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SALES, INVENTORY& FINANCIAL

MANAGEMENT
IN
IFFCO MARKETING
IN THE GUIDANCE OF

SUBMITTED BY

Mr.Ajit Saxena,

Pradeep Pandey

Sr.Manager (Finance & Account)

MBA-Sem-lll (2009-11)

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ACKNOWLEDGEMENT

I feel great pleasure in extending my thanks to all who have helped me in

completing my summer internship.Without their support, I would have not been able
to complete this report.
The experience of training in IFFCO is inexpressible in words. It has not
only acquainted me with the working of the corporate world but has also enhanced my
knowledge. My training at IFFCO,LUCKNOW would certainly help in my
professional front.
I express my humble gratitude to Mr.Alok Verma, Manager (Accounts)
and Mr.B.K Agarwal, Assistant Manager (Accounts), IFFCO,LUCKNOW for his
guidance and inspiration throughout my summer training which helped me to learn
about the companys working and to complete my project work. I would also like to
thank Mr.Ajit Sexana, Head of The Department(Finance & Account), for giving me
chance to complete my Internship program from IFFCO, LUCKNOW.
I am also thank the finance & accounts departments staff for providing me
every type of support which was required in completion of my training.
I would like to show my gratitude to Mr.R.K.Tiwary, (Director) Indira
Gandhi Institute Of Co-Operative Management Lucknow.
I would also like to thank Dr.M.K.Jha,Course Co-coordinator, Indira
Gandhi Institute Of Co-Operative Management Lucknow.

Thank you!

( PRADEEP PANDEY)

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DECLARATION

I PRADEEP PANDEY, a student of MBA III semester, Batch 2009-2011,

Indira Gandhi Institute Of Co-Operative Management Lucknow. Hereby declare that I
have undergone summer training in IFFCO,Lucknow from June 7th to July 26th and the
training report entitled MIS Regarding Inventory,Sales & Financial Management in
IFFCO Marketing, which was completed under the supervision and kind guidance
of Mr. Ajit Sexana , Head of The Department(Finance & Account), is the outcome of
my own efforts and bonafide work and the same has not been submitted in any other
University & organization for the award of any degree or professional diploma.

Date:
Place: Lucknow

(PRADEEP PANDEY)

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TABLE OF CONTENTS

Fertilizer Industry
About IFFCO
IFFCO: Indian Farmers Success story
About cooperative
IFFCOs Mission
IFFCOs Vision
IFFCO Glory 2009-10
IFFCOS Management
Organizational Chart of IFFCO
Plants of IFFCO
Product of IFFCO
IFFCOs Associates
Production in IFFCOs Plants
Sales & Marketing
Prices of IFFCO's Fertilizers
Inventory management in IFFCO
Finance Function
Research Methodology
Findings
Limitation
Conclusion & Recommendation
Bilblography

Fertilizer Industry

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The fertilizer industry in India consists of three major players; The

government owned public sector undertakings, cooperative societies like
IFFCO,KRIBHCO and units from Private sector. There are about 33 major
producers providing N and NP/NPK fertilizer in the country at present. The
fertilizer industry of the India had made constructive use of the fertilizer
subsidy provided by the Government of India to ensure that the country
achieved reasonable self sufficiency in food grain production. The
fertilizer industry has organized itself though fertilizer association of India
(FAI) to coordinate with the Government of India to achieve the macroeconomic objectives related to agricultural sector and provide other
services.
The Indian Fertilizer industry had a very humble beginning in 1906, when
the firstmanufacturing unit of Single Super Phosphate (SSP) was set up in
Ranipet near Chennai with an annual capacity of 6000 MT. The Fertilizer&
Chemicals Travancore of India Ltd. (FACT) atCochin in Kerala and the
Fertilizers Corporation of India (FCI) in Sindri in Bihar were the first
large sized -fertilizer plants set up in the forties and fifties with a view to
establish anindustrial base to achieve self-sufficiency in foodgrains.

Subsequently, green revolution in thelate sixties gave an impetus to the

growth of fertilizer industry in India. The seventies andeighties then witnessed a

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significant addition to the fertilizer production capacity.

Fertilizer is a key ingredient in ensuring the food security of the country
production and productivity of the soil. The domestic food grain production
target has been setat 320 million tones by 2011-12 from the present production
of 210 million tones. Thistarget could be achieved by higher productivity
through improved farming practices,expansion of irrigation, better seeds and
extensive and balanced use of fertilizers. Towardsthis end, the Department is
planning to raise the production of urea from the present installedcapacity of 197
LMT to 300 LMT by the end of 11th Five Year Plan i.e., 2011-12 by taking
concrete steps to boost production and productivity, removing regional
imbalances in production and distribution, securing long term tie-ups for supply
of feedstock and raw material etc.

INDIAN FERTILISER INDUSTRY

INDIAN FARMERS FERTILISER COOPERATIVE LIMITED

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Indian

Farmers Fertilizer Co-operative Limited : (IFFCO)

was

registered on November 3, 1967 as a multi-unit Co-operative Society. On the

enactment of the Multi-unit co-operative Co-operative society. The society is
primarily engaged in production and distribution of fertilizers. The byelaws of
the society provide a broad frame work for the activities of the IFFCO as a
Co-operative society. IFFCO commissioned an ammonia urea complex at
Kalol

and the NPK/DAP plant at Kandla both in the state of Gujarat in 1975.

The Amonia-urea omplex was set up at Phulpur in the state of Utter Pradesh
in 1981. The ammonia-urea unit at Aonal was commissioned in 1988.
In 1993, IFFCO had drawn up a major expansion programme of all the
four plants under overall aegis of IFFCO VISION 2000. The expansion projects
at Aonla, Kalol, Phulpur and Kandla have been completed on schedule. Thus
all the projects conceived as part of vision 2000 have been realized without
time or cost overruns. All the production unit of IFFCO have established a

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reputation for excellence and quality. A new growth path has been chalked out
realize newer dreams and greater hights through vision 2010 which is presently
under implementation. As a part of new vision, IFFCO has acquired fertilizer
unit at Paradeep in Orissa in September 2005. As a result of these expansion
projects and acquisition, IFFCOs annual capacity has been increased to 3.69
million tons of uera and NPK/DAP equivalent to 1,71 million tones of P205.
IFFCO has
fertilizers

and

made strategic investment in several ventures. Godavari

chemidals

Ltd (GFCL) & Indian Potash Ltd (IPL)

in India,

Industries Chimiquesdu Senegal (ICS) and Oman India fertilizer Company

(OMIFCO) in Oman are important fertilizer joint ventures. Indo Egyptain
fertilizer Co (IEFC) in Egypt is under implementation. As a part of strategic
diversification,IFFCO has entered into several key sectors. IFFCO-Tokyo General
Insurance Ltd (ITGI)is a foray into general insurance sector. Through
ITGI, IFFCO has formulated new services of benefit to farmers.Sankat Haran
Bima Yojana provides free insurance cover to farmers along with each bag of
IFFCO fertilizer purchased. To take the benefits of emerging concepts like
agriculture commodity trading, IFFCO has taken equity in National Commodity
and derivative Exchange (NCDEX) and National Collateral Management Services
Ltd (NCMSL).

IFFCO

Chhattisgarh

Power

Ltd

(ICPL)

which

is

under

implementation is yet another foray to move into core area of power. IFFCO is
also behind several other companies with the sole intention of benefiting
farmers. The distribution of IFFCOs fertilizer is undertaken through over 38155
co-operative societies. The entire activities of distribution, sales and promotion
are coordinated by Marketing Central Office (MKCO) at New Delhi assisted by
the marketing offices in the field. In addition, essential agro-inputs for crop
production are made available to the farmers through a chain of 158 farmers

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services center (FSC). IFFCO has promoted several institutions and organizations
to

work

for the

movement,improve

welfare

of

farmers,

strengthening

co-operative

Indian agriculture.Indian Farm Forestry Development Co-

operative Ltd (IFFDC), Co-operative Rural Development Trust( CORDET),IFFCO

foundation, Kisan Sewa Trust belongs to this category. An ambitious project ICT
Initiatives for formers and co-operatives is launched to promote e-culture in rural
India. IFCCO obsessively nurtures its relations with farmers and undertakes a
large number of agricultural extension activities for their benefit every year .
At IFFCO the thirst for ever improving the services to farmers and
members co-operatives is insatiable, commitment to quality is insurmountable
and harnessing of mother earths bounty to drive hunger away from India in an
ecologically sustainable manner is the prime mission. All that IFFCO cherishes
in exchange is an everlasting smile on the face on Indian farmers who forms
the moving spirit behind this mission.
IFFCO,today is a leading player in a Indians fertilizer industry and is
making substantial contribution to the efforts of Indian Government to increase
food grain production in the country.

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IFFCO: Indian Farmers Success story

During mid- sixties the Co-operative sector in Indian was responsible for
distribution of 70 percent

of fertilizers consumed in country.

This sector had

adequate infrastructure to distribute fertilizers but had no production facilities of its

own and hence dependent on public/private sectors for supplies. To overcome this
lacuna and to bridge the demand supply gap in the country, a new co-operative
society was conceived to specifically cater to the requirements of farmers. It
was an unique venture in which the farmers of the country through thire own Cooperative Societies created this new institution to safeguard their interests. The
number of co-operative societies associated with IFFCO has risen from 57 in
1967 to 38, 155 at present.
The village adoption programme was initiated by IFFCO with the objective of
bringing about overall socio-economic development in rural areas with particular
emphasis on agriculture with correct and balanced use of fertilizers, quality seeds and
better farm management. During the year, various promotional, social and community
development programmes based on specific needs were organised. These included
medical and veterinary check-up, training programmes for rural women and drinking
water facilities, etc. During 2009-10, IFFCO effected all-round development in 434
adopted villages under this programme.

Various promotional and extension programmes were organized with focus

primarily onimproving soil health, promote balanced use of fertilizers to improve
N:P:K consumption ratio,educating farmers in the latest available technology so as to
enhance crop productivity through hefficient use of fertilizers, water conservation and
thereby promoting sustainable agriculture.

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During the year under report, the Society conducted 5,292 field programmes,
1,118 sale point personnel training programmes, 153 crop seminars and 910
agricultural campaigns, that is, soil testing and bio-fertilizers. The Society analysed
1,51,413 soil samples, in different States, including 51,848 soil samples tested by 10
mobile soil testing vans for recommending optimum dose of fertilizers for improved
productivity. In addition, 8,125 Critical Input Package (CIP) Kits containing seeds,
fertilizers, bio fertilizers, agro chemicals, etc., were also distributed to the farmers in
the field programmes for raising good crops. Literature in the form of crop folder,
booklet, pamphlets, etc., was distributed during the field programmes.
In order to help the farmers at disadvantaged locations, IFFCO undertakes
special projectsto help the farmers in arranging natural local resources and thus
helping them in improvingtheir livelihood.
During the year 2009-10, the Society has worked intensively in 24 special
projects on agricultural,social and community development programmes in various
States. These special projects were onwatershed management, agricultural
development and micro enterprises, assisting Self Help Groupsin earning livelihood,
etc.

