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Executive Summary
The Summer Project for 2 months includes study on The Shipping Corporation of India Ltd,
What is the company organization structure, How many departments are there in the Finance
and Accounts Divisions of the organization, what is the operation of different departments
related to Finance and Accounts department of SCI.
How different department of finance and account work with the collaboration of other
departments and sub- departments so that the work pressure is reduced and tasks performed are
fast and work efficiency increases.
Exploratory Research method was used for study of the project, which included interviews with
various officials from various departments regarding their work and other information which
could be helpful for me.
The major part of the project will include the study on the Finance and Accounts divisions of
different department and to learn about the working of F&A division in SCI.
2
Introduction
To understand the Finance and Accounts Departments and sub-departments will go through the
work flow process of each department.
Diagram No. 1
FINANCE
&
ACCOUNTS
DIVISION
FINANCE
&
BUDGETING
TAXATION
CHARTERING
BULK
CARRIER
&
TANKER
LINER
&
PASSENGER
FLOATING
STAFF
SHORE PERSONNEL
&
ACCOUNT
CO-ORDINATION
CASH
&
TREASURY
TECHNICAL
&
OFFSHORE
OUTPORT
3
1. Finance and Budgeting Department.
Financing is a field that deals with the allocation of assets and liabilities over time Financing
Activities includes securing loans and Debt servicing of existing loans.
Budgeting is an estimation of the revenue and expenses over a specified future period of
time.
2. Chartering Department.
Chartering is a shipping activity where an individual and/or company acquire a vessel from
another shipping company on mutually agreed terms & conditions.
Chartering is done for vessels i.e. Bulk carriers, Tankers, Liner and offshore vessels.
3. Bulk carrier and Tanker Department.
Bulk Carriers
The diverse and versatile fleet is engaged in transportation of iron ore, coal, fertilizers, steel
and other bulk commodities throughout the world, which are the mainstay of international
bulk trade. Apart from catering to India’s Exim trade, our bulk carriers are also deployed for
coastal movement of bulk cargoes.
Diagram No. 2
Bulk Carrier Liner Tanker
4
Tankers
SCI’s crude oil tankers are primarily deployed to meet the demands of imported crude of
Indian refineries along with coastal movement / storage of indigenous crude. They are also
deployed on cross-trades worldwide. Product tankers are deployed for coastal movement,
import requirements and also cross-trades worldwide. The fleet of various sizes makes it
flexible enough to provide total logistic solution to the needs of the Indian Oil Industry. SCI
holds good position in carriage of crude oil and petroleum products amongst Indian shipping
companies and has been instrumental in maintaining supply lines of crude oil and petroleum
products even during wars and times of strike. Besides, SCI has pioneered ship-to-ship high
seas lighter age operations with its diversified fleet and in-house expertise ensuring the
maximum benefit of economies of scale while circumventing the infrastructural constraints
on the Indian coast, adding to its capability in providing total logistics solutions under one
roof.
Specialized Vessels
These vessels are engaged in the transportation of import/ coastal movement of LPG, import
of Phosphoric acid and also movement of Ammonia.
SCI is the first Indian shipping company to have heralded India’s entry into the highly
technology oriented and capital intensive field of LNG tankers. SCI in alliance with its
strategic partners owns and operates these tankers importing LNG, the fuel of the future, for
Petro net. SCI plans to consolidate itself as a significant regional player in the field of LNG
transportation.
5
4. Liner and passenger Department.
Liner service is a fleet of ships, with a common ownership or management, providing fixed
service, at regular intervals, between named ports, & offer transport to any goods in areas
served by those ports & ready for transit by the sailing dates.
Fixed itinerary, regular service, & to sail, filled or not, on date fixed by a published schedule
distinguish liner shipping from tramp shipping.
Diagram No. 3
Technical services repairs / retrofitting / dry-docking / surveys / ISM & ISPS compliance for
container ships & managed ships.
Coastal services & Passenger service operate domestic pax-cum-cargo services between
mainland and Andaman & Nicobar – government of India behalf.
5. Technical and Offshore Department.
It provide technical services for all type of vessels i.e. Bulk carrier & Tanker, Liner &
offshore vessels etc such as
 Towing and Anchor handling operations in offshore.
 Carriage of men and materials (i.e. fuel oil, cargo, water etc).
 Carry out standby and rescue operations in offshore.
 Carry out routine surveillance in offshore for safety and security reasons.
 Carrying out Fire fighting duties.
 Operations, Manning, Maintenance and Management services to vessels.
Liner Services
Technical Service Costal Service & Passenger Service
6
6. Floating & Shore personnel Accounts Department and Account Co-ordination
Department.
Diagram No. 4
7. Cash and Treasury Department.
The management of the organisation cash flows, its banking, money market and capital market
transactions; the effective control of the risks associated with those activities; and the pursuit of
optimum performance consistent with those risks. The objective of treasury management is to
help the business manage its working capital position in the best way possible, by providing
services and systems to assist the company achieve their optimal cash management model.
Floating Staff Account
Ensure proper and timely payment towards
wages and other allowances to the Floating
Staff Employees
1. Processing and payment of salaries for
Officers, Petty Officers & Crew after statutory
and otherdeductions,if any.
2. Ensure proper Accounting of the Wages.
Shore Personnel
&
Accounts Co-ordination
Payroll
Provident Fund
Gratuity
Staff Welfare Fund
and
Post Retirement Medical Scheme
( PRMS)
MasterData Maintenance – Vendor
and Bank Master
Asset Accounting
Accounts Closing activities
Governance Risk and Control
7
Diagram No. 5
8. Out port Department.
As it is not feasible to open its offices on each and every port to perform required activities,
So SCI has appointed authorized Agents and agent duties are coordinated by Out port
department.
On behalf of SCI agents provides cash to master (captain of vessel) for disbursement of
salary to fleet employees i.e. Officers, Petty Officer & Crew.
The Ouport Accounts Department does a monthly reconciliation of booking of
collection/receipts/remittances made by agent in AFSYS system with the receipts reflected in
SAP.
Cash & Treasury Management
Treasury Operations.
Cash Flows.
Investment of Surplus Funds.
Non Fund based Facilities.
Working Capital
Management.
Finalizations of Accounts.
MIS Reports.
Other activities.
8
9. Taxation Department.
In the Indian tax structure, there are a lot of taxes that people pay for different reasons. Income
tax, sales tax, entertainment tax, value added tax etc. All these taxes are existent because in some
way or the other it impacts and helps the economy.
Tonnage Tax
Tonnage Tax is an alternative method of calculating corporation tax profits by reference to the
net tonnage of the ship operated. The tonnage tax profit replaces both the tax-adjusted
commercial profit/loss on a shipping trade and the chargeable gains/losses made on tonnage tax
assets.
Service Tax
Service tax is a tax levied by the government on service providers on certain service transactions,
but is actually borne by the customers.
The service provider pays the tax and recovers it from the customers.
With effect from 1st June 2015 Service tax applicable is 14%
All the above Departments consist of various sub-departments. The process of each department
is different from another department and how one department is related to another department
while taking the Organization Decisions by taking in consideration of various aspects.
9
Tax Structure in SCI
Diagram No. 6
F & A
Division.
Tax
Indirect Tax
Deals with Central Board
of
Excise and Customs
(CBEC)
Service Tax
Direct Tax
Deals with Central Board
of
Direct Taxation
(CBDT)
Corporate Tax (Tonnage)
10
Objectives, Scope and Limitations
This project is to understand the organizational structure and work flow of The Shipping
Corporation of India with respect to Finance and Accounts Division.
To analyze the respondent’s view about the various Departments and how one department is
inter-linked to the others department while taking the financial decisions of the organization.
To learn about the various provisions of Direct and Indirect taxes applicable to The Shipping
Corporation of India Limited and how the Tax Departments linkages with other Departments in
the Overall Organizational decision making process.
Limitation is that it is concentrated to shipping corporation of India ltd, so policies and other
studies is limited to shipping industry only.
As per Company’s policy certain data and information are not disclosed for obvious reasons,
which would have been very much useful for the report.
There were time constraints for interviewing the concerned person of the organization as they
were busy with their job roles.
11
Indian Economy
The Economy of India is the seventh-largest in the world by nominal GDP and the third-largest
by purchasing power parity (PPP). The country classified as Newly Industrialized Country, one
of the G-20 major economies, a member of BRICS and a developing economy with
approximately 7% average growth rate for the last two decades. India’s economy became the
world's fastest growing major economy from the last quarter of 2014, replacing China's.
The long-term growth prospective of the Indian economy is moderately positive due to its young
population, corresponding low dependency ratio, healthy savings and investment rates, and
increasing integration into the global economy, The Indian economy has the potential to become
the world's 3rd-largest Economy by next decade, and one of the largest economies by mid-
century. And the outlook for short-term growth prospective is also good as according to IMF, the
Indian economy is the "bright spot" in the global landscape, India also topped World Bank’s
growth outlook for the year 2015-16 for the first time with economy grown 7.3% in 2014-15 &
expected to grow at 7.5-8.3% in 2015-16.
India has the one of fastest growing service sectors in the world with annual growth rate of above
9% since 2001, which contributed to 57% of GDP in 2012-13. India has capitalized its economy
based on its large educated English-speaking population to become a major exporter of IT
services, BPO services, and software services with $167.0 billion worth of service exports in
2013-14. It is also the fastest-growing part of the economy. The IT industry continues to be the
largest private sector employer in India. India is also the fourth largest start-up hub in the world
with over 3,100 technology start-ups in 2014-15 The agricultural sector is the largest employer in
India's economy but contributes to a declining share of its GDP (17% in 2013-14). India ranks
second worldwide in farm output. The Industry sector has held a constant share of its economic
contribution(26% of GDP in 2013-14).The Indian auto industry is one of the largest in the world
with an annual production of 21.48 million vehicles in FY 2013-14. India has $600 billion worth
of retail market in 2015 and one of world's fastest growing E-Commerce markets.
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India's two major stock exchanges, Bombay Stock Exchange and National Stock Exchange of
India, had a market capitalization of US$1.71 trillion and US$1.68 trillion respectively as of Feb
2015, which ranks 11th & 12 largest in the world respectively according to the World Federation
of Exchanges. India also home to world's third largest Billionaires pool with 97 billionaires in
2014 and fourth largest number of ultra-high-net-worth households that have more than 100
million dollars.
Statistics
GDP $2. 308 trillion (Nominal April 2015) $7.996 trillion (PPP, April 2015)
GDP rank 7th (Nominal) / 3rd (PPP)
GDP growth 7. 3% (2014-15)
GDP per capita $1,808(Nominal:131st2015) $6,265 (PPP: 121st; 2015)
Inflation (CPI) CPI: 5.01% WPI: -2.36% (May, 2015)
Ease-of-doing-business rank 142 (2015)
Public debt 64.9% of GDP (2014)
Budget deficit 4.1% of GDP (2014–15)
Revenues ₹27.5 trillion (US$430 billion) (2015,IMF)
Expenses ₹37.6 trillion (US$590 billion) (2015,IMF)
Credit rating
(Standard & Poor's)
BBB- (Domestic)
BBB- (Foreign)
BBB+ (T&CAssessment)
Outlook: Stable
Foreign reserves $353.33 billion (as of 17 July 2015)
s
13
Sector Information
India has 13 major ports and about 200 non-major ports. Cargo traffic, which was 976 million
metric tones (MMT) in 2012 is expected to reach 1,758 MMT by 2017. The Indian ports and
shipping industry plays a vital role in sustaining growth in the country’s trade and commerce.
India currently ranks 16th among maritime countries, with a coastline of about 7,517 km.
Around 95 per cent of India's trade by volume and 70 per cent by value takes place through
maritime transport, according to the Ministry of Shipping.
The Indian government continues to support the ports sector. It has allowed foreign direct
investment (FDI) of up to 100 per cent under the automatic route for projects regarding
construction and maintenance of ports and harbors. It has also facilitated a 10-year tax holiday to
enterprises engaged in developing, maintaining and operating ports, inland waterways and inland
ports.
Market size
The handling capacity of the major ports in India is sufficient to match with the trade demands.
The capacity of all major ports as on March 31, 2014 was 800.52 MMT against cargo traffic of
555.54 MMT handled in 2013-14. Thus the capacity utilization is around 70 per cent and as per
internationally-accepted norms the gap between the traffic and the capacity is usually around 30
per cent. Moreover, Government has taken many measures to improve the efficiency of
operations through mechanization, deepening the draft and speedy evacuation.
Significantly, publicly owned major ports in India reported healthy levels of container
throughput growth during April 2014 to February 2015, the first 11 months of fiscal year 2014-
15, compared to the volumes in the previous year, according to the latest provisional figures
compiled by JOC.com. Container-handling in the 11-month period expanded 7.15 percent year-
over-year to 7.25 million 20-foot-equivalent units from 6.77 million TEUs in the same period of
2013-14. Containerized cargo tonnage grew 4.4 percent to 109 million tons from 104 million
tons, the data showed.
In fiscal year 2013-14, which ended in March 2014, overall cargo volumes at major ports grew
1.78 percent year-over-year to 555.5 million tones (MT).
