INTRODUCTION of CENTRAL COALFIELD LIMITED

A PROJECT REPORT
ON
WORKING CAPITAL MANAGEMENT IN
CCL.
By
Sneh Samrani
Sam Higginbottom Institute Of
Agriculture, Technology And Sciences.
Allahabad -211007
June, 2016

A PROJECT REPORT
ON
WORKING CAPITAL MANAGEMENT IN
CCL.
By
Sneh Samrani
Under the guidance of
MR. A. D. WADHWA
(Finance Manager)
Central Coalfields Limited, Ranchi.

CERTIFICATE FROM SUMMER INTERNSHIP
GUIDE.
This is to certify that Ms. Sneh Samrani , a student of the
Bachelor of Business Administration (Honours) at Sam
Higginbottom Institute of Agriculture Technology &
Sciences Allahabad , has done her internship in our
FINANCE DEPARTMENT, CCL Darbhanga House , under my
guidance from 17th
June 2016 to 11th
July 2016( 3 weeks) on
the topic “WORKING CAPITAL MANAGEMENT ” of Central
Coalfields Limited, Ranchi.
She has completed her training successfully.
Mr. A.D.Wadhwa
Manager ( Finance )
CCL , Ranchi

CONTENTS
SL.NO TOPIC
1. Introduction.
2. Historical Background.
3. Highlights of CCL.
4. Vision , Mission , Objectives of CCL.
5. Working capital management.
6. Working capital management in CCL.
7. Cash management.
8. Inventory management.
9. Debtors management.
10. Problems faced by CCL in dues payment.
11. Findings.
12. Recommendations.
13. Conclusion.
14. Bibliography.
INTRODUCTION of CENTRAL COALFIELD LIMITED.

C.C.L is a subsidiary company of Coal India limited under ministry of
coal and mines govt. of India C.C.L is one of the 8 coal production
subsidiaries of coal India limited under ministry of coal and mines.
Company is governed by a board of directors consisting of 5 full time
directors and 6 part time directors. Full time directors are responsible
for specific functions of operation, project & planning, finance and
personnel. India is third largest country in the production of coal. C.C.L
means Central Coalfields Limited.
HISTORICAL BACKGROUND.
Coal Mining first started in India in the year 1815. The private Railway
Companies started mining activities in the year 1850. The Railway
Board Nationalized the coal mining in 1925. The Railway collieries
were transferred to the Coal Board in the year 1944.In 1774 Warren
Hastings initiates commercial coal mining at Raniganj (West Bengal) in
1815-1820 First Shaft Mine opened at Raniganj 1835 Carr, Tagore &
Company takes over the
2. Raniganj Coal Mines 1843 Bengal Coal Company takes over Raniganj
Coal Mines and others; is first Joint Stock Coal Company in India. Upto
1900 Minimal development; River transportation used to transport coal
to Calcutta ;railway lines at Calcutta leads to expansion of Coal
Production in Early 1900s, Capacity at 6 million tonnes per annum
1955-56 Focus on Coal Industry; capacity up to 38.4 Million tonnes. In
1956 National Coal Development Corporation (NCDC ) formed to
explore and expand coal mining in Public Sector. In 1972 Coking Coal
Industry Nationalized, Bharat Coking Coal Limited formed to manage

operations of all Coking Coalmines in Jharia Coalfield. In 1973 Non-
coking coal was nationalized; Coal Mine Authority Limited set up to
manage these mines; NCDC operations bought under the ambit of
CMAL. In1975 Coal India Limited formed as holding Company with 5
subsidiaries:-
Bharat Coking Coal Limited (BCCL),
Central Coalfields Limited (CCL),
Western Coalfields Limited (WCL),
Eastern Coalfields Limited (ECL)
Central Mine Planning and Design Institute Limited (CMPDIL) in 1985.
Northern Coalfields Limited (NCL)
South Eastern Coalfields Limited (SECL) 1992.
Mahanadi Coalfields Limited (MCL)
In 2007 Coal India & five of its Subsidiaries, viz, NCL, SECL, MCL,
WCL, CCL was accorded coveted "Mini Ratna" Status.
HIGHLIGHTS OF Central Coalfield Limited.
Central Coalfield Limited has been on the coal map the country as a
public sector on October, 1956, under different names. In the
beginning it was known as National Coal Development Corporation,
then Central Division of Coal mines Authority , and finally under its
present nomenclatures at Ranchi, Jharkhand. The Central Coalfield
Limited is one of the subsidiaries of coal India Limited registered
under the Company’s Act 1956 in the year 1975.The mining and
extraction of coal is entrusted to a public sector organization Coal

India Limited. The Company is divided into eight subsidiaries and
Central Coalfield Limited is one of them. The company presently
known as CCL has a history of more than three decades. Pursuant to
the Industrial Policy Resolution of 1956, a company was formed by the
names of M/S Hindustan Collieries Private Limited, on 5 September,
1956. The name was changed to the National Coal Development
Corporation. The NCDC was formed on 01.10.1956 with 11 state
railway collieries in Orissa and Madhya Pradesh. Like other industries
and organization, the affair of CCL too is not settled by its owner
(Govt. of India). Rather the professional team of management called
Board of Directors (BOD) is appointed by the Govt. of India to manage
the affair of CCL. It consists of chairman – cum-Managing Director, four
functional Directors in charge of operations, personnel, finance and
projects & planning. Besides part-time Directors as may be appointed
by the Govt. from time to time. At present CCL have 67 collieries and 7
washeries under revenue production. Some of the state collieries are
very old, at least one of which that in Giridih has crossed century in
the year 1961. It also has seven coal washeries, a coal oven plant
,besides workshop and handling plants spread over in Hazaribagh
,Palamu , Dhanbad ,Ranchi, Bokaro , Giridih, and Chatra district. CCL is
the major source of medium coking coal in India. CCL‟s other
important activities are beneficiation of medium coking coal for steel
plants through its chain of coal washeries and manufacture of soft
coke for domestic kitchen. Most of the production (88%) comes from
surface mines. The productivity of underground mines and many of the
surfacemines is low, but because of high priced of coking coal, the
company has been making marginal profit and losses with the recent
deregulation of coking coal price the profitability of the company is
expected to improve. The command area of CCL companies 10
coalfields namelyGiridih, East Bokaro, West Bokaro, piparwar,
Ramgarh-kaitha, North Karanpura.