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MEANING OF COOPERATIVE
According to economic historian, Charles Guide "Cooperation is self-help and
each for all (mutual-aid)". Self-help means the pride of supplying one's own needs by
one's own resources, of being one's own merchant banker, money lender and employer.
"Each for all" means to seek liberation, not only for oneself but for and through others
The International Cooperative Alliance (ICA), at its Manchester Congress held in
September, 1995 adopted a Statement on Cooperative Identity. The Statement included
the definition of Cooperatives, a list of "Cooperative Values and a set of "Cooperative
Principles.
According to ICA, "a cooperative is an autonomous association of persons united
voluntarily to meet their common, economic, social and cultural/needs and aspirations
through a jointly owned and democratically -controlled enterprise"
Cooperative Values:
Self-help
Self-responsibility
Democracy
Equality
Equity and solidarity

THE PRINCIPLES OF COOPERATIVE

Cooperative Principles are guidelines by which cooperatives put their values into
practice.
The

Cooperative

principles

are:

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(1)Voluntary and open membership

(2) Democratic member Control
(3) Member economic participation
(4) Autonomy and Independence
(5) Education, Training and Information
(6) Cooperation among Cooperatives
(7) Concern for community

The origins of cooperative movement in India:

During the British Rule in India, Nicholson a British Officer in India
suggested `Find Raiffersen in India', i.e. introduce Raiffersen model of German
agricultural credit Cooperatives in India. As a follow-up of that recommendation, the
first Cooperative Society Act of 1904 was enacted to enable formation of "agricultural
credit cooperatives" in villages in India under Government sponsorship. With the
enactment of 1904 Act, Cooperatives were to get a direct legal identity as every
agricultural Cooperative was to be registered under that Act only. The 1904
Cooperative Societies Act, was repealed by 1912 Cooperative Societies Act which
provided for formation of Cooperative societies other than credit. Under 1919
Administrative Reforms, Cooperatives was made a provincial subject making each
province

responsible

for

Cooperative

development.

In 1942, the Government of India enacted the Multi-Unit Cooperative

Societies Act, 1942 with an object to cover societies whose operations are extended to
more than one state. Armed with an experience of 42 years in the working of Multi
Unit Cooperative Societies and the Multi-Unit Cooperative Societies Act, 1942, the
Central Government enacted a comprehensive Act known as Multi State Cooperative
Societies

Act,

1984,

repealing

the

Act

of

1942.

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Based on the recommendation of the Mirdha Committee and the "Model

Cooperative Societies Act" this Government of India enacted the Multi State
Cooperative Societies Act, 2002 which provided for democratic and autonomous
working of the Cooperatives. The Multi State Cooperative Societies Act, 2002 came
into

force

with

effect

from

August

19,

2002.

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IFFCOs Mission
IFFCOs mission is to enable Indian farmers to prosper through timely
supply of reliable, high quality agricultural inputs and services in an
environmentally sustainable manner and to undertake other activities to improve
their walefare.
1

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Mission
To provide to farmers high quality fertilizers in right time and adequate
quantities with an objective to increase crop productivity.
To make plants energy efficient and continually review various schemes to
conserve energy.
Commitment to healthy,safety, environment and forestry development to
enrich the quality of community life.
Commitment to social responsibilities for a strong social fabric.
To institutionalize core values and create a culture of a team building,
empowerment and innovation which would help in incremental growth of
employees and enable achievement of strategic objectives.
Foster a culture of trust, openness and mutual concern to make working a
stimulating and challenging experience for stake holders.
Building a value driven organization with an improved and responsive
customer focus. A true commitment to transparency, accountability and
integrity in principle and practice.
To acquire, assimilate and adopt reliable,efficient and
technologies.
Sourcing raw

materials

for

production of

cost

phosphate

effective

fertilizers at

economical cost by entering into joint ventures outside India.

A true Co-operative Society committed for fostering cooperative movement

in the country. Emerging as a dynamic organization, focusing on strategic
strengths. Seizing opportunities for generating and building upon past
success, enhancing earnings to maximize the shareholders value.

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IFFCOs Vision

To augment the incremental incomes of the farmers by helping them to

increase their crop productivity through balanced energy efficient fertilizers,
maintain

the

environmental

health

and

to

make

cooperative

societies

economically& democratically strong for professionalized services to the farming

community to ensure an empowered rural India.
For sustaining growth and ensuring adequate return to the member
holders on their investments,IFFCO is exploring opportunities for diversification

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into other profitable business areas apart from investment in fertilizer sector.
Under the diversification plan, the society would retain focus on farmer-oriented
schemes, strengthening

cooperative

infrastructure.

The

following

business

activities were identified under the VISSION 2010:

Phosphoric Acid plant

Foray into power sector to set up a 500 MW power project
Installation of a Ammonia Urea plants including of fertilizer units;
IFFCO Kisan Bazaar
IFFCO Bank
Multi Commodity Exchange
Acquisition of fertilizer plants
Nellore Fertilizer Project
Agri business

Diversification

into

new growth

areas

such

as

mobile

telephony

and

communication technology in the rural areas.

VISION 2015

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In pursuit of its growth and development, IFFCO had embarked upon and
successfully implemented its Corporate Plans, Mission 2005 and Vision 2010.
These plans have resulted in IFFCO becoming one of the largest producers and
marketeers of chemical fertilizers by expansion of its existing Units, setting up joint
venture companies overseas and diversification into new sectors.
IFFCO has now visualised a comprehensive plan titled Vision-2015 which
will be guided by the following objectives:
Production of fertilizers through expansion of existing units.
Setting up of fertilizer production facilities in India and outside the country
through joint ventures.
Diversification into other profitable sectors.
Strengthening its raw material sourcing through strategic joint ventures in India
and abroad.
Strategic alliances through IFFCO Consortium.

The salient features of the Vision-2015 document are as under:

To stand as a Global Leader in fertilizer production to cater to the food security
need of the nation.
Maximizing the synergies of the core business through downstream value
additions and forward/backward integrations.
Enhancing presence in international markets through strategic joint ventures
and synergistic acquisitions.
Diversification into other profitable businesses to maximise returns to our
stakeholders.
Leveraging state-of-the-art technologies and global best practices to retain its
global competitiveness.
Promoting Integrated Nutrient Management to improve efficiency of fertilizer
use and promoting location specific research on efficient fertilizer practices.
1

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To bring in sustainability and strategies to prevent climate change by reducing

energy consumption, better resources management and promoting renewable
energy sources.
To help the cooperative societies become economically strong, professionally
managed and to equip the farming community with advanced agricultural
practices for improved productivity, to ensure an empowered rural India.
Achieve fertilizer production/marketing target of 15 million tonnes per annum
with an annual turnover of Rs. 30,000 Crore.

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IFFCO Glory 2009-10

IFFCO bagged the first-ever Dot Coop Global Award for Cooperative
Excellence, in a glittering opening ceremony of the General Assembly of
International Cooperative Alliance (ICA) at Geneva. The contest was hosted by
dot Coop LLC, which own the .Coop domain name.

KALOL UNIT
Kalol Unit has achieved PRASHANSA PATRA from National Safety
Council of India Safety Award 2008 in the Manufacturing Sector for
Developing and Implementing Occupational Safety and Health
Management Systems and Procedures.
Two Kalol Unit employees have got Merit Award from Indian National
Suggestion Scheme Association (INSSAN).
Kalol Unit has been awarded by the Gujarat Safety Council and
Directorate of Safety and Health, Gujarat, the prestigious Gujarat State
Safety Award: 2008 for the Lowest Disable Injury Index for the Fifth
Consecutive Year.
Kalol Unit also bagged five prizes from Gujarat Horticulture
Association for Institutional Garden, Cut Flowers and Vegetables,
Society Garden, Traffic Island, GH-2, and the overall first prize
Governors Trophy.

PHULPUR UNIT
Phulpur Unit has received the Golden Jubilee Award in Recognition and
Appreciation of Extraordinary Accomplishment and Contribution to the Nation
from Chamber of Commerce & Industry (Eastern U.P.).

AONLA UNIT

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Aonla Unit bagged TERI Corporate Environment Award 2009 for its effort
towards environmental management and innovative initiative.
Aonla Unit has won the National Award for Prevention of Pollution for the
year 2007-08 under Fertiliser Category.
FAI Award for Best Production Performance for Nitrogenous Fertiliser 2009
from Fertiliser Association of India.
Suraksha Puraskar under NSCI Safety Awards-2008 from National Safety
Council of India for excellent performance in the field of safety.
Greentech Environment Excellence Gold Award-2009 in the fertiliser sector
for outstanding achievement in environment management.

PARADEEP UNIT
Paradeep Unit has won the FAI Award for Improvement in Overall
Performance for the year 2008-09.
FAI Award for Best Technical Innovation implemented in the field of fertiliser
technology for the year 2008-09.
Paradeep Unit also bagged the Certificate of Merit in the field of Energy
Conservation from the Bureau of Energy Efficiency, Government of India.
Paradeep Unit has also been awarded the Best Importer for the year 2008-09
from the Paradeep Port Trust.

IT AWARDS
Top 10 Green I.T. Enterprise Award from CIO magazine and APC by Schnelder
Electric on the Green I.T. initiatives taken by IFFCO.
The CIO Ingenious 100-2009 award for overall technology implementation in
IFFCO by International Data Media Group, India and CIO magazine.

Uptime Champion Award 2009 in Manufacturing and General Industries

Category was given by The Express Group and Emerson Network Power for
making IFFCO infrastructure available almost round-the-clock.

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CIOL Enterprise Connect Award 2009 by Cyber Media in association with

Dataquest magazine.
The Great Mind Challenge for Business Award 2009 was given by IBM for
most innovative solution using
Lotus Software.
Network Computing magazine and United Business Media honoured IFFCOs
Plant Maintenance Software
developed by Aonla Unit with an EDGE Certificate for the use of IT for
maximising business impact.

IFFCOS MANAGEMENT
The representative general body (RGB) which is general body forms the
supreme body that guides the various activities of IFFCO . The RGB consist of:

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1. All members of the board of directors.

2. One delegate from each of the member societies holding shares of the value of
Rs. 100 thousand and above; such delegate shall be as per the provision of
multi-state cooperative societies act/rules as amended from time to time ;
3. Delegate to be elected from amongst the representative of member societies
(other than members holding share of the value Rs. 100 thousand and above) in
each state/union territory at the rate of one delegate for every 200 thousand
societies or part thereof. However the maximum number of delegates from any
state /union territory shall not exceed 25. Such elected shall be as per the
provision of multi state cooperative societies act amended from time to time.
The board of directors of IFFCO carry out all function as specified under the
multi state cooperative societies act/rules. The board of directors frame
policies, direct the various activities of society and undertake any other
activities conductive to overall growth and development of societies. The board
is headed by the chairman.
The managing director is chief executive of the organization with
responsibilities for general conduct, supervision and management of day to day
business and affairs of IFFCO. THE finance director oversees the financial
aspect and the marketing director looks after the marketing function of IFFCO.
The director (technical) looks after the technical aspect, director(HRD) is
responsible for all human resources, director(joint ventures) oversees all the
joint venture operations and directors looks after cooperative development.
These functional directors are assisted by senior executives
who are experts in various disciplines.

