A study on budgetary control of shimul


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A study on budgetary control of shimul

  1. 1. “A STUDY ON BUDGETARY CONTROL OF SHIMUL” (A STUDY CONDUCTED AT SHIMOGA Milk UNION LTD., SHIMOGA) A Project report Submitted to the University of Mysore, Mysore. in partial fulfillment of the requirement for the award of the Degree in Master of Business Administration. by ASHWINI E. Reg.No.08MB3704 Guide Mr. Harish Kumar. M C HARANAHALLI RAMASWAMY INSTITUTE OF HIGHER EDUCATION, HASSAN 2009-10
  2. 2. HARANAHALLI RAMASWAMY INSTITUTE OF HIGHER EDUCATION HASSAN CERTIFICATE Certified that, the project entitled “A STUDY ON BUDGETARY CONTROL OF SHIMUL” conducted at “SHIMOGA MILK UNION LTD.,”, SHIMOGA is a bonafide work carried out by Miss.Ashwini E. in partial fulfillment for the award of degree in Master of Business Administration of the University of Mysore, Mysore during the year 2009-10. (Harish Kumar) (Dr.S.R. Jayaram) Guide Principal
  3. 3. DECLARATION I hereby declare that, this project report entitled “A STUDY ON BUDGETARY CONTROL OF SHIMUL” conducted at Shimoga Milk Union Ltd., Shimoga prepared by me under the guidance of Mr. Harish Kumar, Department of Business Administration, Haranahalli Ramaswamy Institute of Higher Education, Hassan. In partial fulfillment of the requirement for the award Master of Business Administration. I further declare that this project report is prepared from the information collected from the SHIMOGA MILK UNION LTD., SHIMOGA., and that the same is purely for academic purpose and that the report has not been submitted to any other institution of higher learning for the award of any degree, diploma or other similar title. Date: 07-5-2010 Ashwini.E Place: Hassan Reg. No. 07MB3704
  4. 4. ACKNOWLEDGEMENT I, express my deep sense of gratitude and sincere thanks to Mr. PARAMASHIVA, department of head, “SHIMOGA MILK UNION LTD” who gave me an opportunity to conduct this Research Project. I state with great pleasure this report would not have been possible without the wonderful help from various quarters, the list of which is quite too long. I will take this opportunity to express my deep sense of gratitude to Mr. Harish Kumar. M.C. HRIHE, Hassan for his guidance, continuous encouragement and valuable suggestions at every stage of the Project. I would also like to extend my deep sense of gratitude to my parents and all my family members, friends, who have directly or indirectly supported and helped me in the completion of my project successfully Last, but not the least I would like to extend my thanks to all the unseen hands that have made this project possible. Date: Ashwini E Place: Hassan Reg. No. 08MB3704
  5. 5. LIST OF THE TABLES Table No Title of the table Page No 1.6.3 Key activities of Financial 18 management 1.6.4 Organizational of the 20 financial department 1.6.5 Financial Management 21 Process 1.6.6 Decisions, Return, Risk & 22 trade off 1.7 Procedure for test & 23-24 analysis for Milk & Milk products 1.8 Summary of last annual 26 report 1.8.2 Extract of Profit/Loss a/c 27 1.8.3 Extract of Trading & 28 Manufacturing a/c 2.3.1 Organizational structure 41 2.4 Milk & Milk products price 43 list
  6. 6. CONTENTS Sl. No Particulars Page. No Executive Summary Chapter – 1 INTRODUCTION 1.1 Statement of the Problem 01 1.2 Objective of Study 01 1.3 Scope of the Study 02 1.4 Methodology 02 1.5 Limitations of Study 04 Chapter – 2 REVIEW OF LITERATURE 05 - 28 Chapter – 3 INDUSTRY AND COMPANY PROFILE 29 - 50 Industry Profile 29 - 36 Company Profile 37-40 Organization Structure 41 Achievements 44-49 SWOT Analysis 50 Chapter – 4 DATA COLLECTION AND 51 - 64 INTREPETATION Chapter – 5 SUMMARY OF FINDINS, SUGGESSIONS 65 – 67 AND CONCLUSION BIBLIOGRAPHY 68
  7. 7. Budgetary control of SHIMUL Executive Summary “Shimoga Milk Union Limited” is a cooperative sector undertaking, engaged in the processing of Milk & manufacturing the Milk products, it recently launched three new variants of Nandini Milk. The Shimoga milk union is located in the central part of Karnataka. The corporate office of the union is based at Machenalli, covering three districts of Shimoga, Davangere and Chitradurga. The Budgetary Control is playing a vital role in the organization. The role of Budgetary Control is the essence of a business. The information is the blood and Budgetary Control is the heart. In the body the hart plays the role of supplying pure blood to all the elements of the body including the brain. The Budgetary Control plays exactly the same role in the organization. The system ensures that an appropriate data is collected from the various sources, processed and sent further to all the needy destinations. The system is expected to fulfill information needs of an individual, a group of individual, a group of financial functionaries, the managers and the top management. So the Budgetary Control is very important in modern organizations. Thus, I have been chosen the Budgetary Control as the specific area of the study. Therefore, a study has been taken up on “A STUDY ON BUDGETARY CONTOL OF SHIMUL”. The study is taken for “Shimoga milk Union ltd” wherein an attempt has been made to understand the Budgetary Control and a small study has been under taken. So as to get an insight into Budgetary control. HRIHE, Hassan Page 7
  8. 8. Budgetary control of SHIMUL 1.1 Problem statement “A STUDY ON BUDGETARY CONTROL” was conducted through a structured questionnaire so as to • To analyze how Budgetary Control helps the milk union to select best course of action. • To provide a detailed plan of action for a business over a period of time. • To coordinate the different units & activities of the organization with a view to utilize the resources judiciously. • To revise the budgets in the light of changed circumstances. • To exercise control and on cost through comparison of actual results with the budgeted one. • To know the role of BC. The purpose of the study is to estimate of receipts and payments of revenue and capital items in future. Hence the study has been entitled as “A BUDGETARY CONTROL OF SHIMUL”. 1.2 Objectives of the Study • To know the role of Budgetary Control in SHIMUL. • To analyze how Budgetary Control helps the milk union to select best course factors. • To revise the budgets in the light of changed circumstances. • To exercise control and on cost through comparison of actual results with the budgeted one. • It shows the relationship between the actual number of working hours and the maximum possible number of working hours in a budget period. • To provide a detailed plan of action for a business over a period of time. • A Budgetary Control department fulfill the needs of organizations HRIHE, Hassan Page 8
  9. 9. Budgetary control of SHIMUL 1.3 Scope of the Study This study report will be very handy to SHIMUL in terms of understanding the level of the Budgetary Control of SHIMUL. The study conducted on Budgetary Control of SHIMUL is cover the all financial area of Budgetary Control department including how it collects information’s from other department like production, sales, finance etc How Budgetary Control support the top level of management to take a good decision, the work of application software “SAMRUDHI”, in the financial area of Budgetary Control department. 1.4 Research methodology Need for the study BUGETARY CONTROL is the essence of a business. Therefore, financial planning is of utmost significance to a businessman. Financial planning is concerned with raising funds and their effective utilization with a view to maximize the wealth of the company. In spite of good financial plan, the desired may not be achieved if there is no effective control to ensure its implementation. A budget is an important tool for financial planning and control. The budget represents a set of yardsticks or guidelines for use in controlling internal operations of an organization. The management through budget can evaluate the performance of every level of the organization. The discrepancy between planned performance & actual performance is highlighted through budgets. The concept therefore is a blend of principles theories and practice of the Budgetary Control giving rise to single product known as Budgetary Control. HRIHE, Hassan Page 9
  10. 10. Budgetary control of SHIMUL METHODOLOGY OF DATA COLLECTION SOURCES OF DATA There are 2 types of data 1. Secondary data 2. Primary data 1. Secondary data On the other hand it includes those data which are collected from some earlier research work and used in the study, researcher has presently undertaken. Sources of Secondary data  Use of internet  Annual report of Shimoga Milk Union ltd  Standard reference text books  KMF website, KMF co-orp  NDDB.com  Data provided by Shimoga Milk Union 2. Primary data Primary data are generated when the researcher employing mail questionnaire, telephone surveys. Personal interviews observation and experiment investigation particular problem at hand Sources of primary data  Personal interview method In this research, researcher has conducted survey in personal interview method; this type of survey researcher has met the department head. HRIHE, Hassan Page 10