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The Indian ports sector received FDI worth US$ 1,637.30 million in the period April 2000–
February 2015, as per the Department of Industrial Policy and Promotion (DIPP), Ministry of
Commerce and Industry. The ports sector was also awarded 30 projects in FY14, investing over
Rs 20,000 crore (US$ 3.16 billion) which is a threefold increase over the preceding year.
In FY14, coal cargo traffic grew by 20.6 per cent to 104.5 MT from 86.7 MT in FY13. With
regard to commodities, there was a rise of 25 per cent in handling of fertilizers in April 2014 as
against April 2013. Iron ore handling also grew by 16.8 per cent during that period.
Government Initiatives
India’s basic infrastructure will be changed in five years, said Mr Nitin Gadkari, Union Minister
for Road Transport and Highways, Shipping, Government of India, while unveiling plans for Rs
10 trillion (US$ 158.19 billion) investment in highways and shipping sectors by 2019.
The Government of India has set an ambitious target to convert 101 rivers across the nation into
waterways in order to promoting water transport to propel economic growth, he said.
The Indian government will develop 10 coastal economic regions as part of plans to revive the
country’s Sagarmala (string of ports) project, according to the Daily Shipping Times. The zones
will be manufacturing hubs supported by port modernization projects and could cover 300-500
km of coastline. The government is also looking to develop the inland waterway sector as an
alternative to road and rail transport for getting goods to the nation’s ports and is hoping to
attract private investment into the sector.
Also, the Government has decided to set up two new major ports, one each at Sagar in West
Bengal and the other at Dugarajapatnam in Nellore district of Andhra Pradesh.
The Government is considering a proposal to set up an Integrated National Waterways Transport
Grid (INWTG) which covers mainly five National Waterways. The INWTG includes
development of the National Waterways with at least 2.5 meter Least Available Depth (LAD),
upgrading/ setting up of priority terminals, establishing road connectivity, wherever feasible, rail
and port connectivity.
15
The Minister of State for Shipping, Mr Pon Radhakrishnan has informed that following steps
have been taken by the Government for capacity expansion of ports:
 Up to 100 per cent FDI under the automatic route is allowed for port development
projects.
 Income tax incentives are allowed as per Income Tax Act, 1961.
 Enhanced delegation of financial powers to Shipping Ministry to accord investment
approval for PPP projects.
 Streamlining of security clearance procedures.
 Close monitoring of developmental projects in the Major Ports.
The Ministry of Shipping has formulated a Perspective Plan for development of the Maritime
Sector, namely, “The Maritime Agenda (2010-2020).” This Plan has estimated the traffic
projections and capacity additions at the ports up to the year 2020. Based on the estimated
growth, it has projected capacity of 3,130 MT by 2019-20.
Road Ahead
Increasing investments and cargo traffic point to a healthy outlook for India’s ports sector.
Services benefiting from these investments include operation and maintenance (O&M), pilot age,
and harboring and provision of marine assets like barges and dredgers.
The Planning Commission of India in its 12th Five Year Plan projects a total investment of Rs
180,626 crore (US$ 28.57 billion) for this industry. Also, through its Maritime Agenda 2010–
2020, the Ministry of Shipping has set a target capacity of over 3,130 MT by 2020, driven by
private sector participation. Over 50 per cent of this capacity is anticipated to be generated at
non-major ports.
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Company Information
Brief history
The Shipping Corporation of India was established on October 2nd, 1961.
For the last fifty four years, Shipping Corporation of India has been providing yeoman service to
the country’s economy by meeting its ocean transport requirements.
Starting out as a marginal Liner Shipping Company with just 19 vessels, the SCI has today
emerged as the undisputed leader in India’s shipping industry.
The SCI continues to be the only Indian mainline carrier providing liner services from India to
the major global destinations.
SCI’s owned fleet includes Bulk carriers, Crude oil tankers, Product tankers, Container vessels,
and Passenger-cum-Cargo vessels, Phosphoric Acid / Chemical carriers, LPG / Ammonia
carriers and Offshore Supply Vessels.
Sailing through for more than five decades, the SCI today has a significant presence on the
global maritime map.
As the country’s premier shipping line, the SCI owns and operates around 38% of the Indian
tonnage, and has operating interests in practically all areas of the Shipping business; servicing
both national and international trades.
With a highly diversified fleet and a network covering several major sea routes, SCI Reaffirms
its commitment to remain highly responsive and efficient in terms of its services, thus keeping
abreast of latest developments in shipping industry and maintaining itself as largest and most
diversified shipping company in India.
17
The Organizational Structure of Shipping Corporation of India
Diagram No. 7
Shipping Corporation Of India
Chairman
&
Managing Director
Director
(Bulk Carrier
&
Tanker )
SrVice President
Vice
President
General
Manager
Deputy
General
Manager
Manager
Deputy
Manager
Assistant
Manager
Director
(Liner
&
Passenger )
SrVice President
Vice
President
General
Manager
Deputy
General
Manager
Manager
Deputy
Manager
Assistant
Manager
Director
(Technical
&
Offshore)
SrVice President
Vice
President
General
Manager
Deputy
General
Manager
Manager
Deputy
Manager
Assistant
Manager
Director
(Finance
&
Accounts )
SrVice President
Vice
President
General
Manager
Deputy
General
Manager
Manager
Deputy
Manager
Assistant
Manager
Director
(Personal
&
Administration )
SrVice President
Vice
President
General
Manager
Deputy
General
Manager
Manager
Deputy
Manager
Assistant
Manager
18
Finance and Accounts Division
Finance and Budgeting Department
Finance & Budgeting Hierarchy
Diagram No. 8
Budgeting Functions
Diagram No. 9
There are two types of budget
1. Revenue Budget
2. Capital Budget
Budget
Revenue Budget
Capital Budget
19
Revenue Budget
Annual Revenue Budget required to be approved by the Board before March 31 every year
Revenue Budget – Process
1. Revenue Budget process comprises of collating data from the profit centre & cost centre.
2. Data submitted by profit centre on the following
a. Estimated freight income.
b. Estimated direct operating expenses.
c. Estimated indirect operating expenses.
3. Data submitted by cost centre on the following
a. Estimated finance cost by Finance division.
b. Estimated management expenses by P&A.
4. Compute the Indirect Operating cost from estimates received on,
a. Standing charges from profit centre which include the following.
a. Wages.
b. Victual ling.
c. Insurance.
d. Repairs, Spares & Stores.
b. Other expenses, which include the following -
a. Interest expenses.
b. Management expenses.
5. Allocate the revenues & direct operating expenses to each vessel.
6. Allocate the Indirect Operating cost to each vessel (this also includes depreciation).
20
7. Estimate the ‘Other Income’ for the year
8. Compute the total budgeted profit after tax for the year
Capital Budget
1. Annual Plan includes the outlay towards the existing vessels on order and expected vessels to
be ordered during the year.
2. Other Capital expenditure to be incurred by the various divisions on ships as well as onshore
is collated.
3. Capital Budget is based on the Annual Plan Outlay for the year and other capital expenditure.
4. This Capital Budget forms the basis of incurring the capital expenditure for the year.
21
Chartering
Diagram No. 10
Chartering
Chartering is a shipping activity where an individual and/or company acquire a vessel from
another shipping company on mutually agreed terms & conditions.
SCI hires vessels from other vessel owners, and provides the same to customers as per the
requirement. In this case income is received from the Charterer and paid to the owner.
Chartering
&
Freight
Bulk Carrier
And Tanker
Department
Bulk Carrier
Department
Bulk
Commercial
Bulk
Accounts
Tanker
Department
Tanker
Commercial
Tanker
Accounts
Specialized
Vessels (Lng)
Liner And
Passenger
Department
(only Freight)
Liner
Accounts
22
It includes
1. The terms & conditions between the owner & charterer – charter party.
2. All regular expenses – Bunker, Terminal charge, entry, exit etc (Running Expenses) are on
account of charterer.
Types of charter
1. Voyage charter
2. Time charter
3. Bareboat charter / Demise charter
Voyage charter
Voyage charter is the hired vessel for a voyage.
Time charter
Time charter is hired for a specific time period.
Bareboat charter / Demise charter
Bareboat charter / Demise charter is hiring of vessel where the charterer takes over the vessel
along with the right of management & control.
23
Bulk Carrier and Tanker Department
Bulk Carrier & Tanker Division (B&T), the largest profit centre of SCI, operates “State of the
Art” and “Diversified” fleet comprising of vessels designed to carry dry, liquid and liquefied
gaseous bulk cargoes. The diversity of B&T fleet plays a major role in hedging SCI’s business
risk.
The division broadly comprises of 3 segments viz. bulk carriers, tankers and specialized vessels.
Bulk and Tanker Accounts
Diagram No. 11
24
Functions performed by Bulk carrier & Tanker Accounts
 Preparation of Provisional Results and generation of MIS.
 Debtor’s reconciliation.
 Brokerage payments.
 Payments to P&I club and other payments.
 Closing activities and Audit related work.
 LNG Accounting.
25
Liner and Passenger Accounts Department
Liner Freight
Work Flow Activity
Diagram No. 12
26
Bills Of Lading
A Bill of Lading is a document issued by a carrier to a shipper acknowledging that specified
goods have been received on board as cargo.
 Issuance of Bills of Lading gives Birth to an obligation at a price.
 Mother of All Documents.
 Cannot possibly fulfill the obligation without appropriate documentation.
Reconciliation
Diagram No. 13
1. Ensuring accuracy of freight collectible with reference to the original documents such as
freight manifest and amendments thereto.
2. Liaison with Agents for establishing the reasons for mismatch.
3. Follow up with agents for remittance of outstanding freight if any.
4. Rectifying the entries of Freight Department.
5. In some cases, agents send proof of remittance of freight for which details are not
available. Such cases are referred to accounts department for rectifications.
Collection
Finance
Division
collectibles
Reconciliation
27
Ship Management Services
 The system follows the cycle of execution of monthly allocation for determining the
proportionate management overheads for managing the vessels.
 Execution of daily run/ monthly run for transfer of expenses on managed vessels to danaos
for raising of invoices on customers.
 Assisting operating division for raising of monthly invoices on customers as well as debit
notes for quarterly advances due.
 Scrutiny (on continuous basis) & reconciliation (at quarter end / yearend) of customer
accounts of government agencies department.
 Preparation of vessel wise statement of accounts at the end of each financial year in respect
of all the managed vessels.
 Statement of accounts prepared in standard format showing various heads of expenditure/
earnings at the end of each financial year in respect of all managed vessels.
 Arranging for audit of the above mentioned vessel wise statement of accounts
 Submission of the vessel wise audited statement of accounts to the various govt. Agencies or
departments.
 Attending to queries or correspondence from the various govt. Agencies / departments with
respect to accounting matters of managed vessels.
 Reconciliation of vendor/ customer accounts (owners / charterers of vessels on time charter
basis).
 Attending to statutory audit / internal audit / govt. Audit (CAG) / ISO audit requirements for
liner.
 Liaison with regional offices (Delhi, Kolkata, Chennai, port Blair) in connection with
managed vessels related matters.
 Submission of monthly reports to management regarding outstanding dues position & age
wise analysis of debtors.
 At quarter end/ year end passing of adjustment entries for provisioning/ prepaid expenses not
entered / entered through the sub systems (DANAOS/AFSYS), providing detailed
information for balance sheet disclosure (e.g. Related party transactions, ageing analysis,
etc.).
28
Technical and Offshore Department
Technical and Offshore Hierarchy
Diagram No. 14
Technical and Offshore services
Technical and Offshore services activities are as follows
1. Towing and Anchor handling operations in offshore
2. Carriage of men and materials (i.e. fuel oil, cargo, water etc)
3. Carry out standby and rescue operations in offshore, if required
4. Carry out routine surveillance in offshore for safety and security reasons
5. Carrying out Fire fighting duties
6. Operations, Manning, Maintenance and Management services to vessels owned by ONGC.
Director Finance
Vice President
Manager Deputy Manager Assistant Manager
29
Income from Managed Vessels
Diagram No. 15
Income from managed vessels is composed of two categories
1. Remuneration which is receivable only after a statement of income & expenses for quarter
end is prepared.
2. Share of Management expenses will be worked out only after SCI’s total management
expenses are known.
Pre-requisites for invoice preparation
Following are Pre-requisites to complete the three cycles to prepare invoices through Danaos for
managing vessels.
1. Completion of daily run.
2. Depreciation run for respective month.
3. Management expenses allocation run.
Technical service – Revenue
Consultancy Fees for Technical services for Ship Building are as follows
1. Andaman & Nicobar Island Administration.
2. Union Territory of Lakshadweep.
3. Geological Survey of India.
4. Consultancy Charges.
5. Recovery of Salary of officers.
6. Recovery of other expenses such as Tour, Survey etc.
Income from Managed Vessels
Remuneration
Share of Market Expenses
30
Floating Staff Accounts Department
FSAC Hierarchy
Diagram No. 16
Work Flow Activities
The functions of Floating Staff is to ensure proper and timely payment to the Floating Staff
Employees, Accounting of the Wages, Processing and payment of salaries for Officers, Petty
Officers & Crew.
