1

A
Summer Training Report On INVENTORY MANAGEMENT OF NTPC Submitted for partial fulfillment of requirement for the award of degree of Master of Business Administration Of MATS UNIVERSITY, RAIPUR (C.G.)

Session 2010-12

Guided by: Mrs. SHILPI GUPTA Head Professor

Submitted by:Mayank Singh Thakur M.B.A. 3rdSEM

Department of Management
MU10MBA019MATS

Roll No.

University

CERTIFICATE BY COLLEGE

This is to certify that Mr. MAYANK SINGH THAKUR a bonafide student of MATS UNIVERSITY, Raipur (C.G.) studying in M.BA.3rdsemester has successfully completed his project entitled INVENTORY MANAGEMENT OF NTPC, KORBA I wish him all success in every endeavor of life.

Mrs. Shilpi Gupta Head Professor Department of Management MATS University

CERTIFICATE OF INTERNAL GUIDE

This is to certify that the Project titled INVENTORY MANAGMENT of N.T.P.C. Korba is a bonafide work carried out by .. a candidate for the award of Master of Business Administration of Punjab Technical University , M.I.M.T Korba under my guidance and direction.

Signature of guide

Date: Place: (Korba)

Name: MAYANK SINGH THAKUR Designation:

ACKNOWLEDGEMENT

I would like to express my gratitude towards all those who gave me the possibility to complete this project. I want to thank finance department NTPC Korba for providing support for necessary research work and to use the departmental data. Further I want to thank Deputy General Manager Finance of NTPC Korba, MR.D.PHANIKUMAR and my placement head of college Mrs. Geetu Rathod who permitted and encouraged me to go ahead with my project work. I express my gratitude to the Sr. Manager (F) of NTPC Korba Mr. Anuj Kush for his kind support. Especially I want to thank all my colleagues during this project for their support that helped me a lot in my project work.

DECLARATION
I MAYANK SINGH THAKUR student of MAT hereby declared that is report on INVENTORY MANAGEMENT OF NTPC is the record of honestly work done by me and also the record of authentic work carried out by me during the academic year 2011-2012 in NTPC I asset that the statement made and conclusion drown are an outcome of the project work further that to the of my knowledge and belief that the project report does not contain any part of any work which has been submitted for the award of any other degree/diploma/certificate in this institute or any other institute.

MAYANK SINGH THAKUR

INDEX
S. NO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 CONTENTS COMAPANY PROFILE HISTORY OBJECTIVE OF THE STUDY VISSION AND MISSION ACCOUNT POLICIES SWOT ANALYSIS UNIQE ACHIVEMENT OF NTPC BOARD OF DIRECTOR UTILIZATION OF ASH SUBSIDIARIES OF NTPC BALANCE SHEET AND FINANCIAL RESULT WAY FORWOARD INVENTORY MANAGEMENT CONCLUSSION AND SUGGESSION BIBLIOGRAPHY PAGE NO. 09-21 22-25 26 27 28-34 35-36 37-45 46-56 57-63 64-89 68-74 75-76 77-88 89 90

VOCATIONAL INTERNALSHIP PROJECT A Study on INVENTORY MANAGEMENT NTPC LIMITED

POWERING MILLION SMILES

Company Profile

Indias largest power utility, NTPC Ltd was set up in 1975 to accelerate power development in India. Today NTPC is a diversified power major with presence in the entire value chain of the power generation business. Apart from power generation, which is the mainstay of the company, NTPC has already ventured into consultancy, power trading, ash utilization and coal mining. NTPC ranked 317th in the 2009, Forbes Global 2000 ranking of the Worlds biggest companies. The total installed capacity of the company is 30, 144 MW (including JVs) with 15 coal based and 7 gas based stations, located across the country. In addition, under JVs, 3 stations are coal based & another station uses naphtha/LNG as fuel. By 2017, the power generation portfolio is expected to have a diversified fuel mix with coal based capacity of around 53000 MW, 10000 MW through gas, 9000 MW through Hydro generation, about 2000 MW from nuclear sources and around 1000 MW from Renewable Energy Sources (RES). NTPC has adopted a multi-pronged

10 growth strategy which includes capacity addition through green field projects, expansion of existing stations, joint ventures, subsidiaries and takeover of stations. NTPC has been operating its plants at high efficiency levels. Although the company has 18.79% of the total national capacity it contributes 28.60% of total power generation due to its focus on high efficiency.

The table below shows that while the installed capacity has increased by 73.33% in the last twelve years the generation has increased by 101.39%. `In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5.25% as fresh issue and 5.25% as offer for sale by Government of India. NTPC thus became a listed company in November 2004 with the government holding 89.5% of the equity share capital. The rest is held by Institutional Investors and the Public. The issue was a resounding success.NTPC among the largest five companies in India in terms of market capitalization.

11

12

13

Installed Capacity

The generating capacity as well as plant performance or operational efficiency has been continuously growing without break since its inception. NTPCs Installed Capacity and performance depicts the companys outstanding performance across a number of parameters.

Regional Spread of Generating Facilities

REGION Northern Western Southern Eastern JVs Total COAL GAS 2,312 1,293 350 1,480 5,435 TOTAL

7,035 6,360 3,600 6,900 8,14 24,709

9,347 7,653 3,950 6,900 2,294 30,144

14

Coal Based Power Stations The coal based power station has been always the main stay of NTPC . It is one of the biggest user of coal in India. The entire generation back bone of NTPC is based on its coal fired stations. Following are the coal based stations of NTPC

COAL NTPC) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

BASED(Owned

by

STATE Uttar Pradesh Chattisgarh Andhra Pradesh West Bengal Madhya Pradesh Uttar Pradesh Bihar Uttar Pradesh Orissa Uttar Pradesh

COMMISSIONED CAPACITY(MW) 2,000 2,600 2,600 1,600 3,260 2,000 1,840 1,820 3,000 1,050

Singrauli Korba Ramagundam Farakka Vindhyachal Rihand Kahalgaon Dadri Talcher Kaniha Unchahar

15 11. Talcher Thermal 12. Simhadri 13. Tanda 14. Badarpur 15. Sipat-II Total Orissa Andhra Pradesh Uttar Pradesh Delhi Chattisgarh 460 1,000 440 705 1,000 23,895

Gas/Liquid Fuel Based Power Stations With a combined gas based commissioned capacity of 3955 MW, NTPC caters to the peeking demand for power.

GAS BASED (Owned by NTPC) 1. 2. 3. 4. 5. 6. Anta Auraiya Kawas Dadri Jhanor-Gandhar Rajiv Gandhi STATE Rajasthan Uttar Pradesh Gujarat Uttar Pradesh Gujarat CCPP Kerala Haryana

COMMISSIONED CAPACITY(MW) 413 652 645 830 648 350 430 3,955

Kayamkulam 7. Faridabad Total

16

Gas Based Joint Ventures: COAL BASED STATE Maharashtra COMMISSIONED CAPACITY 1480 1480

(Owned by JVs) 1. RGPPL Total

Hydro Based Power Projects (Under Implementation) NTPC has increased thrust on hydro development for a balanced portfolio for long term sustainability. The first step in this direction was taken by initiating investment in Koldam Hydro Electric Power Project located on Satluj River in Bilaspur district

17 of Himachal Pradesh. Two other hydro projects under construction are Tapovan Vishnugad and Loharinag Pala. On all these projects construction activities are in full swing. HYDRO BASED STATE APPROVED

CAPACITY(MW) 1. Koldam (HEPP) Himachal Pradesh 800 2. Loharinag Pala (HEPP) Uttarakhand 600 3. Tapovan Vishnugad (HEPP) Uttarakhand 520 Total 1,920 Performance Statistics In terms of operations, NTPC has always been considerably above the national average. The availability factor for coal based power stations has increased from 89.32% in 1998-99 to 92.47% in 2008-09, which compares favourably with international standards. The PLF has increased from 76.6% in 1998-99 to 91.14% during the year 2008-09.

18

The table below shows that while the installed capacity has increased by 56.58% in the last ten years.

DESCRIPTION UNIT 1998-99 Installed Capacity MW 17,786 Generation MUs 1,09,505 Excluding JVs and Subsidiaries

2008-09 27,850 2,06,939

% OF INCREASE 56.58 88.98

The table below shows the detailed operational performance of coal based stations over the years.

OPERATIONAL PERFORMANCE OF COAL BASED NTPC STATIONS

Unit 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09

Generation BU 109.5 118.7 130.1 133.2 140.86 149.16 159.11 170.88 188.67 200.86 206.94

PLF

76.60 80.39 81.80 81.11 83.57 84.40 87.51 87.54 89.43 92.24 91.14

Availability Factor

89.36 90.06 88.54 89.09 88.70 88.79 91.20 89.91 90.09 92.12 92.47

19

ORGANIZATIONAL STRUCTURE OF NTPC

Chairman & Managing Director (CMD)

Director Director (Project) (Vigilance)

Director Director (Operation)

Director (Technical)

Director (H.R.)

Director (Commercial) (Finance)

Executive Executive Director Director (NR) (ER)

Executive Director (WR)

Executive Director (SR)

General Manager Addl. General Manager Dy. General Manager Senior Manager Manager Deputy Manager Senior Engineer

20
Engineer Sr. Asst. Engineer Asst. Engineer Supervisor & Workmen

LEGEND

O&M - Operation & Maintenance, MM Mechanical Maintenance, EM Electrical Maintenance, C&I - Control & Instrumentation, M&CS Materials & Contract Services, R&M Renovation and Modernization, FQA Field Quality Assurance, R&R Rehabilitation and Resettlement, EMG Environment Monitoring Group, ERECT/CONST Erection/Construction,

O Operation, F Finance, TS Technical Services, FM Fuel Management, HR Human Resources, CMO Chief Medical Officer, MR Management Representative, TA Township Administration, MTP Maintenance Planning, HOD - Head of Department.