  11. 11. Budgetary control of SHIMUL Operational Definitions OFFICE AUTOMATION SYSTEM: Office automation system includes new hardware and software packages like word processing, spreadsheets etc., it makes office employees more productive in addition to the attended situation created office automation technology and the people that use that technology. Research Design Research Design is the basic framework, which provides guidelines for the rest of the research process. It is map or blueprint according to which the research has to be conducted. The Research Design specifies the method of data collection and data analysis. Here the researcher has used exploratory method of research. It includes both open end type of questionnaire. It is helpful in knowing general information about any aspect of the organization. 1.5 Limitations of the Study Despite of tall the effort to make the analysis more comprehensive and scientific, a study of present kind is bound to have certain limitations. Researcher humbly requests the respondent to submit them at this stage. The present study is an attempt made to understand the management information system of SHIMUL. The present study is an empirical work presented in a descriptive manner. Since the objective of the study may be a kind of analysis. Attempt has been made to provide more comprehensive conceptual analysis.  The study cannot replace the managerial judgments in decision making  The study is only limited to the available information in the department  The study is limited to the financial area of Budgetary Control department. HRIHE, Hassan Page 11
  12. 12. Budgetary control of SHIMUL Literature of Review 2.1 Budgeting & Budgetary Control: Definition Finance is the Life blood of a business. Therefore, financial planning is off almost significance to a businessman. Financial planning is concerned with raising funds and their effective utilizations with a view to maximize the wealth of the company. In spite of good financial plan, the desired results may not be achieved if there is no effective control to ensure its implementation. A budget is an important tool for financial planning and control. The budget represents a set of yardsticks or guidelines for use in controlling internal operations of an organization. The management, through budget, can evaluate the performance of every level of the organization. The discrepancy between planned performance & actual performance is highlighted through budgets. Budgeting: Definition A budget is a statement, which shows forecasts of the financial activities of a business to achieve a specific purpose. A budget is basically an estimate of receipts and payments of revenue and capital items in future. 2.2 Budgetary control: Objectives • To provide a detailed plan of action for a business over a period of time. • To coordinate the different units & activities of the organization with a view to utilize the resources judiciously. • To revise the budgets in the light of changed circumstances. • To exercise control and on cost through comparison of actual results with the budgeted one. HRIHE, Hassan Page 12
  13. 13. Budgetary control of SHIMUL 2.3 Budgetary control: There are 5 types of budgetary control. 1. Master budget 2. Financial budget 3. Fixed budget 4. Flexible budget 5. Zero-based budgeting 1. Master budget: Master budget (also known as summary budget or finalized profit plan) combines all the budgets for a period into one harmonious unit and thus, it show the overall budget plan. As profit planning is the main objective of a budget program, it is but natural that all the subsidiary budgets should be co-ordinated and projected into a master or summary budget, which should show the final projected results of the plan. The master incorporates all the subsidiary functional budgets and the budgeted Profit & Loss Account and Balance Sheet. Before the budget plan is put into operation, the master budget is considered by the top management and revised if the position of profit disclosed there is not found to be satisfactory. After suitable revision is made, the master budget is finally approved and put into action. Another view regards the budgeted Profit and Loss account and the Balance sheet as the master budget. The Profit and Loss account is built up from the other budgets already set, and no fresh estimates are necessary. The operating profit is obtained by further deduction of the budgeted income and expenditure items give the budgeted net profit. HRIHE, Hassan Page 13
  14. 14. Budgetary control of SHIMUL Advantages of a forecast Profit and Loss Account are as follows: 1) It presents an overall projected profits position of the concern. 2) It enables the planning and control of the profits of the business. 3) It enables the investigation of causes for variances. 4) The accuracy of all the budgets is automatically checked. 2. Financial budget: Financial budget is a summary statement for the future that shows the estimated requirements of the cash inflow an outflow. According to Walker, “A financial budget is a comparison of estimated cash inflows and outflows for particular period i.e. a quarter or year.” According to Guttmann and Dougal, “financial budget is an estimate of cash receipts and disbursements for a future period of time.” Financial budget may be prepared any of the following three methods: 1. The receipts and payment method 2. The adjusted profit & loss method 3. The balance sheet method Receipts and payment method: Under receipts and payment method estimate of cash receipts and cash payments is worked out during the budgeted period. Estimated cash receipts are added to opening cash balance and estimated cash payments are deducted out of the total. Thus, the closing cash balance is worked out. Estimates regarding sales are indicated by the sales department that also points out the general trend of credit allowed to customers. Purchase department makes forecast about the cash and credit purchases and also points out the period after which the credit purchases are met. HRIHE, Hassan Page 14
  15. 15. Budgetary control of SHIMUL Adjusted Profit & Loss Method: Financial budget under this method is also known as cash flow statement. This method is useful for long term planning; therefore under this method cash inflow and outflow are estimated for a year Balance Sheet Method: Under this method the business concern prepares a budgeted balance sheet. Cash and Bank Balance (or overdraft) is computed with this budgeted balance sheet. Budgeted balance sheet is prepared with all assets items (excluding cash and bank balance) and all liabilities (excluding bank overdraft). 3. Fixed budget: A fixed budget is designed to remain unchanged irrespective of the level of activity. This budget is prepared on the basis of a standard or fixed level of activity. This budget becomes an unrealistic yardstick in case the level of activity actually attained does not conform to the one assumed for budgeting purposes. Due to the limitations of fixed budgeting, firms whose sales and production cannot be accurately estimated have given up the practice of fixed budgeting. 4. Flexible Budget: A budget that is designed to change in accordance with the level of activity attained is called a flexible budget. This budget is prepared after considering the fixed and variable elements of cost and the changes that may be expected for each item at various levels of operations. Flexible is desirable in the following cases:  Sales are unpredictable, e.g., luxury or semi-luxury products.  The venture is new & it is difficult to foresee the demand, e.g., fashion products.  Where the business is subject to the vagaries of nature, such as soft drinks. HRIHE, Hassan Page 15
  16. 16. Budgetary control of SHIMUL 5. Zero-based budgeting: The technique of zero base budgeting provides a solution for overcoming the limitations of traditional budgeting by enabling top management to focus on priorities, key areas and alternatives of action throughout the organization. Some of the problems, which top management has to face are: 1. Programs and activities involving wasteful expenditure are not identified, resulting in avoidable financial and other costs. 2. Inefficiencies of a prior year are carried forward in determining subsequent year’s levels of performance. 3. Manages are not encouraged to identify and evaluate alternative means of accomplishing the same objectives. 4. Decision-making is irrational in the absence of rigorous analysis of all proposed costs and benefits. 5. Managers tend to inflate their budget requests resulting in more demand for funds than their availability. This results in recycling the entire budgeting process. 2.4 Process of zero-Based Budgeting: The following steps are involved in zero based budgeting: Determining the objectives of budgeting: The objective may be to effect cost reduction in staff overheads or it may be to drop, after careful analysis, projects which do not fit into achievement of the organizations objectives etc. Deciding on scope of application: The extent to which the zero base budgeting is to be introduced has to be decided, i.e. whether it will be introduced in all areas of the organization’s activities or only in a few selected areas on trial basis. HRIHE, Hassan Page 16