ORGANISATIONAL CHART OF IFFCO

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1- KALOL PLAN

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YEAR OF COMMISSIONING : 1975

INVESTMENT

: Rs. 71.23 Crore

YEAR OF EXPANSION

: 1997

INVESTMENT

: Rs. 149.70 Crore

PRODUCT

CAPACITY

TECHNOLOGY

TPD

TPA

AMMONIA

1100

3,63,000

M.W. KELLOG & HTAS

UREA

1650

5,44,500

STAMICARBON and H&G

759

2,50,470

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2-KANDLA PLANT

YEAR OF COMMISSIONING

: 1975

INVESTMENT

: Rs. 24.26 Crore

YEAR OF FIRST EXPANSION

: 1981

INVESTMENT

: Rs. 28.60 Crore

YEAR OF SECOND EXPANSION

: 1999

INVESTMENT

: Rs. 205.30 Crore

PRODUCT

CAPACITY

TECHNOLOGY

TPA
P2O5

9,10,000

FOUR STREAMS (A,B,C & D) BASED

ON TVA SLURRY GRANULATION
PROCESS. TWO STREAMS (E & F)
BASED ON AZF PIPE REACTOR.

3,51,540

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3 PHULPUR PLANT

YEAR OF COMMISSIONING

: 1981

INVESTMENT

: Rs. 205.2 Crore Phulpur - I

YEAR OF EXPANSION

: 1997

INVESTMENT

: Rs.1190 Crore Phulpur II

YEAR OF DEBOTTLENECKING

: 2008

INVESTMENT

: Rs.185.3 Crore

PRODUCT

CAPACITY

TECHNOLOGY

TPD

TPA

AMMONIA

2955

9,75,150

KELLOG & HTAS

UREA

5145

16,97,850

SNAMPROGETTI

2367

7,81,011

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4-AONLA PLAN

YEAR OF COMMISSIONING

: 1988

INVESTMENT

: Rs. 651.6 Crore AONLA- I

YEAR OF EXPANSION

: 1996

INVESTMENT

: Rs. 954.7 Crore AONLA- II

YEAR OF DEBOTTLENECKING

: 2008

INVESTMENT

: Rs.149.2 Crore

PRODUCT

CAPACITY
TPD

TECHNOLOGY
TPA

AMMONIA

3480

11,48,400

HALDOR TOPSOE

UREA

6060

19,99,800

SNAMPROGETTI

2788

9,19,908

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5-PRAADEEP PLANT

INVESTMENT

PRODUCT

: Rs. 2237 Crore

CAPACITY

TECHNOLOGY

TPA
PHOS. ACID

8,75,000

JACOBS ENG.

SULPHURIC ACID

23,10,000

LURGI GmbH

P2O5 (Fert. Grades)

8,02,800

JACOBS ENG.

3,25,200

POWER

2 x 55 MW

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PLANT HIGHLIGHTS OF 2009-10

KALOL
Produced highest ever 6.00 lakh MT of Urea with capacity utilisation of 110%.
Achieved lowest specific energy consumption of 5.796 Gcal/MT of Urea during
2009-10.

PHULPUR
Produced highest ever 17.23 lakh MT of Urea with capacity utilisation of
101%. Phulpur-I and Phulpur-II produced highest ever 7.23 LMT and 10.00 LMT of
Urea, respectively, with lowest specific energy consumption of 6.6872 Gcal/MT of
Urea by Phulpur-I and 5.6660 Gcal/MT of Urea by Phulpur-II.

AONLA
Produced 20.01 lakh MT of Urea with capacity utilisation of 100%. Best
production was 20.05 lakh MT of Urea in 2008-09.
Aonla I produced highest ever 10.00 lakh MT of Urea and operated with
specific energy consumption of 5.690 Gcal/MT.
Aonla-II also produced 10.0 lakh MT of Urea and operated with specific
energy consumption of 5.5439 Gcal/MT. The Best production was 10.18 lakh MT of
Urea during 2008-09.

KANDLA
The unit produced 23.74 lakh MT of NPK/DAP. Best production was 26.86
lakh MT of NPK/DAP in 2005-06.
The plant operated with specific energy consumption of 0.244 Gcal/MT of
P2O5. Best was 0.222 Gcal/MT of P2O5 in 2005-06.

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PARADEEP
Produced highest ever 15.00 lakh MT of NP/DAP during the year 2009-10
registering a rise of 14.9 % over last year.
The plant operated with lowest specific energy consumption of 1.784 Gcal/MT
of P2O5. It has come down from 3.164 Gcal/MT of P 2O5 in 2006-07 to 1.784 Gcal/MT
in 2009-10.

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PRODUCTS

1. UREA

IFFCO's Urea is not merely a source of 46% of nutrient nitrogen for crops, but
it is an integral part of millions of farmers in India. A bag of IFFCO's urea is a
constant source of confidence and is a trusted companion for Indian farmer.
When farmers buy IFFCO's urea, they know that what they get is not just a
product but a complete package of services, ably supported by a dedicated team of
qualified personnel. More importantly, they are aware that it is their own urea,
produced and supplied by a cooperative society owned by themselves.

About Urea
Urea is the most important nitrogenous fertiliser in the country because of its
1

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20

high N content (46%N). Besides its use in the crops, it is used as a cattle feed
supplement to replace a part of protein requirements. It has also numerous industrial
uses notably for production of plastics.

2. NPK/DAP

As far as Indian farmer is concerned, IFFCO's NPK/DAP is not just a source of

crucial nutrients N, P, K for the crops, but is an integral part of his/her quest for
nurturing mother earth. The bountiful crop that results from this care is an enough
reason for the graceful bags of IFFCO NPK/DAP bags to be an integral part of the
farmers's

family.

The two grades of NPK produced by IFFCO, 10:26:26 and 12:32:16, indicating
the content of N, P, K proportion, are tailor made to supply the exact composition
required for replinishment of the soil. The Indian farmer's confidence and trust stems
from the fact that IFFCO's NPK/DAP are merely a part of a complete package of
services, ably supported by a dedicated team of qualified personnel. More importantly,
they are aware, IFFCO is a cooperative society owned by farmers cooperatives.

About NPK/DAP

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Diammonium Phosphate
It is the most popular phosphatic fertiliser because of its high analysis and good
physical properties. The composition of pure salt of DAP is N-21.19% and P205

53.76%.

Fertiliser

grade

DAP

is

18:46:0.

NPK Complex Grades

NPK complex fertilisers produced at Kandla are DAP based grades. At present
two grades Grade I - 10:26:26 and Grade II - 12:32:16 are produced.
Granular NPK complexes are free flowing and do not pose any problem during
handling and storage. However, exposure of material for long period to very high
humidity may cause caking. Therefore, NPK complexes are bagged in quality tested
HDPE bags to prevent ingress of moisture.

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3. NP

Ammonium Phosphate Sulphate (20-20-0-13)

1. Moisture % by weight, maximum
:1.0
2. Total Nitrogen, per cent by weight, minimum
:20.0
3. Ammoniacal Nitrogen, per cent by weight,:18.0
minimum
4. Nitrogen in the form of urea, per cent by weight, :2.0
maximum
5. Neutral Ammonium Citrate soluble Phosphates(as:20.0
P205), per cent by weight, minimum
6. Water soluble phosphates (as P2O5), per cent by:17.0
weight, minimum
7. Particle size

:Not less than 90 per cent of the material

shall pass through 4 mm IS sieve and shall
be retained on 1 mm IS sieve. Not more
than 5 per cent shall be below 1 mm IS

8. Sulphur (as S), per cent by weight minimum

sieve.
:13.0

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4. BIO FERTILIZER

A biofertiliser unit was established at Cooperative Rural Development Trust,

Phulpur (Uttar Pradesh) in 1996 - 97 and other at Kalol (Gujarat) in 2003-04 with an
annual capacity of 75 MT and 165 MT respectively of different cultures such as
Rhizobium, Azotobacter, PSM, Azospirillium and Acetobacter.

Phosphate Solubilising

Rhizobium - It is the

Micro

most important nitrogen

Several soil bacteria and

fixing organism. It live

fungi possess the ability

symbiotically in the root

to

nodules of leguminous

Organism

bring

insoluble

phosphates into soluble

plants

and

forms

nitrogen

to

by

secreting

organic acids. They can be applied to and through

recommended for all crops

nitrogen

fixation.

supply
the

plant

Besides,

supplying nitrogen to the crop, nitrogen

fixed by legume - Rhizobia association
would also leave residual nitrogen for the

-11
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20

succeeding crops. The beneficiary crops

are

Groundnut,

Soybean,

Red-gram,

Green-gram, Black-gram, Lentil, Cow

pea, Bengal-gram and Fodder legumes.
Azotobacter - It is non
Acetobacter - It is a

Cabbage,

symbiotic nitrogen fixing

symbiotic

bacteria

capable

recommended

bacteria
of

fixing

for non leguminous crops

atmospheric nitrogen by

like

Wheat,

living within the sugar

Millets, Cotton, Tomato,

plant. They are found in

Paddy,

Mustard,

Safflower

and

all parts of plant body. It

Sunflower. The Azotobacter performs well is suitable for sugarcane cultivation.

if the soil organic matter content is high.
Azospirillium - It is an
associative
microaerophilic nitrogen
fixer is commonly found
in association with the
roots
forage
beneficiary

crop

of

cereals
grasses.

include

and
The

Sugarcane,

Vegetables, Maize, Pearl millet, Rice,

Wheat, Fodders and Oil seeds.

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20

IFFCO ASSOCIATES

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20

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PRODUCTION IN IFFCOS PLANTS

Since its inception, the Units have cumulatively produced 1,190.91 lakh MT
fertiliser materials comprising 714.94 lakh MT Urea and 475.97 lakh MT NPK/DAP
up to the period ending March 31, 2010. During the year 2009-10, the Units surpassed
all previous production records by producing the highest-ever 81.98 lakh MT of
fertilisers consisting of the highest-ever 43.24 lakh MT Urea and also the highest-ever
38.74 lakh MT NP/NPK/DAP. The previous best production level was 71.68 lakh MT
of fertilisers during the year 2008-09. Thus, the Society has produced an additional
10.40 lakh MT of fertilisers during 2009-10 as compared to the last year, registering
an increase in production by 14.5 per cent. Urea Units have produced the highest-ever
43.24 lakh MT as compared to 40.68 lakh MT in the previous year, achieving an
overall capacity utilisation of 101.9 per cent.
Kandla and Paradeep Units have shown excellent performance producing 38.84
lakh MT NPK/DAPas compared to 31.00 lakh MT NPK/DAP during the previous
year, achieving an overall capacity utilisation of 89.4 per cent.
The Paradeep Unit achieved the production of 15 lakh MT NPK/DAP during
the year 2009-10, which is the best production by Paradeep Unit so far and is 14.85
per cent higher as compared to last year. The Kalol Unit achieved the highest-ever
production of 6 lakh MT Urea during 2009-10.
The Aonla and Phulpur Units have also achieved an outstanding production
performance by surpassing their previous best production records
.