21

ORGANISATIONAL STRUCTURE OF KORBA SUPER THERMAL POWER STATION (KSTPS) Station In-charge General Manager

Head of O&M

HOD Finance

HOD (HR)

CMO Hospital

HOD (M&CS)

M.R. (ISO 14001)

HOD (Vigilance)

HOD (Safety)

HOD (TRG/SIM )

HOD (ITS)

HOD (TA)

HOD (R&R)

HOD (EMG)

Sec. Head (FQA)

HOD (MM)

HOD (EM)

HOD (C&I )

HOD (O)

HOD (FM)

HOD MTP/O&E)

HOD (R&M)

HOD (TRG)

22

HISTORY OF NTPC

Our Company was incorporated on November 7, 1975 under the Companies Act as a private limited company under the name National Thermal Power Corporation Private Limited, and the word 'Private' was deleted on September30, 1976 consequent upon the notification issued by the Go I Exempting government companies from the use of word 'private'. In their name. On September 30, 1985, our Company was converted from a private limited company into a public limited company. Subsequently, the name of our Company was changed to its present name NTPC Limited. And a fresh certificate of incorporation was issued on October 28, 2005. The name of our Company was changed to reflect the diversification of our business operations beyond thermal power generation to include, among others, generation of power from hydro, nuclear and renewable energy sources and undertaking coal mining and oil

23 exploration activities. For further information on our business including description of our activities, services, market of each segment, our growth, technology, market, managerial competence and capacity built-up, our standing with reference to our prominent competitors, see Our Business and Industry Overview on pages 55 and 44, respectively. For further information on our business including description of our activities, services, market of each segment, our growth, technology, market, managerial competence and capacity built-up, our standing with reference to our prominent competitors, see Our Business and Industry Overview on pages 55 and 44, respectively. Our Company is not operating under any injunction or restraining order. In July 1976, the registered office of our Company was changed from Shram Shakti Bhawan, New Delhi to Kailas Building, Kasturba Gandhi Marg, New delhi. Subsequently, in May 1979 the registered office of our Company was shifted to NTPC Square, 62-63, Nehru Place, New Delhi and thereafter in October 1988 to its present location for administrative and operational efficiency. Major events 1975 Incorporation of our Company 1978 - Takeover of management of the Badarpur project 1982 - Commissioning of the first 200MW unit at Singrauli Center for education at Power Management Institute, Delhi established First direct foreign currency borrowing. A consortium of foreign banks led by Standard Chartered Merchant Bank extends a loan of GBP 298.41 million for the Rihand project 1984 The transmission line based on High Voltage Direct Current (HVDC) technology, commissioned for power transmission from Rihand to Delhi Singrauli project received World Bank loan of US$ 150 million through Go I 1986 - Synchronized first 500MW unit at Singrauli Our Company became one of the first PSUs to issue bonds in the debt market 1987 - 5,000 MW installed capacity mark crossed 1988 - First syndicated Japanese loan of 30 billion JPY raised 1989 - Consultancy division of our Company launched First unit (88 MW) of our Companys first gas based combined cycle power plant at Anta, Rajasthan commissioned 1990 - Total installed capacity of 10,000 MW reached 1992 - First acquisition by our Company of Frozen Gandhi Unchahar Thermal Power Station (2x210MW) from Uttar Pradesh Rajya Vidyut Utpadan Nigam of Uttar Pradesh The transmission systems owned by our Company were transferred to Power Grid Corporation of India Limited (PGCIL) pursuant to legislation by the Parliament of India 1993 - IBRD extended direct loan of US0 million to our Company under

24 time slice concept for its projects 1994 - 15,000 MW of installed capacity achieved Maiden declaration of dividend of Rs. 650 million Jhanor-Gandhar (Gujarat) becomes our first thermal power station to have commissioned an integrated Liquid Waste Treatment Plant 1997 - 'Navratna' status granted by the GoI100 billion units generation in one year achieved A consortium of foreign banks led by Sumitomo Bank, Hong Kong extends foreign currency loan of 5 billion Japanese Yen for the first time without Go I guarantee 1998 - Commissioned the first Naphtha based plant at Kayamkulam with a capacity of 350 MW 1999 - Our Companys Dadri thermal power project, Uttar Pradesh adjudged the best in India with a PLF of 96.12% Dadri thermal power project, Uttar Pradesh certified with ISO 14001 2002 - Three wholly owned subsidiaries, viz., NTPC Electric Supply Company Limited, NTPC Hydro Limited and NTPC Vidyut Vyapar Nigam Limited incorporated ESP [Electrostatic precipitators) set up at Talcher power plant 20,000 MW installed capacity mark exceeded 2003 - Our Company undertook debt re-structuring. Raised funds through bonds (Series XIII and XIV) Construction of first hydro-electric power project of 800 MW capacity in Himachal Pradesh commenced after the investment approval 2004 - The award of contract for the first Super Critical Thermal Power Plant at Sipat Reached a total installed capacity of 22,249 MW with the Talcher Unit V getting synchronized on May 13, 2004 Our Companys Feroze Gandhi Unchahar Thermal station achieves a record PLF of 87.43% in current year up from 18.02% in February 92 when it was taken over by us LIC extends credit facility for Rs. 70 billion. Rs. 40 billion is in the form of unsecured loans and Rs. 30 billion is in the form of bonds Our Company makes its debut issue of euro bonds amounting to USD 200 million in the international market First coal mining block allotted Listing of our Equity Shares on the Stock Exchanges 2005 - Our Company received the International Project Management Award 2005 for its Simhadri project at the International Project Management Association World Congress. Oil block allocated under NELP V Our Company adopted core values 'BCOMIT' (Business Ethics, Customer Focus, Organizational Pride, Mutual Respect and Trust, Innovation and Speed and Total Quality for Excellence) Our Company ranked as the Third Great Place to work for in India for second time in succession by a survey conducted by Grow Talent and Business World 2005 2006 - Badarpur

25 Thermal Power Station having an installed capacity of 705 MW transferred to our Company 2007 - MOC, GOI granted in-principle approval for allocation of a New coal block, Chatti-Bariatu (South) to our Company subject to the conditions stipulated in the approval letter. The share of reserves is estimated to be 354 Million Tones 2008- Our Company adjudged as the Star PSU 2008 Board expanded by appointment of five independent Directors India Power Award conferred on Centre for Power Efficiency and Environmental Protection 2009 Memorandum of understanding entered into with the Nuclear Power Corporation of India Limited (NPCIL) for development of nuclear power in India 30,000 MW installed capacity mark crossed Long term fuel supply agreement signed with Coal India Limited for supply of coal to our power stations for a period of 20 years Our Company acquired 44.6% of presently paid-up capital of Kerala and Transformers and Electricals Kerala Limited from Government of Kerala at a total consideration of Rs. 313.4 million, subject to final price to be based on the valuation of the assets of Kerala and Transformers and Electricals Kerala Limited. Kerala and Transformers and Electricals Kerala Limited is engaged in manufacturing and repair of heavy duty transformers International Gold Star Quality Award conferred on Centre for Power Efficiency and Environmental Protection. -NTPC enters MOU with Nuclear Power Corporation of India Ltd. (NPCIL) to work together for development of Nuclear Power in India and for this purpose to form a Joint Venture Company for setting up Nuclear Power Projects. - NTPC inks JV agreement with SAIL, RINL, Coal India and NMDC.

26

OBJECTIVE OF THE STUDY

(i) To ensure that the supply of raw material & finished goods will remain continuous so that production process is not halted and demands of customers are duly met. (ii) To minimize carrying cost of inventory. (iii) To keep investment in inventory at optimal level. (iv)To reduce the losses of theft, obsolescence & wastage etc. (v) To make arrangement for sale of slow moving items. (vi)To minimize inventory ordering costs. (vii) To keep inventory at sufficiently high level to perform production and sales activities smoothly.

27 (viii) To minimize investment in inventory at minimum level to maximize profitability

VISSION AND MISSION OF NTPC:VISSION:The Vision

The vision of the company states the fundamental purpose of their existence via: To be one of the worlds largest and best power utilities, powering Indias Growth The values of the company provide the essential and enduring general guiding Principles in the way it conducts itself in realizing the vision through COMMIT. Customer Focus Organizational Pride .mutual Respect and Truth Initiative and Speed .total Quality NTPC dreams of building a great company could be achieved through articulation of this core ideology by involving people in sharing this vision and core values and taking steps for actualization of the same

28

MISSION:THE MISSION Develop and provide reliable power, related products and services at competitive prices, integrating multiple energy sources with innovative and eco-friendly technologies and contribute to society. CORE VALUES:Core Values BCOMIT Business Ethics Customer Focus Organizational & Professional Pride Mutual Respect & Trust Innovation & Speed Total Quality for Excellence

ACCOUNTING POLICIES
1. BASIS OF PREPARATION The Financial statements are prepared on accrual basis of accounting under historical cost convention in accordance with generally accepted accounting principles in India and the relevant provisions of the Companies Act, 1956 including accounting standards noticed there under. 2. USE OF ESTIMATES The preparation of financial statements requires estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses during the reporting period. Although such estimates and assumptions are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates & assumptions and such differences are recognized in the period in which the results are crystallized.
3. GRANTS-IN-AID 3.1

Grants-in-aid received from the Central Government or other authorities towards

capital expenditure as well as consumers' contribution to capital works are treated initially as capital reserve and subsequently adjusted as income in the same proportion as the depreciation written off on the assets acquired out of the grants.

29 3.2 Where the ownership of the assets acquired out of the grants vests with the government, the grants are adjusted in the carrying cost of such assets. 3.3 Grants from Government and other agencies towards revenue expenditure are recognized over the period in which the related costs are incurred and are deducted from the related expenses. 4. FIXED ASSETS 4.1 Fixed Assets are carried at historical cost less accumulated depreciation. 4.2 Expenditure on renovation and modernization of fixed assets resulting in increased life and/or efficiency of an existing asset is added to the cost of related assets. 4.3 Intangible assets are stated at their cost of acquisition less accumulated amortization. 4.4 Capital expenditure on assets not owned by the Company is re ected as a distinct item in Capital Work-in- Progress till the period of completion and thereafter in the Fixed Assets. 4.5 Deposits, payments/liabilities made provisionally towards compensation, rehabilitation and other expenses relatable to land in possession are treated as cost of land. 4.6 In the case of assets put to use, where financial settlement of bills with contractors is yet to be effected, capitalization is done on provisional basis subject to necessary adjustment in the year of financial settlement. 4.7 Assets and systems common to more than one generating unit are capitalized on the basis of engineering estimates/assessments. 5. CAPITAL WORK-IN-PROGRESS 5.1 In respect of supply-cum-erection contracts, the value of supplies received at site and accepted is treated as Capital Work-in-Progress. 5.2 Administration and general overhead expenses attributable to construction of fixed assets incurred till they are ready for their intended use are identified and allocated on a systematic basis to the cost of related assets.