  17. 17. Budgetary control of SHIMUL Developing decision units: Decision units for which cost- benefit analysis is proposed have to be developed so as to arrive at decisions whether they should be allowed to continue or be dropped. Each decision unit, as far as possible should be independent of other units so that it can be dropped if the cost analysis proves to be unfavorable for it. Developing decision packages: A decision package for each unit should be developed. While developing a decision package, answers to the following questions would be desirable. i. Is it necessary to perform a particular activity at all? If the answer is in the negative, there is no need to proceed further. ii. How much has been the actual cost of the activity and what has been the actual benefit both in tangible as well as intangible forms? iii. What should be the estimated cost of the level of activity and the estimated benefit from such activity? iv. Should the activity be performed in the way in which it is being performed and what should be the cost? v. If the project or activity is dropped, can the unit be replaced by an outside agency? Advantages of zero based budgeting: 1. It provides the organization with a systematic way to evaluate different operations and programs undertaken. It enables management to allocate resources according to priority of the programs. 2. It ensures that each and every programmed undertaken by managers is really essential for the organization, and is being performed in the best possible way. 3. It enables the management to approve departmental budgets on the basis of cost- benefit analysis. No arbitrary cuts or increases in budget estimates are made. 4. It links budgets with the corporate objectives. Nothing will be allowed simply because it was being done in the past. An activity may be shelved if it does not help in achieving the goals of the enterprises. HRIHE, Hassan Page 17
  18. 18. Budgetary control of SHIMUL 5. It helps in identifying areas of wasteful expenditure and, if desired, it can also be used for suggesting alternatives courses of action. 6. It facilitates the introduction and implementation of the system of ‘management by objectives’. Thus, it can be used not only for fulfillment of the objectives of traditional budgeting, but also for a variety of other purposes. 2.5 BUDGET: A budget is a plan expressed in quantitative, usually monetary term, covering a specific period of time, usually one year. In other words a budget is a systematic plan for the utilization of manpower and material resources. In a business organization, a budget represents an estimate of future costs and revenues. Budgets may be divided into 2 basic classes: Capital budget & operating budget Capital budgets are directed towards proposed expenditures for new projects and often require special financing. Operating budgets are directed towards achieving short-term operational goals of the organization, for instance, production or profit goals in a business firm. Operating budgets may be sub-divided into various departmental of functional budgets. The main characteristics of a budget are: 1. It is prepared in advance and is derived from the long-term strategy of the organization. 2. It relates to future period for which objectives or goals have already been laid down. It is expressed in quantitative form, physical or monetary units, or both. Different types of budgets are prepared for different purposed e.g, sales Budget, production Budget, administrative Expenses Budget, Raw-material Budget etc. All these sectional budgets are afterwards integrated into a master budget, which represents an overall plan of the organization. HRIHE, Hassan Page 18
  19. 19. Budgetary control of SHIMUL 2.6 Advantages of Budget: A budget helps us in the following ways: 1. It brings about efficiency and improvement in the working of the organization. 2. It is a way or motivating managers to achieve the goals set for the units. 3. It serves as a benchmark for controlling on-going operations. 4. It helps in developing a team spirit where participation in budgeting is encouraged. 5. It helps in reducing wastage and losses by revealing them in time for corrective action. 6. It serves as a basis for evaluating the performance of managers. 7. It serves as a means of educating the managers. 2.7 Production Budget: This budget provides an estimate of the total volume of production distributed product-wise with scheduling of operations by days, weeks and months, and a forecast of the inventory of finished products. Generally, the production budget on the sales budget. The responsibility for the overall production budget ties with works manager and that of with departmental works managers. Production budget may be expressed is physical or financial terms or both in relation to production. The production budgets attempt to answer questions like I. What is to be produced? II. When is to be produced? III. How is to be produced? IV. Where is to be produced? HRIHE, Hassan Page 19
  20. 20. Budgetary control of SHIMUL The production budget envisages the production program for achieving the sales target. It serves as a basis for preparation of related cost budgets, e.g., materials cost budget, Labour cost budget, etc. it also facilities the preparation of a cash budget. The production budget is prepared after taking into consideration several factors like- Inventory policies, sales requirements, production stability, plant capacity, availability of materials and Labour, time taken in production process etc. Production costs budgets: Basically, there are 3 elements of costs, namely direct material, direct Labour and overheads. Separate budgets for each of there elements has to be prepared. The direct materials budget has 2 components, 1) Materials Requirement budget 2) Materials procurement or purchase budget. The former deals with the total quantity of materials required during the budget period, while the latter deals with the materials to be acquired from the market during the budget period. Materials to be acquired are estimated after taking account the closing and the opening inventories and the materials from which orders have already been placed. Overhead budget: The overheads may relate to factory, general administration, sales and distribution function. Separate budgets may, therefore, be prepared for factory overheads, administrative overheads and selling and distribution overheads. Manufacturing overheads budget: Factory or manufacturing overheads includes the cost of indirect material, indirect Labour and indirect expenses. HRIHE, Hassan Page 20
  21. 21. Budgetary control of SHIMUL Manufacturing overheads may be classified into: 1. Fixed overheads i.e., which tend to remain constant irrespective of change in the volume of output. 2. Variables overheads i.e., which tend to vary with the output, 3. Semi-variable overheads i.e., which are partly variable and partly fixed. The manufacturing overhead budget will provide an estimate of these Overheads to be incurred during the budget period. Fixed manufacturing overheads can be estimated on the basis of past information and knowledge of any changes which may occur during the ensuring budget period Variable. 2.8 Budgetary Control Rations: Activity ratio: It is a measure of the level of activity attained over a period of time. It is obtained by expressing the number of standard hour’s equivalent to the work produced as a percentage of the budgeted hours. Mathematically: Standard hours for actual production X 100 Budgeted hours Capacity Ratio: This ratio indicates whether and to what extent budgeted hours of activity are actually utilized. It shows the relationship between the actual number of working hours and the maximum possible number of working hours in a budget period. Mathematically: Actual hours worked X100 Budgeted hours HRIHE, Hassan Page 21
  22. 22. Budgetary control of SHIMUL Efficiency Ratio: It indicates the degree of efficiency attained in production. It is obtained by expressing the standard hour’s equivalent to the work produced as a percentage of the actual hours spent in producing that work. Mathematically: Standard hours for actual production X 100 Actual hours worked 2.9 Meaning of Financial Management: Financial management is broadly concerned with the acquisition & of funds by a business firm. Its scope may be defined in terms of the following question. • How large should the firm be & how fast should it grow? • What should be the composition of the firm’s assets? • What should be the mix of the firm’s financing? • How the firm should analyze, plane and control its financial affairs? Importance of Financial Management: Financial Management is indeed the key to successful business operations. Without proper administration and effective utilization of finance. The importance of financial management can be ascertained from the study of the following point. 1. Successful promotion: Successful promotion of a business concern depends upon efficient financial management. If the plan adopted fails to provide adequate capital to meet the requirements of fixed and working capital and particularly the latter. 2. Smooth Running: Since finance is required at each stage of the business such as promotion, incorporation, development, expansion and management of day-to- day expenses. HRIHE, Hassan Page 22