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20

The Kalol and Phulpur Units achieved the lowest-ever Energy Consumption.
The overall composite Specific Energy Consumption per tonne of Urea for all the
Plants during 2009-10 was 5.832 GCal/MT Urea, which is the lowest energy
consumption so far.

The unit-wise production performance was as under:

Unit

2009-10

2008-09

Production /Capacity Utl.

Production /Capacity Utl.

(Lakh MT)

(per cent)

(Lakh MT)

6.00

110.2

5.60

102.8

Phulpur-

I 7.23

103.5

6.63

109.1

Phulpur-II

10.00

100.0

8.40

92.6

Aonla-I

10.00

100.0

9.87

106.0

Aonla-II

10.01

100.0

10.18

109.4

SUB-TOTAL UREA-

43.24

101.9

40.68

103.8

Kandla-

23.74

98.3

17.94

74.3

Paradeep-

15.00

78.1

13.06

68.0

SUB-TOTAL NPK/DAP-

38.74

89.4

31.00

71.5

TOTAL PRODUCTION-

81.98

95.6

71.68

86.8

N-

25.85

98.4

23.29

93.9

P2O5

11.95

69.7

9.18

53.6

(per cent)

UREA
Kalol-

NPK/DAP/NP

Production in terms of:

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20

PRODUCTWISE PRODUCTION PERFORMANCE

(Lakh MT)

NUTRIENTWISE PRODUCTION PERFORMANCE

(Lakh MT)

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UNITWISE PRODUCTION PERFORMANCE

(Lakh MT)

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20

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20

IFFCO FERTILIZERS
BY
ROAD & RAIL

PCF
WAREHOUSE

PACS
NON-PACS
FSC

FARMERS

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SALES PROCEDURE IN IFFCO

The three concern involved in the sale procedure of IFFCO are the field officer, the
societies and the agencies. IFFCO does not sell its product directly to farmers except
FSC. Sale is made through the societies (PACS OR NONPACS) or the Farmers
Service Centre (FSC). The sale procedure for all the three societies are different.
IFFCO sells its product to PACS through G.P. cheques (GOODS FOR PAYMENT) to
NON-PACS Societies through D.D. i.e. DEMAND DRAFT and FSC in cash.

COOPERATIVE SOCIETIES
IFFCO sells its fertilizers through a network of more than 38150 cooperative societies
in different states of marketing territory. This societies are well scattered, covering
almost all village in the country and are the backbone of the cooperative system nearly
62% of the societies are getting fertilizers directly from IFFCO whereas 29% are
getting through the state federation. The two primary cooperative societies are1. SPOT
2. CUF

SALE THROUGH G.P. CHEQUES- The member and non members of societies
asses the requirement of the surrounding area according to their limits. Then PACS
approach for the G.P. cheque. PACS give application to the District Cooperative Bank
in which the quantity of fertilizers needed are mentioned. DCB calculate the amt and
issue G.P. cheques for the amt to the secretary of the society. The secretary of the
society give this cheque along with covering letter to the F.O. who issue the Release
Order in which the name of the society, kind and the quantity of fertilizers payment
details and warehouse are mentioned. The F.O. gives G.P. cheques to R.O. and R.O. to
the transporting agency from where delivery order is issued to the godownkeeper who

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makes the delivery challan. He gives delivery challan to the truck driver and load the
material to the truck. Then the truck driver unload the truck, submit one copy of

the challan at the society and take the receiving of the material on other copy of the
challan from secretary of the society. He gives this receipt copy of challan to the
godownkeeper. Then he submits all the receipt copy of the challan lifting delivery
statement at the agency on daily basis. Then the agency deposit G.P. cheques along
with the receipt copy of challan in DCB. After verifying the signatures on the challan,
the bank credit the value of fertilizers in IFFCO account. Then the F.O. approaches
DCB for the transfer of the funds to the Uttar Pradesh Cooperative Bank by the way of
the loan application or the demand draft. Then the funds from the UPCB are
transferred to the Head Office.

Farmers Service Centre

The Society also sensitises farmers through its own 158 Farmers Service Centre
(FSCs) spread over 10 States, namely, Punjab, Haryana, Rajasthan, Himachal Pradesh,
U.P., Uttarakhand, Bihar, Madhya Pradesh, West Bengal and Goa. Apart from the
supply of fertilizers, seeds, agro-chemicals and so on, under one roof, these centre also
serve as the contact point for providing technical know-how to farmers. During 200910, these FSCs sold about 5.49lakh tones of fertilizers as against 4.47lakh tones in
2008-09. FSCs have also organized need-based promotional programs such as farmers
meetings, soil test campaigns and demonstrations in the villages around FSCs with a
view to propagate the message of balanced and efficient use of fertilizers.

SALE OF FERTTILIZERS THROUGH FSC

FO supervises the FSCs of his area. It is the duty of FO to assess the demand of
fertilizers in the concerned district. After assessing the demand, FO issues the release
order gives it to the transporter. The transporter goes to the PCF and PCF gives the

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20

delivery order to the transporter. He takes the delivery to the godown and
godownkeeper gives the fertilizer to the transporter and makes challan. The
godownkeeper gives the two copies of challan to the transporter. He supplies the

fertilizers to the FSC. He take the receiving on one copy of challan from the sales of
the FSC and give the other copy to him. Then the transporter submit the receipt copy
of challan in the Area Office along with bill verified by the salesman of FSC.

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MARKETING
Sales Performance
The year 2009-10 had not been very good from the agriculture point of view.
The south-west monsoon during Kharif 2009 was the most deficient since 1972. Out
of 36 meteorological sub-divisions in the country, 22 recorded deficient rainfall during
the south-west monsoon period (June-September 2009). Moreover, distribution of
rainfall was very erratic over time and space.
Deficiency in rainfall, particularly in July and August 2009, severely affected
Kharif crops, especially paddy. However, the recovery of monsoon in the last quarter
of the year 2009 protected the Kharif crops to some extent and improved the prospects
of Rabi crops in 2009-10. The overall production of Kharif cereals in 2009-10
declined by about 18.51 million tonnes over 2008-09. The foodgrain production
during the year 2009-10 is estimated at 218 million tonnes as against the actual
233.88 million tonnes in 2008-09.
The fertiliser consumption in the country during 2009-10 is estimated to be slightly
higher as compared to last year at 263 lakh tonne of nutrients (N+P+K) as against
actual of about 249 lakh tonnes of nutrients achieved during 2008-09, representing an
increase of about 5.6 per cent. Urea consumption during 2009-10 is estimated at 265
lakh tonnes as against 266 lakh tonnes during 2008-09.
DAP/MAP/TSP consumption during 2009-10 is likely to be seven per cent
higher at 104 lakh tonnes as against 97 lakh tonnes during 2008-09. NPKs
consumption during 2009-10 is estimated at 82 lakh tonnes as against 70 lakh tonnes
in 2008-09. The import of Urea and DAP/MAP/TSP in the country during 2009-10
were about 52.1 lakh tonnes and 59.3 lakh tonnes, respectively.

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20

TOTAL SALE OF FERTILISERS

(Lakh MT)

SALES OF FERTILISER MATERIAL

(Lakh MT)
Material
UREA

2009-10

2008-09

-Own

43.22

40.71

- Imported

20.13

17.98

SUB TOTAL

63.35

58.69

NP/NPK

27.94

24.47

DAP/MAP - Own

11.14

6.88

15.84

22.54

SUB TOTAL

26.98

29.42

TOTAL (NPK/DAP)

54.92

53.89

118.27

112.58

- Imported

TOTAL (UREA+NP/NPK+DAP)

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SALES PERFORMANCE
(Lakh MT)

SALES PERFORMANCE
(Lakh MT)

-11
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20

SALES DURING KHARIF SEASON

(Lakh MT)

SALES DURING KHARIF SEASON(Lakh MT)

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SALES DURING RABI SEASON

(Lakh MT)

SALES DURING RABI SEASON

-11
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During the year, IFFCO achieved the highest-ever sales of 118.27 lakh tonnes
of fertiliser material compared to the previous years record sale of 112.58 lakh
tonnes, representing an increase of about five per cent. Higher sales could be achieved
primarily due to effective planning, proper logistics management combined with
timely supplies and distribution, and intensive marketing strategy adopted by the
Society at all levels. Urea sales during 2009-10 were 63.35 lakh tonnes as compared
to 58.69 lakh tonnes achieved during 2008-09, representing an increase of 7.9 per
cent. NP/NPK/DAP sales during 2009-10 were slightly higher by about 1.9 per cent at
54.92 lakh tones as against 53.89 lakh tonnes in 2008-09.

Distribution Network
IFFCO distributes its fertilisers in 29 States/UTs in the country through the
cooperative system. As a matter of policy, IFFCO is channelising its entire production
and imports through the cooperative network.
IFFCO sells its fertilisers through a network of about 39,862 cooperative
societies in different States. Nearly 60 per cent of the material was sold directly to
Societies whereas 35 per cent was routed through Federations. About 5 per cent
fertilisers are sold through 158 Farmers Service Centres run by IFFCO. The Member
Societies are well spread out, reaching out to most of the villages in the country and
thus constitute the backbone of the cooperative network.

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Product Movement
The Society despatched 117.7 lakh tonnes of fertiliser material (Urea and
NP/NPK/DAP/MAP) from the plants and ports during the current year. This included
9.5 lakh tonnes of Urea from OMIFCO, 10.3 lakh tonnes imported Urea on GOI
Account, and 15.9 lakh tonnes imported DAP/MAP. OMIFCO and imported Urea
were dispatched from the ports to different States according to ECA allocation given
by the GOI.
FIELD STRUCTURE OF IFFCO
There are about 80 field officers in 70 district under 12 Area Offices in UP.
These area Offices are in :
1. AGRA
2. ALLAHABAD
3. BAREILLY
4. FAIZABAD
5. GORAKHPUR
6. JHANSI
7. KANPUR
8. LUCKNOW
9. MEERUT
10. MORADABAD
11. SAHARANPUR
12. VARANASI

Prices of IFFCO's Fertilisers

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20

(Applicable only within India)

(Indian Rupees Per Tonne (w.e.f. 1st April, 2010)
UREA
N-46%

NPK
10-26-26

M.R.P.
5310
7897
Local Taxes Extra, where ever applicable.