30 5.3 Deposit works/cost plus contracts are accounted for on the basis of statements of account received from the contractors. 5.4 Unsettled liability for price variation/exchange rate variation in case of contracts are accounted for on estimated basis as per terms of the contracts. 6. OIL AND GAS EXPLORATION COSTS 6.1 The Company follows `Successful Efforts Method' for accounting of oil & gas exploration
activities.

6.2 Cost of surveys and prospecting activities conducted in search of oil and gas are expensed off in the year in which these are incurred. 6.3 Acquisition and exploration costs are initially capitalized as `Exploratory Wellsin-Progress' under Capital Work-in- Progress. 7. DEVELOPMENT OF COAL MINES Expenditure on exploration of new coal deposits is capitalized as `Development of coal mines' under Capital Work-in- Progress till the mines project is brought to revenue account. 8. FOREIGN CURRENCY TRANSACTIONS 8.1 Foreign currency transactions are initially recorded at the rates of exchange ruling at the date of transaction. 8.2 At the balance sheet date, foreign currency monetary items are reported using the closing rate. Non-monetary items denominated in foreign currency are reported at the exchange rate ruling at the date of transaction. 8.3 Exchange differences (loss), arising from translation of foreign currency loans relating to fixed assets/capital work-in-progress to the extent regarded as an adjustment to interest cost are treated as borrowing cost. 8.4 Exchange differences arising from settlement / translation of foreign currency loans (other than regarded as borrowing cost), deposits / liabilities relating to fixed assets / capital work-in-progress in respect of transactions entered prior to 01.04.2004, are adjusted in the carrying cost of related assets. Such exchange differences arising from settlement / translation of long term foreign currency

31 monetary items in respect of transactions entered on or after 01.04.2004 are adjusted in the carrying cost of related assets. 8.5 Other exchange differences are recognized as income or expense in the period in which they arise. 9. BORROWING COSTS Borrowing costs attributable to the fixed assets during construction/renovation and modernization are capitalized. Such borrowing costs are apportioned on the average balance of capital work-in-progress for the year. Other borrowing costs are recognized as an expense in the period in which they are incurred. 10. INVESTMENTS 10.1 Current investments are valued at lower of cost and fair value determined on an individual investment basis. 10.2 Long term investments are carried at cost. Provision is made for diminution, other than temporary, in the value of such investments. 10.3 Premium paid on long term investments is amortized over the period remaining to maturity. 11. INVENTORIES 11.1 Inventories are valued at the lower of cost, determined on weighted average basis, and net realizable value. 11.2 The diminution in the value of obsolete, unserviceable and surplus stores and spares is ascertained on review and provided for. 12. PROFIT AND LOSS ACCOUNT 12.1 INCOME RECOGNITION 12.1.1 Sale of energy is accounted for based on tariff rates approved by the Central Electricity Regulatory Commission (CERC) as modified by the orders of Appellate Tribunal for Electricity to the extent applicable. In case of power stations where the tariff rates are yet to be approved, provisional rates are adopted.

32 12.1.2 Advance against depreciation considered as deferred revenue in earlier years is included in sales, to the extent depreciation recovered in tariff during the year is lower than the corresponding depreciation charged. 12.1.3 Exchange differences on account of translation of foreign currency borrowings recoverable from or payable to the beneficiaries in subsequent periods as per CERC Tariff Regulations are accounted as `Deferred Foreign Currency Fluctuation Asset/Liability'. The increase or decrease in depreciation or interest and finance charges for the year due to the accounting of such exchange differences as per accounting policy no. 8 is adjusted in sales. 12.1.4 Exchange differences arising from settlement / translation of monetary items denominated in foreign currency (other than long term) to the extent recoverable from or payable to the beneficiaries in subsequent periods as per CERC Tariff Regulations are accounted as `Deferred Foreign Currency Fluctuation Asset/Liability' during construction period and adjusted in the year in which the same becomes recoverable/payable. 12.1.5 The surcharge on late payment/overdue sundry debtors for sale of energy is recognized when no significant uncertainty as to measurability or collectability exists. 12.1.6 Interest/surcharge recoverable on advances to suppliers as well as warranty claims/liquidated damages wherever there is uncertainty of realization/acceptance are not treated as accrued and are therefore accounted for on receipt/acceptance. 12.1.7 Income from consultancy services is accounted for on the basis of actual progress/technical assessment of work executed, in line with the terms of respective consultancy contracts. Claims for reimbursement of expenditure are recognized as other income, as per the terms of consultancy service contracts. 12.1.8 Scrap other than steel scrap is accounted for as and when sold. 12.1.9 Insurance claims for loss of profit are accounted for in the year of acceptance. Other insurance claims are accounted for based on certainty of realization. 12.2 EXPENDITURE 12.2.1 Depreciation is charged on straight line method at the rates specified in Schedule XIV of the Companies Act, 1956 except for the following assets at the rates mentioned below: a) Kutcha Roads 47.50 b) Enabling works 47.50

33 - Residential buildings including their internal electrification. - Non-residential buildings including their internal electrification, water supply, sewerage & drainage works, railway sidings, aerodromes, helipads and airstrips c) Personal computers and Laptops 19.00 % including peripherals d) Photocopiers and Fax Machines 19.00 % e) Air conditioners, Water coolers and 08.00 % Refrigerators 12.2.2 Depreciation on additions to/deductions from fixed assets during the year is charged on pro-rata basis from/up to the month in which the asset is available for use/disposal. 12.2.3 Assets costing up to Rs.5000/- are fully depreciated in the year of acquisition. 12.2.4 Cost of software recognized as intangible asset, is amortized on straight line method over a period of legal right to use or 3 years, whichever is earlier. Intangible assets - Others are amortized on straight line method over the period of legal right to use. 12.2.5 Where the cost of depreciable assets has undergone a change during the year due to increase/decrease in long term liabilities on account of exchange fluctuation, price adjustment, change in duties or similar factors, the unamortized balance of such asset is charged prospectively over the residual life. 12.2.6 Where the life and/or efficiency of an asset is increased due to renovation and modernization, the expenditure thereon along-with its unamortized depreciable amount is charged prospectively over the revised useful life determined by technical assessment. 12.2.7 Machinery spares which can be used only in connection with an item of plant and machinery and their use is expected to be irregular, are capitalized and fully depreciated over the residual useful life of the related plant and machinery. 12.2.8 Capital expenditure on assets not owned by the company is amortized over a period of 4 years from the year in which the first unit of project concerned comes into commercial operation and thereafter from the year in which the relevant asset 19.00 % 06.33 %

34 becomes available for use. However, such expenditure for community development in case of stations under operation is charged off to revenue. 12.2.9 Leasehold lands other than acquired on perpetual leases are amortized over the lease period. Leasehold buildings are amortized over the lease period or 30 years, whichever is lower. Leasehold land and buildings, whose lease periods are yet to be finalized, are amortized over a period of 30 years. 12.2.10 Expenses on ex-gratia payments under voluntary retirement scheme, training & recruitment and research and development are charged to revenue in the year incurred. 12.2.11 Preliminary expenses on account of new projects incurred prior to approval of feasibility report/techno economic clearance are charged to revenue. 12.2.12 Actuarial gains/losses in respect of `Employee Benefit Plans' are recognized in the statement of Profit & Loss Account. 12.2.13 Net pre-commissioning income/expenditure is adjusted directly in the cost of related assets and systems. 12.2.14 Prepaid expenses and prior period expenses/income of items of Rs.1, 00,000/and below are charged to natural heads of accounts. 12.2.15 Carpet coal is charged off to coal consumption. However, during precommissioning period, carpet coal is retained in inventories and charged off to consumption in the first year of commercial operation. Transit and handling losses of coal as per norms are included in cost of coal. 13. FINANCE LEASES 13.1 Assets taken on lease are capitalized at fair value or net present value of the minimum lease payments, whichever is lower. 13.2 Depreciation on the assets taken on lease is charged at the rate applicable to similar type of fixed assets as per accounting policy no. 12.2.1. If the leased assets are returnable to the lesser on the expiry of the lease period, depreciation is charged over its useful life or lease period, whichever is shorter. 13.3 Lease payments are apportioned between the finance charges and outstanding liability in respect of assets taken on lease.

35 14. PROVISIONS AND CONTINGENT LIABILITIES A provision is recognized when the company has a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation and in respect of which a reliable estimate can be made. Provisions are determined based on management estimate required to settle the obligation at the balance sheet date and are not discounted to present value. Contingent liabilities are disclosed on the basis of judgment of the management/independent experts. These are reviewed at each balance sheet date and are adjusted to reflect the current management estimate. 15. CASH FLOW STATEMENT Cash flow statement is prepared in accordance with the indirect method prescribed in Accounting Standard (AS) 3 on `Cash Flow Statements'. SWOT ANALYSIS of NTPC LIMITED

1. STRENGTH OF NTPC LIMITED The company has kept itself sufficient liquid fund to meet any kind of cash requirement. Efficient working capital of the plant. Efficient and timely completion of projects.

36 A minimum risk factor. Best integrated project management system. Company with excellent records and high profit. An early starter, more than 30 years experience in power sector. One amongst the nine jewels of India called Navratnas. Highly motivated and dedicated workers and officers. Excellent growth prospect with significant additions, modifications and replacements. Employee friendly personnel policies. Low project cost of NTPC LTDs plant. One of the listed companies on BSE & NSE.

2. WEAKNESSESS of NTPC LIMITED Depleting raw materials. Some of the pants of NTPC LTD has become old and need investment for replacement or modifications.