  23. 23. Budgetary control of SHIMUL 3. Decision Making: Financial management provides scientific analysis of all facts and figures through financial tools such as ratio analysis, variances analysis, budgets etc. 4. Solution to Finance Problem: The efficient of Finance management helps the top management by providing solutions to the various financial problems faced by it. 5. Measure of performance: Financial management is considered as a yard stick to measure the performance of the firm. 2.10 Scope and function of financial management: The approach to the scope and functions of financial management is divided, in order to have a better exposition, into 2 board categories a) Traditional approach b) Modern approach Traditional approach: The Traditional approach which was popular in early stage, limited the role of financial manager to rising and administering of funds needed by the corporate enterprises to meet their financial needs. It deals with the following aspects: I. Arrangement of funds from financial institutions. II. Arrangement of funds through financial institutions likes share, bonds etc. III. Looking after the legal and accounting relationship between a corporation and its source of funds. Modern approach: According to modern approach the firm financial, management provides a conceptual and analytical frame work for financial decision making. The main contents of the modern approach are as follows: i. What is the total volume of funds an enterprise should commit? ii. What specific assets should an enterprise acquire? iii. How should the funds required be financed? HRIHE, Hassan Page 23
  24. 24. Budgetary control of SHIMUL The functions of financial management may be classified on the basis of liquidity, Profitability and management.  Liquidity: It is ascertained on the basis of three important considerations. a) Forecasting cash flow: Matching the inflows against cash outflows. b) Raising funds: Financial manager will have to ascertain the sources from which funds may be raised and the time when these funds are needed. c) Managing the flow of internal funds.  Profitability: While ascerting profitability, the following factors are taken into account. a) Cost control b) Pricing c) Forecasting future profits d) Measuring cost of capital  Management: Assets management has assumed an important role in financial management. a) The management of long term funds. b) The management of short term funds HRIHE, Hassan Page 24
  25. 25. Budgetary control of SHIMUL 2.11 Key Activities of Financial management: The three board activities financial management are: a) Financial analysis b) Management of firm’s asset structure c) Management of the firm’s financial structure. These activities are related to the balance sheet of the firm: Financial Analysis, Planning & Control Management of Balance Sheet management of The Firm’s Long term financing Fixed Assets the firm’s Assets Financial structure structure Short term financing Current Assets HRIHE, Hassan Page 25
  26. 26. Budgetary control of SHIMUL 2.12 Organizational of the Finance Functions Like any functional management in a firm ‘finance’ is a vital functional organ of the firm. If finance function does not operate well, the whole organizational activity will be ruined. So inefficient financial management paralyses the activity of the firm. The finance function can be broadly classified into 2 parts. • Routine financial matters like custody of cash and bank accounts, collection or loans, payment of cash. • Special financial functions like financial planning and budgeting, profit analysis, investment decision. HRIHE, Hassan Page 26
  27. 27. Budgetary control of SHIMUL The following chart will give an idea about the financial department Organizational of the Financial Department ChiefFinance Officer Treasurer Controller Cash Credit Financial Cash Manager Manager Accounting Accounting Manager Manager Capital Fund Raising Tax Data Budgeting Manager Manager Processing Manager Manager Portfolio Internal Auditor Manager HRIHE, Hassan Page 27
  28. 28. Budgetary control of SHIMUL 2.13 The Financial Management Process Information Information Financial Analysis Financial Control Financial Planning Financial Decision Making Information Information 1. Financial Analysis: This is preliminary, diagnostic stage and will include a financial analysis and review to determine the current financial performance and condition of the business. An identifical of any particular financial problem, risks, constraints or limitations. An assessment of finance strength, weakness, opportunities and threats. 2. Financial Decision- Making: Based on the findings of the review stage, financial decisions and choices will have to be made. HRIHE, Hassan Page 28
  29. 29. Budgetary control of SHIMUL 3. Financial Planning: The essence of financial planning is to ensure that the right amount of funds is available at the right cost for the level of risk involved. 4. Financial Control: The final stage of the process will require throughout the organization. 2.14 Decisions, Return, Risk and Trade Off: The inter-relationship between market value, financial decisions, risk-return and trade off is depicted in the chart. Finance Manager Maximization of share value Financial Decisions Funds Financing Investment Dividend Requirement Decision Decision Decision Decision Return Risk Trade Off HRIHE, Hassan Page 29
  30. 30. Budgetary control of SHIMUL 2.15 Procedure for Test and Analysis for Milk & Milk Products: The purpose is to define & document a procedure for tests and analysis conducted for milk & milk products. The procedure is explained in the below table HRIHE, Hassan Page 30
  31. 31. Sl Product Parameter Instrument/Method no Budgetary control of SHIMUL 1 Milk a. Temperature 1. Thermometer 1. Organoleptic Evaluation 2. Sensory Organs 2. clot on boiling test 3. Boiling 3. Acidity 4. Titration 4. Fat 5. Garber/EMT 5. CLR & SNF 6. Lacto meter 6. MBRT 7. Hot Water Bath 7. Phosphates 8. Hot Water Bath 8. SPC 9. Plating 9. Chloroform 10. Plating 2 Cream Temperature Thermometer Fat% Garber method Acidity Titration MBRT Ref. Wi (C.3.7) Phosphates Hot Water Bath SPC Plating Chloroform Plating 3 Butter Moisture Gravimetric Method Fat Garber method Acidity Titration Yeast and Moulds Plating 4 Ghee Organoleptic test Sensory Organs Moisturey Gravmetric Test FFA Titration BR Index Butyrate Refractometer Adulteration Baudin test RM Value RM Apparatus Polenske Titration 5 Peda Moisture Gravimetric Method Fat% Garber method 6 Curd Physical Characteristics Titration Acidity Plating Coli form Plating Yeast &Moulds 7 Lassi Sweet Fat% Gravimetric Method SNF% Garber method Acidity Titration 8 Lassi Khara Fat% Garber method Acidity HRIHE, Hassan Titration Page 31 9 Skim Milk Organoleptic test Sensory Organs Powder Moisturey Gravmetric Test
  32. 32. Budgetary control of SHIMUL Test and Analysis of Milk & Milk Products Procedure for Internal Quality Audit: The purpose of this document is to define & document internal quality audit to ensure that OMS conforms to planned requirements and is effectively implemented and maintained. Procedure for Maintenance: The purpose of this document is to define and document a procedure for maintenance of spare parts. Procedure for Critical Product Purchasing: The purpose of this document is to define and document a procedure for CPC purchasing of required materials periodically. The procedure is limited to purchase of packing materials, consumables, veterinary durgs, milk cans. Procedure for Regular Purchasing: The purpose of this document is to define and document a procedure for regular purchasing of required materials periodically. The procedure is limited to purchase of items require for Dairy excluding milk & CPC purchase at Shimoga Milk Union. Procedure of Control of Non-Conforming Products: The purpose of this document is to define and document a procedure for control of non conforming product to ensure the product, which does not conform to specified requirements is identified and controlled to prevent its unintended use or delivery. HRIHE, Hassan Page 32
  33. 33. Budgetary control of SHIMUL 2.16 Summary of Last Annual Report Extract of balance sheet Balance sheet of Shimoga Milk Union Ltd As on 31-3-2009 Liabilities Amount Asset Amount Share Capital 44029200.00 Fixed asset 325559448.58 Reserves & surplus 38028771.20 Investment 69044986.00 Loans 37573970.98 Working capital 119630375.10 Grants 198225.00 Current asset Current liabilities Stock in hand 26895931.40 P/L A/c 6513784.72 Sundry debtors 2289252.22 Cash & bank bal 39499267.53 Loans and advances 50945923.95 Total 221231309.68 total 221231309.68 HRIHE, Hassan Page 33
  34. 34. Budgetary control of SHIMUL 2.17 Extract of Profit and loss a/c Profit and loss account of Shimoga Milk Union Ltd As on 31-3-2009 Expenditure Amount Income Amount Staff expenses 48328724.73 Trade profit 91207873.65 Administrative expenses 10822722.95 Other income 3386560.35 Transport expenses Interest on 6151235.90 investment and 4738854.21 deposits Tax 1579683.00 Grants 930606.00 Milk sales expenses 204349015.00 Packing 4614915.00 Interest and bank commission 1817926.45 Profit 6513784.72 Total 100263894.21 Total 100263894.72 HRIHE, Hassan Page 34