VISION, MISSION AND OBJECTIVES OF CCL.
Vision :
" Committed to create eco-friendly mining ".
MISSION :
"To become a World class, Innovative, Competitive & Profitable Coal
Mining Operation to achieve Customer Satisfaction as a top priority.
Objectives OfCCL :
Coal mining through efficiently operated mines.
Besides fulfilling coal needs of the customer in terms of quantity,
focus on quality, Value addition and beneficiation to the satisfaction of
the customers.
Marketing of coal as main product.
WORKING CAPITAL MANAGEMENT.

Capital required for a business can be classified under two
main categories via :
1) Fixed Capital
2) Working Capital
Every business needs funds for two purposes for its establishment
and to carry out its day-to-day operations. Long terms funds are
required to create production facilities through purchase of fixed
assets such as plant and machinery, land, building, furniture, etc.
Investments in these assets represent that part of firm capital which
is blocked on permanent or fixed basis and is called fixed capital.
Funds are also needed for short-term purposes for the purchase of raw
material, payment of wages and other day – to- day expenses etc.
These funds are known as working capital. In simple words, working
capital refers to that part of the firm’s capital which is required for
financing short- term or current assets such as cash, marketable
securities, debtors & inventories. Funds, thus, invested in current
assts keep revolving fast and are being constantly converted in to
cash and this cash flows out again in exchange for other current
assets. Hence, it is also known as revolving or circulating capital or
short term capital.
CONCEPTOF WORKING CAPITAL .
There are two concepts of working capital:
1. Gross working capital
2. Net working capital
 The Gross Working Capital is the capital invested in the total
current assets of the enterprises current assets are those assets

which can convert in to cash within a short period normally one
accounting year.
 Optimization of investment in current asset
 Financing of current assets.
 NET WORKING CAPITAL = CURRENT ASSETS – CURRENT
LIABILITIES.
 Net working capital can be positive or negative. When the
current assets exceeds the current liabilities are more than the
current assets. Current liabilities are those liabilities, which are
intended to be paid in the ordinary course of business within a
short period of normally one accounting year out of the current
assts or the income business.
 Liquidity position of the firm
 Judicious mix of short-term and long -term financing.
CONSTITUENTSOFCURRENTASSETS :
1. Cash in hand and cash at bank.
2. Bills receivables.
3. Sundry debtors.
4. Short term loans and advances.
5. Inventories of stock as: a. Raw material b. Work in process c.
Stores and spares d. Finished goods.
6. Temporary investment of surplus funds.
7. Prepaid expenses.

8. Accrued incomes.
9. Marketable securities.
CONSTITUENTSOFCURRENTLIABILITIES.
1. Accrued or outstanding expenses.
2. Short term loans, advances and deposits.
3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation
6. Bills payable.
7. Sundry creditors.
FACTORS DETERMINING THE WORKING CAPITAL
REQUIREMENTS .
1. NATURE OF BUSINESS: The requirements of working is very
limited in public utility undertakings such as electricity, water
supply and railways because they offer cash sale only and supply
services not products, and no funds are tied up in inventories and
receivables. On the other hand the trading and financial firms
requires less investment in fixed assets but have to invest large
amt. of working capital along with fixed investments1.
2. SIZE OF THE BUSINESS: Greater the size of the business, greater
is the requirement of working capital.
3. PRODUCTION POLICY: If the policy is to keep production steady
by accumulating inventories it will require higher working
capital.

4. LENTH OF PRDUCTION CYCLE: The longer the manufacturing time
the raw material and other supplies have to be carried for a longer in
the process with progressive increment of labour and service costs
before the final product is obtained. So working capital is directly
proportional to the length of the manufacturing process.
5. SEASONALS VARIATIONS: Generally, during the busy season, a firm
requires larger working capital than in slack season.
6. WORKING CAPITAL CYCLE: The speed with which the working cycle
completes one cycle determines the requirements of working capital.
Longer the cycle larger is the requirement of working capital.
7. RATE OF STOCK TURNOVER: There is an inverse co-relationship
between the question of working capital and the velocity or speed
with which the sales are affected. A firm having a high rate of stock
turnover will needs lower amt. of working capital as compared to a
firm having a low rate of turnover.
8. CREDIT POLICY: A concern that purchases its requirements on
credit and sales its product/ services on cash requires lesser amt. of
working capital and vice-versa.
9. BUSINESS CYCLE: In period of boom, when the business is
prosperous, there is need for larger amt. of working capital due to rise
in sales, rise in prices, optimistic expansion of business, etc. On the
contrary in time of depression, the business contracts, sales decline,
difficulties are faced in collection from debtor and the firm may have a
large amt. of working capital.
10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we
shall require large amt. of working capital.
11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have
more earning capacity than other due to quality of their products,
monopoly conditions, etc. Such firms may generate cash profits from

operations and contribute to their working capital. The dividend policy
also affects the requirement of working capital. A firm maintaining a
steady high rate of cash dividend irrespective of its profits needs
working capital than the firm that retains larger part of its profits and
does not pay so high rate of cash dividend.
12. PRICE LEVEL CHANGES: Changes in the price level also affect the
working capital requirements. Generally rise in prices leads to
increase in working capital.
Workingcapitalmanagementin CCL.
Requirements:
For purchasing spare parts like nut, bolt etc.
For purchasing of small equipment .
For purchasing fuels .
For payments of wages, carriage etc.
Few points for working capital management in
CCL:
Current Assets
Cash Management
Debtors Management
Inventory Management
Current Liabilities .
Creditor’s Management .