12-32-16

NP
DAP
20:20:0:13 18-46-0

8337

6895

9950

Farmers Service Centres

The Society also sensitises farmers through its own 158 Farmers Service Centres
(FSCs) spread over 10 States, namely, Punjab, Haryana, Rajasthan, Himachal Pradesh,

-11
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20

U.P., Uttarakhand, Bihar, Madhya Pradesh, West Bengal and Goa. Apart from the
supply of fertilisers, seeds, agro-chemicals and so on, under one roof, these centres
also serve as the contact point for providing technical know-how to farmers.
During 2009-10, these FSCs sold about 5.49 lakh tonnes of fertilisers as against 4.47
lakh tones in 2008-09. FSCs have also organised need-based promotional programmes
such as farmers meetings, soil test campaigns and demonstrations in the villages
around FSCs with a view to propagate the message of balanced and efficient use of
fertilisers.

Granular Urea from OMAN

The Government of India has entrusted the responsibility of the handling and
marketing of 50 per cent of OMIFCO Urea to IFFCO. During 2009-10, IFFCO
handled 32 vessels carrying 10.19 lakh tonnes of OMIFCO Urea at Kandla, Mundra,
Pipavav, Vizag, Kakinada Deep Water, Krishnapatnam and Tuticorin ports.
Despatches of OMIFCO Urea were made to different States against ECA allocation.

Water Soluble Fertiliser

The Society carried out extensive trials on Urea Phosphate (17:44:0) fertiliser (100 per
cent water soluble) in collaboration with ICAR, State Agricultural Universities during
the last three years. The results were very encouraging and highlighted the importance
of fertigation to increase both waterand nutrient use efficiency in high value crops
such as fruits, vegetables, flowers and sugarcane.During 2009-10, the Society sold
385.6 tonnes of Urea Phosphate and 174.0 tonnes of NPK 19:19:19.

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20

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Concept of Inventories
Accounting Standard 2 determines the valuation of inventories, on the basis of
cost price or net releasable value which ever is low. AS-2 provides for valuation of
inventories.

What are inventories?

Inventories are assets: Hold for sale in the ordinary course of business.
In the process of production for such sale.
In the form of materials or supplies to be consumed in the
production process or in rendering of services.
Inventories encompass finished goods produced or work in process being
produced by the enterprise and include materials, maintenance supplies,
consumables, loose tools awaiting use in the production process.

Types of inventory
1.

Inventory of raw materials: This consist of basic materials that have

not yet been commited to production in a manufacturing firm.The
purpose of maintaining row material inventory is to uncouple the
production function from the purchasing function so that delays in

2.

shipment row materials do not cause production delays.

Inventory of stores and spare parts: This catrgory includes those
products, which are accessories to the main products produced for the
purpose of sale. Examples of stores and spares items are bolts, nuts,
clamps, screws etc.

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2009
20

3.

Inventory of work-in-progress: This catrgory includes those

materials that have been committed to the production process but have
not been completed. The more complex and lengthy the production
process, the iarger will be the investment in work-in-process

4.

inventory.
Inventory of finished goods: These are completed products awaiting
sale. The purpose of finished goods inventory is to uncouple the
production and sale functions so that it no longer is necessary to
produce the goods before a sale can occur.

NEED TO HOLD INVENTORY

Normally there are 3 motives to hold inventory. They are as follows:
1. Precautionary motives: necessitates holding of inventory to guard against the
unpredictable changes in the demand and supply forces & other factors.
2. Transaction motives: emphasizes the need to maintain inventory to facilitate
smooth production and sales operation.
3. Speculative motive: influences the decision to increase or decrease the
inventory level. To advantage of price level.
Other factors which may necessitate purchasing & holding of raw material
inventory are quantity discounts and anticipated price increase. The firm may
purchase large quantity of raw materials then desired for exact production and sales
level.

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20

INVENTORY CONTROL
Inventory control is the systematic control and regulation of purchase storage and
usage of material in such a way as to maintain an even flow of production and at same
time avoiding excessive investment inventories. An efficient control reduces losses
and wastage of material that otherwise passed unnoticed.
Inventory control is the core of MATERIAL MANAGEMENT. The need and
importance of inventories varies in direct proportion to idle cost of man and
machinery, and the urgency of requirements man and machinery and the factory could
wait should could customers material would not lie for want of them and no
inventories need to be carried. But its highly uneconomical to keep men and machine
waiting and the requirements for modern life are so urgent that they cant wait. Hence
firm must carry inventory either in the form of raw material or work in process or
finished goods.

TECHNIQUES OF INVENTORY MANAGEMENT

1. ECONOMIC ORDER QUANTITY: It means" what should be the size of the
order?" and "At what level should the order be placed". EOQ model assumed
that inventory can be obtained without time lag.
2. REORDER POINT: It can be defined as that level of inventory when a new
order should be placed with supplier for replenishment. It determines the avg.
daily consumption, lead time and the safety stock.
3. SAFETY STOCK: It is the buffer or minimum stock may be defined as the
minimum additional inventory to serve as a safety margin to meet an
unexpected increase in usage or delay due to shipping in the supply of
inventory.

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COSTS OF HANDLING INVENTORY

1. ORDERING COST: relating to purchased items pertaining to requisitioning,

order placing, transportation, receiving-inspecting & storing, clerical staff.
2. CARRYING COST: relating to warehousing, handling, clerical staff, insurance,
deterioration & obsolescence.
3. SHORTAGE COST: arise when inventories are short of requirement for
meeting the needs of production or the demand of customers. When a firm
carries a large safety stock to reduce shortage costs its carrying costs tend to be
high.

LOSSES IN IFFCO1. TRANSIT LOSS- When the fertilizers are dispatched from the plants to the
transport mode (rail or road), then the loss of bags due to carelessness of
anybody is called Transit Loss. The plant is responsible for losses.

2. HANDLING AND TRANSPORTATION LOSSES- It occurs while handling

the fertilizers. These losses occurred between the rake point to the warehouse
and the warehouse to the sales point. These losses are handled over by the
transport agency concerned at that time.

3. STANDARDISATION LOSSES- During transition there might be some

physical losses in the bags carrying fertilizers due to which there is spill over
of fertilizers. The fertilizers of these damaged bags are collected and repacked
into new bags, the losses due the above reason are called
STANDARDISATION Losses.

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20

INSURANCE OF FERTILIZERS AT THE WAREHOUSE- According to the value of

stock and the stores finished goods keeps varying, insurance shall be obtained in the
form of declaration policy where by the average daily stock for each product held
during the month should be declared to the insurer in the first week of next month.
The stock of product lying at different warehouse like PCF, DCDF etc should also be
covered through warehousing agency.
4. RESERVATION OF THE STORAGEPCF 249150.00 MT
SWC 59000.00 MT
DCDF 29900.00 MT
STORAGE 26650.00 MT

COST OF STOCK LYING AT WAREHOUSE

1. In respect of manufacture urea covered by GROUP CONCESSION SCHEME
at cost of production after adjustment of contribution to/ subsidy from
FERTILIZER INDUSTRY CO-ORDINATE COMMITTEE (FICCI)
2. Fertilizers whose prices have been controlled by the Government of India are
valued at Cost + freight up to the warehouses only.

NET REALIZABLE VALUE:

1. For stock of urea lying in the warehouse, selling price set by Government of
India.
2. For fertilizers whose prices have been controlled by the Government of India.
The price prevalent on the date of balance sheet.

GENERAL OUTLINES
1

-11
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20

Inventories constitute about 60% of current assets of companies of India.

The manufacturing companies hold inventories in the form of raw materials, work in
process, finished goods, stores and spares, chemicals, lubricants etc.

Three motives for holding inventories: To facilitate smooth production and sales operation (transaction motive),
To guard against the risk of unpredictable changes in usage rate and delivery
time (precautionary motive)
To take advantage of price fluctuation (speculative motive)
Inventories represent investment of a firms funds. The objective of
theinventory management should be the maximization of the value of the firm.
The firm should therefore consider costs, return, risk factors in establishing its
inventory policy.

Two types of cost are involved in the inventory maintenance:1. Ordering cost requisition, placing of order, transportation, receiving,
inspecting, storing, clerical staff, are fixed per order. Therefore, they decline as the
order size increases.
2. Carrying cost warehousing, handling, clerical staff, insurances and taxes.
Carrying costs vary with inventory holding. As order size increases, average inventory
holding increases and therefore the carrying costs increase.
The firm should minimize the total cost (ordering + carrying). The economic
order quantity of inventory level occur at point where total cost is minimum
EOQ = 2AS/C,
where A= annual requirement, S = ordering cost per unit, C = carrying cost per
unit per annum.

-11
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20

When

should

the

firm

place

an

order

to

replenish

inventory?

The inventory level at which the firm places order to replenish inventory is
called re-order level. It depends on lead time, usage rate Re-order level = lead
time * usage rate Lead time is the time normally taken in replenishing
inventory after the orderhas Placed.
Under uncertainty about lead time. Therefore firms maintain safety stock
which provide buffer or cushion to meet contingencies.
Re-order level = safety stock + lead time * usage rate
A firm which carries number of inventories that differ in value, can follow a
selective control system. ABC analysis classifies- A category consists highest value, B
category consists high value items, C category consists lowest value item. Tight
control may be applied for high value item and loose control for low value item.
Large number of companies these days follows the total quality management
(TQM) system which requires companies to adopt just in time (JIT) and computerized
system of inventory.
How are inventories valued under AS-2.
Inventories are valued at the lower cost and net realizable value. The cost of
inventories should comprise all costs of purchase, costs of conversion and other costs
incurred in bringing the inventories to their present location and condition.
The cost of purchase consists of the purchase price including duties and
taxes freight inwards and other expenditure directly attributable to the acquisition.
Trade discount, rebate, duty drawback and other similar items are deducted in
determining the cost of purchases. The cost of conversion of inventories includes costs
directly related to the units of production such as direct labor.

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INVENTORY VALUATION AT IFFCO

Inventories are valued at lower of cost or net realizable value.
a) The cost in respect of various items of inventory is computed as under:
i) Raw Materials, Packing Materials, Construction Materials, Loose Tools in
Stock, Chemicals & Catalysts in Stock and Stores & Spares at monthly
weighted average cost.
ii) Stock-in-Process at direct cost and an appropriate portion of overheads.
iii) Finished Goods:
Manufactured Nitrogenous Fertilizers covered by Group Concession Scheme at
Annualized Cost of Production at Plant after adjustment of subsidy as
determined as per the Revised Norms of the Fertilizer Industry Coordination
Committee (FICC).
Manufactured Phosphatic Fertilizers at Annualized Cost of Production at Plant
plus freight unto the warehouses after adjustment of subsidy as estimated in
accordance with known policy parameters in this regard.
Imported Nitrogenous Fertilizers at procurement cost plus direct expenses less
reimbursement of handling cost as fixed by the Government of India.
Imported Phosphatic Fertilizers at procurement cost plus direct expenses after
adjustment of subsidy as estimated in accordance with known policy
parameters in this regard.
b) Net realizable value of Finished Goods is determined at estimated selling price
in the ordinary course of business less the estimated costs necessary to make
the sale.