3. OPPORTUNITIES for NTPC LIMITED Demand and supply gap. Upcoming hydro & nuclear sector. Use opportunities in the consultancy services both abroad as well as in India.

37 Growth in power sector.

4. THREATS in NTPC LIMITED Varying price of raw materials makes working costly. Huge competitions from SEBs, Reliance Energy & TATA Power and other private players in power industries. Coming up of other sources of power generation and consumption. Huge capital requirement for expansion, diversification, horizontal and vertical integration.

UNIQE ACHIVEMENTS OF NTPC

38

1. Top Liner Maharatna Award to NTPC

NTPC the largest Power Generation Company in India was awarded the Top Liner- The largest Maharatna Award for highest growth at 3rd DSIJ Awards Ceremony held in New Delhi. The Award was presented by Shri Sushilkumar Shinde, Union Minister of Power to Shri A. K. Ahuja, Executive Director (Corp. Planning), NTPC. NTPC has been playing a major role in meeting the power needs of the country and contributing to its economic and social development. The company has been conferred with coveted Maharatna status by the government for its outstanding achievements over the years.

The evaluation for the award was done by KPMG who were the knowledge partners to DSIJ, based on Net Sales/Operating Profit/ Net Profit of the organizations.

39

2. SCOPE Excellence Award to Shri Arup Roy Choudhury, CMD, NTPC Prime Minister Dr. Manmohan Singh presented the SCOPE Excellence Award Gold Trophy in individual category to Shri Arup Roy Choudhury, Chairman & Managing Director, NTPC Limited at the SCOPE Excellence Award function held in New Delhi today. He has been awarded for his outstanding contribution to the public sector.

Shri Roy Choudhury is a dynamic leader with proven abilities to achieve transformational changes in the sector. He seeks to position NTPC a Maharatna enterprise on course to become the largest and best power producer in the world. NTPC is the largest power generating company in India with an installed capacity of over 32694 MW operating 28 power stations across the country. Illustrious career of Shri Arup Roy Choudhury spans over 32 years of outstanding contribution in the fields of engineering, general management, strategic management and business leadership. He is a Graduate in Civil Engineering from Birla Institute of Technology, Mesra and a Post-Graduate in Management and Systems from IIT-Delhi. A keen learner of the latest professional developments, he is currently pursuing a doctorate in Select Study of Project Performance Metrics in Indian Construction Industry from IIT-Delhi. Shri Arup Roy Choudhury has the distinction of becoming the youngest Chief Executive Officer of a Central Public Sector Enterprise (CPSE) at the age of 44 years when he joined as Chairman & Managing Director, National Buildings Construction Corporation Limited (NBCC) on April 03, 2001.

40 Shri Choudhurys rich and varied contribution to the organizations he has worked with has been recognized by prestigious professional, academic and Government institutions, both national and international. His vision, leadership and industriousness transformed NBCC, which was a sick company with negative net-worth and salary back-log in 2001, into a blue-chip enterprise having Schedule A and Miniratna status bestowed upon it by the Government of India. As Chairman, Standing Conference of Public Enterprises (SCOPE), the apex body of central public sector enterprises (CPSEs), Shri Choudhury has been effectively leading policy advocacy for greater empowerment of these enterprises. He is also promoting the cause of greater professionalism, competitiveness, societal commitment, transparency and global-benchmarking among the CPSEs. Shri Choudhury believes in growth and excellence through proactive approach and his dictum is Sankalp Shuddha Hi Siddha i.e. if your intentions are pure, you are bound to succeed. He has a strong commitment for the wellbeing of the society at large. His sharp focus on corporate governance and environmentally sustainable growth has been demonstrated in concrete actions and substantial benefits. 3. PSU Excellence Award for NTPC Shri Arup Roy Choudhury, Chairman & Managing Director, NTPC Limited and Shri A.K. Singhal, Director (Finance) received the prestigious PSU Excellence Award 2010 at the Summit on India Public Sector Agenda@2015 held in New Delhi today. Shri Vilasrao Deshmukh, Union Minister of Heavy Industries & Public Enterprises presented the award to NTPC in the Best Financial Performance category. PSU Excellence Awards were organized under the aegis of Department of Public Enterprises, Indian Chamber of Commerce and Deloitte. NTPC is Indias largest power generation company with total installed capacity of over 32000 MW. The company has recently been conferred Maharatna status by the Govt. of India. NTPC posted profit after tax of Rs 8728 corer with net sales of Rs. 46322 corer and total income of Rs. 49246 corer for the year 2009-10. The strong balance-sheet of the company gives it an edge in terms of resourcefulness to pursue both organic and inorganic growth opportunities.

41

Shri Arup Roy Choudhury, Chairman & Managing Director, NTPC Limited and Shri A.K. Singhal, Director (Finance) receiving the prestigious PSU Excellence Award 2010, presented by Shri Vilasrao Deshmukh, Union Minister of Heavy Industries & Public Enterprises. PSU Excellence Awards were organized under the aegis of Department of Public Enterprises, Indian Chamber of Commerce and Deloitte. 4. Enertia Awards for NTPC Projects & Shri D K Jain, Director (Technical), NTPC Ltd receives award for Excellence in Nuclear, Thermal (Conventional Energy) Shri D K Jain, Director (Technical), NTPC Ltd received the Enertia award from Shri Anil Razdan, Former Secretary Power, Govt of India in the power generation awards category for nuclear, thermal and conventional energy for Korba Super thermal power project and Simhadri Super thermal power project (jointly) at a function held in Mumbai. He was also conferred with the special award in the individual awards category for his Excellence in Nuclear, Thermal (Conventional Energy). Shri Jain received this award from Shri Suresh Prabhu, Former Union Minister of Power, Govt of India. He received the award for his yeomen contribution in design and execution of large power projects to India's Power sector for over the last 35 years. The power projects of NTPC were awarded at the 4th Enertia Awards for their stellar performance in the thermal sector for their operations at a PLF of over 97% maintaining availability factor of over 94% in the financial year 2009-10 Enertia Awards are Prestigious and Pioneering Awards in Energy & Power Sector and the only awards for Sustainable Development with Key focus on Hydropower, Green & Renewable Energy.

42

Shri D K Jain, Director (Technical), NTPC Ltd receiving a special award in the individual awards category for Excellence which was presented to him by Shri Suresh Prabhu, Former Union Minister of Power, Govt of India at the 4th Enertia Award held at Mumbai. Shri Jain received the award for his yeomen contribution in design and execution of large power projects to India's Power sector for over the last 35 years.

43 Shri D K Jain, Director (Technical), NTPC Ltd received the Enertia award from Shri Anil Razdan, Former Secretary Power, Govt of India in the power generation awards category for nuclear, thermal and conventional energy for Korba Super thermal power project and Simhadri Super thermal power project (jointly) at a function held in Mumbai on 6th October 2010. 5. Vishwakarma Award for 12 NTPC Employees Twelve NTPC employees from Ramagundam Ms. N. Sujathamma, G. Sureshkumar, KS Pradeep, Sl NoK Hari Babu, B Vijay Kumar, M. Thimma Reddy received the Pratham Shreni ( class A) and Mohd Ghouse , N. Sampath Kumar, Penchala Sathaiah,Syed Akhil Baba, D Venkata Raji Reddy and M Raji Reddy received the Dwitiya Shreni (class B) Vishwakarma Award of Government of India. The awards were presented by Shri Mallikarjun Kharge, Union Minister of Labor and Employment in New Delhi recently. NTPC projects Talc her Thermal, Farakka, Rihand, Auraiya have also received the National Safety Award for the year 2008.

6. Prime Ministers Shram Award to NTPCs Misri Lal Choudhary Shri Misri Lal Choudhary of NTPC Anta received the prestigious Prime Ministers Shram Vir Award from Shri Mallikarjun Kharge, Union Minister for Labor and Employment today in New Delhi. Shri M.L. Choudhary, Senior Technician with NTPC- Anta suggested a method of throttling the shaft seal air pressure by fabricating a reg valve assembly thus rectifying problem of lubricating oil ingress into steam turbine generator winding at Anta Gas Power Station of NTPC. The methodology

44 provided the flexibility of controlling the shaft seal air pressure and arrest oil ingress without opening the generator end shield. Shram Awards are given to every year to the workers of both public and private sectors in recognition of their outstanding contribution towards production and showing exemplary zeal and enthusiasm in discharge of their duties.

Shri Misri Lal Choudhary of NTPC Anta receiving the prestigious Prime Ministers Shram Vir Award from Shri Mallikarjun Kharge, Union Minister for Labor and Employment today in New Delhi. Shri M.L. Choudhary suggested a method of throttling the shaft seal air pressure by fabrication a reg valve assembly thus rectifying problem of lubricating oil ingress into steam turbine generator winding at Anta gas power station of NTPC. The methodology provided the flexibility of controlling the shaft seal air pressure and arrest oil ingress without opening the generator end shield. 7. The Best Performing CFO Award Instituted by CNBC TV 18 Shri A. K. Singhal, Director(Finance), NTPC received the award from Honorable Union Minister for Corporate Affairs Shri Salman Khurshid in a CFO Awards function held at Mumbai on 17th November, 2009. Shri A. K. Singhal, Director(Finance), NTPC Ltd. Received the prestigious The Best Performing CFO Award in the Infrastructure Sector at the CNBC TV 18 CFO Awards held in Mumbai. The evaluation for the award was done by an esteemed jury panel with Mr. J. J. Irani, Director, Tata sons as the Chairman of the jury. The Jury Members consisted of Mr. TV Mohandas Pai, Global HR Head Infosys, Mr. Keki