Working Management in CCL is divided in 2
categories :-
Inflows
Outflows
1. SALES REALISATIONS
(A) National thermal power corporation.(NTPC)
(B) Damodar valley corporation. (DVC)
(C) PSPCL
(D) JSEB
2. Interest/Dividend
Outflows.
 Revenue expenditure :-
 Salary
 Store
 Contractor
 Transportation etc
Capital Expenditure.
 Plant and machinery.
 Land.
 Building.
Investment.

 Fixed Deposit.
 Mutual Fund.
Operating cycle is the time duration required to convert
sales into cash, after the conversion of resources into
inventories.
The operating cycle of a manufacturing
company involves three phases:

 Acquisition of resources such as raw
material , labour, power and fuel etc .
 Manufacture of the product which includes
conversion of raw material into work-in-
progress into finished goods.
 Sale of the product either for cash or on
credit. Credit sales create account
receivable for collection.
CASH MANAGEMENT.
Cash is the most liquid asset. Cash is common denominator to
which all other current assets can be reduced because
receivables and inventories get converted into cash. Cash is
lifeblood of any firm needed to acquire supply resources,
equipment and other assets used in generating the products and
services. Marketable securities also come under near cash,
serve as back pool of liquidity which provide quick cash when
needed.
 MANAGEMENT OF CASH .
Although cash is only 1-3% of total current assets but its
management is very important.
Management of cash includes :

 Determination of optimum amount of cash required in the
business.
 To keep the cash balance at optimum level and investment of
surplus cash in profitable manner.
 Prompt collection of cash from receivables and efficient
disbursement of cash.
Cash flow is the movement of cash into or out of an account, a
business, or an investment over a given period. The cycle of cash
inflows and outflows plays a crucial role in a business’s financial
health. It’s a sign of good financial health when cash inflows exceed
cash outflows.
1.Cash flow management describes the process of anticipating and
planning for cash receipts and disbursements. Cash management is
the process of managing the short-term liquid resources of the
business to optimize its results.
2. It’s important to understand that profit does not equal cash. Profit
stems from revenue and is calculated by deducting the expenses
incurred to generate that revenue in a given accrual period, regardless
of whether the underlying cash flow has actually occurred or not (e.g.,
when a firm makes a sale, it can account for it, even though the
company may have to wait 60 days for the customer to actually send a
cheque) . Profit is an accounting concept derived from the income
statement. Conversely, cash flow reflects the cash transactions—
movement in (i.e., accounts receivable being paid) and out (i.e.
accounts payable being paid) of a business in a given period.
3. Since accounts receivable don’t always line up perfectly with
accounts payable, a business may confront a cash flow crunch (lack of

short-term liquidity) even if the business is profitable on paper.
OBJECTIVES OF CASH MANAGEMENT :
keep the optimum cash balance requirements at minimum level
by prompt collection & late disbursement etc.
FACTORS TO BE CONSIDERED WHILE
DETERMINING THE OPTIMUM CASH BALANCE:
ance costs .

nt.
Effective Cash Flow Management Technique:
 Identify Source of Deficit.
 Develop a Temporary Cash Flow Solution.
 Balance Future Income and Outlays to Prevent Future
Crises.
 CCL follows AS3, but both (direct and indirect).

INVENTORYMANAGEMENT.
Introduction
A. Inventory is those goods and materials themselves, held
available in stock by a business. Most manufacturing
organizations usually divide their Inventory into:
 Raw Materials: Materials and components scheduled for use in
making a product.
 Materials used in Process: Materials and components that
have begun their transformation to finished goods.
 Finished Goods: The goods that are ready for sale to the
consumers are finished goods.
 Goods for Resale: Returned goods that are salable.
B. The Significance of Inventory:
 For smooth Running of the business operations and uninterrupted
production, inventory is crucial.
 The time lag present in the supply chain from supplier to user at
every stage, requires that one maintains certain amount of
inventory to use in this “lead time”.
 They are required as buffers to meet uncertainties in demand,
supply and movement of goods.
 If the inventory is unavailable, it can indirectly hamper the
productivity of the Company since their will be salary and wages
procrastinations and increase in the liability.
 The speculative motive of holding inventory influences the decision
to increase or decrease the inventory level to take advantage of
price fluctuations.
C. Inventory Management: The objective of Inventory Management is:
 To maintain sufficient inventory for the smooth production and sales
operations and to avoid excessive and inadequate levels of
inventory.

 Maintain sufficient stock of raw materials in period of short supply
and anticipate price changes.
 Maintain sufficient finished goods inventory for smooth sales
operation and efficient customer service.
 Minimize the carrying cost and time.
 Control Investment in inventories and keep it at an optimum level.
Inventory Management in CCL: In CCL the management of the materials i.e.
goods and stores/inventory is known as Materials Management. The entire
gamut of materials here can be divided into two types:
a) Spares: Those materials with a higher self life used as a part of any
Assembly/Sub-assembly of machine/equipment having some retain
down value are known as spares. The spares are of two types:
A. Long durable spares
B. Spares that are of regular use & consumable in nature: Examples of
such type include Different Types of Filters, Break Shoes, Bearings,
V-Belts, Repair Kits, Head Light Bulbs etc.
b) Consumables: Those materials that are perishable and have shorter
self life are known as consumables. They do not have any written down
value such as Cotton Waste, Mobiles, HSD, MS, Consumable Electrical
Items, Pipe & Pipe Fittings etc.
Depending upon the application, the Materials are further classified into
two categories:
a) Capital Materials: Those materials constituting capital and creating
an asset for the organization are known as capital goods. At CCL, a
capital register is maintained for all capital goods
received/available.
b) Revenue Materials: When the materials i.e. goods or
stores/spares/consumables are used for replacement of worn out
part or consumable then it is known be revenue in nature.
Material Planning, Programming and Indenting:
The first step of Materials Management activity in an Organization as big as
CCL is planning, programming and subsequently requisition of spares and
consumables i.e. materials. If the Company wishes to purchase machines or

