. While NLO payment is that which is made directly or at source.
Imports Cost
This section also makes payments against L/C after receiving all the required documents from imports section.
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BILLS PAYABLES
Sui Southern Gas Company is involved in various kinds of payables because it has to carry on its operations and activities. It has also to pay to different companies and vendors for supply of goods and services. All types of payment vouchers are recorded and preceded through this section of finance department. The following are the major areas of payment: 1. Transportation Cost 2. Payment to Contractors 3. Medical Department 4. Clearance of Goods 5. Utility Bills
Transportation cost
Sui southern Gas Company operates its transport for every dealing outside the offices has specified the CNG & petrol pumps for their official purpose. All the vehicles of SSGC consume petrol,CNG or diesel from those specified petrol pumps. At the end of the month, they send the total amount of bill by specifying the vehicle numbers to focal points which are authorized by SSGC to do so.
Payment to contractors
The major portion of payment is comprised of contracts being done by SSGC.SSGC has a number of contractors like civil contractors, electrical contractors & mechanical contracts. All these contracts are dealt by project and construction department (P&C) at KT.This department receives bills from all contractors, get them verified by different authorized persons, and then finally dispatched it to Head Office. Sometimes bills are not processed at a particular time period. In this case most probably mechanical and civil contractors receive certain amount as advance. At the time of processing of bills, amount of advance is adjusted.
Medical Department
All the Hospitals, OPD, Chemists, Labs, Dentists and Surgeons which are on panel in SSGS Company are also being paid their bills by sending their supporting documents along with the bills. The particular hospital or vendor sends reference letter along with hospital bill. The Medical department prepares a hospitalization summary. After that invoice is prepared by Medical department which is verified by billing doctor, Deputy Chief Medical Officer/(CMO).if the amount payable is within 50,000.If the amount is up to 500,000.the invoice is verified by SGM(MS),but if the exceeds the limit of 500,000 it is signed by MD.
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Utility Bills
Apart from all these payments, this section also make payments for all utility bills like KESC,PTCL,Water Sewerage Board, Mobile phones Connections,& transformer stations which is being installed by SSGC.Moreover all maintenance charges like computer hardware or miscellaneous payments are being processed by this department after receiving invoices from focal points. This section is divided into 2 parts: 1. Non- local order 2. Local order
The documents required in both the sections are some but few are different. Following are the documents: 1. Bank payment voucher 2. Check list 3. Local purchase order 4. Cash memo 5. Comparative statement 6. Work order 7. Income tax invoice 8. Evaluation report 9. Approval 10. Receiving statement.
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Validation
After all the details have been thoroughly checked, then action icon is clicked. Then a screen appears click on the validate and approval,& then ok it. Finally the payment voucher will be validated &manually approved. In the end print is taken of the payment voucher. The payment voucher is not accounted until it is paid by bank section. After validation these are authorized by finance department and then dispatched to bank section.
WITHHOLDING TAX POLICY: On all bills a certain tax rate is deducted as instructed by the government. These tax rates depend on the kind of good for which bill have generated. Usually tax rates applied are: 3.5 % on supplies expenses 5 % on advertisement expenses 6 % on services expenses 2 % on transportation expenses 0 % on medical expenses
The tax deducted on these bills is recorded in the separate company account and after each month the total tax deducted is deposited in the government tax office.
In local order processing: Intends are received from departmental head by the department deputy and, quotations are taken from three different suppliers. Or advertisement is given in the newspaper for bid invitation. After the selection of bids and approval from the top authorities, evaluation report and purchase order is prepared with five copies i.e. procurement, finance, supplier (Original), R&D and intender copy. When materials are received and checked, receiving statement is prepared at R&D department (store) and, is sent to bills section. Purchase order, receiving statement and invoices of the supplier are attached together and process for payment voucher is attached, too. The payment vouchers are checked and approved by the DCM, DGM and GM if required and, is sent to the cash and bank section for cheque preparation.
LO Section deducts few charges from the amount payable to supplier. They are: General Sales tax @16% Withholding tax @3.5% GST Withholding tax@20% on GST amount Liquid Damages @0.1%
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Sui Southern Gas Company limited In this division those bills are processed that are incurred through local order. Normally the capital purchases are done through local order such as supply of pipes, machinery etc. Local Order: The companys order of the purchase of goods. Receiving Statement: The statement sent by the user department which states that the goods supplied are of the same quantity & quantity as per order. Supplier Bill: The bill submitted by the supplier for the goods. LO section after receiving these documents process the bills in the same manner as discussed above and send voucher to the cash & bank section for the payment. Functions of Local Order: The core function of the department is to arrange payments against purchase orders issued by the procurement department of Unit A & C in respect of the following purchases. In this regard LO verifies invoices quantities and rates against Receiving Slip and Purchase Order (PO) and ensure that the authorized person has approved these.It is also the responsibility of LO to insure that goods and services are recorded correctly i.e. capitalized or charged to revenue account. Pipes Spare parts of meter plant Stationary Computers including computer stationary Supplies other than overhead Diesel, Lubricants and Petrol Paint Vehicles Office Equipment
It is also the responsibility of LO to ensure that goods and services are recorded correctly i.e. capitalized or charge to revenue account. It is the practice of LO to reconcile their Bankbook Record with LO-Day Book and with their register on monthly basis in addition to daily reconciliation. New general code for LO are attached:
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Making Capital Budget Capitalization Depreciation Policies Adjustment Reclassification & Transfers Retirement Disposal