  35. 35. Budgetary control of SHIMUL 2.18 Extract of Trading and Manufacturing A/c Trading and manufacturing account of Shimoga Milk Union Ltd As on 31-3-2009 Particulars Amount Particulars Amount Milk and milk Opening stock 16156452.85 706631645.34 products Milk & milk products Purchase of milk 534903008.75 112466857.39 (dairy sales) Fodder and other 106835008.00 Closing stock 26895931.30 expend Storage and 3963598.18 transportation exp Processing and manufacturing 37938944.60 expenses Purchase packed 19689548.00 things Trade profit 91207873.65 Total 845994434.03 Total 845994434.03 HRIHE, Hassan Page 35
  36. 36. Budgetary control of SHIMUL 3.1 Industry Profile The concepts of the Budgetary control have evolved over a period of time comprising many different facts of financial functions. Budgetary control is necessity of all the organization The initial concept of Budgetary control was to process to data from the organization and present it in the form of report at regular intervals. The system was largely capable of handling the data from collection to processing. It was more impersonal, requiring each individual to pick and choice the proposed data and uses it for his requirements. This concept was further modified when a decision was made between data and information the information is the product of an analysis of data. This concept is similar to a raw material and finished products. The concepts of Budgetary control gives high regards to the individual and his ability to use the information. A Budgetary control gives information through data analysis. Budgetary control study associates with the above said objectives. It is concerned with collection of data and interpretation of data. This Budgetary control study particularly on Shimoga Milk Union limited focuses on mainly itsOrganizational study & a glance on all of its financial departments. This report hopes to understand the functions of Budgetary control of Shimoga Milk Union limited in a real working condition & give real working experience while study. Industrial Background of the Study The birth of milk industry In India can be traced back in 1965. At that time, the prime minister of India, Lal Bahadur Shastri combined the wisdom & energy of farmers with professional management to successfully capture liquid milk and milk product markets while supporting farmer investment with input and services and it give way to N.D.D.B. National Dairy Development Board The N.D.D.B was formed to replace exploitation with empowerment, tradition with modernity, stagnation with growth, transforming dairying into an instrument for the development of India’s rural people. N.D.D.B. began its operations with the mission of making dairying a vehicle to a better future for Million of grassroots milk products. The mission achieved thrust and HRIHE, Hassan Page 36
  37. 37. Budgetary control of SHIMUL direction with the launching of “operation flood” a program emergence as the world’s largest milk producing nation. Operation flood’s third phase was completed in 1996 and has to its credit a number of significant achievements. In June 1974, an integrated project was launched in Karnataka to restructuring & reorganizes the dairy industry on the co-operative principal 7 to lay foundation for a new direction in dairy development.Work on the first ever, World Bank aided dairy development project was initiated in 1975. At the end of September 1984 the World Bank- aided project ended and the dairy development activities were extended to cover the entire state except coastal taluks Kannada district & the process of dairy development was continued in the second phase from April1984. As on March 2001, India’s 96,000 dairy co-operatives integrated through a co- operative structure “the Anand pattern” owned by more than ten million farmers. It procures an average of 16.5 million liters of milk everyday. The milk is processed & marketed by 170 milk producers, co-operative unions which in turn own 15 states co- operative milk-marketing federations. Since its inspection, the dairy board has planned and spearheaded India’s dairy programs by placing dairy development in the hands of milk producers and the professionals they employ to manage their co-operative allied industries N.D.D.B also promotes other commodity based co-operative allied industries and veterinary biological on an national wide basis. Functions of the Unions: DCS are grouped at district level into co-operative milk producer’s unions. The unions organize new DCS, assist DCS with their management including audit of accounts, supervise, purchase, process & market the liquid milk. Provision of input facilities are also organized by the union 7 channelised to the dairy farmers through DCS. The input facilities include supply of cattel feed, fodder, AI, Veterinary services, training & know how on scientific animal husbandry. HRIHE, Hassan Page 37
  38. 38. Budgetary control of SHIMUL N.D.D.B and 2010 goals: In state Milk federation & the Milk producers co-operative union in consultation with dairy board/NDDB has drawn 2010 goals & strategies as fallows. • Production enhancement • Assuring quality and creating a national framework • Setting realistic goals for strengthening co-operative business. Origin of the Industry In 1986, British government to meet the requirements of army personnel established military dairy forms. In 1937, first Shimoga Milk Union “Luck now Milk Products co-operative Union limited” has set up National Dairy Development Board (NDDB) was established on 25 September 1965 under the society’s registration Act 1950. It was a non-profit making organization. Milk: What is Milk? Milk white liquid secreted by the mammary glands of female mammals to nourish their young for a period beginning immediately after birth. Man has used the milk of animals as food from before recorded history began. Now most milk is consumed by humans as a result the cow and milk & milk products have become important articles of commerce. Milk is a mixture of water, fat, protein, sugar and inorganic salts. Major Constituents of Milk are: Water Proteins Lactose Mineral Constituents Minor Constituents Milk comprises of water, fat and solid-not-fat (SNF) Milk is nutritionally balanced when fat and SNF are in the right proportions. SNF is made up of proteins, lactose and minerals. Normal cow milk contains about 4% fat and 8.5% SNF buffalo milk contains about 7% fat and 9% SNF. HRIHE, Hassan Page 38
  39. 39. Budgetary control of SHIMUL What is Pasteurized Milk? Milk is good nutritive medium for the growth of bacteria. After the milk is drawn, from the udder. It is likely to be contaminated with bacteria during handing, transportation, etc, pasteurization is of process which ensures the destruction of pathogenic or disease causing bacteria and makes the milk safe for human consumption. Loose milk sold in the market is generally not pasteurized. Sometimes un-pasteurized milk may also be packed in sachets for sale. Consumers need to ensure that they purchase pasteurized milk only by examining the label on the packet. Importance of Packed Milk: Fresh milk drawn from a healthy animal contains very few microorganisms, improper handling subsequently results in its contamination and spoilage increased acidity of milk, because of the activity of microorganisms, causes the milk to curdle on heating. Milk can remain in a good condition for 24 hours it is properly handled and pasteurized. Packed milk is procured under hygienic conditions scientifically handled, pasteurized at 720C for 15 seconds to destroy pathogenic organisms and chilled to 40C to restrict the growth of other organisms. Such milk is healthy and can remain good condition for longer period when stored under refrigerated condition. Packed milk is therefore safe and healthy, and choose only the packed milk of a name you can trust. Butter: Yellow to white fatty food obtained from cows milk or cream by churning it to flocculate the fat globules into a solid emulsion that also contains some water, curd milk sugar and inorganic salts. Butter is high-energy food containing approximately 715 calories per 100 gms and has substantial amount of vitamins A and D but is low in other vitamins. It contains phosphorus but is low in protein. The color of butter is caused by carotene and other fat-soluble pigments contained in the fat. Butter has been relished as a spread and as a cooking fat. It is an important edible fat in northern Europe, North America oceanic and other places to which Europeans have migrated. HRIHE, Hassan Page 39