any equipments and/or the Spares & Consumables for the FY2015-16, then in
the current FY2014-15, it needs to implement the aforementioned things. CCL
uses the following information for planning, programming materials for a
particular period:
 First the area of jurisdiction is decided.
 Then the consumption pattern of materials for the past three years
and/or as decided in the organization is determined, the record of
which is mentioned in the log books/cardex available at Central Stores,
Regional Stores and at Unit Stores. All material has a stock card for
record keeping there. A stock card is a kind of material ledger.
 The age or life of equipment desired to be purchased is determined and
care is taken that the age is under the warranty/guarantee period. If
yes, there is no need for the Company to focus on buying spares of the
desired equipment. Also, the number of remaining life of machine is
determined.
 Then the number of equipment i.e. fleet/population of equipment is
determined.
 Next, it is checked whether the same materials are kept in other
Central, Regional and/or Unit Stores of the Organization.
 Now for planned requisition of materials, there are classifications. To
requisition the consumables in a financial year a duly Printed &
Prescribed Form known as Material Budget is prepared which is
available for the Group/Class Wise for consumables.
 The materials which are consumable in nature are broadly classified
hereunder:
Class Material Class Description
1. Engineering Material
2. Consumable Stores
3. Mining Supplies

4. General Supplies
5.0. Spare parts for underground (U/G) or open cast (O/C) mining
machines for face (actual coal cutting).
5.1 Materials for transport vehicles.
5.2. Spare parts for mine ventilation, fans, pumps, coal handling plants.
5.3. Materials for electrical equipment
5.4. Materials for workshop, mechanical plant and equipment.
5.5. Materials for washer plant and equipment and ropeway.
6.0. For excavation machines for digging and loading.
6.1. Machines for transport
6.2. Machines for levelling
6.3. Material handling equipment
7. Brought out spares for both U/G and O/C machineries.
8. Plant and machineries.
9. Unallotted.
10. Scrap.
The next step of Materials Mgt. is indenting, which means requisition of
materials that are required by the Company. Indents are prepared for 100%
requirement of all the Plants & Equipments but these are also prepared for
requisitioning the Spares & Consumables too depending upon the necessity
of requirements, based on which indents are of three types at CCL:
 Normal Indent
 Emergent Indent
 Emergent Indent for Local Purchase
The Indents for spares when made are signed by the Initiating Officers of the
User/Technical Dept. or the Officers who have prepared the Indent. They are
subsequently countersigned by the Head of the Technical Department of
Indenting Unit. Such Indents are then signed by the Stores Officer or an
Executive of the Material Management Department subsequent to which it is
signed by the Head of Finance Department according the mentioning of
Budgetary Provisions & finally approved by the Competent Authority.
The Indents for Consumables are prepared by the Stores Executive,
countersigned by the concerned Technical Department, certified for

Budgetary Provisions by the Head of Finance and are approved by the
Competent Authority.
Once the materials planning, programming and indenting are done, the
Indents received by the different Units are being compiled at Head Office & a
Consolidated Indent is prepared. The same is again approved thereof by the
Competent Authority as per the Delegation of Powers and intimation of
Indent Approval is accorded to Indenting Authority.
The MM functioning can broadly be categorized to undertake two important
functions,
A. Purchase Management
B. Stores/Inventory Management
1. Purchase Management in CCL: Objective: To procure plant and equipment,
spares and other store materials with a view to:
a) Maintaining continuity of production by correct supplies, in time.
b) Items purchased are most economic taking into account their
quality, durability, efficiency etc.
c) Developing vendor relationship to ensure fair play and equity.
Adequate care is taken that the materials obtained are of:
A) Of right quality
B) In right quantity
C) At the right time
D) At right prices
E) From right sources.
The Purchase Functions in CCL are normally undertaken at two levels:
 Centralized Purchases: Done through Headquarter
 Decentralized Purchases: Done through Area/Units.
Upon receipt of the approved Material budget/Indent the function of Purchase
Management starts with the drafting of NIT (Notice Inviting Tender)/Tender
Notice. Normally the NIT has the following minimum important parameters

which are essential for deciding a tender. The following are the Terms and
conditions of the NIT:
 Prices: The materials shall be purchased on unit price of the goods
along with any taxes if applicable on the price quoted. Whether the
quoted prices are inclusive of one or more of the aforesaid taxes and/or
exclusive of one or more of the taxes or duties, the percentage of
taxes are to be clearly mentioned.
 The Delivery Schedule: Whether the quoted materials are to be
delivered ex-stock (ready stock) or will take certain time from the date
of receipt of supply/purchase order so that the material can be
arranged.
 Place of Delivery: There are certain salient features of purchase order
without which the lowest price cannot be calculated. One of them
being the place of delivery. The place may be offered by the supplier to
deliver the goods either ex-warehouse, ex-shop, ex-their factory
premises or FOR Destination.
 Packing & Forwarding Charges: These are either inclusive in quoted
price or are exclusively incurred as additional costs.
 Guarantee/Warranty Certificate: A certificate of guarantee/warranty is
provided by the tenderer to the effect that the offered materials
against this tender are for fit for working for a period of 18 months from
the date of supply or 12 months from the date of fitment whichever is
earlier.
 Price Certificate: The manufacturer/supplier furnishes a price
certificate to the effect that the quoted price is not more than the
prices quoted to other parties.
 Price Fall Clause: In case of any higher price charged by the Supplier,
by exercising this clause, the Company reserves the right to recover
the difference of difference of price at which the supplier supplies &
price quoted in the same period to other purchasers.