Officers’/Petty Officers’ salary is processed through FLAPS
1. Kardex from Fleet Personnel Department;
2. SIMS- On Board advances and portage bills
3. FLAPS – Floating Staff Accounts Processing System
4. Monthly Payroll – OSV FS Employees
Masters Disbursement Account
1. Delivery of Cash to Master through Agents;
2. Receipt of monthly disbursement account from ships and accounting via SIMS
3. PDA is created for CTM in Danaos and payment is processed in SAP.
Director Finance
Vice President
Manager Deputy Manager Assistant Manager
31
Allotments for Officers/Petty Officers/Crew
1. Monthly
2. Casual
Crew Wages
1. Joining advances in office
2. On Board advances during article period
3. Account of Wages (Portage Bill) generated on board thru SIMS
4. Balance of Wages settled in office
Provident Fund Accounting
1. Officers/Petty Officers PF is transferred to the SCI PF Trust on the basis of FLAPS data
processed.
2. Crew PF data (deductions as per Bills) received from Ship and the same is accounted and
remitted to The Commissioner, Seamen’s PF Office.
Full and Final Settlement
1. For Officer
a. Provident Fund
b. Gratuity Balance
c. Leave Salary
2. For Crew
a. Gratuity
Year-end Work
1. Collection of data from ships as on 31st March
a. Officers allowances as on 31st March
b. Crew Portage bill for incomplete articles
2. Processing of Income tax Certificates (Form 16) at the end of the Financial Year
3. Annual EDR (Earnings and Deduction Register)
32
Shore personnel and accounts co-ordination Department
SPAC Hierarchy
Diagram No. 17
Payroll
1. Processing of monthly payroll in SAP HCM for shore staff
2. Posting monthly payroll to SAP FI & Transfer of Total Salary payable to respective regional
offices through SAP FI entry for reconciliation.
3. Generating the ECS (Electronic clearing system) file for Mumbai region and forwarding the
ECS file to the bank to ensure timely credit of salary to the employees’ bank account.
4. Intimating all the regions for creating ECS files at their end for credit to respective bank
accounts.
5. Ensuring timely payment of Profession Tax and filing of returns.
Provident Fund
1. Shore staff & Floating staff PF settlements
a. Calculation of PF dues and get approval of PF Trustees.
b. Arranging for pre audit by Internal Audit department
c. Preparing Final Settlement Receipt (FSR) and couriering to beneficiaries’ address.
d. After receiving signed FSR, preparing PF settlement cheques.
2. Issuing TDS certificates and other TDS related compliance viz. filing returns and timely
deposit of TDS wherever applicable.
a. Maintaining records of PF Settlements.
Director Finance
Vice President
Manager Deputy Manager Assistant Manager
33
3. PF Loan (Refundable and Non Refundable)
a. Verification of PF Loan applications and supporting documents on the basis of PF
Trust Rules.
b. Calculation of Loan Entitlement.
c. Obtaining Trustees approval for Loan amount.
d. Disbursement of loans
e. Feeding monthly installment for recovery through salary for shore employee.
f. Intimating monthly loan installment to Floating Staff Accounts Department.
4. Generation of Annual PF slips & distribution to all locations.(annual)
5. Monthly uploading of PF recoveries in Version Software.(monthly)
6. Appointment of Statutory Auditors ,preparing PF Trust Accounts and arranging for Statutory
Audit.(annual)
7. Investment and management of Trust funds.(periodic)
8. Obtaining tax exemption, filing returns, obtaining refunds, replying to scrutiny notices etc
through an approved CA firm.(periodic)
9. Arranging trustee meetings of PF trust & preparing minutes of meeting (periodic).
Gratuity
1. Shore & Floating staff Gratuity settlements
a. Preparing Final Settlement Receipt (FSR) and couriering to beneficiaries’ address.
b. After receiving signed FSR, preparing Gratuity settlement cheques.
2. Issuing TDS certificates and timely deposit of TDS.(periodic)
3. Filing returns , obtaining exemptions, Liasioning with Income Tax offices for refunds
through an approved CA Firm(periodic)
4. Investment and management of Trust funds.(periodic)
5. Appointment of Statutory Auditors, preparing Gratuity Trust Accounts & arranging for
Statutory Audit (annual)
6. Arranging trustee meetings of Gratuity Trust & preparing minutes of meeting. .(periodic)
34
Asset accounting
1. Obtaining Asset Code Creation Request Forms from concerned users.
2. Verification & Creation of asset master record in SAP.
3. Opening and carry forward of asset balances to new fiscal year in asset module
4. Ensure capitalization of vessels on completion of maiden voyage.
5. Pass entries for sale of vessels & booking of profit/loss on sale of vessels.
6. Maintaining Fixed Asset Register in Asset Module.
7. Reconciliation of financial records with physical verification report.
8. Passing of necessary entries in Asset module on the basis of Physical Verification Report.
Corporate Accounts
1. Closure of SAP FI period and opening new period after the closure of DANAOS & AFSYS
period & updating of monthly rates
2. Co-ordinate with all divisions to ensure that all entries are booked before closure of SAP FI
period
3. Execute allocation cycles after execution of Managed vessel and Empties cycle by Liner and
T & OS accounts division
a. Allocation of unallocated expenses and income to vessels
b. Allocation of common profit centre expenses to vessel voyage
c. Execute unfinished voyage program, Post entries for unfinished voyage income &
expenses.
d. Execution of foreign currency revaluation for all vendors, customers, open item and
non - open item managed GLs.
e. Checking and manually rectifying the errors thrown by the system while execution of
valuation cycles
35
Prepare financial results.
1. Coordinating with various departments for data required to prepare "Notes to Accounts”.
2. Replying to internal audit queries
3. Providing data required for Analysis of financial results.
4. Uploading of quarterly financial results on SCI website after the approval of same by board
of directors in board meeting .
5. Preparation of Balance Sheet , Profit and Loss Account as per Companies Act, Cash Flow
Statement ,supporting schedules and notes to accounts
6. Compiling contingent liability report by collating inputs received from all divisions
7. Compiling financial data for PSE Survey
8. Phase I & Phase II Audit by CAG
9. Creation of GL Codes in GL master and ensuring the correct mapping in financial statement
10. Foreign currency Valuation errors
11. PF Balances mismatch
12. Disclosure of foreign currency receipts & payments
13. Advisory services for PF & Gratuity Trust investments
14. PF Loan module implementation.
36
Cash and Treasury Department
Cash and Treasury Hierarchy
Diagram No. 18
Treasury Operations
1. Handling cash and online payments.
2. Receiving cash/cheques/DD and issuing necessary receipts.
3. Monitoring funds of Domestic and International bank accounts.
4. Fund allocation to various divisions.
5. Transfer of funds to Regional offices as per requirements.
6. Buying and Selling of currencies through online bidding.
7. Liasioning with banks and Documentation.
8. Reconciliation of cash and bank accounts.
Director Finance
Vice President
Manager Deputy Manager Assistant Manager
37
Cash Flows
1. Monitoring division wise Cash Inflows & Outflows.
2. Daily cash inflows are prepared to decide disbursement plan for the day.
3. Consolidated cash flow position prepared fortnightly / monthly.
Investment of Surplus Funds
1. Surplus funds are invested in Fixed Deposits (FD) & Mutual Funds(MF).
2. Funds are invested in the ratio of 60:40 in PSU and Private Banks based on DPE guidelines.
3. Card rates are taken from various banks and investment made at the best available rate.
4. Funds are invested in debt based MF(PSU) subject to a maximum of 30% of the surplus
fund with overall cap of Rs 250 crore.
5. Facility of Corporate liquid Deposits on current accounts.
6. Documentation, Record keeping and Accounting.
Non Fund based Facilities
Liasioning with banks for issuance / extension of
1. Bank guarantees (Domestic as well as Foreign).
2. Counter guarantees.
3. Performance guarantees.
4. Letter of credits.
Working Capital Management
In order to manage the working capital requirement, options available are as follows
1. Short term loan from Banks.
2. Loan against Fixed Deposits.
3. Commercial Papers.
4. Buyers Credit.
38
Finalizations of Accounts
1. Control of main accounts from Functional ledger accounts pertaining to Cash & Treasury
Department.
2. Preparing quarterly statement in respect of accrued interest on Bank deposits.
3. Preparation and submission of quarterly statement showing actual and accrued interest on
bank deposits and NAV of Mutual Fund Investments.
4. Attending to observations of Internal Auditors, Statutory Auditors and Govt. Auditors.
MIS Reports
1. Daily Cash & Bank Balances.
2. Weekly cash and bank balances and the projections of monthly funds requirements.
3. Monthly statement of placement of Funds in short term instruments to the Board.
4. Quarterly status of Mutual Fund Investment.
5. Quarterly status of Bank Guarantees issued as well as received in co-ordination with the
concerned departments.
Other activities
1. Preparation of Board Agenda for opening / closing of banks accounts, change of authorised
signatories for all bank accounts including regional offices.
2. Preparation of Board Agenda for other treasury operations.
3. Maintaining daily Exchange rates for records.
4. Any other work related to regulatory requirements for treasury operations.
39
Out port Accounts Department
Process Flow for Agents Funding and Settlement
Out port Process
Diagram No. 19
The various functions preformed are as follows
1. Pre-funding of Agents.
2. Weekly invoice reports sent to Agents.
3. Receiving FDA (Final Disbursement Account) Invoices from Agents and sending them for
scanning.
4. Maintaining Electronic Inward Receipt register for Agents FDA.
5. Settling Agents FDA on Final Authorization by SCI.
6. Bank Reconciliation of Freight Bank Accounts.
7. Quarterly provisions basis paid/final, locked, failed items.
40
Accounting in the ERP System
1. Agents are required to use 2 main ERP related systems in their offices/ locations from Afsys
and Danaos.
2. Afsys: A daily Freight collection deposited by the agents in SCI Freight Bank Accounts is
accounted in SCI books, through Afsys system used by agent.
Expenses and Income related to PDA & FDA
1. Voyage PDA/FDAs for vessel related expenses – E.g.: Pilot age, Port expenses, stuffed
container expenses, crew expenses etc.
2. General PDA/FDAs for expenses which are not related to any specific vessel call –E.g.:
Empty container expenses, monthly communication expenses etc.
Stages in Danaos System for PDA/FDA are as follows
1. PDA(Prefunding) – Locked, Sent to Finance, Paid / Final
2. FDA (Actual invoices) – Draft, Invoicing, Closed, Approved 1, Approved 2, Final
3. Disallowances in FDA
4. Final Settlement of FDA
a. Agents’ accounts (maintained in SAP), to be automatically debited with any
disallowances made by Operating department in Danaos. Agents can view the same
in Danaos.
b. Final settlement for each voyage / General PDA to be made as soon as all FDA line-
items in the said Voyage / General PDA is authorized at level 2 in Danaos.
c. Once all line items are authorized at level 2 status of the FDA changes as Final.
41
Insurance
There’s separate Insurance department in SCI which handles all insurance related
things whether it be insurance of ships, or personnel (Fleet and shore).
Some policies are taken through insurance companies and some through
international shipping union Clubs.
Below is the major insurance expense for SCI.
Hull & Machinery Rs 38.88Cr.
War Risk Marine Insurance – Rs75.93Cr.
Protection & Indemnity (P&I) - $63,00,875.
Time Charter’s Liability Cover - $3,37,603.
Container insurance - $62,000.
Freight Demurrage & Defense Class - $2,84,530.
Special Contingency (Marine Piracy) - $198,000.
42
Taxation Department
Tax Hierarchy
Diagram No. 20
The above diagram shows the hierarchy of the taxation department. The main objective of the
Taxation department is timely recording of tax related liabilities and payments.
Director Finance
Taxation
Department
Taxation (Sr Vice
President)
Shore Personnel And
Floating Staff - TDS
(DGM)
Service Tax
(Deputy
Manager)
Service Tax
(Assistant
Manager)
Corporate Tax
(Assistant
Manager)
43
In the taxation department various tasks which are performed by the employees are as follows.
Shore Personnel and Floating staff-TDS
1. Floating staff salary - TDS
2. Shore staff salary - TDS
3. TDS payable on expenses other than salaries
Service Tax
1. Service tax and CENVAT credit.
2. Sales tax/Value Added Tax.
Corporate Income Tax
1. Corporate tax.
2. Wealth tax.
3. Dividend distribution tax.
4. Foreign/Freight tax.
5. Customs duty.
6. Works contract tax (WCT).
The employees work with collaboration with each other so that the tasks can be performed
efficiently and effectively and also the tasks are divided so that the process work efficiency
increases and work pressure is reduced.
44
Shore personnel and floating staff- TDS (tax deduction at source)
The Shore personnel and floating staff –TDS tasks are performed by DGM of taxation
department. In the organization the employees are bifurcated into two categories shore personnel
staff and floating staff. The shore personnel staff are the employees which are working on shore
i.e. Managers, Deputy Managers, Assistant managers, Vice President, Director and Chairman
and Managing Director. The floating staff are employees which are working on ships.