Cost formulae for determining cost of inventories

Weighted Average Method
1

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IFFCO are using weighted average method. Under this method the issue
price is calculated by dividing the value of materials in hand by the number of units
in hand. Thus it takes into account both quantities and money value for arriving at
the issue rate. Whenever a new consignment is received, a new weighted average
price is calculated by adding the value of the consignment to the cost of stock in
hand. The rate thus, calculated is used to price all issues until a new consignment
is received. The method is more scientific as it smoothens the fluctuations in
purchase price. Further, inventory is valued at one rate.

CLASSIFICATION OF MATERIALS AT IFFCO

IFFCO is engaged in the production of fertilizers. It is one of the leading
industries of India. The final product of the company is UREA; which is produced
with the help of Ammonia and Carbon dioxide. CO2 is obtained directly from air and
Ammonia is produced at Ammonia plant using the following materials:
Naphtha
Natural Gas
RLNG
(Where inventory for Natural gas and RLNG is nil.)

Consumption of Raw Material, Utilities and Stores

The Societys greatest strength is its cost competitiveness and customer
focus. During the current year, the Society further reduced its manufacturing costs by

better production management, which has contributed to increase in Operating

Margin. The Society is also pursuing many operational excellence programmes so as
to optimize the costs and achieve higher operational efficiency.

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Inventory Consolidation
A data warehouse has been created at HO where the Inventory data of all
the Plants except Paradeep is being replicated automatically due to which information
like availability of any item of stores & spares at any Unit, status of surplus and
nonmoving
inventory can be accessed on line by the persons to whom access rights have
been assigned. The System is expected to help in optimizing the inventory of stores &
spares at the Units.

New Material Management System (MMS)

A new material management system has been developed at Kalol with
active input and support of other units. The system has been implemented at Kalol
and it is likely to be implemented in Phulpur, Aonla and Kandla by June 2008. The
eprocurement
system has been modified to support both New MMS and old MMS.
Plant Maintenance System (PMMS)
PMMS Phase-I having modules on Equipment Data Bank, MWR, Log Book,
History card, Preventive Maintenance Schedules and Shutdown have been
successfully implemented in all the Units except for Paradeep. It is expected to help
effective Planning and Decision making related to Plant Equipment Maintenance.
Consumption of Raw Materials, Stores etc.
Besides these raw materials, certain stores and spares must be considered.

General Spares
General Stores
Chemicals
Steal
Cement
1

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Catalyst
MATERIAL HANDLING
Material Handling includes moving, packaging and storing all the materials
used by the firms. The material handling systems is judged by how it serves the
production into most economical cost.

EFFICIENT INVENTORY CONTROL

Inventory control is a systematic control and regulation of purchase and
usage of materials in such a way so as to maintain an even flow of production at the
same time avoiding excessive investment in inventories. Efficient material control
reduces losses and wastage of materials that otherwise pass unnoticed.
Inventory control is the core of material management. The need and
importance of inventories varies in direct proportion to the idle time cost of men and
machinery, and urgency of requirements. If men and machinery in the factory could
wait and so could the customers, materials good not lie in want for them and no
inventory need to be carried. But it is highly uneconomical to keep the men and
machine waiting and the requirements for modern life are so urgent that they can not
wait for materials to arrive after the need for them has arisen. Because materials
constitute a significant part of the total production of cost thus, cost is controllable to
some extent; proper planning and controlling of inventories are of great importance.
Inventory control is planned method of determining what to indent, so that
purchasing and storing cost is to be minimum without affecting the production or
sales. Without proper control inventories have a tendency to grow beyond economic
limits. Funds are tied up unnecessarily in surplus stores and stocks. Productive
operations are stalled, and finances of the plant are severely sprained. Lack of control

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over inventory also leads to excessive consumption and wastage, as operatives are
liable to become careless with irrational supply of materials.
A good inventory management policy should ensure smooth and
uninterrupted supply without making unnecessary investment of funds in inventory.
This requires that inventory management policy must balance the requirements of the
following two opposing and conflicting ends: To maintain large quantity for smooth operation and efficient customers
services.
To maintain only a minimum possible inventory because holding costs
and opportunity cost of funds invested in inventory.

OBJECTIVE OF INVENTORY CONTROL

Scientific control of inventories should serve the following purposes:
To provide the continuous flow of required materials& spares parts and
components for efficient uninterrupted flow of production.
To minimize the investment in inventories stock keeping in view operating
requirements.
To provide for efficient store of materials so that inventories are protected from
losses by fire and threat and handling time and costs are kept at minimum.
To keep surplus and absolute items to minimize uncertainty..
To maintain inventory against deterioration, obsolescence and unauthorized
use.
To ensure that finished goods are available for delivery to customers just to
fulfill the order.

TECHNIQUES OF INVENTORY CONTROL; USED AT IFFCO

Reduction of surplus stock is an essential requirement inventory control.
Various techniques are available to solve the various types of problems associated
1

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with inventory control:

Min-Max plan
Order cycling system
Fixation of various levels
Use of control ratios
Review of slow and non-moving items
The ABC Analysis

Min-Max plan
In this plan analyst lays down a maximum and minimum for each stock
item. Minimum level establishes the reorder point and order is placed for quantity of
material, which will bring it to the maximum level.

Order Cycling System

In this system, quantities in hand of each item or class of stock are reviewed
periodically (30, 60.90 days). In that, if it is observed that stock level of a given item
will not be sufficient till the next schedule review keeping in view of its probable rate
of depletion, an order is placed to replenish its supply.
Fixation of Various Levels
Certain stock levels or fixed levels are given below:Maximum Level
It represents minimum quantity above which stock should not be held at any
time.
Maximum stock = Re-order level + Reordering quantity (Minimum level
Consumption * Minimum Re-order period)
Minimum Level

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It represents the minimum quantity of stock that should be held at all the
time.
Minimum Level = Reorder level (Normal consumption * Normal Re-order
period)
Safety Level
Normal issues of stock usually stopped at this level and made only under
specific instructions.
Safety stock level = Ordering Level (Average rate of consumption
Re-order level)
OR
= (Maximum rate of consumption Average rate of Consumption) Lead Time.
Ordering Level
It is a level at which indents should be placed for replenishing stocks.
Ordering Level = Minimum level + Consumption during the lag period.
OR
= Maximum Consumption* Maximum re-order period.

USE OF CONTROL RATIOS

Inventory turnover ratio helps management to avoid capital being locked Up
unnecessarily. This ratio reveals the efficiency of stock keeping.

Inventory turnover ratio =Cost of materials consumed / Cost of average

stock held during the period.
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Where,
Cost of average stock = [Cost of opening stock + Cost of closing stock] / 2,
Inventory turnover ratio = Days during the period /Inventory turnover ratio.

REVIEW OF SLOW MOVING AND NON- MOVING ITEMS

Stock turnover ratio should be as high as possible. Loss due to obsolescence be
eliminated or these items used in some profitable work. Slow moving stock should be
identified and speedily disposed off. The speed of movement should be increased. The
turnover of different items of stock can be analyzed to find out the moving stocks.
The percentage of slow moving stores = Slow moving stores / Total Inventory

THE ABC ANALYSIS

With the numerous parts and materials that enter into each and every industrial
production, inventory control leads itself, inventory and foremost, to the problem of
analysis. Such analytical approach is popularly known as ABC (ALWAYS BETTER
CONTROL) Analysis.

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20

This Plan is based upon segregation of arterial for selection control. It measures
money value i.e. cost significance for each materials item in relation to total cost and
inventory value. The logic behind is that the management should study each item of
stock in terms of its usage , lead-time , technical or other problems and its relative
money value in the total investment in inventories. Critical, i.e. high value items
deserve very close attention, and low value items need to be devoted minimum
expense and effort in the task of controlling inventories.

INVENTORY SOFTWARE
There is very powerful software in IFFCO for inventories of the various
items. This software holds all the transactions of the stocks. So this software helps
much in maintenance of stocks. It makes very easy to account persons to maintain the
transactions of inventories.
A part of this software is installed on the systems of the stores, whenever a
transaction is made in the store, the details of that transaction is reaches to the
systems of the store accounting section, because both the systems are connected in
the local area network (LAN). So with the help of LAN environment it is very easier
toaccountants to retrieve the information regarding the transactions made by the
stores.
Apart from this, this software has the variety of qualities which we can discuss
with thehelp of menus of software.
There are six different menus in this software these are as follows:

Data entry
Queries
Reports
Processing
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Calculator
Exit

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FINANCIAL PERFORMANCE
As per its tradition, the Society has again exhibited an impressive financial
performance in all its major parameters, namely, revenue growth, margins and
resource utilisation, testifying to the robustness of its Corporate Strategy of creating
multiple drivers of growth in spite of constraints in the availability of raw materials
and the inordinate delays in the receipt of large subsidy amounts from Government of
India. It was made possible due to higher production, sales volume and improvement
in operating efficiencies. With the efforts of your Society, international prices of
fertilisers have eased to reasonable levels, which is good from the point of supplying
strategic plant nutrients to farmers at affordable prices. As a consequence of lowering
of international prices of inputs and imported fertilisers and subsidy levels, the Sales
Turnover of the Society in value has come down to Rs. 16,809 Crore during 2009-10
from Rs. 32,933 Crore in the previous year even though the physical turnover was
higher at 118.27 lakh MT of fertilisers during 2009-10 as against 112.58 lakh MT in
2008-09. The performance is even more satisfying when viewed in the light of the
challenging business environment in the fertiliser industry.

Financing Cost
The gross interest expenditure at Rs. 765 Crore during 2009-10 was much
lower in comparison to Rs. 1,023 Crore incurred in the previous year. There was a
significant improvement in working capital management with a lower inventory of
finished goods/raw materials, improved debt collections, measures taken to tap
alternate cheaper sources of borrowings and negotiating lower interest rates with
lenders at the most competitive rates. The short-term interest burden includes an

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amount of Rs. 122 Crore attributed to the financing cost of funding the delayed receipt
of subsidy/concession from the Government of India during the year.

Foreign Exchange Management

The year witnessed wide volatility in Foreign Exchange Parity of different
currencies particularly in respect of INR/USD parity. As a result of efficient Foreign
Exchange Management, the Society earned Foreign Exchange gain of Rs. 105 Crore
during the year. The Board will like to place on record the outstanding performance of
the Jt. Managing Director and CFO and his team for the excellent performance on this
Foreign Exchange Management.

Net Profit
Various business segments of the Society achieved healthy growth in
profitability over the previous year. The Profit Before Depreciation, Interest and Tax
(PBDIT) was Rs. 1,790.20 Crore as compared to Rs. 1,935.55 Crore in the previous
year. The Profit Before Tax at Rs. 567.28 Crore showed an increase of 28.36 per cent
as compared to Rs. 441.95 Crore in the previous year with the Profit After Tax at Rs.
401.10 Crore as compared to the previous years figure of Rs. 360.01 Crore.