 Material Fitment Certificate: A fitment certificate to the effect has to
be furnished by the tenderer stating that the offered material(s) is/are
being manufactured in accordance with its given specifications and
are guaranteed for its proper fitment into the machines.
 Payment Terms: The method in which payment is to be made is laid
down in payment terms. The payment could be either 100% against
delivery or 50% against delivery and 50% payment after satisfactory
inspection of material after 7 or 21 days depending on type of supplies.
Normally payments are made within 21 days after receipt, acceptance
and accountal of material. Sometimes advance payment are also been
agreed in case of Equipment Purchase and/or purchase of Capital Item.
 Paying Authority: The name of the officer and the area where the
payment will be made is also mentioned in the NIT.
 Submission of Bill: The Bills of supplies in duplicate/triplicate are to be
submitted along with a few other documents like copy of purchase
order, copy of receipted challan, price certificate copy etc. to the
consignee.
 Security Deposit/Bank Guarantee: After successful bidding, CCL issues
the supply order in which the tenderer has to submit a 5% or as may be
decided Security Deposit in the form of Bank Guarantee. It is however
released after successful supply, acceptance and given performance
guarantee on accountal of the material.
 Inspection Authority: The Name of the Competent Inspection Authority
is usually mentioned in the NIT.
 Earnest Money Deposit: The NITs may or may not be attracting the
EMD Clause. However, some Manufacturers are exempted from this
clause having NSIC Certificate and/or enjoying the Ancillary Status of
the Company.

 Consignee Details: Incorporated with the details of Company’s
Consigness.
After receipt of Financially Concurred & Approved Indents/ Materials
Budgets, the mode of tendering are being decided which may be of the
following types:
A. Open Global Tender: Anyone around the Globe can participate in the
Tender.
B. Open Domestic Tender: Anyone within Country can participate into the
Tender.
C. Limited Tender: Only few parties can quote the tender.
D. Single Tender for Proprietary & Non-proprietary Items: Issued only to a
selected Firms. When the Company understands that there is only one
manufacturer source of Proprietary Nature and/or also in case of
Original Equipment Manufacturer the Single Tenders are being issued.
Sometimes only in special cases after specific approval by the
Competent Authority, some Branded Materials are being procured
under Single Tendering System Viz. Godrej Furniture, IPads etc.
The NIT has three important bidding parts, Technical Part, Commercial Part
& Price Part. Normally the Tenders are invited in Two Bid System. One is
Techno-Commercial Part & another contains Price Part. In fact the CCL
exercises all three types of Bidding System as detailed below depending
upon the material type, its urgency etc:
a) Single Bid System: All the three parts of NIT are consolidated in one
tender.
b) Two Bid System: Technical and commercial parts are consolidate in
one tender and pricing in the next one.
c) Three Bid System: All three parts are tendered separately.
Upon receipt of Offers from the Vendors against Tenders, after opening of
First Part of the Offers submitted and/or as the case may be, a Techno-
Commercial Comparative Statement and Evaluation Report is prepared. The

Price Part is subsequently opened only for Techno-Commercially Qualified
Bidders in Two or Three Bid System. A Comparative Price Statement is
prepared having full details of Taxes, Packing & Forwarding Charges, Duties,
Delivery Point etc to arrive at the Lowest Landed Cost (also commonly
known as L1 Price) item wise & firm wise. After approval by Competent
Authority & Budget Certification/Financial Concurrence, finally the
Contract/Purchase Order is issued. The Contract/Purchase Order is of three
types:
A. Normal Purchase Order: Placed for delivery of Goods & Services at the
earliest in accordance with the Terms & Conditions as laid down in the
said Contract.
B. Rate Contract: Under this the prices and terms and conditions are fixed
and are applicable/valid for a period of 1 to3 years. The Area Direct
Demanding Officers exercises for their as and when required basis
item procurement by using the Rate Contract.
C. Depot Agreement: This is more or less like the Rate Contract with the
addition that the Manufacturer/Supplier has to keep all the materials
off the shelf for which Depot Surcharge are payable extra.
2. Stores Management in CCL: Structure of Stores:
For safe, secure and logistic control of stores and inventories in an
organization like CCL there are three tier arrangements for stores
management:
A. Central Stores: Normally only one Central Stores in CCL is located at a
central place to cater the bulk need of different areas/regions of the
Company of the centralized nature of items.
B. Regional/Area Stores: For maintaining a better administrative control,
CCL has administrative regions/areas headed by the Area GM. Each
area/region normally has more than one mine under its control of both
OC and UG mines category. All such areas have Regional/Area Stores
which are responsible to cater the entire stores and inventory
requirement of the Unit/ChargedOff Stores. This unit/charged off stores
ultimately issue the stores and inventory to the production unit

attached to them. Such consuming mines have different grade of
consumers like unit/colliery workshops, mines, automobile garages
etc. The head of the Regional Stores known as Direct Demanding
Officers as well as their normal functioning as Regional Stores officers.
The Regional Stores Officers also responsible for the collection of
materials from the Company’s centralized consigning i.e. the Central
Stores catering need for units attached to them.
C. Unit/Charged off Stores: It is responsible for collection of materials
from Regional Stores of the Area who ultimately issues the stores,
spares & consumables to the ultimate users attached to the unit i.e.
the different sub units of the mine. The store spares and consumable of
these Units/Charged Off Stores are not taken into account of Inventory
Valuation and are being treated as charged/used off and that is why the
Unit Store also known as Charged Off Stores.
In all such Central, Regional and Unit Stores there are following important
sections:
1. Purchase Section
2. Material Receipt Section
3. Material Storage/Issue Section
4. Accounts Section
5. Material Disposal Section.
 Each Section are normally headed by a Section Incharge which are Sr.
Stores Keepers subordinated by Assistant Store Keepers, Store Issue
Clerks and labours. The account section is headed by either an
Account Officer or Accountant.
 Against the given supply order and/or Rate Contract/Depot Agreement,
the vendor supplies the material to the Consignee Stores. Normally the
supplier delivers the material along with some documents like copy of
invoice in duplicate, copy of delivery challan in duplicate, fitment
certificate etc. And/or any other document directed in accordance to
the supply order like copy of excise gate pass, copy of octrai receipt
etc.