45 Mystery, MD-HDFC, Mr. R. S. Sharma, CMD, ONGC, Mr. Sanjiv Bajaj, Managing Director, Bajaj Fiserv Limited, Mr. Sanjay Nayar, CEO and Country Head, KKR and Mr. Ravi Sud, Sr. Vice President & Chief Finance Officer, Hero Honda. 8. India Pride Awards Energy and Power Category Instituted by Dainik Bhaskar & DNA Shri A. K. Singhal, Director(Finance), NTPC received the award from Shri P. Chidambaram, Union Home Minister on 9th October, 2009 at the India Pride Awards function held in New Delhi. NTPC was awarded Gold trophy for excellence in Energy & Power Category. 9. Enertia Award 2010 The award was received by Shri D. K. Jain, Director (Technical) from Shri Anil Razdan, Former Se4cretary Power, GOI at a function held in Mumbai on 6-10-2010. 'NTPC's Korba STPS and Simhadri STPS jointly' have been declared Winners of the 4th Enertia Awards 2010 India's Awards for Sustainable Energy & Power under "Category-I : Power Generation Awards Nuclear, Thermal and Conventional Energy" for their superb performance in power sector as they recorded PLFs of 97.61% and 97.27% respectively for the year 2009-10. Similarly the availability factors were 95.46% for NTPC Korba and 94.38% for NTPC Simhadri in the same period making these two stations of NTPC the best performing Super Thermal Power Plants in the country for the period 2009-10. 10. SAFA Best Presented Accounts Awards 2008 South Asian Federation of Accountants 'Certificate of Merit' was conferred on 5thNovember, 2009 in Dhaka, Bangladesh. NTPC received the 'Certificate of Merit' for Best Presented Accounts and Corporate Governance Disclosures Awards 2008 in the category of Public Sector Entities from South Asian Federation of Accountants (An Apex Body of SAARC). SAFA is a Committee for Improvement in Transparency, Accountability and Governance. 11. CII-EXIM Excellence Award, 2010 NTPC has been awarded with the prestigious CII-EXIM Bank Award for improving business imperatives. In the year 2010, three stations namely Dadri, Korba and Anta bagged this award. Dadri station received "Significant

46 Achievement" Award (a higher level Award) while Korba and Anta received "Strong Commitment to Excel" Award. 12. National Awards for Meritorious Performance Ministry of Power The Gold Award was received by Shri R.S. Sharma, CMD, NTPC from Shri Sushil Kumar Shinde, Humble Union Minister of Power. NTPC's Six (6) Stations received the National Awards for Meritorious Performance in Power Sector for the year 2008-09. Simhadri (1000 MW) received the Gold, Korba (2100 MW) and Ramagundam (2600 MW) received the Silver and Vindhyachal (3260 MW), Rihand (2000 MW) and NCPP Dadri (840) received the bronze medal.

47

BOARD OF DIRECTORS:Shri Arup Roy Choudhury, Chairman & Managing Director since September 01, 2010, has an illustrious career spanning over 32 years of outstanding contribution in the fields of engineering, general management, strategic management and business leadership. He is a Graduate in Civil Engineering from Birla Institute of Technology, Mesra and a Post-Graduate in Management and Systems from IIT-Delhi. A keen learner of the latest professional developments, he is currently pursuing a doctorate in Select Study of Project Performance Metrics in Indian Construction Industry from IIT-Delhi. Shri Choudhury brings to NTPC the dynamism of a leader with proven abilities to achieve transformational changes. He seeks to position the Maharatna enterprise on course to become the largest and best power producer in the world. Shri Choudhury has the distinction of becoming the youngest Chief Executive Officer of a Central Public Sector Enterprise (CPSE) at the age of 44 years when he joined as Chairman & Managing Director, National Buildings Construction Corporation Limited (NBCC) on April 03, 2001. Prior to that he had worked in prominent public and private sector companies since 1979, when he started his career. Shri Choudhurys rich and varied contribution of over 32 years has been recognized by prestigious professional, academic and Government institutions, both national and international. His vision, leadership and industriousness transformed NBCC, which was a sick company with negative net-worth and salary back-log in 2001, into a blue-chip enterprise having Schedule A and Miniratna status bestowed upon it by the

48

Government of India. The stunning turnaround of the Company brought about by him has enabled NBCCs turnover grow about 10 times and net-worth over 500 times during his tenure of nine-and-a-half years at the helm. He pulled NBCC out of the abyss and catapulted it into the distinguished league of Top Ten CPSEs. Under him, NBCC broadened its business horizons. Its entry into power project development dovetails very productively with his new role as CMD, NTPC. As Chairman, Standing Conference of Public Enterprises (SCOPE), the apex body of central public sector enterprises (CPSEs), Shri Choudhury has been effectively leading policy advocacy for greater empowerment of these enterprises. He is also promoting the cause of greater professionalism, competitiveness, societal commitment, transparency and global-benchmarking among the CPSEs. Shri Choudhury believes in growth and excellence through proactive approach and his dictum is Sankalp Shuddha Hi Siddha i.e. if your intentions are pure, you are bound to succeed. Shri Choudhury has a strong commitment for the well-being of the society at large. His sharp focus on corporate governance and environmentally sustainable growth has been demonstrated in concrete actions and substantial benefits. Shri A.K. Singhal, Director (Finance) since August 2005, a Chartered Accountant, comes with rich experience of 29 years of Corporate Finance Management. He is also a member of All India Management Association (AIMA) and Institute of Internal Auditors (IIA). Prior to joining NTPC in 2001, he was the Executive Director (Finance) in National Fertilizers Limited (NFL) as head of Finance & Accounts department. He held various managerial positions in Krishak Bharati Cooperative Limited (KRIBHCO) and Engineering

49 Projects of India Limited (EPIL). As Finance Director on the Board of NTPC, he is responsible for formulating financial strategies and plans to enable the company in achieving its Vision. He gives directions with respect to the entire gamut of Financial Management of the organization including timely financial resource mobilization at minimum possible cost from Domestic & Global sources including equity issues, optimum utilization of funds, formulation of companys annual financial budget and undertaking budgetary controls. He is also responsible for designing internal control systems commensurate with the size of the organization and for ensuring compliance of such systems. Being responsible for compliances of Company Law and other statutory requirements, he also gives direction to the Corporate Governance framework of the company. After company became listed he has been acting as one of the vital links between the shareholders of the company and the rest of the Board. In recognition of his contribution, he was adjudged as the Best CFO in the Public Sector category by the Committee for Members in Industry (CMII) of ICAI for the year 2007-08. Sh. I.J.Kapoor, Director (Commercial) since December 2008 is a Graduate in Mechanical Engineering and Masters in Business Administration (Marketing). He joined NTPC in 1978 as 3rd batch Engineering Executive Trainee (EET) and is the first EET to be on the Board of the Company. He has a rich and varied experience of over 32 years in the areas of Commercial, Engineering, Contracts & Materials Management, Project Management, Consultancy, Cost Engineering, Station Engineering and Quality Assurance & Inspection. Prior to his elevation as Director (Commercial), he was Regional Executive Director (National Capital), NTPC, responsible for management of ~ 3900 MW generating capacity, administering more than th of NTPCs turn over along with project implementation activities for 2x490 MW at Dadri Stage-II. As Director (Commercial), he is responsible for formulation & implementation of policies & strategies to ensure marketing of NTPCs entire electrical output, appropriate pricing from regulatory

50 authority and 100% & timely realization from customers, thereby generate adequate internal resources for the company to meet the future challenge of higher capacity addition. In addition, he is the Director In- charge of Consultancy and Business Development activities. He is also part time Chairman on the Board of Aravali Power Company Private Ltd. (1500 MW) and National Power Exchange Ltd. He is part time Director on the Board of PTC India Ltd., Meja Urja Nigam Private Ltd. (1320 MW), NTPC- BHEL Power Projects Private Ltd. and NTPC Vidyut Vyapar Nigam Ltd. He is responsible for successful implementation of National Solar Mission Phase-I. He is a Fellow of Institution of Engineers, India and Senior Member, IEEE, USA. Sri B.P. Singh (55 yrs), Director (Projects), is a Graduate in Mining Engineering. He has rich and varied experience both in coal as well as power sector. He started his career in 1974 in coal mining sector firstly with Indian Iron & Steel Company and subsequently joined Bharat Coking Coal Ltd. He joined NTPC Ltd. in 1981 and worked in various capacities, at Corporate Centre and Power Projects, in the areas of Fuel Management, Coal Mining & Coal Washery. He was elevated as Executive Director (Coal Mining & Coal Washeries) in 2004. He played the pivotal role in formulation of NTPCs overall strategy for fuel security. He has been instrumental in acquisition and development of fuel assets i.e. one Oil & Gas Exploration block under NELP V in Arunachal Pradesh, six coal mining blocks across various coalfields in the country besides two more blocks for joint operation through a 50:50 JV with CIL. He is also the Chairman of NTPC-SCCL Global Ventures Private Ltd. He joined the Board of the Company as Director (Projects) in Aug, 2009. Besides representing NTPC in various committees set up by Govt. of India on Integrated Coal Policy, fuels for Power Generation, Pricing of Coal, Techno-economics of using washed coal, etc. he has also been part of various Govt. teams & missions like U.K. Trade Mission, IndoAustralia Joint Working Group on Energy & Minerals, etc. He is also a 'Senate Member' of Dr. BR Ambedkar National Institute of

51 Technology, Jalandhar, Expert Member on Research Council of Central Institute of Mining & Fuel Research (CIMFR) and represents NTPC as 'Member' in MGMI. Shri D.K. Jain, has taken over the charge as Director (Technical) as on 13th May 2010.

Shri D.K. Jain (58 years), is a graduate in Mechanical Engineering from IIT, Kharagpur. He joined NTPC Limited in 1978. He has rich and varied experience of over 35 years in design and execution of large power plants. He has worked in various capacities in the areas of renovation & modernisation, engineering and project execution. He was actively involved in design and engineering of first pit-head super thermal power station of NTPC at Singrauli. Before his elevation as Director (Technical), he was Executive Director (Engineering), responsible for identification of sites, taking up feasibilities studies, design and detailed engineering of coal, gas and hydro power projects. He also oversees the Mine Planning and Design of NTPCs Captive Coal Blocks. Shri S. P. Singh(57 Years), Director(HR), is a Graduate in Electrical Engineering from Madhav Institute of Technology & Science, JIWAJI University , Gwalior (year 1973- 74) and completed his schooling from the prestigious Colvin Taluqdars College, Lucknow. Shri Singh joined NTPC in 1984 and worked for more than 25 years in Engineering Department, looking after various functions of Plant Engineering related Quality Assurance & Inspection, Project Layout engineering, Project Engineering etc. He served as ED (Corporate Contacts & Materials) and Chief Executive officer, of NTPC Electric Supply Company (A wholly owned subsidiary of NTPC) and lastly as ED (I/C) Human Resources during his tenure in NTPC. He started his career in BHEL in 1975 as Engineer Trainee and worked for 9 years at BHEL, Hardwar in the Turbogenerator Design Department.