Appropriations Out of Net Profit

In accordance with the provisions of the Multi-State Cooperative Societies Act,
2002, (MSCS Act), contribution towards the Capital Repatriation Fund is required to
be deducted from Profit After Tax for the purpose of arriving at the Net Profit in terms
of Section 62(2) of the MSCS Act. Accordingly, after

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providing for Rs. 0.47 Crore as contribution towards the Capital Repatriation Fund,
the Net Allocable Profit works out to Rs. 400.63 Crore. The same has been proposed
for appropriation as under:

SHARE CAPITAL AND NET WORTH

As on March 31, 2010, the paid-up Share Capital was Rs. 426.24 Crore as against
Rs. 426.28 Crore during 2008-09. During the year, Share Capital of Rs. 0.65 Crore
was repatriated to weaker cooperative societies and Shares valuing Rs. 0.62 Crore to
Member Cooperative Societies were issued. The total number of Member
Shareholders as on March 31, 2010, was 39,862.

RESERVES AND SURPLUS

The Reserves and Surplus increased from Rs. 3,532.59 Crore as on March 31, 2009, to
Rs. 3,844.26 Crore as on March 31, 2010, indicating an increase of Rs. 311.67 Crore
over the previous year. The Net Worth of the Society as on March 31, 2010, increased
to Rs. 4,270.50 Crore from Rs. 3,958.87 Crore in the previous year.
Item

2009-10

2008-09

400.63

358.54

120.19

107.56

Net Allocable Profit

Less: Proposed Appropriations
(i) Reserve Fund as per bye-laws 56(i)
(ii) Reserve Fund for contingency
As per Bye-laws 56(iv)

40.06

35.85

(iii) Reserve for Cooperative Welfare Fund

1.75

1.75

(iv) Reserve for Cooperative Education Fund

4.01

3.59

(v) Reserve for Donations

0.50 166.51

0.75 149.50

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Net Disposable Profit

234.12

209.04

85.18

85.10

148.94

123.94

Less: Proposed Dividend

(@ 20 per cent of the paid-up equity)
Balance Transferred to General Reserve

LOAN FUNDS
All repayment of borrowings along with interest have been discharged in time
during the year. The outstanding loan funds as on March 31, 2010, at Rs. 11,532
Crore, indicate a significant decrease of Rs. 1,271 Crore over the year-end position of
the previous year. The Societys Debt-Equity Ratio as on March 31, 2010, was 2.70:1
as against 3.23:1 at the end of the previous financial year.

FIXED ASSETS
The Gross Block (including Capital Work in Progress) increased to Rs. 9,433
Crore as on March 31, 2010, from Rs. 9,099 Crore as on March 31, 2009, resulting in
addition of Rs. 334 Crore during the current year. The entire additions were funded
out of internal accruals of the Society.

NET CURRENT ASSETS

The Net Current Assets were Rs. 3,631 Crore as on March 31, 2010, as
compared to Rs. 4,490 Crore as on March 31, 2009, indicating a decrease of Rs. 859
Crore. This has been achieved due to a decrease in:
The funds generated from efficient Working Capital management were used for
the payment of current liabilities, due to which during the current financial year the

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current liabilities have decreased to Rs. 1,799 Crore as compared to Rs. 2,860 Crore in
the previous financial year.

DIVIDEND
Members will be delighted to note that your Society has been paying the
maximum permissible dividend consecutively for the last eight years. Considering the
continued good performance during the year under review, the Board of Directors has
once again recommended the payment of dividend at the rate of 20 per cent, which
makes it the ninth consecutive year.
The dividend would be paid on equity share capital of the Members whose
names appeared on the Membership Register as on March 31, 2010. The amount of
dividend would be linked pro-rata to the quarter in which equity share capital was
credited during the year.
Subsidy recoverable from the Government of India:
Inventory of Finished Goods/Raw Materials:
Sundry Debtors due to improved Debt Collections:

Rs. 1,986 Crore

Rs. 424 Crore
Rs. 339 Crore

Significant Accounting Policies

1. Basis of Preparation of Financial Statements
The Financial Statements are prepared on accrual basis of accounting under the
historical cost convention in accordance with the Generally Accepted Accounting
Principles in India, the Accounting Standards issued by the Institute of Chartered
Accountants of India and the relevant provisions of Multi State Cooperative Societies
Act, 2002.

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2. Use of Estimates
The preparation of financial statements, in conformity with the Generally
Accepted Accounting Principles, require estimates and assumptions to be made that
affect the reported amount of assets and liabilities as on the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period.
Difference between the actual results and estimates are recognised in the period
in which the results materialise.

3. Fixed Assets
a) Fixed Assets are stated at historical cost less accumulated
depreciation. Cost comprises of the purchase price and any attributable cost of
bringing the asset to its working condition for its intended use.
b) Assets retired from active use and held for disposal are shown
separately under Fixed Assets at lower of net book value and net realisable
value.

4. Expenditure incurred during Construction Period

In respect of new / major expansion of Units, the indirect expenditure incurred
during construction period upto the date of the commencement of commercial
production, which is attributable to the construction of the project, is capitalised on
proportionate basis.

5. Intangible Assets
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An intangible asset is recognised where it is probable that the future economic

benefits attributable to the asset will flow to the Society and the cost of the asset can
be measured reliably. Such assets are stated at cost less accumulated amortisation.

6. Impairment of Assets
At each balance sheet date an assessment is made whether any indication exists
that an asset has been impaired. If any such indication exists, an impairment loss
i.e. the amount by which the carrying amount of an asset exceeds its recoverable
amount, is provided in the books of account.

7. Investments
a) Long Term Investments are carried at cost. Provision for diminution
in the value of such investments is made to recognise a decline, other than
temporary, in the value of the investments.
b) Current Investments are valued at lower of cost and fair value
determined on an individual investment basis.

8. Inventories
Inventories are valued at lower of cost and net realizable value.
a) The cost in respect of various items of inventory is computed as
under:

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i) Raw Materials, Packing Materials, Construction Materials,

Loose Tools in Stock, Chemicals and Catalysts in Stock and Stores and
Spares at monthly weighted average cost.
ii) Stock-in-Process at direct cost and an appropriate portion of
overheads.
iii) Finished Goods:
Manufactured Nitrogenous Fertilisers covered by
Group Concession Scheme at Annualised Cost of
Production at Plant after adjustment of subsidy as
determined as per the Norms of the Fertiliser
Industry Coordination Committee (FICC).
Manufactured Phosphatic Fertilisers at Annualised
Cost of Production at Plant after adjustment of
subsidy as notified / estimated in accordance with
known policy parameters in this regard.
Imported Nitrogenous Fertilisers at procurement
cost determined on weighted average basis plus
direct expenses less reimbursement of handling cost
as fixed by the Government of India.
Imported Phosphatic Fertilisers at procurement cost
determined on weighted average basis plus direct
expenses after adjustment of subsidy as estimated
in accordance with known policy parameters in this
regard.

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b) Net realisable value of Finished Goods is determined at estimated

selling price in the ordinary course of business less the estimated costs
necessary to make the sale.

9. Depreciation / Amortisation
a) Depreciation on Fixed Assets is provided on Straight Line Method as
follows:
(i) In respect of assets acquired upto 31st March, 1990 at the rates
prescribed under Income Tax Act, 1961 and rules framed thereunder.
(ii) In respect of assets acquired after 31st March, 1990 at the rates
based on Schedule XIV of the Companies Act, 1956 except for fixed assets
taken over at Paradeep Unit, which are depreciated based on useful life of such
assets.
b) Assets are depreciated to the extent of 95% of the original cost excep assets
individually costing uptoRs.5,000/-, which are fully depreciated in the year of
acquisition.
c) Railway wagons under "Own Your Wagon Scheme" are depreciated over a
period of ten years.
d) Machinery Spares, which can be used only in connection with an item of
Plant and Machinery and its use is expected to be irregular, are fully depreciated
over the remaining useful life of the related asset.
e) Premium paid for acquisition of leasehold land, other than those acquired
under perpetual lease basis, is amortised over the period of lease.
f) Leasehold Buildings are fully depreciated over the period of lease in case
period of lease is less than the useful life derived from the rates as per Schedule
XIV of the Companies Act, 1956.

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g) Addition to assets are depreciated for the full year irrespective of the date of
addition and no depreciation is provided on assets sold / discarded during the year.
However, in the case of capitalisation of project, depreciation is provided on a pro-rata
basis from the date of commencement of commercial production.
h) Intangible assets are amortised over their estimated useful lives but not
exceeding ten years when the asset is available for use.

10.Revenue Recognition
Revenue is recognised to the extent that it can be reliably measured and is
probable that the economic benefits will flow to the Society.
a) Sales of Goods
Domestic Sales are recognised on the basis of issue and acceptance of
Release Orders whereby all significant risks and rewards of ownership are
transferred to the buyer and the Society retains no effective control of the goods
transferred to a degree usually associated with the ownership.
High Sea sales are recognised upon endorsement
of bill of lading in favour of buyer.
b) Subsidy from Government of India
Revenue Subsidy from Government of India allowable under
Concession Scheme with regard to Fertilisers is recognised on a systematic
basis to match with the related costs that are intended to compensate.

c) Other Income

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i) Dividend income is recognised when the right to receive payment is

established.
ii) Interest on delayed payments from customers, insurance claims, coal
grade slippage claims, Railway claims for finished goods and claims receivable
on account of despatch money on shipments are recognised when no significant
uncertainty exists with regard to the amount to be realised and ultimate
collection thereof.
iii) Income from transfer of Certified Emission Reduction (CER) is
recognised on delivery of CERs to the buyer's account as evidenced by the
copy of transfer documentation, confirming the transfer of CERs.
iv) Income from Scrap / salvage and waste material is recognised when
sold.

11.Foreign Currency Transactions

a) Foreign Currency transactions are recorded on initial recognition at the
exchange rate prevailing on the date of the transaction. On settlement of transactions,
the realised gains and losses on foreign exchange transactions are recognised in the
Profit and Loss Account.
b) Foreign currency monetary items remaining unsettled at the end of the year
are reported at year-end rates. The exchange rate differences arising thereof are
recognised in the Profit and Loss Account. Nonmonetary items, which are carried at
historical cost denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.

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c) In respect of forward contracts premium or discount arising at the inception

of forward exchange contracts is amortised as an expense or income over the period
of the contract. Forward contracts remaining unsettled at the end of the year are
reported at year end rates.Any profit or loss arising on cancellation or renewal of
forward exchange contracts is recognised as income or expense in the year in which
such profit or loss arises.
d) Financial statements of Foreign Branches are considered to be integral and
are translated as follows:
Monetary assets and liabilities at exchange rates prevailing at the end of

the year.
Non-monetary items at exchange rates prevailing on the date of

transaction.
Revenue items are accounted for at the exchang rate, which
approximates the rate prevailing as on the date of transaction.
Resultant translation differences arising therefrom are recognised in the
Profit and Loss Account.

