PRESENTED BY:

Deepthi, Gouthami, Saindhavee,

Shuvekchya, Sumit & Yudhir
COMPANY PROFILE
Established in : 1907 A.D

Situated at : Jamshedpur Tata Steel Group is among the
top-ten global steel companies with an annual crude
steel capacity of over 29 million tons per annum.

Has operations in 26 countries and commercial presence
in 50 countries

Has 80000 employees over 5 continents and is a Fortune
500 company.

OBJECTIVES
Strengthen India's industrial base.

Profitability

Protecting and safeguarding the shareholders
investments.

Effective discharge of its duties and obligations
towards employees, customers and community.

PLANNING HORIZON
The planning horizon is 5 years.

It has a rolling plan for its capital expenditures.

A review is made in December January.

Revised estimates of expenditure are prepared for the
ongoing projects.

Nature of the Capital Budget
Annual capital expenditure budget consists of two
parts:-

1. Carry Over Items: The projects which were started in
the past years and are still continuing . The concept
of rolling plan is especially applicable to these items.
This is because ,revision in capital expenditure is
required on account of various environmental factors.



2.New Projects: Important because the company makes
the crucial decision of committing valuable resources
at this point . It is at this point that cost- benefit
analysis is made . This projects go over to the carry
over items in the succeeding years.

Both for carry over and new projects , phasing of
expenditure is worked out on the basis of
availability of funds and
technical requirements.


Capital Projects
The capital expenditure projects are divided into two
categories:

1. Minor Schemes : Involving outlays under RS.25 lakh .
Approximately Rs.7 crore is allocated to this scheme
annually .
Schemes undertaken include: New equipment and
modification, prototypes, balancing facilities,
replacements , system changes.


2. Major Schemes: Involving outlays > Rs.25 lakh .
A total of RS.30 to RS.35 crore is allocated to this
project annually.

Minor schemes involve routine expenditure requiring
less intensive managerial attention .

Major schemes deal with areas which are relatively
unknown and the companys commitments are high.



Administrative
Organization for Capital Budgeting

Conception state: a lot of idea are conceived from this
stage.

Formalization state: ideas in terms of operational
details are provided.







The movement of ideas to the stage of final approval
is as follows:
Departmental the proposal to the chef engineer
for the consideration.

project division provides essentiality of the
project.

project division submits the formalized proposal
for the consideration.

Co-ordination:
Conducted by a special cell called C.E.D.D.
Impacts on other departments is taken into account.
Ensures that no important facet affecting other
departments is missed.
Ensured by a periodical meeting of all concerned
officials.
Formal system for the meeting is followed.
Maximum interval between two such meetings is
one week.



Evaluation:

Submission of the project to study group.
Study group checks the viability of the project.
Study group consists : Chief Engineer, Controller of
Budgets ,Controller of Accounts ,
Representatives from works
In case the proposal satisfies all of the study group
members it is forwarded to the Capital Expenditure
Control Committee.
This committee checks the financial constraints of the
project as spelt out by the head office.


Criteria to assign priority to a project
Simple method of ROI(book value) is used

Sometimes, the PBP is also considered

Minimum ROI fixed at 15%

Non-monetary criteria factors considered
Essentiality of the project
Govt. rules and regulations
Union contractual requirements
The social objectives

TISCO doesnt use DCF Method.
Reasons being;

Thought to be complex
Needs a lot of data which is not available
There is normal human resistance to change


Approval & Budget finalization stage

Proposals cleared by the Capital Expenditure Control
Committee go into the formal budget.

Budget is prepared annually, phasing 3 years

Once in 3 months, proposals are sent to H. O for BODs
approval

Capital Exp < Rs. 1000 is approved by the dept. head,
& charged to the current years a/c



Cap. Exp. Upto Rs. 10,000 can be approved by the Vice
Chairman (if urgent) The V.C is given certain budget in
case of any emergency sanctions.

Projects involving expense of Rs. 10,000 to Rs. 25 lakhs
(minor schemes) are sent to BOD for approval

Expense exceeding 25L are inspected at the H.O and
only then, approval is granted (major projects, major
commitment)
Normal time for proposal approval is 10-12 months


DISBURSEMENT OF SANCTIONED
FUNDS
Immediately after the schemes are approved, the
controller budget is informed by telex of the
approval, giving scheme numbers.

Disbursement of funds.

Approval.

Control Of Expenses:

A check is kept on the way expenses are incurred in
different phases.

If deviations are large, the causes for deviations are
investigated.
If deviations exceed 15% of the original approval, a
fresh revised estimate is submitted for approval
Performance Appraisal:
TISCO has a Make-Good reports committee which
goes into the appraisal of projects performance.

ABC Analysis.

Measuring actual performance.

Corrective actions.