 As soon as the material is received after unloading into stores
premises, the same are kept into the Stores Receipt Section. The
personnel of this section after manual counting and inspection signs
the delivery challan and return s a copy of challan as a token of
material receipt back to the supplier.
 Afterwards the details of the materials are recorded in the day
book/daily receipt register wherein the entire details of the received
material as per delivery challan are being recorded and subsequently
an inspection invitation advice to the concerned technical department
is issued.
 After receipt of inspection invitation letter, the concerned inspecting
authority visits and inspects the received material in accordance to
the supply order and delivery challan and subsequently submit the
satisfactory inspection note, if satisfied.
 Subsequently the Stores Keeper prepares the Store Receipt Voucher
(SRV) also known as Daily Receipt Register (DRR) where all the details
mentioned in Day Book is also recorded. The DRR/SRV is in four copies.
The first copy is meant for the preparing authority i.e. stores receipt
section, the second copy is meant for finance department for making
payments, the third copy is used for data entry and the fourth is
retained by the stores issue section.
 The SRV/DRR is signed by the stores keepers of receipt section, store
keepers of storage/issue section, chief store keeper and is finally
accepted by the stores officer.
Storage/Issue Section:
 In this section the duly received, inspected and accepted materials are
being handed over by the store receipt section with SRV/ DRR.

 The Issue Section Incharge physically receives the material in
accordance with details of SRV/DRR and after due recording and
signature in cardex/ stock card, the materials are being placed/stored
at its designated location/bin. A Bin Card having locational details of
individual receipt are being tagged on each and every stores received
by Issue Section.
 The Issue Section Incharge put their signature on SRV/DRR as token of
safe/ undisputed received of stores and spares and returns the
DRR/SRV’s back to the Receipt Section. The Receipt Section forwards
the SRV to the Chief Stores Keeper who after being satisfied with
available documents and transactions records signs and forward the
same to the Stores Officer for final acceptance of the material
received.
 After due authentication by the Stores Officer Incharge, the SRV are
forwarded the Stores Finance Section for settlement of
payments/accounting of Bills as the case may be.
 The storage/issue section are having immense custodial
responsibilities of all the inventories under their control. The periodical
physical verification of sample materials or a part of stores,
cleanliness, dust separations, prevention of theft, temperature control
etc. are some of the normal vigilance function of the Incharge of the
storage/issue section.
 Now the Authorized Officer of Technical Department get the material
issued by furnishing the Stores Requisition Voucher.
 Subsequently the Stores Issue Section Incharge after being satisfied
with the Authorization, issues the required material to the users after
due posting in the stock card/ cardex. Finally at the end of the day all
such stores requisition/issue vouchers after having signs of CSK are
submitted to Associated Stores Finance Section for material
accounting.

 The material transferred from Central to Regional Store is made by
Depot Transfer Document applicable to both inter Company & Intra
Company. The Issued materials are returned back to the Stores by way
of Stores Return Vouchers.
For maintaining the Supply Chain Management System for both spares and
consumables of an effective Inventory Management and Control System,
following important evaluation analysis are being exercised by Store
Executives in close cohesion with the Technical Department so that a
situation of non availability of fast moving spares and consumables can be
avoided and a smooth reordering level are maintained on one hand and
avoiding the inventory built up on the other. Thus a situation of inventory
mounting could be ruled out in order to maintain Company’s norm. As per
CCL’s Inventory Norm, the inventory carrying cost should not be more than
six months stores consumption. The store budgets are provided under four
heads:
1. Timber
2. Petrol (Motor Spirit), Oil, Lubricants
3. Explosives
4. General Stores i.e. spares and consumables.
Now, the budgetary allocation is made in the aforementioned four heads in
the mining industry.
In order to give 96% store satisfaction i.e. 96% of all requisitioned item by
the technical department has to be off the shelf. Anything below 96% is “bad
inventory” management.For Eg. if requisitioned items delivered are only 90%
satisfaction lavel, then the store satisfaction is lower by 6%.
It is nearly impossible to achieve 100% store satisfaction by maintaining any
amount of inventory management. Depending upon movement, (issue history
of items and applicability of items the spares, assemblies and subassemblies
can be categorised hereunder:
1. The fast moving stores and spares.
2. Medium moving stores and spares.
3. Slow moving stores and spares4.

4. Float items: Float items are those that are mandatorily required by the
machine in case of failure of any assembly or subassembly, it is an
integral that needs to be replenished where the repairing time of
assembly/subassembly are higher even when the spares are available.
5. Float items of insurance in nature: Insurance items are those which
may or may not be required throughout the life of the equipment.
Accounting Standard (AS)-2 (Valuation of inventories)
The objective of this standard is to formulate the method of computation of
cost of inventories/ stock, determine the value of closing stock/inventory at
which the inventory is to be shown in the balance sheet till it is not sold and
recognized as revenue. This statement deals with the determination of such
value, including the ascertainment of cost of inventories and any write down
there off to net realizable value.
Standard methods of Inventory valuation used: Some commonly used
methods of inventory valuation are as follows:
 LIFO (Last in First Out): The items purchased most recently is assumed
to be the first item sold.
 FIFO ( First in First Out): The first item purchased is assumed to be the
first item sold
 Weighted Average Method: The average cost per unit of inventory i.e.
the ratio of the total cost of goods available for sale and the total
quantity available for sale is applicable in case of weighted average
method of valuation of inventory.
Valuation Method used in CCL: CCL uses the weighted average method for
valuation of its inventories.
Method of Analysis of Inventory: There are four kinds of normal analysis
which are exercised for an effective inventory management control:
1. ABC Analysis: Such type of analysis depends on the movement of any
spares/ consumables i.e. fast and medium pace moving item. It is a
movement based analysis system of material control. In this technique,
material is analyzed according to their movement so that the fast moving