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Sui Southern Gas Company limited Fixed Asset purchasing process: In order to purchase an asset, fixed asset requisition (FAR) is required to be filed by concerned department, which should be approved by the head of that department. FAR contains details of assets required by the department. The FAR is now forwarded to Procurement department, where Deputy Manager checks whether the FAR falls within the budget. The procurement department invites quotations through tender (if not available in store) and on the basis of commercial and technical evaluation and lowest bidders, a supplier is selected (all such procedures documented in Evaluation Report) and then Purchase order (PO) is prepared and sent to supplier. All assets are received by the KT stores department, where quality inspection is conducted (however not documented) and then a Material Receiving Statement (MRS) is generated and a copy of which is forwarded to the finance department. Following entry is generated: Inventory receiving account AP accrual account xxx xxx
On delivery of asset to the concern department, following entry is generated: Asset clearing account Inventory receiving account Capitalization of Fixed Assets: When invoice received by finance department, Account payable department enter invoice in AP module which match invoice with material receiving statement and following entries are generated: AP accrual account Liability account Asset cost account Asset clearing account Depreciation expense Accumulated depreciation xxx xxx xxx xxx xxx xxx xxx xxx
At payment of invoice, following entry is generated: Liability account Bank xxx xxx
According to company policy, the return on Fixed Asset is 17% and this year the total assets capitalization is Rs.7.1 billion aprox. ZARA ABDUL AZIZ Page 41
Steps for Requisition: Step1: Fixed Asset Requisition sent to the inventory section duly authorized by the departmental head. Step2: Requisition verified by the inventory section and approved by CM, DGM and GM/MD. Step3: Supply of assets by the supplier at Receipt & Dispatch section at Karachi Terminal. Step4: Requisition sent to the procurement department for order placement. Step5: Asset delivered to the user / requisitioning department. Step6: Details incorporated in the relevant records at month end.
Depreciation and Adjustment Process: Once an asset has been capitalized, working for its depreciation starts. Full year depreciation is charged for the first year regardless of its purchase data. The company uses the straight line method of depreciating except for meter plant, where reducing balance method is used. Depreciation rates differ for different assets. It even differs for same assets in different cities. In the certain situation we call for making adjustments e.g. transfer of an asset from one unit to another, different between assets in books and its physical existence etc. On next page I have shown the working on depreciation which was given to me by Sir Gulab.
Transfers & Reclassification: When an asset booking are wrongly recorded in any clause of asset e.g.: a plant and machinery item booked in tools and equipment it is the responsibility of fixed asset dept to check all the required items to their respective accounts. A form is issued called Asset Transfer Advice (ATA) which is to be filled by sender and receiver dept.
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Retirement of the Asset: After the completion of life of asset which is fixed by company we retire it. 1 st the Assets Retirement Requisition (ARA) is prepared by the user department and it is sent to the fixed asset section of finance to retire that asset. The company SSGCs follows certain policies for the retire of asset e.g. only those asset which have a zero book value can be retired. After checking the book value the inspection team is to be formulated. That inspection team inspects the asset, which is to be retired for verification of the condition of the asset. After inspection the report sent to the fixed asset section along with ARA. It is approved / disapproved on the basis of inspection report by GM, DGM and SGM. After approval the asset sent to store at Karachi Terminal (KT) for disposal. In case an employee of the company buys it, it is sold on written down value or at 7.5% of its cost, whichever is higher. And some old assets, which are fully scraped and not present physically, are deleted from the books through approval of the management. Process: 1. Asset Retirement Advice prepared by the user department and sent to the inventory section
2.
Inspection of the asset to be retired is conducted for verification of the condition of that asset
3. Section Inspection report sent to the inventory along with ARA 4. Retirement advice is approved / disapproved on the basis of inspection report by GM, DGM and SGM. 5. Asset sent to store at KT for disposal.
Disposal of Fixed Assets: In order to dispose of an asset, Asset Disposal Advice (ADA) is required to be filed by store department, which should be approved by the DGM store. ADA contains details of asset and sale precede amount. And send to the fixed asset dept to retire the assets from books of company. In case of gain:
Sale Proceed account xxx Accumulated Depreciation xxx Asset cost account Gain on sale of fixed asset
xxx xxx
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Sale Proceed account Accumulated Depreciation loss on sale of fixed asset Asset cost account
Tax Depreciation: Its is annually calculated on the total depreciated amount in 3 steps: 1st : On additions 50% declining balance method 2nd: 15% on the remaining addition balance. 3rd: 15% on the written down value (WDV) By adding 50%+15%+15% gives the total depreciation tax amount. The proper calculations are attached.
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3011101 3011102 3011105 3011107 3011107 3011108 3011109 3011110 3011111 3011112 3011113 3011114 3011115 3011116 3011117 3011118 3011118 3011119 3011120 3011121 3011122 3011124 3011123 3011999
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Sui Southern Gas Company limited the organization. The equal treatment will lead to boast up the potential and coordination between them. Asset Capitalization: According to the company policy only the assets which worth more than Rs. 5000 can only be capitalized whereas there are some assets which worth less than Rs. 5000 such as Furniture and Tools etc. Such assets are usually capitalized in bulk quantity. Such as if a chair worth Rs. 3000 each and company purchase 300 chairs then these 300 chairs are capitalized in account of one chair instead of 300 chairs separately. Such type of assets should be capitalized under a broad category of chairs (or even broader category of furniture & fixtures)
CONCLUSION
In the end I would like to conclude that SSGC is a great Organization to work in because here what I saw is the pure process on Finance. Everything was related to what I studied in my academic life and it was fun to be here. SSGC has its monopoly around Pakistan with largest customer dealing and they provide best services with quality product. In future I would wish to join SSGC to serve my people.
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