  40. 40. Budgetary control of SHIMUL Ghee: Semi-fluid butterfat made by the evaporation of water and clarification of butter from the milk of cow buffaloes, goats or sheep. It can be many months and is a stable food on the Indian subcontinent used for cooking and medicinally and in Hindu religious ceremonies. Peda: Peda refers to the partially dehydrated whole milk product prepared by direct heating milk in a pan with constant stirring and scrapping till it reaches a semi solid consistency under PFA rules the fat contents in Peda shall not be less than 20% of the dry matter in the finished products. Peda constitutes a base for the manufacture of most Indian milk sweets it has been estimated that nearly 4.5% of our milk production is utilized for Peda making. Milk assembly, its modernized processing into bulk and its products and efficient selling and distribution to urban consumers. The marketing system in the rural areas and the consumers are in urban areas. High efficiency is essential to achieve the goal set for the dairy industry. It is an instrument of economic change. Considerable interest was being shown by farmers in India to affect consistent economic viability in the dairy industry through optimizing organized milk marketing process, such as procurement, processing and distribution and various independent operations of the dairy plant, to achieve the desired objectives. To achieve the above desired objectives and to foster the needs of milk production and its marketing in an organization way, the following institutions play important role. They are: Anand pattern dairying Operation Flood HRIHE, Hassan Page 40
  41. 41. Budgetary control of SHIMUL Anand Pattern Dairying: In 1940, the government of India contracted a private milk dairy to purchase milk from kariya, one of the 19 districts of Gujarat and supply pasteurized chilled milk to Bombay. But the milk procurement price was not fixed and milk products continued to receive low and fluctuating prices. The dairy farmers resented the system but trapped by their own resources. The small dairy farmers, who were engaged only in these trades, went on strike and they formed the primary level with co-operative in 1946. The co- operative was first attempted by rural producers to reach on their own for the bulk urban market. This gave birth to AMUL as organizational instrument that serves the rural dairy functions both production as well as marketing. AMUL is abbreviation of Anand Milk Union Limited. Operation Flood: One of the ‘aims’ of the dairy development of government of India was to flood India with milk. One such program is the “operation Flood” designed by national dairy development board (NDDB) to create a “vertical flood” of rurally produced milk in India. This has been in operation since 1970. Growth and development of the Milk Industry: The sale of milk in the form of sachet is estimated to be 36mn MT valued at Rs 470 billion per year. The market is currently growing at round 4% pa in volume terms. The milk surplus states in India are Uttar Pradesh, Punjab, Hariyana, Rajasthan, Gujarat, Andrapradesh, Maharastra, Karnataka and Tamilnadu. The manufacturing of milk products is concentrated in these milk surplus states. The top 6 states viz., Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan, Tamilnadu, and Gujarat together account for 58% of National production. Milk products grew by mere 1% pa between 1947 and 1970. Since early 70’s under operation flood. Production growth increased significantly averaging over 5% per annum. About 75% of milk is consumed at the household level, which is not a part of commercial dairy industry. Loose milk has a larger market in India as it is perceived to be fresh by most consumers in reality however; it poses a higher risk of adulteration and contamination. HRIHE, Hassan Page 41
  42. 42. Budgetary control of SHIMUL Although milk production has grown at a fast pace during the last 3 decades, milk yield per animal is very low. The main reasons for the low yield are • Lack of use of scientific practices in rearing cattle • Inadequate availability of fodder in all seasons • Unavailability of veterinary health services • Not raring the hybrid cattle Present Status of the Industry: Dairy co-operative network • Includes 170 Shimoga Milk Unions • Operates in over 285 districts • Covers nearly 103281 village level societies • Is owned by nearly 11 million farmer members Milk Production: • India’s milk production increase from 21.2 million Mt in 1968 to 84.6 million Mt in 2001-02. • Per capita availability of milk presently is 226gms per day, up from 122gms per day in 1968-1969. • India’s 4% annual growth of Milk production surpasses the 2% growth in population. • The net increase in availability is around 2% per year HRIHE, Hassan Page 42
  43. 43. Budgetary control of SHIMUL Study of the Functional Department of the Shimul Industry Finance Department Finance is the lifeblood of any organization finance mainly focuses on wealth maximization it mainly focuses on minimizing the cost and maximizing the cost and maximizing the profit. Auditing Auditing will be carried on as per co-operative audit department (government of Karnataka) under sec rule 441, once in a year. Monthly Audit: Private chartered accountant will do pre-auditing once in a month appointed by SHIMOGA MILK UNION LTD and he has to submit a monthly report to the finance department. Records: Records are maintained in ledger as per the standing orders of Shimoga Milk Union. Various accounts and details accounts are processed using an excel spreadsheet software and all the details are stored in a computer and hard copies are stored and maintained in the respective files. HRIHE, Hassan Page 43
  44. 44. Budgetary control of SHIMUL 3.2 COMPANY PROFILE Origin of Shimoga Milk Union: SHIMOGA MILK UNION LTD started its operations on 21st may 1971, with a initial investment of 24.17 lakhs with the capacity of 10,000 (TLPD) thousands liters per day. SHIMOGA MILK UNION LTD is located in Machennahalli, 12Kms from Shimoga and 6Kms from Bhadravathi. The dairy is located in an elevated place on Survey No.72 having 25 acres of land. The Shimoga milk Union is located in central part of the state of KARNATAKA. The corporate office of the union is based at Machenahalli, covering three districts of Shimoga, Davangere and Chitradurga. Growth and Development of Shimoga Milk Union: Shimoga dairy is one of the important dairies in Karnataka in the year 1963, first in city a pilot project scheme was started to supply milk to consumers of Shimoga and Bhadravathi and provide additional income to the rural farmers of district. In the initial period, the milk used to be sold in bulk. Dairy came into existence on 21 may 1971, it extended its operations with the help of the Government. In order to expand its business, it started manufacturing ghee. Earlier than 1985, it was named as government dairy, because it was control of the Government. On Feb 1985, the dairy was taken over by KMF and named as Shimoga dairy. In the initial stage, milk was distributed only to Shimoga and Bhadravathi cities only. It was supplying the milk in bottles and in July 1985. It started supplying milk in polythene bags to the consumers. In August 1985, there was a paradigm shift in the working pattern. Dairy adopted AMUL pattern. A new dairy was established in Jan 1991, with a capacity of (ILLKPD) was taken over by SHIMOGA MILK UNION LTD. At the same time the chilling centers of Davanagere, Chitradurga, Honnali and Anandapura was handed over to SHIMOGA MILK UNION LTD. A new Dairy has been established with a capacity of 1.0 Lakhs Liters per day under the Operation Flood II & III with NDDB assistance. The Union has five chilling centers located at Honnali, Anandapura, Chitradurga, Hosadurga, & HRIHE, Hassan Page 44
  45. 45. Budgetary control of SHIMUL Tadagani with chilling capacity of 0.95 Lakhs Liters per Day. The union has a Dairy at Shimoga and a mini dairy at Davangere, processing, packing and selling 25,000 liters per day. The union procures on an average 1.32 Lakhs Kgs. of milk per day and sells 0.93 Lakhs liters per day. The union, apart from selling toned milk, also produces Butter, Ghee, Peda, Butter Milk and Curds. Present Status of the Company: DCS 818 Members 107369 Dairy Procurement of Milk 1, 49,500 LPD Milk Sales 91,194 LPD Artificial Insemination Centers 209 Artificial Insemination 679310 Vaccines 421 Fodder in Tones 14201 Organization Structure of Shimoga Milk Union Ltd: SHIMOGA MILK UNION LTD functions same as the AMUL organization structure. In this pattern the milk producers themselves control all the functions of dairying milk production, procurement, processing and marketing, this structure consist of 3- tire systems. First Tire: The basic unit in the Anand pattern is the village milk producers co-operative a voluntary association of milk producers in a village, who wish to market their milk collectively. Those who have a permanent residence and who own a milk animal can become a member by paying a share capital to DCS. Management: The members of society in general meeting elect a managing committee of nine members democratically. The chairperson of the committee retires every year. The managing committee sets the co-operative policies and selects the society staff including a secretary, a milk collector, a Fat Tester, a clerk, inseminator, Accountant and helper to perform the society’s administration depending upon the size of the business. HRIHE, Hassan Page 45