TDS
Diagram No. 21
TDS
Shore
Staff
Salary
Withholding
Tax
Vendor/
Party
Floating staff
Salary
45
Work flow Activity
The task performed for shore staff & floating staff -TDS are as follows
1. Checking & Entering in SAP External Saving Declarations on monthly basis.
2. Assessment of Tax Liabilities of Employees.
3. Monthly TDS remittances.
4. Issuance of salary certificates to shore staff employees.
5. Filing of quarterly e-TDS Return.
6. E-TDS Assessment related proceedings / hearings.
The tasks performed for Vendors are as follows
1. Monthly deposit of TDS deducted from Vendors to Income Tax Dept.
2. Quarterly filing of E-TDS Return.
3. Quarterly issue of TDS Certificates.
4. Reconciliation of TDS Accounts.
5. E-TDS Assessment related proceedings / hearings.
The tasks performed which are related to Withholding tax are as follows
1. Monthly payment of Withholding Tax.
2. Quarterly E-TDS Return.
3. Attending to matters, appeals, etc. relating to withholding tax on charter hire of vessels
from non-resident ship-owners.
4. Filing of relevant appeals with CIT (A) & ITAT.
5. Attending meeting with counsel on Tax Matter.
46
Service tax
The service tax tasks are performed by Deputy Manager and Assistant Manager of Tax
Department. Shipping Corporation of India Ltd is providing various services which are related to
shipping industry transporting goods from source to destination via ships and vice versa as per
the requirement of Clients. So According to the provision of Government of India Service tax is
applicable and is paid by the organization.
While applying service tax respective department (B&T, L&PS, T&OS, etc) which creates
invoice for service provided to clients uses Tax codes in SAP
1. For Example T1 – 10.3%, T2 – 12.36%, T4 – 14%.
2. Major work of Tax department in SCI includes compilation of service tax data from
different departments.
3. Tax department also works out output tax liability and input tax for availing CENVAT
credit.
Work Flow Activity
The various tasks performed related to service tax are as follows
1. Monthly Payment of Service Tax.
2. Filing of Half Yearly Service Tax Return.
3. Compilation of Data/information from Various Departments for submitting to Assessing
Officer / Comm. Of Service Tax/ CESTAT.
4. Attending to Service tax authorities in connection with Notices received from time to
time.
5. Handling of Internal Queries from different Departments.
6. Filing of relevant Appeals with Comm. Of Service Tax (A) and CESTAT.
7. Meeting with Advocates & Counsels in relation with Service Tax Appeals and Hearings
on regular basis.
8. Attending Service Tax hearings before Assessing Officer / Commissioner / CESTAT.
47
CENVAT
Diagram No. 22
Without CENVAT Credit With CENVAT Credit
Company A B A B
Purchase - 220 - 200
Value Added 200 30 200 30
Sub Total 200 250 200 230
Service Tax
10%
20 25 20 23
Total 220 275 220 253
Let us assume that service tax on Service is 10% of value. ‘A’ renders service to ‘B’ at Rs. 200.
Thus, ‘B’ gets the service at Rs. 220, inclusive of tax @ 10%. He further provides services to ‘C’
at Rs 250. While he calculates his charges, ‘B’ has considered his cost of service as Rs. 220 and
added Rs. 30 as his service charge. While providing service to C, B will charge tax again @
10%. Thus C will get the service at Rs 275 (250 + 10% tax). In fact, ‘Value added’ by B is only
Rs 30 (250-220), tax on which would have been only Rs. 3, while the tax paid was Rs. 25. As
stages of providing the service continue, each subsequent recipient has to pay tax again and again
on the service which has already suffered tax. This is called cascading effect.
In the example illustrated above, ‘B’ will receive service from ‘A’ @ Rs. 220, which is inclusive
of duty of Rs. 20. Since ‘B’ is going to get credit of duty of Rs. 20, he will not consider this
amount for his costing. He will charge conversion charges of Rs. 30 and sell his service at Rs.
Cenvat
Excise Service Tax
48
230. He will charge 10% tax and raise invoice of Rs. 253 to ‘C’ (230 plus tax @10%). In the
Invoice prepared by ‘B’, the duty shown will be Rs. 23. However, ‘B’ will get credit of Rs. 20
paid on the service received by him from ‘A’. Thus, effective duty paid by ‘B’ will be on Rs 3.
‘C’ will get the service at Rs.253 and not at Rs. 275 which he would have been the price in
absence of CENVAT. Thus, in effect, ‘B’ has to pay duty only on Rs.30, which is the value
added by him
‘B’ is receiving service from ‘A’. In second case, his service price is Rs 200/- as he is entitled to
Cenvat credit of Rs 20/- i.e. tax paid on services. His invoice shows tax paid as Rs 23. However,
since he has got credit of Rs. 20/- , is paying in effect only Rs 3/- as tax, which is 10% of Rs 30/-
, i.e. 10% of ‘value added’ by him. The ‘Value added’ is difference between cost of input service
and output service. In the above example, ‘value’ added by B is Rs 30 and hence, by tax credit
system he is paying tax only on Rs 30. At each stage the service provider pays duty only on the
‘value’ added by him. Thus, it does not make any difference even if a service passes through a
number of stages.
Sales Tax & Value Added Tax (VAT)
Sales tax/VAT is applicable while selling of ships when the ship is getting scrapped.
The various tasks performed related to Sales tax/VAT are as follows
1. Payment of Sales tax/ VAT dues.
2. Filing of Sales tax/ VAT return with different Sales tax / VAT authorities
3. VAT Audit of Maharashtra and Gujarat
4. Attending to sales tax / VAT related other matters in consultation with SCI’s Sales tax
/ VAT advisor.
49
Corporate Income tax (Tonnage)
The corporate income tax tasks are performed by Assistant manager of Taxation department.
Work flow activity
The task performed related to corporate tax is as follows
1. Computation for estimating advance tax liability for quarterly/timely payments of
Corporate/Tonnage Tax.
2. Compilation/Reconciliation of Large No. of TDS Certificates from Parties & Banks.
3. Preparation and filing of Annual Tax Return.
4. Compilation of Data/information from Various Departments for submitting to Assessing
Officer/CIT/ ITAT.
5. Filing of relevant Appeals with CIT (A) and ITAT and High Court.
6. Meeting with Advocates & Counsels in relation with Income Tax Appeals and Hearings on
regular basis.
7. Attending Income tax hearings before Income Tax Officer / Commissioner / ITAT /High
Court on regular basis.
The tasks performed related to Wealth tax & Dividend distribution tax are as follows.
1. Preparation and filing of annual Wealth tax return and attending to related matters.
2. Computation and payment of dividend distribution tax and filing of annual return and
attending to related matters.
3. Computation of foreign tax liability based on Freight register for passing tax provision
entries.
50
METHODOLOGY
Type of Research
According to project “Study on Finance and Account Division of Shipping Corporation of India
Ltd”, Research Methodology applicable would be Exploratory Research.
Exploratory Research
The main purpose of exploratory research is the description of functionalities of different
Departments and task performed by each department. This type of research methodology relies
on the Experiences and Observations. The research is carried out to know what has happened and
what is happening with respect to the Finance and Accounts Divisions of Shipping Corporation
of India Ltd.
51
Sources of Data
Primary data
1. Interview
2. Observation
Secondary data
1. Manuals
2. Annual Reports
3. Letters
4. Show cause Notices
5. Agreements
6. Web information
7. Historical data and information
52
Data Collection Instrument
The Data Collection Instrument included are Interview, Observation and Reading.
Interview
Unstructured interview is interaction with Department persons of various Divisions with a
sequence of questions to understand the core functions and task performed by them.
Transcribing Data will be recorded from verbal interaction with the respondents and will be
transcribed i.e. convert the sound speech into words as accurately as possible.
Observation
Observation is very important method for obtaining the comprehensive data to understand the
process.
Participant Observer as a member of subject of study while observing and keeping notes of the
attributes of subject that is being researched so that can directly experience the phenomenon
being studied by this approach and can get the first hand experience with Informants.
Reading
Reading of Documents Limitation in this approach is document may be protected, I may not
have access to them as they are the Confidential Documents .As per the Company policy such
Documents cannot be Disclosed.
53
Population
The population of the project study is “Employees working in Finance & Accounts Division of
Shipping Corporation of India Ltd”.
1. Tax Cell – N.R.Sariaya (Senior Vice President)
2. Tax Cell (Service Tax) – Piyush Srivastava (Deputy Manager)
3. Tax Cell (Service Tax) - Shweta Amladi (Assistant Manager)
4. Tax Cell (Corporate Income Tax) – Indar Rathi(Assistant Manager)
5. Tax Cell (Salary TDS) – Vitthal Gabhale (Deputy General Manager)
6. Tanker Commercial – Aniket Bhalerao (Assistant Manager)
7. Bunker Commercial – Kunal Medhe (Assistant Manager)
8. Bunker Commercial – S.N.Patnaik (Deputy General Manager)
9. Finance And Budgeting – Karthik Karolia (Assistant Manager)
10. Chartering – Lankesh. G (Vice President)
11. Cash & Treasury – Abhay Baral(Deputy Manager)
12. Shore Personnel (Gratuity) – Sanjay Ambekar (Deputy Manager)
13. Shore Personnel (Provident Fund) – Nitin Tare (Manager)
14. Accounts Co-Ordination – Swapnita Rane (Assistant Manager)
15. Shore Accounts - B.K.Patel (Vice President)
16. Insurance – P.V.Kulkarni (Vice President)
54
Sampling Method
Opportunity Sampling
Simply Selecting the Senior Authorities that are available at that time as per their Convenience
i.e. Approaching Department Heads and requesting them to be interviewed.
An opportunity sample is obtained by asking members of the Department relevant Queries and
Questions regarding the Department with respect to Finance and Account Division of Shipping
Corporation of India Ltd.
Advantages
This Method of sampling is Quick, Convenient, Simple, Economical and most common type of
Sampling Method.
Sample Size
The sample size was 16.
55
Conclusion
Major sources of income for SCI
Diagram No. 23
Major Expenses for SCI
Diagram No. 24
Bulk and Tanker Services
IncomeChartering Tax Cash and Treasury (Liability
& Payment)
LinerFreight
Freight
Expense
Salary
FloatingStaffShore Personnel
Floatingstaff AccountsDepartment
Advance toEmployees
Out portAccount
PaymenttoAgentsas per
the Dutiesperformed
Bunker/ RepairsandOtherExpenses
Tax Bills
Technical & Offshore Services ShipManagementServices
56
Major Heads of Operating Earnings
 Freight Income
An Income earned for carriage or transportation of goods by water is called as freight.
 Charter Hire Income
When a vessel is given on hire for a specific period of time the income earned is called as
Charter hire.
 Demurrage Income
Demurrage income arises when there is a delay in loading or unloading of cargo.
Major Sources of income for SCI
 Bulk & Tanker services – Chartering & freight.
 Liner & passenger Services – Freight.
 Technical & offshore services – consultancy services.
Above are the major sources from which SCI books its income respectively. All the above
services income is processed through various respective operational, commercial and accounts
department within which they book income and applicable taxes through various ERP like SAP,
DANOS & AFSYS.
After booking various Taxes by respective department, TAX cell consolidates all the taxes from
various departments and process it further for payment through Cash & Treasury Department.
Major expenses by SCI
 Salary – Shore personnel & Floating Staff.
 Port dues, light dues , canal dues, Insurance , Container leasing cost, other miscellaneous
expenses.
 Bunker / Repairs – Fuel charges, Maintenance of ships (Dry Dock), Technical service such as
workshop assistance.
Above are the major expenses incurred by SCI, which is processed through various respective
departments and while booking expenses Tax is booked in system and TAX cell pays all the tds
deducted. Bills are processed and paid through bills department.
57
As SCI has major source of income come through international freight it losses on CENVAT
Credit.
As Financials of SCI shows it is a cash rich company but due to a public sector unit its
investment horizons gets limited due to directives from department of public enterprise doesn’t
allow that freedom which an private company can enjoy.
As SCI is one of the biggest shipping company in India Fleet wise, its Bunker requirement is also
high but due to slow decision making and being a PSU under DPE guidelines they cannot Hedge
it.
Being PSU and into High Tax payer category they still don’t enjoy relief from repeated enquiries
from Tax department, due to which TAX cell major concentration gets diverted towards court
cases from various Tax department, plus point is that this also makes SCI more accountable.
As Being a PSU they loose on something but they gain also on some part, SCI enjoys add-on
Credit from BPCL, HPCL, Oil India corporation for bunkering which SCI private competitors
doesn’t enjoys, which helps a lot for SCI in maintain cash flow.
Its Technical and offshore Division is wholly dependent on ONGC for its work that to ONGC
and SCI both being PSU they got that contract . So they should acquire more clients in that line
of business and not solely depend on single client.
Being PSU and into High Tax payer category they still don’t enjoy relief from repeated enquiries
from Tax department, due to which TAX cell major concentration gets diverted towards court
cases from various Tax department, plus point is that this also makes SCI more accountable.