materials are given greater attention and care. All items are classified
according to their movement i.e. high, medium and low moving which are
known as A, B and C items respectively.
2. XYZ Analysis: Such type of analysis depends on the movement of any
spares/ consumables i.e. slow pace moving item.
3. HML Analysis: It is High, Medium and Low Value Stores Analysis.
4. VED Analysis: Vital, Essential, and Desirable items are kept under this
category.
For example: A high moving item like Repair Kit RK 2008 has an opening
stock of 20, with 200 as received stock, 180 as issued and 40 as closing
stock. Since the item has high usage frequency it is an “A” material, A “high
moving” item and a “critical/vital” item. Hence it can be concluded using the
above four analysis that the item is of high priority.
We take another example of Caterpillar Dumper Brake Bearing Assy. It is a
slow moving (C), high valued (H), vital (V) item and hence is high priority. By
making such exercises and analysis, CCL decides upon the reorder quantity.
Disposal Function:
 The MSTC i.e. Metal & Scrap Trading Corporation, a GOI Organisation
takes care the disposal of old materials of CCL. If the material is
unused and stocked up without reason, it is to be disposed off. For this
there are a few steps:
 First a Survey Off Report is made for Disposal having the details of
material description, material quantity, weight, location, Written Down
Value, Reserve Value etc having the signature of Stores Officer, User
Department, Associated Finance & General Manger.
Issues: Among the most important and major problem with regards to the
inventory management system of CCL are highlighted hereunder:
 Normally due to uniqueness and different make and models (varieties)
coupled with poor standardization of the equipments, the Company is

under compulsion to maintain a higher inventory carrying cost against
its own norms of six months consumption.
 Due to obsoleteness of the equipment, the left out inventories of the
related equipment becomes a burden for the organization and leads
again to more inventory carrying cost.
 Sometimes due to a wrong planning, programming and indenting, poor
ABC, XYZ, VED and HML analysis in the absence of poorly maintained
records and/or negligence, non application of judicious mind, the
inventories shoots up and thus leads to higher inventory carrying cost.
 Due to the non implementation of standardised material codification
system and also non implementation of online inventory management
system for the entire Company, the materials available at one location
required at other locations are not properly being utilised which results
in a higher inventory at one location and becomes an emergent
requirement at another location.
 Due to the non availability of genuine and proper cross reference list of
OEM’s parts number with the OCM part number, at many times even
though the materials available in the same stores and/or other stores
having the OCM part number, could not be identified to be used as an
exact OEM’s part number.
Recommendations:
There must be strict norms for standardised code and proper reference list of
plant machineries part numbers for all the equipments of Company. This will
not only help in universality of language between subsidiaries but also
reduce the inventory carrying cost of those goods rusting as stored inventory
in Company A and demanded by Company B. For example if Company B
which is a subsidiary of the same parent Company of CIL, suddenly requires a
Heavy Earth Mining Machinery Spare due to an unforeseen breakdown but is
unable to get it repaired or buy a new one quickly and in turn hampering the
process of Overburden Removal in one of the mines, then the HEMM Spares

kept unused in another subsidiary may be utilized for the need of its sister
Company. But often the subsidiaries including CCL face the problem of
identification of HEMM spares due to difference in coding methodology of the
same machine by different subsidiaries causing further delay. To avoid this if
the material code is universal, there will be no discrepancy in HEMM Spares
and other goods identification and the emergencies can be met with ease
and resources of companies effectively utilized.
In phase one, intra-area online sharing of all information within units and
regional stores should be done. In phase two, Inter India connectivity from
one regional to each regional store and in phase three, one regional store to
central stores connectivity should be done. And finally in phase four, one
subsidiary of CIL should to be linked digitally with another subsidiary. This
will provide faster communication between sub parts of CIL and also reduce
delays due to non or miscommunication. This will also solve the problem of
wrong indentation, programming and planning because of maintenance of
proper records in dematerialized form.
The Inventory of Finished Goods
The Company has following types of Coal or Coke for Sale into the Market:
A. Coking Coal.
B. Semi-Coking Coal.
C. Non Coking Coal.
D. Washed Coking Coal.
E. Washed Semi & Non-Coking Coal.
F. Washery Rejects.
G. Washery Middling Coal.
H. Washery Slurry Coal.
After completion of one production cycle or time period, normally all such
types of Coal are being measured with help of Company’s Surveyors with the
application of modern equipments like Total Stations. The Coal is

despatched through Road and/or Rail Transport. The Comapny arranges the
availability of Railway Racks in co-ordination of Department of Indian
Railways for its Bulk Consumers recorded under FSA and their Consumers of
Core Sector. The e-auction Coal is delivered to the purchasers both by Rail or
Road. The Company is able to reduce its Coal Stock Year on Year.
Debtors management.
Meaning of Debtor management
Debtor management means the process of decisions relating to
the investment in business debtors. In credit selling, it is certain that we
have to pay the cost of getting money from debtors and to take some risk
of loss due to bad debts. To minimize the loss due to not receiving money
from debtors is the main aim of debtor management.
Main elements of Debtors management:
For effectual debtor management, accompanying elements had better
be probed:
1. Credit policy
Credit policy imapcts debtor management since it channelizes
management regarding controlling debtors and to make equilibrium
among freehanded and rigorous credit. If business firm does not meet
requirements to sell the productions on credit after a provided
restriction of sale. This released credit policy will elicit the quantity of
profitableness and sale. But risk will also increase with enhancing of
sale. If capitalist trade the commodity to those debtors whose
potentiality to compensate is not beneficial, then it is potency that
roughly some quantity will turn bad debts. Business firm can raise the
time limit for compensating by such debitors. On the other hand, if

business firm's credit policy is rigorous, then it will raise security and
liquidity, but diminish the profitableness. Thus, finance official had
better devise credit policy at optimum level where liquidity and
profitableness will be equal. Capitalist can demonstrate it graphically.
(a) Length of Credit period
Length of credit time period is also an important element that affects
the conclusions of finance officer associated with the manage
debitors. It is the time which permits debtor to render his debt for
purchasing goods on credit from marketeer. Finance official can
attribute the length of credit period agreeing with the approximation
of clients.
(b) Cash discount
Cash discount is method to acquire wealth quick from debtors. It is
monetary value of investment funds in credit sale.
2. Credit policy analysis
It refres to the formal unfavorable judgment of credit policy. Rating
and analytic thinking of credit policy is based on following
components.
(a) Gathering debtor's data
For investigation of the financial position of debitors, capitalist have to
gather the data. This data can be incurred from financial statements
of the former years of the customer's bank reports and data provided
by credit rating agencies. This data will be practicable for
determining where debitors will come in the financial obligation or
not. It will also be utilitarian for experiencing capableness to
compensate the financial obligation.
(b) Credit Decisions
After aggregation and analysis the debitors data, manager has to
determine whether business firm had better facilitate to trade
commodities on credit or not. If business firm trades the goods on
credit to peculiar debtor, then at what level it will be traded after
checking his perspective. For this finance manager can fix the