52

Shri N.N.Misra (55 years), Director (Operations), graduated in Electrical Engineering with Honors from Regional Engineering College, Rourkela in the year 1977. Shri Misra joined NTPC in 1977 as Executive Trainee (2nd Batch). He has an experience of 33 years in NTPC out of which 28 years were in the Design Department looking after the various functions of Electrical Design and Project Engineering beginning with the first Project of NTPC. He is actively associated with BIS and represents NTPC in Electro Technical Divisional Council of BIS. Shri Misra represents India in CIGRE (International Conference on Large High Voltage Electric System) for High Voltage Equipment and has contributed in many Study Committees and Working Groups of CIGRE. Shri Misra was involved in selecting and successfully implementing the first 765 KV Sub-Station of India at Sipat. He has a rich and varied experience having worked as Executive Director of the National Capital Region, Executive Director looking after Corporate Contracts & Materials, Executive Director looking after Human Resources and lastly Executive Director looking after Operation Services. Shri Misra also represents NTPC as Part-time Director in a number of Joint Ventures of NTPC. Shri P.K. Sengupta is B. Com and FICWA. He has held the position of Director (Finance) in Eastern Coalfields Limited, Director (Finance) in Coal India Limited prior to becoming Chairman & Managing Director of Coal India Limited in January 1995. He has held directorship in Steel Authority of India and Neyveli Lignite Corporation as non-official part-time Director. He has expertise in the area of Financial Management and General Administration. He has been on the Board of the Company with effect from August 26, 2008 as a non-official part - time director.

53 Shri M.N. Buch is M.A. (History) from Delhi University, M. Phil (Public Administration) from Indian Institute of Public Administration, Punjab University, PG Diploma holder in Port Management and Administration from University College, London and an Indian Administrative Officer of Gujarat Cadre, 1964 batch. He has held various posts in Gujarat Government. He had held the position of Joint Secretary to the Government of India in Department of Banking, Ministry of Finance, Additional Secretary to the Ministry of Labour, GOI, Director- General, Sports Authority of India prior to becoming Member of Public Enterprises Selection Board, GOI. He has been also on the Board of various public sector banks. He has wide experience in both Development and Regulatory Administration at the Central, State and District levels. He has been on the Board of the Company with effect from August 26, 2008 as a non-official part - time director. Shri Shanti Narain is B.Sc (Hons. in Physics) and M.Sc. (Mathematics) from Delhi University and has pursued Management Development Programme at British Transport Staff College, UK. He has held various posts in Railways prior to becoming Member (Traffic), Railway Board. He has key expertise in strategic management of transport systems with special focus on Railways, involving planning, marketing, customer relations, monitoring and control of operational and commercial activities and development of transport infrastructure. He has been on the Board of the Company with effect from August 26, 2008 as a non-official part time director. Shri K. Dharmarajan, a retired IAS officer, has served as faculty and resource person at the IIFT, NIUA, TERI and University of Pennsylvania (USA). He was the Chairman at Expert Committee for Property Tax Reforms, Delhi and is well known in the areas of institutional development, administration, international trade & commerce, energy and poverty. He has been on the Board of the Company with effect from August 26, 2008 as a non-official part time director.

54 Dr. M. Govinda Rao is Director, National Institute of Public Finance and Policy, New Delhi. He is also a Member, Economic Advisory Council to the Prime Minister. His past positions include Director, Institute for Social and Economic Change, Bangalore and Fellow, Research School of Pacific and Asian Studies, Australian National University, Canberra, Australia. He has played a number of advisory roles in various Expert Committees. He has published 12 books and monographs on various aspects of Public Finance besides technical articles in a number of journals. He has been on the Board of the Company with effect from August 26, 2008 as a non-official part - time director. Shri Adesh Jain is a Bachelor of Science in Mathematics and an Electrical Engineer from the Indian Institute of Science, Bangalore. He has done his MS in Control Systems at Carleton University, Ottawa. He has over 40 years of experience in project oriented work beginning with two state-of-the-art projects in early 1970s in USA. In 1973, he returned to India to help the country embark upon major computerization program. He has also served as the Head of IT and Project Management Services in BHEL. In 1992, he started the Centre for Excellence in Project Management. He has been conferred with 6 major awards in India, including the Gem of India award. He is author of the book New Dimensions in Project Management. He has been on the Board of the Company with effect from January 30, 2009 as a nonofficial part - time director. Shri Santosh Nautiyal is a Post Graduate in Political Science and Public Administration. He belonged to Indian Administrative Services (Orissa 1968) and retired in July 2006 as Chairman (in the rank of Secretary to the Govt. of India,) National Highway Authority of India. He has held various positions like Additional Secretary, Government of India in Department of Consumer Affairs, Principal Secretary of Government of Orrisa, Joint Secretary in Ministry of Steel and Managing Director in Industrial

55 Promotion and Investment Corporation of Orrisa Ltd. He also served as Chairman of Food Corporation of India and after retirement was appointed as Chairman of the National Shipping Board constituted by the Central Government. He has been on the Board of the Company with effect from January 30, 2009 as a nonofficial part - time director. Shri Kanwal Nath, is M.Sc. in Physics, and holds PG Diploma in Development Finance from the University of Birmingham, UK. He has over 37 years of experience in Indian Audit and Accounts service. He retired as Dy. Comptroller & Auditor General in February 2007. He has also held position of Joint Secretary & Financial Adviser (JS & FA) in Ministry of Water Resources and additional charge of JS & FA, Ministry of Power. He has wide experience in the Audit of Organizations in Power, Telecommunication and Railway Sector. He has been on the Board of the Company with effect from January 30, 2009 as a non-official part - time director. Shri Arun Kumar Sanwalka is M.Sc (Engg) from UK, I. Mech. (E), UK. and AMIE (India) Mech. & Prod. He has held various positions in Indian Railways and retired from the position of General Manager, Northeast Frontier Railway after 38 years of service. He has wide expertise in the areas of General Management & Administration, Transport planning, Project management and coordination. He has also handled several projects for establishing large production, maintenance and repair facilities of Indian Railways. He also held the position of Executive Director (Motive Power), RDSO for several years. He has been on the Board of the Company with effect from January 30, 2009 as a non-official part time director. Shri I.C.P. Keshari, is a Government nominee Director. He graduated with a Master of Arts degree from Delhi University and holds Junior Research Fellowship of UGC for Master of Philosophy. Shri Keshari is an Indian Administrative Services officer of Madhya Pradesh cadre. He is currently Joint Secretary in the Ministry of

56 Power. Prior to this, Shri Keshari was in the Ministry of Commerce & Industry and has also held various administrative posts in the State of Madhya Pradesh and Chattisgarh. Shri Keshari appointed as a Director on Board in May, 2009. Shri Rakesh Jain, born in 1957, is a Government nominee Director in our Company. He holds Masters Degree in Physics from Delhi University. He is an officer of Indian Audit & Accounts Service (1981). He is currently the Joint Secretary & Financial Adviser (JS & FA) in the Ministry of Power and also holds additional charge of the post of JS & FA of the Ministry of Labor & Employment. He has held various important positions such as Director General (Accounts, Entitlement, Complaints & Information System); Principal Director (Report States) Office of Comptroller & Auditor General of India; Accountant General (AG)(Audit), Rajasthan; AG(AE-II) Madhya Pradesh; Principal Director (Commercial Audit), Ranchi and Principal Director of Audit, Embassy of India, Washington, USA. Shri T. Venkatesh,(48 years) has done his Post Graduation in Mechanical Engineering and is an Indian Administrative Service officer of 1988 batch of U.P. Cadre. Prior to his assignment as Jt. Secy. (DOPT) in the Ministry of Personnel & Public Grievances & Pension, he held various administrative posts including DM (Bareilly), Commissioner (Gorakhpur) and Secretary (PWD) in the state of Uttar Pradesh. He is looking after the work of Chief Vigilance Officer of our company since October, 2009.

57

UTILIZATION OF ASH Nearly 75% of India's total power generation capacity is thermal, of which coal-based power generation is nearly 90%, and diesel, wind, gas and steam adding to about 10%. High ash content in the range of 30 to 50% in Indian coals is the major cause of large voluminous quantities of coal ash. India's dependence on coal as a major source of energy had been of prime importance in the past and shall continue in this millennium, and therefore fly ash management would remain an important area of national concern. At present nearly 100 million tones of fly ash is being generated annually in India and more than 65000 acres of land is presently occupied by ash ponds.

It is estimated that by 2004 AD the ash generation will increase to 125 million tons per annum, which means that it will require nearly 100000 acres of valuable land for storage and disposal of ash by following the conventional methods, which in turn shall necessitate acquiring new ash disposal areas, sites involving displacement and hence rehabilitation problems.

58

There are 11 major thermal power plants in Chhattisgarh State which produces fly ash to the tune of about 26880 metric tons per day i.e. nearly 9.7 million tones of fly ash annually, out of which the four major thermal power plants in Korba district alone generates about 24000 metric tons per day or 8.7 million tones of fly ash annually. This is nearly 90 % of the total ash generated in the state and about 8.7% of the total ash generated in the country. The total power generation capacity from the four major coal based thermal power plants situated at Korba is 3650 MW. They are namely 1. Korba Super Thermal Power station, NTPC Ltd. Jamnipali, Korba 2100 MW 2. Balco Captive Power Plant, Pragati Nagar, Korba - 270 MW 3. Korba Thermal Power Station, C.G State Electricity Board (East), Korba - 440 MW 4. Hasdeo Thermal Power Station, C.G State Electricity Board (West), Korba - 840 MW Presently fly ash produced by these plants are stored and disposed off in ash dykes by following the conventional method of ash slurry system consuming about 704.907 hectares of valuable land. Safe disposal and effective utilization of such voluminous quantity of fly ash is of immediate concern and strict compliance of the provisions laid down by the Ministry of Environment of Forest, Govt. of India vide its notification dated 14 Sept 1999 for utilization of fly ash generated from the coal based thermal power plants has to be imperatively carried out.