Being one the biggest shipping company of India SCI was loss making company for last three
years, this year SCI made Rs 200 crore profit due change in depreciation method and fall in
crude oil prices till $40 in last quarter of 2013-14 financial year.
58
Major Income of SCI is in USD and their Payments are also in USD so on this part SCI is
secured that they are not majorly loosing on currency fluctuations.
So from this it can be concluded that SCI being a PSU it has some disadvantage on decision
making but enjoys some facility because of PSU status. So in short one of the biggest shipping
company can also be one the profitable company on shipping industry if there is fast pace
decision making which would make it more efficient but with responsibility there should be
accountability as SCI is a national asset.
Though Finance and accounts division and their sub departments are not the revenue generator
for shipping corporation of India, but it holds that work which cannot be avoidable and needed
for smooth functioning of SCI as they deals with monetary things which ultimately matters for
any company at the end because that only shows how’s company performing.

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A Study on Finance and Accounts Department of Shipping Corporation of India Ltd

  • 1. 1 Executive Summary The Summer Project for 2 months includes study on The Shipping Corporation of India Ltd, What is the company organization structure, How many departments are there in the Finance and Accounts Divisions of the organization, what is the operation of different departments related to Finance and Accounts department of SCI. How different department of finance and account work with the collaboration of other departments and sub- departments so that the work pressure is reduced and tasks performed are fast and work efficiency increases. Exploratory Research method was used for study of the project, which included interviews with various officials from various departments regarding their work and other information which could be helpful for me. The major part of the project will include the study on the Finance and Accounts divisions of different department and to learn about the working of F&A division in SCI.
  • 2. 2 Introduction To understand the Finance and Accounts Departments and sub-departments will go through the work flow process of each department. Diagram No. 1 FINANCE & ACCOUNTS DIVISION FINANCE & BUDGETING TAXATION CHARTERING BULK CARRIER & TANKER LINER & PASSENGER FLOATING STAFF SHORE PERSONNEL & ACCOUNT CO-ORDINATION CASH & TREASURY TECHNICAL & OFFSHORE OUTPORT
  • 3. 3 1. Finance and Budgeting Department. Financing is a field that deals with the allocation of assets and liabilities over time Financing Activities includes securing loans and Debt servicing of existing loans. Budgeting is an estimation of the revenue and expenses over a specified future period of time. 2. Chartering Department. Chartering is a shipping activity where an individual and/or company acquire a vessel from another shipping company on mutually agreed terms & conditions. Chartering is done for vessels i.e. Bulk carriers, Tankers, Liner and offshore vessels. 3. Bulk carrier and Tanker Department. Bulk Carriers The diverse and versatile fleet is engaged in transportation of iron ore, coal, fertilizers, steel and other bulk commodities throughout the world, which are the mainstay of international bulk trade. Apart from catering to India’s Exim trade, our bulk carriers are also deployed for coastal movement of bulk cargoes. Diagram No. 2 Bulk Carrier Liner Tanker
  • 4. 4 Tankers SCI’s crude oil tankers are primarily deployed to meet the demands of imported crude of Indian refineries along with coastal movement / storage of indigenous crude. They are also deployed on cross-trades worldwide. Product tankers are deployed for coastal movement, import requirements and also cross-trades worldwide. The fleet of various sizes makes it flexible enough to provide total logistic solution to the needs of the Indian Oil Industry. SCI holds good position in carriage of crude oil and petroleum products amongst Indian shipping companies and has been instrumental in maintaining supply lines of crude oil and petroleum products even during wars and times of strike. Besides, SCI has pioneered ship-to-ship high seas lighter age operations with its diversified fleet and in-house expertise ensuring the maximum benefit of economies of scale while circumventing the infrastructural constraints on the Indian coast, adding to its capability in providing total logistics solutions under one roof. Specialized Vessels These vessels are engaged in the transportation of import/ coastal movement of LPG, import of Phosphoric acid and also movement of Ammonia. SCI is the first Indian shipping company to have heralded India’s entry into the highly technology oriented and capital intensive field of LNG tankers. SCI in alliance with its strategic partners owns and operates these tankers importing LNG, the fuel of the future, for Petro net. SCI plans to consolidate itself as a significant regional player in the field of LNG transportation.
  • 5. 5 4. Liner and passenger Department. Liner service is a fleet of ships, with a common ownership or management, providing fixed service, at regular intervals, between named ports, & offer transport to any goods in areas served by those ports & ready for transit by the sailing dates. Fixed itinerary, regular service, & to sail, filled or not, on date fixed by a published schedule distinguish liner shipping from tramp shipping. Diagram No. 3 Technical services repairs / retrofitting / dry-docking / surveys / ISM & ISPS compliance for container ships & managed ships. Coastal services & Passenger service operate domestic pax-cum-cargo services between mainland and Andaman & Nicobar – government of India behalf. 5. Technical and Offshore Department. It provide technical services for all type of vessels i.e. Bulk carrier & Tanker, Liner & offshore vessels etc such as  Towing and Anchor handling operations in offshore.  Carriage of men and materials (i.e. fuel oil, cargo, water etc).  Carry out standby and rescue operations in offshore.  Carry out routine surveillance in offshore for safety and security reasons.  Carrying out Fire fighting duties.  Operations, Manning, Maintenance and Management services to vessels. Liner Services Technical Service Costal Service & Passenger Service
  • 6. 6 6. Floating & Shore personnel Accounts Department and Account Co-ordination Department. Diagram No. 4 7. Cash and Treasury Department. The management of the organisation cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks. The objective of treasury management is to help the business manage its working capital position in the best way possible, by providing services and systems to assist the company achieve their optimal cash management model. Floating Staff Account Ensure proper and timely payment towards wages and other allowances to the Floating Staff Employees 1. Processing and payment of salaries for Officers, Petty Officers & Crew after statutory and otherdeductions,if any. 2. Ensure proper Accounting of the Wages. Shore Personnel & Accounts Co-ordination Payroll Provident Fund Gratuity Staff Welfare Fund and Post Retirement Medical Scheme ( PRMS) MasterData Maintenance – Vendor and Bank Master Asset Accounting Accounts Closing activities Governance Risk and Control
  • 7. 7 Diagram No. 5 8. Out port Department. As it is not feasible to open its offices on each and every port to perform required activities, So SCI has appointed authorized Agents and agent duties are coordinated by Out port department. On behalf of SCI agents provides cash to master (captain of vessel) for disbursement of salary to fleet employees i.e. Officers, Petty Officer & Crew. The Ouport Accounts Department does a monthly reconciliation of booking of collection/receipts/remittances made by agent in AFSYS system with the receipts reflected in SAP. Cash & Treasury Management Treasury Operations. Cash Flows. Investment of Surplus Funds. Non Fund based Facilities. Working Capital Management. Finalizations of Accounts. MIS Reports. Other activities.
  • 8. 8 9. Taxation Department. In the Indian tax structure, there are a lot of taxes that people pay for different reasons. Income tax, sales tax, entertainment tax, value added tax etc. All these taxes are existent because in some way or the other it impacts and helps the economy. Tonnage Tax Tonnage Tax is an alternative method of calculating corporation tax profits by reference to the net tonnage of the ship operated. The tonnage tax profit replaces both the tax-adjusted commercial profit/loss on a shipping trade and the chargeable gains/losses made on tonnage tax assets. Service Tax Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. The service provider pays the tax and recovers it from the customers. With effect from 1st June 2015 Service tax applicable is 14% All the above Departments consist of various sub-departments. The process of each department is different from another department and how one department is related to another department while taking the Organization Decisions by taking in consideration of various aspects.
  • 9. 9 Tax Structure in SCI Diagram No. 6 F & A Division. Tax Indirect Tax Deals with Central Board of Excise and Customs (CBEC) Service Tax Direct Tax Deals with Central Board of Direct Taxation (CBDT) Corporate Tax (Tonnage)
  • 10. 10 Objectives, Scope and Limitations This project is to understand the organizational structure and work flow of The Shipping Corporation of India with respect to Finance and Accounts Division. To analyze the respondent’s view about the various Departments and how one department is inter-linked to the others department while taking the financial decisions of the organization. To learn about the various provisions of Direct and Indirect taxes applicable to The Shipping Corporation of India Limited and how the Tax Departments linkages with other Departments in the Overall Organizational decision making process. Limitation is that it is concentrated to shipping corporation of India ltd, so policies and other studies is limited to shipping industry only. As per Company’s policy certain data and information are not disclosed for obvious reasons, which would have been very much useful for the report. There were time constraints for interviewing the concerned person of the organization as they were busy with their job roles.
  • 11. 11 Indian Economy The Economy of India is the seventh-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The country classified as Newly Industrialized Country, one of the G-20 major economies, a member of BRICS and a developing economy with approximately 7% average growth rate for the last two decades. India’s economy became the world's fastest growing major economy from the last quarter of 2014, replacing China's. The long-term growth prospective of the Indian economy is moderately positive due to its young population, corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy, The Indian economy has the potential to become the world's 3rd-largest Economy by next decade, and one of the largest economies by mid- century. And the outlook for short-term growth prospective is also good as according to IMF, the Indian economy is the "bright spot" in the global landscape, India also topped World Bank’s growth outlook for the year 2015-16 for the first time with economy grown 7.3% in 2014-15 & expected to grow at 7.5-8.3% in 2015-16. India has the one of fastest growing service sectors in the world with annual growth rate of above 9% since 2001, which contributed to 57% of GDP in 2012-13. India has capitalized its economy based on its large educated English-speaking population to become a major exporter of IT services, BPO services, and software services with $167.0 billion worth of service exports in 2013-14. It is also the fastest-growing part of the economy. The IT industry continues to be the largest private sector employer in India. India is also the fourth largest start-up hub in the world with over 3,100 technology start-ups in 2014-15 The agricultural sector is the largest employer in India's economy but contributes to a declining share of its GDP (17% in 2013-14). India ranks second worldwide in farm output. The Industry sector has held a constant share of its economic contribution(26% of GDP in 2013-14).The Indian auto industry is one of the largest in the world with an annual production of 21.48 million vehicles in FY 2013-14. India has $600 billion worth of retail market in 2015 and one of world's fastest growing E-Commerce markets.
  • 12. 12 India's two major stock exchanges, Bombay Stock Exchange and National Stock Exchange of India, had a market capitalization of US$1.71 trillion and US$1.68 trillion respectively as of Feb 2015, which ranks 11th & 12 largest in the world respectively according to the World Federation of Exchanges. India also home to world's third largest Billionaires pool with 97 billionaires in 2014 and fourth largest number of ultra-high-net-worth households that have more than 100 million dollars. Statistics GDP $2. 308 trillion (Nominal April 2015) $7.996 trillion (PPP, April 2015) GDP rank 7th (Nominal) / 3rd (PPP) GDP growth 7. 3% (2014-15) GDP per capita $1,808(Nominal:131st2015) $6,265 (PPP: 121st; 2015) Inflation (CPI) CPI: 5.01% WPI: -2.36% (May, 2015) Ease-of-doing-business rank 142 (2015) Public debt 64.9% of GDP (2014) Budget deficit 4.1% of GDP (2014–15) Revenues ₹27.5 trillion (US$430 billion) (2015,IMF) Expenses ₹37.6 trillion (US$590 billion) (2015,IMF) Credit rating (Standard & Poor's) BBB- (Domestic) BBB- (Foreign) BBB+ (T&CAssessment) Outlook: Stable Foreign reserves $353.33 billion (as of 17 July 2015) s
  • 13. 13 Sector Information India has 13 major ports and about 200 non-major ports. Cargo traffic, which was 976 million metric tones (MMT) in 2012 is expected to reach 1,758 MMT by 2017. The Indian ports and shipping industry plays a vital role in sustaining growth in the country’s trade and commerce. India currently ranks 16th among maritime countries, with a coastline of about 7,517 km. Around 95 per cent of India's trade by volume and 70 per cent by value takes place through maritime transport, according to the Ministry of Shipping. The Indian government continues to support the ports sector. It has allowed foreign direct investment (FDI) of up to 100 per cent under the automatic route for projects regarding construction and maintenance of ports and harbors. It has also facilitated a 10-year tax holiday to enterprises engaged in developing, maintaining and operating ports, inland waterways and inland ports. Market size The handling capacity of the major ports in India is sufficient to match with the trade demands. The capacity of all major ports as on March 31, 2014 was 800.52 MMT against cargo traffic of 555.54 MMT handled in 2013-14. Thus the capacity utilization is around 70 per cent and as per internationally-accepted norms the gap between the traffic and the capacity is usually around 30 per cent. Moreover, Government has taken many measures to improve the efficiency of operations through mechanization, deepening the draft and speedy evacuation. Significantly, publicly owned major ports in India reported healthy levels of container throughput growth during April 2014 to February 2015, the first 11 months of fiscal year 2014- 15, compared to the volumes in the previous year, according to the latest provisional figures compiled by JOC.com. Container-handling in the 11-month period expanded 7.15 percent year- over-year to 7.25 million 20-foot-equivalent units from 6.77 million TEUs in the same period of 2013-14. Containerized cargo tonnage grew 4.4 percent to 109 million tons from 104 million tons, the data showed. In fiscal year 2013-14, which ended in March 2014, overall cargo volumes at major ports grew 1.78 percent year-over-year to 555.5 million tones (MT).