  46. 46. Budgetary control of SHIMUL Among the managing committee members one will be elected as a president of DCS for one-year term that is the administrative head of the DCS. Second Tire: A key element in the Anand pattern DCS is that all registered village milk societies are members of a DCS milk producers union that enable them jointly to own a dairy processing factory and a cattle feed plant. Management: The union is controlled by Board of Directors consisting of 16 to 17 members of which 12 are democratically elected from among the representative of the village societies, the remaining five comprises of Managing Director as a member secretary, one or two representative of the federation. There 5 members are not eligible for contesting to the post of chairman. The chairman is elected by the board members retire every year by rotation so that each member functions for 3 years, the board employs the Managing Director who makes the appointment of junior staff. A sound code of conduct and the administrators of the union. Third tire: The union members of a co-operative milk marketing federation by subscribing to it at least 20,000 each as a share capital, the federation is responsible for evolving and implementation of policies on cooperative marketing liquid milk and milk products. Management: The federation board consists mainly of the elected chairman of all the members of the union and the federations managing director. Each member has voting right. The members elect a chairman of the board. The board evaluates the federation’s policies on all its functions. Functions of Shimoga Milk Union Ltd: HRIHE, Hassan Page 46
  47. 47. Budgetary control of SHIMUL DCS are grouped at district level into co-operative milk producers union. The unions organize new DCS and assist DCS with their management including audit of accounts, Purchases, processing and marketing of liquid Milk. HRIHE, Hassan Page 47
  48. 48. Budgetary control of SHIMUL 3.3 Organizational structure: Board of Directors President Managing Director Administrative Finance Manager MIS Manager Marketing officer officer Dairy Department Procurement Officer Deputy.Mgr Deputy.Mgr Distribution Development Plant Quality division division Deputy Mgr Deputy Procuremen Mgr Input t HRIHE, Hassan Page 48
  49. 49. Budgetary control of SHIMUL 3.4 Profile of the Company: Shimoga Milk Union manufactures the following products: 1. Toned Milk 2. Double toned Milk 3. Standardized Milk 4. Full Cream Milk 5. Ghee 6. Butter Milk 7. Homogenized Milk 8. Peda 9. Curd Shimoga Milk Union Markets the following products 1. Gulab Jamoon Mix 2. Flavoured Milk 3. Mysore pak 4. Panner 5. Badam Powder 6. Good life Milk HRIHE, Hassan Page 49
  50. 50. Budgetary control of SHIMUL Milk & milk Products Price List: Price List if Nandini Milk & Milk Products No Products name Kgs/Liters/grams Selling price in (Rs) 1 500 ML 8.50 Toned Milk 1000 ML 17.00 2 500 ML 9.00 Double toned milk 1000 ML 18.00 3 500 ML 10.00 Standardized Milk 1000 ML 20.00 4 500 ML 11.50 Full cream Milk 1000 ML 23.00 5 200 ML 37.00 Ghee 500 ML 82.50 1000 ML 158.00 6 Butter Milk 4.50 7 Homogenized Milk 1000 ML 15.00 8 Peda 250 ML 50.00 9 Curd 500ML 8.50 10 Gulab Jamoon Milk 200 gms 45.50 11 Flavoured Milk 200 ML 13.00 12 Mysore pak 250 gms 55.00 13 Badam powder 200 gms 40.50 HRIHE, Hassan Page 50
  51. 51. Budgetary control of SHIMUL 3.5 Achievements Mile Stones: 1963- A Pilot project was started to supply milk to Shimoga and Bhadravathi 1971- Government dairy at Shimoga was started with the capacity of 10,000 1985- Opening of KMF P and I wing. 1985- First milk procurement rout was started 1985-KMF has taken over the dairy. 1987-Registrations of SHIMOGA MILK UNION LTD. 90-97-NDDB funded for co-operative development program 1997-Grands from Government of India for women and Child development program 1999-Installation of LNZ distribution system 2005-Set upping of 24 ATM parlors and customer grievance cell in Chitradurga and Davanagere 2007-Set upping of 3 ATM parlors and 687 dealers 2009-In this year 38 new societies started, in this bulk milk coolers are adopted for best quality of milk. From each society 220 Kg milk has proposed to collect. In this year planned to increase the milk by decreasing the amount to produced milk like artificial insemination, fodder and providing 50% of concision to the formal. HRIHE, Hassan Page 51
  52. 52. Budgetary control of SHIMUL Introduction of New products 1985- Ghee 1988- Peda 1993- Standard Milk 1997- Butter Milk and curds 1999- Lassi 2000- Introduction of tonned milk in 200ml sachet. 2006- Toned milk, Homogenized milk, sterilized milk and Full cream milk 2007- Skim milk powder, Cheese, Badam powder, Paneer and Mysore Pak 2009- Burfi, Jamoon, khova, flavored milk and Ice cream. Chilling Centers Dairies Established 1984- Chitradurga 1991- Dairy 1991- Honnali 1991- Anandapura 1999- Tadagani 2007- Davangere 2009- Harihara HRIHE, Hassan Page 52
  53. 53. Budgetary control of SHIMUL 3.6 Mission Statement: Shimoga Milk Union is provide maximum possible price for the milk supplied by its members and provide necessary inputs to enhance milk production while ensuring economic viability of the union and is also committed or provide quality milk and milk products to consumers and emerge as one of the top most Milk Unions of the co-operative dairy industry in the country. Goals by 2008:  Organizing 700 functional DCS.  Procuring of LKPD of Milk.  Marketing of 1.75 LLPD of Milk.  Introducing concept of clean milk production.  Collecting 6 corers as share capital Distributing 80% of the Income earned from sales to farmers, producers, and members.  Increasing processing capacity to 1.9 LLPD  Reducing Recover Period from 17 days to 7 days  Paying Payments after 14days  Training staff to enhance QMS  Adoption of ISOHACCP Goals by 2009: • Establishment of 856 milk dairys. • 10% to 5% increase in selling. • Dividing the milk union into four groups. • To open 38 new societies. HRIHE, Hassan Page 53
  54. 54. Budgetary control of SHIMUL • Planning to insert new bulk milk coolers to get good quality of milk. • Tetra packing and making good milk products. • Giving good price to the farmers. • Planning to preserve 220kg of milk. The Main Activities of the Union DCS membership: At the end of March 2008, a Network of 818 DCS have been organized and over in 175 Taluks in all three districts of milk-shed area and there are around 107369 members of DCS out of which 50863 are women. Milk Chilling Centers: There are 5 chilling centers situated at Anandpura with 100 TLPD (Thousand Liters per Day), Chitradurga with 10 TLPD, Hosadurga with 8 TLPD, Tadagani-30 TLPD, and the main dairy is situated in Machenahally having a capacity of 40,000 TLPD and processing capacity of 5 LLPD. There are 80 milk procurement routes operating from union and is collecting milk on an average of 3, 50,000 KGPD during the year march-08. The Milk procurement routs are not constant. It keeps on fluctuating according to the availability of milk. Animal Health Facilities: There are 7 veterinary routes operating and conducting health camps and attending emergency cases. Animal Breeding: Artificial Inseminations are being done through AI centers. HRIHE, Hassan Page 54
  55. 55. Budgetary control of SHIMUL Feed and Fodder Development: Cattle feed and high yielding varieties of fodder being supplied to producer along with technical advice. Milk & Milk Products Marketing: The pasteurized milk being distributed to three districts i.e., Davanagere, Shimoga and Chitradurga through 8 parlous, 3 A.T.M parlors, 687 milk dealers. On an average every day 1, 02,000 litter being sold in 65 towns. In addition to milk, milk products like Peda, curds and butter milk are sold in the milk shed area. Shimoga milk Union Ltd Objectives  Providing remunerative and assured market for the milk product by the farmers.  Providing quality milk to urban consumers.  To build village level institutions in co-operative sector to manage dairy activities.  To ensure provision of milk production inputs processing faculties and dissemination. Shimoga milk Union Ltd Quality Objectives:  To train our workmen from time to time for exposure to advance technology for efficient operations.  To provide adequate infrastructure facility for improving the work environment.  To set goals/targets at all level to achieve continuous improvement. Shimoga milk Union Quality Policy: SHIMOGA MILK UNION LTD is committed to producers’ welfare through customer delight by adopting continuous improvement and ensures pure and hygienic milk and milk products. HRIHE, Hassan Page 55
  56. 56. Budgetary control of SHIMUL New Projects in Shimul  30TLPD new milk chilling center cum packing center at Chitradurga  Installation of Bulk Coolers of Chilling Centers from 20,000 LPO to 60,000LPD.  Network based dairy into system.  Expansion of Ice Cream Plant from 5000 Liters, to 15,000 Liters capacity at an outlay of Rs.5.69 crores.  Launching of New Milk Products at Nandini Milk Products Unit HRIHE, Hassan Page 56
  57. 57. Budgetary control of SHIMUL 3.7 SWOT ANALYSIS STRENGTH • Procurement and Input (Net work) • Goodwill • ISO 9001-2000 certified • Second larger producer • Vast Market WEAK • World trade organization standards • Advertisement execution in its early • Early stages of automation of computerization OPPORTUNITIES • Enter rural market • Exports THREATS • Entry of big players • WTO standards • Government policies HRIHE, Hassan Page 57