59 Fly Ash Utilization Information Centre, Korba The Regional Officer, Chhattisgarh Environment Conservation Board, HIG - 21, 22, Maharana Pratap Nagar (Extension), Near Ghantaghar Chowk, Korba District-Korba.

To ensure maximum and realistic utilization of fly ash a marathon meeting of TPPs, Govt. Works Departments, S.E.C.L, brick manufacturers and builders was held by collector, Korba on dated 24/12/2002 and reviewed again on 11/01/2003. The power plants were directed to submit a detailed action plan consisting of diversified utilization of fly ash in various potential sectors such as - road, embankment, brick, block, tile manufacturing and back filling, stowing of mines and reclamation of low lying and waste land areas for agriculture. The first step towards this was laid down by commencement of an information centre on fly ash utilization at the Regional Office of Chhattisgarh Environment Conservation Board, Korba. This is an earnest step taken towards providing relevant information on fly ash utilization not only to the entrepreneurs but also to the common people of Korba.

Workshop on Fly Ash Utilization

60

A national level two-day workshop on "Fly Ash Utilization" was organized by the District administration in association with Chhattisgarh Environment Conservation Board on 29th and 30th of January 2003. Dr. P. Raghavan, Principal Secretary, Industry Commerce and Mining, Govt. of Chhattisgarh was the chief guest for the workshop and was presided over by Shri Vivek Dhand, Secretary, Environment and Urban Administration and Development Chairman, C.G Environment Conservation Board, Raipur. Dr. Vimal Kumar, Mission Director, Fly Ash Mission, New Delhi and Advisor (Fly Ash) Department of Science and Technology, Govt. of India was the guest of honor. Other participants of this Workshop were eminent Scientists from the recognized institutes of the country engaged in the field of fly ash utilization such as

Central Road research Institute, New Delhi Central Mining Research Institute, Dhanbad Regional Research Laboratory, Bhopal, Fly Ash Mission, New Delhi, ECO Environmental Consultancy Group, Vadodara and Gujarat Indian School of Mines, Dhanbad Fly Ash utilization Division, NTPC

61 Fly Ash utilization Division, NTPC, New Delhi presented their technical papers with case studies regarding utilization of fly ash in various sectors. The workshop culminated with site visit which included sites of potential ash consumption i.e. brick making reclamation of low lying area near Risda Ash Dyke, Back filling in the SECL Gevra Open Cast Mines The workshop proved successful in sensitizing people and heads of industries and various Govt. and private sectors towards safe and effective fly ash utilization in and around Korba district. Fly Ash Utilization by Thermal power Plants and Other Sectors in Korba Pursuant to the directives of District Administration, Power plant management are now diversifying their operations in low lying areas, abandoned mines, major road/ embankment works, agriculture etc. where fly ash can be utilized in large quantity. A series of concerted activities have taken place since December 2002 in the form of a peoples movement towards sensitizing the producers of fly ash that time has now come to convert this so-called wasteful material into resourceful material.

1. Fly Ash Brick Making Six mechanized fly ash brick manufacturing units at Korba are producing about 60000 bricks per day. In addition to this, two mechanized fly ash brick manufacturing units have been set up by private entrepreneurs also at Korba, the total production being about 30000 bricks/day. Apart from this about 23 entrepreneurs have registered in DTIC proposals for establishing ash brick units. To give impetus to ash brick manufacturing, District Mining Officer, who is also the Nodal Officer for fly ash utilization, is ensuring strict compliance of certain vital instructions issued in connection with conventional brick making by MOEF i.e. mixing a minimum of 25% fly ash with clay and fixed chimney in place of moving kilns.

62

2. Reclamation of Low Lying Areas Reclamation of low lying areas with pond ash has been identified by C.G State Electricity Board, Korba (East), near Risdi Ash Bund for a total of about 13 hectares, which will consume nearly 462000 MT of pond ash. Another low lying area of approximately 7.39 hectares of revenue land near village Dumarmuda, Tehsil Katghora has been identified by C.G State Electricity Board, Korba (West), which will consumed nearly 500000 MT of pond ash from Lotlota ash dyke Balco has identified a low lying area of about 2.2 hectares of land for construction of coal handling plant near Balco Captive Power Plant at village Kendaikhar. 3. Road Making

63 Balco is utilizing pond ash/bottom ash for construction/widening of approximately 82 km. Long Urga - Hati road which is proposed to consume nearly 10000 MT pond ash and bottom ash. RES has constructed two rural roads using fly ash in village Ajgarbahar area. 4. Mine Stowing NTPC, Korba is in the process of utilizing fly ash for stowing of Balgi underground mine of SECL at Korba area after obtaining technical feasibility and sample testing report from CMRI, Dhanbad. This mine stowing activity shall consume about 3000000 MT of fly ash. 5. Other Activities The Regional office of C.G Environment Conservation Board at Korba, which is the first of its kind in the state, conducts meetings, seminars and workshops on fly ash utilization and this office has been instrumental in providing necessary information regarding diversified and environment friendly effective utilization of fly ash. In order to achieve the target of 100% fly ash utilization in the forthcoming years all the thermal power plants, Govt. Works Departments and SECL Management of Korba, Kushmunda and Gevra area have been asked for maximum utilization of fly ash in all construction activities as an integral part of their projects. The district Administration, Korba has also taken serious note of pollution caused during transportation of fly ash. To control this menace, the administration has instructed all TPPs and cement manufacturers to deploy closed tankers for bulk and pollution free transportation. Two such tankers have been deployed by NTPC, Korba. Similarly administration has taken earnest steps to control fugitive emission from ash dyke areas and has deployed shift wise personnel under strict vigilance to ensure continuous water sprinkling in ash dyke. The District Administration has also evolved a well orchestrated effort in creating mass awareness by floating populist slogans amongst to the public, the media and entrepreneurs viz.

64

Subsidiaries of NTPC

NTPC Electric Supply Company Ltd. (NESCL)

65

The company was formed on August 21, 2002. It is a wholly owned subsidiary company of NTPC with the objective of making a foray into the business of distribution and supply of electrical energy, as a sequel to reforms initiated in the power sector.

NTPC Vidyut Vyapar Nigam Ltd. (NVVN) The company was formed on November 1, 2002, as a wholly owned subsidiary company of NTPC. The companys objective is to undertake sale and purchase of electric power, to effectively utilize installed capacity and thus enable reduction in the cost of power. NVVN NTPC Hydro Ltd. (NHL) The company was formed on December 12, 2002, as a wholly owned subsidiary company of NTPC with an objective to develop small and medium hydroelectric power projects of up to 250 MW. More>>

Pipavav Power Development Co. Ltd. (PPDCL) A memorandum of understanding was signed between NTPC, Gujarat Power Corporation Limited (GPCL) and Gujarat Electricity Board (GEB) in 2004 for development of a 1000 MW thermal power project at Pipavav in Gujarat by forming a new joint venture company between NTPC and GPCL with 50:50 equity participation. Pursuant to the decision of Gujarat Government, NTPC Ltd. has dissociated itself from this company. PPDCL is under winding up. Kanti Bijlee Utpadan Nigam Limited, (formerly known as Vaishali Power Generating Company Limited)

66

To take over Muzaffarpur Thermal Power Station (2*110MW), a subsidiary company named Vaishali Power Generating Company Limited (VPGCL) was incorporated on September 6, 2006 with NTPC contributing 51% of equity and balance equity was contributed by Bihar State Electricity Board. This company was formed to renovate the existing unit and run the plant. The second unit has been successfully resynchronized on October 17, 2007 after 4 years of being idle. Renovation and modernization of the first unit is under progress. The company was rechristened as Kanti Bijlee Utpadan Nigam Limited on April 10, 2008. Bharatiya Rail Bijlee Company Limited (BRBCL) A subsidiary of NTPC under the name of Bharatiya Rail Bijlee Company Limited was incorporated on November 22, 2007 with 74:26 equity contribution from NTPC and Ministry of Railways, Govt. of India respectively for setting up of four units of 250 MW each of coal based power plant at Nabinagar, Bihar. Investment approval of the project was accorded in January, 2008.

IMPORTANCE OF NTPC IN CHHATISGARH Chhattisgarh to get 2,000 Mw from upcoming NTPC project Kolkata/ Raipur: The National Thermal Power Corporation (NTPC) will give 2,000Mw of power to Chhattisgarh at a nominal price from its proposed 4,000-Mw power project in Raigarh district. The state government and the largest power producer of the country inked an agreement yesterday to this effect. Under the deal, NTPC will sell 2000-Mw of power to Chhattisgarh government at Rs 2.50 per unit from its 4,000-Mw Lara power project.

67

The project, with have super critical technology, will have eight units of 800-Mw each. The project is scheduled to be completed and commissioned in the 12th five-yearplan by 2017. States and Union territories of the Western region will be the beneficiaries. NTPC had signed a Memorandum of Understanding (MOU) with the Chhattisgarh on July 12, 2009 for the Lara power project in the coal-rich pocket of Raigarh district, about 300 km north-east of Raipur. The company has already been allotted a coal mine in the area. The development of the mine is in progress. As per the MOU, the NTPC will sell 50 per cent of power generated in the Lara project to the state. The condition to get half of the power produced in the project was put by the government in return for land and water it would give for the construction of the plant. The agreement to sell 2,000 Mw power from the project to the state was finally sealed yesterday. Raipur, Jan 2 (IANS) The second 500 MW stage-II unit of the state-owned National Thermal Power Corps (NTPC) Sipat project in Chhattisgarh has begun commercial production, a company official said Friday. The approved capacity of Sipat Super Thermal Power Project, located some 140 km from here in Bilaspur district, is 2,980 MW.