  • 14. 14 The Indian ports sector received FDI worth US$ 1,637.30 million in the period April 2000– February 2015, as per the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry. The ports sector was also awarded 30 projects in FY14, investing over Rs 20,000 crore (US$ 3.16 billion) which is a threefold increase over the preceding year. In FY14, coal cargo traffic grew by 20.6 per cent to 104.5 MT from 86.7 MT in FY13. With regard to commodities, there was a rise of 25 per cent in handling of fertilizers in April 2014 as against April 2013. Iron ore handling also grew by 16.8 per cent during that period. Government Initiatives India’s basic infrastructure will be changed in five years, said Mr Nitin Gadkari, Union Minister for Road Transport and Highways, Shipping, Government of India, while unveiling plans for Rs 10 trillion (US$ 158.19 billion) investment in highways and shipping sectors by 2019. The Government of India has set an ambitious target to convert 101 rivers across the nation into waterways in order to promoting water transport to propel economic growth, he said. The Indian government will develop 10 coastal economic regions as part of plans to revive the country’s Sagarmala (string of ports) project, according to the Daily Shipping Times. The zones will be manufacturing hubs supported by port modernization projects and could cover 300-500 km of coastline. The government is also looking to develop the inland waterway sector as an alternative to road and rail transport for getting goods to the nation’s ports and is hoping to attract private investment into the sector. Also, the Government has decided to set up two new major ports, one each at Sagar in West Bengal and the other at Dugarajapatnam in Nellore district of Andhra Pradesh. The Government is considering a proposal to set up an Integrated National Waterways Transport Grid (INWTG) which covers mainly five National Waterways. The INWTG includes development of the National Waterways with at least 2.5 meter Least Available Depth (LAD), upgrading/ setting up of priority terminals, establishing road connectivity, wherever feasible, rail and port connectivity.
  • 15. 15 The Minister of State for Shipping, Mr Pon Radhakrishnan has informed that following steps have been taken by the Government for capacity expansion of ports:  Up to 100 per cent FDI under the automatic route is allowed for port development projects.  Income tax incentives are allowed as per Income Tax Act, 1961.  Enhanced delegation of financial powers to Shipping Ministry to accord investment approval for PPP projects.  Streamlining of security clearance procedures.  Close monitoring of developmental projects in the Major Ports. The Ministry of Shipping has formulated a Perspective Plan for development of the Maritime Sector, namely, “The Maritime Agenda (2010-2020).” This Plan has estimated the traffic projections and capacity additions at the ports up to the year 2020. Based on the estimated growth, it has projected capacity of 3,130 MT by 2019-20. Road Ahead Increasing investments and cargo traffic point to a healthy outlook for India’s ports sector. Services benefiting from these investments include operation and maintenance (O&M), pilot age, and harboring and provision of marine assets like barges and dredgers. The Planning Commission of India in its 12th Five Year Plan projects a total investment of Rs 180,626 crore (US$ 28.57 billion) for this industry. Also, through its Maritime Agenda 2010– 2020, the Ministry of Shipping has set a target capacity of over 3,130 MT by 2020, driven by private sector participation. Over 50 per cent of this capacity is anticipated to be generated at non-major ports.
  • 16. 16 Company Information Brief history The Shipping Corporation of India was established on October 2nd, 1961. For the last fifty four years, Shipping Corporation of India has been providing yeoman service to the country’s economy by meeting its ocean transport requirements. Starting out as a marginal Liner Shipping Company with just 19 vessels, the SCI has today emerged as the undisputed leader in India’s shipping industry. The SCI continues to be the only Indian mainline carrier providing liner services from India to the major global destinations. SCI’s owned fleet includes Bulk carriers, Crude oil tankers, Product tankers, Container vessels, and Passenger-cum-Cargo vessels, Phosphoric Acid / Chemical carriers, LPG / Ammonia carriers and Offshore Supply Vessels. Sailing through for more than five decades, the SCI today has a significant presence on the global maritime map. As the country’s premier shipping line, the SCI owns and operates around 38% of the Indian tonnage, and has operating interests in practically all areas of the Shipping business; servicing both national and international trades. With a highly diversified fleet and a network covering several major sea routes, SCI Reaffirms its commitment to remain highly responsive and efficient in terms of its services, thus keeping abreast of latest developments in shipping industry and maintaining itself as largest and most diversified shipping company in India.
  • 17. 17 The Organizational Structure of Shipping Corporation of India Diagram No. 7 Shipping Corporation Of India Chairman & Managing Director Director (Bulk Carrier & Tanker ) SrVice President Vice President General Manager Deputy General Manager Manager Deputy Manager Assistant Manager Director (Liner & Passenger ) SrVice President Vice President General Manager Deputy General Manager Manager Deputy Manager Assistant Manager Director (Technical & Offshore) SrVice President Vice President General Manager Deputy General Manager Manager Deputy Manager Assistant Manager Director (Finance & Accounts ) SrVice President Vice President General Manager Deputy General Manager Manager Deputy Manager Assistant Manager Director (Personal & Administration ) SrVice President Vice President General Manager Deputy General Manager Manager Deputy Manager Assistant Manager
  • 18. 18 Finance and Accounts Division Finance and Budgeting Department Finance & Budgeting Hierarchy Diagram No. 8 Budgeting Functions Diagram No. 9 There are two types of budget 1. Revenue Budget 2. Capital Budget Budget Revenue Budget Capital Budget
  • 19. 19 Revenue Budget Annual Revenue Budget required to be approved by the Board before March 31 every year Revenue Budget – Process 1. Revenue Budget process comprises of collating data from the profit centre & cost centre. 2. Data submitted by profit centre on the following a. Estimated freight income. b. Estimated direct operating expenses. c. Estimated indirect operating expenses. 3. Data submitted by cost centre on the following a. Estimated finance cost by Finance division. b. Estimated management expenses by P&A. 4. Compute the Indirect Operating cost from estimates received on, a. Standing charges from profit centre which include the following. a. Wages. b. Victual ling. c. Insurance. d. Repairs, Spares & Stores. b. Other expenses, which include the following - a. Interest expenses. b. Management expenses. 5. Allocate the revenues & direct operating expenses to each vessel. 6. Allocate the Indirect Operating cost to each vessel (this also includes depreciation).
  • 20. 20 7. Estimate the ‘Other Income’ for the year 8. Compute the total budgeted profit after tax for the year Capital Budget 1. Annual Plan includes the outlay towards the existing vessels on order and expected vessels to be ordered during the year. 2. Other Capital expenditure to be incurred by the various divisions on ships as well as onshore is collated. 3. Capital Budget is based on the Annual Plan Outlay for the year and other capital expenditure. 4. This Capital Budget forms the basis of incurring the capital expenditure for the year.
  • 21. 21 Chartering Diagram No. 10 Chartering Chartering is a shipping activity where an individual and/or company acquire a vessel from another shipping company on mutually agreed terms & conditions. SCI hires vessels from other vessel owners, and provides the same to customers as per the requirement. In this case income is received from the Charterer and paid to the owner. Chartering & Freight Bulk Carrier And Tanker Department Bulk Carrier Department Bulk Commercial Bulk Accounts Tanker Department Tanker Commercial Tanker Accounts Specialized Vessels (Lng) Liner And Passenger Department (only Freight) Liner Accounts
  • 22. 22 It includes 1. The terms & conditions between the owner & charterer – charter party. 2. All regular expenses – Bunker, Terminal charge, entry, exit etc (Running Expenses) are on account of charterer. Types of charter 1. Voyage charter 2. Time charter 3. Bareboat charter / Demise charter Voyage charter Voyage charter is the hired vessel for a voyage. Time charter Time charter is hired for a specific time period. Bareboat charter / Demise charter Bareboat charter / Demise charter is hiring of vessel where the charterer takes over the vessel along with the right of management & control.
  • 23. 23 Bulk Carrier and Tanker Department Bulk Carrier & Tanker Division (B&T), the largest profit centre of SCI, operates “State of the Art” and “Diversified” fleet comprising of vessels designed to carry dry, liquid and liquefied gaseous bulk cargoes. The diversity of B&T fleet plays a major role in hedging SCI’s business risk. The division broadly comprises of 3 segments viz. bulk carriers, tankers and specialized vessels. Bulk and Tanker Accounts Diagram No. 11
  • 24. 24 Functions performed by Bulk carrier & Tanker Accounts  Preparation of Provisional Results and generation of MIS.  Debtor’s reconciliation.  Brokerage payments.  Payments to P&I club and other payments.  Closing activities and Audit related work.  LNG Accounting.
  • 25. 25 Liner and Passenger Accounts Department Liner Freight Work Flow Activity Diagram No. 12
  • 26. 26 Bills Of Lading A Bill of Lading is a document issued by a carrier to a shipper acknowledging that specified goods have been received on board as cargo.  Issuance of Bills of Lading gives Birth to an obligation at a price.  Mother of All Documents.  Cannot possibly fulfill the obligation without appropriate documentation. Reconciliation Diagram No. 13 1. Ensuring accuracy of freight collectible with reference to the original documents such as freight manifest and amendments thereto. 2. Liaison with Agents for establishing the reasons for mismatch. 3. Follow up with agents for remittance of outstanding freight if any. 4. Rectifying the entries of Freight Department. 5. In some cases, agents send proof of remittance of freight for which details are not available. Such cases are referred to accounts department for rectifications. Collection Finance Division collectibles Reconciliation
  • 27. 27 Ship Management Services  The system follows the cycle of execution of monthly allocation for determining the proportionate management overheads for managing the vessels.  Execution of daily run/ monthly run for transfer of expenses on managed vessels to danaos for raising of invoices on customers.  Assisting operating division for raising of monthly invoices on customers as well as debit notes for quarterly advances due.  Scrutiny (on continuous basis) & reconciliation (at quarter end / yearend) of customer accounts of government agencies department.  Preparation of vessel wise statement of accounts at the end of each financial year in respect of all the managed vessels.  Statement of accounts prepared in standard format showing various heads of expenditure/ earnings at the end of each financial year in respect of all managed vessels.  Arranging for audit of the above mentioned vessel wise statement of accounts  Submission of the vessel wise audited statement of accounts to the various govt. Agencies or departments.  Attending to queries or correspondence from the various govt. Agencies / departments with respect to accounting matters of managed vessels.  Reconciliation of vendor/ customer accounts (owners / charterers of vessels on time charter basis).  Attending to statutory audit / internal audit / govt. Audit (CAG) / ISO audit requirements for liner.  Liaison with regional offices (Delhi, Kolkata, Chennai, port Blair) in connection with managed vessels related matters.  Submission of monthly reports to management regarding outstanding dues position & age wise analysis of debtors.  At quarter end/ year end passing of adjustment entries for provisioning/ prepaid expenses not entered / entered through the sub systems (DANAOS/AFSYS), providing detailed information for balance sheet disclosure (e.g. Related party transactions, ageing analysis, etc.).