monetary standard for rendering goods on credit entry. If a peculiar
debtor is underneath than applied standard, then it had better not
admit the proposal of purchasing goods on credit.
3. Formulation Collection Policy
For acquiring fund quickly from debtor, the following steps will be
acquired under formulation of accumulation policy.
(a) Carry reminding letter for compensating debt
(b) Take the assistance of debt collection authority for acquiring bad
debt.
(c) To do effectual legal action against bad debitors.
(d) Appeal in person to debitor to compensate his dues on email or
mobile
(e) Finance manager had better supervise collection position via
moderate accumulation period from past miscellaneous debtor and
their turnover rate.
Slow payment has a incapacitating effect on business, in detail on
small businesses who can least yield it. If capitalist do not handle
debitors, they will begin to deal the business as capitalist will step by
step lose check due to cut down hard currency flow and definitely
capitalist could go through an raised relative incidence of high-risk
debt. The accompanying points determines will assist in managing the
debitors:
1. Have the correct mental attitude to the check of credit and make
certain that it acquires the anteriority it is worthwhile.
2. Demonstrate absolved credit exercises as a subject of business
firm policy.
3. Make certain that these exercises are distinctly understood by
suppliers, customers and staff.
4. Be professional person when consenting new bills, particularly
more prominent ones.

5. Check out each client tremendously before capitalist suggest
credit.
6. Determine credit limits for each customer.
7. Ceaselessly look back these limitations when capitalist distrust
tough times are coming or if operating in a explosive sphere.
8. Accommodate very close lipped to the more prominent
customers.
9. Bill is in right away and distinctly.
10. Believe charging penalizations on delinquent accounts.
11. Believe assuming debit/ credit cards as a defrayment alternatives.
12. Prompt the debtor counterbalances and maturating timetables and
do not allow any debts get too prominent or too outdated
Cash basis:
Credit basis:
DSP.
.

Problems faced by CCL in dues payment system.
• Quantity problems
• Difference in goods quantity supplied by CCL and received
by the party.
• Quality problems
• CCL supplies C, D, E grade of coal in various industries.
• Party’s blame- it received E grade coal while CCL supplied
D grade coal.
• Others.
• Moisture
• Stowing
• Settlement of disputes:
• Eastern umpire
• Western umpire
• Northern umpire
• Southern umpire

Findings.
SLC decides the supplying colliery, the party, the
supply date and quantity.
CCL black list the parties for certain duration which
are not capable of clearing their disputes.
CCL stopped the supply to BSEB for last few years due
to delay in payments and misbehavior of BSEB officers.
CCL is not responsible for the goods which are damaged during
the guarantee period.
CCL rejects the equipments/machines which fail to meet the
quality standard and doesn’t make payment.
Delay in delivery of goods by the suppliers leads to reduction in
payment amount by 5% per week. This reduction limited to 10%
but may reach 15%.
Findings.
CCL mainly follows cash flow projection and budget for cash planning
and control. Cash flow projection is also used to determine the
optimum cash balance of CCL.
CCL has not faced any kind of liquidity crunch in last 5 years, indicates
CCL maintains a sufficient cash balance.
No bank loans to fulfill its working capital needs -> CCL has enough
cash balance to fulfill its day to day requirement of cash.
CCL has taken a loan from the world bank to fulfill its fixed capital
requirements.

Recommendations.
For Cash Management.
 Maintain certain cash balance to meet sudden heavy demands.
 Regular and full bank reconciliation statement and cheque
investigations.
 Prepare the invoice documents immediately after the dispatch
and mail them to the clients at the earliest.
 Accelerate the collection by reducing the lag between the time a
customer pays the bill and the cheque is collected.
 Ensure the proper demarcation between the duties of the
individuals who receive cash and those who record the receipt of
cash to avoid misappropriation of cash.
For Inventory Management.
 Better coordination among various department namely purchase,
marketing and finance to help achieve greater efficiency.
 Simplify the procedures for disposing obsolete and use ideas like
JIT.
 Develop long term relationship with vendors for improving
quality and quantity of inventory.

 Try to strike a trade off between the ordering and carrying cost
of inventories.
For Debtors Management.
 Maintain proper mutual understanding with customers regarding
credit period and timely payment. Arrange for the periodic
bilateral meetings.
 Maintain proper negotiations for the quality and price of coal.
Appoint umpires to settle down the disputes regarding quality,
quantity and price.
 Assign top management to set proper standard and practices of
debtors management to take proper action in order to collect the
old outstanding dues.
 Be careful about choosing the right kind of collection policies.
 Start securitization scheme for all the states so as to clearvthe
outstanding dues through long term bounds.

Conclusion.
There are many problems faced in
working capital management.
However , after following suggested
recommendations ,CCL can not only
get more business benefit but can
also approach towards gaining
qualitative advantage.

BIBLIOGRAPHY
1. M.Y. KHAN, P.K.JAIN (1981), Financial
Management, and Cost Accounting (third
edition) New Delhi: McGraw – Hill
publishing company limited.
2. I.M.PANDEY.Financial Management
New Delhi Vikas publishing house private
Ltd – ninth addition 2004
3. Financial Management COMPANY
DATA: Sale & Other Data of Central
coalfields limited, WEBSITES
www.google.com , www.ccl.gov.in .

INTRODUCTION of CENTRAL COALFIELD LIMITED

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