68 The second 500 MW units in the stage-II began commercial production from Thursday.The first 500 MW unit was commissioned in June 2008, the official said.

69

70

AUDIT REPORTS

71

72

73

74

75

76

77

78

Inventory

Fuel cost for one month and reasonable fuel stocks as actually maintained but

limited to fifteen days for pit head stations and thirty days for non pit-head stations, corresponding to the "Target Availability"; Sixty days stock of secondary fuel oil, corresponding to the "Target Availability"; Maintenance spares at actual subject to a maximum of one percent of the capital cost but not exceeding one year's requirements less value of one fifth of initial spares already capitalized for first five years;

79

INVENTORY MANAGEMENT
Introduction: Inventories are stock of the product a company is manufacturing for sale and components. a. Raw-Materials: - Are those basic inputs that are converted into finished products through the manufacturing process. Raw-materials inventories are those units, which have been purchased and stored for future production. b. Work-In-Process inventories are semi-manufactured products. The represent products that need more work before they become finished products for sale. c. Finished Goods inventories are those completely manufactured products, which are ready for sale. Stocks of raw-materials and work-in-process facilitate production which stock of finished goods is required for smooth marketing operations. These inventories serve as a link between production and consumption of goods. d. Stores and spares are also maintained by some firms. This includes office and plant cleaning materials like soaps, brooms, oil, fuel, light, bulbs etc. These materials do not directly enter in production. But are necessary for production process.

Need to hold inventory

80

The question of managing inventories arises only when the company holds inventories. Maintaining inventories involves tying up of the company's funds and incurrence of storage and handling cost. Though it is expensive to maintain inventories, the company needs to hold inventories. There are three general motives for holding inventories. Transaction Motive: - Emphasizes the need to maintain inventories to facilitate smooth production and sales operations. Precautionary motive: - Necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors. Speculative motive: - Influences the decision to increase or reduce inventory levels to take advantages of price influences. A company should maintain adequate stock of materials for a continuous supply to the factory for the uninterrupted production. It is not possible for a company to procure raw materials whenever it is needed. A time lag exists between demand for materials and its supply. Also there exists uncertainty in procuring raw materials in

81 time on many occasions. The procurement of materials may be delayed because of such factors as strike, transport disruption or short supply. Therefore, the firm should maintain sufficient stock of raw materials at a given time to stream line production.

Objective of Inventory Management In the context of inventory management the firm is faced with the problem of meeting two conflicting needs To maintain a large size of inventory for sufficient and smooth production and sales operations. To maintain a minimum investment in inventories to maximize profitability. Both excessive and inadequate inventories are not desirable. These are two dangerous points within which the firm should operate. The objective of inventory management should be to determine and maintain optimum level of inventory investment. The optimum level of inventory will lie between the two danger points of excessive and inadequate inventories. The firm should always avoid a situation of over investment or under investment in inventories. The major dangerous of over investment are Unnecessary tie-up of the firms funds losses of profit Excessive carrying cost Risk of quality

The aim of inventory management thus should be to avoid excessive and inadequate levels of inventories and to maintain sufficient inventory for smooth production and

82 sales operations. Efforts should be made to place an order at the right time with the right source to acquire the right quantity at the right price and quality. An effective inventory management should Ensure a continuous supply of raw materials to facilitate uninterrupted Maintain sufficient stock of raw materials in periods of short supply and Maintain sufficient finished goods inventory for smooth sales operations Minimize the carrying cost and time. Control investment in inventories and keep it at an optimum level. production. anticipate price changes and efficient customer service

Inventory management techniques In managing inventories the firm objective should be in consonance with the shareholders' wealth maximization principle. To achieve this firm should determine the optimum level of inventory. Efficiently controlled inventories make the firm flexible. Inefficient inventory control results in unbalanced inventory and inflexibility-the firm ma sometimes run out of stock and sometimes may pileup unnecessary stocks. This increases level of investment and makes the firm unprofitable. To manage inventories efficiency, answers should be sought to the following two questions. 1) 2) How much should be ordered? When should it be ordered?

The first question how much to order, relates to the problem of determining economic order quantity (EOQ), and is answered with an analysis of costs of manufacturing certain level of inventories. The second question when to order arise because of determining the reorder point.

Economic Order Quantity (EOQ)

83 One of the major inventory problems to be resolved is how many inventories should be added when inventory is replenished. If the firm is buying raw materials it has to decide lots in which it has to be purchased on each replenishment. If the firm is planning a production run, the issue is how much production to schedule or how much to make. These problems are called order quantity problems and the task of the firm is to determine the optimum or economic order quantity (or economic lot size) determining an optimum inventory level involves two types of costs. 1) Ordering cost 2) Carrying cost The economic order quantity is that inventory level which minimizes the total of ordering and carrying costs. Ordering cost The term ordering cost is used in case of raw materials (or supplies) and includes the entire cost of acquiring raw materials. The include costs incurred in following activities. Requisitioning purchase ordering, transporting, receiving, inspecting and storing (store placement). Carrying cost Cost incurred for maintaining a given level of inventory is called carrying cost. They include storage, taxes, insurances, deterioration and obsolescence. Reorder Point (ROP) The problem how much to order is solved determining the economic order quantity yet the answer should the sought to the second problem, when to order this is a problem of determining the reorder point is that inventory level at which an order should be placed to replenished the inventory. To determine the reorder point under certainty, we should know a) Lead time b) Average usage

84

c) Economic order quantity Lead time is the time normally taken is replenishing inventory after the order has been placed by certainty we mean the usage and lead time do not fluctuate under such a situation ROP is simply that inventory level which will be maintained for consumption during the lead time. i.e., Reorder point (under certainty) =lead time X Average usage

Re-order Point (under certainty) = Lead time X Average usage. The national power corporation korba management all the unit and corporate level every month reviews inventory. All the functional head are called for minutes and the inventory holdings are discussed in detail at the meeting every month ntpc purchases the material when the customer places the order, since the product of are tailor-made to customers requirements. After purchasing the raw materials, which is mostly, still will be stocked at one place all other procured against production orders are stored. Depending up on the requirement in various production departments the raw material is sent to the respective departments or production shops. When the order is placed for raw material certain raw material is in transit, such raw material is called as raw material in transit. Example Raw material on overseas. The raw material can be transfer from unit to another unit or from one department to another is called transferin transits. It is nothing but to the transfer of raw material among the inter firm units of national thermal power corporation korba.. The raw material, which is production process, is called work-in process. The work in process becomes finished goods inventory. The finished should not be kept for a longer time. They should be sold off to clear off the entire inventory. However, finished goods inventory is not there for Annapurna Ear canal Limited, since production is mainly done on customer order and specifications. The raw material is purchased and the whole process is repeated again which we call it as inventory cycle. Inventory turnover Ratio:Inventory turnover ratio indicates the efficiency of the firm in producing and selling its products. It is calculated by dividing the cost of goods sold by the average

85 inventory. The average inventory is the average of open and closing balance of inventory. Inventory turnover Ratio= Cost of Goods Sold / Average Inventory

Inferences: the sales of goods have been increasing per year but the average inventory has been going down. From the above table it can inferred that the proportion cost of goods sold to average stock it is increased to 9.38times in the year2005 and again decreased 5.9 times in the year 2007and again increased 9 times in the year 2008. Inventory holding period:-

Inventory holding period is the reciprocal of inventory turnover ratio. This can be measure in terms of number of days. Inventory holding period=

86 Average inventory x365days Cost of goods of sold

Graph Inferences: the cost of inventory is increasing whereas the holding period of inventory is also increasing which decreasing its rs. cost. From the above table it can infer that the proportion of average inventory to cost of goods sold had 39 days in 2005. In the year 2007 it can be increased that is 62 days and again decries.

87

Inventory Management Programmed Overview and Objective Inventory management plays a strategic role in the supply chain management of power stations and accomplishment of the business objectives, including cost efficiency and working capital optimization. The inventory management professional should have a comprehensive understanding of the inventory systems and processes that will enable successful balancing of availability of material with demand, and tracking of spares throughout the supply chain. The program aims at imparting necessary knowledge and skills to participants for managing power station inventory and warehouse. At the end of the programmer, the participants shall be able to: State and apply organization policies and guidelines in inventory management Analyze the critical issues and challenges in inventory management Increase warehouse efficiency of power stations.

88 Apply the tools and techniques that will enhance operational efficiency, optimize inventory carrying cost. Formulate and implement preservation plan for large value inventory Analyze the cases of high value inventory damage due to warehousing problems Identify the best practices and bench marks within /out side NTPC regarding inventory optimization and warehousing solutions Enhance compliance in ware house management

Profile The coverage includes a series of class room sessions, case discussions and experience sharing of issues and experience: System & processes of material planning and inventory control in power station Company policies and strategies in inventory management Inventory optimization process in uncertain business environment ERP interface and process automation for BI and Analytics Modern tools for tracking E-procurement experience sharing VMI, LTSA models for procurement and case studies Vendor development experience of other utilities/PSU and case discussions simulation and Technology application like RFID in inventory

89 Issues in inventory management of NTPC power stations and future strategy Latest trends and innovations in procurement, logistics and warehouse management Issues in preservation and storage of spares Functional interfaces and compliance issues in warehouse management Preventive vigilance aspects in warehouse management.

Material Management
Over 24249 MW of operational plant capacity developed in house has given NTPC the experience in Handling plant & machinery, spares and consumables from various countries in the world to remote destinations. Services covered under Materials Management include the following: Optimal logistics and transportation strategies Review and Risk Coverage Requirement Integrated Inventory Management system, and interlink ages with O&M system Optimal Inventory Policy Development of Material management system & its computerization Scrap disposal management

90

Experience as Consultant in Material Management:-

91

CONCLUSION & SUGGESTIONS:-

92

BIBLIOGRAPHY
1. NTPC Website (ntpc.co.in). 2. House Journal of K.S.T.P.P. 3. Company Information (NTPC). 4. Financial Management (V.K Shrivastav.) 5. Annual Report of N.T.P.C. 6. Guideline for closing of accounts (K.S.T.P.S) 7. Other Informations (www.google.com) .