  • 28. 28 Technical and Offshore Department Technical and Offshore Hierarchy Diagram No. 14 Technical and Offshore services Technical and Offshore services activities are as follows 1. Towing and Anchor handling operations in offshore 2. Carriage of men and materials (i.e. fuel oil, cargo, water etc) 3. Carry out standby and rescue operations in offshore, if required 4. Carry out routine surveillance in offshore for safety and security reasons 5. Carrying out Fire fighting duties 6. Operations, Manning, Maintenance and Management services to vessels owned by ONGC. Director Finance Vice President Manager Deputy Manager Assistant Manager
  • 29. 29 Income from Managed Vessels Diagram No. 15 Income from managed vessels is composed of two categories 1. Remuneration which is receivable only after a statement of income & expenses for quarter end is prepared. 2. Share of Management expenses will be worked out only after SCI’s total management expenses are known. Pre-requisites for invoice preparation Following are Pre-requisites to complete the three cycles to prepare invoices through Danaos for managing vessels. 1. Completion of daily run. 2. Depreciation run for respective month. 3. Management expenses allocation run. Technical service – Revenue Consultancy Fees for Technical services for Ship Building are as follows 1. Andaman & Nicobar Island Administration. 2. Union Territory of Lakshadweep. 3. Geological Survey of India. 4. Consultancy Charges. 5. Recovery of Salary of officers. 6. Recovery of other expenses such as Tour, Survey etc. Income from Managed Vessels Remuneration Share of Market Expenses
  • 30. 30 Floating Staff Accounts Department FSAC Hierarchy Diagram No. 16 Work Flow Activities The functions of Floating Staff is to ensure proper and timely payment to the Floating Staff Employees, Accounting of the Wages, Processing and payment of salaries for Officers, Petty Officers & Crew. Officers’/Petty Officers’ salary is processed through FLAPS 1. Kardex from Fleet Personnel Department; 2. SIMS- On Board advances and portage bills 3. FLAPS – Floating Staff Accounts Processing System 4. Monthly Payroll – OSV FS Employees Masters Disbursement Account 1. Delivery of Cash to Master through Agents; 2. Receipt of monthly disbursement account from ships and accounting via SIMS 3. PDA is created for CTM in Danaos and payment is processed in SAP. Director Finance Vice President Manager Deputy Manager Assistant Manager
  • 31. 31 Allotments for Officers/Petty Officers/Crew 1. Monthly 2. Casual Crew Wages 1. Joining advances in office 2. On Board advances during article period 3. Account of Wages (Portage Bill) generated on board thru SIMS 4. Balance of Wages settled in office Provident Fund Accounting 1. Officers/Petty Officers PF is transferred to the SCI PF Trust on the basis of FLAPS data processed. 2. Crew PF data (deductions as per Bills) received from Ship and the same is accounted and remitted to The Commissioner, Seamen’s PF Office. Full and Final Settlement 1. For Officer a. Provident Fund b. Gratuity Balance c. Leave Salary 2. For Crew a. Gratuity Year-end Work 1. Collection of data from ships as on 31st March a. Officers allowances as on 31st March b. Crew Portage bill for incomplete articles 2. Processing of Income tax Certificates (Form 16) at the end of the Financial Year 3. Annual EDR (Earnings and Deduction Register)
  • 32. 32 Shore personnel and accounts co-ordination Department SPAC Hierarchy Diagram No. 17 Payroll 1. Processing of monthly payroll in SAP HCM for shore staff 2. Posting monthly payroll to SAP FI & Transfer of Total Salary payable to respective regional offices through SAP FI entry for reconciliation. 3. Generating the ECS (Electronic clearing system) file for Mumbai region and forwarding the ECS file to the bank to ensure timely credit of salary to the employees’ bank account. 4. Intimating all the regions for creating ECS files at their end for credit to respective bank accounts. 5. Ensuring timely payment of Profession Tax and filing of returns. Provident Fund 1. Shore staff & Floating staff PF settlements a. Calculation of PF dues and get approval of PF Trustees. b. Arranging for pre audit by Internal Audit department c. Preparing Final Settlement Receipt (FSR) and couriering to beneficiaries’ address. d. After receiving signed FSR, preparing PF settlement cheques. 2. Issuing TDS certificates and other TDS related compliance viz. filing returns and timely deposit of TDS wherever applicable. a. Maintaining records of PF Settlements. Director Finance Vice President Manager Deputy Manager Assistant Manager
  • 33. 33 3. PF Loan (Refundable and Non Refundable) a. Verification of PF Loan applications and supporting documents on the basis of PF Trust Rules. b. Calculation of Loan Entitlement. c. Obtaining Trustees approval for Loan amount. d. Disbursement of loans e. Feeding monthly installment for recovery through salary for shore employee. f. Intimating monthly loan installment to Floating Staff Accounts Department. 4. Generation of Annual PF slips & distribution to all locations.(annual) 5. Monthly uploading of PF recoveries in Version Software.(monthly) 6. Appointment of Statutory Auditors ,preparing PF Trust Accounts and arranging for Statutory Audit.(annual) 7. Investment and management of Trust funds.(periodic) 8. Obtaining tax exemption, filing returns, obtaining refunds, replying to scrutiny notices etc through an approved CA firm.(periodic) 9. Arranging trustee meetings of PF trust & preparing minutes of meeting (periodic). Gratuity 1. Shore & Floating staff Gratuity settlements a. Preparing Final Settlement Receipt (FSR) and couriering to beneficiaries’ address. b. After receiving signed FSR, preparing Gratuity settlement cheques. 2. Issuing TDS certificates and timely deposit of TDS.(periodic) 3. Filing returns , obtaining exemptions, Liasioning with Income Tax offices for refunds through an approved CA Firm(periodic) 4. Investment and management of Trust funds.(periodic) 5. Appointment of Statutory Auditors, preparing Gratuity Trust Accounts & arranging for Statutory Audit (annual) 6. Arranging trustee meetings of Gratuity Trust & preparing minutes of meeting. .(periodic)
  • 34. 34 Asset accounting 1. Obtaining Asset Code Creation Request Forms from concerned users. 2. Verification & Creation of asset master record in SAP. 3. Opening and carry forward of asset balances to new fiscal year in asset module 4. Ensure capitalization of vessels on completion of maiden voyage. 5. Pass entries for sale of vessels & booking of profit/loss on sale of vessels. 6. Maintaining Fixed Asset Register in Asset Module. 7. Reconciliation of financial records with physical verification report. 8. Passing of necessary entries in Asset module on the basis of Physical Verification Report. Corporate Accounts 1. Closure of SAP FI period and opening new period after the closure of DANAOS & AFSYS period & updating of monthly rates 2. Co-ordinate with all divisions to ensure that all entries are booked before closure of SAP FI period 3. Execute allocation cycles after execution of Managed vessel and Empties cycle by Liner and T & OS accounts division a. Allocation of unallocated expenses and income to vessels b. Allocation of common profit centre expenses to vessel voyage c. Execute unfinished voyage program, Post entries for unfinished voyage income & expenses. d. Execution of foreign currency revaluation for all vendors, customers, open item and non - open item managed GLs. e. Checking and manually rectifying the errors thrown by the system while execution of valuation cycles
  • 35. 35 Prepare financial results. 1. Coordinating with various departments for data required to prepare "Notes to Accounts”. 2. Replying to internal audit queries 3. Providing data required for Analysis of financial results. 4. Uploading of quarterly financial results on SCI website after the approval of same by board of directors in board meeting . 5. Preparation of Balance Sheet , Profit and Loss Account as per Companies Act, Cash Flow Statement ,supporting schedules and notes to accounts 6. Compiling contingent liability report by collating inputs received from all divisions 7. Compiling financial data for PSE Survey 8. Phase I & Phase II Audit by CAG 9. Creation of GL Codes in GL master and ensuring the correct mapping in financial statement 10. Foreign currency Valuation errors 11. PF Balances mismatch 12. Disclosure of foreign currency receipts & payments 13. Advisory services for PF & Gratuity Trust investments 14. PF Loan module implementation.
  • 36. 36 Cash and Treasury Department Cash and Treasury Hierarchy Diagram No. 18 Treasury Operations 1. Handling cash and online payments. 2. Receiving cash/cheques/DD and issuing necessary receipts. 3. Monitoring funds of Domestic and International bank accounts. 4. Fund allocation to various divisions. 5. Transfer of funds to Regional offices as per requirements. 6. Buying and Selling of currencies through online bidding. 7. Liasioning with banks and Documentation. 8. Reconciliation of cash and bank accounts. Director Finance Vice President Manager Deputy Manager Assistant Manager
  • 37. 37 Cash Flows 1. Monitoring division wise Cash Inflows & Outflows. 2. Daily cash inflows are prepared to decide disbursement plan for the day. 3. Consolidated cash flow position prepared fortnightly / monthly. Investment of Surplus Funds 1. Surplus funds are invested in Fixed Deposits (FD) & Mutual Funds(MF). 2. Funds are invested in the ratio of 60:40 in PSU and Private Banks based on DPE guidelines. 3. Card rates are taken from various banks and investment made at the best available rate. 4. Funds are invested in debt based MF(PSU) subject to a maximum of 30% of the surplus fund with overall cap of Rs 250 crore. 5. Facility of Corporate liquid Deposits on current accounts. 6. Documentation, Record keeping and Accounting. Non Fund based Facilities Liasioning with banks for issuance / extension of 1. Bank guarantees (Domestic as well as Foreign). 2. Counter guarantees. 3. Performance guarantees. 4. Letter of credits. Working Capital Management In order to manage the working capital requirement, options available are as follows 1. Short term loan from Banks. 2. Loan against Fixed Deposits. 3. Commercial Papers. 4. Buyers Credit.
  • 38. 38 Finalizations of Accounts 1. Control of main accounts from Functional ledger accounts pertaining to Cash & Treasury Department. 2. Preparing quarterly statement in respect of accrued interest on Bank deposits. 3. Preparation and submission of quarterly statement showing actual and accrued interest on bank deposits and NAV of Mutual Fund Investments. 4. Attending to observations of Internal Auditors, Statutory Auditors and Govt. Auditors. MIS Reports 1. Daily Cash & Bank Balances. 2. Weekly cash and bank balances and the projections of monthly funds requirements. 3. Monthly statement of placement of Funds in short term instruments to the Board. 4. Quarterly status of Mutual Fund Investment. 5. Quarterly status of Bank Guarantees issued as well as received in co-ordination with the concerned departments. Other activities 1. Preparation of Board Agenda for opening / closing of banks accounts, change of authorised signatories for all bank accounts including regional offices. 2. Preparation of Board Agenda for other treasury operations. 3. Maintaining daily Exchange rates for records. 4. Any other work related to regulatory requirements for treasury operations.
  • 39. 39 Out port Accounts Department Process Flow for Agents Funding and Settlement Out port Process Diagram No. 19 The various functions preformed are as follows 1. Pre-funding of Agents. 2. Weekly invoice reports sent to Agents. 3. Receiving FDA (Final Disbursement Account) Invoices from Agents and sending them for scanning. 4. Maintaining Electronic Inward Receipt register for Agents FDA. 5. Settling Agents FDA on Final Authorization by SCI. 6. Bank Reconciliation of Freight Bank Accounts. 7. Quarterly provisions basis paid/final, locked, failed items.
  • 40. 40 Accounting in the ERP System 1. Agents are required to use 2 main ERP related systems in their offices/ locations from Afsys and Danaos. 2. Afsys: A daily Freight collection deposited by the agents in SCI Freight Bank Accounts is accounted in SCI books, through Afsys system used by agent. Expenses and Income related to PDA & FDA 1. Voyage PDA/FDAs for vessel related expenses – E.g.: Pilot age, Port expenses, stuffed container expenses, crew expenses etc. 2. General PDA/FDAs for expenses which are not related to any specific vessel call –E.g.: Empty container expenses, monthly communication expenses etc. Stages in Danaos System for PDA/FDA are as follows 1. PDA(Prefunding) – Locked, Sent to Finance, Paid / Final 2. FDA (Actual invoices) – Draft, Invoicing, Closed, Approved 1, Approved 2, Final 3. Disallowances in FDA 4. Final Settlement of FDA a. Agents’ accounts (maintained in SAP), to be automatically debited with any disallowances made by Operating department in Danaos. Agents can view the same in Danaos. b. Final settlement for each voyage / General PDA to be made as soon as all FDA line- items in the said Voyage / General PDA is authorized at level 2 in Danaos. c. Once all line items are authorized at level 2 status of the FDA changes as Final.
  • 41. 41 Insurance There’s separate Insurance department in SCI which handles all insurance related things whether it be insurance of ships, or personnel (Fleet and shore). Some policies are taken through insurance companies and some through international shipping union Clubs. Below is the major insurance expense for SCI. Hull & Machinery Rs 38.88Cr. War Risk Marine Insurance – Rs75.93Cr. Protection & Indemnity (P&I) - $63,00,875. Time Charter’s Liability Cover - $3,37,603. Container insurance - $62,000. Freight Demurrage & Defense Class - $2,84,530. Special Contingency (Marine Piracy) - $198,000.
  • 42. 42 Taxation Department Tax Hierarchy Diagram No. 20 The above diagram shows the hierarchy of the taxation department. The main objective of the Taxation department is timely recording of tax related liabilities and payments. Director Finance Taxation Department Taxation (Sr Vice President) Shore Personnel And Floating Staff - TDS (DGM) Service Tax (Deputy Manager) Service Tax (Assistant Manager) Corporate Tax (Assistant Manager)
  • 43. 43 In the taxation department various tasks which are performed by the employees are as follows. Shore Personnel and Floating staff-TDS 1. Floating staff salary - TDS 2. Shore staff salary - TDS 3. TDS payable on expenses other than salaries Service Tax 1. Service tax and CENVAT credit. 2. Sales tax/Value Added Tax. Corporate Income Tax 1. Corporate tax. 2. Wealth tax. 3. Dividend distribution tax. 4. Foreign/Freight tax. 5. Customs duty. 6. Works contract tax (WCT). The employees work with collaboration with each other so that the tasks can be performed efficiently and effectively and also the tasks are divided so that the process work efficiency increases and work pressure is reduced.
  • 44. 44 Shore personnel and floating staff- TDS (tax deduction at source) The Shore personnel and floating staff –TDS tasks are performed by DGM of taxation department. In the organization the employees are bifurcated into two categories shore personnel staff and floating staff. The shore personnel staff are the employees which are working on shore i.e. Managers, Deputy Managers, Assistant managers, Vice President, Director and Chairman and Managing Director. The floating staff are employees which are working on ships. TDS Diagram No. 21 TDS Shore Staff Salary Withholding Tax Vendor/ Party Floating staff Salary
  • 45. 45 Work flow Activity The task performed for shore staff & floating staff -TDS are as follows 1. Checking & Entering in SAP External Saving Declarations on monthly basis. 2. Assessment of Tax Liabilities of Employees. 3. Monthly TDS remittances. 4. Issuance of salary certificates to shore staff employees. 5. Filing of quarterly e-TDS Return. 6. E-TDS Assessment related proceedings / hearings. The tasks performed for Vendors are as follows 1. Monthly deposit of TDS deducted from Vendors to Income Tax Dept. 2. Quarterly filing of E-TDS Return. 3. Quarterly issue of TDS Certificates. 4. Reconciliation of TDS Accounts. 5. E-TDS Assessment related proceedings / hearings. The tasks performed which are related to Withholding tax are as follows 1. Monthly payment of Withholding Tax. 2. Quarterly E-TDS Return. 3. Attending to matters, appeals, etc. relating to withholding tax on charter hire of vessels from non-resident ship-owners. 4. Filing of relevant appeals with CIT (A) & ITAT. 5. Attending meeting with counsel on Tax Matter.