  58. 58. Budgetary control of SHIMUL DATA COLLECTION AND INTERPRETATION SHIMOGA DISTRICT MILK PRODUCER’S SOCIETIES UNION LIMITED Shimoga Dairy, Machenahalli, Nidige Post, SHIMOGA – 577222 2007-2008, 2008-2009, & 2009-2010 Financial year Estimated expenditure Sl Particulars 12-09-2007 15-09-2008 10-09-2009 no 2007-2008 2008-2009 2009-2010 Lakhs Lakhs Lakhs 1 Opening products of milk products 185.6 66.75 103.29 2 Purchase of milk from milk unions 6366.25 5667.57 6184.39 3 Milk storage & transportation expenses 577.47 610.38 404.56 4 Transportation expenses (others) 22 23 19.5 5 Cattle feeds & development expenses 914.97 1009.04 1294.08 6 Milk processing & manufacturing expenses 550.41 570.83 535.57 7 Employees salary & allowances 559.66 556.45 594.9 8 Administrative expenses 72.99 76.5 101.86 9 Taxes & rates & rent 24.5 31.5 32 10 Milk distribution expenses 163.3 166.87 165.02 11 Milk & milk products packing charges 230.06 211.25 238.53 12 NDDB loan repayment with bank commission 86.34 82.5 62 13 Depreciation or asset 45 58 45 14 Cattel animal health program & expenses 26.91 36.82 34.34 income from artificial insemination 15 Program 62.04 56.19 62.73 16 Training program expenses 4.3 6.94 23.22 17 Fir staid program expenses 18.74 3.89 26.93 18 Extension of facilities for co-operatives unions 51 55.61 111.73 HRIHE, Hassan Page 58
  59. 59. Budgetary control of SHIMUL 19 Capital investment & advances quality control 1174.45 376.75 763.15 & plant management 20 Expenses (NPCS) 376.5 345.12 324.22 21 National information system 12.8 12.8 12 22 Purchase of diesel (contractors vehicles) 135 108 108 23 Staff program expenses 84.51 11.32 49.75 24 Savings 20.5 21.07 11.58 Total 11765.3 10165.15 11308.35 4.1 Opening products of milk products 1 Opening products of milk products 200 180 160 140 120 1 Opening products of 100 milk products 80 60 40 20 0 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that opening product of milk in 2007-08, 2008-09, 2009-10 is 190 lacks, 70 lacks and 110 lacks respectively. Opening products of milk 2008-09 decreased by 118.85 lakhs. Due to the manufacturing inability and the mismanagement in the organization. 2009 – 2010 it increased 36.54lakhs due to the management change. HRIHE, Hassan Page 59
  60. 60. Budgetary control of SHIMUL 4.2 Purchase of milk from milk unions 2 Purchase of milk from milk unions 6600 6400 6200 6000 2 Purchase of milk from 5800 milk unions 5600 5400 5200 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that purchase of milk from milk unions in 2007-08, 2008-09, 2009-10 is 6350, 5670 and 6200 respectively. Purchase of milk from milk unions 2008-09 decreased by 698.5 lakhs and 2009-10 516.82 lakhs increase.. Due to the financial inability in 2009-10 it increases due to the financial restructuring. HRIHE, Hassan Page 60
  61. 61. Budgetary control of SHIMUL 4.3 Milk storage & transportation expenses 3 Milk storage & transportation expenses 700 600 500 400 3 Milk storage & 300 transportation expenses 200 100 0 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that Milk storage & transportation expenses in 2007-08, 2008-09, 2009-10 is 575, 610 and 400 respectively. Milk storage & transportation expenses 08-09 increased 32.91 lakhs and 09-10 decreased 205.82lakhs. HRIHE, Hassan Page 61
  62. 62. Budgetary control of SHIMUL 4.4 Cattle feeds & development expenses 4 Cattle feeds & development expenses 1400 1200 1000 800 4 Cattle feeds & 600 development expenses 400 200 0 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that cattle feeds and development expenses in 2007-08,2008-09,2009-10 is 900, 1000 and 1300 respectively. Cattle feeds & development expenses in the year 08-09 increased 94.1 lakhs and in 09-10 increased 285.04 lakhs. HRIHE, Hassan Page 62
  63. 63. Budgetary control of SHIMUL 4.5 Milk processing & manufacturing expenses 5 Milk processing & manufacturing expenses 580 570 560 550 5 Milk processing & 540 manufacturing expenses 530 520 510 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that milk processing and manufacturing expenses in 2007-08, 2008-09, 2009-10 is 550, 570 and 535 respectively. Milk processing & manufacturing expenses in the year 08-09 increased 20.42 lakhs and in 09-10 decreased by 35.26 lakhs. . HRIHE, Hassan Page 63
  64. 64. Budgetary control of SHIMUL 4.6 Employees salary & allowances 6 Employees salary & allowances 600 590 580 570 6 Employees salary & 560 allowances 550 540 530 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that Employees salary and allowances in 2007-08, 2008-09,2009-10 is 560, 555 and 595 respectively. Employee’s salary & allowances in the year 08-09 decreased by 3.21 lakhs and in 09-10 increased 38.45 lakhs. . HRIHE, Hassan Page 64
  65. 65. Budgetary control of SHIMUL 4.7 Administrative expenses 7 Administrative expenses 120 100 80 60 7 Administrative expenses 40 20 0 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that Administrative expenses in 2007-08, 2008-09, 2009-10 is 75, 79 and 110 respectively. Administrative expenses in the year 08-09 increased 3.51 lakhs and in 09-10 increased 25.36 lakhs. HRIHE, Hassan Page 65
  66. 66. Budgetary control of SHIMUL 4.8 Taxes, Rates & Rents 8 Taxes & rates & rent 35 30 25 20 8 Taxes & rates & rent 15 10 5 0 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that tax, rent and rates in 2007-08, 2008-09, 2009-10 is 24, 32 and 33 respectively. Taxes, Rates & Rents in the year 08-09 increased 7 lakhs and in the year 09-10 increased 1.50 lakhs HRIHE, Hassan Page 66
  67. 67. Budgetary control of SHIMUL 4.9 Milk distribution expenses 9 Milk distribution expenses 168 167 166 165 9 Milk distribution 164 expenses 163 162 161 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that milk distribution expenses in 2007-08, 2008-09, 2009-10 is 163.5, 166.8 and 165 respectively. Milk distribution expenses in the year 08-09 increased 3.57 lakhs and in the year 09-10 decreased by 1.85 lakhs. . HRIHE, Hassan Page 67
  68. 68. Budgetary control of SHIMUL 4.10Milk & milk products packing charges 10 Milk & milk products packing charges 245 240 235 230 225 10 Milk & milk products 220 packing charges 215 210 205 200 195 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that milk and milk product packing charges in 2007-08, 2008-09, 2009-10 is 230, 211 and 237 respectively. Milk & milk products packing charges in the year 08-09 decreased 18.81 lakhs and in the year 09-10 increased 27.28 lakhs. HRIHE, Hassan Page 68
  69. 69. Budgetary control of SHIMUL 4.11 Capital investment & advances quality control & plant management 11 Capital investment & advances quality control & plant management 1400 1200 1000 800 11 Capital investment & advances quality control & 600 plant management 400 200 0 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that capital investment and advance quality control in 2007-08, 2008-09, 2009-10 is 1190, 390 and 790 respectively. Capital investment & advances quality control & plant management in the year 08-09 decreased 797.70 lakhs and in the year 09-10 increase 386.40 lakhs. . HRIHE, Hassan Page 69
  70. 70. Budgetary control of SHIMUL 4.12 Staff program expenses 12 Staff program expenses 90 80 70 60 50 12 Staff program 40 expenses 30 20 10 0 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that staff program expenses in 2007-08, 2008-09, 2009-10 is 85,10 and 50 respectively. Staff program expenses in the year 08-09 decrease 73.19 lakhs and in the year 09-10 increase 38.43 lakhs. HRIHE, Hassan Page 70
  71. 71. Budgetary control of SHIMUL 4.13 Grand Total Financial Expenditure Sl no Total 12000 11500 11000 10500 Sl no Total 10000 9500 9000 Lakhs Lakhs Lakhs 2007-2008 2008-2009 2009-2010 12-09-2007 15-09-2008 10-09-2009 The above table shows that grand total in 2007-08, 2008-09, 2009-10 is 11700,11000 and 11560 respectively. Financial expenditure in the year 08-09 decrease 1600.15 lakhs and in the year 09-10 increase 1143.2 lakhs. HRIHE, Hassan Page 71
  72. 72. Budgetary control of SHIMUL Findings 5.1 Summary of Findings: As my study conducted on the Budgetary Control of SHIMUL was finding the following points. The department generated the following types of reports • Section wise report • Management report • Board meeting report • NDDB report • Section head meeting report 1. The opening products of milk products 2009-10 it increased 36.54lakhs compare to the previous year. 2. Purchase of milk from milk unions 2009-10 516.82 lakhs increase compare to the previous year. 3. Milk storage & transportation expenses 2009-10 decreased 205.82lakhs. 4. Cattle feeds & development expenses in the year 2009-10 increased 285.04 lakhs. 5. Milk processing & manufacturing expenses in the year2009-10 decreased by 35.26 lakhs compare to the previous year. 6. Employees salary & allowances in the year 2009-10 increased 38.45 lakhs. 7. Administrative expenses in the year 2009-10 increased 25.36 lakhs. 8. Taxes & Rates & rents in the year 2009-10 increased 1.50 lakhs. 9. Milk distribution expenses in the year 2009-10 decreased by 1.85 lakhs. 10. Milk & milk products packing charges in the year 2009-10 increased 27.28 lakhs. 11. Capital investment & advances quality control & plant management in the year 2009-10 increase 386.40 lakhs. 12. Staff program expenses in the year 2009-10 increase 38.43 lakhs. HRIHE, Hassan Page 72