12.Current Tax and Deferred Tax

Tax expense for the period, comprising Current Tax and Deferred Tax is
included in determining the Net Profit / (Loss) for the year.
a) Provision for Current Income Tax is made as per provisions of
Income Tax Act, 1961 after considering the applicable Double Taxation
Avoidance Agreement provisions.

b) Deferred Tax resulting from "timing differences" between taxable

income and accounting income is determined by using the tax rates and the tax
1

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laws that have been enacted or substantively enacted as on the Balance Sheet
date. Deferred Tax assets are carried forward to the extent it is reasonably /
virtually certain that future taxable profit will be available against which such
Deferred Tax assets can be realised.

13.Borrowing Cost
Borrowing costs that are attributable to the acquisition construction of
qualifying assets are capitalised as part of cost of such assets. A qualifying asset is one
that necessarily takes substantial period of time to get ready for intended use. All other
borrowing costs are recognised as an expense in the period in which they are incurred.

14.Employee Benefits
a) Short Term Employee Benefits
Short Term Employee Benefits are recognised as an expense on an
undiscounted basis in the Profit and Loss Account of the year in which the
related service is rendered.
b) Post Employment Benefits
The Employees' Gratuity Fund Scheme and Provident Fund Scheme are
the Society's defined benefit plans which are funded by the Society and are
managed by separate Trusts.

i) The present value of Society's obligations under gratuity

scheme is determined on the basis of actuarial valuation at the year end

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and the fair value of plan assets is reduced from the gross obligations
under gratuity scheme, to recognize the obligation on net basis.
ii) The contribution to Provident Fund and Family Pension
Scheme is recognised as expense and is charged to the Profit and Loss
Account. The Society has an obligation to make good the shortfall, if
any, between the return from the investments of Provident Fund Trust
and the notified interest rates. Liability, on account of such shortfall,if
any, is recognised on the basis of actuarial valuation carried out at the
year end.
c) Long Term Employee Benefits
The liability for Leave Encashment / Compensated Absences is
recognised on the basis of an actuarial valuation made at the end of the year.
d) Termination Benefits
The compensation paid under Voluntary Retirement Scheme is
amortised over a period of five years in equal instalments. The unamortised
amount is shown as "Miscellaneous Expenditure not written-off". Gains and
losses arising out of actuarial valuation are recognised immediately in the
Profit and Loss Account.

15.Provisions, Contingent Liabilities and Contingent Assets

a) Provisions are recognised for liabilities that can bemeasured by using a
substantial degree of estimation,if:
i) the Society has a present obligation as a result of a past event;
ii) a probable outflow of resources embodying economic benefits is
expected to settle the obligation; and
1

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iii) the amount of the obligation can be reliably estimated.

b) Contingent liability is disclosed in case of:
i) a present obligation arising from a past event when it is not probable
that an outflow of resources embodying economic benefits will be required to
settle the obligation.
ii) a possible obligation, unless the probability of outflow in settlement
is remote.
c) Reimbursement expected in respect of expenditure required to settle a
provision is recognised only when it is virtually certain that the reimbursement will be
received.
d) Contingent assets are neither recognised nor disclosed in the financial
statements.

16.Operating Leases
Assets acquired on leases wherein a significant portion of the risks and rewards
of ownership are retained by the lessors are classified as operating leases. Lease
rentals paid for such leases are recognised as an expense on straight line basis over the
term of lease.

17.Prior Period Income / Expenditure

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Income / Expenditure items relating to prior period(s) not exceeding

Rs.2,00,000/- each except depreciation is treated as Income / Expenditure for the
current year.

18.Pre-Paid Expenses
Expenditure upto Rs.50,000/- in each case except insurance premium is
accounted for in the year in which the same is incurred.

FINANCIAL PERFORMANCE

PROFIT BEFORE TAX (PBT)

1

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(In Rs. Crore)

PROFIT AFTER TAX (PAT)

(In Rs. Crore)

TURNOVER

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(In Rs. Crore)

NETWORTH
(In Rs. Crore)

Performance Highlights for the Year 2009-10

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81.98 Lakh MT
Highest Production of Fertilisers

(Previous Best 71.68 Lakh MT in 2008-09)

43.24 Lakh MT

Highest Production of Urea

(Previous Best 40.68 Lakh MT in 2008-09)

38.74 Lakh MT

Production of NPK/DAP/NP

(Previous Best 32.26 Lakh MT in 2006-07)

118.27 Lakh MT

Highest Sale of Fertilisers

(Previous Best112.58 Lakh MT in 2008-09)

63.35 Lakh MT

Highest Sale of Urea

(Previous Best 58.69 Lakh MT in 2008-09)

54.92 Lakh MT

Highest Sale of NPK/DAP/NP

(Previous Best 53.89 Lakh MT in 2008-09)

Rs. 567.28 Crore

Profit Before Tax

(Best PBT Rs. 807.09 Crore in 2002-03)

Rs. 401.10 Crore

Profit After Tax

(Best PAT Rs. 557.2 Crore in 2002-03)

Rs. 16,809 Crore

Total Turnover

(Previous Best Rs. 32,933 Crore in 2008-09)

1,608 MT per employee

Plant Productivity

(Previous Best 1,669 MT in 2005-06)

7,885 MT per employee

Highest Marketing Productivity

(Previous Best 7,397 MT in 2008-09)

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RESEARCH METHODOLOGY
Research represents a systematic method of exploring actual persons and
groups, focused primarily on their experience within their social worlds, inclusive of
social attitudes and values, the mode of analysis of these experiences which permit
stating proposition in the form. Research covers the search for and retrieval for a
specific purpose. Basically research is a search for knowledge with the help of
bjective and systematic method of finding solution to a problem. Steps followed to
conduct the study.

FORMULATING RESEARCH PROBLEM:

The problem under study viz. how effective are the measures applied by
IFFCO, Aonla to control the inventory is basically studied through analytical research.
Material is important for the efficiency of the system. It is a matter of great
importance for inventory department. Inventory department of IFFCO, Aonla is
responsible for efficient inventory control. Thus the whole study was conducted under
the guidance of officers of this department.

EXTENSIVE LITERATURE SURVEY:

Many published studies, books on material, their effective control were referred
for getting a true direction to research process.

DATA COLLECTION:
The study is conducted using Collection of data.

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METHOD ADOPTED:
Personal interview were conducted where a set of pre conceived question were
asked to the officer of inventory department regarding material control policies
adopted by them. Books of account of Aonla I and Aonla II were studied thoroughly to
gain details about inventory stock, cost of material consumed, increase and decrease in
stock during last year etc.

Market Research Methodology

Before the following five steps are discussed it is important to make a few
comments about these steps. First although the list does strongly imply an orderly
step-by-step process, it is rare that a research project follows these steps in the exact
order that they are presented in the figure. Market research is more of an interactive
process whereby a researcher, by discovering something in a given step, may move
backward in the process and begin again at another step [Market research 2006]
Finding some new information while collecting data, may cause the researcher to
establish different research objectives. In the following the different market research
steps are described.

Defining the research problem

The step defining the research problem exists of 2 main steps:
(1) formulating the problem and
(2) establishing research objectives.

Selecting and establishing research design

The step selecting and establishing research design consists of 3 main steps:
(1) select the research design,
1

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(2) identify information types and sources and

(3) determine and design research instrument.
As stated earlier, every research project and every business is different. Still,
there are enough commonalities among research projects to categorize them by
research methods and procedures used to collect and analyze data. There are three
types of research design:
Exploratory research design
Descriptive research
Causal research

Collecting and analyzing data

Data collection is usually done by trained interviewers who are employed by
field data collection companies to collect primary data. A choice has to be made
between collecting the data yourself or hiring an external office who are specialized
in interviews.

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FINDINGS
Majority of the farmers are using IFFCO product and rest are using other
including Tata, Narmada &others.
60% of the farmers are waiting for a particular brand of fertilizers
Most of the farmers are selecting the fertilizers on brand basis and second
major criteria to select the fertilizers is availability
90% of the farmers desired for the plastic bag and only 10%for the jute bag
70% of farmers desires 50kg pack & rest 30% prefer 25kg pack.
In a village about 60% farmers meetings,15% Field Day,10% Socioeconomic
&15% Other Promotional Programmes were organized by IFFCO
I found that farmers are satisfied with the IFFCO fertilizers even in unadopted

villages.
There are a number of reasons to prefer the plastic bag:
Moisture control
Reused and strong
They are using silos for the storage of finished goods in a case of

uncertainty(strike, machine failure, transportation problem)

IFFCOs promotional activities are very good

LIMITATION

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In IFFCO, there employees are not having that much time to give us the
information about the topic.
There employees do not want for external interference.
Some employees are not that much qualified according to the job profile.
Problem occurred in material coding.
Inadequate recording of material store

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CONCLUSION & RECOMMENDATION

It might seem axiomatic that inventory control is efficient as long as inventory
level is going down. But the fact is that, if inventories are minimized without adequate
operations, inventories have been mismanaged rather than controlled efficiently. Thus,
the basic objectives of inventory management appear to be conflicting in nature.
Inventories should increase or decrease in amount or time as related to sales
requirements and production schedules.
In most inventories a small proportion of items accounts for a very
substantial usage (in terms of monetary value and annual consumption) and a large
proportion of items accounts for a small usage. ABC analysis based on this empirical
reality advocates in essence a selective approach to inventory control, which calls for
a greater concentration of efforts on inventory items accounting for the bulk of usage
value.
Responsibility for control of inventories is of the top management, though
decisions in this regard might well be based upon the combined judgment of the
production manager, the sales manager and the purchasing manager. This is desired
in view of the financial considerations involved in the problem and also because of
need for coordinating the different kinds of inventories and conflicting viewpoints of
different departments. Decisions relating to inventories should be taken by higher
authority of the organization as well as departments.
There are some points may be given as recommendation or a program
may be constructed for inventory monitoring and controlling, which consists some
following elements:
Active disposal of goods that is surplus, obsolete and unusable.

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More effective exercise should be followed of vigilance against imbalance of

raw material and work in progress which tends to limit the utility of stocks.
To strict adherence to production schedule.
To shortening the production cycle.
To change in design to maximize use of standards parts and components, which
are available off the shelf.
To maintain the special pricing to dispose off unusually slow moving items.
To make vigorous efforts to expedite completion of unfinished production jobs
to get them in to sellable condition.

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BILBIOGRAPHY
Website
www.iffco.nic.in
Search Engine
www.google.com
Books

IFFCO Companys Annual Report 2009-10

Guidelines on identification, Obsolete, Surplus items. IFFCO Manual
Students Guide to Accounting Standards: Rawat,D.S (2009)
GopalKrishnan, P; Sudershan,M.- An Integrated Approach

on

MaterialManagement ( Prentice Hall )

Doler, W. Donald; Lee Jr, Lamer; Burt, N David, Inventory purchasing&
material management system.
Pandey; I.M Inventory Management (Vikas Publications)
Valuation of Inventories AS-2
Indian Accounting Standards and GAPP by Dolphin, DSouza
(Snow White Publisher)