  • 46. 46 Service tax The service tax tasks are performed by Deputy Manager and Assistant Manager of Tax Department. Shipping Corporation of India Ltd is providing various services which are related to shipping industry transporting goods from source to destination via ships and vice versa as per the requirement of Clients. So According to the provision of Government of India Service tax is applicable and is paid by the organization. While applying service tax respective department (B&T, L&PS, T&OS, etc) which creates invoice for service provided to clients uses Tax codes in SAP 1. For Example T1 – 10.3%, T2 – 12.36%, T4 – 14%. 2. Major work of Tax department in SCI includes compilation of service tax data from different departments. 3. Tax department also works out output tax liability and input tax for availing CENVAT credit. Work Flow Activity The various tasks performed related to service tax are as follows 1. Monthly Payment of Service Tax. 2. Filing of Half Yearly Service Tax Return. 3. Compilation of Data/information from Various Departments for submitting to Assessing Officer / Comm. Of Service Tax/ CESTAT. 4. Attending to Service tax authorities in connection with Notices received from time to time. 5. Handling of Internal Queries from different Departments. 6. Filing of relevant Appeals with Comm. Of Service Tax (A) and CESTAT. 7. Meeting with Advocates & Counsels in relation with Service Tax Appeals and Hearings on regular basis. 8. Attending Service Tax hearings before Assessing Officer / Commissioner / CESTAT.
  • 47. 47 CENVAT Diagram No. 22 Without CENVAT Credit With CENVAT Credit Company A B A B Purchase - 220 - 200 Value Added 200 30 200 30 Sub Total 200 250 200 230 Service Tax 10% 20 25 20 23 Total 220 275 220 253 Let us assume that service tax on Service is 10% of value. ‘A’ renders service to ‘B’ at Rs. 200. Thus, ‘B’ gets the service at Rs. 220, inclusive of tax @ 10%. He further provides services to ‘C’ at Rs 250. While he calculates his charges, ‘B’ has considered his cost of service as Rs. 220 and added Rs. 30 as his service charge. While providing service to C, B will charge tax again @ 10%. Thus C will get the service at Rs 275 (250 + 10% tax). In fact, ‘Value added’ by B is only Rs 30 (250-220), tax on which would have been only Rs. 3, while the tax paid was Rs. 25. As stages of providing the service continue, each subsequent recipient has to pay tax again and again on the service which has already suffered tax. This is called cascading effect. In the example illustrated above, ‘B’ will receive service from ‘A’ @ Rs. 220, which is inclusive of duty of Rs. 20. Since ‘B’ is going to get credit of duty of Rs. 20, he will not consider this amount for his costing. He will charge conversion charges of Rs. 30 and sell his service at Rs. Cenvat Excise Service Tax
  • 48. 48 230. He will charge 10% tax and raise invoice of Rs. 253 to ‘C’ (230 plus tax @10%). In the Invoice prepared by ‘B’, the duty shown will be Rs. 23. However, ‘B’ will get credit of Rs. 20 paid on the service received by him from ‘A’. Thus, effective duty paid by ‘B’ will be on Rs 3. ‘C’ will get the service at Rs.253 and not at Rs. 275 which he would have been the price in absence of CENVAT. Thus, in effect, ‘B’ has to pay duty only on Rs.30, which is the value added by him ‘B’ is receiving service from ‘A’. In second case, his service price is Rs 200/- as he is entitled to Cenvat credit of Rs 20/- i.e. tax paid on services. His invoice shows tax paid as Rs 23. However, since he has got credit of Rs. 20/- , is paying in effect only Rs 3/- as tax, which is 10% of Rs 30/- , i.e. 10% of ‘value added’ by him. The ‘Value added’ is difference between cost of input service and output service. In the above example, ‘value’ added by B is Rs 30 and hence, by tax credit system he is paying tax only on Rs 30. At each stage the service provider pays duty only on the ‘value’ added by him. Thus, it does not make any difference even if a service passes through a number of stages. Sales Tax & Value Added Tax (VAT) Sales tax/VAT is applicable while selling of ships when the ship is getting scrapped. The various tasks performed related to Sales tax/VAT are as follows 1. Payment of Sales tax/ VAT dues. 2. Filing of Sales tax/ VAT return with different Sales tax / VAT authorities 3. VAT Audit of Maharashtra and Gujarat 4. Attending to sales tax / VAT related other matters in consultation with SCI’s Sales tax / VAT advisor.
  • 49. 49 Corporate Income tax (Tonnage) The corporate income tax tasks are performed by Assistant manager of Taxation department. Work flow activity The task performed related to corporate tax is as follows 1. Computation for estimating advance tax liability for quarterly/timely payments of Corporate/Tonnage Tax. 2. Compilation/Reconciliation of Large No. of TDS Certificates from Parties & Banks. 3. Preparation and filing of Annual Tax Return. 4. Compilation of Data/information from Various Departments for submitting to Assessing Officer/CIT/ ITAT. 5. Filing of relevant Appeals with CIT (A) and ITAT and High Court. 6. Meeting with Advocates & Counsels in relation with Income Tax Appeals and Hearings on regular basis. 7. Attending Income tax hearings before Income Tax Officer / Commissioner / ITAT /High Court on regular basis. The tasks performed related to Wealth tax & Dividend distribution tax are as follows. 1. Preparation and filing of annual Wealth tax return and attending to related matters. 2. Computation and payment of dividend distribution tax and filing of annual return and attending to related matters. 3. Computation of foreign tax liability based on Freight register for passing tax provision entries.
  • 50. 50 METHODOLOGY Type of Research According to project “Study on Finance and Account Division of Shipping Corporation of India Ltd”, Research Methodology applicable would be Exploratory Research. Exploratory Research The main purpose of exploratory research is the description of functionalities of different Departments and task performed by each department. This type of research methodology relies on the Experiences and Observations. The research is carried out to know what has happened and what is happening with respect to the Finance and Accounts Divisions of Shipping Corporation of India Ltd.
  • 51. 51 Sources of Data Primary data 1. Interview 2. Observation Secondary data 1. Manuals 2. Annual Reports 3. Letters 4. Show cause Notices 5. Agreements 6. Web information 7. Historical data and information
  • 52. 52 Data Collection Instrument The Data Collection Instrument included are Interview, Observation and Reading. Interview Unstructured interview is interaction with Department persons of various Divisions with a sequence of questions to understand the core functions and task performed by them. Transcribing Data will be recorded from verbal interaction with the respondents and will be transcribed i.e. convert the sound speech into words as accurately as possible. Observation Observation is very important method for obtaining the comprehensive data to understand the process. Participant Observer as a member of subject of study while observing and keeping notes of the attributes of subject that is being researched so that can directly experience the phenomenon being studied by this approach and can get the first hand experience with Informants. Reading Reading of Documents Limitation in this approach is document may be protected, I may not have access to them as they are the Confidential Documents .As per the Company policy such Documents cannot be Disclosed.
  • 53. 53 Population The population of the project study is “Employees working in Finance & Accounts Division of Shipping Corporation of India Ltd”. 1. Tax Cell – N.R.Sariaya (Senior Vice President) 2. Tax Cell (Service Tax) – Piyush Srivastava (Deputy Manager) 3. Tax Cell (Service Tax) - Shweta Amladi (Assistant Manager) 4. Tax Cell (Corporate Income Tax) – Indar Rathi(Assistant Manager) 5. Tax Cell (Salary TDS) – Vitthal Gabhale (Deputy General Manager) 6. Tanker Commercial – Aniket Bhalerao (Assistant Manager) 7. Bunker Commercial – Kunal Medhe (Assistant Manager) 8. Bunker Commercial – S.N.Patnaik (Deputy General Manager) 9. Finance And Budgeting – Karthik Karolia (Assistant Manager) 10. Chartering – Lankesh. G (Vice President) 11. Cash & Treasury – Abhay Baral(Deputy Manager) 12. Shore Personnel (Gratuity) – Sanjay Ambekar (Deputy Manager) 13. Shore Personnel (Provident Fund) – Nitin Tare (Manager) 14. Accounts Co-Ordination – Swapnita Rane (Assistant Manager) 15. Shore Accounts - B.K.Patel (Vice President) 16. Insurance – P.V.Kulkarni (Vice President)
  • 54. 54 Sampling Method Opportunity Sampling Simply Selecting the Senior Authorities that are available at that time as per their Convenience i.e. Approaching Department Heads and requesting them to be interviewed. An opportunity sample is obtained by asking members of the Department relevant Queries and Questions regarding the Department with respect to Finance and Account Division of Shipping Corporation of India Ltd. Advantages This Method of sampling is Quick, Convenient, Simple, Economical and most common type of Sampling Method. Sample Size The sample size was 16.
  • 55. 55 Conclusion Major sources of income for SCI Diagram No. 23 Major Expenses for SCI Diagram No. 24 Bulk and Tanker Services IncomeChartering Tax Cash and Treasury (Liability & Payment) LinerFreight Freight Expense Salary FloatingStaffShore Personnel Floatingstaff AccountsDepartment Advance toEmployees Out portAccount PaymenttoAgentsas per the Dutiesperformed Bunker/ RepairsandOtherExpenses Tax Bills Technical & Offshore Services ShipManagementServices
  • 56. 56 Major Heads of Operating Earnings  Freight Income An Income earned for carriage or transportation of goods by water is called as freight.  Charter Hire Income When a vessel is given on hire for a specific period of time the income earned is called as Charter hire.  Demurrage Income Demurrage income arises when there is a delay in loading or unloading of cargo. Major Sources of income for SCI  Bulk & Tanker services – Chartering & freight.  Liner & passenger Services – Freight.  Technical & offshore services – consultancy services. Above are the major sources from which SCI books its income respectively. All the above services income is processed through various respective operational, commercial and accounts department within which they book income and applicable taxes through various ERP like SAP, DANOS & AFSYS. After booking various Taxes by respective department, TAX cell consolidates all the taxes from various departments and process it further for payment through Cash & Treasury Department. Major expenses by SCI  Salary – Shore personnel & Floating Staff.  Port dues, light dues , canal dues, Insurance , Container leasing cost, other miscellaneous expenses.  Bunker / Repairs – Fuel charges, Maintenance of ships (Dry Dock), Technical service such as workshop assistance. Above are the major expenses incurred by SCI, which is processed through various respective departments and while booking expenses Tax is booked in system and TAX cell pays all the tds deducted. Bills are processed and paid through bills department.
  • 57. 57 As SCI has major source of income come through international freight it losses on CENVAT Credit. As Financials of SCI shows it is a cash rich company but due to a public sector unit its investment horizons gets limited due to directives from department of public enterprise doesn’t allow that freedom which an private company can enjoy. As SCI is one of the biggest shipping company in India Fleet wise, its Bunker requirement is also high but due to slow decision making and being a PSU under DPE guidelines they cannot Hedge it. Being PSU and into High Tax payer category they still don’t enjoy relief from repeated enquiries from Tax department, due to which TAX cell major concentration gets diverted towards court cases from various Tax department, plus point is that this also makes SCI more accountable. As Being a PSU they loose on something but they gain also on some part, SCI enjoys add-on Credit from BPCL, HPCL, Oil India corporation for bunkering which SCI private competitors doesn’t enjoys, which helps a lot for SCI in maintain cash flow. Its Technical and offshore Division is wholly dependent on ONGC for its work that to ONGC and SCI both being PSU they got that contract . So they should acquire more clients in that line of business and not solely depend on single client. Being PSU and into High Tax payer category they still don’t enjoy relief from repeated enquiries from Tax department, due to which TAX cell major concentration gets diverted towards court cases from various Tax department, plus point is that this also makes SCI more accountable. Being one the biggest shipping company of India SCI was loss making company for last three years, this year SCI made Rs 200 crore profit due change in depreciation method and fall in crude oil prices till $40 in last quarter of 2013-14 financial year.
  • 58. 58 Major Income of SCI is in USD and their Payments are also in USD so on this part SCI is secured that they are not majorly loosing on currency fluctuations. So from this it can be concluded that SCI being a PSU it has some disadvantage on decision making but enjoys some facility because of PSU status. So in short one of the biggest shipping company can also be one the profitable company on shipping industry if there is fast pace decision making which would make it more efficient but with responsibility there should be accountability as SCI is a national asset. Though Finance and accounts division and their sub departments are not the revenue generator for shipping corporation of India, but it holds that work which cannot be avoidable and needed for smooth functioning of SCI as they deals with monetary things which ultimately matters for any company at the end because that only shows how’s company performing.